B. | Capitalization
and Indebtedness |
Not
applicable.
C. | Reasons
for the Offer and Use of Proceeds |
Not
applicable.
General
The
Company is in the business of exploring and, if warranted, developing mineral properties, which is a highly speculative endeavor. A purchase
of any of the Common Shares involves a high degree of risk and should be undertaken only by purchasers whose financial resources are
sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment. An investment in the
Common Shares should not constitute a significant portion of an individual’s investment portfolio and should be made only by persons
who can afford a total loss of their investment. Prospective shareholders should evaluate carefully the following risk factors associated
with an investment in the Common Shares.
The
following risks and uncertainties could materially adversely affect the Company’s business, financial condition and results of
operations. Additional risks and uncertainties not presently known to management of the Company or that are currently deemed immaterial
may also impair the Company’s operations and financial condition.
Risks
Relating to our recent Conversion and Continuation
We
may still be treated as a U.S. corporation and taxed on our worldwide income after the conversion and continuation.
The
conversion and continuation of our company from the State of Nevada to the Province of British Columbia, Canada is considered a migration
of our company from the State of Nevada to the Province of British Columbia, Canada. Certain transactions whereby a U.S. corporation
migrates to a foreign jurisdiction can be considered by the United States Congress to be an abuse of the U.S. tax rules because thereafter
the foreign entity is not subject to U.S. tax on its worldwide income. Section 7874(b) of the Internal Revenue Code of 1986, as amended
(the “Code”), was enacted in 2004 to address this potential abuse. Section 7874(b) of the Code provides generally that certain
corporations that migrate from the United States will nonetheless remain subject to U.S. tax on their worldwide income unless the migrating
entity has substantial business activities in the foreign country to which it is migrating when compared to its total business activities.
If
Section 7874(b) of the Code applied to the migration of our company from the State of Nevada to the Province of British Columbia, Canada,
our company would continue to be subject to United States federal income taxation on its worldwide income. Section 7874(b) of the Code
could apply to our migration unless we had substantial business activities in Canada when compared to our total business activities.
We
may be classified as a Passive Foreign Investment Company as a result of the merger and continuation.
Sections
1291 to 1298 of the Code contain the Passive Foreign Investment Company (“PFIC”) rules. These rules generally provide for
punitive treatment of “U.S. holders” of PFICs. A foreign corporation is classified as a PFIC if more than 75% of its gross
income is passive income or more than 50% of its assets produce passive income or are held for the production of passive income.
Because
most of our assets after the conversion and continuation are in cash or cash equivalents and shares of our wholly-owned subsidiary, Minera
Polymet SpA, we may in the future be classified as a PFIC. If we are classified as a PFIC, then the holders of shares of our company
who are U.S. taxpayers may be subject to PFIC provisions which may impose U.S. taxes, in addition to those normally applicable, on the
sale of their shares of our company or on distribution from our company.
Holders
of shares of the Company who are U.S. taxpayers should consult their own tax advisors with respect to the application of the PFIC rules
in their particular circumstances.
Negative
Operating Cash Flow
During
the years ended January 31, 2022 and 2021 the Company earned no revenue while the net loss from operations totaled $1,622,000 and $210,654,
respectively. If the Company does not find sources of financing as and when needed, it may be required to cease its operations.
Mineral
exploration and development are very expensive. During the fiscal year ended January 31, 2022, the Company had no revenue from its operations
and its operating expenses totaled $1,520,118 (2021 - $357,570). These expenses were further increased by $118,144 (2021 - $105,766)
in interest we accrued on our notes payable. These expenses were in part offset by $2,404 gain from foreign exchange fluctuation (2021
- $2,811 loss) and by $13,858 gain we recorded on forgiveness of debt (2021 - $255,493). Since inception, we have supported our operations
through equity and debt financing and, to a minor extent, through option payments received on our option or joint venture agreements,
and royalty payments from third-party vendors, who we allowed to mine our claims. Our ability to continue our operations, including exploring
and developing our properties, will depend on our ability to generate operating revenue, obtain additional financing, or enter into joint
venture agreements. Until we earn enough revenue to support our operations, which may never happen, we will continue to be dependent
on loans and sales of our equity or debt securities to continue our development and exploration activities. If we do not find sources
of financing as and when we need them, we may be required to severely curtail, or even to cease, our operations.
Insufficient
Capital
The
Company was incorporated on January 10, 2005, and to date has been involved primarily in organizational activities, acquiring and exploring
mineral claims and obtaining financing. The Company’s financial statements have been prepared assuming that it will continue as
a going concern. From the Company’s inception on January 10, 2005, the Company has accumulated losses of $12,144,764. As a result,
the Company’s management has expressed substantial doubt about the Company’s ability to continue as a going concern. The
continuation of the Company’s operations depends on its ability to complete equity or debt financings as needed or generate capital
from profitable operations. Such financings may not be available or may not be available on reasonable terms. The Company’s financial
statements do not include any adjustments that could result from the outcome of this uncertainty. Whether the Company will be successful
as a mining company must be considered in light of the costs, difficulties, complications and delays associated with its proposed exploration
programs. These potential problems include, but are not limited to, finding claims with mineral deposits that can be cost-effectively
mined, the costs associated with acquiring such properties and the unavailability of human or equipment resources. The Company cannot
provide assurance it will ever generate significant revenue from its operations or realize a profit. The Company expects to continue
to incur operating losses during the next 12 months.
Effects
of COVID-19 Outbreak
In
March of 2020, the World Health Organization declared an outbreak of COVID-19 Global pandemic. The COVID-19 has impacted vast array of
businesses through the restrictions put in place by most governments internationally, including the USA, Canadian and Chilean governments,
as well as provincial and municipal governments, regarding travel, business operations and isolation/quarantine orders. At this time,
it is unknown to what extent the impact of the COVID-19 outbreak may have on the Company as this will depend on future developments that
are highly uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate
geographic spread of the disease, and the duration of the outbreak, including the duration of travel restrictions, business closures
or disruptions, and quarantine/isolation measures that are currently, or may be put, in place worlds-wide to fight the virus. While the
extent of the impact is unknown, the COVID-19 outbreak may hinder the Company’s ability to raise financing for exploration or operating
costs due to uncertain capital markets, supply chain disruptions, increased government regulations and other unanticipated factors, all
of which may also negatively impact the Company’s business and financial condition.
Debt
Owing to Related Parties
As
of January 31, 2022, the Company owed $57,254 to related parties that were due in the next 12-month period for the services and reimbursable
expenses they have provided; in addition, the Company owed its related parties $1,715,016 on account of long-term notes payable and for
services provided, which are payable on or after January 31, 2023 (as amended). The Company does not have the cash resources to pay the
long-term debt; therefore it may decide to partially pay these individuals by issuing shares of the Company’s common stock to them.
Because of the low market value of the Company’s common stock, the issuance of shares will result in substantial dilution to the
percentage of the outstanding common stock owned by current shareholders.
Financing
Risks
The
Company has no history of significant earnings and, due to the nature of its business, there can be no assurance that the Company will
be profitable. The Company has paid no dividends on its shares since incorporation and does not anticipate doing so in the foreseeable
future. The only present source of funds available to the Company is through the sale of its securities. Even if the results of any future
exploration are encouraging, the Company may not have sufficient funds to conduct the further exploration that may be necessary to determine
whether or not a commercially mineable deposit exists on the Properties. While the Company may generate additional working capital through
equity offerings or through the sale or possible syndication of the Properties, there is no assurance that any such funds will be available.
If available, future equity financing may result in substantial dilution to shareholders
Speculative
Nature of Mineral Exploration
Resource
exploration is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts
resulting not only from the failure to discover mineral deposits but also from finding mineral deposits that, though present, are insufficient
in quantity and quality to return a profit from production. The marketability of minerals acquired or discovered by the Company may be
affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations,
the proximity and capacity of milling facilities, mineral markets and processing equipment and such other factors as government regulations,
including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection,
the combination of which factors may result in the Company not receiving an adequate return of investment capital.
There
is no assurance that the Company’s mineral exploration and development activities will result in any discoveries of commercial
bodies of ore. The long-term profitability of the Company’s operations will, in part, be directly related to the costs and success
of its exploration programs, which may be affected by a number of factors. Substantial expenditures are required to establish reserves
through drilling and to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial
benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered
in sufficient quantities to justify commercial operations or that funds required for development can be obtained on a timely basis.
No
Known Mineral Reserves
It
is unknown whether the Properties contain viable mineral reserves. If the Company does not find a viable mineral reserve, or if it cannot
exploit the mineral reserve, either because the Company does not have the money to do it or because it will not be economically feasible
to do so, the Company may have to cease operations and you may lose your investment. Mineral exploration is a highly speculative endeavor.
It involves many risks and is often non-productive. Even if mineral reserves are discovered on the Properties, the Company’s production
capabilities will be subject to further risks and uncertainties including:
● |
Costs
of bringing the property into production including exploration work, preparation of production feasibility studies, and construction
of production facilities, all of which the Company has not budgeted for; |
● |
Availability
and costs of financing; |
● |
Ongoing
costs of production; and |
● |
Environmental
compliance regulations and restraints. |
Market
Factors May Affect Ability to Market Any Minerals Found
Even
if the Company discovers minerals that can be extracted in a cost-effective manner, it may not be able to find a ready market for its
minerals. Many factors beyond the Company’s control affect the marketability of minerals. These factors include market fluctuations,
the proximity and capacity of natural resource markets and processing equipment, government regulations, including regulations relating
to prices, taxes, royalties, land tenure, land use, importing and exporting minerals and environmental protection. The Company cannot
accurately predict the effect of these factors, but any combination of these factors could result in an inadequate return on invested
capital.
Mineral
Exploration is Hazardous
The
search for minerals is hazardous. In the course of exploration, development and production of mineral properties, the Company could incur
liability or damages as it conducts its business due to the dangers inherent in mineral exploration, including pollution, cave-ins, fires,
flooding, earthquakes and other hazards. It is not always possible to fully insure against such risks or against which the Company may
elect not to insure. The Company has no insurance for these types of hazards, nor does it expect to obtain such insurance for the foreseeable
future. Should such liabilities arise, they could reduce or eliminate any future profitability and result in increasing costs and a decline
in the value of the securities of the Company.
Government
Regulations
The
mining business is subject to various levels of government control and regulation, which are supplemented and revised from time to time.
The Company cannot predict what legislation or revisions might be proposed that could affect its business or when any such proposals,
if enacted, might become effective. The Company’s exploration activities are subject to laws and regulations governing worker safety,
and, if it explores within the national park that is part of its Farellón property, protection of endangered and other special
status species as well as protection of significant archeological remains, if there are any, will likely require compliance with additional
laws and regulations. The cost of complying with these regulations has not been burdensome to date, but if the Company mines the Properties
and processes more than 5,000 tonnes of ore monthly, it will be required to submit an environmental impact study for review and approval
by the federal environmental agency. The Company anticipates that the cost of such a study will be significant and, if the study were
to show too great an adverse impact on the environment, the Company might be unable to develop the property or it might have to engage
in expensive remedial measures during or after developing the property, which could make production unprofitable. This requirement could
materially adversely affect the Company’s business, the results of its operations and its financial condition if it were to proceed
to mine a property or process ore on the property. The Company has no immediate or intermediate plans to process ore on any of the Properties.
If
the Company does not comply with applicable environmental and health and safety laws and regulations, it could be fined, enjoined from
continuing its operations, and suffer other penalties. Although the Company makes every attempt to comply with these laws and regulations,
it cannot provide assurance that it has fully complied or will always fully comply with them.
Environmental
and Safety Regulations and Risks
Environmental
laws and regulations may affect the operations of the Company. These laws and regulations set various standards regulating certain aspects
of health and environmental quality. They provide for penalties and other liabilities for the violation of such standards and establish,
in certain circumstances, obligations to rehabilitate current and former facilities and locations where operations are or were conducted.
The permission to operate can be withdrawn temporarily where there is evidence of serious breaches of health and safety standards, or
even permanently in the case of extreme breaches. Significant liabilities could be imposed on the Company for damages, clean-up costs
or penalties in the event of certain discharges into the environment, environmental damage caused by previous owners of acquired properties
or noncompliance with environmental laws or regulations. In all major developments, the Company generally relies on recognized designers
and development contractors from which the Company will, in the first instance, seek indemnities. The Company minimizes risks by taking
steps to ensure compliance with environmental, health and safety laws and regulations and operating to applicable environmental standards.
There is a risk that environmental laws and regulations may become more onerous, making the Company’s operations more expensive.
Competition
The
mining industry is intensely competitive in all its phases. The Company competes for the acquisition of mineral properties, claims, leases
and other mineral interests as well as for the recruitment and retention of qualified employees with many companies possessing greater
financial resources and technical facilities than the Company. The competition in the mineral exploration and development business could
have an adverse effect on the Company’s ability to acquire suitable properties or prospects for mineral exploration in the future.
Stress
in the Global Economy
Negative
fluctuations in a state of global economy may cause general tightening in the credit markets, lower levels of liquidity, increases in
the rates of default and bankruptcy, and lower business spending, all of which may have a negative effect on the Company’s business,
results of operations, financial condition and liquidity. The Company’s suppliers may not be able to supply it with needed raw
materials on a timely basis, may increase prices or go out of business, which could result in the inability of the Company to carry out
its planned exploration programs. Furthermore, it may become difficult to locate other mineral exploration companies with available funds
willing to engage in risky ventures such as the exploration of the Properties.
Such
conditions may make it very difficult to forecast operating results, make business decisions and identify and address material business
risks. As a result, the Company’s operating results, financial condition and business could be adversely affected.
The
Company conducts operations in a foreign jurisdiction and is subject to certain risks that may limit or disrupt its business operations.
The
Company’s head office is in Canada and its mining operations are in Chile. Mining investments are subject to the risks normally
associated with the conduct of any business in foreign countries including uncertain political and economic environments; wars, terrorism
and civil disturbances; changes in laws or policies, including those relating to imports, exports, duties and currency; cancellation
or renegotiation of contracts; royalty and tax increases or other claims by government entities, including retroactive claims; risk of
expropriation and nationalization; delays in obtaining or the inability to obtain or maintain necessary governmental permits; currency
fluctuations; restrictions on the ability of local operating companies to sell gold, copper or other minerals offshore for US dollars,
and on the ability of such companies to hold US dollars or other foreign currencies in offshore bank accounts; import and export regulations,
including restrictions on the export of gold, copper or other minerals; limitations on the repatriation of earnings; and increased financing
costs.
These
risks could limit or disrupt the Company’s exploration programs, cause it to lose its interests in its mineral claims, restrict
the movement of funds, cause it to spend more than it expected, deprive it of contract rights or result in its operations being nationalized
or expropriated without fair compensation, and could materially adversely affect the Company’s financial position or the results
of its operations. If a dispute arises from the Company’s activities in Chile, the Company could be subject to the exclusive jurisdiction
of courts outside North America, which could adversely affect the outcome of the dispute.
While
the Company takes steps it believes are necessary to maintain legal ownership of its claims, title to mineral claims may be invalidated
for a number of reasons, including errors in the transfer history or acquisition of a claim the Company believed, after appropriate due
diligence investigation, to be valid, but in fact, wasn’t. If ownership of the Company’s claims was ultimately determined
to be invalid, the Company’s business and prospects would likely be materially and adversely affected.
The
Company’s ability to realize a return on its investment in mineral claims depends upon whether it maintains the legal ownership
of the claims. Title to mineral claims involves risks inherent in the process of determining the validity of claims and the ambiguous
transfer history characteristic of many mineral claims. The Company takes a number of steps to protect the legal ownership of its claims,
including having its contracts and deeds notarized, recording these documents with the registry of mines and publishing them in the mining
bulletin. The Company also reviews the mining bulletin regularly to determine whether other parties have staked claims over its ground.
However, none of these steps guarantees that another party could not challenge the Company’s right to a claim. Any such challenge
could be costly to defend and, if the Company lost its claim, its business and prospects would likely be materially and adversely affected.
No
Anticipation of Payment of Dividends
A
dividend has never been declared or paid in cash on the Common Shares. The Company does not anticipate such a declaration or payment
for the foreseeable future. The Company intends to retain any earnings to develop, carry on, and expand its business.
Price
Volatility of Publicly Traded Securities
In
recent years, the securities markets in Canada have experienced a high level of price and volume volatility, and the market prices of
securities of many companies have experienced wide fluctuations in price which have not necessarily been related to the operating performance,
underlying asset values or prospects of such companies. There can be no assurance that continual fluctuations in price will not occur.
It may be anticipated that any quoted market for the Common Shares will be subject to market trends generally, notwithstanding any potential
success of the Company in creating revenues, cash flows or earnings. The value of Common Shares will be affected by such volatility.
Fluctuating
Mineral Prices and Currency Risk
The
Company’s revenues, if any, are expected to be in large part derived from the extraction and sale of precious and base minerals
and metals. Factors beyond the control of the Company may affect the marketability of metals discovered, if any. Metal prices have fluctuated
widely, particularly in recent years. Consequently, the economic viability of any of the Company’s exploration projects cannot
be accurately predicted and may be adversely affected by fluctuations in mineral prices.
