XOTC:CNYC Annual Report 10-K Filing - 6/30/2012

Effective Date 6/30/2012


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2012

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 000-33189

CANYON COPPER CORP.
(Exact name of registrant as specified in its charter)

NEVADA 88-0452792
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   
Suite 408 - 1199 West Pender Street  
Vancouver, BC, Canada V6E 2R1
(Address of principal executive offices) (Zip Code)
   
Registrant’s telephone number, including area code (604) 331-9326
   
Securities registered under Section 12(b) of the Exchange Act: NONE.
Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.00001 Par Value per Share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.
Yes [   ]     No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [   ]     No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed 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 days.
Yes [X]     No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (s. 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X]     No [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (s229.405 of this chapter) 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.
[   ]

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 of the Exchange Act.

Large accelerated filer [   ] Accelerated filer                      [   ]
Non-accelerated filer   [   ] (Do not check if a smaller reporting company) Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes [   ]     No [X]

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 the last business day of the registrant’s most recently completed second fiscal quarter.
$11,538,328, based on a closing price of $0.18 of the issuer’s common stock on December 30, 2011.

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:
68,696,934, as at September 26, 2012.


CANYON COPPER CORP.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2012

TABLE OF CONTENTS

  PAGE
     
PART I   4
     
ITEM 1. BUSINESS 4
ITEM 1A. RISK FACTORS 7
ITEM 2. PROPERTIES 12
ITEM 3. LEGAL PROCEEDINGS 28
ITEM 4. MINE SAFETY DISCLOSURES. 29
     
PART II   30
     
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 37
ITEM 9A. CONTROLS AND PROCEDURES. 37
ITEM 9B. OTHER INFORMATION. 38
     
PART III   39
     
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 39
ITEM 11. EXECUTIVE COMPENSATION. 42
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. 45
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. 47
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. 47
     
SIGNATURES   50

2


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements contained in this Annual Report constitute "forward-looking information.” These statements, identified by words such as “plan,” "anticipate,” "believe,” "estimate,” "should,” "expect" and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. Forward-looking information involves known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors include, among others, general business, economic, competitive, political and social uncertainties; limited operating history; the actual results of current exploration activities; ability to obtain sufficient financing to meet our ongoing operating costs; changes in project parameters as plans continue to be refined; changes in labour costs or other costs of operation; future mineral prices; equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry, including but not limited to environmental hazards, cave-ins, pit-wall failures, flooding, rock bursts and other acts of God or unfavourable operating conditions and losses; delays in obtaining governmental approvals or financing or in the completion of exploration activities, as well as those factors discussed in the section titled "Item 1A. Risk Factors" in this Annual Report.

Forward looking information is based on a number of material factors and assumptions, including the results of exploration and drilling activities, the availability and final receipt of required approvals, licenses and permits, that sufficient working capital is available to complete proposed exploration and drilling activities, that contracted parties provide goods and/or services on the agreed time frames, the equipment necessary for exploration is available as scheduled and does not incur unforeseen break downs, that no labour shortages or delays are incurred and that no unusual geological or technical problems occur. While we consider these assumptions may be reasonable based on information currently available to us, they may prove to be incorrect. Actual results may vary from such forward-looking information for a variety of reasons, including but not limited to risks and uncertainties disclosed in the section titled “Item 1A. Risk Factors” in this Annual Report.

We intend to discuss in our quarterly and annual reports any events or circumstances that occurred during the period to which such documents relate that are reasonably likely to cause actual events or circumstances to differ materially from those disclosed in this Annual Report. New factors emerge from time to time, and it is not possible for management to predict all of such factors and to assess in advance the impact of each such factor on our business or the extent to which any factor, or combination of such factors, may cause actual results to differ materially from those contained in any forwarding looking information.

We advise you to carefully review the reports and documents we file from time to time with the United States Securities and Exchange Commission (the “SEC”), particularly its periodic reports filed with the SEC pursuant to the Securities Exchange Act of 1934 (the "Exchange Act").

As used in this Annual Report, the terms “we,” “us,” “our,” “Canyon Copper,” and the “Company” refer to Canyon Copper Corp., unless otherwise indicated. All dollar amounts in this Annual Report are expressed in U.S. dollars, unless otherwise indicated.

3


PART I

ITEM 1.            BUSINESS.

OVERVIEW

We were incorporated on January 21, 2000 under the laws of the State of Nevada.

We are an exploration stage company engaged in the acquisition, exploration and development of mineral properties. We currently hold 100% title in a major claim block totalling 661 unpatented mineral claims, covering approximately 13,220 acres located in Mineral County, Nevada (the “New York Canyon Claims”). We also hold 21 patented mineral claims covering an area of approximately 420 acres, located within the vicinity of the New York Canyon Claims area. We collectively refer to the New York Canyon Claims and the patented claims as the “New York Canyon Project.” See “Item 2. Properties”.

We also hold an option to acquire a 100% interest in a copper porphyry project comprised of 307 unpatented mineral claims having an area of approximately 6,300 acres located on the northern end of the Walker Lane Belt in Plumas County, California (the “Moonlight Property”). We acquired our interest in the Moonlight Property pursuant to an assignment agreement dated November 25, 2011 among Metamin Enterprises Inc. (the “Assignor”), a company controlled by Benjamin Ainsworth, our President, Secretary and director, Metamin Enterprises USA Inc., a wholly owned subsidiary of the Assignor, and the Company. See “Significant Corporate Developments” and “Item 2. Properties”.

We have not earned any revenues to date and do not anticipate earning revenues until such time as we enter into commercial production of our mineral properties. We are presently in the exploration stage of our business and we can provide no assurance that commercially viable mineral deposits exist on our claims or that we will discover commercially exploitable levels of mineral resources on our properties, or if such deposits are discovered, that we will enter into further substantial exploration programs.

SIGNIFICANT CORPORATE DEVELOPMENTS

We experienced the following significant corporate developments since the beginning of the fiscal year ended June 30, 2012:

1.

Listing on the TSX Venture Exchange. On July 18, 2011, our shares of common stock commenced trading on the TSX Venture Exchange under the symbol “CNC”.

   
2.

New York Canyon Project: Acquisition of Patented Mineral Claims. In October 2011, we acquired 100% title to three patented mineral claims included in the New York Canyon Project. The patented mineral claims, being Copper Queen 1, Copper Queen 2 and Mildred, form a contiguous block of approximately 57 acres over the Copper Queen workings including 2 former mine shafts.

   
3.

Moonlight Property: Assignment Agreement. On November 25, 2011, we entered into an assignment agreement (the “Assignment Agreement”) with Metamin Enterprises Inc. (the “Assignor”), a company controlled by Benjamin Ainsworth, our President, Secretary and director, and Metamin Enterprises USA Inc. (the “Subsidiary”), a wholly owned subsidiary of the Assignor, whereby: (i) the Assignor assigned all of its right, title and interest in and to an option agreement dated September 20, 2010, as amended on February 18, 2011 and October 31, 2011, (the “Option Agreement”) between the Assignor and Lester Storey (the “Optionor”) in respect of a mineral property located in Plumas County, California (the “Moonlight Property”); and (ii) the Subsidiary transferred to us certain mineral claims held by the Subsidiary that form part of the Moonlight Property.

   

In consideration of the assignment, we agreed to:


  (a)

pay to the Assignor the following cash payments:

       
  (i)

$15,000 on January 16, 2012, the date of approval from the TSX Venture Exchange (the “Exchange Approval Date”) (which amount has been paid);

  (ii)

$25,000 on or before February 18, 2012 (which amount has been paid);

4



  (iii)

$25,000 on or before February 18, 2013;

  (iv)

an annual advanced royalty, deductible from any future royalty payments, of $15,000 commencing on February 18, 2014 and payable every year thereafter; and


  (b)

issue to the Assignor the following shares of our common stock (“Shares”):

     
  (i)

75,000 Shares on the Exchange Approval Date (which shares have been issued);

  (ii)

75,000 Shares on or before February 18, 2012 (which shares have been issued);

  (iii)

150,000 Shares on or before February 18, 2013; and

  (iv)

200,000 Shares on or before February 18, 2014.

We also reimbursed the Assignor approximately $90,000 for annual maintenance and exploration expenses previously incurred on the Moonlight Property by the Assignor. The Assignor will retain a 1% net smelter return on metals extracted from the Moonlight Property, which can be repurchased by us for $1,000,000, and a gross overriding royalty of 2.5% on receipts from the sale of industrial minerals.

As we acquired the Assignor’s right and interest in the Option Agreement, we will also be required to do the following in order to maintain and exercise the Option:

  (a)

pay to the Optionor the following cash payments:

     
  (i)

$25,000 on or before February 18, 2012 (which amount has been paid);

  (ii)

$25,000 on or before February 18, 2013;

  (iii)

an annual advanced royalty, deductible from any future royalty payments, of $15,000 commencing on February 18, 2014 and payable every year thereafter; and

       
  (b)

issue to the Optionor the following Shares:

     
  (i)

75,000 Shares on the Exchange Approval Date (which shares have been issued);

  (ii)

75,000 Shares on or before February 18, 2012 (which shares have been issued);

  (iii)

150,000 Shares on or before February 18, 2013; and

  (iv)

200,000 Shares on or before February 18, 2014.


Under the Option Agreement, we are also required to incur $100,000 in exploration expenditures on the Moonlight Property by February 18, 2013. The Optionor will retain a 1% net smelter return on metals extracted from the Moonlight Property, which can be repurchased by us for $1,000,000, and a gross overriding royalty of 2.5% on receipts from the sale of industrial minerals.

   
4.

New York Canyon Project: Implementing Phase One Exploration Program. In August 2011, we commenced Phase One of our exploration program on the New York Canyon Project. Phase One involved the re-assay of 1,440 drill samples from our 2006 drill program on Longshot Ridge. In early 2012, we received the results of the re-analysis and engaged an independent consultant to update our 2010 mineral resource estimate. See “Item 2. Properties – New York Canyon Project – Current Exploration Activities”.

   
5.

New York Canyon Project: Project Wide Geochemical Sampling Program. In summer 2012, we commenced a geochemical program to cover the considerable area of the New York Canyon Project with a survey of arroyo/stream sediments. The purpose of the survey is to assess the potential for areas of mineralization that may be associated with the several areas of old prospects and workings within the claims. See “Item 2. Properties - New York Canyon Project – Current Exploration Activities”.

   
6.

New York Canyon Project: Reduction in Mineral Claims to Reduce BLM Fees. In August 2012, as part of a cost reduction initiative, we conducted a detailed review of our New York Canyon Claims in order to determine whether certain claims should be released due to their low mineral potential. As a result of our review, we determined that 632 mineral claims could be released, resulting in Bureau of Land Management (“BLM”) annual fees being reduced by approximately $88,500.

5


PRODUCTS, DISTRIBUTION, SUPPLIERS, AND CUSTOMERS

We do not currently produce any products, metals, or minerals nor do we offer any products for sale. We are not party to any distribution arrangements, and have no principal customers or suppliers. We do not anticipate any changes in this status for at least the next 12 months, or until such time as there is a commercially viable mineral or metal deposits located on our mineral properties.

COMPETITION

We are an exploration stage company. We compete with other mineral resource exploration and development companies for financing and for the acquisition of new mineral properties. Many of the mineral resource exploration and development companies with whom we compete have greater financial and technical resources than us. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford greater geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and development. This competition could adversely impact on our ability to finance further exploration and to achieve the financing necessary for us to develop our mineral properties.

MARKETS AND ECONOMICS

Although we compete with other junior exploration companies for financing, properties of merit, and subcontractors, there is no competition for the exploration or removal of mineralized material from the New York Canyon Project or the Moonlight Property. Although there can be no assurance, large and well capitalized markets are readily available for all metals and precious metals throughout the world. A very sophisticated futures market for the pricing and delivery of future production also exists. At present there are no limitations with respect to the sale of metals or precious metals other than price. The price for metals is affected by a number of global factors, including economic strength and resultant demand for metals for production, fluctuating supplies, mining activities and production by others in the industry, and new and or reduced uses for subject metals.

GOVERNMENTAL CONTROLS AND APPROVALS

Exploration and development activities are all subject to stringent national, state and local regulations. All permits for exploration and testing must be obtained through the local Bureau of Land Management (“BLM”). The granting of permits requires detailed applications and filing of a bond to cover the reclamation of areas of exploration. From time to time, an archaeological clearance may need to be obtained prior to proceeding with any exploration programs.

We have applied for and received permits from the BLM to conduct drilling activities on BLM administered lands within the New York Canyon Project. The BLM reference the property as case file NV N-79198. We have also applied to the BLM for permits to conduct drilling on the Moonlight Property. We are required to adhere to the stipulations of the permit, primarily to plug all drill holes as they are completed and to reclaim roads and drill sites when they are no longer necessary. Reclamation work is ongoing but not complete as the project remains active.

Mining operations are regulated by Mine and Safety Health Administration (“MSHA”). MSHA inspectors will periodically visit projects to monitor health and safety for the workers, and to inspect equipment and installations for code requirements. Although we are not engaged in mining operations, we require all of our workers to have completed safety training courses when working on our project.

Other regulatory requirements monitor the following:

  (a)

Explosives and explosives handling.

  (b)

Use and occupancy of site structures associated with mining.

  (c)

Hazardous materials and waste disposal.

  (d)

State Historic site preservation.

  (e)

Archaeological and paleontological finds associated with mining.

6


We believe that we are in compliance with all laws and plans to continue to comply with the laws in the future. We believe that compliance with the laws will not adversely affect its business operations. There is however no assurance that any change in government regulation in the future will not adversely affect our business operations.

ENVIRONMENTAL LIABILITY

We will have to sustain the cost of reclamation and environmental remediation for all exploration work undertaken. Both reclamation and environmental remediation refer to putting disturbed ground back as close to its original state as possible. Other potential pollution or damage must be cleaned up and renewed along standard guidelines outlined in the usual permits. Reclamation is the process of bringing the land back to its natural state after completion of exploration activities. Environmental remediation refers to the physical activity of taking steps to remediate, or remedy, any environmental damage caused. The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the recommended work program. Because there is presently no information on the size, tenor, or quality of any resource or reserve at this time, it is impossible to assess the impact of any capital expenditures on earnings, our competitive position or us in the event that a potentially economic deposit is discovered.

Prior to undertaking mineral exploration activities, we must make application for a permit, if we anticipate disturbing land. A permit is issued after review of a complete and satisfactory application. We do not anticipate any difficulties in obtaining a permit, if needed. If we enter the production phase, the cost of complying with permit and regulatory environment laws will be greater because the impact on the project area is greater. Permits and regulations will control all aspects of the production program if the project continues to that stage. Examples of regulatory requirements include:

  (i)

Water discharge will have to meet drinking water standards;

  (ii)

Dust generation will have to be minimal or otherwise re-mediated;

  (iii)

Dumping of material on the surface will have to be re-contoured and re-vegetated with natural vegetation;

  (iv)

An assessment of all material to be left on the surface will need to be environmentally benign;

  (v)

Ground water will have to be monitored for any potential contaminants;

  (vi)

The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be re-mediated; and

  (vii)

There will have to be an impact report of the work on the local fauna and flora including a study of potentially endangered species.

PATENTS AND TRADEMARKS

We do not own, either legally or beneficially, any patents or trademarks.

RESEARCH AND DEVELOPMENT ACTIVITIES AND COSTS

We have no plans to undertake any research and development activities in the foreseeable future, and have not incurred research and development expenditures to date.

EMPLOYEES

Aside from our officers and directors, we have no employees at present.

ITEM 1A.          RISK FACTORS.

The following are some of the important factors that could affect our financial performance or could cause actual results to differ materially from estimates contained in our forward-looking statements. We may encounter risks in addition to those described below. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, financial condition or results of operation.

7


An investment in our common stock involves a high degree of risk. Investors should carefully consider the risks described below and the other information in this Annual Report before investing in our common stock. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed. The price of our common stock could decline due to any of these risks, and investors may lose all or part of their investment.

We lack an operating history and have losses which we expect to continue into the future. As a result, we may have to suspend or cease exploration activities and if we do not obtain sufficient financing, our business will fail.

We were incorporated on January 21, 2000 and to date have been involved primarily in the acquisition of our mineral properties and the exploration and development on our New York Canyon Project and our Moonlight Property. We have no exploration history upon which an evaluation of our future success or failure can be made. Our ability to achieve and maintain profitability and positive cash flow is dependent upon:

- our ability to locate a profitable mineral property; and
   
- our ability to generate revenues.

Our plan of operation calls for significant expenses in connection with the exploration of the New York Canyon Project and the Moonlight Property, which may require us to obtain financing. We recorded a net loss of $597,845 for the year ended June 30, 2012 and have an accumulated deficit of $22,435,613 since inception. As at June 30, 2012, we had cash of $718,907. For the next twelve months, we have sufficient funds to meeting our annual claim payments, carrying out our geochemical sampling program on the New York Canyon project and meeting our ongoing reporting obligations. However, we will require additional financing in order to implement the proposed shallow reverse drill program on the Moonlight Property and the test drilling program on the New York Canyon Project. There is no assurance we will be successful in raising such funding or on terms that are acceptable to us. Since inception, we have been dependent on investment capital and debt financing from third parties as our primary source of liquidity. We anticipate continuing to rely on sales of shares of our common stock and loans in order to continue to fund our business operations. Issuances of additional shares will result in further dilution of our existing shareholders.

Obtaining financing would be subject to a number of factors, including the market prices for the mineral property and base and precious metals. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us. Since our inception, we have used our common stock to raise money for our operations and for our property acquisitions. We have not attained profitable operations and are dependent upon obtaining financing to pursue our plan of operation.

Because we anticipate our operating expenses will increase prior to our earning revenues, we may never achieve profitability.

Prior to completion of our exploration stage, we anticipate that we will incur increased operating expenses without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from the exploration of our mineral claims and the production of minerals thereon, if any, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we may not be able to ever generate any operating revenues or achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.

Because we are an exploration stage company, our business has a high risk of failure.

As noted in the financial statements that are included with this Annual Report, we are an exploration stage company that has incurred net losses since inception, we have not attained profitable operations and we are dependent upon obtaining adequate financing to complete our exploration activities. These conditions, as indicated in our audit report included in this Annual Report for the year ended June 30, 2012, raise substantial doubt as to our ability to continue as a going concern. The success of our business operations will depend upon our ability to obtain further financing to complete our planned exploration program and to attain profitable operations. If we are not able to complete a successful exploration program and attain sustainable profitable operations, then our business will fail.

8


Because we have not commenced business operations, we face a high risk of business failure.

We have not earned any revenues as of the date of this Annual Report. Potential investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.

We have no known mineral reserves and if we cannot find any, we will have to cease operations.

We have no mineral reserves. Mineral exploration is highly speculative. It involves many risks and is often non-productive. Even if we are able to find mineral reserves on our property our production capability is subject to further risks including:

-

Costs of bringing the property into production including exploration work, preparation of production feasibility studies, and construction of production facilities, all of which we have not budgeted for;

- Availability and costs of financing;
- Ongoing costs of production; and
- Environmental compliance regulations and restraints.

The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond our control and which cannot be accurately predicted, such as market fluctuations, the lack of milling facilities and processing equipment near the New York Canyon Project and such other factors as government regulations, including regulations relating to allowable production, exporting of minerals, and environmental protection. If we do not find a mineral reserve or define a mineral inventory containing gold, silver or copper or if we cannot explore the mineral reserve, either because we do not have the money to do it or because it will not be economically feasible to do it, we will have to cease operations and investors will lose their investment.

In order to maintain our rights to our mineral properties, we will be required to make annual filings with federal and state regulatory agencies and/or be required to complete assessment work on our mineral properties.

In order to maintain our rights to our mineral properties, we will be required to make annual filings with federal and state regulatory authorities. In addition, we may be required by federal and/or state legislation or regulations to complete minimum annual amounts of mineral exploration work on our mineral properties. A failure by us to meet the annual maintenance requirements under federal and state laws could cause our rights to our mineral properties to lapse.

Because of the inherent dangers involved in mineral exploration, there is a risk that we may incur liability or damages if and when we conduct mineral exploration activities.

The search for valuable minerals involves numerous hazards. As a result, if and when we conduct exploration activities we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or against which we may elect not to insure. The payment of such liabilities may have a material adverse effect on our financial position.

If the price of base and precious metals declines, our financial condition and ability to obtain future financings will be impaired.

The price of base and precious metals is affected by numerous factors, all of which are beyond our control. Factors that tend to cause the price of base and precious metals to decrease include the following:

(a)

Sales or leasing of base and precious metals by governments and central banks;

   
(b)

A low rate of inflation and a strong US dollar;

   
(c)

Speculative trading;

9



(d)

Decreased demand for base and precious metals industrial, jewelry and investment uses;

   
(e)

High supply of base and precious metals from production, disinvestment, scrap and hedging;

   
(f)

Sales by base and precious metals producers and foreign transactions and other hedging transactions; and

   
(g)

Devaluing local currencies (relative to base and precious metals price in US dollars) leading to lower production costs and higher production in certain major base and precious metals producing regions.

Our business is dependent on the price of base and precious metals. We have not undertaken hedging transactions in order to protect us from a decline in the price of base and precious metals. A decline in the price of base and precious metals may also decrease our ability to obtain future financings to fund our planned development and exploration programs.

If we are unable to hire and retain key personnel, we may not be able to implement our business plan.

