ITEM
1. BUSINESS
Overview
and History
We
are a minerals company in the business of acquiring and advancing mineral properties to the discovery point, where we believe maximum
shareholder returns can be realized. Although we have conducted limited extraction of gold on one of our gold prospects, Goldrich is
an exploration stage company as defined by the U.S. Securities and Exchange Commission (“SEC”) under Subpart 1300 of Regulation
S-K under the Securities Exchange Act of 1934, as amended “Subpart 1300”), although over $50 million in revenue from gold
has been extracted from its claims since 2015.
Incorporated
in 1959, Goldrich Mining Company (OTCQB trading symbol “GRMC”) has been a publicly traded company since October 9, 1970.
Our executive offices are located at 2525 E. 29th Ave. Ste. 10B-160, Spokane, WA 99223, and our phone number there is (509)
535-7367. Our website address is www.goldrichmining.com. Information contained on our website is not part of this annual report.
At
this time, our major mineral exploration prospects are contained within our wholly-owned Chandalar property, located approximately 190
air miles north of Fairbanks, Alaska. The property is largely on land owned by the State of Alaska, which is one of the active and highly
ranked mining jurisdictions in the world. Both patented federal mining claims and Alaska state mining claims provide exploration and
mining rights to lode and placer mineral deposits. A more detailed description of our Chandalar property is set forth in “Item
2 – Properties” of this Annual Report.
The
Chandalar property contains both our Chandalar hard-rock (lode) gold project, our primary target, and the Chandalar alluvial gold mine.
The area has a long prospecting and mining history dating to the discovery of placer gold deposits in 1905, soon followed by the discovery
of more than 30 separate high-grade lode gold mineralization prospects. Over the next 80 years the lode gold mineralization occurrences
were intermittently explored or mined by various small operators, but because of the district’s remote location the readily mineable
alluvial gold deposits received the most attention.
Although
there is a history of past lode and alluvial extraction on our Chandalar property, it currently does not contain any known proven or
probable ore reserves as defined in Subpart 1300. The probability that ore reserves that meet SEC Subpart 1300 guidelines will be discovered
on an individual hard rock prospect at Chandalar cannot be determined at this time. We commissioned an independent engineering firm to
complete a mining plan and initial assessment for the Company’s Chandalar placer mine, completed in June 2021, according to the
new amendments adopted by the SEC to modernize the property disclosure requirements for mining registrants as codified in Subpart 1300.
The new disclosure requirements under Subpart 1300 replaced the SEC Industry Guide 7, and mining registrants on January 1, 2021. The
new disclosure requirements under Subpart 1300 allow issuers to disclose inferred, indicated and measured resources as defined therein.
Subject to the findings of Company’s initial assessment, we will decide if a preliminary feasibility study should also be prepared
for the Chandalar placer mine. A preliminary feasibility study allows an issuer to disclose any proven or probable mineral reserves on
a mineral property.
The
ownership and management of Goldrich changed in 2003. Beginning in 2004, we ended a twenty-year hiatus of hard-rock exploration on the
property and began employing modern exploration techniques. Our focus is two-fold:
(1)
Continue exploration of our Chandalar property where we have discovered and identified drilling targets for a potentially large bulk
tonnage hard-rock intrusion-related gold deposit.
(2)
Continue gold extraction from the Chandalar placer gold deposit discovered on the property.
We
have spent many millions of dollars in exploration and mining activities at our Chandalar property. Some of the highlights include (see
details of highlights in the Properties section below):
2012:
As described below in Joint Venture Agreement, we signed an agreement with NyacAU to form a joint venture, Goldrich NyacAU
Placer, LLC (“GNP”) for the purpose of mining the alluvial gold deposits within the bounds of our Chandalar property.
2013:
Achievements included GNP’s mobilization of drilling equipment and plant setup, approval of permits to expand mining operations,
significant infrastructure improvements and extraction of 680 ounces of fine gold.
2014:
We conducted a property-wide airborne radiometric and magnetic survey to generate and further refine exploration targets for bulk-tonnage
low-grade mineralization and possible deeper sources of intrusion-related mineralization. We also completed advanced petrographic studies
of drill core samples from the Chandalar gold property. The new data refined the orogenic model that has historically guided exploration
at Chandalar and redirected our future exploration for intrusion-related mineralization.
2015:
We completed reclamation of a mine waste road built in 2010 and received a confirmation of completion and satisfaction from the Army
Corps of Engineers. GNP extracted approximately 3,600 ounces of fine gold.
2016:
GNP extracted approximately 8,200 ounces of fine gold.
2017:
We performed additional oxygen isotope studies to
further confirm intrusion-related mineralization. In addition, GNP completed a sonic drill program and
drilled 231 holes totaling 14,271 feet to further define the Chandalar placer deposit. GNP extracted approximately 12,300 ounces of fine
gold.
2018:
GNP extracted approximately 17,100 ounces of fine
gold.
2019
- 2021: GNP was dissolved in 2019 due to its inability to reach commercial production, and no mining activities were undertaken in
2019, 2020, and 2021.
Although
GNP extracted over 42,000 ounces of fine gold from 2013 to 2018, GNP failed to meet the minimum production requirements under the GNP
Operating Agreement. Goldrich began arbitration proceedings against NyacAU and certain NyacAU related parties in 2017 (see Joint
Venture Agreement and Arbitration below). GNP was dissolved in June 2019 and is in the late stages of
the process of liquidation. Except for equipment needed for reclamation, most of the heavy equipment and the wash plant were removed
in March through mid-April 2019. There was no gold extracted in 2019, 2020, and 2021. NyacAU is the holder of the mine permits
and began reclamation of the mine in 2019. NyacAU is responsible for future reclamation costs. Goldrich hired an independent mining engineering
firm in 2019 to formulate a mine plan and complete an initial assessment under Subpart 1300 to determine if Goldrich should pursue production
at the placer mine. The mine plan and initial assessment were completed in June 2021. Any plan to continue future mining is contingent
upon our success in raising sufficient capital to fund these activities or any portion of them (see Joint
Venture Agreement below for details of the GNP joint venture, arbitration activities and the joint venture’s pending liquidation).
Concerning
hard-rock exploration, although we are pleased with the progress that has been made, weak financial markets during the last several years
have been an important factor affecting the level of our exploration activities. If the placer mine enters into commercial production
(by Goldrich or a third-party operator), we look forward to potential internal cash flow and additional opportunities for financing that
will give us a unique advantage for growth over other junior mining exploration companies; however, finances must be obtained before
we can continue mining activities.
We
also intend to list our shares on a recognized stock exchange in Canada in addition to maintaining our quotation on the OTCQB in the
United States. We believe these factors will increase our access to financial markets and positively affect our ability to raise the
funds necessary to add value to our property and increase shareholder value. Our
main focus in the future will continue to be the exploration of the hard-rock targets of our Chandalar property as funds become available.
Competition
There
is aggressive competition within the minerals industry to discover and acquire mineral properties considered to have commercial potential.
We compete for the opportunity to participate in promising exploration projects with other entities. In addition, we compete with others
in efforts to obtain financing to acquire and explore mineral properties, acquire and utilize mineral exploration equipment and hire
qualified mineral exploration personnel.
We
may compete with other junior mining companies for mining claims in regions adjacent to our existing claims, or in other parts of the
world should we dedicate resources to doing so in the future. These companies may be better capitalized than us and we may have difficulty
in expanding our holdings through additional mining claims.
In
competing for qualified mineral exploration personnel, we may be required to pay compensation or benefits relatively higher than those
paid in the past, and the availability of qualified personnel may be limited in high-demand mining periods, such as have been experienced
during the increased price of gold in recent years.
Employees
In
October 2009, William Schara began employment as our President and Chief Executive Officer (“CEO”). We rely on consulting
contracts for some of our management and administrative personnel needs, including for our Chief Financial Officer (“CFO”),
Mr. Ted Sharp. The contract for Mr. Sharp expired on December 31, 2009, however, Mr. Sharp continues to provide services to the Company
under the same terms provided in the contract. We employ individuals and contractors on a seasonal basis to conduct exploration, mining
and other required company activities, mostly during the late spring through early fall months.
We
currently have 2 full-time employees; our CEO and Controller. We had as many as 23 part-time employees and contractors during 2011, 5
part-time employees and contractors during 2012, and one employee at the mine site for logistics and other company activities during
2013, 2014, 2015, and 2017. In addition to the employees of Goldrich, GNP had as many as 10 employees during 2012, 46 employees during
2013, 10 employees during 2014, 67 employees during 2015, 50 employees during 2016, 63 employees during 2017, and 61 employees in 2018.
Seasons
We
conduct exploration activities at Chandalar between late spring and early autumn. Access during that time is exclusively by airplane.
All fuel is supplied to the campsite by air transport. Access during winter months is by ice road, snowmobile and ski-plane. All heavy
supplies and equipment are brought in by trucking over the ice road from Coldfoot. Snow melt generally occurs toward the end of May,
followed by an intensive, though short, 90-day growing season with 24 hours of daylight and daytime temperatures that range from 60°
to 80° Fahrenheit. Freezing temperatures return in late August and freeze-up typically occurs by early October. Winter temperatures,
particularly in the lower elevations, can drop to -50° F or colder for extended periods. Annual precipitation is 15 to 20 inches,
coming mostly in late summer as rain and during the first half of the winter as snow. Winter snow accumulations are modest. The area
is essentially an arctic desert.
Regulation
Our
mineral exploration activities are subject to various federal, state, and local laws and regulations governing prospecting, exploration,
production, labor standards, occupational health and mine safety, control of toxic substances, land use, water use, land claims of local
people and other matters involving environmental protection and taxation. New rules and regulations may be enacted, or existing rules
and regulations may be applied in a manner that could limit or curtail exploration at our property. It is possible that future changes
in these rules or regulations could have a significant impact on our business, causing those activities to be economically re-evaluated
at that time.
Taxes
Pertaining to Mining
Alaska’s
tax and regulatory policy is widely viewed by the mining industry as offering the most favorable environment for establishing new mines
in the United States. The mining taxation regimes in Alaska have been stable for many years. There is regular discussion of taxation
issues in the legislatures but no changes have been proposed that would significantly alter their current state mining taxation structures.
The economics of any potential mining operation on our properties would be particularly sensitive to changes in the State of Alaska’s
tax regimes. Amendments to current laws, regulations and permits governing our operations and the general activities of mining and exploration
companies, or more stringent implementation thereof, could cause unanticipated increases in our exploration expenses, capital expenditures
or future production costs, or could result in abandonment or delays in establishing operations at our Chandalar property. Although management
has no reason to believe that new mining taxation laws that could adversely impact our Chandalar property will materialize, such an event
could and may happen in the future.
At
present, Alaska has a 7% net profits mining license tax on all mineral production (AS 43.65), a 3% net profits royalty on minerals from
state lands (AS 38.05.212) (where we hold unpatented state mining claims), and a graduated annual mining claim rental beginning at $1.03/acre.
Alaska state corporate income tax is 9.4% if net profit is more than a set threshold amount. Alaska has an exploration incentive credit
program (AS 27.30.010) whereby up to $20 million in approved accrued exploration credits can be deducted from the state mining license
tax, the state corporate income tax, and the state mining royalty. All qualified new mining operations are exempt from the mining license
tax for 3 1/2 years after production begins.
Environmental
Regulations
Our
Chandalar property contains an inactive small mining mill site on Tobin Creek with tailings impoundments, last used in 1983. The mill
was capable of processing 100 tons of ore per day. A total of 11,884 tons were put through the mill, and into two small adjacent tailings
impoundments. A December 19, 1990 letter from the Alaska Department of Environmental Conservation (the “Alaska DEC”) to the
Alaska Division of Mining of the Department of Natural Resources (the “Alaska DNR”) states: “Our samples indicate the
tailings impoundments meet Alaska DEC standards requirements and are acceptable for abandonment and reclamation.” The Alaska DNR
conveyed acknowledgement of receipt of this report to us in a letter dated December 24, 1990. We subsequently reclaimed the tailings
impoundments and expect that no further remedial action will be required. Vegetation has established itself on the tailings impoundments,
thereby mitigating erosional forces.
In
1990, the Alaska DEC notified us that soil samples taken from a gravel pad adjacent to our Tobin Creek mill site contained elevated levels
of mercury. In response to the notification, we engaged a professional mineral engineer to evaluate procedures for remediating contamination
at the site. In 1994, the engineer evaluated the contamination and determined that it consists of approximately 160 cubic yards of earthen
material that could be cleansed by processing it through a simple gravity washing plant. This plan was subsequently approved by the state.
In 2000, the site was listed in the Alaska DEC’s contaminated sites database as a “medium” priority contaminated site.
We are not aware of any changes in state environmental laws that would affect our state approved cleanup plan or impose a timetable for
it to be done. During 2008, our employees took a suite of samples at the contamination site to update the readings taken in 1990 or prior.
The results of this sampling reconfirmed the earlier findings, and also suggest that some attenuation of the mercury contamination has
occurred. An independent technical consultant assessed those results and believes that proper procedures for sampling and testing were
followed. During 2011, 2013 and 2014, we took additional samples that showed an overall reduction of mercury in the previously sampled
area. However, one sample on the margin of the sampled area yielded high mercury content, and that may necessitate continued expansion
of the area to be sampled in the future. The 2011, 2013 and 2014 sample results were submitted to the State for analysis and determination
of what additional sampling the State may require on the area around the mill. In 2013, we received a letter request from the Alaska
DEC to update our plan for remediating the contaminated site and in 2014, 2015, and 2016 continued communication with the Alaska DEC
to determine what remediation is necessary. We have engaged an independent environmental engineering company to perform an evaluation
of the remediation requirements based on locality, latitude, altitude, permafrost and other factors. During 2017, the environmental engineering
company performed an eco-scoping study on the site. The Alaska DEC has notified us that further sampling will need to be performed in
and around the streambed from the mine site to the stream’s confluence into Chandalar Lake. At December 31, 2021, we have an accrued
liability of $100,000 in our financial statements for sampling and remediation costs.
ITEM
1A. RISK FACTORS
The
following sets forth certain risks and uncertainties that could have a material adverse effect on our business, financial condition and/or
results of operations, and the trading price of our common stock which may decline and investors may lose all or part of their investment.
These risk factors should be considered along with the forward-looking statements contained in this Annual Report on Form 10-K because
these factors could cause our actual results or financial condition to differ materially from those projected in forward-looking statements.
Additional risks and uncertainties that we do not presently know or that we currently deem immaterial also may impair our business operations.
We cannot assure you that we will successfully address these risks or that other unknown risks exist that may affect our business.
Risks
Related to Our Operations
Our
ability to operate as a going concern is in doubt.
The
audit opinion and notes that accompany our consolidated financial statements for the year ended December 31, 2021, disclose a ‘going
concern’ qualification to our ability to continue in business. The accompanying consolidated financial statements have been prepared
under the assumption that we will continue as a going concern. We are an exploration stage company and we have incurred losses since
our inception. We do not have sufficient cash to fund normal operations and meet debt obligations for the next 12 months without deferring
payment on certain current liabilities and raising additional funds. During the year ended December 31, 2021, we raised $447,000 net
cash from senior secured notes payable to third-party and related-party persons, as described elsewhere, and $347,414 in warrant exercises,
as described elsewhere. We believe that the going concern condition cannot be removed with confidence until the Company has entered into
a business climate where funding of its activities is more assured.
