General
Overview
Our Chandalar, Alaska gold mining property contains both hard-rock (lode)
targets and placer deposits and has seen over a hundred years of intermittent
mining exploration and extraction history. There has been extraction of gold
from several alluvial, or placer gold streams, and from an array of small quartz
veins that dot the property. However, only in very recent times is the primary
source of the gold becoming evident. As a result of our exploration, considering
structural geology, petrographic, geochemical and geophysical evidence, we have
realized that all of the gold is sourced within a system of magmatic
hydrothermal alteration features such as small pegmatitic dikes and chloritized
schist. We believe these features are common to and link all of the hard-rock
(lode) prospects, the weathering of which generated the gold placer deposits,
and furthermore are an outlying expression of an underlying gold bearing pluton.
We have defined drilling targets for a hard-rock (lode) gold deposit in an area
of interest approximately 1,800 feet wide and over five miles long, possibly
underlain by a series of mineralized magmatic intrusions (plutons). Exploration
therefore has taken on two directions; one toward defining a low-grade, large
tonnage body of mineralization running beneath the headwaters of Little Squaw
Creek where dense swarms of gold mineralized pegmatitic dikelets are seen, the
other a deeper, larger mineralized plutonic body(ies) from which the district's
mineralizing fluids may have emanated and migrated through Chandalar country
rock.
In December 2021, Goldrich submitted a permit application to the Alaska
Department of Natural Resources ("DNR") to carry out a multi-year, 25,000-foot
diamond core drill program at the Company's Chandalar Property. The permit was
received in February 2022. The target zone of this hard-rock (lode) drill
program, located on the Little Squaw Creek ("LSC") drainage, is immediately
above and partially overlapping the LSC placer deposit and mine. The target zone
sits at the heart of a zone surrounded by historic placer workings in every
creek and four historic hard-rock gold mines. Previous exploration, including
drill programs, soil and rock samples, airborne magnetic and radiometric
studies, and advanced petrographic studies in addition to the angularity of the
placer gold nuggets indicates close proximity to a hard-rock source. Subject to
financing, Goldrich plans to commence an initial 12,000-foot program in May
2022.
Although our main focus continues to be the exploration of these hard-rock
targets, we also endeavor to develop our placer properties as a source of
internal cash to protect us from future market fluctuations and to provide funds
for future exploration. In 2012, Goldrich and NyacAU LLC ("NyacAU") formed
Goldrich NyacAU Placer LLC ("GNP"), a 50/50 joint-venture company, managed by
NyacAU, to mine Goldrich's various placer properties at Chandalar.
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As shown below, the placer gold extracted by GNP increased each year from 2015
through 2018, trending toward production figures that were anticipated by a
preliminary economic assessment authored by qualified geologists for us:
Year Ounces of Ounces of
Placer Gold Fine Gold
2015 4,400 3,900
2016 10,200 8,200
2017 15,000 12,300
2018 20,900 17,100
Although GNP's extraction increased over the years, ultimately the extraction
numbers attained over those years fell short of the Minimum Production
Requirements required in the GNP Operating Agreement. According to the terms of
the agreement, GNP was required to pay a Minimum Production Requirement of 1,100
ounces for 2016, 1,200 ounces for 2017, and 1,300 ounces for 2018 to both
Goldrich and NyacAU by October 31, 2018. This payment was not made. Under the
joint venture Operating Agreement, GNP would be dissolved if GNP failed to meet
the Minimum Production Requirement. On August 20, 2018, we announced the
intended dissolution of the GNP joint venture. GNP was formally dissolved in May
2019 and is currently being liquidated with NyacAU managing the process.
Goldrich and NyacAU are currently in arbitration as noted above.
