-----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, FoBC52jSzbaUpIXHBkgAb4sYhmrd2Iv1BdclDFGAZnzb3bSDYB38K78FK8vHenHg 64Hy3U8fd8SH6GXUBlhSIw== 0001144204-08-064569.txt : 20081114 0001144204-08-064569.hdr.sgml : 20081114 20081114165630 ACCESSION NUMBER: 0001144204-08-064569 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20080930 FILED AS OF DATE: 20081114 DATE AS OF CHANGE: 20081114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WITS BASIN PRECIOUS MINERALS INC CENTRAL INDEX KEY: 0000912875 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 841236619 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12401 FILM NUMBER: 081192541 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: SUITE 900 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: (612)349-5277 MAIL ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: SUITE 900 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 FORMER COMPANY: FORMER CONFORMED NAME: ACTIVE IQ TECHNOLOGIES INC DATE OF NAME CHANGE: 20010702 FORMER COMPANY: FORMER CONFORMED NAME: METEOR INDUSTRIES INC DATE OF NAME CHANGE: 19960313 10-Q 1 v132000_10q.htm
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

OR

¨
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______
 
Commission file number 1-12401

WITS BASIN PRECIOUS MINERALS INC.
(Exact Name of Small Business Issuer as Specified in its Charter)

MINNESOTA
  
84-1236619
(State or Other Jurisdiction of
  
(I.R.S. Employer Identification Number)
Incorporation or Organization)
    

900 IDS CENTER, 80 SOUTH EIGHTH STREET, MINNEAPOLIS, MINNESOTA 55402-8773
(Address of Principal Executive Offices)

612.349.5277
(Issuer’s Telephone Number, Including Area Code)


(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Check whether the registrant: (1) 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 issuer 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨     Accelerated filer ¨     Non-accelerated filer ¨   Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x

As of November 13, 2008, there were 139,946,436 shares of the registrant’s common stock, par value $0.01, outstanding.
 
 
WITS BASIN PRECIOUS MINERALS INC.
FORM 10-Q
TABLE OF CONTENTS
SEPTEMBER 30, 2008

       
Page
       
PART I
FINANCIAL INFORMATION
    
       
Item 1.
Condensed Consolidated Financial Statements
  
4
       
 
Condensed Consolidated Balance Sheets -
   
 
As of September 30, 2008 and December 31, 2007
  
4
       
 
Condensed Consolidated Statements of Operations -
    
 
For the three months and nine months ended
    
 
September 30, 2008 and September 30, 2007
  
5
       
 
Condensed Consolidated Statements of Cash Flows -
    
 
For the nine months ended September 30, 2008
    
 
and September 30, 2007
  
6
       
 
Notes to the Condensed Consolidated Financial Statements
  
7
       
Item 2.
Management’s Discussion and Analysis of
    
 
Financial Condition and Results of Operations
  
25
       
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
  
31
       
Item 4T.
Controls and Procedures
  
31
       
PART II
OTHER INFORMATION
    
       
Item 1.
Legal Proceedings
  
32
       
Item 1A.
Risk Factors
  
32
       
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
  
32
       
Item 3.
Defaults Upon Senior Securities
  
32
       
Item 4.
Submission of Matters to a Vote of Security Holders
  
32
       
Item 5.
Other Information
  
32
       
Item 6.
Exhibits
  
34
       
 
Signatures
  
35
 
2
 
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain statements which are forward-looking in nature and are based on the current beliefs of our management as well as assumptions made by and information currently available to management, including statements related to the uncertainty of the quantity or quality of probable ore reserves, the fluctuations in the market price of such reserves, general trends in our operations or financial results, plans, expectations, estimates and beliefs. In addition, when used in this Form 10-Q, the words “may,” “could,” “should,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “predict” and similar expressions and their variants, as they relate to us or our management, may identify forward-looking statements. These statements reflect our judgment as of the date of this Form 10-Q with respect to future events, the outcome of which is subject to risks. We have attempted to identify, in context, certain of the factors that we believe may cause actual future experience and results to differ materially from our current expectations, which may have a significant impact on our business, operating results, financial condition or your investment in our common stock, as described in the section following Item 1 entitled “Risk Factors” in Part I of our Annual Report on Form 10-KSB for the year ended December 31, 2007.

Readers are cautioned that these forward-looking statements are inherently uncertain. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in our subsequent periodic reports filed with the Securities and Exchange Commission on Forms 10-K, 10-Q and 8-K and Schedule 14A.
 
3
 
WITS BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
PART 1 – FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets

     
September 30,
  
December 31,
  
     
2008
  
2007
  
     
(unaudited)
  
(audited)
  
Assets
          
Current assets:
          
Cash
  
$
263,273
  
$
130,481
  
Prepaid expenses
    
426,401
    
91,030
  
Total current assets
    
689,674
    
221,511
  
               
Property, plant and equipment, net
    
2,073,653
    
73,206
  
Mineral properties and development costs
    
4,955,635
    
—
  
Advance payments on equity investments
    
6,850,000
    
7,000,000
  
Debt issuance costs, net
    
23,223
    
16,415
  
Total Assets
  
$
14,592,185
  
$
7,311,132
  
               
Liabilities and Shareholders’ Deficit
              
Current liabilities:
              
Convertible notes payable, net of original issue discount
  
$
11,486,268
  
$
9,843,283
  
Short-term notes payable, net of original issue discount
    
462,861
    
234,220
  
Accounts payable
    
237,326
    
229,292
  
Accrued interest
    
1,380,722
    
514,286
  
Other accrued expenses
    
2,138,742
    
793,782
  
Current portion of long-term recourse note payable
    
249,510
    
—
  
Total current liabilities
    
15,955,429
    
11,614,863
  
               
Long-term recourse note payable, net of discount
    
6,022,301
    
—
  
               
Shareholders’ deficit:
              
Common stock, $.01 par value, 300,000,000 shares authorized: 138,845,903 and 113,982,533 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively
    
1,388,459
    
1,139,825
  
Additional paid-in capital
    
58,290,551
    
51,147,313
  
Warrants outstanding
    
4,943,302
    
5,710,383
  
Accumulated deficit
    
(22,932,460
)
  
(22,932,460
)
Deficit accumulated during the exploration stage, subsequent to April 30, 2003
    
(49,075,397
)
  
(39,368,792
)
Total shareholders’ deficit
    
(7,385,545
)
  
(4,303,731
)
Total Liabilities and Shareholders’ Deficit
  
$
14,592,185
  
$
7,311,132
  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
4
 
WITS BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)

Condensed Consolidated Statements of Operations
(unaudited)

   
Three Months Ended Sept. 30,
  
 Nine Months Ended Sept. 30,
  
 May 1, 2003
(inception)
to Sept. 30,
  
   
2008
  
 2007
  
 2008
  
 2007
  
 2008
  
Revenues
  
$
—
  
$
—
  
$
—
  
$
—
  
$
—
  
                                 
Operating Expenses:
                
             
General and administrative
    
2,225,700
    
1,256,998
    
5,700,109
    
4,030,700
    
24,534,113
  
Exploration expenses
    
302,653
    
519,391
    
1,785,178
    
1,795,512
    
12,150,919
  
Depreciation and amortization
    
26,431
    
4,127
    
38,711
    
11,923
    
515,025
  
Merger transaction costs
    
—
    
141,025
    
—
    
1,127,859
    
1,238,619
  
Stock issued as penalty
    
—
    
—
    
—
    
—
    
2,152,128
  
Loss on impairment of Kwagga Gold
    
—
    
—
    
—
    
—
    
2,100,000
  
Loss (gain) on sale of mining properties
    
—
    
(47,260
)
  
—
    
(47,260
)
  
571,758
  
Loss on disposal of assets
    
—
    
—
    
12,362
    
—
    
13,995
  
Total operating expenses
    
2,554,784
    
1,874,281
    
7,536,360
    
6,918,734
    
43,276,557
  
Loss from operations
    
(2,554,784
)
  
(1,874,281
)
  
(7,536,360
)
  
(6,918,734
)
  
(43,276,557
)
                                 
Other Income (Expense):
                                
Other income (expense), net
    
168
    
66,265
    
600
    
69,712
    
104,064
  
Interest expense
    
(793,759
)
  
(391,671
)
  
(2,166,879
)
  
(726,254
)
  
(6,164,012
)
Foreign currency gain (loss)
    
109,392
    
—
    
(3,966
)
  
—
    
(3,966
)
Total other expense
    
(684,199
)
  
(325,406
)
  
(2,170,245
)
  
(656,542
)
  
(6,063,914
)
Loss from Operations before Income Tax
                                
Benefit and Discontinued Operations
    
(3,238,983
)
  
(2,199,687
)
  
(9,706,605
)
  
(7,575,276
)
  
(49,340,471
)
Benefit from Income Taxes
    
—
    
—
    
—
    
—
    
243,920
  
Loss from Continuing Operations
    
(3,238,983
)
  
(2,199,687
)
  
(9,706,605
)
  
(7,575,276
)
  
(49,096,551
)
                                 
Discontinued Operations:
                                
Gain from discontinued operations
    
—
    
—
    
—
    
—
    
21,154
  
Net Loss
  
$
(3,238,983
)
$
(2,199,687
)
$
(9,706,605
)
$
(7,575,276
)
$
(49,075,397
)
                                 
Basic and Diluted Net Loss per Common Share:
                                
Continuing operations
  
$
(0.02
)
$
(0.02
)
$
(0.08
)
$
(0.07
)
$
(0.69
)
Discontinued operations
    
—
    
—
    
—
    
—
    
—
  
Net Loss per Common Share
  
$
(0.02
)
$
(0.02
)
$
(0.08
)
$
(0.07
)
$
(0.69
)
                                 
Basic and Diluted Weighted Average Shares Outstanding
    
136,510,088
    
107,156,590
    
126,074,077
    
103,231,278
    
70,845,493
  

The accompanying notes are an integral part of these condensed consolidated financial statements.
 
5
 
WITS BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
Condensed Consolidated Statements of Cash Flows
(unaudited)
 
       
Nine Months Ended Sept. 30,
  
May 1, 2003
(inception) to
Sept. 30,
  
   
2008
  
2007
  
2008
  
OPERATING ACTIVITIES:
              
Net loss
  
$
(9,706,605
)
$
(7,575,276
)
$
(49,075,397
)
Adjustments to reconcile net loss to cash flows used in operating activities:
                    
Depreciation and amortization
    
38,711
    
11,923
    
515,025
  
Loss (gain) on disposal of miscellaneous assets
    
12,362
    
—
    
(51,585
)
Non-cash loss on nickel property (exploration)
    
150,000
    
—
    
150,000
  
Loss on sale of mining projects
    
—
    
(112,840
)
  
571,758
  
Non-cash loss on foreign currency
    
3,966
    
—
    
3,966
  
Issuance of common stock and warrants for exploration rights
    
185,282
    
160,000
    
5,885,372
  
Amortization of debt issuance costs
    
60,664
    
27,814
    
236,002
  
Amortization of original issue discount & beneficial conversion feature
    
1,160,412
    
391,829
    
3,357,302
  
Amortization of prepaid consulting fees related to issuance and modifications of warrants and issuance of common stock
    
734,842
    
484,431
    
6,243,511
  
Issuance of common stock and warrants for services
    
251,797
    
27,000
    
2,353,737
  
Compensation expense related to stock options
    
1,641,211
    
937,677
    
2,924,035
  
Loss on impairment of Kwagga Gold
    
—
    
—
    
2,100,000
  
Issuance of common stock and warrants for interest expense
    
61,885
    
—
    
1,235,305
  
Issuance of common stock as penalty from private placement
    
—
    
—
    
2,152,128
  
Contributed services by an executive
    
—
    
—
    
274,500
  
Gain from discontinued operations
    
—
    
—
    
(21,154
)
Changes in operating assets and liabilities:
                    
Accounts receivable, net
    
—
    
(12,065
)
  
18,017
  
Prepaid expenses
    
(9,726
)
  
(35,239
)
  
(263,788
)
Accounts payable
    
8,034
    
71,206
    
167,045
  
Accrued expenses
    
2,251,473
    
809,822
    
3,338,954
  
Net cash used in operating activities
    
(3,155,692
)
  
(4,813,718
)
  
(17,885,267
)
                     
INVESTING ACTIVITIES:
                    
Purchases of property and equipment
    
(28,106
)
  
(9,169
)
  
(143,629
)
Acquisition costs incurred with purchase of Bates-Hunter Mine
    
(64,680
)
  
—
    
(64,680
)
Proceeds from sale of mining projects
    
—
    
136,899
    
220,820
  
Proceeds from sale of miscellaneous assets
    
—
    
—
    
89,639
  
Purchases of investments
    
—
    
—
    
(2,244,276
)
Advance payments on equity investments
    
—
    
(7,795,000
)
  
(7,000,000
)
Net cash used in investing activities
    
(92,786
)
  
(7,667,270
)
  
(9,142,126
)
                     
FINANCING ACTIVITIES:
                    
Payments on short-term and long-term debt
    
(250,000
)
  
(1,325,000
)
  
(3,009,645
)
Cash proceeds from issuance of common stock, net of offering costs
    
1,225,242
    
780,000
    
7,634,049
  
Cash proceeds from exercise of stock options
    
—
    
30,000
    
199,900
  
Cash proceeds from exercise of warrants
    
198,500
    
2,010,387
    
6,724,547
  
Cash proceeds from short-term debt, net of OID
    
2,275,000
    
11,079,000
    
14,654,000
  
Cash proceeds from long-term debt
    
—
    
—
    
650,000
  
Debt issuance costs
    
(67,472
)
  
(52,895
)
  
(259,225
)
Net cash provided by financing activities
    
3,381,270
    
12,521,492
    
26,593,626
  
                     
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
132,792
    
40,504
    
(433,767
)
CASH AND CASH EQUIVALENTS, beginning of period
    
130,481
    
85,910
    
697,040
  
CASH AND CASH EQUIVALENTS, end of period
  
$
263,273
  
$
126,414
  
$
263,273
  

The accompanying notes are an integral part of these condensed consolidated financial statements.
 
6
 
WITS BASIN PRECIOUS MINERALS INC. AND SUBSIDIARIES
(AN EXPLORATION STAGE COMPANY)
Notes to Condensed Consolidated Financial Statements
September 30, 2008
(unaudited)
 
NOTE 1 - NATURE OF BUSINESS

Wits Basin Precious Minerals Inc., and subsidiaries (“we,” “us,” “our,” “Wits Basin” or the “Company”) is a minerals exploration and development company based in Minneapolis, Minnesota. As of September 30, 2008, we own a past producing mine in Colorado (Bates-Hunter Mine) and hold interests in mineral exploration projects in South Africa (FSC) and Mexico (Vianey). The following is a summary of our projects:

 
·
On June 12, 2008, we completed the acquisition of the Bates-Hunter Mine, a prior producing gold mine located in Central City, Colorado, which included real property, mining claims, permits and equipment (the “Bates-Hunter”). We consummated the acquisition by transferring our right to purchase the Bates-Hunter to a newly created wholly owned subsidiary of ours, the Hunter Bates Mining Corp., pursuant to a formal asset purchase agreement dated September 20, 2006, in which we issued a limited recourse promissory note for $6,750,000 Canadian Dollars and issued 3,620,000 shares of our common stock. Through a defined work program, 4,300 feet in surface drilling was accomplished, which provided detailed data for the creation of a 3-D map of the region. No further exploration activities will be conducted at the Bates-Hunter Mine until such time as we have funds.

 
·
We hold a 35 percent equity interest in Kwagga Gold (Barbados) Limited (“Kwagga Barbados”), which, through its wholly owned subsidiary Kwagga Gold (Proprietary) Limited, holds mineral exploration rights in South Africa. This project is referred to as the “FSC Project” and is located adjacent to the historic Witwatersrand Basin. The last completed drillhole on the FSC Project occurred in 2005. On December 12, 2007, we entered into an agreement with AfriOre International (Barbados) Limited (“AfriOre”), the holder of the other 65 percent of Kwagga Barbados, whereby we may acquire all of AfriOre’s interest of Kwagga Barbados. On March 3, 2008, we entered into a letter of intent with Communications DVR Inc. (“DVR”), a capital pool company listed on the TSX Venture Exchange (TSXV: DVR.P), whereby it is anticipated that DVR will acquire the aforementioned 65 percent of Kwagga Barbados in exchange for 22 million common shares of DVR. Currently, no exploration activities are being conducted at the FSC Project.

 
·
On October 31, 2007, we executed an amendment to the formal joint venture agreement with Journey Resources Corp., a corporation formed under the laws of the Province of British Columbia (“Journey”) and Minerales Jazz S.A. De C.V., a corporation duly organized pursuant to the laws of Mexico and a wholly owned subsidiary of Journey. Pursuant to the terms of the amendment, we own a 50 percent undivided beneficial interest in “located mineral claims” in the property known as the Vianey Mine Concession located in the State of Guerrero, Mexico (“Vianey”). In addition to located mineral claims, our interest includes all surface rights, personal property and permits associated with Vianey and all other claims, leases and interests in minerals acquired within two kilometers of the external perimeter of Vianey.  All work being performed at Vianey is under the supervision of Journey, which mainly consists of cleaning the site for a future work program.

Additionally, we have advanced $6,850,000 related to two equity investments to acquire interests in the following mining projects located in the People’s Republic of China (the “PRC”): (1) a nickel mining operation and (2) the iron ore mining properties of Nanjing Sudan Mining Co., Ltd, Xiaonanshan Mining Co., Ltd and Mannshan Zhao Yuan Mining Co. Ltd. See Note 8 – Advanced Payments on Equity Investments for further information about the status of these two projects.
 
7
 
As of September 30, 2008, we possess only a few pieces of equipment and employ insufficient numbers of personnel necessary to actually explore and/or mine for minerals, we therefore remain substantially dependent on third party contractors to perform such operations.
 
NOTE 2 – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Form 10-KSB filed April 4, 2008. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year as a whole.

All dollar amounts are expressed in this Report in US Dollars, unless specifically noted otherwise. Certain PRC transactions are denominated in the Chinese Dollar, referred to as the China Yuan Renminbi (“CNY” or “RMB”).
 
NOTE 3 – NET LOSS PER COMMON SHARE

Basic net loss per common share is computed by dividing net loss applicable to common shareholders by the weighted average number of common shares outstanding during the periods presented. Diluted net loss per common share is determined using the weighted average number of common shares outstanding during the periods presented, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of options, warrants and conversion of convertible debt. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

As of September 30, 2008, we have (1) 16,643,500 shares of common stock issuable upon the exercise of outstanding stock options, (2) 24,357,974 shares of common stock issuable upon the exercise of outstanding warrants and (3) reserved an aggregate of 62,403,229 shares of common stock issuable under outstanding convertible debt agreements. These 103,404,703 shares, which would be reduced by applying the treasury stock method, were excluded from diluted weighted average outstanding shares amount for computing the net loss per common share, because the net effect would be antidilutive for each of the periods presented. Additionally, we have reserved approximately 50 million shares that could be issued upon satisfactory performance of a consultant (for services to be performed after September 30, 2008) and the potential consummation of various mining project acquisitions, subject to the satisfaction of certain conditions under the respective agreements.
 
8
 
NOTE 4 – COMPANY’S CONTINUED EXISTENCE

The accompanying condensed consolidated financial statements have been prepared in conformity with US GAAP, assuming we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the nine months ended September 30, 2008, we incurred losses from continuing operations of $9,706,605. At September 30, 2008, we had an accumulated deficit of $72,007,857 and a working capital deficit of $15,265,755. Our ability to continue as a going concern is dependent on our ability to raise the required additional capital or debt financing to meet short and long-term operating requirements. We believe that private placements of equity capital and debt financing may be adequate to fund our long-term operating requirements. We may also encounter business endeavors that require significant cash commitments or unanticipated problems or expenses that could result in a requirement for additional cash. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our current shareholders could be reduced, and such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective business endeavors or opportunities, which could significantly and materially restrict our operations. We are continuing to pursue external financing alternatives to improve our working capital position. If we are unable to obtain the necessary capital, we may have to cease operations.

As of the date of this Form 10-Q, we do not claim to have any mineral reserves on our properties.
 
NOTE 5 – PREPAID EXPENSES

Prepaid expenses consist of two components: prepaid consulting fees and other prepaid expenses. The prepaid consulting fees include cash and calculated amounts from the issuance of common stock, warrants or options to consultants for various services that we do not have the internal infrastructure to perform. The amortization periods coincide with terms of the agreements. The other prepaid expenses contain amounts we have prepaid for general and administrative purposes and are being expensed as utilized.

In July 2008, we entered into a six month consulting agreement with an unaffiliated third party consultant and issued a two-year warrant to purchase up to 4 million shares of our common stock (with a fair value of $600,000 based on the Black-Scholes Pricing model).

Included in the other prepaid expenses are two bonds (held in the form of a certificate of deposit), in the amount of $10,000 each, required by the State of Colorado for exploration activities, which earn nominal interest. The two bonds should not have to be expensed unless an event requires us to release them to the State. Components of prepaid expenses are as follows:

     
September 30,
  
December 31,
  
   
2008
  
2007
  
Prepaid consulting fees
  
$
361,388
  
$
35,743
  
Other prepaid expenses
    
65,013
    
55,287
  
   
$
426,401
  
$
91,030
  
 
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT

Depreciation expense of the depreciable assets is calculated on a straight-line method over the estimated useful life, presently ranging from two to twenty years. Components of our depreciable assets are as follows:

     
September 30,
  
December 31,
  
   
2008
  
2007
  
Land
  
$
610,423
  
$
—
  
Buildings
    
1,330,902
    
—
  
Equipment
    
199,694
    
115,522
  
Less accumulated depreciation
    
(67,366
)
  
(42,316
)
   
$
2,073,653
  
$
73,206
  
 
9
 
NOTE 7 – MINERAL PROPERTIES AND DEVELOPMENT COSTS

On June 12, 2008, through our wholly owned subsidiary Hunter Bates Mining Corp., a Minnesota corporation, we completed the acquisition of the Bates-Hunter Mine project, located in Central City, Colorado, which included land, buildings, equipment, mining claims and permits, financed through a limited recourse promissory note in the principal amount of $6,750,000 Canadian Dollars ($6,736,785 and $6,732,819 in US Dollars as of June 12, 2008 and September 30, 2008 respectively) and the issuance of 3,620,000 shares of our common stock with a fair value of $0.205 per share (the closing sale price on June 11, 2008) totaling $742,100. We also incurred acquisition costs of $80,698.

