UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 
 FORM 10-K
 
 x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2009
 
 Commission file number 001-01428
 
 HUNTMOUNTAIN RESOURCES LTD.
 (Exact name of registrant as specified in its charter)
 
 Washington
 (State or other jurisdiction of incorporation or organization)
 
 1611 N. Molter Road
 Suite 201
 Liberty Lake, Washington 99019
 (Address of principal executive offices, including zip code.)
 
 (509) 892-5287
 (Registrant’s telephone number, including area code)
 
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes No x
 
 Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act: o Yes No x
 
 Indicate by check mark whether the registrant(1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 day.
 oYes x No
 
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o
 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 if the Exchange Act.
 
 Large Accelerated filer
o
Accelerated filer
oNon-accelerated filer
o
Smaller reporting company
x(Do not check if a smaller reporting company)
 
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). oYes x No
 
 State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of December 31, 2009: $997,063.  As of November 4, 2010 there were 76,251,362 shares of this registrant’s common stock outstanding.
 PART I




ITEM 1.
DESCRIPTION OF BUSINESS




References made in this Annual Report on Form 10-K to “we,” “our”, “us”, “the Company”, or “HuntMountain” refer to HuntMountain Resources Ltd. and our subsidiaries.


References made to “C$” are to Canadian dollars.  References to “$” are to United States dollars.  Certain financial information relating to the Company originated in C$ and were converted into $ based on prevailing and average exchange rates for the fiscal period ended December 31, 2009.  The rate of exchange at December 31, 2009 for C$ to $ was .9532 and the average rate of exchange for the twelve month period ending December 31, 2009 was .8803.




The accompanying consolidated financial statements include the accounts of HuntMountain, a Washington corporation, its wholly-owned Canadian subsidiary HuntMountain Resources LTD (“HMR LTD”), HuntMountain’s wholly owned Mexican subsidiary, Cerro Cazador Mexico S.E. (“CCM”), HuntMountain’s wholly-owned subsidiary HuntMountain Investments, LLC (“HMI”), its majority owned subsidiary, Hunt Mining Corp. formerly known as Sinomar Capital Corp. (“Hunt Mining”), Hunt Mining’s wholly owned Canadian Subsidiary Hunt Gold USA, LLC (Hunt Gold), Hunt Mining’s wholly owned Canadian Subsidiary 1494716 Alberta, Ltd. (Alberta) and Cerro Cazador S.A. (“CCSA”), Hunt Mining’s Argentine subsidiary 95% owned by Hunt Mining and 5% owned by Alberta,




Proposed Dissolution of the Company




On February 18, 2010, the Company’s board of directors recommended and authorized a shareholder meeting to consider and vote upon a proposal to approve the voluntary dissolution and liquidation of the Company pursuant to a plan of complete dissolution and liquidation dissolution.  On July 16, 2010, the Company filed with the Securities and Exchange Commission (“SEC”), a preliminary schedule 14A proxy statement to submit the vote to the Company’s shareholders.  As of the date of the filing of this form 10-K, the preliminary 14A proxy statement has not yet been approved by the SEC and the vote has yet to go before the shareholders.  The dissolution of the Company, if approved by the shareholders, will not affect the operations of Hunt Mining which will continue in existence along with its subsidiary companies.




(a)           Business Development




Currently all exploration activities are being pursued by our majority owned subsidiary, Hunt Mining through its wholly owned subsidiary, CCSA which on December 23, 2009 the company exchanged 100% of its shares of CCSA, which were acquired by Hunt Mining as part of a reverse takeover transaction.  Hunt Mining is a mineral exploration company incorporated on January 10, 2006 under the laws of Alberta, Canada which trades on the TSX Venture Exchange under the ticker symbol HMX.  Prior to December 23, 2009 Hunt Mining was a Capital Pool Company within the meaning ascribed by Policy 2.4 of the TSX Venture Exchange.  Hunt Mining issued 29,118,507 common shares and 20,881,493 non-voting convertible preferred shares to the Company at a deemed price of C$0.30 per Common Share and C$0.30 per convertible preferred share in consideration for the acquisition of all of the common shares of CCSA. Each convertible preferred share shall be convertible into one Common Share of Hunt Mining for no additional consideration at any time as long as the public float is not less than 20%.  This transaction gave the Company controlling interest in Hunt Mining, 65% owned by the Company and 4% owned by the Company’s wholly-owned subsidiary HMI.




On February 18, 2010, the board of directors, believing it to be in the best interest of the Company to eliminate some of the debt owed to the Hunt Family Limited Partnership (“HFLP”), a related party controlled by the Company’s President, Chief Executive Officer and Chairman, Tim Hunt, decided to sell its stock in Black Hawk Exploration and its interest in the Dun Glen property and all of its Mexican assets in consideration of cancelling $600,000 of the debt owed to HFLP.  See “Note 16, Subsequent Events” to our consolidated financial statements for further details.




Our predecessor, Metaline Mining and Leasing Company (“MMLC”) was incorporated in the State of Washington in 1927.  Historically, MMLC was engaged in the mineral exploration business.  The Company was dormant for a number of years during which time management did not think that the business climate for successfully financing mineral exploration was a viable option. In 2005, given the increase in precious metals prices and a more favorable environment for financing mineral exploration MMLC embarked on a business plan to again become active in mineral exploration. In March 2005 MMLC completed two private placements with net proceeds of approximately $650,000.   In August, 2005, the shareholders of MMLC voted to merge MMLC with and into a wholly-owned subsidiary, HuntMountain.  As a result, HuntMountain was the surviving entity.  The stock symbol was changed to ‘HNTM’ and due to the fact that we were delisted from the OTC Bulletin Board as a result of our failure to timely file this form 10-K for the period ended December 31, 2009, the Company’s stock currently trades on the Pink Sheets.




2




In March 2006, we acquired interests in exploration properties in Pershing County, Nevada, Santa Cruz province of Argentina, and Québec Canada. In March, 2007 the Company, through its Argentine subsidiary,  CCSA, was awarded the exploration and development rights to the La Josefina Project from Fomento Minero de Santa Cruz Sociedad del Estado (“Fomicruz”).  The legal agreement granting our rights to the La Josefina property was finalized in July, 2007.




In August, 2007 the Company incorporated a Mexican Subsidiary, CCM and began looking at properties for acquisition in the State of Chihuahua. In January, 2008 the Company signed a purchase agreement for 100% ownership of an exploration concession totaling approximately 9,000 hectares in Chihuahua, Mexico. On November 12, 2008 the Company announced the acquisition of an additional 100 hectares in Chihuahua, Mexico.  On February 18, 2010 the Company transferred all of its Mexican assets to the Hunt Family Limited Partnership (“HFLP”), a related party, along with all its stock in Black Hawk and its interest in the Dun Glen property in consideration of cancelling $600,000 of the debt that the Company owed to HFLP on an outstanding note payable.  See “Note 16, subsequent events” to our consolidated financial statements for further information.




(b)           Business of Issuer




We, through our majority owned subsidiary Hunt Mining, are engaged in the business of acquiring, exploring and developing mineral properties, primarily those containing gold, silver and associated base metals.




Competition




With the increased value of gold, the mining exploration industry has become very competitive in the identification and acquisition of properties that may have commercial potential.  We compete for the opportunity to participate in exploration projects with other entities, many of which have greater financial and human resources.  In addition, we compete with others in efforts to obtain financing to explore and develop mineral properties.




Employees




At the end of 2009, we had 4 employees located in Liberty Lake, Washington, responsible for the management and oversight of our exploration, administration, financing, and marketing activities.  Our employees are not subject to a union labor contract or a collective bargaining agreement.  On February 2, 2010, all of our employees resigned.  For the foreseeable future we intend to supplement our workforce by utilizing the services of consultants and contractors.




Regulation




The Company’s planned mineral exploration activities in all operating areas are subject to various federal, state, and local laws and regulations governing prospecting, development, production, labor standards, occupational health and mine safety, control of toxic substances, and other matters involving environmental protection and taxation.  It is possible that future changes in these laws or regulations could have a significant impact on the Company’s business, causing those activities to be economically reevaluated at that time.




Available Information




We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), and therefore file periodic reports and other information with the Securities and Exchange Commission (SEC). These reports may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549, or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet web site at www.sec.gov that contains reports, proxy information statements and other information regarding issuers that file electronically.




We are a Washington corporation with our principal executive offices located at 1611 N. Molter Road, Suite 201, Liberty Lake, Washington 99019. Our telephone number is (509) 892-5287.  Our filings under the Exchange Act (including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports) are also available at our principal executive offices free of charge. Our Code of Business Conduct and Ethics for Directors, Officers and Employees is also available at the executive offices free of charge. We will provide copies of these materials to shareholders upon request using the above-listed contact information, directed to the attention of Mr. Tim Hunt.




We have included the Principal Executive Officer and Principal Financial Officer certifications regarding our public disclosure required by Section 302 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1 and 31.2 to this report.




Item 1A. Risk Factors




As a smaller reporting company, we have elected not to provide the disclosure required by this item.




Item 1B. Unresolved Staff Comments –None.




3




ITEM 2.
DESCRIPTION OF PROPERTY




Santa Cruz Province, Argentina




The properties held in the Santa Cruz Province, Argentina, are operated through our majority owned subsidiary Hunt Mining through their wholly owned subsidiary, CCSA.  The proposed dissolution of the Company will not affect the operations of Hunt Mining which will continue in existence along with its subsidiary companies.













La Josefina Property




Overview




In March, 2007, CCSA, a wholly owned Argentine subsidiary of Hunt Mining, was awarded the exploration and development rights to the La Josefina Project from Fomicruz.  Fomicruz is owned by the government of the Santa Cruz province in Argentina. The legal agreement granting our rights to the La Josefina property was finalized in July, 2007.Pursuant to this agreement, CCSA is obligated to spend $6 million in exploration and complete pre-feasibility and feasibility studies during a 4 exploration season period commencing in October, 2007 at La Josefina in order to earn mining and production rights for a 40-year period in a joint venture partnership (“JV”) with Fomicruz.  CCSA may terminate this agreement at the end of each exploration stage if results are negative. With the successful completion of positive pre-feasibility and feasibility studies at the end of the 4th year, a new company will be formed which will be 91%-owned by CCSA and 9%-owned by Fomicruz. Once commercial production starts, Fomicruz has a one-time election to increase its interest in the Company to either 19%, 29% or 49% by reimbursing CCSA 10%, 20% or 40%, respectively, of CCSA’s total investment in the project. The royalty prescribed by Federal (Argentina) mining code will be a 1% mine-mouth royalty if the operation produces doré bullion within the province, which is required in the agreement. Also, because La Josefina is a Provincial Mining Reserve with the mineral rights belonging to the province, the project will carry an additional 5% mine-mouth royalty.




In February 2008 CCSA purchased the “La Josefina Estancia”, a 92 square kilometer parcel of land within the La Josefina project area. CCSA plans to use the La Josefina Estancia as a base of operations for Santa Cruz exploration.  The purchase price for the La Josefina Estancia was $710,000.




4




Location




The La Josefina property is located in north central Santa Cruz Province, about 160 kilometers NW of the coastal town of Puerto San Julian and 120 kilometers NE of the town of Gobernador Gregores.




Infrastructure present on the project includes a ranch house and several out-buildings that are currently being used as camp headquarters and core storage facilities.




Climate and Physiography




The Patagonia region is classified as a continental steppe-like climate. It is arid, very windy and has two distinct seasons; a cold season and a warm season. The area is sparsely vegetated, consisting mostly of scattered low bushes and grass. Because Patagonia is in the southern hemisphere, the seasons are opposite to North America. The cold winter months are from May to September and warmer summer is from November to March. The average annual precipitation averages only 200 mm, much of which occurs as winter snow; average monthly temperatures range from 3°C to 14°C, but vary widely depending on elevation. The winds are persistent, cool, dry and gusty, averaging about 36 km/hour and directed predominantly to the east-southeast off the Andean Cordillera. All of the Company’s Santa Cruz province projects are characterized by subdued hilly terrain with internal drainages and playa lakes. Elevations range from 300 meters to 800 meters above sea level. Hill slopes are not steep; they are usually less than 10°. Rock exposures on these hillsides are typically excellent. Almost all of the mineralization and significant geochemical and geophysical anomalies are on the crests or the flanks of these subdued hills.




Mining claim detail




The La Josefina Project includes 15 Manifestations of Discovery (Manifestacións de Descubrimiento, or simply “MDs”) totaling 52,776 hectares which are partially covered by 399 mining claims (minas or pertenencias), as shown in Figure 2 and listed in the following table:




Mineral Properties of the La Josefina ProjectM.D.

Expediente


Hectares


No. of PertsNicolás Alejandro

409.072/F/98



3500



30Lucas Marcelo

409.071/F/98



3500



12Sofia Luján

409.070/F/98



3500



6Matiao Augusto

409.069/F/98



3500



24Maria José

409.068/F/68



3500



35Ivo Gonzalo

409.067/F/98



3500



35Mirta Julia

409.066/F/98



3500



35Ailin

409.065/F/98



3500



35Mariana T.

409.064/F/98



3500



18Benjamin

409.063/F/98



3500



35Giuliana

409.062/F/98



5100



25Rosella


409.061F/98



3227



18Noemi

409.060/F/98



3013



30Diana

409.059/F/98



2995



25Miguel Ángel

409.058/F/98



3435



35Julia

409.048/F/98



6



152,776



399


5





(MAP)





Required property payments




CCSA must maintain the La Josefina mining rights by paying the annual canons due the province on the project’s 399 pertenencias. This currently amounts to 318,400 Argentine pesos per year (approximately $93,647) that can be deducted from the $6,000,000 work commitment.




Accessibility




The La Josefina Project is located in the north-central part of Santa Cruz Province, the southernmost of the several Argentine provinces comprising a vast, sparsely-populated, steppe-like region of southern South America known as Patagonia. The nearest town to the project is Gobernador Gregores (population 2,500), about 110 kilometers southwest, and the nearest Atlantic coastal town is Puerto San Julián (population 6,200), approximately 190 kilometers southeast. The project is accessible via automobile by driving east from Gobernador Gregores for 40 km on gravel Provincial Road 25 – or west from Puerto San Julián for 170 km on the same road – and then north on gravel Provincial Road 12 for 110 km. Provincial Road 12 crosses the edge of the project and continues another 240 kilometers north of Pico Truncado (population 15,000) in the northeastern part of the province. The provincial roads are generally accessible via two-wheel drive vehicles in dry weather but can become slippery to impassable for short periods when wet. Gobernador Gregores and Puerto San Julián are both served by weekly “commuter” flights to/from Comodoro Rivadavia (population 137,000), an important industrial center and port city, 428 kilometers north of Puerto San Julián via paved highway Ruta 3. Comodoro Rivadavia serves as the region’s major supply center for the booming petroleum and mining industries and is served by several airline flights daily to Buenos Aires and other major cities in Argentina. Ruta 3, Argentina’s major coastal highway, runs from Buenos Aires on the north to Ushuaia at the southernmost tip of the continent and offers all-weather access to a number of sea ports.




6




Geologic Setting




The La Josefina Project is located near the center of a large non-deformed stable platform known as the Deseado Massif, which covers an area of approximately 100,000 square kilometers in the northern third of Santa Cruz Province. The Deseado Massif is similar to the Somun Cura Massif encompassing parts of the adjacent provinces to the north. The two massifs are major metallotectonic features of the Patagonia region and represent the products of massive continental volcanism formed in the wake of extensional rifting caused by the breakup of the South American and African continents in Jurassic time.




The Deseado Massif is dominated by felsic volcanic and volcaniclastic rock units belonging to a few major regional sequences deposited in middle- to late-Jurassic time. The rocks are broken into a series of regional fractures that probably represent reactivated basement fracture zones. Faults active during the period of intense Jurassic extension and volcanism trend mostly NNW-SSE and form a series of grabens, half-grabens and horst blocks which are tilted slightly to the east. Since Jurassic time, the rocks have been cut by normal faults of several different orientations, mainly NW-SE and ENE-WSW but have undergone only a moderate amount of compression. In general, the Jurassic rocks remain relatively undeformed and generally flat to gently dipping, except locally where close to faults, volcanic domes or similar features.




The geology of the La Josefina Project Area was mapped in detail by Moreira (2005). The project geology is essentially a scaled version of the Deseado Massif geology described above. Specifically:


●
The project area is dominated by Jurassic-age rhyolitic volcanic units belonging to the Chon Aike Formation
  ●
There is one inlier of metamorphic basement rocks belonging to the Paleozoic age La Modesta Formation;
  ●
There are several small inliers of andesitic volcanics belonging to the Bajo Pobre Formation which is slightly older than the Chon Aike;
  ●
About half of the area is covered by thin Quaternary basalt flows; and
 
 ●
The project is crossed by a number of conjugate NNW-SSE and NE-SW sets of strong fault lineaments which are similar to those occurring throughout the Deseado Massif region.
  Missing or unrecognized are the Jurassic-age sedimentary and volcaniclastic units of the Roca Blanca and La Matilde formations that are present at many other places in the region. Rhyolitic ignimbrites, lavas and tuffs of the Chon Aike Formation are intermittently exposed over about half of the La Josefina Project area with the remainder of the area largely concealed beneath the veneer of Quaternary basalts. Moreira (2005) subdivided the Chon Aike of the project area into nine members, each representing a separate volcanic event with generally similar sequences consisting of basal surge breccia followed by pyroclastic flows (ignimbrites), ash-fall tuffs and finally by re-worked volcaniclastic detritus. According to Moreira, the volcanism responsible for these nine episodic eruptions reached its climax over a relatively short 4-million year period in upper Jurassic time and is responsible for epithermal events that emplaced the gold-silver mineralization found in the La Josefina Project Area.




Nearly all of the hundreds of gold-silver and base metals occurrences in the Deseado Massif region of southern Argentina are categorized as “low-sulfidation type epithermal vein deposits.” “Epithermal” deposits are high-level hydrothermal systems which usually form within one kilometer of the surface at relatively low temperatures, generally in the range of 50°C to 200°C. They often represent deeper parts of fossil geothermal systems with some forming hot-springs at or near the surface. The modifier “low-sulfidation” denotes a variety of epithermal deposits characteristically deficient in sulfide minerals and often called “quartz-adularia” vein systems after the two most common gangue (non-valuable) minerals in the veins. Well-known examples of low-sulfidation type epithermal deposits include Comstock (Nevada, USA), McLaughlin (California, USA), Creede (Colorado, USA), Ladolam (Lihir, Papua New Guinea), El Peñon (Chile), Guanajuato (Mexico), Hishikari (Japan) and – in the Deseado Massif region of Argentina – Mina Martha and Cerro Vanguardia.




