Business development
Liberty Star Uranium & Metals Corp. was formerly Liberty Star Gold Corp. and formerly Titanium Intelligence, Inc. (“Titanium”). Titanium was incorporated on August 20, 2001 under the laws of the State of Nevada. On February 5, 2004 we commenced operations in the acquisition and exploration of mineral properties business. Big Chunk Corp. (“Big Chunk”) is our wholly owned subsidiary and was incorporated on December 14, 2003 in the State of Alaska. Big Chunk is engaged in the acquisition and exploration of mineral properties business in the State of Alaska. Redwall Drilling Inc. (“Redwall”) was our wholly owned subsidiary and was incorporated on August 31, 2007 in the State of Arizona. Redwall performed drilling services on our mineral properties. Redwall ceased drilling activities in July 2008 and was dissolved on March 30, 2010. In April 2007, we changed our name to Liberty Star Uranium & Metals Corp. to reflect our current concentrated efforts on uranium exploration. We are considered to be an exploration stage company, as we have not generated any revenues from operations.
Our current business
We are an exploration stage company engaged in the acquisition and exploration of mineral properties in the States of Arizona and Alaska. Claims in the State of Alaska are held in the name of our wholly-owned subsidiary, Big Chunk Corp. Claims in the State of Arizona are held in the name of Liberty Star. We use the term “Super Project” to indicate a project in which numerous mineral targets have been identified, any one or more of which could potentially contain commercially viable quantities of minerals. Our significant projects are described below.
North Pipes Super Project (“North Pipes” and “NPSP”): Located in Northern Arizona on the Arizona Strip, we plan to ascertain whether the NPSP claims possess commercially viable deposits of uranium and associated co-product metals. We have not identified any ore reserves to date.
Big Chunk Super Project (“Big Chunk”): Located in the Iliamna region of Southwestern Alaska, we plan to ascertain whether the Big Chunk claims possess commercially viable deposits of copper, gold, molybdenum, silver, palladium rhenium and zinc. We have not identified any ore reserves to date.
Bonanza Hills Project (“Bonanza Hills”): Located in the Iliamna region of Southwestern Alaska, our plans have been to ascertain whether the Bonanza Hills claims possess commercially viable deposits of gold and silver. We have not identified any ore reserves to date. Bonanza Hills is hampered by its remote location. We have paid cash in lieu of physical exploration as permitted by Alaska state mining regulations. We did not pay rental fees in a timely fashion as required by regulation because we chose to expend those monies on other more promising Liberty projects. We may choose to pay those rental fees in arrears, as permitted by Alaska state mining regulations, and reinstate those claims if a third party has not overstaked those claims in the interim. If other projects continue to be more promising, we may completely relinquish any rights we may have at the end of the Assessment Year, 12:01 pm Alaska time September 1, 2012.
Tombstone Super Project (“Tombstone”)(formerly referred to as Tombstone Porphyry Precious Metals Project): Tombstone is located in Cochise County, Arizona. We plan to ascertain whether the Tombstone claims possess commercially viable deposits of copper, molybdenum, gold, silver, lead, zinc, manganese and other metals. We have not identified any ore reserves to date.
East Silver Bell Porphyry Copper Project (“East Silver Bell”): Located northwest of Tucson, Arizona, we plan to ascertain whether the East Silver Bell claims possess commercially viable deposits of copper. We have not identified any ore reserves to date.
Title to mineral claims involves certain inherent risks due to difficulties of determining the validity of certain claims as well as potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral properties. We have investigated title to all the Company’s mineral properties and, to the best of its knowledge, title to all properties are in good standing, except for our Bonanza Hills project claims which are not in good standing for unpaid required annual rental payments for rental year 2011 to 2012 in the amount of $15,800
The mineral resource business generally consists of three stages: exploration, development and production. Mineral resource companies that are in the exploration stage have not yet found mineral resources in commercially exploitable quantities, and are engaged in exploring land in an effort to discover them. Mineral resource companies that have located a mineral resource in commercially exploitable quantities and are preparing to extract that resource are in the development stage, while those engaged in the extraction of a known mineral resource are in the production stage. We are in the exploration stage – as we have not found any mineral resources in commercially exploitable quantities.