The
Company sometimes holds a significant portion of its cash in US dollars. Currency exchange rate fluctuations can result in conversion
gains and losses and diminish the value of its US dollars. If the US dollar declined significantly against the Canadian dollar or the
Chilean peso, its US dollar purchasing power in Canadian dollars and Chilean pesos would also significantly decline and that could make
it more difficult for the Company to conduct its business operations. The Company has not entered into derivative instruments to offset
the impact of foreign exchange fluctuations.
Management
The
success of the Company is currently largely dependent on the performance of its directors and officers. The loss of the services of any
of these persons could have a materially adverse effect on the Company’s business and prospects. There is no assurance the Company
can maintain the services of its directors, officers or other qualified personnel required to operate its business.
Key
Person Insurance
The
Company does not maintain key person insurance on any of its directors or officers, and as result the Company would bear the full loss
and expense of hiring and replacing any director or officer in the event the loss of any such persons by their resignation, retirement,
incapacity, or death, as well as any loss of business opportunity or other costs suffered by the Company from such loss of any director
or officer.
Difficulty
for United States Investors to Effect Services of Process Against the Company.
The
Company is incorporated under the laws of the Province of British Columbia, Canada. Consequently, it will be difficult for United States
investors to affect service of process in the United States upon the directors or officers of the Company, or to realize in the United
States upon judgments of United States courts predicated upon civil liabilities under the Exchange Act. The majority of the Company’s
directors and officers are residents of Canada and all of the Company’s material assets are located outside of the United States.
A judgment of a United States court predicated solely upon such civil liabilities would probably be enforceable in Canada by a Canadian
court if the United States court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter.
There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or the Company
predicated solely upon such civil liabilities.
Conflicts
of Interest
Some
of the directors and officers are engaged and will continue to be engaged in the search for additional business opportunities on behalf
of other corporations, and situations may arise where these directors and officers will be in direct competition with the Company. Conflicts,
if any, will be dealt with in accordance with the relevant provisions of the Business Corporations Act (British Columbia). Some
of the directors and officers of the Company are or may become directors or officers of other companies engaged in other business ventures.
In order to avoid the possible conflict of interest which may arise between the directors’ duties to the Company and their duties
to the other companies on whose boards they serve, the directors and officers of the Company have agreed to the following:
● |
Participation
in other business ventures offered to the directors will be allocated between the various companies and on the basis of prudent business
judgment and the relative financial abilities and needs of the companies to participate; |
● |
No
commissions or other extraordinary consideration will be paid to such directors and officers; and |
● |
Business
opportunities formulated by or through other companies in which the directors and officers are involved will not be offered to the
Company except on the same or better terms than the basis on which they are offered to third party participants. |
“Penny
Stock” Rules May Make Buying or Selling Our Common Stock Difficult, and Severely Limit its Marketability and Liquidity
Because
the Company’s securities are considered a penny stock, shareholders will be more limited in their ability to sell their shares.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally
equity securities with a price of less than USD$5.00, other than securities registered on certain national securities exchanges or quoted
on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided
by the exchange or quotation system. Because the Company’s securities constitute “penny stocks” within the meaning
of the rules, the rules apply to the Company and to its securities. The rules may further affect the ability of owners of shares to sell
the Company’s securities in any market that might develop for them. As long as the trading price of the Common Shares is less than
USD$5.00 per share, the Common Shares will be subject to Rule 15g-9 under the Exchange Act. The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that:
● |
Contains
a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; |
● |
Contains
a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer
with respect to a violation to such duties or other requirements of securities laws; |
● |
Contains
a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the
spread between the bid and ask price; |
● |
Contains
a toll-free telephone number for inquiries on disciplinary actions; |
● |
Defines
significant terms in the disclosure document or in the conduct of trading in penny stocks; and |
● |
Contains
such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation. |
The
broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations
for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which
such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such shares; and
(d) a monthly account statement showing the market value of each penny stock held in the customer’s account. In addition, the penny
stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written
acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed
and dated copy of a written suitably statement. These disclosure requirements may have the effect of reducing the trading activity in
the secondary market for the Common Shares.
Tax
Issues
Income
tax consequences in relation to the Common Shares will vary according to circumstances of each investor. Prospective investors should
seek independent advice from their own tax and legal advisers prior to investing in Common Shares of the Company.
Other
Risks and Uncertainties
Although
the Company has tried to identify all significant risks, it may not have identified all risks. There may be other risks.
The
Company has sought to identify what it believes to be the most significant risks to its business, but it cannot predict whether, or to
what extent, any of such risks may be realized nor can it guarantee that it has identified all possible risks that might arise. Investors
should carefully consider all of such risk factors before making an investment decision with respect to the Company’s Common Shares.
Item
4 | Information
on the Company |
A. | History
and Development of the Company |
Company
Name
The
legal and commercial name of the company is Red Metal Resources Ltd.
Principal
Office
The
Company’s head office is located at 1130 West Pender Street, Suite 820, Vancouver, British Columbia, V6E 4A4. Its registered office
address is 595 Burrard Street, Suite 700, Vancouver, British Columbia, V7X 1S8.We do not have an agent in the United States. The Company’s
mailing address is 278 Bay Street, Suite 102, Thunder Bay, Ontario, P7B 102
Corporate
Information and Important Events
Red
Metal Resources Ltd. was incorporated under the Nevada Business Corporations Act on January 10, 2005, as Red Lake Exploration, Inc. On
August 27, 2008, the name of the Company was changed to Red Metal Resources Ltd. On February 10, 2021, the Company changed its corporate
jurisdiction from the State of Nevada to the Province of British Columbia by means of a process called a “conversion” under
the Nevada Revised Statutes and a “continuation” under the Business Corporations Act (British Columbia). Upon the
Company’s continuation to British Columbia, the Articles of Incorporation and Bylaws of the Company, under the Nevada Revised Statutes,
were replaced with the Articles of the Company, under the Business Corporations Act (British Columbia). The authorized capital
of the Company was amended to an unlimited number of common shares without par value.
On
November 18, 2021, the Company filed a final non-offering prospectus with the B.C. Securities Commission and became a reporting issuer
in the province of British Columbia. The common shares of the Company were approved for listing on the Canadian Securities Exchange (the
“CSE”) and began trading under the symbol “RMES” as of market open on November 25, 2021, and the Company
consequently became a reporting issuer in the province of Ontario. The Company’s common shares continue to trade on the OTC Link
alternative trading system on the OTC PINK marketplace under the symbol “RMESF”.
On
August 21, 2007, the Company formed Minera Polymet Limitada (“Polymet”) as a limited liability company, under the laws of
the Republic of Chile. On September 28, 2015, the Company changed Polymet’s incorporation from Limited Liability Company to a Closed
Stock Corporation (“SpA”). As of the date of this Form 20-F the Company owns 100% of Polymet, which holds its Chilean mineral
property interests.
The
Company is engaged in the business of mineral exploration in Chile with the objective to explore and, if warranted, develop mineral properties.
All of the Company’s mineral concessions are located in the Candelaria iron oxide copper-gold (IOCG) belt of the coastal cordillera,
in the Carrizal Alto Mining District, III Region of Atacama, Chile. The Company has three active copper-gold projects on two properties,
namely the Farellón and Perth Projects both located on the Carrizal Property, and the Mateo Project located on the Mateo Property.
In addition to holding these active properties, as an exploration company, the Company periodically stakes, purchases or options claims
to allow time and access to fully consider the geological potential of claims.
The
Company’s flagship project, the Farellón Project, is an early-stage exploration property consisting of eight mining concessions
totaling 1,234 hectares.
Consistent
with the Company’ historical practices, the Company’s management continues to monitor its costs in Chile by reviewing the
Company’s mineral claims to determine whether they possess the geological indicators to economically justify the capital to maintain
or explore them. As at the time of this Form 20-F, Polymet has six employees and engages independent consultants on as needed basis.
Most of the Company’s support - such as vehicles, office, and equipment - is supplied under short-term contracts. The only long-term
commitments that the Company has are for royalty payments on four of its mineral concessions - Farellón Alto 1 - 8, Quina 1 -
56, Exeter 1 - 54, and Che. These royalties are payable once exploitation begins. The Company is also required to pay property taxes
that are due annually on all the concessions that are included in its properties.
The
cost and timing of all planned exploration programs are subject to the availability of qualified mining personnel, such as consulting
geologists, geo-technicians and drillers, and drilling equipment. Although Chile has a well-trained and qualified mining workforce from
which to draw and few early-stage companies such as Red Metal are competing for the available resources, if the Company is unable to
find the personnel and equipment needed at the prices that were budgeted for the programs, the Company might have to revise or postpone
its exploration plans.
Capital
Expenditures
Due
to a lack of operating capital, during the fiscal years ended January 31, 2021 and 2020, the Company conducted no material exploratory
operations on any of its mineral properties; and it also did not increase its land holdings in Chile.
During
the year ended January 31, 2022, the Company raised sufficient capital to continue exploration work on its Farellón Property,
In the short to medium term, based on the positive results from multiple past exploration programs on the Farellón Project, the
Company planned to carry out a two-phase drill program. The first phase of the drill program commenced on January 25, 2022, and was completed
in the early March of 2022; it consisted of a drilling that tested the primary mineralization at depth that has, thus far, only been
intersected in a few drill holes, and determine the potential of the cobalt mineralization in the sulfide zone.
The
highlights of the first phase included the following:
|
● |
First
hole on new zone intercepted six meters of vein with strong visible copper sulphides; further 1.5 km of untested strike length; |
|
● |
All
holes have intercepted visible copper sulphide mineralization and alteration associated with IOCG deposits; and |
|
● |
Diamond
drill core provided valuable alteration and structural information not seen in previous RC drilling. |
As
of the date of this Annual Report on Form 20-F sampling is ongoing for drillholes and no visual estimates of grade have been made.
During
the year ended January 31, 2022, the Company spent a total of $232,569 on the Farellón Property Project.
If
the first phase continues to return positive results, a second phase drilling program would be conducted in order to complete an initial
mineral resource estimate.
Takeover
Offers
The
Company is not aware of any indication of any public takeover offers by third parties in respect of our common shares during our last
and current financial years.
The
U.S. Securities and Exchange Commission (SEC) maintains an internet site that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.
Additional
information can be found at the Company’s website at http://www.redmetalresources.com/
Nature
of Operations and Principal Activities
The
Company is engaged in the business of mineral exploration in Chile with the objective to explore and, if warranted, develop mineral properties.
All of the Company’s mineral claims are located in the Candelaria iron oxide copper-gold (IOCG) belt of the coastal cordillera
in the Carrizal Alto Mining District, III Region of Atacama, Chile. The Company has three active copper-gold projects on two properties,
namely the Farellón and Perth Projects both located on the Carrizal Property, and the Mateo Project located on the Mateo Property.
In addition to holding these active properties, as an exploration company, the Company periodically stakes, purchases or option claims
to allow time and access to fully consider the geological potential of claims.
The
Company’s flagship project, the Farellón Project, is a mid-stage exploration project consisting of eight exploitation concessions
totaling 1,234 hectares.
The
Company acquired the initial mining claim for the Farellón Project pursuant to an assignment agreement between Polymet and Minera
Farellón Limitada (“Minera Farellón”) dated September 25, 2007, and amended on November 20, 2007. Under
the terms of the assignment agreement, Minera Farellón agreed to assign to Polymet its option to buy the Farellón 1 Al
8 mining concession. Polymet acquired the option on April 25, 2008, and concurrently assumed all of Minera Farellón’s rights
and obligations under the Farellón option agreement. Polymet exercised the option and bought the property from the vendor on April
25, 2008. The patented mining concessions are registered in the name of and owned 100% by Polymet.
On
September 17, 2008, the Company acquired the Cecil 1 - 49, Cecil 1 - 40 and Burghley 1 - 60 claims for an aggregate purchase price of
$27,676. On December 1, 2009, the Company initiated the manifestacion process by applying to convert the Cecil 1 - 40 and Burghley 1
- 60 exploration (pedimento) claims to mining (mensura) claims. In January 2013, the Company abandoned the manifestacion process for
the Cecil 1-40 and Burghley 1-60 claims as the Company discovered that the most prospective ground, as outlined in the Company’s
prospecting and mapping program completed in April 2012, was covered by several mensuras underlying both claims.
On
August 21, 2012, the Company acquired four mineral claims - Azucar 6-25, Kahuna 1-40, Stamford 61-101, and Teresita - through the government
auction for a total price of $19,784.
On
December 15, 2014, the Company entered into an option agreement with David Marcus Mitchell to earn 100% interest in a Quina 1-56 clam
(the “Quina Claim”). The Quina Claim covers 251 hectares and is centered at 310,063 east and 6,890,435 south UTM PSAD56
Zone 19 and is contiguous to the Farellón Property. Acquisition of the Quina Claim added approximately 2 kilometers of strike
length of the Farellón Veins. In order to acquire the 100% interest in the Quina Claim the Company paid a total of $150,000 in
combined stock and cash payments and completed the acquisition on December 15, 2018.
On
June 3, 2015, the Company entered into an option agreement, made effective on June 15, 2015, with Minera Stamford S.A., to earn 100%
interest in a mining claim known as “Exeter 1-54” (the “Exeter claim”). The Exeter claim totals 235 hectares
and is contiguous to the Farellón Property, which is located in the Carrizal Alto mining district, located approximately 75 kilometers
northwest of the city of Vallenar, 150 kilometers south of Copiapo and 20 kilometers west of the Pan American Highway. In order to acquire
100% interest in the Exeter claim, the Company paid a total of $150,000 and completed the transaction on May 12, 2019.
These
properties form substantial land holdings in a historical mining district, which was a prolific past producer, shut down due to economic
conditions, rather than exhaustion of deposits. The Company’s Carrizal Property, adjacent and contiguous to the Carrizal Alto Mine,
has undergone only limited modern exploration, which has so far demonstrated the potential of the property to host a mineralized deposit.
The
Company’s Perth and Mateo Projects are both early-stage exploration projects. The Perth Project is composed of 13 mining concessions
covering 2,044 hectares and the Mateo Project is composed of 5 mineral concessions covering 182 hectares. Both projects are 100% owned
by Polymet.
To
date the Company has not determined whether its claims contain mineral reserves that are economically recoverable and it has not produced
revenues from its principal business.
Principal
Market and Revenues
The
Company does not currently have any market, as it has not yet identified any mineral resource on any of the Company’s properties
that is of a commercially exploitable quantity. If the Company’s succeeds in identifying a mineral resource in commercially exploitable
quantities, its principal markets would consist of metals refineries and base metal traders and dealers. The Company’s first customer
likely will be ENAMI, the Chilean national mining company, which refines and smelts copper from the ore that it buys from Chile’s
small- and medium-scale miners. ENAMI is located in Vallenar. The Company could also sell its ore to the Dos Amigos heap leach facility
located approximately fifty kilometers south of Vallenar in Domeyko.
To
date the Company has not generated any revenues from any of its properties.
Seasonality
of our Business
The
Company’s mineral exploration activities are not subject to seasonal variation due to the year-round favorable weather conditions
in Chile.
Sources
and Availability of Raw Materials
The
raw materials for our exploration programs include camp equipment, hand exploration tools, sample bags, first aid supplies, groceries
and propane. All of these types of materials are readily available from a variety of local suppliers.
Marketing
Channels
We
do not currently have any market, as we have not yet identified any mineral resource on any of our properties that is of a commercially
exploitable quantity, and therefore do not currently engage in marketing activities.
Patents
and Licenses; Industrial, Commercial and Financial Contracts; and New Manufacturing Processes
In
conducting our business operations, we are not dependent on any patented or license processes, technology, industrial, commercial or
financial contract or new manufacturing processes.
Competitive
Conditions
The
mineral exploration business is an extremely competitive industry. We are competing with many other exploration companies looking for
minerals. We are one of the smallest exploration companies and a very small participant in the mineral exploration business. Being a
junior mineral exploration company, we compete with other similar companies for financing and joint venture partners, and for resources
such as professional geologists, camp staff, helicopters and mineral exploration contractors and supplies. We do not represent a competitive
presence in the industry.
Governmental
Regulations
The
mining business is subject to various levels of government control and regulation, which are supplemented and revised from time to time.
The Company cannot predict what legislation or revisions might be proposed that could affect its business or when any such proposals,
if enacted, might become effective. The Company’s exploration activities are subject to laws and regulations governing worker safety,
and, if it explores within the national park that is part of its Farellón property, protection of endangered and other special
status species as well as protection of significant archeological remains, if there are any, will likely require compliance with additional
laws and regulations. The cost of complying with these regulations has not been burdensome to date, but if the Company mines the Properties
and processes more than 5,000 tonnes of ore monthly, it will be required to submit an environmental impact study for review and approval
by the federal environmental agency. The Company anticipates that the cost of such a study will be significant and, if the study were
to show too great an adverse impact on the environment, the Company might be unable to develop the property or it might have to engage
in expensive remedial measures during or after developing the property, which could make production unprofitable. This requirement could
materially adversely affect the Company’s business, the results of its operations and its financial condition if it were to proceed
to mine a property or process ore on the property. The Company has no immediate or intermediate plans to process ore on any of the Properties.
