The business plan from Naxos: (sorry for the formatting)
To: SHAREHOLDERS
Date: July 22, 1999
Subject: Business Development Framework
We submit a Business Development Framework for your attention. This plan involves pursuing several promising avenues within the Franklin Lake area as well as looking at other opportunities for which we may find ourselves positioned. At the same time we propose to leave the door open to the possibility of success extracting the elusive PGM's from the clays within the playa.
To our knowledge, there has not been a business plan ever developed by management and the board of directors for the shareholders. We have attempted to bring together some ideas and recommendations as a basis for a working plan that needs to be conveyed to the shareholders. A business development framework must be acceptable to both shareholders and to financial institutions.
Please take the time to read this plan and forward comments. We need positive feedback in the way that you, the shareholder, can help with ideas and to make Naxos grow.
BUSINESS DEVELOPMENT FRAMEWORK
FOR
NAXOS RESOURCES LTD.
July 20, 1999
Table of Contents
Executive Summary 1
Mission Statement 2
Introduction 2
Company Overview 2
Mineral Exploration – Franklin Mining Camp 2
Lithium 3
Placer Gold 3
Lode Gold 3
Industrial Minerals 3
Mineral Exploration – General 3
Non-Mining Ventures 4
Environment 4
Management Team 4
The New Company 4
Short Range Plan 4
Long Range Plan 4
Capital Requirements 5
Financial Plan 5
Short Term Financing 5
Long Term Financing 5
Conclusions 5
Recommendations 6
EXECUTIVE SUMMARY
This is a proposed business development plan setting out the Company's structure, assets, and short to long term objectives. It is by no means a comprehensive study, but is an attempt at defining a vision with a sense of the company's direction and future state.
In the long term, it is the intention to create profitability for Naxos Resources Ltd.. In the short term, it is the intention to improve the corporate image to one where shareholders, the investment community and mining companies will view the company as a positive viable operation operated by professionals with a long range goal and a vision of how to achieve it. This approach will bring access to new capital and new shareholders
In the very near term, financing is of the upmost importance in order to keep Naxos solvent and begin a new exploration era.
We compete directly with other resource/venture companies for a share of the investor capital. Under the current financial and investment climate, the stock will not reach its former high of $10.62US (January 1995) based solely on gold. Naxos needs other venues in order to give the stock some value and at the same time provide ongoing cash flow for its operations. Gold is not the ‘magnet' it once was. We recommend that Naxos pursue the lithium project as a viable means of raising immediate funds and providing a source of cash flow should we be successful. At the same time, we recognize the potential of the Franklin Camp for further exploration and development in terms of gold-platinum group elements and industrial minerals.
A significant plus for Naxos Resources is its good asset base with no major liabilities. Now is the time to become positioned for opportunities by building a strong management team with both mining and business experience.
1
MISSION STATEMENT
To explore and develop opportunities while adhering to the principle of sustainable development and to be responsible in a social and environmental manner. Investment, development, production and reclamation will be done to world class standards in consultation with government, industry and workers. In pursuit of our goals, Naxos resolves to treat shareholders and the community with respect.
INTRODUCTION
On their own initiative, an independent committee of directors formed to consider strategic alternatives to enhance shareholder value by creating a business development framework for Naxos Resources Ltd. Essentially we must refocus our energies on previously untapped resources at Franklin Lake as well as investigate other alternatives whether it be mining or non-mining ventures. This approach will give us the credibility we must have in the mining and financial communities which will be the foundation of our survival and ultimate success. At the same time, we leave the door open to the possibility of solving the riddle of the clays. We believe this two pronged and parallel approach to be the most viable and realistic. The fundamental questions that require answers are:
Where are we going?
What must we do to get there?
How will we act as we go?, and
What are the shareholder's values?
COMPANY OVERVIEW
Naxos Resources Ltd. is a federally incorporated company incorporated under the Canada Business Corporations Act and its shares trade on the Over The Counter Bulletin Board in the United States under the symbol "NAXOF". The Company is considered to be an exploration and development stage mining company with its principal property at Franklin Lake located in Death Valley Junction, California.