Subsequent to 2019, Goldrich commissioned an independent third-party mining
engineering firm to complete a mining plan and initial assessment for the
Company's Chandalar Mine. In June, 2021, Goldrich released the results of an
independent Initial Assessment Report (the "IA"), prepared in accordance with
the new SEC Subpart 1300 property disclosure requirements, for the Company's
Chandalar placer mine. The IA was prepared by Global Resources Engineering
("GRE"), a widely-respected mining engineering firm in Denver, Colorado.
Using a base case gold price of $1,650, the key economic results of the IA with
a summarized gold price sensitivity analysis were as follows (A complete copy of
the IA may be downloaded at
https://www.goldrichmining.com/chandalar-gold-district/technical-reports.html):
Base Case Gold Price Sensitivity Analysis
Parameter $1,650 Gold $1,500 $2,000 $2,500Undiscounted Pre-Tax Net Cash Flow: $75 million $57 million $116 million $175 million
After-tax NPV@5%(1):
$64 million $50 million $92 million $129 million
After-tax IRR(1): 139% 112% 195% 275%
Undiscounted After-tax Net Cash Flow(1): $72 million $57 million $103 million $145 million
After-tax Payback Period (years):
1.3 1.44 1.19 1.1
All-in Sustaining Costs: $799/Au oz.
All-in Costs: $1,064/Au oz.
Total Operating Costs: $646/Au oz.
The IA also estimated pit-constrained mineral resources for the Little Squaw
Creek Placer deposit as follows:
Raw(1)
Resource Volume Gold Grade Raw(1) Gold Fine(2) Gold
Classification (1000s bcy) (troy oz./bcy) (troy oz) (troy oz)
Measured 2,609 0.0302 79,000 69,000
Indicated 2,188 0.0265 58,000 51,000
Measured & Indicated 4,797 0.0285 138,000 120,000
Inferred 771 0.0245 19,000 17,000
(1) Raw Gold - Gold as recovered from the placer deposit, historically 84% gold
and 16% other metals like silver and copper (referred to as 840 fine).
(2) Fine Gold - Gold that is 99.99% pure (referred to as 9999 fine).
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Goldrich will decide if a preliminary feasibility study should also be prepared
for the Chandalar Mine. A preliminary feasibility study would allow Goldrich to
disclose any reserves of the Chandalar Mine. The Company is encouraged by the
results of the IA as it helps establish the value of the placer deposit, shows a
large geochemical anomaly indicative of a potential large hard-rock (lode) gold
source, and may provide financing opportunities.
Looking forward, our ability to develop either hard-rock (lode) targets or
placer deposits is subject to financing. The on-going development of the
hard-rock gold targets, the recent change in SEC regulations which allow us to
release the new information in the IA, and significant increases in the price of
gold since 2019 appear to have increased the availability of funds so we are
hopeful to secure sufficient funds for a major exploration program and for
reopening the placer mine.
Liquidity and Capital Resources
We are an exploration stage company and have incurred losses since our
inception. We currently do not have sufficient cash to support the Company
through 2022 and beyond. We anticipate that we will incur approximately $650,000
for general operating expenses and property maintenance, $674,800 for interest,
$1,531,199 for interest - related party, $481,780 for payment of the gold notes,
$4,064,211 for payment of notes payable to related party, and $1,088,421 for the
payment of senior secured loans over the next 12 months as of December 31, 2021.
Additional funds will be needed for any exploration expenditures, should any be
undertaken. We also anticipate additional unknown and undeterminable costs for
arbitration. We plan to raise the financing through a combination of debt and/or
equity placements, sale of mining property interests, and revenue from placer
operations.