The following table summarizes the initial allocation of the purchase price to the mining claims and permits acquired in the transaction. Since the allocation is preliminary and future refinements are likely to be made based on the completion of final valuation studies, we have not recorded any amortization expense nor have we determined that impairment has occurred for the period ended September 30, 2008.

     
Recorded
US $ Value
  
Mining claims (1)
    
4,952,292
  
Mining permits (2)
    
3,343
  
   
$
4,955,635
  

(1) We acquired some surface rights and some mining rights to 22 parcels located in Gilpin County, Colorado.
(2) We acquired various mining, special use, water discharge, stormwater and drilling permits, all of which require renewal at various times.

NOTE 8 – ADVANCE PAYMENTS ON EQUITY INVESTMENTS

Background

We made loans through China Global Mining Resources Limited, a British Virgin Islands corporation and wholly owned subsidiary of ours (“CGMR BVI”) in the aggregate amount of $7 million to acquire interests in certain mining properties located in the PRC. The loans to CGMR BVI were made out of the proceeds from the China Gold, LLC convertible promissory notes (see Note 10). CGMR BVI’s obligations under the loans are secured by its rights to acquire interests in a group of iron ore mining properties and a nickel property. As of September 30, 2008, we only hold the rights or options to acquire PRC properties and therefore continued to record these as advanced payments until such time as we complete a transaction. The nickel property purchase is not proceeding forward for various reasons noted below. 
 
Iron Ore – Nanjing Sudan Mining, Maanshan Xiaonanshan Mining, Mannshan Zhao Yuan Mining

CGMR BVI is a party to that certain Equity and Asset Transfer Heads of Agreement, dated May 4, 2007 (the “Nanjing Heads of Agreement”) with two individual PRC sellers, Maanshan Xiaonanshan Mining Co. Ltd (“XNS”) and Mannshan Zhao Yuan Mining Co. Ltd (“MZM”) (all four collectively, the “Sellers”), pursuant to which CGMR BVI (or its nominee) holds the right to acquire 100% equity of the iron ore processing plant, the Nanjing Sudan Mining Co., Ltd. (“Sudan”) and the related assets of the two iron ore mining properties of XNS and MZM. The Nanjing Heads of Agreement states a purchase price of $66 million (or the RMB equivalent), to be paid in cash or in shares of stock of a listed company, as agreed by the parties. Of this amount, CGMR BVI advanced an aggregate of $5 million to be credited against the final purchase price.
 
10
 
The Nanjing Heads of Agreement called for the completion of definitive documents and the receipt of necessary government approvals before May 30, 2007, but the parties continued to work under a verbal agreement to extend the applicable timetable (mainly due to a difficulty in obtaining the necessary permits), until January 25, 2008, when Wits Basin, CGMR BVI and the Sellers entered into a letter agreement establishing a payment schedule and a revised purchase price relating to Nanjing Heads of Agreement. The letter agreement set the purchase price at 620 million RMB (as of January 25, 2008, approximately $86 million US) and required payments to be made based on verification of permitting issuances. The increase in the purchase price was due primarily to the increase in iron ore spot pricing and the change to denomination in the RMB was due primarily to the continual changes in the exchange rate applicable to the U.S. Dollar.

On March 14, 2008, the parties executed two additional agreements. One of the agreements amended the terms of Nanjing Heads of Agreement to memorialize the closing date for the acquisition to be on or around April 20, 2008. The closing date was subsequently extended again to be no later than July 31, 2008. The second agreement defined that additional assets are to be included in the acquisition. The parties agreed to identify and provide third party appraisal valuations for all of the assets to be acquired, and that the purchase price for the acquisition was further subject to adjustments (increases or decreases) based on the valuation of those assets at closing. This second agreement was necessary since the Sudan and the XNS are actively being operated, and as such, equipment is being added and removed from service as a normal course of business. The parties further agreed to consider a 10% payment in the event of a breach of the Nanjing Heads of Agreement.

On August 11, 2008, pursuant to the terms of Nanjing Heads of Agreement, whereby CGMR BVI could transfer its rights to a nominee, the Sellers entered into three new definitive agreements (specifically, Equity Transfer Agreements) with Maanshan Global Mining Resources Limited (“MGMR”), a limited liability company incorporated under the laws of the PRC. MGMR is a wholly owned subsidiary of CGMR BVI.

(1) Equity Transfer Agreement of the Nanjing Sudan Mining Co., Ltd.

Pursuant to the Equity Transfer Agreement of the Nanjing Sudan Mining Co., Ltd. (“Sudan ETA”), MGMR will acquire 100% of the equity of Sudan for the purchase price of 160 million RMB or the US Dollar equivalent (approximately $23.3 million US at the agreed upon exchange rate equal to the middle day rate issued by the People’s Bank of China for August 11, 2008, or 6.86 RMB to $1.00 US). The purchase price payment will require the use of a Chinese escrow agent and be divided into two installments: 90.8 million RMB within 20 working days of the satisfaction of all conditions precedent identified in the Sudan ETA and 69.2 million RMB 15 days prior to the formal closing. Additionally, Sellers are obligated to make certain capital expenditures relating to Sudan’s plant and equipment, with such expenditures anticipated to be approximately 120 million RMB. The Sellers were to be reimbursed by MGMR provided that a detailed ledger of the costs of such improvements had been provided by September 10, 2008 (which did not occur and such detailed ledger is still forthcoming). The Sudan ETA requires the parties to have an independent accounting firm produce an inventory listing of the assets of Sudan prior to closing. The closing of the transaction is to occur no later than 15 days after the issuance of certain necessary governmental approvals and licenses, which shall occur no later than December 20, 2008.
 
(2) Equity Transfer Agreement of the Maanshan Xiaonanshan Mining Co., Ltd.

Pursuant to the Equity Transfer Agreement of the Maanshan Xiaonanshan Mining Co., Ltd. (“XNS ETA”), MGMR will acquire 100% of the equity of XNS for the purchase price of 130 million RMB or the US Dollar equivalent (approximately $19 million US at the agreed upon exchange rate equal to the middle day rate issued by the People’s Bank of China for August 11, 2008, or 6.86 RMB to $1.00 US). The purchase price payment will require the use of a Chinese escrow agent and be divided into two installments: 73.8 million RMB within 20 working days of the satisfaction of all conditions precedent identified in the XNS ETA and 56.2 million RMB 15 days prior to the formal closing. Additionally, Sellers are obligated to make certain expenditures (mining, natural resource and land use fees) relating to the increase in mine output production and such expenditures over the prior output level will be reimbursed to Sellers by MGMR pursuant to a detailed ledger of the costs of such expenditures. The XNS ETA requires the parties to have an independent accounting firm produce an inventory listing of the assets of XNS prior to closing. The closing of the transaction is to occur no later than 15 days after the issuance of certain necessary governmental approvals and licenses, which shall occur no later than December 20, 2008.
 
11
 
(3) Equity Transfer Agreement of the Mannshan Zhao Yuan Mining Co., Ltd.

Pursuant to the Equity Transfer Agreement of the Mannshan Zhao Yuan Mining Co., Ltd. (“MZM ETA”), MGMR will acquire 100% of the equity of MZM for the purchase price of 80 million RMB or the US Dollar equivalent (approximately $11.7 million US at the agreed upon exchange rate equal to the middle day rate issued by the People’s Bank of China for August 11, 2008, or 6.86 RMB to $1.00 US). The purchase price payment will require the use of a Chinese escrow agent and be divided into two installments: 45.4 million RMB within 20 working days of the satisfaction of all conditions precedent identified in the MZM ETA and 34.6 million RMB 15 days prior to the formal closing. The agreement requires the parties to have an independent accounting firm produce an inventory listing of the assets of MZM prior to closing. The closing of the transaction is to occur no later than 15 days after the issuance of certain necessary governmental approvals and licenses, which shall occur no later than December 20, 2008.

In the event of breach of the terms of the any of the Equity Transfer Agreements by Sellers, they will be required to return the $5 million advance and further pay damages in an amount equal to twice the deposit amount and all direct and indirect expenses relating to the transactions incurred by MGMR, CGMR BVI and Wits Basin. In the event the breach is due to the failure by Sudan, XNS or MZM (collectively the “Iron Ore Properties”) to possess the necessary land use rights to mine their respective properties or otherwise be unable to operate, Sellers and the Iron Ore Properties will be required to return the $5 million advance, pay for additional expenses of MGMR and pay damages in the amount of $33 million. In the event of a breach by MGMR, it will be required to pay Sellers damages in the amount of $33 million.

Pursuant to the terms of the Equity Transfer Agreements, MGMR entered into a consulting agreement with one of the Sellers, Mr. Lu Benzhao, whereby he shall assist MGMR in operating the Iron Ore Properties, assist in obtaining and maintaining necessary governmental approvals and provide strategic advice, among other services. The term of the consulting agreement is for two years, commencing upon the closing of the acquisition of the Sudan and XNS. In consideration of his services, MGMR shall be obligated to pay Mr. Benzhao a consulting fee of approximately $10 million within 1 day of the closing of the Sudan and XNS. Additionally, Mr. Benzhao will be eligible to earn up to $44 million and other equity incentives through the life of the consulting agreement, such cash amount to be paid by December 31, 2009. MGMR can offset against the amount of the final payment on the consulting agreement any breaches by Sellers of any representations and warranties under the Equity Transfer Agreements. Pursuant to the consulting agreement, Mr. Benzhao also agreed to a five-year non-compete and non-solicitation relating to any similar businesses in the Maanshan and Nanjing municipalities and standard confidentiality provisions.

The completion of the acquisition of the Sudan, XNS and MZM will require significant financing. We anticipate that financing will be obtained through the proposed joint venture with London Mining Plc or we will look for other financing arrangements with third parties. In the event these transactions are not completed, there can be no assurance that we will be able to recover the $5 million advance on a timely basis, or at all.

Subsequent to the end of the fiscal quarter, on October 29, 2008, MGMR entered into two amendment agreements with the Sellers, CGMR BVI and China Global Mining Resources Limited, a Hong Kong corporation (“CGMR HK”) setting forth certain amendments to the Sudan and XNS Equity Transfer Agreements, whereby, amongst other amendments, the schedule relating to the timing of purchase price payments for the Equity Transfer Agreements were amended. CGMR HK is a wholly owned subsidiary of Wits Basin. See Note 15 – Subsequent Events for details on these amendments.
 
12
 
Iron Ore – Yun County Changjiang Mining Company Ltd.

CGMR BVI is also party to that certain Equity Transfer Heads of Agreement (“Changjiang Heads of Agreement”) dated May 4, 2007 with three individual sellers, whereby CGMR BVI holds a right to acquire a 95% equity interest in Yun County Changjiang Mining Company Limited (“Changjiang”), which holds licenses to explore for iron ore in the Hubei province of the PRC, for an aggregate of $57 million. The purchase price is to be paid with no more than $15 million and the remainder in shares of stock of a listed company. Two of the sellers, holding an aggregate of 90% of the interest in Changjiang, are parties to the Nanjing Heads of Agreement. Under the Changjiang Heads of Agreement, CGMR BVI is required to arrange for a loan to Changjiang in the amount of $10 million, such loan to be secured by the capital stock of Changjiang. Additionally, in the event CGMR BVI and Changjiang enter into an exclusive supply agreement relating to the purchase by CGMR BVI of iron ore from Changjiang, CGMR BVI will also be required to arrange for an additional loan to Changjiang, the amount of such loan to be determined based on the reserves of iron ore located on the related mining properties, but not to exceed 1.2 billion RMB. In order to begin production at the Changjiang, the involvement of the Chinese government will be required, and as such, the Changjiang is a long-term project. As of September 30, 2008, no funds have been advanced for this project.
 
Nickel – Shaanxi Hua Ze Nickel Smelting Co.

CGMR BVI was a party to that certain Joint Venture Agreement with Shaanxi Hua Ze Nickel Smelting Co. (“Shaanxi Hua Ze”) dated April 14, 2007 (as supplemented on June 6, 2007) and a Supply Contract, pursuant to which the parties contemplated a joint venture relating to the Xing Wang Mine, in which CGMR BVI would purchase 40 metric tons of electrolytic nickel from Shaanxi Hua Ze. CGMR BVI provided a $2 million advance payment, which payment also served as a prepayment of the initial contribution outlined in the Joint Venture Agreement. The consummation of the Joint Venture Agreement would have required an additional investment of approximately 580 million RMB (or approximately $78 million US).

Our inability to meet the agreed upon timetables for contributions and the seller’s inability to obtain the necessary permits for the joint venture created significant delays in forward progress and on July 31, 2008, CGMR BVI entered into (1) a Termination Agreement with Shaanxi Hua Ze whereby it was agreed to terminate the Joint Venture Agreement and (2) a Settlement Agreement whereby the parties terminated the Supply Contract. As part of the Settlement Agreement, Shaanxi Hua Ze agreed to refund to CGMR BVI $1.85 million within 20 business days, representing a partial refund of the $2 million advanced to Shaanxi Hua Ze. For the period ended June 30, 2008, we recorded a $150,000 loss (as exploration expenses) on this advance, in anticipation of the refund.
 
On October 20, 2008, we received the $1.85 million refund and therefore will no longer be providing details on this property.
 
NOTE 9 – DEBT ISSUANCE COSTS

We’ve paid debt issuance costs with respect to legal services relating to promissory notes issued. The following table summarizes the activity of those debt issuance costs:

     
September 30,
  
December 31,
  
   
2008
  
2007
  
Debt issuance costs, net, beginning of period
  
$
16,415
  
$
—
  
Add: additional debt issuance costs
    
67,472
    
52,895
  
Less: amortization of debt issuance costs
    
(60,664
)
  
(36,480
)
Debt issuance costs, net, end of period
  
$
23,223
  
$
16,415
  
 
13
 
NOTE 10 – CONVERTIBLE NOTES PAYABLE

China Gold, LLC

On April 10, 2007, we entered into a Convertible Notes Purchase Agreement (“CNPA”) with China Gold, LLC, a Kansas limited liability company (“China Gold”), whereby we issued and sold the initial convertible note in the amount of $3,000,000, with a purchase discount of $60,000 (“Note 1”). On May 7, 2007, we issued and sold an additional convertible note in the amount of $2,000,000, with a purchase discount of $40,000 (“Note 2”). On June 19, 2007, we entered into Amendment No. 1 to the CNPA, whereby, among other things, China Gold was entitled to a Purchase Right to acquire shares of our common stock at equivalent terms to its rights to otherwise convert the notes; and we issued and sold an additional convertible note in the amount of $4,000,000, with a purchase discount of $80,000 (“Note 3”). On July 9, 2007, we issued and sold an additional convertible note in the amount of $800,000, with a purchase discount of $16,000 (“Note 4” and collectively with Note 1, Note 2 and Note 3, the “Notes”). The Notes bore an initial interest rate of 8.25% per annum and were convertible at the option of China Gold into shares of our common stock, originally at a conversion price of $1.00 per share. As of September 30, 2008, the outstanding Notes principal balance was $9,800,000, with accrued interest of $1,329,657. We received net proceeds of $9,604,000, less $196,000 paid to an affiliate of China Gold in the form of loan discount fees. We have fully amortized the original issue discount using the straight-line method, which approximated the interest method.
 
On October 31, 2007, we entered into a letter agreement with China Gold whereby the parties amended the maturity date on each of the Notes to February 29, 2008. As consideration for the Note extensions, we agreed to reduce the conversion price applicable to the Notes and to the Purchase Right from $1.00 to $0.50 per share. The letter agreement further gave us an option to obtain an extension of the maturity dates of the Notes to May 31, 2008 in consideration for a further reduction in the conversion price and the Purchase Right price from $0.50 to $0.25 per share, which we exercised in February 2008.

On May 14, 2008, we entered into an additional letter agreement with China Gold whereby the parties amended the maturity date of the Notes to July 14, 2008. As consideration for the Notes extensions, we agreed to increase the interest rate applicable to the Notes from 8.25% to 12.25% (effective May 14, 2008) and to reduce the purchase price relating to the Purchase Right from $0.25 to $0.18 per share. On May 14, 2008, the fair value of our common stock was $0.17, therefore, there was no additional charge required to be recorded for the reduction in the conversion price. We received an additional extension until September 12, 2008 without further compensation required by China Gold.

See Note 15 – Subsequent Events for details on a payment and amendments to the Notes.
 
Other Third Party

In December 2007, in consideration of an unsecured loan from an unaffiliated third party, we received net proceeds of $100,000 and issued a convertible promissory note in the principal amount of $110,000. The promissory note had a maturity date of March 31, 2008, and bears interest at a rate of 10% per annum. Furthermore, the note holder has the right to convert any portion of the principal or interest of the outstanding note into shares of our common stock based on a conversion rate equal to $0.20 per share and is considered to be conventional convertible debt under the accounting guidance of Emerging Issues Task Force (“EITF”) 05-2 “The Meaning of ‘Conventional Convertible Debt’ in Issue No. 00-19”. Under the terms of the convertible promissory note and as additional consideration for the loan, we issued a warrant to purchase up to 100,000 shares of our common stock at $0.20 per share with an expiration date of February 12, 2009. The application of the provisions of EITF 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,” and EITF 00-27, “Application of Issue 98-5 to Certain Convertible Instruments” resulted in the proceeds of the loan being allocated based on the relative fair value of the loan and warrants. Lastly, due to the reduced relative fair value assigned to the convertible debt, the debt had a beneficial conversion feature that was “in-the-money” on the commitment date which totaled $27,500. Since the debt was convertible on the issuance date, the entire beneficial conversion amount was charged to interest expense in 2007. The lender provided an extension on the maturity date until September 30, 2008 and as consideration for the extension, we issued a two-year warrant to purchase up to 200,000 shares of our common stock at $0.20 per share and recorded the Black-Scholes pricing model calculation of $20,000 as additional interest expense. On September 30, 2008, the lender again provided an extension on the maturity date until December 31, 2008 and as consideration for the extension, we agreed to make a one-time cash payment of $3,100 in December 2008. As of September 30, 2008, the note has accrued interest of $8,636.
 
14
 
Platinum Senior Secured Convertible Promissory Note

On February 13, 2008, we entered into a Note and Warrant Purchase Agreement (the “Platinum Agreement”) dated February 11, 2008 with Platinum Long Term Growth V, LLC, a Delaware limited liability company (“Platinum”), pursuant to which we issued to Platinum a 10% Senior Secured Convertible Promissory Note in the principal amount of $1,020,000 (the “Platinum Note”). The Platinum Note has a maturity date of February 11, 2009. Platinum has the option to convert the Platinum Note at any time into shares of our common stock at an initial conversion price of $0.18 per share. The conversion price is further subject to weighted-average anti-dilution adjustments in the event we issue equity or equity-linked securities at a price below the then-applicable conversion price. The Platinum Note accrues interest at a rate of 10% per annum, and such interest is payable on a quarterly basis commencing March 31, 2008, with the principal balance of the Platinum Note, together with any accrued and unpaid interest thereon, due and payable on the maturity date. At any time after August 11, 2008, if the seven trailing trading day volume-weighted average price (“VWAP”) of our common stock is less than $0.30 per share (as appropriately adjusted for any splits, combinations or like events relating to the common stock), Platinum shall have the option to: (Option 1) require us to prepay in cash all or any portion of the Platinum Note at a price equal to 115% of the aggregate principal amount to be repaid together with accrued and unpaid interest or (Option 2) demand that all or a portion of the Platinum Note be converted into common stock at a conversion price equal to the lesser of the then-applicable conversion price or 85% of the lowest VWAP for the 10 trading days preceding such demand. Subject to certain conditions, if, between August 11, 2008 and February 11, 2009, our common stock exceeds $0.50 per share for a period of 20 consecutive trading days, we will be entitled to require the holder of the Platinum Note to convert the outstanding balance of the Platinum Note at the applicable conversion price. The number of shares issuable under the Platinum Note is limited to 4.99% of the current aggregate common stock outstanding (approximately 7 million shares at September 30, 2008).
 
Our obligations under the Platinum Note are secured by a first priority security interest in all of our assets with the exception of our equity interests and assets held in CGMR BVI and Wits-China Acquisition Corp., a Minnesota corporation and a wholly owned corporation of ours, to the extent such entities or assets are located in or relate to China and are subject to a lien in favor of China Gold, LLC. Platinum’s security interest includes our equity interest in Gregory Gold Producers, Inc., a Colorado corporation and a wholly owned corporation of ours and our 35% equity ownership in Kwagga Gold (Barbados) Limited (the FSC Project). We also delivered to Platinum a guaranty of Gregory Gold Producers.
 
Pursuant to the Platinum Agreement, we issued Platinum a five-year warrant to purchase up to 2.5 million shares of our common stock at an exercise price of $0.35 per share, which contains a cashless exercise provision beginning any time after August 11, 2008, and further provides for a weighted-average anti-dilution adjustment to the exercise price in the event we issue equity or equity-linked securities at a price below the then-applicable exercise price.

As additional consideration pursuant to the terms of the Platinum Agreement, we agreed to accelerate the vesting of a previously issued warrant (to MHG Consultant LLC, an affiliate of Platinum) to purchase up to 3 million shares of our common stock that was transferred to Platinum at closing, such that the remaining 2.25 million unvested shares underlying such warrant became immediately vested and exercisable. We provided Platinum piggy-back registration rights relating to the shares of common stock issuable upon conversion of the Note and exercise of the warrants. The Platinum Agreement and other transaction documents contain standard representations, warranties, and covenants of the parties.
 