We
currently have no historical recurring source of revenue and our ability to continue as a going concern is dependent on our ability to
raise capital to fund our future exploration and working capital requirements or our ability to profitably execute our business plan.
Our plans for the long-term return to and continuation as a going concern include financing our future operations through sales of our
common stock and/or debt and the eventual profitable exploitation of our mining properties. Additionally, the current capital markets
and general economic conditions in the United States are significant obstacles to raising the required funds. These factors raise substantial
doubt about our ability to continue as a going concern.
GNP
was dissolved in 2019 and is now in the process of liquidation. We are seeking to raise sufficient capital to continue profitably operating
the mine. The current plant has been disassembled and it, as well as most of the equipment used by GNP, has been demobilized from the
mine site. While we are working to replace the dissolved GNP operations with commensurate gold extraction by us or a qualified third-party
operator, we cannot assure you we will have sufficient capital to implement our plan of operation, that we will be successful in beginning
gold extraction operations in the future, the timing for any such operations or that the extraction results in future years will be similar
to past results.
The
consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as
a going concern. If the going concern basis were not appropriate for these financial statements, adjustments would be necessary in the
carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.
We
have a history of losses and expect to continue to incur losses in the future.
We
have incurred losses since inception, with the exception of the year ended December 31, 2015, and expect to continue to incur losses
in the future. We had net income of $50,163 in the year ended 2015, but we incurred net losses during each of the following more recent
periods:
| ● | $1,759,159
for the year ended December 31, 2021; |
| ● | $2,169,540
for the year ended December 31, 2020; |
| ● | $2,603,065
for the year ended December 31, 2019; and |
| ● | $3,779,949
for the year ended December 31, 2018. |
We
had an accumulated deficit of approximately $39.4 million as of December 31, 2021. We expect to continue to incur losses unless and until
such time as the Chandalar Mine or one of our properties enters into commercial production and generates sufficient revenues to fund
continuing operations. We recognize that if we are unable to generate significant revenues from mining operations and dispositions of
our properties, we will not be able to earn profits or continue operations. At this early stage of our operation, we also expect to face
the risks, uncertainties, expenses and difficulties frequently encountered by companies at the start up stage of their business development.
We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so could have a materially
adverse effect on our financial condition.
We
may be unable to timely pay our obligations under our outstanding note payable in gold or our secured senior secured notes, which may
result in us losing some of our rights to gold from Chandalar alluvial extraction operations and may adversely affect our assets, results
of operations and future prospects.
At
December 31, 2021, a portion of the Company’s notes payable in gold outstanding, with a net liability of $481,780, obligate the
Company to deliver 266.788 ounces of fine gold on demand. To date, the gold notes have not been paid and the note holders have not demanded
payment or delivery of gold. These notes are secured against our right to future distributions of gold extracted from subsequent gold
mining operations. At December 31, 2021, we owed secured senior notes to related parties totaling $4,064,211 and outstanding notes payable
to unrelated parties of $1,088,421, payable within 10 days of a demand notice of the holders. There has been no notice of default or
demand issued by any holder. These notes are secured against all of the assets and property of each of Goldrich Mining Company and Goldrich
Placer, LLC, whether real, personal or mixed, in which the holders of any Notes (or their Collateral Agent) hold a security interest
at such time, including any property subject to liens or security interest granted by the Deed of Trust.
Under
our gold forward sales contracts, each of the following constitutes an event of default: (a) our failure to perform or observe any term,
covenant or agreement contained in the gold forward sales contract; (b) any warranty made by us in the gold forward sales contract shall
prove to have been incorrect in a material respect when made; or (c) we shall declare bankruptcy. Upon the occurrence of an event of
default, the holders of the gold forward sales contracts may designate a termination date for the contract and upon termination receive
the delivery date index price (as determined in the gold forward sales contract) of any quantities of gold we were deficient in delivering
payable in either (i) cash or (ii) an amount of our shares of common stock equal such value converted into shares at the greater of $0.15
per share or 75% of the current market price per share on the delivery date.
Under
our senior secured notes, each of the following constitutes an event of default: (a) the Company fails to pay (i) any portion of the
principal amount of any Note when due or (ii) any accrued and unpaid Interest when due and such failure continues for three (3) Business
Days or (iii) any other amount that is due and payable under this Amended Agreement, any Note, or the Deed of Trust and such failure
continues for ten (10) Business Days after demand for such payment is made by the Holder; (b) the Company fails to observe or perform
any other obligation, covenant, or agreement applicable to the Company under this Amended Agreement as and when due and fails to cure
such failure within 10 Business Days of notice of such failure by the holder to the Company; (c) the Company fails to observe or perform
any covenant or agreement applicable under the Guaranty and fails to cure such failure within 10 Business Days of notice of such failure
by the holder to the Company; (d)an insolvency or liquidation proceeding or assignment is commenced with respect to the Company or its
subsidiary; or (e) any alleged creditor other than the holders seeks to collect any amount allegedly due and owing to said creditor at
that time.
If
we are unable to timely satisfy our obligations under the notes payable in gold or the secured senior notes, including timely payment
of gold on demand or interest when due and payment of the principal amount on demand for the secured senior notes and we are not able
to re-negotiate the terms of such agreements, the holders will have rights against us, including potentially seizing or selling our assets.
The notes payable in gold are specifically secured against our right to future gold distributions from subsequent gold mining operations.
The senior secured notes are secured against all our assets. Any failure to timely meet our obligations under these instruments may adversely
affect our assets, results of operations and future prospects or cause us to declare bankruptcy.
We
have entered into arbitration with our joint venture partner.
In
2017, we, our subsidiary and the joint venture, as claimants, filed an arbitration statement of claim before a three-member Arbitration
Panel (“the Panel”), against our JV partner and its affiliates; NyacAU, LLC (“NyacAU”), BEAR Leasing, LLC, and
Dr. J. Michael James, as respondents. In 2018, the respondents filed a counter-claim against the Company, its subsidiaries and certain
members of our current and former management, the counterclaim respondents. Since 2019 and through the date of this report, the Panel
has released various awards relating to the allegations of both parties. Some of which have been in favor of our positions some have
been in favor of our JV partner and its affiliates. Under the terms of the Operating Agreement, both partners are required to abide by
the rulings proceeding from the arbitration Panel. The arbitration is ongoing and the various parties to the claims and counterclaims
continue to disagree on several matters.
On
May 25, 2019, the Panel issued an Interim Award, which requested input from the parties on a small number of discrete issues, all
input to be supported by references to the arbitration record. On November 30, 2019, the Panel issued the Partial Final Award and concurrently
the Second Interim Award RE Dissolution/Liquidation of GNP and Related Issues (“the Second Interim Award”). On September
4, 2020, the Arbitration Panel (the “Panel”) issued the Final Post Award Orders, wherein the Panel issued rulings on multiple
material issues. On December 4, 2020, the Panel issued Supplemental Orders 5-8, wherein the Panel issued rulings on multiple material
issues. Subsequent to the year ended December 31, 2020, on April 7, 2021, the Panel issued Order on Respondents’ Motion to Preserve
Confidentiality of Arbitration Proceedings, wherein the Panel ruled that the Company did not violate confidentiality when it filed the
arbitration rulings as exhibits to its public reporting with the Securities and Exchange. On April 7, 2021, the Panel also issued Order
on Respondents’ Motion to Confirm Judgment wherein the Panel issued rulings to clarify, modify, or correct an award made in the
Partial Final Award. On August 30, 2021, the Panel also issued Second Partial Final Award and Modified Second Interim Award re Dissolution/Liquidation
of GNP and Related Issues. A summary of each award is provided below in the Item 2: Properties section under Arbitration.
The
arbitration has settled many matters, but remains open to accommodate the final activities of liquidation and winding up of GNP. We are
working with NyacAU to settle the remaining issues and awards.
GNP
is in liquidation.
NyacAU
filed the formal Notice of Dissolution in May 2019 and received the certificate of dissolution in July with an effective date of June
3, 2019. GNP has been in the liquidation process (see Joint Venture Agreement and Arbitration below). The Panel ruled that NyacAU should
continue as the manager of the liquidation. Except for equipment needed for reclamation, most of the heavy equipment and the wash plant
were removed on a winter trail in March through mid-April 2019. The Panel has jurisdiction over the liquidation process. The arbitration
is ongoing and the various parties to the claims and counterclaims continue to disagree on several matters. The Panel may or may not
rule in our favor.
We
are required to raise additional capital to fund our exploration and, if warranted, development and production programs on the Chandalar
property.
We
are an exploration stage company and currently do not have sufficient capital to fully fund any long-term plan of operation at the Chandalar
gold property. We will require additional financing in the future to fund exploration of and development and production on our properties,
if warranted, to attain self-sufficient cash flows. We expect to obtain financing through various means including, but not limited to,
private or public placement offerings of debt or our equity securities, the exercise of outstanding warrants, the sale of a production
royalty, the sales of gold from future production, joint venture agreements with other mining companies, or a combination of the above.
The level of additional financing required in the future will depend on the results of our exploration work and recommendations of our
management and consultants. Failure to obtain sufficient financing may result in delaying or indefinite postponement of exploration or
even a loss of some property interest. Additional capital or other types of financing may not be available if needed or, if available,
may not be available on favorable terms or terms acceptable to us. Failure to raise such needed financing could result in us having to
discontinue our mining and exploration business.
We
have only a brief, recent history of gold extraction.
We
have only a brief recent history of gold extraction from 2013-2018 and have carried on our business at a loss. As a result of dissolution
of GNP, the current plant has been disassembled and it, as well as most of the equipment used by GNP, has been demobilized from the mine
site. While we are working to replace the GNP operations with commensurate gold extraction by us or a qualified third-party operator,
we cannot assure you that similar results will be accomplished in future years. At this time, due to the risks and uncertainties described
in this section, we cannot assure you that extraction activities in the future will generate revenues, profits or cash flow to us.
Estimates
of cash flows, extraction costs, profitability and other financial and extraction measurements are subject to the inherent risks related
to accurately forecasting extraction.
Estimates
of future extraction costs and potential extraction profitability are dependent on numerous factors, which could affect the success and
profitability of extraction activities. These risks include volatile gold prices, engineering and construction errors, changes or shortages
in equipment and labor availability and costs, variances in grade, natural disasters and other events outside our control. The occurrence
of such events could make anticipated results differ from actual results and could negatively affect our financial position.
We depend
largely on a single property - the Chandalar property.
Our
major mineral property at this time is the Chandalar property. We are dependent upon making a gold deposit discovery at Chandalar for
the furtherance of the Company at this time. Should we be able to make an economic find at Chandalar, we would then be solely dependent
upon a single mining operation for our revenue and profits, if any.
Chandalar
is located within the remote Arctic Circle region and exploration and, if warranted, development and production activities may be limited
by climate and location.
While
we have conducted test mining and minor gold mining extraction in recent years, our current focus remains on exploration of our Chandalar
property. With our current infrastructure at Chandalar, the arctic climate limits exploration activities to a summer field season that
generally starts in early May and lasts until freeze-up in mid-September. The remote location of the Chandalar property limits access
and increases exploration expenses. Costs associated with such activities are estimated to be between 25% and 50% higher than costs associated
with similar activities in the lower 48 states in the United States. Transportation and availability of qualified personnel is also limited
because of the remote location. Higher costs associated with exploration activities and limitations for the annual periods in which we
can carry on exploration activities will increase the costs and time associated with our planned activities and could negatively affect
the value of our property and securities.
Our
resource estimate at Chandalar is based on a limited amount of drilling completed to date.
We
commissioned an independent engineering firm to complete a mining plan and initial assessment (“IA”) for the Chandalar Alluvial
Gold Deposit on our Chandalar property according to the new amendments adopted by the SEC to modernize the property disclosure requirements
for mining registrants as codified in Subpart 1300. The IA was completed in June 2021. The IA is based on a limited amount of drilling
completed during 2007, 2013, and 2017. These estimates have a high degree of uncertainty. While we plan on conducting further drilling
programs on the deposit, we cannot guarantee that the results of future drilling will return similar results or that our current estimate
of resources will ever be established as proven and probable reserves as defined in the new SEC regulations in Subpart 1300. Any gold
resources that may be discovered at Chandalar through our drilling programs may be of insufficient quantities to justify commercial operations.
Our
exploration activities may not result in commercially successful mining operations.
Our
operations are focused on mineral exploration, which is highly speculative in nature, involves many risks and is frequently non-productive.
Unusual or unexpected geologic formations and the inability to obtain suitable or adequate machinery, equipment or labor are risks involved
in the conduct of exploration programs. The focus of our current exploration plans and activities is conducting mineral exploration and
deposit definition drilling at Chandalar. The success of this gold exploration is determined in part by the following factors:
| ● | identification
of potential gold mineralization based on analysis; |
| ● | availability
of government-granted exploration permits; |
| ● | the
quality of our management and our geological and technical expertise; and |
| ● | capital
available for exploration. |
Substantial
expenditures are required to establish proven and probable reserves through drilling and analysis, to determine metallurgical processes
to extract metal, and to establish commercial mining and processing facilities and infrastructure at any site chosen for mining. Whether
a mineral deposit at Chandalar would be commercially viable depends on a number of factors, which include, without limitation, the particular
attributes of the deposit, such as size, grade and proximity to infrastructure; metal prices, which fluctuate widely; and government
regulations, including, without limitation, regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting
of minerals and environmental protection. Any gold resources that may be discovered at Chandalar may be of insufficient quantities to
justify commercial operations.
Actual
capital costs, operating costs, extraction and economic returns may differ significantly from those anticipated and there are no assurances
that any future development activities will result in profitable mining operations.
We
have limited operating history on which to base any estimates of future operating costs related to any future development of our properties.
Capital and operating costs, extraction and economic returns, and other estimates contained in pre-feasibility or feasibility studies
may differ significantly from actual costs, and there can be no assurance that our actual capital and operating costs for any future
development activities will not be higher than anticipated or disclosed.
Mining
and Exploration activities involve a high degree of risk.
Our
operations on our properties will be subject to all the hazards and risks normally encountered in the mining of and exploration for deposits
of gold. These hazards and risks include, without limitation, unusual and unexpected geologic formations, seismic activity, rock bursts,
pit-wall failures, cave-ins, flooding and other conditions involved in the drilling and removal of material, any of which could result
in damage to, or destruction of, mines and other producing facilities, damage to life or property, environmental damage and legal liability.
Milling operations, if any, are subject to various hazards, including, without limitation, equipment failure and failure of retaining
dams around tailings disposal areas, which may result in environmental pollution and legal liability.
The
parameters that would be used at our properties in estimating possible mining and processing efficiencies would be based on the testing
and experience our management has acquired in operations elsewhere. Various unforeseen conditions can occur that may materially affect
estimates based on those parameters. In particular, past mining operations at Chandalar indicate that care must be taken to ensure that
proper mineral grade control is employed and that proper steps are taken to ensure that the underground mining operations are executed
as planned to avoid mine grade dilution, resulting in uneconomic material being fed to the mill. Other unforeseen and uncontrollable
difficulties may occur in planned operations at our properties that could lead to failure of the operation.
