Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of The Company’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment
to
this Form 10-KSB. x
Indicate
by check mark whether the Company is a shell company (as defined in Rule 12b-2
of the Act). Yes o
No x
State
the
issuer’s revenues for its most recent fiscal year. $0.0
State
the
aggregate market value of the voting stock held by non-affiliates computed
by
reference to the price at which the stock was sold, or the average bid and
asked
price of such stock, as of a specified date within the past 60 days. As of
December 31, 2007, the value of such stock was $4,188,519. Shares of common
stock held by each executive officer and director and by certain persons who
own
5% or more of the outstanding common stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
Number
of
shares outstanding of Issuer’s class A common stock, $0.01 par value,
outstanding on December 31, 2007: 51,709,470. Number of shares outstanding
of
Issuer’s class B common stock, $0.001 par value, outstanding on December 31,
2007: 5,000,000.
Documents
Incorporated by Reference: NONE
***
FORM
10-KSB
September
30, 2006
USCORP
TABLE
OF CONTENTS
|
FORWARD
LOOKING STATEMENTS
|
|
|
|
|
|
|
|
PART
I
|
|
|
|
ITEM
1
|
Description
of Business
|
|
|
ITEM
2
|
Description
of Property
|
|
|
ITEM
3
|
Legal
Proceedings
|
17
|
|
ITEM
4
|
Submission
of Matters to a Vote of Security Holders
|
17
|
|
|
|
|
|
PART
II
|
|
|
|
ITEM
5
|
Market
for The Company’s Common Equity and Related Stockholder Matters
|
|
|
ITEM
6
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
|
19
|
|
ITEM
7
|
Financial
Statements
|
22
|
|
ITEM
8
|
Changes
in and Disagreements with Accountants
|
|
|
ITEM
8A
|
Controls
and Procedures
|
38
|
|
ITEM
8B
|
Other
Information
|
39
|
|
|
|
|
|
PART
III
|
|
|
|
ITEM
9
|
Directors,
Executive Officers, Promoters and Control Persons
|
39
|
|
ITEM
10
|
Executive
Compensation
|
40
|
|
ITEM
11
|
Security
Ownership of Certain Beneficial Owners and Management
|
40
|
|
ITEM
12
|
Certain
Relationships and Related Transactions
|
41
|
|
ITEM
13
|
Exhibits
|
41
|
|
ITEM
14
|
Principal
Accountant Fees and Services
|
41
|
|
Signatures
|
|
|
|
|
|
|
|
PART
F/S
|
|
|
|
|
|
|
|
Financial
Statements
|
||
FORWARD
LOOKING STATEMENTS
Some
of
the information contained in this Annual Report may constitute forward-looking
statements or statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based on current
expectations and projections about future events. The words “estimate”, “plan”,
“intend”, “expect”, “anticipate” and similar expressions are intended to
identify forward-looking statements which involve, and are subject to, known
and
unknown risks, uncertainties and other factors which could cause The Company’s
actual results, financial or operating performance, or achievements to differ
from future results, financial or operating performance, or achievements
expressed or implied by such forward-looking statements. Projections and
assumptions contained and expressed herein were reasonably based on information
available to The Company at the time so furnished and as of the date of this
filing. All such projections and assumptions are subject to significant
uncertainties and contingencies, many of which are beyond The Company’s control,
and no assurance can be given that the projections will be realized. Potential
investors are cautioned not to place undue reliance on any such forward-looking
statements, which speak only as of the date hereof. The Company undertakes
no
obligation to publicly release any revisions to these forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
PART
I
ITEM
1. DESCRIPTION OF BUSINESS
BACKGROUND
USCorp
(hereafter, the “Company”, “we” and “our” refer to USCorp) was formed in May
1989 in the state of Nevada as The Movie Greats Network, Inc. In August 1992,
the Company changed its name to The Program Entertainment Group, Inc. In August
1997, the Company changed its name to Santa Maria Resources, Inc. In September
2000, the Company changed its name to Fantasticon, Inc. and in January 2002
the
Company changed its name to USCorp.
In
April
2002, the Company acquired USMetals, Inc. (“USMetals”), a Nevada corporation, by
issuing 24,200,000 shares of Company Common Stock. USMetals became a wholly
owned subsidiary of the Company.
Southwest
Resource Development, Inc. (“Southwest”) was formed and organized under the laws
of the State of Nevada on April 3, 2004 as a wholly owned subsidiary of USCorp.
On or about May 29, 2004, Southwest acquired 8 lode and 21 placer mining claims
(the “Mining Claims”) formerly known as the Chocolate Mountain Region Claims and
the Picacho Area Claims.
Subsequently
both USMetals and Southwest have acquired additional mining claims and performed
significant exploration work, including the completion of feasibility studies,
as described more fully below (See “USMETALS
- Summary of Organization and Business” and “SOUTHWEST
RESOURCE DEVELOPMENT, INC.
-
Summary of Organization and Business”).
