THUNDER MOUNTAIN GOLD, INC.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operation ("MD&A") is intended to help the reader understand our
financial condition. MD&A is provided as a supplement to, and should be read in
conjunction with, our financial statements and the accompanying integral notes
("Notes") thereto. The following statements may be forward-looking in nature and
actual results may differ materially.
COVID-19
InMarch 2020 , COVID-19 was declared a pandemic by theWorld Health Organization and theCenters for Disease Control and Prevention . Its rapid spread around the world and throughoutthe United States prompted many countries, includingthe United States , to institute restrictions on travel, public gatherings, and certain business operations. These restrictions disrupted economic activity in the Company's business related to raising capital. As ofJune 30, 2022 , the disruption did not materially impact the Company's financial statements. However, if the severity of the economic disruptions increase as the duration of the COVID-19 pandemic continues, the negative financial impact due to the BeMetals Option Agreement could be significantly greater in future periods. The effects of the continued outbreak of COVID-19 and related government responses could have disruptions to the Company`s Option Agreement with BeMetals Corp. Under the terms of the BeMetals Option Agreement,BMET USA will be entitled to purchase 100% of the issued and outstanding shares ofSouth Mountain Mines, Inc. ("SMMI") from the Company. The term of the agreement is for two years startingJune 10, 2019 , with an option to extend an additional year, with BeMetals conducting a preliminary economic assessment ("PEA") completed by a mutually agreed third-party engineering firm. Over its term, this agreement requires cash payments to the Company of$1,350,000 ;$1,100,000 in cash and$250,000 in exchange for shares of the Company's common stock. In the event that BeMetals decides not to proceed with theSouth Mountain Project , BeMetals will not be obligated to make any additional payments. The COVID-19 outbreak could have a variety of adverse impacts to the Company, including their ability to continue operations of their exploration under the BeMetals Operation Agreement.Thunder Mountain Gold evaluated these impairment considerations and determined that no such impairments occurred as ofJune 30, 2022 .
COVID-19 Additional Precautions
Thunder Mountain Gold Inc. has also taken steps to mitigate the potential risks to employees and suppliers posed by the spread of COVID-19. The Company has taken extra precautions for employeeswho work under the terms of the BeMetals Option Agreement, and have implemented work from home policies where appropriate. As ofJune 30, 2022 , there has been no material adverse impact to the BeMetals Operation Agreement. Management will continue to review and modify plans as conditions change. Despite efforts to manage these impacts to the Company, the ultimate impact of COVID-19 also depends on factors beyond management's knowledge or control, including the duration and severity of this outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects. Therefore, management cannot estimate the potential future impact to financial position, results of operations and cash flows, but the impacts could be material.
Plan of Operation:
FORWARD LOOKING STATEMENTS: The following discussion may contain forward-looking statements that involve a number of risks and uncertainties. Factors that could cause actual results to differ materially include the following: inability to locate property with mineralization, lack of financing for exploration efforts, competition to acquire mining properties; risks inherent in the mining industry, and risk factors that are listed in the Company's reports and registration statements filed with theSecurities and Exchange Commission . OnFebruary 27, 2019 , the Company entered into an Option Agreement, (the "BeMetals Option Agreement") with BeMetals Corp. Under the terms of the BeMetals Option Agreement,BMET USA will be entitled to purchase 100% of the issued and outstanding shares ofSouth Mountain Mines, Inc. ("SMMI") fromThunder Mountain Resources, Inc. ("TMRI"), both wholly owned subsidiaries of the Company. The term of the agreement is for two years with BeMetals completing a PEA completed by a mutually agreed third-party engineering firm. Over its term, this agreement requires BeMetals to issue 10,000,000 shares of BMET stock to the Company, and cash payments to the Company of$1,350 ,000:$1,100,000 in cash and$250,000 in exchange for shares of the Company's common stock. ThroughJune 30, 2022 , cash proceeds of$1,100,000 and$250,000 in exchange for shares of the Company's common stock have been received. In the event BeMetals decides not to proceed with theSouth Mountain Project , BeMetals will not be obligated to make any additional payments. 16
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The Company's plan of operation through the end of the 2022 calendar year will be supporting BeMetals Corp. during their option period and aiding in the exploration and advancement of the project. Planned exploration at South Mountain in 2022 includes surface core drilling and some additional surface geophysical survey.
South Mountain is a polymetallic development project focused on high-grade zinc, silver and gold. It is located approximately 70 miles southwest ofBoise, Idaho (see Figure 2). The Project was intermittently mined from the late 1800s to the late 1960s and its existing underground workings remain intact and well maintained. Historic production at the Project has largely come from high-grade massive sulfide bodies that remain open at depth and along strike. According to historical smelter records, approximately 53,642 tons of mineralized material has been mined to date. These records also indicate average grades; 14.5% Zn, 11.63 opt Ag, 0.063 opt Au, 2.4% Pb, and 1.4% Cu were mined.Thunder Mountain Gold Inc. purchased and advanced the Project from 2007 through 2019 investing approximatelyUS$12M during that period. The current mineral resource estimate of the deposit is detailed in Table 3 below and the Company expects to provide a revised mineral resource update following a phase 2 drilling program in 2020.
The Project is largely on and surrounded by private surface land, and as such, the permitting and environmental aspects of the Project are expected to be straightforward. Permits are currently in place for underground and surface exploration and development activities.
Figure 2. Location of
[[Image Removed]]Under the BeMetals Corporation (TSX-V: BMET) Option Agreement, BeMetals andThunder Mountain Gold formed a project team early in 2019 that is focused on advancing theSouth Mountain Project . ThisBoise Idaho -based team includes key management ofThunder Mountain Gold Inc. ,who have coordinated re-establishment of the Project site prior to the start of drilling. In addition, BeMetals appointed a project manager and project geologist for this team, along with technical and underground support. 17 -------------------------------------------------------------------------------- With the help ofThunder Mountain Gold , BeMetals (BMET) commenced drilling at South Mountain in July of 2019 and drilled twenty-one holes totaling 7,517 feet (2,290 meters) from five underground drilling stations within the Sonneman level. The drilling program was designed to test potential down plunge extensions, and overall continuity to the mineralized zones and confirm the grade distribution of the current polymetallic mineral resource. All of the drill core recovered from the drilling was logged on site and assayed byALS Chemex . Selected intervals and results are summarized in the Company`s Form 10K for the year endedDecember 31, 2021 . OnSeptember 21, 2021 , the Company agreed to an extension of the Option Agreement with BeMetals Corp. The Extension is through the 2022 calendar year, with the same terms to acquire up to a 100% interest in theSouth Mountain Project in southwestIdaho, U.S.A. In exchange for the Extension, BeMetals paid the Company the Tranche 6 Payment of$250,000 .