If
we decide to exploit our Chandalar property and build a large gold mining operation based on existing or additional deposits of gold
mineralization that may be discovered and proven, we plan to process the resource using technology that has been demonstrated to be commercially
effective at other geologically similar gold deposits elsewhere in the world. These techniques may not be as efficient or economical
as we project, and we may never achieve profitability.
Increased
costs could affect our financial condition.
We
anticipate that costs at our projects that we may explore or develop, will frequently be subject to variation from one year to the next
due to a number of factors, such as changing ore grade, metallurgy and revisions to mine plans, if any, in response to the physical shape
and location of the ore body. In addition, costs are affected by the price of commodities such as fuel, rubber, and electricity. Such
commodities are at times subject to volatile price movements, including increases that could make extraction at certain operations less
profitable. A material increase in costs at any significant location could have a significant effect on our profitability.
A
shortage of equipment and supplies could adversely affect our ability to operate our business.
We
are dependent on various supplies and equipment to carry out our mining exploration and, if warranted, development and production operations.
The shortage of such supplies, equipment and parts could have a material adverse effect on our ability to carry out our operations and
therefore limit or increase the cost of reaching production.
We
may be adversely affected by a decrease in gold prices.
The
value and price of our securities, our financial results, and our exploration activities may be significantly adversely affected by declines
in the price of gold and other precious metals. Gold prices fluctuate widely and are affected by numerous factors beyond our control
such as interest rates, exchange rates, inflation or deflation, fluctuation in the relative value of the United States dollar against
foreign currencies on the world market, global and regional supply and demand for gold, and the political and economic conditions of
gold producing countries throughout the world. The price for gold fluctuates in response to many factors beyond anyone’s ability
to predict. The prices that would be used in making any economic assessment estimates of resources or reserves on our properties would
be disclosed and would probably differ from daily prices quoted in the news media. Percentage changes in the price of gold cannot be
directly related to any estimated resource quantities at any of our properties, as they are affected by a number of additional factors.
For example, a ten percent change in the price of gold may have little impact on any estimated quantities of resources or reserves at
Chandalar and would affect only the resultant cash flow. Because any future mining at Chandalar would occur over a number of years, it
may be prudent to continue mining for some periods during which cash flows are temporarily negative for a variety of reasons, including
a belief that a low price of gold is temporary and/or that a greater expense would be incurred in temporarily or permanently closing
a mine there. Resource or reserve calculations and life-of-mine plans, if any, using significantly lower gold and precious metal prices
could result in material write-downs of our investments in mining properties and increased reclamation and closure charges.
In
addition to adversely affecting any of our resource or reserve estimates and its financial aspects, declining metal prices may impact
our operations by requiring a reassessment of the commercial feasibility of a particular project. Such a reassessment may be the result
of a management decision related to a particular event, such as a cave-in of a mine tunnel or open pit wall. Even if any of our projects
may ultimately be determined to be economically viable, the need to conduct such a reassessment may cause substantial delays in establishing
operations or may interrupt on-going operations, if any, until the reassessment can be completed.
Title
to our properties may be defective.
We
hold certain interests in our Chandalar property in the form of State of Alaska unpatented mining claims. We hold no interest in any
unpatented U.S. federal mining claims at Chandalar or elsewhere. Alaska state unpatented mining claims are unique property interests,
in that they are subject to the paramount title of the State of Alaska, and rights of third parties to uses of the surface within their
boundaries, and are generally considered to be subject to greater title risk than other real property interests. The rights to deposits
of minerals lying within the boundaries of the unpatented state claims are subject to Alaska Statues 38.05.185 – 38.05.280, and
are governed by Alaska Administrative Code 11 AAC 86.100 – 86.600. The validity of all State of Alaska unpatented mining claims
is dependent upon inherent uncertainties and conditions. These uncertainties relate to matters such as:
| ● | The
existence and sufficiency of a discovery of valuable minerals; |
| ● | Proper
posting and marking of boundaries in accordance with state statutes; |
| ● | Making
timely payments of annual rentals for the right to continue to hold the mining claims in
accordance with state statutes; |
| ● | Whether
sufficient annual assessment work has been timely and properly performed and recorded; and |
| ● | Possible
conflicts with other claims not determinable from descriptions of records. |
The
validity of an unpatented mining claim also depends on: (1) the claim having been located on Alaska state land open to appropriation
by mineral location, which is the act of physically going on the land and making a claim by putting corner stakes in the ground; (2)
compliance with all applicable state statutes in terms of the contents of claim location notices or certificates and the timely filing
and recording of the same; (3) timely payment of annual claim rental fees; and (4) the timely filing and recording of proof of annual
assessment work. In the absence of a discovery of valuable minerals, the ground covered by an unpatented mining claim is open to location
by others unless the owner is in actual possession of and diligently working the claim. We are diligently working and are in actual possession
of all of our mining claims comprising our Chandalar, Alaska property. The unpatented state mining claims we own or control there may
be invalid, or the title to those claims may not be free from defects. In addition, the validity of our claims may be contested by the
Alaska state government or challenged by third parties.
Title
to our property may be subject to other claims.
There
may be valid challenges to the title to properties we own or control that, if successful, could impair our exploration activities on
them. Title to such properties may be challenged or impugned due to unknown prior unrecorded agreements or transfers or undetected defects
in titles.
A
major portion of our mineral rights on our flagship Chandalar property consists of “unpatented” lode mining claims created
and maintained on deeded state lands in accordance with the laws governing Alaska state mining claims. We have no unpatented mining claims
on federal land in the Chandalar mining district, but do have unpatented state mining claims. Unpatented mining claims are unique property
interests, and are generally considered to be subject to greater title risk than other real property interests because the validity of
unpatented mining claims is often uncertain. This uncertainty arises, in part, out of complex federal and state laws and regulations.
Also, unpatented mining claims are always subject to possible challenges by third parties or validity contests by the federal and state
governments. In addition, there are few public records that definitively determine the issues of validity and ownership of unpatented
state mining claims.
We
have attempted to acquire and maintain satisfactory title to our Chandalar mining property, but we do not normally obtain title opinions
on our properties in the ordinary course of business, with the attendant risk that title to some or all segments our properties, particularly
title to the State of Alaska unpatented mining claims, may be defective. We do not carry title insurance on our patented mining claims.
Estimates
of resources and reserves are subject to evaluation uncertainties that could result in project failure.
Our
exploration and future mining operations, if any, are and would be faced with risks associated with being able to accurately predict
the quantity and quality of resources or reserves within the earth using statistical sampling techniques. Estimates of any resources
or reserves on any of our properties would be made using samples obtained from appropriately placed trenches, test pits and underground
workings and intelligently designed drilling. There is an inherent variability of assays between check and duplicate samples taken adjacent
to each other and between sampling points that cannot be reasonably eliminated. Additionally, there also may be unknown geologic details
that have not been identified or correctly appreciated at the current level of accumulated knowledge about our Chandalar property. This
could result in uncertainties that cannot be reasonably eliminated from the process of estimating resources or reserves. If these estimates
were to prove to be unreliable, we could implement a plan that may not lead to commercially viable operations in the future.
Government
regulation may adversely affect our business and planned operations.
Our
mineral exploration activities are subject to various laws governing prospecting, mining, development, production, taxes, labor standards
and occupational health, mine safety, toxic substances, land use, water use, land claims of local residents and other matters in the
United States. New rules and regulations may be enacted or existing rules and regulations may be applied in a manner that could limit
or curtail exploration at our Chandalar property. The economics of any potential mining operation on our properties would be particularly
sensitive to changes in the federal and State of Alaska’s tax regimes.
The
generally favorable State of Alaska tax regime could be reduced or eliminated. Such an event could materially hinder our ability to finance
the future exploitation of any gold deposit we might prove-up at Chandalar, or elsewhere on State of Alaska lands. Amendments to current
laws, regulations and permits governing our operations and the general activities of mining and exploration companies, or more stringent
implementation thereof, could cause unanticipated increases in our exploration expenses, capital expenditures or future extraction or
production costs, or could result in abandonment or delays in establishing operations at our Chandalar property.
Our
activities are subject to environmental laws and regulation that may materially adversely affect our future operations, in which case
our operations could be suspended or terminated.
We
are subject to a variety of federal, state and local statutes, rules and regulations in connection with our exploration activities. We
are required to obtain various governmental permits to conduct exploration at and development of our property. Obtaining the necessary
governmental permits is often a complex and time-consuming process involving numerous federal, state and local agencies. The duration
and success of each permitting effort is contingent upon many variables not within our control. In the context of permitting, including
the approval of reclamation plans, we must comply with known standards, existing laws, and regulations that may entail greater or lesser
costs and delays depending on the nature of the activity to be permitted and the interpretation of the laws and regulations implemented
by the permitting authority. The failure to obtain certain permits or the adoption of more stringent permitting requirements could have
a material adverse effect on our business, plans of operation, and property in that we may not be able to proceed with our exploration
programs. Compliance with statutory environmental quality requirements may require significant capital investments, significantly affect
our earning power, or cause material changes in our intended activities. Environmental standards imposed by federal, state, or local
governments may be changed or become more stringent in the future, which could materially and adversely affect our proposed activities.
As a result of these matters, our operations could be suspended or cease entirely.
Mineral
exploration and mining are subject to potential risks and liabilities associated with pollution of the environment and the disposal of
waste products occurring as a result of mineral exploration and production. Insurance against environmental risk (including potential
liability for pollution or other hazards as a result of the disposal of waste products occurring from exploration and production) is
not generally available to us (or to other companies in the minerals industry) at a reasonable price. To the extent that we become subject
to environmental liabilities, the remediation of any such liabilities would reduce funds otherwise available to us and could have a material
adverse effect on our financial condition. Laws and regulations intended to ensure the protection of the environment are constantly changing
and are generally becoming more restrictive.
Federal
legislation and regulations adopted and administered by the U.S. Environmental Protection Agency, Forest Service, Bureau of Land Management
(“BLM”), Fish and Wildlife Service, Mine Safety and Health Administration, and other federal agencies, and legislation such
as the Federal Clean Water Act, Clean Air Act, National Environmental Policy Act, Endangered Species Act, and Comprehensive Environmental
Response, Compensation, and Liability Act, have a direct bearing on U.S. exploration and mining operations within the United States.
These regulations will make the process for preparing and obtaining approval of a plan of operations much more time-consuming, expensive,
and uncertain. Plans of operation will be required to include detailed baseline environmental information and address how detailed reclamation
performance standards will be met. In addition, all activities for which plans of operation are required will be subject to review by
the BLM, which must make a finding that the conditions, practices or activities do not cause substantial irreparable harm to significant
scientific, cultural, or environmental resource values that cannot be effectively mitigated.
U.S.
federal initiatives are often administered and enforced through state agencies operating under parallel state statutes and regulations.
Although some mines continue to be approved in the United States, the process is increasingly cumbersome, time-consuming, and expensive,
and the cost and uncertainty associated with the permitting process could have a material effect on exploring and mining our properties.
Compliance with statutory environmental quality requirements described above may require significant capital investments, significantly
affect our earning power, or cause material changes in our intended activities. Environmental standards imposed by federal, state, or
local governments may be changed or become more stringent in the future, which could materially and adversely affect our proposed activities.
As a result of these matters, our operations could be suspended or cease entirely.
At
this time, our Chandalar property does not include any federal lands and therefore we do not file plans of operations with the BLM. However,
we are subject to obtaining watercourse diversion permits from the U.S. Army Corp of Engineers.
Land
reclamation requirements for our properties may be burdensome and expensive.
Although
variable depending on location and the governing authority, land reclamation requirements are generally imposed on mineral exploration
companies (as well as companies with mining operations) in order to minimize long term effects of land disturbance.
Reclamation
may include requirements to:
| ● | control
dispersion of potentially deleterious effluents; and |
| ● | reasonably
re-establish pre-disturbance land forms and vegetation. |
In
order to carry out reclamation obligations imposed on us in connection with our potential development activities, we must allocate financial
resources that might otherwise be spent on further exploration and development programs. We plan to set up a provision for our reclamation
obligations on our properties, as appropriate, but this provision may not be adequate. If we are required to carry out unanticipated
reclamation work, our financial position could be adversely affected.
Future
legislation and administrative changes to the mining laws could prevent us from exploring and operating our properties.
New
local, state and U.S. federal laws and regulations, amendments to existing laws and regulations, administrative interpretation of existing
laws and regulations, or more stringent enforcement of existing laws and regulations, could have a material adverse impact on our ability
to conduct exploration and mining activities. Any change in the regulatory structure making it more expensive to engage in mining activities
could cause us to cease operations. We are at this time unaware of any proposed Alaska state or U.S. federal laws and regulations that
would have an adverse impact on the future of our Alaska mining properties.
Regulations
and pending legislation governing issues involving climate change could result in increased operating costs, which could have a material
adverse effect on our business.
A
number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to various climate change
interest groups and the potential impact of climate change. Legislation and increased regulation regarding climate change could impose
significant costs on us, our venture partners and our suppliers, including costs related to increased energy requirements, capital equipment,
environmental monitoring and reporting and other costs to comply with such regulations. Any adopted future climate change regulations
could also negatively impact our ability to compete with companies situated in areas not subject to such limitations. Given the political
significance and uncertainty around the impact of climate change and how it should be dealt with, we cannot predict how legislation and
regulation will affect our financial condition, operating performance and ability to compete. Furthermore, even without such regulation,
increased awareness and any adverse publicity in the global marketplace about potential impacts on climate change by us or other companies
in our industry could harm our reputation. The potential physical impacts of climate change on our operations are highly uncertain and
would be particular to the geographic circumstances in areas in which we operate. These may include changes in rainfall and storm patterns
and intensities, water shortages, changing sea levels and changing temperatures. These impacts may adversely impact the cost, production
and financial performance of our operations.
We
do not insure against all risks.
Our
insurance policies will not cover all the potential risks associated with our operations. We may also be unable to maintain insurance
coverage to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate
to cover any resulting liability. Moreover, insurances against risks such as environmental pollution or other hazards as a result of
exploration and production are not generally available to us or to other companies in the mining industry on acceptable terms. We might
also become subject to liability for pollution or other hazards for which we may not be insured against or for which we may elect not
to insure against because of premium costs or other reasons. Losses from these events may cause us to incur significant costs that could
have a material adverse effect upon our financial condition and results of operations.
We
compete with larger, better capitalized competitors in the mining industry.
The
mining industry is acutely competitive in all of its phases. We face strong competition from other mining companies in connection with
the acquisition of exploration stage properties, or properties capable of producing precious metals. Many of these companies have greater
financial resources, operational experience and technical capabilities than us. As a result of this competition, we may be unable to
maintain or acquire attractive mining properties on terms we consider acceptable or at all. Consequently, our revenues, operations and
financial condition and possible future revenues could be materially adversely affected by actions by our competitors. At our property
at Chandalar, Alaska, we face no other competitors at this time.
We
may experience cybersecurity threats.