7




The many low-sulfidation epithermal occurrences of the Deseado Massif are products of episodic rhyolitic volcanism spread widely over a 50-million year time period and a 100,000 square kilometer area. Despite differences in space and time, they are all remarkably similar in style and origin and they closely fit the classic low-sulfidation epithermal vein model. The region’s premier deposit example and flagship operation is the Cerro Vanguardia mine, operated jointly by AngloGold Ashanti and Fomicruz, which opened in 1998. The Cerro Vanguardia mine has produced continuously at the approximate rate of 250,000 ounces gold and 2.5 million ounces silver per year at average cash costs of $133 to $232 per ounce of gold (AngloGold Annual Reports, 2001-2006). The deposits are fissure vein systems localized by structures, often a meter or more wide and hundreds of meters to several kilometers long. They are comprised of quartz veins, stockworks and breccias that carry gold, silver, electrum and some sulfides, mainly pyrite, with variable, but usually small, amounts of base metal sulfides. The richest mineralization commonly occurs in dilational zones caused by structural irregularities along or down the vein. The thickening and thinning along and down the structure, often referred to as “pinch-and-swell,” is responsible for rod-like high-grade ore shoots that are hallmarks of these systems.




History




In 1975 the first occurrence of metals known in the La Josefina area was publicly mentioned by the Patagonia delegation of the National Ministry of Mining who reported the presence of an old lead-zinc mine in veins very near Estancia La Josefina (Viera and Marquez, 1975). This received no further attention until 1994 when a research project by the Institute of Mineral Resources of the UNLP and the geology department of the University of Patagonia San Juan Bosco examined the occurrence. The investigation corroborated not only the presence of base metals but also found significant amounts of previously unknown precious metals (1 to 3 g/t Au and 5 to 21 g/t Ag).




In 1994, immediately after the La Josefina gold-silver discovery, Fomicruz claimed the area as a Provincial Mineral Reserve and subsequently explored the project in collaboration with the Instituto de Recursos Minerales (INREMI) of La Plata University. The geology and alteration of the project area was mapped at a scale of 1:20,000, mineralized structures and zones of sinter were mapped at 1:2,500, trenches across the structures were continuously sampled and mapped at scales of 1:100 and ground geophysical surveys consisting of 6,000 metres of inverse polarization resistivity and 5,750 meters of magnetic surveys were completed over sectors of greatest interest (INREMI, 1996). In 1998, after four years of exploring and advancing interest in the project, Fomicruz offered La Josefina for public bidding by international mining companies. In accordance with provincial law, the winner would continue exploring the project to earn the right to share production with Fomicruz of any commercial discoveries. The bid was awarded to Minamérica S. A., a small private Argentine mining company. Minamérica S.A. dug a limited number of new trenches, initiated a program of systematic surface geochemical sampling, completed several new IP-Resistivity geophysical survey lines and drilled the first exploration holes on the project – 12 diamond core holes (HQ-size, 63.5mm diameter) totaling 800 meters in length. Minamerica S.A. ceased exploration activity and the property reverted back to Fomicruz in 1999.




In 2000, Fomicruz resumed exploration of the project and continued their efforts until 2006. Pits were dug to bedrock on 100-meter grids over some of the target areas, 3,900 meters of newtrenches were dug and sampled, more than 8,000 float, soil and outcrop samples were collected for geochemical analyses, some new IP-Resistivity surveys were completed and 59 diamond core holes (total 3,680 meters) were drilled to average shallow depth below surface of 55 meters. Of these holes, 37 were NQ-size core (47.6mm diameter) and 22 were HQ-size core (63.5mm). Fomicruz reports spending more than $2.8 million in exploring and improving infrastructure on the La Josefina Project from 1994 to 2006.




Exploration




The 4-year exploration period contained in the La Josefina/Fomicruz agreement was originally planned to proceed in the following three stages:




Year 1


Year 2


Years 3 & 4Target Area

To July 2008


July 2008 toJuly 2009


July 2009 toJuly 2011


TotalsNoreste Area

$
300,000


$
400,000


$
500,000


$
1,200,000Veta Norte


500,000



800,000



800,000



2,100,000Central Area


500,000



800,000



900,000



2,200,000Piedra Labrada


200,000



100,000



200,000



500,000Grand Total

$
1,500,000


$
2,100,000


$
2,400,000


$
6,000,000


Between November of 2007 and December of 2008 CCSA completed a 37,605 meter drilling program on the La Josefina property. In 2009 CCSA incurred $521,782 in exploration expenses on the La Josefina property. In 2008 CCSA incurred $4,551,394 in exploration expenses on the La Josefina property.  To date, we have exceeded the $6,000,000 work commitment.




8




Legal Framework for Exploration in Argentina




In Argentina, minerals are owned by the provinces, even when they are generally regulated by the national Mining Code. The Mining Code establishes that private property of mines is determined by legal concession.




The provinces can impose a maximum 3% mine-mouth royalty on mineral production. In the case of Santa Cruz Province, if most of the mining processes are performed in the state with doré bar as the final product the mine-mouth royalty can drop to 1%.




In addition, in 1993 the Argentine Congress approved “The Mining Investment Law” which covers all mining stages: prospecting, exploration, extraction, milling, leaching and smelting, when this industrialization is performed by the same economic unit in the region of origin of the mineral. Mining companies need to file paper work with the National Mining Office in order to get an official certificate which gives several advantages. These advantages include 30 years of tax stability on new mines development, capital investment depreciation rights, advantages on provincial and municipal taxes, deduction of 100% on income taxes for the cost of investment done during prospecting and exploration studies, a special regime for amortizing investment in infrastructure machinery and equipment, exemption from income tax of profits resulting from mines and mineral rights; and certain import and export benefits alleviating taxes. By virtue of the mining code, new mine developments can claim a five-year federal tax holiday on production income in Argentina.




Exploration stages:




a) Cateos: The first step in acquiring mining rights is filing a cateo, which gives exclusive prospecting rights for the requested area for a period of time, according with the size of the obtained surface. The maximum size of each cateo is 10,000 hectares, which gives one thousand days to explore the area. A maximum of 20 cateos can be held by a single entity (individual or company) in any one province.




b) Manifestation of Discoveries: The holder of a cateo has exclusive right to establish a Manifestation of Discovery (MD)on that cateo, but MDs can also be set without a cateo on any land not covered by another entity’s cateo. MDs are filed as either a vein or a disseminated discovery. A square protection zone can be declared around the discovery – up to 840 hectares for a vein MD or up to 7,000 hectares for a disseminated MD. The protection zone grants the discoverer exclusive rights for an indefinite period, during which the discoverer must provide an annual report presenting a program of exploration work and investments related to the protection zone.




c) Minas (Mining claims): An MD can later be upgraded to a Mina(mine claim), which gives the holder the right to begin commercial extraction of minerals.




A period not less than sixty (60) days must elapse between the publication of the expiration of the time for exclusive exploration rights belonging to a person and the request of a Cateo by another person (Article 28, amended by Law 22259). During this period of 60 days (as amended by Law 24468), it is allowed that the owner of the Cateo makes its Manifestation of Discoveries. An additional period to make the required “formal work” up to 150 days is obtained and the exploration area is reduced to 70 zones or mining claims of 6 hectares each for vein type deposits or 35 zones of mining claims of 100 hectares each for disseminated type deposits.




The Mines Notary is the officer attesting in the discovery statement to the delivery date and hour, certifying after the Mining Authorities find out whether there is or not another petition in the zone. The certification is made after the Graphic Department verifies on a map the location of the announced discovery.




When the permission has been granted, the claims are to be defined.  Once the discovery has been verified and the mine deposit confirmed, the petitioner will request the formal concession for the mine.




The explorer must compensate the surface owner for any damage incurred during the exploration activities.




Mining Property:




The mine concession is unlimited in time, and only ends when the exploration ceases. It can be transferred by any of the means used for transfers of common property, and as in common real state, mining properties are subject to mortgages.




The payment of an annual Lease or Mining Right of 80 Argentinean pesos for each claim in vein deposit and 800 Argentinean pesos for each disseminated deposit, is required. The lease must be paid in advance and in two equal semi-annual installments (June 30 and December 31).




9




The miner shall have to invest in the mine equipment, camps, building, roads, power plants, within the term of 5 years for a minimum amount of 500 times the annual Lease.




Provinces that decide to collect royalties may not receive a percentage exceeding three per cent over the “mine’s exit value” of the extracted ore.




Bajo Pobré Property




Overview




In January, 2006 CCSA signed a Letter of Intent with FK Minera S.A. to acquire a 100% interest in the Bajo Pobré gold property located in Santa Cruz Province, Argentina. In March, 2007 CCSA signed a final contract to acquire the Bajo Pobré property.  Pursuant to this agreement, CCSA can earn up to a 100% equity interest in the Bajo Pobré property by making cash payments and exploration expenditures over a five-year earn-in period. The required expenditures and ownership levels upon meeting those requirements are:




Year of the Agreement

Payment to FK Minera S.A.


Exploration Expenditures


OwnershipFirst Year -2007

$
50,000


$
250,000



0
%Second Year-2008

$
50,000


$
250,000



0
%Third Year -2009

$
75,000


$
0



51
%Fourth Year -2010

$
75,000


$
0



60
%Fifth Year -2011

$
75,000


$
0



100
%


After the fifth year, CCSA shall pay FK Minera the greater of a 1% NSR royalty on commercial production or $100,000 per year.  CCSA has the option to purchase the NSR Royalty for a lump sum payment of $1,000,000 less the sum of all royalty payments made to FK Minera to that point. CCSA has the right to conduct exploration on these properties for a period of at least 1,000 days and retains 100% ownership of any mineral deposit found within. Should a mineral deposit be discovered, the Company has the exclusive option to file for mining rights of said deposit.




CCSA paid approximately half of its required payment to FK Minera S.A. in the second year of the agreement and all of its required payment to FK Minera S.A. in the first year of the agreement.  As of December 31, 2009, CCSA has not engaged in any exploration activity on the Bajo Pobré property. CCSA has not fulfilled any of our exploration obligations relative to the Bajo Pobré property. Further, CCSA has not received any form of formal relief from the contract terms relating to the Bajo Pobré property.  CCSA’s ability to retain rights to explore the Bajo Pobré property is uncertain at this time.




On November 5, 2009 the Company received notification from the Santa Cruz Province Mining Authority that FK Minera S.A. and Arturo Canero, its principal, have been inhibited in the disposal of its assets, including the Bajo Pobre property.  They orally stated that such inhibition would be released since it would submit other assets in replacement; however, to date there is no evidence of such replacement of assets.




Filed with the Santa Cruz provincial mining authority, the Bajo Pobré property is comprised of one “Manifestation of Discovery” type mining claim designated “MD Joanna Belem 409162/S/94 and 32 covering “pertenencia” type mining claims. The property covers an area of approximately 120 square kilometers.




Location and Accessibility




The Bajo Pobré Property is located in north-central Santa Cruz province near 47 18’ 04” south latitude and 69 11’ 28” west longitude, 90 kilometers south of the town of Las Heras. It can be accessed by driving west from Las Heras on provincial route 43 for 53 kilometers then south on route 39 for 85 kilometers crossing estancias Laguna grande, El Mirasol, La Herradura and Cumbres Blancas. From there, turning south-east on the access road to Estancia Santa Cruz and traveling an additional 82 kilometers to the property boundary. The total distance of 220 kilometers can be traveled in the summer by two wheel drive vehicles and normally in the winter by four wheel drive vehicles.




Climate and Physiography




The Patagonia region is classified as a continental steppe-like climate. It is arid, very windy and has two distinct seasons; a cold season and a warm season. The area is sparsely vegetated, consisting mostly of scattered low bushes and grass. Because Patagonia is in the southern hemisphere, the seasons are opposite to North America. The cold winter months are from May to September and warmer summer is from November to March. The average annual precipitation averages only 200 mm, much of which occurs as winter snow; average monthly temperatures range from 3°C to 14°C, but vary widely depending on elevation. The winds are persistent, cool, dry and gusty, averaging about 36 km/hour and directed predominantly to the east-southeast off the Andean Cordillera. All of the Company’s Santa Cruz province projects are characterized by subdued hilly terrain with internal drainages and playa lakes. Elevations range from 300 meters to 800 meters above sea level. Hill slopes are not steep; usually less than 10° and the rock exposures on these hillsides are typically excellent. Almost all of the mineralization and significant geochemical and geophysical anomalies are on the crests or the flanks of these subdued hills.




10




History




The Bajo Pobré property was discovered in 1970 and has been worked intermittently by several government entities and private companies. Exploration began in the 1990’s with geologic mapping and surface sampling.  Assays from this sampling yielded values from nil to 40 grams per ton gold.  Drill targets identified from surface sampling were augmented in 2002 with additional targets derived from a geophysical survey.  In 2003 and 2004, the property saw a limited amount of exploration drilling which tested a small portion of these targets.




Geology




The project is located within the Deseado Massif which is dominated by felsic volcanic and volcaniclastic rock units belonging to a few major regional sequences deposited in middle- to late-Jurassic time. The rocks are broken into a series of regional fractures that probably represent reactivated basement fracture zones. Faults active during the period of intense Jurassic extension and volcanism trend mostly NNWSSE and form a series of grabens, half-grabens and horst blocks which are tilted slightly to the east. Since Jurassic time, the rocks have been cut by normal faults of several different orientations, mainly NW-SE and ENE-WSW but have undergone only a moderate amount of compression. In general, the Jurassic rocks remain relatively undeformed and generally flat to gently dipping, except locally where close to faults, volcanic domes or similar features.




The geology of the project area is dominated by Jurassic-aged, volcanic rocks of the Bajo Pobré formation. Mineralization is characterized as epithermal in nature, comprised of numerous zones of quartz veining, vein breccias, and stock works with a cumulative strike length of more than 9 kilometers. Individual veins range from 0.5 meters to 6 meters in width.




Exploration Program




We have not engaged in any exploration activity on the Bajo Pobré property. We have not fulfilled any of our exploration obligations relative to the Bajo Pobré property and presently have no current plans to conduct exploration activities on the Bajo Pobré property.




El Gateado Property




Overview




In March, 2006 CCSA acquired the right to conduct exploration on El Gateado for a period of at least 1,000 days, commencing after the Argentine Government issues a formal claim notice, and retain 100% ownership of any mineral deposit found within. CCSA has not yet received a formal claim notice pertaining to the El Gateado property.  Should a mineral deposit be discovered, we have the exclusive option to file for mining rights on the deposit.  As of the date of this report, the Argentine Government has yet to issue a formal claim notice.




Location and Accessibility




El Gateado is a 10,000 hectare exploration concession filed with the Santa Cruz Provincial mining authority The El Gateado Project is located in the north-central part of Santa Cruz Province, the southernmost of the several Argentine provinces comprising a vast, sparsely-populated, steppe-like region of southern South America known as Patagonia (Figure 1). The nearest town to the project is Gobernador Gregores (population 2,500), about 110 kilometers southwest, and the nearest Atlantic coastal town is Puerto San Julián (population 6,200), 190 kilometers southeast. The project is accessible via automobile by driving east from Gobernador Gregores for 40 km on gravel Provincial Road 25 – or west from Puerto San Julián for 170 km on the same road – and then north on gravel Provincial Road 12 for 110 km. Provincial Road 12 crosses the edge of the project and continues another 240 kilometers north to the oil town of Pico Truncado (population 15,000) in the northeastern part of the province. The provincial roads are generally accessible via two-wheel drive vehicles in dry weather but can become slippery to impassable for short periods when wet. Gobernador Gregores and Puerto San Julián are both served by weekly “commuter” flights to/from Comodoro Rivadavia (population 137,000), an important industrial center and port city, 428 kilometers north of Puerto San Julián via paved highway Ruta 3. Comodoro Rivadavia serves as the region’s major supply center for the booming petroleum and mining industries and is served by several airline flights daily to Buenos Aires and other major cities in Argentina. Ruta 3, Argentina’s major coastal highway, runs from Buenos Aires on the north to Ushuaia at the southernmost tip of the continent and offers all-weather access to a number of sea ports.




11




Climate and Physiography




The Patagonia region is classified as a continental steppe-like climate. It is arid, very windy and has two distinct seasons; a cold season and a warm season. The area is sparsely vegetated, consisting mostly of scattered low bushes and grass. Because Patagonia is in the southern hemisphere, the seasons are opposite to North America. The cold winter months are from May to September and warmer summer is from November to March. The average annual precipitation averages only 200 mm, much of which occurs as winter snow; average monthly temperatures range from 3°C to 14°C, but vary widely depending on elevation. The winds are persistent, cool, dry and gusty, averaging about 36 km/hour and directed predominantly to the east-southeast off the Andean Cordillera. All of the Company’s Santa Cruz province projects are characterized with subdued hilly terrain with internal drainages and playa lakes. Elevations range from 300 meters to 800 meters above sea level. Hill slopes are not steep; usually less than 10° and the rock exposures on these hillsides are typically excellent. Almost all of the mineralization and significant geochemical and geophysical anomalies are on the crests or the flanks of these subdued hills.




History




No known exploration has taken place at El Gateado prior to the work completed by CCSA in 2006 and 2007 (See below). During that time CCSA conducted a program consisting of surface channel outcrop sampling, geological mapping, topographic surveying and 1,500 meters of diamond core drilling.




Geology




The project is located within the Deseado Massif which is dominated by felsic volcanic and volcaniclastic rock units belonging to a few major regional sequences deposited in middle- to late-Jurassic time. The rocks are broken into a series of regional fractures that probably represent reactivated basement fracture zones. Faults active during the period of intense Jurassic extension and volcanism trend mostly NNW-SSE and form a series of grabens, half-grabens and horst blocks which are tilted slightly to the east. Since Jurassic time, the rocks have been cut by normal faults of several different orientations, mainly NW-SE and ENE-WSW but have undergone only a moderate amount of compression. In general, the Jurassic rocks remain relatively undeformed and generally flat to gently dipping, except locally where close to faults, volcanic domes or similar features.




Mineralization on the property is localized within the volcanic and volcanoclastic Jurassic-aged Chon Aike Formation. The precious metal occurrences are generally characterized as epithermal systems manifested in quartz vein and stockwork exposures.




Exploration Program




We began field reconnaissance work in February 2006 with the completion of a topographic survey, base map generation, and a staked grid. In late 2006 and early 2007 we drilled 13 holes on the El Gateado property. Results of our drilling program, based on assay results over 1 g/t Au, were as follows:




Hole

From (m)


To (m)


Length (m)


Au (g/t)GAT-DDH06 001


146.6



147.4



0.80



11.7GAT-DDH06 001


140.2



140.8



0.60



8.24GAT-DDH06 001


142.5



143.2



0.70



6.5GAT-DDH06 001


144



145



1.00



4.78GAT-DDH06 001


141.4



142



0.60



3.92GAT-DDH06 001


145



145.8



0.80



3.82GAT-DDH06 001


139.7



140.2



0.50



3.76GAT-DDH06-006


21



22.5



1.50



3.64GAT-DDH06 001


139.2



139.7



0.50



3.03GAT-DDH06 001


143.2



144



0.80



2.92GAT-DDH07-007


33



33.5



0.50



2.61GAT-DDH06 001


140.8



141.4



0.60



2.52GAT-DDH06 001


137.7



138.7



1.00



2.39
  12
  Hole

From (m)


To (m)


Length (m)


Au (g/t)GAT-DDH07-008


58.6



59.5



0.90



2.33GAT-DDH06 001


145.8



146.6



0.80



1.89GAT-DDH07-008


55.4



55.9



0.50



1.77GAT-DDH07-008


57.2



58



0.80



1.34GAT-DDH07-012


9



9.5



0.50



1.32GAT-DDH06-003


36.74



37.5



0.76



1.3GAT-DDH07-013


10



11



1.00



1.29GAT-DDH07-012


35



36



1.00



1.08GAT-DDH06-004


67



68



1.00



1.07GAT-DDH07-007


32.1



32.6



0.50



1.07GAT-DDH06-004


16



17



1.00



1.01


CCSA incurred approximately $706,000 in exploration expenses on the initial El Gateado drilling program.  CCSA did not conduct any exploration activity on the El Gateado property in 2008 or 2009 nor do they have any immediate plans to conduct exploration activity on the property.