PROJECT HIGHLIGHTS - SOUTH MOUNTAIN PROJECT
In May of 2021, BeMetals Corp. completed an updated Mineral Resource Estimate
("MRE"), incorporating results from Phase 1 and 2 underground diamond drilling
programs at the South Mountain Project . The updated MRE includes a substantially
increased resource for the Project while maintaining the high-grade nature of
the mineralization.
The updated Independent MRE, which has an effective date of April 20, 2021 , was
prepared in accordance with National Instrument 43-101 Standards of Disclosure
for Mineral Projects ("NI-43-101") by Hard Rock Consulting, LLC , based in the
U.S.A. More details are included in Tables 1 & 2 below and a technical report
for this MRE was filed with SEDAR, and on the Company's website, within 45 days
from the date of this news release.
After signing the Option Agreement Extension, BeMetals Corp. embarked on a phase
3 program at South Mountain with the objective to significantly expand the scale
of the current Mineral Resource Estimate ("MRE") at South Mountain (See Summary
of the MRE below), testing and establishing the down depth extent of
mineralization on the DMEA zone. The DMEA Zone is the largest known body of
mineralization on the Property, containing the majority of tonnage in the
current MRE, and the mineralized zone remains open at depth.
Based on the last two phases of underground drilling and all the historical
exploration data available, we believe there is the potential to expand the
down-plunge extensions of the mineral resource with this new phase of surface
drilling at the Property. The plan is to initially complete approximately 7,000
feet (2,100 meters) of surface core drilling in this phase of exploration.
Assuming this exploration program is successful, the BMET will update the
current MRE and continue the ongoing Preliminary Economic Assessment for the
Project in 2022.
By December of 2021, 2 surface core holes had been drilled for a combined total of 3,600 feet, the results of which were added to the resource model.
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MINERAL RESOURCE ESTIMATE
HIGHLIGHTS OF UPDATED MINERAL RESOURCEº Measured & Indicated ("M&I"): 206,900 tons grading 9.63% Zinc ("Zn"), 4.41
ounces per ton ("opt") Silver ("Ag"), 0.064 opt Gold ("Au"), 1.01% Lead
("Pb") and 0.63% Copper ("Cu").
º This represents a 21.8% increase to the M&I tonnage from the historical
2019 MRE with a 20.36% Zn equivalent grade ("ZnEq").
º Inferred: 833,700 tons grading 7.63% Zn, 5.72 opt Ag, 0.041 opt Au, 0.97%
Pb and 0.81% Cu.
º This represents a 129.5% increase in the Inferred tonnage from the
historical 2019 MRE with an 18.10% ZnEq.
Note: See Table 1 and 2 footnotes section 4 for details of the Zn equivalent grade calculation
In two phases of underground drilling completed during 2019 and 2020 a combined total of approximately 16,000 feet of underground core drilling was completed at South Mountain. During these drilling campaigns, our site team also widened and advanced the existing Sonneman level eastwards by 170 feet to establish a new drill station closer to theTexas Zone . All the results of this drilling have now been in incorporated into the updated MRE for the South Mountain deposit. Tables 1 & 2 below provide the Mineral Resource Statement for the Project inU.S. and Metric units respectively with details of the modelling methodology and cut-off grades applied to the mineral resource. Figure 1 illustrates the principal areas where the South Mountain deposit has been expanded from the historical MRE that was completed in 2019. The historical Technical Report for the Mineral Resource Estimate for the South Mountain ProjectOwyhee County, Idaho USA Report Date: Dated:April 1, 2019 is filed on SEDAR.
Table 1. South Mountain Mineral Resource Statement (
Grades and Contained Metal
Ore Type Classification Mass Zinc Zinc Silver Silver Gold Gold Lead Lead Copper Copper ZnEq
thousand t. thousand t. thousand
sh. ton % thousand lb oz/sh. t. oz oz/sh. t. oz % thousand lb % thousand lb %
ton ton
Measured 53.8 11.45 12,300 3.67 197 0.069 3.7 0.79 900 0.46 500 20.21
Indicated 118.9 11.36 27,000 4.77 568 0.077 9.1 1.36 3,200 0.53 1,300 22.14
Massive Sulfide Measured + 172.8 11.39 39,300 4.43 765 0.074 12.9 1.18 4,100 0.51 1,800 21.54
Indicated
Inferred 777.2 8.09 125,700 5.90 4,586 0.043 33.7 1.04 16,100 0.74 11,500 18.34
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Measured 10.6 1.25 300 5.46 58 0.023 0.2 0.30 100 1.26 300 18.23
Indicated 23.5 0.49 200 3.78 89 0.005 0.1 0.07 0 1.20 600 12.63
Skarn Measured
+ 34.1 0.72 500 4.30 147 0.011 0.4 0.14 100 1.21 800 14.38
Indicated
Inferred 56.5 1.34 1,500 3.19 181 0.006 0.3 0.04 100 1.66 1,900 14.92
Measured 64.5 9.77 12,600 3.96 255 0.062 4.0 0.71 900 0.59 800 19.88
Indicated 142.4 9.57 27,200 4.61 656 0.065 9.2 1.15 3,300 0.64 1,800 20.57
Total Measured
+ 206.9 9.63 39,800 4.41 912 0.064 13.2 1.01 4,200 0.63 2,600 20.36
Indicated
Inferred 833.7 7.63 127,300 5.72 4,766 0.041 34.0 0.97 16,200 0.81 13,400 18.10