OVERVIEW
USCorp
is
an “exploration stage” company. The Company’s operations center on completing
exploration and beginning development of USMetals’ mining property known as the
Twin Peaks Project, and Southwest’s mining properties formerly known as the
Chocolate Mountain Region claims which the Company now refers to collectively
as
the Picacho Salton Project. The Company has realized no revenues from operations
to date.
All
of
the Company’s mining business activities are conducted at this time through its
subsidiaries, USMetals, Inc. (“USMetals”) and Southwest Resource Development,
Inc. (“Southwest”).
The
Company, through its wholly-owned subsidiary, USMetals, owns 143 Lode Mining
Claims in the Eureka Mining District of Yavapai County, Arizona, called the
Twin
Peaks Project; and through its wholly-owned subsidiary, Southwest, owns a total
of 106 claims, 84 Lode and 22 Placer Claims in the Mesquite Mining District
of
Imperial County, California, which the Company refers to as the Picacho Salton
Project.
A.
RECENT DEVELOPMENTS.
On
September 29, 2006 the Company’s Registration Statement on Form SB-2 was
declared effective by the US Securities and Exchange Commission registering
6,700,000 shares of the Company’s Class A common stock for resale pursuant to an
equity line arrangement with Dutchess Private Equities Fund, LP. The total
dollar amount under the equity line is $10,000,000. As of the date of the Annual
Report the Company has not submitted any puts to Dutchess.
On
November 2, 2006 we announced in a press release the addition of new lode and
placer claims to our California claims in the Mesquite Mining District of
Imperial County. We now have 106 claims in this area which we refer to
collectively as the Picacho Salton Project. These claims consist of three
separate groups of contiguous claims in close proximity to each other. Most
of
the claims are predominantly gold properties. 140 acres of these new claims,
the
equivalent of seven claims, contain a deposit of Pink Rhyolite (decorative
rock)
and construction grade aggregate.
During
2007 USMetals added two claims to the Twin Peaks Project bringing the total
to
143 contiguous claims.
In
the
spring of 2007 the Company’s transfer agent, US Stock Transfer Corporation was
acquired by ComputerShare, the world’s largest transfer agency.
On
May 2,
2007 we announced in a press release a $1.2 million commitment by a private
Swiss fund. The fourth and final traunch of $300,000 was received in early
October, 2007, completing the commitment. Subsequent to the period of this
Annual Report the first debenture was converted to 2,400,000 shares of common
stock. These shares are restricted from resale under rule 144.
On
May 9,
2007 we announced in a press release a Notice of Intent to drill has been
prepared for the BLM for the Twin Peaks Property. Surface geochemical sampling,
GPS coordinated claim and structural mapping of the area are underway.
Radionuclide survey samples have been taken from the northeast quadrant of
the
property that exhibit promising levels of radioactivity. We are also examining
the deposits of titanium magnetite on the property for possible
development.
On
July
26, 2007 we announced in a press release the completion of the Twin Peaks
Feasibility Study and the availability of its summary on our web site.
On
August
28, 2007 we announced in a press release the completion of a Feasibility Study
on the Picacho Salton Property and the availability of its summary on our web
site.
In
August
and September of 2007 we received $620,000 from a private east coast finance
group as the result of a private placement. The Company offered one unit for
$0.75 per unit consisting of one share of common stock and one warrant to
purchase ½ share of common stock at an exercise price of $0.40 per one full
share. The exercise period is two years, expiring in October 2009.
On
November 8, 2007 we announced in a press release the results of a recent report
prepared for the Company by Geological Support Services regarding the titanium
magnetite deposits at the Twin Peaks Project, which stated in part:
“The
magnetite of the twin peaks has been sampled and sent off for assay…ore grade
shows it to have saleable levels of TiO
[titanium oxide]”.
B.
DESCRIPTION OF CURRENT BUSINESS OPERATIONS.
The
Company’s plan of operation and business objectives will be to engage in (a) the
precious metals exploration, mining, and refining business, and (b) the
acquisition of qualified candidates engaged in businesses that would compliment
the Company’s existing or proposed operations. All of the Company’s business
operations are conducted through its subsidiaries
USMETALS
- Summary of Organization and Business.
USMetals
(“USMetals”) was formed and organized under the laws of the State of Nevada on
May 3, 2000. On or about April 2, 2002, the Company acquired USMetals; including
its 141 lode mining claims (the “Mining Claims”). The purpose of USMetals is to
engage in the business of acquiring and developing mineral properties, exploring
for gold, silver, and other non-ferrous metals and minerals within the
contiguous United States. It is the further intention of USMetals to mine and
to
process any commercially-proven resources developed at its
properties.
The
Mining Claims of USMetals are located in West-Central Arizona, in the Eureka
Mining District of Yavapai County, Arizona, approximately 42 miles west of
Prescott, Arizona. Within the boundaries of USMetals’ Mining Claims, more
commonly referred to as the “Twin Peaks Project,” are the historic sites of the
Crosby, Hayes, Swiss Belle and Gloryhole Mines, past producers of gold and
silver. The claims are geographically located in the southwestern division
of
the Eureka Mining District, which includes many significant mines and prospects.
