ITEM 1. BUSINESS.
General
We are a minerals exploration and development company focused on the discovery and extraction of precious metals from mineral deposits in the Southwestern United States.
In February 2008, we acquired our lead project, a prospective gold, silver and calcium carbonate property located in Esmeralda County, Nevada that we call the “Columbus Project.” We acquired the Columbus Project through the acquisition of Columbus Brine Inc. (“CBI”), which was merged into our wholly owned subsidiary incorporated for the sole purpose of completing the acquisition, CBI Acquisition, Inc. A description of the consideration paid to the former stockholders of CBI is provided in the description of the Columbus Project contained in Item 2 of this Annual Report.
In addition to the Columbus Project, we own the right to acquire a prospective gold, silver and tungsten property located in San Bernardino County, California that we call the “Red Mountain Project,” and we are the owners of a mineral property located in Clark County, Nevada known as the “Ireland Claim.”
Recent Corporate Developments
The following significant developments have occurred since the end of our last fiscal quarter ended September 30, 2008:
1.
In October 2008, we completed the installation of, and commenced operations at, our pilot production plant located at the Columbus Project. The pilot production plant is being operated as part of our pre- feasibility program designed to test the commercial viability of mining and extracting precious metals from the Columbus Project. A diagram and description outlining the pilot production process for the Columbus Project is attached as an exhibit to this Annual Report.
2.
On October 31, 2008, our Board of Directors unanimously resolved to extend the term of the options previously granted to our officers, directors and one of our consultants in March 2007 for an additional 3 years as follows:
Optionee
No. of Options
Exercise Price
Expiry Date
Douglas D.G Birnie
Chief Executive Officer, President,
Secretary and Director 2,200,000
$0.05
March 30, 2012
Robert D. McDougal
Chief Financial Officer, Treasurer and
Director 500,000
$0.05
March 30, 2012
Michael A. Steele
Director 500,000
$0.05
March 30, 2012
Andrew Dall
Consultant 500,000
$0.05
March 30, 2012
Other than extending the term for which the options granted may be exercised by the respective optionees listed above, no other amendments were made.
3.
On November 4, 2008, Lawrence E. Chizmar, Jr. resigned from our Board of Directors due to personal health reasons. There were no disagreements between us and Mr. Chizmar relating to our operations, policies, practices or otherwise. A replacement to fill the vacancy in our Board caused by Mr. Chizmar’s resignation has not yet been chosen.
4.
In March 2009 we received assay results from 7 of 39 exploratory holes drilled at the Columbus Project. Samples from this drill program were collected in accordance with strict chain-of-custody parameters and are being analyzed by two independent laboratories. The 7 holes for which the results were received were located within a newly discovered mineralized area located approximately 3 miles south of our permitted mine area. We have labeled the area where these 7 holes were drilled as “Zone B.” The drill samples were analyzed using a caustic fusion technique and the results reported were from the extracted precious metals. The weight mean average grade for all the mineralized intercepts amongst the 7 holes was 0.045 ounces per ton (“opt”) of gold equivalent. The weight mean average grade within a potentially surface minable of zero to 100 feet was 0.043 opt of gold equivalent. The minable material down to at least 100 feet should be easily minable at a low cost using the dredge type mining method currently employed at our permitted mine area located approximately 3 miles north, which we have labeled “Zone A.” Detailed results for these 7 holes are provided under the description of the Columbus Project contained in Item 2 of this Annual Report. We have not yet received the results from the remaining 32 holes drilled in the third quarter of 2008, including an additional 7 holes drilled adjacent to Zone B. We will disclose these results once they have been received and analyzed.
5.
In March 2009 we also received the results of a bulk leach test that was conducted on 1,738 pounds of material extracted from our permitted mine area on the Columbus Project that we have labelled “Zone A.” The test was conducted by an independent laboratory commissioned by us. The bulk material used in the test assayed 0.055 opt of gold and 0.520 opt of silver. The leach test extracted 0.047 opt of gold and 0.464 opt of silver into solution. The precious metals were then collected on resins and processed to produce gold and silver bullion for a net extraction of 0.038 opt of gold and 0.385 opt of silver. This represents a leach extraction rate of 86.2% of gold into solution and 69.1% of gold recovered as metal. The overall extraction was 0.043 opt of gold equivalent (calculated at $900/oz gold and $12/oz silver). Upon completion of the test, the precious metal beads were delivered to us. We will commission further testing in an effort to optimize net metal recovery.
Competition
We are a mineral resource exploration and development company. We compete with other mineral resource exploration and development companies for the acquisition of new mineral properties, the services of contractors, equipment and financing. Many of the mineral resource exploration and development companies with whom we compete may have greater access to a limited supply of qualified technical personnel and contractors and to specialized equipment needed in the exploration, development and operation of mineral properties. This could have an adverse effect on our ability to explore and develop our properties in a timely manner. In addition, because many of our competitors are more established and have a longer operating history than us, they may have greater access to promising mineral properties.
In addition, many of our competitors have greater financial resources than us. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford greater geological expertise in the targeting and exploration of mineral properties. This may make our competitors more attractive to potential investors and could adversely impact our ability to obtain additional financing if and when needed.
Government Regulations
The mining industry in the United States is highly regulated. We intend to secure all necessary permits for the exploration of the Columbus Project, the Red Mountain Project and Ireland Claim and, if development is warranted on the properties, will file final plans of operation prior to starting any mining operations. The consulting geologists that we hire are experienced in conducting mineral exploration activities and are familiar with the necessary governmental regulations and permits required to conduct such activities. As such, we expect that our consulting geologists will inform us of any government permits that we will be required to obtain prior to conducting any planned activities on the Columbus Project, the Red Mountain Project and the Ireland Claim. We are not able to estimate the full costs of complying with environmental laws at this time since the full nature and extent of our proposed mining activities cannot be determined until we complete our exploration program.
If we enter into the development or production stages of any mineral deposits found on the Columbus Project, the Red Mountain Project and the Ireland Claim, of which there are no assurances, the cost of complying with environment laws, regulations and permitting requirements will be substantially greater than in the exploration phases because the impact on the project area is greater. Permits and regulations will control all aspects of any mineral deposit development or production program if the project continues to those stages because of the potential impact on the environment. Examples of regulatory requirements include:
- Water discharge will have to meet water standards;
- Dust generation will have to be minimal or otherwise re-mediated;
- Dumping of material on the surface will have to be re-contoured and re-vegetated;
- An assessment of all material to be left on the surface will need to be environmentally benign;
- Ground water will have to be monitored for any potential contaminants;
- The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be re-mediated; and,
- There will have to be a report of the potential impact of the work on the local fauna and flora.
Employees
As of the date of this Annual Report, other than our officers and directors, we have five full-time employees. We do not have any part-time employees.
Research And Development Expenditures
We have not incurred any research or development expenditures since our incorporation.
ITEM 1A.
ITEM 1A. RISK FACTORS.
The following are some of the important factors that could affect our financial performance or could cause actual results to differ materially from estimates contained in our forward-looking statements. We may encounter risks in addition to those described below. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, financial condition or results of operation.
Although we have begun operation of a pilot production module for the Columbus Project, there is no assurance that this project is commercially feasible.
We have begun pilot production operations on the Columbus Project. This pilot production module is part of our pre-feasibility study for the Columbus Project, and is designed to evaluate the commercial viability of the Columbus Project. There is no assurance that the results of our pre-feasibility program will result in a decision to enter into commercial production.
Additional exploration work is required before proved or probable reserves can be established.
We intend to report the results of our exploration activities promptly after those results have been received and analyzed by us. However, there is no assurance that the test results reported by us will be indicative of extraction rates throughout our mineral properties. We have not yet established proved or probable reserves on the Columbus Project or on our other mineral properties, and additional exploration work will be required before proved or probable reserves can be established.
If we do not obtain additional financing, we may not be able to complete our exploration and development programs for our mineral projects.
We currently have sufficient financial resources to pay for the anticipated costs of our exploration and development programs for the first half of 2009. We will require additional financing in order to proceed with our planned exploration and development programs beyond the first half of 2009. In addition, the actual costs of completing those programs could be greater than we have anticipated.
There is no assurance that we will be able to obtain additional financing when need or in an amount sufficient to meet our needs or that such financings will be offered on terms that are acceptable to our management. Our ability to obtain additional financing will be subject to a number of factors, including the variability of market prices for gold and silver, investor interest in our mineral projects, and the performance of equity markets in general. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us. If we are not able to obtain financing when needed or in an amount sufficient to enable us to complete our programs, we may be required to scale back our exploration and development programs.
If we complete additional financings through the sale of shares of our common stock, our existing stockholders will experience dilution.
The most likely source of future financing presently available to us is through the issuance of our common stock. The only other anticipated alternative for the financing of further exploration would be the offering by us of an interest in our properties to be earned by another party or parties carrying out further exploration thereof, which is not presently contemplated. In addition, if our management decides to exercise the right to acquire a 100% interest in the Red Mountain Project, we will be required to issue significantly more shares of our common stock. Issuing shares of our common stock, for financing purposes or otherwise, will dilute the interests of our existing stockholders.
In order to maintain our rights to the Columbus Project, Red Mountain Project and Ireland Claim, we will be required to make annual filings with federal and state regulatory agencies and/or be required to complete assessment work on those properties.
In order to maintain our rights to the Columbus Project, Red Mountain Project and Ireland Claim, we will be required to make annual filings with federal and state regulatory authorities. Currently the amount of these fees is nominal; however, these maintenance fees are subject to adjustment. In addition, we may be required by federal and/or state legislation or regulations to complete minimum annual amounts of mineral exploration work on the Columbus Project, Red Mountain Project and Ireland Claim. A failure by us to meet the annual maintenance requirements under federal and state laws could cause our rights to the Columbus Project, Red Mountain Project and Ireland Claim to lapse.
Because we are an exploration stage company, we face a high risk of business failure.
To date, our primary business activities have involved the acquisition of mineral claims and the exploration and development on these claims. We have not earned any revenues as of the date of this report. Potential investors should be aware of the difficulties normally encountered by exploration stage companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.
Because we anticipate our operating expenses will increase prior to our earning revenues, we may never achieve profitability.
Prior to completion of our exploration stage, we anticipate that we will incur increased operating expenses without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from the exploration of our mineral claims and the production of minerals thereon, if any, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we may not be able to ever generate any operating revenues or achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.
Because of the speculative nature of exploration of mining properties, there is substantial risk that no commercially exploitable minerals will be found and our business will fail.
The search for valuable minerals as a business is extremely risky. We may not find commercially exploitable reserves of gold or silver on our mineral claims. Exploration for minerals is a speculative venture, necessarily involving substantial risk. The expenditures to be made by us in the upcoming exploration of our mineral projects may not result in the discovery of commercial quantities of ore. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. In such a case, we would be unable to complete our business plan.
Because of the inherent dangers involved in mineral exploration, there is a risk that we may incur liability or damages if and when we conduct mineral exploration activities.
The search for valuable minerals involves numerous hazards. As a result, if and when we conduct exploration activities we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or against which we may elect not to insure. The payment of such liabilities may have a material adverse effect on our financial position.
Even if we discover commercial reserves of precious metals on our optioned mineral claims, we may not be able to successfully reach commercial production.
Our optioned mineral claims do not contain any known bodies of ore. If our exploration programs are successful in discovering ore of commercial tonnage and grade, we will require additional funds in order to place those mineral claims into commercial production. At this time, there is a risk that we will not be able to obtain such financing as and when needed.
Even if we can successfully reach commercial production, any change to mining laws or regulations or levy of additional taxes in the future may make our planned production process nonviable economically.
Several bills have been introduced by the US federal government that would levy resource taxes on mineral exploration companies. Any levy of additional taxes would have an adverse effect on our business. In addition, laws and regulations governing the exploration of mineral properties and the mining process are subject to change. Changes to mining laws and regulations that would have the effect of increasing the cost of mineral exploration and mining activities would adversely impact our business.
If we are unable to hire and retain key personnel, we may not be able to implement our business plan and our business will fail.
Our success will largely depend on our ability to hire highly qualified personnel with experience in geological exploration. These individuals may be in high demand and we may not be able to attract the staff we need. In addition, we may not be able to afford the high salaries and fees demanded by qualified personnel, or may lose such employees after they are hired. Currently, we have not hired any key personnel. An inability to hire key personnel when needed could have a significant negative effect on our business.
Because our executive officers do not have formal training specific to the technicalities of mineral exploration, there is a higher risk our business will fail.
Our executive officers and directors do not have formal training as geologists or in the technical aspects of management of a mineral exploration company. Accordingly, we will have to rely on the technical services of others trained in appropriate areas. If we are unable to contract for the services of such individuals, it will make it difficult and maybe impossible to pursue our business plan.
As we undertake exploration of our optioned mineral claims, we will be subject to compliance with government regulation that may increase the anticipated cost of our exploration program.
There are several government regulations that materially restrict the exploration of minerals. We may be required to obtain work permits, post bonds and perform remediation work for any physical disturbance to the land in order to comply with these laws. While our planned exploration program budgets for regulatory compliance, there is a risk that new regulations could increase our costs of doing business and prevent us from carrying out our exploration program.
Certain work to be performed on our mineral projects may require us to apply for permits from federal, state or local regulatory bodies.
If our applications for permits from the relevant regulatory bodies are denied, we may not be able to proceed with our exploration and development programs as disclosed above, which could have a negative affect on our business.
If we receive positive results from our exploration program and we decide to pursue commercial production, we may be subject to an environmental review process that may delay or prohibit commercial production.
If the results of our geological exploration program indicate commercially exploitable reserves, and we decide to pursue commercial production of our mineral claims, we may be subject to an environmental review process under environmental assessment legislation. Compliance with an environmental review process may be costly and may delay commercial production. Furthermore, there is the possibility that we would not be able to proceed with commercial production upon completion of the environmental review process if government authorities did not approve our mine or if the costs of compliance with government regulation adversely affected the commercial viability of the proposed mine.