1.) The effective date of the mineral resource estimate isApril 20th, 2021 . The QP for the estimate is Mr.Richard A. Schwering , P.G., SME-RM, ofHard Rock Consulting, LLC . and is independent of BeMetals Corp.,Thunder Mountain Gold Inc. , andSouth Mountain Mines Inc. 2.) Mineral resources are not mineral reserves and do not have demonstrated economic viability such as diluting materials and allowances for losses that may occur when material is mined or extracted; or modifying factors including but not restricted to mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors. Inferred mineral resources may not be converted to mineral reserves. It is reasonably expected, though not guaranteed, that the majority of Inferred mineral resources could be upgraded to Indicated mineral resources with continued exploration. 3.) The mineral resource is reported at an underground mining cutoff of$102.5 U.S. Net Smelter Return ("NSR") within coherent wireframe models. The NSR calculation and cut-off is based on the following assumptions: an Au price of$1,750 /oz, Ag price of$23.00 /oz, Pb price of$1.02 /lb., Zn price of$1.20 /lb. and Cu price of$3.40 /lb.; Massive Sulfide ore type metallurgical recoveries and payables of 52.25% for Au, 71.25% for Ag, 71.40% for Zn, 66.50% for Pb, and 49.00% for Cu and a total smelter cost of$33.29 ; Skarn ore type metallurgical recoveries and payables of 71.25% for Au, 80.75% for Ag, 51.00% for Zn, 47.50% for Pb, and 87.70% for Cu and a smelter cost of$7.24 ; assumed mining cost of$70 /ton, process costs of$25 /ton, and general and administrative costs of$7.5 /ton. Based on the stated prices and recoveries the NSR formula is calculated as follows; NSR = (Ag grade * Ag price * Ag Recovery and Payable) + (Au grade * Au price * Au Recovery and Payable) + (Pb grade * 20 * Pb Price * Pb Recovery and Payable) + (Cu grade * 20 * Cu Price * Cu Recovery and Payable) + (Zn grade * 20 * Zn Price * Zn Recovery and Payable) for each ore type. 4.) The zinc equivalent grades were calculated as Zn Grade + (((Pb Price * Pb Recovery and Payable) / (Zn Price*Zn Recovery and Payable)) * Pb Grade) + (((Cu Price * Cu Recovery and Payable) / (Zn Price * Zn Recovery and Payable)) * Cu Grade) + (((Ag Price * Ag Recovery and Payable) / (Zn Price * 20 * Zn Recovery and Payable)) *Ag Grade ) + (((Au Price * Au Recovery and Payable) / (Zn Price * 20 * Zn Recovery and Payable)) *Au Grade ) 5.) Rounding may result in apparent differences when summing tons, grade and contained metal content. Tonnage and grade measurements are inU.S. units.
Table 2. South Mountain Mineral Resource Statement (Metric Units)
Grades and
Contained Metal
Ore Type Classification Mass Zinc Zinc
kt % t ppm kg ppm g % t % T %
Measured 48.85 11.45 5,600 126 6,100 2.38 116,200 0.79 400.00 0.46 200 20.21
Massive Indicated 107.90 11.36 12,300.0 164 17,700 2.63 283,500 1.36 1,500 0.53 600 22.14
Sulfide Measured + Indicated 156.75 11.39 17,800.0 152 23,800 2.55 399,700 1.18 1,900 0.51 800 21.54
Inferred 705.03 8.09 57,000.0 202 142,600 1.49 1,049,000 1.04 7,300 0.74 5,200 18.34
Measured 9.62 1.25 100.0 187 1,800 0.78 7,500 0.30 0 1.26 100 18.23
Skarn Indicated 21.28 0.49 100.0 130 2,800 0.17 3,700 0.07 0 1.20 300 12.63
Measured + Indicated 30.90 0.72 200.0 148 4,600 0.36 11,200 0.14 0 1.21 400 14.38
Inferred 51.26 1.34 700.0 110 5,600 0.19 9,900 0.04 0 1.66 900 14.92
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Measured 58.47 9.77 5,700.0 136 7,900 2.12 123,700 0.71 400 0.59 300 19.88
Indicated 129.18 9.57 12,400.0 158 20,400 2.22 287,300 1.15 1,500 0.64 800 20.57 Total Measured + 187.65 9.63 18,100.0 151 28,400 2.19 411,000 1.01 1,900 0.63 1,200 20.36
Indicated
Inferred 756.30 7.63 57,700.0 196 148,200 1.40 1,058,900 0.97 7,300 0.81 6,100 18.10
1) The effective date of the mineral resource estimate isApril 20th, 2021 . The QP for the estimate is Mr.Richard A. Schwering , P.G., SME-RM, ofHard Rock Consulting, LLC . and is independent of BeMetals, Corp.,Thunder Mountain Gold Inc. , andSouth Mountain Mines Inc. 2) Mineral resources are not mineral reserves and do not have demonstrated economic viability such as diluting materials and allowances for losses that may occur when material is mined or extracted; or modifying factors including but not restricted to mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors. Inferred mineral resources may not be converted to mineral reserves. It is reasonably expected, though not guaranteed, that the majority of Inferred mineral resources could be upgraded to Indicated mineral resources with continued exploration. 3) The mineral resource is reported at an underground mining cutoff of$102.5 U.S. Net Smelter Return ("NSR") within coherent wireframe models. The NSR calculation and cut-off is based on the following assumptions: an Au price of$1,750 /oz, Ag price of$23.00 /oz, Pb price of$1.02 /lb., Zn price of$1.20 /lb. and Cu price of$3.40 /lb.; Massive sulfide ore type metallurgical recoveries and payables of 52.25% for Au, 71.25% for Ag, 71.40% for Zn, 66.50% for Pb, and 49.00% for Cu and a total smelter cost of$33.29 ; Skarn ore type metallurgical recoveries and payables of 71.25% for Au, 80.75% for Ag, 51.00% for Zn, 47.50% for Pb, and 87.70% for Cu and a smelter cost of$7.24 ; assumed mining cost of$70 /ton, process costs of$25 /ton, and general and administrative costs of$7.5 /ton. Based on the stated prices and recoveries the NSR formula is calculated as follows; NSR = (Ag grade * Ag price * Ag Recovery and Payable) + (Au grade * Au price * Au Recovery and Payable) + (Pb grade * 20 * Pb Price * Pb Recovery and Payable) + (Cu grade * 20 * Cu Price * Cu Recovery and Payable) + (Zn grade * 20 * Zn Price * Zn Recovery and Payable) for each ore type. 4) The zinc equivalent grades were calculated as Zn Grade + (((Pb Price * Pb Recovery and Payable) / (Zn Price*Zn Recovery and Payable)) * Pb Grade) + (((Cu Price * Cu Recovery and Payable) / (Zn Price * Zn Recovery and Payable)) * Cu Grade) + (((Ag Price * Ag Recovery and Payable) / (Zn Price * 20 * Zn Recovery and Payable)) *Ag Grade ) + (((Au Price * Au Recovery and Payable) / (Zn Price * 20 * Zn Recovery and Payable)) *Au Grade ) 5) Rounding may result in apparent differences when summing tons, grade and contained metal content. Tonnage and grade measurements are inU.S. units and converted to metric.
