This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our company's or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock.
As used in this annual report, the terms "we", "us", "our", the “Company” and "McNab" mean McNab Creek Gold Corp. and our subsidiaries, unless otherwise indicated.
Overview
We are a junior mineral exploration company. We seek to explore our mineral interests in the SMH Property located in Eureka County, Nevada . Subsequent to year end management decided to discontinue holding an interest in the Roxy Prospect located in Pershing County, Nevada. We will be exploring the SMH claims in phases. Our proposed work program is set out in detail under the Plan of Operation section.
The Company’s acquisition of its SMH Property and Roxy Property were negotiated at arm’s length with Mr. E.L. Hunsaker III before he became a director of the Company. However, in view of a potential conflict of interest in Mr. Hunsaker remaining as a director of the Company, he has resigned his position as a director of the Company and has been replaced by Mr. Christopher R. Verrico.
The SMH 31-50 claims were transferred to McNab Creek Gold Corporation by virtue of a Quitclaim Deed executed in January 2004 by Scoonover Exploration LLC of Elko, Nevada. E.L. Hunsaker III, is a managing member of Scoonover Exploration LLC (Scoonover Exploration a Nevada Limited Liability Company). The claims were acquired for the consideration of $3,500; with a 2.5% net smelter return royalty retained by Scoonover (the 2.5% net smelter return royalty was sold to Golden Patriot Corp., of which E.L. Hunsaker III is also a director). The SMH quitclaim is recorded in Eureka County Nevada Book 374, Page 001-003.
The Roxy 1-8 claims were transferred to McNab Creek Gold Corporation by virtue of a Quitclaim Deed executed in July 2004 by Scoonover Exploration LLC of Elko, Nevada. E.L. Hunsaker III, is a managing member of Scoonover Exploration LLC (Scoonover Exploration a Nevada Limited Liability Company). The claims were acquired for the consideration of $3,500; with a 2.5% net smelter return royalty retained by Scoonover (the 2.5% net smelter return royalty was sold to Golden Patriot Corp., of which E.L. Hunsaker III is also a director). The
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Roxy quitclaim is recorded in Pershing County Nevada Book 384, Page 740-742. Subsequent to year end management decided to discontinue holding an interest in the Roxy Prospect.
There is no assurance that a commercially viable mineral deposit exists on any one of our properties. Extensive exploration will be required before we can make a final evaluation as to the economic and legal feasibility of any potential deposit.
Corporate History
We were incorporated on February 15, 2001 as "Parthenon Development Corporation" under the laws of the State of Nevada. We acquired our mineral exploration properties in January, 2004 and July, 2004. We raised seed capital to finance our mineral exploration activities during the period September, 2003 to March, 2004. We changed our name to "McNab Creek Gold Corp." on August 1, 2003 when management determined that our company would explore gold and silver deposits in the vicinity of the Carlin Trend and Kennedy District in the State of Nevada.
We have not been involved in any bankruptcy, receivership or similar proceedings. We have not undergone any material reclassification, merger, consolidation or sale of significant assets not in the ordinary course of business. Our purchase of the SMH and Roxy mineral exploration properties described under “Plan of Operation” was, for our company, a purchase of significant assets not in the ordinary course of business.
Our Current Business
We are a junior mineral exploration company. We have acquired two blocks of lode mineral claims in Pershing County and Eureka County in the State of Nevada. We will be exploring these claims in phases. There is no guarantee that a producing mine that is economically feasible to explore can be located and identified nor can we guarantee that our property is economically feasible to explore. Our proposed work program is set out in detail under the Plan of Operation.
Description of Our Exploration Properties
SMH PROSPECT
Location and Access
The SMH Prospect comprises 400 acres in 20 unpatented and contiguous lode claims. An unpatented mining claim is a particular parcel of Federal land, valuable for a specific mineral deposit or deposits. It is a parcel for which an individual has asserted a right of possession. The right is restricted to the extraction and development of a mineral deposit. The rights granted by a mining claim are valid against a challenge by the United States and other claimants only after the discovery of a valuable mineral deposit. The claims are located south of the Carlin Trend, Figure 1, more specifically in Section 23, 26 and 35 of Township 26 North and Range 52 East in Eureka County Nevada. Subject to a 2.5% production royalty, the claims were transferred to McNab Creek Gold Corporation by virtue of a Quitclaim Deed executed in January, 2004 by Scoonover Exploration LLC of Elko, Nevada. The name of the claims and their BLM Serial Numbers are given in Table 1. All claims have anniversary dates on September 1 and are in good standing until 2005.
