HuntMountain Resources company history: the story so far

History

HuntMountain Resources assembled gold and silver projects in Nevada, Québec, Argentina and Mexico, funded largely by its chairman's family, and by mid-2011 was behind on its SEC filings.

2006-2007: Building a portfolio

HuntMountain set out to explore for gold and silver, and in 2006 it began collecting projects. In March 2006 it signed a lease with an option to buy the Dun Glen Gold Project, 94 claims in Pershing County, Nevada, paying $30,000 in advance royalties. In June it secured an option from Diagnos, Inc. on two gold properties in Québec, which required $70,000 and at least three drill holes on each.

The money came mostly from the family of President and Chairman Tim Hunt. In April 2006 the Hunt Family Limited Partnership exercised warrants for 15,444,132 shares, paying $1,003,869. In early 2007 the company obtained an unsecured loan facility of up to $2,000,000 from Hunt and related parties, which the lender could convert into units at $0.43. In April 2007 its Argentine subsidiary, Cerro Cazador, signed a lease-purchase to earn up to 100% of the Bajo Pobré gold property in Santa Cruz, Argentina. In December 2007 the auditor, LeMaster & Daniels, resigned.

2008: Debt becomes equity

The Hunt convertible note was cleared in two steps. On April 16, 2008 $5,050,014 of principal and interest was converted into 20,200,056 units of common stock. On July 30-31, 2008 a further conversion, after the company drew another $500,000, discharged the note and produced 20,394,192 units. Other shareholders were diluted as a result. In August 2008 the chief financial officer concluded that the first three quarterly reports of 2007 could not be relied on, because of errors in accounting for the conversion feature of the notes. Restated filings were being prepared, and none appear in the record.

In the field, October 2008 drilling at the Veta Sur target on the La Josefina project in Argentina returned 0.8 metres of 3,540 grams per tonne silver and 1.4 metres of 5.5% copper. The company was working with provincial miner Fomicruz S.E. to earn 91% on a positive feasibility study. In November it bought the El Milagro concession in Chihuahua, Mexico, within its El Capitan project.

2009-2010: Hunt loans and asset deals

In June 2009 the Hunt Family LP provided a new unsecured loan of up to $5,000,000 at 11%, convertible at $0.10 per unit, well below the earlier $0.43. It replaced a shareholder loan of $3,198,510. The partnership also had 46,401,248 warrants reissued at $0.10 and received a 3% royalty on the company's Mexican properties. In December the maturity was extended to December 31, 2010 and the limit raised to $5,500,000.

The company also began shedding or sharing assets. In December 2009 it transferred 75% of the economic interest in Dun Glen to Blackhawk Exploration, which was to spend at least $700,000 by December 2013. Separately, Sinomar Capital Corp. agreed to take over Cerro Cazador, with the deal valued at C$15 million in Sinomar shares. The TSX Venture Exchange gave final approval on December 31, 2009, and HuntMountain was to hold over 80% of Sinomar's common shares. The record does not confirm the closing. HuntMountain also had to pay about $1,450,000 of the subsidiary's drilling-contractor bills.

2011: Catching up

The record is quiet for 2010. In July 2011 the company reported that its auditor, Behler Mick PS, had resigned effective April 14, 2011. Its 2008 and 2009 reports had carried going-concern warnings, meaning doubt about the company's ability to keep operating. Malone Bailey LLP was hired effective June 30, 2011 to audit 2010 and review interim periods while the company worked to bring its SEC filings current. At that date the 2010 audit was pending, the restated 2007 quarterly reports had not appeared, and it was not reported whether the Hunt loan had been repaid or converted.

Written from the 15 story beats below (2006 to 6 July 2011), which come from the company's own announcements and filings.

Beat by beat

The events that changed the company's story, in plain English, each written against everything known about the company at the time. The dot shows whether it was good, bad or neutral for shareholders.

2011

6 July
Effective June 30, 2011 the company hired Malone Bailey LLP of Houston to audit its fiscal year ended December 31, 2010 and review interim quarters while it works to bring its SEC filings current. The prior auditor, Behler Mick PS, had resigned effective April 14, 2011; its reports for 2008 and 2009 each carried a going-concern uncertainty paragraph, and the company reports no disagreements with it. The filing implies the company's SEC filings were behind (the company says it is bringing them current).
auditor change

2010

8 Jan
On December 17, 2009 the board extended the maturity of the June 2009 Hunt Family LP loan from December 31, 2009 to December 31, 2010, and raised the maximum amount available from $5,000,000 to $5,500,000. This continues reliance on Hunt-family funding and settles the open question of what happens at the original maturity: the note was extended, not repaid or (per this filing) converted.
debt financing
7 Jan
The Toronto-listed TSX Venture Exchange gave final approval on December 31, 2009 to Sinomar Capital Corp.'s reverse takeover of Cerro Cazador S.A., the Argentine subsidiary holding La Josefina. This resolves the pending deal conditionally approved on December 7; the filing says HuntMountain is to own over 80% of Sinomar's common shares, and that CCSA stays in its consolidated accounts and no pro forma statements are needed. The filing does not give a closing date or say whether the Sinomar share issuance has been completed.
asset acquisition disposition