We have filed an arbitration claim against our joint venture operating partner
to challenge certain accounting treatments of capital leases, allocations of tax
losses, charges to the JV for funding costs related to the JV manager's
financing, related-party transactions, and other items of dispute. For recent
developments in the arbitration proceedings, see the sections entitled Joint
Venture Agreement and Arbitration above and Subsequent Events below. Each of
these is disclosed in detail in the Notes to our financial statements included
as part of this Annual Report as filed on Form 10-K for 2021. The arbitration is
proceeding on the basis that GNP has been dissolved. As noted above, under a
Security Agreement between GNP, as the debtor, and NyacAU, as the secured party,
NyacAU has recorded a secured interest in all of GNP's right, title and interest
in and to all placer gold located or produced from Goldrich's Chandalar mining
claims leased to GNP as collateral for repayment of fifty percent (50%) of GNP's
LOC1 to NyacAU. Arbitration proceedings may significantly affect the balance of
LOC1, the magnitude of which cannot be estimated at the date of this report. The
arbitration Panel calculated a tentative balance of LOC1 at $16,483,271 as of
June 2019. This balance will be adjusted for any additional awards and/or
adjustments made by the arbitration Panel.
The audit opinion and notes that accompany our consolidated financial statements
for the year ended December 31, 2021, disclose a 'going concern' qualification
to our ability to continue in business. The accompanying consolidated financial
statements have been prepared under the assumption that we will continue as a
going concern. We are an exploration stage company and we have incurred losses
since our inception. We do not have sufficient cash to fund normal operations
and meet debt obligations for the next 12 months without deferring payment on
certain current liabilities and raising additional funds. We believe that the
going concern condition cannot be removed with confidence until the Company has
entered into a business climate where funding of its activities is more assured.
We currently have only a brief, recent history of a recurring source of revenue
and in 2016 received our first cash distribution from the joint venture. If we
profitably execute a production business plan, our ability to continue as a
going concern may improve and become less dependent on our ability to raise
capital to fund our future exploration and working capital requirements. Our
plans for the long-term include the profitable exploitation of our mining
properties and financing our future operations through sales of our common stock
and/or debt. Additionally, the capital markets and general economic conditions
in the United States are constantly changing and may present significant
obstacles to raising the required funds. These factors raise substantial doubt
about our ability to continue as a going concern.
During the year ended December 31, 2021, we completed financings of $447,000,
compared to $375,000 net cash for note financings and placements of our
securities during the year ended December 31, 2021. On November 1, 2019, the
Company and lenders entered into the Amended and Restated Loan Security and
Intercreditor Agreement (the "Agreement"). Under the Agreement, the borrower and
holders entered into a Deed of Trust whereunder the Notes are secured by a
security interest in all real property, claims, contracts, agreements, leases,
permits and the like.
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If we are unable to timely satisfy our obligations under these secured senior
notes payable, the notes payable in gold, originally due November 2018 and
subsequently amended to be on demand, and the interest on both the secured
senior note due quarterly and the notes payable in gold, and we are not able to
re-negotiate the terms of such agreements, the holders will have rights against
us, including potentially seizing or selling our assets. The notes payable in
gold are secured against our right to future distributions of gold extracted by
our joint venture with NyacAU or subsequent gold production. At December 31,
2021, we had outstanding total notes payable in gold of $481,780, representing
266.789 ounces of fine gold due on demand. During the year ended December 31,
2019, the Company renegotiated terms with the holders. The Fourth Delayed
Delivery Required Quantity shall be delivered to the Purchaser at the Delivery
Point on the date that is sixty (60) days after the date that the Purchaser
gives notice to the Company. To date, the gold notes have not been paid, the
note holders have not demanded payment and have indicated willingness to work
with the Company to extend the due date.
At December 31, 2021, the Company had outstanding Notes payable of $1,088,421
and outstanding Notes payable - related party of $4,064,211. The Notes payable
and Notes payable - related party had matured on October 31, 2018. In November
2019, the Company and the holders of the notes amended the notes, and the notes
are now due within 10 days of a demand notice of the holders. There has been no
notice of default or demand issued by any holder.
We believe we will be able to secure sufficient financing for further operations
and exploration activities of our Company, but we cannot give assurance we will
be successful in attracting financing on terms acceptable to us, if at all.
