BUSINESS
History and Organization
The following is only a summary of the information, financial statements and the notes included in this Form 10-K. Unless the context indicates or suggests otherwise, the terms “Recursos”, the “Company”, “we,” “our” and “us” means Recursos Montana S.A.
Our Business
We were incorporated on September 23, 2010 pursuant to the laws of the State of Nevada.
Our address in the Dominican Republic is at 1st Street, #3, Cerros del Atlantico, Puerto Plata and with our telephone number being (037) 0022-0092. Our office is located in the private resident of the President of our Company and until such time as the Company can afford to rent its own facilities this arrangement will serve as our office. To date there has been no charge for the use of this office.
We are an Emerging Growth Company as defined in the Jumpstart Our Business Startups Act.
We shall continue to be deemed an emerging growth company until the earliest of—
(A) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;
(B) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement under this title;
(C) the date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or
(D) the date on which such issuer is deemed to be a ‘large accelerated filer’, as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.
As an emerging growth company we are exempt from Section 404(b) of Sarbanes Oxley. Section 404(a) requires Issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures.
Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting.
As an emerging growth company we are exempt from Section 14A(a) and (b) of the Securities Exchange Act of 1934 which require the shareholder approval of executive compensation and golden parachutes.
We have irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Act.
We are a pre-exploration stage company engaged in the acquisition and exploration of mineral properties. We hold 100% title to a mineral claim consisting of 72.5 hectares (185 acres) called the “Vunidawa Gold Claim.” The Vunidawa Gold Claim is located approximately 60 kilometers (96 miles) southwest of Korovou, Fiji Our plan is to conduct mineral exploration activities on the Vunidawa Gold Claim in order to assess whether it possesses commercially extractable deposits of gold.
We have not earned any revenues to date. We do not anticipate earning revenues until such time as we enter into commercial production of the Vunidawa Gold Claim. We are presently in the pre-exploration stage of our business and we can provide no assurance that we will discover commercially exploitable levels of mineral resources on the Vunidawa Gold Claim, or if such deposits are discovered, that we will enter into further substantial exploration programs. We currently do not have sufficient financial resources to meet the anticipated costs of completing the exploration program for the Vunidawa Gold Claim. Accordingly, we will need to obtain additional financing in order to complete our plan of operation and meet our current obligations as they come due.
To date, we have not commenced exploration activities on the Vunidawa Gold Claim. Our plan is to implement our exploration program on the Vunidawa Gold Claim in order to assess whether it possess mineral deposits of gold capable of commercial extraction. A description of the Vunidawa Gold Claim is provided under the heading “Properties” below.
Our Company does not have any subsidiaries. Our Company has no current plans, proposals or arrangement, written or otherwise, to seek a business combination with another entity.
We have no historical information to allow anyone to base an evaluation on our future performance. We have only been incorporated since September 23, 2010 and have generated no revenue during our time in existence. We do not know if we will be successful in our business operations in the future. Like all new businesses we are a start-up company and will suffer all the problems of being a start-up company as follows:
·
possible delays in exploring the Vunidawa and experiencing cost overruns;
trying to generate revenue or identify sources of cash, managing our assets and administrating ongoing financial commitments to our creditors;
adhering to all regulatory requirements both as a future public company and as a company required to meet State and Federal filing requirements; and
ensuring our shareholders are informed about our development on a regular basis.
We have no full-time employees and our management devotes a small percentage of their time to the affairs of the Company.
The shareholders may read and copy any material filed by Recursos with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC, 20549. The shareholders may obtain information on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information which Recursos has filed electronically with the SEC by assessing the website using the following address: http://www.sec.gov. Recursos has no website at this time.
Foreign Currency and Exchange Rates
Our mineral property is located in the Republic of Fiji. The cost expressed in the geological report on Vunidawa is expressed in the local currency, Fijian dollar. For purposes of consistency and to express United States Dollars throughout this Form 10-Q, Fijian dollars have been converted into United States currency at the rate of US $1.00 being approximately equal to .55801 Fijian dollars.
ITEM 1A.