The market for our common stock is limited and investors may have difficulty selling their stock.
Our shares are currently traded on the over the counter market, with quotations entered for our common stock on the OTC Bulleting Board under the symbol “IRLD.” However, the volume of trading in our common stock is currently limited. As a result, holders of our common stock may have difficulty selling their shares.
Because our common stock is a penny stock, stockholders may be further limited in their ability to sell their shares.
Our shares constitute a penny stock under the Exchange Act and are expected to remain classified as a penny stock for the foreseeable future. Classification as a penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his or her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares will be subject to Rules 15g-2 through 15g-9 of the Exchange Act. Rather than having to comply with these rules, some broker-dealers will refuse to attempt to sell a penny stock.
No Assurance That Forward Looking Assessments Will Be Realized.
Our ability to accomplish our objectives and whether or not we are financially successful is dependent upon numerous factors, each of which could have a material effect on the results obtained. Some of these factors are in the discretion and control of management and others are beyond management’s control. The assumptions and hypothesis used in preparing any forward-looking assessments contained herein are considered reasonable by management. There can be no assurance, however, that any projections or assessments contained herein or otherwise made by management will be realized or achieved at any level.
FOR ALL OF THE AFORESAID REASONS AND OTHERS SET-FORTH AND NOT SET-FORTH HEREIN, AN INVESTMENT IN OUR SECURITIES INVOLVES A CERTAIN DEGREE OF RISK. ANY PERSON CONSIDERING TO INVEST IN OUR SECURITIES SHOULD BE AWARE OF THESE AND OTHER FACTORS SET-FORTH IN THIS REPORT AND IN THE OTHER REPORTS AND DOCUMENTS THAT WE FILE FROM TIME TO TIME WITH THE SEC AND SHOULD CONSULT WITH HIS/HER LEGAL, TAX AND FINANCIAL ADVISORS PRIOR TO MAKING AN INVESTMENT IN OUR SECURITIES. AN INVESTMENT IN OUR SECURITIES SHOULD ONLY BE ACQUIRED BY PERSONS WHO CAN AFFORD TO LOSE THEIR TOTAL INVESTMENT.
ITEM 2.
ITEM 2. PROPERTIES.
We currently lease office space located at Suite 100, 2441 W. Horizon Ridge Parkway, Henderson, NV 89052 at a rate of $4,625 per month. The lease terms expired on August 31, 2008, and we continue to rent the existing space on a month-to-month basis.
We currently own an interest in, or rights to, three mineral projects that we refer to as the Columbus Project, the Red Mountain Project and the Ireland Claim.
THE COLUMBUS PROJECT
The Columbus Project is a potential gold, silver and calcium carbonate project that is currently made up of 128 mineral and millsite claims that we refer to as the “CSM Claims” and rights to an additional 147 mineral claims that we refer to as the “DDB Claims.”
Location
The mineral claims that make up the Columbus Project are located in the Columbus Salt Marsh, in Esmeralda County, Nevada, approximately 41 miles west of Tonopah, halfway between Las Vegas and Reno. The Columbus Salt Marsh is an enclosed basin and is a dry lake bed for the majority of the year. All surface drainage from the surrounding 300 square mile area flows into the Columbus Salt Marsh.
Figure 1. Location of Columbus Project
Title and Ownership Rights to the CSM Claims and the DDB Claims
The CSM Claims are wholly owned by Columbus S.M., LLC (“CSM”). CSM was a wholly owned subsidiary of CBI, and is now our wholly owned subsidiary. The DDB Claims are wholly owned by a mining syndicate known as the DDB Syndicate. Lawrence E. Chizmar Jr., a former member of our Board of Directors (and a former director of CBI) and a limited liability company controlled by Douglas D.G. Birnie, our President and Chief Executive Officer, and a member of our Board of Directors, are each the owners of a 1/8 interest in the DDB Syndicate. The remaining members of the DDB Syndicate are made up of the former officers and directors of CBI, the brother of a former officer and director of CBI, and certain affiliates of Nanominerals Corp. (“Nanominerals”). Nanominerals is a significant shareholder in our Company. Mr. Birnie also owns a 3.5% interest in Nanominerals. The DDB Claims were located by the DDB Syndicate in February, 2007, prior to Mr. Birnie’s, Nanominerals’ or Mr. Chizmar’s involvement with our Company. Mr. Birnie also acquired his interest in Nanominerals prior to his or their involvement with our Company.
Figure 2. Location of the CSM Claims and the DDB Claims
We acquired our interest in the CSM Claims and the DDB Claims from Nanominerals pursuant to an assignment by Nanominerals of its rights to both the Columbus Project and the Red Mountain Project under the terms of two letter agreements (the “Columbus Letter Agreement” and the “Red Mountain Letter Agreement,” respectively). In August 2007, Nanominerals completed the assignment of its rights and interests under both the Columbus Letter Agreement and the Red Mountain Letter Agreement to us, in consideration for which we:
(a)
issued an aggregate of 30,000,000 shares of our common stock to Nanominerals and certain business associates of Nanominerals (including 1,200,000 shares to Robert D. McDougal, our current Chief Financial Officer, Treasurer and a member of our Board of Directors);
(b)
granted Nanominerals a 5% royalty on any net smelter returns from either of the Columbus Project or the Red Mountain Project, or any other mineral projects that Nanominerals may assign or transfer to us in the future;
(c)
assumed all of Nanominerals obligations under the Columbus Letter Agreement and the Red Mountain Letter Agreement; and
(d)
agreed to reimburse Nanominerals for any properly documented expenditures made by it on either the Columbus Project or the Red Mountain Project.
In addition to the consideration paid by us, Lorrie Ann Archibald, then our Chief Executive Officer, Treasurer and sole director, and our principal shareholder, sold to Nanominerals 18,200,000 shares of our common stock, being all of the shares of our common stock owned by Ms. Archibald at that time, for an aggregate of $45,500. Mr. Birnie was appointed as our Chief Executive Officer, President and Secretary, and Mr. McDougal was appointed as our Chief Financial Officer pursuant to the terms of the Nano Agreement.
By December 2007, under the terms of the Columbus Letter Agreement, we had earned a 15% operating interest in the Columbus Project by:
(a)
paying a total $24,000 per month split amongst CSM, John T. Arkoosh (the former President and a former director of CBI) and William Maghan (a former director of CBI) until December 31, 2007; and
(b)
spending a total of $3,000,000 on examining, testing, exploring or developing the Columbus Project before December 31, 2007 (the “CP Expenditures”).
In February 2008, we increased our ownership of the Columbus Project to 100% by merging CBI with and into our wholly owned subsidiary incorporated for the sole purpose of acquiring CBI, CBI Acquisition, Inc. To complete the merger, we issued to the former stockholders of CBI an aggregate of 10,440,087 shares of our common stock and share purchase warrants to acquire an additional 5,220,059 shares of our common stock. The warrants issued are exercisable at a price of $2.39 per share and expire on February 19, 2013. After August 19, 2010, if our common stock trades at an average price of 150% of the exercise price of the warrants over a period of 20 consecutive trading days, than we may accelerate the expiration date to a date that is 30 days after the date that we send notice of our intention to exercise the acceleration right. The warrants issued to the former stockholders of CBI provide the holder with a cashless exercise right. In addition, we agreed to honor the terms of an option previously granted by CBI to one of its former stockholders, and to extend that option to June 29, 2010. As a result, this person may exercise an option to purchase 79,719 at a price of $1.36 per share on or before June 29, 2010.
After completing the acquisition of CBI, we acquired CBI’s rights under the terms of a mining lease that CBI entered into with the DDB Syndicate in November 2007 (the “DDB Agreement”). The DDB Agreement provides us with a 5 year lease on the DDB Claims, ending on November 29, 2012, with an option to purchase the DDB Claims at anytime during the lease period. During the year ended December 31, 2008, we paid the DDB Syndicate $130,000 under the terms of the DDB Agreement, and we must pay the DDB Syndicate rental payments of $30,000 per year, payable on June 30, 2009, 2010 and 2011 respectively in order to maintain our lease rights. Under the option rights provided under the DDB Agreement, we may purchase the DDB Claims by either:
(a)
paying the DDB Syndicate the purchase price of $400,000, less any rental payments previously made prior to exercise of the option right; or
(b)
paying the DDB Syndicate $10, plus granting the DDB Syndicate a royalty of 2% of net smelter returns on the DDB Claims.
Access and Infrastructure
The Columbus Project contains an existing mill site with power generator sets and an onsite fresh water well. Water used for processing is available from existing wells located on the surrounding basin (the “Columbus Basin”). There is also a high voltage grid located at the Candelaria Mines, approximately three miles from the Columbus Project.
Permits have been obtained for the production of calcium carbonate and the extraction of precious metals from an area of interest consisting of approximately 380 acres, including millsite, roads and mineable acreage.
History
The Columbus Project is located in an area that has historically been known as a well mineralized region. A gold and silver mining operation known as the Candelaria Mine is located approximately three miles northwest of the Columbus Project. The Clayton Valley Brine Project, a lithium extraction project, is located approximately 25 miles southeast of the Columbus Project.
The history of the area dates back to the 1860s upon the discovery of significant deposits of silver. During this period, the Candelaria Mine was established. To date, the Candelaria Mine has produced approximately 68 million ounces of silver.
The Clayton Valley Brine Project was established in the 1960’s and uses a brine aquifer to extract minerals. Clayton Valley has historically been one of the largest sources of lithium in the United States.
Geology
The Columbus Basin is an enclosed basin that appears to be a sediment-filled collapsed caldera of a volcano or a rift basin. A caldera is a volcanic feature formed by the collapse of land following a volcanic eruption. Surveys conducted on the area indicate that there appears to be a two mile wide fault structure in the northwest section of the Columbus Basin. The subsurface of the Columbus Basin contains an ash layer approximately 150 feet thick, located at a depth of approximately 400 feet. This ash layer hosts a large brine aquifer.
Exploration Activities Conducted on the Columbus Project to Date
Surface Sampling Program
In 2002, independent consultants SRK Consulting conducted a study on Zone A, reporting 8.8 million tons of material minable for calcium carbonate production within a 270 acre area to a depth of 25 feet. In August, 2006, Nanominerals commissioned Arrakis, Inc., an independent mining and metallurgical consulting engineering firm, to conduct surface sampling studies on the Columbus Project. Fifty-nine surface samples were taken by Arrakis and were processed at Arrakis’ laboratory in Englewood, Colorado. The results from these samples indicated an anomaly area located south of Zone A containing an average in-situ area wide grade of 0.078 opt of gold. These results were from surface samples only, and are not necessarily indicative of the mineralization found at depth.
In December, 2006, Arrakis returned to the Columbus Project and took five additional surface samples, four borings and a two thousand pound bulk sample. One boring went down to a depth of 10 feet, two borings went down to a depth of 15 feet and the final boring when down to a depth of 20 feet. The results of these additional samples fit the trend shown by the original surface samples, with no significant variations at depth.
The bulk sample taken by Arrakis was used to conduct gravity concentration tests. Most of the gold contained in the samples appear to be less than 50 microns. Arrakis noted that the gravity concentration tests indicated that more than 90% of the ore was made up of a clay matrix that would need to be carefully de-agglomerated and diluted prior to effective gravity concentration. A high grade calcium carbonate product is expected to be producible from these clay tailings.
2007 Drill Program - Zone A
In the fourth quarter of 2007, a drill program was conducted by Arrakis within the 320-acre permitted area of the Columbus Project, an area that we have now labeled as “Zone A.” The program consisted of 18 holes drilled to a maximum of 100 feet in depth. Independent analyses of the 18 holes indicate an average gold grade as follows:
154 sample average = 0.074 opt gold
18 drill hole average = 0.070 opt gold
The drill program and sample analyses were completed under chain-of-custody (COC) parameters by Arrakis. The samples were analyzed using an Acid Microwave Digestion method.
Drilling was completed by using a split auger to collect 2-foot composite samples every 10 feet down each hole. Holes were drilled to a maximum depth of 100 feet, with some holes being shallower due to bedrock or drilling conditions The drill program covered the 320-acre permitted mine site with 18 drill holes in a 6-hole by 3-hole evenly spaced grid.
Zone A - 2007 Drill Program Results
Composite
Depth Hole A1
(Au opt) Hole A2
(Au opt) Hole A3
(Au opt) Hole A4
(Au opt) Hole A5
(Au opt) Hole A6
(Au opt)
10’ - 12’ 0.082 0.083 0.087 0.107 0.129 0.070
20’ - 22’ 0.089 0.071 0.062 0.086 0.094 0.064
30’ - 32’ 0.080 0.072 0.081 0.067 0.080 0.066
40’ - 42’ 0.079 0.070 0.095 0.096 0.073 0.064
50’ - 52’ 0.089 0.078 0.083 0.108 0.088 0.064
60’ - 62’ 0.086 0.069 0.092 0.097 0.076 0.060
70’ - 72’ 0.074 0.085 0.089 0.092 0.072 0.060
80’ - 82’ 0.082 0.047 0.063 0.092 0.074 0.054
90’ - 92’ 0.086 0.067 0.074 0.065 0.071 0.053
100’ - 102’ 0.039
0.063 0.083 0.060 0.060
Average 0.079 0.071 0.079 0.089 0.082 0.062
Composite
Depth Hole A7
(Au opt) Hole A8
(Au opt) Hole A9
(Au opt) Hole A10
(Au opt) Hole A11
(Au opt) Hole A12
(Au opt)
10’ - 12’ 0.062 0.063 0.086 0.128 0.116 0.103
20’ - 22’ 0.054 0.044 0.057 0.089 0.095 0.085
30’ - 32’ 0.077 0.068 0.078 0.085 0.053 0.077
40’ - 42’ 0.062 0.062 0.076 0.110 0.076 0.070
50’ - 52’ 0.054 0.066 0.077 0.117 0.108 0.104
60’ - 62’ 0.076 0.065 0.081 0.109 0.102 0.089
70’ - 72’
0.069 0.079 0.100 0.109 0.104
80’ - 82’
0.061 0.081 0.089 0.102 0.109
90’ - 92’
0.068 0.091 0.078 0.105
100’ - 102’
0.085 0.095 0.086 0.101
Average 0.064 0.062 0.077 0.101 0.092 0.095
Composite
Depth Hole A13
(Au opt) Hole A14
(Au opt) Hole A15
(Au opt) Hole A16
(Au opt) Hole A17
(Au opt) Hole A18
(Au opt)
10’ - 12’ 0.009 0.076 0.089 0.092 0.055 0.079
20’ - 22’ 0.035 0.046 0.063 0.029 0.047 0.059
30’ - 32’ 0.034 0.100 0.113 0.093 0.028 0.049
40’ - 42’
0.058 0.093 0.085
0.072
50’ - 52’
0.007 0.066 0.069
0.064
60’ - 62’
0.047 0.081
0.059
70’ - 72’
0.029 0.028
0.061
80’ - 82’
0.035 0.029
0.052
90’ - 92’
0.021
0.031
100’ - 102’
0.025
0.043
Average 0.026 0.057 0.067 0.055 0.044 0.057
Based on the test results on the samples taken from the Columbus Project, Arrakis recommended proceeding with (1) a pilot processing installation at the existing mill site located on the property; and (2) exploration drilling of an anomalous zone indicated by the samples in an effort to determine the economic viability of the project. The anomalous zone has been labeled by us as “Zone B” and is located approximately 3 miles south of Zone A, where our permitted mine area and pilot production plant are located.