There are tungsten mines in the Camp Wood area, to the northeast, the existing
historic gold mines and prospects, which abut USMetals’ property to the
southeast along the Santa Maria River, and tungsten, copper, and zinc mines
to
the south and southeast. The area has a long history of mining activities.
Mining companies and prospectors can obtain experienced labor, affordable
housing, equipment repair, and mining services within the district.
The
Santa
Maria River traverses the Mining Claims and USMetals is the only company that
holds water rights to that section of the river, a valuable asset for a mining
company in this arid country.
All
of
USMetals’ mining properties are unpatented mining claims; consequently, the
Company has only possessory title with respect to such properties. The claims
were duly transferred by official deed from the prior owner to USMetals on
March
22, 2002. The real property upon which USMetals’ claims are located is subject
to a paramount lien by the United States of America; all of USMetals’ claims are
subject to the applicable rules and regulations of the United States Department
of the Interior, Bureau of Land Management, which administers USMetals’ use and
activities on said Mining Claims. USMetals has paid all of the required fees
in
order to maintain the 143 Mining Claims, which USMetals owns, for the current
periods. All of the necessary documents and affidavits have been filed with
the
Yavapai County Recorder, as was mentioned hereinabove.
The
Company and USMetals have had a number of strategic working relationships with
various independent contractors in order to develop its Mining Claims. USMetals
further relies on the declarations and valuations formed and given in past
geological exploration and geochemical studies. USMetals has had consulting
and/or independent contractor relationships with Boart Longyear, LLC, Geological
Support Services, LLC, Biozone, Inc. and Wondjina Research Institute. It should
be noted that if USMetals was forced to disassociate itself with one or more
of
the abovementioned independent contractors, it could readily secure the services
of other individuals or entities to perform the work or services of equal or
greater quality; the loss of any one or all of the abovementioned contractors
would not cause USMetals material adverse effects; however, each of these firms
has demonstrated its capability and reliability in assisting The Company and
USMetals to develop the Mining Claims, and, to date, the abovementioned
companies have provided invaluable assistance to The Company’s senior executive
management in evaluating the potential represented by USMetals’ Mining
Claims.
Geological
Support Services, LLC recently completed a feasibility study on the Twin Peaks
Project that identified proven reserves of 612,000 ounces of gold and 2,160,000
ounces of silver in 3.6 million tons of ore, grading at .17 oz. gold per ton
and
.6 oz. silver per ton and a revenue cutoff grade of .03 per ton, using a gold
price of $600 per Troy ounce and a silver price of $12 per Troy ounce. And
Geological Support Services, LLC also completed a feasibility study on of the
Picacho Salton Project that identified proven resources of 231,513 ounces of
gold in 6,614,666 tons of ore grading at .035 oz per ton with a cutoff grade
of
.015 using a gold price of $600 per troy ounce gold.
On
February 14, 2005 the Company filed a Form 8-K with the Securities and Exchange
Commission reporting that the Company concluded the acquisition of 2 additional
gold mining claims located near Kingman, Arizona from a private corporation.
Under
the
direction of our consulting geophysicist, we fully explored and tested the
property. Based on the exploration and test results, however, Management
determined it was not economically viable to pursue exploration or development
of this property. Due to certain conditions not being met, title to the claims
reverted back to the prior claim holder.
SOUTHWEST
RESOURCE DEVELOPMENT, INC.
- Summary of Organization and Business
Southwest
Resource Development, Inc. (“Southwest”) was formed and organized under the laws
of the State of Nevada on April 3, 2004 as a wholly owned subsidiary of USCorp.
On or about May 29, 2004, Southwest acquired 8 lode and 21 placer mining claims
(the “Mining Claims”) formerly known as the Chocolate Mountain Region Claims and
the Picacho Area Claims. In 2007 this claims group was expanded to a total
of
106 claims consisting of 22 placers and 84 lodes, on 4,600 acres, which the
Company now refers to collectively as the Picacho Salton Project. The purpose
of
Southwest is to engage in the business of acquiring and developing mineral
properties, exploring for gold, silver, and other non-ferrous metals and
minerals within the contiguous United States. It is the further intention of
Southwest to mine and to process any commercially-proven resources developed
at
its properties.
In
lieu
of cash payment for the original 8 lode and 21 placer claims acquired in 2004
the Company entered into what is essentially a joint venture with the former
owners whereby the former owners are entitled to receive 20% of all net smelter
returns of gold after expenses, whether paid in cash or in kind. The remaining
77 claims are wholly owned by USCorp’s subsidiary, Southwest.
The
Company has spent the last 5 years developing a plan that would bring multiple
properties under Company ownership. Through its wholly owned subsidiary,
Southwest, the Company has now acquired for development of a total of 4,600
acres of precious metal properties located in the Chocolate Mountain region
of
the Mesquite Mining District in Imperial County, California: Geological testing
has successfully recovered gold and silver from dry washes and feeder rills.