Other Santa Cruz Properties




Overview




In 2006, CCSA was granted exclusive rights to explore three properties known as El Overo, El Alazan, and El Tordillo in Santa Cruz province of Argentina. We have the right to conduct exploration on these properties for a period of at least 1,000 days, commencing after the Argentine Government issues a formal claim notice, and retain 100% ownership of any mineral deposit found within. Should a mineral deposit be discovered, we have the exclusive option to file for mining rights on the deposit.  As of the date of this report, the Argentine Government has yet to issue a formal claim notice.




Location and Accessibility




The “El Alazan”, “El Overo”, and “El Tordillo”  properties form a contiguous land block located 220 kilometers NW of the port town of Puerto San Julian and 100 kilometers north of the town of Gobernador Gregores.  This entire property package covers an area approximately 300 square kilometers in size. The projects are accessible via automobile by driving east from Gobernador Gregores for 40 km on gravel Provincial Road 25 – or west from Puerto San Julián for 170 km on the same road – and then north on gravel Provincial Road 12 for 50 km. Then turning northwest on provincial route 74 for 65 km The provincial roads are generally accessible via two-wheel drive vehicles in dry weather but can become slippery to impassable for short periods when wet. Gobernador Gregores and Puerto San Julián are both served by weekly “commuter” flights to/from Comodoro Rivadavia (population 137,000), an important industrial center and port city, 428 kilometers north of Puerto San Julián via paved highway Ruta 3. Comodoro Rivadavia serves as the region’s major supply center for the booming petroleum and mining industries and is served by several airline flights daily to Buenos Aires and other major cities in Argentina. Ruta 3, Argentina’s major coastal highway, runs from Buenos Aires on the north to Ushuaia at the southernmost tip of the continent and offers all-weather access to a number of sea ports.




Climate and Physiography




The Patagonia region is classified as a continental steppe-like climate. It is arid, very windy and has two distinct seasons; a cold season and a warm season. The area is sparsely vegetated, consisting mostly of scattered low bushes and grass. Because Patagonia is in the southern hemisphere, the seasons are opposite to North America. The cold winter months are from May to September and warmer summer is from November to March. The average annual precipitation averages only 200 mm, much of which occurs as winter snow; average monthly temperatures range from 3°C to 14°C, but vary widely depending on elevation. The winds are persistent, cool, dry and gusty, averaging about 36 km/hour and directed predominantly to the east-southeast off the Andean Cordillera. All of the Company’s Santa Cruz province projects are characterized by subdued hilly terrain with internal drainages and playa lakes. Elevations range from 300 meters to 800 meters above sea level. Hill slopes are not steep; usually less than 10° and the rock exposures on these hillsides are typically excellent. Almost all of the mineralization and significant geochemical and geophysical anomalies are on the crests or the flanks of these subdued hills.




13




History




To date, there has been no known historic precious metal exploration conducted on these three properties. However, they cover areas of strong hydrothermal alteration and structural complexity conducive to precious metal discovery that have been indicated by satellite images.  They are also located adjacent to several known gold and silver occurrences.




Geology




The project is located within the Deseado Massif which is dominated by felsic volcanic and volcaniclastic rock units belonging to a few major regional sequences deposited in middle- to late-Jurassic time. The rocks are broken into a series of regional fractures that probably represent reactivated basement fracture zones. Faults active during the period of intense Jurassic extension and volcanism trend mostly NNW-SSE and form a series of grabens, half-grabens and horst blocks which are tilted slightly to the east. Since Jurassic time, the rocks have been cut by normal faults of several different orientations, mainly NW-SE and ENE-WSW but have undergone only a moderate amount of compression. In general, the Jurassic rocks remain relatively undeformed and generally flat to gently dipping, except locally where close to faults, volcanic domes or similar features.




Mineralization on the properties is localized within the volcanic and volcanoclastic Jurassic-aged Chon Aike Formation. These precious metal occurrences are generally characterized as low-sulfidation epithermal systems manifested in quartz vein and stockwork exposures.




Exploration Program




We have not conducted any exploration work on the El Overo, El Alazan, and El Tordillo properties. We plan to conduct exploration work on these properties pending the outcome of exploration work on our other Santa Cruz properties.




On March 24, 2010 the Company announced that CCSA filed for control of 17 new mineral concessions totaling 139,000 hectares in Santa Cruz province, Argentina. With this addition the Company became the second largest public company landholder in Santa Cruz province.




United States




Dun Glen Gold Project, Nevada USA




On February 18, 2010 the Company transferred its stock in Black Hawk and its interest in the Dun Glen property to the Hunt Family Limited Partnership (“HFLP”), a related party, along with all its Mexican assets in consideration of cancelling $600,000 of the debt that the Company owed to HFLP on an outstanding note payable.  See “Note 16, subsequent events” to our consolidated financial statements for further information.  Below is a brief narrative about the history of the property up until the point it was sold.




Overview




In early 2006 we entered into agreements to lease, with an option to purchase, the properties comprising the Dun Glen Project. The initial lease/option term of the agreements is 10 years, renewable for an additional 10 years.  As of December 31, 2009, the Company has made lease payments totaling $137,500.  Future lease payments are as follows:




●
4th Anniversary $60,000


●
5th (and each anniversary thereafter) $72,500




During the term of the agreement, we have the option to purchase 86% of the claims for $5,000 upon delivery of a copy of an approved mine plan of operations or a final feasibility study.  The seller will retain a 3% net smelter return (“NSR”) royalty of which we may purchase up to 2 percentage points for $1,000,000 per percentage point.  NSR is generally defined as the gross value of the metals less the costs of smelting, refining and transportation.  We also have the option to purchase the remaining two claim blocks (or 14% of the claims) for $250,000 per block at any time during the term of the agreements.  The sellers will retain a 3% NSR royalty on production from their respective claim blocks. We may purchase up to 2 percentage points for $875,000 per percentage point.  We must maintain all of the claims referenced within the agreement in good standing during the lease period.  We may terminate the lease at any time upon 60 days notice.




On December 10, 2009, the Company entered into a Property Interest Purchase Option Agreement (“Black Hawk Agreement”) with Black Hawk Exploration, Inc. (“Black Hawk”) to transfer 75% of the company’s economic interest in the Dun Glen Project.  In return, the Company received a one-time payment of $50,000 at signing, and is due to receive further payments of $25,000 on or before each of December 10, 2010, and December 10, 2011.  Black Hawk also issued to the company 250,000 restricted common shares of Black Hawk Exploration and will issue a further 100,000 restricted common shares on or before December 10, 2010.




14




The terms of the Black Hawk Agreement state that Black Hawk has the responsibility to maintain the property in good standing at their expense, including the timely filing or payment of all claims maintenance fees or taxes and all the underlying future lease payments owed by the Company as noted above.




Black Hawk has agreed to expend at least $700,000 before December 10, 2013 as a work commitment on the Property in order to earn a 75% interest in the property.  The Company and Black Hawk also agreed that any revenue generated from tailings, dumps or stockpiles on the Property will be allocated 75% to Black Hawk and 25% to the Company.




The Black Hawk Agreement states that with a 90 day advance written notice from Black Hawk to the Company, Black Hawk can elect not to proceed with the acquisition of any property, or any further interest in the property without further obligation to the Company.




Location




The Dun Glen Gold Project is a precious metal exploration property located in the historic Sierra district in Dun Glen Canyon on the west flank of the East Range in northern Pershing County, Nevada.  The project area consists of 94 contiguous unpatented lode mining claims covering approximately 1,700 acres within the Sierra Mining District.  It lies approximately 25 miles southwest of Winnemucca and 21 miles north of the Florida Canyon Mine and is accessible via 2 wheel drive vehicle year round. The Dun Glen property can be accessed by driving 21 miles south of Winnemucca on U.S. Interstate 80, taking the Mill City exit and following a county-maintained 8-mile long dirt road.












15




Canada




Abitibi Properties, Quebec




Overview


In June 2006, the Company entered into an agreement with Diagnos, Inc., (“Diagnos”) obtaining an exclusive option to acquire a 100 percent interest in two prospective gold properties known as the Lac à l’Eau Jaune and Malartic Surimau Projects located in the Abitibi region of Québec, Canada.  The Company paid Diagnos $70,000 for the two Properties and will acquire a 100% interest by conducting an initial exploration program comprised of at least three drill holes on each property.  Upon completion of the initial drilling programs, the Company will have the option to select up to an additional seven properties in which it may acquire a 100% interest by paying Diagnos a sum of $40,000 and completing an initial three-hole exploration drilling program for each property.  The option will expire if the initial drill program is not drilled by March 31, 2010.




For each economic discovery made on any of the acquired Properties, the Company will pay Diagnos a bonus of $500,000.  The Company will also grant Diagnos a 2% Net Smelter Royalty (“NSR”) for economic discoveries made on the initial or additional properties, but will retain the option to acquire 1% of the NSR upon payment of $1 million to Diagnos within five years of making the economic discovery.  An economic discovery is defined in the agreement as being the production of a positive feasibility study for a given project in compliance with Canada’s National Instrument 43-101.




The Quebec properties consist of 46 provincial mining claims, each of which requires a renewal payment of $50 per year and a minimum work commitment of $1,250 per year to maintain.




As of December 31, 2009, management of the Company determined that the $70,000 carrying value of the property purchase option had been impaired based on the fact that a drilling program would most likely not be completed by the expiration date of March 31, 2010.  The Company therefore recorded a write a write-down of $70,000 which was recognized as an impairment of mineral property purchase option in the fourth quarter of 2009 leaving a carrying value of zero.




Location




The Lac à l’Eau Jaune Project is located approximately eighteen miles southwest of the Chibougamau mining camp and is comprised of 21 claims totaling 2,900 acres.  The project area is accessible from Chibougamau via Road 167 south and Road 113 west toward the Chibougamau airport.  The Malartic Surimau Project covers 25 claims totaling 3,554 acres approximately 25 miles west of the Town of Val D’or and ten miles south of the Town of Cadillac and is accessible from Highway 117 by a maintained dirt road.  The property is separated into two blocks, with five claims lying directly north of the property’s main body.




16








Geology




Malartic Surimau Property:




The Archaean Malartic gold mines are located along the Larder Lake-Cadillac Fault zone, in the Abitibi sub-province of the Superior Province, some 20 km west of Val d’Or in Quebec, Canada.  Historically the main mines of the district known as its East Canadian, Barnat, Sladen and Canadian Malartic properties produced over 162 tonnes of gold to 2000.




The district straddles the faulted contact between the mafic to ultramafic volcanics of the Piché Group to the north and the greywacke-mudstone sequence of the Pontiac Group to the south.   The majority of the gold mineralization is found within the sediments where it is spatially associated with small monzonite porphyry bodies, younger diorite intrusives and crosscutting brittle (silicified) faults.  The host succession has been subjected to NE trending F1 folds, asymmetric F2 folds with a SE striking penetrative S2 cleavage which is in turn paralleled by brittle faults.   The monzodiorite intrusives predate F2, while a series of significant ESE trending brittle faults occur near the volcanic-sediment boundary.  Two main styles of mineralization are observed, which consist of elongate zones of disseminated auriferous pyrite in fractured and silicified greywacke and adjacent monzodiorite porphyry along ESE striking and S2 parallel faults, andstockwork zones of quartz-albite-K feldspar veinlets and intervening disseminated pyrite in intensely fractured and altered porphyritic monzodiorite and diorite adjacent to faults.




The alteration includes K (potassium) and Na (sodium) feldspar addition, carbonization and silicification in the sediments and by biotite development in the intrusives.   Pyrite constitutes 5 to 10% of the altered greywackes and monzodiorites, and 5 to 20% of the mineralized diorite which also contains abundant magnetite.




17




Lac à l’Eau Jaune property:




The Chibougamau District of northern Quebec, some 350 km to the north-east of Val d’Or, has produced in excess of 1,050 tonnes (33.75 million ounces) of gold to date from a variety of styles of ore, but is mostly characterized by copper-gold vein deposits distinct from typical greenstone hosted quartz-carbonate veins. The deposits of the district range from volcanogenic massive sulfides with copper, zinc and silver to gold bearing sulfide veins with associated silver, zinc, lead arsenic & antimony; to copper-gold  and gold-copper veins with varying amounts of sulfides; and auriferous quartz veins with minor chalcopyrite. Most of the copper-gold deposits are localized in southeast trending ductile shear zones and are within meta-anorthosite and gabbroic hosts.




Exploration Program




In October of 2007, the Company entered into an agreement with Diagnos to conduct a phased exploration program at both the Lac a l’Eau Jaune (“LEJ”) and Malartic Surimaum properties. Diagnos conducted site visits and exploration work on the LEJ claim block in November of 2007, collecting 26 rock samples that were sent to ALS Chemex in Val d’Or, Québec for assay analysis. In the spring of 2008, Diagnos conducted compilation work followed by a field exploration program on the LEJ project. Fieldwork was carried out from May 19th to the 1st of June and included geological mapping, prospecting, rock sampling and soil sampling. During this period a Mobile Metal Ion (MMI) orientation survey was carried out. The purpose of the orientation survey was to test the usefulness of the method in the project area. A total of 152 rock samples, mostly from outcrop, were collected and delivered for analysis to ALS Chemex in Val d’Or, Québec. A total of 72 soil samples were collected and sent for MMI analysis to SGS Minerals Services, Toronto.Rock samples collected on the LEJ property were analyzed for a multi-element suite including gold and copper. Diagnos conducted site visits and exploration work on the Malartic claim block in September of 2008 and collected 145 rock samples which were sent to ALS Chemex in Val d’Or, Québec.




Mineralization was observed in the ultramafic volcanic and quartzite units. Highest grades were obtained at the quartzite/ultramafic contact which was found in both the northern and southern claim block. The “quartzite” may also be described as a heavily silicified sheared horizon with areas containing clasts of semi-massive to massive sulfides (Cpy, Py, Sp) and abundant mineralization within the schistosity. The ultramafic volcanic rocks show up to 5% disseminated/clasts Py and Cpy in the northern block while the southern block showed the ultramafic to be either moderately mineralized or with large (5-10 cm) massive sulfide pouches.




The Company incurred $27,982 and $227,880 in 2009 and 2008, respectively, in exploration expenses relating to the Quebec properties.




El Milagro/El Capitan Property




On February 18, 2010 the Company transferred all of its Mexican assets to the Hunt Family Limited Partnership (“HFLP”), a related party, along with all its stock in Black Hawk and its interest in the Dun Glen property in consideration of cancelling $600,000 of the debt that the Company owed to HFLP on an outstanding note payable.  See “Note 16, subsequent events” to our consolidated financial statements for further information. Below is a brief narrative about the history of the property up until the point it was sold.




Overview




In 2008 the company purchased a 100% interest in the “El Capitan” and “El Milagro” mineral exploration and mining concessions from a Mexican Particular; Jesus Guadelupe Morales. The El Capitan exploration concession was purchased for $110,000 with no underlying royalties. The El Milagro mining concession was purchased for $150,000 and retains a 2% net profit royalty which must be paid to a previous owner should a mine be put into production.




18




Location




The El Capitan and El Milagro property package is located in the northern Mexican state of Chihuahua.











CCSA Mexico and the Company incurred $21,826 and $30,104 in exploration expenses on the El Milagro/El Capitan property in 2009 and 2008, respectively.




ITEM 3.
LEGAL PROCEEDINGS




There are no material pending legal proceedings to which the “Registrant” is a party or of which any of its property is subject.




ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





Not Applicable


19


PART II




ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES




(a)
Market Information




The Common Stock of the Company is currently quoted on the Pink Sheets under the symbol “HNTM”.  The following table shows the high and low closing sales prices for the Common Stock for each quarter since January 1, 2008.  The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.




High Closing


Low ClosingYear Ended 12/31/2008First Quarter


.93



.50Second Quarter


.85



.73Third Quarter


.77



.59Fourth Quarter


.69



.26Year Ended 12/31/2009First Quarter


.50



.18Second Quarter


.28



.16Third Quarter


.22



.16Fourth Quarter


.20



.06




(b)
Holders




There are approximately 1,421 holders of the Registrant’s common equity at the date hereof




(c)
Dividends




We have never paid a dividend.  There is no plan to pay dividends for the foreseeable future.




(d)
Securities Authorized for Issuance Under Equity Compensation Plans


Securities Authorized for Issuance Under Equity Compensation Plans.




Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants and rights (1)

(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 shareholders


2,245,000


$
0.44



755,000Equity compensation plans not approved by shareholders


-0-



-0-



-0-Total


2,245,000


$
0.44



755,000




(e)
Unregistered Sales




The Company had no unregistered sales of shares for the year ended December 31, 2009.




The following are the transactions which occurred during the year ended December 31, 2008.




In January, 2008 the Company issued 408,000 shares and 408,000 warrants pursuant to the conversion of principal of a convertible note. The warrants issued have a $0.40 exercise price and an expiration date of five years from the date of issuance. The private placement was made pursuant to section 4(2) and a Regulation D Rule 506 exemptions from registration under the Act.




In March, 2008 the Company issued 4,000 shares and 4,000 warrants pursuant to the conversion of principal of a convertible note. The warrants issued have a $0.40 exercise price and an expiration date of five years from the date of issuance. The private placement was made pursuant to section 4(2) and a Regulation D Rule 506 exemptions from registration under the Act.




On April 9, 2008 the Company issued 40,000 shares and 40,000 warrants pursuant to the conversion of principal of a convertible note. The warrants issued have a $0.40 exercise price and an expiration date of five years from the date of issuance. The private placement was made pursuant to section 4(2) and a Regulation D Rule 506 exemptions from registration under the Act.




20




On April 16, 2008 the Company issued 20,200,056 shares and 20,200,056 warrants pursuant to the conversion of principal and accrued interest of a convertible note. The warrants issued have a $0.40 exercise price and an expiration date of five years from the date of issuance. The private placement was made pursuant to section 4(2) and a Regulation D Rule 506 exemptions from registration under the Act.




In July, 2008 the Company issued 22,394,192 shares and 22,394,192 warrants pursuant to the conversion of principal and accrued interest of a convertible note. The warrants issued have a $0.40 exercise price and an expiration date of five years from the date of issuance. The private placement was made pursuant to section 4(2) and a Regulation D Rule 506 exemptions from registration under the Act.





ITEM 6.
SELECTED FINANCIAL DATA–We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.




ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




FORWARD-LOOKING STATEMENTS




This Annual Report and other documents we file with the Securities and Exchange Commission (“SEC”) contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, our beliefs and our management’s assumptions.  All statements other than statements of historical facts are forward-looking statements, including any statements of the plans and objectives of management for future operations, projections of revenue earnings or other financial items, any statements regarding future economic conditions or performance, and any statement of assumptions underlying any of the foregoing.  Some of these forward-looking statements may be identified by the use of words in the statements such as “anticipate,” “estimate,” “could,” “would,” “expect,” “project,” “intend,” “plan,” “believe,” “seek,” “should,” “may,” “assume,” “continue,” variations of such words and similar expressions.  These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict.  We caution you that our performance and results could differ materially from what is expressed, implied, or forecast by our forward-looking statements due to general financial, economic, regulatory and political conditions affecting the economy and markets, as well as more specific risks and uncertainties affecting the Company.  The Company operates in a rapidly changing environment that involves a number of risks, some of which are beyond the Company’s control.  Future operating results and the Company’s stock price may be affected by a number of factors.  Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “ITEM 1. BUSINESS,” and all subsections therein, including, without limitation, the subsection entitled, “FACTORS THAT MAY AFFECT THE COMPANY,” and the section entitled “MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS,” all contained in this Annual Report on Form 10-K.  Given these risks and uncertainties, any or all of these forward-looking statements may prove to be incorrect.  Therefore, you should not rely on any such forward-looking statements.  Furthermore, we do not intend (and we are not obligated) to update publicly any forward-looking statements.  You are advised, however, to consult any further disclosures we make on related subjects in our reports to the Securities and Exchange Commission.




Year ended December 31, 2009 compared to year ended December 31, 2008




Result of Operations




Dividend and interest income increased to $17,617 in 2009, up from $8,211 in 2008.




Total expenses decreased from approximately $40.7 million in 2008 to $11.2 million in 2009.  The change is primarily due to reduced exploration activity and the costs associated with the completion of the drilling campaign on the La Josefina property in 2008.  As a result, the Company recorded a net loss of $11.2 million in 2009, compared to a net loss of $40.7 million in 2008.




Liquidity and Capital Resources




Working Capital, Cash and Cash Equivalents




The Company’s working capital deficit at December 31, 2009 was $3.6 million compared to $3.6 million at December 31, 2008. The ratio of current assets to current liabilities was 0.50 to 1 at December 31, 2009 compared to 0.23 to 1 at December 31, 2008.  The increase in the ratio is primarily due to the increase in cash and cash equivalents which was $3,040,744 at December 31, 2009 versus only $250,484 at December 31, 2008.  The other primary reason for the increased ratio is due to the increase in short term note payable and shareholder loan which was approximately $5.2 million at December 31, 2009 versus approximately $1.9 million at December 31, 2008.




21




Net cash used in operating activities was $3.6 million in 2009 compared with $8.3 million in 2008.  The decrease is primarily due to decreased financing charges and amortization of debt discount.




In 2009, investing activities provided $3.4 million, compared with $839,587 used in 2008. The increase is primarily related to the noncontrolling interest in subsidiary of $3.6 million, and is slightly offset by the purchase of equipment of $700,648 in 2008 versus only $7,693 in 2009.




Cash flow from financing activities was $3.3 million in 2009 compared to $8.7 million in 2008.  The decrease is primarily the result of $6.8 million received from a convertible note financing and $1.9 million received from a shareholder loan in 2008 versus only $3.2 million received in 2009 from a convertible note financing.




As a result, cash and cash equivalents increased by $2,790,260 in 2009 to $3,040,744 as of December 31, 2009 versus only $250,484 at December 31, 2008.  It will be necessary for the Company to raise additional capital to continue it’s business activities in 2010.




Overview




We are an exploration stage company focusing on the exploration of gold, silver and base metal properties in South America, Central America, Canada and the United States. From 2005 through December 31, 2009 our activities primarily related to securing exploration projects and conducting exploration activities including diamond drilling.




On February 18, 2010, the Company’s board of directors recommended and authorized a shareholder meeting to consider and vote upon a proposal to approve the voluntary dissolution and liquidation of the Company pursuant to a plan of complete dissolution and liquidation dissolution.  On July 16, 2010, the Company filed with the Securities and Exchange Commission (“SEC”), a preliminary schedule 14A proxy statement to submit the vote to the Company’s shareholders.  As of the date of the filing of this form 10-K, the preliminary 14A proxy statement has not yet been approved by the SEC and the vote has yet to go before the shareholders. The dissolution of the Company, if approved by the shareholders, will not affect the operations of Hunt Mining which will continue in existence along with its subsidiary companies.




Our current operating plans, through our majority owned subsidiary, Hunt Mining, for the next 12 months include:




●
Evaluating assay data created in the exploration processes conducted in Argentina in 2007 and 2008;


●
Developing and evaluating an exploration plan based on the findings of our assay data analysis;




Off-Balance Sheet Arrangements




None.




Contractual Obligations




Our contractual obligations as of December 31, 2009 were as follows:




Payments due by periodContractual obligations

Total


Less than 1year


1-3 years


3-5 years


More than 5 yearsLease obligation – Bajo Bobre Property

$
244,607


$
169,607


$
75,000


$
0


$
0Exploration obligation – Bajo Pobre Property


500,000



500,000



0



0



0Dun Glen Property (*)


495,000



60,000



217,500



145,000



72,500Total

$
1,239,607


$
729,607


$
292,500


$
145,000


$
72,500




*On December 10, 2009, the Company entered into a Property Interest Purchase Agreement (“Black Hawk Agreement”) with Black Hawk Exploration (Black Hawk) to transfer 75% of the company’s economic interest in the Dun Glen Project.  One of the terms of the Black Hawk Agreement states that Black Hawk has the responsibility to maintain the property in good standing at their expense, including the timely filing or payment of all claims maintenance fees or taxes and all the underlying future lease payments owed by the Company as noted above.  On February 18, 2010 the Company transferred its stock in Black Hawk and its interest in the Dun Glen property to the Hunt Family Limited Partnership (“HFLP”), a related party, along with all its Mexican assets in consideration of cancelling $600,000 of the debt that the Company owed to HFLP on an outstanding note payable.  See “Note 16, subsequent events” to our consolidated financial statements for further information.




22




Critical Accounting Policies




Estimates




The process of preparing financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses.  Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements.  Accordingly, upon settlement, actual results may differ from estimated amounts.




Provision for Taxes




Income taxes are provided based upon the liability method of accounting pursuant to the Income Taxes topic of the FASB Accounting Standards Codification.  Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against the deferred tax asset if management does not believe the Company has met the “more likely than not” standard imposed to allow recognition of such an asset.




Property, Plant and Equipment




The Company evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount may not be recoverable.  If the sum of estimated future net cash flows on an undiscounted basisis less than the carrying amount of the related asset grouping, asset impairment is considered to exist.  The related impairment loss is measured by comparing estimated future net cash flows on a discounted basis to the carrying amount of the asset.  Changes in significant assumptions underlying future cash flow estimates may have a material effect on the Company’s financial position and results of operations.  Property and equipment are being depreciated over useful lives of three to seven years using straight-line depreciation.




Share-Based Compensation




We account for stock-based compensation as required by the Stock Compensation topic of the FASB Accounting Standards Codification.  Under the fair value recognition provisions of this topic, share-based compensation cost is measured at the vesting date based on the value of the award.  Determining the fair value of share-based awards at the grant date requires judgment, including estimating expected dividends.  In addition, judgment is also required in estimating the amount of share-based awards that are expected to be forfeited.  If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted.




Adoption of New Accounting Principles




Effective January 1, 2009, we adopted the provisions of Topic 810 in the Accounting Standards Codification (ASC 810) (previously Statement of Financial Accounting (“FAS” No. 160 “Non Controlling Interests in Consolidated Financial Statements - an amendment of ARB 51”) (“ASC 810”) without a material effect on our results of operations and financial position. ASC 810 establishes accounting and reporting standards for the non controlling ownership interest in a subsidiary and for the deconsolidation of a subsidiary.




Item 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK –We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.




23




ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


HUNTMOUNTAIN RESOURCESAND SUBSIDIARIES(An Exploration Stage Enterprise)


Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm




December 31, 2009 and 2008




24
 Contents




HuntMountain Resources Ltd. and Subsidiaries(Formerly Metaline Mining & Leasing Company)(An Exploration Stage Enterprise)Contents




PageREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
26CONSOLIDATED FINANCIAL STATEMENTS:Consolidated balance sheets
27Consolidated statement of income
28Consolidated statement of cash flows
29Consolidated statement of stockholders’ equity
30Notes to consolidated financial statements
31 - 46
 
 25
 Contents


HuntMountain Resources Ltd.


Liberty Lake, WA




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




We have audited the accompanying consolidated balance sheets of HuntMountain Resources Ltd as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended and for the period from July 1, 2005 (inception of development stage) through December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Cerro Cazador S.A., a majority owned subsidiary, which statements reflect 34% of total consolidated assets as of December 31, 2009 and 17% of consolidated net loss for the year ended December 31, 2009. Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Cerro Cazador S.A. as of December 31, 2009 and for the year then ended is based solely on the report of the other auditors.




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 audits 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 HuntMountain Resources Ltd as of December 31, 2009 and 2008 and the results of its operations and its cash flows for the years then ended and for the period from July 1, 2005 (inception of development stage) through December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.




The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s accumulated deficit and lack of revenues raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding the resolution of this issue are also discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.






BehlerMick PS


Spokane, Washington


November 9, 2010




26
 Contents





HuntMountain Resources Ltd. and Subsidiaries

(An Exploration Stage Enterprise)Consolidated Balance Sheets
 December 31,2009


2008AssetsCURRENT ASSETS:Cash and cash equivalents:Cash

$
2,927,057


$
62,162Short term cash investments - domestic


14,898



14,246Short-term cash investments - Argentina


98,789



174,076Total cash and cash equivalents


3,040,744



250,484Receivables


221,075



153,135Prepaid expenses and advances


4,753



77,453Accrued interest receivable


—



5,909Deposits paid to vendors


—



584,000Total current assets


3,266,572



1,070,981PROPERTY AND EQUIPMENT, NET:


515,349



613,204OTHER ASSETS:Receivable - V.A. tax, Argentina


489,598



380,152Performance bond


199,508



98,927Land - La Josefina Estancia


710,000



710,000Property deposits and property purchase option


286,032



341,500Investments


167,331



7,331Total other assets


1,852,469



1,537,910Total assets

$
5,634,390



3,222,095Liabilities and Stockholders’ Equity (Deficit)CURRENT LIABILITIES:Trade accounts payable

$
1,557,504


$
2,376,401Accrued wages and related taxes


1,106



115,260Employee expense payable


—



3,412Tax payable, Argentina


121,934



123,290Shareholder loan, including interest payable


—



1,898,534Net short term note payable


4,798,649



—Accrued interest on note payable


476,979



—Other payables


—



202,500Total current liabilities

$
6,956,172


$
4,719,397COMMITMENTS AND CONTINGENCIES

$
—



—STOCKHOLDERS’ EQUITY (DEFICIT):Preferred stock – 10,000,000 shares, $0.001 par value, authorized; no shares issued and outstanding


—



—Common stock – 300,000,000 shares, $0.001 par value, authorized; 76,251,362 shares issued and outstanding.


76,251



76,251Additional paid-in capital


58,822,183



50,975,578Retained earnings - prior to development stage


90,527



90,527Deficit accumulated during the development stage


(63,604,058
)


(52,448,659
)Accumulated other comprehensive loss


(263,583
)


(190,999
)Total HuntMountain Resources, Ltd. stockholders’ equity (deficit)


(4,878,680
)


(1,497,302
)Non-controlling interest in subsidiary


3,556,898



—Total stockholders’ equity (deficit)


(1,321,782
)


(1,497,302
)Total liabilities and stockholders’ equity (deficit)

$
5,634,390


$
3,222,095
  The accompanying notes are an integral part of these consolidated financial statements.
  27
 Contents
  HuntMountain Resources Ltd. and Subsidiaries

(An Exploration Stage Enterprise)Consolidated Statements of Operations
 Years Ended December 31,


From InceptionthroughDecember 31,2009


2008



2009INCOME:

$
—


$
—


$
—EXPENSES:Professional fees


783,511



942,414



2,412,735Marketing


5,176



51,293



233,180Exploration expenses


805,592



5,758,673



8,680,667Travel expenses


148,721



279,202



705,700Administrative and office expenses


372,087



385,844



1,118,176Payroll expenses


775,968



945,845



2,638,828Impairment of purchase option


70,000



—



70,000Stock compensation expense


218,710



229,262



646,572Common stock and options issued for services


—



126,588



479,838Interest expense and banking charges


504,922



331,257



1,029,097Other expense - Argentina


—



87,240



87,240Value added tax net present value adjustment


85,943



953,520



1,039,463Depreciation expense


105,547



90,634



203,1943,876,177



10,181,772



19,344,690LOSS BEFORE OTHER INCOME


(3,876,177
)


(10,181,772
)


(19,344,690
)OTHER INCOME/(EXPENSE):Financing charges


(2,837,296
)


(23,594,347
)


(31,687,292
)Amortization of debt discount


(4,610,459
)


(6,890,868
)


(12,828,943
)Other-than-temporary impairment of investments


(95,772
)


—



(95,772
)Other income, lease


326,500



—



326,500Other income, debt forgiveness


60,214



—



60,214Dividend and interest income


17,617



8,211



98,110Miscellaneous expenses


(15,667
)


2,680



(10,244
)Taxes


(56,391
)


—



(56,391
)Foreign currency loss


(67,968
)


—



(67,968
)Gain on sale of fixed assets


—



2,418



2,418LOSS BEFORE INCOME TAXES:

$
(11,155,399
)

$
(40,653,678
)

$
(63,604,058
)OTHER COMPREHENSIVE LOSS


(72,584
)


(137,919
)


(263,583
)COMPREHENSIVE LOSS

$
(11,227,983
)

$
(40,791,597
)

$
(63,867,641
)BASIC AND DILUTED COMPREHENSIVE LOSS PER SHARE based on weighted-average shares outstanding

$
(0.15
)

$
(0.71
)WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING, BASIC AND DILUTED


76,251,362



57,365,938
  The accompanying notes are an integral part of these consolidated financial statements.
  28
 Contents
 
 HuntMountain Resources Ltd. and Subsidiaries

(An Exploration Stage Enterprise)Consolidated Statements of Cash Flows
 Years Ended

December 31,


From Inception of DevelopmentStageJuly 1, 2005through December 31,2009


2008


2009Increase (Decrease) in Cash and Cash EquivalentsCASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(11,155,399
)

$
(40,653,678
)

$
(63,604,058
)Adjustments to reconcile net loss to net cash used in operating activitiesDepreciation


105,547



90,634



203,194Stock option compensation expense


218,640



229,262



646,502Common stock and options issued for services


—



126,588



479,838Financing charge


2,837,296



23,594,348



31,687,292Amortization of debt discount


4,610,459



6,890,868



12,828,944Property purchase option


70,000



—



—Gain on sale of precious metal investments


—



—



(15,194
)Loss recognized on other-than-temporary impairment of investments


95,772



—



95,772Unrealized holding loss on securities


(250,000
)






(250,000
)(Increase) decrease in receivables


(8,313
)


(299,833
)


(541,601
)(Increase) decrease in prepaid expenses


72,700



(4,841
)


(4,753
)(Increase) decrease in performance bond


(100,581
)


—



(100,581
)(Increase) decrease in deposits paid to vendors


584,000



(584,000
)


—Increase in accounts payable


(822,205
)


2,122,985



1,636,773Increase in interest payable, shareholder loan


448,445



28,534



476,979Increase in accrued liabilities


(118,922
)


(4,942
)


27,463Increase in other payables


(202,500
)


202,500



—Net cash used in operating activities


(3,615,061
)


(8,261,575
)


(16,433,430
)CASH FLOWS FROM INVESTING ACTIVITIES:Acquisition of equipment


(7,693
)


(700,647
)


(1,429,556
)Accrued interest income


—



(3,940
)


(5,909
)Performance bond


—



—



(247,486
)Property deposits


—



(135,000
)


(271,500
)Investments


(14,532
)


—



14,381Cash acquired in noncontrolling interest in subsidiary


245,082



—



245,082Net cash provided (used) in investing activities


222,857



(839,587
)


(1,694,988
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from convertible note financing


3,320,500



6,849,413



14,232,062Proceeds from sale of common stock


—



—



1,132,870Proceeds from sale of subsidiary’s stock


2,894,104



—



2,894,104Proceeds from shareholder loan


—



1,870,000



1,870,000Net cash from financing activities


6,214,604



8,719,413



20,129,036Effect of currency translation on cash


(32,140
)

$
(21,071
)


(67,795
)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


2,790,260



(402,820
)


1,932,823CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR/PERIOD


250,484



653,304



1,107,921CASH AND CASH EQUIVALENTS, END OF YEAR/PERIOD

$
3,040,744


$
250,484


$
3,040,744Supplemental Disclosures of Cash Flow Information:NON-CASH FINANCING ACTIVITIES:Conversion of note into equity

$
—


$
10,163,010


$
10,313,010Cashless exercise of options

$
—


$
188,829


$
188,829Accrued interest

$
(448,445
)

$
(275,082
)

$
(888,677
)Conversion of accrued interest into equity

$
—


$
598,550


$
598,550Conversion of shareholder loan to convertible note

$
3,760,500


$
—


$
3,760,500Conversion of shareholder loan to convertible note

$
206,072


$
—


$
206,072Income taxes, paid net of refunds:

$
—


$
—


$
—Interest paid:

$
—


$
—


$
—
  The accompanying notes are an integral part of these consolidated financial statements.
  29
 Contents
  HuntMountain Resources Ltd. and Subsidiaries(An Exploration Stage Enterprise)Consolidated Statements of Stockholders’ Equity
  Number ofSharesOutstanding


CommonStockAmount


AdditionalPaid-InCapital


RetainedEarnings


DeficitAccumulatedDuring TheDevelopmentStage


AccumulatedOtherComprehensiveIncome (Loss)


TotalBALANCES, DECEMBER 31, 2004


7,277,934


$
379,282


$
—


$
144,968


$
—


$
1,061


$
525,311Common stock issued for cash


9,222,066



503,434



148,500



—



—



—



651,934Stock options issued to employees


—



—



4,000



—



—



—



4,000Stock options issued for services


—



—



900



—



—



—



900Reclassification due to par value change


—



(866,216
)


866,216



—



—



—



—Comprehensive income (loss):Other comprehensive loss:


—



—



—



—



—



1,401



1,401Net loss


—



—



—



(54,441
)


(187,887
)


—



(242,328
)Comprehensive loss


























(240,927
)BALANCES, DECEMBER 31, 2005


16,500,000


$
16,500


$
1,019,616


$
90,527


$
(187,887
)

$
2,462


$
941,218Common stock issued for cash


15,744,132



15,744



1,117,126



—



—



—



1,132,870Exercise of stock options


18,153



18



(18
)


—



—



—



—Stock options issued to employees


—



—



67,000



—



—



—



67,000Stock options issued for services


—



—



220,850



—



—



—



220,850Common stock issued to rectify imbalance


4,000



4



(4
)


—



—



—



—Comprehensive income (loss):Other comprehensive loss:


—



—



—



—



—



(8,235
)


(8,235
)Net loss


—



—



—



—



(2,013,647
)


—



(2,013,647
)Comprehensive loss


























(2,021,882
)BALANCES, DECEMBER 31, 2006


32,266,285


$
32,266


$
2,424,570


$
90,527


$
(2,201,534
)