We
rely on secure and adequate operations of information technology systems in the conduct of our operations. Access to and security of
the information technology systems are critical to our operations. Given that cyber risks cannot be fully mitigated and the evolving
nature of these threats, we cannot assure that our information technology systems are fully protected from cybercrime or that the systems
will not be inadvertently compromised, or without failures or defects. Potential disruptions to our information technology systems, including,
without limitation, security breaches, power loss, theft, computer viruses, cyber-attacks, natural disasters, and noncompliance by third
party service providers and inadequate levels of cybersecurity expertise and safeguards of third party information technology service
providers, may adversely affect our operations as well as present significant costs and risks including, without limitation, loss or
disclosure of confidential, proprietary, personal or sensitive information and third party data, material adverse effect on its financial
performance, compliance with its contractual obligations, compliance with applicable laws, damaged reputation, remediation costs, potential
litigation, regulatory enforcement proceedings and heightened regulatory scrutiny.
Newly
adopted rules regarding mining property disclosure by companies reporting with the SEC may result in increased operating and legal costs.
On
October 31, 2018, the SEC adopted new rules to modernize mining property disclosure in reports filed with the SEC in order to harmonize
SEC disclosure requirements with international standards. These rules became effective in the Company’s fiscal year beginning on
January 1, 2021. The new rules are codified in subpart 1300 of Regulation S-K under the Securities Exchange Act of 1934, as amended (“Subpart
1300”). The new rules may require the preparation and filing of technical reports on the Company’s properties on a more frequent
basis than the Company’s historical practice. Such changes to the Company’s reporting requirements and the preparation of
technical reports and assessments could result in increased compliance costs. The Company completed an initial assessment on its Chandalar
property in 2021 in compliance with the new rules.
Risks
related to the Company
We
are dependent on our key personnel.
Our
success depends in a large part on our key executives: William Schara, our President and CEO, and Ted Sharp, our Corporate Secretary
and CFO. The loss of their services could have a material adverse effect on us. Mr. Sharp is a licensed Certified Public Accountant and
an independent contractor, with business management and consulting interests that are independent of the consulting agreement he currently
has in place with the Company—he is not an employee of the Company.
At
such time as we again undertake mineral exploration activities, we will need to fill positions such as Vice President of Exploration,
Vice President of Operations and Chandalar Project Manager with persons possessing requisite skills. Our ability to manage our mineral
exploration activities at our Chandalar gold property or other locations where we may acquire mineral interests will depend in large
part on the efforts of these individuals. We may face competition for qualified personnel, and we may not be able to attract and retain
such personnel.
Certain
of our executive officers do not dedicate 100% of their time on our business.
William
V. Schara, our CEO, devotes 100% of his time to company business. Ted Sharp, our CFO, provides services under a consulting arrangement,
which permits him to provide services to other companies. Mr. Sharp dedicates approximately 20% of his business time to Goldrich, and
currently provides consulting services to a variety of small business clients, which may detract from the time Mr. Sharp can spend on
our business. Mr. Sharp often conducts business remotely by internet communication. In the event of a failure of laptop or telecommunications,
or at times of internet connection disruption, Mr. Sharp’s ability to communicate with other company personnel or conduct company
transactions may be obstructed.
Our
officers and directors may have potential conflicts of interest due to their responsibilities with other entities.
The
officers and directors of the Company serve as officers and/or directors of other companies in the mining industry, which may create
situations where the interests of the director or officer may become conflicted. The consulting arrangement of Mr. Sharp allows him to
provide services to other companies. The companies to which Mr. Sharp provides services may be potential competitors with the Company
at some point in the future. The directors and officers owe the Company fiduciary duties with respect to any current or future conflicts
of interest.
Risks
related to our Common Stock
The
market for our common stock has been volatile in the past and may be subject to fluctuations in the future.
The
market price of our common stock has ranged from a high of $0.095 and a low of $0.022 during the twelve-month period ended December 31,
2021. The market price for our common stock closed at $0.078 on December 31, 2021, the last trading day of 2021. The market price of
our common stock may fluctuate significantly from its current level. The market price of our common stock may be subject to wide fluctuations
in response to quarterly variations in operating results, announcements of technological innovations or new products by us or our competitors,
changes in financial estimates by securities analysts, or other events or factors. In addition, the financial markets have experienced
significant price and volume fluctuations for a number of reasons, including the failure of the operating results of certain companies
to meet market expectations that have particularly affected the market prices of equity securities of many exploration stage companies
that have often been unrelated to the operating performance of such companies. These broad market fluctuations, or any industry-specific
market fluctuations, may adversely affect the market price of our common stock. In the past, following periods of volatility in the market
price of a company’s securities, class action securities litigation has been instituted against such a company. Such litigation,
whether with or without merit, could result in substantial costs and a diversion of management’s attention and resources, which
would have a material adverse effect on our business, operating results and financial condition.
We
have convertible securities and convertible debt outstanding, which if fully exercised could require us to issue a significant number
of shares of our common stock and result in substantial dilution to existing shareholders.
As
of December 31, 2021, we had 179,787,595 shares of common stock issued and outstanding. We may be required to issue the following shares
of common stock upon exercise of options and warrants or conversion of convertible securities:
| ● | 1,050,000
shares of common stock issuable upon exercise of vested options outstanding as of December
31, 2021; |
| ● | 32,190,475
shares of common stock issuable upon conversion of preferred shares outstanding as of December
31, 2021; |
| ● | 22,327,894
shares of common stock issuable upon exercise of warrants outstanding as of December 31,
2021; and |
| ● | 102,079,934
shares of common stock issuable if Nicholas Gallagher (“Gallagher”), a related
party and member of the Company’s Board of Directors and a secured note holder, exercises
his option to be paid in shares for unpaid interest as of December 31, 2021. |
If
these convertible and exercisable securities are fully converted or exercised, we would issue an additional 157,648,303 shares of common
stock, and our issued and outstanding share capital would increase to 337,435,898 shares. The convertible securities are likely to be
exercised or converted at the time when the market price of our common stock exceeds the conversion or exercise price of the convertible
securities. Holders of such securities are likely to sell the common stock upon conversion, which could cause our share price to decline.
Broker-dealers
may be discouraged from effecting transactions in our common stock because they are considered a penny stock and are subject to the penny
stock rules.
Rules
15g-1 through 15g-9 promulgated under the United State Securities and Exchange Act of 1934, as amended (the “Exchange Act”)
impose sales practice and disclosure requirements on certain brokers-dealers who engage in certain transactions involving a “penny
stock.” Subject to certain exceptions, a penny stock generally includes any non-NASDAQ equity security that has a market price
of less than $5.00 per share. The market price of our common stock on the FINRA OTCBB during the twelve-month period ended December 31,
2021, ranged between a high of $0.095 and a low of $0.022, and our common stock is deemed penny stock for the purposes of the Exchange
Act. The additional sales practice and disclosure requirements imposed upon brokers-dealers may discourage broker-dealers from effecting
transactions in our common stock, which could severely limit the market liquidity of the stock and impede the sale of our stock in the
secondary market.
A
broker-dealer selling penny stock to anyone other than an established customer or “accredited investor,” generally, an individual
with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse, must make
a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior
to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the penny stock regulations require the broker-dealer
to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the United States Securities and Exchange
Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt. A broker-dealer is also
required to disclose commissions payable to the broker-dealer and the registered representative and current quotations for the securities.
Finally, a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held
in a customer’s account and information with respect to the limited market in penny stocks.
In
the event that your investment in our shares is for the purpose of deriving dividend income or in expectation of an increase in market
price of our shares from the declaration and payment of dividends, your investment will be compromised because we do not intend to pay
dividends, except as required by the terms of the Series A Convertible Preferred Shares.
We
have never paid a dividend to our shareholders, and we intend to retain our cash for the continued growth of our business. We do not
intend to pay cash dividends on our common stock in the foreseeable future. As a result, your return on investment will be solely determined
by your ability to sell your shares in a secondary market. The terms of the Series A Convertible Preferred Shares require payment of
a dividend to the holders at the time they convert their shares; however, this dividend can and likely will be paid in the form of additional
shares of common stock sufficient to satisfy the dividend provision.
ITEM
2. PROPERTIES
Map
1 – Location of the Chandalar, Alaska Mining District
Chandalar
Property, Alaska
The
Chandalar gold property is currently our only mineral property. It is an exploration stage property. We were attracted to the Chandalar
district because of its similarities to productive mining districts, its past positive exploration results, and the opportunity to control
multiple attractive gold quartz-vein prospects and adjacent unexplored target areas for large bulk tonnage deposits. We believe that
our dominant land control eliminates the risk of a potential competitor finding ore deposits located within adjacent claims. Summarily,
we believe the scale, number and frequency of the Chandalar district gold-bearing exposures and geochemical anomalies compare favorably
to similar attributes of productive mining districts.
Location,
Access & Geography of Chandalar
Our
Chandalar property essentially envelops the entire historic Chandalar mining district and lies approximately 70 miles north of the Arctic
Circle at a latitude of about 67°30’. It is about 190 air miles north of Fairbanks, Alaska, a full-service support center for
the oil and mining industry, and 48 air miles east of the Dalton Highway, the major all-weather north-south route that links Fairbanks
to the Prudhoe Bay oil fields on the Arctic Ocean to the north, and 48 air miles east-northeast of the town of Coldfoot (Map 1). Access
to our Chandalar Squaw Lake mining camp and nearby Chandalar Gold Mine is either by aircraft from Fairbanks, or overland during the winter
season via a 95-mile-long ice road from Coldfoot through the community of Chandalar Lake to Squaw Lake.
Map
2 – Chandalar Mining Claim Block
Geographically,
our Chandalar property is situated in rugged terrain just within the south flank of the Brooks Range where elevations range from 1,900
feet in the lower valleys to just over 5,000 feet on the surrounding mountain peaks. The region has undergone glaciation due to multiple
ice advances originating from the north and, while no glacial ice remains, the surficial land features of the area reflect abundant evidence
of past glaciation.
The
property is characterized by deeply incised creek valleys that are actively down-cutting the terrain. The steep hill slopes are shingled
with frost-fractured slabby slide rock, which is the product of arctic climate mass wasting and erosion. Consequently, bedrock exposure
is mostly limited to ridge crests and a few locations in creek bottoms. Vegetation is limited to the peripheral areas at lower elevations
where there are relatively continuous spruce forests in the larger river valleys. The higher elevations are characterized by arctic tundra.
Snow
melt generally occurs toward the end of May, followed by an intensive, though short, 90-day growing season with 24 hours of daylight
and daytime temperatures that range from 60 to 80° Fahrenheit. Freezing temperatures return in late August and freeze-up typically
occurs by early October. Winter temperatures, particularly in the lower elevations, can drop to -50° F or colder for extended periods.
Annual precipitation is 15 to 20 inches, coming mostly in late summer as rain and during the first half of the winter as snow. Winter
snow accumulations are modest. The area is essentially an arctic desert.
Map
3 – Gold Prospects and Geologic Structure of Chandalar
Chandalar
Mining Claims
We
have a block of contiguous mining claims at Chandalar that cover a net area of about 22,858 acres (approximately 35.7 square miles) (Map
2), and which are maintained by us specifically for the exploration and possible exploitation of placer and lode gold deposits. The mining
claims were located to secure most of the known gold bearing zones occurring within an area approximately five miles by eight miles.
Within the claim block, we own in fee simple 426.5 acres as twenty-one federal lode claims, one patented federal placer claim, and one
patented federal mill site. The 23 federal patented claims cover the most important of the known gold-bearing structures. In addition,
there are 197 Traditional and MTRSC 40-acre State of Alaska claims. The 197 Traditional and MTRSC state mining claims provide exploration
and mining rights to both lode and placer mineral deposits on an additional 22,432 acres of unpatented claims. Unlike federal mining
claims, State of Alaska mining claims cannot be patented, but the locator has the exclusive right of possession and extraction of the
minerals in or on the claim.
Alaska
state unpatented mining claims are unique property interests in that they are subject to the paramount title of the State of Alaska,
and rights of third parties to non-interfering uses of the surface within their boundaries, and are generally considered to be subject
to greater title risk than other real property interests. There are few public records that definitively determine the issues of validity
and ownership of unpatented state mining claims and possible conflicts with other claims are not always determinable from the descriptions
contained in public records. The rights to deposits of minerals lying within the boundaries of the unpatented state claims are subject
to Alaska Statues 38.05.185 – 38.05.280, and are governed by Alaska Administrative Code 11 AAC 86.100 – 86.600.
The
validity of an Alaska state unpatented mining claim depends on: (1) the claim having been located on state land open to appropriation
by mineral location, which is the act of physically going on the land and making a claim by putting stakes in the ground; (2) compliance
with all applicable state statutes in terms of the contents of claim location notices or certificates and the timely filing and recording
of the same; (3) timely payment of annual claim rental fees; and (4) the timely filing and recording of proof of annual assessment work.
In the absence of a discovery of valuable minerals, the ground covered by an unpatented mining claim is open to location by others unless
the owner is in actual possession of and diligently working the claim. We are diligently working and are in actual possession of all
our claims at Chandalar.
The
locator of a mining claim on land belonging to the State of Alaska does not have an option to patent the claim. Instead, rights to deposits
of minerals on Alaska state land that is open to claim staking may be acquired by discovery, location and recording as prescribed in
Alaska state statutes, as previously noted. The locator has the exclusive right of possession and extraction of the minerals in or on
the claim, subject to state statutes governing mining claims. We are not in default of any annual assessment work filing or annual claim
rental payment required by the state of Alaska to keep our title to the mining rights at Chandalar in good standing.
An
important part of our Chandalar property is patented federal mining claims owned by us. Patented mining claims, which are real property
interests that are owned in fee simple, are subject to less risk than unpatented mining claims. We have done a title chain search of
our patented federal mining claims and believe we are the owner of the private property, and that the property is free and clear of liens
and other third-party claims except for the 2% mineral production royalty. The 2% mineral production royalty was formerly held by our
previous management (Anderson Partnership, also known as Jumbo Basin). During 2012, NyacAU loaned $250,000 to GNP and GNP purchased the
royalty from Anderson Partnership. The loan to GNP for the royalty carried interest at the greater of prime plus 2% or 10% and was repaid
from Goldrich’s portion of production (as defined in the joint venture agreement). The royalty was extinguished when Goldrich paid
back the loan.
The
Company entered into First Amendment to the Amended and Restated Loan, Security, and Intercreditor Agreement dated November 1, 2019 with
Nicholas Gallagher (“Gallagher”), a related party and member of the Company’s Board of Directors, in his capacity as
Agent for and on behalf of Gallagher and other lenders to amend the Senior Secured Note financing effective as of August 25, 2021. Under
the Agreement, the borrower and holders entered into a Deed of Trust whereunder the Notes are secured by a security interest in all real
property, claims, contracts, agreements, leases, permits and similar assets. For more information see Notes Payable and Notes Payable
– Related Party below.
Chandalar
Geology and Mineralization
Refer
to Maps 3 and 4 for graphic representation of both the hard-rock (lode) prospects and alluvial (placer) fans on which we are focusing
varying degrees of exploration effort, as determined by exploration activities already completed in prior years.