15
 
Since Platinum has the right to convert any portion of the principal or interest of the outstanding note into shares of our common stock at any time after the issuance date, it is considered to be conventional convertible debt under the accounting guidance of Emerging Issues Task Force (“EITF”) 05-2 “The Meaning of ‘Conventional Convertible Debt’ in Issue No. 00-19.” The application of the provisions of EITF 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,” and EITF 00-27, “Application of Issue 98-5 to Certain Convertible Instruments” resulted in the proceeds of the loan being allocated based on the relative fair value of the debt and warrants. Using the Black-Scholes pricing model to value the 2.5 million warrant issued with the loan and the 2.25 million warrant transferred from MHG to Platinum during the three month period ended March 31, 2008, the relative fair value allocated to the warrants and recorded as a debt discount was $523,367. Furthermore, due to the reduced relative fair value assigned to the convertible debt, the debt had a beneficial conversion feature that was “in-the-money” on the commitment date which totaled $496,633. Since the debt was convertible on the issuance date, the entire beneficial conversion amount was charged to interest expense during the three month period ended March 31, 2008. The remaining original issue discount allocated to the fair value of the warrants is being amortized over the life of the Platinum Note using the straight-line method, which approximates the interest method.

On August 27, 2008, Platinum gave notice to convert $50,000 of the principal balance into 538,184 shares of our common stock. The conversion price was calculated to be $0.092905 per share on August 27, 2008 (pursuant to Option 2 that became effective any time after August 11, 2008 as described above). Because the reset feature occurred resulting in additional shares being issued, an additional beneficial conversion charge of $52,081 was recorded as interest expense and credited to additional paid in capital.

As of September 30, 2008, the principal balance is $970,000 with accrued interest of $25,391.
 
London Mining Plc

On August 22, 2008, we entered into a financing arrangement with London Mining, Plc, a United Kingdom corporation (“LM”), pursuant to which we issued to LM a Convertible Promissory Note in the principal amount of $1,000,000 (the “LM Note”). The LM Note is convertible at the option of LM at any time into shares of our common stock at a conversion price of $0.20 per share (as appropriately adjusted for any splits, combinations or like events relating to the common stock). There was no beneficial conversion charge as the Company's stock value on the commitment date was $0.17. Our obligations under the LM Note are unsecured and the LM Note accrues interest at a rate of 8% per annum with such interest payable with the principal balance on the earlier of (1) the closing of the proposed acquisition of the Iron Ore Properties or (2) August 22, 2009. On August 27, 2008, we received an initial $500,000 advance and on September 19, 2008, we received an additional $300,000 advance. As of September 30, 2008, the outstanding principal balance is $800,000 with accrued interest of $4,457.
 
Summary of Convertible Notes Payable

The following table summarizes all of the convertible note balances:

Original gross proceeds received in 2007
  
$
9,910,000
  
Less: original issue discount at time of issuance of notes
    
(206,000
)
Less: principal payments
    
—
  
Less: value assigned to beneficial conversion feature and warrants
    
(40,224
)
Add: amortization of original issue discount and beneficial conversion feature
    
179,507
  
Balance at December 31, 2007
    
9,843,283
  
Add: Gross proceeds of 2008
    
1,820,000
  
Less: value assigned to original beneficial conversion feature and warrants
    
(1,020,000
)
Less: value assigned to additional beneficial conversion feature and warrants
    
(72,081
)
Add: amortization of original issue discount and beneficial conversion feature
    
965,066
  
Less: conversion of principal
    
(50,000
)
Less: principal payments
    
—
  
Balance at September 30, 2008
  
$
11,486,268
  
 
The total principal balance as of September 30, 2008 is $11,680,000.
16
 
NOTE 11 – SHORT-TERM NOTES PAYABLE
 
In June 2008, in consideration of an unsecured loan from Shirley Co. LLC, a Colorado limited liability company, we issued a promissory note in the principal amount of $50,000 to Shirley Co. The promissory note had an original maturity date of August 8, 2008, and bears interest at a rate of 2% per annum. Under the terms of the promissory note and as additional consideration for the loan, we issued a two-year warrant to purchase up to 50,000 shares of our common stock at $0.20 per share. The proceeds of the unsecured loan were allocated based on the relative fair value of the principal amount and the warrant granted in accordance with APB 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants.” The fair value allocated to the warrant was $7,139 based on the Black-Scholes pricing model and was fully amortized by August 8, 2008. The lender provided an extension on the maturity date until December 31, 2008 and as consideration for the extension, we issued a two-year warrant to purchase up to 100,000 shares of our common stock at $0.15 per share and recorded the Black-Scholes pricing model calculation of $11,000 which was expensed as additional interest expense. As of September 30, 2008, the note has accrued interest of $310.

In June 2008, in consideration of an unsecured loan from Pioneer Holdings, LLC, a Kansas limited liability company (“Pioneer”), we issued a promissory note in the principal amount of $160,000 to Pioneer. The zero interest promissory note had a maturity date of September 4, 2008. Under the terms of the promissory note and as additional consideration for the loan, we issued a two-year warrant to purchase up to 160,000 shares of our common stock at $0.15 per share. The proceeds of the unsecured loan were allocated based on the relative fair value of the principal amount and the warrant granted in accordance with APB 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants.” The fair value allocated to the warrant was $22,297 based on the Black-Scholes pricing model and was fully amortized by September 4, 2008.

In July 2008, in consideration of an additional unsecured loan from Pioneer, we issued a promissory note in the principal amount of $100,000 to Pioneer. The zero interest promissory note had a maturity date of October 10, 2008. Under the terms of the promissory note and as additional consideration for the loan, we issued a two-year warrant to purchase up to 100,000 shares of our common stock at $0.15 per share. The proceeds of the unsecured loan were allocated based on the relative fair value of the principal amount and the warrant granted in accordance with APB 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants.” The fair value allocated to the warrant was $9,674 based on the Black-Scholes pricing model and is being amortized over the term of the debt.

On July 10, 2008, we entered into a new 90-day 10% Senior Secured Promissory Note with Platinum Long Term Growth V, LLC, a Delaware limited liability company (“Platinum”), in which we issued a promissory note in the principal amount of $110,000 with an original maturity date of October 8, 2008 and we received net proceeds of $100,000. The promissory note is secured by a continuing first priority security interest in all of our assets with the exception of our equity interests and assets, to the extent such entities or assets are located in or relate to the Iron Ore Properties and are subject to a lien in favor of China Gold, LLC (See Note 10 regarding Platinum’s February 11, 2008 10% Senior Secured Convertible Promissory Note of $1,020,000). As of September 30, 2008, the note has accrued interest of $2,490. The promissory note was subsequently extended to December 8, 2008.

In July 2008, Gregory Gold Producers entered into an unsecured promissory note in the principal amount of $20,000, which bears interest of 10% per annum and a maturity date of December 31, 2008. The lender is a member of the board of directors for Gregory Gold.
 
In August 2008, Pioneer made a direct $25,000 payment to one of the investment banking companies we have engaged in negotiating the financing of the Iron Ore Properties and our proposed joint venture agreement with London Mining. We agreed with Pioneer to pay interest of 12.25% on this direct payment and such repayment was a due on demand arrangement.
 
17
 
The following table summarizes the short-term notes payable balance (total principal of $465,000):

Balance at December 31, 2007
  
$
234,220
  
Add: Gross proceeds of 2008
    
465,000
  
Less: original issue discount at time of issuance
    
(10,000
)
Less: value assigned to warrants
    
(50,110
)
Add: amortization of original issue discount
    
83,751
  
Less: principal payments
    
(260,000
)
Balance at September 30, 2008
  
$
462,861
  
 
See Note 15 – Subsequent Events for details on the satisfaction of the $160,000, $100,000 and $25,000 Pioneer loans described above.
 
NOTE 12 - LONG-TERM RECOURSE NOTE PAYABLE
 
On June 12, 2008, the Company and Hunter Bates Mining Corp., a Minnesota corporation and a wholly owned subsidiary of ours, completed the acquisition of the Bates-Hunter Mine project, located in Central City, Colorado, which included land, buildings, equipment, mining claims and permits, financed through a limited recourse promissory note of Hunter Bates payable to Mr. Otten in the principal amount of $6,750,000 Canadian Dollars. The note requires Hunter Bates to pay to Mr. Otten $250,000 Canadian on or before December 1, 2008 and commencing on April 1, 2010, a quarterly installment of accrued interest plus a Production Revenue Payment (as defined in the note). The note is interest-free until January 1, 2010, and from such date shall bear interest at a rate of 6% per annum, with a maturity date of December 31, 2015. Hunter Bates’ payment of the Note is secured by a deed of trust relating to the all of the property acquired in favor of Gilpin County Public Trustee for the benefit of Mr. Otten. The note balance reflects the discount (originally $580,534) relating to the recourse note being non-interest bearing until the first payment in 2010.

Terms of the note in US Dollars as of September 30, 2008 are as follows:

Principal
  
$
6,736,785
  
Less: discount for imputed interest
     (468,940 )
Plus unrealized foreign currency loss
     3,966  
Balance
     6,271,811  
Less: current portion
     (249,510 )
Long-term portion
  
$
6,022,301
  
NOTE 13 - SHAREHOLDERS’ EQUITY
 
Common Stock Issuances

During the three months ended September 30, 2008: (1) we issued an aggregate of 400,000 shares of our unregistered common stock to two unaffiliated third party consultants for services in public and investor relations and (2) we issued 4,400,000 shares through the exercise of warrants for cash and received net proceeds of $100,000.

During the three months ended September 30, 2008, Platinum (See Note 10) received an aggregate of 3,569,383 shares of our common stock as follows: (1) we issued Platinum 260,268 shares in lieu of its interest payment due on June 30, 2008 under its senior secured convertible promissory note (valued at $52,053); (2) Platinum exercised certain warrants and received 2,770,931 shares of our common stock by surrendering 216,876 of its available shares (via the cashless exercise provision) to pay for the exercise; and (3) Platinum converted $50,000 of its senior secured convertible promissory note into 538,184 shares.
 
Stock Based Compensation

On January 1, 2006, we adopted Financial Accounting Standards Board (“FASB”) Statement No. 123(R), “Share-Based Payment,” which requires the fair value of share-based payments, including grants of employee stock options and employee stock purchase plan shares, to be recognized in the income statement based on their estimated fair values unless a fair value is not reasonably estimable. Our condensed consolidated financial statements as of and for the three and nine months ended September 30, 2008 and 2007, reflect the impact of SFAS 123(R). SFAS 123(R) requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our condensed consolidated statements of operations.
 
Option Grants

We have five stock option plans: the 1999 Stock Option Plan, the 2000 and 2003 Director Stock Option Plans, the 2001 Employee Stock Option Plan and the 2007 Stock Incentive Plan. Stock options, stock appreciation rights, restricted stock and other stock and cash awards may be granted under the plans. In general, options vest over a period ranging from immediate vesting to five years and expire 10 years from the date of grant. Additionally, we have two non-plans, each titled “Non-Plan Stock Options” which are outside of the five plans listed above. As of September 30, 2008, an aggregate of 21,250,000 shares of our common stock may be granted under our plans and non-plans as determined by the board of directors, of which 1,664,000 are available for future issuances.
 
18
 
We use the Black-Scholes pricing model as a method for determining the estimated fair value for employee stock awards under SFAS 123(R). Compensation expense for employee stock awards is recognized on a straight-line basis over the vesting period of service awards. For performance-based awards, we recognize the expense when the performance condition is probable of being met. The adoption of SFAS 123(R) also requires certain changes to the accounting for income taxes and the method used in determining diluted shares, as well as additional disclosure related to the cash flow effects resulting from share-based compensation.

There were no options granted during the three months ended September 30, 2008. Relating to the options granted during the other periods of 2008, the fair value of each option grant was estimated on the date of grant using the Black-Scholes pricing model and the weighted average assumptions used in these calculations are summarized below:

   
2008
  
2007
  
Weighted average fair value of options granted
  
$0.20
  
$0.75
  
Risk-free interest rate
  
3.13%
  
4.65%
  
Expected volatility factor
  
150% - 151%
  
156% - 160%
  
Expected dividend
  
—
  
—
  
Expected option term
  
10 years
  
10 years
  

We recorded $423,944 and $212,402 related to employee stock compensation expense for the three months ended September 30, 2008 and 2007, respectively and $1,641,211 and $937,677 for the nine months ended September 30, 2008 and 2007, respectively. All stock compensation expense is included in general and administrative expense. There was no tax benefit from recording this non-cash expense due to our income tax valuation allowance and due to a portion of the options being incentive stock options. The compensation expense had no impact on the loss per share for the three months ended September 30, 2008 and a $0.01 impact on the loss per share for the nine months ended September 30, 2008. As of September 30, 2008, approximately $2,951,000 of total unrecognized compensation expense is expected to be recognized over a period of approximately three years.
 
The following table summarizes information about our stock options:

  
  
Number of
Options
  
Weighted
Average
Exercise
Price
  
Options outstanding - December 31, 2007
    
13,659,500
  
$
0.53
  
               
Granted
    
3,000,000
    
0.20
  
Canceled or expired
    
(16,000
)
  
4.25
  
Exercised
    
—
    
—
  
Options outstanding - September 30, 2008
    
16,643,500
  
$
0.47
  
               
Options exercisable – September 30, 2008
    
8,443,500
  
$
0.47
  
               
Weighted average fair value of options granted during the nine months ended September 30, 2008
        
$
0.20
  
Weighted average fair value of options granted during the nine months ended September 30, 2007
        
$
0.62
  
 
19
 
The following tables summarize information about our stock options outstanding at September 30, 2008:

     
Options Outstanding
  
Range of
Exercise Prices
  
Number
Outstanding
  
Weighted
Remaining
Contractual
Life
  
Weighted
Average
Exercise
Price
  
Aggregate
Intrinsic
Value(1)
  
$0.15 to $0.30
    
7,025,000
    
8.1 years
  
$
0.23
  
$
—
  
$0.31 to $0.43
    
4,850,000
    
6.9 years
  
$
0.38
  
$
—
  
$0.56 to $1.02
    
4,706,000
    
5.2 years
  
$
0.87
  
$
—
  
$2.75 to $3.00
    
62,500
    
2.5 years
  
$
2.84
  
$
—
  
$0.15 to $3.00
    
16,643,500
    
6.9 years
  
$
0.47
  
$
—
  

   
Options Exercisable
  
Range of
Exercise Prices
  
Number
Exercisable
  
Weighted
Remaining
Contractual
Life
  
Weighted
Average
Exercise
Price
  
Aggregate
Intrinsic
Value(1)
  
$0.15 to $0.30
    
2,725,000
    
7.8 years
  
$
0.23
  
$
—
  
$0.31 to $0.43
    
2,950,000
    
6.9 years
  
$
0.38
  
$
—
  
$0.56 to $1.02
    
2,706,000
    
3.9 years
  
$
0.76
  
$
—
  
$2.75 to $3.00
    
62,500
    
2.5 years
  
$
2.84
  
$
—
  
$0.15 to $3.00
    
8,443,500
    
5.8 years
  
$
0.47
  
$
—
  

(1) The aggregate intrinsic value represents the difference between the closing stock price on September 30, 2008 and the exercise price, multiplied by the number of in-the-money options that would have been received by the option holders had all option holders exercised their options on September 30, 2008. No options were exercised during the three and nine month periods ended September 30, 2008 and 2007.
 
Stock Purchase Warrants

For warrants issued to non-employees in exchange for services, we account for such warrants in accordance with EITF Issue No. 96-18 “Accounting For Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services.” We value the fair value of the equity instrument using the Black-Scholes pricing model unless the value of the services is more reliably measurable.

Using the Black-Scholes pricing model, the following assumptions were used to value the fair value of warrants granted during the three months ended September 30, 2008: dividend yield of 0%, risk-free interest rate from 2.0% to 2.7%, expected life equal to the contractual life between two and five years, and volatility of approximately 148%.

In July 2008, we entered into a consulting agreement for investor and public relations with an unaffiliated third party and issued a two-year warrant to purchase up to 4 million shares of our common stock at $0.01 per share. The fair value of the warrant totaled $600,000 using the Black-Scholes pricing model. The consultant exercised all 4 million in the same month for $40,000.

In July 2008, in consideration of a $100,000 loan with an unaffiliated third party, we issued a two-year warrant to purchase up to 100,000 shares of our common stock at $0.15 per share, which includes a cashless exercise provision. The value of the warrant totaled $10,000 using the Black-Scholes pricing model.
 
20
 
In August 2008, in consideration of extensions on maturity dates from various note holders, we issued (1) a warrant to purchase up to 200,000 shares of our common stock at $0.20 per share for the maturity date extension on a $110,000 loan and (2) a warrant to purchase up to 100,000 shares of our common stock at $0.15 per share for the maturity date extension on a $50,000 loan. The aggregate value of the warrants totaled $31,000 using the Black-Scholes pricing model.

The following table summarizes information about the Company’s warrants:

 
  
Number
  
Weighted
Average
Exercise
Price
  
Range of
Exercise Price
  
Outstanding at December 31, 2007
    
27,430,238
  
$
0.53
  
$
0.01 – $7.15
  
                     
Granted
    
10,285,000
    
0.15
    
0.01 – 0.35
  
Cancelled or expired
    
(3,320,000
)
  
0.58
    
0.12 – 1.00
  
Exercised (1)
    
(10,037,264
)
  
0.02
    
0.01 – 0.15
  
Outstanding at September 30, 2008
    
24,357,974
  
$
0.56
  
$
0.01 – $7.15
  
                     
Warrants exercisable at September 30, 2008
    
24,357,974
  
$
0.56
  
$
0.01 – $7.15
  

(1) Pursuant to a cashless exercise provision, Platinum surrendered 216,876 of its available shares to pay for its cashless exercise of 2,770,931 shares, with an exercise price of $0.01per share.
 
NOTE 14 – EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. This guidance states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities and should be included in the computation of earnings per share using the two-class method outlined in SFAS No. 128, Earnings per Share. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. The adoption of this new guidance on January 1, 2009 should not have an effect on our reported earnings per share.

In April 2008, the FASB issued FASB Staff Position (FSP) No. FAS 142-3, Determination of the Useful Life of Intangible Assets. This guidance addresses the determination of the useful life of intangible assets which have legal, regulatory or contractual provisions that potentially limit a company’s use of an asset. Under the new guidance, a company should consider its own historical experience in renewing or extending similar arrangements. We are required to apply the new guidance to intangible assets acquired after December 31, 2008.

In February 2008, the FASB issued FASB Staff Position FAS 157-2 (“FSP FAS 157-2”) “ Effective Date of FASB Statement No. 157” which delays the effective date of SFAS No. 157 for non-financial assets and non-financial liabilities that are recognized or disclosed in the financial statements on a nonrecurring basis to fiscal years beginning after November 15, 2008. These non-financial items include assets and liabilities such as reporting units measured at fair value in a goodwill impairment test and non-financial assets acquired and non-financial liabilities assumed in a business combination. The Company has not applied the provisions of SFAS No. 157 to its non-financial assets and non-financial liabilities in accordance with FSP FAS 157-2.
 
21
 
In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R) retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. In general, the statement 1) broadens the guidance of SFAS No. 141, extending its applicability to all events where one entity obtains control over one or more other businesses, 2) broadens the use of fair value measurements used to recognize the assets acquired and liabilities assumed, 3) changes the accounting for acquisition related fees and restructuring costs incurred in connection with an acquisition, and 4) increases required disclosures. We are required to apply SFAS No. 141(R) prospectively to business combinations for which the acquisition date is on or after January 1, 2009. Earlier application is not permitted.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements – an amendment of Accounting Research Bulletin No. 51” (“SFAS No. 160”).  SFAS No. 160 will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity. This new consolidation method will significantly change the accounting for transactions with minority interest holders. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008, and will be adopted by us in the first quarter 2009.  SFAS No. 160 is currently not expected to have a material effect on the Company’s results of operations, cash flows or financial position.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS No. 161”). SFAS No. 161 amends and expands the disclosure requirements of SFAS No. 133 with the intent to provide users of financial statements with an enhanced understanding of: 1) how and why an entity uses derivative instruments; 2) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations and 3) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company has not assessed the impact of the adoption of SFAS No. 161 on its consolidated financial statements as of the date of this filing.

NOTE 15 – SUBSEQUENT EVENTS

The Company’s Board of Directors authorized an extension for two warrants to purchase shares of the Companies common stock, both originally issued to Stephen King currently our CEO (who at that time, served only as a member of the board) and subsequently assigned to his spouse. Each warrant represents the right to purchase up to one million (1,000,000) shares with an exercise price of $0.15 per share. The warrants had expiration dates of October 13, 2008 and November 4, 2008 and each was extended for two full years to October 13, 2010 and November 4, 2010, respectively. No other modifications were authorized.

On October 10, 2008, Platinum Long Term Growth V, LLC gave notice to convert an additional $100,000 of the principal balance of their 10% Senior Secured Convertible Promissory Note (See Note 10) into 1,100,533 shares of our common stock. Pursuant to the terms of the convertible promissory note, the conversion price was adjusted from $0.18 to $0.090865 per share, which was 85% of the lowest VWAP for the 10 trading days preceding October 10, 2008.

On October 20, 2008, we received the $1.85 million refund pursuant to the Termination and Settlement Agreements with Shaanxi Hua Ze Nickel Smelting Co. (See Note 8).

On October 23, 2008, we repaid the three loans from Pioneer Holdings, LLC (See Note 11) in the aggregate amount of $296,865 from the proceeds of the $1.85 million Shaanxi Hua Ze Nickel refund. This payment included $11,865 of interest. Additionally, we entered into negotiations with Pioneer for extensions to the maturity dates on the $160,000 and $100,000 loans and as consideration for the extensions, we agreed to amend the terms of the loans, such that an interest rate of 12.25% would be retroactively applied to the $285,000 principal.

On October 23, 2008, we paid accrued interest of $1,441,000 (from the proceeds of the $1.85 million Shaanxi Hua Ze Nickel refund) towards China Gold, LLC’s four convertible promissory notes of $9.8 million (See Note 10).
 
22
 
On October 27, 2008, we received the final $200,000 advance pursuant to the $1 million Convertible Promissory Note financing arrangement with London Mining, Plc (See Note 10).