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There is no assurance that a commercially viable mineral deposit exists on any of our properties, and further exploration is required before we can evaluate whether any exist and, if so, whether it would be economically feasible to develop or exploit those resources. Even if we complete our current exploration program and we are successful in identifying a mineral deposit, we would be required to spend substantial funds on further drilling and engineering studies before we could know whether that mineral deposit will constitute an ore reserve (an ore reserve is a commercially viable mineral deposit). Please refer to the section entitled "Risk Factors" for additional information about the risks of mineral exploration.
To date, we have not generated any revenues and we remain in the exploration stage. Our ability to pursue our business plan and generate revenues is subject to our ability to obtain additional financing, and we cannot give any assurance that we will be able to do so.
Competition
We are a mineral resource exploration stage company engaged in the business of mineral exploration. We compete with other mineral resource exploration stage companies for financing from a limited number of investors that are prepared to make investments in mineral resource exploration stage companies. The presence of competing mineral resource exploration stage companies may impact our ability to raise additional capital in order to fund our property acquisitions and exploration programs if investors are of the view that investments in competitors are more attractive based on the merit of the mineral properties under investigation and the price of the investment offered to investors.
We also compete for mineral properties of merit with other exploration stage companies. Competition could reduce the availability of properties of merit or increase the cost of acquiring additional mineral properties.
Many of the resource exploration stage companies with whom we compete may have greater financial and technical resources than we do. Accordingly, these competitors may be able to spend greater amounts on acquisitions of properties of merit and on exploration of their properties. In addition, they may be able to afford greater geological expertise in the targeting and exploration of resource properties. This competition could result in our competitors having resource properties of greater quality and interest to prospective investors who may finance additional exploration and to senior exploration stage companies that may purchase resource properties or enter into joint venture agreements with junior exploration stage companies. This competition could adversely impact our ability to finance property acquisitions and further exploration.
Compliance with Government Regulation
We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in the States of Arizona and Alaska.
We are required to perform annual assessment work in order to maintain the Big Chunk and Bonanza Hills Alaska State mining claims. If annual assessment work is not performed we must pay the assessment amount in cash in order to maintain the claims. Completion of annual assessment work in the amount of $400 per 1/4 section (160 acre) claim or $100 per 1/16 section (40 acre) claim extends the claims for a one year period. Assessment work performed in excess of the required amount may be carried forward for up to 4 years to reduce future obligations for assessment work. We estimate that the required annual assessments to maintain the claims will be approximately $260,600.
The annual state rentals for the Big Chunk and Bonanza Hills Alaska State mining claims vary from $70 to $280 per mineral claim and escalate with the age of the mining claim. The rental period begins at noon September 1st through the following September 1st and annual rental payments are due on November 30th of each year. Annual rent is due in full within 45 days of staking a new claim and covers the period from staking until the next September 1st. The rentals of $164,600 to extend the Big Chunk claims through September 1, 2012 were paid in November 2011. The annual rentals of $15,800 to extend the Bonanza Hills claims through September 1, 2012 have not been paid. Our management decided to use rental funds for Bonanza Hills on other projects we believe to have more potential. Alaska State mining claim rentals can be paid in arrears and the claims validated as long as no intervening locator has overstaked our claims. We have not made the decision to make payment in arrears or relinquish our rights to these claims. The estimated state rentals due for the Big Chunk claims by November 30, 2012 for the period from September 1, 2012 through September 1, 2013 are $166,740. Alaska State production royalty is three percent of net income. State law prescribes that after a 3.5 -year exemption from state taxes a metal mine is liable for a 15% state licensing tax on net income from the mine.