Unpatented mining claims consist of U.S. Federal controlled ground for which the proprietary mineral rights have been claimed; one claim covers approximately 20.7 acres and is obtained by completing a proscribed set of monumentation, postings and filings (described by Nevada law) generally described as:
- Erect four corner locations monuments and one location monument
Claim Name BLM Serial Number SMH 31 NMC925335 SMH 32 NMC925336 SMH 33 NMC925337 SMH 34 NMC925338 SMH 35 NMC925339 SMH 36 NMC925340 SMH 37 NMC925341 SMH 38 NMC925342 SMH 39 NMC925343 SMH 40 NMC925344 SMH 41 NMC925345 SMH 42 NMC925346 SMH 43 NMC925347 SMH 44 NMC925348 SMH 45 NMC925349 SMH 46 NMC925350 SMH 47 NMC925351 SMH 48 NMC925352 SMH 49 NMC925353 SMH 50 NMC925354 Accessibility and Physiography
The SMH Prospect is reached by driving approximately 22 miles west on U.S. Interstate Highway 80 to Carlin, Nevada, then 41 miles south on Nevada State Highway 278 to Mineral Hill Road then approximately 4.8 miles east to the Aiken Canyon access road and 3.4 miles southeast to the property.
The SMH Property is accessible by a combination of paved roads and all weather gravel roads from Carlin in the north and from Eureka in the south. Both towns are the nearest population centers. Exploration trails abound in and around the Carlin and Battle Mountain areas while in areas of moderate and rolling topography, most places are negotiable by 4x4 vehicles even in the absence of roads. Within the property itself, the topography is moderate, rising from 6,650 ft on the southwestern part of the property to 7,000 ft on the northeastern part of the property. The climate is arid giving rise to sparse vegetation and generally stunted plant growth.
History
Most previous work completed on the SMH Property involved geologic mapping, soil and rock chip sampling, trenching, test pitting and reverse circulation drilling. The latest work carried out on the property was rock chip sampling by both Newmont Explorations and later by Independence Mining in 1999.
Cominco owned a large block of land in the Sulphur Spring range that included the SMH ground. Of four drill holes completed by Cominco in the area in 1988, two holes, MHS-1 and MHS-4 were located on the SMH Property. Only the data on MHS-4 is available which shows no detectable gold.
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Following the Cominco drilling, the Dickenson-Nevada J.V. partners made up of Reserve Industries Corporation, Precambrian Exploration and Dickenson Mines Limited operated the WHY claims and collected 183 soil samples of which 118 samples came from several disparate lines and 65 samples came from a claim post-based soil grid (i.e. 600 x 750 feet spacing). Assays from these samples were rather low for gold but trace elements did identify several prospective targets.
Asamera leased the WHY claims from Dickenson - Nevada J.V. in August, 1990 and initiated a ten-hole AIRTRAC drilling program along with backhoe trenching, geochemical rock chip sampling and sagebrush biogeochemical sampling. Asamera to 36 rock chip samples in three trenches and drilled a 500-foot drill hole on the eastern side of the property. Data from this hole is not available.
All of the Asamera AIRTRAC drill holes were shallow, from 35 to 50 feet. Only one of the holes (WHY -2) intersected any significant mineralisation - 0.013opt Au from 5-35 feet in jasperoid along the north-south fault.
Sagebrush sampling identified three low-grade multi element and gold anomalies in the south central part of the WHY claim group. Two of the anomalies trend east-west across the roughly north-south stratigraphic trend of the lithologies and cut across several lithologic units.
In August, 1992, AUR leased the WHY claims from Reserve Industries who was acting on behalf of the Dickenson - Nevada J.V. partners. In the same year of acquisition, AUR completed three trenches and an unspecified number of test pits. A total of 61 rock chip and 9 soil samples were collected. No significant assays resulted from the trench and test pit sampling.
Between July and August, 1993, AUR drilled 3,935 feet in nine reverse circulation drill holes using a tire-mounted Ingersol-Rand TH100 rig.