PHASE 2 TEXAS ZONE DRILLING - SOUTH MOUNTAIN PROJECT
A total of 8,904 feet (2,714 meters) of underground core drilling was completed during Phase 2, with 30 holes in both theTexas andDMEA zones. During this drilling campaign, our site team widened and advanced the existing Sonneman level eastwards by 170 feet (52 meters) to establish a new drill station closer to theTexas Zone (See Figure 1). With better access to drill theTexas Zone , a total of 24 holes were completed to test this zone of mineralization. Geological logging of the core supported by sampling results indicate that two styles of high-grade mineralization have developed in this area and are now identified as the Texas West and Texas East zones. Table 1 below illustrates the drilling results received to date from theTexas West Zone . This zone is characterized by skarn-hosted, dominantly copper and silver mineralization. This is demonstrated, for example, in the drilled intercepts:
º 3.81% Cu with 7.82 opt (244.3 g/t) Ag over 15.7 feet (4.79 meters) in hole
SM20-043 (Interval 1),
º 2.56% Cu with 8.32 opt (260.1 g/t) Ag over 35.6 feet (10.85 meters) in
SM20-028, and
º 2.23% Cu with 10.81 opt (337.9 g/t) Ag over 16.96 feet (5.17 meters) in
hole SM20-038.
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Geological logs of the core demonstrate that the higher copper grades over
significant drilled widths in Texas West appear to be controlled by the
increased abundance of chalcopyrite, which is a common copper sulphide mineral,
often extractable through conventional flotation methods. Representative sample
material of this and other zones of the deposit have been identified and are
being collected for metallurgical test work at the SGS Mineral Services site in
Lakefield , Canada . Results from this study will be included with historical test
work and incorporated into the planned PEA study later this year.
Table 2 below displays the drill hole intersections from the
º 8.65% Zn, 6.98 opt (218.1 g/t) Ag and 0.078 opt (2.44 g/t) Au over 11 feet
(3.37 meters) in hole SM20-043 (Interval 2), and
º 4.17% Zn, 6.23 opt (194.8 g/t) Ag and 0.130 opt (4.05 g/t) Au over 27.39
feet (8.35 meters) in hole SM20-050.
The gold grades of 0.130 opt (4.05 g/t) over 27.39 feet (8.35 meters); 0.066 opt (2.07 g/t) over 15.45 feet (4.71 meters) and 0.122 opt. (3.82 g/t) over 4.39 feet (1.34 meters) in holes SM20-050, SM20-043, and SM20-029, respectively, are of specific interest from a value potential for theTexas East Zone . TheseTexas East intersections represent the successful targeting and interpreted extension of mineralization below historical high-grade rib sampling in the Sonneman level from the 1980s (See Figure 1). (See Thunder Mountain Gold news release, dated;January 27, 2020 ). The 2020 drill program intersected mineralization extending theTexas Zone further down dip of historical drilling and the exposures in the underground development.Texas Zone mineralization is now interpreted to continue from the collar of the old Texas Shaft some 1,150 feet (350 meters) down dip to the SM20-050 intercept. Both the Texas West and East zones remain open to depth (See Figure 1). Table 3 further below provides drill hole azimuth, dip, end of hole length and collar coordinates for each of the reported drill holes.
Table 1. Analytical and Assay Results from
Drill Hole ID, Zone From To Core Cu % Ag Au Pb % Zn %
& Interval (ft) (ft) Interval (ft) opt opt
TEXAS WEST ZONE
SM20-028 198.95 234.55 35.60 2.56 7.586 0.008 0.1 0.13
SM20-030 54.89 82.09 27.20 1.13 3.649 0.003 0.02 0.26
SM20-031 136.09 140.58 4.49 1.56 8.940 0.012 1.09 2.21
SM20-033 110.79 119.49 8.69 2.77 7.330 0.011 0.03 0.15
SM20-036 112.40 143.70 31.30 0.99 9.243 0.007 0.39 2.15
SM20-038 106.00 131.00 25.00 1.64 8.152 0.022 0.86 0.55
INCLUDING: 106.00 122.97 16.96 2.23 9.855 0.030 1.12 0.77
SM20-041
INTERVAL 1: 63.71 73.88 10.17 1.29 5.177 0.003 0.07 0.04
INTERVAL 2: 104.20 109.19 4.99 0.44 4.947 0.069 0.91 1.99
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Drill Hole ID, Zone From To Core Cu % Ag Au Pb % Zn %
& Interval (ft) (ft) Interval (ft) opt opt
SM20-042
INTERVAL 1: 58.99 65.19 6.20 1.92 3.004 0.002 0.01 0.03
INTERVAL 2: 78.08 83.99 5.91 1.06 3.325 0.002 0.03 0.1
SM20-043 (ft) (ft) Interval (ft) opt opt
INTERVAL 1: 131.00 154.00 23.00 2.84 5.294 0.006 0.01 0.29
INCLUDING: 131.00 146.69 15.68 3.81 7.125 0.005 0.01 0.07
SM20-049
INTERVAL 1: 106.89 120.64 13.75 1.82 2.608 0.002 0.01 0.18
INTERVAL 2: 147.31 151.25 3.94 2.42 4.025 0.004 0.01 0.07
Analytical and Assay results are pending for drill holes SM20-32, 34, 35, 37, 39, 40, 44-48 and 51
Note: Reported widths are drilled core lengths as true widths are unknown at this time. It is estimated based upon current data that true widths might range between 60-80% of the drilled intersection. A nominal cut-off grade of 0.5% Cu has been applied to determine the boundaries of the intersections for this skarn-hosted mineralization with no more than 1.22 meters of internal dilution. *A nominal cut-off grade of 4.375 opt (150 g/t) Ag has been applied to this intersection. Table 3 below documents; Drill Hole Azimuth, Dip, end of hole length, and Collar Coordinates (Note: See details below in QA/QC section).