If
the Company does not comply with applicable environmental and health and safety laws and regulations, it could be fined, enjoined from
continuing its operations, and suffer other penalties. Although the Company makes every attempt to comply with these laws and regulations,
it cannot provide assurance that it has fully complied or will always fully comply with them.
Environmental
and Safety Regulations and Risks
Environmental
laws and regulations may affect the operations of the Company. These laws and regulations set various standards regulating certain aspects
of health and environmental quality. They provide for penalties and other liabilities for the violation of such standards and establish,
in certain circumstances, obligations to rehabilitate current and former facilities and locations where operations are or were conducted.
The permission to operate can be withdrawn temporarily where there is evidence of serious breaches of health and safety standards, or
even permanently in the case of extreme breaches. Significant liabilities could be imposed on the Company for damages, clean-up costs
or penalties in the event of certain discharges into the environment, environmental damage caused by previous owners of acquired properties
or noncompliance with environmental laws or regulations. In all major developments, the Company generally relies on recognized designers
and development contractors from which the Company will, in the first instance, seek indemnities. The Company minimizes risks by taking
steps to ensure compliance with environmental, health and safety laws and regulations and operating to applicable environmental standards.
There is a risk that environmental laws and regulations may become more onerous, making the Company’s operations more expensive.
C. | Organizational
Structure |
The
Company owns 100% of Minera Polymet SpA (“Polymet”), a corporation organized under the laws of the Republic of Chile
on August 21, 2007. Polymet holds the Company’s Chilean mineral property interests and, to comply with Chilean legal requirements,
Polymet has appointed a legal representative in Chile. Polymet’s head office is located in Vallenar, III Region of Atacama, Chile.
D. | Property,
Plant and Equipment |
The
Company’s executive office is located at 1130 West Pender Street, Suite 820, Vancouver, British Columbia V6E 4A4, Canada. The Company
rents this location from its CFO at no cost. This space accommodates our finance and administrative department.
The
Company’s secondary office is located at 278 Bay Street, Suite 102, Thunder Bay, ON P7B 1R8. The Company rents this location from
Fladgate Exploration Consulting Corporation (“Fladgate”), a company owned by Ms. Caitlin Jeffs and Mr. Michael Thompson,
who each hold 33% of Fladgate. During the nine-month period ended October 31, 2021, the Company paid $1,000 per month for this office.
At October 31, 2021, Fladgate agreed to forgive the accrued office rent fees, and as of the date of this Annual Report on Form 20-F,
the Thunder Bay office is provided to the Company free of charge. This space acts as the Company’s mailing address, and accommodates
our CEO and VP of Exploration, as well as provides geological support to the Chilean operations.
Our
Chilean office is located in Vallenar, III Region of Atacama, Chile. This office is provided to the Company free of charge by Mr. Jeffs,
the Company’s major shareholder and father of our CEO, Caitlin Jeffs.
The
Company believes that the existing space is adequate for the Company’s current needs. Should the Company require additional space,
the Company believes that such space can be secured on commercially reasonable terms.
Overview
of Mineral Properties
Active
Properties
Through
a number of transactions since 2007, the Company has assembled its active mineral properties identified and further detailed in Figure
1 and Table 1, respectively, below as the Farellón Property, the Perth Property, and the Mateo Property:
Figure
1: Location and access to active properties (accessible by road from Vallenar)
Table
1 - Active Properties
|
|
Percentage, |
|
Hectares |
Property |
|
type
of claim |
|
Gross
area |
|
Net
area(a) |
Farellón |
|
|
|
|
|
|
Farellón Alto 1 – 8 |
|
100%, mensura |
|
66 |
|
|
Quina 1 – 56 |
|
100%, mensura |
|
251 |
|
|
Exeter 1 – 54 |
|
100%, mensura |
|
235 |
|
|
Cecil 1 – 49 |
|
100%, mensura |
|
228 |
|
|
Teresita |
|
100%, mensura |
|
1 |
|
|
Azucar 6 – 25 |
|
100%, mensura |
|
88 |
|
|
Stamford 61 – 101 |
|
100%, mensura |
|
165 |
|
|
Kahuna 1 – 40 |
|
100%, mensura |
|
200 |
|
|
|
|
|
|
1,234 |
|
1,234 |
|
|
|
|
|
|
|
Perth |
|
|
|
|
|
|
Perth 1-36 |
|
100%, mensura |
|
109 |
|
|
Rey Arturo 1-30 |
|
100%, mensura |
|
276 |
|
|
Lancelot 1 1-27 |
|
100%, mensura |
|
260 |
|
|
Galahad IA 1 44 |
|
100%, mensura |
|
217 |
|
|
Camelot 1 53 |
|
100%, mensura |
|
227 |
|
|
Percival 4 1 60 |
|
100%, mensura |
|
300 |
|
|
Tristan II A 1 55 |
|
100%, mensura |
|
261 |
|
|
Galahad IB 1 3 |
|
100%, mensura |
|
10 |
|
|
Tristan II B 1 4 |
|
100%, mensura |
|
7 |
|
|
Merlin IB 1 10 |
|
100%, mensura |
|
38 |
|
|
Merlin A 1 48 |
|
100%, mensura |
|
220 |
|
|
Lancelot II 1 23 |
|
100%, mensura |
|
115 |
|
|
Galahad IC |
|
100%, mensura |
|
4 |
|
|
|
|
|
|
2,044 |
|
2,044 |
Mateo |
|
|
|
|
|
|
Margarita |
|
100%, mensura |
|
56 |
|
|
Che 1 and Che 2 |
|
100%, mensura |
|
76 |
|
|
Irene and Irene II |
|
100%, mensura |
|
60 |
|
|
|
|
|
|
192 |
|
|
Overlapped claims(a) |
|
|
|
(10) |
|
182 |
|
|
|
|
|
|
3,460 |
(a)
Irene and Irene II overlap each other; the net area of both claims is 50 hectares.
Carrizal
Property – Farellón And Perth Projects
Technical
Report
The
information in this Annual Report on Form 20-F with respect to the Carrizal Property is derived from the report titled “Independent
Technical Report on the Carrizal Cu-Co-Au Property” dated August 31, 2021 with an effective date of August 1, 2021, written by
Scott Jobin-Bevans, Ph.D., PMP, P. Geo of Caracle Creek International Consulting Inc. (the “Technical Report”). The
Technical Report has been prepared in accordance with the requirements of National Instrument 43-101 – Standards of Disclosure
for Mineral Projects (“NI 43-101”). Mr. Jobin-Bevans is an independent “Qualified Person” for purposes
of NI 43-101. The full text of the Technical Report is available for review at the mailing address of the Company at 278 Bay Street,
Suite 102, Thunder Bay, Ontario, P7B 102, and may also be accessed online under the Company’s SEDAR profile at www.sedar.com and
on the Company’s website http://www.redmetalresources.com.
Property
Description and Location
The
Carrizal Property is located approximately 700 km north of Chile’s capital city of Santiago, in Region III, referred to as the
“Region de Atacama”. The Carrizal Property lies within the Carrizal Alto Mining District, straddling the border between Huasco
and Copiapo provinces, approximately 75 km northwest of the City of Vallenar, 150 km south of Copiapo, and 20 km west of the Pan-American
Highway (Figure 1). The centre of the Carrizal Property is situated at coordinates 308750 mE and 6895000 mN (PSAD56 UTM Zone 19, Southern
Hemisphere).
The
Carrizal Property has historically been subdivided into two separate projects, namely the Perth and Farellón project areas, representing
roughly the northern and southern halves of the Carrizal Property, respectively. The Carrizal Property consists of 21 exploitation concessions
(‘mensuras’). The Carrizal Property covers a total area of 3,278 hectares (2,044 ha in the Perth Project and 1,234 ha in
the Farellón Project) (Figures 2, 3 and 4).
Figure
2 - Location of the Farellón and Perth projects claim blocks of the Carrizal Property, Region III, Region de Atacama,
northern Chile
Figure
3 - Claims in the southern portion of the Carrizal Property referred to as the Farellón Project area
Figure
4 - Claims in the northern portion of the Carrizal Property referred to as the Perth Project area
Accessibility
The
Carrizal Property is readily accessible from the City of Vallenar, Chile, via both paved and well-maintained dirt roads. Access is primarily
gained by taking the Pan-American highway (Ruta 5) north from Vallenar to the Carrizal turn-off (approximately 20 km north). From the
turn-off, a well-maintained dirt road runs to the CMP Cerro Colorado iron mine and continues to Canto del Agua and towards Carrizal Alto.
From this route, a dirt side road then leads directly to the Carrizal Property (Figure 1).
Title/Interest
The
Company owns all of the concessions in the Carrizal Property, through right of title.
Surface
Rights and Legal Access
The
surface rights of the Carrizal Property are owned by the Chilean government; however, if the Carrizal Property is developed and mined
at a later date, the surface rights will need to be secured as part of the permitting process. Surface rights are rented to mines for
the life of the mine by the Chilean government and claim holders have legal unimpeded access to their pedimentos and mensuras.
Other
Land Tenure Agreements
There
are pre-existing Net Smelter Return Royalties (“NSR”) on the properties as outlined in Table 2 below and there are
no other known land tenure agreements regarding the Carrizal Property. To date, only the existing mensuras and mensuras that are in progress
have been surveyed by the Chilean government. The remaining concessions which are exploration pedimentos do not require a survey until
an application has been made to transfer them to mensuras.
Table
2 - Pre-existing NSRs on various concessions, Carrizal Property
Concession
Name |
|
Concession
Type |
|
Concession
Number |
|
NSR
(%) |
|
Buy
Back
USD$ |
|
NSR2*
(%) |
Southern
claim block (Farellón) |
Farellón
Alto 1 - 8 |
|
Mensura |
|
033030156-2 |
|
1.5* |
|
600,000 |
|
1.5 |
Cecil
1 - 49 |
|
Mensura |
|
033030329-8 |
|
|
|
|
|
2.5 |
Azúcar
6 - 25 |
|
Mensura |
|
033030342-5 |
|
|
|
|
|
2.5 |
Kahuna
1 - 40 |
|
Mensura |
|
033030360-3 |
|
|
|
|
|
2.5 |
Stamford
61 - 101 |
|
Mensura |
|
033030334-4 |
|
|
|
|
|
2.5 |
Teresita |
|
Mensura |
|
033030361-1 |
|
|
|
|
|
2.5 |
Quina
1 - 56 |
|
Mensura |
|
033030398-0 |
|
1.5* |
|
1,500,000 |
|
1.5 |
Exeter
1 - 54 |
|
Mensura |
|
033030336-0 |
|
1.5* |
|
750,000 |
|
1.5 |
Northern
claim block (Perth) |
Perth
1 - 36 |
|
Mensura |
|
033030383-2 |
|
|
|
|
|
2.5 |
Rey
Arturo 1 - 30 |
|
Mensura |
|
033030638-6 |
|
|
|
|
|
2.5 |
Lancelot
1 1 - 27 |
|
Mensura |
|
033022832-6 |
|
|
|
|
|
2.5 |
Galahad
IA 1 - 44 |
|
Mensura |
|
03201D252-K |
|
|
|
|
|
2.5 |
Camelot
1 - 53 |
|
Mensura |
|
03201D253-8 |
|
|
|
|
|
2.5 |
Percival
4 1 - 60 |
|
Mensura |
|
03201D256-2 |
|
|
|
|
|
2.5 |
Tristan
II A 1 - 55 |
|
Mensura |
|
03201D264-3 |
|
|
|
|
|
2.5 |
Galahad
IB 1 - 3 |
|
Mensura |
|
03201D55-4 |
|
|
|
|
|
2.5 |
Tristan
II B 1 - 4 |
|
Mensura |
|
03201D251-1 |
|
|
|
|
|
2.5 |
Merlin
IB 1 - 10 |
|
Mensura |
|
033030691-2 |
|
|
|
|
|
2.5 |
Merlin
A 1 - 48 |
|
Mensura |
|
033030692-0 |
|
|
|
|
|
2.5 |
Lancelot
II 1 - 23 |
|
Mensura |
|
033030690-4 |
|
|
|
|
|
2.5 |
Galahad
IC |
|
Mensura |
|
03201D254-6 |
|
|
|
|
|
2.5 |
Pursuant
to Mining Royalty Agreements dated July 29, 2020 (“Mining Royalty Agreements’), Polymet offered royalties to each
of Richard Jeffs, Caitlin Jeffs and Joao (John) da Costa (each a “Royalty Holder”) for total aggregate consideration
of USD$5,000. The Mining Royalty Agreements have not been finalized in accordance with Chilean law in part due to the current
COVID restrictions preventing the parties from executing the agreement under applicable Chilean Law. Upon finalization according to Chilean
law, any future royalties arising from the sale of mineral and other materials from the mining properties listed in the table below located
in Chile (collectively, the “Carrizal Property”) will be payable to each of the Royalty Holders in accordance with
the terms of their respective Mining Royalty Agreements. The royalty payments are only payable as soon as Polymet initiates or restarts
the operation, exploitation, and consequent sale of mineral and other materials from the Properties.
Table
3 – Net Smelter Returns Royalty to be paid (%)
Property |
|
Richard
Jeffs,
Major
Shareholder(1) |
|
Caitlin
Jeffs,
CEO
and
Director(1) |
|
Joao
da Costa,
CFO
and
Director(1) |
|
Cecilia
Alday |
|
David
Mitchell |
|
Minera
Stamford S.A. |
Farellón
Alto 1 - 8 (2) |
|
0.75 |
|
0.45 |
|
0.30 |
|
1.5 |
|
|
|
|
Cecil
1 - 49 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Azúcar
6 - 25 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Kahuna
1 - 40 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Stamford
61 - 101 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Teresita |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Quina
1 - 56 (3) |
|
0.75 |
|
0.45 |
|
0.30 |
|
|
|
1.5 |
|
|
Exeter
1 - 54(4) |
|
0.75 |
|
0.45 |
|
0.30 |
|
|
|
|
|
1.5 |
Perth
1 - 36 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Rey
Arturo 1 - 30 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Lancelot
II 1 - 40 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Lancelot
1 1 - 27 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Merlin
IB 1 - 10 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Merlin
I A 1 - 48 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Tristan
II B 1 - 4 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Galahad
IA 1 - 44 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Camelot
1 - 60 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Galahad
I C 1 - 60 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Tristan
II A 1 - 60 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Galahad
I B 1 - 3 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Percival
4 1 - 60 |
|
1.25 |
|
0.75 |
|
0.50 |
|
|
|
|
|
|
Notes:
(1) |
Each
of the NSR’s to Richard Jeffs, Caitlin Jeffs and Joao da Costa will be paid quarterly once commercial exploitation begins and
will be paid on gold, silver, copper and cobalt sales. If, within two years, the Company does not commence commercial exploitation
of the mineral properties, an annual payment of USD$10,000 per Royalty Holder will be paid. Pursuant to Chilean law, this
agreement is not fully complete until registered against the land title in Chile. |
(2) |
Farellón
Alto 1 – 8 is subject to a royalty in favor of Cecilia Alday Limitada equal to 1.5% of the net smelter return that Polymet
receives from the property to a maximum of USD$600,000. The royalty is payable monthly and is subject to a monthly minimum
of USD$1,000 when Red Metal starts selling any minerals it extracts from the property. |
(3) |
Red
Metal has the right to buy out the royalty for a one-time payment of USD$1,500,000. |
(4) |
Red
Metal has the right to buy out the royalty for a one-time payment of USD$750,000. |
Mineral
Tenure
Chile’s
current mining and land tenure policies were incorporated into laws in 1982 and amended in 1983. The laws were established to secure
the property rights of both domestic and foreign investors to stimulate mining development in Chile. While the state owns all mineral
resources, exploration and exploitation of these resources is permitted by acquiring mining concessions which are granted by the courts
according to the law.
Concessions
are defined by UTM coordinates representing the centre-point of the concession and dimensions (in metres) in north-south and east-west
directions. There are two kinds of concessions, mining and exploration, and three possible stages of a concession to get from an exploration
concession to a mining concession: ‘pedimento’, ‘manifestacion’, and ‘mensura’ (see below for descriptions).
An exploration concession (‘pedimento’) can be placed on any area, whereas the survey to establish a permanent exploitation
concession (‘mensura’) can only be effected on “free” areas where no other mensuras exist.
Pedimento
A
pedimento is an initial exploration concession with well-defined UTM coordinates delineating the north-south and east-west boundaries.
The minimum size of a pedimento is 100 ha and the maximum is 5000 ha, with a maximum length-to-width ratio of 5:1. A pedimento is valid
for a maximum period of 2 years. At the end of the 2-year period it can either be reduced in size by at least 50% and renewed for an
additional 2 years or, entered into the process to establish a permanent concession by converting it into a manifestacion. New pedimentos
are allowed to overlap pre-existing pedimentos, however, the pedimento with the earliest filing date always takes precedence providing
the concession holder maintains their concession in accordance with the Mining Code of Chile and the applicable regulations.