RISK FACTORS
An investment in our common stock involves an exceptionally high degree of risk and is extremely speculative. In addition to the other information regarding Recursos contained in this Form 10-K, you should consider many important factors in determining whether to purchase the shares in our Company. The following risk factors reflect all known potential and substantial material risks which could be involved if you decide to purchase shares in our Company.
Risks Associated with our Company:
Because we are a pre-exploration stage company, we face a high risk of business failure.
To date, our primary business activities have involved the acquisition of the Vunidawa Gold Claim. We have not earned any revenues as of the date of this report. Potential investors should be aware of the difficulties normally encountered by pre-exploration stage companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.
Because we anticipate our operating expenses will increase prior to our earning revenues, we may never achieve profitability.
Prior to completion of our pre-exploration stage, we anticipate that we will incur increased operating expenses without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from the exploration of our mineral claims and the production of minerals thereon, if any, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we may not be able to ever generate any operating revenues or achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.
We have no known mineral reserves.
We are in the initial phase of our exploration program for the Vunidawa Gold Claim. It is unknown whether this property contains viable mineral reserves. If we do not find a viable mineral reserve, or if we cannot exploit the mineral reserve, either because we have insufficient capital resources or because it is not be economically feasible to do it, we 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 our property our production capabilities will be subject to further risks and uncertainties including:
(i)
Costs of bringing the property into production including exploration work, preparation of production feasibility studies, and construction of production facilities, all of which we have not budgeted for;
(ii)
Availability and costs of financing;
(iii)
Ongoing costs of production; and
(iv)
Environmental compliance regulations and restraints.
The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond our control and which cannot be accurately predicted, such as market fluctuations, the lack of milling facilities and processing equipment near the Vunidawa Gold Claim, and such other factors as government regulations, including regulations relating to allowable production, importing and exporting of minerals, and environmental protection.
Because of the unique difficulties and uncertainties inherent in mineral exploration ventures, we face a high risk of business failure.
You should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of our mineral property. These include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates. Our mineral property does not contain a known body of commercial ore and, therefore, any program conducted on our mineral property would be an exploratory search of ore. There is no certainty that any expenditures made in the exploration of our mineral property will result in discoveries of commercial quantities of ore. Most exploration projects do not result in the discovery of commercially mineable deposits of ore. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. If the results of our exploration program do not reveal viable commercial mineralization, we may decide to abandon our claim and acquire new claims for new exploration. The acquisition of additional claims will be dependent upon our possessing sufficient capital resources to purchase such claims. If we do not have sufficient capital resources and are unable to obtain sufficient financing, we may be forced to abandon our operations.
Assurance of Title
We have taken all reasonable steps to attempt to ensure that proper title to the Vunidawa Gold Claim has been obtained and that all grants of such rights thereunder, if any, have been registered with the appropriate public offices. Despite the due diligence conducted by us, there is no guarantee that title to such Vunidawa Gold Claim will not be challenged or impugned. Our mineral property interests may be subject to prior unregistered agreements or transfers and title may be affected by undetected defects.
We face significant competition.
We are a pre-exploration stage company. We compete with numerous other companies and individuals possessing greater financial resources and technical facilities than itself in the search for, and acquisition of, mineral claims, leases and other mineral interests, as well as the recruitment and retention of suitably qualified individuals. They competitors may spend greater amounts on retaining such personnel, which could cause delays in our exploration program or cause our business to fail.
Because the prices of metals fluctuate, if the price of metals for which we are exploring decreases below a specified level, it may no longer be profitable to explore for those metals and we will cease operations.
The market prices of commodities, including copper and gold, are volatile and are affected by numerous factors which are beyond our control. These factors include international supply and demand, consumer product demand, international economic trends, currency exchange rate fluctuations, interest rates, inflation, global or regional political events, as well as a range of other market forces. Sustained downward movements in commodity prices, including copper or gold, could render less economic, or uneconomic, some or all of the exploration activities to be undertaken by us.
Because of the inherent dangers involved in mineral exploration, there is a risk that we may incur liability or damages as we conduct our business.