Laboratory analysis indicates these findings warrant continued development.
Geological Support Services, LLC has completed a feasibility study that
identified proven resources of 231,513 ounces of gold in 6,614,666 tons of
ore
grading at .035 oz per ton with a cutoff grade of .015 using a gold price of
$600 per troy ounce gold on of the Picacho Salton Project.
The
Chocolate Mountains region, located in southeastern Imperial county of
California, includes the Picacho State Park and surrounding areas that has
a
rich history of gold mining activities dating back to 1775. This property is
in
a district that has been producing gold since the 1800s. In 1890 a large stamp
mill was built beside the Colorado River at the town of Picacho. The Picacho
Mine was opened in the Picacho Basin area and a narrow gauge railroad began
hauling ore from the mine to the mill. By 1904, the town of Picacho had a
population of 2,500 people. The ruins of the mill are in the Picacho State
Recreation Area a few miles east of the Picacho Salton Project claims. Thousands
of people visit the old mill ruins each year. To the south and west of the
Picacho Salton Project claims there are ruins of many old placer and lode
workings as well as recently producing major mining operations.
Numerous
discoveries of placer gold throughout Imperial County have remained undeveloped
due to a common problem encountered by small miners. Due to the lack of an
adequate water supply to support placer gold recovery operations in the region,
scores of small and medium size mining operations have failed to successfully
recover precious metals known to exist throughout the region. Southwest believes
it has located a potentially adequate water source. Southwest intends to use
a
state of the art gold recovery system designed and developed for the specific
conditions found on these properties. Based on the recent reports of geologists
and engineers, Southwest believes this property has the potential to develop
into a significant gold producing operation.
Historically,
mining has been carried out in the Mesquite Mining District of Imperial County
using old hard rock mining and placer methods. However, in 1984, new mining
methods (“heap leaching”) were used to develop and mine low-grade ore bodies,
with an economically viable cut-off grade as low as .01 to .02 ounces of gold
per ton. Test production has determined the cutoff grade and the economic
viability of this property. Geological Support Services, LLC recently completed
a feasibility study that has identified proven resources of 231,513 ounces
of
gold in 6,614,666 tons of ore grading at .035 oz per ton with a cutoff grade
of
.015 using a gold price of $600 per troy ounce gold on the Picacho Salton
Project. Southwest intends to go into production as soon as possible after
approvals and financing are obtained.
Property
descriptions, locations and nature of ownership.
Picacho
Salton Project Claims in the Mesquite Mining District of Imperial County,
California, U.S.A, Group #1: 640 acres on four contiguous, unpatented Placer
Claims. Access to these claims is by a private dirt road 2 miles north of the
intersection of Highway 78 and Ogilby Road, near Glamis, California.
Picacho
Salton Project Claims in the Mesquite Mining District of Imperial County,
California, U.S.A, Group #2: 17 unpatented Placer Claims. These contiguous
claims cover 2,720 acres. All of these claims are just east of the intersection
of Highway 78 and Ogilby Road. Access to the property is by private dirt
road.
Picacho
Salton Project Claims in the Mesquite Mining District of Imperial County,
California, U.S.A, Group #3: 8 unpatented Lode Claims covering 160 acres. Means
of access to the property is by an unmarked private dirt road, south of Picacho
State Park.
On
November 1, 2006 USCorp announced the acquisition of the additional Mining
Property, through its wholly owned subsidiary Southwest. Situated on 1,280
acres
covering 64 lode mining claims of precious metal properties and located in
the
Mesquite Mining District of Imperial County, California, some of the new
property has common borders to Southwest’s other gold properties. Means of
access to the property is by an unmarked private dirt road, south of Picacho
State Park.
The
143
unpatented lode mining claims, covering 2,860 acres, which the Company refers
to
as the “Twin Peaks Project,” are located in the Eureka Mining District of
Yavapai County, Arizona, U.S.A. Access to the property from the west is by
county maintained and private dirt roads from Highway 93 (connecting Phoenix,
Arizona with Las Vegas, Nevada).
The
Company, through its wholly owned subsidiaries, owns unpatented mining claims
and pays an annual Maintenance Fee payment to the Bureau of Land Management
(BLM) for each of its claims. Maintenance Fee payments of $125 per claim are
due
on or before August 31 each year.
Maps
indicating the locations of our properties.
In
the
Map above “1”“2” “3” “4” and “5” represent the approximate locations of the
company’s Picacho Salton Project properties in the Mesquite Mining District of
Imperial County, California. These five locations are represented by the number
“2” in the map below.
History
of previous operations.
Twin
Peaks Project claims group, in the Eureka Mining District of Yavapai County,
Arizona: From a historical perspective, Spaniards arrived in the area over
400
years ago and used the Santa Maria River to gain access to the claims area.
According to historical sources, the local Indians used to mine gold and silver
in the area, which was refined and shipped to Spain. More recently, in the
1880’s, John Lawler and Charles Crosby pioneered the Eureka Mining District. In
1883, John Lawler discovered the area was rich in gold, silver, lead, and zinc.