$
(5,773
)

$
340,056Common stock issued for executive compensation


150,000



75



74,925



—



—



—



75,000Stock options issued to employees


—



—



52,600







—



52,600



—Stock options issued for services


—



—



131,500



—



—



—



131,500Convertible note issuance


—



—



9,247,871



—



—



—



9,247,871Convertible note conversion


600,000



150



149,850



—



—



—



150,000Comprehensive income (loss):Other comprehensive loss:


—



—



—



—



—



(47,308
)


(47,308
)Net loss


—



—



—



—



(9,593,448
)


—



(9,593,448
)Comprehensive loss


























(9,640,756
)BALANCES, DECEMBER 31, 2007


33,016,285


$
32,491


$
12,081,316


$
90,527


$
(11,794,981
)

$
(53,081
)

$
356,272Exercise of stock options


188,829



189



(189
)


—



—



—



—Stock options issued to employees


—



—



229,262







—



—



229,262Stock options issued for services


—



—



126,588



—



—



—



126,588Convertible note issuance


—



—



27,787,800



—



—



—



27,787,800Convertible note conversion


43,046,248



43,046



10,750,801



—



—



—



10,793,847Miscellaneous stock adjustment


—



526



—















526Comprehensive income (loss):Other comprehensive loss:


—



—



—



—



—



(137,919
)


(137,919
)Net loss


—



—



—



—



(40,653,678
)


—



(40,653,678
)Comprehensive loss


























(40,791,597
)BALANCES, DECEMBER 31, 2008


76,251,362


$
76,251


$
50,975,578


$
90,527


$
(52,448,659
)

$
(190,999
)

$
(1,497,302
)Stock options issued to employees


—



—



218,710



—



—



—



218,710Convertible note issuance


—



—



2,837,296



—



—



—



2,837,296Debt discount


—



—



4,790,599



—



—



—



4,790,599Comprehensive income (loss):Other comprehensive loss:


—



—



—



—



—



(72,584
)


(72,584
)Net loss


—



—



—



—



(11,155,399
)


—



(11,155,399
)Comprehensive loss


























(11,227,983
)BALANCES, DECEMBER 31, 2009


76,251,362


$
76,251


$
58,822,183


$
90,527


$
(63,604,058
)

$
(263,583
)

$
(4,878,680
)
  The accompanying notes are an integral part of these consolidated financial statements.
  30
 Contents
 
 HuntMountain Resources Ltd. and Subsidiaries

(An Exploration Stage Enterprise)
 Notes to Consolidated Financial Statements
  NOTE 1 – DESCRIPTION OF BUSINESS
  HuntMountain Resources Ltd. (“the Company” or “HuntMountain”), a Washington corporation, was formed in 2005.  Metaline Mining and Leasing Company, a Washington corporation since 1927, merged with and into the Company in August 2005.  The Company’s business plan is to acquire interests in exploration properties in North and South America.  As of the end of 2008, the Company had acquired one exploration property in Nevada, seven properties in the province of Santa Cruz in Argentina, one property in Mexico and an option on two properties in Quebec.
  The accompanying consolidated financial statements include the accounts of HuntMountain, a Washington corporation, its wholly-owned Canadian subsidiary HuntMountain Resources LTD (“HMR LTD”), HuntMountain’s wholly owned Mexican subsidiary Cerro Cazador Mexico S.A. De C.V. (“CCM”), HuntMountain’s wholly-owned subsidiary HuntMountain Investments, LLC (HMI), Sinomar Capital Corp. who subsequently on February 1, 2010, changed their name to Hunt Mining Corp. (“Hunt Mining”), a Canadian subsidiary 65% owned by HuntMountain and 4% owned by HMI, Hunt Mining’s wholly owned Canadian Subsidiary Hunt Gold USA, LLC, Hunt Mining’s wholly owned Canadian Subsidiary 1494716 Alberta, Ltd., and Cerro Cazador S.A. (CCSA), Hunt Mining’s Argentine subsidiary 95% owned by Hunt Mining and 5% owned by 1494716 Alberta, Ltd.
  HMR LTD is incorporated in British Columbia and provincially registered in the Yukon.  HMR LTD was formed for the purpose of holding Canadian exploration properties, should the Company acquire an interest in any such properties.  CCM was incorporated to acquire a property package in Chihuahua, Mexico. HMI was incorporated for the specific purpose of holding shares in subsidiary companies.  CCSA was formed in Argentina for the purpose of holding Argentine exploration properties and executing agreements in Argentina.
  Currently all exploration activities are being pursued by our majority owned subsidiary, Hunt Mining through its wholly owned subsidiary, CCSA which on December 23, 2009 the Company exchanged 100% of its shares of CCSA, which were acquired by Hunt Mining as part of a reverse takeover transaction.  Hunt Mining is a mineral exploration company incorporated on January 10, 2006 under the laws of Alberta, Canada which trades on the TSX Venture Exchange under the ticker symbol HMX.  Prior to December 23, 2009 Hunt Mining was a Capital Pool Company within the meaning ascribed by Policy 2.4 of the TSX Venture Exchange.  Hunt Mining issued 29,118,507 common shares and 20,881,493 non-voting convertible preferred shares to the Company at a deemed price of C$0.30 per Common Share and C$0.30 per convertible preferred share in consideration for the acquisition of all of the common shares of CCSA. Each convertible preferred share shall be convertible into one Common Share of Hunt Mining for no additional consideration at any time as long as the public float is not less than 20%.  This transaction gave the Company controlling interest in Hunt Mining, 65% owned by the Company and 4% owned by the Company’s wholly-owned subsidiary HMI.
  NOTE 2 – GOING CONCERN
  As shown in the accompanying financial statements, the Company has had no revenues and has incurred an accumulated deficit from the inception of the development stage of $63,604,058 through December 31, 2009. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
  On February 18, 2010, the Company’s board of directors recommended and authorized a shareholder meeting to consider and vote upon a proposal to approve the voluntary dissolution and liquidation of the Company pursuant to a plan of complete dissolution and liquidation dissolution.  On July 16, 2010, the Company filed with the Securities and Exchange Commission (“SEC”), a preliminary schedule 14A proxy statement to submit the vote to the Company’s shareholders. As of the date of the filing of this form 10-K, the preliminary 14A proxy statement has not yet been approved by the SEC and the vote has yet to go before the shareholders. The dissolution of the Company, if approved by the shareholders, will not affect the operations of Hunt Mining which will continue in existence along with its subsidiary companies.  See “Note 16, Subsequent Events” for further details.
  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company does not continue in existence.
  31
 Contents
  NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  This summary of significant accounting policies is presented to assist in the understanding of the financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
  Accounting Method
  The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.
  Accounts Receivable
  The Company carries its accounts receivable at net realizable value. On a periodic basis, the Company evaluates its accounts receivable and determines if an allowance for doubtful accounts is necessary, based on a history of past write-offs and collections and current credit conditions. At December 31, 2009 the Company’s accounts receivable balance was $22,377 compared to $153,135 at December 31, 2008. The Company’s accounts receivable balance includes no allowance for doubtful accounts based upon management’s expectations and analysis.
  Use of Estimates
  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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.
  Cash and Cash Equivalents
  Cash and cash equivalents include short-term cash investments that have an initial maturity of 90 days or less. In the normal course of business, 30% of all funds wire transferred from the Company to CCSA are withheld by the Government of Argentina. These withheld amounts are invested in money market instruments until the Government of Argentina approves CCSA’s formal application for release. Funds held in this fashion are included in short-term cash investments. Of the $2,927,057 held in cash, $2,919,009 is held for use by Hunt Mining and is not available for distribution to the Company.
  Principles of Consolidation
  The consolidated financial statements include the accounts of the Company and its wholly and majority-owned subsidiaries after elimination of intercompany accounts and transactions. All of the wholly owned subsidiaries of the Company are named above in Note 1 – Description of Business.
  Marketable Securities
  The Company accounts for marketable securities as required by the Debt and Equity Securities topic of the FASB Accounting Standards Codification Debt securities and equity securities that have readily determinable fair values are to be classified in three categories:
  Held to Maturity – the positive intent and ability to hold to maturity.  Amounts are reported at amortized cost, adjusted for amortization of premiums and accretion of discounts.
  Trading Securities – bought principally for purpose of selling them in the near term.  Amounts are reported at fair value, with unrealized gains and losses included in earnings.
  Available for Sale – not classified in one of the above categories.  Amounts are reported at fair value, with unrealized gains and losses excluded from earnings and reported separately as a component of stockholders’ equity.
  At this time, the Company holds securities classified as available for sale.  See Note 4 - Investments for further details.
  Mineral Development Costs
  All exploration expenditures are expensed as incurred. Significant property acquisition payments for active exploration properties are capitalized. If no economic ore body is discovered, previously capitalized costs are expensed in the period the property is abandoned. Expenditures to develop new mines, to define further mineralization in existing ore bodies, and to expand the capacity of operating mines, are capitalized and amortized on a units-of-production basis over proven and probable reserves.
  32
 Contents
  Should a property be abandoned, its capitalized costs are charged to operations. The Company charges to the consolidated statement of operations the allocable portion of capitalized costs attributable to properties sold. Capitalized costs are allocated to properties sold based on the proportion of claims sold to the claims remaining within the project area.
  Equipment
  The Company evaluates equipment for impairment annually, or when events or changes in circumstances indicate that the related carrying amount may not be recoverable.  If the sum of estimated future net cash flows on an undiscounted basis is less than the carrying amount of the related asset grouping, an asset impairment is considered to exist.  The related impairment loss is measured by comparing estimated future net cash flows on a discounted basis to the carrying amount of the asset.  Changes in significant assumptions underlying future cash flow estimates may have a material effect on the Company’s financial position and results of operations.  To date no such impairments have been identified.
  Office Equipment and vehicles are stated at cost and depreciated on the straight-line basis over an estimated useful life of 3 years.  Drilling and excavation equipment is stated at cost on the balance sheet for December 31, 2009 and 2008. The Company has not begun depreciating drilling and excavation equipment because the equipment has not yet been placed into service.
  Basic and Diluted Net Loss Per Share
  The Company complies with the requirements of the Earnings per Share Topic of the FASB Accounting Standards Codification, which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of an entity similar to fully diluted earnings per share. Although there were common stock equivalents outstanding on December 31, 2009, they were not included in the calculation of earnings per share because they would have been considered anti-dilutive.
  Basic earnings per share are computed using the weighted average number of shares outstanding during the years (76,251,362 at December 31, 2009 and 57,365,938 at December 31, 2008).
  Outstanding warrants to purchase 45,646,248 and 43,646,248 shares of common stock, options to purchase 2,245,000 and 2,495,000 shares of common stock at December 31, 2009 and 2008, respectively, as well as outstanding convertible debt plus accrued interest of $5,667,479 which can be converted into 56,747,917 units, where each unit consists of one share of common stock and one warrant to purchase one share of common stock at December 31, 2009, were not included in the computation of diluted loss per share for the years ended December 31, 2009 and 2008, respectively, because to do so would have been antidilutive.  Therefore, basic loss per share is the same as diluted loss per share.
  Deferred Income Tax
  Deferred income tax is provided for differences between the bases of assets and liabilities for financial and income tax reporting.  A deferred tax asset, subject to a valuation allowance, is recognized for estimated future tax benefits of tax-basis operating losses being carried forward.
  Provision for Taxes
  Income taxes are provided based upon the liability method of accounting pursuant to the Income Taxes topic of the  FASB Accounting Standards Codification Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against the deferred tax asset if management does not believe the Company has met the “more likely than not” standard imposed to allow recognition of such an asset.
  Reclamation and Remediation
  Expenditures for ongoing compliance with environmental regulations that relate to current operations are expensed or capitalized as appropriate. Expenditures resulting from the remediation of existing conditions caused by past operations that do not contribute to future revenue generations are expensed. Liabilities are recognized when environmental assessments indicate that remediation efforts are probable and the costs can be reasonably estimated.
  33
 Contents
  Estimates of such liabilities are based upon currently available facts, existing technology and presently enacted laws and regulations taking into consideration the likely effects of inflation and other societal and economic factors, and include estimates of associated legal costs. These amounts also reflect prior experience in remediating contaminated sites, other companies’ clean-up experience and data released by The Environmental Protection Agency or other organizations. Such estimates are by their nature imprecise and can be expected to be revised over time because of changes in government regulations, operations, technology and inflation. Recoveries are evaluated separately from the liability and, when recovery is assured, the Company records and reports the asset separately from the associated liability.
  Adoption of New Accounting Principles
  Effective January 1, 2009, we adopted the provisions of Topic 810 in the Accounting Standards Codification (ASC 810) (previously Statement of Financial Accounting (“FAS” No. 160 “Non Controlling Interests in Consolidated Financial Statements - an amendment of ARB 51”) (“ASC 810”) without a material effect on our results of operations and financial position. ASC 810 establishes accounting and reporting standards for the non controlling ownership interest in a subsidiary and for the deconsolidation of a subsidiary.
  Fair Value Measurements
  The Company’s financial instruments as defined by FASB ASC 825-10-50, include cash, receivables, accounts payable and accrued expenses. All instruments except the performance bond are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at December 31, 2009 and December 31, 2008. The performance bond was marked to market on December 31, 2009 and December 31, 2008.
  FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements.  FASB ASC 820 establishes a three-tier fair hierarchy which prioritizes the inputs used in measuring fair value as follows:
  Level 1: Quoted prices are available in active markets for identical assets or liabilities. Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
 Level 2: Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
 Level 3: Pricing inputs include significant inputs that are generally unobservable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. Level 3 instruments include those that may be more structured or otherwise tailored to the Company’s needs.
 Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.
  The following table discloses by level within the fair value hierarchy the Company’s assets and liabilities measured and reported on the Consolidated Balance Sheets as of December 31, 2009, at fair value on a recurring basis:
  Total


Level I


Level II


Level IIIAssets:Performance bond

$
199,508


$
199,508


$
0


$
0Receivable – V.A. Tax


489,598



0



0



489,598Total:

$
689,106


$
199,508


$
0


$
489,598
 The performance bond, required to secure the Company’s rights to explore the La Josefina property, is a step-up coupon US dollar bond issued by the Government of Argentina with a face value of $600,000 and a maturity date of 2035. The bond was originally purchased for $251,613 and had a value of $98,927 at December 31, 2008. As of the year ended December 31, 2009 the value of the bond increased to $199,508.
  34
 Contents
  The Receivable V.A. Tax accrued due to the payment of valued added tax on certain transactions in Argentina. This asset is reported at net present value based upon the Company’s estimate of an expected benefit period of 7 years and a discount rate of 18.6% based upon the average Argentine interest rates.
  Concentration of Credit Risk
  The Company maintains its cash and cash equivalents in multiple financial institutions.  Balances in the United States are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per institution and balances in Canada are insured by the Canada Deposit Insurance Corporation up to C$100,000 per institution.  Balances on deposit may occasionally exceed insured amounts. At December 31, 2009, deposits in Canadian banks exceeded the insured amount by C$2,792,959. All of the Company’s cash in U.S. bank accounts at December 31, 2009 was FDIC insured. The Company also maintains cash in an Argentine bank. The Argentine accounts, which had a U.S. dollar balance of $13,352 at December 31, 2009, are considered uninsured.
  Beneficial Conversion Feature of Convertible Notes
  Following the guidance provided by ASC Topic 470 “Debt with Conversion and Other Options”, the Company allocated proceeds first to the warrants issuable upon conversion of the note. The value of the warrants was recorded on the balance sheet as debt discounts and increases to shareholder’s equity. The debt discounts are being amortized over the remaining life of the convertible note. The value of warrants in excess of the actual debt advance amounts were expensed as financing fees.
  Once the Company allocated proceeds of convertible note advances to the warrant values, the embedded conversion feature of shares issuable on conversion of the notes was recognized. All amounts relating to the share values were expensed as financing fees.
  Foreign Currency Translation
  Our international operations use the United States Dollar as their functional currency. The financial statements of international subsidiaries are translated to their U.S. dollar equivalents at end-of-period currency exchange rates for assets and liabilities and at average currency exchange rates for revenues and expenses. Translation adjustments for international subsidiaries are recorded as a loss in the accompanying Consolidated Statements of Income. Transaction gains and losses resulting from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized as incurred in the accompanying Consolidated Statements of Income, except for certain inter-company balances designated as long-term investments.
  Other Comprehensive Income
  The Company follows guidance provided by FASB ASC Topic 220 “Comprehensive Income”, which establishes guidelines for the reporting and display of comprehensive income (loss) and its components in financial statements. Comprehensive income (loss) includes the accrued gain or loss on the performance bond.
  Compensated Absences
  The Company has not accrued for compensated absences because the amounts are deemed to be immaterial.
  Reclassifications
  Certain prior year amounts in the accompanying financial statements have been reclassified to conform to the fiscal 2009 presentation. These reclassifications have resulted in no changes to the Company’s accumulated deficit or the net loss presented.
  35
 Contents
  NOTE 4 – INVESTMENTS
  The Company had the following investments:
  December 31,2009


2008Partnership interest in two units of Pondera Partners, Ltd., a drilling project located in Teton County, Montana (at cost less equity partnership losses)

$
7,331


$
7,331
  The Company has invested in various privately and publicly held companies.  At this time, the Company holds securities classified as available for sale.  Amounts are reported at fair value as determined by quoted market prices, with unrealized gains and losses excluded from earnings and reported separately as a component of stockholders’ equity.
  At December 31, 2009, the Company determined that the following available-for-sale security had experienced an impairment that was other-than-temporary.  Key factors used in determining whether or not the impairment was other-than-temporary included the severity of the impairment and the fact that the Company was planning on selling the shares within the first quarter of the next year, see “Note 16, Subsequent Events” for further information.  In connection with this determination, the company recognized an impairment charge of $90,000.  This impairment charge is presented under the caption “Other-than-temporary impairment of investments” on the Company’s Consolidated Statements of Operations at December 31, 2009.
  The following table presents certain details related to the investment for which the Company determined the impairment was other-than-temporary:
  Investment

# of shares


Original Value


Market Value at 12/31/09


Recognized ImpairmentBlack HawkExploration Inc.


250,000


$
250,000


$
160,000


$
(90,000
)
  NOTE 5 – PROPERTY PURCHASE OPTION
  On June 19, 2006, the Company entered into an agreement with Diagnos, Inc., (Diagnos) obtaining an exclusive option to acquire a 100% interest in two prospective gold properties located in the Abitibi region of Québec, Canada.  The properties consist of 46 claims covering approximately 6,500 acres.
  The Company will acquire a 100% interest in the properties by paying Diagnos a sum of $70,000 and by conducting an initial exploration program comprised of at least three drill holes on each property.  During the year ended December 31, 2006, the Company paid the $70,000 fee, which is shown as property purchase option on the consolidated balance sheets.  Upon completion of the initial drilling programs, the Company will have the option to select up to an additional seven properties in which it may acquire a 100% interest by paying Diagnos a sum of $40,000 and completing three-hole exploration drilling programs for each property.  The option will expire if the initial two properties are not drilled by March 31, 2010.
  For each economic discovery made on any of the acquired properties, the Company will pay Diagnos a bonus of $500,000.  The Company will also grant Diagnos a 2% Net Smelter Royalty (NSR) for economic discoveries made on the initial or additional properties, but will retain the option to acquire 1% of the NSR upon payment of $1 million to Diagnos within five (5) years of making the economic discovery.  An economic discovery is defined in the agreement as being the production of a positive feasibility study for a given project in compliance with Canada’s National Instrument 43-101.
  As of December 31, 2009, management of the Company determined that the $70,000 carrying value of the property purchase option had been impaired based on the fact that a drilling program would most likely not be completed by the expiration date of March 31, 2010.  The Company therefore recorded a write a write-down of $70,000 which was recognized as an impairment of mineral property purchase option in the fourth quarter of 2009 leaving a carrying value of zero.
 