The
Chandalar lode occurrences are part of a regionally mineralized schist belt that extends east-west across the 600-mile width of Alaska
along the south flank of the Brooks Range. The geology and mineralization of the Chandalar lode gold systems are quite similar to many
important productive gold deposits that have been variously categorized as greenstone-hosted, orogenic, shear-zone related, low-sulfide,
mesothermal, amongst other names and which, collectively, account for a major part of the world’s gold production. Although there
is a history of past lode and alluvial extraction on our Chandalar property, it currently does not contain any known proven or probable
ore reserves as defined in Subpart 1300. The probability that ore reserves that meet Subpart 1300 guidelines will be discovered on an
individual hard rock prospect at Chandalar cannot be determined at this time. However, in June 2021, Goldrich released the results of
an independent Initial Assessment Report (the “IA”), prepared in accordance with the new SEC Subpart 1300 property disclosure
requirements, for the Company’s Chandalar placer mine in the Chandalar Gold District in Alaska as discussed below in Historical
Mining and Exploration Activities in the Modern Era.
Infrastructure
We
have established a substantial exploration infrastructure at our Chandalar property, including a 25-person camp, heavy and light-duty
equipment, a 5,000-foot airstrip, and a network of roads that offer all-weather access to all of the major gold prospects. Current surface
access to the camp from the Dalton Highway is restricted to the winter months via a winter trail from Coldfoot along the Dalton Highway.
The State of Alaska has a right-of-way to construct a permanent all-season road along this trail which, when built, will allow year-around
surface access to the project site. We are not aware of any plans to build this road at the present time.
Historical
Mining and Exploration Activities in the Modern Era
We
maintain an extensive file of the prospecting and exploration of the Chandalar Mining district, cataloging documents dated as early as
1904. Most of the previous work was by mining companies and individuals who were focused on mining the gold placers and quartz veins
but who conducted little organized geologically based exploration. Even less attention was given beyond existing vein exposures.
When
new management began exploration in 2004, we ended a twenty-year hiatus of hard-rock exploration on the property and began employing
modern exploration techniques. We have spent many millions of dollars in exploration and mining activities of our Chandalar property
as discussed below.
2004
In
2004, we contracted an independent geological consulting company to review and analyze previous work done on Chandalar. A technical report
produced by the consultants recommended an initial exploration program to better assess the gold lodes and the placer gold deposits.
We
also commissioned a remote sensing technical study of the Chandalar district by another independent contractor who studied high altitude
air photography available for the region. The purpose of the study was to identify geological structures that may be associated with
gold occurrences in a schist belt containing greenstones. The lineament study identified fifty-nine sites thought to be favorable for
discovery of mineralization. Major linears, especially where they may form a regional rift, are an excellent exploration tool in the
search for gold. The consultant recommended making field examinations of known gold occurrences associated with the linears and other
structural features identified by the study.
During
the 2004 summer field season at Chandalar, using independent certified professional geologists, we followed up on the work recommended
by the remote sensing consultant’s studies. We also expanded our claim block to cover outlying vein showings and reconnaissance
sampling of rocks, soils and stream sediments for geochemical analyses. The objective of the field program was to assess the validity
of historic records, refine known drilling targets and identify new drilling targets. Several prospects of previously unevaluated or
unknown gold mineralization were found.
2005
During
2005, we completed a modest prospecting and geologic mapping program at Chandalar, which was limited by our lack of funds. In all, 189
exploratory samples of stream sediments, soils and rock chips were taken, and mapping was completed on a series of ten prospects. That
work was successful in identifying additional gold prospects within our claim block, and also in developing specific drilling targets
on several of the prospects.
2006
During
early 2006, we acquired sufficient funds to undertake a substantial exploration program on the Chandalar property. During the 2006 summer
field season, a geological contractor completed a 1:20,000 scale geologic map of the Chandalar district, and we drilled 39 reverse circulation
drill holes for 7,763 feet on nine of some thirty gold prospects within our Chandalar claim block. In the process, several miles of old
roads were repaired and three miles of new roads were constructed. We established an exploration base camp (Mello Bench camp) capable
of housing 20 people, and accomplished environmental clean ups of two abandoned mining campsites that predate our management takeover
in 2003.
2007
Concerning
hard-rock exploration, the 2007 Chandalar exploration program expanded our understanding of several hard-rock gold prospects through
trenching and associated sampling. In all, forty prospect areas were mapped in detail and 1,342 samples of rock (including trench and
placer drill holes to bedrock) and soil were collected and analyzed. Forty-five trenches for 5,927 feet were accomplished using an excavator,
of which 4,954 feet cut into bedrock and were sampled. Some 534 trench samples were taken continuously along the lengths of all trenches.
Additionally, ground magnetic surveys on fifteen of the prospects were conducted with survey lines totaling 28 miles.
Concerning
placer exploration, we conducted 15,000 feet (4,572 meters) of reverse circulation drilling on the Little Squaw Creek drainage. Of 107
holes collared, 87 were completed to their targeted depths. We engaged an independent geological contractor to conduct all sampling in
our drilling program, complete all drill sample gold recovery, evaluate ore, maintain drill sample security and report the results of
their work.
2008
The
analytical processing of the 3,031 drill samples and report on the final results of the samples gold contents from our 2007 placer drill
program was completed by March of 2008. From these results, we concluded that we discovered a relatively large alluvial gold deposit
of sufficient grade to be potentially economical to mine under prevailing gold prices. This drill program delineated approximately 10.5
million cubic yards of mineralized material at an average grade of 0.025 ounces (0.78 grams) gold per cubic yard containing an estimated
250,000 ounces of gold (This mineralized material was not a mineral reserve as defined in SEC Industry Guide 7 but, as noted above and
detailed below, an Initial Assessment was completed in 2021 according to the new SEC disclosure requirements in Subpart 1300). We believe
that with continued drilling, the mineralized body may be substantially increased.
The
deposit is geologically characterized as an aggradational placer gold deposit. It is unusual in the sense that it is the only such known
alluvial, or placer, gold deposit in Alaska, although many exist in Siberia. Our discovery contrasts to others in Alaska that are commonly
known as bedrock placer gold deposits. Aggradational alluvial gold deposits contain gold particles disseminated through thick sections
of unconsolidated stream gravels in contrast to bedrock placer deposits where thin but rich gold-bearing gravel pay streaks rest directly
on bedrock surfaces. Aggradational placer gold deposits are generally more uniform and thus more conducive to bulk mining techniques
incorporating economies of scale. This contrasts with bedrock placer gold deposits where gold distribution tends to be erratic and highly
variable. The plan view of our discovery is somewhat funnel-shaped, and as such has been divided into two distinct geomorphological zones:
a Gulch, or narrower channel portion, and a Fan, or broad alluvial apron portion.
2009
We
began a placer gold test mining operation on Little Squaw Creek. We also started to execute on the recommended plan in April 15, 2009
technical report prepared by an independent consultant. Some exploration of the various other placer gold creeks on the Chandalar property
took place. Prospecting work on the hard-rock gold deposit possibilities was also accomplished. That work led to some key understandings
of the geology. The work also resulted in the generation of an internal Company memorandum by Mr. Barker proposing an exploratory diamond-core
drill program of about 40 drill holes aggregating 20,000 feet. The proposed drill program would evaluate the degree of mineralization
occurring as a large strata-bound unit nearly 5 miles in length, as explained in the report Interpretation of Exploratory Findings at
Chandalar.
In
the 2009 test mining operation, we accomplished a major step in assessing the economic potential of this mineralized body. Most importantly,
we found that the mineralized material is a continuous but variably mineralized horizon. There are specific horizons within it that are
up to 20 feet thick containing the richest gold grades. The mineralized material is about forty percent composed of gravel, cobbles and
boulders set in a sixty percent matrix of fine silt. It is nicely compacted and stands well when opened up. Because of the high silt
content, the mineralized material, and the overburden as well, expands by over forty percent in volume when it is mined and converted
into loose cubic yards. During 2009 mining test, we stripped approximately 40,000 bank cubic yards of waste material and processed about
9,875 bank cubic yards of gold bearing gravels through our wash plant. About 593.5 ounces of alluvial gold were recovered which, when
smelted, yielded 497.5 ounces of fine gold.
The
2009 alluvial gold test mining operation successfully yielded valuable geological, mining and engineering data that lead us to the decision
to ramp-up the project into gold extraction in the spring of 2010.
2010
During
the winter of 2009/2010, we raised additional funds to ramp-up the Little Squaw Creek Gold Mine into extraction. The ramp-up process
involved substantial infrastructure upgrades, including building a new 30-man mining camp located about two miles from the exploration
camp that had been in use since 2004. Infrastructure and mining development at the Little Squaw Creek alluvial gold mine was initiated
in late May 2010, with the first gold extraction being delivered to a smelter-refinery on July 15, 2010.
The
2010 gold extraction was limited by the lack of capital to get a second wash plant on line. The 2009 wash plant was re-modeled with improvements
(primarily an enlarged hopper with a wet grizzly style in-feed) and put on line for the 2010 extraction. Unfortunately, the plant turned
out to be capable of processing only about 29 bank cubic yards per hour on a consistent basis. Attempts at higher processing rates led
to overloading the machine and frequent break downs. The plant ran for 1,094 hours, extracting at an average rate of about 1.45 ounces
of fine gold per hour.
While
there were no drill holes within 400 feet of the perimeter of the 2009 test pit, there was mineralized material exposed in three walls
of the pit which encouraged management’s decision to expand the mine by following the mineralized material, using in-pit grade
control, and mining material to the physical and economic extent possible. No estimate of metallurgical recovery balances could be made
regarding the mined mineralized material in 2010 for lack of sufficient prior data about the gold content in the block of ground that
was mined. The gold recovery performance of the plant was checked on a consistent basis by panning its tailings. No significant gold
was ever found in the tailings, leading management to conclude that the wash plant, albeit undersized for the job, was working properly.
The
mining operation ultimately involved stripping an estimated 131,000 bank cubic yards of waste material and the mining and processing
of about 31,680 bank cubic yards of gold bearing gravels. During the 2010 extraction season, 1,503 ounces of fine gold and 259 ounces
of silver were recovered at the refinery. Additionally, 24.1 ounces of gold nuggets estimated to contain 19.2 ounces of fine gold were
extracted and either sold to jewelers or retained by the Company. Our gross precious metal sales in 2010 came to $1,904,124.
Map
4 - Chandalar Exploratory Gold Deposit Drill Target with Holes Proposed in 2009 and Drilled in 2011
2011
Our
2011 hard-rock drilling plan was extrapolated from a 2007 exploration plan that was not undertaken previously due to financial limitations.
Independent third-party professionals analyzed the 2006 hard-rock rotary drill results and the surface exploration work performed in
intervening years and recommended prioritized hard-rock drill targets for the 2011 exploration season. The 2011 exploration program included
a diamond-core drilling exploration program on a series of hard-rock gold targets on our Chandalar claims. These targets contain numerous
gold showings which we believed were the source areas of the alluvial gold deposits in the creek drainages. We believe we have accumulated
a body of knowledge on the Chandalar claims which points us toward significant areas of interest for discovery of very large tonnages
of mineralization, and our drilling program has been designed to further qualify those targets for potential commercialization.
We
completed our 2011 diamond core drilling campaign at Chandalar, Alaska along with a property-wide, grid-based soil sampling and a detailed
airborne magnetometer survey. We completed a 25-hole, 4,404-meter (14,444-foot) exploratory program, using HQ size core, tested six prospect
areas located along a 4-km (2.5-mile) long northeast trending belt of gold showings. The drilling contractor completed the last hole
on September 30, 2011.
The
HQ diameter diamond drill holes were generally sampled using a five-foot sample length and overall core recovery averaged greater than
90%. Six quality control samples (one blank and five standards) were inserted into each batch of 120 samples. The drill core was sawn,
with half sent to the ALS Minerals sample preparation in Fairbanks, Alaska, where the samples were prepared for assay and then sent to
the ALS Minerals Lab in Sparks, Nevada for analyses. Gold was analyzed by fire assay and Atomic Absorption Spectrometry finish and a
four-acid sample digestion with Inductively Coupled Plasma Spectrometry method was used to analyze a full suite of elements. Samples
were securely transported from the project site to the ALS Minerals preparation laboratory in Fairbanks via chartered aircraft hired
by the Company.
Donald
G. Strachan, Certified Professional Geologist and Goldrich’s contracted project manager for Chandalar, managed the drill program
and confirmed that all procedures, protocols and methodologies used in the drill program conform to industry standards.
The
results of this first diamond core exploration drilling on our Chandalar gold property have exposed what we believe is a wide-spread
system of gold mineralization at intervals from surface to depths of up to 120 meters (about 400 feet). We also believe the mass of rock
affected by the mineralizing system to be large, as more than 50 gold showings are scattered over about six square miles (fifteen square
kilometers), only a fraction of which has yet been drill-tested. The drill cores contain a total of 56 mineralized intervals of 0.5 or
greater grams per tonne gold (g/t Au) that average 2.3 meters (7.5 feet) in length and have a weighted average grade of 1.66 g/t Au.
Gold-bearing intercepts were obtained in 72% of the holes, with many having multiple intercepts.
Drilling
results draw us to focus on two prospects – Aurora and Rock Glacier – which we believe are geologically associated and related
to the same controlling mineralizing features. Intercepts include:
| ● | 1.5
meters (5.0 feet) at 6.57 g/t Au in Hole LS11-0063 on the Aurora prospect; |
| ● | 2.1
meters (7.0 feet) at 6.02 g/t Au in Hole LS11-0041 on Rock Glacier |
A
map and tables showing drill hole locations, drill depths, data and intercepts can be found in our annual reports filed with the SEC
for 2011 and 2012.
These
and other intercepts are associated with much longer core runs of strongly anomalous gold (> 0.10 g/t Au) between 4.3 meters (14 feet)
and 21.3 meters (70 feet) in length. Also worth noting, while constructing a road to a proposed drill site, we encountered two zones
of shearing with sheeted and stockwork quartz veinlets, approximately 5 meters (16 feet) and 15 meters (49 feet) wide. These zones are
located 135 meters vertically above and 200 meters southwest of Aurora drill holes #61 to #64. Representative continuous chip sampling
of these zones yielded assays of 2.8 g/t gold and 2.1 g/t gold, respectively. We believe the mineralized Aurora drill hole intercepts
may represent an extension of these zones and that additional drilling could extend these zones even further.
While
the silver (Ag) values associated with these and most of the other gold intercepts are generally less than 2 g/t, unusually, native silver
is observed in one core interval of 0.46 meters (1.5 feet) from 80.01 meters (262.5 feet) to 80.47 meters (264.0 feet) in Hole LS11-0042,
which assays greater than 690 g/t Ag (> 20.1 oz/st Ag [st = short ton]) with only a trace of gold. A second curious silver rich interval
occurs in Hole LS11-0040 for 2.1 meters (7.0 feet) from 23.47 meters (77.0 feet) to 25.60 meters (84.0 feet), which returned 397 g/t
(11.6 oz/st Ag), again accompanied with only a trace of gold. We believe this silver mineralization may represent a separate mineralizing
event within a large and complex precious metal bearing mineral system.
Chandalar’s
wide-spread precious metal system is hosted by carbonaceous, pyrrhotite-arsenopyrite-pyrite bearing schist. Significantly, extensive
intercepts of hydrothermal alteration manifested by massive chloritization and strong silicification of the schist are associated with
the mineralization, and are often geochemically anomalous (> 0.05 g/t) in gold as well. Mineralized intercepts have now been intersected
by drilling over a vertical elevation difference of 550 meters (1,800 feet), with the lowest exposure being in the northeast at the Aurora
prospect which is close to the Little Squaw alluvial gold deposit.