Charles
Crosby first discovered the Crosby Mine and worked his claims from 1906 to
1933.
His works are on a mineralized structure and flat zone. When the Crosby Mine
opened in 1906, it processed 120 ounces of gold per day. It operated a 40-stamp
amolotion mill until World War II. The Crosby group of claims are in the
northeast corner of the Twin Peaks claims group.
From
the
mid-1920s to the mid-1930s, a prospector worked the Gloryhole claim, in the
southwest quadrant of the Company’s Twin Peaks claims group. The ore he mined
ran over 8 ounces of gold per ton. In 1941 and 1942, the claim was yielding
2.6
ounces of gold per ton. At that time, the ore was shipped to the railhead at
Hillside and by train to a smelter in El Paso, Texas.
In
1885,
the Hayes Silver Mine opened. The deposit at the mine was so rich - over 300
ounces of gold and silver per ton - that the owners shipped the ore directly
to
England for smelting and refining. The Hayes claims group are part of the
Company’s Twin Peaks claims group.
Picacho
Salton Project Claims in the Mesquite Mining District of Imperial County,
California: There has been no commercial scale mining on any of the Company’s
claims in this region.
The
present condition of the property, the work we have completed on the property,
our proposed program of exploration and development, and the current state
of
exploration and development of the property.
Twin
Peaks Project Claims Group: The Company has conducted exploration work on the
property, including drilling 3,000 feet of core samples (in addition to 10,000
feet drilled by prior owners) and road improvements to repair and create dirt
road accesses to the property, and re-stake all claims using GPS. The Company
relies on geological work of experts performed by us and under prior ownership
in support of our reports of the presence of gold, silver, uranium and other
mineralization on the property. Geological Support Services, LLC recently
completed a feasibility study on the Twin Peaks Project that identified proven
reserves of 612,000 ounces of gold and 2,160,000 ounces of silver in 3.6 million
tons of ore, grading at .17 oz. gold per ton and .6 oz. silver per ton and
a
revenue cutoff grade of .03 per ton, using a gold price of $600 per Troy ounce
and a silver price of $12 per Troy ounce. In December, 2007 we received a
Cultural Resource Survey (an archeological report) for proposed drill sites
as
part of the Company’s application filed in August 2007 with the BLM to conduct
additional drilling to prove up additional resources. The Company is not
conducting mineral extraction operations on this property yet.
On
November 1, 2006 USCorp announced the acquisition of what we then referred
to as
the “Picacho Salton Mining Property”, through its wholly owned subsidiary
Southwest. Situated on 1,280 acres covering 64 mining claims of precious metal
properties and located in the Mesquite Mining District of Imperial County,
California, some of these newly acquired claims have common borders to USCorp’s
Picacho Gold Property. The Company’s California properties are now collectively
known as the Picacho Salton Project.
Regarding
the Picacho Salton Project Claims Groups in the Mesquite Mining District of
Imperial County: The Company has performed exploration work on the property.
The
Company relies on geological work of experts performed by us under prior
ownership in support of our early reports of the presence of gold and silver
on
the property. Geological Support Services, LLC recently completed a feasibility
study that has identified proven resources of 231,513 ounces of gold in
6,614,666 tons of ore grading at. 035 oz per ton with a cutoff grade of .015
using a gold price of $600 per troy ounce gold on the Picacho Salton Project.
There are no current mineral extraction operations on this property. The
proposed program is exploratory in nature.
The
physical condition of the plant and equipment and the source of power utilized
with respect to each property.
At
this
time there are no physical plants on any of the Company’s properties. The
Company owns rights to water on the Santa Maria River which traverses the Twin
Peaks Project property. Power is available on properties adjacent to the Twin
Peaks Project and portable generators can be used as necessary. Power is also
available on properties adjacent to our placer claims in California and portable
generators can be used when necessary. There are natural wells located in
several places on our California claims. We will supplement well water with
trucked water if necessary.
Adequate
roads exist to each of our claims groups. Some existing roads may need to be
repaired or extended.
A
brief description of the rock formations and mineralization of existing or
potential economic significance on the properties, including the identity of
the
principal metallic or other constituents.
In
regards to the Twin Peaks Project, past geologic valuations have been confirmed
by recent geological work as reported in Geological Support Services’
feasibility study on the project indicating mineralized material on claims
within the boundaries of the Twin Peaks on the Crosby claims, Hayes claims
and
Gloryhole claims as follows: 1,200,000 tons of ore at the Crosby with 0.118
ounces of gold per ton and 0.520 ounces of silver per ton; 1,200,000 tons of
ore
at the Hayes with 0.128 ounces of gold per ton and 0.960 ounces of silver per
ton; 1,200,000 tons of ore at the Crosby with 0.258 ounces of gold per ton
and
0.584 ounces of silver per ton. The Company uses these historical and current
reports in support of its determination that economically viable mineralization
is present on the properties.