MINERAL EXPLORATION – Franklin Camp
The Franklin Mining Camp is defined as the Amargosa River valley and all its drainage areas including: Amargosa Valley, Stewart Valley, Pahrump Valley, Forty Mile Wash and Crater Flat. The area has precious metal, base metal and industrial mineral potential. The camp has past production of gold, silver, copper, lead, zinc, borax and clay.
2
Naxos should entertain the idea of exploration and development within the Franklin Camp, as they have a large land position and are known in the area. It would appear that less than 50% of the property has been explored/sampled. There is excellent potential for exploration within the Franklin Camp.
Lithium Potential
There appears to be a very good lithium potential from the brines on the existing claim blocks under lease to Naxos. From Sanguitti's report (1991), referencing the Bureau of Land Management (BLM) and USGS report of 1980, "Economic studies by BLM indicated an estimated $52 million worth of lithium in the brines of Alkali Flat" (Franklin Lake) (based on 1980 values and dollar). Other potential elements contained in the brines such as boron and rare earths must also be investigated. Exploration of the brines will in no way affect efforts at recovery of elements from the clays
Placer Gold Potential
Investigate placer gold potential in the area. With a huge outwash area and drainage from gold-bearing areas, there exists a good potential for placer gold areas. This will entail a large sampling program using available equipment on site. The material from the previous drilling program in 1998 should be investigated for placer gold (ie. pan for concentrate).
Lode Gold Potential
Investigate areas for lode gold potential. The general geology of the Franklin Camp is encouraging in that there exists a very good potential for low grade, bulk tonnage gold deposits that are prevalent in Nevada. This would involve a literature and map review of published data and reports, which subsequently will lead to careful prospecting and sampling. This exploration project will require time. Some areas have been identified as good prospecting targets.
Industrial Mineral Potential
The area has potential zeolite and bentonite resources as evident from the presence of producing mines in the area.
MINERAL EXPLORATION – General
Mineral exploration should also be considered outside of the Franklin Mining Camp, where opportunities do prevail. Commodities should include base metals, precious metals (gold, silver, platinum/palladium) and industrial minerals. The company should consider investigating mineral properties that belong to major companies who have had to shed them due to downsizing.
3
NON-MINING VENTURES
There are opportunities that Naxos should investigate outside the realm of mining ventures. These opportunities may come from the shareholders, and we recommend that the board and management be open to all viable proposals. An open-minded approach is one which will be best for the company and its shareholders.
ENVIRONMENT
There are no major environmental problems, however there are some environmental concerns that need to be addressed that include environmental cleanups. There appears to be no toxic environmental problem(s) that are contaminating the landscape.
MANAGEMENT TEAM
There is a need to develop a strong management team and board of directors with specific skills covering exploration, mining, finance, investor relations, planning and human resources. This must be a fully committed and cohesive working team.
THE NEW COMPANY
Short Range Plan
The short-range plan is to improve the corporate image. This can be accomplished by:
Installing a qualified mining professional to head management,
Communicating the business plan to shareholders (abridged version).
Conducting an investigation of the lithium potential and reconnaissance prospecting for lode gold.
Continuing work with Great Lakes Chemical and a group currently interested in licensing a recovery method to us.
Long Range Plan
The long-range plan is to create profitability. Steps taken towards this goal would include:
Exploring the lode gold, placer gold and industrial mineral potential in the Franklin Camp and entering into joint ventures where possible,
Optioning (and/or joint venture) viable mineral properties when available with potential for reserves that are being "shed" by major mining companies,
Continuing investigation of other methods for gold and precious metals extraction from the clays.
4
Capital Requirements
The capital requirements for the short term is approximately $US 350,000, whereas the capital required for the long term is approximately $US 1,500,000.