We, as a participant in exploration and mining programs, may become subject to liability for hazards such as unusual geological or unexpected operating conditions that cannot be insured against or against which we may elect not to be so insured because of high premium costs or other reasons. We are currently uninsured against all such risks as such insurance is either unavailable or uneconomic at this time. We also currently have no keyman insurance or property insurance as such insurance is uneconomical at this time. We will obtain such insurance once it is available and, in the opinion of the board of directors, economical to do so. We may incur a liability to third parties (in excess of any insurance cover) arising from pollution or other damage or injury.
The Vunidawa Gold Claim is located in Fiji and is subject to changes in political conditions and regulations in that country.
The Vunidawa Gold Claim is located in Fiji. In the past, Fiji has been subject to political and social instability, changes and uncertainties which may cause changes to existing government regulations affecting mineral exploration and mining activities. Our mineral exploration activities in Fiji may be adversely affected in varying degrees by changing governmental regulations relating to the mining industry or shifts in political conditions that increase the costs related to our activities or maintaining our Vunidawa Gold Claim. Finally, Fiji’s status as a developing country may make it more difficult for us to obtain required financing for our property.
Due to the significant costs associated with reporting under the Exchange Act, there is a risk that our business could fail.
We are now a reporting company under the Exchange Act. As a result, we will be required to file annual and quarterly reports and proxy materials with the SEC. Due to the significant cost associated with meeting these reporting obligations, we may have insufficient funds for the exploration and development of our Vunidawa Gold Claim which may cause our business to fail.
We are vulnerable to the change of the world gold supply, demand and prices.
Gold prices change on a world market beyond our control. A drop in price would adversely affect our ability to generate a profit. All our revenues would be derived from the sale of gold and possibly other precious metals. Changes in the price of gold thus may affect profitability and impede us from being able to afford to continue operations. Gold prices historically have fluctuated widely; price tends to be linked to a number of factors beyond our control such as: various macroeconomic factors (terrorism, political and regional events that may include such, confidence in the global monetary system, rate of inflation expectations, interest rates, US dollar and certain other currency strength); speculative or hedging activities; forward sales by producers, speculators and other holders; central bank lending; sales and purchases of gold; industrial and jewelry demand; and the current supply and demand. These things are impossible for us to predict. Per ounce, gold has been $384 (1995), $279 (2000), $420 (2005), $1,120 (2010), $1,834 (2011), $1,750 (2013) and later in 2013 fell to approximately $1,300. The price per ounce has now dropped to the $1,400 range. London PM Fix Price for instance. This volatility may favour operations now but should the price drop unexpectedly some or all exploration activities may become economically unfeasible in the future.
Risks Related To the Ownership of Our Stock
Because our executive officers and directors currently own 60% of our issued and outstanding shares, investors may find that corporate decisions controlled by our executive officers and directors are inconsistent with the interests of other stockholders.
Our executive officers and directors currently own 60% of our issued and outstanding shares of common stock. Accordingly, in accordance with our Articles of Incorporation and Bylaws, our executive officers and directors are able to control who is elected as a director and thus could act, or could have the power to act, as our management. Since our executive officers and directors are not simply passive investors, but is also our executive officers and directors, their interests as an executive officers and directors may, at times, be adverse to those of passive investors. Where those conflicts exist, our shareholders will be dependent upon them exercising, in a manner fair to all of our shareholders, their fiduciary duties as an officer or as a director.
We will likely conduct further offerings of our equity securities in the future, in which case your proportionate interest may become diluted.
We will likely be required to conduct additional equity offerings in the future to finance our exploration program or to finance subsequent projects that we decide to undertake. If common stock is issued in return for additional funds, the price per share could be lower than the price per share of our shareholder who purchased share under the recent offering. We anticipate continuing to rely on equity sales of our common stock in order to fund our business operations. If we issue additional stock, your percentage interest in us could become diluted.
If a market for our common stock does not develop, stockholders may be unable to sell their shares.