On October 28, 2008, in consideration of a secured loan from China Gold, LLC, we issued a secured promissory note in the principal amount of $441,000 to China Gold. The secured promissory note has a maturity date of the earlier of (i) December 31, 2008 or (ii) such time as the Company completes it proposed acquisitions of certain iron ore properties in the PRC and bears interest at a rate of 12.25% per annum. Under the terms of the secured promissory note and as additional consideration for the loan, we issued a two-year warrant to purchase up to 882,000 shares of our common stock at $0.11 per share. The note is secured pursuant to the terms of the Security Agreement dated June 19, 2007 with China Gold (filed as Exhibit 10.3 to our 8-K filed on June 25, 2007).

On October 29, 2008, Maanshan Global Mining Resources Limited (MGMR) entered into two amendment agreements with the Sellers of the Sudan and XNS iron ore properties, China Global Mining Resources Limited (CGMR BVI) and China Global Mining Resources Limited, a Hong Kong corporation (“CGMR HK”) setting forth certain amendments to the Sudan and XNS Equity Transfer Agreements (See Note 8). CGMR HK is a wholly owned subsidiary of Wits Basin.

(1) Assignment and Amendment Agreement on the Equity Transfer of Sudan

Pursuant to that certain Assignment and Amendment Agreement on the Equity Transfer of Sudan dated October 29, 2008, the parties agreed to (1) assign the purchase rights of the Sudan ETA to CGMR HK and (2) amend the payment schedule such that only 40 million RMB ($5,830,904 US) is required to be deposited with the escrow agent three days prior to closing, with the final 120 million RMB ($17,492,711 US) to be paid within 90 days of closing. However, should deficiencies of available cash from operations exist, the final 120 million RMB payment can be extended out another 60 days and will then accrue interest at a rate of 8 percent. Pursuant to the terms of the Sudan ETA, CGMR HK is further entitled to transfer its right to another affiliate.

Completion of the transaction is subject to a number of conditions, including, without limitation, obtaining and transferring to CGMR HK necessary government approvals and permits, Sudan’s satisfaction of an annual inspection, approval of Sudan’s two shareholders and executive director, satisfaction by Sudan and Sellers’ of applicable taxes and certain other liabilities, and other standard closing conditions.

(2) Supplementary and Amendment Agreement on the Equity Transfer of XNS

Pursuant to that certain Supplementary and Amendment Agreement on the Equity Transfer of XNS dated October 29, 2008, the parties agreed to (1) assign the purchase rights of the XNS ETA to CGMR HK and (2) amend the payment schedule such that the entire 130 million RMB ($18,950,438 US) is required to be deposited with the escrow agent three days prior to closing. Pursuant to the terms of the XNS ETA, CGMR HK is further entitled to transfer its right to another affiliate.

Completion of the transaction is subject to a number of conditions, including, without limitation, obtaining and transferring to CGMR HK necessary government approvals and permits, XNS’s satisfaction of an annual inspection, approval of XNS’s two shareholders and executive director, satisfaction by XNS and Sellers’ of applicable taxes and certain other liabilities, and other standard closing conditions.

Effective with these October 29, 2008 amendments of the Sudan ETA and the XNS ETA, further negotiations on the MZM will be postponed until after the proposed formal closings for Sudan and XNS.
 
23
 
On November 10, 2008, the Company and China Gold, LLC entered into a second amendment to that certain Convertible Notes Purchase Agreement, whereby the four original notes were cancelled and we issued to China Gold an Amended and Restated Promissory Note (the “Amended Note”) in the aggregate principal amount of $9,800,000, which amongst other amendments to the terms of the four notes, terminated the conversion feature and terminated the Purchase Rights. In consideration thereof, we have issued China Gold a five-year warrant to purchase up to 39,200,000 shares of the our common stock at an exercise price of $0.15 per share. The Amended Note interest rate is 12.25% per annum. The principal and unpaid interest is due and payable at the earlier of (1) China Gold’s demand at any time on or after December 31, 2008 or (2) to the extent funds are available, upon the closing of our proposed acquisition of the Sudan and XNS iron ore properties.

On November 12, 2008, we entered into a bridge financing arrangement with Hawk Uranium, Inc. (“Hawk”), whereby Hawk would loan the Company $60,000 in consideration of a 90-day promissory note, which bears interest at a rate of 10%. The proceeds of the financing are being expressly used to maintain the permits and land claims of the FSC Project in South Africa. The Company’s chairman, Vance White, is an officer and director of Hawk Uranium. In consideration of the loan, we will be issuing a 5-year warrant to purchase up to 250,000 shares of our common stock at an exercise price of $0.125 per share to Hawk.
 
24
 
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations

The following management discussion and analysis of financial condition and results of operations should be read in connection with the accompanying unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this report and the audited consolidated financial statements and notes thereto included in the Company’s Form 10-KSB for the fiscal year ended December 31, 2007.

OVERVIEW

We are a minerals exploration and development company based in Minneapolis, Minnesota. As of September 30, 2008, we own a past producing mine in Colorado (Bates-Hunter Mine) and hold interests in mineral exploration projects in South Africa (FSC) and Mexico (Vianey). The following is a summary of our projects:

On June 12, 2008, we completed the acquisition of the Bates-Hunter Mine, a prior producing gold mine located in Central City, Colorado, which included real property, mining claims, permits and equipment (the “Bates-Hunter”). We consummated the acquisition by transferring our right to purchase the Bates-Hunter to a newly created wholly owned subsidiary of ours, the Hunter Bates Mining Corp., pursuant to a formal asset purchase agreement dated September 20, 2006, in which we issued a limited recourse promissory note for $6,750,000 Canadian Dollars and issued 3,620,000 shares of our common stock. Through a defined work program, including the dewatering of the existing mine shaft, we utilized Canadian drilling contractors to perform over 4,300 feet in surface drilling, which has provided detailed data for the creation of a 3-D map of the Bates-Hunter region. As of the date of this Report, we have concluded the drilling program and management is working on a revised work program and will release details after its assessment has been completed.

We hold a 35 percent equity interest in Kwagga Gold (Barbados) Limited (“Kwagga Barbados”), which, through its wholly owned subsidiary Kwagga Gold (Proprietary) Limited, holds mineral exploration rights in South Africa. This project is referred to as the “FSC Project” and is located adjacent to the historic Witwatersrand Basin. The last completed drillhole on the FSC Project occurred in 2005. On December 12, 2007, we entered into an agreement with AfriOre International (Barbados) Limited (“AfriOre”), the holder of the other 65 percent of Kwagga Barbados, whereby we may acquire all of AfriOre’s interest of Kwagga Barbados. On March 3, 2008, we entered into a letter of intent with Communications DVR Inc. (“DVR”), a capital pool company listed on the TSX Venture Exchange (TSXV: DVR.P), whereby it is anticipated that DVR will acquire the aforementioned 65 percent of Kwagga Barbados in exchange for 22 million common shares of DVR. Currently, no exploration activities are being conducted at the FSC Project.

On October 31, 2007, we executed an amendment to the formal joint venture agreement with Journey Resources Corp., a corporation formed under the laws of the Province of British Columbia (“Journey”) and Minerales Jazz S.A. De C.V., a corporation duly organized pursuant to the laws of Mexico and a wholly owned subsidiary of Journey. Pursuant to the terms of the amendment, we own a 50 percent undivided beneficial interest in “located mineral claims” in the property known as the Vianey Mine Concession located in the State of Guerrero, Mexico (“Vianey”). In addition to located mineral claims, our interest includes all surface rights, personal property and permits associated with Vianey and all other claims, leases and interests in minerals acquired within two kilometers of the external perimeter of Vianey.  All work being performed at Vianey is under the supervision of Journey, which mainly consists of cleaning the site for a future work program.

Additionally, we have advanced $6,850,000 related to two equity investments to acquire interests in the following mining projects located in the People’s Republic of China (the “PRC”): (1) a nickel mining operation and (2) the iron ore mining properties of Nanjing Sudan Mining Co., Ltd, Xiaonanshan Mining Co., Ltd and Mannshan Zhao Yuan Mining Co. Ltd. On October 20, 2008, we received a $1.85 million refund as final payment for the termination of our interests held in the nickel mine.
 
25
 
As of September 30, 2008, we possess only a few pieces of equipment and we employ insufficient numbers of personnel necessary to actually explore and/or mine for minerals. Therefore, we are substantially dependent on the third party contractors we engage to perform such operations.

In the future, we will continue to seek new areas for exploration and the rights that would allow us to be either owners or participants. These rights may take the form of direct ownership of the mineral exploration property like the Bates-Hunter or, like our interest in Kwagga Barbados, these rights may take the form of ownership interests in entities holding exploration rights. Furthermore, although our initial focus was in gold exploration projects, future projects will involve other minerals.

Our principal office is located at 900 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota 55402-8773. Our telephone number is (612) 349-5277 and our Internet address is www.witsbasin.com. Our securities trade on the Over-the-Counter Bulletin Board under the symbol “WITM.”

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007.

Revenues

We had no revenues from continuing operations for the three and nine months ended September 30, 2008 and 2007. Furthermore, we do not anticipate having any future revenues until an economic mineral deposit is discovered or unless we make further acquisitions or complete other mergers or joint ventures with business models that produce such results.
 
Operating Expenses

General and administrative expenses were $2,225,700 for the three months ended September 30, 2008 as compared to $1,256,998 for the same period in 2007. Of the expenses reported in 2008, approximately $1,001,000 relates to our due diligence with respect to potential acquisitions of China mining properties (travel and visa requirements, site visits and significant costs with consultants), $466,000 relates to public relations services, consulting fees, shareowner services, and $424,000 relates to stock based compensation expenses. General and administrative expenses were $5,700,109 for the nine months ended September 30, 2008 as compared to $4,030,700 for the same period in 2007. Of the expenses reported in 2008, approximately $1,716,000 relate to our due diligence with respect to potential acquisitions of China mining properties (travel and visa requirements, site visits and significant costs with consultants), $1,641,000 relates to stock based compensation expenses, and $1,274,000 relates to public relations services, consulting fees, shareowner services. Of the expenses reported in 2007, the majority related primarily to our direct expenses relating to the Easyknit merger, the acquisition of China mining projects and consulting fees, which included direct mailing and emailing campaigns, minerals trade publications, research analysts, public relations, luncheons and special invite events and improvements to our website. We anticipate that our operating expenses will increase during the year due to our continued plans for exploration and acquisition financing.

Exploration expenses were $302,653 for the three months ended September 30, 2008 as compared to $519,391 for the same period in 2007. Exploration expenses were $1,785,178 for the nine months ended September 30, 2008 as compared to $1,795,512 for the same period in 2007. Exploration expenses for 2008 relate primarily to the expenditures at the Bates-Hunter Mine and the $150,000 loss we recorded relating to the Shanxi Hua Ze Nickel Smelting Co., a nickel mining operation, located in the PRC. We anticipate the rate of exploration spending will decrease during the remainder of 2008 since we have temporarily ceased the surface and under ground drilling programs at the Bates-Hunter and await further details for exploratory work at Vianey. Exploration expenses for 2007 relate to the expenditures on the Bates-Hunter and Vianey projects, which include the issuance of 2,100,000 shares of common stock valued at $560,000 to obtain the rights to the Vianey project.
 
26
 
Depreciation and amortization expenses were $26,431 for the three months ended September 30, 2008 as compared to $4,127 for the same period in 2007. Depreciation and amortization expenses were $38,711 for the nine months ended September 30, 2008 as compared to $11,923 for the same period in 2007. The increase in depreciation expense for the three months ended September 30, 2008, is mainly due to our closing on the Bates-Hunter Mine property in June 2008 and the associated increase of property, plant and equipment necessary to operate and work the project. We anticipate that depreciation expense will continue at the elevated rate for the near term until we can do a complete analysis of the assets acquired. Depreciation of these assets is calculated on a straight-line method.

For the nine months ended September 30, 2007, we had incurred $1,127,859 in costs for the uncompleted and terminated merger with Easyknit Enterprises Holdings Limited. These costs represented fees charged by our Hong Kong and US attorneys and various Hong Kong advisors. In November 2007, we terminated the merger and on December 18, 2007, we entered into a Settlement Agreement and General Release with Easyknit, whereby the parties agreed to dismiss with prejudice and release each other from all claims, counterclaims and defenses.

On September 19, 2007, we sold all of our rights and claims in the Canadian Holdsworth Project for $50,000 Canadian ($47,260 US).

For the nine months ended September 30, 2008, we recorded $12,362 in losses related to certain assets that became damaged and un-repairable, which were being utilized for de-watering the Bates-Hunter Mine site.
 
Other Income and Expenses

Our other income and expense consists of interest income, interest expense and other expense. Interest income for the three months ended September 30, 2008 was $168 compared to $685 for the same period in 2007. Interest income for the nine months ended September 30, 2008 was $600 compared to $4,132 for the same period in 2007. During September 2007, we sold all of the shares of MacDonald Mines Exploration Ltd., we held. The sale of these marketable securities generated a gain of $65,580 for the three and nine months ended September 30, 2007. We expect that future interest income will be low during the next twelve months as our cash balances are low.

Interest expense for the three months ended September 30, 2008 was $793,759 compared to $391,671 for the same period in 2007. Interest expense for the nine months ended September 30, 2008 was $2,166,879 compared to $726,254 for the same period in 2007. Interest expense relates primarily to interest on significant new debt, amortization of discounts relating to warrants and beneficial conversion features, extensions to debt agreements and additional rights granted to the promissory note holders. We expect interest expense to continue to increase during 2008, at amounts greater than previously recorded due to our continued need for cash and with the consummation of certain mining properties in the PRC.

With the consummation of the Bates-Hunter Mine acquisition in June 2008, we are recording direct non-cash gains and losses due to our dealings with the recourse promissory note, which is payable in Canadian Dollars. We recorded a $109,392 gain due to the exchange rate between the US Dollar and the Canadian Dollar for the three months ended September 30, 2008. For the nine months ended September 30, 2008, we have recorded a net loss of $3,966.
 
LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measure of an entity’s ability to secure enough cash to meet its contractual and operating needs as they arise. We have funded our operations and satisfied our capital requirements primarily through the sale of securities and debt financing. We do not anticipate generating sufficient net positive cash flows from our operations to fund the next twelve months unless we complete an acquisition of substance. For the nine months ended September 30, 2008 and 2007, we had net cash used in operating activities of $3,155,692 and $4,813,718, respectively.
 
27
 
We had a working capital deficit of $15,265,755 at September 30, 2008, compared to $11,393,352 at December 31, 2007. Cash and equivalents were $263,273 at September 30, 2008, representing an increase of $132,792 from the cash and equivalents of $130,481 at December 31, 2007.

On April 10, 2007, we entered into a Convertible Notes Purchase Agreement (“CNPA”) with China Gold, LLC, a Kansas limited liability company (“China Gold”), whereby we issued and sold the initial convertible note in the amount of $3,000,000, with a purchase discount of $60,000 (“Note 1”). On May 7, 2007, we issued and sold an additional convertible note in the amount of $2,000,000, with a purchase discount of $40,000 (“Note 2”). On June 19, 2007, we entered into Amendment No. 1 to the CNPA, whereby, among other things, China Gold was entitled to a Purchase Right to acquire shares of our common stock at equivalent terms to its rights to otherwise convert the notes; and we issued and sold an additional convertible note in the amount of $4,000,000, with a purchase discount of $80,000 (“Note 3”). On July 9, 2007, we issued and sold an additional convertible note in the amount of $800,000, with a purchase discount of $16,000 (“Note 4” and collectively with Note 1, Note 2 and Note 3, the “Notes”). The Notes bore an initial interest rate of 8.25% per annum and were convertible at the option of China Gold into shares of our common stock, originally at a conversion price of $1.00 per share. As of September 30, 2008, the outstanding Notes principal balance was $9,800,000, of which we received net proceeds of $9,604,000, less $196,000 paid to an affiliate of China Gold in the form of loan discount fees and accrued interest of $1,329,657.
 
On October 31, 2007, we entered into a letter agreement with China Gold whereby the parties amended the maturity date on each of the Notes to February 29, 2008. As consideration for the Note extensions, we agreed to reduce the conversion price applicable to the Notes and to the Purchase Right from $1.00 to $0.50 per share. The letter agreement further gave us an option to obtain an extension of the maturity dates of the Notes to May 31, 2008 in consideration for a further reduction in the conversion price and the Purchase Right price from $0.50 to $0.25 per share, which we exercised in February 2008.

On May 14, 2008, we entered into an additional letter agreement with China Gold whereby the parties amended the maturity date of the Notes to July 14, 2008. As consideration for the Notes extensions, we agreed to increase the interest rate applicable to the Notes from 8.25% to 12.25% (effective May 14, 2008) and to reduce the purchase price relating to the Purchase Right from $0.25 to $0.18 per share. On May 14, 2008, the fair value of our common stock was $0.17, therefore, there was no additional charge required to be recorded for the reduction in the conversion price. We’d received an additional extension until September 12, 2008 without further compensation required by China Gold.

On October 23, 2008, we paid $1,441,000 of accrued interest to China Gold from the proceeds of the $1.85 million Shaanxi Hua Ze Nickel refund. On November 10, 2008, the parties entered into Amendment No. 2 to the CNPA, whereby the Notes were cancelled and we issued to China Gold an Amended and Restated Promissory Note (the “Amended Note”) in the aggregate principal amount of $9,800,000, which amongst other amendments to the terms of the Notes, terminated the conversion feature of the Notes and terminated the Purchase Rights. In consideration thereof, we have issued China Gold a five-year warrant to purchase up to 39,200,000 shares of the our common stock at an exercise price of $0.15 per share. The Amended Note interest rate is 12.25% per annum. The principal and unpaid interest is due and payable at the earlier of (1) China Gold’s demand at any time on or after December 31, 2008 or (2) to the extent funds are available, upon the closing of our proposed acquisition of the Sudan and XNS iron ore properties.
 
From September to December 2007, we entered into three short-term notes payable transactions and borrowed an aggregate of $260,000 from the three lenders. We entered into amendments with two of the lenders providing them with reductions in the exercise price of the securities issued to them. Pacific Dawn Capital, LLC received two price reductions on its right-to-purchase of 1,000,000 shares, from $0.20 to $.15 to $0.10 per share. Donald Stoica, who became a director in April 2008, is an officer, director and member of Pacific Dawn. Additionally, Nancy White received a reduction of her warrant to purchase 100,000 shares from $0.27 to $0.20 per share. Mrs. White is the mother of H. Vance White, our Chairman. We retired these two notes as of March 31, 2008 and on June 5, 2008, we retired the final principal ($10,000) and accrued interest ($3,364) due under the third note by issuing 76,190 shares of our common stock, valued at $16,000, in lieu of a cash payment.
 
28
 
From September to December 2007: (i) through a private placement of units of our unregistered securities (each unit consisting of one share of our unregistered common stock and a five-year warrant to purchase one share of common stock at an exercise price of $0.25 per share) we sold 2,400,000 units at a price per unit of $0.25, resulting in gross proceeds of $600,000, and (ii) through a private placement of our securities, we sold 2,193,334 shares of our common stock at $0.15 per share, resulting in gross proceeds of $329,001.

In December 2007, through a private placement offering, we received net proceeds of $100,000 and issued a convertible promissory note in the principal amount of $110,000. The promissory note had an original maturity date of March 31, 2008, and bears interest at a rate of 10% per annum. We have secured a maturity date extension until December 31, 2008. The note holder has the right to convert any portion of the principal or interest of the outstanding note into shares of our common stock based on a conversion rate equal to $0.20 per share.

On February 13, 2008, we entered into a Note and Warrant Purchase Agreement (the “Platinum Agreement”) dated February 11, 2008 with Platinum Long Term Growth V, LLC, a Delaware limited liability company (“Platinum”), pursuant to which we issued to Platinum a 10% Senior Secured Convertible Promissory Note in the principal amount of $1,020,000 (the “Platinum Note”). The Platinum Note has a maturity date of February 11, 2009. Platinum has the option to convert the Platinum Note at any time into shares of our common stock at an initial conversion price of $0.18 per share or at any time after August 11, 2008, if the seven trailing trading day volume-weighted average price (“VWAP”) of our common stock is less than $0.30 per share, Platinum shall have the option to convert into common stock at a conversion price equal to the lesser of the then-applicable conversion price or 85% of the lowest VWAP for the 10 trading days preceding such demand. On August 27, 2008, Platinum gave notice to convert $50,000 of the principal balance into 538,184 shares of our common stock. Pursuant to the terms of the Platinum Note, accrued interest is payable on a quarterly basis and as of September 30, 2008, there remains $25,391 of accrued interest due for the months of July, August and September. Furthermore, on September 30, 2008, we entered into a single agreement (which addressed both this Platinum Note and their 90-day 10% Senior Secured Promissory Note) whereby we received an extension on the payment of the $25,391 interest and are required to pay a one-time fee of $10,000 along with the accrued interest on December 8, 2008. As of September 30, 2008, the principal balance is $970,000.

In May 2008, through a private placement of units of our unregistered securities (each unit consisting of one share of our unregistered common stock and a five-year warrant to purchase one share of common stock at an exercise price of $0.25 per share) we sold 1,200,000 units at a price per unit of $0.25, resulting in gross proceeds of $300,000.

On June 12, 2008, we assigned our rights (to purchase the Bates-Hunter Mine) of that certain Asset Purchase Agreement dated September 20, 2006, to Hunter Bates Mining Corp. (a Minnesota corporation and a wholly owned subsidiary of ours) and consummated the acquisition by issuing a limited recourse promissory note from Hunter Bates payable to George E. Otten (a Colorado resident and one of the sellers) in the principal amount of $6,750,000 Canadian dollars and issuing 3,620,000 unregistered shares of our common stock. The note requires Hunter Bates to pay to Mr. Otten $250,000 Canadian on or before December 1, 2008 and commencing on April 1, 2010, a quarterly installment of accrued interest plus a Production Revenue Payment (as defined in the note). In order for Hunter Bates to be obligated to make a Production Revenue Payment, production at the mine would need to be achieved in order to make a profit. At this time, management has not determined the timeframe in which it believes that the mine can be put into production. The note is interest-free until January 1, 2010, and from such date shall bear interest at a rate of 6% per annum, with a maturity date of December 31, 2015. Hunter Bates’ payment of the Note is secured by a deed of trust relating to the all of the property acquired in favor of Gilpin County Public Trustee for the benefit of Mr. Otten. If an event of default occurs under the deed of trust, Hunter Bates and Wits Basin shall be jointly and severally liable solely for a limited recourse amount of $2,000,000 Canadian dollars less the aggregate of (i) all payments of principal and interest under the note, (ii) any cash proceeds received by or on behalf of Mr. Otten from the cash sale, prior to such default, of any of the 3,620,000 shares of common stock (calculated on the basis of $0.5525 Canadian dollars per share) and (iii) any deemed proceeds resulting from the in specie disposition of any of the 3,620,000 shares of common stock by Mr. Otten to any of the selling parties (calculated on the basis of $0.5525 Canadian dollars per share). Mr. Otten’s sole recourse for any amounts due upon default of the note that are over and above the limited recourse amount set forth above shall be the secured property described in the deed of trust.
 