Additionally, anticipating continued placer production after dissolution of GNP,
we look forward to internal cash flow and additional options for financing. A
successful mining operation may provide the long-term financial strength for the
Company to remove the going concern condition in future years. To increase its
access to financial markets, Goldrich recently qualified to be quoted on the
OTCQB of the OTC Markets and intends to also seek a listing of its shares on a
recognized stock exchange in Canada.
The consolidated financial statements do not include any adjustments that might
be necessary should the Company be unable to continue as a going concern. If the
going concern basis were not appropriate for these financial statements,
adjustments would be necessary in the carrying value of assets and liabilities,
the reported expenses and the balance sheet classifications used.
Results of Operations
On December 31, 2021 we had total liabilities of $11,055,037 and total assets of
$763,073. This compares to total liabilities of $9,588,289 and total assets of
$703,858 on December 31, 2020. As of December 31, 2021, our liabilities consist
of $268,677 for remediation and asset retirement obligations, $481,780 of notes
payable in gold, $4,064,211 of notes payable to related parties, $1,088,421 of
notes payable, $1,857,927 of trade payables and accrued liabilities, $1,017,403
due to related parties, $1,531,199 of interest payable to related parties,
$674,800 of interest payable, and $30,618 for dividends payable. Of these
liabilities, $10,746,360 are due within 12 months. The increase in liabilities
compared to December 31, 2020 is largely due to an increase in the secured
senior notes payable and notes payable related party and the interest associated
with the notes. The increase in total assets was due to an increase in prepaid
expenses.
On December 31, 2021 we had negative working capital of $10,634,714 and a
stockholders' deficit of $10,291,963 compared to negative working capital of
$9,256,903 and a stockholders' deficit of $8,884,431 for the year ended December
31, 2020. Working capital decreased because of increased deferred compensation
to the Company's officers as well as an increase in the notes payable and notes
payable related party which are due on demand and classified as current
liabilities.
During 2021, we used cash from operating activities of $812,583 compared to
$878,943 for 2020. Net loss of $1,759,159 for 2021 compared to net loss of
$2,169,540 for 2020. At the end of 2021, we have accumulated approximately $47.1
million and $43.7 million in federal and state net operating losses,
respectively, which may enable us to generate like amounts in net income prior
to incurring any significant income tax obligation. The net operating losses
will expire in various amounts from 2022 through 2039, with $10.5 million having
no expiration date.
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During 2021, we used cash from investing activities of $nil compared to $25,000
in 2020.
During 2021, cash of $814,414 was provided by financing activities, compared to
cash of $904,600 provided during the year ended December 31, 2020. Cash of
$422,000 was provided and $20,000 was repaid from notes payable related party,
net of offering costs, $25,000 from notes payable, net of offering costs,
$347,414 from warrant exercises, and $40,000 from stock subscription payable.
This compares to cash of $375,000 provided from notes payable related party, net
of offering costs and $40,000 provided from notes payable, net of offering
costs, $439,000 from warrant exercises, and $50,600 from the Covid-19 PPP loan
in 2020.
Private Placement Offerings
No private placement offerings occurred during 2021 and 2020.
Warrant Exercises
During the year ended December 31, 2021, the Company received $347,414 cash as a
result of the exercise of Class S and T warrants at an exercise price of $0.03
per common share, resulting in the issuance of 11,580,467 common shares. Of the
warrants exercised, 7,458,303 were formerly owned by Mr. Gallagher and had been
transferred to unrelated parties. The unrelated parties then exercised the
warrants for cash. The Company received an additional $40,000 for the exercise
of Class T warrants which are included in stock subscription payable at December
31, 2021. Once the exercise is complete, the Company will issue 1,333,333 common
shares for the exercise.
During September and October 2020, the Company received $439,000 cash as a
result of the exercise of Class Q, Class S, and Class T warrants at an exercise
price of $0.03 per common share. Ownership of these warrants had been in the
hands of a related party and were sold by him personally to unrelated parties.
