Item 2. Management's Discussion and Analysis or Plan of Operation
LOOKING STATEMENTS: The following discussion may contain forward-looking
statements that involve a number of risks and uncertainties. Factors that
could cause actual results to differ materially include the following:
inability to locate property with mineralization, lack of financing for
exploration efforts, competition to acquire mining properties; risks inherent
in the mining industry, and risk factors that are listed in the Company's
reports and registration statements filed with the Securities and Exchange
discussion and analysis is intended to be read in conjunction with the
Company's unaudited financial statements and the integral notes thereto for
the quarter ending September 30, 2010. The following statements may be
forward-looking in nature and actual results may differ materially.
following Management's Discussion and Analysis of Financial Condition and
Results of Operation ("MD&A") is intended to help the reader
understand our financial condition. MD&A is provided as a supplement to,
and should be read in conjunction with, our financial statements and the
accompanying integral notes ("Notes") thereto. The following
statements may be forward-looking in nature and actual results may differ
Company maintains a corporate office in Boise, Idaho. This is the primary
work area for the South Mountain Project and is utilized primarily by Pete
Parsley and Eric Jones. Jim Collord has been working from a temporary
residence in Boise Idaho at no additional charge to the Company. He will
continue to work from his home office in Elko, Nevada as well as in the Boise
office as the exploration program at South Mountain is completed over the
Company employed three, full-time, salaried Management personnel during the
quarter, which was budgeted. Jim Collord - President - had his salary
reinstated by the board during the quarter to 100% of his base. Previously,
Jim Collord had been at a half rate salary for the previous nine months while
financial conditions improved. Pete Parsley and Eric Jones remained on full
salary during the Quarter.
24, 2010, the Board approved a grant of 2.0 million stock options to
Management, Directors and non-employee consultants, for service on the
Company's Board in 2010. The final stock option issuance is subject to
approval of the Stock Option Incentive Plan by the Shareholders. The exercise
price of the options was placed at $0.27, which approximates the fair market
value of the Company's common equity at the date of grant. Excluding expenses
reimbursed as incurred, these stock options represent the only remuneration
these non-employee Directors received.
primary focus of Management during the third quarter was to complete the
listing of the Company with the Toronto Stock Exchange - Venture Listing
(TSX-V) concurrent with the private placement financing $996 thousand. This
task was completed on September 23, 2010, and the Company`s common shares
began trading on the TSX-V on September 24, 2010 under the symbol THM. The
Company will continue to trade in the U.S. on the Over the Counter Bulletin
Board under the symbol THMG. The Company engaged a Canadian legal firm in
Vancouver, B.C. to assist with the listing application and Haywood Securities
was retained as a sponsor.
the Management focused on completing the 2010 exploration program at the
South Mountain Project as discussed below:
of activities conducted during the reporting period and the plan of operation
follows for the Company and its wholly-owned subsidiaries, Thunder Mountain
Resources, Inc. and South Mountain Mines, Inc.
Mountain Project, Owyhee County, Idaho (South Mountain Mines, Inc.)
Company's land package at South Mountain consists of a total of private land
under lease to approximately 542 acres, the original 17 patented claims (326
acres) that the Company owns outright plus and 21 unpatented claims (290
acres) for a total of approximately 1,158 acres. The Company has initiated
negotiations on additional private land surrounding the existing land
package, and has applications in for approximately 3,100 acres of Idaho State
Land that covers areas of geologic interest.
primary target for drill testing during the fall of 2010 was on the intrusive
breccia target located on the south side of South Mountain approximately
one-half mile from the historic mine workings. Centra Consulting completed
the storm water plan needed for the exploration road construction, and it was
accepted by the Environmental Protection Agency. Road construction started on
August 1, 2010 by Warner Construction and a total of 3.2 miles of access and
drill site roads were completed through the end of September.
of road cut sampling was undertaken on the new roads as they were completed.
Three sets of samples were obtained along the cut bank of the road.