Our success is dependent upon the performance of key personnel working full-time in management, supervisory and administrative capacities or as consultants. This is particularly true in highly technical businesses such as mineral exploration. These individuals are in high demand and we may not be able to attract the personnel we need. The loss of the services of senior management or key personnel could have a material and adverse effect on us, our business and results of operations. Failure to hire key personnel when needed, or on acceptable terms, would have a significant negative effect on our business.

As we undertake exploration of our mineral properties, we will be subject to compliance with government regulation that may increase the anticipated cost of our exploration program.

There are several governmental regulations that materially restrict mineral exploration. We are required to obtain work permits, post bonds and perform remediation work for any physical disturbance to the land in order to comply with these laws. If we enter the production phase, the cost of complying with permit and regulatory environment laws will be greater because the impact on the project area is greater. Permits and regulations will control all aspects of the production program if the project continues to that stage. Examples of regulatory requirements include:

(a)

Water discharge will have to meet drinking water standards;

   
(b)

Dust generation will have to be minimal or otherwise re-mediated;

   
(c)

Dumping of material on the surface will have to be re-contoured and re-vegetated with natural vegetation;

   
(d)

An assessment of all material to be left on the surface will need to be environmentally benign;

   
(e)

Ground water will have to be monitored for any potential contaminants;

   
(f)

The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be re-mediated; and

   
(g)

There will have to be an impact report of the work on the local fauna and flora including a study of potentially endangered species.

There is a risk that new regulations could increase our costs of doing business and prevent us from carrying out our exploration program. We will also have to sustain the cost of reclamation and environmental remediation for all exploration work undertaken. Both reclamation and environmental remediation refer to putting disturbed ground back as close to its original state as possible. Other potential pollution or damage must be cleaned-up and renewed along standard guidelines outlined in the usual permits. Reclamation is the process of bringing the land back to its natural state after completion of exploration activities. Environmental remediation refers to the physical activity of taking steps to remediate, or remedy, any environmental damage caused. The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the recommended work program. If remediation costs exceed our cash reserves we may be unable to complete our exploration program and have to abandon our operations.

10


If we become subject to increased environmental laws and regulation, our operating expenses may increase.

Our development and production operations are regulated by both US Federal, California and Nevada state environmental laws that relate to the protection of air and water quality, hazardous waste management and mine reclamation. These regulations will impose operating costs on us. If the regulatory environment for our operations changes in a manner that increases costs of compliance and reclamation, then our operating expenses would increase with the result that our financial condition and operating results could be adversely affected.

There has been a very limited public trading market for our securities, and the market for our securities may continue to be limited and be sporadic and highly volatile.

There is currently a limited public market for our common stock. Our common stock trades in Canada on the TSX Venture Exchange and over the counter in the United States on the OTC Bulletin Board and OTCQB market place. We cannot assure you that an active market for our shares will be established or maintained in the future. The OTC Bulletin Board and OTCQB are not national securities exchanges, and many companies have experienced limited liquidity when traded through these quotation systems. Holders of our common stock may, therefore, have difficulty selling their shares, should they decide to do so. In addition, there can be no assurances that such markets will continue or that any shares, which may be purchased, may be sold without incurring a loss. The market price of our shares, from time to time, may not necessarily bear any relationship to our book value, assets, past operating results, financial condition or any other established criteria of value, and may not be indicative of the market price for the shares in the future.

In addition, the market price of our common stock may be volatile, which could cause the value of our common stock to decline. Securities markets experience significant price and volume fluctuations. This market volatility, as well as general economic conditions, could cause the market price of our common stock to fluctuate substantially. Many factors that are beyond our control may significantly affect the market price of our shares. These factors include:

- price and volume fluctuations in stock markets;
- changes in our operating results;
- any increase in losses from levels expected by securities analysts;
- changes in regulatory policies or law;
- operating performance of companies comparable to us; and
- general economic trends and other external factors.

Even if an active market for our common stock is established, stockholders may have to sell their shares at prices substantially lower than the price they paid for the shares or might otherwise receive than if an active public market existed.

If we complete a financing through the sale of additional shares of our common stock, shareholders will experience dilution.

The most likely source of future financing presently available to us is through the issuance of our common stock. Any sale of share capital will result in dilution to existing shareholders. The only other anticipated alternative for the financing of further exploration would be the offering by us of an interest in our properties to be earned by another party or parties carrying out further exploration thereof, which is not presently contemplated.

Because our stock is a penny stock, stockholders will be more limited in their ability to sell their stock.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system.

11


Because our securities constitute "penny stocks" within the meaning of the rules, the rules apply to us and to our securities. The rules may further affect the ability of owners of shares to sell our securities in any market that might develop for them. As long as the quotation price of our common stock is less than $5.00 per share, the common stock will be subject to Rule 15g-9 under the Securities Exchange Act of 1934 (the “Exchange Act”). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that:

1.

contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;

   
2.

contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of securities laws;

   
3.

contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;

   
4.

contains a toll-free telephone number for inquiries on disciplinary actions;

   
5.

defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and

   
6.

contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation.

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.

ITEM 2.            PROPERTIES.

We rent approximately 1,606 square feet of office space located at Suite 408, 1199 West Pender Street, Vancouver, British Columbia, Canada from ESO Uranium Corp. at a cost of approximately CDN $3,500 per month. This rental is on a month-to-month basis with no formal agreements.

We do not own any real property. We currently hold 100% title in a major claim block totalling 661 unpatented mineral claims, covering approximately 13,220 acres located in Mineral County, Nevada (the “New York Canyon Claims”). We also hold 21 patented mineral claims covering an area of approximately 420 acres, located within the vicinity of the New York Canyon Claims area. We collectively refer to the New York Canyon Claims and the patented mineral claims as the “New York Canyon Project.” We also hold an option to acquire a 100% interest in a copper porphyry project comprised of 307 unpatented mineral claims having an area of approximately 6,300 acres located on the northern end of the Walker Lane Belt in Plumas County, California (the “Moonlight Property”).

12


NEW YORK CANYON PROJECT

Description of Property

New York Canyon Claims

The 661 unpatented lode mining claims were physically staked on the ground. Unpatented claims require annual maintenance fees of $140 per claim payable to the U.S. Bureau of Land Management (“BLM”) by August 31 of each year. Additionally, the county requires recording fees of approximately $15 per claim each year. The claims are current and in good standing through August 31, 2013.

The acquisition of title to the claims was completed pursuant to the terms of the Property Option Agreement dated March 18, 2004 (the “Property Option Agreement”) among the Company and Nevada Sunrise LLC (“Nevada Sunrise”), Robert Weicker, Sharon Weicker, Kurt Schendel, and Tami Schendel (collectively, the “Optionors”).

Under the terms of the Property Option Agreement, we exercised our option to acquire the New York Canyon Claims by: (i) paying $460,000 to the Optionors; (ii) issuing 526,667 shares of our common stock to the Optionors; and (iii) incurring exploration expenditures of a minimum of $2,250,000 on the New York Canyon Claims. The Optionors also retained a 2% net smelter returns royalty (the “Royalty”) over any future production. We have the option to reduce the Royalty to 1% by making a lump sum payment of $1,000,000 to the Optionors.

In accordance with the terms of the Property Option Agreement and upon our acquisition of the New York Canyon Claims, Nevada Sunrise assigned to us its interest under two lease agreements. On October 9, 2004, Nevada Sunrise entered into a lease agreement with Tammy Gentry and Pat Hannigan pursuant to which it obtained a nine year lease over the Copper Queen #2 patented mineral claim. As a result of the assignment of this lease, we acquired the Copper Queen #2 patented mineral claim by paying the lessors $50,000.

In addition, on January 1, 2005, Nevada Sunrise entered into a lease agreement with Clifford DeGraw and Richard Markiewicz pursuant to which it obtained a seven year lease over the Mildred and Copper Queen #1 patented mineral claim. As a result of the assignment of these leases, we acquired the Mildred and Copper Queen #1 patented claims by paying an aggregate $130,000.

Lease Agreement with Jaycor Mining Inc.

On July 21, 2004, we entered into a lease agreement (the “Jaycor Lease Agreement”) with Jaycor Mining, Inc. (“Jaycor”). Under the terms of the Lease Agreement, we were granted rights to explore and, if proved feasible, develop 18 patented mineral claims held by Jaycor (the “Jaycor Claims”). These rights were granted as a lease for an initial term of 15 years, and are renewable for a further 15 years.

As consideration for the lease of the Jaycor Claims, we were required to pay Jaycor the following amounts prior to the commencement of any future production activities: (i) $25,000 on execution of the Jaycor Lease Agreement; (ii) $1,000 monthly commencing on the first anniversary; (iii) $2,000 monthly commencing on the second anniversary; and (iv) $3,000 monthly commencing on the third anniversary and continuing for as long as the Jaycor Lease Agreement is in effect (collectively, the “Jaycor Minimum Payments”)

In addition to the Minimum Payments, we have issued an aggregate of 6,583 shares to Jaycor in accordance with the Jaycor Lease Agreement. As of the date of this Annual Report, we have made all required Minimum Payments and is in good standing under the Jaycor Lease Agreement.

The Jaycor Claims under the Lease Agreement are subject to an overriding royalty deed granted to Kookaburra Resources Ltd. (“Kookaburra”) by Jaycor. Upon commencement of production, we are required to pay Kookaburra a net smelter returns royalty of 1.75%, up to a maximum of $2,000,000. In addition, we have also agreed to pay Jaycor a net smelter return royalty of 0.5% until such time as Kookaburra has been paid $2,000,000, at which time the royalty payable to Jaycor will then increase to 1.5% . The 1.5% rate payable is subject to a maximum of $2,000,000, at which time the ongoing royalty payment to Jaycor will be reduced to 0.5% for as long as the Lease Agreement is in effect.

13


The Jaycor Claims are located in Sections 32, 33 and 34 T8N; R35E MDBM in Mineral County, Nevada and are recorded as follows:

Name of Claim Mineral Survey No. US Patent # County Land Parcel
Mayflower 38 10541 009-170-11
Wall Street 43 21509 009-170-09
Turk 44 21510 009-170-09
Footwall 3447 264845 009-170-03
Nora Higgins 3447 264845 009-170-02
Willie Higgins 3447 264845 009-170-02
Annex No. 1 3447 264845 009-170-03
Annex No. 2 3447 264845 009-170-03
Annex No. 3 3447 264845 009-170-03
Annex No. 4 3447 264845 009-170-03
Iron Gate 4444 806518 009-170-02
Velvet 4444 806518 009-170-02
Saddle 4444 806518 009-170-02
Vacation 4571 982162 009-170-12
Goodenough 4612 989401 009-170-02
Copper Butte 4612 989401 009-170-02
Copper Bar 4612 989401 009-170-02
Hecla 4612 989401 009-170-02

The holders of patented minerals claims generally retain all mineral and property rights, and the permitting procedures for both exploration and development can be streamlined and fast tracked.

BLM Annual Maintenance Fees

In order to maintain our New York Canyon Project claims each year we must pay a maintenance fee of $140 per claim to the Nevada State Office of the Bureau of Land Management and on November 1 of each year we must file an affidavit and Notice of Intent to Hold the claims in Mineral County. We have paid the required maintenance fees and filed the affidavits required in order to extend the claims to August 31, 2013.

14


Figure 1 – New York Canyon Property

Location and Access, Climate, Local Resources, and Physiography

The New York Canyon Project is approximately five miles east of Luning and 30 miles east of Hawthorne, the seat of Mineral County, in the sparsely populated west central part of Nevada. The largest full-service city with daily commercial air flights to most major American cities is Reno, located 169 miles north-northwest of the New York Canyon Project via paved highway US95. Access to the New York Canyon Project from Hawthorne is via paved highway US95 for 25 miles to Luning and then by 5 miles of all-weather gravel road.

15


The New York Canyon Project is at the south end of the Gabbs Valley Range with part of the New York Canyon Project extending westward into Soda Spring Valley. The terrain is part of the “Basin and Range” physiographic province consisting of steep rugged hills at elevations from 5,500 to 7,000 feet separated by broad basins ranging from 4,600 to 5,500 feet elevation.

The climate is semi-arid with two seasons: a wet cold winter and a dry hot summer. The main period of snow occurs between November and March. Annual rainfall for the last several years has ranged from 2 to 6 inches per year with temperatures ranging from 25°F to 95°F. The prevailing vegetation consists of grasses, low shrubs (most commonly sagebrush) and occasional patches of pinion pine and juniper trees at higher elevations. The local economy is based largely on ranching and mining with many people employed by the Hawthorne Naval Ammunition Depot.

During the past twenty years, a number of mines have operated in this part of Nevada, mostly gold and silver mines with some by-product base metals. As a result, the community contains a small pool of experienced labor sufficient for the needs of many short-term mining operations.

History

The New York Canyon Project has a long history of exploration, development and production beginning with discovery of the copper oxide deposits in 1875. The district’s first recorded production occurred from 1906 to 1929 when the Wall Street Copper Company consolidated various holdings in the district and commenced copper production at the Anderson, Champion, Mayflower, New York, Turk, Vacation and Wall Street Mines. An estimated 8.9 million pounds of copper was recovered from approximately 110,000 tons of ore at an average grade of 5.5% copper during this period.

1965 to 1979 — A total of 107 exploration drill holes (98,433 feet) were drilled during 1965 to 1979 in the New York Canyon Project area, initially by Amax but primarily by Conoco Oil Company, who subsequently operated the Project from 1977 to 1981. Exploration was focused mainly on porphyry copper-molybdenum sulfide targets at the Copper Queen and Champion prospects. This historic drilling by Conoco, from 1977 to 1981, indicated 13.2 million tons of mineralized material with an average grade of 0.55% copper for the Longshot Ridge area and 142 million tons grading 0.35% and 0.015% molybdenum for the Copper Queen deposit.

In 1979, Conoco contracted Hazen Research, Inc. to conduct a preliminary testing program for copper recovery using sulfuric acid bottle roll leaching tests and flotation tests on drill core sample composites. Hazen prepared composites based on five rock types crushed to minus 0.5 inch size. Drill core from the Copper Queen deposit yielded recoveries ranging from 65% to 75% copper over the six-day leach period with acid consumptions of 160 pounds per ton for porphyry copper mineralized rock to 509 pounds of sulfuric acid (H2SO4) per ton of carbonate-rich host rock. Copper oxide material provided recoveries ranging from 75.0% to 84.45% from the six-day bottle roll test with corresponding acid consumption of 232 to 349 pounds H2SO4 per ton of ore.

1992 to 1997 — Kookaburra Resources Ltd. (“Kookaburra”) and its various joint venture partners – including Coca Mines and Phelps Dodge – conducted the next stage of exploration from 1992 to 1997, drilling 54 holes totaling 13,018 feet to test the Longshot Ridge and Copper Queen skarns. In 1993, Peter Cowdery, PhD., P.Eng. of CORE Engineering and Associates conducted an estimate of the mineralized material at the Longshot Ridge copper oxide deposit for Kookaburra Resources Ltd. The CORE technical report indicated 17.7 million tons of mineralized material with an average grade of 0.55% copper using a 0.23% copper cutoff.

Prior to our acquisition of the New York Canyon Project, Kookaburra commissioned Mountain States R & D International, Inc. to conduct a simulated vat leach test to determine copper recovery in relation to acid consumption on minus three-quarter inch copper mineralized material from Longshot Ridge. A 13.67 kilogram composite of typical copper oxide material was placed into a 5½ foot high column and leached with 25 gram per liter sulfuric acid for 19 days. Results of the test indicated a 39.41% copper recovery with total acid consumption of 174.7 pounds per ton of mineralized material.

General Geology

The New York Canyon Project lies within the central portion of the Walker Lane structural belt, a broad zone of northwest-southeast striking parallel to sub-parallel, right lateral strike-slip faults extending for more than 400 miles through western Nevada and into northern California. The structural belt was initiated during the Jurassic period, at which time a number of important porphyry copper deposits and related skarn deposits, such as Yerington, were formed. Volcanism and related hydrothermal mineralization, often of Tertiary age, are recognized along the length of this structural trend. Significant mining districts associated with the Walker Lane Belt, in addition to Yerington, include Comstock, Goldfield, Rawhide, Tonopah-Hall, Dome Hill and numerous other copper and/or gold-silver occurrences.

16


The New York Canyon area stratigraphy is comprised mostly of conformable marine sedimentary units of Triassic and Jurassic ages which are intruded by granitic rocks of Cretaceous age. Tertiary-age non-mineralized volcanic flows locally cover these older rocks on the hills and Quaternary-age alluvium and colluvium cover them in the valleys. At New York Canyon, the rocks are disrupted by structures mostly related to the Walker Lane structural belt. These structures provide conduits for mineralizing fluids and often subsequently disrupt mineralized zones.

The oldest rocks belong to the middle to late Triassic age Luning Formation, consisting predominately of dolomite, dolomitic limestone and limestone with minor shale, argillite and conglomerate. Project mapping and logging of drill holes indicate this sequence is approximately 2000 thinner in the Project area than its regionally mapped thickness of more than 10,000 feet. The Luning limestones are thin to medium bedded and intercalated with siltstones in the bottom 1000 feet of the sequence, and massive to thick bedded in the top 4000 feet of the sequence.

The late Triassic age Gabbs Formation conformably overlies the Luning Formation. The Gabbs Formation consists of three members: a thin bedded fossiliferous limestone, argillaceous limestone, and calcareous tuffaceous siltstone. The type locality of the Gabbs Formation is in New York Canyon, where its thickness is measured as 400 feet, but drill logs indicate it is up to 650 feet thick.

The Jurassic age Sunrise Formation conformably overlies the Gabbs Formation. The Sunrise Formation consists of five members with quartz latite porphyry flows near the base overlain by thin bedded limestones, siltstones, silty limestone, tuffaceous siltstone, shale and claystone totaling about 800 feet in thickness in the New York Canyon area.

The Jurassic age Dunlap Formation conformably overlies the Sunrise Formation. The Dunlap Formation is a 3000-foot thick sequence of basal conglomerate, limestones, clastic sediments, and volcanic flows of andesitic and rhyolitic composition.

The strata of New York Canyon are intruded by Jurassic to Cretaceous age multiphase domes, plugs, dikes and sills consisting primarily of diorite and granodiorite with areas of quartz monzonite, granite and other associated felsic rock types.

Numerous Tertiary age units (mostly Oligocene and Miocene age) consisting of mafic to felsic volcanics, volcanoclastics, flows, tuffs, tuffaceous sediments, and continental sediments locally overlie the older rocks. These lithologies are of varying thicknesses ranging from 100s of feet to more than 1000 feet.

Quaternary age deposits consisting of various alluvial and lacustrine sediments comprise the youngest units in the area and fill the valley bottoms and form pediments along the range fronts. These young units may be 200 feet or more thick.

Property Geology at New York Canyon

The upper New York Canyon area consists primarily of the Luning Formation which is overlain by the Gabbs and Sunrise Formations in the Longshot Ridge area. The Luning Formation exposed beneath the Longshot Ridge area consists of gray to tan colored, thickbedded limestone and dolomite. Felsic sills and dikes intrude all units in the area.

The Gabbs Formation at Longshot Ridge is extremely calc-silicate altered. It was originally a very thin bedded to laminated limestone and silty limestone intercalated with siltstone and shale. The Gabbs Formation is comprised of three members: (#1) the lowest member, which is 250 feet thick, consisting of thick black bioclastic limestone intercalated with siltstone, (#2) the middle member, 200 feet thick, consisting of predominately argillaceous limestone intercalated with calcareous and tuffaceous siltstone, and (#3) the upper member, from 0 to 200 feet thick, consisting of argillaceous limestone intercalated with siltstone. The black bioclastic carbonaceous limestone at the base of the Gabbs Formation is a distinct unit which provides a clear marker for the contact with the underlying Luning Formation.

17


The two lowest members of the Sunrise Formation at Longshot Ridge are also calcsilicate altered. The Sunrise consists of five members: (#1) the lowest member, 100 feet thick, consisting of argillaceous limestone intercalated with siltstone and some quartz latite porphyry flows near the base, overlain by (#2), 50 feet thick, consisting of thick-bedded fossiliferous limestone intercalated with siltstone and silty limestone, overlain by (#3), 250 feet thick, consisting of shale and siltstone, overlain by (#4), 200 feet thick, consisting of silty limestone and limestone, and capped by (#5), 200 feet thick, consisting of claystone and limestone.

The Dunlap formation, mentioned in the previous description of regional geology, is not present in the Longshot Ridge area. Similarly, only one of the Tertiary-age volcanic sequences exists along the flank of Longshot Ridge.

The intrusive rocks (Fi) on Longshot Ridge are primarily sills with some local dikes. Rock types mapped at the surface and encountered in drill holes consist of granodiorite porphyry, porphyritic quartz monzonite, quartz monzonite porphyry and quartz-feldspar porphyry. These sills and dikes are typically only 5 to 20 feet thick but are relatively common throughout the area.

Rock strata on Longshot Ridge average N75°E in strike dip about 35°. The rocks are severely faulted and folded. Drag and overturned features are common. The major faults are curvilinear with fairly high dip angles that commonly change along the strike of the structure. The faults generally trend either northeast or northwest, but there are some local faults that strike north and dip steeply east. For the most part, the faults appear to have normal displacements ranging from 50 to 200 feet.

Deposit Types at New York Canyon Project

Mineralization in the New York Canyon Project occurs principally as contact metasomatic copper skarn deposits and as possible copper porphyry deposits within intrusive bodies at depth beneath the skarns.