2009

9 Dec
On December 7, 2009 Sinomar Capital Corp. announced the TSX Venture Exchange had given conditional approval to its reverse takeover of Cerro Cazador S.A., the company's Argentine subsidiary that holds La Josefina. The deal was first announced June 24, 2009 and is to be paid in Sinomar shares with a combined deemed value of C$15 million, leaving HuntMountain with over 80% of Sinomar's common shares; closing is expected around December 22, 2009. As a condition, HuntMountain must pay the subsidiary's remaining drilling-contractor payables of about 5,523,155 Argentine pesos (about $1,450,000), counted as an equity investment in the subsidiary.
material agreement
4 June
As of June 2, 2009 the company obtained an unsecured loan of up to $5,000,000 from the Hunt Family LP at 11% interest, maturing December 31, 2009, convertible at $0.10 per unit (one share plus one $0.10 warrant with a seven-year life). It replaces the shareholder loan owed to the partnership, which stood at $3,198,510 on March 31, 2009. As consideration, 46,401,248 existing warrants held by the partnership were cancelled and reissued at $0.10 expiring April 22, 2016, and the partnership received a 3% net smelter royalty on all the company's Mexican resource properties. This continues reliance on Hunt-family funding; a $0.10 conversion price is well below the $0.43 used earlier, so conversion would likely dilute other holders (inference).
debt financing

2008

14 Nov
Filed Nov 14, 2008, this 8-K covers two items. An October 20 release reports Veta Sur drill results at La Josefina, including 0.8 m of 3,540 g/t silver and 1.4 m of 5.5% copper; it also states the company has a partnership with provincial miner Fomicruz S.E. to earn a 91% interest on a positive feasibility study. On November 3, 2008 the company acquired the El Milagro mining concession (about 100 hectares) in Chihuahua, Mexico, within its El Capitan project; the former owners keep net profits royalties of 1% and 1.5%. This gives the earlier-mentioned Chihuahua project its first stated terms.
drilling progress report
13 Aug
On August 12, 2008 the CFO concluded that the quarterly reports for March 31, June 30 and September 30, 2007 should no longer be relied on, because of errors in accounting for the beneficial conversion feature of convertible notes. Management is preparing restated filings; no restated figures are given. Williams & Webster, the current auditor, was not the auditor when those reports were filed.
financial restatement
31 July
On July 30-31, 2008 the Hunt Family LP and two limited partners converted $5,000,000 of principal on the convertible note, the company drew a further $500,000 on an extension of the note, and the partnership then converted $598,548 of principal and interest. This discharges the note completely, and 20,394,192 units of common stock were issued on the terms from the November 13, 2007 8-K. This continues the pattern of Hunt-family funding converting to equity, following the April 2008 conversion; the new shares dilute other holders (inference).
capital raising announcement
1 May
On April 16, 2008 the Hunt Family Limited Partnership and two of its limited partners converted a convertible promissory note, $5,050,014 of principal and interest, into 20,200,056 units of common stock. This clears the note entirely, removing that debt and increasing the share count (inference: dilution for other holders). The units were issued under the terms in the November 13, 2007 8-K. The filing also shows the company now as HuntMountain Resources Ltd., a Washington corporation.
capital raising announcement

2007

27 Dec
The company's auditor, LeMaster & Daniels PLLC, resigned on December 20, 2007 (received December 24), effective immediately, for the company and its subsidiaries. The filing says its reports for the last two years had no adverse opinion or disclaimer.
auditor change
11 Apr
On April 5, 2007 the company's Argentine subsidiary Cerro Cazador signed a final lease-purchase agreement with FK Minera S.A. to earn up to 100% of the Bajo Pobré gold property in Santa Cruz, Argentina, through cash payments totalling US$325,000 and US$500,000 of exploration spending over five years, followed by a minimum royalty of US$100,000 a year (or 1% NSR if greater). The press release also mentions a recently accepted bid for the La Josefina property, and gives Randal Hardy as President in the release, while the 8-K is signed by Tim Hunt as Chairman & CEO.
material agreement
7 Feb
As of January 31, 2007 the company obtained an unsecured loan facility of up to $2,000,000 from Tim Hunt and/or related parties, for working capital, surety and bonding. Terms: maturity within 180 days, interest up to 11%, fee up to 1%; the lender can choose to convert the debt into units at $0.43 per share plus a $0.60 two-year warrant, and repayment is expected from a private placement. Another insider-funded financing, with conversion that would add shares.
material agreement

2006

23 June
On June 19, 2006 the company obtained from Diagnos, Inc. an exclusive option to acquire 100% of two gold properties in Québec (Lac à l'Eau Jaune and Malartic Surimau, 46 claims, about 6,500 acres), effective March 31, 2006. Getting them requires $70,000 within 90 days and at least three drill holes on each property, with options on up to seven more properties, a $500,000 bonus per economic discovery and a 2% royalty to Diagnos.
material agreement
27 Apr
On April 24, 2006 the Hunt Family Limited Partnership, controlled by President and Chairman Tim Hunt and his wife, exercised warrants for 15,444,132 shares, paying the company $1,003,869. The warrants came from the March 23, 2005 stock purchase agreement; this brings in cash and increases the share count (inference: existing holders' percentage is diluted).
capital raising announcement
17 Mar
On March 13, 2006 the company signed a lease with option to purchase the Dun Glen Gold Project (94 unpatented claims, about 1,700 acres, Pershing County, Nevada) from Scoonover Exploration, and took over Scoonover's agreements with Heckman and Painter covering 13 of the claims. It paid $30,000 in advance royalties at signing, owes rising annual advance royalties ($37,500 in year 1 up to $72,500 from year 5), and can end the lease on 60 days' notice.
material agreement