Document And Entity Information
v4.1.212.0
Document And Entity Information
6 Months Ended
Jun. 30, 2011
Aug. 09, 2011
Document And Entity Information    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Jun. 30, 2011
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2011  
Entity Registrant Name GEOVIC MINING CORP.  
Entity Central Index Key 0001398005  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   104,649,952

Condensed Consolidated Balance Sheets
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Condensed Consolidated Balance Sheets (USD $)
In Thousands
Jun. 30, 2011
Dec. 31, 2010
ASSETS    
Cash and cash equivalents $ 23,841 $ 32,383
Restricted cash 23  
Prepaid expenses 613 538
Other 154 101
Total current assets 24,631 33,022
Property, plant and equipment, net [note 5] 3,513 3,830
Deposits 181 90
Total assets 28,325 36,942
LIABILITIES    
Accrued liabilities and other payables 1,831 3,644
Total current liabilities 1,831 3,644
Other liabilities 511 547
Related party payable 195 348
Share-based payment liability [note 7 and 8]   129
Total liabilities 2,537 4,668
Commitments and contingencies [note 13]    
EQUITY    
Common stock, par value of $0.0001, 200 million shares authorized and 104.6 and 104.3 million shares issued and outstanding as of June 30, 2011 and December 31, 2010, respectively 10 10
Additional paid-in capital 109,069 108,486
Stock purchase warrants 1,078 1,078
Deficit accumulated during the exploration stage (96,054) (87,957)
Total stockholders' equity 14,103 21,617
Noncontrolling interest [note 10] 11,685 10,657
Total equity 25,788 32,274
Total liabilities and equity $ 28,325 $ 36,942

Condensed Consolidated Balance Sheets (Parenthetical)
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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
Jun. 30, 2011
Dec. 31, 2010
Condensed Consolidated Balance Sheets    
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 104,600,000 104,300,000
Common stock, shares outstanding 104,600,000 104,300,000

Condensed Consolidated Statements Of Operations
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Condensed Consolidated Statements Of Operations (USD $)
In Thousands, except Share data
3 Months Ended 6 Months Ended 202 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Jun. 30, 2011
Jun. 30, 2010
Jun. 30, 2011
EXPENSES (INCOME)          
Exploration costs [note 4] $ 2,925 $ 4,379 $ 5,615 $ 6,892 $ 83,774
General and administrative 1,887 1,923 3,711 3,648 35,002
Stock based compensation [notes 6 and 7] 177 154 573 591 18,430
Change in fair value of warrants [note 7] (2) (347) (129) (619) (675)
Interest and bank charges 9 15 22 27 376
Depreciation 248 217 470 441 3,123
Mineral property impairment         3,244
Total Expenses 5,244 6,341 10,262 10,980 143,274
(Gain)/Loss on disposal of asset (2)   73   73
Interest income (18) (1) (28) (2) (4,824)
Net loss before income taxes (5,224) (6,340) (10,307) (10,978) (138,523)
Income tax benefit         (65)
Consolidated net loss (5,224) (6,340) (10,307) (10,978) (138,458)
Less: Net loss attributed to the noncontrolling interest (1,131) (1,890) (2,210) (2,975) (28,410)
Net loss attributed to Geovic stockholders $ (4,093) $ (4,450) $ (8,097) $ (8,003) $ (110,048)
Net loss per share attributed to Geovic common stockholders $ (0.04) $ (0.04) $ (0.08) $ (0.08)  
Weighted average shares outstanding basic and diluted 104,616,170 103,724,508 104,568,049 103,561,077  

Condensed Consolidated Statements Of Equity
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Condensed Consolidated Statements Of Equity (USD $)
In Thousands, except Share data
Common Stock [Member]
Additional Paid-in Capital [Member]
Stock Purchase Warrants [Member]
Deficit [Member]
Noncontrolling Interest [Member]
Total
Balance at Dec. 31, 2009 $ 10 $ 107,625 $ 1,078 $ (69,673) $ 9,865 $ 48,905
Balance, shares at Dec. 31, 2009 103,074,046          
Issuance of stock [note 6] 139,000          
Stock options exercised [note 6]   77       77
Stock options exercised, shares [note 6] 1,079,366          
Stock-based compensation [note 6]   784       784
Noncontrolling interest contribution         7,676 7,676
Net loss       (18,284) (6,884) (25,168)
Balance at Dec. 31, 2010 10 108,486 1,078 (87,957) 10,657 32,274
Balance, shares at Dec. 31, 2010 104,292,412          
Issuance of stock [note 6] 210,000          
Stock options exercised [note 6]   10       10
Stock options exercised, shares [note 6] 147,540          
Stock-based compensation [note 6]   573       573
Noncontrolling interest contribution         3,238 3,238
Net loss       (8,097) (2,210) (10,307)
Balance at Jun. 30, 2011 $ 10 $ 109,069 $ 1,078 $ (96,054) $ 11,685 $ 25,788
Balance, shares at Jun. 30, 2011 104,649,952          