Manifestacion
Before
a pedimento expires, or at any stage during its two-year life (including the first day the pedimento is registered), it may be converted
to a manifestacion. A manifestacion is valid for 220 days, and then prior to the expiry date, the owner must request an upgrade to a
mensura.
Mensura
Prior
to the expiration of a manifestacion, the owner must request a survey (mensura). After acceptance of the Survey Request (‘Solicitud
de Mensura’), the owner has approximately 12 months to have the concession surveyed by a government licensed surveyor. The surrounding
concession owners may witness the survey, which is subsequently described in a legal format and presented to the National Mining Service
of Chile (Sernageomin) for technical review, which includes field inspection and verification. Following the technical approval by Sernageomin,
the file returns to a judge of the appropriate jurisdiction, who dictates the constitution of the claim as a mensura (equivalent to a
patented claim in Canada). Once constituted, an abstract describing the claim is published in Chile’s official mining bulletin
(published weekly), and 30 days later the claim can be inscribed in the appropriate Mining Registry (Conservador de Minas).
Once
constituted, a mensura is a permanent property right, with no expiration date. As long as the annual fees (‘patentes’) are
paid in a timely manner (from March to May of each year), clear title and ownership of the mineral rights is assured in perpetuity. Failure
to pay the annual patentes for an extended period can result in the concession being listed for ‘remate’ (auction sale),
wherein a third party may acquire a concession for the payment of back taxes owed (plus a penalty payment). In such a case, the claim
is included in a list published 30 days prior to the auction and the owner has the possibility of paying the back taxes plus penalty
and thus removing the claim from the auction list.
Due
to the complicated nature of the land tenure system in Chile, Red Metal has engaged a land tenure specialist who sends a monthly report
on the status of all claims in the areas we are working in. This report includes a list of any new concessions in our area along and
any obligation on our part to notify new concession holders of our existing concessions.
Environmental
Liabilities
There
are no known environmental liabilities within the Carrizal Property. The Company has not applied for any environmental permits on the
Carrizal Property and has been advised that none of the exploration work completed to date requires an environmental permit. For all
exploration work in Chile, any damage done to the land must be repaired.
The
Llanos de Challe National Park, which was created in July 1994, covers the southern 750 m of the Farellón Alto 1 - 8 concession.
According to the Mining Code of Chile, to mine or complete any exploration work within the park boundaries, the Company will be required
to get written authorization from the Chilean government.
Exploration
History
Introduction
and Regional History
Mining
has played an important role in Chile’s economy starting in the 16th century with gold, silver and copper being mined from high
grade deposits. Copper mining, in particular, has employed a significant portion of the population both directly and indirectly over
the last 100 years. Historically, the most significant mineral producing zone in Chile has been the Coastal Cordillera, ranging between
50 and 100 km wide, extending over 2,500 km from Valparaiso in the south, northward to the Peruvian boarder.
The
Carrizal Alto Mine area is located within this prolific Coastal Cordilleran range, in the Atacama III Region of northern Chile, between
Copiapo and Vallenar. Historical records indicate that copper mining commenced at Carrizal Alto in the 1820s and continued on a significant
scale mostly by British companies until 1891, when disastrous flooding occurred and mines closed. The historical reports indicate that
the larger mines were obtaining good grades over significant widths in the bottom workings at the time of closure. Very little information
regarding mining has survived, but there is a small amount of historical data located in the SERNAGEOMIN National Archives in Santiago,
Chile. Up until 1891, mining at the Carrizal Alto Mine site produced over 3 million tonnes of Cu ore, grading between 5 and 15% copper
(National Archives in Santiago, Chile). There was also a large quantity of direct shipping ore at 12% copper. At one time there was a
considerable body of tailings present to support these figures, however this material has been reprocessed and depleted due to the high
prices of gold and copper over the last few years.
The
Carrizal Alto Mine area contains a series of northeast-trending shear structures, including the principal vein systems of ‘Mina
Grande’ and ‘Armonia’. Both vein systems have been worked extensively. The Mina Grande shear contains workings that
extend for over 2.5 km as a nearly continuous line of pits, collapsed stopes, narrow open cuts and numerous shafts. The Armonia vein
system is similar, extending for 1.8 km. Oxidation depths range from 50 to 150 m, and judging from remnant material, many of the veins
were probably worked to this depth and then abandoned as sulfide mineralization was reached.
In
the most productive zone at Mina Grande (which stretches for 1.5 km), the mineralized vein reached 15 m in width and is composed of quartz,
sericite, chalcopyrite and pyrite. Amphibole-rich seams occur proximal to the diorite wall rock, which also frequently contains chalcopyrite
and pyrite-bearing impregnations and smaller veins. The main producing mine in the Carrizal Alto Mine area was the Veta Principal on
the Mina Grande shear, which was mined to a depth of 400 m along a strike of 1.8 km and over a width varying from 2-15 m. The deepest
workings reached 600 m. Several slag dumps remain at old sites of local smelters treating the sulfide ores. Carrizal Alto, despite spectacular
past production from the Capote, Mina Grande, and Armonia mines, has remained virtually untouched since the brief gold revival of the
1930s.
The
current Carrizal Property is comprised of two contiguous blocks, namely the Farellón to the south and Perth to the north (Figure
2). Both of these blocks border the historically-productive Carrizal Alto Mine to the east, sharing geological and mineralogical attributes,
and for consistency, the historical names have been retained.
Farellón
Project Area
The
Farellón block of concessions, which are contiguous with the Carrizal Alto Mine area, was mined on a limited basis in the 1940s.
Very little information remains from this time period, except for a few plans of the limited underground mining (SERNAGEOMIN National
Archives, Santiago, Chile).
In
1963, eight samples were taken from two high grade veins from the accessible workings within the Farellón project area, namely
Veta Pique and Veta Naciente. These samples were analysed for copper, gold, silver, and gangue oxides (Table 4). Unfortunately, no units
of measure were provided in the 1963 report accompanying the assay grades, although wt% is most likely for copper. In conjunction with
historic records from the 1940s, this information was incorporated into a mineral resource estimate (see below).
In
the 2010 Technical Report by Micon on the Company’s Farellón Property (which corresponds roughly to the current Farellón
Project area), the author stated that “no attempt was made to verify the sampling program of 1963, as the workings were not entirely
accessible and there is no sample location map upon which to attempt to duplicate the samples” (Lewis, 2010).
Table
4 - Grades of Cu, Au, and Ag from Veins of the Farellón Project
Sample |
|
|
|
Length |
|
Grade |
Number |
|
Vein |
|
(m) |
|
Cu |
|
|
Au |
|
Ag |
|
CaO |
|
FeO |
|
MgO |
|
SiO2 |
1 |
|
Veta
Pique |
|
2.5 |
|
1.8 |
|
|
0.5 |
|
5 |
|
47.89 |
|
6.54 |
|
0.27 |
|
1.34 |
2 |
|
Veta
Pique |
|
2.45 |
|
6.9 |
|
|
1 |
|
20 |
|
31.14 |
|
13.77 |
|
0.3 |
|
2 |
3 |
|
Veta
Pique |
|
3 |
|
3 |
|
|
1 |
|
10 |
|
46.43 |
|
5.86 |
|
0.26 |
|
2.5 |
4 |
|
Veta
Pique |
|
1 |
|
1.2 |
|
|
0.2 |
|
5 |
|
31.52 |
|
3.49 |
|
0.3 |
|
25.66 |
5 |
|
Veta
Naciente |
|
2 |
|
2.4 |
|
|
0.5 |
|
5 |
|
47.99 |
|
5.52 |
|
0.32 |
|
1.5 |
6 |
|
Veta
Naciente |
|
1.8 |
|
3 |
|
|
1 |
|
5 |
|
38.25 |
|
6.09 |
|
0.23 |
|
17.84 |
7 |
|
Veta
Pique |
|
1.7 |
|
1.7 |
|
|
0.5 |
|
3 |
|
43.77 |
|
4.51 |
|
0.28 |
|
10 |
8 |
|
Veta
Naciente |
|
0.8 |
|
1.6 |
|
|
0.5 |
|
3 |
|
28.8 |
|
3.71 |
|
0.23 |
|
29.54 |
Total* |
|
|
|
1.8 |
|
2.1 |
|
|
0.6 |
|
5 |
|
40.66 |
|
5.1 |
|
0.27 |
|
12.62 |
*
The arithmetic average for the total in the table excludes Sample 2.
Derived from the 1963 report in the Sernageomin files, National Archives, Chile.
Oliver
Resources, an Irish-based company, through its Chilean subsidiary Oliver Resources Chile Ltda., briefly explored the Farellón
Property in 1990 with a stream sediment sampling program and sampling of the Farellón Alto and Bajo mine dumps.
The
Farellón Property was incorporated into a larger land package called the Azucar Project in the 1990s, owned by Minera Stamford
S.A. (Minera Stamford), a Chilean exploration company. In a joint venture with Metalsearch, an Australian company, exploration on these
concessions included geological mapping, rock chip sampling, soil geochemistry, reverse circulation (RC) drilling and metallurgical sampling.
Geological mapping of the Azucar project showed a NE-trending sheared contact 50 to 200 m wide, containing significant consistent mineralization
along a 2 km strike length. Minera Stamford collected 152 rock chip and dump samples from prospective areas along the mineralized shear
zone, of which 36 samples fell within the boundary of the Farellón Project. Samples were analyzed for gold, copper and cobalt.
The highest gold sample within the Farellón Property was 13.50 g/t Au, the highest copper result was 6.15% Cu, and the highest
cobalt result was 0.68% Co.
A
reverse circulation drilling program of 33 holes totaling 6,486 m was completed between 1996 and 1997 targeting the shear zone on the
Azucar property by the JV between Minera Stamford and Metalsearch. Twenty-two (22) of these holes were located within the Farellón
Project area, representing a total of 3918 m. Drill holes were placed at irregular intervals along the mineralized shear zone, and the
holes were sampled at regular 1 m intervals along their entire length. Results of this drill campaign confirmed the consistent presence
of mineralization in the shear zone, to a vertical depth of ~200 m. The highest gold concentration was 21.03 g/t Au, the highest
copper result was 9.21% Cu, and the highest cobalt result was 0.58% Co (all of these results are over 1 m intervals).
Table
5 - Summary of the Minera Stamford-Metalsearch JV Reverse Circulation Drill Hole Statistics for the Farellón Project area
|
|
UTM
Coordinates |
|
|
|
|
|
|
Hole
Number |
|
Easting |
|
Northern |
|
Elevation
(m) |
|
Azimuth
(°) |
|
Dip
(°) |
|
Depth
(m) |
FAR-96-06 |
|
308962.3 |
|
6888011 |
|
573 |
|
110 |
|
-62 |
|
100 |
FAR-96-07 |
|
308954.2 |
|
6888059 |
|
560 |
|
110 |
|
-62 |
|
163 |
FAR-96-09 |
|
309131.2 |
|
6888706 |
|
552 |
|
95 |
|
-65 |
|
242 |
FAR-96-010 |
|
309167.3 |
|
6888980 |
|
557 |
|
112 |
|
-75 |
|
211 |
FAR-96-011 |
|
309155.5 |
|
6888870 |
|
565 |
|
102 |
|
-62 |
|
169 |
FAR-96-013 |
|
309092.8 |
|
6888659 |
|
540 |
|
110 |
|
-65 |
|
257 |
FAR-96-014 |
|
309131.5 |
|
6888703 |
|
552 |
|
90 |
|
-90 |
|
203 |
FAR-96-015 |
|
309155 |
|
6888867 |
|
565 |
|
90 |
|
-90 |
|
200 |
FAR-96-016 |
|
309128.3 |
|
6888882 |
|
565 |
|
111 |
|
-65 |
|
200 |
FAR-96-017 |
|
309165.4 |
|
6888979 |
|
557 |
|
90 |
|
-90 |
|
200 |
FAR-96-018 |
|
309181 |
|
6889026 |
|
562 |
|
115 |
|
-65 |
|
51 |
FAR-96-019 |
|
309180 |
|
6889026 |
|
562 |
|
90 |
|
-90 |
|
200 |
FAR-96-020 |
|
309138.7 |
|
6888640 |
|
553 |
|
140 |
|
-65 |
|
150 |
FAR-96-021 |
|
309137.9 |
|
6888641 |
|
553 |
|
90 |
|
-90 |
|
200 |
FAR-96-022 |
|
309086.1 |
|
6888591 |
|
564 |
|
131 |
|
-65 |
|
150 |
FAR-96-023 |
|
309085.3 |
|
6888601 |
|
564 |
|
90 |
|
-90 |
|
200 |
FAR-96-024 |
|
309057.6 |
|
6888503 |
|
544 |
|
110 |
|
-65 |
|
150 |
FAR-96-025 |
|
309056.6 |
|
6888503 |
|
544 |
|
90 |
|
-90 |
|
172 |
FAR-96-026 |
|
309029.9 |
|
6888387 |
|
544 |
|
140 |
|
-65 |
|
150 |
FAR-96-027 |
|
309029.3 |
|
6888387 |
|
544 |
|
90 |
|
-90 |
|
199 |
FAR-96-028 |
|
309337.5 |
|
6889279 |
|
500 |
|
112 |
|
-65 |
|
150 |
FAR-96-029 |
|
309336.5 |
|
6889280 |
|
500 |
|
90 |
|
-90 |
|
201 |
Total |
|
|
|
|
|
|
|
|
|
|
|
3,918 |
Table
provided by Red Metal Resources Ltd.
Table
6 - Summary of significant intercepts from the 1996-1997 RC Drilling Program by Minera Stamford and Metalsearch within the Farellón
Project area
|
|
Significant
Interval (m) |
|
Assay
Results |
Drill
Hole |
|
From |
|
To |
|
Length |
|
Gold
(g/t) |
|
Copper
(%) |
|
Cobalt
(%) |
FAR-96-06 |
|
49 |
|
54 |
|
5 |
|
0.15 |
|
0.73 |
|
0.01 |
FAR-96-07 |
|
25 |
|
34 |
|
9 |
|
0.38 |
|
1.05 |
|
0.02 |
FAR-96-09 |
|
57 |
|
84 |
|
27 |
|
0.51 |
|
0.91 |
|
0.03 |
FAR-96-010 |
|
31 |
|
36 |
|
5 |
|
1 |
|
0.68 |
|
0.04 |
FAR-96-011 |
|
20 |
|
26 |
|
6 |
|
0.67 |
|
0.46 |
|
0.02 |
FAR-96-013 |
|
86 |
|
93 |
|
7 |
|
0.87 |
|
1.68 |
|
0.04 |
FAR-96-014 |
|
77 |
|
83 |
|
6 |
|
0.66 |
|
0.85 |
|
0.06 |
FAR-96-015 |
|
59 |
|
79 |
|
20 |
|
0.99 |
|
0.98 |
|
0.06 |
|
99 |
|
109 |
|
10 |
|
0.18 |
|
1.02 |
|
0.03 |
FAR-96-016 |
|
24 |
|
26 |
|
2 |
|
0.95 |
|
1.57 |
|
0.02 |
|
64 |
|
70 |
|
6 |
|
0.73 |
|
0.81 |
|
0.07 |
FAR-96-020 |
|
14 |
|
16 |
|
2 |
|
0.46 |
|
1.85 |
|
0.05 |
|
39 |
|
43 |
|
4 |
|
0.75 |
|
0.9 |
|
0.03 |
FAR-96-021 |
|
22 |
|
25 |
|
3 |
|
4.17 |
|
5.29 |
|
0.11 |
FAR-96-022 |
|
29 |
|
39 |
|
10 |
|
1.53 |
|
1.31 |
|
0.04 |
FAR-96-022 |
|
100 |
|
108 |
|
8 |
|
3.72 |
|
2.49 |
|
0.06 |
FAR-96-023 |
|
50 |
|
53 |
|
3 |
|
0.48 |
|
1.1 |
|
0.06 |
|
59 |
|
64 |
|
5 |
|
0.28 |
|
0.78 |
|
0.03 |
|
132 |
|
147 |
|
15 |
|
0.6 |
|
1.42 |
|
0.03 |
FAR-96-024 |
|
33 |
|
36 |
|
3 |
|
0.94 |
|
2.89 |
|
0.06 |
FAR-96-025 |
|
65 |
|
85 |
|
20 |
|
0.97 |
|
1.22 |
|
0.02 |
FAR-96-028 |
|
55 |
|
58 |
|
3 |
|
0.12 |
|
0.52 |
|
0.06 |
FAR-96-029 |
|
30 |
|
34 |
|
4 |
|
0.18 |
|
1.15 |
|
0.07 |
The
historic Farellón workings are in metamorphic units within the sheared metamorphic/tonalite contact zone which is about 200 m
wide. The workings are large but restricted to the oxide zone and range from 1-20 m wide. A sample of the wall rock and quartz veined
metamorphic rocks taken by Minera Stamford returned 3.0% copper, 1.4 g/t gold, 0.08% cobalt, and 1.1% arsenic.