Table 2. Analytical and Assay Results from
Drill Hole ID, Zone From To Core Zn % Ag Au Pb % Cu %
& Interval (ft) (ft) Interval (ft) opt opt
SM20-029 202.20 206.59 4.40 19.67 6.688 0.111 3.94 0.25
SM20-043
INTERVAL 2: 185.47 200.89 15.42 6.19 4.918 0.060 0.71 0.39
INCLUDING: 185.47 196.49 11.02 8.65 6.361 0.071 0.9 0.52
SM20-050
INTERVAL 1: 151.84 159.42 7.58 0.1 4.255 0.005 0.01 2.91
INTERVAL 2: 162.89 190.29 27.40 4.17 5.682 0.118 0.78 0.54
Analytical and Assay results are pending for drill holes SM20-32, 34, 35, 37, 39, 40, 44-48 and 51
Note: Reported widths are drilled core lengths as true widths are unknown at
this time. It is estimated based upon current data that true widths might range
between 60-80% of the drilled intersection. Intervals cut-offs are based upon
visual contacts of massive sulphide units with no more than 0.80 meters of
internal skarn. For hole SM20-050 Interval 1. a nominal cut-off grade of 0.5% Cu
has been applied to determine the boundaries of the intersections for this
skarn-hosted mineralization. Table 3 below documents; Drill Hole Azimuth, Dip,
end of hole length, and Collar Coordinates (Note: See details below in QA/QC
section).
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Figure 1: 3D Perspective view inclined 200 looking north-north-east, with hole locations for SM20-028 thru SM20-050
[[Image Removed]]Table 3: Drill Hole Azimuth, Dip, End of hole length and Collar Coordinates
Hole ID Azimuth Dip End of hole East (ft.) North Elev.
Degree Degree Length (ft) (ft.) (ft.)
SM20-028 90 15 246 2311764 393645 6866.77
SM20-029 126 -12 325 2311764 393645 6866.77
SM20-030 95 -30 125 2311764 393645 6866.77
SM20-031 110 -14 179 2311764 393645 6866.77
SM20-032* 105 -64 144 2311764 393645 6866.77
SM20-033 115 -30 205 2311764 393645 6866.77
SM20-034* 80 15 217 2311764 393645 6866.77
SM20-035* 105 14 78 2311764 393645 6866.77
SM20-036 105 -14 269 2311764 393645 6866.77
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Hole ID Azimuth Dip End of hole East (ft.) North Elev.
Degree Degree Length (ft) (ft.) (ft.)
SM20-037* 100 -14 225 2311764 393645 6866.77
SM20-038 110 -30 185 2311764 393645 6866.77
SM20-039* 122 -8 350 2311764 393645 6866.77
SM20-040* 105 -29 200 2311764 393645 6866.77
SM20-041 110 -40 185 2311764 393645 6866.77
SM20-042 87 -62 204 2311764 393645 6866.77
SM20-043 124 -20 399 2311764 393645 6866.77
SM20-044 124 -20 154 2311764 393645 6866.77
SM20-045* 0 -55 108 2311764 393645 6866.77
SM20-046* 127 -37 305 2311764 393645 6866.77
SM20-047* 60 -80 173 2311764 393645 6866.77
SM20-048* 135 -36 275 2311764 393645 6866.77
SM20-049 155 -60 205 2311764 393645 6866.77
SM20-050 150 -42 276 2311764 393645 6866.77
SM20-051* 170 -49 404 2311760 393643 6866.07
*The results pending for this drillhole.
Phase I Drilling at South Mountain under BeMetals Option Agreement
The principal objectives of the Phase 1 work plan at South Mountain were to test for potential extensions of the mineralized zones and confirm the grade distribution of the current polymetallic mineral resource estimate. The Company has now successfully completed the phase 1 program comprised of 20 underground drill holes for a total of approximately 2,290 meters. Geological logging and sampling of all drill holes have now been completed with all analytical results received. These results have been compiled into the Project's geological database and were used to design the phase 2 drilling program for 2020. Following the phase 2 drilling program, all new results were integrated into an updated mineral resource estimation for the Project and announced during the second quarter of 2021.
Table 1. BeMetal`s Analytical and Assay Results for the Phase 1 Drilling Program
Drill Hole ID, Zone From To Core Ag Au
& Interval (m) (m) Interval Zn % g/t g/t Pb % Cu %
(m)
DMEA Zone
SM19-002
Interval 1 46.88 57.39 10.51 17.81 226 2.41 1.59 0.16
Interval 2 67.85 71.63 3.78 5.45 145 8.39 0.58 0.15
Interval 3 85.83 96.39 10.56 11.42 123 4.43 0.36 0.52
SM19-003
Interval 1 51.18 75.35 24.17 11.12 267 3.44 3.75 0.29
Including 51.18 60.78 9.60 11.74 437 5.99 8.68 0.38
Including 62.09 75.35 13.26 11.77 169 1.88 0.54 0.25
Interval 2 77.60 81.24 3.64 9.74 331 1.94 1.11 0.34
25
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SM19-005 75.13 86.37 11.23 7.97 128 1.20 0.91 0.24
SM19-006 28.01 43.71 15.70 21.27 147 8.04 0.77 0.30
SM19-007 26.97 39.17 12.20 18.16 122.6 4.41 1.55 0.16
SM19-014
Interval 1 105.31 120.40 15.09 9.59 127.1 1.50 0.69 0.28 Interval 2 138.07 143.88 5.81 4.88 76.9 2.55 0.21 0.12 Interval 3 155.17 158.95 3.78 14.49 145.5 0.37 0.25 0.48 Interval 4 184.40 189.56 5.15 0.28 79.9 2.08 0.15 0.06 Interval 5 250.65 258.94 8.29 8.11 178.7 0.48 0.57 1.73 Interval 6 266.33 268.16 1.83 1.32 158.9 2.56 0.56 0.11Texas Zone SM19-010 Interval 1 24.41 31.62 7.21 4.37 155.2 0.13 0.03 2.07 Interval 2 53.11 63.15 10.04 0.40 135.1 0.07 0.01 1.75 * Note: 1.00 meter (m) is equal to 3.28 feet (ft). One gram per tonne (g/t) is equal to 0.032 ounces per ton (oz/t, or o.p.t.) Table 2 below shows the latest results received from holes SM19-016, SM19-017 and SM19-018. Table 2. Drill Holes SM19-016, SM19-017 and SM19-018: Analytical and Assay Results Drill Hole ID: Zone From To Core Ag Au & Interval (m) (m) Interval Zn % g/t g/t Pb % Cu % (m) DMEA Zone SM19-016 Interval 1 112.33 132.05 19.72† 0.07 8.39 1.52 0.01 0.002 Interval 2 136.55 146.64 10.09 3.15 151.3 1.68 0.66 0.22 Interval 3 158.27 163.59 5.32† 0.59 46.8 1.81 0.11 0.04 Interval 4 184.18 188.64 4.47† 5.04 482.0 4.27 5.80 0.43 Interval 5 227.32 230.83 3.51 8.85 136.2 0.17 1.25 1.67 MB4 Target Zone SM19-017 Interval 1 1.37 5.23 3.86* 12.90 314.1 0.26 0.88 1.08 Interval 2 16.32 24.08 7.76* 10.23 91.4 0.07 0.36 0.55 SM19-018 Interval 1 0.00 18.62 18.62* 5.15 73.2 0.11 0.02 0.41 Including 8.53 18.62 10.09* 8.06 97.0 0.15 0.02 0.68 Note: Reported widths in tables 1 & 2 are drilled core lengths as true widths are unknown at this time. It is estimated based upon current data that true widths might range between 60-80% of the drilled intersection. For drill holes SM19-017* and SM19-018* true widths are unknown as these are the first drill intersections of the MD4 target. Intervals cut offs are based upon visual contacts of massive sulfide units with no more than 1.75 meters of internal skarn. For SM19-010 a nominal 0.5% copper cut off has been applied to determine the boundaries of the intersections for this skarn hosted mineralization with no more than 1.4m of internal dilution. For SM19-016† (intervals 1, 3 and 4) a nominal 0.46 g/t gold cut off has been applied to determine the boundaries of the intersections with no internal dilution. For SM19-017 & 018 a nominal 2.4% zinc cut off has been applied to determine the boundaries of the intersections for this skarn hosted mineralization with no more than 2m of internal dilution. (Note: See details below in QA/QC section). 