Contact metasomatic deposits include a variety of types such as those that are copper-rich, ironrich, tungsten-rich, etc. The deposits are commonly referred to as skarns when rich in copper and tactites when rich in tungsten. Minerals associated with the copper-rich skarn deposits typically include chalcopyrite, bornite, magnetite, specularite, pyrite, pyrrhotite, sphalerite, and molybdenite. Alteration associated with the skarn deposits converts limestone and limy sediments to higher temperature calc-silicate minerals consisting of garnet, epidote, diopside, tremolite and calcite.

Skarn deposits are always adjacent to small to moderate sized intrusive bodies of intermediate composition such as monzonite and granodiorite. These intrusive bodies – occurring mainly as sills, dikes, plugs or stocks – are the sources for the mineralizing and altering hydrothermal fluids and for the heat that drives the fluids. Skarn mineralization develops along specific altered beds of carbonate rock in zones of strong deformation or faulting adjacent to the intrusive bodies.

The New York Canyon copper skarns closely fit these descriptions. The skarns either consist mostly of oxidized minerals, as at Longshot Ridge, or they consist of both oxidized and sulfide minerals as at the Champion prospect west of Longshot Ridge.

Skarn type copper deposits are occasionally associated with larger intrusive bodies that are hosts for porphyry type copper-molybdenum deposits, such as the major Carr Fork copper skarns associated with the world-class Bingham Canyon porphyry copper deposit in Utah. Sizes can range from 10 million to 100 million tons or more with grades of 1% to 2% Cu. Associated metallic minerals include chalcopyrite, bornite, magnetite, specularite, pyrite, pyrrhotite, sphalerite, and molybdenite. Other examples of significant skarn deposits associated with large porphyry-copper deposits include Santa Rita-Pinos Altos in New Mexico, Mason Valley-Copper Canyon in Nevada, and Mission-Pima in Arizona.

Porphyry-type copper-molybdenum deposits are closely associated with and related to moderate sized intrusive rock bodies of intermediate to felsic composition. Porphyry-type mineralization consists of disseminated sulfides and crosscutting stockwork quartz-sulfide veins or veinlets occurring within the intrusive body and extending outward into the surrounding rocks. The intrusive bodies are commonly 0.3 to 1 mile or more across and their emplacement produces large volumes of altered and intensely fractured ground.

18


At Copper Queen, the westernmost New York Canyon target, known mineralization, incompletely explored to date, consists of both non-oxidized copper sulfide skarns and potential porphyry-type copper-molybdenum sulfides in the underlying intrusive body. The porphyry mineralization remains an exploration target of possible large size based on (1) the widespread occurrences of oxide copper showings on the surface, (2) limited geophysical surveys, (3) apparent doming of the overlying sediments, and (4) the district’s location within the Walker Lane structural belt which hosts several large porphyry systems such as Yerington to the northwest and Hall Mountain to the southeast. Exploration targets for the project might range from 150 million to 400 million tons as grades of 0.4% to 0.5% copper with possible credits in molybdenum.

Mineralization at New York Canyon Project

Mineralization in the New York Canyon Project consists of three principal copper target areas: Longshot Ridge on the east, Champion in the center, and Copper Queen on the west. These target areas are aligned along a west-northwest trend that probably reflects deeper basement structures.

The Longshot Ridge and Champion prospects both contain numerous widespread showings of copper skarn mineralization exposed in surface outcrops and in old mine workings. In contrast, the Copper Queen prospect has no exposed mineralization at the surface but contains copper sulfide skarn at depth and an incompletely tested copper-molybdenum sulfide porphyry system at greater depth. Recent exploration in the New York Canyon Project has focused mainly on the extensive oxide copper skarn mineralization at Longshot Ridge. This mineralization is the subject of this report.

Hydrothermal alteration and mineralization at Longshot Ridge has formed copper-rich skarn in porous and permeable zones within sedimentary rock strata of the Luning, Gabbs and Sunrise Formations. Additionally copper-rich stockwork veinlets in permeable fractures occur in some of the felsic porphyry intrusive dikes and sills that intrude the rock strata. The alteration associated with the intrusive bodies consists of argillization, phyllic, and silicification which are typical for rocks of this type.

The oxide copper minerals abundantly present at Longshot Ridge are apparently products of the supergene weathering and oxidation of primary copper sulfide minerals which were present in the original skarn. The copper mineralization consists almost entirely of secondary copper minerals, principally malachite, azurite, chrysocolla and copper wad. Additionally, some copper-rich limonite (goethite) is reported. A fairly common greenish clay alteration mineral is thought to be a zinc-bearing clay. Because limestones tend to buffer the solutions that carry copper in a supergene environment, the copper weathered from sulfides in the skarn migrates to the non-skarn limestone units where it may be enriched by as much as 300 to 400 percent.

About 90 percent of the Longshot Ridge mineralization is within the two upper units of the Gabbs Formation. Drilling results indicate that the strongest, thickest and most continuous mineralization occurs in a northeast-trending zone, 200 feet wide by 1300 feet long, which is crossed by two northwest-trending structurally-controlled high grade zones, each about 100 feet wide and from 400 to 700 feet long. Mineralization in these trends is from 100 feet to 200 feet thick and covers an area of 500,000 square feet down to a depth of 350 feet, using a 0.30% Cu/ft cutoff. Within this area are many smaller higher-grade zones. A comparison of adjacent holes and twins of previously drilled holes indicates this copper mineralization has good continuity.

The copper skarns and supergene enriched zones are relatively flat lying to only gently dipping (less than 30º dip to the south). For this reason, the thicknesses of mineralization intersected by the vertical holes drilled to test this system represent the approximate true thicknesses of the mineralization.

Luning Formation - these carbonates consist primarily of dolomite and limestone. Alteration associated with these rocks includes a skarn mineral suite consisting primarily of serpentine, talc, garnet, magnetite, and locally diopside. The serpentine and talc minerals in skarn form sinuous veins along the structures within the dolomite and are very diagnostic of skarn formation in dolomite. Due to the massive nature of the Luning Formation, the altering and mineralizing solutions closely followed high-angle cross-cutting structures and formed limited skarn halos with only small areas of moderately high grade copper mineralization.

19


The Luning also has some small local zones of hematite and dolomite containing jasperoid veins a few feet thick. These consist of fine-grained silica, hematite, goethite, limonite and copper oxides. Historically, all the higher-grade copper shipped from this district during World War I was from the copper skarns in the Luning, not from the copper skarns in the Gabbs.

Gabbs Formation The principal host for the Longshot Ridge copper skarn deposits are impure thin-bedded sandy limestone and siltstone in the upper two units of the Gabbs Formation. The alteration associated with these rocks is either a skarn mineral suite consisting of garnet, diopside and magnetite in the limestone, or is hornfels developed in the siltstone. The copper mineralization is much more widespread, but lower grade for the reasons stated in the previous Luning skarn description. The diopside-rich Gabbs skarns are more abundantly fractured and mineralized due to the brittle nature of diopside, and for this reason these skarns are slightly higher grade than the garnet-rich skarn. Commonly the Gabbs skarns are only a few feet thick (5 to 15 feet), but there are many of them.

The lowest Gabbs unit, a carbonaceous bioclastic limestone, is the location of the “marble line,” which is the alteration boundary between marbleized and calc-silicate altered limestone. This unit rarely forms skarns. The upper two units are hosts for the plentiful skarns and hornfels formed when the hydrothermal solutions traveled up structures and outward along permeable units. These same structures and permeable beds were later intruded by granodiorite porphyry dikes and sills. The intrusive bodies proximal to the skarns are most commonly sills but dikes are locally present.

Sunrise Formation The two lowest sedimentary units of the Sunrise Formation are impure thin-bedded sandy limestone and siltstone which are altered and mineralized. The alteration occurs as either a skarn mineral suite consisting of garnet, diopside and magnetite in the limestone, or as hornfels developed in the siltstone. The copper mineralization is much more widespread, but lower grade for the reasons stated above in the previous Luning skarn description. The diopside-rich skarns are more abundantly fractured and mineralized due to the brittle nature of diopside and for this reason these skarns are slightly higher grade than the garnet-rich skarns. The skarns in the Sunrise Formation are commonly very thick (50 feet). The largest of these is the Mayflower Mine, which was mined on a fairly large scale. This thick skarn is capped by a thick hornfels.

Current Exploration Program

We are in the process of completing a two-phase exploration program to effectively test the New York Canyon Project.

Phase One

Phase One of our exploration program involving the following activities:

re-analysis of 2006 Longshot Ridge drill pulps, duplicate samples, blank samples and standards by an independent laboratory to determine the correct copper values;

acquiring representative mineralized material at Longshot Ridge for metallurgical testwork samples to determine the optimal copper beneficiation process;

initiate environmental base line studies for permitting advanced exploration.

Re-Analysis of 2006 Longshot Ridge

In March 2012, we completed the re-analysis of 33 drill holes from the 2006 Longshot Ridge program. The 33 drill holes in 2006, comprised of 26 reverse circulation holes totaling 8,818 ft (2,688 meters) and 7 HQ core holes totaling 2,805 feet (855 meters), were not included in the 2010 resource estimate due to extremely high variability in the duplicate, blank and standard check samples.

Hole # Depth Intersection Total Copper
(C=Core, R=Reverse Circulation) From (m) To (m) meters Average Grade %
06-11-R 0.00 70.10 70.10 0.18
06-15-R 0.00 59.44 59.44 0.15
06-16-R 0.00 64.01 64.01 0.15
06-18-R 0.00 64.10 64.10 0.22

20



Hole # Depth Intersection Total Copper
(C=Core, R=Reverse Circulation) From (m) To (m) meters Average Grade %
06-20-R 0.00 68.58 68.58 0.13
06-21-R 3.05 60.96 57.91 0.31
06-22-R 0.00 108.2 108.2 0.19
06-24-R 0.00 35.05 35.05 0.21
06-28-R 0.00 16.76 16.76 0.68
 
06-30-R 0.00 68.58 68.58 0.19
06-31-R 0.00 166.12 166.12 0.4
06-32-C 3.05 28.95 28.95 0.16
06-33-C 0.00 105.16 105.16 0.37

Note 7 holes did not have any assay due to small pulp size.

Geochemical Sampling Program

In summer 2012, we commenced a geochemical program to cover the considerable area of the New York Canyon Project with a survey of arroyo/stream sediments. The purpose of the survey is to assess the potential for areas of mineralization that may be associated with the several areas of old prospects and workings within the claims. We anticipate that this exploration will take approximately six months to complete for a total cost of $125,000.

Environmental Base Line Studies

In the event that we proceed with Phase Two of our drilling program, we will need to complete our proposed environmental base line study. We anticipate that the environmental base line study will cost approximately $55,000.

Phase Two

The estimated costs of the Phase Two program are detailed in following table and include:

definition drilling, permitting and scoping studies designed to advance the Longshot Ridge project to a pre- feasibility stage;

drill-testing geophysical targets generated from the IP survey and other geological targets in the Copper Queen and Champion areas;

continuation of metallurgical testwork to refine the optimal copper beneficiation process for completion of a pre- feasibility study.


Analyses $450,000
Drilling $1,550,000
Equipment and Supplies $65,000
Environmental $30,000
Field Supplies and Support $145,000
Geological Mapping $20,000
Labor $180,000
Metallurgical Testing $65,000
Management Fee $200,000
Contingency $295,000
Total $3,000,000

Our ability to commence and complete Phase Two of our exploration program is subject to our obtaining substantial financing, of which there is no assurance.

21


MOONLIGHT PROPERTY

Description of Property

We hold an option to acquire a 100% interest in 307 unpatented mineral claims having an area of approximately 6,300 acres located on the northern end of the Walker Lane Belt in Plumas County, California (the “Moonlight Property”). We acquired our interest in the Moonlight Property pursuant to the Assignment Agreement among Metamin Enterprises Inc. (the “Assignor”), a company controlled by Benjamin Ainsworth, our President, Secretary and director, Metamin Enterprises USA Inc., a wholly owned subsidiary of the Assignor, and the Company. In consideration of the assignment, we agreed to:

(a)

pay to the Assignor the following cash payments:

   
(i)

$15,000 on January 16, 2012, the date of approval from the TSX Venture Exchange (the “Exchange Approval Date”) (which amount has been paid);

(ii)

$25,000 on or before February 18, 2012 (which amount has been paid);

(iii)

$25,000 on or before February 18, 2013;

(iv)

an annual advanced royalty, deductible from any future royalty payments, of $15,000 commencing on February 18, 2014 and payable every year thereafter; and

     
(b)

issue to the Assignor the following shares of our common stock (“Shares”):

   
(i)

75,000 Shares on the Exchange Approval Date (which shares have been issued);

(ii)

75,000 Shares on or before February 18, 2012 (which shares have been issued);

(iii)

150,000 Shares on or before February 18, 2013; and

(iv)

200,000 Shares on or before February 18, 2014.

We also reimbursed the Assignor approximately $90,000 for annual maintenance and exploration expenses previously incurred on the Moonlight Property by the Assignor. The Assignor will retain a 1% net smelter return on metals extracted from the Moonlight Property, which can be repurchased by us for $1,000,000, and a gross overriding royalty of 2.5% on receipts from the sale of industrial minerals.

As we acquired the Assignor’s right and interest in the Option Agreement, we will also be required to do the following in order to maintain and exercise the Option:

(a)

pay to the Optionor the following cash payments:

   
(i)

$25,000 on or before February 18, 2012 (which amount has been paid);

(ii)

$25,000 on or before February 18, 2013;

(iii)

an annual advanced royalty, deductible from any future royalty payments, of $15,000 commencing on February 18, 2014 and payable every year thereafter; and

     
(b)

issue to the Optionor the following Shares:

   
(i)

75,000 Shares on the January 16, 2012 (the “Exchange Approval Date”) (which shares have been issued);

(ii)

75,000 Shares on or before February 18, 2012 (which shares have been issued);

(iii)

150,000 Shares on or before February 18, 2013; and

(iv)

200,000 Shares on or before February 18, 2014.

Under the Option Agreement, we are also required to incur $100,000 in exploration expenditures on the Moonlight Property by February 18, 2013. The Optionor will retain a 1% net smelter return on metals extracted from the Moonlight Property, which can be repurchased by us for $1,000,000, and a gross overriding royalty of 2.5% on receipts from the sale of industrial minerals.

In order to maintain Moonlight Property claims each year we must pay a maintenance fee of $140 per claim to the California State Office of the Bureau of Land Management. We have paid the required maintenance fees and filed the affidavits required in order to extend the claims to August 31, 2013.

22


23


Location and Access, Climate, Locale Resources and Physiography

The Moonlight Property is located about 10 miles northeast of Greenville, California and about 100 miles northwest of Reno, Nevada. The property is accessed from the Reno Nevada International airport by taking US Interstate 395 northwest for approximately 85 miles to the town of Susanville California. At the town, turn south onto State Highway 36 towards the town of Westwood for approximately 18.6 miles to a secondary road heading south (approximately 2.2 miles east of Westwood). The western most edge of the Moonlight Property is approximately 12.6 miles from the turnoff of Highway 36 via a series of gravel roads, many of which are actively used by logging companies operating east of the company’s claim block. The access is good all across the current project ground utilizing active forestry roads and many old drill access roads completed by Placer in the 1960-70’s.

The Moonlight Property is situated in the Sierra Nevada province of California, characterized by north-northwest trending mountain ranges separated by alluvial filled valleys. The claims vary in elevation from a low of approximately 5,520feet (1,682 meters) in the Moonlight Valley at the western edge of the property, to a high of approximately 6,420 feet (1,957 meters) on the peak in the southeast corner of the property. Outside the claims to the northwest of the claim block, elevation rises steeply to Moonlight Peak where elevations reach approximately 6,830 feet (2,082 meters). There are a few bedrock exposures on the property and only a thin soil development on the upland portion of the blocks. The Moonlight Valley floor has virtually no bedrock exposure.

The climate is defined by hot summers to a maximum of 100 F and cold, windy winters with lows to -10 F. Precipitation is moderately light with an average rainfall of 30” and an average snowfall of approximately 140”. Spring and autumn months are moderate in temperature. The vegetation varies depending on elevation and moisture. Cedar, lodgepole pine, mountain mahogany, and juniper grow on the slopes of the project ground. Some studies have been done on lichen that may indicate copper mineralization at depth but no final conclusions have been completed on the lichen distribution. The Moonlight Property area is fairly dry with numerous small dry drainages scattered throughout the claim block, water will need to be trucked during drilling phases. The Mountain Meadows Reservoir is located approximately six miles to the west-northwest of the property which could supply water for all advanced exploration activities on the property.

The area is serviced by Pacific Gas & Electric Company and significant high tension power lines lie close to the project ground and parallel Highway 36. The nearest rail line is the Western Pacific that runs through the town of Westwood, approximately 15 road miles to the west of the property. International air services are located in Reno, approximately 85 miles southeast of Susanville. The closest deep water port is Sacramento which is located approximately 150 miles to the southwest.

There is a highly trained mining-industrial workforce available in Carlin-Elko area of northern Nevada which is located approximately 250 road miles from the Moonlight Property area. Most all supplies are available at Carlin, Elko or Reno, where all the needed equipment, supplies and services for mining companies to conduct full exploration and mining development projects are available

Exploration and mining can be conducted year-round, due to the established road and its proximity to infrastructure. The property is large enough to support all future exploration or mining operations including facilities and potential waste disposal areas. Potential processing plant sites may have to be located closer to water. Controlling the mineral rights under valid lode claims will not fully entitle the company to develop a mine. Permitting will need to be carefully planned and executed to be sustainable in the community and this area of California.

History

Plumas County was actively explored between 1863 and the 1930’s. In 1885, Henry Engels first discovered in the Lights Creek area which eventually became the Engels Mine. The Engels Mine is located approximately 2.6 miles east of the Moonlight Property. The mine shut down in the 1930’s and since that time there have been sporadic periods of exploration activity. The Engels Mining Company also operated the Superior Mine, which is southeast to the Moonlight Property between 1922 and 1930.

In 1953 and 1954 Newmont Mining Co. completed a preliminary aerial geologic map of the Lights Creek area of the Moonlight Property.

24


In 1961, American Exploration and Mining (“Amex”), a subsidiary of Placer Dome, began an initial investigation, being reconnaissance and magnetometer surveys, of the Lights Creek area. In October 1962, Amex completed preliminary geological investigations of the various known mineral occurrences in the area. That was followed in by geochemical stream-sediment and soil sampling of the area that outlined six large anomalous zones within an area of about six square miles. One of the copper soil anomalies coincides with the present Moonlight deposit. This resulted in the first claims staked in the Moonlight Valley in late 1964. Preliminary drilling was completed on the Sulfide Ridge geochemical anomaly located outside the present day Moonlight Property. In mid-1966, Induced Polarization surveys were conducted over many of the known mineral occurrences in the Lights Creek district. This survey produced anomalies in the area of the present day Moonlight deposit.

In August 1966, the first drill hole in the Moonlight deposit was completed. This hole, ML-1, showed encouraging results, being disseminated bornite in top 220 feet of hole. Encouraged by the results, Amex staked additional claims and continued drilling through to December 1966. This work indicated that a significant low-grade disseminated copper mineralized zone was present on the Moonlight Property.

During the last half of 1967, Amex completed additional drilling and initiated detailed petrological studies. At this point, diamond drilling in the area totaled 142,093 feet and included drilling on all mineral showings such as Moonlight, Superior, Engels and other satellite showings. At this junction in the program, Amex determined that there was a problem with all the previous analyses that had been completed at their own Golden Sunlight Mine assay facilities in Montana. Therefore, they decided that all drill samples must be re-assayed by an independent firm, Union Assay.

In early 1968, Amex began an investigation of the metallurgy of the deposit with the shipment of two large composited samples to the Placer Dome laboratory in Salmo, B.C. By spring 1968, the re-assaying program had been completed; Amex resumed drilling and carried on through to January 1969. In addition, Amex completed further claim staking. Drilling resumed in August 1969 and continued sporadically until November 1970. In 1969-1970, Amex commissioned a number of independent geophysical studies that were completed on the property including an airborne gamma ray spectrometer survey, IP surveys, and detailed ground magnetometer survey. The IP survey successful identified the north-eastern extension to the Moonlight mineralized body which was subsequently confirmed by drilling. During the same period, Amex completed a number of computer modeling studies in an attempt to look for trends in grade and for possible correlation between degree of fracturing and grade. Several in-house and independent resource estimations were completed by December 1970. In addition, Amex completed a three-dimensional model and a computer designed open pit was complete, using a three-D optimization program and manual smoothing techniques.

The project was put on hold from 1971-1994, with respect to any new field exploration, due to the declining copper prices in the early 1970’s and the change in focus within Amex. In 1994, Amex dropped all interest in the project, allowed the claims to lapse.

In 2007, Sheffield Resources Ltd. (“Sheffield”) acquired an option to purchase the Moonlight Property. Between 2005 to 2007, Sheffield completed a detailed surface sampling program on the Moonlight Property. This sampling program consisted of 304 surface and underground samples. In 2006, Sheffield completed a 14 hole diamond drill program totaling 11,135 feet.

Geology at Moonlight Property

The Moonlight Property is hosted in the Lights Creek intrusive stock which lies near the triple point junction of the Cascade, Sierra Nevada, and Basin and Range provinces. The Moonlight, Engels and Superior deposits are located in the Lights Creek district at the north end of the 25 mile long 5 mile wide Plumas Copper Belt.