Regional Setting
The SMH Property is situated between the Carlin and the Battle Mountain - Eureka structural trends. The rocks that host gold in the Carlin and Battle Mountain areas are present in the SMH Property. The Carlin and Battle Mountain trends are parallel northwesterly alignments of gold and silver deposits stretching between 60 to 70 kilometers. Geophysical studies indicate that both trends lie along ancient zones of crustal weaknesses resulting in fault zones extending deep into the earth's mantle providing conduits for sustained hydrothermal gold mineralisation. In most deposits, microscopic gold is hosted in Paleozoic carbonate rocks, most particularly, the upper units of the Roberts Mountains Formation.
Property Geology
Units of the Vinini Formation primarily underlie the SMH property. Previous work has subdivided the formation into separate sedimentary units comprising laminated silty limestone (Ovll), massive limestone (Ovl), black thinly bedded chert (Ovc), grey siliceous shale, siltstone and chert (Ovs), Quartzite (Ovq) and argillaceous mudstone and siltstone (Ovm). The Vinini Formation (western assemblage rocks) is the fault contact with the Robert Mountains Formation of the (eastern assemblage rocks). Previous drilling and sampling close to the fault returned anomalous gold values.
ROXY PROSPECT
Location and Access
The Roxy Prospect is located in un-surveyed Sections 5, 6, 7, and 8, of T27N, R38E, and MDB&M as shown in Figure 1. The area is within the southeastern portion of the Kennedy Mining District in the State of Nevada. The
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land package consists of eight unpatented lode claims (NMC860160 to NMC860167) along the eastern margin of the southern East Range.
Access is via I-80 to Winnemucca, Nevada, thence south along Grass Valley road, approximately 55 miles through Grass Valley, past the Gold Bank Hills, through Pleasant Valley, almost to McKinney Pass. The Property lies approximately three miles west of the main dirt road and two miles north of McKinney pass. Access may also be gained via I-80 to Battle Mountain. Follow State Road 305 southwest, turning west onto Lander County Road that goes past Battle Mountain Gold's Copper Canyon operations. This road turns to gravel past the mine entrance and heads thorough Buffalo and Dixie valleys, around the south end of the Tobin Range, thence north along Spring Creek through the Sou Hills, to the south end of Pleasant Valley, again almost to McKinney Pass. Subsequent to year end management decided to discontinue holding an interest in the Roxy Prospect
History
Discovery of silver-gold ore occurred in what would become the Kennedy District in 1891. The discovery and development, in 1893, of the Imperial and Gold Note mines brought around 500 hopeful prospectors to the area. The Kennedy District produced almost 85,000 ounces of silver, more than 3,900 ounces of gold, plus 62,439 pounds of copper and 101,479 pounds of lead, between 1903 and 1950. Production came primarily from north and northwest trending quartz veins. The early mines in the district produced free-milling gold-silver ores from oxidized portions of the veins. Ores were processed through a 20-stamp mill. Subsequent production came from lessees who produced small shipments of gold-silver ore. According to NBM&G Bulletin 89 Geology and Mineral Deposits of Pershing County, Nevada (Johnson, 1977), mines of the district ". . . operated intermittently until 1950, but the greatest period of development and productivity was between 1893 and 1905."
Geology
A large Triassic granitic pluton, cut on its northern margin by a Tertiary granodiorite, dominates the geology of the Kennedy District. These stocks intrude Paleozoic Pumpernickel and Havallah formations and Mesozoic Koipato Group rocks. Mapping compiled by Johnson (1977) reveals a north verging thrust emplacing undifferentiated Pennsylvanian-Permian Pumpernickel Formation westward over Triassic metavolcanics of the Koipato Group. Carbonates may also comprise part of the lower plate of the thrust.
Mineralization and Geochemistry
The north-central Nevada region, around the SMH Properties, has a long history of mining activity. The majority of the jobs in the northern Nevada counties (Lander, Humboldt, Eureka, and Elko) are associated with the mining industry. Heavy equipment and operators are available from several sources in the local area. The nearby towns have extensive support and equipment availability. Skilled and experienced manpower is readily available in the local area.
Competitors
Historically, the State of Nevada has been rich in mineral reserves. Areas of Nevada have been explored and in some cases staked through mineral exploration programs. Large areas remain unstaked and areas reopen as claims expire. The cost of staking and re-staking new mineral claims and the costs of most phase one exploration programs are relatively modest. In many more prospective areas, extensive literature is readily available with respect to previous exploration and development activities. These facts make it possible for a junior mineral exploration company such as ours to be very competitive with other similar companies. In the case of the properties which we currently own, we purchased them inexpensively from another junior mineral exploration company. We are in competition with hundreds of other junior exploration companies who are evaluating and reevaluating prospective mineral properties in the State of Nevada.