 36
 Contents
 
 NOTE 6 – COMMITMENTS
  Santa Cruz, Argentina
  On March 27, 2007, CCSA, a wholly owned Argentine subsidiary of Hunt Mining, signed a definitive lease purchase agreement with FK Minera S.A. to acquire a 100% interest in the Bajo Pobré gold property located in Santa Cruz Province, Argentina.  The Company may earn up to a 100% equity interest in the Bajo Pobré property by making cash payments and exploration expenditures over a five-year earn-in period.  The required expenditures and ownership levels upon meeting those requirements are:
  Year of the Agreement

Payment to FK Minera SA


Exploration Expenditures Required


OwnershipFirst year
-2007

$
50,000


$
250,000



0
%Second year
-2008


50,000



250,000



0
%Third year
-2009


75,000



0



51
%Fourth year
-2010


75,000



0



60
%Fifth year
-2011


75,000



0



100
%
  After the fifth year, the Company is obligated to pay FK Minera S.A. the greater of a 1% net smelter royalty (“NSR”) on commercial production or $100,000 per year.  The Company has the option to purchase the NSR for a lump-sum payment of $1,000,000 less the sum of all royalty payments made to FK Minera S.A. to that point.
  As of December 31, 2009, CCSA has not engaged in any exploration activity on the Bajo Pobré property. CCSA has not fulfilled any of our exploration obligations relative to the Bajo Pobré property. Further, CCSA has not received any form of formal relief from the contract terms relating to the Bajo Pobré property.  On November 5, 2009 the Company received notification from the Santa Cruz Province Mining Authority that FK Minera S.A. and Arturo Canero, its principal, have been inhibited in the disposal of its assets, including the Bajo Pobre property.  They orally stated that such inhibition would be released since it would submit other assets in replacement; however, to date there is no evidence of such replacement of assets. The Company’s ability to retain rights to explore the Bajo Pobré property is uncertain at this time.
 
 In March 2007, CCSA was the successful bidder for the exploration and development rights to the La Josefina Project from Fomento Minero de Santa Cruz Sociedad del Estado (Fomicruz).  Fomicruz is a company that is owned by the government of the Santa Cruz province in Argentina.  On July 24, 2007 CCSA entered into an agreement with Fomicruz pursuant to which CCSA agreed to invest a minimum of $6 million in exploration and development expenditures over a four year period, including $1.5 million before July 2008. The agreement delineates that in the event that a positive feasibility study is completed on the La Josefina property that a joint venture company would be formed; the Company would own 91% of the joint venture company and Fomicruz would own the remaining 9%.
  Between November of 2007 and December of 2008 CCSA completed a 37,605 meter drilling program on the La Josefina property. To date, the $6,000,000 work commitment has been exceeded.  CCSA must maintain the La Josefina mining rights by paying the annual canons due the province on the project’s 399 pertenencias. This currently amounts to 318,400 Argentine pesos per year (approximately $93,647) that can be deducted from the $6,000,000 work commitment.  The annual canons were paid for both 2008 and 2009.
  Pershing County, Nevada
  The Company has a lease for the Dun Glen property with an option to purchase a 100% interest in the claims.  Lease payments began in 2006 and are considered advance royalty payments.  The term of the lease is 10 years, renewable at the Company’s option for an additional ten years.  As of December 31, 2009, the Company has made lease payments totaling $137,500.  Future lease payments are as follows:
  ●
4th Anniversary $60,000
 ●
5th (and each anniversary thereafter) $72,500
  On December 10, 2009, the Company entered into an agreement with Black Hawk Exploration (Black Hawk) to transfer 75% of the company’s economic interest in the Dun Glen Project.  In return, the Company received a one-time payment of $50,000 at signing, and is due to receive further payments of $25,000 on or before each of December 10, 2010, and December 10, 2011.  Black Hawk also issued to the company 250,000 restricted common shares of Black Hawk Exploration and will issue a further 100,000 restricted common shares on or before December 10, 2010.
  The terms of the Black Hawk Agreement state that Black Hawk has the responsibility to maintain the property in good standing at their expense, including the timely filing or payment of all claims maintenance fees or taxes and all the underlying future lease payments owed by the Company as noted above.
  On February 18, 2010 the Company transferred its stock in Black Hawk and its interest in the Dun Glen property to the Hunt Family Limited Partnership (“HFLP”), a related party, along with all its Mexican assets in consideration of cancelling $600,000 of the debt that the Company owed to HFLP on an outstanding note payable.  See “Note 16, subsequent events” for further information.
  37
 Contents
  Quebec, Canada
  As addressed in Note 5, during 2006, the Company entered into a definitive Option Agreement for the acquisition of a 100% interest in two properties in the Abitibi region of Quebec.  Pursuant to the terms of the Option Agreement, the Company paid $70,000 ($35,000 for each of the two properties) in cash to the property owner.  The Company has also agreed to explore these properties and drill at least three exploration drill holes in each.  The payments and drilling of exploration drill holes will earn the Company a 100% interest in each of these properties and give the Company the option to acquire additional properties from the same property owner at similar terms.  The Company has also agreed to keep the claims in good standing until the agreement is terminated.
  As of December 31, 2009, management of the Company determined that the $70,000 carrying value of the property purchase option had been impaired based on the fact that a drilling program would most likely not be completed by the expiration date of March 31, 2010.  The Company therefore recorded a write a write-down of $70,000 which was recognized as an impairment of mineral property purchase option in the fourth quarter of 2009 leaving a carrying value of zero.
  Facility Leases
  The Company has lease commitments on office space and storage space in Liberty Lake, Washington. The total annual lease obligation for this facility is $69,359 (not including common area maintenance charges).
  NOTE 7 – INCOME TAXES
  The Company accounts for income taxes and the related accounts under the liability method.  Deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and the income tax basis of assets and liabilities.  A valuation allowance is applied against any net deferred tax asset if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
  At December 31, 2009 and 2008 the Company had gross deferred tax assets calculated at the expected rate of 34% of approximately $5,895,000 and $4,810,000, respectively, principally arising from net operating loss carryforwards for income tax purposes.  As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax asset, a valuation allowance of $5,895,000 and $4,810,000 has been established at December 31, 2009 and 2008, respectively.
  The significant components of the Company’s net deferred tax asset (liabilities) at December 31, 2008 and 2007 are as follows:
  2009


2008Net operating loss carryforwards

$
17,337,000


$
14,148,000Gross deferred tax assets (liabilities):Net Operating Loss

$
5,895,000


$
4,810,000Valuation Allowance


(5,895,000
)


(4,810,000
)Net Deferred tax asset (liability)

$
—


$
—
 At December 31, 2009 and 2008, the Company has net operating loss carryforwards of approximately $17,337,000 and $14,148,000 respectively, which will expire in the years 2022 through 2023.  The net change in the allowance account was an increase of $1,085,000.  Some of the losses were from operations outside of the United States and may be limited in their availability because of limitations and other equity transactions.
  NOTE 8 – SALES OF COMMON STOCK AND WARRANTS
  During the year ended December 31, 2007, the Company issued 600,000 units consisting of one share and one warrant pursuant to the conversion of a portion of a convertible note. Each common share had a par value of $0.001 and an issuance price of $0.25. Each warrant has an exercise price of $0.40 per common share. The expiration date of each warrant is five (5) years from the date of issuance.
  During the year ended December 31, 2007, the Company issued 150,000 shares for compensation to the Company’s Chief Operating Officer. The shares had a fair market value of $75,000.
  During the year ended December 31, 2008 the holders of the October Note converted into units, at the conversion price of $0.25 per share outstanding principal of $10,350,000, plus accrued interest of $313,014, of the October Note.  As a result the Company issued a total of 43,046,248 shares and 43,046,248 warrants (see Note 9 – Shareholder Loan).
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 Contents
  During the year ended December 31, 2009 the Company issued 2,000,000 warrants concurrently and in consideration for the issuance of the June Note (see Note 9 – Shareholder Loan).
  NOTE 9 – SHAREHOLDER LOAN
  On June 2, 2009, pursuant to approval from its board of directors, the Company obtained an unsecured loan for multiple advances up to $5,000,000 (“the June 2009 Note”) from Hunt Family Limited Partnership (“HFLP”), a related party. The June 2009 Loan supersedes and replaces the shareholder loan owed to HFLP that had a principal balance of $3,762,000 on June 2, 2009.  These notes are unsecured.
  The June 2009 Note, which matures on December 31, 2009, bears interest at a rate of eleven percent (11%) per annum. All principal and accrued interest balances due pursuant to the June 2009 Note are convertible at the option of the holder into units of the Company’s common stock, at a conversion price of $0.10 per unit, where each unit consists of one share and one warrant to purchase a common share. Each warrant issued pursuant to conversion of the June 2009 Note shall have an exercise price of $0.10 per share and a seven (7) year expiration from the date of issuance.
  The original maturity date of the June 2009 Note was December 31, 2009.  By unanimous consent of the Company’s board of directors on December 17, 2009, the maturity date of the June 2009 Note was amended from December 31, 2009 to December 31, 2010.  At that time, also by unanimous consent, the Company’s board of directors increased the maximum aggregate principal amount available pursuant to the June 2009 Note from $5,000,000 to $5,500,000.
  In addition, concurrently and in consideration for the issuance of the June 2009 Note, all warrants previously issued to HFLP pursuant to the conversion of Notes shall be cancelled and an equal number of warrants to acquire common shares at an exercise price of $0.10 and a maturity date of April 22, 2016 shall be issued. On June 2, 2009 the Company recognized a financing fee expense of $2,837,295 to reflect the difference in the Black-Scholes valuation of the new warrants and the cancelled warrants.
  Concurrently and in consideration for the issuance of the June 2009 Note the Company granted to HFLP a 3% Net Smelter Royalty (“NSR”) on all of the Company’s resource properties in Mexico, past, present and future. The Company also granted an additional 2,000,000 warrants with a $0.10 exercise price and a seven (7) year term in conjunction with the inception of the June Note structure.
 
 The Company recognized the beneficial conversion feature associated with the June Note’s convertibility into shares and warrants. The total value of the shares was determined based on the trading price of the Company’s shares at the time of the draw on the June Note. The total value of warrants was determined using the Black Scholes option pricing model. In employing this model, the Company used the actual three month T-Bill rate on the advance dates for the risk-free rate. Similarly, the actual share price on advance dates was used in the calculation.  The Company assumed expected volatility of 105.06%, no dividends and a five year horizon in all Black Scholes option pricing calculations.
  Additional advances totaling $1,428,500 have been received on the June 2009 Note since it replaced the shareholder loan owed to HFLP that had a principal balance of $3,762,000 on June 2, 2009 bringing the total principal balance to $5,190,500 at December 31, 2009.  The total value of warrants for 2009 from issuances of the June Note was $11,503,750 and the total value of shares was $12,661,000. Since the value of beneficial conversion feature exceeded the amount borrowed, the Company recognized a debt discount to completely offset the amount borrowed. As of December 31, 2009 the balance of the June Note is:
 
 Principal

$
5,190,500Discount


391,851Net

$
4,798,649
 
 The remaining debt discount of $391,851 will be amortized equally over the next 12 months ending December 31, 2010.  The outstanding convertible debt principal balance of $5,190,500 can be converted into 51,905,000 units, where each unit consists of one share and one warrant to purchase a common share. Each warrant issued pursuant to conversion of the June 2009 Note shall have an exercise price of $0.10 per share and a seven (7) year expiration from the date of issuance.
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  The following is a summary of common stock warrant activity for each of the three years ended December 31, 2009:
  Number ofShares UnderWarrants


WeightedAverageExercise PriceBalance at December 31, 2006


—



—Issued in conjunction with conversion of convertible note


600,000


$
0.40Balance at December 31, 2007


600,000


$
0.40Issued in conjunction with conversion of convertible note


43,046,248


$
0.40Balance at December 31, 2008


43,646,248


$
0.40Issued in conjunction with convertible note


2,000,000


$
0.10Balance at December 31, 2009


45,646,248


$
0.39
  NOTE 10 – STOCK OPTION PLAN
  The Company’s 2005 Stock Plan permits the granting of up to 3,000,000 non-qualified stock options, incentive stock options, and restricted shares of common stock to employees, directors, and consultants.  As of December 31, 2009, there were 2,245,000 stock options granted to employees and consultants, of which 2,195,000 are vested.  These options were granted to employees and consultants to the Company.  There were no options granted in 2009.
  For purposes of calculating the fair value of options, volatility for the two years presented is based on the historical volatility of the Company’s common stock over its public trading life.  The Company currently does not foresee the payment of dividends in the near term.  The fair value for these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
  Years Ended December 31,2009


2008Weighted average risk free rate:


1.4
%


1.4
%Weighted average volatility:


105.1
%


82.8
%Expected dividend yield:


0



0Weighted average life (in years):


5.0



5.0
  Expenses of $7,000 for stock options issued to employees and zero for stock options issued to non-employees, including consultants and directors, were recorded in 2009.  This compares to expenses of $229,262 for stock options issued to employees and $126,588 for stock options issued to non-employees in 2008.  The following table summarizes the terms of the options outstanding at December 31, 2009:
 
 Number ofOptions


Weighted Average ExercisePrice


Weighted AverageRemainingContractual Life

(Years)


Number ofExercisableOptions atDecember 31, 200990,000


$
0.20



2.14



90,000700,000


$
0.25



1.60



700,000100,000


$
0.30



1.83



100,00010,000


$
0.34



.58



10,00050,000


$
0.38



3.58



50,000650,000


$
0.45



2.55



650,0005,000


$
0.55



1.50



5,00055,000


$
0.60



2.98



55,000150,000


$
0.63



2.34



150,000100,000


$
0.64



3.69



100,000100,000


$
0.67



4.55



50,000235,000


$
0.76



3.34



235,000TOTALS


2,245,000


$
0.44



2.44



2,195,000
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  The following summarizes option activity for the years presented:
 Balance at January 1, 2008


2,340,000


$
0.35Issued


585,000



0.72Exercised


—



—Cancelled


(60,000
)


0.59Forefeited (cashless exercise)


(370,000
)


0.39Balance at December 31, 2008


2,495,000


$
0.45Issued


—



—Exercised


—



—Cancelled


(250,000.00
)


0.61Balance at December 31, 2009


2,245,000


$
0.44
  Options outstanding at December 31, 2009, have a remaining contractual life of approximately 2.44 years.
 NOTE 11 – LEASES
  The Company has lease commitments on two mineral properties and office and storage space in Liberty Lake, Washington.  The leased mineral properties are the Dun Glen property in Nevada and the Bajo Pobré property in the Santa Cruz province of Argentina.  As of December 31, 2009 the annual lease obligations are:
  Year

Office Facility


Dun Glen (*)


Bajo Pobré


Total2010


69,359



60,000



75,000



203,5232011


69,359



72,500



75,000



216,0232012


69,359



72,500



100,000



241,0232013


69,359



72,500



—



141,0232014


69,359



72,500



—



141,023
  The original commercial lease on our office space was entered into on July 1, 2005 and has a term of ten years which will expire on June 30, 2015.    The rental rate shall be increased annually on the first day of July at the rate determined by the Consumer Price Index.  The table above shows the minimum annual lease payments over the next five years based on the current base rent and does not take into account the rent escalations.
  * On December 10, 2009, the Company entered into a Property Interest Purchase Option Agreement (“Black Hawk Agreement”) with Black Hawk Exploration (“Black Hawk”) to transfer 75% of the company’s economic interest in the Dun Glen Project.  One of the terms of the Black Hawk Agreement states that Black Hawk has the responsibility to maintain the property in good standing at their expense, including the timely filing or payment of all claims maintenance fees or taxes and all the underlying future lease payments owed by the Company as noted above.
  On February 18, 2010 the Company transferred its stock in Black Hawk and its interest in the Dun Glen property to the Hunt Family Limited Partnership (“HFLP”), a related party, along with all its Mexican assets in consideration of cancelling $600,000 of the debt that the Company owed to HFLP on an outstanding note payable.  See “Note 16 - Subsequent Events” for further information.
  NOTE 12 – RELATED PARTY TRANSACTIONS
  The Company leases office space from HFLP, an entity controlled by the Company’s President, Chief Executive Officer and Chairman. The Company paid $69,359 and $68,523 in lease payments to HFLP in 2009 and 2008 respectively.  These amounts do not include common area maintenance charges.
  On December 18, 2009, in conjunction with the RTO, the Company received an advance of $207,990 from Hunt Mining as a refundable deposit.
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  At December 31, 2009 the Company transferred a note payable to Huntwood Industries, an entity controlled by the Company’s President, Chief Executive Officer and Chairman.  The Company now owes an accounts payable balance of $19,953.72 to Huntwood Industries.
  At December 31, 2009 the Company had an accounts payable owing to a director and officer of CCSA, for C$16,805 relating to CCSA’s lease of office space.
  At December 31, 2009 the Company had fees payable advance for accounting expenses owing to a director of CCSA, of C$9,241.
  During the year ended December 31, 2009 the Company paid C$57,002 to a director of CCSA for accounting fees.
  During the year ended December 31, 2009 the Company paid C$144,843 to a director of CCSA for geological fees.
  As of December 31, 2008 the Company had an exploration advance receivable of $200 owed by an executive officer of the Company.
  During the year ended December 31, 2008 the company paid $14,938 to a director of the Company, for consulting services.
  At December 31, 2008 the Company had an employee exploration expense payable of C$4,172 owing to Danilo Silva for exploration expenses incurred on behalf of the Company.
  At December 31, 2008 the Company had fees payable advance for accounting expenses owing a director of CCSA  of C$5,072.
  During the year ended December 31, 2008 the Company paid C$24,841 to a director of CCSA  for accounting fees.
  During the year ended December 31, 2008 the Company paid C$122,980 to a director of CCSA  for geological fees.
  Additional related party transactions are included as part of Note 8, Note 9, Note 13 and Note 16.
  NOTE 13 – REVERSE TAKEOVER TRANSACTION
  On December 23, 2009 the company completed a reverse takeover transaction (“RTO”) in which 100% of the shares of its Argentine wholly owned subsidiary, CCSA, were acquired by Hunt Mining.  Hunt Mining is a mineral exploration company incorporated on January 10, 2006 under the laws of Alberta, Canada.  Prior to December 23, 2009 Hunt Mining was a Capital Pool Company within the meaning ascribed by Policy 2.4 of the TSX Venture Exchange.  Hunt Mining issued 29,118,507 common shares and 20,881,493 non-voting convertible preferred shares to the Company at a deemed price of C$0.30 per Common Share and C$0.30 per convertible preferred share. Each convertible preferred share shall be convertible into one Common Share of Hunt Mining for no additional consideration at any time as long as the public float is not less than 20%.  This transaction gave the Company controlling interest in Hunt Mining, 65% owned by the Company and 4% owned by the Company’s wholly-owned subsidiary HuntMountain Investments, LLC (“HMI”).  If all options and warrants, of Hunt Mining were exercised, the Company’s interest would be reduced to 57%.
  The net assets acquired from Hunt Mining were as follows:
  Cash

