2. Mineral Properties

6 Months Ended

Jun. 30, 2013

For the six months ended June 30, 2013 and 2012, the Company has incurred (recovered) $(7,840) and $43,995 in mineral property costs which have been charged to operations. A summary by property is as follows:

	Ziggurat		Poker Flats			Arbacoochee
	Property		Property			Gold Prospect		Total

Six Months Ended June 30, 2013

Impairment	$	–	$	–		$	–	$	–

Option payments		–		–			–		–

Property expenditures		–		–			–		–

Exploration costs		–		(7,840	)		–		(7,840	)

	$	–	$	(7,840	)	$	–	$	(7,840	)

Six Months Ended June 30, 2012

Impairment	$	–	$	–		$	–	$	–

Option payments		–		–			–		–

Property expenditures		–		36,560			–		36,560

Exploration costs		3,705		3,730			–		7,435

	$	3,705	$	40,290		$	–	$	43,995

From July 8, 2010 (Inception of Exploration Stage) to June 30, 2013

Impairment	$	–	$	–		$	104,027	$	104,027

Option payments		10,288,010		5,056,750			–		15,344,760

Property expenditures		–		93,120			–		93,120

Exploration costs		205,725		103,348			3,820		312,893

	$	10,493,735	$	5,253,218		$	107,847	$	15,854,800

Ziggurat Property

On December 27, 2010, the Company entered into an Option and Mining Claim Acquisition Agreement between Mexivada Mining Corporation (“MMC” or the “Optionor”) and Sphere Resources, Inc. (“Sphere”). The agreement was amended on March 28, 2011 (the “First Amendment”) and further amended on December 22, 2011 (the “Second Amendment”).

MMC is the owner of a 100% interest in certain mining claims in Nye County, in the State of Nevada, known as the “Ziggurat” Property. Resulting from the Agreement and First and Second Amendments, the Company has the following rights and obligations:

	·	Issuance of 393,125 shares of common stock (issued at a fair value of $7,076,250) and 41,875 shares of common stock (issued at a fair value of $753,750) to Sphere and MMC, respectively on execution of the amended Option Agreement;
	·	Issuance of a warrant to purchase 193,100 shares (recorded at a fair value of $1,853,760) and a warrant to purchase 41,875 shares (recorded at a fair value of $402,000) to Sphere and MMC, respectively, with an exercise price of $20.00 per share until March 28, 2016;
	·	The Company has paid to MMC $25,000 upon executing the Option Agreement;
	·	The Company has paid to MMC $35,000 on May 27, 2011;
	·	The Company has paid to MMC $25,000 on or before the second anniversary date of the Agreement);
	·	The Company shall pay to MMC $25,000 on or before the third anniversary date of the Agreement;
	·	An initial 51% interest in the property will be earned upon incurring exploration expenditures of $1,500,000 on or before the third anniversary date of the agreement, all of which will be paid by the Company;
	·	An additional 24% interest in the property will be earned upon incurring additional exploration expenditures of $1,000,000 and completing and delivering to Optionor an industry-standard mining feasibility study on or before the fifth anniversary date of the agreement;
	·	Sphere is required to issue certain shares of common stock to MMC;
	·	The Company granted a 2.5% Net Smelter Royalty (“NSR”) for any and all products that are produced from the Ziggurat mining claims to Sphere and a .5% NSR to MMC;
	·	If and when the Company elects to sell and convey all or a portion of its interest in the Ziggurat Property, the Company shall have the right to purchase up to 100% of the 2.5% NSR granted, conveyed and assigned by the Company to Sphere on its share of production from the Ziggurat Property, under terms to be agreed upon by the Company and Sphere.

Further, the Company paid $117,250 and $16,750 (not paid) to Sphere and MMC, respectively, of which 50% is to be paid within 60 days after the effective date of a S-1 to be filed with the SEC and the remainder after such date of the Company obtaining financing of $2,000,000. As of June 30, 2013, the Company has neither filed the S-1 nor obtained such financing.

Poker Flats Property

On December 22, 2010, the Company entered into an Option and Mining Claim Acquisition Agreement between MMC and Sphere. The agreement was amended on March 28, 2011 (the “First Amendment”) and further amended on December 22, 2011 (the “Second Amendment”).