29
 
During the nine months ended September 30, 2008:

(1) we received $200,000 (less $1,500 in fees) from the exercise of warrants: $10,000 from Platinum for the exercise of 1 million at $0.01 per share; three private placement shareholders exercised an aggregate of 1,000,000 at a reduced price of $0.15 per share for $150,000; and $40,000 from a consultant for the exercise of 4 million at $0.01 per share;
 
(2) through a private placement of our securities, we’ve sold 7,781,666 shares of our common stock at $0.15 per share, resulting in net proceeds of $1,225,242;

(3) we reduced an obligation with the issuance of 172,321 shares of our common stock (valued at $42,908, based on the trading price our common stock, which was negotiated in March 2008, at $0.224 per share) in lieu of a $38,600 cash payment to a consultant;

(4) we issued Platinum 260,268 shares in lieu of its interest payment due on June 30, 2008 under its senior secured convertible promissory note (valued at $52,053);

(5) Platinum converted $50,000 of its senior secured convertible promissory note into 538,184 shares; and

(6) we entered into eight short-term notes payable transactions and borrowed net proceeds of $2,275,000 from the five lenders.
 
Summary

Our existing sources of liquidity will not provide cash to fund operations for the next twelve months. As of the date of this Form 10-Q, we have estimated our cash needs over the next twelve months to be approximately $61,000,000 (which includes approximately $11,900,000 due under our short-term convertible promissory notes (assuming some or all of such notes are not converted into equity prior to maturity); approximately $440,000 for other short-term notes payable; $200,000 for Bates-Hunter, $100,000 for Vianey; $150,000 for FSC and an estimated $45,000,000 due in order to complete the acquisition of the PRC iron ore mining assets during the fourth quarter of 2008). We will continue our attempt to raise additional capital. Some of the possibilities available to us are through private equity transactions, to develop a credit facility with a lender or the exercise of options and warrants. However, such additional capital may not be available to us at acceptable terms or at all. In the event that we are unable to obtain additional capital, we would be forced to reduce operating expenditures and/or cease operations altogether.
 
OFF BALANCE SHEET ARRANGEMENTS

During the nine months ended September 30, 2008, we did not engage in any off balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
 
30
 
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
 
Foreign Exchange Exposure

Since our entrance into the metals and minerals arena, most of the funds requests have required US Dollar denominations, even though most of our transactions have been with foreign entities. In the past, we have had very limited dealings with foreign currency transactions. Based on the proposed purchases of PRC mining projects in China and our purchase of the Bates-Hunter Mine with a promissory note denominated in Canadian Dollars, our exposure to foreign currency costs will increase. The trend for the exchange rates of the Canadian Dollar and the China Yuan Renminbi (CNY or RMB) against the US Dollar is not definable and many factors apply pressure to exchange rates. Decisions made by senior management at a point-in-time relative to that known exchange rate for a proposed transaction, may indeed be unprofitable in the future. The Company does not engage in hedge fund transactions in order to protect future exchange rate declines or increases.

The following table displays the approximate exchange rate for the US Dollar:

Date, as of
  
Canadian Dollar
  
US Dollar
  
China Yuan Renminbi
  
January 1, 2007
  
$
0.858
  
$
1.00
  
$
0.128
  
January 1, 2008
  
$
1.012
  
$
1.00
  
$
0.137
  
September 30, 2008
  
$
0.944
  
$
1.00
  
$
0.147
  
 
With the consummation of the Bates-Hunter Mine acquisition, we are recording direct losses due to our dealings with market risk and the likelihood of such foreign currency costs continuing seems reasonable and such costs could reduce the productivity of our assets.
 
ITEM 4T. Controls and Procedures

Under the supervision of, and the participation of, our management, including our Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation and taking into account the lack of segregation of duties noted below, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

Since the Company does not have a formal audit committee, its Board of Directors oversees the responsibilities of the audit committee. The Board is fully aware that there is lack of segregation of duties due to the small number of employees dealing with general administrative and financial matters. However, the Board has determined that considering the employees involved and the control procedures in place, risks associated with such lack of segregation are insignificant and the potential benefits of adding employees to clearly segregate duties does not justify the expenses associated with such increases at this time.

During the period covered by this report, there were no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting subsequent to such evaluation.
 
31
 
PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.
 
Item 1A. Risk Factors

The most significant risk factors applicable to the Company are described in the section following Item 1 entitled “Risk Factors” in Part I of the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007 (the “2007 Form 10-KSB”). There have been no material changes to the risk factors previously disclosed in the 2007 Form 10-KSB. The risks described in the 2007 Form 10-KSB are not the only risks facing the Company. Additional risks and uncertainties not currently known to management may materially adversely affect the Company’s business, financial condition, and/or operating results.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended September 30, 2008: (1) we entered into agreements with two third party consultants for services in public and investor relations and issued an aggregate of 400,000 shares of our unregistered common stock (2) we issued an aggregate of 260,268 shares of our unregistered common stock in lieu of cash promissory note interest payment (3) we issued 4,400,000 shares of our unregistered common stock through the exercise of warrants for cash and received net proceeds of $100,000 (4) we issued 2,770,931 shares of our common stock via cashless exercise of warrants (the holders surrendered 216,876 of its available shares to pay for the exercise) and (5) we issued 538,184 shares of our common stock to a promissory note holder who converted $50,000 of its senior secured convertible promissory note.

The Company offered and sold the above-referenced securities in reliance on the statutory exemption from registration by Rule 506 of Regulation D under Section 4(2) of the Securities Act of 1933, as amended. The Company relied on this exemption and/or the safe harbor rule thereunder based on the fact that (i) the purchasers had knowledge and experience in financial and business matters such that they were capable of evaluating the risks of the investment, and (ii) the Company has obtained representations from each purchaser indicating that they were an accredited investor and purchasing or offered for investment only.
 
Item 3. Defaults Upon Senior Securities

None.
 
Item 4 Submission of Matters to a Vote of Security Holders

None.
 
Item 5. Other Information
 
On October 28, 2008, in consideration of a loan from China Gold, LLC, we issued a secured promissory note in the principal amount of $441,000 to China Gold. The secured promissory note has a maturity date of the earlier of (i) December 31, 2008 or (ii) such time as the Company completes its proposed acquisitions of certain iron ore properties in the PRC and bears interest at a rate of 12.25% per annum. Under the terms of the secured promissory note and as additional consideration for the loan, we issued a two-year warrant to purchase up to 882,000 shares of our common stock at $0.11 per share. Our obligations under the note are secured pursuant to the terms of our June 19, 2007 Security Agreement with China Gold, which we filed as Exhibit 10.3 to our 8-K filed on June 25, 2007.
 
32
 
On November 10, 2008, the Company and China Gold, LLC entered into a second amendment to that certain Convertible Notes Purchase Agreement dated April 10, 2007, as amended, whereby we cancelled the four original notes and consolidated them into a single Amended and Restated Promissory Note (the “Amended Note”) in the aggregate principal amount of $9,800,000. Pursuant to the Amended Note, we terminated the conversion feature from the prior notes, resulting in the Amended Note being a term note with principal and unpaid interest due and payable at the earlier of (1) China Gold’s demand at any time on or after December 31, 2008 or (2) to the extent funds are available, upon the closing of our proposed acquisition of the Sudan and XNS iron ore properties. The Amended Note further terminated certain Purchase Rights provided China Gold in the prior notes. In consideration of entering into the Amended Note, we have issued China Gold a five-year warrant to purchase up to 39,200,000 shares of the our common stock at an exercise price of $0.15 per share. The Amended Note interest rate is 12.25% per annum.

On November 12, 2008, we entered into an amended and restated consulting agreement with Corporate Resource Management, Inc., a Minnesota corporation (“CRM”). CRM is an entity wholly owned by Debra Kramer, the spouse of Stephen D. King. CRM provides the Company with investment banking services relating to the purchase and sale of mining related assets. Pursuant to the agreement, CRM is entitled to a fee of $13,750 per month, plus reimbursement of normal out-of-pocket expenses. The term of the agreement is for one year, with automatic renewals unless either party provides notice of termination. Each party has the right to terminate the agreement with a 30-day written notice, provided that CRM is entitled to a $75,000 termination fee if the agreement is terminated by the Company without cause. The amended agreement superseded in its entirety the terms of the prior consulting agreement with CRM dated May 15, 2006. Pursuant to the amendment, the Company eliminated a provision for potential payment of commissions of up to two percent of the value of any asset transactions completed during the term of the agreement and for a period of one year following termination.

On November 12, 2008, we entered into a bridge financing arrangement with Hawk Uranium, Inc. (“Hawk”), whereby Hawk would loan the Company $60,000 in consideration of a 90-day promissory note, which bears interest at a rate of 10%. The Company’s chairman, Vance White, is an officer and director of Hawk Uranium. In consideration of the loan, we will be issuing a 5-year warrant to purchase up to 250,000 shares of our common stock at an exercise price of $0.125 per share to Hawk.
 
33
 
Item 6. Exhibits

Exhibit
  
Description
4.1**
  
Warrant to Purchase 882,000 Shares of Wits Basin Precious Minerals Inc. Common Stock issued in favor of China Gold, LLC.
4.2**
  
Warrant to Purchase 39,200,000 Shares of Wits Basin Precious Minerals Inc. Common Stock issued in favor of China Gold, LLC.
10.1
  
Letter Amendment entered into with China Gold, LLC dated July 24, 2008 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 30, 2008).
10.2
  
Equity Transfer Agreement (for the Nanjing Sudan Mining Co., Ltd.) by and among Lu Benzhoa, Lu Tinglan and Maanshan Global Mining Resources Limited, dated August 11, 2008 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 22, 2008).
10.3
  
Equity Transfer Agreement (for the Maanshan Xiaonanshan Mining Co., Ltd.) by and among Lu Benzhoa, Lu Tinglan and Maanshan Global Mining Resources Limited, dated August 11, 2008 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 22, 2008).
10.4
  
Equity Transfer Agreement (for the Maanshan Zhaoyuan Mining Co., Ltd.) by and among Lu Benzhoa, Lu Tinglan and Maanshan Global Mining Resources Limited, dated August 11, 2008 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on August 22, 2008).
10.5
  
Termination Agreement by and among China Global Mining Resources Limited and Shaanxi Hua Ze Nickel and Cobalt Metals Co., Ltd., dated July 31, 2008 (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on August 22, 2008).
10.6
  
Settlement Agreement by and among China Global Mining Resources Limited and Shaanxi Hua Ze Nickel and Cobalt Metals Co., Ltd., dated July 31, 2008 (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on August 22, 2008).
10.7
  
Convertible Promissory Note of Wits Basin Precious Minerals Inc., dated as of August 22, 2008 in the principal amount of $1,000,000 issued in favor of London Mining, Plc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 29, 2008).
10.8
  
Assignment and Amendment Agreement On The Equity Transfer Of Sudan between Lu Benzhao, Lu Tinglan, Maanshan Global Mining Resources Limited, China Global Mining Resources Limited and the Registrant dated October 29, 2008 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 4, 2008).
10.9
  
Supplementary and Amendment Agreement On The Equity Transfer Of XNS between Lu Benzhao, Lu Tinglan, Maanshan Global Mining Resources Limited, China Global Mining Resources Limited and the Registrant dated October 29, 2008 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 4, 2008).
10.10**
  
Secured Promissory Note of Wits Basin Precious Minerals Inc., dated as of October 28, 2008 in the principal amount of $441,000 issued in favor of China Gold, LLC.
10.11**
  
Amended No. 2 to Convertible Notes Purchase Agreement dated November 10, 2008 by and between Wits Basin Precious Minerals Inc and China Gold, LLC.
10.12**
  
Amended and Restated Promissory Note of Wits Basin Precious Minerals Inc., dated as of November 10, 2008 in the principal amount of $9,800,000 issued in favor of China Gold, LLC.
10.13**
  
Amended and Restated Consulting Agreement by and between the Company and Corporate Resource Management, Inc dated November 12, 2008.
10.14**
  
Promissory Note of Wits Basin Precious Minerals Inc., dated as of November 12, 2008 in the principal amount of $60,000 issued in favor of Hawk Uranium Inc.
31.1**
  
Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2**
  
Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
  
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**
  
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

** Filed herewith electronically
 
34
 
SIGNATURES

In accordance with the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

   
WITS BASIN PRECIOUS MINERALS INC.
   
   
Date: November 13, 2008
    
     
 
By:
/s/  Stephen D. King
   
Stephen D. King
   
Chief Executive Officer
     
     
 
By:
/s/  Mark D. Dacko
   
Mark D. Dacko
   
Chief Financial Officer

35
 EX-4.1 2 v132000_ex4-1.htm
EXHIBIT 4.1
 
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND WITHOUT A VIEW TO THEIR DISTRIBUTION AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF ANY EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER APPLICABLE STATE SECURITIES LAWS, UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE UNDER APPLICABLE SECURITIES LAWS.
 
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
WITS BASIN PRECIOUS MINERALS INC.
Warrant No.: CG1
Date: October 28, 2008
 
This certifies that, for value received, China Gold, LLC or its successors or assigns (collectively, the “Holder”), is entitled to purchase from Wits Basin Precious Minerals Inc. (the “Corporation”), Eight Hundred Eighty-Two Thousand (882,000) fully paid and nonassessable shares (the “Shares”) of the Corporation’s common stock, par value $.01 per share (the “Common Stock”), at an exercise price of Eleven Cents ($0.11) per Share (the “Exercise Price”), subject to adjustment as herein provided. This Warrant may be exercised by Holder at any time from and after the date hereof until the date two years from the date hereof, at which time all of Holder’s rights hereunder shall expire.
 
The Holder and Corporation acknowledge and agree that this Warrant has been issued pursuant to the terms of that certain Secured Promissory Note of the Corporation issued in favor of Holder, dated October 28, 2008, in the principal amount of $441,000.
 
This Warrant is subject to the following provisions, terms and conditions:
 
1. Exercise of Warrant. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not as to any fractional shares of Common Stock), by the surrender of this Warrant (properly endorsed, if required, at the Corporation’s principal office, or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the Holder at the address of such Holder appearing on the Corporation’s books at any time within the period above indicated), and upon payment to it by certified check, bank draft or cash of the purchase price for such Shares (or exercise pursuant to Section 2 below). The Corporation agrees that the Shares so purchased shall be deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment for such Shares shall have been made as aforesaid. Certificates for the Shares so purchased shall be delivered to the Holder within a reasonable time, not exceeding 30 days, after the rights represented by this Warrant shall have been so exercised and, unless this Warrant has expired, a new Warrant representing the number of Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be delivered to the Holder within such time. The Corporation may require that any such new Warrant or any certificate for Shares purchased upon the exercise hereof bear a legend substantially similar to that which is contained on the face of this Warrant.

 
 
 
 
2. Cashless Exercise. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not to as any fractional share of Common Stock) by the surrender of this Warrant (properly endorsed, if required, at the Corporation’s principal office, or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the Holder at the address of such Holder appearing on the Corporation’s books at any time within the period above named), together with a notice of cashless exercise. Upon surrender of this Warrant and receipt of a notice of cashless exercise, the Holder shall be entitled to receive (without payment by the Holder of any exercise price) that number of Shares equal to the number of Shares subject to such notice of cashless exercise multiplied by a fraction, the numerator of which shall be the difference between (i) the Fair Market Value of one share of Common Stock and (ii) the Exercise Price, and the denominator of which shall be the Fair Market Value of one share of Common Stock. For purposes of this Warrant, “Fair Market Value” of the Common Stock shall be determined as follows (as applicable): (a) if the Common Stock is traded on an exchange or is quoted on The Nasdaq National Market or Nasdaq SmallCap Market, then the average closing or last sale prices, respectively, reported for the date of conversion; (b) if the Common Stock is traded in the over-the-counter market, then the average of the closing bid and asked prices reported on the date of conversion; or (c) if the Common Stock is not publicly traded and there has been no Qualifying Sale, then fair market value of such stock will be determined by the Company’s board of directors, acting in good faith utilizing customary business valuation criteria and methodologies (without discount for lack of marketability or minority interest).
 
3. Transferability. This Warrant is issued upon the following terms, to which Holder consents and agrees:
 
(a) Until this Warrant is transferred on the books of the Corporation, the Corporation will treat the Holder of this Warrant, registered as such on the books of the Corporation, as the absolute owner hereof for all purposes without effect given to any notice to the contrary.
 
(b) This Warrant may not be exercised, and this Warrant and the Shares underlying this Warrant shall not be transferable, except in compliance with all applicable state and federal securities laws, regulations and orders, and with all other applicable laws, regulations and orders.
 
(c) The Warrant may not be transferred, and the Shares issuable upon exercise of this Warrant, may not be transferred without the Holder obtaining an opinion of counsel, which opinion and counsel are satisfactory to the Corporation, stating that the proposed transaction will not result in a prohibited transaction under the Securities Act and applicable Blue Sky Laws. By accepting this Warrant, the Holder agrees to act in accordance with any conditions imposed on such transfer by any such opinion of counsel.
 
(d) Neither the issuance of this Warrant nor the issuance of the Shares issuable upon exercise of this Warrant have been registered under the Securities Act.
 
4. Certain Covenants of the Corporation. The Corporation covenants and agrees that all Shares which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and full payment for the Shares so purchased, will be duly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue hereof, except those that may be created by or imposed upon the Holder or his property. The Corporation covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Corporation will at all times have authorized and available, free of preemptive or other rights, for the purpose of issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the full exercise of the rights represented by this Warrant.

 
 
 
 
5. Adjustment of Exercise Price and Number of Shares. The Exercise Price and number of Shares are subject to the following adjustments:
 
(a) Stock Dividend, Stock Split or Stock Combination. If (i) any dividends on any class of the Corporation’s capital stock payable in Common Stock or securities convertible into or exercisable for Common Stock (collectively, “Common Stock Equivalents”) shall be paid by the Corporation, (ii) the Corporation shall divide its then-outstanding shares of Common Stock into a greater number of shares, or (iii) the Corporation shall combine its outstanding shares of Common Stock, by reclassification or otherwise, then, in any such event, the Exercise Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) equal to the quotient of (x) the number of shares of Common Stock outstanding immediately prior to such event, multiplied by the Exercise Price in effect immediately prior to such event, divided by (y) the total number of shares of Common Stock outstanding immediately after such event. No adjustment of the Exercise Price shall be made if the amount of such adjustment shall be less than $.05 per Share; but any such adjustment not required then to be made shall be carried forward and shall be made at the time and together with the any subsequent adjustment(s) which, together with any adjustment(s) so carried forward, shall amount to not less than $.05 per Share.
 
(b) Number of Shares Issuable on Exercise of Warrants. Upon each adjustment of the Exercise Price pursuant to this Section, the Holder shall thereafter (until another such adjustment) be entitled to purchase, at the adjusted Exercise Price, the number of Shares, calculated to the nearest full Share, equal to the quotient of (i) the product of (A) the number of Shares issuable under this Warrant (as then adjusted pursuant hereto prior to the current adjustment), multiplied by (B) the Exercise Price in effect prior to such adjustment, divided by (ii) the adjusted Exercise Price.
 
(c) Notice of Adjustment. Upon any adjustment of the Exercise Price and any increase or decrease in the number of Shares of Common Stock issuable upon the exercise of the Warrant, then, and in each such case, the Corporation shall within 30 days thereafter give written notice thereof, by first-class mail, postage prepaid, addressed to each Holder as shown on the books of the Corporation. Any such notice shall state the adjusted Exercise Price and adjusted number of Shares issuable upon the exercise of the Warrant, and shall set forth in reasonable detail the methods of calculation of such adjustments and the facts upon which such calculations were based.
 
(d) Effect of Reorganization, Reclassification or Merger. If at any time while this Warrant is outstanding there should be (i) any reorganization of the Corporation’s capital stock (other than splits or combinations of Common Stock contemplated by and provided for in Section 5(a)), (ii) any consolidation or merger of the Corporation with another corporation, limited liability Corporation, partnership or other business entity, or any sale, conveyance, lease or other transfer by the Corporation of all or substantially all of its property to any other corporation, limited liability Corporation, partnership or other business entity, which is effected in such a manner that the holders of Common Stock shall be entitled to receive cash, stock, securities or assets with respect to or in exchange for Common Stock, or (iii) any dividend or any other distribution upon any class of the Corporation’s capital stock payable in capital stock of a different class, other securities of the Corporation, or other Corporation property (other than cash), then the Corporation shall use its best efforts to ensure that, as a part of such transaction, lawful provision shall be made so that Holder shall have the right thereafter to receive, upon the exercise hereof, the number of shares of stock or other securities or property of the Corporation or of the successor entity (or, as applicable, a parent corporation of such successor entity) resulting from a consolidation or merger, or of the entity to which the property of the Corporation has been sold, conveyed, leased or otherwise transferred, as the case may be, which the Holder would have been entitled to receive upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer, if this Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer. In any such case, appropriate adjustments (as determined by the Corporation’s board of directors) shall be made in the application of the provisions of this Warrant to the end that the provisions set forth herein shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter deliverable upon the exercise of the Warrant as if the Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, such consolidation, merger, sale, conveyance, lease or other transfer and the Holder had carried out the terms of the exchange as provided for by such capital reorganization, consolidation or merger.