$
245,082Other Assets


163,163Accounts Payable


(3,308
)Total

$
404,937
  As a condition of the RTO, the Company entered into an agreement with CCSA pursuant to which the Company agreed to pay all of the CCSA’s remaining accounts payable owed to Patagonia Drill Mining Services S.A. (“PDM”). In order to pay all of the payables owing to PDM in accordance with the terms of the qualifying transaction, management negotiated an agreement with PDM pursuant to which the Company agreed to purchase all remaining accounts payable owed by the CCSA to PDM for total consideration of $1,029,373. This amount excluded the $584,000 deposit made by the Company against the PDM payables in 2008. Therefore, the $584,000 deposit amount was applied to the CCSA’s PDM payables concurrently with the signing of the agreement.
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  NOTE 14 – VALUE ADDED TAX CREDIT
  The Company has in other assets --Receivable - V.A. tax, Argentina as of December 31, 2009 and 2008 of $489,598 and $380,153 respectively.  These amounts reflect the Value Added Tax Credit accrued due to the payment of valued added tax on certain transactions in Argentina. The Company will realize this credit as an offset against V.A. taxes due on future revenues.  In accordance with APB 21, the asset is reported at net present value based upon the Company’s estimate of future revenues.  The Company used an expected benefit period of 7 years and a discount rate of 18.6% based upon the average Argentine interest rates and has recorded, as other expense, a $85,943 net present value adjustment in 2009, which is not deemed to be recoverable at this time.
  NOTE 15 – PROPERTY AND EQUIPMENT
  For the year ending December 31, 2009 the Company acquired $2,912 in office furniture and equipment and $4,045 in excavation equipment.  The excavation equipment has not yet been placed into service and therefore no depreciation expense was recorded in 2009.  The excavation equipment is included in the idle equipment in the table below.
  In July of 2008 the Company acquired for cash a truck-mounted drilling rig for $260,634. In December of 2008 the Company acquired spare parts and other related equipment for the drilling rig at a cost of $91,418. In October of 2008 the Company acquired a bulldozer for $37,765.  These items have not been placed into service as of the year ending December 31, 2009 and therefore no depreciation expense has been recorded to date.  These items are shown in the table below as idle equipment.
  In April, May and June of 2008 CCSA acquired three trucks, with a December 31, 2009 undepreciated value of $128,792. In 2008 CCSA acquired computer and camp equipment with a December 31, 2009 undepreciated value of $137,706. Also in 2007, CCSA acquired the La Josefina Estancia for $710,000.
  The following is a summary of property, equipment and accumulated depreciation at December 31, 2009 and 2008:
  December 31, 2009


December 31, 2008Office Furniture & Equipment

$
324,492


$
322,047Land


710,000



710,000Less accumulated depreciation


203,005



98,660Subtotal: Property, Plant & Equipment, net:


831,487



933,387Idle Equipment


393,862



389,817Total: Property, Plant & Equipment, net:

$
1,225,349


$
1,323,204
  Depreciation expense was $105,547 in 2009 and $90,634 in 2008.
  The Company evaluates the recoverability of property and equipment when events and circumstances indicate that such assets might be impaired. The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by these assets to their respective carrying amounts.
  Maintenance and repairs are expensed as incurred. Replacements and betterments are capitalized. The cost and related reserves of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in results of operations.
  NOTE 16 - SUBSEQUENT EVENTS
  Shareholder Loan
  Subsequent to December 31, 2009 HFLP loaned an additional $40,000 to the Company under the same terms as discussed in Note 9.
  Transfer of investments to related party
  On February 18, 2010 the Company transferred its stock in Black Hawk and its interest in the Dun Glen property to the Hunt Family Limited Partnership (“HFLP”), a related party, along with all its Mexican assets in consideration of cancelling $600,000 of the debt that the Company owed to HFLP on an outstanding note payable. The book value of the properties and stock transferred was $433,532 resulting in a gain on the sale of investments of $166,468 which was recorded in the first quarter of 2010.
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  Loan Purchase Agreement
  On March 8, 2010, Hunt Mining announced that it received acceptance from TSX Venture Exchange to enter into an agreement to purchase a portion of a loan owing from its wholly owned subsidiary CCSA to HuntMountain. Hunt Mining will acquire a portion of the loan totaling $700,000 at a 3% discount to the originally loaned amount. The total acquisition cost is therefore $679,000. Due to Argentine banking regulations, acquiring the loan in this way allows Hunt Mining to retain more working capital than if CCSA paid the loan back directly to HuntMountain.
  An agreement establishing the loan from HuntMountain to Hunt Mining was effected in June of 2009. The purpose of the loan was to finance CCSA’s ongoing operations while Hunt Mining’s management was working on the RTO that closed on December 23, 2009.
  Payoff of Assumed Accounts Payable
  As noted in Note 13, a condition of the Share Purchase Agreement relating to the RTO was that the Company must enter into a Note Receivable Agreement with CCSA pursuant to which the Company would agree to pay the remaining accounts payable of CCSA owed to an Argentine drilling contractor in the approximate amount of $1,613,373.  On March 9, 2010, the Company made a payment of $700,000 on the assumed liability from CCSA and converted $584,000 that had been recorded as a prepayment on the assumed liability which left an additional amount of $329,373 which was converted into a promissory note to the drilling contractor.  The note bears is payable in 8 monthly installments of $40,000 due on the 25th of each month starting April 25, 2010 and a final payment on December 25, 2010 of $18,752.  The company has made the April, May, June, July and August payments leaving an unpaid principal balance of $139,126 as of the date of this report.
  Purchase of Furniture and Fixtures from a Related Party
  Subsequent to March 31, 2010 Hunt Mining acquired furniture and fixtures from HFP, LLC, an entity controlled by the Company’s President and Chief Executive Officer, for US$42,368.
  Purchase of Equipment from a Related Party
  On June 8,2010, HFLP, a related party, purchased from the Company a fully depreciated truck for $5,000 which the Company recorded as a gain on the sale of equipment.  HFLP also purchased a tractor for $34,000 that had a carrying value of $37,764 with no depreciation because it had yet to be placed into service.  The Company recorded a loss on the sale of equipment of $3,764.  The final item that was purchased for $1,625 was a rock saw that had previously been expensed and had no book value.  The Company recorded a gain on the sale of the rock saw of $1,625.
  Deposits received for the Sale of Idle Drilling Equipment from a Related Party
  Deposits in the amount of $49,263, $48,732 and $39,865 were received on July 14, 2010, September 1, 2010 and October 13, 2010 respectively, combined with the forgiveness of an accounts payable amount of $19,954 for a total of $157,814 for the sale of the Company’s idle drilling equipment to Huntwood Industries, a related party.  The drilling equipment had a book value of $356,097 and the Company will recognize a loss on the sale of equipment in the amount of $198,283.
  Dissolution of the Company
  On February 18, 2010, the Company’s board of directors recommended and authorized a shareholder meeting to consider and vote upon a proposal to approve the voluntary dissolution and liquidation of the Company pursuant to a plan of complete dissolution and liquidation dissolution.  On July 16, 2010, the Company filed with the Securities and Exchange Commission (“SEC”), a preliminary schedule 14A proxy statement to submit the vote to the Company’s shareholders.  As of the date of the filing of this form 10-K, the preliminary 14A proxy statement has not yet been approved by the SEC and the vote has yet to go before the shareholders. The dissolution of the Company, if approved by the shareholders, will not affect the operations of Hunt Mining which will continue in existence along with its subsidiary companies.
  Warrant and Option Cancellation Agreements
  In February 18, 2010 the Company’s board of directors approved the Company to enter into warrant and option cancellation agreements with holders of the Company’s warrants and options.  The terms of such agreements are to be that such holder will agree to their warrants and/or options being cancelled in exchange for a common share grant equal to 10% of the number of warrants/options held.  As of July 1, 2010, most of the holders have signed such agreements, leaving only 300,000 of the Company’s warrants/options outstanding.
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  Subsequent events have been evaluated through November 9, 2010, the date that these financial statements were available to be issued.
  ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  Not applicable.
  ITEM 9A.
CONTROLS AND PROCEDURES
  EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
  In connection with the preparation of this annual report on Form 10-K, an evaluation was carried out by the Company’s management, with the participation of the Chief Executive Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of December 31, 2008.  Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.
  Based on that evaluation, the Company’s management concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Securities and Exchange Commission’s rules and forms.
  MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
  Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting.  The Company’s internal control over financial reporting is a process, under the supervision of the Chief Executive Officer and the Chief Financial Officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with United States generally accepted accounting principles (GAAP).  Internal control over financial reporting includes those policies and procedures that:
  ●
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets;
  ●
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and
  ●
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
  The Company’s management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  As a result of this assessment, management identified material weaknesses in internal control over financial reporting.
  A material weakness is a control deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
  The material weaknesses identified are described below:
  Lack of Appropriate Accounting Policies, Procedures, and Sufficiency of Accounting Resources.  Management of HuntMountain has not established with appropriate rigor the accounting policies, procedures, and documentation of significant judgments and estimates made by management in the preparation of the financial statements.  Additionally, the Company has limited accounting personnel to prepare its financial statements, including the consolidation of the Company and its subsidiaries.  As a result of the identified material weakness, required material adjustments were identified by the auditors.
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 Contents
  As a result of the material weaknesses in internal control over financial reporting described above, HuntMountain’s management has concluded that, as of December 31, 2009, the Company’s internal control over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework issued by the COSO.
  This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.  We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
  CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
  As of the end of the period covered by this report, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the period ended December 31, 2009, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
  ITEM 9B.
OTHER INFORMATION.
  The Company failed to file a form 8-K on October 19, 2009 under Item 1.01 “Entry into a Material Definitive Agreement”.  On October 13, 2009, the Company entered into a Share Purchase Agreement (“the Agreement”) between Sinomar Capital Corp (“Sinomar”) and Cerro Cazador S.A. (“CCSA”) and HuntMountain Resources LTD (“HuntMountain”) and HuntMountain Investments, LLC (“HMI”) whereas HuntMountain and HMI are hereinafter collectively called the “Shareholders”.
  Subject to the terms and conditions of the Agreement, Sinomar agrees to purchase all of the CCSA Shares from the Shareholders and in consideration therefor Sinomar shall issue to the Shareholders an aggregate total of 29,118,507 Sinomar Common Shares and 20,881,493 Sinomar Preferred Shares, at a deemed price of $0.30 per Sinomar Common Share and $0.30 per Sinomar Preferred Share, in exchange for all of the CCSA Shares, and the Shareholders agree to sell all of the Shareholders’ CCSA Shares on the foregoing basis.
  A copy of the Agreement is filed along with this form 10-K as exhibit 10.1.
  46
  PART III
  ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
  Directors and Executive Officers
  The following information is provided with respect to each executive officer and director of the Company:
  Name (age)

Position

Length of ServiceTim Hunt (57)

President, Chief Executive Officer and  Chairman

2005William R. Green (71)

Director

1993*Eberhard A. Schmidt (72)

Director

2005Alastair H. Summers (73)

Director

2006Randal L. Hardy (48)

Director

2005**Darrick Hunt (32)

Director

2008Matthew J. Hughes (49)

Executive Vice-President of Exploration & Chief Operating Officer

2005***Danilo Silva (47)

President of CCSA

2006Bryn Harman, CFA (40)

Chief Financial Officer

2007***
 
 
 *Previously held executive officer and director positions with the predecessor company, Metaline Mining & Leasing Company.
 **Previously served as President and Chief Financial Officer of the Company.
 *** Effective February 2, 2010 Mr. Matthew Hughes resigned from the position of Executive Vice-President of Exploration and Chief Operating Officer of the Company and Mr. Bryn Harman resigned from the position of Chief Financial Officer of the Company.
  Tim Hunt, President, Chief Executive Officer and Chairman, is a general partner of HFLP and is the founder and president of Spokane, Washington-based T.R.A. Industries, Inc., dba Huntwood Industries, one of the largest building products manufacturers in the Western United States. Mr. Hunt has led the development of Huntwood Industries over the past 20 years – taking the business from a start-up venture to a significant middle-market enterprise. During his business career, Mr. Hunt has been engaged in a variety of business start-up ventures both related and unrelated to Huntwood Industries. Mr. Hunt had also previously served as a member of the board of directors at State National Bank; a community based financial institution headquartered in Eastern Washington. Mr. Hunt also spent two years as an investment banker, specializing in the mining industry, with National Securities.
  William R. Green, P.E., Ph.D. is a mining engineer and geologist, and was a professor of mining engineering at the University of Idaho from 1965 to 1983. He has been actively involved in the mining industry since 1962, working as a consultant to financial managers and various US and Canadian public mining companies. He was a co-founder, and served as an officer and director, of both Bull Run Gold Mines and Yamana Resources. He was the President, CEO and Chairman of Mines Management, Inc., a U.S. public company from 1964 until 2003.
  Eberhard A. Schmidt, Ph.D. has more than 35 years of experience in exploring, evaluating and developing precious and base metal properties in the western United States and Mexico. He managed regional exploration offices for Cyprus Mines, Amoco Minerals and Meridian Minerals in Spokane and for Minera Hecla in Mexico. Dr. Schmidt received his Ph.D. in Structural and Economic Geology from the University of Arizona and is a past president of the Northwest Mining Association.
  Alastair H. Summers has more than 45 years of experience in mine development and production in North and South America, including over ten years as an executive with Hecla Mining Company. He was Vice President and General Manager for Minera Hecla de Mexico responsible for the design, construction, operation and reclamation of the La Choya open pit/heap leach gold mine. Mr. Summers also served as President and General Manager of Minera Hecla Venezolana initiating improvements to Hecla’s La Camorra operation which resulted in production increases from 85,000 to 250,000 ounces of gold per year. Mr. Summers’ career includes the development, design, and operation of several successful mines for The Bunker Hill Company, Western Nuclear, and American Mine Services. He is registered as a Professional Geologist in Idaho and Professional Engineer in Colorado.
  47
  Randal L. Hardy, serves as President and CEO Timberline Resources Corporation, a public drilling and precious metals exploration venture based in Coeur d’Alene, ID. Mr. Hardy was appointed as a Director in August 2007. Mr. Hardy was appointed to this position after previously holding the position of President of the Company since September 2006, and immediately prior to this time servicing as its Vice President and Chief Financial Officer. Mr. Hardy has over 20 years of experience in financial and operational management. He is the former President and CEO of Sunshine Minting, Inc., a precious metal custom minting and manufacturing firm. During his 8-year tenure as the Company’s President, it grew from 25 employees to over 125. Prior to this, Mr. Hardy served as Treasurer of the NYSE-listed Sunshine Mining and Refining Company for over 6 years. He graduated Magna Cum Laude from Boise State University with a BBA in Finance.
  Darrick Hunt, CPA is the Chief Financial Officer of Spokane, Washington-based Huntwood Industries, the largest building materials manufacturer and one of the largest employers in the Eastern Washington/Northern Idaho region.  He holds a license as a Certified Public Accountant under the Board of Accountancy of Washington State, having received his Bachelors in Business Administration from Gonzaga University.
  Matthew J. Hughes, who served as the Company’s Executive Vice President of Exploration and Chief Operating Officer until his resignation on February 2, 2010, is a geologist with seventeen years of experience in the discovery, exploration and mining of precious metal projects in the United States, Argentina, China, Brazil and Uzbekistan. Mr. Hughes was appointed as the Executive Vice President of Exploration and Chief Operating Officer in August 2007 after having served as Vice President of Exploration since December 2005. He has been directly responsible for the discovery of numerous precious and base metal occurrences, including the producing Mina Martha high-grade silver lode in Santa Cruz, Argentina. He has worked as the Chief Geologist for Mundoro Mining, Inc. where he led the exploration and development of the nine million ounce Maoling gold deposit, thought to be the largest undeveloped gold deposit in China. He served as Senior Exploration Geologist and consultant for Yamana Resources, Minas Buenaventura, and Silver Standard Resources. Mr. Hughes has been the Vice President of Exploration for Platero Resources, Chief Mine Geologist for Kinross Candelaria Mining Co., and Exploration Geologist for NERCO Exploration and Atlas Precious Metals. He received his Bachelor of Science degree in geology from the University of Oregon.  Effective February 2, 2010 Mr. Hughes resigned from the position of Executive Vice-President of Exploration and Chief Operating Officer of the Company.  Mr. Hughes is now the President, Chief Executive Officer and director of Hunt Mining, a majority owned company of HuntMountain.
  Danilo Silva, General Manager of South American Operations, also serves as the President of CCSA, the wholly-owned Argentine subsidiary of Hunt Mining a majority owned subsidiary of the Company.  He has over 18 years of experience in the natural resources industry, including over 11 years as a geologist in base and precious metal mining exploration. Mr. Silva has served as Senior Geologist and Project Manager for Yamana Resources and Compania Minera Polimet, as Senior Geologist for Buenaventura, and as General Manager for Platero Resources. While serving in these positions, he discovered numerous viable gold and silver targets. He has led successful exploration and drill programs and has managed the advancement of many projects, including the discovery and development of the Mina Martha high-grade silver mine in Santa Cruz province. Mr. Silva has served as a consulting geologist for several companies, including Placer Dome and Hidefield Gold. Mr. Silva holds a degree in Geological Science from the National University at Bahia Blanca in Argentina.
  Bryn Harman, CFA, served as the Company’s Chief Financial Officer until his resignation on February 2, 2010. Mr. Harman had been our Chief Financial Officer since November, 2007. Prior to joining us Mr. Harman had been the Vice President and Director of Research for ICM Asset Management since 2002. From 1999 until 2002 Mr. Harman was a Senior Equity Analyst for RedChip Companies. Mr. Harman is a Chartered Financial Analyst and is graduated from the University of Saskatchewan with a Bachelor of Commerce (finance) degree. Mr. Harman is a member of the CFA Institute and the Institute of Management Accountants.  Effective February 2, 2010 Mr. Harman resigned from the position of Chief Financial Officer of the Company.  Mr. Harman is now the Chief Financial Officer, Secretary and director of Hunt Mining, a majority owned company of HuntMountain.
  Committees of the Board of Directors
 Audit Committee
  The Audit Committee is responsible for monitoring the integrity of the Company’s financial reporting standards and practices and its financial statements, overseeing the Company’s compliance with ethics and compliance policies and legal and regulatory requirements, and selecting, compensating, overseeing, and evaluating the Company’s independent auditors.
  48
 William Green, Eberhard Schmidt and Alastair Summers serve as members of the Audit Committee. William Green, Eberhard Schmidt and Alastair Summers are independent as defined by NASDAQ marketplace rules 4200(a)(15) and 4350(d)(2). In forming our Board of Directors, we sought individuals with the ability to guide our operations based on their business experience, both past and present, and their education. Our business model is not complex and our accounting issues are straightforward. Responsibility for our operations is centralized within management. We recognize that having a person who possesses all of the attributes of an independent audit committee financial expert would be a valuable addition to our Board of Directors. However, we are not, at this time, able to compensate such a person, and therefore, may find it difficult to attract such a candidate.
 The Board of Directors has adopted a policy requiring that the Audit Committee pre-approve the audit and non-audit services performed by the independent auditor in order to assure that the provision of such services does not impair the auditor’s independence.
 Compensation Committee
  William Green, Eberhard Schmidt and Alastair Summers serve as members of the Compensation Committee. William Green, Eberhard Schmidt and Alastair Summers are independent as defined by NASDAQ marketplace rules 4200(a)(15) and 4350(d)(2).
  Corporate Governance and Nominating Committee
  William Green, Eberhard Schmidt and Alastair Summers serve as members of the Corporate Governance and Nominating Committee. William Green, Eberhard Schmidt and Alastair Summers are independent as defined by NASDAQ marketplace rules 4200(a)(15) and 4350(d)(2).
 The Company does not have a disclosure committee.
  Section 16(a) Beneficial Ownership Reporting Compliance
 Section 16(a) of the Securities Exchange Act of 1934 requires  our officers, directors and persons owning more than 10% of our common stock are obligated to file reports of ownership and changes in ownership with the Securities and Exchange Commission under Section 16(a) of the Securities Exchange Act of 1934. To our knowledge, based solely upon review of the copies of such reports received or written representations from the reporting persons, we believe that during our fiscal year ended December 31, 2009 our directors, executive officers and persons who own more than 10% of our common stock complied with all Section 16(a) filing requirements.
  Code of Ethics
  We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. A copy of the code of ethics was filed as Exhibit 14.1 with the Company’s Form 10-K on April 14, 2009.
  ITEM 11.
EXECUTIVE COMPENSATION
 The following table sets forth the compensation paid by the Company to its Chief Executive Officer and our other most highly compensated officers for the year ended December 31, 2009, the year ended December 31, 2008 and the year ended December 31, 2007:
  Name


