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| GSPG.OB > SEC Filings for GSPG.OB > Form 10-K on 15-Apr-2009 | All Recent SEC Filings |
15-Apr-2009
Annual Report
The following discussion provides information that we believe is relevant to an assessment and understanding of the consolidated results of operations and financial condition of our company. It should be read in conjunction with the Consolidated Financial Statements and accompanying Notes also included in this 10-K.
The following discussion addresses matters we consider important for an understanding of our financial condition and results of operations as of and for the year ended December 31, 2008, as well as our future results.
Overview
GoldSpring, Inc. is a North American precious metals mining company, focused in Nevada, with extensive, contiguous property in the Comstock Lode District. Our Company was formed in mid-2003, and we acquired two properties in the Comstock Lode before the end of that year. We secured permits, built an infrastructure and brought the exploration project into test mining production within a year of its acquisition. The Company, in 2005, began consolidating the Comstock Lode by acquiring additional properties in the district, expanding our footprint and creating opportunities for exploration and mining. We are an emerging company, looking to build on our success through the acquisition of other mineral properties in the Comstock Lode District with significant precious metals exploration potential. The Company's objectives are to increase reserves through exploration, expand its footprint in the Comstock, resume mining, optimize its production, and maximize shareholder value
Our Company spent the majority of 2007 collecting and analyzing geological information from our Comstock project in Nevada, with the objective of developing an exploration and developmental drilling program. Based upon our review of geological information, including the assay results of several prior drilling campaigns, we believed the Hartford / Lucerne Complex provided the opportunity to identify significant precious metals mineralization that would lead us to mine production. We have also committed to assembling a tier-one team of mining industry professionals. In late 2007, we completed a drill plan based on the geological model for mineralization in the Comstock Mining District. In December 2007, we launched our exploration and developmental drilling program, which was focused on surface drilling at the Hartford / Lucerne Complex to delineate the zones of mineralization. The drill hole depth of this reverse circulation drilling program typically varied between 600 to 1000 feet. To date, we have drilled 170 Reverse Circulation holes as part of the 2007-2009 drill program. We have received data from 128 of the 170 holes; the data includes surveyed location, logged geology, and assays received from American Assay Labs in Reno, Nevada. We are currently awaiting data on the remaining 42 holes. Larry Martin leads GoldSpring's team of geologists in this exploration program.
In 2008, the Company began to execute a mineral exploration and mine development business model with all activities focused on resumption of mine production in late 2009 or 2010. The most relevant steps taken are as follows:
[ ] Expanding our footprint in the Comstock Region and other acquisition opportunities through the entry into of two letters of intent to purchase rights, which upon consummation, may allow the Company to amass one of the largest land positions in the Comstock District.
[ ] Further exploration in the Comstock Region to accomplish the above, including a decision to review the geology of the Hartford complex in a more detailed manner
[ ] Completion of the Plum Mine reserve report through a focus on infill drilling to allow completion of the Report
[ ] Expanding the permitted drilling area and updating of the mine reclamation bond
[ ] Consummation of loan agreement with major shareholder to borrow up to $2.5 million for completion of the drilling program, of which 100% has been funded as of December 31, 2008 and efforts to secure further funding to enable recommencement of mine production
In addition to our exploration and drilling program, GoldSpring has added additional surface and mineral rights to its portfolio in the Comstock Lode Mining District through acquisitions and the staking of new claims. Our Company now controls over 3,500 acres of patented and unpatented mining claims. Approximately 2,000 acres of these holdings have been added through staking new claims, at a cost of less than $25,000. Scott Jolcover, GoldSpring Director, and Joel Casburn, a consulting land-man with 30 years of experience in managing and consolidating mineral districts, are working to expand the Company's portfolio of land and mineral holdings. Our exploration program is currently conducting surface geochemistry, geology mapping, rock chip and shallow auger sampling that have identified a number of favorable target areas. We have consolidated historic exploration and production records using Techbase software to generate a computer model of the Comstock Mining District with the objective of delineating additional geologic targets that were previously untested.
Early 2009 Developments
In the first quarter of 2009, a modification application to the Water Pollution Control Permit was submitted to the Nevada Division of Environmental Protection. The permit modifications highlight the Company's newly designed processing facilities that will optimize recovery of the recently discovered mill-grade gold and silver ore at the Hartford Complex.
The major improvements to the processing facilities include the:
· Construction and operation of two new crushed ore storage areas;
· Implementation of a high-grade ore milling circuit in a contained area;
· Expansion of the leach solution pumping systems;
· Formation of a new pregnant solution pond; and
· Expansion of the Merrill Crowe processing plant.