 
 
 
 
6. Limitation of Exercise of Warrant. Notwithstanding anything to the contrary herein, Holder may not exercise all or any portion of this Warrant during the time period and to the extent that the shares of Common Stock that Holder could acquire upon such exercise would cause the Beneficial Ownership (as defined below) of Common Stock held by Holder and its affiliates to exceed 4.99%. The parties shall compute “Beneficial Ownership" of Common Stock in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended. Holder will, at the request of the Corporation, from time to time, notify the Corporation of Holder’s computation of Holder’s Beneficial Ownership. By written notice to Issuer, Holder may waive the provisions of this Section 6, but any such waiver will not be effective until the 61st day after delivery thereof. Nothing herein shall preclude Holder or its affiliates from disposing of a sufficient number of other shares of Common Stock beneficially owned by Holder or its affiliates so as to thereafter permit the exercise of all or any portion of this Warrant.
 
7. Piggyback Registration Rights. If at any time within two (2) years after complete exercise of this Warrant the Corporation proposes to register under the 1933 Act (except by a Form S-4 or Form S-8 Registration Statement or any successor forms thereto) or qualify for a public distribution under Section 3(b) of the 1933 Act, any of its securities, it will notify the Holder hereof at least twenty (20) days prior to each such filing and will use its best efforts to include in the Registration Statement (to the extent permitted by applicable regulation) the Shares purchased or purchasable by the Holder upon the exercise of the Warrant to the extent requested by the Holder hereof within ten (10) days after receipt of notice of such filing (which request shall specify the interest in this Warrant or the Shares intended to be sold or disposed of by such Holder and describe the nature of any proposed sale or other disposition thereof). The Holder of this Warrant agrees to cooperate with the Corporation in the preparation and filing of any Registration Statement, and in the furnishing of information concerning the Holder for inclusion therein, or in any efforts by the Corporation to establish that the proposed sale is exempt under the 1933 Act as to any proposed distribution.
 
8. No Rights as Shareholder. This Warrant shall not entitle the Holder hereof to any voting rights or other rights as a shareholder of the Corporation.
 
9. Loss or Mutilation. Upon receipt by the Corporation from Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and indemnity reasonably satisfactory to the Corporation, and in case of mutilation upon surrender and cancellation hereof, the Corporation will execute and deliver in lieu hereof a new Warrant of like tenor to Holder; provided, however, in the case of mutilation no indemnity shall be required if this Warrant in identifiable form is surrendered to the Corporation for cancellation.

 
 
 
 
10. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota without regard to its conflicts-of-law provisions.
 
11. Amendments and Waivers. The provisions of this Warrant may not be amended, modified or supplemented, and waiver or consents to departures from the provisions hereof may not be given, unless the Corporation agrees in writing and has obtained the written consent of the Holder.
 
12. Successors and Assigns. All the terms and conditions of this Warrant shall be binding upon and inure to the benefit of the permitted successors and assigns of the Corporation and Holder.
 
13. Headings and References. The headings of this Warrant are for convenience only and shall not affect the interpretation of this Warrant. Unless the context indicates otherwise, all references herein to Sections are references to Sections of this Warrant.
 
14. Notices. All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing. Notices sent to the Holder shall be mailed, hand delivered or faxed and confirmed to the Holder at his, her or its address set forth in the Corporation’s records. Notices sent to the Corporation shall be mailed, hand delivered or faxed and confirmed to Wits Basin Precious Minerals Inc., c/o Mark D. Dacko, 900 IDS Center, 80 South Eight Street, Minneapolis, MN 55402-8773, or to such other address as the Corporation or the Holder shall notify the other as provided in this Section.
 
15. Counterparts. This warrant may be executed by the Corporation and attested to in counterparts.
 
In Witness Whereof, the Corporation has caused this Warrant to be signed by its duly authorized officer on the date first set forth above.
 
WITS BASIN PRECIOUS MINERALS INC.:
 
 
By:
/s/ Mark D Dacko
 
Mark D. Dacko
 
Chief Financial Officer

 
 
 
 
 EX-4.2 3 v132000_ex4-2.htm
EXHIBIT 4.2
 
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND WITHOUT A VIEW TO THEIR DISTRIBUTION AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF ANY EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER APPLICABLE STATE SECURITIES LAWS, UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE UNDER APPLICABLE SECURITIES LAWS.
 
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
WITS BASIN PRECIOUS MINERALS INC.
 
Warrant No.: CG2
Date: November 10, 2008
 
This certifies that, for value received, China Gold, LLC or its successors or assigns (collectively, the “Holder”), is entitled to purchase from Wits Basin Precious Minerals Inc. (the “Corporation”), Thirty-Nine Million Two Hundred Thousand (39,200,000) fully paid and nonassessable shares (the “Shares”) of the Corporation’s common stock, par value $.01 per share (the “Common Stock”), at an exercise price of Fifteen Cents ($0.15) per Share (the “Exercise Price”), subject to adjustment as herein provided. This Warrant may be exercised by Holder at any time from and after the date hereof until the date five years from the date hereof, at which time all of Holder’s rights hereunder shall expire.
 
The Holder and Corporation acknowledge and agree that this Warrant has been issued pursuant to that certain Convertible Notes Purchase Agreement dated April 10, 2007 by and between Issuer and Purchaser, as amended by Amendment No. 1 dated June 19, 2007 and as amended by Amendment No. 2 of even date herewith (as amended, the “Purchase Agreement”), and that, in consideration of receipt of this Warrant, Holder has agreed to the amendment of certain terms set forth in the Notes issued pursuant to the Purchase Agreement, including without limitation the cancellation of any right to convert the Notes and certain Purchase Rights of Holder therein. The capitalized terms used in this Warrant and not otherwise defined herein shall have the same meaning as defined in the Purchase Agreement.
 
This Warrant is subject to the following provisions, terms and conditions:
 
1. Exercise of Warrant. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not as to any fractional shares of Common Stock), by the surrender of this Warrant (properly endorsed, if required, at the Corporation’s principal office, or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the Holder at the address of such Holder appearing on the Corporation’s books at any time within the period above indicated), and upon payment to it by certified check, bank draft or cash of the purchase price for such Shares (or exercise pursuant to Section 2 below). The Corporation agrees that the Shares so purchased shall be deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment for such Shares shall have been made as aforesaid. Certificates for the Shares so purchased shall be delivered to the Holder within a reasonable time, not exceeding 30 days, after the rights represented by this Warrant shall have been so exercised and, unless this Warrant has expired, a new Warrant representing the number of Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be delivered to the Holder within such time. The Corporation may require that any such new Warrant or any certificate for Shares purchased upon the exercise hereof bear a legend substantially similar to that which is contained on the face of this Warrant.

 
 
 
 
2. Cashless Exercise. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not to as any fractional share of Common Stock) by the surrender of this Warrant (properly endorsed, if required, at the Corporation’s principal office, or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the Holder at the address of such Holder appearing on the Corporation’s books at any time within the period above named), together with a notice of cashless exercise. Upon surrender of this Warrant and receipt of a notice of cashless exercise, the Holder shall be entitled to receive (without payment by the Holder of any exercise price) that number of Shares equal to the number of Shares subject to such notice of cashless exercise multiplied by a fraction, the numerator of which shall be the difference between (i) the Fair Market Value of one share of Common Stock and (ii) the Exercise Price, and the denominator of which shall be the Fair Market Value of one share of Common Stock. For purposes of this Warrant, “Fair Market Value” of the Common Stock shall be determined as follows (as applicable): (a) if the Common Stock is traded on an exchange or is quoted on The Nasdaq National Market or Nasdaq SmallCap Market, then the average closing or last sale prices, respectively, reported for the date of exercise; (b) if the Common Stock is traded in the over-the-counter market, then the average of the closing bid and asked prices reported on the date of exercise; or (c) if the Common Stock is not publicly traded and there has been no Qualifying Sale, then fair market value of such stock will be determined by the Company’s board of directors, acting in good faith utilizing customary business valuation criteria and methodologies (without discount for lack of marketability or minority interest).
 
3. Transferability. This Warrant is issued upon the following terms, to which Holder consents and agrees:
 
(a) Until this Warrant is transferred on the books of the Corporation, the Corporation will treat the Holder of this Warrant, registered as such on the books of the Corporation, as the absolute owner hereof for all purposes without effect given to any notice to the contrary.
 
(b) This Warrant may not be exercised, and this Warrant and the Shares underlying this Warrant shall not be transferable, except in compliance with all applicable state and federal securities laws, regulations and orders, and with all other applicable laws, regulations and orders.
 
(c) The Warrant may not be transferred, and the Shares issuable upon exercise of this Warrant, may not be transferred without the Holder obtaining an opinion of counsel, which opinion and counsel are satisfactory to the Corporation, stating that the proposed transaction will not result in a prohibited transaction under the Securities Act and applicable Blue Sky Laws. By accepting this Warrant, the Holder agrees to act in accordance with any conditions imposed on such transfer by any such opinion of counsel.
 
(d) Neither the issuance of this Warrant nor the issuance of the Shares issuable upon exercise of this Warrant have been registered under the Securities Act.

 
 
 
 
4. Certain Covenants of the Corporation. The Corporation covenants and agrees that all Shares which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and full payment for the Shares so purchased, will be duly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue hereof, except those that may be created by or imposed upon the Holder or his property. The Corporation covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Corporation will at all times have authorized and available, free of preemptive or other rights, for the purpose of issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the full exercise of the rights represented by this Warrant.
 
5. Adjustment of Exercise Price and Number of Shares. The Exercise Price and number of Shares are subject to the following adjustments:
 
(a) Stock Dividend, Stock Split or Stock Combination. If (i) any dividends on any class of the Corporation’s capital stock payable in Common Stock or securities convertible into or exercisable for Common Stock (collectively, “Common Stock Equivalents”) shall be paid by the Corporation, (ii) the Corporation shall divide its then-outstanding shares of Common Stock into a greater number of shares, or (iii) the Corporation shall combine its outstanding shares of Common Stock, by reclassification or otherwise, then, in any such event, the Exercise Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) equal to the quotient of (x) the number of shares of Common Stock outstanding immediately prior to such event, multiplied by the Exercise Price in effect immediately prior to such event, divided by (y) the total number of shares of Common Stock outstanding immediately after such event. No adjustment of the Exercise Price shall be made if the amount of such adjustment shall be less than $.05 per Share; but any such adjustment not required then to be made shall be carried forward and shall be made at the time and together with the any subsequent adjustment(s) which, together with any adjustment(s) so carried forward, shall amount to not less than $.05 per Share.
 
(b) Number of Shares Issuable on Exercise of Warrants. Upon each adjustment of the Exercise Price pursuant to this Section, the Holder shall thereafter (until another such adjustment) be entitled to purchase, at the adjusted Exercise Price, the number of Shares, calculated to the nearest full Share, equal to the quotient of (i) the product of (A) the number of Shares issuable under this Warrant (as then adjusted pursuant hereto prior to the current adjustment), multiplied by (B) the Exercise Price in effect prior to such adjustment, divided by (ii) the adjusted Exercise Price.
 
(c) Subsequent Issuance or Sale of Common Stock.
 
(i) In the event the Corporation shall issue, after the date hereof and while this Warrant remains outstanding (a “Dilutive Issuance”), (i) any additional shares of Common Stock or other class of the Corporation’s common stock (“Additional Shares”) or (ii) options, warrants or other securities that can, by their terms, be converted into Common Stock or other classes of the Corporation’s common stock (“Additional Option Shares”) for consideration per share less than the Exercise Price, the Exercise Price shall automatically be adjusted to a price (calculated to the nearest cent) determined by dividing:
 
(A) an amount equal to the sum of (x) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the Exercise Price, (y) the number of shares of Common Stock issuable upon conversion or exchange of any obligations or of any shares of stock of the Corporation outstanding immediately prior to such issue or sale multiplied by the Exercise Price, and (z) an amount equal to the aggregate “consideration actually received” by the Corporation pursuant to such Dilutive Issuance, by

 
 
 
 
(B) the sum of the number of shares of Common Stock outstanding immediately after such issue or sale and the number of shares of Common Stock issuable upon conversion or exchange of any obligations or of any shares of stock of the Corporation outstanding immediately after such issue or sale.
 
(ii) If the Corporation shall sell and issue shares of Common Stock or other class of the Corporation’s common stock, or rights, options, warrants, or convertible securities containing the right to subscribe for or purchase shares of Common Stock or other class of the Corporation’s common stock, for consideration consisting, in whole or in part, of property other than cash or its equivalent, then in determining the total consideration per share paid to the Corporation for the purposes of this Section 5(c), the board of directors of the Corporation shall determine, in its discretion, the fair value of said property and such determination, if made in good faith, shall be binding upon the Holder.
 
(iii) For purposes of this Section 5(c), the following provisions will be applicable:
 
(A) In the case of an issue or sale for cash of shares of Common Stock, the “consideration actually received’” by Corporation relating to a Dilutive Issuance therefore shall be deemed to be the amount of cash received in such Dilutive Issuance, before deducting therefrom any commissions or expenses paid by the Corporation.
 
(B) In case of a Dilutive Issuance (otherwise than upon conversion or exchange of obligations or shares of stock of the Corporation) of additional shares of Common Stock for a consideration other than cash or a consideration partly other than cash, the amount of the consideration other than cash received by Corporation for such shares, then the board of directors shall determine, in its discretion, the fair the value of such consideration, which, if made in good faith, shall be binding upon the Holder.
 
(C) In case of a Dilutive Issuance by Corporation in any manner of any rights to subscribe for or to purchase shares of Common Stock, or any option for the purchase of shares of Common Stock or stock convertible into Common Stock, all shares of Common Stock or stock convertible into Common Stock to which the holders of such rights or options shall be entitled to subscribe for or purchase pursuant to such rights or options shall be deemed “outstanding” as of the date of the offering of such rights or the granting of such options, as the case may be, and the minimum aggregate consideration named in such rights or options for the shares of Common Stock or stock convertible into Common Stock covered thereby, plus the consideration, if any, received by Corporation for such rights or options, shall be deemed to be the “consideration actually received” by Corporation (as of the date of the offering of such rights or the granting of such options, as the case may be) for the issuance of such shares.

 
 
 
 
(D) In case of a Dilutive Issuance by Corporation in any manner of any obligations or of any shares of stock of Corporation that shall be convertible into or exchangeable for Common Stock, all shares of Common Stock issuable upon the conversion or exchange of such obligations or shares shall be deemed issued as of the date such obligations or shares are issued, and the amount of the “consideration actually received” by Corporation for such additional shares of Common Stock shall be deemed to be the total of (X) the amount of consideration received by Corporation upon the issuance of such obligations or shares, as the case may be, plus (Y) the minimum aggregate consideration, if any, other than such obligations or shares, receivable by Corporation upon such conversion or exchange, except in adjustment of dividends.
 
(E) The amount of the “consideration actually received” by Corporation upon the issuance of any rights or options referred to in subparagraph (C) above or upon the issuance of any obligations or shares which are convertible or exchangeable as described in subparagraph (D) above, and the amount of the consideration, if any, other than such obligations or shares so convertible or exchangeable, receivable by Corporation upon the exercise, conversion or exchange thereof shall be determined in the same manner provided in subparagraphs (A) and (B) above with respect to the consideration received by Corporation in case of the issuance of additional shares of Common Stock; provided, however, that if such obligations or shares of stock so convertible or exchangeable are issued in payment or satisfaction of any dividend upon any stock of Corporation other than Common Stock, the amount of the “consideration actually received” by Corporation upon the original issuance of such obligations or shares or stock so convertible or exchangeable shall be deemed to be the value of such obligations or shares of stock, as of the date of the adoption of the resolution declaring such dividend, as determined by the board of directors of Corporation at or as of that date. On the expiration of any rights or options referred to in subparagraph (C), or the termination of any right of conversion or exchange referred to in subparagraph (D), or any change in the number of shares of Common Stock deliverable upon exercise of such options or rights or upon conversion of or exchange of such convertible or exchangeable securities, the Exercise Price shall forthwith be readjusted to such Exercise Prices as would have obtained had the adjustments made upon the issuance of such options, rights or convertible or exchangeable securities been made upon the basis of the delivery of only the number of shares of Common Stock actually delivered or to be delivered upon the exercise of such rights or options or upon the conversion or exchange of such securities.
 
(iv) Notwithstanding the foregoing, in the event China Gold, LLC transfers or assigns all or any portion of this Warrant to a third party, the rights afforded to the Holder pursuant to this Section 5(c) shall terminate with respect to such portion (or all if applicable) of the Warrant effective upon such transfer or assignment, and this Section 5(c) shall have no continuing legal effect as to such portion (or all, if applicable) of this Warrant.
 
(d) Notice of Adjustment. Upon any adjustment of the Exercise Price and any increase or decrease in the number of Shares of Common Stock issuable upon the exercise of the Warrant, then, and in each such case, the Corporation shall within 30 days thereafter give written notice thereof, by first-class mail, postage prepaid, addressed to each Holder as shown on the books of the Corporation. Any such notice shall state the adjusted Exercise Price and adjusted number of Shares issuable upon the exercise of the Warrant, and shall set forth in reasonable detail the methods of calculation of such adjustments and the facts upon which such calculations were based.

 
 
 
 
(e) Effect of Reorganization, Reclassification or Merger. If at any time while this Warrant is outstanding there should be (i) any reorganization of the Corporation’s capital stock (other than splits or combinations of Common Stock contemplated by and provided for in Section 5(a)), (ii) any consolidation or merger of the Corporation with another corporation, limited liability Corporation, partnership or other business entity, or any sale, conveyance, lease or other transfer by the Corporation of all or substantially all of its property to any other corporation, limited liability Corporation, partnership or other business entity, which is effected in such a manner that the holders of Common Stock shall be entitled to receive cash, stock, securities or assets with respect to or in exchange for Common Stock, or (iii) any dividend or any other distribution upon any class of the Corporation’s capital stock payable in capital stock of a different class, other securities of the Corporation, or other Corporation property (other than cash), then the Corporation shall use its best efforts to ensure that, as a part of such transaction, lawful provision shall be made so that Holder shall have the right thereafter to receive, upon the exercise hereof, the number of shares of stock or other securities or property of the Corporation or of the successor entity (or, as applicable, a parent corporation of such successor entity) resulting from a consolidation or merger, or of the entity to which the property of the Corporation has been sold, conveyed, leased or otherwise transferred, as the case may be, which the Holder would have been entitled to receive upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer, if this Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer. In any such case, appropriate adjustments (as determined by the Corporation’s board of directors) shall be made in the application of the provisions of this Warrant to the end that the provisions set forth herein shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter deliverable upon the exercise of the Warrant as if the Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, such consolidation, merger, sale, conveyance, lease or other transfer and the Holder had carried out the terms of the exchange as provided for by such capital reorganization, consolidation or merger.
 
6. Limitation of Exercise of Warrant. Notwithstanding anything to the contrary herein, Holder may not exercise all or any portion of this Warrant during the time period and to the extent that the shares of Common Stock that Holder could acquire upon such exercise would cause the Beneficial Ownership (as defined below) of Common Stock held by Holder and its affiliates to exceed 4.99%. The parties shall compute “Beneficial Ownership" of Common Stock in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended. Holder will, at the request of the Corporation, from time to time, notify the Corporation of Holder’s computation of Holder’s Beneficial Ownership. By written notice to Corporation, Holder may waive the provisions of this Section 6, but any such waiver will not be effective until the 61st day after delivery thereof. Nothing herein shall preclude Holder or its affiliates from disposing of a sufficient number of other shares of Common Stock beneficially owned by Holder or its affiliates so as to thereafter permit the exercise of all or any portion of this Warrant.
 
7. Registration Rights. With respect to the shares of Common Stock issuable upon exercise of the Warrant, Holder shall have the benefit of the registration rights contained in Appendix 1 to the Purchase Agreement.
 
8. No Rights as Shareholder. This Warrant shall not entitle the Holder hereof to any voting rights or other rights as a shareholder of the Corporation.

 
 
 
 
9. Loss or Mutilation. Upon receipt by the Corporation from Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and indemnity reasonably satisfactory to the Corporation, and in case of mutilation upon surrender and cancellation hereof, the Corporation will execute and deliver in lieu hereof a new Warrant of like tenor to Holder; provided, however, in the case of mutilation no indemnity shall be required if this Warrant in identifiable form is surrendered to the Corporation for cancellation.
 
10. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota without regard to its conflicts-of-law provisions.
 
11. Amendments and Waivers. The provisions of this Warrant may not be amended, modified or supplemented, and waiver or consents to departures from the provisions hereof may not be given, unless the Corporation agrees in writing and has obtained the written consent of the Holder.
 
12. Successors and Assigns. All the terms and conditions of this Warrant shall be binding upon and inure to the benefit of the permitted successors and assigns of the Corporation and Holder.
 
13. Headings and References. The headings of this Warrant are for convenience only and shall not affect the interpretation of this Warrant. Unless the context indicates otherwise, all references herein to Sections are references to Sections of this Warrant.
 
14. Notices. All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing. Notices sent to the Holder shall be mailed, hand delivered or faxed and confirmed to the Holder at his, her or its address set forth in the Corporation’s records. Notices sent to the Corporation shall be mailed, hand delivered or faxed and confirmed to Wits Basin Precious Minerals Inc., c/o Mark D. Dacko, 900 IDS Center, 80 South Eight Street, Minneapolis, MN 55402-8773, or to such other address as the Corporation or the Holder shall notify the other as provided in this Section.
 
15. Counterparts. This warrant may be executed by the Corporation and attested to in counterparts.
 
In Witness Whereof, the Corporation has caused this Warrant to be signed by its duly authorized officer on the date first set forth above.
 