2009 Bulk Leach Test Results - Zone A
In the first quarter of 2009 we sent 1,738 pounds of material extracted and collected under COC parameters by Arrakis from our permitted mine site in Zone A of the Columbus Project to independent consultants AuRIC Metallurgical Laboratories of Salt Lake City, Utah (“AuRIC”) for bulk leach testing. No mineral processing operations such as crushing, grinding, drying or screening were performed on the sample. We received the testing results in March 2009. The sample was analyzed using a caustic fusion technique and reported head
grades of 0.055 opt gold and 0.520 opt silver. The material was then leached and resulted in the extraction of 0.047 opt gold and 0.464 opt silver into solution. The precious metals were then collected on resins and processed to produce gold and silver bullion for a net extraction of 0.038 opt gold and 0.385 opt silver. This represents leach extraction of 86.2% of gold into solution and 69.1% of gold recovered as metal. The overall extraction was a 0.043 opt gold equivalent value.
2008 Drill Program - Zone A and Zone B
In the third quarter of 2008, a 39-hole exploratory drill program was completed to depths ranging from 200 feet to 400 feet below the surface in the anomaly area previously identified in the 2006 surface sampling program conducted by Arrakis. A total of 25 holes were drilled within Zone A and an additional 14 holes were drilled south of Zone A. Over 1,000 samples were collected under COC parameters and delivered to two independent laboratories for analysis.
In the first quarter of 2009, we received assay results from independent consultants McEwen Geological LLC of Arvada, Colorado, (“McEwen”), from 7 contiguous holes drilled within an area located approximately 3 miles south of Zone A. We have labeled the area where these 7 holes were drilled as “Zone B.” The drill samples were analyzed using a caustic fusion technique and the results reported were from the extracted precious metals. The weight mean average grade for all the mineralized intercepts was 0.045 opt of gold equivalent (see table below). The weight mean average grade for a potential surface mine area (0-100 feet) was 0.043 opt of gold equivalent. The material from the surface to at least 100 feet is easily minable at low cost using the dredge type mining method currently employed at our mine site, located in Zone A, three miles to the north.
Zone B - 2008 Drill Program Results to Date
Assay results from the 7 additional holes drilled in an area adjacent to Zone B and the 25 holes drilled in Zone A have not yet been returned. Ireland will disclose the results from the additional holes drilled in Zone B and Zone once those results have been returned and analyzed.
The extent of the Zone A and Zone B mineralization has yet to be determined by further drill sample analysis. To confirm the drill results Ireland will conduct additional bulk sample tests in both Zone A and Zone B. Current drill results, together with geological modeling by McEwen, have outlined an area approximately ½ mile wide by 1-7/8 mile long in Zone B that hosts approximately 68 million tons of potentially minable materials within 100 feet of the surface. Potential tonnages outlined to date are listed below.
Location Acres Depth Thickness Potential Tonnage
Zone A - Mine Area
3’ to 40’ 37’
14.8M tons
Zone B - (Holes S7B to S13B)
0’ to 100’ 100’
68 M tons
Readers are cautioned that, although we believe that the results of our exploration activities to date have been sufficiently positive to proceed with the installation and operation of a pilot processing facility at
__________________________________________
Mineralized Intervals were determined using a 0.020 opt gold equivalent cut-off.
2 Au Equivalent calculated using: $900/oz Au, $12/oz Ag
the Columbus Project millsite, we have not yet established any probable or proven reserves. Additional exploration work will be required before probable or proven reserves can be established. There are no assurances that the results of our pre-feasibility and technical programs will result in a decision to enter into commercial production.
Current Exploration and Development Plans for the Columbus Project
Our technical program for the Columbus Project has two primary objectives: (a) to prove the mineral resources/minable reserves, and (b) to determine the commercial feasibility of mining and extracting precious metals from the project.
1.
Pilot Production Module: The installation of our pilot production plant at the Columbus Project was completed in October 2008 by Arrakis and the pilot production plant is currently in operation. The pilot production process consists of a full scale production and processing circuit that we are using to test the commercial viability of mining and extracting precious metals from the mineralized zones of the Columbus Project.
If the operation of this pilot production facility proves to our satisfaction that the Columbus Project is economically viable, we will seek to expand the production process or construct additional production circuits within the mill site to increase production capacity. The production model for the Columbus Project is anticipated to be a low cost, high volume mining operation. A diagram and description outlining the pilot production process for the Columbus Project is attached as an exhibit to this Annual Report.
We currently have a production permit from the Bureau of Land Management (the “BLM”) for the Columbus Project. The production permit allows us to produce calcium carbonate and extract precious minerals on the 320 acre mine site and 60 acres of mill sites claims located at the Columbus Project at a mine rate of up to 792,000 tons per year. The mine site and mill sites are located on the northern edge of the 5,000 acre area of interest identified by our surface sampling program.
We are currently using a dredge mining method to extract minerals from the Columbus Project. The material is mined and handled as a slurry throughout the production process. Once the material has been slurried, we use a gravity concentration process to filter the minerals from the material. This production process has, to date, proven to be very successful and is our preferred method of mining as the cost per ton of material mined is low. The final extraction method is expected to involve leaching chemicals to recover the minerals from the materials.
We are continuing to make adjustments to the processing circuit in an effort to optimize precious metals recovery and to determine the economics of this process. Bench and bulk leach tests are being conducted at off site facilities by independent consultants.
We anticipate that we will continue to operate our pilot production plant on an ongoing basis unless our production process is proven to be commercially unviable.
Readers are cautioned that, although we believe that the results of our exploration activities to date are sufficiently positive to proceed with the installation and operation of a pilot production circuit for the Columbus Project, we have not yet established any probable or proven reserves. There is no assurance that we will be able to establish that any commercially extractable ore reserves exist on the Columbus Project or that we will enter into commercial production.
2.
Drilling Exploration Program: Drilling on our 39-hole drilling program for the Columbus Project has been completed. The goal of this drilling program is to determine whether there are sufficient reserves on the Columbus Project for economic viability. The holes were drilled to depths ranging from 200 feet to 400 feet in depth. The objective of the program is to determine the three dimensional extent and economic potential of the gold mineralization within the anomalous area of interest that had previously been discovered by our surface sampling program. We have completed drilling on all 39 holes and, in the first quarter of 2009, we received the results from 7 holes drilled in Zone B, the results of which are reported above. We expect to receive the results from the remaining holes drilled, including 7 additional holes drilled adjacent to Zone B and 25 holes in Zone A, within the next few months.
We anticipate spending approximately $2,795,000 on our exploration and development program for the Columbus Project in 2009.
THE RED MOUNTAIN PROJECT
The Red Mountain Project is a potential gold, silver and tungsten project that consists of 60 mineral claims covering approximately 7,500 acres, all located in San Bernardino County and Kern County, California. Title to these mineral claims is currently recorded in the names of a number of individuals who, together, make up a mining syndicate known as Red Mountain Mining (“RMM”). We have been notified that some of the claims making up the Red Mountain Project may conflict with other existing mineral claims and other property rights covering the location of the project. We intend to work with RMM to in order to resolve these issues.
Rights to the Red Mountain Project
We acquired our rights to the Red Mountain Project on August 14, 2007, pursuant to an assignment to us by Nanominerals of its rights and interests under the Red Mountain Letter Agreement between it and RMM. For a description of the consideration paid by us to Nanominerals in exchange for the assignment of its rights under the Red Mountain Letter Agreement, as well as its rights under the Columbus Letter Agreement, please see our description of the Columbus Project, provided above, and below at “Item 13. Certain Relationships and Related Transactions, and Director Independence.”
The Red Mountain Letter Agreement provides that we are to:
(a)
pay $5,000 per month to RMM until December 31, 2011;
(b)
spend a total of $200,000 by December 31, 2008 on examining, testing, exploring or developing the Red Mountain Project (the “RMP Phase 1 Expenditures”); and
(c)
spend a total of $1,000,000 by December 31, 2011 on examining, testing, exploring or developing the Red Mountain Project (the “RMP Phase 2 Expenditures”).
For each $100,000 spent by us on the RMP Phase 1 or RMP Phase 2 Expenditures, we will earn a 5% interest in the Red Mountain Project (or a proportionate fractional interest for expenditures in denominations of less than $100,000). We will earn a maximum 60% interest in the Red Mountain Project if we spend the full $1,200,000 of the RMP Phase 1 and RMP Phase 2 Expenditures by the deadlines set out above.
In addition, at anytime, we may acquire a 100% interest in the Red Mountain Project (the “RM Acquisition Rights”) by:
(ii)
between 480,000 and 9,600,000 additional shares of our common stock, with the actual number of additional shares to be issued to be determined by dividing $2,400,000 by the Acquisition Price; and
(iii)
for every 4 additional shares issued under (b)(ii), we will be required to issue one additional share purchase warrant to acquire one additional share of our common stock at a price per share equal to 125% of the Acquisition Price, for a period of two years.
The Acquisition Price to be used to calculate the aggregate number of shares and share purchase warrants to be issued to RMM under the terms of the Red Mountain Letter Agreement will be the average closing price of our common stock during the 60 days prior to the acquisition date, provided, however, that the Acquisition Price shall not be lower than $0.25 and shall not be greater than $5.00.
As of December 31, 2008, the date of our most recently available financial statements, we had spent $512,677 on the Red Mountain Project, meaning that, as of December 31, 2008, we owned a 25.6% interest in the project.
Location and Access
The Red Mountain Project is located at the base of Red Mountain, which is 27 miles south of Ridgecrest in San Bernardino County and Kern County, California, approximately 75 miles northeast of Los Angeles. The Red Mountain Project can be accessed by using a gravel road that bisects the project from northwest to southeast.
The Red Mountain Project does not contain any useable infrastructure other than a water well.
Figure 3. Location of the Red Mountain Project
History
The Red Mountain Project is east of and adjacent to the Rand Mining District, initially discovered in 1894. The Rand Mining District was mined off and on until just recently for gold, silver and tungsten. The majority of the mines in the area consisted of small independent operations. There is currently no commercial mining occurring on the Red Mountain Project site.
Geology
The area surrounding the Red Mountain Project is highly mineralized with recorded production of gold, silver and tungsten.
Nanominerals had Arrakis review the Red Mountain Project, including the existing reports on work previously done by RMM. RMM has excavated over 100 test pits at the project site and has gravity concentrated the bulk samples taken from these pits. The results of RMM’s tests show values ranging from less than 0.01 troy ounces of gold per ton to over 1.00 troy ounces of gold per ton. Those test results reportedly show an average of 0.06 o.p.t. Arrakis reported that the grades were similar to other grades that have been reported in the area on similar mine sites.
Based on their review of the existing reports and a field visit to the Red Mountain Project site, Arrakis has recommended that we proceed with an exploration program to verify the reported gold grades in RMM’s studies and to test the recoverability in order to assess the economic viability of the Red Mountain Project.
Current Exploration
Our exploration and development program for the Red Mountain Project currently consists of the following:
1.
Comprehensive Project Report: A comprehensive project report on the Red Mountain Project has been prepared for us by an independent geological consultant. This report includes a review, summary and analysis of the mining history of the area and previous exploration work done on the project area. Based on the previous exploration work done on the region and on the specific project area, the consulting geologist recommended that additional exploration work be conducted on the Red Mountain Project. We expect the project report to be updated once our sampling program has been completed and the results of that program have been analyzed.
2.
Sampling and Drilling Program: We have initiated a surface sampling program on the Red Mountain Project. We have postponed the drilling program on the Red Mountain Project until we obtain additional financing. See “Financing Requirements”.
We anticipate that we will spend approximately $200,000 on our exploration program for the Red Mountain Project in 2009.
THE IRELAND CLAIM
Location and Access to the Ireland Claim
The Ireland Claim consists of one unpatented mineral lode claim situated in the Yellow Pine Mining District in Clark County, Nevada, Section 24 of Township 25 south, range 58 east.
The Ireland Claim is located approximately 30 miles southwest of Las Vegas, Nevada, and approximately 4 miles south of Goodsprings, Nevada on the eastern slope of the Spring Mountains. Access to the Ireland Claim may be obtained by traveling southwest along Interstate Highway No. 15 from Las Vegas to the town of Jean, Nevada. Goodsprings is accessible from Jean by paved road at a distance of approximately seven miles to the northeast. The Ireland Claim is approximately four miles south of Goodsprings and may be accessed from Goodsprings by gravel road.