Our North Pipes claims are Federal lode mining claims located on U.S. Federal Lands and administered by the Department of Interior, Bureau of Land Management. The Bureau of Land Management (“BLM”) has prepared an environmental impact statement (“EIS”) addressing potential for contamination of significant amounts of uranium leaking into the Colorado River. The EIS indicated the danger of such contamination insignificant. Regardless, the United States Secretary of the Interior, Kenneth Salazar, through executive order has withdrawn Federal lands from locatable mineral exploration and mining North of the Grand Canyon along the Utah border in Arizona, the so-called “Arizona Strip”. Nearly 1 million acres of land managed by the BLM and the Forest Service were segregated in July 2009 by the Secretary of Interior. The executive order has resulted in the withdrawal of an area of the Arizona Strip from mining in particular, and the moratorium now is instated for the next 20 years. However, the moratorium permits existing claims and mines to continue as before, including our North Pipes lode mining claims.
We are required to pay annual rentals to maintain our North Pipes Federal lode mining claims in good standing. The rental period begins at 12:01 PM on September 1st through the following September 1st at 12:00 and rental payments are due by the first day of the rental period starting at 12:01 PM. The annual rental is $140 per claim. Additional fees of $45 per claim are due in the first year of filing a Federal lode mining claim along with the first year’s rent. The rentals of $60,340 for the period from September 1, 2011 to September 1, 2012 have been paid. The annual rentals due by September 1, 2012 of $60,340 are required to maintain the North Pipes claims are for the period from September 1, 2012 through September 1, 2013. There is no requirement for annual assessment or exploration work on the Federal lode mining claims, this having been supplanted by the rental fee. There are no royalties associated with the Federal lode mining claims.
We are required to pay annual rentals for our Federal lode mining claims for our East Silver Bell project in the State of Arizona. The rental period begins at noon on September 1st through the following September 1st and rental payments are due by the first day of the rental period. The annual rental is $140 per claim. The rentals fees of $3,640 for the period from September 1, 2011 to September 1, 2012 have been paid. The annual rentals due by September 1, 2012 of $3,640 are required to maintain the East Silver Bell claims are for the period from September 1, 2012 through September 1, 2013. There is no requirement for annual assessment or exploration work on the Federal lode mining claims, this having been supplanted by the rental fee. There are no royalties associated with the Federal lode mining claims.
We are required to pay annual rentals for our Federal lode mining claims for our Tombstone project in the State of Arizona. The rental period begins at noon on September 1st through the following September 1st and rental payments are due by the first day of the rental period. The annual rental is $140 per claim. Additional fees of $45 per claim are due in the first year of filing a Federal lode mining claim along with the first year’s rent. The rentals and initial filing fees of $17,094 for the period from September 1, 2011 to September 1, 2012 have been paid. The annual rentals due by September 1, 2012 of $13,365 are required to maintain the Tombstone claims are for the period from September 1, 2012 through September 1, 2013. There is no requirement for annual assessment or exploration work on the Federal lode mining claims, this having been supplanted by the rental fee. There are no royalties associated with the Federal lode mining claims.
We are required to pay annual rentals for our Arizona State
Land Department (“ASLD”) Mineral Exploration Permits (“AZ MEP”) at our Tombstone
Super Project in the State of Arizona. A mineral exploration permit is
permission from ASLD to prospect and explore for minerals on State Trust land.
Exploration is any activity conducted for the purpose of determining the
existence of a valuable mineral deposit, such as: geologic mapping, drilling,
geochemical sampling, and geophysical surveys. Prior to exploration, the Plan of
Operations must be approved by ASLD. The permitting process for an exploration
permit takes a minimum of sixty (60) days. If the application is approved, the
initial rent is $2 per acre. If renewed, no additional rents are due for the
second year. Rents are set at $1 per acre for years 3 thru 5. Work expenditure
requirements are: $10 per acre for years 1-2; and $20 per acre for years 3-5.
Removal of any minerals or materials from State Trust land without the
appropriate lease or permit is prohibited. The permit is valid for one year from
the due date of the rental and bond. If renewal requirements are met, the permit
can be renewed annually for up to five years. If discovery of a valuable mineral
deposit is made, the permitee must apply for a mineral lease before actual
mining activities can begin. A mineral lease permits the mining of minerals
discovered under the exploration permit. The approval process takes a minimum of
six (6) months. The mineral lease is issued for a term of twenty (20) years.