The Plumas Copper Belt is situated along the northwest extension of the Walker Lane Mineral Belt. The Walker Lane has hosted some of the biggest precious and base metal mines in the western US and major discoveries continue to be made along this prolific trend.

Triassic-Jurassic weakly metamorphosed basalts and andesites are intruded by late Jurassic-Cretaceous plutonic rocks of varying composition in the Lights Creek district. The roof pendant metavolcanics have been largely eroded in the Lights Creek district exposing a 7 square mile area of the Lights Creek Stock. Earlier work suggests there are five distinct batholithic differentiates in the Lights Creek area.

25


The Lights Creek Stock refers to quartz monzonite, which is the ore host at the Moonlight and Superior deposits. Both Sheffield and Placer have noted that the quartz monzonite tends to be finer grained with a more porphyritic texture near the contact with metavolcanics and less potassium feldspar-rich and more equigranular with depth and towards the center of the quartz monzonite stock.

Deposit Types at Moonlight Property

The Moonlight copper deposit is classified as a porphyry copper deposit with associated gold, silver and molybdenum credits.

Typical porphyry copper deposits are cylindrical, stock-like composite bodies having elongate outcrops 1.5 x 2 km in diameter and containing an outer shell of medium to coarse-grained equigranular rock with a porphyritic core of similar composition. The most common ore hosts are quartz monzonite to granodiorite felsic plutonic rocks. In addition, a second population of deposits occurs in more mafic intrusive rocks of syenitic to dioritic composition.

Typically, four alteration halos are often present roughly centered on the porphyry stock:

Potassic Zone – this zone was always present and characterized by secondary potassium feldspar (K- spar), biotite and/or chlorite replacing primary K-spar, plagioclase and mafics. Minor sericite may be present.

 

Phyllic Zone - not always present a characterized by vein quartz, sericite and pyrite with minor chlorite, illite and rutile replacing the K-spar and biotite.

 

Argillic Zone – was not always present. It is identified by the clay minerals kaolinite and montmorillonite with minor disseminated pyrite. Plagioclase is strongly altered, K-spar unaffected and biotite chloritized.

 

Propylitic Zone –always present and contains chlorite, calcite and minor epidote. The mafic minerals are highly altered while the plagioclase is less altered.

At depth all zones are thought to coalesce into a single, large K-spar-quartz- chlorite-sericite unit.

The closest known porphyry copper deposit in this area of NW United States is the Yerington copper deposits located 60 miles south east of Reno (approximately 145 miles southeast of the Moonlight deposit). The Yerington porphyry copper deposit lies in the central portion of the mid-Jurassic Yerington batholith, a three phase intrusive body composed of an older granodiorite, a quartz monzonite and a younger quartz monzonite porphyry dyke swarm. The mine operated by Anaconda Copper from 1952-1978 and produced approximately 162 million tons of oxide and sulphide copper ore averaging 0.55% Cu. From 1990-1999, Arimetco Inc. produced approximately 31,500 tons of copper from oxide ore using SXEW technology.

Placer recognized that the deposits of the Lights Creek district had many characteristics which were not typical of porphyry copper deposits and lacked many of the typical features.

Many copper deposits which had previously been classified as porphyry copper-type have now been recharacterized as belonging to the iron oxide copper-type. There is considerable evidence that the Lights Creek deposits should be included in this group. Deposits with a fairly wide variety of characteristics have been classified as belonging to the iron oxide copper group. However the characteristics listed below are consistently used to classify these types of deposits.

Abundant magnetite and/or hematite which is often specular. If both are present, hematite is more common higher in the system.

   

Low pyrite content with increased pyrite often located beneath and adjacent to the ore zone.

   

Typically tabular shaped orebody rather than cylindrical or deep sided cupola-shaped like porphyry copper deposits.

   

Abundant bornite and/or hypogene chalcocite often as a late fracture filling phase of mineralization.

26



Anomalous Au, Ag, U, and rare earth elements.

The Lights Creek deposits show all of these characteristics.

Mineralized diabase dikes have been observed at both Moonlight and Superior raising the question of how long after the crystallization of the quartz monzonite did some of the mineralization take place. More study is needed before a more complete genetic model can be developed for the Lights Creek district.

Mineralization at Moonlight Property

Regional Mineralization

The Lights Creek stock appears to be unique to Northern California as it hosts porphyry copper-type mineralization. At least three zones of copper mineralization have been delimited by past workers.

Property Mineralization-Engels

The steeply northward plunging, tabular Engels copper ore body is contained in a vertical shear zone that ranges from 25 to 125 feet in width. The ore principally consisted of bornite and chalcopyrite hosted in a hornblende gabbro body. Younger quartz diorite and quartz monzonite bodies are associated with the gabbro and likely played an important role in the placement of the copper mineralization.

Property Mineralization-Superior

The Superior mine is thought to have formed at a higher temperature than the Moonlight deposit. The previously mined deposit consists of a stockwork of seven parallel, northeasterly striking, and easterly dipping (550-800) vein zones. The veins principally consist of chalcopyrite and some bornite, along with associated magnetite and pyrite and are 8-20 ft thick. Magnetite is more prevalent at the Superior Mine than at the Moonlight deposit while specularite, common at Moonlight is non-existent at Superior. The Superior mine exhibits some porphyry like attributes and similarities to Moonlight in that they are both found within an intrusive body in close proximity to an older metavolcanic sequence. Its copper mineralization is contained in stockwork vein system hosted in a similar quartz monzonite body to the host of the Moonlight deposit. Mineralization historically was mined from steeply dipping, thick chalcopyrite rich veins, steeply dipping controls to the mineralization at Moonlight are only now being considered important. A large body of disseminated copper mineralization has been identified at Superior as the result of work completed by Placer/Amex. They drilled approximately 96 drill holes or approximately 50,200 feet of diamond drilling (including 3,550 feet of rotary drilling) from 1964-1968.

Property Mineralization-Moonlight

Two different styles of mineralization were revealed by Sheffield’s drilling. An earlier stage of disseminated very fine grained copper minerals is commonly located interstitial to silicates and especially to disseminated rosettes of tourmaline. Most of the copper encountered in drilling the southern part of the Moonlight deposit was contained in this disseminated style of mineralization. Copper mineralization is also contained in later stage veinlets and crackle breccias associated with tourmaline, quartz, hematite and magnetite. Pyrite is virtually absent in both styles of mineralization at the depths drilled at Moonlight. However, some pyrite was encountered at the deeper levels of drilling and may be more abundant at greater depths.

Oriented core and inspection of the bedrock in drilling sumps and shallow prospect workings showed that copper mineralization was contained on fractures with a wide variety of orientations. Strong copper mineralization was commonly observed on veinlets trending N20-35W and dipping 15-35 SW. In addition to the mineralization in shallow dipping fractures, copper is contained on NS steep to moderately E dipping, N60-75E steeply N dipping, N70-85W steeply south dipping veinlets. A more complete description of the geologic characteristics of the deposit is presented in the geology section below.

Both Sheffield and Placer have recognized that there at least two styles or stages of mineralization at the Moonlight deposit. The paragenetically earlier style is characterized by disseminated copper minerals located interstitial to quartz, feldspar, chlorite and especially disseminated rosettes of tourmaline. This mineralization usually consists of fine grained chalcopyrite but zones of disseminated bornite are also common. High in the system disseminated hypogene chalcocite has also been occasionally observed. Bornite has been observed to rim chalcopyrite grains in some places. Placer characterized this mineralization as late stage magmatic or pneumatolytic. A metasomatic origin should not be precluded. This style of mineralization shows some association with potassium feldspar and a very strong association with tourmaline and sometimes chlorite abundance.

27


Unless overprinted by second stage fracture or breccia hosted mineralization, this style of mineralization has typically been observed to assay 0.1 - 0.8 %Cu. Visual estimates from core logging suggest that this style of mineralization accounts for less than 25 % of the copper value in the north part of the deposit around Sheffield holes 06MN-9,10,11,12. It is estimated to account for about 50% of the copper in the central part of the deposit around holes 05MN-1,2 and 06MN-8,13,14 and approximately 75% of the copper value in the southern part of the deposit around holes 06MN-3,4,5,6.

The second transgressive stage of mineralization is characterized by veinlets or stockwork breccias which often have a gangue of tourmaline and lesser quartz with strong hematite. Strong copper mineralization was commonly observed on veinlets trending N20-35W and dipping 15 -35 SW. The overall orientation of the Moonlight deposit appears to be parallel to these gently southwest dipping fractures and indicates a good exploration target underneath the metavolcanics to the southwest. In addition to the mineralization in shallow dipping fractures, copper is contained on N-S steep to moderately E dipping, N60-75E steeply N dipping, N70-85W steeply south dipping veinlets. Although fracture hosted mineralization is widespread and often high grade at Moonlight, drilling to date has not revealed extensive vein-like structures similar to those mined at the Superior and Engels mines.

The copper sulfides show a very strong vertical zonation, with chalcocite or digenite predominating in the upper levels of the deposit. With increasing depth, bornite predominates and chalcopyrite appears. Bornite is often observed to rim or cut chalcopyrite. Bornite and chalcopyrite are also observed to be cut by chalcocite veinlets. At the deeper levels chalcopyrite typically predominates in fracture hosted mineralization, but bornite is often still abundant. Magnetite can sometimes appear with hematite decreasing in abundance with depth. In rare cases pyrite will appear in veinlets at depth. Iron or magnesium-rich carbonates are also common in fracture hosted mineralization. Late stage copper-poor calcite and quartz veinlets that cut both preceding types of mineralization are also common.

Sericitic, chloritic and albitic alteration has been observed to form halos around veinlets and breccia zones. Epidote becomes more abundant in and around veinlets with depth. Potassium feldspar is abundant but it is unclear how much is primary and how much is hydrothermal. In addition to the quartz, feldspar and 1-5% disseminated tourmaline that typically makes up the Lights Creek Quartz Monzonite, there is 2-8% finely disseminated hematite and magnetite. The hematite is typically specular and thin section work indicates that it is usually replacing magnetite. This replacement by hematite decreases with depth and the quartz monzonite is typically more magnetic with depth

This veinlet or breccia hosted mineralization is much more common in the northern part of the deposit and chalcocite-rich mineralization here commonly runs more than 1%. In holes 06MN-9,10,11,2 chalcocite-rich mineralization grades quickly into chalcopyrite with depth and bornite is not very abundant. In the southern and central parts of the deposit the chalcocite-bornitechalcopyrite zonation is well developed. Fracture hosted mineralization sometimes runs more than 1% copper in the central and southern portions of the deposit as well.

Current Exploration Program

We have commenced permitting for a shallow reverse circulation drill program at the Moonlight copper oxide deposit in order to establish a resource estimate of the oxide mineralization. The drill program is planned for late 2012 and will be greatly facilitated by the network of new logging roads in the area. In support of this work, the old drill core, in storage in nearby Crescent Mills, will be re-logged to confirm the limits of the oxide mineralization and the bornite chalcocite sulphide mineralization. We anticipate the cost of this drill program will be $250,000.

ITEM 3.            LEGAL PROCEEDINGS.

We are not currently a party to any legal proceedings.

28


ITEM 4.            MINE SAFETY DISCLOSURES.

Not applicable.

29


PART II

ITEM 5.

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

MARKET INFORMATION

Shares of our common stock trade in Canada on the TSX Venture Exchange under the symbol “CNC” and over the counter in the United States on the OTC Bulletin Board and OTCQB market place under the symbol “CNYC." As our shares of common stock were not listed on the TSX Venture Exchange until July 18, 2011, the following table indicates the high and low bid prices of our shares of common stock on the OTC Bulletin Board obtained during the periods indicated:

    2012     2011  
    High     Low     High     Low  
First Quarter ended September 30 $  0.39   $  0.08   $  0.13   $  0.05  
Second Quarter ended December 31 $  0.29   $  0.09   $  0.35   $  0.05  
Third Quarter ended March 31 $  0.18   $  0.10   $  0.45   $  0.25  
Fourth Quarter ended June 30 $  0.14   $  0.06   $  0.40   $  0.28  

The above quotations have been adjusted to reflect our 79-for-100 reverse split effective November 24, 2010. Quotations entered on the OTC Bulletin Board reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

HOLDERS OF OUR COMMON STOCK

As of September 26, 2012, we had 109 registered holders of our common stock holding an aggregate of 68,696,934. We believe a large number of stockholders hold stock on deposit with their brokers or investment bankers registered in the name of depositories.

DIVIDENDS

We have neither declared nor paid any cash dividends on our capital stock since our inception and do not contemplate paying cash dividends in the foreseeable future. It is anticipated that earnings, if any, will be retained for the operation of our business. Our board of directors will determine future dividend declarations and payments, if any, in light of the then-current conditions they deem relevant and in accordance with Chapter 78 of Nevada Revised Statutes (the “NRS”).

There are no restrictions in our articles of incorporation or in our bylaws which prevent us from declaring dividends. Chapter 78 of NRS, however, does prohibit us from declaring dividends where, after giving effect to the distribution of a dividend:

  (a)

We would not be able to pay our debts as they become due in the usual course of business; or

     
  (b)

Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving distributions.

RECENT SALES OF UNREGISTERED SECURITIES

All unregistered sales of our equity securities made during the fiscal year ended June 30, 2012 have been previously reported in our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.

30



ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

PLAN OF OPERATION

Over the next twelve months, our plan of operation is to complete following exploration programs on our mineral properties:

New York Canyon Project

Phase One of our exploration program on the New York Canyon Project involves the re-analysis of the 2006 Longshot Ridge drill pulps and initiating environmental base line studies, which will permit us to conduct advanced exploration, if warranted. We commenced Phase One of our exploration program in July 2011 by delivering the drill pulps from the 2006 Longshot Ridge to Sparks Laboratory in Nevada. In December 2011, we received new assay results and these results were audited by an independent consultant for quality assurance (QA) and quality control (QC). In March 2012, we engaged an independent consultant to conduct a review of the results in order to provide us with a more robust estimate of the project and assist us in identifying key targets for a drilling program at the New York Canyon Project.

In late 2012, subject to obtaining financing, we plan to drill test the oxide mineralization found to the north and northeast of the Longshot Ridge deposit. This represents the initial stages of Phase Two of our exploration program on the New York Canyon Project.

Moonlight Property

In spring 2012, we conducted a preliminary assessment of the Moonlight Property, which involved a detailed review of all historical data on the Moonlight Property. Based on the results of this preliminary assessment, we have decided to commence a shallow reverse drill program at the Moonlight Property. The drill program is scheduled for late 2012 and will target the copper oxide deposit on the Moonlight Property. We anticipate that the drill program will cost approximately $250,000.

Anticipated Expenses

We anticipate that we will require the following funds for exploration programs and our ongoing operations:

ITEM AND ACTIVITY   12 Month Total  
    Budget  
LAND STATUS      
New York Canyon Project      
2012 - 2013 unpatented claim maintenance fees $  98,000  
Monthly Payments – Patented Claims   36,000  
Moonlight Property      
Assignment and Option Payments   50,000  
2012-2013 unpatented claim maintenance fees   48,000  
EXPLORATION PROGRAM      
New York Canyon Project      
Metallurgical sampling and testing   75,000  
Environmental base line study work   55,000  
Geological mapping/geological survey   30,000  
Field supplies and support   20,000  
Contingency   25,000  

31



ITEM AND ACTIVITY   12 Month Total  
    Budget  
Moonlight Property      
Drilling   250,000  
Metallurgical sampling and testing   50,000  
Environmental base line study work   30,000  
Geological mapping/geological survey   30,000  
Field supplies and support   20,000  
Contingency   25,000  
GENERAL AND ADMINISTRATIVE EXPENSES      
General and Administrative   297,000  
TOTAL $ 1,134,000  

As at June 30, 2012, we had cash of $715,907. For the next twelve months, management anticipates that we have sufficient funds to meet our annual claim payments, implement our geochemical sampling program on the New York Canyon Project and meet the costs associated with our ongoing reporting obligations. However, we will require additional financing in order to implement the shallow reverse drill program on the Moonlight Property and the proposed test drilling program on the New York Canyon Project. There is no assurance we will be successful in raising such funding or on terms that are acceptable to us. Since inception, we have been dependent on investment capital and debt financing from third parties as our primary source of liquidity. We anticipate continuing to rely on sales of shares of our common stock and loans in order to continue to fund our business operations. Issuances of additional shares will result in further dilution of our existing shareholders.

RESULTS OF OPERATIONS

Summary of Year End Results                  
    Year Ended     Year Ended     Percentage  
    June 30, 2012     June 30, 2011     Increase / Decrease  
Revenue $  -   $  -     n/a  
Operating Expenses   (1,250,536 )   (841,815 )   48.6%  
Other Income (Expense)   652,691     (10,466 )   (6,336.3)%  
Net Loss $  (597,845 ) $  (852,281 )   (29.9)%  

Revenue

We have not earned any revenues to date and do not anticipate earning revenues until such time as we enter into commercial production of our mineral properties. There can be no assurance that we will be successful in discovering commercial quantities or that we can commercially produce metals or minerals. We are presently an exploration stage company engaged in the search for mineral reserves. We can provide no assurances that we will be able to discover any commercially exploitable levels of mineral resources on our property, or, even if such resources are discovered, that we will be able to enter into commercial production of our mineral properties.

Expenses

The major components of our expenses for the year are outlined in the table below:

    Year Ended     Year Ended     Percentage  
    June 30, 2012     June 30, 2011     Increase / Decrease  
Operating expenses:                  
Foreign exchange loss $  59,198   $  41,050     44.2%  
General and administrative   713,313     395,371     80.4%  
Mineral exploration costs   478,025     405,394     17.9%  
Total $  1,250,536   $  841,815     48.6%  

32


Our operating expenses increased from $841,815, during the year ended June 30, 2011, to $1,250,536, during the year ended June 30, 2012. The increase in our operating expenses is due to increases in general and administrative expenses, mineral exploration costs and foreign exchange loss.

General and Administrative Expenses

We recorded the following general and administrative expenses during the fiscal years ended June 30, 2012 and 2011:

    Year Ended     Year Ended     Percentage  
    June 30, 2012     June 30, 2011     Increase / Decrease  
Accounting and Legal $  177,453   $  104,765     69.3%  
Management and Consulting   187,217     195,168     (4.1)%  
Office and Miscellaneous   42,986     26,223     63.9%  
Interest and Bank Charges   1,058     1,099     (3.7)%  
Corporate and Shareholder Communications   180,473     18,793     860.3%  
Rent   26,017     18,003     44.5%  
Telephone   3,554     3,183     11.7%  
Travel and Transportation   7,977     13,036     (38.8)%  
Transfer Agents and Filing Fees   86,578     15,101     473.3%  
Total $  713,313   $  395,371     80.4%  

Accounting and legal expenses increased from $104,765, during fiscal 2011, to $177,453, during fiscal 2012, primarily resulting from increased accounting and legal costs in connection with our listing on the TSX Venture Exchange and the filing of our Registration Statement on Form S-1 with the SEC.

Management and consulting fees consisted of fees incurred to our Chief Executive Officer, Chief Financial Officer and President. The slight decrease from $195,157, during fiscal 2011, to $187,217, during fiscal 2012, is primarily due to a decrease in fees incurred by our Chief Financial Officer.

Corporate and shareholder communications expenses increased substantially from $18,793, during fiscal 2011, to $180,473, during fiscal 2012. Additional fees in fiscal 2012 primarily relate to costs incurred for our 2011 Annual General Meeting, distribution of news releases and consulting fees for website development and the preparation of investor and shareholder materials.

The increase in rent expense from $18,003, during fiscal 2011, to $26,017, during fiscal 2012, is due to our monthly rent increasing from CDN $1,500 per month to CDN $3,500 per month in March 2012.

In fiscal 2012, travel and transportation of $7,977 relates to travel costs associated with site visits to the Moonlight Property.

The substantial increase in transfer agent and filing fees from $15,101, during fiscal 2011, to $86,578, during fiscal 2012, is due listing and annual fees paid to the TSX Venture Exchange.

Mineral Exploration Costs

We recorded mineral exploration costs of $405,394, during fiscal 2011, as compared to $452,146, during fiscal 2012. Mineral exploration costs primarily consisted of annual payments to maintain the New York Canyon Project in good standing and mineral lease payments. Additional mineral exploration costs in fiscal 2012 primarily relate to the fees paid for the re-analysis the 2006 Longshot Ridge drill pulps.

Net Loss

The decrease in our net loss for the year ended June 30, 2012 is due to the fact that we recorded a gain on change in fair value of derivative liability, which relates to the issuance of share purchase warrants under our brokered and non-brokered foreign private placement offerings, offset by an increase in foreign exchange loss, general and administrative expenses and mineral exploration costs.