The
lower Farellón workings are several hundred metres to the south and associated with massive siderite. A sample collected by Minera
Stamford of the lode material returned 5.6% copper, 2.4 g/t gold, 0.02% cobalt. A 20-ton trial parcel of material from the Farellón
workings in the 1950s is reported to have returned over 1% cobalt.
The
Company acquired the rights to the Farellón Property on April 25, 2008, upon its Chilean subsidiary exercising the option to buy
the property from Minera Farellón. The Company drilled five RC drill holes in 2009, totaling 725 m using a Tramrock Dx40 RC rig.
This larger rig necessitated widening existing roads rehabilitating access to old drill pads. The drill program was designed to twin
some of the Minera Stamford 1996-1997 drill holes for data verification, as no geological information was recovered from the Minera Stamford
drill program and assays were not accompanied by laboratory certificates. One drill hole tested 100 m below the known mineralization,
and another hole tested continuity of mineralization between previously drilled sections.
Collar
locations and azimuths for the 2009 drilling were surveyed using a total station surveying tool. Each drill hole had 1.5 m of blue PVC
piping added to it as a surface pre-collar which was cemented into place to permanently denote the drill hole location. Downhole surveys
were completed on all drill holes from the 2009 program and on six drill holes from the 1996-1997 Minera Stamford program (holes 9, 14,
20, 21, 22, and 23). Surveying of all historic drill holes surrounding the current drilling was attempted, but some of the holes were
caved and the survey tool was unable to be lowered into the hole.
Table
7 - Summary of Red Metal’s 2009 RC Drill Program on the Farellón Project
|
|
UTM
Coordinates |
|
|
|
|
|
|
|
|
Hole
Number |
|
Easting |
|
Northern |
|
Elevation
(m) |
|
Azimuth
(°) |
|
Dip
(°) |
|
Depth
(m) |
|
Comments |
FAR-09-A |
|
309,086 |
|
6,888,591 |
|
550 |
|
131 |
|
-65 |
|
125 |
|
twinning
FAR-96-22 |
FAR-09-B |
|
309,125 |
|
6,888,709 |
|
560 |
|
95 |
|
-65 |
|
100 |
|
twinning
FAR-96-09 |
FAR-09-C |
|
309,127 |
|
6,888,922 |
|
555 |
|
105 |
|
-65 |
|
145 |
|
testing
continuity between sections |
FAR-09-D |
|
308,955 |
|
6,888,696 |
|
539 |
|
95 |
|
-65 |
|
287 |
|
testing
depth extent of mineralization |
FAR-09-E |
|
309,133 |
|
6,888,645 |
|
551 |
|
Vertical |
|
-90 |
|
68 |
|
twinning
FAR-96-21 |
Total |
|
|
|
|
|
|
|
|
|
|
|
725 |
|
|
Table
8 contains the significant intervals calculated from the 2009 RC drill program by the Company. The intervals are reported as core lengths,
as the true width of the mineralized zones have not been determined.
Table
8 - Summary of significant intercepts from Red Metal’s 2009 RC Drill Program on the Farellón Project
DI9:P21rill |
|
Assay
Interval (m) |
|
Assay
Grade |
Hole
Number |
|
|
|
From |
|
To |
|
Core
Length |
|
Gold
(g/t) |
|
Copper
(%) |
|
Cobalt
(%) |
FAR-09-A |
|
|
|
32 |
|
37 |
|
5 |
|
0.59 |
|
1.3 |
|
0.02 |
|
|
|
97 |
|
106 |
|
9 |
|
0.44 |
|
1.63 |
|
0.04 |
|
including |
|
103 |
|
106 |
|
3 |
|
0.48 |
|
2.49 |
|
0.07 |
FAR-09-B |
|
|
|
56 |
|
96 |
|
40 |
|
0.27 |
|
0.55 |
|
0.02 |
|
including |
|
60 |
|
63 |
|
7 |
|
0.46 |
|
1.42 |
|
0.04 |
|
|
|
75 |
|
87 |
|
12 |
|
0.71 |
|
1.28 |
|
0.03 |
FAR-09-C |
|
|
|
77 |
|
82 |
|
5 |
|
4.16 |
|
2.57 |
|
0.05 |
FAR-09-D |
|
|
|
95 |
|
134 |
|
39 |
|
0.11 |
|
0.58 |
|
0.01 |
|
including |
|
95 |
|
103 |
|
8 |
|
0.33 |
|
2.02 |
|
0.02 |
FAR-09-E |
|
|
|
25 |
|
30 |
|
5 |
|
0.54 |
|
1.35 |
|
0.02 |
|
|
|
65 |
|
68 |
|
3 |
|
0.58 |
|
1.46 |
|
0.06 |
Results
from the 2009 drilling confirmed the general location and tenor of the mineralization determined during the 1996-1997 Minera Stamford
drilling program, however, the 2009 program was not able to reproduce the historical gold assays within holes FAR-09-A and FAR-09-E,
designed to duplicate historical holes FAR-96-22 and FAR-96-21, respectively. In the case of FAR-09-E, the disparity between the historical
1996-1997 and 2009 assays was also found with respect to copper. All drill holes during the 2009 drilling program intersected oxide facies
mineralization with only minor amounts of sulfide (e.g. hole FAR-09-D).
In
2011, the Company completed a second drilling program, consisting of nine reverse circulation holes and two combined RC/diamond drill
(core) holes. Chips and core recovered consisted of 2050 m of RC drilled, and 183 m of diamond (core), for a total of 2233 m. The program
was designed to expand the known mineralized zone down-dip to 200 m vertical depth, extend the known mineralized strike length of the
overall deposit to 700 m, and infill large gaps with holes drilled at 75 m spacing. Two of the drill holes finished with diamond drill
core, providing information to better define the structural controls on mineralization.
Collar
locations and azimuths for the 2011 drilling were surveyed using a handheld GPS. The Company used a magnetic REFLEX EZ-TRAC instrument
to complete downhole surveys using a digital remote gyroscope. Downhole surveys were completed on all 11 drill holes from the 2011 program
every 50-100 m downhole so most drill holes had at least three readings taken along with the one at the surface. Due to the high magnetic
susceptibility of the subsurface, the azimuth reading and the magnetic readout gave inaccurate readouts. Therefore, only the downhole
dip could be recorded with any level of confidence. The significant assays are reported as core lengths as the true width of the mineralized
zone was not established.
Table
9 - Survey information from Red Metal’s 2011 Combined RC/Diamond drilling program.
Hole
Number |
|
UTM Coordinates (PSAD 56) |
|
Azimuth
(°) |
|
Dip
(°) |
|
Depth
(m) |
|
Comments |
|
Easting |
|
Northern |
|
Elevation
(masl) |
|
|
|
|
FAR-11-001 |
|
309,298 |
|
6,889,226 |
|
499 |
|
130 |
|
-65 |
|
101 |
|
|
FAR-11-002 |
|
309,180 |
|
6,889,140 |
|
508 |
|
130 |
|
-65 |
|
228 |
|
|
FAR-11-003 |
|
308,992 |
|
6,888,677 |
|
517 |
|
130 |
|
-60 |
|
200 |
|
|
FAR-11-004 |
|
309,095 |
|
6,888,808 |
|
513 |
|
130 |
|
-65 |
|
200 |
|
|
FAR-11-005 |
|
309,041 |
|
6,888,760 |
|
497 |
|
130 |
|
-60 |
|
143 |
|
Abandoned
at 143 m |
FAR-11-006 |
|
309,113 |
|
6,888,870 |
|
556 |
|
130 |
|
-80 |
|
200 |
|
|
FAR-11-007 |
|
309,113 |
|
6,888,870 |
|
556 |
|
130 |
|
-60 |
|
162 |
|
|
FAR-11-008 |
|
309,104 |
|
6,888,984 |
|
531 |
|
130 |
|
-65 |
|
200 |
|
|
FAR-11-009 |
|
308,955 |
|
6,888,710 |
|
536 |
|
130 |
|
-65 |
|
247 |
|
Diamond
200-247 m |
FAR-11-010 |
|
309,007 |
|
6,888,852 |
|
528 |
|
130 |
|
-60 |
|
300 |
|
Diamond
164-300 m |
FAR-11-011 |
|
309,031 |
|
6,888,950 |
|
541 |
|
130 |
|
-65 |
|
252 |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
2,233 |
|
|
Table
10 - Significant intercepts from Red Metal’s 2011 drill program on the Farellón Project.
Drill
hole Number |
|
|
|
Assay
Interval (m) |
|
Assay
Grade |
|
|
|
From |
|
To |
|
Core
Length |
|
Gold
(ppm) |
|
Copper
(%) |
|
Cobalt
(%) |
FAR-11-001 |
|
|
|
36 |
|
49 |
|
13 |
|
0.35 |
|
2.51 |
|
0.06 |
|
including |
|
36 |
|
44 |
|
8 |
|
0.53 |
|
3.95 |
|
0.09 |
FAR-11-002 |
|
Zone
faulted off, no significant intercepts |
FAR-11-003 |
|
|
|
150 |
|
155 |
|
5 |
|
0.28 |
|
0.4 |
|
0.03 |
FAR-11-004 |
|
|
|
141 |
|
145 |
|
4 |
|
0.01 |
|
0.73 |
|
0.01 |
FAR-11-005 |
|
|
|
124 |
|
133 |
|
9 |
|
0.26 |
|
0.84 |
|
0.02 |
|
|
Hole
lost in mineralization |
FAR-11-006 |
|
|
|
80 |
|
112 |
|
32 |
|
0.99 |
|
1.35 |
|
0.02 |
FAR-11-007 |
|
|
|
64 |
|
70 |
|
6 |
|
0.7 |
|
0.66 |
|
0.07 |
FAR-11-008 |
|
|
|
98 |
|
102 |
|
4 |
|
0.26 |
|
0.85 |
|
0.01 |
FAR-11-009 |
|
|
|
202 |
|
211.55 |
|
9.55 |
|
0.42 |
|
0.95 |
|
0.05 |
FAR-11-010 |
|
|
|
179.13 |
|
183 |
|
3.87 |
|
0.39 |
|
0.5 |
|
0.05 |
FAR-11-011 |
|
|
|
54 |
|
56 |
|
2 |
|
0.48 |
|
0.97 |
|
0.03 |
Drilling
returned copper results as high as 8.86% Cu, with 0.80 g/t Au over 1 m (FAR-11-001), and 5.35 g/t Au, 4.77% Cu, and 0.024% Co over a
2 m interval (FAR-11-006). There was evidence of pinching and swelling in the mineralized vein structures, as significant intercepts
ranging in width from 2 m to 32 m. Ten of the eleven drill holes contained significant intercepts (9). Drill hole FAR-11-002 did not
intercept the interpreted mineralized zone, likely due to a misinterpretation of localized fault off-set of the mineralized vein.
All
significant intercepts from the 2011 drilling program were dominated by supergene oxide mineralization from surface to ~150 m depth.
Sulfide mineralization was minimal within this shallow depth range, becoming more abundant as the transition to the hypogene zone approached
below ~150 m depth. This transition zone was highly variable depending on faulting, groundwater flow pathways, and variable elevation.
Below 150 m, hypogene conditions dominated, resulting in abundant sulfide mineralization, as seen in drill holes FAR-11-003 (177-182
m), FAR-11-009 (202-211.55 m), and FAR-11-010 (179.13-183 m). Supergene mineralization was dominated by malachite, chrysocolla, and copper±gold
within goethite and limonite iron oxides. Alteration haloes were associated with supergene mineralization such as carbonate, limonite,
hematite, goethite, and manganese oxide. Other alteration minerals were present, such as chlorite, epidote, actinolite, biotite, and
sericite, however these minerals were not related to the supergene mineralization.
Hypogene
mineralization was dominated by chalcopyrite with associated gold. Chalcopyrite occurred as amorphous blebs and lesser disseminations
hosted in massive, sometimes vuggy quartz and calcite. A good example was found in drill core from hole FAR-11-009 within the mineralized
intersection between 202 m and 211.55 m. The mineralized intersections broadly occur along the regional lithological boundary shear zone
between overlying Paleozoic metasediments to the west and underlying Jurassic intrusives to the east.
Most
of the 2011 drill holes did not pass through the lithological boundaries, even after drilling through the mineralized structures. Therefore,
it was interpreted that this mineralization occurs in close proximity to the lithological boundaries, but that the mineralized structures
do not exactly follow the contact but instead occur as splays and faults emanating off the major structural boundary.
The
2011 drilling results confirmed that mineralization is still present down-dip of the intersections identified during the previous drilling
campaign and are still open at depth. The infill drilling confirmed that the mineralization had significant grades and initiated the
process of outlining a consistent 75 m spacing between drill holes. The 2011 drilling results also indicated that the significant grades
for the copper and gold mineralization were still open along strike to the northeast and southwest, as demonstrated by hole FAR-11-001,
which was drilled towards the northwest. All drill holes during the 2011 drilling program intersected oxide facies mineralization with
the only significant intercepts bearing sulfides in holes FAR-11-003 and FAR-11-009. The supergene-hypogene transition occurred anywhere
between 50 m and 150 m and appeared to be dependent on local fracturing and faulting.
A
mapping and sampling program was conducted on the Farellón Property in 2012, covering the contact zone between the metasediments
and the diorite. The main focus of this program was to ascertain the nature of the veins occurring within each major rock type, and to
determine whether any major differences existed in vein structure, mineralogy, alteration, size, and geochemical composition. Over 1,270
mapping sites were visited, with information such as major rock type and mineralization recorded. Of these sites, 56 samples were selected
and submitted for geochemical analysis. The range of total copper achieved by this sampling program was between 1.17 and 5.78 % Cu,
with between 50 and 99% of that representing copper sulfide mineralization. These samples also contained from 19-2465 ppm Co, and from
0.02-2.87 g/t Au.
Two
diamond drill holes were completed in 2013 by Perfoandes on behalf of Red Metal totaling 116 m (45 m in the first hole, 71 m in the second).
The first hole (F13-001) was located 28 m north of FAR-11-001 on a 45º bearing. Drill core was selectively sampled (16 m sampled
from FAR-13-001 and 15 m sampled from FAR-13-002), and analysed for Au, total Cu and soluble Cu. A significant intersection was encountered
in each drill hole, returning 0.7 % Cu and 0.2 g/t Au over 6 m. The second hole recorded 1.75% Cu and 0.25 g/t Au over 9 m. These results
confirmed similar findings from FAR-11-001, which was collared 28 m to the south. Both holes recorded the change in mineralogy from dominantly
ankerite and other carbonates to more quartz-dominant, containing pyrite and chalcopyrite mineralization.
In
2014, the Company entered into a contract with a Chilean artisanal miner allowing the artisanal miner to extract mineralized material
on the Farellón property in return for a 10% net sales royalty. In January 2015, the artisanal miner began selling mineralized
material to ENAMI, the Chilean national mining company. To date approximately 11,265 tonnes of sulfide-mineralized material with an average
grade of 1.67% Cu, 5.8 g/t Ag and 0.21 g/t Au, as well as 1813 tonnes of oxide mineralized material with an average grade of 1.56% Cu
has been sold to ENAMI. The ENAMI processing facility currently does not have the capability of recovering cobalt and therefore the artisanal
miner did not regularly analyse for cobalt. Three grab samples taken from the same location as the mined mineralized material (Level
7 - 70 m level), were analysed for gold, copper, and cobalt, with results shown below in Table 11.
Table
11 - Level 7 sampling
70
metre Level Sampling* |
Gold
(ppm) |
|
Copper
(%T) |
|
Cobalt
(%) |
n/a |
|
2.86 |
|
0.12 |
n/a |
|
1.43 |
|
0.07 |
2.2 |
|
6.8 |
|
0.11 |
*Grab samples are selective in nature and random in size and may not be representative of mineralization characteristics. n/a = not analyzed.
The
Kahuna concession (part of the Farellón Project area) was historically held by Vector Mining, a private company, and optioned
to Catalina Resources PLC (Catalina), a private UK registered mineral exploration company. Catalina conducted a geophysical exploration
program in order to determine whether the mineralized structures to the northeast, exploited in the Carrizal Alto mine, extended into
the Kahuna area, to determine whether any such structures were associated with possible sulfide mineralization, and to define drill targets
for a subsequent phase of work. The survey area was traversed in detail and a geological map was prepared showing all the different lithologies
and previous mine workings. Two target areas were defined; one within the diorite intrusive hosting the high-grade mineralization at
the old Carrizal Alto mine, the other in the surrounding metamorphic sediments. Two ground geophysical surveys (induced polarisation
(IP) and magnetometry) were completed May 2007, confirming the continuity of the mineral-bearing structures between Carrizal Alto and
the Kahuna area, allowing for the definition of sites for follow-up drilling.
The
ground magnetic survey was completed on a grid measuring 1.2 km by 3.2 km. A total of 70 km were surveyed on lines spaced 50 m apart.