Leases may be renewed for an additional term. Both rents and royalties are
determined by appraisal. Royalties may be based on: 1) a fixed rate subject to
annual adjustment; or 2) a sliding-scale rate which is linked to a commodity
index price and the operation's break-even price. There is a statutory minimum
royalty rate of 2% of gross value. These AZ MEPs require a reclamation bond of
$3,000 which we currently hold. The first year’s rental has been paid for these
MEPs ;and the escalating rental is due on the anniversary of
the MEP each year. After the end of the 4th year, the MEPs must transition to a
State Mineral Lease upon satisfaction of the State Mineral Inspector that
economic indications of a minable deposit exists. After commencement of mining,
the State of Arizona shall be paid a minimal net smelter return after taking
into consideration any extenuating mining challenges royalty but not less than a
2% gross royalty. In the north eastern part of the Tombstone area approximately
1 mile from the Tombstone business district, the company holds 33 Federal lode
mining claims on lease from JABA US Inc., which has held these claims for
approximately 30+ years or more. Two of Liberty Star’s
directors have an interest in JABA US Inc. These claims cover the Walnut Creek
mineral target. Beginning September 1, 2011 at 12:01 PM, Liberty Star started
and subsequently completed staking 9 Federal lode mining claims along the east
edge of old patented mining claims in the main producing part of the old
Tombstone mining area. These new claims are adjacent to the south end of the
Walnut Creek TS claim block and are also named the TS claims. These claims
occupy fractional land areas open to location by federal lode claim. The rental
period begins on September 30th through the following September
29th and rental payments are due by the first day of the rental
period. We hold AZ MEP permits for 4,126.9 acres at our Tombstone project. We
paid initial rental fees from the date of application through September 29, 2012
of $8,254. Required minimum work expenditures for the period ended September 29,
2012 are $41,269. The annual rentals due by September 30, 2012 to maintain the
AZ MEP permits are $4,127. There are no royalties associated with the AZ MEP
permits.
With respect to the foregoing properties, additional approvals and authorizations may be required from other government agencies, depending upon the nature and scope of the proposed exploration program. The amount of these costs is not known at this time as we do not know the size, quality of any resource or reserve at this time, and it is extremely difficult to assess the impact of any capital expenditures on earnings or our competitive position.
Personnel
Currently we employ one full time geologist who is also our CEO, CFO, and Chairman of the Board, James Briscoe. We also employ one full time executive, one full time executive assistant/accountant, one as-needed PhD consulting geologist specializing in GIS computer mapping and database creation, one full time geo-tech, and one CPA on an as needed basis. We hire consultants for investor relations, exploration and administrative functions also on an as needed basis.
Much of the information included in this annual report includes or is based upon estimates, projections or other "forward-looking statements". Such forward-looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.
Such estimates, projections or other "forward-looking statements" involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward-looking statements".
Risks related to our business
Because of the speculative nature of the exploration of natural resource properties, there is substantial risk that this business will fail.
There is no assurance that any of the claims we explore or acquire will contain commercially exploitable reserves of minerals. Exploration for natural resources is a speculative venture involving substantial risk. Hazards such as unusual or unexpected geological formations and other conditions often result in unsuccessful exploration efforts. We may also become subject to significant liability for pollution or hazards, which we cannot insure or which we may elect not to insure. There is substantial risk that our business will fail.
If we cannot compete successfully for financing and for qualified managerial and technical employees, our exploration program may suffer.
Our competition in the mining industry includes large established mining companies with substantial capabilities and with greater financial and technical resources than we have. As a result of this competition, we may be unable to acquire additional financing on terms we consider acceptable because investors may choose to invest in our competitors instead of investing in us. We also compete with other mining companies in the recruitment and retention of qualified managerial and technical employees. Our success will be largely dependent on our ability to hire and retain highly qualified personnel. These individuals are in high demand and we may not be able to attract the personnel we need. We may not be able to afford the high salaries and fees demanded by qualified personnel, or may lose such employees after they are hired. If we are unable to successfully compete for financing or for qualified employees, our exploration program may be slowed down or suspended.
Exploration and exploitation activities are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on our company.