Ownership Interest
We acquired ownership of the Ireland Claim from Multi Metal Mining Corp. effective as of November 30, 2004 in exchange for the sum of $6,000. The full purchase price has been paid to Multi Metal Mining Corp. and, as such, we are the sole legal and beneficial owners of the Ireland Claim. A copy of the purchase agreement was filed as an exhibit to our Annual Report for the fiscal year ended December 31, 2004.
Geology of the Ireland Claim
The regional geography of the Spring Mountain Range consists primarily of Paleozoic sediments that have undergone intense folding accompanied by faulting. The Yellow Pine Mining District is underlain by a series of Carboniferous sediments (i.e. relating to the Carboniferous Period) consisting of limestone, pure crystalline limestone, and dolomite, with occasional intercalated beds of fine-grained sandstone. These strata have a general west to southwest dip from 15 to 45 degrees occasionally disturbed by local folds. Igneous rocks (i.e. rocks formed by solidified magma) are scarce in this region and are represented chiefly by quartz-monzonite porphyry dikes and sills.
History and Previous Operations on the Ireland Claim
The Ireland Claim is situated in an area that has historically been known as a well mineralized region.
The history of the area surrounding the Ireland Claim dates back to 1856 following the investigation of lead ore by Mormon missionaries. The first ore was smelted in 1857 and a mill was built north of Goodsprings in 1898. The completion of the San Pedro, Los Angeles and Salt Lake railroad in 1905 and the recognition of oxidized zinc minerals in the ore found around this location stimulated the development of mines in this region. The region was the subject of intermittent mining activity up to around 1964. The area has remained primarily dormant since 1964. A report on the area from 1931 indicated that several cars of copper-bearing lead ore had been previously mined from the area. To our knowledge, no recent work has been recorded on the Ireland Claim.
The Yellow Pine Mining District has been mined primarily for lead, zinc and silver. However, an estimated 91,000 ounces of gold has also been recovered in the region.
Current State of Exploration on the Ireland Claim
Our exploration program for the Ireland Claim has been deprioritized by our management based on the progress and potential of our Columbus Project. As a result, our exploration program for the Ireland Claim is expected to be delayed, and may be delayed indefinitely. We do not expect to make significant progress on exploration of the Ireland Claim in 2009.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
We are not a party to any other legal proceedings and, to our knowledge; no other legal proceedings are pending, threatened or contemplated.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5.
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
MARKET INFORMATION
Quotations for our common stock were entered on the OTC Bulletin Board under the symbol "IREL" beginning on May 8, 2006. Our symbol was changed to “IRLD” on April 25, 2007 upon completion of our 4-for-1 stock split. The following is the high and low bid information for our common stock during each fiscal quarter of our last two fiscal years.
The above quotations have been adjusted to reflect our 4-for-1 stock split effective April 25, 2007. Quotations entered on the OTC Bulletin Board reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.
PENNY STOCK RULES
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which:
(a)
contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
(b)
contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of securities laws;
(c)
contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;
(d)
contains a toll-free telephone number for inquiries on disciplinary actions;
(e)
defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and
(f)
contains such other information and in such form as the SEC shall require by rule or regulation.
The broker-dealer also must, prior to effecting any transaction in a penny stock, provide the customer with:
(a)
bid and offer quotations for the penny stock;
(b)
the compensation of the broker-dealer and its salesperson in the transaction;
(c)
the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and
(d)
monthly account statements showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that, prior to a transaction in a penny stock that is not otherwise exempt from those rules, the broker-dealer must:
(a)
make a special written determination that the penny stock is a suitable investment for the purchaser; and
(b)
receive from the purchaser his or her written acknowledgement of receipt of the determination and a written agreement to the transaction.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock and therefore stockholders may have difficulty selling those securities.
REGISTERED HOLDERS OF OUR COMMON STOCK
As of March 20, 2009, there were 181 registered holders of record of our common stock. We believe that a large number of stockholders hold stock on deposit with their brokers or investment bankers registered in the name of stock depositories.
DIVIDENDS
We have not declared any dividends on our common stock since our inception. There are no dividend restrictions that limit our ability to pay dividends on our common stock in our Articles of Incorporation or bylaws. Chapter 78 of the Nevada Revised Statutes (the “NRS”), does provide certain limitations on our ability to declare dividends. Section 78.288 of Chapter 78 of the NRS prohibits us from declaring dividends where, after giving effect to the distribution of the dividend:
(a)
we would not be able to pay our debts as they become due in the usual course of business; or
(b)
except as may be allowed by our Articles of Incorporation, our total assets would be less than the sum of our total liabilities plus the amount that would be needed, if we were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders who may have preferential rights and whose preferential rights are superior to those receiving the distribution.
RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
PLAN OF OPERATION
During our 2009 fiscal year, we intend to proceed with our exploration and development programs for the Columbus Project and the Red Mountain Project. To provide Ireland with maximum financial flexibility, we have adjusted our capital expenditure budget for 2009. Accordingly, we have elected to postpone the drilling program at the Red Mountain Project. We continue to believe that the Red Mountain Project is an excellent prospect for us.
Although we currently intend to retain the Ireland Claim, our management has deprioritized our exploration program for the Ireland Claim based on the progress and potential of the Columbus and Red Mountain Projects. As a result, our exploration program for the Ireland Claim is expected to be delayed, and may be delayed indefinitely.
The Columbus Project
Our technical program for the Columbus Project has two primary objectives: (a) to prove the mineral resources/minable reserves, and (b) to determine the commercial feasibility of mining and extracting precious metals from the project.
1.
Pilot Production Module: The installation of our pilot production plant at the Columbus Project was completed in October 2008 and the pilot production plant is currently in operation. The pilot production process consists of a full scale production and processing circuit that we are using to test the commercial viability of mining and extracting precious metals from the mineralized zones of the Columbus Project.
If the operation of this pilot production facility proves to our satisfaction that the Columbus Project is economically viable, we will seek to expand the production process or construct additional production circuits within the mill site to increase production capacity. The production model for the Columbus Project is anticipated to be a low cost, high volume mining operation. A diagram and description outlining the pilot production process for the Columbus Project is attached as an exhibit to this Annual Report.
We currently have a production permit from the Bureau of Land Management (the “BLM”) for the Columbus Project. The production permit allows us to produce calcium carbonate and extract precious minerals on the 320 acre mine site and 60 acres of mill sites claims located at the Columbus Project at a mine rate of up to 792,000 tons per year. The mine site and mill sites are located in Zone A on the northern edge of the 5,000 acre area of interest identified by our surface sampling program.
We are currently using a dredge mining method to extract minerals from the Columbus Project. The material is mined and handled as a slurry throughout the production process. Once the material has been slurried, we use a gravity concentration process to filter the minerals from the material. This production process has, to date, proven to be very successful and is our preferred method of mining as the cost per ton of material mined is low. The final extraction method is expected to involve acid leaching to recover the minerals from the materials.
We are continuing to make adjustments to the processing circuit in an effort to optimize precious metals recovery and to determine the economics of this process. Bench and bulk leach tests are being conducted at off site facilities by independent consultants.
We anticipate that we will continue to operate our pilot production plant on an ongoing basis unless our production process is proven to be commercially unviable.
Readers are cautioned that, although we believe that the results of our exploration activities to date are sufficiently positive to proceed with the installation and operation of a pilot production circuit for the Columbus Project, we have not yet established any probable or proven reserves. There is no assurance that we will be able to establish that any commercially extractable ore reserves exist on the Columbus Project or that we will enter into commercial production.
2.
Drilling Exploration Program: Drilling on our 39-hole drilling program for the Columbus Project has been completed. The goal of this drilling program is to determine whether there are sufficient reserves on the Columbus Project for economic viability. The holes were drilled to depths ranging from 200 feet to 400 feet in depth. The objective of the program is to determine the three dimensional extent and economic potential of the gold mineralization within the area of interest that had previously been discovered by our surface sampling program. We have completed drilling on all 39 holes and, in the first quarter of 2009, we received the results from 7 holes drilled in Zone B, the results of which are reported above. We expect to receive the results from the remaining holes drilled, including 7 additional holes drilled adjacent to Zone B and 25 holes in Zone A, within the next few months.
We anticipate spending approximately $2,795,000 on our exploration and development program for the Columbus Project in 2009.
The Red Mountain Project
Our exploration and development program for the Red Mountain Project currently consists of the following:
1.
Comprehensive Project Report: A comprehensive project report on the Red Mountain Project has been prepared for us by an independent geological consultant. This report includes a review, summary and analysis of the mining history of the area and previous exploration work done on the project area. Based
on the previous exploration work done on the region and on the specific project area, the consulting geologist recommended that additional exploration work be conducted on the Red Mountain Project. We expect the project report to be updated once our sampling program has been completed and the results of that program have been analyzed.
2.
Sampling and Drilling Program: We have initiated a surface sampling program on the Red Mountain Project. We have postponed the drilling program on the Red Mountain Project until we obtain additional financing. See “Financing Requirements”.
We anticipate that we will spend approximately $200,000 on our exploration program for the Red Mountain Project in 2009.
Cash Requirements
We have budgeted for the following expenditures in 2009:
As of December 31, 2008, we had cash in the amount of $2,565,823 and a working capital surplus of $2,559,503. This amount is substantially less than the total expenditures that we have budgeted for our 2009 fiscal year. We estimate that our current financial resources are sufficient to allow us to meet the anticipated costs of our exploration and development programs for the first half of our 2009 fiscal year. However, actual costs could be greater than we have anticipated. We will require additional financing in order to fully complete our exploration and development plans for 2009. We do not currently have any financing arrangements in place, and there are no assurances that we will be able to obtain additional financing in an amount sufficient to meet our needs or on terms that are acceptable to us.
RESULTS OF OPERATIONS
Revenue
We have not earned any operational revenues since our inception and we do not anticipate earning revenues until our mineral properties enter into commercial production, of which there are no assurances. Our pilot production plant at the Columbus Project is currently being operated for pre-feasibility testing purposes only. We are currently in the exploration stage of our business and we can provide no assurances that we will be able to establish the existence of probable or proved mineral reserves on our properties, or if such reserves are established, that we will be able to enter into commercial production.
Expenses
The major components of our expenses for the years ended December 31, 2008 and 2007 are outlined in the table below:
Our operating expenses for the year ended December 31, 2008 increased substantially as compared to our December 31, 2007 fiscal year. The additional operating expenses for our third fiscal quarter of 2008 are primarily expenses related to the exploration and development of the Columbus Project and the exploration of the Red Mountain Project.
The item “Mineral exploration and evaluation expenses - related party” represents (a) amounts paid or reimbursed to Nanominerals for exploration work conducted on the Columbus and Red Mountain Projects; and (b) amounts paid in respect of the DDB Claims to the DDB Syndicate, an entity owned by related parties.
During our 2008 fiscal year, we incurred fees payable to Nanominerals of $420,000 for technical and financing related services relating primarily to the Columbus and Red Mountain Projects. In addition, we incurred $33,354 in respect to reimbursable expenses paid for by Nanominerals. At December 31, 2008, we were indebted to Nanominerals in the amount of $42,733 for unpaid fees and reimbursable expenses.
During our 2008 fiscal year, we made $130,000 in rental payments to the DDB Syndicate under the terms of our lease agreement for the DDB Claims. The DDB Syndicate is a mining syndicate made up of a limited liability
company controlled by Douglas D.G. Birnie (our President and Chief Executive Officer and a member of our Board of Directors), Lawrence E. Chizmar, a former member of our Board of Directors (and a former director of CBI), three former officers, directors and affiliates of CBI, and three companies affiliated with Nanominerals. The $130,000 in rental payments made to the DDB Syndicate consisted of $13,416 paid to each member of the DDB Syndicate, plus an additional $22,670 paid to a company controlled by Mr. Birnie for the reimbursement of expenses related to exploration work done on the DDB Claims.
We also had an outstanding balance for accrued compensation due to Douglas D.G. Birnie (our President and Chief Executive Officer and a member of our Board of Directors) in the amount of $7,684, payable to a company controlled by Mr. Birnie.
The increase in general and administrative expenses is primarily attributable to: (i) increases in the amounts paid as executive compensation; (ii) an increase in legal and accounting expenses incurred by us; (iii) increased professional and administrative expenses associated with the administration of the Columbus Project; and (iv) an overall increase in company activity.
We anticipate that our operating expenses will continue to increase significantly as we pursue our exploration and development programs for the Columbus Project, the Red Mountain Project and the Ireland Claim.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2008 we had a working capital surplus of $2,559,503 as compared to a working capital surplus of $8,621,176 at December 31, 2007. The decrease in our working capital surplus is primarily attributable to the fact that: (i) we had no sources of revenue and only nominal financing during the period; and (ii) we incurred substantial expenses in the acquisition, exploration and development of the Columbus Project and the exploration of the Red Mountain Project.
The increase in cash flows used for investing activities is due to purchases of plant and equipment for our pilot production plant during our 2008 fiscal year.
Financing Requirements
We anticipate that we will require additional financing by the second half of our 2009 fiscal year if we are to complete our proposed exploration and development programs for 2009. We do not currently have any financing arrangements in place. There is no assurance that we will be able to obtain additional financing when need or in an amount sufficient to meet our needs or that such financings will be offered on terms that are acceptable to our management. Our ability to obtain additional financing will be subject to a number of factors, including the variability of market prices for gold and silver, investor interest in our mineral projects, and the performance of equity markets in general. These factors may make the timing, amount, terms or conditions of
additional financing unavailable to us. If we are not able to obtain financing when needed or in an amount sufficient to enable us to complete our programs, we may be required to adjust our exploration and development plans depending upon our existing capital resources.
OFF-BALANCE SHEET ARRANGEMENTS
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted accounting principles requires our management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain.
We have identified certain accounting policies, described below, that are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in the notes to our audited financial statements included under Item 8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Financial Statements:
Audited financial statements for the year ended December 31, 2008, including:
BROWN ARMSTRONG PAULDEN
McCOWN STARBUCK THORNBURGH & KEETER
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Ireland, Inc.