According
to past geologic valuations the Crosby claims are within an area of banded
gray
schist that is surrounded by light-colored granite and intruded by pegmatite,
rhyolite-porhyry, and basic dikes. The vein strikes N10E, and dips 25 to 30
degrees E, and attains a width of up to 18 inches in the old workings. Rich
ore
from the oxidized zone shows brecciated quartz with abundant cellular limonite.
The gold is usually found associated with the oxidized iron minerals. The Hayes
and Gloryhole claims are geologically similar to the Crosby claims, and the
gold
is also found in association with the oxidized iron minerals. Several structural
zones appear to control the mineralization within the claim group. It can be
considered that an alignment of a structural trend exists, with a bearing of
about N2OE between the Hayes Mine and the Crosby Mine, with the Swiss Belle
Mine
at midway along the trend. Another structural zone which is expressed by a
dike
and is reported to run from the Santa Maria River to the base of Hayes Peak,
has
an average bearing of about N53W. The Hayes Shaft was sunk within this dike.
The
dike probably passes slightly west of the Gloryhole Mine and then intersects
a
N2OE structural zone near the base of Hayes Peak. A sample taken at this
intersection assayed 1.167 oz/ton gold and 66.37 oz/ton silver. The structural
zones seem to influence wide areas adjacent to them, which is confirmed by
the
voluminous number of favorable assays and also by the Very Low Frequency
Electromagnetic survey. Cut off grade valuations were not performed.
Geological
Support Services, LLC recently completed a feasibility study on the Twin Peaks
Project that identified proven reserves of 612,000 ounces of gold and 2,160,000
ounces of silver in 3.6 million tons of ore, grading at .17 oz. gold per ton
and
.6 oz. silver per ton and a revenue cutoff grade of .03 per ton, using a gold
price of $600 per Troy ounce and a silver price of $12 per Troy
ounce.
Picacho
Salton Project Claims Groups in the Mesquite Mining District of Imperial County:
A past geochemical sampling program has indicated mineralized material at the
Goldstar placer claims; tonnage and grade valuations were not performed. The
Company used such reports in support of its determination that economically
viable mineralization may be present on the properties as stated in various
historical reports. Geological Support Services, LLC recently completed a
feasibility study that has identified proven resources of 231,513 ounces of
gold
in 6,614,666 tons of ore grading at .035 oz per ton with a cutoff grade of
.015
using a gold price of $600 per troy ounce gold on the Picacho Salton
Project.
On
November 1, 2006 USCorp announced the acquisition of the Picacho Salton Mining
Property, through its wholly owned subsidiary Southwest. Situated on 1,280
acres
covering 64 mining claims of precious metal properties and located in the
Mesquite Mining District of Imperial County, California, some of the recently
acquired claims have common borders to USCorp’s Picacho Gold Property, now
collectively referred to as the Picacho Salton Project Claims.
The
phased nature of the exploration process, and the place in the process our
current exploration activities occupy.
Phase
1
of the exploration process has been completed on a portion of the Hayes group
of
claims within the Twin Peaks Project. Phase I supplemented the previous
exploration effort with additional geological, geochemical and geophysical
surveys, drilling, excavations and road building. We also completed a scoping
study. Phase I was designed to furnish pertinent data for the design of Phase
II
Mining Operation Plan.
Phase
II
has largely been completed as of the date of this Annual Report. We have done
further exploration on our property, and designed a Test Production program
on
selected claims within the Twin Peaks claims group which we plan to initiate
in
fiscal 2008. This will include an electromagnetic flyover of the entire claim
group and completion of a geochemical survey using the boundaries of individual
claims to establish a base grid. This sample grid would be tightened in select
areas. Simultaneously, the geology will be mapped in order to determine the
overall extent of pathfinder mineralization for use in planning additional
drilling, gaining a more detailed understanding of the potential of the entire
site, and solidifying the mineral land position.
We
will
then commence with drilling and assaying in the areas previously targeted in
prior geological reports. The drilling program has been designed to confirm
the
geology and mineralization in the target areas; a broad program is not necessary
due to prior geological work. Extra samples will be retained for metallurgical
testing on promising zones.
The
results of testing the samples has allowed us to plan the conceptual mine and
milling plans, including flow-sheets that were used in the feasibility study
process along with the on-going economic and cost modeling evaluation of the
project. Finally while the results are being evaluated we have begun the
collection of the archeological and environmental data necessary for further
exploration, submission of the Mining Plans of Operations and approvals to
commence mining.
We
have
received a Test Production plan and budget for the Picacho Salton Project Claims
in the Mesquite Mining District of Imperial County from one of our Consulting
Geologists is summarized as follows:
Test
Production Program Budget and Plan
To
start
placer testing operations we must first purchase and modify a wash plant. The
pad and setup of the wash plant is next.