FINANCIAL PLAN
The major financing need is to recapitalize. The present stock price reflects the current status of Naxos. In order to bring urgent and long-term capital into the company, we must review the short and long term financing scenarios that are available to us.
For future funding requirements, we should approach the European institutions for funding where focus is generally on long term profitability rather than short-term gains. Experience dictates that Europeans appear to have longer-term expectations in mind when they invest.
Short Term Financing
The short term financing requirements are urgent in order to bridge the next two to three months. The following options should be considered:
The Exercise of Warrants and Options
Bridge Loan
c) Private Placement:
Long Term Financing
The long term financing requirements are needed in order to carry out the business plan. The following proposals should be considered:
a) Loans: The outstanding loans to the company would be called.
b) Lawsuits The potential lawsuits that have an excellent chance of winning would be accelerated.
c) Private Placement A private placement should be offered in conjunction with further exploration and development. The lithium project would seem to be our most viable route at present.
d) Tax Credits Sell the tax credits (approximately $US7,000,000 & $CDN 7,000,000).
CONCLUSIONS
Naxos has a large asset value considering the above soft assets (lawsuits, loans and tax credits). Naxos also has a large base of shareholders, many who have been loyal to the company for years. A total of $35 million has been spent todate and together with a dilution of over 31 million shares, very little bankable results have been produced. The
5
potential lithium resource provides Naxos with a strong motivation for additional
exploration and development in the Franklin Camp. It also provides some concrete incentive for the shareholders and a means whereby Naxos can gain some immediate credibility and the hopes of creating a cash flow in the long term which the company has never had since its inception.
The company name Naxos does not raise credibility within the financial and mining communities. The actual name must be debated as to whether it should be kept or a new name created with a new management and board.
In the mining world, an idiom worth noting is "mines are made, not found", so if you don't explore, you will never discover and hence have the opportunity to make a mine.
For this plan to succeed, management and the board of directors needs shareholder input.
RECOMMENDATIONS
In order to make this plan viable, the following recommendations must be considered:
In order to institute a new vision, there are three options that the shareholders may want to consider in relation to the name Naxos: 1) rename the company, 2) institute a corporate takeover by one of its subsidaries in order to change the company name, or 3) keep the same name. The present name, as it stands, conotates some negative feelings within the financial/mining communities.
The company should definitely be listed on another exchange. This would improve exposure and give the company much needed improvement in credibility. The idea of re-listing on the new VSE-ASE merger exchange should not be ruled out. With stock appreciation, a full NASDAQ listing should be investigated.
The company should remain in Vancouver, which is the recognized world centre in junior capital funding and development. Vancouver is also noted for its high concentration of world class technical professionals in the mining industry, as well as professional laboratory facilities. Because of this concentration, opportunities are present that may not be available elsewhere.
Create a balanced board and management of technical, financial and human resource people by:
Installing mining professional as top management
Creating a position of vice-president of investor relations/public affairs.
Reduce the company's total dependency on private placements and options for financing etc.
Investigate and invest in ventures other than mining properties.
Invest in other junior mining companies concerning specific mineral properties.
Maintain control of the company's expenditures via strict budget control.
Review present expenditures and eliminate costs where necessary.
Schedule regular monthly board meetings to review company direction, progress and financials.
6
Review all existing company bylaws.
Reduce size of Board of directors.
Implement the long-term incentive stock option plan for management.
Research and development should also be an integral part of the company's business plan.
There will be no more major funding without prior third party verification and duplication of the validity of processes presented for extracting gold and precious metals from clays. We will pay backend compensation in the form of generous royalties for a successful method.
Raise money for completing assays of drill holes from 1998 program under chain of custody.
Review of the claims and property held by Naxos near Dease Lake, northern British Columbia
We recommend that Naxos for the purpose of mineral exploration (if taxes etc pose no real problem) be divided into three entities:
1) Naxos Canada mineral exploration in Canada
2) Naxos USA mineral exploration in USA (Franklin Camp)
3) Subsidiary mineral exploration worldwide or other ventures
Ask for shareholder input into plan. |