We have audited the accompanying balance sheets of Ireland, Inc. (An Exploration Stage Company) as of December 31, 2008 and 2007, and the related statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the years in the two-year period ended December 31, 2008. Ireland Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ireland, Inc. (An Exploration Stage Company) as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As described in Note 1 to the financial statements, the Company’s operating losses raise substantial doubt about its ability to continue as a going concern, unless the Company attains future profitable operations and/or obtains additional financing. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
BROWN ARMSTRONG PAULDEN
McCOWN STARBUCK THORNBURGH & KEETER
ACCOUNTANCY CORPORATION
March 26, 2009
Bakersfield, California
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
See Accompanying Notes to these Consolidated Financial Statements
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
See Accompanying Notes to these Consolidated Financial Statements
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
See Accompanying Notes to these Consolidated Financial Statements
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
See Accompanying Notes to these Consolidated Financial Statements
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
See Accompanying Notes to these Consolidated Financial Statements
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
See Accompanying Notes to these Consolidated Financial Statements
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
Basis of presentation - These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States. The Company’s fiscal year-end is December 31.
Description of business - The Company is considered an exploration stage company since its formation and the Company has not yet realized any revenues from its planned operations. The Company is primarily focused on the acquisition and exploration of mining properties. Upon identification of commercially minable reserves, the Company expects to actively prepare the site for its extraction and enter the development stage.
History - The Company was incorporated on February 20, 2001 under the laws of the State of Nevada under the name Merritt Ventures Corp. On December 19, 2005, the Company changed its name to Ireland Inc.
Going concern - The accompanying financial statements have been prepared assuming the Company will continue as a going concern.
The Company incurred cumulative net losses of $6,657,376 from operations as of December 31, 2008, and has no revenue. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its mineral properties. Management has plans to seek additional capital through private placements and public offerings of its common stock. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.
Principles of consolidation - The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary incorporated for the sole purpose of completing an acquisition, CBI Acquisition, Inc. (CBIA). CBIA was formed on December 19, 2007. CBIA has a wholly-owned single-member LLC subsidiary Columbus Salt Marsh LLC (CSM). Rand Metals LLC (Rand) was formed by the Company on May 1, 2008 for purposes of potential future acquisitions and has activity related to exploration of the Red Mountain Project.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES (continued)
Exploration costs - Mineral exploration costs are expensed as incurred.
Mineral rights - The Company capitalizes acquisition and option costs of mineral property rights. The amount capitalized represents fair value at the time the mineral rights were acquired.
The Company capitalizes acquisition and option costs of mineral rights as tangible assets in accordance with Emerging Issues Task Force abstract 04-02 (“EITF 04-02”), “Whether Mineral Rights are Tangible or Intangible Assets and Related Issues”. Upon commencement of production, the mineral rights will be amortized using the unit-of-production method over the life of the mineral rights. If the Company does not continue with exploration after the completion of the feasibility study, the mineral rights will be expensed at that time.
Mineral property acquisition costs - Costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred either to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates the carrying value of capitalized mining costs and related property and equipment costs, to determine if these costs are in excess of their recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The periodic evaluation of carrying value of capitalized costs and any related property and equipment costs are based upon expected future cash flows and/or estimated salvage value in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets.”
Property and equipment - Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line or unit-of-production methods, as applicable, over the estimated useful lives of the assets, which are generally 3 to 39 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense).
The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of property and equipment or whether the remaining balance of property and equipment should be evaluated for possible impairment. If events and circumstances warrant evaluation, the Company uses an estimate of the related undiscounted cash flows over the remaining life of the property and equipment in measuring their recoverability.
Impairment of long-lived assets - The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under SFAS No. 144 if events or circumstances indicate that their carrying amount might not be recoverable. As of December 31, 2008 exploration progress on these properties is on target with the Company’s exploration and evaluation plan and no events or circumstances have happened to indicate the related carrying values of the properties may not be recoverable. When the Company determines a SFAS 144 impairment analysis should be done, the analysis will be performed using the rules of EITF 04-03, “Mining Assets: Impairment and Business Combinations.”
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES (continued)
Various factors could impact the Company’s ability to achieve forecasted production schedules. Additionally, commodity prices, capital expenditure requirements and reclamation costs could differ from the assumptions the Company may use in cash flow models used to assess impairment. The ability to achieve the estimated quantities of recoverable minerals from exploration stage mineral interests involves further risks in addition to those factors applicable to mineral interests where proven and probable reserves have been identified, due to the lower level of confidence that the identified mineralized material can ultimately be mined economically.
Material changes to any of these factors or assumptions discussed above could result in future impairment charges to operations.
Reclamation and Remediation Costs (Asset Retirement Obligation) - The Company accrued costs associated with environmental remediation obligations in accordance with Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations.” In accordance with SFAS No. 143, the Company records a liability for the present value of the estimated environmental remediation costs in the period in which the liability is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated asset. The liability will be accreted and the asset will be depreciated over the life of the related assets. Adjustments for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation will be made. As reclamation work is performed or liabilities are otherwise settled, the recorded amount of the liability is reduced.
The Company accrues costs associated with environmental remediation obligation when it is probable that such costs will be incurred and they are reasonably estimable. Estimates for reclamation and other closure costs are prepared in accordance with SFAS No. 5 “Accounting for Contingencies,” or Statement of Position 96-1 “Environmental Remediation Liabilities.” Costs of future expenditures for environmental remediation are not discounted to their present value unless subject to a contractually obligated fixed payment schedule. Such costs are based on management’s current estimate of amounts to be incurred when the remediation work is performed, within current laws and regulations.
Future reclamation and environmental-related expenditures are difficult to estimate, in many circumstances, due to the early stage nature of investigations, and uncertainties associated with defining the nature and extent of environmental contamination and the application of laws and regulations by regulatory authorities and changes in reclamation or remediation technology. The Company periodically reviews accrued liabilities for such reclamation and remediation costs as evidence becomes available indicating that the liabilities have potentially changed. Changes in estimates are reflected in the statement of operations in the period an estimate is revised.
Accruals for reclamation and environmental matters totaled $275,338 and $0 at December 31, 2008 and 2007, respectively. The Company is in the exploration stage and is unable to determine the estimated timing of these expenditures relating to these accruals at this time. It is reasonably possible the ultimate cost of reclamation and remediation could change in the future, and that changes to these estimates could have a material effect on future operating results as new information becomes known. For additional information, see Note 12.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES (continued)
Fair value of financial instruments - The Company’s financial instruments consist of accounts payable and accrued liabilities. The carrying value of these financial instruments approximates their fair value based on their liquidity or their short-term nature. The Company is not exposed to significant interest or credit risk arising from these financial instruments.
Revenue recognition - Revenues are recognized during the period in which the revenues are earned. Costs and expenses are recognized during the period in which they are incurred.
Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from these estimates.
Earnings (loss) per share - The Company follows SFAS No. 128, “Earnings Per Share” and SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” which establish standards for the computation, presentation and disclosure requirements for basic and diluted earnings per share for entities with publicly-held common shares and potential common stock issuances. Basic earnings (loss) per share are computed by dividing net income by the weighted average number of common shares outstanding. In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities, such as stock options and warrants. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. Weighted average of common stock equivalents, which include stock options and warrants to purchase common stock, on December 31, 2008 and 2007 that were not included in the computation of diluted EPS, because the effect would be antidilutive, were 18,626,459 and 6,694,521, respectively.
Expenses of offering - The Company accounts for specific incremental costs directly to a proposed or actual offering of securities as a direct charge against the gross proceeds of the offering.
Income taxes - The Company accounts for income taxes under SFAS No. 109, “Accounting for Income Taxes” using the liability method, recognizing certain temporary differences between the financial reporting basis of the Company’s liabilities and assets and the related income tax basis for such liabilities and assets. This method generates either a net deferred income tax liability or asset for the Company, as measured by the statutory tax rates in effect. The Company derives its deferred income tax provision or benefit by recording the change in either the net deferred income tax liability or asset balance for the year. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax will not be realized.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES (continued)
On July 13, 2006, the FASB issued interpretation No. 48, “Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109, and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under FIN 48, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than 50% likelihood of being sustained. Additionally, FIN 48 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, and disclosure and transition. The Company adopted the provision of FIN 48 on January 1, 2007, which did not have any impact on the consolidated financial statements.
For acquired properties, that do not constitute a business as defined in EITF 98-03 “Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business”, deferred income tax liability is recorded on GAAP basis over income tax basis using statutory federal and state rates. The resulting estimated future federal and state income tax liability associated with the temporary difference between the acquisition consideration and the tax basis is computed in accordance with EITF 98-11 and SFAS 109, and is reflected as an increase to the total purchase price which is then applied to the underlying acquired assets in the absence of there being a goodwill component associated with the acquisition transactions in accordance with EITF 98-11 and SFAS 109.
Stock-based compensation - On December 16, 2004, the FASB issued SFAS No. 123R, “Share- Based Payment”, which replaces SFAS No. 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. Under SFAS No. 123R, the Company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption. The transition methods include prospective and retroactive adoption options. Under the retroactive option, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS No. 123R, while the retroactive methods would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. The Company adopted the requirements of SFAS No. 123R for the fiscal year beginning after December 31, 2004.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES (continued)
New accounting pronouncements - In December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Post-Retirement Benefit Plan Assets” (“FSP FAS 132(R)-1”), which amends FASB Statement No. 132 “Employers’ Disclosures about Pensions and Other Post- Retirement Benefits” (“FAS 132”), to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other post-retirement plan. The objective of FSP FAS 132(R)-1 is to require more detailed disclosures about employers’ plan assets, including employers’ investment strategies, major categories of plan assets, concentrations of risk within plan assets, and valuation techniques used to measure the fair value of plan assets. FSP FAS 132(R)-1 is effective for the Company’s fiscal year beginning January 1, 2009. Upon initial application, the provisions of this FSP are not required for earlier periods that are presented for comparative purposes. The Company does not currently have a benefit pension or any post-retirement benefit plans and the Company has determined that the adoption of this statement will have little or no effect on the Company’s consolidated financial position, results of operations, and disclosures.
In November 2008, the EITF reached consensus on Issue No. 08-6, “Equity Method Investment Accounting Considerations” (“EITF 08-6”), which clarifies the accounting for certain transactions and impairment considerations involving equity method investments. The intent of EITF 08-6 is to provide guidance on (i) determining the initial carrying value of an equity method investment, (ii) performing an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment, (iii) accounting for an equity method investee’s issuance of shares, and (iv) accounting for a change in an investment from the equity method to the cost method. EITF 08-6 is effective for the Company’s fiscal year beginning January 1, 2009 and is to be applied prospectively. The Company is currently evaluating the potential impact of adopting this statement on the Company’s consolidated financial position or results of operations.
In June 2008, the EITF reached consensus on Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF 07-5”). EITF 07-5 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which would qualify as a scope exception under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”). EITF 07-5 is effective for the Company’s fiscal years beginning January 1, 2009. Early adoption for an existing instrument is not permitted. The Company does not expect the adoption of EITF 07-5 to have a material impact on the Company’s consolidated financial position or results of operations.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES (continued)
In May 2008, the FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 applies to convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement, unless the embedded conversion option is required to be separately accounted for as a derivative under FAS 133. Convertible debt instruments within the scope of FSP APB 14-1 are not addressed by the existing APB 14. FSP APB 14-1 requires that the liability and equity components of convertible debt instruments within the scope of FSP APB 14-1 be separately accounted for in a manner that reflects the entity’s nonconvertible debt borrowing rate. This requires an allocation of the convertible debt proceeds between the liability component and the embedded conversion option (i.e., the equity component). The difference between the principal amount of the debt and the amount of the proceeds allocated to the liability component will be reported as a debt discount and subsequently amortized to earnings over the instrument’s expected life using the effective interest method. FSP APB 14-1 is effective for the Company’s fiscal year beginning January 1, 2009 and will be applied retrospectively to all periods presented. The Company does not currently have convertible debt instruments and the Company has determined that the adoption of this statement will have little or no effect on the Company’s consolidated financial position, results of operations, and disclosures.
In April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”) which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”). The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141, “Business Combinations” (“FAS 141”). FSP 142-3 is effective for the Company’s fiscal year beginning January 1, 2009 and will be applied prospectively to intangible assets acquired after the effective date. The Company does not expect the adoption of FSP 142-3 to have an impact on the Company’s consolidated financial position, results of operations or cash flows.
The FASB issued FASB Staff Position (FSP) FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for that Asset Is Not Active”. The FSP clarifies the application of FASB Statement No. 157, “Fair Value Measurements”, in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. The FSP is effective October 10, 2008, and for prior periods for which financial statements have not been issued. Revisions resulting from a change in the valuation technique or its application should be accounted for as a change in accounting estimate following the guidance in FASB Statement No. 154, “Accounting Changes and Error Corrections”. However, the disclosure provisions in Statement 154 for a change in accounting estimate are not required for revisions resulting from a change in valuation techniques or its application. The Company has determined that the adoption of this statement will have little or no effect on the Company’s consolidated financial position, results of operations, and disclosures.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES (continued)
In May 2008, the FASB issued SFAS No. 162, “Hierarchy of Generally Accepted Accounting Principles”. This statement is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements of nongovernmental entities that are presented in conformity with GAAP. This statement will be effective 60 days following the U.S. Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendment to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 162 on its consolidated financial statements.
On March 19, 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities.” This statement is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is currently evaluating the impact that SFAS 161 will have on the consolidated financial statements.
In February 2008, the FASB staff issued Staff Position No. 157-2 “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”). FSP FAS 157-2 delayed the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The provisions of FSP FAS 157-2 are effective for the Company’s fiscal year beginning January 1, 2009. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.