1.00 meter (m) is equal to 3.28 feet (ft). One gram per tonne (g/t) is equal to 0.032 ounces per ton (oz/t, or o.p.t.). The above drill holes returned significant intersections of both massive sulfide and skarn styles of mineralization. Important sulfide minerals are pyrrhotite, sphalerite, galena, arsenopyrite and chalcopyrite. During the planned phase 3 campaign at South Mountain, the Company will carry out mineralogy and metallurgical test work studies to confirm historical other previous high-grade results, which will be included in the PEA. 26 -------------------------------------------------------------------------------- [[Image Removed]] Figure 1: 3D Perspective View inclined at 20 degrees looking north-north-east, showing locations of rib-sampling, priority target zones, and the phase 1 drill holes and highlighted the recent SM19-016, SM19-017 and SM19-018 Underground core drilling was conducted to extend and upgrade the South Mountain resource - testing the continuity and down-dip extensions of the high-grade polymetallic massive sulfide zones. The Company and BeMetals completed additional core drilling in theDMEA and Laxey zones to complete the confirmation and extensional drilling in 2021. The Company also retrieved bulk samples for metallurgical test work. More than 15,000 feet (4,500 meters) have been drilled at South Mountain and included in the model. The South Mountain historic ore zones remain open down-dip on the zones encountered. The successful drilling and development work prove that the South Mountain resource continues to grow with potential to increase the resource substantially. 27 -------------------------------------------------------------------------------- [[Image Removed]]
Figure 2: Plan View of the Sonneman & Laxey Levels, South Mountain Deposit,
showing locations of rib-sampling, priority target zones, and drill holes
SM19-016, SM19-017 and SM19-018
28
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[[Image Removed]]
Figure 3: Plan View of Sonneman & Laxey Levels,
showing locations of previously reported rib sampling
QUALITY ASSURANCE AND QUALITY CONTROL PROCEDURES
The project employs a rigorous QC/QA program that includes blanks, duplicates and appropriate certified standard reference material. All samples are introduced into the sample stream prior to sample handling/crushing to monitor analytical accuracy and precision. The insertion rate for the combined QA/QC samples is 10 percent or more depending upon batch sizes. ALS Global completed the analytical work with the core samples processed at their preparation facility in Reno,Nevada, U.S.A. All analytical and assay procedures are conducted in the ALS facility inNorth Vancouver, BC . The samples are processed by the following methods as appropriate to determine the grades; Au-AA23-Au 30g fire assay with AA finish, ME-ICP61-33 element four acid digest with ICP-AES finish, ME-OG62-ore grade elements, four acid with ICP-AES finish, Pb-OG62-ore grade Pb, four acid with ICP-AES finish, Zn-OG62-ore grade Zn, four acid digest with ICP-AES finish, Ag-GRA21-Ag 30g fire assay with gravimetric finish. 29
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Gold Breccia Target
In 2010, five holes were drilled byThunder Mountain Gold in the Gold Breccia anomaly for a total footage of 3,530 feet, and 705 total samples taken every five feet of drill hole. Of the 705 samples taken, 686 samples contained anomalous gold, or 97% of the samples. The highest-grade intercept ran 0.038 ounce per ton. HRC reviewed the reports done on the breccia completed by bothKinross and Newmont; of note was Newmont's comparison of the geology to theBattle Mountain Complex inNevada . The Technical Report was authored by Ms.J.J. Brown , P.G., SME-RM, Mr. Jeffrey Choquette, P.E., and Mr.Randy Martin , SME-RM, all ofHard Rock Consulting , each of whom is an independent qualified person for the purposes of NI 43-101 The NI 43-101 Technical Report has an effective date ofApril 7, 2018 , and has been filed inCanada on SEDAR in accordance with NI 43-101. The Report can be reviewed on the Company`s website at www.thundermountaingold.com.
Note to
Information concerning our mining properties has been prepared in accordance with the requirements of subpart 1300 of Regulation SK, which first became applicable to us for the fiscal year endedDecember 31, 2021 . These requirements differ significantly from the previously applicable disclosure requirements of SEC Industry Guide 7. Among other differences, subpart 1300 of Regulation S-K requires us to disclose our mineral resources, in addition to our mineral reserves, as of the end of our most recently completed fiscal year both in the aggregate and for each of our individually material mining properties. You are cautioned that mineral resources do not have demonstrated economic value. Mineral resources are subject to further exploration and development, are subject to additional risks, and no assurance can be given that they will eventually convert to future reserves. Inferred Resources, in particular, have a great amount of uncertainty as to their existence and their economic and legal feasibility. Investors are cautioned not to assume that any part or all of the Inferred Resource exists or is economically or legally mineable. See Item 1A, Risk Factors. Disclosure of the NI-43-101 has been prepared in accordance with the requirements of Canadian securities laws, including Canadian National Instrument 43-101 ("NI 43-101"). The Highlights of South Mountain NI-43-101 section refers to "mineral resources," "measured mineral resources," "indicated mineral resources," and "inferred mineral resources." Qualified Person - The technical information in this Form 10K has been reviewed and approved byLarry D. Kornze , (Retired) , Qualified Person, and Director ofThunder Mountain Gold Inc. , and a "Qualified Person" as defined by National Instrument 43-101 standards. This property is without known reserves and the proposed program is exploratory in nature according to Instruction 3 to paragraph (b)(5) of the SEC`s Industry Guide 7. There are currently no permits required for conducting exploration in accordance with the Company`s current board approved exploration plan.