WITS BASIN PRECIOUS MINERALS INC.:
 
 
By:
/s/ Mark D Dacko
 
Mark D. Dacko
 
Chief Financial Officer

 
 
 
 
 EX-10.10 4 v132000_ex10-10.htm
EXHIBIT 10.10
 
SECURED PROMISSORY NOTE

$441,000.00
Minneapolis, Minnesota
 
October 28, 2008

FOR VALUE RECEIVED, Wits Basin Precious Minerals Inc., a corporation organized and existing under the laws of the State of Minnesota (the “Maker”), hereby unconditionally promises to pay to China Gold, LLC, a Kansas limited liability company, or its successors and assigns (the “Payee”), at 4520 Main Street, Suite 1650, Kansas City, MO 64111, or such other place or places as may be designated by the Payee, the principal sum of Four Hundred Forty-One Thousand Dollars ($441,000.00) and any accrued interest at the earlier of (i) December 31, 2008 or (ii) such time as the Maker consummates that certain joint venture with London Mining plc relating to China Global Mining Resources Ltd (“CGMR”) and the related acquisition by CGMR of certain iron ore properties in the People’s Republic of China. Interest shall accrue on the outstanding principal balance at a daily rate of 12.25%.

As consideration to Payee for providing financial accommodations to Maker, Maker has agreed to grant a two-year warrant to purchase up to an aggregate of 882,000 shares of the Maker’s $0.01 par value common stock, at a purchase price of $0.11 per share and include a cashless exercise provision.

The Maker acknowledges that the warrant to be issued to Payee pursuant to this Promissory Note shall (i) will be duly authorized by the Maker’s board of directors and (ii) include “piggyback” registration rights, such that at anytime the Maker proposes to file a registration statement with the SEC under the Securities Acts of 1933 or 1934 on such from as available, it will include the shares issuable upon exercise of the warrant in such registration statement.

The Maker acknowledges and agrees that its payment obligations under this Promissory Note are secured by the terms of that certain Security Agreement dated June 19, 2007 with the Payee (the “Security Agreement”), and such payment obligations shall constitute “Obligations” under the Security Agreement. If this Promissory Note is placed in the hands of an attorney for collection, the holder shall be entitled to recover reasonable and necessary collection costs, including reasonable and necessary attorney’s fees.
 
The Maker hereby waives presentment for payment, notice of dishonor, protest, notice of protest, and diligence in collection, and consents that the time of payment on any amount due under this Promissory Note may be extended by the holder without otherwise modifying, altering, releasing, affecting, or limiting the liability of the Maker. Maker agrees to assert no defenses against payment of this Promissory Note except for actual payment thereof.
 
The terms, conditions and provisions of this Promissory Note shall be construed and enforced according to the laws of the State of Kansas.
 
IN WITNESS WHEREOF, the duly authorized officer of Maker has caused this Promissory Note to be executed on the date first written above.

Wits Basin Precious Minerals Inc., a Minnesota corporation 
   
By:
/s/ Mark D Dacko
 
Its: Chief Financial Officer
 
 
 
 
 
 EX-10.11 5 v132000_ex10-11.htm
EXHIBIT 10.11
 
AMENDMENT No. 2 TO
CONVERTIBLE NOTES PURCHASE AGREEMENT
 
This Amendment No. 2 to Convertible Notes Purchase Agreement (this “Amendment”) is entered into on this 10 day of November, 2008, by and between Wits Basin Precious Minerals Inc., a Minnesota corporation (the “Issuer”), and China Gold, LLC, a Kansas limited liability company, its successors and assigns (together with its successors and assigns “Purchaser”), to amend, as hereinafter set forth, the terms of that certain Convertible Notes Purchase Agreement dated April 10, 2007 by and between Issuer and Purchaser, as previously amended on June 19, 2007 (as amended, the “Purchase Agreement”). Capitalized terms used in this Amendment and not otherwise defined herein shall have the same meanings as defined in the Purchase Agreement.
 
A. Issuer and Purchaser entered into the Purchase Agreement on April 10, 2007, which contemplated the initial sale by Issuer, and purchase by Purchaser, of an aggregate minimum of $12,000,000 and an aggregate maximum of $25,000,000 in convertible notes of Issuer within 12 months of the Initial Closing Date.
 
B. Pursuant to the Purchase Agreement, on April 10, 2007, Issuer sold, and Purchaser purchased, that certain Convertible Note in the amount of $3,000,000 (“Note 1”). On May 7, 2007, Issuer sold, and Purchaser purchased, that certain Convertible Note in the amount of $2,000,000 (“Note 2”). On June 19, 2007, Issuer sold and Purchaser purchased that certain Convertible Note in the aggregate amount of $4,000,000 (“Note 3”). On July 9, 2007, Issuer sold, and Purchaser purchased, that certain Convertible Note in the amount of $800,000 (“Note 4”; collectively with Note 1, Note 2 and Note 3, the “Prior Notes”).
 
C. On even date herewith, Issuer and Purchaser have cancelled the Prior Notes and Issuer has issued Purchaser an Amended and Restated Promissory Note in the aggregate principal amount of $9,800,000 in the form attached hereto as Exhibit A (the “Amended and Restated Note”), which, amongst other amendments to the terms of the Prior Notes, terminates the conversion feature of the Prior Notes and terminates certain Purchase Rights (as defined in the Purchase Agreement) provided to Purchaser. In consideration thereof, Issuer has issued Purchaser a five-year warrant to purchase up to 39,200,000 shares of the Issuer’s common stock, par value $0.01 per share, at an exercise price of $0.15 per share, in the form attached hereto as Exhibit B.
 
D. Issuer and Purchaser wish to amend the Purchase Agreement, in the respects, but only in the respects, as set forth herein, to eliminate the Purchase Rights previously provided to Purchaser in the event of satisfaction of the Prior Notes or the Amended and Restated Note.
 
Now, Therefore, the parties hereto hereby agree as follows:
 
Section 1. AMENDMENTS
 
1.1 Section 2.5 of the Purchase Agreement is hereby deleted in its entirety and replaced with the following:

 
2.5 Prepayment of Notes in Event of Iron Ore Closing. Notwithstanding the specific terms and conditions of any Notes, in the event Issuer and/or any of Issuer’s wholly owned subsidiaries complete a joint venture with London Mining plc relating to China Global Mining Resources Limited, a British Virgin Islands corporation (“CGMR”), or any affiliate thereof, and the related acquisition by CGMR, or any affiliate thereof, of one or more iron ore mining properties in the People’s Republic of China at a time when any Notes remain outstanding (the “Iron Ore Closings”), Issuer shall, to the extent funds are available from the Iron Ore Closings, prepay in whole or in part the outstanding Notes issued under the Purchase Agreement out of the proceeds from the Iron Ore Closings. Issuer shall provide, as reasonably practicable, Purchaser notice of the proposed time of effectiveness of the Iron Ore Closings within a reasonable time prior to any such proposed effectiveness.

1.2 Section 8.25 of the Purchase Agreement is hereby deleted in its entirety.
 
1.3 The definition of the term “Registrable Securities” in Section 2 of Appendix 1 to the Purchase Agreement is hereby deleted and the following definition is substituted in place thereof:
 
“Registrable Securities means (i) any shares of Common Stock issuable upon exercise of the Warrant issued to Purchaser by Issuer on November 10, 2008 or any warrant issued in replacement thereof; and (ii) any additional shares of Common Stock issued pursuant to stock splits, in-kind dividends and similar distributions with respect to the stock described in the foregoing clause, but does not include any such shares, which, at the time the identity of the Registrable Securities is to be determined, previously have been sold pursuant to a registration or Rule 144, including Rule 144(K) or Rule 144A.”

1.4 All references to the defined term “Note” or “Notes” in the Purchase Agreement and the other Investment Documents, including the Security Documents, incorporated by reference in the Purchase Agreement shall hereinafter refer to the Amended and Restated Note in lieu of the Initial Note and Additional Notes.
 
1.5 All references to (i) conversion and the terms of conversion of the Notes and (ii) Purchase Rights shall hereinafter have no legal effect.
 
Section 2. SUPPLEMENTAL REPRESENTATION
 
2.1 On November 10, 2008, Issuer makes to Purchaser the supplemental representation and warranty included in Exhibit C (the “Supplemental Representation”). The Supplemental Representation is accurate as of November 10, 2008 and Issuer does not undertake any obligation to update the applicability, voracity or accuracy of any representation on any other date, except as otherwise required under the Purchase Agreement.
 
Section 3. MISCELLANEOUS
 
3.1 This Amendment shall be construed in connection with and as part of the Purchase Agreement, and, except as modified and expressly amended by this Amendment, all terms, conditions and covenants contained in the Purchase Agreement, are hereby ratified and shall be and remain in full force and effect.
 
3.2 Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Amendment may refer to the Purchase Agreement without making specific reference to this Amendment, but nevertheless all such references shall include this Amendment, unless the context otherwise requires.

 
3.3 The description headings of the various sections or parts of this Amendment are for convenience only and shall not affect the meaning or construction of any of the provisions hereof.
 
3.4 This Amendment shall be governed by and construed in accordance with Kansas law.
 
3.5 This Amendment may be executed in any number of counterparts, each executed counterpart constituting an original, but all together only one agreement. Signature to this Amendment may be given by facsimile or other electronic transmission and such signatures shall be fully binding on the party sending the same.
 
[Signature page follows]

 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.
 
ISSUER:
WITS BASIN PRECIOUS MINERALS INC.,
 
a Minnesota corporation
     
 
By:
/s/ Mark D Dacko
 
Name:
Mark D. Dacko
 
Title:
Chief Financial Officer
     
PURCHASER:
CHINA GOLD, LLC,
 
a Kansas limited liability company
     
 
By:
Pioneer Holdings, LLC
 
Its:
Manager

By: 
/s/ C. Andrew Martin
Name: C. Andrew Martin
Title: Manager, Member

 
 EX-10.12 6 v132000_ex10-12.htm
EXHIBIT 10.12
 
NEITHER THIS CONVERTIBLE NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION (TOGETHER, THE “SECURITIES LAWS”) AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ENCUMBERED IN THE ABSENCE OF COMPLIANCE WITH SUCH SECURITIES LAWS AND UNTIL THE ISSUER THEREOF SHALL HAVE RECEIVED AN OPINION FROM COUNSEL ACCEPTABLE TO IT THAT THE PROPOSED DISPOSITION WILL NOT VIOLATE ANY APPLICABLE SECURITIES LAWS. TRANSFER OF THIS CONVERTIBLE NOTE IS ALSO RESTRICTED BY THE CONVERTIBLE NOTES PURCHASE AGREEMENT REFERRED TO HEREIN.
 
THE PAYMENT AND PERFORMANCE OF THIS CONVERTIBLE NOTE IS SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN CONVERTIBLE NOTES PURCHASE AGREEMENT ENTERED INTO AS OF APRIL 10, 2007, AS AMENDED BY THAT CERTAIN AMENDMENT TO CONVERTIBLE NOTES PURCHASE AGREEMENT DATED JUNE 19, 2007 AND THAT CERTAIN AMENDMENT NO. 2 DATED NOVEMBER 10, 2008, BY THE HOLDER AND ISSUER.
 
CERTIFICATE NO: 1
 
AMENDED AND RESTATED PROMISSORY NOTE
$9,800,000.00
November 10, 2008
 
FOR VALUE RECEIVED, Wits Basin Precious Minerals Inc., a corporation organized and existing under the laws of the State of Minnesota (“Issuer”), hereby unconditionally promises to pay to the order of China Gold LLC, a Kansas limited liability company, or its successors and assigns (the “Holder”) on demand at any time on or after December 31, 2008, subject to modification as set forth below (the “Maturity Date”), the principal sum of up to Nine Million Eight Hundred Thousand Dollars and 00/100 Cents ($9,800,000.00) (the “Principal”), together with accrued and unpaid interest thereon, as provided herein and from the Prior Notes below until fully paid (the “Indebtedness”), all without relief from valuation or appraisement laws.
 
This Amended and Restated Promissory Note (the “Note”) is issued pursuant to that certain Convertible Notes Purchase Agreement dated as of April 10, 2007, as previously amended by that certain Amendment to Convertible Notes Purchase Agreement dated June 19, 2007, and as further amended on the date hereof (as amended, modified, or replace from time to time, the “Notes Purchase Agreement”). The Issuer and Holder hereby amend and consolidate into this Amended and Restated Promissory Note the following notes issued pursuant to the Notes Purchase Agreement: (i) Convertible Promissory Note issued on April 10, 2007 in the principal amount of $3,000,000; (ii) Convertible Promissory Note issued on May 7, 2007 in the principal amount of $2,000,000; (iii) Convertible Promissory Note issued on June 19, 2007 in the principal amount of $4,000,000; and (iv) Convertible Promissory Note issued on July 9, 2007 in the principal amount of $800,000 (collectively, the “Prior Notes”). Holder has delivered the Prior Notes to Issuer and they have been cancelled in their entirety.

 
 
 
1. Payment of Principal and Interest. Subject to acceleration or earlier payment as provided for elsewhere in this Note, the Notes Purchase Agreement or any of the other agreements, documents, and instruments relating to any of the Indebtedness or any security therefor that are required by the Notes Purchase Agreement to be executed and delivered to or for the benefit of Holder (collectively, together with this Note and the Notes Purchase Agreement, the “Investment Documents”), the principal balance of this Note, and any accrued and unpaid interest thereon, shall be due and payable at the earlier of (i) Holder’s demand on or after the Maturity Date or (ii) to the extent funds are available, upon the closing of Issuer’s joint venture with London Mining plc relating to China Global Mining Resources Limited, a British Virgin Islands corporation (“CGMR”), or an affiliate thereof, and the related acquisition by CGMR, or an affiliate thereof, of one or more iron ore mining properties in the People’s Republic of China.
 
Issuer shall make all payments payable in cash under this Note in lawful money of the United States. All payments paid by Issuer to Holder under this Note and under the other Investment Documents shall be applied in the following order of priority: (a) to amounts, other than principal and interest, due to Holder pursuant to this Note for all costs of collection of any kind, including reasonable attorneys’ fees and expenses; (b) to accrued but unpaid interest on this Note; and (c) to the unpaid principal balance of this Note. If Issuer makes any payment of principal, interest or other amounts upon the Indebtedness by check, draft, or other remittance, Holder shall not be deemed to have received such payment until Holder actually receives the payment instrument.
 
2. Calculation of Interest. Interest shall accrue on the outstanding principal balance at the end of each day on which any amount is outstanding under this Note at the rate of 12.25% (the “Interest Rate”) per annum. Interest shall be calculated on a basis of the actual number of days elapsed over a year of 365 days, commencing as of the date hereof.
 
3. Prepayment. This Note may be prepaid in cash or other immediately available funds, in whole or in part, by Issuer at any time and from time to time, without premium or penalty (a “Prepayment”).
 
4. Waiver. Payment of principal and interest due under this Note shall be made without presentment or demand. The Issuer and all others at any time liable directly or indirectly (including, without limitation, the Issuer, any co-makers, endorsers, sureties and guarantors, all of which are referred to herein as “Parties”), severally waive presentment, demand and protest, notice of protest, demand, and dishonor, and nonpayment of this Note, and all diligence in collection and agree to pay all costs of collection when incurred, including reasonable attorneys’ fees, and to perform and comply with each of the covenants, conditions, provisions, and agreements of the Issuer contained in every instrument now evidencing the Indebtedness. No release by Holder of any security for payment of the Indebtedness or any modification or restructuring in respect of any lien or security interest held or at any time obtained or acquired by Holder for payment of such Indebtedness shall operate to release, discharge, impair or alter the liability of any Party liable at any time directly or indirectly for payment of such Indebtedness.
 
5. Renewal and Modification. Issuer further agrees that the Indebtedness may be from time to time, extended, renewed, modified, rearranged, or evidenced by one or more other notes or obligations in substitution for this Note and upon and for such term or terms agreed to by Issuer and Holder in writing, and with or without notice to other Parties. Issuer agrees that upon and after such extension, renewal, modification, rearrangement, substitution, or other change in form of the Indebtedness, each of the other Parties shall remain liable in respect of the Indebtedness so renewed, extended, modified, rearranged, or otherwise evidenced in the same capacity and to the same extent as prior thereto. No release or discharge (in whole or in part) of any Party hereto by Holder shall in any manner impair, release, discharge, or alter the liability of any other Party.

 
2
 
 
6. Events of Default. Any one or more of the following events shall constitute an event of default (each, an “Event of Default”) under this Note: (a) Issuer fails to timely pay as and when due any monetary obligation under this Note in accordance with the terms hereof; (b) Issuer’s assignment for the benefit of creditors, or filing of a petition in bankruptcy or for reorganization or to effect a plan or arrangement with creditors; (c) Issuer’s application for, or voluntary permission of, the appointment of a receiver of trustee for any or all Company property; (d) any action or proceeding described in the foregoing paragraphs (b) or (c) is commenced against Issuer and such action or proceeding is not vacated within sixty (60) days of its commencement; (e) Issuer’s dissolution or liquidation; and (f) an event of default under any other Investment Document shall have occurred.
 
7. Rights and Remedies. Upon the occurrence, and during the continuation, of an Event of Default (a) all Indebtedness and all other amounts due and owing under this Note shall (at the option of Holder) immediately become due and payable without demand and without notice to Issuer, (b) Holder shall have all rights, powers and remedies set forth in the Investment Documents, as well as any and all rights and remedies available to it under any applicable law or as otherwise provided at law or in equity; and (c) Issuer shall pay to Holder, in addition to the sums stated above, the costs of collection, regardless of whether litigation is commenced, including reasonable attorneys’ fees.
 
Holder may employ an attorney to enforce its rights and remedies hereunder and Issuer hereby agrees to pay Holder’s reasonable attorneys’ fees and other reasonable expenses, including reasonable expenses relating to any assistance provided by Holder to Issuer in resolving such defaults and amounts incurred by Holder in exercising any of Holder’s rights and remedies upon an Event of Default. Holder’s rights and remedies under this Note and the other Investment Documents shall be cumulative. Holder shall have all other rights and remedies not inconsistent herewith as provided under the Uniform Commercial Code as in effect in the State of Kansas, or otherwise by law, or in equity. No exercise by Holder of one right or remedy shall be deemed an election, and no waiver by Holder of any Event of Default shall be deemed a continuing waiver. No delay by Holder shall constitute a waiver, election, or acquiescence by it.
 
8. Revival and Reinstatement of Note. To the extent that any payment to Holder or any payment or proceeds of any collateral received by Holder in reduction of the Indebtedness is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, to Issuer (or Issuer’s successor) as a debtor-in-possession, or to a receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then the portion of the Indebtedness intended to have been satisfied by such payment or proceeds shall remain due and payable hereunder, be evidenced by this Note, and shall continue in full force and effect as if such payment or proceeds had never been received by Holder whether or not this Note has been marked “paid” or otherwise canceled or satisfied or has been delivered to Issuer, and in such event Issuer shall be immediately obligated to return the original Note to Holder and any marking of “paid” or other similar marking shall be of no force and effect.
 
9. Authority. Issuer warrants and represents that the persons or officers who are executing this Note and the other Investment Documents on behalf of Issuer have full right, power and authority to do so, and that this Note and the other Investment Documents constitute valid and binding documents, enforceable against Issuer in accordance with their terms, and that no other person, entity, or party is required to sign, approve, or consent to, this Note.

 
3
 
 
10. Governing Law; Consent to Forum. This Note shall be governed by the laws of the State of Kansas without giving effect to any choice of law rules thereof; provided, however, that if any of the collateral securing the Indebtedness shall be located in any jurisdiction other than Kansas, the laws of such jurisdiction shall govern the method, manner and procedure for foreclosure of Holder’s security interest, lien or mortgage upon such collateral and the enforcement of Holder’s other remedies in respect of such collateral to the extent that the laws of such jurisdiction are different from or inconsistent with the laws of Kansas. AS PART OF THE CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, ISSUER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE COURT LOCATED WITHIN JOHNSON COUNTY, KANSAS OR FEDERAL COURT IN THE DISTRICT OF KANSAS, AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. ISSUER WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. ISSUER FURTHER AGREES NOT TO ASSERT AGAINST HOLDER (EXCEPT BY WAY OF A DEFENSE OR COUNTERCLAIM IN A PROCEEDING INITIATED BY HOLDER) ANY CLAIM OR OTHER ASSERTION OF LIABILITY WITH RESPECT TO THIS NOTE, THE OTHER INVESTMENT DOCUMENTS, HOLDER’S CONDUCT OR OTHERWISE IN ANY JURISDICTION OTHER THAN THE FOREGOING JURISDICTIONS.
 
11. WAIVER OF JURY TRIAL AND COUNTERCLAIMS. TO THE FULLEST EXTENT PERMITTED BY LAW, AND AS SEPARATELY BARGAINED-FOR CONSIDERATION TO HOLDER, ISSUER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY (WHICH HOLDER ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR IN ANY COUNTERCLAIM OF ANY KIND ARISING OUT OF OR OTHERWISE RELATING TO THIS NOTE, THE INDEBTEDNESS, THE COLLATERAL SECURING THE INDEBTEDNESS, OR THE HOLDER’S CONDUCT IN RESPECT OF ANY OF THE FOREGOING.
 
12. Transfer of Note. Issuer shall not transfer any obligations hereunder without Holder’s prior written consent, which may be withheld in Holder’s sole and absolute discretion. With the prior written consent of Issuer, which shall not be unreasonably withheld, conditioned, or delayed, Holder may participate, sell, assign, transfer or otherwise dispose of all or any portion of its interest in this Note (including Holder’s rights, title, interests, remedies, powers and duties hereunder) to a purchaser, participant, any syndicate, or any other Person (each, a “Note Purchaser”). In connection with any such disposition (and thereafter), Holder may, with adequate safeguards of confidentiality in a manner satisfactory to Issuer, disclose any financial information Holder may have concerning Issuer to any such Note Purchaser or potential Note Purchaser.
 
13. Further Assurances. Issuer agrees to execute and deliver such further documents and to do such other acts as Holder may request in order to effect or carry out the terms of this Note and the other Investment Documents and the due performance of Issuer’s obligations hereunder and thereunder.
 
14. Relationship to Security Agreement. This Note shall be entitled to the benefits of, shall be construed in accordance with any Security Agreement securing the Indebtedness.
 
15. Miscellaneous.
 
(a) Time is of the essence with respect to this Note.
 
(b) Issuer hereby waives presentment, demand, protest, and notice of dishonor and protest. No waiver of any right or remedy of the Holder under this Note shall be valid unless in a writing executed by the Holder and any such waiver shall be effective only in the specific instance and for the specific purpose given. All rights and remedies of the Holder of this Note shall be cumulative and may be exercised singly, concurrently, or successively.