Additional
core drilling is necessary to assess the continuity and extent of outcropping and any projection from the gold-mineralized intercepts
as well as determine the limits of the mineralizing system. In addition to drilling, the 2011 Chandalar gold exploration program included
a grid soil sampling survey consisting of 1,150 samples for multi-element analyses.
The
soil sampling, prioritized to first cover known mineralized trends, consisted of over 1,100 samples collected on a reconnaissance scale
grid over approximately 65 percent of the 22,858-acre Chandalar property. In the airborne geophysical survey, approximately 750 line
miles (1,246 line kilometers) were flown by an international geophysical contractor over the entire Chandalar property along flight lines
100 meters apart.
The
2011 exploration season was successful in significantly expanding our existing body of geological knowledge about our Chandalar property.
The combination of core, soil and magnetic data is expected to provide a solid foundation for going forward with a thorough exploration
and evaluation of the numerous gold occurrences on the property.
2012
As
described below in Joint Venture Agreement, we signed an agreement with NyacAU to form a joint venture, Goldrich NyacAU Placer, LLC (“GNP”)
for the purpose of mining the alluvial gold deposits within the bounds of our Chandalar property.
2013
Achievements
included GNP’s mobilization of drilling equipment and plant setup, approval of permits to expand mining operations, significant
infrastructure improvements and extraction of 680 ounces of fine gold.
2014
In
2014, we completed advanced petrographic studies of drill core samples from the Chandalar gold property. The new data refined the orogenic
model that has historically guided exploration at Chandalar and redirected our future exploration for intrusion-related mineralization.
We also conducted a property-wide airborne radiometric and magnetic survey to generate and further refine exploration targets for bulk-tonnage
low-grade mineralization and possible deeper sources of intrusion-related mineralization.
Our
geologists concurred the studies are important for exploration as the pegmatite textures in outcrop and drilling and the radiogenic activity
from accessory minerals associated with pegmatite-veins may indicate proximity to intrusive-related mineralization and may provide us
a highly useful tool for gold mineralization discovery.
The
petrologic study involved detailed microprobe examination of samples taken from veins in the Chandalar gold system that exhibit characteristics
of pegmatite, an igneous rock deposited during emplacement of a granitic intrusive body. All of the samples contain numerous accessory
minerals that commonly derive from magma or late-stage magmatic fluids, including monazite, thorite and xenotime. Some of the accessory
minerals co-precipitated with gold, indicating that late intrusive stage hydrothermal fluids migrated upward along shear zones within
which the lode gold mineralization is emplaced. Importantly, radiogenic activity is associated with the accessory mineral suite.
We
believe rigorous follow-up rock sampling and radiogenic surveys may result in more effective selection of high-priority drill sites,
an important factor considering the expansive size of the Chandalar system.
In
August 2014, we engaged a contractor and geologists to perform additional airborne magnetic and radiometric studies across the entire
Chandalar property. An airborne radiometric and magnetic survey was conducted to test an intrusion-related model for emplacement of lode
quartz-gold occurrences. Results of the airborne study demonstrate a broad northwest-trending belt of elevated potassium values with
a centrally located, kilometer-scale feature where thorium values are elevated relative to potassium. The potassium/thorium feature anomaly
is closely associated with magnetic anomalies to form a circular kilometer-scale feature in the highlands above and adjacent to the Goldrich-NYAC
Placer operation consistent with an intrusive body at depth and is central to the northeast-trend of lode quartz-gold occurrences.
The
data obtained from these studies will be compiled with data already derived from sampling, trenching, drilling and geophysical testing
to present a comprehensive 3D model of the Chandalar prospects and their geological setting. The results of these studies will assist
us in determining methods and targets for exploration.
2015
We
completed reclamation of mine waste road built in 2010 and received a confirmation of completion and satisfaction from the Army Corps
of Engineers. GNP extracted approximately 3,600 ounces of fine gold.
2016
GNP
extracted approximately 8,200 ounces of fine gold.
2017
We
performed additional oxygen isotope studies to further confirm intrusion-related mineralization. In addition, GNP completed a sonic drill
program and drilled 231 holes totaling 14,271 feet to further define the Chandalar placer deposit and extracted approximately 12,300
ounces of fine gold.
2018
GNP
extracted approximately 17,100 ounces of fine gold.
2019
Due
to the failure of the joint venture to meet the minimum production requirements under its Operating Agreement, GNP was dissolved in June
2019 and is in the process of liquidation (see Joint Venture Agreement and Arbitration below). Except for equipment needed for reclamation,
most the heavy equipment and the wash plant were removed on a winter trail in March through mid-April 2019. There was no gold production
in 2019. NyacAU is the holder of the mine permits and began reclamation of the mine in 2019. NyacAU is responsible for future reclamation
costs. Goldrich hired an independent mining engineering firm in 2019 year to formulate a mine plan and complete an Initial Assessment
to determine if Goldrich should resume production. Any plan to continue future mining is contingent upon our success in raising sufficient
capital to fund these activities or any portion of them.
2020
No
mining or exploration activities were conducted. We continued our work with the independent mining engineering firm to formulate a mining
plan for conducting a future mining operation. Management focus was also directed to moving the arbitration process toward conclusion.
2021
and plans for 2022 and beyond
In
June 2021, Goldrich released the results of an independent Initial Assessment Report (the “IA”), prepared in accordance with
the new SEC Subpart 1300 property disclosure requirements, for the Company’s Chandalar placer mine in the Chandalar Gold District
in Alaska. The IA was prepared by Global Resources Engineering (“GRE”), a widely-respected mining engineering firm in Denver,
Colorado.
Subsequent
to release of the IA, a Revised and Amended Initial Assessment Report (the “RAIA”) was prepared by GRE and has a revised and
amended date of February 24, 2023 and an effective date of May 31, 2021. The RAIA did not change the results of the economic analysis.
Both
the IA and RAIA completed the economic analysis based on a 0.004 raw troy ounce per bank cubic yard cutoff pit constrained mineral resource
that utilized a 0.002 raw troy ounce per bank cubic yard grade shell for grade estimation so there was no change in the economic analysis.
However, the RAIA reported the pit constrained mineral resources at a 0.004 raw troy ounce per bank cubic yard cutoff while the IA pit
constrained mineral resource used a 0.002 raw troy ounce per bank cubic yard cutoff. This difference caused measured and indicated mineral
resources to decrease from 120,000 ounces of fine gold in the IA to 119,000 ounces of fine gold in the RAIA and inferred mineral resources
to decrease from 17,000 ounces of fine gold in the IA to 16,000 ounces of fine gold in the RAIA. The RAIA was also revised to include
additional information requested by the SEC and to add statements of opinions of qualified persons on the adequacy of sample preparation,
security, analytical procedures, and the adequacy of the data.
Using
a base case gold price of $1,650, the key economic results of the RAIA with a summarized gold price sensitivity analysis were as follows
(A complete copy of the RAIA may be downloaded at https://www.goldrichmining.com/chandalar-gold-district/technical-reports.html).
| Parameter |
Base
Case
$1,650 Gold |
Gold
Price Sensitivity Analysis |
| $1,500 |
$2,000 |
$2,500 |
| Undiscounted
Pre-Tax Net Cash Flow: |
$75
million |
$57
million |
$116
million |
$175
million |
| After-tax
NPV@5%(1): |
$64
million |
$50
million |
$92
million |
$129
million |
| After-tax
IRR(1): |
139% |
112% |
195% |
275% |
| Undiscounted
After-tax Net Cash Flow(1): |
$72
million |
$57
million |
$103
million |
$145
million |
| After-tax
Payback Period (years): |
1.3 |
1.4 |
1.2 |
1.1 |
| All-in
Sustaining Costs: |
$799/Au
oz. |
|
|
|
| All-in
Costs: |
$1,064/Au
oz. |
|
|
|
| Total
Operating Costs: |
$646/Au
oz. |
|
|
|
The
RAIA pit-constrained mineral resources for the Little Squaw Creek Placer deposit at a 0.004 raw troy ounce per bank cubic yard cutoff
is as follows:
| Classification |
Resource
Volume
(1000s bcy) |
Raw
Gold
Grade
(t.oz./bcy) |
Raw
Gold
(1000s t. oz) |
Fine
Gold
(1000s t. oz) |
| Measured |
2,609 |
0.0302 |
79,000 |
69,000 |
| Indicated |
2,188 |
0.0265 |
58,000 |
50,000 |
| Measured
& Indicated |
4,797 |
0.0285 |
137,000 |
119,000 |
| Inferred |
771 |
0.0245 |
19,000 |
16,000 |
| (1) | Raw
Gold - Gold as recovered from the placer deposit, historically 84% gold and 16% other metals
like silver and copper (referred to as 840 fine). The Mineral Resource is constrained by
a 0.002 raw troy ounce per bank cubic yard grade shell and a 0.004 raw troy ounce per bank
cubic yard cutoff (840 fineness) at an assumed gold price of 1,600 $/tr oz, assumed mining
cost of 4.50 $/bcy, assumed processing and administrative cost of 7.25 $/bcy, an assumed
gold purity ofpurity of 84%, and pit slopes of 45 degrees. These costs are preliminary estimates
(prior to economic analysis). |
| (2) | Fine
Gold - Gold that is 99.99% pure (referred to as 9999 fine). |
Figure
1 – Proposed 2022 Drill Pad Sites:
A
complete copy of the IA may be downloaded at https://www.goldrichmining.com/chandalar-gold-district/technical-reports.html. Goldrich
will decide if a preliminary feasibility study should also be prepared for the Chandalar Mine. A preliminary feasibility study would
allow Goldrich to disclose any reserves of the Chandalar Mine.
In
December 2021, Goldrich submitted a permit application to the Alaska Department of Natural Resources (“DNR”) to carry out
a multi-year, 25,000-foot diamond core drill program at the Company’s Chandalar Property. The permit was received in February 2022.
Subject to financing, Goldrich plans to commence an initial 12,000-foot program in May 2022.
The
target zone of this hard-rock (lode) drill program, located on the Little Squaw Creek (“LSC”) drainage, is immediately above
and partially overlapping the LSC placer deposit and mine. The target zone sits at the heart of a zone surrounded by historic placer
workings in every creek and four historic hard-rock gold mines. The angularity of the placer gold nuggets also indicates close proximity
to a hard-rock source.
Interpretation
of Exploratory Findings at Chandalar
Since
the 2011 diamond drill coring program, continued processing of prospecting information along with compilation of geophysical survey data,
core re-logging and an associated stream of petrographic studies (relevantly referenced to 2014 activities presented above) has resulted
in the re-thinking of the geologic model guiding the Chandalar gold exploration program. That model started with a preliminary theory
derived from the available evidence of the time that the Chandalar gold mineralization was likely a stratabound indigenous feature of
the Mikado phyllite/schist photoliths (parent rocks), enhanced by compressional mountain building activity (orogenesis). That theory
has now largely been discarded as evidence builds that the gold mineralization is related to a magmatic-hydrothermal alteration system
driven by an underlying pluton (a body of intrusive igneous rock).
There
are more than 50 bedrock gold showings are contained in a North-Easterly (“NE”) trending zone about 3 km (2 miles) wide and
6 km (4 miles) long. The host rock formation of this distinct zone is mainly pyrrhotitic (magnetic iron sulfide) schist. These prospects
are generally associated with the presence of North-Westerly (“NW”) fault zones where they transgress the NE zone of prospects.
The numerous gold mineralized prospects can be grouped into three distinct populations: A - massive quartz veins, B - shear and fault
gouge zones, and C – dikelets of pegmatite (coarsely crystalline igneous rock). Group A are invariably NW striking, repeatedly
sheared and boudinized (segmented like a string of sausages) massive quartz veins containing gold, lead, zinc and arsenic sulfide minerals.
Group B, also NW striking, are encased in heavily chloritized host schist, contain crushed or pulverized quartz vein and/or dikelet material,
all of which have disseminated arsenopyrite with free-milling gold in them. Group C are intensely hydrothermally altered pegmatite dikelets
(generally 5 to 50 cm thick) consisting mostly of secondary clay minerals (after original feldspars, micas and other minerals) mixed
with iron carbonates (siderite) and by-product or remnant quartz, all of which have some degree of gold and arsenic mineralization, sometimes
also with lead and zinc.
The
mapped (surface and drill holes) distribution of the different Groups reflects a general zoning pattern of the gold-mineralized magmatic-hydrothermal
alteration system. Group A appears to be the result of lower temperature crystallization and deposition which is peripheral to the massively
chloritized sheared schist host rocks of Group B and furthermore to what appear to be swarms of hydrothermally altered pegmatitic dikelets
of Group C recorded in some of the drilling. It is important to note the altered gold-bearing dikelets are so soft with pervasive clays
they rarely survive weathering erosion to form outcrops, which makes it very difficult to determine their distribution, except as noted
in drill intercepts. As explained in the 2014 project activities discussion above, these dikelets contain high-temperature accessory
minerals and other minerals which give radiometric responses that help identify their aggregated location. Notably, the dikelets intercepted
in the drill holes are usually seen to be intruding and/or replacing schist host rock and are not usually in rock faults, although fault
zones may be nearby.
The
dikelets of Group C are almost certainly the offspring of larger but hidden intrusive igneous bodies yet to be discovered. The metamorphic
grade of the region appears to never have been high enough to melt the indigenous rock, and it is also doubtful it could have produced
the selective types of rock alterations now recognized. Since virtually all those of Group C exposed by drilling are mineralized to some
degree with gold, geologists servicing the Company clearly believe a parent pluton will also be mineralized, most likely as disseminations,
fracture fillings or quartz stockworks within its cupola (roof pendant) where fractionated hydrothermal fluids pregnant with gold would
crystalize. Such a deposit of gold mineralization is considered by the Company to be an inspiring exploration target as it could host
millions of ounces of gold at economically mineable grades as other intrusive-related gold deposits around the world do.
The
Company’s geologists have compiled and analyzed all available geophysical, geochemical, and geological technical data with the
objective of identifying the best spots to proceed with exploratory drilling. The most useful component in the data portfolio is the
record of the number and intensity of dikelet intercepts in each drill hole. This is found to be most pronounced in the lowest 62-meter
(203 ft.) interval of diamond drill core hole LS 11-0060 drilled at -55° for 263 meters (863 ft.). This drill hole hit a vertical
section of a gold bearing dikelet swarm for some 50 meters (164 ft.) and terminated within it at a vertical depth of 180 meters below
the surface cover of the Rock Glacier prospect. There are no other drill tests of this location. Combined with other supporting technical
data (such as the Little Squaw Creek gold placer deposit about 2.6 km ((1.6 miles)) downstream from it), this site constitutes the best
target choice for discovery of a mineralized pluton deeper under or in the immediate vicinity of the Rock Glacier. The next drill test
is designed to penetrate 300 meters below the Rock Glacier. The possibility also exists that a more prolific zone of higher density gold-mineralized
dikelets could be intersected, which could constitute a gold deposit discovery.