The Trout Creek project is a highly prospective gold exploration target located along the western flank of theShoshone Mountain Range in theReese River Valley inLander County, Nevada . The Project is located approximately 155 air miles northeast ofReno, Nevada , or approximately 20 miles south ofBattle Mountain, Nevada , in Sections 10, 11, 14, 16, 21, 22, 27; T.29N.; R.44E.Mount Diablo Baseline & Meridian,Lander County, Nevada . Latitude: 40 23' 36" North, Longitude: 117 00' 58" West. The property is generally accessible year-round by traveling south fromBattle Mountain Nevada on state highway 305, which is paved. During the year endedDecember 31, 2021 , the Company made the decision to retain 26 (approximately 520 acres) of the 87 unpatented lode mining claims in theTrout Creek area. The Company's 26 unpatented mining claims are staked along a recognizable structural zone in theEureka-Battle Mountain mineralized gold trend. The Company paid annual fees to BLM of$4,290 andLander County $324 fees. 30 -------------------------------------------------------------------------------- TheTrout Creek target is anchored by a regional gravity anomaly on a well-defined northwest-southeast trending break in the alluvial fill thickness and underlying bedrock. Previous geophysical work in the 1980s revealed an airborne magnetic anomaly associated with the same structure, and this was further verified and outlined in 2008 by Company personnel, with consultation fromJim Wright - Wright Geophysics using a ground magnetometer. The target is covered by alluvial fan deposits of generally unknown thickness, shed from the adjacentShoshone Range , a fault block mountain range composed of Paleozoic sediments of both upper and lower plate rocks of theRoberts Mountains thrust. Wright Geophysics also conducted a ground gravity survey and CSMAT over the pediment target area and this provided insight into the gravel-bedrock contact as well as defining the favorable structural setting within the buried bedrock. An untested drill target was identified under the gravel pediment along these structures, and the geophysics showed that the bedrock was within 500 feet of the surface, which is reasonable depth for exploration drilling and potential mining if a significant mineralization is encountered.
The Company does not plan to conduct any work on the Trout Creek Property in
2022, but instead will focus all of their efforts on their
There are currently no environmental permits required for the planned
exploration work on the property. In the future, a notice of intent may be
required with the
Competition
We are an exploration stage company. We compete with other mineral resource exploration and development companies for financing and for the acquisition of new mineral properties. Many of the mineral resource exploration and development companies with whom we compete have greater financial and technical resources than us. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford greater geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investorswho may finance additional exploration and development. This competition could adversely impact on our ability to finance further exploration and to achieve the financing necessary for us to develop our mineral properties.
Employees
The Company employs three full-time officers. As part of the BeMetals agreement, the Company allowed these officers to work on theSouth Mountain Project on a consulting arrangement with BeMetals.
Results of Operations:
For the three months endedJune 30, 2022 , the Company recorded a net loss of$453,580 , compared to net income of$191,542 , for the same time endingJune 30, 2021 . Net Loss for the six-month period endedJune 30, 2022 was$965,309 for the same period in 2021 the Net income was$142,320 . The decrease in net income for 2022 is primarily due to a reduction in the market value of the Company's investment in BeMetals stock. For the three and six month periods endedJune 31, 2022 the Company recognized an unrealized loss on the investment in BeMetals of$381,924 and$620,988 , respectively. The Company recognized a gain of$163,507 and a loss of$71,011 for the three- and six-month periods endedJune 30, 2021 . Three-month period comparisons The Company recognized$75,000 in management services income for the three-month periods endedJune 30, 2022 , and 2021, respectively. Operating expenses for the three months endingJune 30, 2022 , of$146,656 decreased from the same respective time period in 2021 by$1,520 or 1%. Exploration expenses for the three months endedJune 30, 2021 decreased by$1,617 when compared to same period in 2021. Legal and accounting costs decreased in three-month period endedJune 30, 2022 compared to 2021 by$18,152 for a total of$14,454 . The decrease in Legal and accounting was associated to the early closing of the 10-K expenses for the year endedDecember 31, 2022 compared to 2021. Management and administrative expense increased by$18,536 or 17%. This increase in Management and administration cost was due to the Board of Directors compensation of$13,650 for the three months endedJune 30, 2022 . There were no stock options issued for the three months endedJune 30, 2022 and 2021, respectively. 31
-------------------------------------------------------------------------------- Six-month period comparisons The Company recognized$150,000 in total revenue for the six-month period ended onJune 30, 2022 compared with total revenue of$400,000 for the same period endedJune 30, 2021 , a decrease of$250,000 or 63%. Management services revenue from BeMetals remained the same at$75,000 in both quarters; however, for the quarter endedJune 30, 2021 the Company recognized a$250,000 gain on the sale of mineral properties under the terms of the BeMetals Option Agreement. No gain was recognized for the same period in 2022. The final cash payment under the BeMetals Option Agreement was received in third quarter of 2021. Operating expenses for the six months endingJune 30, 2022 , of$494,419 increased from the same respective time period in 2021 by$206,245 or 72%. Exploration expenses decreased by$5,462 or 71% when compared to same period in 2021. Legal and accounting costs increased by$30,585 or 56% for a total of$85,092 . Management and administrative expense increased by$181,846 or 81% principally due to stock compensation of$158,341 for stock options issued to our officers and directors onMarch 21, 2022 . There were no stock options issued during the six months endedJune 31, 2021 . The consolidated financial statements for the six-months endedJune 30, 2022 have been prepared under the assumption that we will continue as a going concern. Such assumption contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the consolidated financial statements as ofJune 30, 2022 , we have sufficient cash reserves to cover normal operating expenditures for the following 12 months.