The Nevada Division of Environmental Protection, Bureau of Mining Regulations and Reclamation, has begun its review of the application. Major modification applications typically take nearly 180 days to complete. Under the modified permit, the Company initially plans to mine and process at a rate of 720,000 tons of gold and silver ore per year. The majority of the ore that will be processed in the milling circuit will have a high percentage of the contained precious metals recovered because of efficiencies afforded by the milling process.
Several other operating permits are also being updated to allow operations to begin in 2010. Dennis Anderson, Professional Mine Engineer, leads the mine permitting efforts and is supported by the engineering consultants at Telesto Nevada, LLC of Reno, Nevada.
In anticipation of mining resumption, the Company has procured a 300 ton per day ball mill and related equipment. The ball mill is being added to process the high grade gold and silver mineralization, optimizing gold and silver recovery. Precious metal recovery using the ball mill and grinding to 100 Mesh should be around 95% versus 75% for heap leaching.
Assuming sufficient funds are raised in a timely manner, the Company's goal would be to reopen the Mine during in 2010. In order to resume production, the Company must complete a reserve report certified by a qualified third party; complete a comprehensive mine plan; and complete a mining schedule, all of which are dependent upon ability to secure sufficient funds to procure the mining fleet and related assets. In addition, we will need to construct the milling facility, process ponds and expand the existing processing facilities. A haul truck and shovel fleet, and ancillary mine production equipment will need to be acquired and placed in service by the mine production team.
There are also risks involved in the fact that one individual and his affiliates, as of December 31, 2008, beneficially own in excess of 24% of our voting stock. Pursuant to financing agreements, this convertible debt holder and his affiliates with a 61 day notice can waive the 4.9% ownership restriction, allowing him to convert 100% of his convertible debt and related interest, which totals $10,404,773 at December, 2008, into our common shares. This group, if they waive the ownership restriction and convert all convertible debt and related interest into our voting common stock, may take actions that could conflict with your interests. This includes the election of Company directors, approval of actions generally requiring the approval of the holders of our voting stock, including adopting amendments to our articles of incorporation and bylaws and approving mergers, certain acquisitions or sales of all or substantially all of our assets, which could delay or prevent someone from acquiring or merging with us or limit the ability of our other stockholders to approve transactions that they may deem to be in their best interests.
Results of Operations and Operational Plan
Our Comstock Lode Mine, which is located in Storey County, Nevada, went into test mining production in late third quarter 2004. We have not established reserves on this exploration project. Therefore, all of our activities on this property are considered test mining or exploratory in nature. In November 2005, we retained mining engineer Jim Golden, who became our COO in 2006, to conduct a comprehensive review of all aspects of the Comstock Lode Mine operation, including the overall mine plan, with the objective of further improving efficiency, increasing production, and reducing costs. Furthermore, TechBase of Colorado, with the help of our consultants, has been retained to complete a detailed mine plan and a reserve report for the Comstock Lode. We released our first Resource Report in September 2008. We believe that these steps coupled with our exploratory drilling of the Hartford / Lucerne Complex will improve our overall performance at the Comstock Lode Mine.
Among the exploration and business development activities that are in process:
· Ore body delineation
· Reserve definition
· Completion of drilling and reserve report
· Development of comprehensive mine plan from exploration results
· Increase of ore reserves
· Augment ability to mine and operate at more efficient levels
· Intent to resume mine operations after completion of the reserve report and the comprehensive mine plan.
· Expansion of existing footprint in the Comstock region (which was largely accomplished through the in process DWC and Sutro Tunnel transactions)
Expansion of team of experts to study geology and metallurgy, as well as develop mine plan, define reserves and complete initial reserve report
Secure funds to complete drilling
The Company hired Orbit Garant Drilling and George Delong Construction and Drilling to perform exploration and developmental drilling at the Comstock project. The Company also added several mining professionals and consultants in 2008 to its team to further augment its expertise in all facets of mining, including metallurgy. In order to fund its exploration efforts, the Company, in 2008, raised $5,120,000 in capital to finance the developmental and exploratory drilling.