33


LIQUIDITY AND CAPITAL RESOURCES

Working Capital                  
                Percentage  
    At June 30, 2012     At June 30, 2011     Increase / Decrease  
Current Assets $  772,520   $  1,270,655     (39.2)%  
Current Liabilities   730,967     780,265     (6.3)%  
Working Capital (Deficit) $ 41,553   $  490,390     (91.5)%

Cash Flows            
    Year Ended     Year Ended  
    June 30, 2012     June 30, 2011  
Cash Flows used in Operating Activities $  (1,154,569 ) $  (678,759 )
Cash Flows used in Investing Activities   -     -  
Cash Flows provided by Financing Activities   646,512     1,652,805  
Net Increase (decrease) in Cash During the Year $  (508,057 ) $  974,046  

Our working capital decreased from $490,390, as at June 30, 2011, to $41,553, as at June 30, 2012. The decrease in working capital was primarily a result of a decrease in cash due to general and administrative expenses, Phase One of our exploration program on the New York Canyon Project, our acquisition of an interest in the Moonlight Property and listing on the TSX Venture Exchange. These amounts were partially offset by the fact that we completed our brokered and non-brokered foreign private placement financings in July 2011 for total proceeds of CDN $1,057,425 ($1,101,503). The details of the private placement financings are set out below:

  (a)

a brokered offering of 2,164,071 units for gross proceeds of CDN $757,425 ($789,231) pursuant to Regulation S of the Securities Act; and

     
  (b)

a non-brokered offering of 857,142 units for gross proceeds of CDN $300,000 ($312,272) pursuant to Regulation S of the Securities Act.

Future Financings

Our plan of operation calls for significant expenses in connection with the exploration of the New York Canyon Project. For the next twelve months, management anticipates that we have sufficient funds to meet our annual claim payments, implement our geochemical sampling program on the New York Canyon Project and meet the costs associated with our ongoing reporting obligations. However, we will require additional financing in order to implement the shallow reverse drill program on the Moonlight Property and the proposed test drilling program on the New York Canyon Project.

Obtaining financing is subject to a number of factors, including the market prices for the mineral property and copper. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us. Since our inception, we have used our common stock to raise money for our operations and for our property acquisitions. We have not attained profitable operations and are dependent upon obtaining financing to pursue our plan of operation. For these reasons, our independent auditors believe there exists a substantial doubt about our ability to continue as a going concern.

OFF-BALANCE SHEET ARRANGEMENTS

None.

34


CRITICAL ACCOUNTING POLICIES

We have identified certain accounting policies, described below, that are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in Note 2 to our audited financial statements included in this Annual Report for the year ended June 30, 2011.

Mineral Property Costs

We have been in the exploration stage since our inception on January 21, 2000 and have not yet realized any revenues from our planned operations. We are primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized. We assess the carrying costs for impairment under ASC 360, “Property, Plant, and Equipment” at each fiscal quarter end. When we have been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

Long-Lived Assets

In accordance with ASC 360, “Property, Plant and Equipment”, we test long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

Stock-Based Compensation

We record stock-based compensation in accordance with ASC 718, “Compensation – Stock Based Compensation” and ASC 505, “Equity Based Payments to Non-Employees”, which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based awards made to employees and directors, including stock options.

ASC 718 requires companies to estimate the fair value of share-based awards on the date of grant using an option-pricing model. We use the Black-Scholes option-pricing model as its method of determining fair value. This model is affected by our stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over the requisite service period.

All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

35


ITEM 8.            FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Financial Statements

1. Report of Independent Registered Public Accounting Firm;
   
3. Balance Sheets as at June 30, 2012 and 2011;
   
4. Statements of Operations for the years ended June 30, 2012 and 2011 and accumulated from inception to June 30, 2012;
   
5. Statement of Stockholders’ Equity (Deficit) for the period from inception to June 30, 2012;
   
6. Statements of Cash Flows for the years ended June 30, 2012 and 2011 and accumulated from inception to June 30, 2012; and
   
7. Notes to the Financial Statements.

36



CANYON COPPER CORP.
(An Exploration Stage Company)
June 30, 2012
(Expressed in U.S. dollars)

  Index
Report of Independent Registered Public Accounting Firm F–1
Balance Sheets F–2
Statements of Operations F–3
Statement of Stockholders’ Equity (Deficit) F–4
Statements of Cash Flows F–10
Notes to the Financial Statements F–11


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Canyon Copper Corp.
(An Exploration Stage Company)

We have audited the accompanying balance sheets of Canyon Copper Corp. (An Exploration Stage Company) as of June 30, 2012 and 2011, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended and accumulated from January 21, 2000 (date of inception) to June 30, 2012. 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. The financial statements of Canyon Copper Corp. accumulated from January 21, 2000 (date of inception) to June 30, 2009 were audited by other auditors whose report dated September 22, 2009 included an explanatory paragraph regarding the Company’s ability to continue as a going concern. The financial statements for the period from January 21, 2000 (date of inception) to June 30, 2009 reflect a net loss of $19,928,215 of the related cumulative totals. The auditors’ report has been furnished to us, and our opinion, insofar as it related to amounts included for such periods, is based solely on the report of such 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes 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 internal control over financial reporting. Accordingly, we express no such opinion. 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 the Company as of June 30, 2012 and 2011, and the results of its operations and its cash flows for the years then ended and accumulated from January 21, 2000 (date of inception) to June 30, 2012, in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has not generated any revenues and has incurred operating losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ SATURNA GROUP CHARTERED ACCOUNTANTS LLP

Saturna Group Chartered Accountants LLP

Vancouver, Canada

September 20, 2012

F-1



CANYON COPPER CORP.
(An Exploration Stage Company)
Balance Sheets
(Expressed in U.S. dollars)

    June 30,     June 30,  
    2012     2011  
     
ASSETS            
Current Assets            
   Cash   718,907     1,226,964  
   Prepaid expenses and deposits   53,613     43,691  
Total Current Assets   772,520     1,270,655  
Deferred financing costs       60,965  
Total Assets   772,520     1,331,620  
             
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)            
Current Liabilities            
   Accounts payable and accrued liabilities   136,134     188,837  
   Due to related parties (Note 4)   586,426     591,428  
   Derivative liabilities (Note 5)   8,407      
Total Current Liabilities   730,967     780,265  
   Due to related parties (Note 4)   197,204     77,784  
   Derivative liabilities (Note 5)       389,826  
Total Liabilities   928,171     1,247,875  
Nature of Operations and Continuance of Business (Note 1)            
Contingent Liability (Note 10)            
Stockholders’ Equity (Deficit)            
Preferred stock
     Authorized: 100,000,000 shares, par value $0.00001
     Issued and outstanding: nil shares (2011 – 500,000 shares)
 

   

5
 
Common stock
     Authorized: 131,666,666 shares, par value $0.00001
     Issued and outstanding: 68,696,934 shares (2011 – 65,375,721 shares)
 

687
   

654
 
Additional paid-in capital   22,279,275     21,620,854  
Common stock subscribed       300,000  
Deficit accumulated during the exploration stage   (22,435,613 )   (21,837,768 )
Total Stockholders’ Equity (Deficit)   (155,651 )   83,745  
Total Liabilities and Stockholders’ Equity (Deficit)   772,520     1,331,620  

(The accompanying notes are an integral part of these financial statements)

F-2



CANYON COPPER CORP.
(An Exploration Stage Company)
Statements of Operations
(Expressed in U.S. dollars)

                Accumulated from  
                January 21, 2000  
    Year Ended     Year Ended     (date of inception)  
    June 30,     June 30,     to June 30,  
    2012     2011     2012  
       
                   
Revenue            
                   
Operating Expenses                  
                   
   Depreciation           5,540  
   Foreign exchange loss   59,198     41,050     75,767  
   General and administrative (Note 4)   713,313     395,371     10,578,078  
   Impairment of mineral property costs           2,759,130  
   Impairment of property and equipment           10,811  
   Mineral exploration costs   478,025     405,394     5,808,892  
                   
Total Operating Expenses   1,250,536     841,815     19,238,218  
                   
Operating Loss   (1,250,536 )   (841,815 )   (19,238,218 )
                   
Other Income (Expense)                  
                   
   Accretion of discounts on convertible debt           (799,963 )
   Debt conversion expense           (2,010,076 )
   Gain on change in fair values of derivative liabilities   657,267     7,024     1,097,006  
   Loss on settlement of related party debt           (2,871 )
   Impairment of investment securities           (459,817 )
   Interest expense   (30,009 )   (17,490 )   (386,243 )
   Loss on extinguishment of debt           (252,454 )
   Loss on sale of investment securities           (411,430 )
   Write-off of accounts payable   25,433         28,453  
                   
Total Other Income (Expense)   652,691     (10,466 )   (3,197,395 )
                   
Net Loss   (597,845 )   (852,281 )   (22,435,613 )
                   
Net Loss Per Share, Basic and Diluted   (0.01 )   (0.01 )      
                   
Weighted Average Shares Outstanding   68,423,000     62,393,000        

(The accompanying notes are an integral part of these financial statements)

F-3



CANYON COPPER CORP.
(An Exploration Stage Company)
Statement of Stockholders’ Equity (Deficit)
From January 21, 2000 (Date of Inception) to June 30, 2012
(Expressed in U.S. dollars)

                                                    Deficit        
                                              Accumulated     Accumulated        
  Preferred Stock     Common Stock     Additional     Common     Stock     Other     During the        
          Par           Par     Paid-in     Stock     Subscriptions     Comprehensive       Exploration        
    Shares     Value     Shares     Value     Capital     Subscribed      Receivable      Loss     Stage     Total  
    #     $     #            $      
Balance, January 21, 2000 (date of inception)                                        
   Issuance of stock for services and payment of advances for $0.006 per share           36,340,000     364     274,636                     275,000  
   Net loss for the period                                   (290,820 )   (290,820 )
Balance – June 30, 2000           36,340,000     364     274,636                 (290,820 )   (15,820 )
   Net loss for the year                                   (11,766 )   (11,766 )
Balance, June 30, 2001           36,340,000     364     274,636                 (302,586 )   (27,586 )
   Issuance of stock for cash at $0.011 per share           5,407,501     54     74,346                     74,401  
   Net loss for the year                                   (43,817 )   (43,817 )
Balance, June 30, 2002           41,747,501     418     348,983                 (346,403 )   2,998  
   Net loss for the year                                   (17,713 )   (17,713 )
Balance, June 30, 2003           41,747,501     418     348,983                 (364,116 )   (14,715 )
   Cancellation of stock owned by a director           (23,173,333 )   (232 )   232                      
   Conversion of debentures                       902,126                 902,126  
   Issuance of stock for cash at $4.50 per share           184,333     2     1,049,998                     1,050,000  
   Stock issuance costs                   (105,000 )                   (105,000 )
   Net loss for the year                                   (1,601,036 )   (1,601,036 )
Balance, June 30, 2004           18,758,501     188     1,294,213     902,126             (1,965,152 )   231,375  

(The accompanying notes are an integral part of these financial statements)

F-4



CANYON COPPER CORP.
(An Exploration Stage Company)
Statement of Stockholders’ Equity (Deficit)
From January 21, 2000 (Date of Inception) to June 30, 2012
(Expressed in U.S. dollars)

                                                    Deficit        
                                              Accumulated     Accumulated        
    Preferred Stock     Common Stock     Additional     Common     Stock     Other     During the        
          Par           Par     Paid-in     Stock     Subscriptions     Comprehensive       Exploration        
    Shares     Value     Shares     Value     Capital     Subscribed      Receivable      Loss     Stage     Total  
    #       #      $    $          
                                                             
Balance, June 30, 2004           18,758,501     188     1,294,213     902,126             (1,965,152 )   231,375  
   Issuance of stock for consulting services           105,333     1     761,999                     762,000  
   Cancellation of stock issued for consulting services           (52,667 )   (1 )   (727,999 )                   (728,000 )
   Issuance of stock pursuant to the exercise of options           105,333     1     199,999                     200,000  
   Issuance of stock pursuant to conversion of debentures           144,677     1     902,125     (902,126 )                
   Issuance of stock pursuant to mineral property option agreements           371,300     4     1,876,496                     1,876,500  
   Issuance of stock to settle related party debt           52,044     1     73,123                     73,124  
   Cancellation of stock owned by the President of the Company           (5,266,667 )   (53 )   53                      
   Issuance of preferred stock for investment securities   500,000     5             1,382,013                     1,382,018  
   Unrealized loss on investment securities                               (437,712 )       (437,712 )
   Fair value of stock options granted                   384,144                     384,144  
   Intrinsic value of beneficial conversion features                   180,183                     180,183  
   Net loss for the year                                   (4,025,401 )   (4,025,401 )
Balance, June 30, 2005   500,000     5     14,217,854     142     6,326,349             (437,712 )   (5,990,553 )   (101,769 )

(The accompanying notes are an integral part of these financial statements)

F-5



CANYON COPPER CORP.
(An Exploration Stage Company)
Statement of Stockholders’ Equity (Deficit)
From January 21, 2000 (Date of Inception) to June 30, 2012
(Expressed in U.S. dollars)

                                                    Deficit        
                                              Accumulated     Accumulated        
    Preferred Stock     Common Stock     Additional     Common     Stock     Other     During the        
          Par           Par     Paid-in     Stock     Subscriptions      Comprehensive      Exploration        
    Shares     Value     Shares     Value     Capital     Subscribed     Receivable       Loss     Stage     Total  
    #    $     #                
                                                             
Balance, June 30, 2005   500,000     5     14,217,854     142     6,326,349             (437,712 )   (5,990,553 )   (101,769 )
   Issuance of stock for cash at $0.75 per share           1,316,667     13     1,249,987                     1,250,000  
   Issuance of stock for cash at $0.90 per share           395,000     4     449,996                     450,000  
   Issuance of stock for geological data at a fair value of $1.17 per share           6,583         9,750                     9,750  
   Issuance of stock to settle debt at a fair value of $1.11 per share           16,786         23,585                     23,585  
   Issuance of stock for cash at $1.20 per share           1,178,417     12     1,789,988                     1,790,000  
   Share issuance costs                   (222,668 )                   (222,668 )
   Issuance of stock pursuant to a mineral property agreement           131,667     1     284,999                     285,000  
   Fair value of stock options granted                   3,229,195                     3,229,195  
   Issuance of stock pursuant to the exercise of stock options           39,500     1     52,499                     52,500  
   Unrealized loss on investment securities recognized as an impairment loss                               437,712         437,712  
   Net loss for the year                                   (7,692,137 )   (7,692,137 )
Balance, June 30, 2006   500,000     5     17,302,474     173     13,193,680                 (13,682,690 )   (488,832 )

(The accompanying notes are an integral part of these financial statements)

F-6



CANYON COPPER CORP.
(An Exploration Stage Company)
Statement of Stockholders’ Equity (Deficit)
From January 21, 2000 (Date of Inception) to June 30, 2012
(Expressed in U.S. dollars)

                                                    Deficit        
                                              Accumulated     Accumulated        
    Preferred Stock     Common Stock     Additional     Common     Stock     Other     During the        
          Par           Par     Paid-in     Stock     Subscriptions      Comprehensive      Exploration        
    Shares     Value     Shares     Value     Capital     Subscribed      Receivable      Loss     Stage     Total  
    #    $     #    $      $        $    
Balance, June 30, 2006   500,000     5     17,302,474     173     13,193,680                 (13,682,690 )   (488,832 )
   Issuance of stock for cash at $0.75 per share           683,613     7     648,993                     649,000  
   Issuance of stock for cash at $0.90 per share           43,889     1     49,999                     50,000  
   Issuance of shares pursuant to mineral property agreement           135,617     1     172,949                     172,950  
   Issuance of shares to settle debt           105,333     1     99,999                     100,000  
   Issuance of shares to settle related party debt           5,583         5,300                     5,300  
   Issuance of shares to settle convertible debentures           362,593     4     344,230                     344,234  
   Intrinsic value of beneficial conversion features                   254,749                     254,749  
   Net loss for the year                                   (2,177,278 )   (2,177,278 )
Balance, June 30, 2007   500,000     5     18,639,102     187     14,769,899                 (15,859,968 )   (1,089,877 )
   Issuance of stock for cash at $0.75 per share           316,000     3     299,997                     300,000  
   Fair value of stock options granted                   578,932                     578,932  
   Net loss for the year                                   (1,216,504 )   (1,216,504 )
Balance, June 30, 2008   500,000     5     18,955,102     190     15,648,828                 (17,076,472 )   (1,427,449 )

(The accompanying notes are an integral part of these financial statements)

F-7



CANYON COPPER CORP.
(An Exploration Stage Company)
Statement of Stockholders’ Equity (Deficit)
From January 21, 2000 (Date of Inception) to June 30, 2012
(Expressed in U.S. dollars)

                                                    Deficit        
                                              Accumulated     Accumulated        
    Preferred Stock     Common Stock     Additional     Common     Stock     Other     During the        
          Par           Par     Paid-in     Stock     Subscriptions      Comprehensive      Exploration        
    Shares     Value     Shares     Value     Capital     Subscribed      Receivable      Loss     Stage     Total  
    #    $     #    $              
Balance, June 30, 2008   500,000     5     18,955,102     190     15,648,828                 (17,076,472 )   (1,427,449 )
   Issuance of stock for cash at $0.30 per share           1,290,333     13     489,987                     490,000  
   Issuance of stock for cash at $0.04 per share           14,931,000     149     755,851         (56,000 )           700,000  
   Share issuance costs                   (2,767 )                   (2,767 )
   Issuance of shares to settle convertible debentures           15,513,978     155     2,980,208                     2,980,363  
   Net loss for the year                                   (2,851,743 )   (2,851,743 )
Balance, June 30, 2009   500,000     5     50,690,413     507     19,872,107         (56,000 )       (19,928,215 )   (111,596 )
   Issuance of stock for cash at $0.04 per share           11,237,750     112     568,888                     569,000  
   Fair value of stock options granted                   362,614                     362,614  
   Subscriptions received                           56,000             56,000  
   Net loss for the year                                   (1,057,272 )   (1,057,272 )
Balance, June 30, 2010   500,000     5     61,928,163     619     20,803,609                 (20,985,487 )   (181,254 )
   Rounding due to stock split           243                              
   Issuance of stock for cash at CDN$0.35 per unit           3,447,315     35     1,258,572                     1,258,607  
   Fair value of share purchase warrants                                                            
   recorded as derivative liabilities                   (396,850 )                   (396,850 )
   Share issuance costs                   (44,477 )                   (44,477 )
   Subscriptions received                       300,000                 300,000  
   Net loss for the year                                   (852,281 )   (852,281 )
Balance, June 30, 2011   500,000     5     65,375,721     654     21,620,854     300,000             (21,837,768 )   83,745  

(The accompanying notes are an integral part of these financial statements)

F-8



CANYON COPPER CORP.
(An Exploration Stage Company)
Statement of Stockholders’ Equity (Deficit)
From January 21, 2000 (Date of Inception) to June 30, 2012
(Expressed in U.S. dollars)

                                                    Deficit        
                                              Accumulated     Accumulated        
    Preferred Stock     Common Stock     Additional     Common     Stock     Other     During the        
          Par           Par     Paid-in     Stock     Subscriptions      Comprehensive      Exploration        
    Shares     Value     Shares     Value     Capital     Subscribed      Receivable      Loss     Stage     Total  
    #    $     #    $            $    
Balance, June 30, 2011   500,000     5     65,375,721     654     21,620,854     300,000             (21,837,768 )   83,745  
   Issuance of stock for cash at CDN$0.35 per unit           3,021,213     30     1,101,472     (300,000 )               801,502  
   Fair value of share purchase warrants recorded as derivative liabilities                   (275,848 )                   (275,848 )
   Agent’s compensation options granted                   24,387                     24,387  
   Share issuance costs                   (225,342 )                   (225,342 )
   Issuance of stock pursuant to a mineral property agreement           300,000     3     48,747                     48,750  
   Repurchase and cancellation of preferred stock   (500,000 )   (5 )           (14,995 )                   (15,000 )
   Net loss for the year                                   (597,845 )   (597,845 )
Balance, June 30, 2012           68,696,934     687     22,279,275                 (22,435,613 )   (155,651 )

(The accompanying notes are an integral part of these financial statements)

F-9



CANYON COPPER CORP.
(An Exploration Stage Company)
Statements of Cash Flows
(Expressed in U.S. dollars)

                Accumulated from  
                January 21, 2000  
    Year Ended     Year Ended     (date of inception)  
    June 30,     June 30,     to June 30,  
    2012     2011     2012  
       
Operating Activities                  
                   
   Net loss   (597,845 )   (852,281 )   (22,435,613 )
                   
   Adjustments to reconcile net loss to net cash used in operating activities:            
         Accretion of discounts on convertible debt           799,963  
         Amortization of deferred financing costs           27,475  
         Depreciation           5,540  
         Foreign exchange translation loss on debt   (9,370 )   5,929     (35,636 )
         Gain on change in fair value of derivative liabilities   (657,267 )   (7,024 )   (1,097,006 )
         Impairment of investment securities           564,223  
         Impairment of mineral property costs           2,747,630  
         Impairment of property and equipment           10,811  
         Loss on conversion of debt           2,010,076  
         Loss on extinguishment of debt           252,454  
         Loss on sale of investment securities           411,430  
         Loss on settlement of related party debt           2,871  
         Stock-based compensation           4,872,104  
         Shares issued for mineral property   48,750         48,750  
                   
   Changes in operating assets and liabilities:                  
       Prepaid expenses and deposits   (9,922 )   (40,340 )   (53,613 )
       Accounts payable and accrued liabilities   (52,703 )   43,894     378,187  
       Due to related parties   123,788     171,063     773,227  
                   
Net Cash Used in Operating Activities   (1,154,569 )   (678,759 )   (10,717,127 )
                   
Investing Activities                  
                   
     Proceeds received on sale of investment securities           432,060  
     Acquisition of mineral properties           (413,138 )
     Purchase of property and equipment           (16,351 )
                   
Net Cash Provided by Investing Activities           2,571  
                   
Financing Activities                  
                   
   Advances from related parties       199,640     346,659  
   Proceeds from issuance of notes and loans payable           448,363  
   Proceeds from issuance of convertible debentures           1,684,655  
   Repayment of notes payable           (319,792 )
   Repayment of convertible debentures           (149,092 )
   Debt financing costs           (250,143 )
   Deferred financing costs   60,965     (60,965 )    
   Proceeds from issuance of common stock   801,502     1,558,607     9,933,245  
   Stock issuance costs   (200,955 )   (44,477 )   (245,432 )
   Repurchase of preferred stock   (15,000 )       (15,000 )
                   
Net Cash Provided by Financing Activities   646,512     1,652,805     11,433,463  
                   
Increase (Decrease) in Cash   (508,057 )   974,046     718,907  
                   
Cash, Beginning of Period   1,226,964     252,918      
                   
Cash, End of Period   718,907     1,226,964     718,907  

Supplementary Cash Flow Information (Note 12)

(The accompanying notes are an integral part of these financial statements)

F-10



CANYON COPPER CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
June 30, 2012
(Expressed in U.S. dollars)

1.