In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” which amends SFAS No. 141, and provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree. It also provides disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) is effective for the Company’s fiscal year beginning January 1, 2009 and is to be applied prospectively. The Company is currently evaluating the potential impact of adopting this statement on the Company’s consolidated financial position, results of operations or cash flows.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51” which establishes accounting and reporting standards pertaining to ownership interests in subsidiaries held by parties other than the parent, the amount of net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for the Company’s fiscal year beginning January 1, 2009. The Company is currently evaluating the potential impact of adopting this statement on the Company’s consolidated financial position, results of operations or cash flows.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES (continued)
In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option For Financial Assets And Financial Liabilities - Including An Amendment Of FASB Statement No. 115”. This pronouncement permits entities to use the fair value method to measure certain financial assets and liabilities by electing an irrevocable option to use the fair value method at specified election dates. After election of the option, subsequent changes in fair value would result in the recognition of unrealized gains or losses as period costs during the period the change occurred. SFAS No. 159 becomes effective as of the beginning of the first fiscal year that begins after November 15, 2007, with early adoption permitted. However, entities may not retroactively apply the provisions of SFAS No. 159 to fiscal years preceding the date of adoption. The adoption of this statement had little or no effect on the Company’s consolidated financial position, results of operations, and disclosures.
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31, 2008 and 2007:
Depreciation expense was $19,687 and $672 for the years ended December 31, 2008 and 2007, respectively.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. RECLAMATION BONDS
Reclamation bonds consisted of the following as of December 31, 2008 and 2007:
During the year ended December 31, 2008, the Company acquired a reclamation bond of $24,720 in connection with the acquisition of CBI, a bond of $100,000 to provide surface reclamation coverage for operations, and $28,762 for financial guarantee. On December 29, 2008, the Bureau of Land Management authorized a partial refund, in the amount of $27,394, of the $807,000 reclamation bond acquired during 2007. At December 31, 2008, the authorized refund was recorded as a refund receivable and a reduction to the reclamation bond.
4. MINERAL EXPLORATION PROPERTIES
Ireland claim - On November 30, 2004, the Company entered into a mineral property purchase agreement to acquire a 100% undivided interest in one mineral claim located in the Yellow Pine Mining District in Clark County, Nevada, known as the Ireland Claim, for a total consideration of $6,000.
The Company has not determined whether the mineral claim contains mineralized material and has consequently written off all mineral rights acquisition costs to operations during the previous financial periods.
The Columbus and Red Mountain projects - On March 30, 2007, as amended August 8, 2007, the Company entered into an Assignment Agreement with Nanominerals Corp. (NMC) a Nevada corporation, to acquire two mineral property option interests, the first located in Esmeralda County, Nevada (the “Columbus project”) and the second located in San Bernardino County, California (the “Red Mountain project”). The assignments were completed on August 14, 2007.
Pursuant to the above assignment agreement, the Company issued 30,000,000 common shares to NMC and, in return, received a deed of assignment to the option interests in the Columbus Project and to the Red Mountain Project. The Company granted a 5% net smelter return royalty and has reimbursed $1,162,125 in documented fees and expenses to NMC.
Upon assignment of the option rights, the Company assumed the terms of the underlying agreements to earn the respective interests in both properties.
The mineral property options have been capitalized as tangible assets in accordance with Emerging Issues Task Force abstract 04-02 and allocated in accordance with EITF 98-11. Valuation of $225,000 is based on issuance of 30,000,000 shares at $0.0075 which was the share price at the time of the option assignment agreement.
At such time an option transaction is completed the option cost will continue to be included in the overall acquisition cost of the underlying mineral properties. If the Company does not complete an option transaction or the underlying mineral properties are considered impaired, the acquisition cost will be either written down or expensed at that time.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. COLUMBUS PROJECT
On June 26, 2007, the Company paid $807,000 to the Bureau of Land Management as a bond for future reclamation work on the proposed Columbus Project. This payment was made pursuant to the underlying option agreement in anticipation of the completion of the transaction.
The Columbus project was subject to an underlying option agreement dated July 22, 2006. Under the terms of this agreement, to earn a 15% interest, the Company was required to pay $24,000 per month until December 31, 2007 and spend $3,000,000 on qualifying expenses by December 31, 2007. These expenditures were satisfied as of December 31, 2007.
As of December 31, 2007, the Company had earned a 15% operating interest in the Columbus project by satisfying the above terms of the agreement.
To earn a 100% interest in the Columbus project, the Company, after earning 15%, had the right to merge with the corporation holding the remaining 85% interest. To exercise the merger right, the Company issued shares of common stock with an aggregate value of $20,000,000 and issued share purchase warrants to purchase up to a further 50% of the number of shares of common stock to be issued.
On February 20, 2008, the Company, through its wholly-owned subsidiary CBIA, acquired a 100% interest in the Columbus Project, including an option for additional mining claims, by way of merger with the owner of the Columbus Project, Columbus Brine Inc. (CBI). Under the terms of the Merger Agreement, the Company issued an aggregate of 10,440,087 shares of its common stock, and 5,220,059 share purchase warrants to the former shareholders of CBI. Each share purchase warrant issued by the Company entitles the holder to purchase one additional share of the Company’s common stock at a price of $2.39 per share for a period of 5 years. This acquisition supersedes the option agreement.
The following table reflects the recorded purchase consideration for the Columbus Project:
In accordance with EITF 04-03 paragraph 2 and EITF 98-11 the purchase price of $32 million was allocated to the assets acquired and liabilities assumed, based on their respective fair values at the date of acquisition. The purchase price allocated to the real properties was based on fair market values determined using an independent real estate appraisal firm (Arden Salvage Company) and the fair value of the remaining assets acquired and liabilities assumed were based on management’s best estimates taking into account all available information at the time.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. COLUMBUS PROJECT (continued)
The following table reflects the components of the Columbus Project:
Pursuant to the terms of the acquisition of CBI, the Company issued an aggregate of 10,440,087 shares of common stock and 5,220,059 share purchase warrants to the former shareholders of CBI. Each share purchase warrant issued by the Company entitles the holder to purchase one additional share of the Company’s common stock at a price of $2.39 per share for a period of 5 years. Each warrant provides the holder with a cashless right of exercise. If the holder chooses to utilize this cashless exercise right, the total number of shares that the holder will be entitled to exercise will be determined by the following formula: [( A - B ) C ] ÷ A where:
A = the average closing price of the Company’s common stock during the five trading days prior to exercise.
B = the exercise price of $2.39.
C = the maximum number of shares of the Company’s common stock issuable upon exercise of the warrants.
If the holder chooses to utilize the cashless exercise right, the holder must do so with respect to all of the unexercised warrants held by him.
The Company will have the right to accelerate the expiration date of the warrants at any time after August 19, 2010 if the average closing price of the Company’s common stock over any 20 consecutive trading days is equal to or greater than 150% of the exercise price. If the Company exercises this acceleration right, the expiration date for the warrants will be accelerated to 30 days after the Company sends out notice that it is exercising the acceleration right.
The Company estimated the fair value of warrants issued in connection with the acquisition of CBI using the Binomial lattice pricing model as further discussed in Note 7.
The Company applied EITF 98-03 with regard to the acquisition of the Columbus Project. The Company determined that the acquisition of the Columbus Project did not constitute an acquisition of a business, as that term is defined in EITF 98-03, and the Company recorded the acquisition as a purchase of assets.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. COLUMBUS PROJECT (continued)
The Company believes the acquisition of the Columbus Project was beneficial because it provides for 100% ownership of the properties and fosters greater opportunity to finance and further develop the project.
This merger was treated as a statutory merger for tax purposes whereby, CBIA was the surviving merger entity.
6. RED MOUNTAIN PROJECT
The Red Mountain project is subject to an underlying option agreement dated March 15, 2007. Under the terms of this agreement, to earn a 60% interest, the Company is required to pay $5,000 per month until December 31, 2011 and spend an aggregate of $1,200,000 in additional qualifying expenditures by December 31, 2011.
The Company may at any time during the life of the Red Mountain project, earn a 100% interest, by paying $100,000, issuing shares of common stock with an aggregate value of $1,400,000 and issuing share purchase warrants to purchase up to an additional 25% of the number of shares of common stock to be issued. If the project achieves commercial production, the Company will be required to pay an additional $100,000, issue shares of common stock with an aggregate value of $2,400,000 and issue share purchase warrants to purchase up to an additional 25% of the number of shares of common stock to be issued.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. STOCKHOLDERS’ EQUITY
During the year ended December 31, 2008, the Company’s stockholders’ equity activity consisted of the following:
a) On February 20, 2008, the Company issued an aggregate of 10,440,087 shares of its common stock, and 5,220,059 share purchase warrants to the former shareholders of CBI in connection with the acquisition. Each share purchase warrant issued by the Company entitles the holder to purchase one additional share of the Company’s common stock at a price of $2.39 per share of 5 years.
Warrants associated with the 2008 equity issuances do not constitute a registration payment arrangement.
The value of the warrants issued in connection with the CBI acquisition option contain a cashless exercise provision and are callable by the Company based upon certain conditions which are defined in Note 5 related to the acquisition. The fair market valuation of the warrants was computed using the binomial lattice method and were allocated to the acquisition cost of the project. The fair market value of the warrants was computed based on the following assumptions:
On April 24, 2007, the Company approved a US private placement offering pursuant to Rule 506 of Regulation D of the Securities Act of up to 10,000,000 units at a price of $0.65 per unit. Each unit consists of one share of common stock and one half of one share purchase warrant. Each whole warrant entitles the holder to purchase one additional share of common stock for a period of 12 months at a price of $1.00 per share. Warrants associated with the 2007 equity issuances do not constitute a registration payment arrangement and are considered part of the overall equity offering. On September 20, 2007, the Company amended the terms of the warrants issued under the US and foreign private placements by extending the terms of the warrants to two years from the date the units were issued.
Also effective on April 24, 2007, the Company approved a foreign private placement offering of up to 10,000,000 units to persons who are not “U.S. Persons” as defined in Regulation S of the Securities Act of 1933. The units are identical to those offered to US investors.
Units issued under the US offering resulted in over allotment of 1,812,000 units. To account for over allotment the Company decreased the number of units available under the foreign offering by an equal number of units. Total units of 20,000,000 for the entire offering were unchanged.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. STOCK OPTION PLAN AND WARRANTS (continued)
Expenses for the years ended December 31, 2008 and 2007 related to the granting and vesting of stock options were $1,454,758 and $101,317, respectively and are included in general and administrative expense and mineral exploration and evaluation expense. During the year ended December 31, 2008, the Company recorded $1,417,485 in stock option modification expense for two officers, director and a consultant. No such stock option modifications occurred before.
Stock options - During the year ended December 31, 2008, the Company granted stock options to a director totaling 100,000 with a weighted average exercise price of $1.60 per share. As of December 31, 2008 stock options outstanding totaled 3,954,719 with a weighted average exercise price of $0.15 per share.
On November 4, 2008, a director of the Company provided a notice of immediate resignation. As a result of the resignation, the options granted to the director that were unvested as of the date of resignation were forfeited. The Company accounted for the impact of the forfeiture under SFAS 123R. As a result of forfeiture, the Company reduced the expense recognized related to vesting of stock options by $21,012.
On October 31, 2008, the Company extended the term of stock options previously issued to two officers, director and a consultant for 3,700,000 shares of common stock for an additional 3 years. The Company accounted for the impact of the amended stock option grants as a stock option modification under SFAS 123R. As a result of the modification, the Company recognized $1,417,485 of additional stock-based compensation expense due to the increase in the fair market value of these stock option grants that was recorded in general and administrative expense and mineral exploration and evaluation expense.
On June 27, 2008, the Company extended the term of stock options previously issued to a nonemployee former shareholder of CBI for 79,719 shares of common stock for an additional 2 years. The Company accounted for the impact of the amended stock option grant as a stock option modification under SFAS 123R. As a result of modification, the Company recognized $19,935 of additional acquisition cost of CBI due to the increase in the fair market value of this stock option grant that was recorded as a reduction of accrued acquisition costs.
During the year ended December 31, 2007, the Company granted stock options to officers, consultants and employee totaling 3,895,000 with a weighted average exercise price of $0.13 per share. As of December 31, 2007, stock options outstanding totaled 3,895,000 with a weighted average exercise price of $0.13 per share.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. STOCK OPTION PLAN AND WARRANTS (continued)
The following table summarizes the Company’s stock option activity for the years ended December 31, 2008 and 2007:
The Company estimated the fair value of options granted prior to March 31, 2007 using the Black-Scholes option pricing model. The Company now utilizes the Binomial lattice pricing model to estimate the fair value of options granted. The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual exercise behavior of option holders. The Company has used the same assumptions within each of the pricing models utilized to estimated the fair value of the options granted as follows:
The Company estimates expected volatility using a representative peer group average, because of the limited historical equity transactions of the Company. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues over equivalent lives of the options.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. STOCK OPTION PLAN AND WARRANTS (continued)
The following table summarizes the status of the Company’s unvested shares as of December 31, 2008 and changes during the years ended December 31, 2008 and 2007:
As of December 31, 2008, there was $6,837 of total unrecognized compensation cost related to unvested stock options. This cost is expected to be fully recognized in 2009.
The following table summarizes information about options granted during the year ended December 31, 2008:
The following table summarizes information about options granted during the year ended December 31, 2007:
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. STOCK OPTION PLAN AND WARRANTS (continued)
Stock options/warrants - During the year ended December 31, 2008 the Company granted stock warrants related to common stock issued in connection with the CBI acquisition totaling 5,220,059 with an exercise price of $2.39 per share for a period of 5 years. These share purchase warrants also contain additional material terms, as described in Note 5.
Stock options/warrants - During the year ended December 31, 2007 the Company granted stock warrants related to common stock issued through a private placement totaling 10,160,650 with an exercise price of $1.00 per share.
The Company may accelerate the expiry date (call provision) for the warrants issued during 2007 after one year from the date of issuance of common stock if the common stock trades at a weighted average price over $3.50 for 20 consecutive trading days.