Condensed Consolidated Statements Of Cash Flows
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Condensed Consolidated Statements Of Cash Flows (USD $)
In Thousands
3 Months Ended 6 Months Ended 202 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Jun. 30, 2011
Jun. 30, 2010
Jun. 30, 2011
OPERATING ACTIVITIES          
Consolidated net loss $ (5,224) $ (6,340) $ (10,307) $ (10,978) $ (138,458)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation expense 248 217 470 441 3,123
Stock-based compensation expense 177 154 573 591 18,430
Change in fair value of warrants (2) (347) (129) (619) (675)
(Gain)/Loss on disposal of assets (2)   73   73
Writeoff of mineral leases         3,244
Changes in non-cash operating working capital:          
(Increase) decrease in income tax receivable          
Increase in restricted cash (23)   (23)   (23)
Increase in prepaid expenses (201) (250) (75) (138) (613)
(Increase) decrease in other assets 36 27 (53) 34 (46)
(Increase) decrease in deposits (80)   (91) 4 (290)
Increase (decrease) in accrued liabilities and other payables (176) (823) (1,813) (682) 1,831
Increase in other liabilities (30) 18 (36) (126) 511
Increase (decrease) in related party payable 93 82 (153) (164) 195
Cash used in operating activities (5,184) (7,262) (11,564) (11,637) (112,698)
INVESTING ACTIVITIES          
Purchases of property, plant and equipment (271) (58) (277) (146) (6,761)
Proceeds on sale of assets 2   51   51
Acquisition of mineral leases         (3,244)
Cash used in investing activities (269) (58) (226) (146) (9,954)
FINANCING ACTIVITIES          
Noncontrolling interest contribution 1,208 1,074 3,238 2,261 40,095
Proceeds from issuance of common stock and preferred stock         95,589
Cash paid to rescind exercise of stock options         (15)
Proceeds from issuance of stock warrants         16,168
Proceeds from exercise of stock options and warrants 6   10 44 2,401
Stock issue costs         (7,745)
Cash provided by financing activities 1,214 1,074 3,248 2,305 146,493
Net increase (decrease) in cash (4,239) (6,246) (8,542) (9,478) 23,841
Cash, beginning of period 28,080 45,921 32,383 49,153  
Cash, end of period $ 23,841 $ 39,675 $ 23,841 $ 39,675 $ 23,841

Nature Of Business And Continuance Of Operations
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Nature Of Business And Continuance Of Operations
6 Months Ended
Jun. 30, 2011
Nature Of Business And Continuance Of Operations  
Nature Of Business And Continuance Of Operations

1. NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS

Geovic Mining Corp. (the "Company") is incorporated under the laws of the state of Delaware. The Company owns 100% of the shares of Geovic, Ltd. ("Geovic"), a company that has been in the mining exploratory stage since its inception on November 16, 1994. The Company is an exploration stage company in the process of planning to develop its mineral properties through its subsidiaries. As an exploration stage entity, we require further technical analysis and financing in order to bring our properties into development.

Geovic is engaged in the business of exploring for cobalt, nickel and related minerals through its majority-owned (60.5%) subsidiary, Geovic Cameroon, PLC ("GeoCam"), a financially dependent public limited company duly organized and incorporated under the laws of the Republic of Cameroon.

The Company is also engaged in the worldwide exploration of energy and mineral resources directly or indirectly through its ownership of Geovic Energy Corp. and Geovic Mineral Sands Corp., formed in 2007 and 2009 respectively under the laws of the State of Colorado, Geovic France SAS, formed in December 2008 under the laws of France, and Geovic Nouvelle-Calédonie SAS, formed in March 2009 under the laws of New Caledonia.