Nature of Operations and Continuance of Business

     

Canyon Copper Corp., (the “Company”), was incorporated in the State of Nevada, U.S.A. on January 21, 2000 under the name Aberdene Mines Limited. On August 7, 2006, the Company changed its name to Canyon Copper Corp. The Company is an exploration stage company, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, “Development Stage Entities”. The Company’s principal business plan is to acquire, explore and develop mineral properties and ultimately seek earnings by exploiting mineral claims.

     

The Company has been in the exploration stage since its formation in January 2000 and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition, exploration and development of mineral properties. Upon location of a commercial mineable reserve, the Company will actively prepare the site for extraction and enter a development stage. At present, management devotes most of its activities to raising sufficient funds to further explore and develop its mineral properties. Planned principal activities have not yet begun. The ability of the Company to emerge from the exploration stage with respect to any planned principal business activity is dependent upon its successful efforts to raise additional debt or equity financing and/or attain profitable mining operations. As at June 30, 2012, the Company has not generated any revenue and has accumulated losses of $22,435,613 since inception. The Company also has significant mineral property acquisition and exploration commitments. There is no guarantee that the Company will be able to complete any of the above objectives. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

     

Management’s plan for the next twelve months is to continue initial exploration activities on the New York Canyon Project in Nevada and the Moonlight Property in Plumas County, California. The agreements pursuant to which the Company acquired its interests in the New York Canyon Project provide for a series of cash payments and annual filing maintenance costs. If the Company fails to make such payments or expenditures in a timely fashion, it may lose its interest in those properties. As at June 30, 2012, the Company had cash of $718,907 on hand, and for the next twelve months, management anticipates that the minimum cash requirements to fund its proposed exploration program and continued operations will be $1,134,000. Accordingly, the Company does not have sufficient funds to meet planned expenditures over the next twelve months. There is no assurance that the Company will be able to raise sufficient cash to fund its future exploration programs and operational expenditures.

     
2.

Summary of Significant Accounting Policies

     
(a)

Basis of Presentation

     

These financial statements and related notes are prepared in conformity with accounting principles generally accepted in the United States and are expressed in U.S. dollars.

     
(b)

Use of Estimates

     

The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to long-lived assets, mineral property costs, fair values of derivative liabilities, stock-based compensation, and deferred income tax asset valuations. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

     
(c)

Cash and Cash Equivalents

     

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

F-11



CANYON COPPER CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
June 30, 2012
(Expressed in U.S. dollars)

2.

Summary of Significant Accounting Policies (continued)

     
(d)

Investment Securities

     

The Company reports investments in debt and marketable equity securities at fair value based on quoted market prices or, if quoted prices are not available, discounted expected cash flows using market rates commensurate with credit quality and maturity of the investment. All investment securities are designated as available for sale with unrealized gains and losses included in stockholders' equity. Unrealized losses that are other than temporary are recognized in earnings. Realized gains and losses are accounted for on the specific identification method.

     

The Company periodically reviews these investments for other-than-temporary declines in fair value based on the specific identification method and writes down investments to their fair value when an other-than- temporary decline has occurred. When determining whether a decline is other-than-temporary, the Company examines (i) the length of time and the extent to which the fair value of an investment has been lower than its carrying value: (ii) the financial condition and near-term prospects of the investee, including any specific events that may influence the operations of the investee such as changes in technology that may impair the earnings potential of the investee: and (iii) the Company’s intent and ability to retain its investment in the investee for a sufficient period of time to allow for any anticipated recovery in market value. The Company generally believes that an other-than-temporary decline has occurred when the fair value of the investment is below the carrying value for one year, absent of evidence to the contrary.

     
(e)

Mineral Property Costs

     

The Company has been in the exploration stage since its inception and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized. The Company assesses the carrying costs for impairment under ASC 360, “Property, Plant, and Equipment” at each fiscal quarter end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

     
(f)

Long-Lived Assets

     

In accordance with ASC 360, “Property Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

     
(g)

Asset Retirement Obligations

     

The Company accounts for asset retirement obligations in accordance with the provisions of ASC 440, “Asset Retirement and Environmental Obligations” which requires the Company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the assets.

     
(h)

Income Taxes

     

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

F-12



CANYON COPPER CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
June 30, 2012
(Expressed in U.S. dollars)

2.

Summary of Significant Accounting Policies (continued)

     
(i)

Income Taxes (continued)

     

As of June 30, 2012 and 2011, the Company did not have any amounts recorded pertaining to uncertain tax positions.

     

The Company files federal and provincial income tax returns in Canada and federal, state and local income tax returns in the U.S., as applicable. The Company may be subject to a reassessment of federal and provincial income taxes by Canadian tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year. For Canadian and U.S. income tax returns, the open taxation years range from 2008 to 2011. In certain circumstances, the U.S. federal statute of limitations can reach beyond the standard three year period. U.S. state statutes of limitations for income tax assessment vary from state to state. Tax authorities of Canada and U.S. have not audited any of the Company’s income tax returns for the open taxation years noted above.

     

The Company recognizes interest and penalties related to uncertain tax positions in tax expense. During the years ended June 30, 2012 and 2011, there were no charges for interest or penalties.

     
(j)

Foreign Currency Translation

     

The functional and reporting currency of the Company is the United States dollar. Occasional transactions may occur in a foreign currency and the Company has adopted ASC 740, “Foreign Currency Translation Matters”. Monetary assets and liabilities denominated in foreign currencies are translated to United States dollars using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

     
(k)

Financial Instruments and Fair Value Measures

     

ASC 820, “Fair Value Measurements and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, amounts due to related parties, and derivative liabilities. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets, and the fair value of derivative liabilities is determined based on “Level 2” inputs, which consist of model-derived valuations in which significant inputs are derived from observable market data. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

F-13



CANYON COPPER CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
June 30, 2012
(Expressed in U.S. dollars)

2.

Summary of Significant Accounting Policies (continued)

     
(l)

Comprehensive Loss

     

ASC 220, “Comprehensive Income” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As at June 30, 2012 and 2011, the Company had no items that represent comprehensive income or loss.

     
(m)

Loss Per Share

     

The Company computes loss per share in accordance with ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. As a June 30, 2012, the Company had 6,466,683 (2011 – 5,272,076) potentially dilutive shares outstanding.

     
(n)

Stock-based Compensation

     

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Based Compensation” and ASC 505, “Equity Based Payments to Non-Employees”, which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based awards made to employees and directors, including stock options.

     

ASC 718 requires companies to estimate the fair value of share-based awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option-pricing model as its method of determining fair value. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviours. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over the requisite service period.

     

All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

     
(o)

Recent Accounting Pronouncements

     

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

     
3.

Mineral Properties

     
(a)

The Company owns a 100% interest, subject to a 2% net smelter royalty, in the New York Canyon Copper Project located in Mineral County, Nevada. The Company acquired its interest by making cash payments of $460,000, issuing 2,000,000 shares at a fair value of $1,495,000, and incurring $2,000,000 in exploration expenditures.

     
(b)

On October 9, 2004, a lease agreement was entered into with Tammy Gentry and Pat Hannigan on the Copper Queen #2 patented claim located within the overall New York Canyon property. The term of the lease is nine years. As required by the lease agreement, there was an initial payment of $1,000, with quarterly payments of $1,500 commencing October 1, 2004. On September 30, 2011, the Company exercised its right to purchase the claim for $50,000 and all quarterly payments made were applied to the purchase price.

     
(c)

On January 1, 2005, a lease agreement was entered into with Clifford DeGraw and Richard Markiewicz on the Mildred and Copper Queen #1 patented claims located within the overall New York Canyon property. The term of the lease is seven years. As required by the lease agreement, there was an initial payment of $2,500, with quarterly payments commencing April 1, 2005 and required so long as the lease agreement remains in effect as follows: $2,500 per quarter during the first year; $3,500 per quarter during the second year; $4,000 per quarter during the third year; $5,000 per quarter during the fourth year; and $7,500 per quarter thereafter. On June 20, 2011, the Company exercised its right to purchase the claims for $130,000 and all quarterly payments made were applied to the purchase price.

F-14



CANYON COPPER CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
June 30, 2012
(Expressed in U.S. dollars)

3.

Mineral Properties (continued)

         
(d)

On July 21, 2004, the Company entered into a fifteen-year renewable lease agreement, which gives the Company the right of exploration for and production of minerals in eighteen mineral claims owned by the lessor. The mineral claims are located within the area of the Company’s New York Canyon Copper Project. Under the terms of the agreement, the Company must make cash payments of $25,000 on execution of the agreement (paid). On the first anniversary of the execution of the agreement, the Company must make payments to the lessor of $1,000 per month, $2,000 per month after the second anniversary and $3,000 per month after the third anniversary for as long as the lease is in effect. In addition, at six and twenty-four months after the execution of the agreement, the Company will give the lessor, respectively, 10,000 shares (issued at a fair value of $3,500 in fiscal 2005) and 15,000 shares (issued at a fair value of $7,950 in fiscal 2007) of the Company’s common stock. This agreement is subject to a Net Smelter Interest payable to two parties (1.75% Net Smelter Royalty (“NSR”) + 0.5% NSR). The 1.75% is terminated upon payments of $2,000,000; then the second party will retain 1.5% NSR which will revert to 0.5% after an additional $2,000,000 is paid.

         
(e)

On August 5, 2010, the Company entered into a Purchase and Sale Agreement with a company with common directors and officers, whereby the Company sold 39 mineral claims located in the Mineral County, Nevada, for consideration of $10 and the retention of a 2% net smelter return royalty.

         
(f)

On November 25, 2011, the Company entered into an Assignment Agreement with Metamin Enterprises Inc., a company controlled by the President of the Company, (the “Assignor”), to acquire the Assignor’s interest in an Option Agreement between the Assignor and Metamin Enterprises USA Inc. (the “Optionor”), a wholly-owned subsidiary of the Assignor, in respect of certain mineral claims, known as the Moonlight property, located in Plumas County, California. On January 19, 2012, the Company closed the Assignment Agreement with the Assignor and Optionor. In consideration for the assignment, the Company is required to make the following payments to the Assignor:

         

(i)

Cash payments:

  • $15,000 on the TSX Venture Exchange acceptance date (paid);

  • $25,000 on or before February 18, 2012 (paid);

  • $25,000 on or before February 18, 2013; and

  • An annual advanced royalty, which shall be deductible from future royalty payments, of the $15,000 commencing on February 18, 2014 and payable every year thereafter.

       

     

       

    (ii)

    Share payments:

  • 75,000 shares of common stock on the TSX Venture Exchange acceptance date (issued);

  • 75,000 shares of common stock on or before February 18, 2012 (issued);

  • 150,000 shares of common stock on or before February 18, 2013; and

  • 200,000 shares of common stock on or before February 18, 2014.

       

     

       

    In addition, the Company agreed to reimburse the Assignor for annual maintenance and exploration expenses previously incurred on the property, which amount cannot exceed $200,000. The Assignor will retain a 1% net smelter return on metals extracted from the property, which can be repurchased for $1,000,000, and a gross overriding royalty of 2.5% on receipts from the sale of industrial minerals. Upon closing of the Assignment Agreement, the Company will assume all of the Assignor’s rights and obligations under the Option Agreement, and will be required to make the following payments to the Optionor in order to maintain and exercise the option:

       

     

       

    (i)

    Cash payments:

  • $25,000 on or before February 18, 2012 (paid);

  • $25,000 on or before February 18, 2013; and

  • An annual advanced royalty, which shall be deductible from future royalty payments, of the $15,000 commencing on February 18, 2014 and payable every year thereafter.

       

     

       

    (ii)

    Share payments:

  • 75,000 shares of common stock on the TSX Venture Exchange acceptance date (issued);

  • 75,000 shares of common stock on or before February 18, 2012 (issued);

  • 150,000 shares of common stock on or before February 18, 2013; and

  • 200,000 shares of common stock on or before February 18, 2014.

             

    (iii)

    Exploration expenditures:

  • $100,000 on or before February 18, 2013.

    F-15



    CANYON COPPER CORP.
    (An Exploration Stage Company)
    Notes to the Financial Statements
    June 30, 2012
    (Expressed in U.S. dollars)

    3.

    Mineral Properties (continued)

           

    The Optionor will retain a 1% net smelter return on the metals extracted from the Moonlight property, which can be repurchased for $1,000,000, and a gross overriding royalty of 2.5% on receipts from the sale of industrial minerals.

           
    4.

    Related Party Transactions

           
    (a)

    As at June 30, 2012, the Company was indebted to the President of the Company for $269,872 (Cdn$275,000) (2011 - $222,983 (Cdn$215,000)). The amount due is non-interest bearing, unsecured and due on demand.

           
    (b)

    As at June 30, 2012, the Company was indebted to the Chief Executive Officer (“CEO”) of the Company for $513,757 (Cdn$522,322) (2011 - $446,229 (Cdn$413,209)), which consists of the following amounts:

           

    (i)

    $269,873 (Cdn$275,000) (2011 - $222,983 (Cdn$215,000)) for management fees, which is non- interest bearing, unsecured and due on demand;

       

     

     

    (ii)

    $73,602 (Cdn$75,000) (2011 - $77,784 (Cdn$75,000)) in advances for working capital purposes which bears interest at 15% per annum, is secured by a promissory note, and was due on May 22, 2012. On May 17, 2012, the Company entered into a First Amendment to Loan Agreement with the CEO to extend the term of the loan to May 22, 2014. As at June 30, 2012, accrued interest of $17,725 (Cdn$18,062) (2011 - $7,033 (Cdn$6,780)) is owing on this loan.

       

     

     

    (iii)

    $50,000 (2011 - $50,000) in advances for working capital purposes which bears interest at 15% per annum, is secured by a promissory note, and was due on April 1, 2012. On May 17, 2012, the Company entered into a First Amendment to Loan Agreement with the CEO to extend the term of the loan to April 1, 2014. As at June 30, 2012, accrued interest of $12,986 (2011 - $5,466) is owing on this loan.

       

     

     

    (iv)

    $73,602 (Cdn$75,000) (2011 - $77,784 (Cdn$75,000)) in advances for working capital purposes which bears interest at 15% per annum, is secured by a promissory note, and is due on July 1, 2012. On May 17, 2012, the Company entered into a First Amendment to Loan Agreement with the CEO to extend the term of the loan to July 1, 2014. As at June 30, 2012, accrued interest of $15,970 (Cdn$16,274) (2011 - $5,179 (Cdn$4,993)) is owing on this loan.

           

    (c)

    During the year ended June 30, 2012, the Company incurred management fees of $59,744 (2011 - $60,497), $59,744 (2011 - $60,497), and $91,210 (2011 - $74,173) to the Chief Executive Officer of the Company, President of the Company, and Chief Financial Officer, respectively.

     

     

     

    (d)

    During the year ended June 30, 2012, the Company incurred rent of $26,017 (2011 - $17,957) to a company with common officers and directors.

     

     

     

    (e)

    During the year ended June 30, 2012, the Company incurred interest of $30,009 (2011 - $17,490) to the Chief Executive Officer of the Company.

     

     

     

     

    5.

    Derivative Liabilities

     

     

    The Company has share purchase warrants that were issued in private placements which have exercise prices denominated in Canadian dollars which differs from the Company’s functional currency (U.S. dollars). As a result, these share purchase warrants cannot be considered to be indexed to the Company’s own stock and accordingly must be accounted for as derivative liabilities with changes in fair value recorded in the statement of operations.

     

     

    The fair value of the derivative liability for the 1,674,730 share purchase warrants exercisable at Cdn$0.50 per share issued on May 11, 2011 was $385,694. The fair value of the derivative liability for the 48,928 share purchase warrants exercisable at Cdn$0.50 per share issued on June 8, 2011 was $11,156. The fair value of the derivative liability for the 428,571 share purchase warrants exercisable at Cdn$0.50 per share issued on July 8, 2011 was $89,267. The fair value of the derivative liability for the 1,082,036 share purchase warrants exercisable at Cdn$0.50 per share issued on July 13, 2011 was $186,581.

    F-16



    CANYON COPPER CORP.
    (An Exploration Stage Company)
    Notes to the Financial Statements
    June 30, 2012
    (Expressed in U.S. dollars)

    5.

    Derivative Liabilities (continued)

       

    The fair values of these share purchase warrants as at June 30, 2012 and 2011 are as follows:


          2012     2011  
           
                   
      1,674,730 warrants expiring on November 10, 2012   2,738     378,707  
      48,928 warrants expiring on December 7, 2012   135     11,119  
      428,571 warrants expiring on January 8, 2013   1,492      
      1,082,036 warrants expiring on January 13, 2013   4,042      
                   
          8,407     389,826  

    During the year ended June 30, 2012, the Company recorded a gain on the change in fair value of the derivative liabilities of $657,267.

    The Company uses the Black-Scholes option pricing model to calculate the fair values of the derivative liabilities. The following table shows the weighted average assumptions used in the calculations:

                Risk-free     Expected     Expected  
          Expected     Interest     Dividend     Life (in  
          Volatility     Rate     Yield     years)  
      As at issuance date:                        
               1,674,730 warrants expiring on November 10, 2012   175%     0.37%     0%     1.5  
               48,928 warrants expiring on December 7, 2012   172%     0.29%     0%     1.5  
               428,571 warrants expiring on January 8, 2013   173%     0.29%     0%     1.5  
               1,082,036 warrants expiring on January 13, 2013   173%     0.27%     0%     1.5  
      Weighted average as at June 30, 2012   133%     0.16%     0%     0.5  

    6.

    Common Stock

         

    Stock transactions for the year ended June 30, 2012:

         
    (a)

    On July 8, 2011, the Company issued 857,142 units at Cdn$0.35 per unit for proceeds of $312,272 (Cdn$300,000) to a company controlled by the CEO of the Company. Each unit consisted of one share of common stock and one-half of one share purchase warrant, with each whole share purchase warrant entitling the holder to purchase an additional share of common stock at Cdn$0.50 per share until January 8, 2013. Subject to the terms and conditions of the warrants, the Company may accelerate the expiry date of the warrants if the Company’s shares close at a price equal to or greater than Cdn$0.60 for 10 consecutive trading days. If the Company elects to exercise its accelerated expiry date, the accelerated expiry date will be 30 days after the Company sends out the notice of acceleration. The fair value of the derivative liability associated with the share purchase warrants issued as part of the private placement was estimated at $89,267 using the Black-Scholes option-pricing model. Refer to Note 5.

         
    (b)

    On July 13, 2011, the Company issued 2,164,071 units at Cdn$0.35 per unit for total proceeds of $789,230 (Cdn$757,425) pursuant to a non-brokered private placement. Each unit consisted of one share of common stock and one-half of one share purchase warrant, with each whole share warrant entitling the holder to purchase an additional share of common stock at Cdn$0.50 per share until January 13, 2013. Subject to the terms and conditions of the warrants, the Company may accelerate the expiry date of the warrants if the Company’s shares close at a price equal to or greater than Cdn$0.60 for 10 consecutive trading days. If the Company elects to exercise its accelerated expiry date, the accelerated expiry date will be 30 days after the Company sends out the notice of acceleration. Pursuant to the private placement, the Company recorded share issuance costs of $225,342 which consisted of cash payments of $200,959 and 129,844 agent’s compensation options granted with a fair value of $24,387. The agent’s compensation options were granted with an exercise price of Cdn$0.35 per unit. Each unit consisted of one share of common stock and one-half of one share purchase warrant with each whole share purchase warrant exercisable at Cdn$0.50 per share expiring on January 13, 2013. The fair value of these agent’s compensation options was estimated at the date of grant using the Black-Scholes option-pricing model assuming an expected life of 1.5 years, a risk- free rate of 0.27%, an expected volatility of 173%, and a 0% dividend yield. The weighted average fair value of the agent’s compensation options was $0.19 per option. The fair value of the derivative liability associated with the share purchase warrants issued as part of the private placement was estimated at $186,581 using the Black-Scholes option-pricing model. Refer to Note 5.

    F-17



    CANYON COPPER CORP.
    (An Exploration Stage Company)
    Notes to the Financial Statements
    June 30, 2012
    (Expressed in U.S. dollars)

    6.

    Common Stock (continued)

         
    (c)

    On January 19, 2012, the Company issued 150,000 shares of common stock with a fair value of $26,250 pursuant to an assignment agreement to acquire the Moonlight property. Refer to Note 3(f).