Liquidity and Capital Resources:
The consolidated financial statements for the year endedJune 30, 2022 have been prepared under the assumption that we will continue as a going concern. Such assumption contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the consolidated financial statements for the three-month period endedJune 30, 2022 , we have sufficient cash reserves to cover normal operating expenditures for the following 12 months. The liquidity of the Company was enhanced onFebruary 27, 2019 when the Company entered the BeMetals Option Agreement with BeMetals Corp., andBMET USA , a wholly owned subsidiary of BeMetals. Under the terms of the BeMetals Option Agreement,BMET USA will be entitled to purchase 100% of the issued and outstanding shares of SMMI from TMRI, both wholly owned subsidiaries of the Company. The term of the agreement is for two years with BeMetals completing a preliminary economic assessment ("PEA") completed by a mutually agreed third-party engineering firm. Over its term, this agreement requires cash payments to the Company of$1,350,000 ;$1,100,000 in cash and$250,000 in exchange for shares of the Company's common stock. ThroughJune 30, 2022 , cash proceeds of$1,100,000 and$250,000 in exchange for shares of the Company's common stock have been received. BeMetals also agreed to pay the Company$25,000 per month for management services. In the event that BeMetals decides not to proceed with theSouth Mountain Project , BeMetals will not be obligated to make any additional payments. The Company has historically incurred losses, however, under the BeMetals Option Agreement, the Company now has a recurring source of revenue, and its ability to continue as a going concern is no longer dependent on equity capital raises and borrowings. However, the Company believes it has the ability to raise capital in order to fund its future exploration and working capital requirements if necessary. Potential additional sources of cash, include additional external debt, the sale of shares of our stock, or alternative methods such as mergers or sale of 8,000,000 BeMetals common stock shares held by the company. (See South Mountain Project above), No assurances can be given, however, that we will be able to obtain any of these potential sources of cash. 32 -------------------------------------------------------------------------------- Our plans for the long-term continuation as a going concern include financing our future operations through sales of our common stock and/or debt and the potential exploitation of our mining properties. Our plans may also, at some future point, include the formation of mining joint ventures with senior mining company partners on specific mineral properties whereby the joint venture partner would provide the necessary financing in return for equity in the property. In addition to the BeMetals Corp. Option Agreement, we believe that the Company will be able to meet its financial obligations because of the following:
º On
º We do not include in this consideration any option payments mentioned
below.
º Management is committed to manage expenses of all types to not exceed the
on-hand cash resources of the Company at any point in time, now or in the
future.
º The Company will also consider other sources of funding, including
potential mergers, the sale of all or part of the Company`s BeMetals Corp.
(TSX-V: BMET) common shares beneficially held, and/or additional farm-out
of its other exploration property.
For the six-month period endedJune 30, 2022 the Company reported a net cash decrease of$270,455 , compared to a net cash increase of$756,245 for the same period in 2021. The Company reported net cash used by operating activities of$232,455 compared to cash used by operating activities of$103,504 for the same period in 2021. The Company did not have any cash provided or used by investing for the period endedJune 30, 2022 compared to cash provided by investing activities of$899,557 for the same period in 2021. In 2021 the Company received cash from investing activities of$250,000 from the sale of mineral interests forthe Tranche 5 payment, pursuant to the BeMetals Option Agreement, and$649,557 proceeds from sale of 2,000,000 shares of BeMetals common shares. The Company reported cash used in financing activities of$38,000 and$39,808 for the period endedJune 30, 2022 and 2021, respectively, related to the repayment of related party notes payable to officer and directors of the Company. Our future liquidity and capital requirements will depend on many factors, including timing, cost and progress of our exploration efforts, our evaluation of, and decisions with respect to, our strategic alternatives, and costs associated with the regulatory approvals. If it turns out that we do not have enough cash to complete our exploration programs, we will attempt to raise additional funds from a public offering, a private placement, mergers, farm-outs or loans. Additional financing may be required in the future to fund our planned operations. We do not know whether additional financing will be available when needed or on acceptable terms, if at all. If we are unable to raise additional financing, when necessary, we may have to delay our exploration efforts or any property acquisitions or be forced to cease operations. Collaborative arrangements may require us to relinquish our rights to certain of our mining claims. Contractual Obligations During 2008 and 2009, three lease arrangements were made with landowners that own land parcels adjacent to the Company's South Mountain patented and unpatented mining claims. The leases were for a seven-year period, with options to renew, with annual payments (based on$20 per acre) listed in the following table. The leases have no work requirements. Payments due by period Contractual obligations Less than 2-3 4-5 More than Total* 1 year years years 5 years Acree Lease (yearly, June)(1)$ 3,390 $ 3,390 - - $ -Lowry Lease (yearly, October)(1)(2)$ 22,560 $ 11,280 $ 11,280 - $ - OGT LLC(3)$ 25,000 $ 5,000 $ 10,000 $ 10,000 $ - Total$ 50,950 $ 19,670 $ 21,280 $ 10,000 $ - (1) Amounts shown are for the lease periods years 15 through 16, a total of 2 years that remains after 2021, the lease was extended an additional 10 years at$30 /acre after 2014. (2) The Lowry lease has an early buy-out provision for 50% of the remaining amounts owed in the event the Company desires to drop the lease prior to the end of the first seven-year period. (3)OGT LLC , managed by the Company's wholly owned subsidiary SMMI, receives a$5,000 per year payment for up to 10 years, or until a$5 million capped NPI Royalty is paid. 33
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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: a) Estimates. Our management routinely makes judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increase, these judgments become even more subjective and complex. Although we believe that our estimates and assumptions are reasonable, actual results may differ significantly from these estimates. Changes in estimates and assumptions based upon actual results may have a material impact on our results of operation and/or financial condition. b) Stock-based Compensation. The Company records stock-based compensation in accordance with ASC 718, "Compensation - Stock Compensation" using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. c) Income Taxes. We have current income tax assets recorded in our financial statements that are based on our estimates relating to federal and state income tax benefits. Our judgments regarding federal and state income tax rates, items that may or may not be deductible for income tax purposes and income tax regulations themselves are critical to the Company's financial statement income tax items. d) Investments. In a joint venture where the Company holds more than 50% of the voting interest and has significant influence, the joint venture is consolidated with the presentation of non-controlling interest. In determining whether significant influences exist, the Company considers its participation in policy-making decisions and its representation on the venture's management committee.
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