2008 Developments
The Company has drilled a total of 130 holes in its Phase 1 exploratory program through December 2008 at the Hartford / Lucerne Complex. The purpose of this program is to define the boundaries of the ore bodies and to produce a comprehensive reserve report and mine plan. The total estimated cost of this plan is $3,500,000 of which $3,443,000 has been expended to date. The assay results from this drill campaign have been encouraging. The initial resource report released in September after obtaining 3rd party assays on 38 of these drill holes plus assay results from 450 holes from prior drill campaigns indicated a resource of 4,926,000 tons grading 0.080 ounces per ton gold containing 392,000 ounces at a cutoff grade of 0.030 ounces per ton. The resource is highlighted by 930,000 tons grading 0.209 ounces per ton gold containing 194,000 ounces of gold using 0.10 ounces per ton gold cutoff grade. A reserve report is expected to be completed during the second quarter 2009. The Company intends to expand the exploration program beyond the Hartford Complex in 2009.
Summary Exploratory Drilling Results Table
The chart below details the results of the assay testing, which was conducted by
an independent third-party laboratory. The encouraging assay results received
from the drilling program have expanded the surface area and the depth of the
identified body of mineralized material in the Hartford Complex. To date, the
Company's drilling program results at the Hartford Complex since December 2007
are summarized in the table below.
Drill Hole Intercept in Feet Gold Grade Silver Grade
Number From To (ounces per ton Au) (ounces per ton Ag)
111 0 40 0.049 1.52
105 190 0.029 0.5
205 220 0.039 0.23
110 90 105 0.039 0.47
120 130 0.024 0.14
140 160 0.028 0.12
320 340 0.043 0.7
109 0 100 0.04 0.71
65 95 0.102 0.8
108 125 145 0.019 1.34
200 215 0.047 1.62
250 265 0.027 0.87
310 400 0.022 1.05
107 115 225 0.028 0.27
125 165 0.058 0.33
106 15 50 0.017 0.49
130 140 0.019 0.33
105 235 245 0.052 0.47
104 0 190 0.057 1.17
75 190 0.091 1.98
103 0 180 0.034 0.83
60 85 0.123 2.1
102 0 35 0.081 2.28
170 290 0.047 0.55
185 220 0.12 0.78
325 390 0.123 2.23
101 20 365 0.118 0.89
125 265 0.243
555 570 0.394 0.48
585 595 0.163 2.26
100 0 160 0.05 0.39
99 5 30 0.016 0.41
60 90 0.022 0.37
130 285 0.051 0.49
98 35 145 0.044 0.12
240 250 0.025 0.17
270 305 0.026 1.2
97 105 240 0.041 0.34
|
96 80 160 0.032 1.08
95 0 60 0.014 0.33
110 145 0.039 0.16
Hole 94 10 40 0.023 0.61
50 65 0.031 0.28
93 20 100 0.017 0.11
130 270 0.029 1.05
92 0 55 0.028 0.34
150 165 0.025 0.15
175 195 0.024 0.32
225 280 0.019 0.79
91 40 70 0.026 0.75
90 35 90 0.021 0.19
89 0 20 0.013 0.31
60 80 0.017 0.08
90 105 0.019 0.18
88 5 20 0.016 0.33
150 165 0.032 0.14
175 215 0.017 0.25
87
86 No Mineralization
85
84 45 80 0.03 0.084
170 245 0.036 0.072
295 355 0.046 0.089
455 485 0.028 1.151
83 0 20 0.051 0.877
125 415 0.02 0.46
82 0 90 0.01 0.297
90 110 0.031 1.444
110 125 0.014 0.186
160 195 0.021 0.293
81 115 265 0.113 0.908
80 180 235 0.015 0.04
370 450 0.049 1.211
79 350 390 0.012 0.131
78 5 40 0.011 0.337
45 90 0.029 0.152
100 195 0.065 1.139
77 0 15 0.039 0.33
65 185 0.05 1.059
76 0 90 0.041 0.627
105 330 0.12 0.937