The unrelated parties then exercised the warrants for cash, resulting in the
issuance of 14,633,330 common shares.
Warrant Extensions
On June 30, 2021, the Company's Board of Directors, voted to extend the expiry
dates for all Class R warrants not already expired, by two years. Prior to this
change, the Class R warrants were set to expire at various times throughout
2021, with the last one expiring on December 9, 2021. With this change,
11,666,668 Class R warrants were modified to expire on various dates from August
1 to December 9, 2023.
Notes Payable in Gold, Notes Payable & Notes Payable - Related Party
At December 31, 2021, we owed $481,780 for Notes payable in Gold, $1,088,421 for
Notes payable and $4,064,211 for Notes payable - related party. Interest payable
on these borrowings totaled $2,028,104. These borrowings have matured beyond
their original due dates and have been amended to be due upon demand.
At December 31, 2020, we owed $503,590 for Notes payable in Gold, $1,062,106 for
Notes payable and $3,641,053 for Notes payable - related party. Interest payable
on these borrowings totaled $1,258,038. These borrowings have matured beyond
their original due dates and have been amended to be due upon demand.
During the year ended December 31, 2021, one holder of the Notes payable,
received shares in lieu of cash for interest. A total of 280,752 common shares
were issued in exchange for interest payable of $4,211 at $0.015 per share.
During the year ended December 31, 2020, the holders of the Notes payable and
Notes payable - related party, received shares in lieu of cash for interest. A
total of 13,719,248 common shares with a basis of $0.015 per share, were issued
to the lenders, reducing interest payable by $205,787, of which $168,976 was to
a related party.
Effective November 1, 2019, we entered into an Amended and Restated Loan,
Security, and Intercreditor Agreement (the "Amended Agreement") and effective
August 25, 2021, we entered into First Amendment to the Amended and Restated
Loan, Security, and Intercreditor Agreement dated November 1, 2019 ("First
Amendment") with Nicholas Gallagher, a related party and member of our Board of
Directors, in his capacity as agent for and on behalf of the holders of the
Notes payable.
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As a result of the borrowings under the Notes payable in gold, Notes payable and
Notes payable - related party (collectively, the "Notes"), we are faced with a
significant hurdle in financing the Company going forward, whether to conduct
exploration programs or initiate a mining program at the Chandalar mine. Our
near-term cash requirements are greater than the assets we have available to
satisfy them, and the holders of the Notes could choose to exercise their rights
to demand payment, which would result in a default situation relative to the
Notes. Mr. Gallagher is secured in his lending to the Company by means of the
Amended Agreement, and if he were to demand payment, the Company would not be
able to pay him the amounts due and he would be entitled to take ownership of
our claims and other assets. We believe these holders to be friendly to the
Company and that they will refrain from demanding payment, but the Company
cannot control the potential demands nor the consequences that would be
extracted as a result of default on the Notes.
Subsequent Events
Subsequent to December 31, 2021, the Company received $70,000 cash as a result
of exercise of Class R warrants at an exercise price of $0.045 per common share.
Ownership of these warrants had been in the hands of a related party and were
sold by him personally to unrelated parties. The unrelated parties then
exercised the warrants for cash, resulting in the issuance of 1,555,555 common
shares.
On January 20, 2022, the Company repaid a total of $25,000 in expense
reimbursements and Notes payable - related party to Mr. Gallagher.
Subsequent to December 31, 2021, the Company received $33,158 cash as a result
of exercise of Class T warrants at an exercise price of $0.03 per common share,
resulting in the issuance of 1,105,262 common shares.
Mining Permit and Future Mining Activities
The upward movements in the price of gold to a range of $1,800 to $2,000 per
ounce or higher during 2020 created renewed interest in gold mining, gold
exploration and investments in companies engaging in those activities, including
the junior mining/exploration sector in which we participate. Additionally, the
fact that we own a mine that has produced over 44,000 ounces in recent years
along an annual increasing trend has caught the interest of placer mining
companies and investors who support placer mining operations. We believe we have
the fundamentals to raise capital and continue our primary strategy of
exploration and secondarily placer mining.