The
Company believes it is progressing step by step in solving the more than century-old puzzle of how the more than 50 scattered gold prospects
of the Chandalar gold mining district may be genetically related or what other commonality they may have. It is variously manifested
in abundant gold showings within an oval NE-oriented zone some 3 km wide and 6 km long (about 18 km²). The Chandalar magmatic-hydrothermal
alteration “system” is recognized as a geological fact by those studying it and is being used as a working model on which
to base future explorations. There may be several plutons along this stretch of this zone feeding the “system”. In 2021 and
onward, the Company will be focused on identifying “hot spots” within this zone for drill testing.
Joint
Venture Agreement
On
April 3, 2012, Goldrich Placer, LLC (“GP”), a subsidiary of Goldrich, entered into a term sheet for a joint venture with
NyacAU, LLC (“NyacAU”), an Alaskan private company, to bring Goldrich’s Chandalar placer gold properties into production
as defined in the joint venture agreement (the “Operating Agreement”), which was subsequently signed and made effective April
2, 2012. In each case as used herein in reference to the JV, ‘production’ is as defined by the JV agreement. As part of the
agreement, Goldrich Placer, LLC (“GP”), a subsidiary of Goldrich and NyacAU (together the “Members”) formed a
50:50 joint venture company, Goldrich NyacAU Placer LLC (“GNP”), to operate the Chandalar placer mines, with NyacAU acting
as managing partner. Goldrich has no significant control or influence over the JV, and therefore accounts for its investment using the
cost less impairment method.
As
of December 31, 2018, the JV had not achieved commercial production as required under the Operating Agreement, and as a result the JV
was formally dissolved in May 2019 and, as of December 31, 2021, is in the process of being liquidated. The Panel has jurisdiction over
the liquidation process and has ruled that NyacAU should continue as the manager of the liquidation. Except for equipment needed for
reclamation, most the heavy equipment and the wash plant were removed on a winter trail in March through mid-April 2019.
Under
the terms of the joint venture agreement (the “Agreement”), the JV was to make annual Member’s Distributions of 10%
of the balance of revenue generated by the Joint Venture after deducting Operating Expenses as defined by the GNP Operating Agreement.
Related to these distributions, on June 23, 2015, the Company raised net proceeds of $1.1 million through the sale of 12.5% of the cash
flows GP, Goldrich’s subsidiary, receives in the future from its interest in GNP (“Distribution Interest”), paid in
cash, to Chandalar Gold, LLC (“CGL”) and GVC Capital, LLC, (“GVC”), both of which are non-related entities. Goldrich
retained its ownership of its 50% interest in GNP but, after the transaction, subject to the terms of the GNP operating agreement, Goldrich
will effectively receive approximately 44%, CGL will effectively receive 6% (12% of Goldrich’s 50% of GNP = 6%) and GVC will effectively
receive 0.25% (0.5% of Goldrich’s 50% of GNP = 0.25%) of any distributions produced by GNP. At December 31, 2020 and 2019, an amount
of $35,794 has been accrued for the distribution which is included in accrued liabilities for distributions to us that were applied to
Loan3. No amount was accrued for the 2018 distribution due to the dissolution of the JV, although during arbitration proceedings, Loan3
was determined and agreed to be paid in full (see Arbitration below). During the year ended December 31, 2020, Goldrich purchased
595,000 membership units, or approximately 49% of CGL’s membership units for $25,000. This provides Goldrich with 49% of any distributions
produced by GNP and paid to CGL. The Company accounts for its investment in CGL using the equity method. The Company does not anticipate
any distributions from CGL until the placer resumes production.
Concerning
Loan3, in 2012, the joint venture purchased, on Goldrich’s behalf, a 2% royalty interest, payable on all production from certain
Goldrich mining claims at the Chandalar, Alaska property for $250,000 from Jumbo Basin Corporation. This transaction gave rise to Loan3,
was carried at an interest rate of the greater of prime plus 2% or 10%, and was to be repaid from distributions to Goldrich as defined
in the Operating Agreement, prior to any distributions in cash to Goldrich. The 2016 and 2017 Members Distributions, as adjusted by the
rulings of the arbitration Panel, were first applied against Loan3 in accordance with the terms of the Operating Agreement, the distributions
were sufficient to pay all of Loan3 principal and interest in full.
Arbitration
In
2017, we, our subsidiary and the joint venture, as claimants, filed an arbitration statement of claim before a three-member Arbitration
Panel (“the Panel”), against our JV partner and its affiliates; NyacAU, LLC (“NyacAU”), BEAR Leasing, LLC, and
Dr. J. Michael James, as respondents. In 2018, the respondents filed a counter-claim against the Company, its subsidiaries and certain
members of our current and former management, the counterclaim respondents. The arbitration claim alleged, amongst other things, claims
concerning related-party transactions, accounting issues including capital vs. operating leases, interpretation of the joint venture
operating agreement, allocation of tax losses between the joint venture partners, and unpaid amounts due Goldrich relating to the Chandalar
Mine.
During
the years ended December 31, 2019, 2020, and 2021, the Panel has released various awards relating to the allegations of both parties.
Some of which have been in favor of our positions and some have been in favor of our JV partner and its affiliates. The arbitration is
ongoing and the various parties to the claims and counterclaims continue to disagree on several matters.
On
May 25, 2019, the Panel issued an Interim Award, which requested input from the parties on a small number of discrete issues, all
input to be supported by references to the arbitration record. On November 30, 2019, the Panel issued the Partial Final Award and concurrently
the Second Interim Award regarding Dissolution/Liquidation of GNP and Related Issues (“the Second Interim Award”). On September
4, 2020, the Arbitration Panel (the “Panel”) issued the Final Post Award Orders, wherein the Panel issued rulings on multiple
material issues. On December 4, 2020, the Panel issued Supplemental Orders 5-8. On April 7, 2021, the Panel issued Order on Respondents’
Motion to Preserve Confidentiality of Arbitration Proceedings, wherein the Panel ruled that the Company did not violate confidentiality
when it filed the arbitration rulings as exhibits to its public reporting with the Securities and Exchange Commission. On April 7, 2021,
the Panel also issued Order on Respondents’ Motion to Confirm Judgment. On August 30, 2021, the Panel also issued Second Partial
Final Award and Modified Second Interim Award re Dissolution/Liquidation of GNP and Related Issues. A summary of each award is provided
below. Matters of minor significance on which the Panel ruled or waived actions on matters over which the Panel had no jurisdiction are
not included in the summary.
The
Partial Final Award
A
summary of the various matters addressed in the Partial Final Award is as follows:
Capital
vs. Operating Leases
In
response to a claim made by Goldrich, the Panel ruled that certain leases were capital leases, rather than operating leases, which increased
the basis upon which distributions are made to the JV partners. In addition, the Panel modified the interest rates applicable to the
leases, which decreased the profitability of the JV for the change in interest on all leases but only decreased the basis upon which
distributions are made to Goldrich for leases that were deemed to be operating leases. The net change had no effect on the Company’s
financial statements. The ruling did, however, affect the amount of interim distributions made from GNP to Goldrich for 2016 and 2017
as noted below.
Ownership
by GNP of Leased Equipment
The
Panel ruled that certain continuing lease payments made by GNP for equipment treated as operating leases, which were subsequently ruled
capital leases, represented buy-out payments at the conclusion of the capital lease. Therefore, ownership of the subject equipment was
transferred to GNP. As a result of the ruling, certain leased equipment became the property of GNP, but was subsequently transferred
to Bear Leasing to satisfy other GNP debts when GNP was dissolved.
Lease
Charges and Ownership of Arctic Camp Purchased by NyacAU related party from Third-Party
The
Panel ruled that lease payments made by GNP to Bear Leasing toward rented Arctic camp facilities that had been purchased from an unrelated
third-party from 2012 through 2014 represented purchase consideration. As a result, GNP was deemed the beneficial owner of the camp in
connection with the dissolution/liquidation process. Further, LOC1 was reduced by the lease payments GNP was charged beyond the purchase
price for the Arctic camp.
Interim
Distributions to Goldrich for 2016 and 2017
As
a result of the awards noted above, the Panel determined that the Company is entitled to an additional $214,797 in distributions for
2016 and an additional $198,644 for 2017, for a total of $413,442. In like manner, the Panel determined that NyacAU is entitled to an
additional $413,442 in distributions for these years. As we are uncertain as to the collectability of these distributions, no recognition
of these revenues is included in our Statement of Operations for the year ended December 31, 2021.
Payment
of Interest Earned by LOC1
The
Partial Final Award also addressed our claim for payment of interest earned by LOC 1. The Panel determined that NyacAU should pay the
Company 50% of the interest earned on LOC 1 actually received by NyacAU, or $126,666. NyacAU contested the amount of LOC1 interest paid
by GNP to NyacAU. The matter is further discussed below in the summary for the Final Post Award Order and Supplemental Orders.
2012
Reclamation Work
The
Panel ruled Goldrich is responsible to pay the full amount charged by GNP for the 2012 reclamation work to NyacAU and NyacAU is also
entitled to 5% pre-judgement interest on the award from the date the first invoice was sent to Goldrich. Goldrich has accrued a liability
for this ruling, however Goldrich has contested the party to whom payment should be made and whether additional amounts not invoiced
by GNP should be included in the award.
Allocation
of Tax Losses
From
2012 through 2018, NyacAU, as managers of GNP, had allocated net tax losses from GNP totaling $19,888,374 to NyacAU and $839,537 to Goldrich.
Goldrich claimed it had a right to 50% of all tax losses under the GNP Operating Agreement and filed Form 8082 for each year with the
Internal Revenue Service (“IRS”) to correct the GNP K-1’s filed by NyacAU. Goldrich claimed a total of $9,946,369,
50% of the total GNP losses for the years 2012 through 2018. The Panel generally agreed with that allocation but only during the periods
where actual mining operations were being performed, since those rationally are the only periods in which both parties bore a material
economic risk, in terms of the impact of mining operations on processed and unprocessed gold. Based on the evidence before the Panel,
mining operations were performed in August-September 2013, and 2015-2018.
Prior
to Goldrich receiving the award, the IRS had processed and accepted the Forms 8082, corrected GNP K-1’s, and amended tax returns
filed by Goldrich for 2012 through 2017. The IRS also notified Goldrich that Goldrich’s 2012 through 2014 tax returns were closed
for further changes due to the expiration of the statute of limitations for those years. The IRS also conducted an audit of Goldrich’s
2014 through 2017 tax returns with a ‘no change’ determination. Therefore, although Goldrich was not awarded 50% of all GNP
2012 to 2014 tax losses in the arbitration, Goldrich has been allowed to take the full total of its share of GNP tax losses of $9,946,369,
which can be used to offset taxable profits Goldrich generates in future years.
In
August 2020, the IRS issued an unfavorable ruling as it affects the Company in regard to the audit of the joint venture which, when the
individual partners’ effects are communicated to us by the IRS, is probable to decrease our net federal and state net operating
loss carryforwards by $2.0 million and $1.8 million, respectively, for the years under audit. The JV partners had been instructed by
the Panel to take steps to ensure tax losses have been shared equally, as the Operating Agreement requires, but only during the periods
where actual mining operations were being performed. In the closing conference, it was evident that GNP had taken positions with the
IRS that conflicted with the Panel’s direction. The recourse available to us in regard to the audit ruling is a challenge of the
IRS ruling before the tax court, should we determine this to be in our best interests.
Other
| ● | The
arbitration awarded NyacAU’s request that an entry be made on GNP’s books for
unpaid and unbilled interest expense of $66,180 under the appropriate Lease, incurred during
the period of construction of the wash plant. In the liquidation process, NyacAU (through
Bear Leasing) shall be treated as a third-party creditor with respect to the recovery of
this amount from GNP. |
| ● | The
Panel awarded Dr. James $9,858, plus interest at 5% and legal fees, for personal expenses
incurred relating to 2012 Goldrich reclamation costs. The matter is further discussed below
in the summary for Judgements issued by Superior Court. |
| ● | The
Partial Final Award found the Company liable for an act of negligent misrepresentation regarding
the concealment of certain technical information from NyacAU. We have vigorously disputed
the concealment and the finding of negligence. Nevertheless, as a result of the Panel’s
determination, the Panel awarded Dr. J. Michael James a reimbursement of 17% of his previous
$350,000 stock investment in the Company or $59,500 plus interest of 5% and legal fees. The
matter is further discussed below in the summary for Judgements issued by Superior Court. |
| ● | As
requested by Goldrich and NyacAU, the Panel will retain jurisdiction and oversight over the
dissolution/liquidation process to its completion. The Panel stated, “there is likely
more information the parties will have to provide on certain issues--including, among others,
changes in the balance of LOC 1 and the issue of transfer of the permit to Goldrich--before
a Final Award on dissolution/liquidation can be made.” As of the date of this report,
the balance of LOC1 continues to change as a result of on-going rulings by the Panel. Additionally,
the Panel has stated it lacks jurisdiction on the transfer of the mining permit, which the
Panel has ruled is a matter to be negotiated between the parties. |
| ● | The
Panel ruled that “there has been no prevailing party in the arbitration to this point,
although it reserves judgment as to whether a prevailing party will emerge from the Final
Award with regard to issues which are now part of the Revised [Second] Interim Award. Accordingly,
as to all issues covered by this Partial Final Award, the parties shall bear their own costs,
expenses, and attorneys’ fees.” |
The
Second Interim Award
The
Second Interim Award was necessitated by the fact that the dissolution/liquidation of the joint venture had not yet run its course. A
summary of the various matters addressed in the Second Interim Award is as follows:
Transfer
of Mining Permits
The
Panel ordered that:
| a) | No
later than January 15, 2020, NyacAU and Goldrich shall attempt to establish, by agreement,
a market value for the GNP permit in connection with a transfer of the Permit to Goldrich
or a third party, taking into consideration the obligation of GNP, or any transferee of the
permit, to complete reclamation in accordance with NyacAU’s government-approved reclamation
plan. |
| b) | Reasonably
prior to May 31, 2020, NyacAU shall perform its obligation to “make provision
… for reclamation by (1) adding all reclamation expenses actually incurred by
NyacAU to LOC 1; (2) from GNP’s assets, to the extent possible after payment
of GNP’s debts and liabilities and liquidation expenses”. |
Neither
order was successfully executed by the parties on the dates specified by the Panel. The Second Interim Award confirmed the dissolution
of GNP and noted that “no provision of the Claims Lease or the Operating Agreement speaks directly to the rights or obligations
of GNP to transfer its mining permit, which is held in the name of the manager, NyacAU. Although GNP no longer has the right to mine,
GNP and specifically NyacAU have the liability of reclamation. Absent a transfer of the Permit, GNP (through NyacAU) would be obligated
to complete reclamation, and obtain final approval from appropriate government authorities, as required by the Claims Lease—a process
estimated to take several years.”
If
NyacAU does not transfer the mining permit to Goldrich as part of the dissolution, they will retain the requirement to reclaim the mine,
and Goldrich will be prevented from mining the property, since two mining permits cannot be issued for the same claims. The actual cost
of the reclamation will be subject to many variables, not the least of which will be whether the remedial activity is undertaken while
the mine is inactive or conversely, when the mine is actively producing gold. If the mining permit were to be transferred to Goldrich
or another entity with the reclamation obligation intact, the reclamation activity could be undertaken as a key piece of a mining plan
in order to mitigate reclamation costs. If an agreement cannot be reached to transfer the mining permit and the associated reclamation
of prior mining activities, Goldrich will be prevented from mining its claims until a new mining permit is acquired after the current
mining permit expires in 2024, and will be limited to exploration activities on the hard rock deposits of the Chandalar property.