The following table summarizes information about options/warrants granted during the years ended December 31, 2008 and 2007:
The Company estimated the fair value of warrants issued in connection with the acquisition of CBI using Binomial lattice pricing model. The following assumptions were used to value these warrants:
The Company estimates expected volatility using a representative peer group average, because of the limited historical equity transactions of the Company. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues over equivalent lives of the options.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. INCOME TAXES
The Company is a Nevada corporation and is subject to federal income taxes. Nevada does not impose a corporate income tax.
The income tax benefit consisted of the following at December 31, 2008 and 2007,
Significant components of the Company’s net deferred income tax assets and liabilities at December 31, 2008 and 2007 were as follows:
A valuation allowance for deferred tax related to option compensation was established for net deferred tax assets not allocated to offset acquisition related deferred tax liabilities due to the uncertainty of realizing these deferred tax assets based on conditions existing at December 31, 2008 and 2007.
Deferred income tax liability was recorded on GAAP basis over income tax basis using statutory federal rate with the corresponding increase in the purchase price allocation to the assets acquired.
The resulting estimated future federal income tax liability associated with the temporary difference between the acquisition consideration and the tax basis as computed in accordance with EITF 98-11 and SFAS 109, is reflected as an increase to the total purchase price which has been applied to the underlying mineral and Columbus project assets in the absence of there being a goodwill component associated with the acquisition transactions in accordance with EITF 98-11 and SFAS 109.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. INCOME TAXES (continued)
The Company had cumulative net operating losses of approximately $5,715,972 and $2,140,776 as of December 31, 2008 and 2007, respectively for federal income tax purposes. Cumulative net operating losses from December 31, 2006 and previous years are effectively nil due to the annual limitation imposed by the Internal Revenue Code of 1986 as a result of the ownership percentage change limitations. The net operating loss carryforwards will be expiring between 2027 and 2028.
As of January 1, 2007, the Company did not have any unrecognized tax benefits. The adoption of FIN 48 did not result in any cumulative effect adjustment to the January 1, 2007 balance of the Company’s accumulated deficit. Upon adoption of FIN 48, the Company did not accrue for interest and penalties as there were no unrecognized tax benefits. If interest and penalties were to be assessed, we would charge interest to interest expense, and penalties to general and administrative expense. It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the reporting date.
The Company and its subsidiary file income tax returns in the United States. These tax returns are subject to examination by taxation authorities provided the years remain open under the relevant statues of limitations, which may result in the payment of income taxes and/or decrease its net operating losses available for carryforwards. The Company is no longer subject to income tax examinations by US federal tax authorities for years prior to 2005. While the Company believes its tax filings do not include uncertain tax positions, the results of potential examinations or the effect of changes in tax law cannot be ascertained at this time. The Company currently has no tax years under examination.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. PROPERTY RENTAL AGREEMENTS AND LEASES
The Company through its subsidiary CBIA has a lease agreement for mining claims with DDB Syndicate, an entity owned by related parties, including Douglas D.G. Birnie, Mr. Chizmar, three former officers and directors of CBI, Geotech Mining Inc., Jack Corp. and Wiser Corp. Geotech Mining Inc., Jack Corp. and Wiser Corp. are affiliates of Nanominerals Corp.
The DDB Syndicate has leased the DDB Claims to CSM, a wholly owned subsidiary of the Company. The mining lease agreement (the DDB Agreement), between the DDB Syndicate and CSM, provide CSM with a lease, extending for approximately 5 years, with an option to purchase the DDB Claims at any time during the lease period. To maintain the lease rights, CSM must pay the DDB Syndicate $130,000 by June 30, 2008, with annual rental payments thereafter of $30,000 per year, payable on June 30, 2009, 2010, and 2011 respectively. CSM may exercise its option to purchase the DDB Claims by paying a purchase price of $400,000, less any rental payments made by CSM prior to exercising the option, or paying the DDB Syndicate $10, plus the grant of a 2% royalty of net smelter returns on the DDB Claims.
The following table summarizes the rental payments under the mining lease agreement:
The Company has made $130,000 in rental payments during the year ended December 31, 2008, which consists of $13,416 in payments to each of the eight owners of DDB Syndicate including reimbursement of expenses of $22,670 to a company controlled by Douglas D.G. Birnie.
11. COMMITMENTS AND CONTINGENCIES
Lease obligations - The Company rents office space in Henderson, Nevada. The lease terms expired on September 1, 2008 and the Company continues to rent the existing space under month-to-month terms for $4,625 per month.
Rental expense, resulting from this operating lease agreement, was $46,125 and $8,800 for the years ended December 31, 2008 and 2007, respectively.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. ENVIRONMENTAL AND RECLAMATION ACTIVITIES
The liabilities accrued for the reclamation and remediation costs at December 31, 2008 and 2007, were as follows:
The activity in the accrued reclamation and remediation cost liability for the years ended December 31, 2008 and 2007, was as follows:
13. CONCENTRATION OF CREDIT RISK
The Company maintains its cash accounts in three financial institutions. Cash accounts at these financial institutions are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per financial institution. To date, the Company has not experienced a material loss or lack of access to its cash accounts; however, no assurance can be provided that access to the Company’s cash accounts will not be impacted by adverse conditions in the financial markets. At December 31, 2008, the Company had deposits in excess of FDIC insured limits in the amount of $1,871,021.
IRELAND INC.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. CONCENTRATION OF ACTIVITY
For the year ended December 31, 2008, the Company purchased services from two major vendors Arrakis, Inc. and Boart Longyear that exceeded more than 10% of total purchases and amounted to approximately $1,453,845 and $702,314, respectively.
For the year ended December 31, 2007, the Company purchased services from two major vendors Arrakis, Inc. and NMC that exceeded more than 10% of total purchases and amounted to approximately $309,725 and $645,000, respectively. NMC is considered a related party and is more fully discussed in the related party note that follows.
15. RELATED PARTY TRANSACTIONS
During the years ended December 31, 2008 and 2007, the Company utilized the services of NMC to provide technical and financing related activities. These services related primarily to the Columbus project and the Red Mountain project.
In addition to the above fees, NMC provided dedicated use of its laboratory, instrumentation, milling equipment and research facilities. NMC provided invoices for these fees plus expenses.
For the year ended December 31, 2008, the Company incurred total fees and reimbursements of expenses to NMC of $420,000 and $33,354, respectively, for a total of $453,354.
At December 31, 2008, the Company had an outstanding balance due to NMC of $42,733. The Company also had an outstanding balance for accrued compensation to Mr. Birnie, its executive officer of $7,684 payable to a company wholly owned by Mr. Birnie. Accounts payable - related party totaled $50,417 as of December 31, 2008.
For the year ended December 31, 2007, the Company incurred total fees and reimbursements of expenses to NMC of $645,000 and $626,314, respectively, for a total of $1,271,314. These expenses are presented in the financial statements as mineral exploration and evaluation expenses - related party of $976,314 and mineral and property holding costs - reimbursed to related party of $295,000.
At December 31, 2007, the Company had an outstanding balance due to NMC of $37,128. The Company also had an outstanding balance for accrued compensation to Mr. Birnie, its executive officer of $45,000, payable to a company wholly owned by Mr. Birnie. Accounts payable - related party totaled $82,128 as of December 31, 2007.
The company has the mining claim lease for the DDB Claims as further discussed in Note 10.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
On October 6, 2007, we received notice that Telford Sadovnick, P.L.L.C. (“Telford Sadovnick”) had resigned as our independent public accountants.
Telford Sadovnick stated that they were resigning as our independent auditor due to the fact that Telford Sadovnick had withdrawn its registration with the Public Company Accountability Oversight Board (“PCAOB”) and is no longer able to audit US issuers.
Telford Sadovnick’s reports on the financial statements of us for the past two fiscal years ended December 31, 2006 and December 31, 2005 did not contain an adverse opinion or disclaimer of opinion, nor were they modified or qualified as to uncertainty, audit scope or accounting principles with the exception of a statement regarding the uncertainty of our ability to continue as a going concern.
There were no disagreements between us and Telford Sadovnick on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to the satisfaction of Telford Sadovnick, would have caused them to make reference to the subject matter of the disagreement in connection with their report for the financial statements for the past year.
On October 15, 2007, our Board of Directors appointed Brown Armstrong Paulden McCown Starbuck Thornburgh & Keeter Accountancy Corporation (“Brown Armstrong”) as our new independent registered public accounting firm.
ITEM 9A(T).
ITEM 9A(T). CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2008 (the “Evaluation Date”). This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the Evaluation Date.
Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the Company.
Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of the Evaluation Date, based on the framework set forth in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this framework, management concluded that our internal control over financial reporting was effective as of the Evaluation Date.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this annual report.
Changes in Internal Control Over Financial Reporting
As of the Evaluation Date, there were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2008 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer and the Chief Financial Officer, do not expect that the our controls and procedures will prevent all potential error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Directors and Executive Officers
Douglas D.G. Birnie. Mr. Birnie was appointed as our Chief Executive Officer, President and a member of our Board of Directors on June 29, 2007. Mr. Birnie was also appointed as our Secretary on March 30, 2007. Mr. Birnie was appointed as our President and Secretary, and as one of our directors pursuant to the terms of our assignment agreement with Nanominerals. Mr. Birnie graduated with a Bachelor of Commerce degree from the University of British Columbia in 1994. In 1995, Mr. Birnie was a founder of Columbus Group Communications Inc., a privately held internet solutions company. In 1998, Mr. Birnie received the Ernst and Young Entrepreneur of the Year award and the Business Development Bank of Canada Young Entrepreneur of the Year Award. During his tenure at Columbus Group, Mr. Birnie held the positions of CFO and COO until the company was acquired by TELUS Corp. in 2001. Mr. Birnie continued to work for TELUS Corp. as Director - Strategic Planning with the e.Solutions department until 2003.
Robert D. McDougal. Mr. McDougal was appointed as our Chief Financial Officer on March 30, 2007 and has served as a member of our Board of Directors since December 14, 2007. Mr. McDougal was also appointed as our Treasurer on January 23, 2008. Mr. McDougal was appointed as our Chief Financial Officer pursuant to the terms of our assignment agreement with Nanominerals. Mr. McDougal is a Certified Public Accountant. He began practicing public accounting in 1973 and established his own practice in 1981. The majority of his practice is focused on mining and mining related clients including public companies, private companies’ partnerships and individuals. Mr. McDougal was a Director and Officer of GEXA Gold Corporation, a publicly traded mining company, from 1985 to 2001. Mr. McDougal was one of the founders of Millennium Mining Corporation, which was subsequently merged into Gold Summit Corporation, a publicly traded company. He is the managing partner of GM Squared, LLC, which holds numerous mining claims. He served on the Nevada Society of Certified Public Accountants Committee on Natural Resources for seven years, four years as chairman. Prior to this time Mr. McDougal spent 20 years in the United States Air Force, retiring with the rank of Major. Mr. McDougal is currently a member of the Board of Directors of Searchlight Minerals Corp.
Michael A. Steele. Mr. Steele was appointed as a member of our Board of Directors on December 14, 2007. For the past 15 years, Mr. Steele has been the president and director of Avonlea Investments Ltd., a private company. From 1998 to 2000, Mr. Steele acted as the president of International Menu Solutions Corp., a company formerly quoted on the OTC Bulletin Board.
TERMS OF OFFICE
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our stockholders or until removed from office in accordance with our bylaws. Our officers are appointed by our Board of Directors and hold office until removed by the Board.
SIGNIFICANT EMPLOYEES
We have no significant employees other than the officers and directors described above.
AUDIT COMMITTEE
Our audit committee is composed of Robert D. McDougal and Michael A. Steele. Mr. McDougal is our “audit committee financial expert” as defined by the applicable rules of the SEC. Mr. McDougal is not independent as he also acts as our Chief Financial Officer and Treasurer. Mr. Steele is an independent member of our Board of Directors.
CODE OF ETHICS
We adopted a Code of Ethics applicable to our officers and directors which is a "code of ethics" as defined by applicable rules of the SEC. If we make any amendments to our Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our Code of Ethics to our Chief Executive Officer, Chief Financial Officer, or certain other finance executives, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a current report on Form 8-K filed with the SEC. A copy of our Code of Ethics was attached as an exhibit to our Annual Report filed with the SEC on September 28, 2004.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our equity securities (collectively, the “Reporting Persons”), to file reports of ownership and changes in ownership with the SEC. Reporting Persons are required by SEC regulation to furnish us with copies of all forms they file pursuant to Section 16(a). Based on our review of the copies of such forms received by us, other than as described below, no other reports were required for those persons.
The following persons have failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act:
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
COMPENSATION TO EXECUTIVE OFFICERS
The following table sets forth the total compensation paid or accrued to our named executive officers, as that term is defined in Item 402(m)(2) of Regulation S-K during our last two completed fiscal years.
(1)
Represents consulting fees paid or accrued to a limited liability company of which Mr. Birnie is the sole member for services provided by Mr. Birnie as an executive officer and director of Ireland.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table provides information concerning unexercised options for each our named executive officers, as that term is defined in Item 402(m)(2) of Regulation S-K as of our fiscal year end of December 31, 2008.
DIRECTOR COMPENSATION
The following table sets forth the compensation paid to our directors during our December 31, 2008 fiscal year, other than directors who were also named executive officers as that term is defined in Item 402(m)(2). Compensation paid to directors who were also named executive officers during our December 31, 2008 fiscal year is set out in the tables above.
(1)
We pay our independent directors $1,000 per day for Board of Director meetings attended in person, and $500 per day for Board of Director meetings attended by conference call.
(2)
Mr. Chizmar resigned as a member of our Board of Directors on November 4, 2008.
EMPLOYMENT CONTRACTS
We have no employment contracts, termination of employment or change-in-control arrangements with any of our executive officers or directors.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
EQUITY COMPENSATION PLANS
The following table sets forth certain information concerning all equity compensation plans previously approved by stockholders and all previous equity compensation plans not previously approved by stockholders, as of the most recently completed fiscal year.