Channel samples were taken on 25-foot, 50-foot or 100-foot intervals,
depending upon the nature of the material cut by the road with the shorter
spaced intervals being taken in areas of bedrock. A total of 197 samples were
collected and sent to ALS Chemex labs in Elko, Nevada.
results from the road cuts enhanced the gold soil sample anomaly outlined
during the 2009 program. Of the 197 road cut samples taken, as of October
22nd results have been received on 169 intervals. In addition to the three
anomalies identified by soils sampling, the road cuts added a fourth target
that yielded a 350-foot long zone that averaged 378 parts per billion gold
(0.011 ounce per ton). Follow up sampling on a road immediately adjacent to
this zone yielded a 100-foot sample interval that ran 5.91 parts per million
gold (0.173 ounce per ton).
on the intrusive breccia target commenced on October 1, 2010 with a Schramm
reverse circulation rig contracted through Drill Tech of Winnemucca, Nevada.
Five holes on the four significant gold anomalies in the intrusive breccia
target were planned and completed. Assays are pending.
the larger gold mining companies have visited South Mountain since the road
cut sampling was completed and the drilling commenced. Both Newmont and
Barrick Gold spent several days examining the geology and conducting sampling
programs. Centerra also briefly visited the site. All companies that have
visited the site have signed confidentiality agreements with the Company.
geologic work on South Mountain has been ongoing during the drilling program.
This included area geologic mapping and sampling as well as road cut mapping.
It is apparent that the system is quite large and the geologic work has
expanded beyond the known gold intrusive breccia anomaly and historic mine
Claims, Lander County, Nevada (Thunder Mountain Resources, Inc.)
Company's land package at Trout Creek consists of 60 unpatented mining claims
located approximately 20 miles south of Battle Mountain, Nevada. The claims
are located near Newmont's Phoenix Mine and the Cove McCoy Mine (now in
reclamation), and on a significant trend between Cortez Gold Mine's
Pipeline/Cortez Hills deposits and the Phoenix Mine.
interpretive work confirms that structures exist within the pediment gravels,
suggesting that the thickness of valley fill gravel is not prohibitive for
exploration, or for mining should a resource be
The likelihood of shallow bedrock, coupled with the favorable structural
setting identified by geophysics and favorable host rocks outcropping along
the range front all support that there is a strong pediment target on the
Trout Creek Claims.
Wright, geophysical consultant, compiled the open source geophysical data for
the project area, and it essentially confirmed the new geologic interpretation
of the pediment target. Jim provided a recommendation on cost estimate to
conduct a ground magnetic survey over the project area, this further refining
the structures that area covered by valley fill pediment.
Gold has expanded their confidentiality agreement with Thunder Mountain Gold
to include the Trout Creek Project area in order to review the data.
Newmont has also expressed and interest in working the Company, and this
could be a strategic effort as they own a significant private land package
around the claims.
Creek is a high priority target for the Company, and it is being budgeted for
advancement during the 2011 field season. Financing strategies are being
developed, as well as examining the potential of joint venturing with a
Mountain Claim Group, Owyhee County, Idaho (Thunder Mountain Gold, Inc.)
Mountain Project consists of 40 unpatented mining claims totaling approximately
800 acres located 30 miles southwest of Grand View in Owyhee County, Idaho.
Rock chip sampling within the area of the anomaly has identified quartz
veining with gold values ranging from 3.6 ppm to 16.5 ppm.
extensive soil sampling program conducted on 200'x 200' grid spacing defined
two northeast trending soil anomalies with gold values ranging from 0.020 ppm
to 0.873 ppm Au. The gold anomalies are approximately 1,000' in length and
approximately 300' in width. The gold anomalies are associated with northeast
trending structures with accompanying quartz stockwork veining in an exposure
of Cretaceous/Tertiary granite. A 2,500' base metal soil anomaly is observed
trending northwest proximal to rhyolite and rhyodacitic dikes which intrude
the granitic stock. Coarse visible gold was observed in some of the panning
samples, and accounts for some of the variability in soil sample values taken
from broad anomaly. In addition, there is evidence of a historical small
placer operation and this was confirmed by panning surface samples that
yielded visible coarse gold.
Company believes that a trenching and drilling program are warranted along
the recognized gold-bearing structure. The Company has internally drafted a
multi-phase exploration program to advance this property in 2011.
Claim Group, Mohave County, Arizona (Thunder Mountain Resources, Inc.)
additional fieldwork was done during the reporting period on the 19
unpatented mining claims totaling approximately 380 acres at the Portland
property. The Portland property is located approximately 30 miles northwest
of Kingman, Arizona.