The
dirt
access road from the Highway to the site (approximately 2 miles) must be
reworked/repaired. We will also need a Front End Loader (“F.E.L.”) with Back-Hoe
attachment. For continuous hard work excavating trenches, digging test pits
and
carrying alluvial material back to the wash plant for processing on a daily
basis. It would be used for the duration of the test production
program.
The
sampling method is standard in geological exploration and is confined to dry
arroyo drainages and rills. Grab samples taken outside of the dry river beds
and
rills will be by prospectors pick or regular pick and shovel. Instruments to
be
used will be a VLF unit, an EM unit, microscopes, spectrometer, GPS unit,
possibly an I.R. unit, a magnetometer and miscellaneous sieves. A 10 or 12
kW
generator set will independently power the night lights and camper unit. We
need
to determine if the present wells go down a minimum of 400 feet to reach
adequate water supply to support test production wash plant.
We
will
make a decision whether to proceed with each successive phase of the exploration
program upon completion of the previous phase and upon analysis of the results
of that program.
We
will
follow QA/QC protocols provided by the Society for Mining, Metallurgy and
Exploration Guidance on best practices for Exploration
www.smenet.org.
Recent
Initial Exploration and Exploitation
Although
many companies and individuals are engaged in the mining business, including
large established mining companies, there is a limited supply of desirable
mineral lands available for claim staking, lease, or other acquisition in the
United States and other areas where USCorp contemplates conducting its
exploration and/or production activities. However, it has been determined by
qualified geologists and mining companies that USCorp’s Arizona properties have
mineralization of a variety of precious and non-precious minerals. Historically,
the specific geographic region in which USCorp intends to conduct its
exploratory and mining activities has been the subject of various general
samplings, which were performed by the State of Arizona, the United States
Department of the Interior Bureau of Mines, and the United States Department
of
the Interior Bureau of Land Management.
The
Company has relied upon a number of studies by companies that are not presently
affiliated or associated with USCorp to determine the feasibility and valuation
of USCorp’s pursuit to develop the Mining Claims. These studies are comprised of
several exploration techniques, such as geological and geophysical surveys,
drilling, and excavations, in order to determine the economic potential, and
subsequent exploration and mining, of the Claims. These different firms have
utilized varied means to calculate the potential of the exploration and
development of the Twin Peaks Project’s Mining Claims.
Early
Exploration Conducted and Valuations.
The
Twin
Peaks Project: Past geological studies indicated that beginning in 1981 a
geologist performed certain exploratory drillings in order to obtain samples
of
the contents from the Crosby Mine Site No. 6, located Yavapai County, Arizona
(one of the claims in USMetals’ Twin Peaks Project). The geologist drilled 28
core drill holes on the Crosby Mine site. His report was based on 200-foot
depth
cores. This area was 18,519 cubic yards, or approximately 20,000 tons of
mineralized material. The total area that was drilled was 1,500’ x 600’ x 200’.
A total of 744 core samples were taken from the 6,000-foot of core hole
drillings. The samples were assayed for gold and silver.
The
results indicated the presence of mineralization of gold and silver. The core
samples also revealed quartz monzonite porphyry formations throughout the area
of sampling. The many faults located in this area were of considerable
importance in controlling supergene enrichment; the largest quantity and highest
grade of ore occurs when these faults intersect or are closely spaced. There
was
significant evidence of this enrichment recorded from the samples taken from
the
Crosby Mine site area. And, the gold and silver that was found is natural to
the
formations of the enrichment zone.
Recent
Exploration and Samplings
Recent
geological surveys, provided by Geological Support Services, LLC, one of
USMetals’ principal advisors have confirmed prior geological reports. It was
verified that the Twin Peaks Project is on a mineralized structure and flat
zone
with gold and silver carrying mineralization.
Historically,
over 10,000 feet of core drillings were performed and over 1,500 fire assays
were conducted. These assays showed an overall average of .14 ounces of gold
per
ton and .595 ounces of silver per ton, on one area covering 3 claims.
The
geological, geophysical, and geochemical studies stated above were reviewed
and
evaluated by an independent mining, consulting, and geologic firm that was
engaged to evaluate the commercial feasibility of the claims. The report and
economic study recommended the continuation of exploration and the start of
production.
The
geological justification for the exploration project at the Twin Peaks Project
is that numerous past geological studies have found gold and silver
mineralization in economically viable quantities at various locations within
the
boundaries of the claims group. There are also areas within the claims group
that contain uranium and areas containing polymetals.
The
geological justification for the exploration project at the Picacho Salton
Project claims is that there is visible gold in the ground and past geological
studies have found gold and silver in economically viable quantities at various
locations within the boundaries of the claims groups.