MMC is the owner of a 100% interest in certain mining claims located in the Carlin Mining District in Elko County Nevada, known as the “Poker Flats” Property. Resulting from the Agreement and First and Second Amendments, the Company has the following rights and obligations:

	·	Issuance of 194,375 shares of common stock (issued and recorded at a fair value of $3,498,750) and 20,625 shares of common stock (issued and recorded at a fair value of $371,250) to Sphere and MMC, respectively on execution of the amended Option Agreement;
	·	Issuance of a warrant to purchase 94,375 shares (recorded at a fair value of $906,000) and a warrant to purchase 20,625 shares (recorded at a fair value of $198,000) of common stock to Sphere and MMC, respectively, with an exercise price of $20.00 per share until March 28, 2016;
	·	The Company has paid to MMC $25,000 upon executing the Option Agreement;
	·	Sphere is required to issue certain shares of common stock to MMC;
	·	An initial 51% interest in the property will be earned upon incurring exploration expenditures of $500,000 on or before the third anniversary date of the agreement, all of which will be paid by the Company;

	·	An additional 24% interest in the property will be earned upon incurring additional exploration expenditures of $250,000 and completing and delivering to Optionor an industry-standard mining feasibility study on or before the fifth anniversary date of the agreement;
	·	Upon exercise of the option, the Company will assume a 75% interest in an existing Production Royalty Agreement which requires the payment of 3% NSR for any and all products that are produced from the Poker Flats mining claims to MMC and a 2% NSR to Sphere;
	·	If and when the Company elects to sell and convey all or a portion of its interest in the Poker Flats Property, the Company shall have the right to purchase up to 75% and MMC shall have the right to purchase up to 25% of the 3% NSR on mineral production from the Poker Flats Property retained by the owner of the mining claims subject to the Poker Flats Option Agreement, for one million U.S. dollars (U.S. $1,000,000) per NSR percentage point;
	·	If and when the Company elects to sell and convey all or a portion of its interest in the Poker Flats Property, the Company shall have the right to purchase up to 100% of the 2% NSR granted, conveyed and assigned by the Company to Sphere on its share of production from the Poker Flats Property, under terms to be agreed upon by the Company and Sphere.

On April 1, 2011, the Company entered into a Mining Lease and Agreement (the “Agreement”) with K & K Tomera Lands, LLC, a Nevada Limited Liability Company (“Tomera”). This Mining Lease and Agreement pertains to the Poker Flats property located within the Carlin Mining District in Elko County, Nevada.

Under the terms of this Agreement, the Company agreed to pay Tomera a Production Royalty of 5% of NSR, as defined in the Agreement. In order to maintain this Agreement in effect, the Company shall pay to Tomera Advance Minimum Royalty (“AMR”) Payments. AMR payments are calculated based on the net mineral acres leased on an annual basis. The Company paid, at the execution of the Agreement, $30,800 for the first year of the lease based on the 1,760 net mineral acres leased at $17.50 per acre. Future AMR payments, on a per net mineral acre basis, are: $17.50 per acre on the first and second anniversaries of the Agreement, $21.00 per acre on the third and fourth anniversaries, $24.50 per acre on the fifth and sixth anniversaries, and $28.00 per acre on the seventh and any subsequent anniversaries. The Company paid $30,800 and $30,800 during the years ended December 31, 2012 and 2011, respectively. The term of the Agreement is for a period of ten years. The Company has the option to extend the initial term for an additional ten year period.

In connection with the Mining Lease and Agreement, the Company entered into a Surface Access and Use Agreement on April 1, 2011 with Kevin Tomera, a Nevada resident, which grants the Company general rights of ingress and egress over certain surface tracts and the right to use the surface tracts in conduct of its mineral exploration, development and mining activities. Additionally, Tomera has granted the Company an option to purchase portions of the surface tracts. Under the terms of the Surface Access and Use Agreement, the Company agrees to pay Kevin Tomera annual rental of $4.50 per acre for each acre of land included in the surface tracts. The Company paid $5,760 and $5,760 during the years ended December 31, 2012 and 2011, respectively. The term of the Agreement is for ten years.

Arbacoochee Gold Prospect

On October 22, 2010, the Company acquired all of the mineral rights in the Arbacoochee Gold Prospect located in northeastern Alabama. The acquisition includes all legal rights and equitable title to the mineral rights held by deed in the name of Alabama Mineral Properties, LLC (“AMP”).

The mineral rights were acquired for cash of $50,000 and 5,563,468 shares of the Company’s issued and outstanding common stock at a fair value of $54,027. The shares were a contribution from shareholders, resulting in a capital contribution. The Company assumed an existing mineral royalty agreement which requires the payment of 6% NSR overriding royalty for any and all precious metals that are mined, processed or recovered from the Arbacoochee Gold Prospect to AMP.

At December 31, 2010, the Company impaired the Arbacoochee Gold Prospect and $104,027 was charged to operations.

Spartan Gold Ltd. 10-Q