Claim Group, La Paz County, Arizona (Thunder Mountain Resources, Inc.)
additional field work was conducted during the quarter on the 22 unpatented
mining claims of the Gold Hill claim group in La Paz County, Arizona.
Tonopah Claim Group, Esmeralda County, Nevada (Thunder Mountain Gold, Inc.)
No additional work was completed during the quarter on the
West Tonopah claim group located in Esmeralda County, Nevada. The West
Tonopah claim group consists of eight unpatented claims located 1.5 miles
southwest of Tonopah, Nevada.
New Project Reconnaissance
The Company is planning on additional reconnaissance work
during the 4th quarter and during 2011. A number of submittals have been
received and will be field reviewed as time allows, plus grassroots work in
favorable geologic setting is planned.
Results of Operations:
The Company had no revenues and no production for the
three and nine months ended September 30, 2010 and 2009. Total expenses for
the three and nine months ended September 30, 2010 increased significantly by
$139,250 or 106% for the three months and $370,875 or 83% respectively, to
$270,766 and $817,460 compared with $131,516 and $446,585 for the three and
nine months ended September 30, 2009. The increase is a result of the
Company's exploration activities on the South Mountain property. Exploration
for the quarter and year increased by 641% and 407% to $120,081 and $232,867
as the Company completed its summer drilling program and completed 3.2 miles
of access roads at the South Mountain property. Management and administrative
expenses increased by 15% and 46% to $96,277 and 426,460 for the quarter and
year to date as a result of the reinstating of salaries for executive
officers. After a more than a year of significant salary reductions, the
Board reinstated the CFO Eric Jones at 100% of his based salary in the 4th
quarter of 2009 and CEO James E. Collord at 100% of his base salary in the
third quarter of 2010, respectively. The Company also experienced an increase
in Legal and accounting fees of 102% to $51,273 for the quarter end and 88%
to $148,838 year to date primarily due to the Company's financing activities
related to the TSX-V listing and other capital raising efforts.
Total other income for the three and nine periods ended
September 30, 2010 swung to a gain of approximately $80 thousand and $52
thousand, respectively, compared to a loss of approximately $2 thousand over
the same period as last year. The increase in other income is primarily due
to the gain recognized on the decrease in the fair value of the warrant
liability recorded on the balance sheet of approximately $355 thousand. The
gain on the warrant liability was offset by a loss recognized on the issuance
of common stock and warrants as part of the TSX-V listing. The Company also
experienced an increase in interest expense due to increased borrowing from a
related party during the year.
On September 30, 2010, the Company had total current
liabilities of $150,058 consisting of $62,675 in trade accounts payable and
$22,103 in related party accounts payable along with notes payable to a
related party of $65,280, net of $11,666 discount for the beneficial
conversion embedded in the bridge loan. Current liabilities decreased by
$20,545, or 12% compared to year end December 31, 2009 primarily due to the
reduction in deferred compensation and notes payable, which was partially
offset by an increase in accounts payable as a result of cost incurred
related to the summer drilling program and construction of access roads.
Long term liabilities increased significantly during the
quarter as a result of the stock purchase warrants issued in private
placements completed during the year. The Company has accounted for the
warrants as derivative instruments which have been valued using a Black
Scholes fair value model. The Company recognized a long-term liability of
$1,504,768 related to the warrants at the date of issuance and has recognized
a gain of $342,766 gain on the warrant at September 30, 2010, as a result of
a decrease in fair value of the warrants between the date of issuance and the
end of the quarter.
For the nine months period ended September 30, 2010 net
cash used for operating activities was $640,441, consisting of our year to
date net operating loss less non non-cash expenses for depreciation, stock
compensation awards to officers and directors, amortization of the beneficial
conversion feature embedded in the related party note payable, changes in the
fair value of the warrant liability and the loss recognized on the
TSX-V private placement. This compares with $328,599 used
by operating activities for the nine months ended September 30, 2009. Cash
used by investing activities was $10,900 for the nine months ended September
30, 2010 related to the purchase and maintenance of the Company's mining
claims. Cash provided by financing activities for the nine month periods
ended September 30, 2010 and 2009 were $1,240,383 and $166,425 respectively.
