BIG VALLEY RESOURCES INC ("BV-V;BVLRF-L") - Management Discussion
During the quarter ended June 30, 2000, gold prices continued to be depressed as was the junior resource market. These factors impacted the Company in that it was unsuccessful in raising additional funds to meet its obligation under the terms of its agreement with Kinross Gold Corporation. As a result, the Company forfeited its non-refundable deposit of $300,000 previously paid to Kinross, and wrote off all of its investment in the QR mine. Further, pursuant to an agreement with 580085 B.C. Ltd., a company controlled by Big Valley's President (at that time) and which had been formed for the sole purpose of obtaining additional financing for the purchase of the QR mine, the Company purchased all of the outstanding shares of 580085 for $1 and recorded a charge of $200,000 against its operations with respect to the forfeiture by 580085 to Kinross of its non-refundable $200,000 bond. With regard to this transaction the Company also recognized a liability of $200,000 under a debenture agreement with a creditor of 580085.
Subsequent to the end of the quarter, on August 22, 2000, the Company reported that it has entered into a letter agreement with certain parties related to it, one of which is the current optionee of an acquisition agreement with Kinross, to acquire all of the QR mine assets and related liabilities in consideration for an aggregate consideration of $5,550,000, of which $1,050,000 will be paid by the Company issuing 6,176,470 common shares at $0.17 per share and the balance will consist of a debenture repayable in monthly installments of $147,157 over 36 months commencing in January 2001. The agreement is subject to regulatory approval and possibly shareholder approval.
Further, with respect to the proposed QR mine acquisition transaction, the Company and its financiers agreed to raise a $5.0 million to provide funds for project working capital, exploration and bonding. On October 27, 2000 the Company reported that the cash component ($4.5 million) of the financing for the acquisition of the QR mine had been arranged with an arm's-length third party. In addition, a firm commitment letter had been completed with respect to receiving an additional $5.0 million for project expenditures. The financings were subject to completion of certain terms and conditions, including receiving shareholders and regulatory approval if and as required.
In order expedite the Company's transition from a junior resource company to an operating mining company, the Company decided it prudent to appoint a new Chief Executive Officer and Chief Financial Officer. In order to accommodate this matter, the incumbent President, Lloyd Tattersall, and Chief Financial Officer, Egil Livgard, agreed to resign as officers and directors of the Company. It was agreed that Messrs. Tattersall and Livgard would continue to act as consultants to the Company. As part of the management changes, John Enns consented to rejoin the Company's Board of Directors. The Board expressed its thanks to Messrs. Tatteresall and Livgard for their many years of service to the Company.
The resignations of Messrs. Tattersall and Livgard became effective September 25, 2000. On that date, Dean Mason, C.A. was appointed Interim President and a director. In addition, Robert G. McMorran, C.A. was appointed Secretary. At the same time the Company decided to move its corporate office from Williams Lake to Suite 200, 580 Hornby Street, Vancouver, B.C. Unfortunately, John Enns tendered his resignation shortly thereafter due to personal reasons. The Board accepted his resignation and thanked him for his valuable service to the Company.
On October 2, 2000 the Company reported that it had appointed an Advisory Committee consisting of Robert Watts, Fred Sveinson and Peter Bradshaw. All members of the Committee had many years of experience in varying aspects of mineral exploration and operating mines. On November 10, 2000 the Committee made its report to the Board of Directors including several recommendations with respect to the nature and sequence of operating activities that should be undertaken prior to reopening the QR mine. The Company advised that it intended to follow the recommendations of the Advisory Committee. Having completed its mandate, the Advisory Committee was disbanded with the appreciation of the Company for their efforts and assistance.
The Company did not issue any securities during the quarter ended June 30, 2000 but subsequent to that date (September 19, 2000) the Company received approval from regulatory authorities to settle $215,924.48 of debt by issuing 1,279,144 common shares at $0.17 per share.
Further, on December 15, 2000, the Company reported that it had agreed to complete a private placement of up to 3,000,000 special warrants at $0.20 per special warrant. Each special warrant is exercisable into one common share and one common share purchase warrant. Each warrant entitles the holder thereof to acquire one common share at a price of $0.25 per share in the first year and $0.30 per share in the second year. The private placement is subject to the approval of the Canadian Venture Exchange. At the same time the Company reported that it had issued 800,000 common shares at an ascribed value of $0.25 per share pursuant to the terms and conditions for conversion of a $200,000 convertible debenture.
For the year ended June 30, 2000, the Company reported a loss from operations of $2,176,117 as compared to a loss of $1,703,230 for 1999. Included in the current year's loss was a charge of $200,000 for the assumption of a debenture obligation (described above) plus write-offs of mineral property costs, capital assets and wood product costs in the amounts of $1,342,191, $33,066 and $100,000 respectively. The operating loss prior to all of the above items (excluding a $6,141 loss on disposal of capital assets) was $494,719 as compared to $598,884 in 1999.
Subsequent to June 30, 2000 the Company advised that it had undertaken and completed a diamond drill program on the Company's Lloyd 2 claim. In total 1053m was drilled in four holes. All but the first hole intersected rocks of the Polly Mountain intrusive stock under cover of volcanic rocks. The drill core was being logged and split for forwarding to an assay lab. Assay results were not expected until early 2001.
During the quarter ended June 30, 2000 the Company did not actively conduct investor relations activities. On November 10, 2000 the Company advised that it had reached agreement with LKB Capital Corp. and Associates to perform the duties of Investor Relations for the fee of $5,000 per month plus an incentive stock option consisting of 100,000 shares at $0.40 per share; 100,000 shares at $0.75 per share; and 200,000 shares at $1.00 per share. The Investor Relations agreement was subject to the approval of the Canadian Venture Exchange.
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