In the IP survey a total of 27 km of data were acquired with a gradient array. Three one km lines were surveyed in a more detailed follow-up
survey with a multi-array consisting of both pole-dipole and multi-bipole gradient array. The principal orientation of the shear zones
was confirmed to be to the northeast towards Carrizal Alto where similar structures were exploited previously for copper and cobalt.
However, there are also several trends to the northwest interpreted to be fault zones that offset the mineralized shear zones slightly.
A north-south trend is probably due to dykes. A strong IP anomaly was located in the western portion of the survey area. The IP anomaly
correlated with a shallow strongly conductive zone known to be associated with mineralization developed on the margin of the intrusive
and exposed in shallow workings. Despite positive results warranting further attention, Catalina eventually dropped the option to the
Kahuna Property, and it returned to Vector Mining.
Figure
5 - Drill hole collar locations on the Carrizal Property
(Geology based on Arevelo and Welkner, 2003; figure supplied by Red Metal).
Perth
Project Area
The
northern concessions of the Carrizal Property have historically been called the Perth Project. There are numerous artisanal workings
throughout this section of the Carrizal Property. The Puenta Negra Mine area contains the Argentina and Dos Amigos veins, with the most
significant workings on the property occurring at the Argentina shaft (Figure 6). Unfortunately, no historic mining records have been
located for the Argentina and Dos Amigos veins.
In
the 1990s the Cachina Grande area of the Carrizal Alto received some attention. The Cachina Grande area is underlain by Paleozoic metasediments
to the west of the dioritic-hosted Carrizal Alto. In 1991, seven samples from the Cachina Grande area were taken for the report on the
Carrizal Alto mining district by Oliver Resources (Ulriksen, 1991). Samples were taken from the Argentina old workings vein 1.8 m, resulting
in a range of Cu between 1.76 and 3.4% Cu, and between 0.05 and 1.22 g/t Au. Samples taken from the Dos Amigos North dump were grab samples
and ranged between 0.46 and 0.83% Cu, and between 1.29 and 3.41 g/t Au.
Appleton
Resources Ltd. optioned the Perth Property in 2007 and completed a surface sampling program covering 12 veins identified on the southern
portion of the project area, as part of a NI 43-101-compliant report on their Perth Caliza Property (which includes the southern portion
of the current Perth project area) (Butrenchuk, 2008). Significant results from the 56-sample program by Appleton Resources in 2007 include
total copper between 0.01 and 11.4% Cu, and between 0.01 and 10.7 g/t Au and up to 0.186% Co.
Figure
6 - Argentina Shaft and Headframe in the northern Perth Project Area
In
2011, the Company conducted another sampling program, collecting 129 samples from its Perth Property, and analysing for total copper,
soluble copper, gold, and cobalt. Results include total copper ranging between 0.01 to 11.36% Cu, gold ranging between 0.01 to 29.93
g/t Au, and cobalt ranging between 2 to 6933 ppm.
In
2013 and 2014, the Company optioned the Perth Project area to Mineria Activa, a Chilean private mining company. Mineria Activa conducted
a surface sampling, stripping and channel sampling program followed by a two-phase drilling program within the Perth Project area. The
surface sampling and stripping program consisted of collecting 762 samples, a combination of grab and chip samples, and analysing them
for total copper, soluble copper, gold, and cobalt. Results included a range of copper total results between 0.001 and 7.16% Cu, between
0.005 and 16.5g/t Au, and between 0.001 and 0.437% Co. Mineria Activa drilled 30 diamond drill holes on the Perth Project area, of these
30 holes, only three were entirely on the Red Metal mineral concessions, the remainder targeted a vein that is exposed at surface on
a claim owned by another company that runs through the middle of Red Metal’s Perth Project area. Of these three drill holes only
one, DP-04, intersected any significant mineralization; 1 m grading 2.15 gt Au, 1.32% Cu and 0.017% Co.
Historical
Resource Estimates and Production
There
are no formal historical resource estimates on the Farellón project. However, a number of old memo-style reports were put together
by the provincial engineer for Atacama particularly in 1963. The sources for the 1963 report were other reports dated from 1942 to 1949.
In the report it was noted that the deposit consisted of 3 veins in metamorphic rocks and that blocks of material approximately 50 m
in length and depth had been extracted. The historical estimates do not conform to the presently accepted CIM standards and definitions,
for resource estimates, as required by NI 43-101 regulations.
The
1963 report contained a number of tables which indicated the reserves reported in the previous 1949 report by Ing. Herbert Hornkohl.
There are a number of inaccuracies in the tables contained in the 1963 report, most likely related to typing errors, and Micon has attempted
to correct these errors by comparing them to the 1949 tables, where applicable. The tables from the reports are reproduced below but
not all of the units of measurement were provided for the tabulated grades in the reports. Therefore, Micon has not assigned units of
measurement to any grades which are not specified in the reports. After the 1949 study was conducted, the mine was worked and at 1963
there was no visible mineralization (positive ore). There were 500 tons of waste and 1,320 tons of extracted material with the following
grades.
Table
12 - “Positive Ore”
|
|
Tons |
Grade |
|
|
Cu
(%) |
|
Au
(g/t) |
|
Ag |
|
CaO
(%) |
|
SiO2
(%) |
|
Fe2O3 |
|
Al2O3 |
|
S |
Veta
Pique* |
|
5,849 |
|
3.1 |
|
1.2 |
|
3.8 |
|
45.3 |
|
4.4 |
|
7.8 |
|
1.6 |
|
0.7 |
Veta
Naciente* |
|
6,817 |
|
2.7 |
|
1.1 |
|
4.9 |
|
44.1 |
|
5.0 |
|
11.7 |
|
2.7 |
|
0.7 |
Total |
|
12,666 |
|
2.9 |
|
1.1 |
|
4.4 |
|
44.7 |
|
4.7 |
|
9.9 |
|
2.2 |
|
0.7 |
Derived
from the 1949 and 1963 reports in the Sernageomin files, Chile.
Table
13 - “Waste”
Tons |
|
Cu |
|
Au |
|
Ag |
|
CaO |
|
FeO |
|
MgO |
|
SiO2 |
500 |
|
2.20 |
|
1.0 |
|
10.0 |
|
45.98 |
|
5.29 |
|
0.60 |
|
2.50 |
Derived
from the 1949 and 1963 reports in the Sernageomin files, Chile.
Table
14 - “Extractions”
|
|
Tons |
|
Cu |
|
Au |
|
Ag |
|
CaO |
|
FeO |
|
MgO |
|
SiO2 |
Veta
Pique* |
|
810 |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
Veta
Naciente* |
|
510 |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
Total |
|
1,320 |
|
2.3 |
|
1.0 |
|
5.0 |
|
45.07 |
|
6.54 |
|
0.22 |
|
3.0 |
*Note:
Veta Pique = Shaft vein and Veta Naciente = Outcrop vein.
Derived
from the 1949 and 1963 reports in the Sernageomin files, Chile.
The
May 2000 Minera Stamford report mentions a resource estimate but this is a conceptual resource estimate based on a minimal amount of
information. However, Micon has reviewed this conceptual estimate and concluded that it would not meet the criteria necessary for its
inclusion in an NI 43-101 report. Therefore, the Company should not rely on it as justification for a program of compilation work and
further exploration. Further work is required to locate and evaluate the true extent and nature of the mineralization on the Farellón
Project.
As
mentioned previously a small amount of historical production has occurred on the Farellón Property primarily during the 1940s.
However, there are few existing records of the production and there appear to be some discrepancies in the potential size of the waste
dumps (1,000 and 500 tons) and grades reported in the material between the 1949 and 1963 reports contained in the archived files.
Geological
Setting
Regional
Geology
Chile
is divided into three major physiographic units running north-south, namely the Coastal Cordillera, Central Valley (also termed the Central
Depression), and the High Cordillera (Andes). The Carrizal Property lies within the Coastal Cordillera, on the western margin of Chile
(Figure 7).
There
are five main geological units within the Coastal Cordillera, including, (1) early Cretaceous back-arc basin marine carbonates (east);
(2) late-Jurassic to early-Cretaceous calc-alkaline volcanic arc rocks (central); (3) early-Cretaceous Coastal batholith (west) (Marschik,
2001); (4) the Atacama fault zone (west) (Marschik, 2001); and, (5) Paleozoic basement metasedimentary rocks along the western margin
(Hitzman, 2000). Many of these geological units are shown in Figure 7.
The
Coastal Cordillera formed in the Mesozoic Era as major plutonic complexes were emplaced into broadly contemporaneous arc and intra-arc
volcanics and underlying Paleozoic deformed metasediments (Hitzman, 2000). This time period also saw development of the NW-trending brittle
Atacama fault system, followed by widespread extension-induced tilting. Sedimentary sequences accumulated immediately east of the Mesozoic
arc terrane in a series of interconnected, predominantly marine, back-arc basins. Early- to mid-Jurassic through mid-Cretaceous volcanism
and plutonism throughout the Coastal Cordillera and immediately adjoining regions are generally considered to have taken place under
variably extensional conditions in response to retreating subduction boundaries (slab roll-back) and steep, Mariana-type subduction (Hitzman,
2000).
Local
Geology
The
Carrizal Property covers two distinct contact zones between Paleozoic metasedimentary rocks in the central section, and late Jurassic
diorites and monzodiorites to the northwest and southeast.
Paleozoic
metasedimentary rocks belonging to the Chanaral Metamorphic Complex are composed of shales, phyllites and quartz-feldspar schists/gneisses
(Minera Stamford, 2000). The sedimentary rocks have a strong NNE-striking shallow foliation dipping 40°
southeast. The intrusives towards the southeast corner
of the Carrizal Property, in the Farellón Project area, belong to the Canto del Agua formation and consist of diorites and gabbros
hosting many NE-oriented intermediate-mafic dykes. These diorites are known to host extensive veining with copper and gold mineralization
(Arevalo and Welkner, 2003). Locally, a small stock-like felsic body, called Pan de Azucar, with lesser satellite dykes, intrudes the
diorite. The intrusive relationship between the diorite and metasediments on this south end of the Carrizal Property always appears to
be tectonic (Willsteed, 1997).
Property
Geology
The
southern contact zone between the metasedimentary rocks and the diorite is a mylonitic shear zone, ranging between 5 m and 15 m in width,
striking NNE, and dipping 65° to
the northwest. This shear zone is host to mineralized quartz-calcite veins that splay off to the east into the diorites of the adjacent
Carrizal Alto Mine area.
The
Perth project area at the northern end of the Carrizal Property, also hosts a significant NS-trending vein swarm. Although these veins
pinch and swell, they are generally 2 m wide and have been measured up to 6 m wide. Individual veins can be traced from a few 100 m to
greater than 2 km in length. Most of the veins identified thus far on surface lie within the metasedimentary rocks, however several veins
have been traced cross-cutting the northern metasediment-granodiorite contact.
Mineralization
The
Carrizal Property occurs within the Central Andean IOCG Province (Sillitoe, 2003; Figure 7). Vein type, plutonic-hosted IOCG deposits
such as Carrizal Alto and by extension the contiguous Carrizal Property, are characterized by a distinct mineralogy that includes not
only copper and gold but also cobalt, nickel, arsenic, molybdenum, and uranium (Sillitoe, 2003; Clark, 1974). All of the IOCG deposits
in the region are partially defined by their iron content in the form of either magnetite or hematite (Sillitoe, 2003).
Figure
7 - The Central Andean IOCG Province of northern Chile (Sillitoe, 2003).
The
Carrizal Alto Mine, directly adjacent to the Carrizal Property, is highlighted (red) for reference.
A
variety of alteration assemblages has been noted in the Chilean deposits according to whether or not the deposits are hematite or magnetite
dominated:
1. Magnetite-rich
veins contain appreciable actinolite, biotite and quartz, as well as local apatite, clinopyroxene, garnet, hematite and K-feldspar, and
possess narrow alteration haloes containing one or more of actinolite, biotite, albite, K-feldspar, epidote, quartz, chlorite, sericite
and scapolite.
2. Hematite-rich
veins tend to contain sericite and/or chlorite, with or without K-feldspar or albite, and to possess alteration haloes characterised
(Sillitoe, 2003) by these same minerals. Typically the vein deposits of the coastal Cordillera are chalcopyrite, actinolite and magnetite
deposits (Ruiz, 1962).
Carrizal
Alto, just east of the Carrizal Property, has historically been known as a significant cobalt deposit (Ruiz, 1962; Clark, 1974) and has
returned cobalt grades of up to 0.5% Co in the form of cobaltiferous arsenopyrite (Sillitoe, 2003; Ruiz, 1962), carrollite, and other
cobalt sulfides (Clark, 1974). Copper mineralization on the Carrizal Property consists of malachite and chrysocolla in the oxide zone
and chalcopyrite in the sulfide zone. There is some indication that in the oxide zone some of the copper mineralization is tied up in
a goethite-bearing clay matrix (Willsteed, 1997; Floyd, 2009).
Alteration
associated with the greater shear zone is comprised of actinolite, biotite, sericite, epidote, quartz and carbonate mineralization. The
sulfidized quartz-calcite veins occurring within the shear zone can display an intense pyrite-sericite-biotite alteration halo. In places,
there is massive siderite and ankerite alteration (Minera Stamford, 2000).
Deposit
Types
The
main target on the Carrizal Property is vein-style iron oxide-copper gold (IOCG) mineralization associated with a shear contact between
intrusive diorite and metasedimentary rocks, containing significant amounts of iron oxide, copper, gold and cobalt, distinctive of IOCG
deposits in the region (Sillitoe, 2003). IOCG deposits of northern Chile are known to exist in the belt from just south of the town of
Vallenar (almost 29°S) to just south of Chanaral (26°S) (Hitzman, 2000). Although this deposit type covers a wide spectrum, the
characteristic IOCG deposits of northern Chile have been clearly defined by Sillitoe (2003) as the following:
Iron
oxide-copper-gold deposits, defined primarily by their elevated magnetite and/or hematite contents, constitute a broad, ill-defined clan
related to a variety of tectono-magmatic settings. The youngest and, therefore, most readily understandable IOCG belt is located in the
Coastal Cordillera of northern Chile and southern Peru, where it is part of a volcano-plutonic arc of Jurassic through Early Cretaceous
age. The arc is characterised by voluminous tholeiitic to calc-alkaline plutonic complexes of gabbro through granodiorite composition
and primitive, mantle-derived parentage. Major arc-parallel fault systems developed in response to extension and transtension induced
by subduction rollback at the retreating convergent margin. The arc crust was attenuated and subjected to high heat flow. IOCG deposits
share the arc with massive magnetite deposits, the copper-deficient end-members of the IOCG clan, as well as with manto-type copper and
small porphyry copper deposits to create a distinctive metallogenic signature.
The
IOCG deposits display close relations to the plutonic complexes and broadly coeval fault systems. Based on deposit morphology and dictated
in part by lithological and structural parameters, they can be separated into several styles: veins, hydrothermal breccias, replacement
mantos, calcic skarns and composite deposits that combine all or many of the preceding types. The vein deposits tend to be hosted by
intrusive rocks, especially equigranular gabbrodiorite and diorite, whereas the larger, composite deposits (e.g. Candelaria-Punta del
Cobre) occur within volcano-sedimentary sequences up to 2 km from pluton contacts and in intimate association with major orogen-parallel
fault systems. Structurally localised IOCG deposits normally share faults and fractures with pre-mineral mafic dykes, many of dioritic
composition, thereby further emphasising the close connection with mafic magmatism. The deposits formed in association with sodic, calcic
and potassic alteration, either alone or in some combination, reveal evidence of an upward and outward zonation from magnetite-actinolite-apatite
to specular hematite-chlorite-sericite and possess Cu-Co-Au-Ni-As-Mo-U-(LREE) (light rare earth element) signature reminiscent of some
calcic iron skarns around diorite intrusions. Scant observations suggest that massive calcite veins and, at shallower paleodepths, extensive
zones of barren pyritic feldspar-destructive alteration may be indicators of concealed IOCG deposits.
The
Carrizal Property lies well within the Chilean IOCG belt and fits many of the tectonic and mineralogical definitions outlined by Sillitoe
(2003). The Carrizal Property is considered to be a vein-style IOCG deposit with significant amounts of iron oxide, copper, gold and
cobalt distinctive of IOCG deposits in the region.
The
main targets on the Carrizal Property are the two mineralized shear contact zones between the metasediments and diorites (Farellón
Project area) and monzodiorites (Perth Project area). The shear zone has been interpreted to host several parallel, mineralized lenses.
Exploration
Red
Metal began its exploration programs on the Property in 2009 with a 5-hole RC drilling program followed by programs in 2011 (11 RC/core
holes), and in 2013 (2-hole RC drilling program), focusing on the Farellón Project area. Red Metal completed surface sampling
and mapping programs between 2011 and 2014, as described below. The last work completed on the Property by the Company was in 2014.