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In effect, we are also competitive with senior companies who are doing grass roots exploration. In the event our exploration activities uncover prospective mineral showings, we anticipate being able to attract the interest of better financed industry partners to assist on a joint venture basis in more extensive exploration. We are at a competitive disadvantage compared to established mineral exploration companies when it comes to being able to complete extensive exploration programs on claims which we hold or may hold in the future. If we are unable to raise capital to pay for extensive claim exploration, we will be required to enter into joint ventures with industry partners which will result in our interest in our claims being substantially diluted.
Unless we conclude an aggressive property acquisition program which carries work commitments, we will be able to continue operating on modest cash reserves for the next 18 months. We currently have cash on hand of $9,037. Management of the Company has committed up to $50,000 in loan proceeds to ensure that the Company is able to continue its operations for at least the next 12 months.
Governmental Regulations
We are not in a business which requires government approval for principal products or services. In the event mining claims which we own or which we acquire in the future prove to host viable ore bodies, we would be required to apply for numerous government approvals in order to commence mining. All costs to obtain the necessary government approvals would be factored into technical and viability studies in advance of a decision being made to proceed with development of an ore body.
The mining industry in the United States is highly regulated. We have hired Mr. Michael H. Sandidge as a mining exploration consultant. Mr. Sandidge has extensive industry experience and is familiar with all government regulations respecting the initial acquisition early exploration of mining claims in Nevada. The mining consultants who we retain have extensive industry experience and are familiar with all government regulations respecting the initial acquisition and early exploration of mining claims in Nevada. We are unaware of any proposed or probable government regulations which would have a negative impact on the mining exploration industry in Nevada. We propose to adhere strictly to the regulatory framework which governs mining operations in Nevada.
Research and Development
We have not expended any funds on research and development activities and do not expect to do so in the foreseeable future.
Employees
We currently have one full time employee, namely Kenneth Townsend, our President, C.F.O. and director. The time spent by this employee on our business is directly proportional to our level of activity on a month to month basis. Mr. Townsend typically spends 50 to 100 hours per month on our business.
We employ Mr. Michael Sandidge as a consultant to our company. Mr. Sandidge is a registered professional geologist in the state of Washington with a MS degree in geology from University of Texas at El Paso and an undergraduate degree in geology from University of Washington. His work experience includes researching and consulting from 1982 to present. He worked on several projects while an undergraduate and graduate student, they included investigating the petroleum potential of the Overthrust Belt of southwestern United States and northern Mexico, structural interpretation of the Kootenay Arc of southern British Columbia, Canada, structural and intrusive history of the Central Coastal Plutonic Province, western British Columbia, Canada, tectonic evaluation and metallogenic potential of the Lake Baikal and Tien Shan regions of the former Soviet Union, and the tectonic and metallogenic evolution of the Xolapa Complex of southern Mexico. He worked as a consultant in both exploration and environmental programs in Arizona (AZCO Mining Company, 200Mt Sanchez copper deposit) and northern Mexico from 1993-1994, environmental and resource expansion in Arizona (Phelps Dodge
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Corporation, Morenci Mine) in 1995, precious metal potential of northern Argentina (Homestake/Argentina Gold Corporation) in 1996, regional reconnaissance and precious metal potential of the Maricunga Belt and structural evaluation of the 1.2Bt Cerro Casale deposit (Bema Gold) in 1996, project management and precious metal potential of the Andacollo Project (Sierra La Plata Corporation) in 1997, regional platinum group minerals (PGM) evaluation of the Kola Peninsula (Outukumpu) in 1997, epithermal precious metal potential in Far East Russian Federation (Cyprus/AMAX/Far East Geological Institute) in 1998. Presently, Michael Sandidge is VP of Exploration for West Hawk Development Corporation, a publicly listed, Toronto Stock Exchange Venture Exchange, based in Vancouver, British Columbia, Canada.
On May 10, 2006 the Company entered into a six- month Consulting Agreement with Wannigan Capital Corp. to provide assistance in its day-to-day operations. Specifically, they assist in interaction with the Company’s auditors, transfer agent and regulatory authorities. Wannigan Capital Corp received 100,000 common shares of the Company as remuneration.
RISK FACTORS
Much of the information included in this annual report includes or is based upon estimates, projections or other "forward looking statements". Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.
Such estimates, projections or other "forward looking statements" involve various risks and uncertainties as outline below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward looking statements".