Year


Salary


Bonus


Stock Awards


Option Awards


TotalTim Hunt,

President, CEO and Chairman


2009


$
0


$
0


$
0


$
0


$
02008


$
0


$
0


$
0


$
0


$
02007


$
0


$
0


$
0


$
0


$
0Matthew Hughes, (1)

Chief Operating Officer


2009


$
150,721


$
0


$
0


$
0


$
150,7212008


$
148,846


$
0


$
0


$
64,000


$
212,8462007


$
120,577


$
15,000


$
75,000


$
17,178


$
227,755Bryn Harman, (2)

Chief Financial Officer


2009


$
118,750


$
0


$
0


$
0


$
118,7502008


$
113,000


$
0


$
0


$
50,000


$
163,4232007


$
13,327


$
0


$
0


$
15,500


$
28,827
 (1)
Effective February 2, 2010, Mr. Hughes resigned from the position of Chief Operating Officer of the Company.
 (2)
Effective February 2, 2010, Mr. Harman resigned from the position of Chief Financial Officer of the Company.
  49
  Executive Compensation Agreements
  Hughes Employment Agreement
  Matthew Hughes has been an employee of the Company since December 2005 as Vice President of Exploration.  In August 2007, he entered into a seven-year employment agreement whereby he would become the Executive Vice President and Chief Operating Officer.  A brief description of the material terms of this agreement are as follows:  the term is seven-years with future renewals to be negotiated between the employee and the chief executive officer; it can be terminated for cause (without notice) or without cause; if termination occurs without cause, Mr. Hughes will be entitled to receive six (6) months of his annual salary in severance; in the event that the company is acquired and results in Mr. Hughes’ termination or diminution of duties, he will be entitled to receive twelve (12) months of his annual salary.  His compensation included an initial annual salary of $150,000, 150,000 shares of restricted stock, and a $15,000 cash bonus. Mr. Hughes’s base salary was set to increase periodically through the life of the agreement; however, due to cost cutting measures, Mr. Hughes salary was permanently reduced to $148,500 on January 1, 2009.
  Mr. Hughes was also granted incentive stock options to purchase 100,000 shares of common stock (at the closing stock price on the effective date of the agreement, August 22, 2007) pursuant to the 2005 Stock Option Plan, with 50,000 vesting on February 1, 2008 and 50,000 vesting on September 1, 2008.  Mr. Hughes is also eligible to receive health insurance for himself and his family through the Company, and the Company will pay the premiums for the policy he chooses.  Effective February 2, 2010 Mr. Hughes resigned from the position of Executive Vice-President of Exploration and Chief Operating Officer of the Company.
  Harman Employment Agreement
  On October 29, 2007 the Company entered into an employment agreement with Bryn Harman. Mr. Harman’s compensation included an annual salary rate of $105,000 until May 7, 2008, an annual salary rate of $115,000 from May 7, 2008 to November 7, 2008 and an annual rate of $125,000 thereafter, Due to cost cutting measures, Mr. Harman’s base salary was permanently reduced to an annual rate of $117,000 on January 1, 2009.  Mr. Harman was granted 150,000 stock options vesting over time during the first year of employment.  Of the 150,000 stock options, 50,000 were exercised in April of 2008 and the remaining 100,000 were subsequently cancelled on April 13, 2009.  Effective February 2, 2010 Mr. Harman resigned from the position of Chief Financial Officer of the Company.
  Outstanding Equity Awards at Year End
  The following table summarizes the amount of our executive officers’ equity-based compensation outstanding at the fiscal year ended December 31, 2009:
  Name


Options awards
Stock awardsNumber of Securities Underlying Unexercised Options - Exercisable


Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Options - Unexercisable


Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options


Option Exercise Price


Option Exercise date


Number of Shares That Have Not Vested


Market Value of Shares That Have Not Vested


Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested


Equity Incentive Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not VestedTim Hunt



250,000



—



—


$
0.25


03/26/2011



—



—



—



—Matthew Hughes



50,000



—



—


$
0.25


12/15/2011



—



—



—



—50,000



—



—


$
0.25


12/15/2012



—



—



—



—50,000



—



—


$
0.25


12/15/2013



—



—



—



—50,000



—



—


$
0.45


02/01/2013



—



—



—



—50,000



—



—


$
0.45


09/01/2013



—



—



—



—50,000



—



—


$
0.63


11/02/2011



—



—



—



—50,000



—



—


$
0.67


09/01/2015



—



—



—



——



50,000



—


$
0.67


02/01/2014



—



—



—



—
  50
  Director Compensation
  No annual compensation is paid to our directors.  Upon appointment to the board of directors each director is granted an option to purchase 150,000 shares of the Company’s common stock at the prevailing market price on the date of appointment. During the year ended December 31, 2009, no options were granted by the Company.  There was no compensation paid to any directors during the year ended December 31, 2009 and as such, no table is provided.
  Retirement, Resignation or Termination Plans
  We sponsor no plan, whether written or verbal, that would provide compensation or benefits of any type to an executive upon retirement, or any plan that would provide payment for retirement, resignation, or termination as a result of a change in control of our Company or as a result of a change in the responsibilities of an executive following a change in control of our Company.  Specific executive employment agreements described above do, however, provide, that in the event of a change in control, if the executive’s employment is terminated by the Company without cause, as such term is defined in the respective employment agreements, the executive will be entitled to the payment amounts set forth in the employment agreement.
  The Company does not have a disclosure committee.
  ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
  The following table sets forth information as of May 13, 2010 regarding any person known to the Company to be the beneficial owner of more than five percent of any class of the Company’s voting securities as well as the names and shareholdings of each director and executive officer of the Company, and the shareholdings of all directors and executive officers as a group.
  Name of Person or Group

Amount and Nature of Beneficial Ownership

(all direct unless otherwise noted)


Percentof ClassHunt Family Limited Partnership

1611 N. Molter Road, Ste. 201

Liberty Lake, WA 99019


86,576,694
(1)


73.51
%
 (1)
Includes 45,048,446 shares owned through the Hunt Family Limited Partnership, and 41,528,248 shares that could be issued upon the exercise of common stock purchase warrants within the next sixty days.  Tim Hunt and his spouse Resa Hunt personally exercise control powers over HFLP.
  Security Ownership of Management
 The following table sets out as of May 13, 2010, the names and shareholdings of each director and executive officer of the Company, and the shareholdings of all directors and executive officers as a group. At such date, the number of issued and outstanding shares of common stock of the Company was 76,251,362 and there were an additional 45,368,248 shares that could potentially be issued within the next sixty days upon the exercise of vested stock options and warrants.
  Name and Address of Beneficial Owner

Amount and Nature of

Beneficial Ownership

(all direct unless otherwise noted)


% of classTim Hunt – President, CEO and Chairman of the Board (1)

1611 N. Molter Road, Ste 201

Liberty Lake, WA 99019


108,206,200



91.44
%(6)William R. Green – Director(2)

1611 N. Molter Road, Ste 201

Liberty Lake, WA 99019


1,046,000



1.37
%(6)
  51
 Name and Address of Beneficial Owner

Amount and Nature of

Beneficial Ownership

(all direct unless otherwise noted)


% of classRandal L. Hardy – Director(4)

1611 N. Molter Road, Ste 201

Liberty Lake, WA 99019


475,000



0.62
%(6)Eberhard A. Schmidt – Director(2)

1611 N. Molter Road, Ste 201

Liberty Lake, WA 99019


165,000



0.22
%(6)Alastair H. Summers – Director(2)

1611 N. Molter Road, Ste 201

Liberty Lake, WA 99019


170,000



0.22
%(6)Darrick Hunt – Director(5)

1611 N. Molter Road, Ste 201

Liberty Lake, WA 99019


4,230,000



5.41
%(6)Matthew Hughes – EVP & COO(3)(8)

1611 N. Molter Road, Ste 201

Liberty Lake, WA 99019


645,000



0.84
%(6)Bryn D. Harman – Chief Financial Officer(8)

1611 N. Molter Road, Ste 201

Liberty Lake, WA 99019


25,324



0.03
%(6)Danilo Silva – President of Cerro Cazador, S.A.(2)

1611 N. Molter Road, Ste 201

Liberty Lake, WA 99019


150,000



0.20
%(6)Total Management Group


115,112,524
*


94.54
%(7)*All executive officers and directors as a group (9 persons)
  
 (1)
Includes 45,048,446 shares and 41,528,248 shares that could be issued through warrant conversion from a prior promissory note owned through the Hunt Family Limited Partnership; 508,700 shares owned jointly owned with Resa Hunt, Tim’s wife; 20,570,806 shares owned directly by Tim Hunt; 250,000 shares that could be issued upon exercise of options within 60 days, and 300,000 shares that could be issued through warrant conversion from a prior private equity sale. Tim Hunt personally exercises control powers over HFLP.
  (2)
includes 150,000 shares that could be issued upon exercise of options within 60 days.
  (3)
includes 400,000 shares and 40,000 warrants that could be issued upon exercise of options within 60 days.
  (4)
includes 400,000 shares that could be issued upon exercise of options within 60 days.
  (5)
includes 1,840,000 shares that could be issued through warrant conversion and 150,000 shares that could be issued upon exercise of options within 60 days.
  (6)
percentage calculations noted above assumes that only specific individual identified exercised its options and/or warrants.
  (7)
percentage calculation assumes that all executive officers and directors exercise options and/or warrants.
  (8)
Effective February 2, 2010, Mr. Hughes resigned from the position of Chief Operating Officer of the Company and Mr. Harman resigned from the position of Chief Financial Officer of the Company.
  There are no arrangements known to the Company, the operation of which may at a subsequent time result in the change of control of the Company.
  52




ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  This information is incorporated by reference from Notes 8, 9, 12, 13 and 16 to the Company’s Audited Financial Statements as set forth in Item 8 of this Form 10K.
  The Company has lease commitments on office space and storage space owned by HFLP, an entity controlled by the Company’s Chairman and CEO. The total annual lease obligation for this facility is $69,359 (not including common area maintenance charges).
  Shareholder Loan
  On June 2, 2009, pursuant to approval from its board of directors, the Company obtained an unsecured loan for multiple advances up to $5,000,000 (“the June 2009 Note”) from Hunt Family Limited Partnership (“HFLP”), a related party. The June 2009 Loan supersedes and replaces the shareholder loan (the October Note) owed to HFLP that had a principal balance of $3,760,500 on June 2, 2009.
  The June 2009 Note, which matures on December 31, 2009, bears interest at a rate of eleven percent (11%) per annum. All principal and accrued interest balances due pursuant to the June 2009 Note are convertible at the option of the holder into units of the Company’s common stock, at a conversion price of $0.10 per unit, where each unit consists of one share and one warrant to purchase a common share. Each warrant issued pursuant to conversion of the June 2009 Note shall have an exercise price of $0.10 per share and a seven (7) year expiration from the date of issuance.
  The original maturity date of the June 2009 Note was December 31, 2009.  By unanimous consent of the Company’s board of directors on December 17, 2009, the maturity date of the June 2009 Note was amended from December 31, 2009 to December 31, 2010.  At that time, also by unanimous consent, the Company’s board of directors increased the maximum aggregate principal amount available pursuant to the June 2009 Note from $5,000,000 to $5,500,000.
  In addition, concurrently and in consideration for the issuance of the June 2009 Note, all warrants previously issued to HFLP pursuant to the conversion of Notes shall be cancelled and an equal number of warrants to acquire common shares at an exercise price of $0.10 and a maturity date of April 22, 2016 shall be issued. On June 2, 2009 the Company recognized a financing fee expense of $2,837,295 to reflect the difference in the Black-Scholes valuation of the new warrants and the cancelled warrants.
  Concurrently and in consideration for the issuance of the June 2009 Note the Company granted to HFLP a 3% Net Smelter Royalty (“NSR”) on all of the Company’s resource properties in Mexico, past, present and future. The Company also granted an additional 2,000,000 warrants with a $0.10 exercise price and a seven (7) year term in conjunction with the inception of the June Note structure.
 
 The Company recognized the beneficial conversion feature associated with the June Note’s convertibility into shares and warrants. The total value of the shares was determined based on the trading price of the Company’s shares at the time of the draw on the June Note. The total value of warrants was determined using the Black Scholes option pricing model. In employing this model, the Company used the actual three month T-Bill rate on the advance dates for the risk-free rate. Similarly, the actual share price on advance dates was used in the calculation.  The Company assumed expected volatility of 105.06%, no dividends and a five year horizon in all Black Scholes option pricing calculations.
  Additional advances totaling $1,308,500 have been received on the June 2009 Note since it replaced the shareholder loan owed to HFLP that had a principal balance of $3,760,500 on June 2, 2009 bringing the total principal balance to $5,069,000 at December 31, 2009.
  More detail
  On December 18, 2009, in conjunction with the RTO, the Company received an advance of $207,990 from Hunt Mining as a refundable deposit.
  At December 31, 2009 the Company transferred a note payable to Huntwood Industries, an entity controlled by the Company’s Chief Executive Officer and Chairman.  The Company now owes an accounts payable balance of $19,953.72 to Huntwood Industries.
  At December 31, 2009 the Company had an accounts payable owing to a director and officer of CCSA, for C$16,805 relating to CCSA’s lease of office space.
  53
  At December 31, 2009 the Company had fees payable advance for accounting expenses owing to a director of CCSA, of C$9,241.
  During the year ended December 31, 2009 the Company paid C$57,002 to  a director of CCSA for accounting fees.
  During the year ended December 31, 2009 the Company paid C$144,843 to  a director and officer of CCSA, for geological fees.
  As of December 31, 2008 the Company had an exploration advance receivable of $200 owed by an executive officer of the Company.
  During the year ended December 31, 2008 the company paid $14,938 to a director of the Company, for consulting services.
  As of December 31, 2008 the Company had an exploration advance receivable of $200 owed by an executive officer of the Company.
  At December 31, 2008 the Company had an employee exploration expense payable of C$4,172 owing to  a director and officer of CCSA, for exploration expenses incurred on behalf of the Company.
  At December 31, 2008 the Company had fees payable advance for accounting expenses owing a director of CCSA,of C$5,072.
  During the year ended December 31, 2008 the Company paid C$24,841 to a director of CCSA, for accounting fees.
  During the year ended December 31, 2008 the Company paid C$122,980 to a director and officer of CCSA, for geological fees.
 ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Audit Fees
  The aggregate fees billed for professional services rendered by the Company’s principal accountant for the audit of the Company’s annual financial statements for the fiscal years ended December 31, 2009 and 2008 and for services rendered by the Company’s principal accountant relating to the preparation of quarterly financial statements for inclusion in the Company’s quarterly reports on Form 10Q were $53,885 and $57,597 respectively.
  Audit Related Fees
  The Company incurred no fees during the last two fiscal years for assurance and related services by the Company’s principal accountant that were reasonably related to the performance of the audit of the Company’s financial statements.
 
 Tax Fees
  The Company incurred fees totaling $2,606 and $3,432 during the fiscal years ended December 31, 2009 and 2008, respectively, for professional services rendered by the Company’s principal accountant for tax compliance, tax advice and tax planning.
  All Other Fees
  The Company incurred $225 and $7,402 in fees during the fiscal years ended December 31, 2009 and 2008 respectively, for services rendered by the Company’s principal accountant relating all other services.
  Our audit committee’s pre-approval policies and procedures described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committees pre-approve all accounting related activities prior to the performance of any services by any accountant or auditor.
  The percentage of hours expended on the principal accountant’s engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full time, permanent employees was 0%.
 54
  ITEM 15.
EXHIBITS
 (a) The following documents are filed as part of the report:
  Incorporated as referenceExhibit
Document Description
Form
Date
Number
FiledHerewith
 3.1
Articles of incorporation
DEF 14C
10/5/2007
3.13.2
Bylaws
DEF 14C
10/5/2007
3.210.1
Share Purchase Agreement



X14.1
Code of Business Conduct and Ethics
10-K
4/14/2010
14.114.2
Code of Ethics for President, CEO and Senior Financial Officers
10-K
4/14/2010
14.114.3
Code of Ethics for Financial Reporting Officers
10-K
4/14/2010
14.121
Subsidiaries of the Registrant



X31.1
Certification of the Principal Executive Officer



X31.2
Certification of the Chief Financial Officer



X32.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



X32.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



X99.1
Audit Committee Charter
10-K
4/14/2010
14.1
 
 55
 
 SIGNATURES
  In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  HUNTMOUNTAIN RESOURCES LTD.TIM HUNTBy:Tim Hunt, President and Chief Executive Officer(Principal Executive Officer)TIM HUNTBy:Tim Hunt(Principal Financial Officer)
  In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
  TIM HUNT11/9/2010Tim Hunt
DatePresident, Chief Executive Officer and Chairman(Principal Executive and Financial Officer)WILLIAM R. GREEN11/9/2010William R. Green
DateDirectorEBERHARD SCHMIDT11/9/2010Eberhard Schmidt
DateDirectorALASTAIR SUMMERS11/9/2010Alastair Summers
DateDirectorDARRICK HUNT11/9/2010Darrick Hunt
DateDirectorRANDAL HARDY11/9/2010Randal Hardy
DateDirector
   56