Equity Compensation Plan Information
Plan Category
Number of Securities to
be Issued Upon
Exercise of Outstanding
Options, Warrants and
Rights
(a)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b) Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding Securities
Reflected in column (a))
(c)
Equity Compensation Plans
Approved By Security Holders
None
Not Applicable
None
Equity Compensation Plans Not
Approved By Security Holders
3,875,000(1)
$0.13
5,276,513
(1)
Includes an option to purchase 100,000 shares of our common stock at a price of $1.75 per share expiring August 15, 2017 granted to a consultant outside of our 2007 Stock Incentive Plan.
2007 Stock Incentive Plan
On March 27, 2007, we established our 2007 Stock Incentive Plan (the “2007 Plan”). The purpose of the 2007 Plan is to enhance the long-term stockholder value of the Company by offering opportunities to our directors, officers, employees and eligible consultants and any entity that directly or indirectly is in control of or is controlled by the Company (a “Related Company”) to acquire and maintain stock ownership in the Company in order to give these persons the opportunity to participate in our growth and success, and to encourage them to remain in our service or in the service of a Related Company.
The 2007 Plan is administered by our Board of Directors or by a committee of two or more directors appointed by our Board of Directors (the "Plan Administrator"). Subject to the provisions of the 2007 Plan, the Plan Administrator has full and final authority to grant the awards of stock options and to determine the terms and conditions of the awards and the number of shares to be issued pursuant thereto. The 2007 Plan authorizes the grant of options that are intended to qualify as “incentive stock options” under the Internal Revenue Code of 1986 or nonqualified stock options.
All of our employees and members of our Board of Directors are eligible to be granted options. Individuals who have rendered or are expected to render advisory or consulting services to us are also eligible to receive options so long as they do not provide capital raising services or promote or maintain a market for our securities. Upon adoption, the maximum number of shares of our Common Stock with respect to which options or rights could be granted under the 2007 Plan to any participant was 6,000,000 shares. The 2007 Plan contains an automatic adjustment provision where the number of authorized shares authorized to be subjected to option grants increases on the first day of each quarter beginning with the fiscal quarter commencing July 1, 2007 by the lesser of the following amounts: (1) 15% of the total number of outstanding shares of the Company’s Common Stock, less any shares that were previously available under the 2007 Plan an any shares available under any other stock option plan that we may adopt; or (2) a lesser number of shares of Common Stock as may be determined by our Board of Directors, subject to certain adjustments to prevent dilution.
The exact terms of the option granted are contained in an option agreement between us and the person to whom such option is granted. Eligible employees are not required to pay anything to receive options. The exercise price for options intending to qualify as incentive stock options must be no less than 100% of the fair market value of our common stock on the date of grant. The exercise price for nonqualified stock options is determined by the Plan Administrator but may not be less than 75% of the fair market value of our common stock on the date of the grant. Fair market value for purposes of the 2007 Plan is calculated based on the price of our common stock during the 10 trading days prior to the grant date. An option holder may exercise options from time to time, subject to vesting. Options will vest immediately upon death or disability of a participant and upon certain change of control events.
The Plan Administrator may amend the 2007 Plan at any time and in any manner, however no recipient of any award may, without his or her consent, be deprived thereof or of any of his or her rights thereunder or with respect thereto as a result of such amendment or termination.
The 2007 Plan terminates on March 27, 2017 unless sooner terminated by action of our Board of Directors. No option is exercisable by any person after such expiration. If an award expires, terminates or is canceled, the shares of our Common Stock not purchased thereunder may again be made available for issuance under the 2007 Plan.
We have not yet filed a registration statement under the Securities Act of 1933 to register the shares of our Common Stock reserved for issuance under the 2007 Plan.
Options Granted to Consultant
In accordance with the terms of the Consulting Agreement dated November 5, 2007 between us and RJ Falkner & Company, Inc., we granted an option to R. Jerry Falkner to purchase 100,000 shares of our common stock. The option granted is exercisable at a price of $1.75 per share and expires on August 15, 2017. The option granted to Mr. Falkner was not granted under our 2007 Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of March 20, 2009 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) each of our directors and each of our named executive officers (as defined under Item 402(m)(2) of Regulation S-K), and (iii) officers and directors as a group. Unless otherwise indicated, the shareholders listed possess sole voting and investment power with respect to the shares shown.
(1)
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s
actual ownership or voting power with respect to the number of shares of common stock actually outstanding. As of March 20, 2009, there were 97,010,087 shares of our common stock issued and outstanding.
(2)
The shares listed as beneficially owned by Mr. Birnie consists of: (i) 1,900,000 shares of our common stock held by Mr. Birnie; (ii) warrants to acquire 100,000 shares of our common stock at an exercise price of $1.00 per share until June 20, 2009; and (iii) options to acquire 2,200,000 shares of our common stock at an exercise price of $0.05 per share until March 30, 2012. Mr. Birnie also owns a 3.5% interest in Nanominerals Corp. The shares listed as beneficially owned by Mr. Birnie do not include any part of the shares of our common stock owned by Nanominerals as Mr. Birnie does not have any voting or investment power over the shares owned by Nanominerals.
(3)
The shares listed as beneficially owned by Mr. McDougal consists of: (i) 1,200,000 shares of our common stock held by Mr. McDougal; and (ii) options to acquire 500,000 shares of our common stock at an exercise price of $0.05 per share until March 30, 2012.
(4)
The shares listed as beneficially owned by Mr. Steele consists of: (i) options to acquire 500,000 shares of our common stock at an exercise price of $0.05 per share until March 30, 2012; and (ii) 400,000 shares and warrants to acquire an additional 200,000 shares at a price of $1.00 per share owned by Avonlea Ventures #2 Inc. Mr. Steele owns a 50% interest in Avonlea Ventures #2 Inc.
(5)
The sole officer and director of Nanominerals is Dr. Charles A. Ager. Together with his wife, Carol Ager, Dr. Ager owns a 35% interest in Nanominerals. Individually, Dr. Ager owns 2,100,000 shares of our common stock and Mrs. Ager owns 300,000 shares of our common stock. The shares owned by Dr. Ager and Mrs. Ager have not been included in the shares beneficially owned by Nanominerals. Mr. Birnie also owns a 3.5% interest in Nanominerals Corp. The shares listed as beneficially owned by Mr. Birnie have not been included in the shares beneficially owned by Nanominerals.
CHANGES IN CONTROL
We are not aware of any arrangement which may result in a change in control in the future.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Except as disclosed below, none of the following parties has, during our December 31, 2008 fiscal year, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:
(a)
Any of our directors or officers;
(b)
Any person proposed as a nominee for election as a director;
(c)
Any person who beneficially owns, directly or indirectly, more than 5% of our outstanding common stock; or
(d)
Any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law of any person listed in (a) to (c), above, or any person (other than a tenant or employee) who shares the household of any person listed in (a) to (c), above.
Acquisition of the Columbus Project
On February 20, 2008, we completed the acquisition of Columbus Brine Inc. (“CBI”). The acquisition of CBI was completed pursuant to the Agreement and Plan of Merger entered into by us, our wholly owned subsidiary incorporated for the sole purpose of completing the acquisition, CBI Acquisition, Inc. (“Ireland Sub”), CBI, and CBI’s directors and officers, John T. Arkoosh, William Maghan and Lawrence E. Chizmar, Jr. (collectively referred to as the “CBI Principals”) on December 14, 2007, and as amended on January 31, 2008 (the Agreement and Plan of Merger, as amended, is referred to as the “Merger Agreement”).
In connection with our acquisition of CBI, we issued Mr. Chizmar 202,099 shares of our common stock and share purchase warrants entitling Mr. Chizmar to purchase 100,900 additional shares of our common stock at a price of $2.39 per share. Mr. Chizmar was a member of our Board of Directors from February 20, 2008 until November 4, 2008. The warrants issued to Mr. Chizmar expire February 19, 2013 and contain a cashless right
of exercise. We may accelerate the expiration date for these warrants after August 19, 2010 if the average price of our common stock over any 20 consecutive trading days is greater than or equal to 150% of the exercise price. Mr. Chizmar was appointed to our Board of Directors pursuant to the terms of the Merger Agreements, and resigned from our Board of Directors due to personal health reasons.
DDB Claims
Mr. Chizmar, a former member of our Board of Directors, and a limited liability company controlled by Douglas D.G. Birnie, our CEO, President and Secretary, and a member of our Board of Directors, are each the owners of a 1/8 interest in the mining syndicate known as the DDB Syndicate. The former officers and directors of CBI (other than Mr. Chizmar), and an affiliate of one of those former officers and directors of CBI, collectively own a 3/8 interest in the DDB Syndicate. The remaining 3/8 interest in the DDB Syndicate is collectively owned by affiliates of Nanominerals Corp. (“Nanominerals”). Mr. Birnie is also the owner of a 3.5% interest in Nanominerals. Mr. Birnie, Nanominerals and Nanominerals’ affiliates acquired their respective interests in the DDB Syndicate and the DDB Claims prior to his and their involvement with the Company. Mr. Birnie acquired his interest in Nanominerals prior to their involvement with the Company. On November 30, 2007, the DDB Syndicate leased the DDB Claims to Columbus S.M. LLC (“CSM”), formerly a wholly owned subsidiary of CBI, and now a wholly owned subsidiary of the Company. The mining lease agreement (the “DDB Agreement”) between the DDB Syndicate and CSM provides CSM with a lease, extending for approximately 5 years, with an option to purchase the DDB Claims at any time during the lease period. In order to maintain its lease rights, CSM must pay the DDB Syndicate $130,000 by June 30, 2008, with annual rental payments thereafter of $30,000 per year, payable on June 30, 2009, 2010 and 2011 respectively. CSM may exercise its option to purchase the DDB Claims by:
(a)
paying the DDB Syndicate a purchase price of $400,000, less any rental payments made by CSM prior to exercising the option; or
(b)
paying the DDB Syndicate $10, plus the grant of a 2% royalty of net smelter returns on the DDB Claims.
As the owners of a 1/8 interest each in the DDB Syndicate, Mr. Chizmar and a limited liability company controlled by Mr. Birnie are each entitled to 1/8 of any amounts paid by us under the DDB Agreement. During the year ended December 31, 2008, we paid a total of $130,000 to the DDB Syndicate under the terms of the DDB Agreement.
Nanominerals Corp.
Nanominerals Corp. (“Nanominerals”) is the owner of 40,150,000 shares, or 41.4%, of our Common Stock. Nanominerals acts as a consultant to us on technical exploration and financial matters. Mr. Birnie is the owner of a 3.5% interest in Nanominerals. Mr. Birnie acquired his interest in Nanominerals prior to his and their involvement with our Company. During the year ended December 31, 2008, we incurred fees totaling $420,000 due to Nanominerals for services provided. In addition, during the year ended December 31, 2008, we reimbursed Nanominerals a total of $33,354 in respect of expenses incurred by Nanominerals in relation to our exploration and development activities on the Columbus Project and the Red Mountain Project.
Affiliates of Nanominerals are also the owners of a 3/8 interest in the DDB Syndicate, which owns the DDB Claims as described above.
DIRECTOR INDEPENDENCE
Our common stock is quoted on the OTC Bulletin Board interdealer quotation system, which does not have director independence requirements. In determining whether any of our directors are independent directors, we have applied the definition for independence set out in NASDAQ Rule 4200(a)(15). In applying this definition, we have determined that Michael A. Steele is our sole independent director. Neither of Douglas D.G. Birnie nor Robert D. McDougal qualifies as an independent member of our Board of Directors.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The aggregate fees billed for the two most recently completed fiscal years for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal periods were as follows:
$21,572 in fees was billed by our principal accountant during the year ended December 31, 2008 for the audit of Columbus Brine Inc. in connection with our acquisition of that company.
Our audit committee reviewed the qualifications of Brown Armstrong Paulden McCown Starbuck Thornburgh & Keeter Accountancy Corporation, prior to engaging them as our auditors in accordance with Rule 2-01(c)(7)(i)(A).
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
The following exhibits are either provided with this Annual Report or are incorporated herein by reference:
(1)
Filed as an exhibit to our Registration Statement on Form SB-2 originally filed on April 18, 2002, as amended.
(2)
Filed as an exhibit to our Annual Report on Form 10-KSB for the year ended December 31, 2005 filed on April 12, 2006.
(3)
Filed as an exhibit to our Current Report on Form 8-K filed on April 30, 2007.
(4)
Filed as an exhibit to our Annual Report on Form 10-KSB for the year ended December 31, 2006 filed on April 5, 2007.
(5)
Filed as an exhibit to our Current Report on Form 8-K filed on June 21, 2007.
(6)
Filed as an exhibit to our Current Report on Form 8-K filed on August 14, 2007.
(7)
Filed as an exhibit to our Current Report on Form 8-K filed on November 9, 2007.
(8)
Filed as an exhibit to our Current Report on Form 8-K filed on December 20, 2007.
(9)
Filed as an exhibit to our Current Report on Form 8-K filed on February 6, 2008.
(10)
Filed as an exhibit to our Annual Report on Form 10-KSB for the year ended December 31, 2003, filed on September 28, 2004.
(11)
Filed as a Schedule to Exhibit 10.2.
(12)
Filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2007 filed on March 31, 2008.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
IRELAND INC.
By: /s/ Douglas D.G. Birnie
DOUGLAS D.G. BIRNIE
Chief Executive Officer, President and Secretary
(Principal Executive Officer)
Date: March 26, 2009
By: /s/ Robert D. McDougal
ROBERT D. MCDOUGAL
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Date: March 26, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Douglas D.G. Birnie
DOUGLAS D.G. BIRNIE
Chief Executive Officer, President and Secretary
Director
Date: March 26, 2009
By: /s/ Robert D. McDougal
ROBERT D. MCDOUGAL
Chief Financial Officer and Treasurer
Director
Date: March 26, 2009
By: /s/ Michael A. Steele
MICHAEL A. STEELE
Director
Date: March 24, 2009