75 60 65 0.125 0.296
120 125 0.071 0.372
140 185 0.097 0.195
190 195 0.013 0.063
310 405 0.023 0.394
|
74 0 30 0.061 0.586
140 325 0.024 0.162
73 0 120 0.016 0.702
140 175 0.019 1.038
72 0 15 0.017 0.234
50 85 0.052 0.937
335 345 0.062 1.586
71 50 65 0.017 0.21
80 135 0.023 0.12
165 240 0.04 0.29
260 280 0.064 1.75
70 0 65 0.02 0.48
130 175 0.029 0.4
190 245 0.027 0.3
295 380 0.029 0.36
69 0 35 0.061 0.059
140 325 0.024 0.16
68 15 35 0.045 0.74
45 55 0.029 0.25
70 80 0.041 0.82
80 90 0.031 1.07
90 105 0.021 0.72
105 120 0.175 0.68
120 145 0.036 0.8
145 170 0.035 1.45
170 185 0.024 0.62
67 55 260 0.064 1.17
66 0 50 0.014 0.35
50 155 0.057 1.05
155 185 0.016 0.33
65 0 50 0.017 0.11
115 130 0.039 0.11
160 320 0.025 0.14
320 420 0.156 0.62
420 500 0.024 0.11
64 0 25 0.057 0.51
115 420 0.044 0.3
63 125 170 0.03 0.47
300 315 0.11 0.69
62 100 120 0.033 0.56
61 0 15 0.036 0.96
210 225 0.053 0.48
240 310 0.053 0.84
385 405 0.022 0.02
60 275 335 0.02 0.18
375 435 0.012 0.02
665 685 0.065 0.08
59 105 265 0.035 0.56
|
300 315 0.019 0.07
58 130 285 0.018 0.48
57 90 105 0.018 0.43
135 155 0.023 0.06
270 425 0.017 0.18
56 435 445 0.191 0.1
750 765 0.07 0.04
55 345 355 0.104 0.17
385 410 0.016 0.05
450 605 0.026 0.02
54 315 355 0.043 0.93
450 470 0.033 0.08
505 520 0.048 0.23
635 675 0.022 0.09
53 0 25 0.018 0.69
225 260 0.033 0.13
52 70 90 0.046 0.16
120 170 0.12 0.52
190 255 0.022 0.35
290 325 0.015 1.13
51 55 120 0.041 0.23
175 295 0.024 0.46
50 0 50 0.128 0.43
155 275 0.068 0.83
Bottom in ore @ 275
49 0 50 0.018 0.73
165 290 0.025 0.15
310 355 0.119 0.37
48 0 90 0.041 0.86
47 0 85 0.04 0.81
46 0 15 0.012 0.5
105 115 0.019 0.06
220 305 0.058 0.46
325 350 0.031 0.07
45 90 95 0.257 1.64
165 255 0.012 0.08
255 345 0.077 0.82
44 215 275 0.172 1.19
230 235 1.559 6.35
345 430 0.064 0.06
355 370 0.242 0.2
43 335 410 0.01 0.43
42 615 715 Low grade ore Low grade ore
41 10 25 0.03 0.17
135 155 0.137 0.61
185 270 0.015 0.04
295 405 0.037 0.61
|
540 560 0.025 0.31
40 210 260 0.238 0.16
235 240 1.937 0.7
325 340 0.043 0.68
39 0 120 0.031 0.43
120 170 0.009 0.37
170 210 0.04 1
38 0 20 0.087 0.83
60 170 0.025 0.38
190 235 0.031 0.73
400 425 0.021 0.35
37 0 155 0.032 0.53
36 95 110 0.191 0.18
175 195 0.019 0.2
205 255 0.044 0.31
285 315 0.025 0.08
330 400 0.025 0.09
410 520 0.173 1.08
585 625 0.01 0.04
35 0 15 0.03 0.63
170 190 0.033 0.16
320 380 0.026 0.16
400 420 0.016 0.35
465 560 0.014 0.52
34 0 10 0.055 0.95
195 205 0.025 0.12
305 335 0.021 0.41
365 420 0.029 0.58
540 550 0.02 0.44
33 0 15 0.019 0.16
30 40 0.05 0.21
160 170 0.025 0.72
240 250 0.045 0.08
310 325 0.015 0.5
365 380 0.025 0.02
395 420 0.025 0.02
32 0 60 0.039 0.27
195 265 0.026 0.33
295 315 0.019 0.25
420 460 0.02 0.15
555 585 0.017 0.74
31 0 15 0.053 1.67
225 370 0.041 0.12
390 420 0.014 0.06
575 635 0.08 0.52
30 0 55 0.037 0.63
280 350 0.017 0.31
375 410 0.06 0.22
570 630 0.02 0.89
|
29 0 15 0.04 0.63
405 485 0.113 2.09
495 570 0.017 0.19
600 640 0.078 0.32
28 0 15 0.023 0.78
65 210 0.083 0.63
255 290 0.051 0.6
310 410 0.02 0.65
27 0 20 0.044 0.94
140 150 0.063 0.56
175 255 0.044 0.38
315 495 0.04 1.13
26 0 25 0.025 0.88
240 375 0.065 0.41
395 435 0.029 0.69
25 0 60 0.033 0.8
. . .
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