Drilling
Red
Metal acquired the rights to the Farellón Property on April 25, 2008, upon its Chilean subsidiary exercising the option to buy
the Project from Minera Farellón. Red Metal completed five RC drill holes in 2009, totaling 725 m and using a Tramrock Dx40 RC
rig. In 2011, Red Metal completed a second drilling program, consisting of nine RC holes and two combined RC/diamond drill (core) holes.
The program was designed to expand the known mineralized zone down-dip to 200 m vertical depth, extend the known mineralized strike length
of the overall deposit to 700 m, and infill large gaps with holes drilled at 75 m spacing. Two of the drill holes finished with diamond
drill core, providing information to better define the structural controls on mineralization.
2022
Drilling Program on Farellón Alto
During
January – February 2022, the Company successfully completed a nine-hole 2,010m drill program on its Farellón Alto 1-8 concession.
The drill program targeted down dip extensions of known mineralized zones as well as testing new zones.
Highlights
● |
First
hole on new zone intercepted six meters of vein with strong visible copper sulphides; further 1.5 km of untested strike length; |
● |
All
holes have intercepted visible copper sulphide mineralization and alteration associated with IOCG deposits; and |
● |
Diamond
drill core provided valuable alteration and structural information not seen in previous RC drilling. |
Diamond
Drilling
First
five drillholes were focused at the northern end of the previously drilled Farellón project close to the artisanal mine workings.
All five drill holes intercepted zones of sulphide mineralization including chalcopyrite and chalcocite, zones of strong alteration associated
with IOCG deposits and breccia zones up to 20m in width. Significant elements noted in initial observations included widespread potassic
and argillic alteration and significant amounts of iron oxides transitioning from hematite into magnetite at depth.
The
final four drillholes of the program targeted the south and north end of the Farellón zone and tested a previously undrilled structure
parallel to the Farellón zone. These four drillholes intercepted zones of sulphide mineralization including chalcopyrite and chalcocite
and zones of strong alteration associated with IOCG deposits.
Table
15 - Summary of holes (1)
Drillhole |
|
Target |
|
Length |
|
Highlights |
FAR-22-012 |
|
Farellón
North |
|
143 |
|
9
metre zone with visible copper sulphide mineralization, infill gap in historic drilling |
FAR-22-013 |
|
Farellón
North |
|
170 |
|
Extending
known mineralization down dip by ~50 m, 23 metre zone of quartz/calcite veining with copper sulphides |
FAR-22-014 |
|
Farellón
North |
|
158 |
|
Step
out ~100m along strike |
FAR-22-015 |
|
Farellón
North |
|
266 |
|
Down
dip from FAR-22-014 |
FAR-22-016 |
|
Farellón
North |
|
286 |
|
Extend
known mineralization to 196 metres vertical depth |
FAR-22-017 |
|
Farellón
South |
|
326 |
|
Mineralized
breccia zone at 236-243 m |
FAR-22-018 |
|
Farellón
South |
|
293 |
|
Multiple
zones of disseminated chalcopyrite mineralization and intense IOCG associated alteration |
FAR-22-019 |
|
Farellón
North |
|
188 |
|
85-91
m brecciated quartz veining with strong chalcopyrite mineralization |
FAR-22-020 |
|
New
Zone |
|
182 |
|
142-147.6
m quartz calcite vein with strong chalcopyrite mineralization and actinolite, iron and sericite alteration |
(1) Widths
are drill indicated core length as insufficient drilling has been undertaken to determine true widths with at this time.
New
Zone Drill Tested
The
newly tested parallel structure lies approximately 250 metres west of the Farellón vein and was mapped and sampled on surface
in 2012. Mapping completed in 2012 traced the vein continuously over approximately 1.5km. All six surface samples taken along the structure
in 2012 are listed below and all samples returned significant copper, gold and cobalt. The structure was tested with one drillhole and
a six-metre quartz calcite vein was intercepted from 142m to 142.6m with visible chalcopyrite mineralization, intense pyrrhotite, albite
and actinolite alteration.
Table
16 - Historic 2012 surface sampling on new zone
Sample
ID |
|
Easting |
|
Northing |
|
CuT% |
|
Au
g/t |
|
Co% |
123984 |
|
309701 |
|
6889159 |
|
4.97 |
|
0.43 |
|
0.07 |
123985 |
|
309862 |
|
6889291 |
|
3.73 |
|
0.80 |
|
0.02 |
123986 |
|
309644 |
|
6889070 |
|
3.40 |
|
0.41 |
|
0.03 |
123987 |
|
309424 |
|
6888843 |
|
1.60 |
|
0.23 |
|
0.10 |
123989 |
|
309227 |
|
6888420 |
|
3.86 |
|
0.68 |
|
0.04 |
123990 |
|
309040 |
|
6888003 |
|
2.49 |
|
0.63 |
|
0.02 |
As
of the date of this Annual Report on Form 20-F sampling is ongoing for drillholes and no visual estimates of grade have been made.
Sample
Preparation, Analysis, and Security
There
have been no exploration or drilling samples collected by Red Metal, and as such, there are no preparation, analysis, or security details
to describe.
Data
Verification
During
the site visit for purposes of preparing the Technical Report, the Qualified Person verified that the Carrizal Property contains widespread
underground workings. The Qualified Person examined all historical data made available relating to historic sampling and drilling within
the Carrizal Property, and took six mineralized rock grab samples from the artisanal mine working and investigated underground, in order
to verify the typical grades of Cu, Au, and Co encountered on the Carrizal Property.
A
description of the samples is provided in Table 17 and assay results in Table 18. Assays from grab rock samples collected on the Carrizal
Property confirmed the presence of copper (oxide and sulfide phases), gold, silver, and cobalt. In the opinion of the QP, this verification
data was adequate for the purpose of the Technical Report to provide an independent review of the Company’s Carrizal Property and
verify the validity of the historical database.
Table
17 - Description of verification samples collected on the Farellón claims of the Carrizal Property
Sample
No. |
|
Location |
|
Type |
|
Alteration/Silicates |
|
Zone |
|
Mineralization |
FN-01 |
|
Farellón
North |
|
Grab
– level 7 stockpile on surface |
|
Chlorite;
quartz>calcite |
|
Hypogene |
|
chalcopyrite,
pyrite |
FN-02 |
|
Farellón
North |
|
Grab
– level 7 stockpile on surface |
|
Chlorite;
quartz>calcite |
|
Hypogene |
|
chalcopyrite,
pyrite |
FN-03 |
|
Farellón
North |
|
Grab
– level 7 stockpile on surface |
|
Chlorite;
quartz>calcite |
|
Hypogene |
|
chalcopyrite,
pyrite |
FN-04 |
|
Farellón
North |
|
Grab
– level 7 stockpile on surface |
|
Chlorite;
quartz>calcite |
|
Enriched
Supergene |
|
chalcopyrite,
pyrite, bornite |
FS-01 |
|
Farellón
South |
|
Grab
– adit stockpile – roughly 3 years on surface |
|
Oxidized,
hematized, limonite |
|
Supergene |
|
cuprite;
azurite, malachite |
FS-02 |
|
Farellón
South |
|
Grab
– underground, east wall of south drift |
|
|
|
Enriched
Supergene |
|
chalcocite,
chrysocolla |
Table
18 - Assay results for verification samples collected on the Farellón claims of the Carrizal Property
Sample
No. |
|
Au |
|
Ag |
|
Cu
(total) |
|
Cu
(oxide) |
|
Cu
(sulfide) |
|
Co |
|
Co |
Method |
|
FA-AAS |
|
4ACID-AAS |
|
4ACID-AAS |
|
LIX-AAS |
|
Calc. |
|
FUS-AAS |
|
Calc. |
units |
|
ppm |
|
ppm |
|
% |
|
% |
|
% |
|
ppm |
|
% |
(Detection
Limit) |
|
(-0.01) |
|
(-0.1) |
|
(-0.001) |
|
(-0.001) |
|
(-0.001) |
|
(-1) |
|
(-0.0001) |
FN-01 |
|
0.46 |
|
12.1 |
|
2.735 |
|
0.119 |
|
2.616 |
|
17366 |
|
1.7366 |
FN-02 |
|
0.25 |
|
10.1 |
|
5.573 |
|
0.076 |
|
5.497 |
|
578 |
|
0.0578 |
FN-03 |
|
0.16 |
|
12.3 |
|
6.631 |
|
0.12 |
|
6.511 |
|
171 |
|
0.0171 |
FN-04 |
|
1.56 |
|
28.5 |
|
7.145 |
|
0.213 |
|
6.932 |
|
2086 |
|
0.2086 |
FS-01 |
|
3.49 |
|
5.3 |
|
10.62 |
|
10.786 |
|
0 |
|
467 |
|
0.0467 |
FS-02 |
|
0.48 |
|
2.3 |
|
3.538 |
|
3.221 |
|
0.317 |
|
2285 |
|
0.2285 |
Northern
Section of the Farellón Project Area
Samples
FN-01 through FN-04 were collected from an ore dump near the portal to the North Mine. The ore, reported to be from Level 7 of the mine
(hypogene/enriched supergene zones), contained mainly chalcopyrite with lesser bornite.
Figure
8 - North Mine portal access
Figure
9 - Mineralized rocks from underground at the North Mine, Level 7
Assays
from samples FN-01 through FN-04 range from 0.16 to 1.56 ppm Au, 10.1 to 28.5 ppm Ag, 2.74 to 7.15% Cu(T); the copper was mainly in sulfide
form (e.g. chalcopyrite). The highest concentration of gold and silver were from sample FN-04 which also had the highest sulfide copper
concentration. Analyses for cobalt, using the peroxide fusion method, returned concentrations ranging from 0.21% to 1.74% Co.
Southern
Section of the Farellón Project Area
Sample
FS-01 was collected from a small stockpile near the old workings of the South Mine which had been exposed to the elements for a number
of years. This sample was heavily oxidized and contained copper oxides including cuprite, malachite and azurite (supergene zone). Sample
FS-02 was collected from the east wall of the south drift in the South Mine Exploration Portal. This sample contained chalcocite, chrysocolla,
malachite, and azurite (enriched supergene zone).
Figure
10 - Old south mine workings on the Farellón Project area looking north
Assays
from sample FS-01 reflect its high copper oxide content reporting 10.62% Cu(T) and averaging 10.70% Cu between the two assay methods
used for copper. This sample contained the highest gold concentration at 3.49 ppm Au and assayed 0.05% Co. Sample FS-02 contained 3.54%
Cu(T), with relatively low sulfide copper (enriched supergene zone), and 0.23% Co.
Figure
11 - Main mineralization structure from underground exploratory workings in the South Mine and the site of rock sample
FS-02
Figure
12 - Mining personnel standing in front of the South Mine exploration portal in the Farellón Project area
Mineral
Processing and Metallurgical Testing
No
mineral processing or metallurgical testing programs have been undertaken on the Carrizal Property.
Mineral
Resource Estimates
No
mineral resource estimates have been done for the Carrizal Property. As discussed in the “CARRIZAL PROPERTY – FARELLÓN
AND PERTH PROJECTS – Exploration History” section of this Annual Report on Form 20-F, some documentation exists for historical
resource estimates on the Farellón Project prior to February 1, 2001. However, the historical estimates do not conform to the
presently accepted CIM standards and definitions for resource estimates, as required by NI 43-101 regulations. As such, the Company is
not relying on the historical resource estimates as justification for a program of compilation work and further exploration.
As
exploration progress on the Farellón Project, further economic and technical evaluation of the resource potential for the project
will need to be performed in accordance with present industry practices and standards, as set out in NI 43-101.
Mateo
Property
Property
Description and Location
The
Mateo Property is composed of 5 mineral concessions covering 182 hectares in the III Region of Chile, Region de Atacama. The project
is situated 10 kilometres east of the City of Vallenar with the highest point at approximately 1,050 metres above sea level. The property
is located close to power, water, and the urban centre of Vallenar, with a readily available mining workforce.
Accessibility
The
property is easily accessible year-round via a well-used road from Vallenar. The road crosses through the middle of the west half of
the property and along the southern border of the east half of the property.
Geology
and Mineralization
The
Mateo Property is located within the brittle-ductile north-south-trending Atacama Fault System that is known to host many of the major
deposits in the Candelaria IOCG belt. Known mineralization is hosted in an andesitic volcaniclastic sequent assigned to the Bandurrias
Formation. Widespread iron oxide and skarn style alteration indicate an IOCG mineralizing system further supported by significant amounts
of economic grade mineralization found in six historic artisanal mines on the property. Mineralization is found in mantos, veins and
breccias.
Exploration
History
Historical
work on the Mateo Property includes several drill programs completed by different Chilean private and public companies. Records exist
from eight drill holes completed in 1994 on the Irene mine and include two full reports written by ENAMI, the Chilean national mining
company, with interpretation of mineralization and recommendations for further exploration and mining work.
The
Irene mine was investigated by ENAMI in 1994. Work completed during the time included surface RC drilling, including 490 metres in four
RC drill holes, and underground diamond drilling, including 220 metres in four drill holes. The Company obtained ENAMI’s reports
of mining activities from 1994 to 1997. Approximately 11,875 tonnes of rock were mining in that time averaging 4.3% copper, 61.9 grams
per tonne silver, and 1.01 grams per tonne gold. During the period June 2009 to December 2010, the vendor of the Irene mine, Minera Farellón,
conducted small scale mining activities on a different area of the Irene claims and mined 1,705 tonnes grading 1.39$ Cu, 1.39 g/t Ag,
0.29 g/t Au in sulphides and 1,477 tonnes grading 1.98% Cu in oxides. The difference in grade between the historic work and recent work
is not an indication that further high-grade material will not be found on the Mateo Property and further modeling and exploration work
needs to be completed to determine the best drill targets.
Drilling
No
drilling has been completed on the Mateo Property.
Sampling,
Analysis and Data Verification
In
2011, the Company completed a mapping and prospecting program over an area including the Mateo concessions and a wide area surrounding
the concessions. The geological mapping identified nine significant zones of mineralization on the property and confirmed widespread
skarn style alteration. Reconnaissance samples were collected on multiple mineralized structures from mantos, veins and mineralized breccia
bodies. All samples were taken to Geoanalitica Ltda Laboratories in Coquimbo. No reference samples were used for the mapping samples.
Samples
of 21.72 g/t Au with 0.69% Cu, 3.10 g/t Au with 0.50% Cu and 3.57 g/t with 0.62% Cu taken from one vein traced for approximately 350
metres on surface. Multiple mineralized veins, mantos and breccia bodies were identified with 36 of 138 samples returning Au results
greater than 1.00 g/t and 59 of 138 samples returning Cu results greater than 1.00%.
Table
19 - Additional significant reconnaissance sampling results from the Mateo mapping program are listed below:
Sample |
|
Easting |
|
Northing |
|
Cu
% |
|
Au
g/t |
201272 |
|
338,028 |
|
6,836,645 |
|
7.37 |
|
1.12 |
202871 |
|
336,478 |
|
6,836,158 |
|
2.63 |
|
1.14 |
202852 |
|
337,880 |
|
6,835,567 |
|
7.11 |
|
1.18 |
202849 |
|
337,880 |
|
6,834,692 |
|
10.3 |
|
1.73 |
201220 |
|
337,898 |
|
6,834,724 |
|
4.29 |
|
2.07 |
201277 |
|
337,314 |
|
6,834,958 |
|
9.39 |
|
2.42 |
202850 |
|
337,822 |
|
6,834,611 |
|
2.58 |
|
2.46 |
202810 |
|
338,521 |
|
6,838,037 |
|
2.44 |
|
2.49 |
202882 |
|
336,945 |
|
3,835,537 |
|
2.57 |
|
3.08 |
202812 |
|
338,504 |
|
6,838,120 |
|
0.5 |
|
3.1 |
202815 |
|
338,382 |
|
6,838,223 |
|
0.62 |
|
3.57 |
202880 |
|
336,740 |
|
6,835,991 |
|
1.46 |
|
5.7 |
202826 |
|
338,179 |
|
6,838,079 |
|
5.3 |
|
6.85 |
201217 |
|
337,909 |
|
6,834,632 |
|
3.46 |
|
10.11 |
202813 |
|
338,469 |
|
6,838,147 |
|
0.69 |
|
21.72 |
Mineral
Processing and Metallurgical Testing
No
mineral processing or metallurgical testing programs have been undertaken on the Mateo Property.
Mineral
Resource Estimates
The
Company has a non-NI 43-101 compliant resource estimate on its Mateo Property. As the historical estimate does not conform to the presently
accepted CIM standards and definitions for resource estimates, as required by NI 43-101 regulations, the Company is not relying on the
historical resource estimate as justification for a program of compilation work and further exploration. Further economic and technical
evaluation of the resource potential for the project will need to be performed in accordance with present industry practices and standards,
as set out in NI 43-101.
| Item
10 | Additional
Information |
Not
applicable.
| B. | Memorandum
and Articles of Association |
Incorporation
Red
Metal Resources Ltd. was incorporated under the Nevada Business Corporations Act on January 10, 2005, as Red Lake Exploration, Inc. On
August 27, 2008, the name of the Company was changed from Red Lake Exploration, Inc. to Red Metal Resources Ltd. In addition to the name
change of the Company on August 27, 2008, an amendment to the Articles of Incorporation was concurrently processed increasing the amount
of the total authorized capital stock of the Company from 75,000,000 shares with a par value of $0.001 designated as Common Stock to
500,000,000 shares with a par value of $0.001.