If we can attract the type of investor who is comfortable with reinstating the
placer mining operation, we may have a viable and productive path forward toward
obtaining financing in the short-term to achieve long-term profitability. To
effectively pursue this strategy, (1) the mining permit for the Chandalar mine
must be transferred to us from NyacAU, our former JV partner and the current
holder of the permit, (2) financial concessions and removal of doubt concerning
LOC1 must be done, and (3) reclamation costs for the Chandalar mine that
currently are the responsibility of NyacAU must be mitigated by a mining plan
that accomplishes much of the reclamation costs as part of the ongoing mining
activity. We do not believe an investor or group of investors will be willing to
step forward to fund the placer mining activity without these three factors
aligning themselves as described.
Additionally, without a profitable mining operation, the ability to pay back the
Notes may not be available to us. If that is the case, the payback would require
us to raise money from placements of equity instruments to raise the cash to
satisfy the obligations. Such a use of funds may present a funding effort that
receives tepid or little response in the equity markets.
However, we do believe there are investors motivated to provide funding for
exploration programs to locate and exploit the hard rock deposits from which the
placer mineralization is coming from. This strategy can be pursued independent
of any mining activities.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Inflation
We do not believe that inflation has had a significant impact on our
consolidated results of operations or financial condition.
Contractual Obligations
See Subsequent Events above.
Critical Accounting Policies
We have identified our critical accounting policies, the application of which
may materially affect the financial statements, either because of the
significance of the financials statement item to which they relate, or because
they require management's judgment in making estimates and assumptions in
measuring, at a specific point in time, events which will be settled in the
future. The critical accounting policies, judgments and estimates which
management believes have the most significant effect on the financial statements
are set forth below:
? Estimates of the recoverability of the carrying value of our mining and mineral
property assets. We use publicly available pricing or valuation estimates of
comparable property and equipment to assess the carrying value of our mining
and mineral property assets. However, if future results vary materially from
the assumptions and estimates used by us, we may be required to recognize an
impairment in the assets' carrying value.
? Estimates of our environmental liabilities. Our potential obligations in
environmental remediation, asset retirement obligations or reclamation
activities are considered critical due to the assumptions and estimates
inherent in accruals of such liabilities, including uncertainties relating to
specific reclamation and remediation methods and costs, the application and
changing of environmental laws, regulations and interpretations by regulatory
authorities.
? Accounting for Investments in Joint Ventures. For joint ventures in which we do
not have joint control or significant influence, the cost method is used. Under
the cost method, these investments are carried at the lower of cost or fair
value. For those joint ventures in which there is joint control between the
parties and in which we have significant influence, the equity method is
utilized whereby our share of the ventures' earnings and losses is included in
the statement of operations as earnings in joint ventures and our investments
therein are adjusted by a similar amount. We have no significant influence over
our joint venture described in Note 4 Joint Ventures to the financial
statements, and therefore account for our investment using the cost method. For
joint ventures where we hold more than 50% of the voting interest and has
significant influence, the joint venture is consolidated with the presentation
of a non-controlling interest. In determining whether significant influence
exists, we consider our participation in policy-making decisions and our
representation on the venture's management committee. We currently have no
joint venture of this nature.
? Estimates of contingent uncertainties. The arbitration rulings and awards have
resulted in potential obligations and partially-offsetting potential
receivables to and from GNP, some of which must be recognized and recorded,
while others cannot be recognized or recorded until the actual realization of
the cash benefit. If future results vary materially from the assumptions and
estimates used by us, we may be required to recognize material differences from
those we have recognized in the financial statements, and those disclosed in
Note 12 Commitments and Contingencies.
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