NyacAU
has indicated they will not transfer the permit without also transferring the reclamation obligation, of which they believe to be approximately
$3 million. Goldrich has indicated they will not accept transfer of the permit together with the reclamation obligation, which they believe
to be substantially greater. Both parties are in discussion to attempt to reach an agreement for the transfer of both the permit and
the reclamation obligation, no transfer of either, or some other arrangement.
Balance
and payment of LOC1
The
Panel calculated a tentative balance of LOC1 at $16,483,271 as of June 2019. This balance will be adjusted for any additional awards
and/or adjustments made by the Panel.
As
allowed by the Operating Agreement and a separate Security Agreement between GNP, as the debtor, and NyacAU, as the secured party, NyacAU
has a security interest in all of GNP’s right, title and interest in and to all placer gold located or produced from Goldrich’s
Chandalar mining claims leased to GNP as collateral for repayment of fifty percent (50%) of GNP’s LOC1 to NyacAU. The agreements
between GNP and NyacAU are silent concerning what happens if GNP is dissolved and is no longer producing gold, the basis of calculation,
timing of remittance and other key factors related to repayment if mining activities were to be undertaken again. If there is no further
placer production from these claims, Goldrich does not have a liability to pay LOC1.
The
Panel ruled in the Final Post Award, discussed below, that LOC1 cannot be increased for costs incurred after mining operations have ceased,
including costs for reclamation. Mining operations ceased on September 21, 2018, but were ruled to have ceased on September 28, 2018
by the Panel. This deprives NyacAU of a security interest in 50% of future placer gold production at the site to repay NyacAU for expenses
incurred subsequent to the cessation of mining operations.
If
an agreement cannot be reached for the transfer of the mining permit and reclamation liability to Goldrich or an operating company that
will harvest the placer gold in the deposit, mining will likely not continue at the mine. Further, in order to operate the mine, Goldrich
will be required to raise money to fund replacement equipment, wash plant, infrastructure and initial operating costs to restart the
mine, due to the mining assets which have been removed as part of the liquidation of GNP. Goldrich has prepared a new mine plan and an
initial assessment to show the mine’s potential, as announced in Goldrich’s news release dated June 11, 2021. However, at
the date of this report, there is no candidate for operating the mine without a settling concession as part of the transfer of the permit
and the associated reclamation obligations.
Goldrich
may not have a reasonable avenue to pursue in restarting the mine and may be limited to raising investment funds for the sole purpose
of exploration of the hard rock deposits.
Right
to Offset Damages or Distributions
The
Panel granted the request that any damages awarded to one party can be an offset to distributions (or damages) due to the other party.
Judgements
issued by Superior Court
On
April 29, 2020, the Superior Court of the State of Alaska issued a judgement in favor of Dr. James, in the total amount of $13,713 (for
the 2012 reclamation costs personally incurred, including interest) and $83,588 (for the adjustment to Dr. James’ stock purchase,
including interest). The Court ordered both Goldrich and NyacAU to submit a status report to the Court in September 2020 regarding the
Panel’s clarification of the amounts payable for the 2012 reclamation, including interest, and to clarify the correct party for
the award, NyacAU or GNP. The status report has been filed by both parties, and these judgements remain unpaid and in force before the
Superior Court. In June 2020, the Superior Court awarded additional amounts for attorney’s fees and costs. At December 31, 2020,
a total of $101,669 is included in accounts payable and interest payable on the consolidated balance sheet for the judgements, additional
costs, and interest. During the year-ended December 31, 2021, an additional $5,141 was accrued for interest. At December 31, 2021, a
total of $106,810 is included in accounts payable and interest payable on the consolidated balance sheet for the judgements.
Final
Post Award Orders
A
summary of the various matters addressed in the Final Post Award is as follows:
On
September 4, 2020, the Panel issued Final Post Award Orders, wherein the Panel issued rulings on multiple material issues:
Reclamation:
| a) | We
had previously filed a motion to compel NyacAU to correct accruals for certain expenses including
reclamation, demobilization, equipment rental and utilities. Most notably, we contended that
an accrual for reclamation liability of approximately $2.1 million was woefully short of
an $18.4 million estimate prepared by independent professionals as engaged by Goldrich. The
Panel denied our motion and ruled that Goldrich does not have the authority to compel the
establishment of any reserves on the GNP financial records; NyacAU having sole authority
to establish reserves as manager of the joint venture. There was no direct financial consequence
to us as a result of this ruling. This had no effect on the balance of LOC1 as the Panel
ruled that costs after mining ended cannot be added to the balance of LOC1. |
| b) | We
had previously filed a motion to compel NyacAU to reclaim the disturbed acres as required
under the Operating Agreement and the mining permit issued to NyacAU in 2013, and to require
NyacAU to fund the reclamation reserve from cash that had been distributed to NyacAU. The
Panel denied our motion and ruled that while there was express provision in the Operating
Agreement to establish reserves necessary for contingent or unforeseen liabilities or obligations,
which could conceivably include reclamation reserves, the agreement does not impose an express
obligation to reclaim the project site. The obligation to perform reclamation is imposed
by the claims lease and the mining permit issued to NyacAU, which requires the permit holder
to reclaim the site in accordance with government regulations. The ruling also states that
the determination of the scope of potential obligations to reclaim under the permit is beyond
the jurisdiction of the Panel. Further, the Panel ruled that the Operating Agreement does
not impose an obligation on the Company to pay 50% of the reclamation fee, confirming again
the obligation resides with the permit holder. Still further, the Panel ruled that the reclamation
fees were not operating expenses to bring the mine to commercial production and therefore
by definition of the Operating Agreement, precludes reclamation expenses from being added
to LOC1. This ruling deprives NyacAU of a security interest in 50% of future placer gold
production at the site to repay reclamation expenses which it advances. There was no direct
financial consequence to us as a result of this ruling; however, the effect on the future
balance of LOC1 and our liability for 50% of that balance would be significant now that NyacAU
is not allowed to pass through reclamation costs to GNP but is required to retain responsibility
for those costs as holder of the mining permit. |
| c) | NyacAU
had previously filed a motion to compel the Company to recognize and remit a reclamation
liability that had been invoiced by GNP to Goldrich in 2014 for reclamation work it performed
on Goldrich’s behalf for violations resulting from our 2012 mining activities. We had
previously challenged the validity of the invoice, citing back charges to GNP that had not
been recognized or remitted to it. The Panel denied Goldrich’s claim and ruled in favor
of NyacAU. We asked the Panel to clarify the party to whom the reclamation is payable, the
specific amount of the payable and the calculation of interest associated with the liability,
but recorded an accrued liability totaling $ 421,366 for the year ended December 31, 2019,
related to this reclamation liability and associated interest thereon, due to the liability
now being estimable and probable under ASC 450. The total consists of $329,157 for reclamation
expense and $92,209 for pre- and post-judgement interest expense, calculated at 5%. See Supplemental
Orders 5-8 below. |
Mining
Claims:
All
of our mining claims remain the property of the Company.
Repayment
of misappropriation of JV funds
We
had previously filed a motion to compel NyacAU to repay funds we considered to be misappropriated as payments on LOC1 in contravention
of the payment priority requirements as outlined in the Operating Agreement (See Note 4 Joint Venture). A successful challenge
of these cash disbursements would return to GNP funds that we considered to be necessary to pay for 2018 partner distributions that have
precedence over repayment of LOC1. The ruling was deferred pending additional information to be determined in the future, such as the
profitability of operations in 2018, which has not yet been determined when taking the Panel’s ruling into account. In December
2020, the Panel denied the motion, see Supplemental Orders 5-8 below.
Clarification
concerning GNP’s 2018 Profitability and 2018 Interim Distributions.
We
had made a challenge to the Panel’s understanding of facts related to GNP’s profitability for 2018 as presented in the arbitration
proceedings, with a motion to distribute interim distribution after applying the rulings made to date. The Panel deferred ruling on the
matter, retaining jurisdiction to decide the issue of interim distributions for 2018 and requested the parties to present evidence and
argument (disregarding any jurisdictional issue) as to (i) whether Goldrich has a right to interim distributions for 2018, and (ii) the
amount, if any, of distributions to be paid. Goldrich has submitted a claim for approximately $680,000 plus prejudgment interest thereon
at 5%; NyacAU claims that Goldrich is not entitled to any distributions for 2018. In December 2020, the Panel denied the motion, see
Supplemental Orders 5-8 below.
Clarification
of LOC1 Interest Paid and Amounts Owed to Goldrich.
We
had challenged the amount of payment of LOC1 interest by GNP to NyacAU and claimed reimbursement of 50% of the amount remitted as specified
by the Operating Agreement. The Panel deferred a ruling and required more information from each party. In December 2020, the Panel ruled
in our favor, see Supplemental Orders 5-8 below.
Subordination
of Mr. Gallagher’s Security to NyacAU’s Security.
A
challenge to the validity of priority of security interest was ruled in the Company’s favor. NyacAU’s security interest for
LOC1 was reaffirmed to be gold production from the mining claims, while Mr. Gallagher’s security is perfected in the mining claims
themselves. The Panel determined there was no conflict between the two security interests. There was no direct financial consequence
to us as a result of this ruling.
Supplemental
Orders 5-8
On
December 4, 2020, the arbitration Panel issued Supplemental Orders 5-8, wherein the Panel issued rulings on multiple material issues:
| ● | 2018
Profitability and 2018 Interim Distributions |
Under
the GNP Operating Agreement, Goldrich was entitled to receive certain interim distributions based on GNP’s profitability. Goldrich
received such distributions for 2016 and 2017. Goldrich challenged the Panel’s understanding of facts related to GNP’s profitability
for 2018 as presented in the arbitration proceedings and made a motion for GNP to distribute interim distributions for 2018 after applying
the arbitration rulings made to date. Goldrich submitted a claim to the arbitration Panel for approximately $680,000 plus prejudgment
interest thereon at 5%. The arbitration Panel denied Goldrich’s claim. Based on the Panel’s ruling, the paydown by NyacAU,
as manager of GNP, of Line of Credit 1 (“LOC1”) with GNP funds, rather than the payment of a 2018 interim distribution to
Goldrich, is not considered a misappropriation of funds. LOC1 is a related party loan between GNP and NyacAU.
The
Panel ruled that GNP was dissolved at the end of the 2018 mining season (September 28, 2018) by failing to meet the Minimum Production
Requirement of the GNP Operating Agreement rather than May 2019, when NyacAU published a formal notice of dissolution to the State of
Alaska and to creditors. Based on this and other evidence, the Panel found that GNP was dissolved by no later than October 9, 2018, which
precedes the date by which any interim distribution would otherwise have been due under the GNP Operating Agreement (October 31 - December
31, 2018). Accordingly, the Panel ruled that Goldrich is precluded from receiving any interim distributions for 2018 under the GNP Operating
Agreement, which provides that “[m]embers have a right to Distributions from the Company before the dissolution and winding
up of the Company.”
| ● | Goldrich’s
Portion of Interest Paid on LOC1 |
Under
the GNP Operating Agreement, Goldrich is to receive 50% of any interest on LOC1 paid by GNP to NyacAU. Goldrich made a claim to the arbitration
Panel that GNP had paid interest to NyacAU and that Goldrich was entitled to 50% of the amount paid. The Panel ruled that NyacAU is obligated
to pay Goldrich 50% of $241,797 in interest “received” by NyacAU up to October 2018, when GNP was dissolved and commenced
liquidation, in the total principal amount of $120,883. Goldrich is also entitled to recover 5% prejudgment interest on unpaid LOC1 interest
as it fell due. The Panel further ruled that LOC1 interest totaled (cumulatively) $3,394.21 as of December 2012; $22,663.46 as of December
2013; $55,632.71 as of December 2014; $101,823.60 as of December 2015; $155,337.06 as of December 2016; $205,817.76 as of December 2017;
and $241,797.20 as of October 1, 2018. Goldrich is awarded 12 months of accrued prejudgment interest at 5% per annum on each of these
year-end amounts. Goldrich has no entitlement to a share of LOC1 interest beyond this. As we are uncertain to the collectability of this
award, no recognition has been made in the consolidated financial statements.
In
the Partial Final Award given in 2019, the arbitration Panel made an award to NyacAU of $377,253 in damages and pre-award interest relating
to 2012 reclamation expenses incurred on Goldrich’s behalf. Goldrich made an “Application for Modification and Correction
of Arbitration Award, for Vacation of Award, or for Resubmission to Arbitration Panel for Clarification”, requesting an order from
the Alaska court, under the Alaska Arbitration Act, that the damages awarded for unpaid 2012 reclamation expenses were to be paid to
GNP, not NyacAU, and that the Panel clarify the appropriate amount of damages and interest to be paid. The Panel ruled on this in “Orders
on Respondents’ Motion to Confirm Judgement” noted below.
Orders
on Respondents’ Motion to Confirm Judgment
On
April 7, 2021, the Panel issued Order on Respondents’ Motion to Preserve Confidentiality of Arbitration Proceedings, wherein the
Panel ruled that the Company did not violate confidentiality when it filed the arbitration rulings as exhibits to its public reporting
with the Securities and Exchange. On April 7, 2021, the Panel also issued Orders on Respondents’ Motion to Confirm Judgment to
correct, clarify, or modify an award made in the Partial Final Award, wherein a claim against the Company for $50,685 for additional
reclamation costs, including interest of $2,589 was awarded to GNP. This event constitutes a ‘Type 1’ event, which required
adjustment and recognition to the financial statements for the year ended December 31, 2020. Together, the $421,366 accrued at December
31, 2019, the $16,503 accrued interest during the year ended December 31, 2020, and the aforementioned $50,685, at December 31, 2020,
a total of $488,554 has been accrued and is included in accounts and interest payable on the consolidated balance sheet. Additional interest
of $18,811 was accrued during the year ended December 31, 2021, bringing the total to $507,365 which is included in accounts and interest
payable on the consolidated balance sheet.
In
July 2021, both parties to the arbitration requested from the Superior Court an abeyance until July 30, 2021 pending the outcome of settlement
discussions. The abeyance deadline has been extended indefinitely to expire at such time as either party notifies the Superior Court
that settlement discussions have been successful in removing the questions before the court, or have failed.
Estimates
of Arbitration
It
is possible that there could be either adverse or favorable developments in the arbitration pending with the Company and its JV partner.
An unfavorable outcome or settlement of pending arbitration could encourage the commencement of additional legal action by the affected
party.
We
record provisions in the consolidated financial statements for pending arbitration results when it determines that an outcome is probable,
and the amount of the gain or loss can be reasonably estimated. At the present time, except as stated otherwise, while it is reasonably
possible that a favorable or unfavorable outcome in the arbitration may occur, after assessing the information available, management
is unable to estimate the possible gain or loss, or range of gains or losses, for the pending arbitration; and accordingly, no estimated
gains or losses have been accrued in the consolidated financial statements for favorable or unfavorable outcomes. Legal defense costs
are expensed as incurred.