As an exploration stage company, we have a history of losses, deficits and negative operating cash flows and may continue to incur losses in the future. We continue to evaluate our cash position and cash utilization. We believe that our present capital resources will be sufficient to satisfy the Company's existing capital and liquidity requirements through at least the middle of 2012, not including our anticipated equity requirements in connection with the Project debt financing by GeoCam. A feasibility study we initiated for the Nkamouna Project in December 2009 was completed in April 2011. Our future success will be largely dependent on mining and processing the reserves in the Nkamouna Project. We do not have available financial resources necessary to construct and open the Project and we are actively seeking third party sources of funding.


Basis Of Presentation
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Basis Of Presentation
6 Months Ended
Jun. 30, 2011
Basis Of Presentation  
Basis Of Presentation

2. BASIS OF PRESENTATION

The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for interim financial statements and the instructions to Form 10-Q and Article 10 of Regulation S-X and accordingly do not include all disclosures required for annual financial statements.

These interim condensed consolidated financial statements follow the same significant accounting policies and methods of application as the Company's audited annual consolidated financial statements as included in the Company's annual report on Form 10-K for the year ended December 31, 2010 (the "Annual Financial Statements"). The interim condensed consolidated financial statements should be read in conjunction with the Annual Financial Statements.

In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for this interim period are not necessarily indicative of the result that may be expected for the full year ending December 31, 2011.


Loss Per Share
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Loss Per Share
6 Months Ended
Jun. 30, 2011
Loss Per Share  
Loss Per Share

3. LOSS PER SHARE

Basic loss per share has been computed by dividing the net loss applicable to the Company's common shareholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share is computed by including the dilutive effect of common stock that would be issued assuming exercise of the outstanding stock options and stock purchase warrants. Shares underlying all outstanding options and warrants are excluded from the computation of diluted loss per share for each of the three and six months ended June 30, 2011 and 2010 because the effect would have been anti-dilutive.


Exploration Costs
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Exploration Costs
6 Months Ended
Jun. 30, 2011
Exploration Costs  
Exploration Costs

4. EXPLORATION COSTS

Exploration costs relate to the search for mineral deposits with economic potential. Exploration costs are expensed as incurred. GeoCam gained exclusive rights to exploitation of the cobalt and nickel deposits with the granting of a Mining Convention by the government of Cameroon on August 1, 2002. The Mining Convention grants GeoCam the exclusive rights to mine, process, and export cobalt, nickel and related substances from lands subject to a Mining Permit, which was granted by decree on April 11, 2003. The Mining Convention, which has a primary term of 25 years, sets forth all legal and fiscal provisions governing the mining operation. It is renewable under certain conditions in 10-year increments for the life of the resource. In addition to exploration through GeoCam, our New Ventures group provides a pipeline of opportunities for future growth through grassroots exploration.

 

The following is a summary of the exploration costs incurred by the Company:

 

     Three Months Ended      Six Months Ended      Unaudited Period
from November 16, 1994
(inception) to
June 30,  2011
 
     June 30,
2011
     June 30,
2010
     June 30,
2011
     June 30,
2010
        

Cameroon, Africa:

              

Property evaluation

   $ 1,075       $ 2,915       $ 2,480       $ 4,306       $ 51,086   

Office costs

     1,289         1,282         2,070         2,140         27,354   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2,364         4,197         4,550         6,446         78,440   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other projects:

              

Colorado/Wyoming

     20         70         57         104         2,033   

Arizona

     169         68         255         205         1,203   

New Mexico

     69         —           207         —           207   

New Caledonia

     208         —           368         —           1,390   

Papua New Guinea

     87         —           169         —           169   

Other

     8         44         9         137         332   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     561         182         1,065         446         5,334   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Exploration Costs

   $ 2,925       $ 4,379       $ 5,615       $ 6,892       $ 83,774   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Property, Plant And Equipment, Net
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Property, Plant And Equipment, Net
6 Months Ended
Jun. 30, 2011
Property, Plant And Equipment, Net  
Property, Plant And Equipment, Net

5. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consisted of the following:

 

     June 30,
2011
    December 31,
2010
 

Cameroon, Africa:

    