On
February 10, 2021, the Company changed its corporate jurisdiction from the State of Nevada to the Province of British Columbia by means
of a process called a “conversion” under the Nevada Revised Statutes and a “continuation” under the Business
Corporations Act (British Columbia). The Articles of Incorporation and Bylaws of the Company, under the Nevada Revised Statutes,
were replaced with the Articles of the Company, under the Business Corporations Act (British Columbia), upon the Company’s
continuation to British Columbia. The authorized capital of the Company consists of an unlimited number of Common Shares without par
value (see the Current Report on Form 8-K the Company filed with the SEC on February 18, 2021).
Objects
and Purposes of the Company
Our
Notice of Articles and Articles of Incorporation place no restrictions upon our objects and purposes.
Directors’
Powers
A
director who holds a disclosable interest in a contract or transaction in which the Company has entered or proposes to enter is not entitled
to vote to approve that contract or transaction, unless all the directors have a disclosable interest in that contract or transaction,
in which case any or all of those directors may vote.
The
directors shall be paid such remuneration for their services as the board may from time to time determine. If the directors so decide,
the remuneration of the directors, if any, will be determined by the shareholders.
The
directors may from time to time on behalf of the Company:
(a) |
borrow
money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate, |
|
|
(b) |
issue
bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any
other person, |
|
|
(c) |
guarantee
the repayment of money by any other person or the performance of any obligation of any other person, and |
|
|
(d) |
mortgage
or charge, whether by way of specific or floating charge, or give other security on the whole or any part of the present and future
undertaking of the Company. |
Qualifications
of Directors
A
director is not required to hold a share in the capital of the Company as qualification for his or her office but must be qualified as
required by the Business Corporations Act (British Columbia) to become, act or continue to act as a director.
There
is no provision in our Notice of Articles or Articles of Incorporation imposing a requirement for retirement or non-retirement of directors
under an age limit requirement.
Share
Rights
Our
authorized capital consists of an unlimited number of Common Shares without par value. Each of our Common Shares entitles the holder
thereof to notice and to attend and to cast 1 vote for each matter to be decided at a general meeting of the Company. Subject to the
Business Corporations Act (British Columbia), the holders of Common Shares are entitled to dividends if and when as declared and
authorized by the board of directors. Our issued shares are not subject to call or assessment rights. There are no provisions for redemption,
purchase for cancellation, surrender, or sinking or purchase funds. Upon liquidation, dissolution or winding-up of the Company, holders
of Common Shares are entitled to receive pro rata the assets of the Company, if any, remaining after payments of all debts and liabilities.
Procedures
to Change the Rights of Shareholders
Subject
to the Business Corporations Act (British Columbia), the Company may by directors’ resolution or by ordinary resolution
of the shareholders, in each case as determined by the board of directors, create special rights or restrictions for, and attach those
special rights or restrictions to, the shares of any class or series of shares, if none of those shares have been issued; or vary or
delete any special rights or restrictions attached to the shares of any class or series of shares, if none of those shares have been
issued. If any of the shares of the class or series of shares have been issued, then the Company may by special resolution of the shareholders
of the class or series affected create special rights or restrictions to the shares or vary or delete any special rights or restrictions
attached to the shares.
Meetings
Unless
an annual general meeting is deferred or waived in accordance with the Business Corporations Act (British Columbia), the Company
must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual general meeting.
Notice
of the time and place of each meeting of shareholders shall be given not less than 21 days before the date of the meeting to each shareholder
who at the close of business on the record date for notice is entered in the securities register as the holder of one or more shares
carrying the right to vote at the meeting. Notice of a meeting of the shareholders called for any purpose other than consideration of
the financial statements and auditor’s report, election of directors and re-appointment of incumbent auditor shall state the nature
of such business in sufficient detail to permit the shareholder to form a reasoned judgment thereon and shall attach to it a copy of
the document to be considered, approved, ratified, adopted or authorized at the meeting or state that a copy of the document will be
available for inspection by the shareholders at the company’s records office or such other reasonably accessible location in British
Columbia. A shareholder may in any manner waive notice of or otherwise consent to a meeting of shareholders.
The
number of shareholders that must be present at a meeting to constitute a quorum is one or more persons present and being, or representing
by proxy, two or more shareholders entitled to attend and vote at the meeting.
Limitations
on Ownership of Securities
There
are no limitations on the right to own securities of our company by non-resident or foreign shareholders imposed either by the Business
Corporations Act (British Columbia), our Notice of Articles or Articles.
There
are no limitations on the rights of non-resident or foreign shareholders to hold or exercise voting rights.
Except
as provided in the Investment Canada Act (Canada), there are no limitations under the applicable laws of Canada or by our charter
or our other constituent documents on the right of foreigners to hold or vote common shares or other securities of our company.
Change
in Control
There
are no provisions in our Articles that would have the effect of delaying, deferring or preventing a change in control of our company,
and that would operate only with respect to a merger, acquisition or corporate restructuring involving our company.
Ownership
Threshold
There
are no provisions in our articles or our bylaws or in the Business Corporations Act (British Columbia) governing the threshold
above which shareholder ownership must be disclosed. The Securities Act (British Columbia) requires us to disclose, in our annual
general meeting proxy statement, holders who beneficially own more than 10% of our issued and outstanding shares.
Changes
in the Capital of the Company
There
are no conditions imposed by our Articles governing changes in capital which are more stringent than those required by the Business
Corporations Act (British Columbia).
|
1. |
The
Escrow Agreement between the Company, the Escrow Agent and the Principal Shareholders dated November 9, 2021; |
|
2. |
the
Subscription Receipt Agreement dated June 15, 2021, between the Company and Computershare Trust Company; |
|
3. |
the
form of Subscription Receipt Subscription Agreement in connection with the Subscription Receipt Offering; |
|
4. |
the
form of Unit Subscription Agreement in connection with the Unit Offering; |
|
5. |
the
Stock Option Plan; |
|
6. |
the
loan agreements between the Company as the borrower, and Caitlin Jeffs as the lender for the following dates and amounts: |
|
7. |
July
31, 2020 for US$1,454.50; (ii) August 10, 2020 for CAD$5,000; (iii) September 1, 2020 for CAD$15,000; (iv) February 16, 2022 for
CAD$175,000;(v) February 24, 2022 for CAD$50,000; and (vi) March 22, 2022 for CAD$165,000. |
|
8. |
the
debt forgiveness agreement between the Company as the borrower, and Fladgate Exploration Consulting Corporation dated January 31,
2022, for CAD$16,950 |
|
9. |
Mining
Royalty Agreements between each of Richard Jeffs, Caitlin Jeffs and Joao (John) da Costa, and Polymet dated July 29, 2020, for a
total aggregate consideration of $5,000. |
There
are no government laws, decrees or regulations in Canada which restrict the export or import of capital or which affect the remittance
of dividends, interest or other payments to non-resident holders of our common shares. Any remittances of dividends to United States
residents and to other non-residents are, however, subject to withholding tax. See “Taxation” below.
There
are no limitations imposed by the laws of Canada, the laws of British Columbia or by the charter or other governing documents of the
Company on the right of a non-resident to hold or vote common shares of the Company, other than as provided in the Investment Canada
Act (the “Investment Act”) and the potential requirement for a review under the Competition Act (Canada) (a
“Competition Act Review”).
The
following summarizes the principal features of the Investment Act and the Competition Act Review for a non-resident who proposes to acquire
common shares. This summary is of a general nature only and is not intended to be, nor is it, a substitute for independent advice from
an investor’s own advisor. This summary does not anticipate statutory or regulatory amendments.
The
Canadian Investment Act
The
Investment Canada Act generally prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation,
partnership, trust or joint venture that is not a “Canadian” as defined in the Investment Canada Act (a “non-Canadian”),
unless, after review, the minister responsible for the Investment Canada Act (the “Minister”) is satisfied that the
investment is likely to be of a net benefit to Canada. The Investment Canada Act is a Canadian federal statute of broad application regulating
the establishment and acquisition of Canadian business by non-Canadians. Investments by non-Canadians to acquire control over existing
Canadian businesses or to establish new ones are either reviewable or notifiable under the Investment Canada Act. The acquisition of
less than a majority but one-third or more of the Common Shares would be presumed to be an acquisition of control of the Company unless
it could be established that, on acquisition, the Company was not controlled in fact by the acquirer through the ownership of Common
Shares. Notwithstanding the review provisions, any transaction involving the acquisition of control of a Canadian business or the establishment
of a new business in Canada by a non-Canadian is a notifiable transaction and must be reported to Industry Canada by the non-Canadian
making the investment either before or within thirty days after the investment.
We
consider that the following general summary fairly describes the principal Canadian federal income tax consequences applicable to a holder
of our common shares who is a resident of the United States, who is not, will not be and will not be deemed to be a resident of Canada
for purposes of the Income Tax Act (Canada) and any applicable tax treaty and who does not use or hold, and is not deemed to use or hold,
his common shares in the capital of our company in connection with carrying on a business in Canada (a “non-resident holder”).
This
summary is based upon the current provisions of the Income Tax Act (Canada), the regulations thereunder (the “Regulations”),
the current publicly announced administrative and assessing policies of the Canada Revenue Agency and the Canada-United States Tax Convention
as amended by the Protocols thereto (the “Treaty”). This summary also takes into account the amendments to the Income Tax
Act (Canada) and the Regulations publicly announced by the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”)
and assumes that all such Tax Proposals will be enacted in their present form. However, no assurances can be given that the Tax Proposals
will be enacted in the form proposed, or at all. This summary is not exhaustive of all possible Canadian federal income tax consequences
applicable to a holder of our common shares and, except for the foregoing, this summary does not take into account or anticipate any
changes in law, whether by legislative, administrative or judicial decision or action, nor does it take into account provincial, territorial
or foreign income tax legislation or considerations, which may differ from the Canadian federal income tax consequences described herein.
This
summary is of a general nature only and is not intended to be, and should not be construed to be, legal, business or tax advice to any
particular holder or prospective holder of our common shares, and no opinion or representation with respect to the tax consequences to
any holder or prospective holder of our common shares is made. Accordingly, holders and prospective holders of our common shares should
consult their own tax advisors with respect to the income tax consequences of purchasing, owning and disposing of our common shares in
their particular circumstances.
Dividends
Dividends
paid on our common shares to a non-resident holder will be subject under the Income Tax Act (Canada) to withholding tax at a rate of
25%, subject to a reduction under the provisions of an applicable tax treaty, which tax is deducted at source by our company. The Treaty
provides that the Income Tax Act (Canada) standard 25% withholding tax rate is reduced to 15% on dividends paid on shares of a corporation
resident in Canada (such as our company) to residents of the United States, and also provides for a further reduction of this rate to
5% where the beneficial owner of the dividends is a corporation resident in the United States that owns at least 10% of the voting shares
of the corporation paying the dividend.
Capital
Gains
A
non-resident holder is not subject to tax under the Income Tax Act (Canada) in respect of a capital gain realized upon the disposition
of a common share of our company unless such share represents “taxable Canadian property”, as defined in the Income Tax Act
(Canada), to the holder thereof. As long as our common shares are listed on the CSE, or on another exchange that is a designated stock
exchange for the purposes of the Income Tax Act (Canada), our common shares generally will not be considered taxable Canadian property
to a non-resident holder unless at any particular time during the 60-month period immediately preceding the disposition of such shares:
(i) |
the
non-resident holder, one or more persons with whom the non-resident holder did not deal with at arm’s length, or the non-resident
holder together with one or more persons with whom the non-resident holder did not deal with at arm’s length, owned or had
an interest in an option in respect of, not less than 25% of the issued shares of any class of our capital stock; and |
|
|
(ii) |
more
than 50% of the fair market value of the shares of the Company was derived directly or indirectly from one or any combination of
real or immovable property situated in Canada, Canadian resource properties (as defined in the Income Tax Act (Canada)), timber resource
properties (as defined in the Income Tax Act (Canada)), or an option, interest or right in such property, whether or not the property
exists. |
In
the case of a non-resident holder to whom shares of our company represent taxable Canadian property and who is resident in the United
States, no Canadian taxes will generally be payable on a capital gain realized on such shares by reason of the Treaty unless the value
of such shares is derived principally from real property situated in Canada.
Certain
United States Federal Income Tax Consequences
The
following is a general discussion of certain possible United States federal foreign income tax matters under current law, generally applicable
to a U.S. Holder (as defined below) of our common shares who holds such shares as capital assets. This discussion does not address all
aspects of United States federal income tax matters and does not address consequences peculiar to persons subject to special provisions
of federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion
does not cover any state, local or foreign tax consequences. See “Certain Canadian Federal Income Tax Consequences” above.
The
following discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published
Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently
applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. In addition,
this discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation which, if
enacted, could be applied, possibly on a retroactive basis, at any time. No assurance can be given that the IRS will agree with such
statements and conclusions, or will not take, or a court will not adopt, a position contrary to any position taken herein.
The
following discussion is for general information only and is not intended to be, nor should it be construed to be, legal, business or
tax advice to any holder or prospective holder of our common shares, and no opinion or representation with respect to the United States
federal income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common
shares should consult their own tax advisors with respect to federal, state, local, and foreign tax consequences of purchasing, owning
and disposing of our common shares.
U.S.
Holders
As
used herein, a “U.S. Holder” includes a holder of less than 10% of our common shares who is a citizen or resident of the
United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof,
any entity which is taxable as a corporation for U.S. tax purposes and any other person or entity whose ownership of our common shares
is effectively connected with the conduct of a trade or business in the United States. A U.S. Holder does not include persons subject
to special provisions of federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions,
insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals or
foreign corporations whose ownership of our common shares is not effectively connected with the conduct of a trade or business in the
United States and shareholders who acquired their shares through the exercise of employee stock options or otherwise as compensation.
Distributions
The
gross amount of a distribution paid to a U.S. Holder will generally be taxable as dividend income to the U.S. Holder for U.S. federal
income tax purposes to the extent paid out of our current or accumulated earnings and profits, as determined under U.S. federal income
tax principles. Distributions which are taxable dividends and which meet certain requirements will be “unqualified dividend income”
and taxed to U.S. Holders at a maximum U.S. federal rate of 20% dividend tax plus 3.8% net investment income tax. Distributions in excess
of our current and accumulated earnings and profits will be treated first as a tax-free return of capital to the extent of the U.S. Holder’s
tax basis in the common shares and, to the extent in excess of such tax basis, will be treated as a gain from a sale or exchange of such
shares.
Capital
Gains
In
general, upon a sale, exchange or other disposition of common shares, a U.S. Holder will recognize a capital gain or loss for U.S. federal
income tax purposes in an amount equal to the difference between the amount realized on the sale or other distribution and the U.S. Holder’s
adjusted tax basis in such shares, all as determined in U.S dollars. Such gain or loss generally will be U.S. source gain or loss and
will be treated as a long-term capital gain or loss if the U.S. Holder’s holding period of the shares exceeds one year. If the
U.S. Holder is an individual, any capital gain will generally be subject to U.S. federal income tax at preferential rates if specified
minimum holding periods are met. The deductibility of capital losses is subject to significant limitations.
Foreign
Tax Credit
A
U.S. Holder who pays (or has had withheld from distributions) Canadian income tax with respect to the ownership of our common shares
may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. Generally,
it will be more advantageous to claim a credit because a credit reduces United States federal income taxes on a dollar-for-dollar basis,
while a deduction merely reduces the taxpayer’s income subject to tax. This election is made on a year-by-year basis and generally
applies to all foreign income taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations
which apply to the tax credit, among which are an ownership period requirement and the general limitation that the credit cannot exceed
the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source income
bears to his or its worldwide taxable income. In determining the application of this limitation, the various items of income and deduction
must be classified into foreign and domestic sources. Complex rules govern this classification process. There are further limitations
on the foreign tax credit for certain types of income such as “passive income”, “high withholding tax interest”,
“financial services income”, “shipping income”, and certain other classifications of income. The availability
of the foreign tax credit and the application of these complex limitations on the tax credit are fact specific and holders and prospective
holders of our common shares should consult their own tax advisors regarding their individual circumstances.
| F. | Dividends
and Paying Agents |
Not
applicable.
Not
applicable .
The
documents concerning our Company may be viewed at the Company’s registered and records office at Suite 700 – 595 Burrard
Street, Vancouver, British Columbia, V7X 1S8, during normal business hours. This Annual Report and the Company’s Form 6-K filings
can be viewed on the EDGAR website at www.sec.gov. Additional information relating to the Company can be found on the website www.sedar.com.
As
at the date of this Annual Report on Form 20-F, the Company has one wholly-owned active subsidiary, Minera Polymet SpA. See Item 4(C).