 
4
 
 
(c) Unless otherwise provided herein, any notice required or permitted to be given hereunder shall be given by Issuer to the Holder or the Holder to the Company in accordance with the Notes Purchase Agreement.
 
(d) Any provision of this Note that is prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction.
 
(e) This Note and the other Investment Documents collectively: (i) constitute the final expression of the agreement between Issuer and Holder concerning the Indebtedness; (ii) contain the entire agreement between Issuer and Holder respecting the matters set forth herein and in the other Investment Documents; and (iii) may not be contradicted by evidence of any prior or contemporaneous oral agreements or understandings between Issuer and Holder. Neither this Note nor any of the terms hereof may be terminated, amended, supplemented, waived or modified orally, but only by an instrument in writing executed by the party against which enforcement of the termination, amendment, supplement, waiver or modification is sought.
 
(f) If there is a conflict between or among the terms, covenants, conditions or provisions of this Note and the other Investment Documents, then any term, covenant, condition and/or provision that Holder may elect to enforce from time to time so as to enlarge the interest of Holder in its security for the Indebtedness, afford Holder the maximum financial benefits or security for the Indebtedness, and/or provide Holder the maximum assurance of payment of the Indebtedness and the Indebtedness in full, shall control. ISSUER ACKNOWLEDGES AND AGREES THAT IT HAS BEEN PROVIDED WITH SUFFICIENT AND NECESSARY TIME AND OPPORTUNITY TO REVIEW THE TERMS OF THIS NOTE AND EACH OF THE INVESTMENT DOCUMENTS WITH ANY AND ALL COUNSEL IT DEEMS APPROPRIATE, AND THAT NO INFERENCE IN FAVOR OF, OR AGAINST, HOLDER OR ISSUER SHALL BE DRAWN FROM THE FACT THAT EITHER SUCH PARTY HAS DRAFTED ANY PORTION OF THIS NOTE OR ANY OF THE INVESTMENT DOCUMENTS.
 
(g) The terms “include”, “including” and similar terms shall be construed as if followed by the phrase “without being limited to.” The term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.” Words of masculine, feminine or neuter gender shall mean and include the correlative words of the other genders, and words importing the singular number shall mean and include the plural number, and vice versa. All article, section, schedule, and exhibit captions are used for convenient reference only and in no way define, limit or describe the scope or intent of, or in any way affect, any such article, section, schedule, or exhibit. Unless the context of this Note clearly requires otherwise, references to the plural include the singular, references to the singular include the plural. Any reference in this Note or in the Investment Documents to this Note or to any of the Investment Documents shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, and supplements thereto and thereof, as applicable. An Event of Default shall “continue” or be “continuing” until such Event of Default has been waived in writing by Holder or completely cured in accordance with the terms of the applicable Investment Documents.
 
[The remainder of this page is intentionally blank. Signature page follows.]

 
5
 
 
IN WITNESS WHEREOF, Issuer has executed and delivered this Note as of the date first stated above.
 
ISSUER:
 
WITS BASIN PRECIOUS MINERALS INC.
   
By:
/s/ Mark D Dacko
Name:
Mark D. Dacko
Title:
Chief Financial Officer

 
 
 
 EX-10.13 7 v132000_ex10-13.htm
EXHIBIT 10.13

AMENDED AND RESTATED
CONSULTING AGREEMENT
 
This Amended and Restated Consulting Agreement (the “Agreement”) is made effective as of November 12, 2008, by and between Wits Basin Precious Minerals Inc., a Minnesota corporation (“Wits Basin”), and Corporate Resource Management, Inc., a Minnesota corporation (the “Consultant”).
 
RECITALS
 
WHEREAS, the parties have entered into that certain Consulting Agreement dated as of May 15, 2006 (the “Original Agreement”) relating to Consultant’s provision of certain investment banking services, as an independent contractor, in connection with the purchase and/or sale of mining-related assets (the “Asset Transactions”); and
 
WHEREAS, the parties wish to amend the terms of their consulting arrangement to the terms set forth herein, superseding the Original Agreement in its entirety.
 
AGREEMENT
 
NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows:
 
1. Effect of Original Agreement. The Original Agreement is hereby superseded in its entirety and shall not have further effect.
 
2. Consulting Services. Consultant agrees to provide certain investor relations and back office services as set forth on Exhibit A hereto, and any other related services as agreed upon by the parties. Consultant is not authorized to, and will not, participate in the preparation or delivery of any materials relating to the sale of Wits Basin’s securities, offer Wits Basin’s securities, make any recommendations regarding Wits Basin’s securities, assist in or provide financing for purchases of Wits Basin’s securities, represent that Consultant is an agent of Wits Basin, participate in any negotiations relating to the sale of Wits Basin’s securities or the terms of any sale of securities by Wits Basin, or enter into agreements on behalf of or bind Wits Basin.
 
3. Compensation. For the various services rendered hereunder, Consultant shall be entitled to a consulting fee in the amount of Thirteen Thousand Seven Hundred Fifty Dollars ($13,750) per month during the term of this Agreement (the “Monthly Fee”). Consultant shall be paid a prorated Monthly Fee for that portion of any less-than-complete month during which the Agreement was in force. The Monthly Fee is commencing retroactively to January 1, 2008.
 
4. Reimbursement for Expenses. Wits Basin shall reimburse Consultant for all reasonable and necessary expenses incurred and paid by Consultant in connection with the completion of Consultant’s responsibilities, promptly following presentation to Wits Basin of receipts for such expenses, provided that Consultant shall be required to obtain the prior written consent of Wits Basin.
 
5. Independent Contractor.
 
(a) Using its best efforts, Consultant shall devote such time to the performance of the services described in this Agreement as may be necessary to satisfactorily complete such services.

 
1
 
 
(b) Consultant shall be an independent contractor in the performance of this Agreement and no employee of Consultant shall be deemed an employee of Wits Basin for any purpose whatsoever. Employees of Consultant shall not participate in any benefit programs for Wits Basin employees including, without limitation, health benefits, life insurance, pension or profit sharing plans and paid vacation and sick leave. Consultant shall be solely responsible for the payment of its income taxes as required by any and all governmental agencies with respect to compensation paid to Consultant by Wits Basin, and shall comply with all regulations thereto.
 
(c) Consultant shall have no power to act as an agent of Wits Basin or bind Wits Basin in any respect.
 
6. Intellectual Property. Consultant agrees that all documents and deliverables (collectively, the “Work Materials”) created in whole or in part by Consultant in the course of or related to the performance of this Agreement shall be treated as if they were “works for hire” for Wits Basin. All ownership and control of the above Work Materials, including any copyright, patent rights and all other intellectual-property rights herein, shall vest exclusively with Wits Basin; provided, however, that such Work Materials shall in no event cover materials that Consultant is required to keep confidentially (including materials that are proprietary to other clients of Consultant) or materials that Consultant does not have the right to sublicense to third parties.
 
7. Property. Consultant will not remove from Wits Basin’s offices or premises any documents, records, notebooks, files, correspondence, reports, memoranda, computer tapes, computer disks or similar materials of or containing Confidential Information (as defined below), or other materials or property of any kind, unless necessary in accordance with Consultant’s duties and responsibilities, and in the event that any of such material or property is removed, all of the foregoing will be returned to their proper files or places of safekeeping as promptly as possible after the removal will have served its specific purpose; nor will Consultant make, retain, remove or distribute any copies of any of the foregoing for any reason whatsoever, except as may be necessary in the discharge of Consultant’s assigned duties; and upon the termination of this Agreement, Consultant will leave with or return to Wits Basin all originals and copies of the foregoing, then in Consultant’s possession, whether prepared by Consultant or by others.
 
8. Confidential Information.
 
(a) Consultant acknowledges and agrees that in the course of, or incident to, its provision of services to Wits Basin, Wits Basin will provide to Consultant, and Consultant will otherwise have access to, Wits Basin’s trade secrets and confidential information (collectively and singularly known as “Confidential Information” and defined further below). Except as will be necessary in the performance of Consultant’s obligations hereunder, Consultant will not disclose or use for Consultant’s direct or indirect benefit or the direct or indirect benefit of any third party, and Consultant will maintain, both during and after this Agreement and Consultant’s provision of services to Wits Basin outside of this Agreement, the confidentiality of any Confidential Information of Wits Basin. Upon Wits Basin’s written consent permitting Consultant to provide or disclose any Confidential Information, Consultant agrees to advise and inform any third party regarding the confidential nature of such information, and ensure that such third party independently agrees in writing to be bound by the terms and conditions set forth in Sections 6, 7 and 8 hereof.

 
2
 
 
(b) For purposes of this Agreement, “Confidential Information” means any and all proprietary information of Wits Basin that derives independent economic value by virtue of its not being known to Wits Basin’s competitors or the general public including, but not limited to, mining prospects, assay results, customer lists, customer information, intellectual property, employee lists, employee information, prospect lists, prospect information, pricing information, inventions, graphic designs, product research and development, financial statements, marketing plans, management systems and procedures, trade secrets, supplier lists, sales techniques, software specifications and information, results of research and development, whether complete or in process, and any other information which Wits Basin identifies as Confidential Information. Consultant will deliver to Wits Basin at the termination of this Agreement, or upon the completion of any services by Consultant to Wits Basin outside of this Agreement, or at any other time that Wits Basin may request, all memoranda, notes, plans, records, diskettes, tapes and other storage media, documentation and other materials (and copies thereof) containing Confidential Information, no matter where such material is located and no matter what form the material may be in, which Consultant may then possess or have under his control. If requested by Wits Basin, Consultant will provide to Wits Basin written confirmation that all such materials have been delivered to Wits Basin or have been destroyed. Consultant will take all appropriate steps to safeguard Confidential Information and to protect it against disclosure, misuse, espionage, loss and theft. “Confidential Information” also includes any and all information which Wits Basin obtains from another third party and treats as proprietary or designates as confidential. The obligations of this Section will survive indefinitely the termination of this Agreement or Consultant’s provision of services to Wits Basin outside this Agreement. All Wits Basin Confidential Information and any and all results derived therefrom in any way will at all times remain the sole property of Wits Basin.
 
For the purposes of this Agreement, “Confidential Information” shall not include information which (i) had been made previously available to the public by Wits Basin; (ii) is or becomes generally available to the public, unless the information being made available to the public results in a breach of this Agreement; (iii) prior to disclosure to Consultant or Consultant’s representatives or agents, was already rightfully in any such person’s possession without any requirement of confidentiality; or (iv) is obtained by Consultant or Consultant’s representatives or agents from a third party who is lawfully in possession of such information, and not in violation of any contractual, legal or fiduciary obligation to Wits Basin, with respect to such information and who does not require Consultant to refrain from disclosing such information to others. In any dispute relating to the obligations under this Section 8, the burden of proof will be on the party receiving the Confidential Information to show that the exclusions herein apply.
 
9. Term; Termination. This Agreement will become effective as of the date hereof and will continue for one (1) year thereafter (the “Term”), unless terminated earlier by either party for any reason with thirty (30) days’ prior written notice to the other party. The Term shall automatically extend for additional successive one (1) year period unless either party provides to the other party written notice of such party’s intent not to renew the term for an additional year at least thirty (30) days prior to the end of the then current period. During any renewal term, either party may terminate this Agreement for any reason with thirty (30) days’ prior written notice to the other party. Notwithstanding the foregoing, either party may immediately terminate this Agreement without thirty (30) days’ prior written notice in the event the other party breaches any of its material obligations hereunder and such party fails to cure such breach within ten (10) days of receipt of notice of such breach from the other party.
 
In the event Wits Basin terminates this Agreement for any reason, prior to the first anniversary of the date of this Agreement, other than a breach by Consultant of its material obligations under this Agreement (and failure to cure within the period specified above), Consultant will be entitled to a termination fee in the amount of Seventy-Five Thousand Dollars ($75,000).

 
3
 
 
10. Representations and Warranties. Wits Basin and Consultant hereby represent and warrant to each other that their respective execution, delivery and performance of this Agreement will not (a) violate or breach Wits Basin’s and/or Consultant’s articles of incorporation or corporate bylaws, or (b) result in a breach of any of the terms or conditions of, or constitute a default under, any mortgage, note, bond, indenture, agreement, license or other instrument or obligation to which Wits Basin or Consultant is now a party or by which any of them or any of their respective properties or assets may be bound or affected, or (c) violate any order, writ, injunction or decree of any court, administrative agency or governmental body in any respect, the violation or breach of which would prevent Wits Basin or Consultant from consummating the transactions contemplated herein.
 
11. Indemnification. Consultant shall indemnify and hold Wits Basin, and its shareholders, directors, employees and agents (collectively, together with Wits Basin, the “Affiliates”) harmless from and against any and all liabilities, losses, damages, claims, costs, causes of action and expenses, including but not limited to the costs of defense and reasonable attorneys’ fees, suffered, paid or incurred by any of the Affiliates, whether or not suit is filed, arising out of, resulting from or connected with, in whole or in part, the intentional misconduct or gross negligence of Consultant. The obligations of this Section 11 shall forever survive the termination of this Agreement.
 
12. Miscellaneous.
 
(a) Entire Agreement. This Agreement sets forth the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior agreements. This Agreement may not be amended or modified in any manner except by an instrument in writing signed by the parties.
 
(b) Severability. The invalidity or unenforceability of one or more provisions of this Agreement shall not affect the validity or enforceability of any of the other provisions, and this Agreement shall be construed as if such invalid or unenforceable provisions were omitted. If any provision is unenforceable because it is overbroad, the parties agree that such provision shall be limited to the extent necessary to make it enforceable, it being the intent of the parties that provisions of this Agreement be enforced to the maximum extent possible.
 
(c) Governing Law; Remedies. This Agreement shall be deemed to have been entered into in, and shall be construed and enforced in accordance with the laws of, the State of Minnesota without regard to conflicts of law principles. Consultant acknowledges and agrees that a violation of the terms of this Agreement would cause irreparable harm to Wits Basin, and that Wits Basin’s remedy at law for any such violation would be inadequate. In recognition of the foregoing, Consultant agrees that, in addition to any other relief afforded by law, including damages sustained by a breach of this Agreement, Wits Basin shall have the right to enforce this Agreement by specific remedies, which shall include, among other things, temporary and permanent injunctions, it being the understanding of Consultant and Wits Basin that both damages and injunctions shall be proper modes of relief and are not to be considered as alternative remedies.
 
(d) Waivers. The failure of any party to insist, in any one or more instances, upon the performance of any of the terms or conditions of this Agreement or to exercise any right, shall not be construed as a waiver of the future performance of any such term or condition or the future exercise of such right.
 
(e) Assignment and Delegation. Consultant will not have the right to assign its rights under this Agreement or delegate any of his obligations under this Agreement without Wits Basin’s prior written consent, which consent may be withheld in Wits Basin’s sole and absolute discretion. To the extent assignable or delegable as described in the preceding sentence, the rights of each party hereunder shall inure to the benefit of each party’s successors and assigns.

 
4
 
 
In Witness Whereof, the undersigned have set their hands to this Agreement to be effective as of the date first written above.
 
WITS BASIN:
 
WITS BASIN PRECIOUS MINERALS INC.
 
   
By:
/s/ Mark D Dacko
 
Mark D. Dacko, Chief Financial Officer
   
CONSULTANT:
 
CORPORATE RESOURCE MANAGEMENT, INC.
 
   
By:
/s/ Debra Kramer
 
Debra Kramer, President
 
Signature Page to
Amended and Restated Consulting Agreement
 
 
 

Exhibit A
 
CRM Contract Description of Services

Consultant agrees to provide general oversight and management in regard to strategic planning, team management and resource management related to but not limited to:
 
 
·
Investor Relations / Public Relations
 
 
·
Marketing
 
 
·
Support Resources for Wits Basin executive team
 
 
·
Investment banking services regarding project capitalization and corporate finance
 
Consultant is not authorized to, and will not, participate in the preparation or delivery of any materials relating to the sale of Wits Basin’s securities, offer Wits Basin’s securities, make any recommendations regarding Wits Basin’s securities, assist in or provide financing for purchase of Wits Basin’s securities, represent that Consultant is an agent for Wits Basin, participate in any negotiations relating to the sale of Wits Basin’s securities or the terms of any sale of securities by Wits Basin, or enter into agreements on behalf of or bind Wits Basins. Consultant is not a licensed broker-dealer.

 
 
 
 
 EX-10.14 8 v132000_ex10-14.htm
Exhibit 10.14
PROMISSORY NOTE

US$60,000
Minneapolis, Minnesota
 
November 12, 2008

FOR VALUE RECEIVED, Wits Basin Precious Minerals Inc., a corporation organized and existing under the laws of the State of Minnesota (the “Maker”), hereby unconditionally promises to pay to Hawk Uranium Inc., a Canadian corporation, or its successors and assigns (the “Payee”), at 120 Adelaide Street West, Suite 2500, Toronto, ON M5H 1T1, Canada, or such other place as may be designated by the Payee, on or before February 12, 2009 (the “Maturity Date”), the principal sum of Sixty Thousand U.S. Dollars ($60,000.00) (the “Principal”). Simple interest shall accrue on the Principal at a rate of ten percent (10%).

As additional consideration to Payee for providing financial accommodations to Maker, Maker has agreed to issue the Payee a five-year warrant to purchase up to an aggregate of 250,000 shares of the Maker’s $0.01 par value common stock at a purchase price of $0.125 per share, such warrant to be issued at such time Maker has authorized and unissued shares of common stock available.
 
The Maker acknowledges that the warrant to be issued to Payee pursuant to this Promissory Note shall have been duly authorized by the Maker’s board of directors.

In connection with the acquisition of the warrant, the Payee represents and assures the Maker, to the best of its knowledge, the following:

(a) Payee is not a “US Person” as defined in Rule 902(K) of the United States Securities Act of 1933 and that the offer and sale of the warrant is being made in an offshore transaction and that no selling efforts were made by the Maker or any of its affiliates;
(b) Payee acknowledges that it has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Maker concerning an investment in the warrant, and any additional information which the Payee has requested;
(c) Payee has had experience in investments in restricted, speculative securities and other investments which involve the risk of loss of investment. Payee has the requisite knowledge to assess the relative merits and risks of this investment without the necessity of relying upon other advisors, and Payee can afford the risk of loss of its entire investment in the warrant;
(d) Payee acknowledges that the warrant to be issued pursuant to this Promissory Note has not been registered under the Securities Act of 1933, and accordingly is deemed a “restricted security” within the meaning of Rule 144 of the Act. As such, may not be resold or transferred unless the Maker has received an opinion of counsel reasonably satisfactory that such resale or transfer is exempt from the registration requirements of that Act. The Maker shall not unreasonably withhold approval of any application filed by Payee under Rule 144(d) of the Act to clear the subject security of restrictions after Payee has satisfied the requirements of Rule 144(d); and

 
 
 

(e) Payee understands and acknowledges that the certificate representing the common shares issued upon exercise will contain a restrictive securities legend.

All payments on account of this Note, when paid, shall be applied first to the payment of Principal and the balance, if any, shall be applied to reduction of the unpaid interest. Maker may prepay this Note in full or in part at any time and from time to time without premium or penalty.

Maker hereby grants the Payee a security interest in Maker’s right to acquire a 65% interest in Kwagga Gold (Barbados) Limited (the “Spin Off Shares”), subject to any existing security interest granted by Maker prior to the date hereof relating to the Spin Off Shares. The security interest granted herein is to be construed to the fullest extent permitted without violating any term or right of any existing security interest or any holder of such security interest granted prior to the date hereof. If this Note is placed in the hands of an attorney for collection, the holder shall be entitled to recover reasonable and necessary collection costs, including reasonable and necessary attorney’s fees.

The Maker hereby waives presentment for payment, notice of dishonor, protest, notice of protest, and diligence in collection, and consents that the time of payment on any amount due under this Note may be extended by the holder without otherwise modifying, altering, releasing, affecting, or limiting the liability of the Maker. Maker agrees to assert no defenses against payment of this Note except for actual payment thereof.

The terms, conditions and provisions of this Note shall be construed and enforced according to the laws of the State of Minnesota.

IN WITNESS WHEREOF, the duly authorized officer of Maker has caused this Note to be executed on the date first written above.

Wits Basin Precious Minerals Inc.,
a Minnesota corporation
 
/s/ Mark D Dacko
By: Mark D Dacko
Its: Chief Financial Officer

 
 
 
 
 EX-31.1 9 v132000_ex31-1.htm
EXHIBIT 31.1

CERTIFICATION

I, Stephen D. King, certify that:

1. I have reviewed this report on Form 10-Q of Wits Basin Precious Minerals Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, and evaluated the effectiveness of our internal control over financial reporting, and printed in this report our conclusions about the effectiveness of our internal control over financial reporting as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: November 13, 2008
By:
/s/ Stephen D. King
   
Stephen D. King
   
Chief Executive Officer
   
Wits Basin Precious Minerals Inc.

 
 
 
 
 EX-31.2 10 v132000_ex31-2.htm
EXHIBIT 31.2

CERTIFICATION

I, Mark D. Dacko, certify that:

1. I have reviewed this report on Form 10-Q of Wits Basin Precious Minerals Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, and evaluated the effectiveness of our internal control over financial reporting, and printed in this report our conclusions about the effectiveness of our internal control over financial reporting as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: November 13, 2008
By:
/s/ Mark D. Dacko
   
Mark D. Dacko
   
Chief Financial Officer
   
Wits Basin Precious Minerals Inc.

 
 
 
 
 EX-32.1 11 v132000_ex32-1.htm
EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the report of Wits Basin Precious Minerals Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen D. King, the Chief Executive Officer of the Company, hereby certifies, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 13, 2008
By:
/s/ Stephen D. King
 
 
Stephen D. King
   
Chief Executive Officer

 
 
 
 
 EX-32.2 12 v132000_ex32-2.htm
EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the report of Wits Basin Precious Minerals Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark D. Dacko, the Chief Financial Officer of the Company, hereby certifies, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 13, 2008
By:
/s/ Mark D. Dacko
 
 
Mark D. Dacko
   
Chief Financial Officer

 
 
 
 
 -----END PRIVACY-ENHANCED MESSAGE-----