The increase in cash provided by financing activities was mainly due to the
$1,245,737 raise through private placements completed during the year, along
with net cash borrowings from related parties of $44,646 less $50,000 in payments
on notes payable to third parties.
Liquidity and Capital Resources:
We are an exploration stage company and have incurred
losses since our inception. The Notes to our financial statements for the
year ended December 31, 2009, together with the opinion of our independent
auditors included "going concern" explanatory paragraphs.
Subsequent to the filing of our Form 10-K on March 31, 2010, we have been
successful in addressing those concerns. As a result, we have removed the
explanatory paragraphs from the Notes to the Financial Statements for the
quarter ended September 30, 2010.
Management actions in addressing the "going
Management believes that the Company currently has cash
sufficient to support an exploration program as outlined in Managements
Discussion & Analysis above based on the following:
The Company currently has approximately $855,000 of cash
in our bank accounts, which should be sufficient to fund planned exploration
activities and administrative expenses for the next twelve months.
On September 24, 2010, the Company closed a private
placement offering for 6,130,271, with each unit consisting of one common
share and one common share purchase warrant, for net proceeds $995 thousand.
The warrants contain a ratchet provision where by the strike price increases
each year over the term of the warrant.
On May 10, 2010, the Company closed a private offering of
1.25 million units at a rate of $0.20 per unit, for total proceeds of
$250,000. Each unit consisted of one share of common stock and one Series A
warrant, which entitles the holder to purchase one share of common stock and
one-half Series B warrant (a "unit") at price of $0.20 per unit.
Each whole Series B warrant would be exercisable into one share of common
stock at an exercise price of $0.75 per share and have a term of 18 months
from the date of initial registration. The Company has the option to call the
Series A warrants in the event that the Company's common shares trade at or
above $0.25 per share for five consecutive trading days. The Series B
warrants are also callable by the Company in the event that the Company's
common equity trades at or above $0.94 for five consecutive trading days. No
Placement Agent was used, and no commissions were paid.
13, 2010, the Company initiated a private placement offering of 6 million
Units at an offering price of $0.20 CDN per Unit. Each Unit is comprised of
one share of common stock and a warrant to purchase one share of the
Company's common stock. The warrants are for a term of two years with an
exercise price of $0.20 CDN for the first twelve months and $0.35 CDN
thereafter. The warrants are callable at the Company's option in the event
the Company's common shares trade at a weighted average price of $0.50 CDN
for a period of 20 consecutive trading days. A finder's fee equal to 10% of
the amounts raised plus warrants equal to 10% of the underlying units sold in
the private placement is payable. Subscriptions for the full amount of the placement
have been received for approximately $1,350,000 CDN, or approximately
$1,305,000 USD. Payment into escrow is expected to occur on or about
September 1, 2010.
Due to additional interest by other investors, the placement is believed to
be over-subscribed and the offering is being extended to allow placement of
additional Units as approved by the Company's board.
non-exploration monthly burn rate is currently approximately $30,000,
therefore we believe we have cash sufficient to support company operations
for the next 12 months.
and the Board have not undertaken plans or commitments that exceed the cash
available to the Company. We do not include in this consideration any
additional investment funds mentioned above.
will manage expenses of all types so as to not exceed the on-hand cash
resources of the Company at any point in time, now or in the future.
is committed to proper management and spending restraint such that the Company
is believed to be able to weather current disruptions in investment markets
and continue to attract investment dollars in coming months and years.
Company's future liquidity and capital requirements will depend on many
factors, including timing, cost and progress of its exploration efforts,
evaluation of, and decisions with respect to, its strategic alternatives, and
costs associated with the regulatory approvals. Additional financing may be
required to meet our exploration and corporate expenses incurred during the
next 12 months.
Company owns outright the South Mountain Mine property in Owyhee County,
Idaho that consists of 17 patented mining claims totaling approximately 326
acres, for which Management has recorded the property in the Company's
financial statements for $357,497.
Company owns outright three 4-wheel drive vehicles that are used for
exploration and project work, as well as miscellaneous field equipment and
office furniture. It also leases office space in
Garden City, Idaho.