There is currently no market for our common stock and we can provide no assurance that a market will develop. We intend to apply for quotation of our common stock on the OTCBB. However, we can provide no assurance that our shares will be approved for quotation on the OTCBB or, if quoted, that a public market will materialize. If our common stock is not quoted on the OTCBB or if a public market for our common stock does not develop, stockholders may not be able to re-sell the shares of our common stock that they have purchased and may lose all of their investment.
Because our stock is a penny stock, stockholders will be more limited in their ability to sell their stock.
The shares offered by this prospectus constitute a penny stock under the Securities Exchange Act of 1934 (the “Exchange Act”). The shares will remain classified as a penny stock for the foreseeable future. The classification as a penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his or her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares will be subject to Rules 15g-1 through 15g-10 of the Exchange Act. Rather than having to comply with these rules, some broker-dealers will refuse to attempt to sell a penny stock.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
There are no unresolved staff comments.
ITEM 2.
PROPERTIES
On October 28, 2010, we acquired the Vunidawa Gold Claim from Morris Ventures LLC for $5,000. The Vunidawa Gold Claim consists of 72.5 hectares (approximately 185 acres), located 60 kilometers (96 miles) southwest of Korovou, Fiji.
Information relating to the Vunidawa Gold Claim:
Accessibility, Climate, Locale Resources, Infrastructure and Topography
The Vunidawa Gold Claim is accessible from Korovou, Fiji by traveling on the country’s only highway system which for the most part consists of one lane in each direction and by taking an all weather gravel road. The town of Korovou has an experienced work force and will provide all the necessary services needed for an exploration and development operation, including police, hospitals, groceries, fuel, helicopter services, hardware and other necessary items. Drilling companies and assay facilities are present in Korovou.
Tropical mountain forests grow at lower elevations in the northwest corner of the Vunidawa Gold Claim and good rock exposure is found along the peaks and ridges in the eastern portion of the claim. The climate is mild year round with the rainy season falling from May to October.
For ease of reference, the following conversion factors are provided:
Gold was first reported in the area by Fijian and British prospectors over 50 years ago. Mineral claims were recorded in 1956 in the surrounding areas.
During the 1990s, a number of exploration companies have drilled properties to the west of the Vunidawa Gold Claim.
Regional Geology
Fiji lies at the midpoint of opposing Tonga Kermadec and new Hebrides convergence zones, separated from the actual convergence zones by two extensional back-arc basins which are the North Fiji Basin to the west and the Lau Basin to the east in addition to a series of transform faults including the Fiji Fracture Zone and the Matthew Hunter Ridge. Many of the reconstructions of the past configuration of the is part of the Pacific indicate, however, that Fiji was not so long ago an integral part of the Pacific “Rim of Fire”; the complex plate boundary between Pacific and the Indo Australia plates; a boundary which is well recognized as the locus of several major world-class porphyry copper gold and epithermal gold systems.
Property Geology
The principal bedded rocks for the area of Vunidawa Gold Claim are volcanic rocks which are exposed along a wide axial zone of a broad complex.
The main igneous intrusions consist of the Medrausucu consisting of gabbros and tonalities. Age data indicate that the intrusive stocks are intermediate in age between Savura Volcanic Group rocks west of the area and the younger Tertiary Wainimala Group rocks exposed to the east.
Irregular shaped masses of granite are seen in both sharp and gradational contact with the diorite. The different phases of Medrausucu are exposed from north of the Vunidawa Gold Claim to just east of the town of Korovou and are principal host rocks for gold veins at the Korovou Gold Mine.
Repeated cycles of folding, faulting and deformation has created a complex structural history in the Korovou area. Major faults strike north and northeasterly and coincide with zones of the Savura Volcanic Group. The principal shear direction changes from northwest in the area of the Korovou Gold Mine to north south in the area north of Korovou.
The major transform fault areas are the Fiji Fracture Zone and the Hunter Fracture Zone. One system consists of a set of perpendicular fractures, which strike approximately at right angles to each other, and at acute angles to the trend of formations. The other system consists of two sets of fractures with opposing dips, but which strike parallel to each other and to the trend of the overall formations. The first system contains the principle veins of the area and are younger than the second system. The Savura Volcanic Group represent the most important and continuous fractures in the first system.