In
2007
we conducted additional exploration, testing, surveying and re-staking of all
claims, and adding a total of 77 significant claims to the group of which 70
claims are primarily gold bearing and seven claims, approximately 140 acres,
are
Pink Rhyolite (decorative rock) and construction grade aggregate. Geological
Support Services LLC completed a feasibility study covering the gold claims,
it
says in part: “The feasibility study operating plan assumes an open caste quarry
type operation containing proven reserves of approximately 231,513 ounces of
gold in 6,614,666 tons of ore grading at .035 oz per ton with a cutoff grade
of
.015 using a gold price of $600 per troy ounce gold. The plan anticipates
conventional truck and shovel mining techniques. Processing to be phased
according to ore type and permit approvals. Phase 1 being a wash and
sedimentation gravity system with initial production capacity of 1000 tons
per
day ramping to 6000 tons per day. This type of operation has been proven to
achieve .02 ounce per ton recovery, in the targeted placers. With approval
of
cyanide leach permits, the implementation of leaching facilities will increase
recovery to the 87% target. Also along with the construction of the leaching
facilities, the milling circuit for processing the hard rock lode ore will
be
constructed. This grinding circuit will be designed to crush incoming hard
rock
down to 150- prior to gravity separation and leaching. Although this study
is
based upon production of 6000 tons a day it is anticipated that if additional
water resources are developed production could be increased to greater levels.
Mine life based on indicated reserves is in excess of 20 years. The feasibility
study assumes an economic base case utilizing a $600 per ounce gold price.
At
current fuel and labor prices, cash operating costs, including operating cost
and sustaining capital are estimated to be $260 dollars per ounce of gold
produced. Initial capital costs are anticipated to be $13,790,300 all amounts
are in U.S. Dollars.”
A
breakdown of the exploration timetable and budget, including estimated amounts
that will be required for each exploration activity.
The
six
month exploration timetable and budget for the Twin Peaks Project is as
follows:
Initial
capital costs are currently estimated to be $12,974,728. All amounts are in
US
dollars to complete an electromagnetic flyover, a comprehensive drilling
program, road repair and extensions, design and building of a test mill of
50 to
1,000 tons per day capacity. The estimate of six month time period is an
estimate of time need to perform tasks only and does not take into account
delays for governmental review and approval of our mining plan.
The
12
week exploration timetable and budget for the Picacho Salton Project claims
is
as follows:
Initial
capital costs are anticipated to be $13,790,300 all amounts are in U.S. Dollars
to complete an electromagnetic flyover, comprehensive road repair and
extensions, design and purchase of a wash plant of 10 tons per hour capacity.
The estimate of twelve week time period is an estimate of time needed to perform
tasks only and does not take into account delays for governmental review and
approval of our mining plan. At current fuel and labor prices, cash operating
costs, including operating cost and sustaining capital are estimated to be
$260
dollars per ounce of gold produced.
How
the exploration program will be funded.
The
Company anticipates that funding will be by equity or debt financing in the
form
of private placements, working interest joint venture, and/or gold bullion
loans
in the United States, Europe and Asia. To date we have received the proceeds
from a gold bullion loan in the amount of $635,000 as previously reported in
Current Report on Form 8-K dated September 27, 2005, $620,000 in proceeds from
a
private placement and $1,200,000 in proceeds from convertible debentures in
addition to contributions from the Company’s Chairman and CEO.
Identification
of who will be conducting any proposed exploration work, and a discussion of
their qualifications.
The
Company is utilizing the services of Geological Support Services, LLC, Wondjina
Research Institute and Biozone, Inc, for exploration and geological work on
the
Company’s properties. Given adequate financing we intend to use additional
qualified mining consultants and engineers subject to their availability and
willingness and our need, but we have not contracted with any other vendors
as
of the date of this Annual Report. A summary of the qualifications of Geological
Support Services, LLC follows:
Geological
Support Services, LLC, Robert A. Cameron, Ph.D. managing partner, is consulting
exploration geologist to the Company. Cameron has a Ph.D. in Geophysics from
Canterbury University, Kent, England. Since 1987 Cameron has consulted in the
mining industry as a geologist in various capacities for companies and projects
in the private sector in the United States, Mexico, Australia, New Zealand,
West
Germany, Poland and Canada. In addition to private consulting, he has worked
since 2001 as a professor of geology and geosciences.
Specific
Environmental Regulation.
Mining
is
subject to potential risks and liabilities associated with pollution of the
environment and the disposal of waste products occurring as a result of mineral
exploration and production. Environmental liability may result from mining
activities conducted by others prior to USMetals’ ownership of a property.
Insurance for environmental risks (including potential liability for pollution
or other hazards as a result of the disposal of waste products occurring from
exploration and production) is not generally available at a reasonable price
to
companies within the industry. To the extent USMetals is subject to
environmental liabilities, the payment of such liabilities would reduce funds
otherwise available to USMetals and could have a material adverse effect on
USMetals.
In
the
context of environmental compliance and permitting, including the approval
of
reclamation plans, USMetals must comply with standards, laws and regulations
which may entail greater or lesser costs and delays depending on the nature
of
the activity to be permitted, constructed and operated and how stringently
the
regulations are implemented by the applicable regulatory authority. It is
possible that the costs and delays associated with compliance with such laws,
regulations and permits could become such that a company would not proceed
with
the development of a project or the operation or further development of a mine.
Laws, regulations and regulatory policies involving the protection and