         
    (d)

    On February 16, 2012, the Company issued 150,000 shares of common stock with a fair value of $22,500 pursuant to an assignment agreement to acquire the Moonlight property. Refer to Note 3(f).

         

    Stock transactions for the year ended June 30, 2011:

         
    (a)

    On November 24, 2010, the Company effected a 79-for-100 reverse stock split of the authorized, issued and outstanding common stock. As a result, the authorized share capital decreased from 166,666,666 shares of common stock with a par value of $0.00001 per share to 131,666,666 shares of common stock with a par value of $0.00001 per share. All share amounts have been retroactively adjusted for all periods presented.

         
    (b)

    On May 11, 2011, the Company issued 3,349,459 units at a price of Cdn$0.35 per unit for proceeds of $1,223,579. Each unit consisted of one share of common stock and one-half of one share purchase warrant, with each whole warrant entitling the holder to purchase an additional share of common stock at Cdn$0.50 per share until November 10, 2012.

         
    (c)

    On June 8, 2011, the Company issued 97,859 units at a price of Cdn$0.35 per unit for proceeds of $35,027. Each unit consisted of one share of common stock and one-half of one share purchase warrant, with each whole warrant entitling the holder to purchase an additional share of common stock at Cdn$0.50 per share until December 7, 2012.

         
    (d)

    During the year ended June 30, 2011, the Company received $300,000 which was included in common stock subscribed as at June 30, 2011.

         
    7.

    Preferred Stock

         

    On October 20, 2011, the Company entered into a stock repurchase agreement, whereby the Company repurchased 500,000 Series A, 0% Convertible Preferred Stock of the Company in consideration for $15,000. On November 4, 2011, the Company cancelled the 500,000 shares of preferred stock.

         
    8.

    Stock Options

         

    On August 21, 2009 (as amended on May 4, 2011), the Board of Directors of the Company adopted the Company’s 2009 Stock Option Plan (the “Plan”). The Plan is administered by the Board of Directors. Stock options granted under the Plan have a maximum term of five years. The aggregate number of shares of the Company’s common stock available for issuance under the 2009 Plan is 10% of the Company’s issued and outstanding shares. As at June 30, 2012, the Company had 3,637,276 stock options available for granting pursuant to the 2009 Plan.

         

    A summary of the Company’s stock option activity is as follows:


                Weighted        
                Average     Aggregate  
                Exercise     Intrinsic  
          Number of     Price     Value  
          Options      
                         
      Outstanding, June 30, 2010 and 2011   3,548,418     0.27        
                         
       Forfeited   (316,000 )   0.34        
                         
      Outstanding, June 30, 2012   3,232,418     0.27      

    Additional information regarding stock options outstanding as at June 30, 2012 is as follows:

        Outstanding and exercisable  
              Weighted        
              average     Weighted  
    Range of         remaining     average  
    exercise prices   Number of     contractual life     exercise price  
    $   shares     (years)    
                       
    0.13   2,686,000     2.1     0.13  
    0.95   546,418     0.4     0.95  
                       
        3,232,418     1.8     0.27  

    F-18



    CANYON COPPER CORP.
    (An Exploration Stage Company)
    Notes to the Financial Statements
    June 30, 2012
    (Expressed in U.S. dollars)

    9.

    Share Purchase Warrants

       

    The following table summarizes the continuity of the Company’s share purchase warrants:


                Weighted  
                Average  
          Number of     Exercise  
          Warrants     Price  
      Balance, June 30, 2010   9,047,321   $ 0.13  
         Issued   1,723,658     Cdn$0.50  
         Expired   (9,047,321 ) $ 0.13  
      Balance, June 30, 2011   1,723,658     Cdn$0.50  
         Issued   1,510,607     Cdn$0.50  
      Balance, June 30, 2012   3,234,265     Cdn$0.50  

    As at June 30, 2012, the following share purchase warrants were outstanding:

    Number of Exercise  
    Warrants Price Expiry Date
         
    1,674,730 Cdn$0.50 November 10, 2012
    48,928 Cdn$0.50 December 7, 2012
    428,571 Cdn$0.50 January 8, 2013
    1,082,036 Cdn$0.50 January 13, 2013
         
    3,234,265    

    10.

    Contingent Liability

       

    On January 23, 2007, Focused Investor Relations Marketing Inc. commenced an action in Ontario, Canada against the Company seeking payment in the amount of $84,000 pursuant to an oral agreement. This action was dismissed by the Ontario Superior Court of Justice during the year ended June 30, 2012.

       
    11.

    Income Taxes

       

    The Company has net operating losses carried forward of $7,668,530 available to offset taxable income in future years which expire beginning in fiscal 2020.

       

    The Company is subject to United States federal and state income taxes at an approximate rate of 35%. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:


          2012     2011  
           
      Net loss before income taxes   (597,845 )   (852,281 )
      Income tax rate   35%     35%  
      Income tax recovery   209,246     298,298  
      Permanent differences and other   212,981     2,459  
      Change in valuation allowance   (422,227 )   (300,757 )
      Provision for income taxes        

    F-19



    CANYON COPPER CORP.
    (An Exploration Stage Company)
    Notes to the Financial Statements
    June 30, 2012
    (Expressed in U.S. dollars)

    11.

    Income Taxes (continued)

       

    The significant components of deferred income tax assets and liabilities at June 30, 2012 and 2011 are as follows:


          2012     2011  
           
                   
      Mineral property costs   2,998,808     2,831,499  
      Net operating losses carried forward   2,683,986     2,429,068  
      Valuation allowance   (5,682,794 )   (5,260,567 )
                   
      Net deferred income tax asset        

    As at June 30, 2012, the Company is in arrears on filing its statutory corporate income tax returns and the amounts presented above are based on estimates. The actual losses available could differ from these estimates.

       
    12.

    Supplemental Cash Flow Information


                      Accumulated from  
                      January 21, 2000  
          Year Ended     Year Ended     (date of inception)  
          June 30,     June 30,     to June 30,  
          2012     2011     2012  
             
                         
      Non-cash Investing and Financing Activities:                  
                         
             Preferred stock issued for investment securities           1,535,575  
             Investment securities used to pay the finder’s fee for the                  
             preferred stock issuance           153,557  
             Common stock issued to settle debt           3,528,100  
             Common stock issued for mineral property lease   48,750         2,383,242  
                         
      Supplemental Disclosures:                  
                         
           Interest paid           98,850  
           Income taxes paid            

    F-20


    ITEM 9.            CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

    None.

    ITEM 9A.          CONTROLS AND PROCEDURES.

    Disclosure Controls and Procedures

    We carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2012 (the “Evaluation Date”). This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the Evaluation Date as a result of the material weaknesses in internal control over financial reporting discussed below.

    Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

    Notwithstanding the assessment that our internal control over financial reporting was not effective and that there were material weaknesses as identified in this report, we believe that our financial statements contained in our Annual Report on Form 10-K for the year ended June 30, 2012 fairly present our financial condition, results of operations and cash flows in all material respects.

    Management's Annual Report on Internal Control Over Financial Reporting

    Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the Company.

    Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

    Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.

    A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

    Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of the Evaluation Date, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this framework, management concluded that our internal control over financial reporting was not effective as of the Evaluation Date.

    37


    Management assessed the effectiveness of the Company’s internal control over financial reporting as of Evaluation Date and identified the following material weaknesses:

    Inadequate Segregation of Duties: We have an inadequate number of personnel to properly implement control procedures.

    Insufficient Written Policies & Procedures: We have insufficient written policies and procedures for accounting and financial reporting.

    Inadequate Financial Statement Closing Process: We have an inadequate financial statement closing process.

    Lack of Audit Committee Financial Expert: Our audit committee has deficiencies due to the fact that it does not have an audit committee financial expert.

    Management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) prepare and implement sufficient written policies and checklists for financial reporting and closing processes and (4) may consider appointing outside directors and audit committee members in the future.

    Management, including our Chief Executive Officer and the Chief Financial Officer, has discussed the material weakness noted above with our independent registered public accounting firm. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.

    This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this annual report.

    Changes in internal control over financial reporting

    There were no changes in our internal control over financial reporting that occurred during the fiscal year ended June 30, 2012 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

    Limitations on the effectiveness of controls and procedures

    Our management, including our Chief Executive Officer and the Chief Financial Officer, do not expect that the our controls and procedures will prevent all potential errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

    ITEM 9B.          OTHER INFORMATION.

    None.

    38


    PART III

    ITEM 10.          DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

    Our executive officers and directors and their respective ages and titles are as follows:

    NAME OF DIRECTOR / OFFICER AGE POSITION
    Anthony Harvey 78 Director, Chairman and Chief Executive Officer
    Benjamin Ainsworth 71 Director, President And Secretary
    Kurt Bordian 44 Chief Financial Officer and Treasurer
    Bryan Wilson 62 Director
    James E. Yates 70 Director

    Set forth below is a brief description of the background and business experience of our executive officers and directors for the past five years:

    Anthony Harvey (Director, Chairman, and Chief Executive Officer): On May 30, 2006, Mr. Harvey was appointed as our Chairman, Chief Executive Officer and as a member of our Board of Directors. Mr. Harvey has over 40 years of consulting experience on numerous mining projects internationally with capital costs ranging up to and exceeding $400 million. Mr. Harvey has spent 30 years working with Wright Engineers Ltd. – Fluor Daniels in various management positions, including Senior Project Manager, involved in the design and construction of 14 mines world-wide on behalf of major mining corporations.

    Mr. Harvey is presently the founder and board member of ARH Management Limited, which has provided management and consulting services to the resource industry. Mr. Harvey was a director of ESO Uranium Corp. (ESO-TSX.V), a company engaged in the exploration of uranium, and Terra Energy Inc. (TTR-TSX.V), a petroleum and natural gas company based in Calgary, Alberta. Mr. Harvey was a former founder, president and chairman of Azco Mining Inc. (AZCO-TSX/AMEX), former founder, chairman and director of Oremex Resources Inc. (ORM-TSX.V), and former chairman and director of Lakeshore Gold Corp. (LSG-TSX).

    Benjamin Ainsworth (Director, President and Secretary): On May 30, 2006, Mr. Ainsworth was appointed as our Secretary and a member of our Board of Directors. Since November 7, 2007, Mr. Ainsworth has served as our President.

    Mr. Ainsworth is a senior geologist and mining consultant who has been involved in the mining industry for over thirty-five years. Mr. Ainsworth joined Placer Development in 1965 and held positions of Senior Geologist, Chief Geochemist, Exploration Manager – Eastern Canada, Exploration Manager – Chile, and President – Placer Chile, South America. Throughout the 1970’s, Mr. Ainsworth was involved in the design, budgeting and implementation of exploration programs that included large and small drill programs, geophysical surveys, geological mapping, geochemical surveys, and a full range of project evaluation studies.

    Mr. Ainsworth is the principal, senior geologist and mining consultant of Ainsworth Jenkins Holdings Inc. The consulting firm has been responsible for concept, design and implementation of a number of exploration projects. Mr. Ainsworth is a director of several public companies including Black Panther Mining Corp. (BPC.TSX.V), ESO Uranium Corp. (ESO-TSX.V), Columbia Yukon Explorations Inc. (CYU-TSX.V), Consolidated Venturex Holdings Ltd. (CVA-TSX.V), Sultan Minerals Inc. (SUL-TSX.V), Hathor Exploration Ltd. (HAT-TSX.V) and Dajin Resources Ltd. (DJI-TSX.V).

    Kurt Bordian (Chief Financial Officer and Treasurer): Mr. Bordian was appointed as our Chief Financial Officer on January 6, 2006 and as our Treasurer on November 7, 2007. Mr. Bordian is responsible for our financial management functions. He has worked primarily in the mineral exploration and oil and gas industries over the past 12 years.

    Mr. Bordian currently serves as a director or officer on a number mineral exploration and development companies, including: Chief Financial Officer of ESO Uranium Corp. (ESO-TSX.V) since November 2006; director of Thor Explorations Ltd. (THX-TSX.V); director of Calypso Uranium Corp. (CLP-TSX.V) since April 2006 and former Chief Financial Officer from February 2006 to March 2007; and director of Palo Duro Energy Inc. (PDE-TSX.V) since August, 2006 and former Chief Financial Officer from August, 2006 to September, 2006.

    39


    Previously, Mr. Bordian has served as a director or officer on the following public companies: director of Legal Access Technologies Inc. from November 2004 to January 2006 and Chief Financial Officer from November 2004 to April 2005; Chief Financial Officer of Mexoro Minerals Ltd. from February 2007 to June 2007; director of Bordeaux Energy Inc. (BDO-TSX.V) from July 2006 to June 2007 and Chief Financial Officer from July 2006 to September 2006; Chief Financial Officer, Secretary and director of Black Tusk Minerals Inc. (BKTK-OTCBB) from August 2005 to September 2008; Chief Financial Officer of Gold Point Energy Corp. (GPE-TSX.V); and President, CEO and director of Magnate Ventures Inc. (MGV.H-NEX) from May, 2007 to August 2009.

    Mr. Bordian is a Certified General Accountant in Canada, and holds a Bachelor of Commerce (Honors) Degree from the University of Manitoba.

    Bryan Wilson (Director): Mr. Wilson has served as a member of our Board of Directors since March 6, 2006. Mr. Wilson also served as our President and Treasurer from May 30, 2006 to November 7, 2007.

    Mr. Wilson obtained a Bachelor of Science from the University of Waterloo in 1975. He has worked in the fields of mining exploration and development for 18 years and financial services for 12 years. He has filled various roles such as a Mining Analyst for C.M. Oliver and Dominick & Dominick Securities Inc. and as a Corporate Finance Specialist for Thames Capital. Since September 2008, Mr. Wilson has served as Director, Exploration Business Development of Centerra Gold (CG – TSX), a company engaged in the acquisition, development and production of gold properties in Central Asia, the former Soviet Union and emerging markets. Mr. Wilson is currently a director of Doubleview Capital Corp. (DBV – TSXV), a company engaged in the exploration of mineral properties in British Columbia. Mr. Wilson previously served as President and CEO of Gee-Ten Ventures Inc. (GTV – TSX.V), a company engaged in the exploration and development of mineral projects, from February 2008 to September 2008 and as a director of Gee-Ten Ventures Inc. from February 2008 to February 2010. Since September 1999, Mr. Wilson has acted as a director of Spider Resources Inc. (SPQ-TSX.V), a junior exploration company, and was the CEO and President of Spider Resources Inc. from June 2003 to June 2005.

    In addition to the companies above, Mr. Wilson also served as President, CEO and director of St. Genevieve Resources Ltd. (SGVL-CNSX, STGIF-OTCBB), a mining exploration and development company, from January 2003 to March 2008.

    James E. Yates (Director): Mr. Yates joined our Board of Directors on April 15, 2009. Mr. Yates has over twenty years’ experience in the mineral exploration industry and has served as a director and officer of several public mining companies. From 1982 to 1988 he was the Founder, President and Director of Hycroft Resources, which successfully brought the Crofoot Mine into production. Mr. Yates has overseen the corporate management and financing of a number of projects in North America including American Bullion Minerals, Zappa Resources, and Jersey Goldfields, having raised in excess of $20 million for mineral exploration development. Mr. Yates is currently a director of ESO Uranium Corp. (ESO – TSX.V), a mineral exploration company focused on uranium exploration, and Nevada Geothermal Power Inc. (NGP – TSX.V), a company engaged in producing geothermal electrical power from geothermal resources in the United States.

    Term of Office

    Our directors are appointed for a one-year term to hold office until the next annual general meeting of our stockholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.

    COMMITTEES OF THE BOARD OF DIRECTORS

    Audit Committee

    Our audit committee currently consists of Anthony Harvey, James E. Yates and Bryan Wilson. Mr. Harvey is not an independent director as he currently acts as our Chairman and Chief Executive Officer. Mr. Yates and Mr. Wilson are independent members of our Board of Directors. See “Item 13 – Certain Relationships and Related Transactions, and Director Independence”.

    40


    Audit Committee Financial Expert

    Our Board of Directors has determined that we do not presently have a director who meets the definition of an “audit committee financial expert.” We believe that the cost related to appointing a financial expert to our Board of Directors at this time is prohibitive.

    Disclosure Committee and Charter

    We have a disclosure committee and disclosure committee charter. The disclosure committee is comprised of all of our officers and directors. The purpose of the committee is to provide assistance to the Chief Executive Officer and the Chief Financial Officer in fulfilling their responsibilities regarding the identification and disclosure of material information about us, and the accuracy, completeness and timeliness of our financial reports.

    CODE OF ETHICS

    We adopted a Code of Ethics applicable to our Chief Executive Officer, Chief Financial Officer, Corporate Controller and certain other finance executives, which is a "code of ethics" as defined by applicable rules of the SEC. Our Code of Ethics was attached as an exhibit to our Annual Report on Form 10-KSB for the year ended June 30, 2003, filed with the SEC on August 26, 2003. If we make any amendments to our Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our Code of Ethics to our chief executive officer, chief financial officer, or certain other finance executives, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a Current Report on Form 8-K filed with the SEC.

    SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

    Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10% of a registered class of our securities (“Reporting Persons”), to file reports of ownership and changes in ownership with the SEC. Reporting Persons are required by SEC regulations to furnish us with copies of all forms they file pursuant to Section 16(a). Based solely on our review of such reports received by the Company, other than as described below, we believe that, during the year ended June 30, 2012, all Reporting Persons complied with all Section 16(a) filing requirements applicable to them.

    The following persons have failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act:


    Name and Principal Position
    Number of Late
    Insider Reports
    Transactions Not
    Timely Reported
    Known Failures to
    File a Required Form
    Anthony Harvey
    Director, Chairman and Chief
    Executive Officer
    None

    None

    None

    Benjamin Ainsworth
    Director, President And Secretary
    None
    None
    None
    Kurt Bordian
    Chief Financial Officer and
    Treasurer
    None

    None

    None

    Bryan Wilson
    Director
    None
    None
    None
    James E. Yates
    Director
    Four
    Four
    None

    41


    ITEM 11.          EXECUTIVE COMPENSATION.

    SUMMARY COMPENSATION TABLE

    The following table sets forth the total compensation paid to or earned by our named executive officers, as that term is defined in Item 402(m)(2) of Regulation S-K, as of our fiscal years ended June 30, 2012 and 2011:






    Name & Principal
    Position






    Year





    Salary
    ($)





    Bonus
    ($)




    Stock
    Awards
    ($)




    Option
    Awards
    ($)
    Non-
    Equity
    Incentive
    Plan
    Compen-
    sation
    ($)
    Non-
    qualified
    Deferred
    Compen-
    sation
    Earnings
    ($)



    All Other
    Compen-
    sation
    ($)





    Total
    ($)
    Anthony Harvey,
    Director, Chairman
    and CEO(1)
    2012
    2011
    59,744
    60,497
    -
    -
    -
    -
    -
    -
    -
    -
    -
    -
    -
    -
    59,744
    60,497
    Kurt Bordian,
    CFO and
    Treasurer(2)
    2012
    2011
    91,210
    74,173
    -
    -
    -
    -
    -
    -
    -
    -
    -
    -
    -
    -
    91,210
    74,173
    Benjamin Ainsworth,
    Director, President
    and Secretary(3)
    2012
    2011
    59,744
    60,497
    -
    -
    -
    -
    -
    -
    -
    -
    -
    -
    -
    -
    59,744
    60,497

    Notes:

    (1)

    Mr. Harvey is compensated for his services pursuant to a management consultant agreement dated December 1, 2007 among Canyon Copper, ARH Management Ltd. (“ARH”) and Mr. Harvey. Under the terms of the agreement, ARH is to be paid a consulting fee of CDN $5,000 per month.

       
    (2)

    Mr. Bordian, through his holding company, is compensated CDN $6,000 per month for his services as Chief Financial Officer and CDN $2,000 per month for various accounting and bookkeeping services.

       
    (3)

    Mr. Ainsworth is compensated for his services pursuant to a management consultant agreement dated December 1, 2007 among Canyon Copper, Ainsworth-Jenkins Holdings Inc. (“AJ Holdings”) and Mr. Ainsworth. Under the terms of the agreement, AJ Holdings is to be paid a consulting fee of CDN $5,000 per month.

    OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

    The following table provides information concerning unexercised options for each of our named executive officers, as that term is defined in Item 402(m)(2) of Regulation S-K, as of our fiscal year ended June 30, 2012:







    Name and Principal
    Position


    Number of
    Securities
    Underlying
    Unexercised
    Options (#)
    Exercisable


    Number of
    Securities
    Underlying
    Unexercised
    Options (#)
    Unexercisable
    Equity Incentive
    Plan Awards:
    Number of
    Securities
    Underlying
    Unexercised
    Unearned
    Options





    Option
    Exercise
    Price





    Option
    Expiration
    Date
    Anthony Harvey
    Director, Chairman
    and CEO
    948,000
    131,667
    -
    -
    -
    -
    $0.13
    $0.95
    Aug 20, 2014
    Dec 2, 2012
    Kurt Bordian
    CFO and Treasurer
    395,000
    131,667
    -
    -
    -
    -
    $0.13
    $0.95
    Aug 20, 2014
    Dec 2, 2012
    Benjamin Ainsworth
    Director, President
    and Secretary
    474,000
    131,667
    -
    -
    -
    -
    $0.13
    $0.95
    Aug 20, 2014
    Dec 2, 2012

    42


    DIRECTOR COMPENSATION

    The following table sets forth the compensation paid to our directors for the fiscal year ended June 30, 2012.