Exploration and exploitation activities are subject to federal, state, and local laws, regulations and policies, including laws regulating the removal of natural resources from the ground and the discharge of materials into the environment. Exploration and exploitation activities are also subject to federal, state, and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment.
Various permits from government bodies are required for drilling operations to be conducted; no assurance can be given that such permits will be received. Environmental and other legal standards imposed by federal, state, or local authorities may be changed and any such changes may prevent us from conducting planned activities or increase our costs of doing so, which would have material adverse effects on our business. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages which we may not be able to or elect not to insure against due to prohibitive premium costs and other reasons. Any laws, regulations or policies of any government body or regulatory agency may be changed, applied or interpreted in a manner which will alter and negatively affect our ability to carry on our business.
There are no known reserves of minerals on our mineral claims and we cannot guarantee that we will find any commercial quantities of minerals.
We have not found any mineral reserves on our claims and there can be no assurance that any of our mineral claims contain commercial quantities of any minerals. Even if we identify commercial quantities of minerals in any of our claims, there can be no assurance that we will be able to exploit the reserves or, if we are able to exploit them, that we will do so on a profitable basis.
Because the probability of an individual prospect ever having reserves is extremely remote, any funds spent on exploration will probably be lost.
The probability of an individual prospect ever having reserves is extremely remote. In all probability our properties do not contain any reserves. As such, any funds spent on exploration will probably be lost which would most likely result in a loss of your investment.
Risks related to our company
We have a limited operating history and as a result there is no assurance we can operate on a profitable basis.
We have a limited operating history and must be considered in the exploration stage. Our operations will be subject to all the risks inherent in the establishment of an exploration stage enterprise and the uncertainties arising from the absence of a significant operating history. Potential investors should be aware of the difficulties normally encountered by mineral exploration companies and the high rate of failure of such enterprises, especially those with a limited operating history. 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. The expenditures to be made by us in the exploration of the mineral claim may not result in the discovery of mineral deposits. Problems such as unusual or unexpected formations of rock or land and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. If the results of our exploration do not reveal viable commercial mineralization, we may decide to abandon our claims and acquire new claims for new exploration or cease operations. The acquisition of additional claims will be dependent upon us possessing capital resources at the time in order to purchase such claims. If no funding is available, we may be forced to abandon our operations. No assurance can be given that we will ever operate on a profitable basis.
If we do not obtain additional financing, our business will fail and our investors could lose their investment.
We had cash in the amount of $155,869 and negative working capital of $(4,287,593) as of January 31, 2012. We currently do not generate revenues from our operations. Our business plan calls for substantial investment and cost in connection with the acquisition and exploration of our mineral properties currently under lease and option. Any direct acquisition of any of the claims under lease or option is subject to our ability to obtain the financing necessary for us to fund and carry out exploration programs on the subject properties. The requirements are substantial. We do not currently have any arrangements for financing in addition to the Northern Dynasty Secured Convertible Note and the Fairhills Capital financing agreement (as defined and described in Item 5, Part II of this annual report) and private placements of our securities. Our loan from Northern Dynasty could be called at any time on 45 days notice. There is no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on their investment in our common stock. Further, we may continue to be unprofitable. Obtaining additional financing would be subject to a number of factors, including market prices for minerals, investor acceptance of our properties, contractual restrictions on our ability to enter into further financing arrangements, and investor sentiment. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us and our business could fail.
Because there is no assurance that we will generate revenues, we face a high risk of business failure.
We have not earned any revenues as of the date of this filing and have never been profitable. We do not have an interest in any revenue generating properties. We were incorporated on August 20, 2001 and took over our current business on February 5, 2004. To date, we have been involved primarily in organizational and exploration activities. We will incur substantial operating and exploration expenditures without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We have limited operating history upon which an evaluation of our future success or failure can be made. Our net loss from inception to January 31, 2012 is $(61,431,261). We recognize that if we are unable to generate significant revenues from our activities, we will not be able to earn profits or continue operations. Based upon current plans, we also expect to incur significant operating losses in the future. We cannot guarantee that we will be successful in raising capital to fund these operating losses or generate revenues in the future. We can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail and our investors could lose their investment.