    Name

    Fees
    Earned or
    Paid in
    Cash
    ($)



    Stock
    Awards
    ($)



    Option
    Awards
    ($)
    Non-Equity
    Incentive
    Plan
    Compen-
    sation
    ($)
    Nonqualified
    Deferred
    Compen-
    sation
    Earnings
    ($)


    All Other
    Compen-
    sation
    ($)




    Total
    ($)
    Bryan Wilson - - - - - - -
    James E. Yates - - - - - - -

    ITEM 12.

    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of September 26, 2012 by: (i) each of our directors and nominees, (ii) each of our named executive officers, and (iii) officers and directors as a group. Other than as described below, no person or group is known by us to beneficially own more than 5% of our outstanding shares of common stock. Unless otherwise indicated, the stockholders listed possess sole voting and investment power with respect to the shares shown.



    Title of Class

    Name and Address
    of Beneficial Owner
    Amount and Nature
    of Beneficial
    Ownership(1)
    Percentage
    of Common
    Stock(1)

    Directors and Officers
    Common Stock
    Anthony Harvey
    Director, Chairman and Chief Executive Officer
    3,915,098 shares
    Direct and Indirect(2)
    5.6%
    Common Stock
    Benjamin Ainsworth
    Director, President and Secretary
    1,309,084 shares
    Direct and Indirect(3)
    1.9%
    Common Stock
    Kurt Bordian
    Chief Financial Officer and Treasurer
    847,934 shares
    Direct(4)
    1.2%
    Common Stock
    Bryan Wilson
    Director
    368,667 shares
    Direct(5)
    *
    Common Stock
    James Yates
    Director
    1,341,067 shares
    Direct and Indirect(6)
    1.9%
    Common Stock
    All Officers and Directors
    as a Group (5 persons)
    7,781,850 shares
    11.2%

    5% Stockholders
    Common Stock

    Anthony Harvey
    Suite 408, 1199 West Pender Street
    Vancouver, BC V6E 2R1
    3,915,098 shares
    Direct and Indirect(2)
    5.6%

    Common Stock

    Cornucopia Holdings Limited
    Herrengasse 2 PO Box 562
    Vaduz, Liechtenstein FL 9490
    4,187,000 shares
    Direct
    6.1%

    Common Stock

    Knightwall Invest Inc.
    3076 Sir Francis Drakes Highway
    Road Town, Tortola BVI
    4,937,500 shares
    Direct
    7.2%

    Common Stock

    Centrum Bank AG
    Kirchstrasse 3 9490 Vaduz
    Principality of Liechtenstein
    12,744,967 shares
    Direct
    18.6%

    Notes:

    * Less than 1%.

    43



    (1)

    Applicable percentage of ownership is based on 68,696,934 shares of common stock outstanding as of September 26, 2012 together with securities exercisable or convertible into shares of Common Stock within 60 days of September 26, 2012 for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to securities exercisable or convertible into shares of common stock that are currently exercisable or exercisable within 60 days of September 26, 2012 are deemed to be beneficially owned by the person holding such options for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

    (2)

    The number of shares listed as beneficially owned by Mr. Harvey consists of: (i) 1,507,584 shares of common stock owned directly by Mr. Harvey; (ii) 857,142 shares held by ARH Management Ltd., a company controlled by Mr. Harvey; (iii) 42,134 shares of common stock held by Mr. Harvey’s spouse; (iv) the option to purchase 131,667 shares of common stock at a price of $0.95 per share until December 2, 2012; (v) the option to purchase 948,000 shares of common stock at a price of $0.13 per share until August 20, 2014; and (vi) warrants to purchase 428,571 shares of common stock at a price of CDN $0.50 per share until January 8, 2013 by ARH Management Ltd.

    (3)

    The number of shares listed as beneficially owned by Mr. Ainsworth consists of: (i) 537,917 shares of common stock owned directly by Mr. Ainsworth; (ii) 150,000 shares held by Metamin Enterprises Inc., a company controlled by Mr. Ainsworth; (iii) the option to purchase 131,667 shares of common stock at a price of $0.95 per share until December 2, 2012; and (iv) the option to purchase 474,000 shares of common stock at a price of $0.13 per share until August 20, 2014.

    (4)

    The number of shares listed as beneficially owned by Mr. Bordian consists of: (i) 321,267 shares of common stock owned directly by Mr. Bordian; (ii) the option to purchase 131,667 shares of common stock at $0.95 per share until December 2, 2012 and (iii) the option to purchase 395,000 shares of common stock at $0.13 per share until August 20, 2014.

    (5)

    The number of shares listed as beneficially owned by Mr. Wilson consists of: (i) 79,000 shares of common stock held directly by Mr. Wilson; (ii) the option to purchase 52,667 shares of common stock at a price of $0.95 per share until December 2, 2012; and (iii) the option to purchase 237,000 shares of common stock at a price of $0.13 per share until August 20, 2014.

    (6)

    The number of shares listed as beneficially owned by Mr. Yates consists of: (i) 484,067 shares of common stock owned directly by Mr. Yates; (ii) 466,000 shares of common stock held by Mr. Yates’ spouse; (iii) warrants to purchase 76,000 shares of common stock at a price of CDN $0.50 per share until November 10, 2012; and (iv) the option to purchase 316,000 shares of common stock at a price of $0.13 per share until August 20, 2014.

    Change in Control

    We are not aware of any arrangement which may result in a change in control in the future.

    EQUITY COMPENSATION PLAN INFORMATION

    The following table sets forth certain information concerning all equity compensation plans previously approved by stockholders and all previous equity compensation plans not previously approved by stockholders, as at June 30, 2012.

    EQUITY COMPENSATION PLAN INFORMATION AS AT JUNE 30, 2012






    Plan Category


    Number of securities to
    be issued upon exercise
    of outstanding options,
    warrants and rights
    (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 security holders 2,567,500 $0.13 3,637,275
    Equity Compensation Plans not approved by security holders 664,918 $0.80 Nil
    Total 3,232,418 $0.27 3,637,275

    44


    Amended and Restated 2009 Stock Option Plan

    On May 4, 2011, our Board of Directors adopted an Amended and Restated 2009 Stock Option Plan (the "Stock Option Plan"). The purpose of the Stock Option Plan is to assist us in attracting, retaining and motivating directors, officers, employees and consultants of our company. The Stock Option Plan provides that, subject to the requirements of the TSX Venture Exchange, the aggregate number of securities reserved for issuance will be 10% of the number of our shares of common stock issued and outstanding from time to time. The Stock Option Plan will be administered by our board of directors, which will have full and final authority with respect to the granting of all options thereunder.

    Stock Options may be granted under the Stock Option Plan to such service providers of our company, if any, as the board of directors may from time to time designate. The exercise price of Stock Option grants will be determined by the board of directors, but cannot be less than the closing market price of the shares of our common stock on the TSX Venture Exchange less allowable discounts at the time of grant. The Stock Option Plan provides that the number of shares of our common stock that may be reserved for issuance to any one individual upon exercise of all stock options held by such individual may not exceed 5% of the issued share of our common stock, if the individual is a director or officer, or 2% of the issued shares of our common stock, if the individual is a consultant, on a yearly basis. Subject to earlier termination and in the event of dismissal for cause, termination other than for cause or in the event of death, all Stock Options granted under the Stock Option Plan will expire not later than the date that is five years from the date that such Stock Options are granted. Stock Options granted under the Stock Option Plan are not transferable or assignable other than by will or other testamentary instrument or pursuant to the laws of succession.

    ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    None of the following parties has, during the past two fiscal years, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us, other than as noted in this section:

      (i)

    Any of our directors or executive officers;

      (ii)

    Any person proposed as a nominee for election as a director;

      (iii)

    Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock;

      (iv)

    Any of our promoters; and

      (v)

    Any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons.

    Indebtedness

    As at June 30, 2012, we are indebted to Mr. Harvey, our CEO, Chairman and a member of our Board of Directors, in the principal amount of $513,757 (CDN $522,322) (2011 - $446,229 (CDN $413,209)). The indebtedness owed to Mr. Harvey consists of the following:

    (a)

    unpaid consulting fees of $269,872 (CDN $275,000) (2011 - $222,983 (CDN $215,000)). This amount is non-interest bearing, unsecured and due on demand.

       
    (b)

    loan of $73,602 (CDN $75,000) (2011 - $77,784 (CDN $75,000)) bearing interest at a rate of 15% per annum and was due on May 22, 2012. On May 17, 2012, we entered into an amendment agreement amending the terms of the loan to extend the term to May 22, 2014. As at June 30, 2012, we have accrued interest of $17,725 (CDN $18,062) in respect of this loan.

       
    (c)

    loan of $50,000 (2011 - $50,000), bearing interest at a rate of 15% per annum and was due on April 1, 2012. On May 17, 2012, we entered into an amendment agreement amending the terms of the loan to extend the term to April 1, 2014. As at June 30, 2012, we have accrued interest of $12,986 in respect of this loan.

    45



    (d)

    loan of $73,602 (CDN $75,000) (2011 - $77,784 (CDN $75,000)) bearing interest at a rate of 15% per annum and was due on July 1, 2012. On May 17, 2012, we entered into an amendment agreement amending the terms of the loan to extend the term to July 1, 2014. As at June 30, 2011, we have accrued interest of $15,970 (CDN $16,274) in respect of this loan.

    As at June 30, 2012, we are indebted to Mr. Ainsworth, our President, Secretary and a member of Board of Directors, in the amount of $269,872 (CDN $275,000) (2011 - $222,983 (CDN $215,000)) for unpaid consulting fees. This amount is non-interest bearing, unsecured and due on demand.

    Moonlight Property

    On November 25, 2011, we entered into the Assignment Agreement with Metamin Enterprises Inc. (the “Assignor”), a company controlled by Benjamin Ainsworth, our President, Secretary and director, and Metamin Enterprises USA Inc. (the “Subsidiary”), a wholly owned subsidiary of the Assignor, whereby: (i) the Assignor assigned all of its right, title and interest in and to an option agreement dated September 20, 2010, as amended on February 18, 2011 and October 31, 2011, (the “Option Agreement”) between the Assignor and Lester Storey (the “Optionor”) in respect of a mineral property located in Plumas County, California (the “Moonlight Property”); and (ii) the Subsidiary transferred to us certain mineral claims held by the Subsidiary that form part of the Moonlight Property.

    In consideration of the assignment, we agreed to:

    (a)

    pay to the Assignor the following cash payments:

       
    (i)

    $15,000 on January 16, 2012, the date of approval from the TSX Venture Exchange (the “Exchange Approval Date”) (which amount has been paid);

    (ii)

    $25,000 on or before February 18, 2012 (which amount has been paid);

    (iii)

    $25,000 on or before February 18, 2013;

    (iv)

    an annual advanced royalty, deductible from any future royalty payments, of $15,000 commencing on February 18, 2014 and payable every year thereafter; and

         
    (b)

    issue to the Assignor the following shares of our common stock (“Shares”):

       
    (i)

    75,000 Shares on the Exchange Approval Date (which shares have been issued);

    (ii)

    75,000 Shares on or before February 18, 2012 (which shares have been issued);

    (iii)

    150,000 Shares on or before February 18, 2013; and

    (iv)

    200,000 Shares on or before February 18, 2014.

    We also reimbursed the Assignor approximately $90,000 for annual maintenance and exploration expenses previously incurred on the Moonlight Property by the Assignor. The Assignor will retain a 1% net smelter return on metals extracted from the Moonlight Property, which can be repurchased by us for $1,000,000, and a gross overriding royalty of 2.5% on receipts from the sale of industrial minerals.

    DIRECTOR INDEPENDENCE

    Our common stock is listed on the TSX Venture Exchange, which requires us to have a minimum of two independent directors. For the purpose of determining director independence, we have adopted the independence requirements of Canadian National Instrument 52-110 – Audit Committees (“NI 52-110”) as we are a reporting issuer in the provinces of British Columbia and Alberta. NI 52-110 recommends that the Board of Directors of a public company be constituted with a majority of individuals who qualify as “independent” directors. An “independent” director is a director who has no direct or indirect material relationship with us. A material relationship is a relationship which could, in the view of the Board of Directors, reasonably interfere with the exercise of a director’s independent judgment. James E. Yates and Bryan Wilson are independent directors, as aside from shares held by them, they have no ongoing interest or relationship with us other than serving as a director. Anthony Harvey and Benjamin Ainsworth are not independent directors because of their respective positions as CEO and President.

    46


    ITEM 14.          PRINCIPAL ACCOUNTING FEES AND SERVICES.

    Audit Fees

    The aggregate fees billed for the two most recently completed fiscal years ended June 30, 2012 and 2011 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included our Quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:

      Year Ended June 30, 2012 Year Ended June 30, 2011
    Audit Fees $23,034 $19,021
    Audit Related Fees - -
    Tax Fees - -
    All Other Fees - -
    Total $23,034 $19,021

    Policy on Pre-Approval by Audit Committee of Services Performed by Independent Auditors

    The policy of our Audit Committee is to pre-approve all audit and permissible non-audit services to be performed by our independent auditors during the fiscal year. Non-audit services that are prohibited to be provided by our independent auditors may not be pre-approved. In addition, prior to the granting of any pre-approval, our Audit Committee must be satisfied that the performance of the services in question will not compromise the independence of the independent auditors.

    No services related to Audit-Related Fees, Tax Fees or All Other Fees described above were approved by the Audit Committee pursuant to the waiver of pre-approval provisions set forth in the applicable rules of the SEC.

    ITEM 15.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

    Exhibit  
    Number Description of Exhibit
       
    3.1

    Amended and Restated Articles of Incorporation.(5)

       
    3.2

    Certificate of Change Pursuant to NRS 78.209 decreasing the authorized capital of common stock to 166,666,666 shares, par value $0.00001 per share.(7)

       
    3.3

    Certificate of Change Pursuant to NRS 78.209 decreasing the authorized capital of common stock to 131,666,666 shares, par value $0.00001 per share.(10)

       
    3.4

    Amended and Restated Bylaws.(13)

       
    10.1

    Property Option Agreement dated March 18, 2004 among the Company, Robert & Sharon Weicker, Kurt & Tami Schendel, and Nevada Sunrise LLC (New York Canyon Project).Error! Reference source not found.

       
    10.2

    Lease Agreement dated July 21, 2004 between the Company and Jaycor Mining, Inc.(3)

       
    10.3

    Consulting Agreement dated January 6, 2006 between the Company and Kurt Bordian.(4)

       
    10.4

    Quitclaim Deed for the New York Canyon Project dated March 12, 2007.(6)

       
    10.5

    Purchase and Sale Agreement dated August 5, 2010 between Canyon Copper Corp. and ESO Uranium Corp.(8)

       
    10.6

    Loan Agreement dated for reference October 7, 2010 between Canyon Copper Corp. and Anthony Harvey.(9)

       
    10.7

    Promissory Note dated for reference October 7, 2010 between Canyon Copper Corp. and Anthony Harvey for the loan of $50,000 (USD).(9)

       
    10.8

    Loan Agreement dated November 22, 2010 between Canyon Copper Corp. and Anthony Harvey.(10)

    47



    Exhibit  
    Number Description of Exhibit
       
    10.9

    Promissory Note dated November 22, 2010 between Canyon Copper Corp. and Anthony Harvey for the loan of $75,000 (CDN).(10)

       
    10.10

    Loan Agreement dated January 19, 2011 between Canyon Copper Corp. and Anthony Harvey.(11)

       
    10.11

    Promissory Note dated January 19, 2011 between Canyon Copper Corp. and Anthony Harvey for the loan of $75,000 (CDN).(11)

       
    10.12

    Engagement letter dated January 26, 2011 between MGI Securities Inc. and Canyon Copper Corp.(12)

       
    10.13

    Sponsorship Engagement Letter dated January 26, 2011 between MGI Securities Inc. and Canyon Copper Corp.(12)

       
    10.14

    Amended and Restated 2009 Stock Option Plan.(13)

       
    10.15

    Agency Agreement dated May 26, 2011 between MGI Securities Inc. and Canyon Copper Corp.(14)

       
    10.16

    Stock Repurchase Agreement dated October 20, 2011 between Canyon Copper Corp. and Langley Park Investment Trust plc.(15)

       
    10.17

    Assignment Agreement dated November 25, 2011 between Canyon Copper Corp., Metamin Enterprises Inc. and Metamin Enterprises USA Inc.(16)

       
    10.18

    First Amendment to Loan Agreement dated May 17, 2012 between Canyon Copper Corp. and Anthony Harvey for the loan of $50,000 (USD) due on April 1, 2014.

       
    10.19

    Promissory Note dated May 17, 2012 between Canyon Copper Corp. and Anthony Harvey for the loan of $50,000 (USD) due on April 1, 2014.

       
    10.20

    First Amendment to Loan Agreement dated May 17, 2012 between Canyon Copper Corp. and Anthony Harvey for the loan of $75,000 (CDN) due on July 1, 2014.

       
    10.21

    Promissory Note dated May 17, 2012 between Canyon Copper Corp. and Anthony Harvey for the loan of $75,000 (CDN) due on July 1, 2014.

       
    10.22

    First Amendment to Loan Agreement dated May 17, 2012 between Canyon Copper Corp. and Anthony Harvey for the loan of $75,000 (CDN) due on May 22, 2014.

       
    10.23

    Promissory Note dated May 17, 2012 between Canyon Copper Corp. and Anthony Harvey for the loan of $75,000 (CDN) due on May 22, 2014.

       
    14.1

    Code of Ethics.(1)

       
    23.1

    Consent of Saturna Group Chartered Accountants LLP.

       
    31.1

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

       
    31.2

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

       
    32.1

    Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

       
    32.2

    Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

       
    99.1

    Audit Committee Charter.(1)

       
    99.2

    Disclosure Committee Charter.(1)

       
    101.INS

    XBRL Instance Document.

       
    101.SCH

    XBRL Taxonomy Extension Schema.

       
    101.CAL

    XBRL Taxonomy Extension Calculation Linkbase.

       
    101.DEF

    XBRL Taxonomy Extension Definition Linkbase.

       
    101.LAB

    XBRL Taxonomy Extension Label Linkbase.

       
    101.PRE XBRL Taxonomy Extension Presentation Linkbase.

    Notes:

    (1)

    Filed with the SEC as an exhibit to our Annual Report on Form 10-KSB filed on August 26, 2003.

    (2)

    Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on April 8, 2004.

    48



    (3)

    Filed with the SEC as an exhibit to our Annual Report on Form 10-KSB filed on October 8, 2004.

    (4)

    Filed with the SEC as an exhibit to our Quarterly Report on Form 10-QSB filed on February 16, 2006.

    (5)

    Filed with the SEC as an exhibit to our Annual Report on Form 10-KSB filed on October 13, 2006.

    (6)

    Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on March 26, 2007.

    (7)

    Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on May 19, 2009.

    (8)

    Filed with the SEC as an exhibit to our Annual Report on Form 10-K filed on September 28, 2010.

    (9)

    Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on October 13, 2010.

    (10)

    Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on November 29, 2010.

    (11)

    Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on January 21, 2011.

    (12)

    Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on January 31, 2011.

    (13)

    Filed with the SEC as an exhibit to our Quarterly Report on Form 10-Q filed on May 9, 2011.

    (14)

    Filed with the SEC as an exhibit to our Registration Statement on Form S-1 filed on August 15, 2011.

    (15)

    Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on October 26, 2011.

    (16)

    Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on November 29, 2011.

    49


    SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

            CANYON COPPER CORP.
             
             
             
    Date: September 27, 2012   By: /s/ Anthony Harvey
            ANTHONY HARVEY
            Chairman & Chief Executive Officer
            Director
            (Principal Executive Officer)
             
             
             
    Date: September 27, 2012   By: /s/ Kurt Bordian
            KURT BORDIAN
            Chief Financial Officer
            (Principal Financial Officer & Principal Accounting Officer)

    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

    Date: September 27, 2012   By: /s/ Anthony Harvey
            ANTHONY HARVEY
            Chairman & Chief Executive Officer
            Director
            (Principal Executive Officer)
             
             
             
    Date: September 27, 2012   By: /s/ Benjamin Ainsworth
            BENJAMIN AINSWORTH
            President, Secretary and Director
             
             
             
    Date: September 27, 2012   By: /s/ Kurt Bordian
            KURT BORDIAN
            Chief Financial Officer
            (Principal Financial Officer & Principal Accounting Officer)
             
             
             
    Date: September 27, 2012   By: /s/ James Yates
            JAMES YATES
            Director


    XOTC:CNYC Annual Report 10-K Filling

    XOTC:CNYC Stock - Get Annual Report SEC Filing of XOTC:CNYC stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

    XOTC:CNYC Annual Report 10-K Filing - 6/30/2012
    Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol |  Title Star Rating |  Category |  Total Assets |  Top Holdings |  Top Sectors |  Symbol |  Name Title |  Date |  Author |  Collection |  Interest |  Popularity Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol / Ticker |  Title Star Rating |  Category |  Total Assets |  Symbol / Ticker |  Name Title |  Date |  Author |  Collection |  Popularity |  Interest Title |  Date |  Company |  Symbol |  Interest |  Popularity Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Popularity |  Our Choices |  Most Recent Title |  Date |  Company |  Symbol |  Interest |  Popularity

    Previous: XOTC:CNMV Quarterly Report 10-Q Filing - 6/30/2012  |  Next: XOTC:CNYC Insider Activity 4 Filing - 1/18/2012