Machinery and equipment

   $ 3,149      $ 3,149   

Vehicles

     739        989   

Buildings

     413        412   

Furniture and equipment

     529        529   

Equipment in transit

     262        66   
  

 

 

   

 

 

 
     5,092        5,145   

Less accumulated depreciation

     (1,931     (1,729
  

 

 

   

 

 

 
     3,161        3,416   
  

 

 

   

 

 

 

United States:

    

Machinery and equipment

   $ 99      $ 8   

Furniture and equipment

     553        688   

Other

     144        73   
  

 

 

   

 

 

 
     796        769   

Less accumulated depreciation

     (444     (355
  

 

 

   

 

 

 
     352        414   
  

 

 

   

 

 

 
   $ 3,513      $ 3,830   
  

 

 

   

 

 

 

Stock Based Compensation
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Stock Based Compensation
6 Months Ended
Jun. 30, 2011
Stock Based Compensation  
Stock Based Compensation

6. STOCK BASED COMPENSATION

Stock options

The Company adopted a stock option plan which was amended in June 2007, 2008 and 2009 (the "Company Option Plan"), under which 18,700,000 Company shares were reserved for issuance upon exercise of options granted under the Company Option Plan. The Company Option Plan is intended to provide a means whereby the Company and its subsidiaries can attract, motivate and retain key employees, consultants, and service providers who can contribute materially to the Company's growth and success, and to facilitate the acquisition of shares of the Company's common stock. The Company Option Plan provides for incentive stock options meeting the requirements of Section 422 of the Internal Revenue Code and nonqualified stock options that do not meet the requirements for incentive stock options. The Company Option Plan requires the option exercise price per share purchasable under the option to be equal to the greater of the closing price of the Company's common shares on the Toronto Stock Exchange the day before or date of grant for all nonqualified stock options and incentive stock options. The Company has historically issued new shares when share-based awards are exercised.

The following table and related information summarizes the Company's stock options and the stock option activity for the six months ended June 30, 2011:

 

     Options Outstanding      Weighted
Average
Remaining
Contractual
Term (Years)
     Aggregate
Intrinsic
Value
(000's)
 
     Options Available
for Grant
    Number
Outstanding
    Weighted
Average
Exercise Price
per Share*
       

Available and outstanding at December 31, 2010

     2,995,048        15,704,952        0.80         

Granted

     (1,720,000     1,720,000        0.70         

Exercised

     147,540        (147,540     0.07         

Forfeited

     1,054,500        (1,054,500     1.42         

Expired

     350,000        (350,000     0.77         
  

 

 

   

 

 

   

 

 

       

Available and outstanding at June 30, 2011

     2,827,088        15,872,912      $ 0.76         5.98       $ 1,507   
  

 

 

   

 

 

         

Exercisable at June 30, 2011

       14,273,412      $ 0.76         5.60       $ 1,507   

Vested or expected to vest at June 30, 2011

       15,852,635      $ 0.76         5.97       $ 1,507   

* Some of the options are granted with Canadian dollar exercise prices, and the weighted average prices reflect the U.S. dollar equivalent prices.

The following stock option grants were issued by the Company during the six months ended June 30, 2011 and 2010 respectively:

 

   

The Company granted 1,720,000 options under the Company Option Plan [2010 – 1,725,000]. The Company recorded compensation expense of $431 relating to vesting of the grants [2010 —$591]. Included in the 2011 grants are 500,000 options issued to an executive of the Company which are scheduled to vest upon the successful completion of financing of the Nkamouna project or certain other events and, if not vested, are scheduled to expire January 21, 2012. The remaining options vest 40% upon grant and 30% on each of the first and second anniversaries of the date of grant. As of June 30, 2011, there was $348 of total unrecognized compensation expense related to non-vested stock based compensation granted under the Company Option Plan which is expected to be recognized over a weighted average period of 0.9 years.

 

   

The weighted-average fair value per share of options granted under the Company's Options Plan during 2011 was $0.40 [2010—$0.47]. The total intrinsic value of share options exercised was $81 [2010—$491]. The total cash received from the exercise of stock options was $10 [2010—$44].

The fair value of all stock options granted during the six months ended June 30, 2011 and 2010 was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions:

 

     2011     2010  

Expected dividend

     0.0     0.0

Risk-free interest rate

     1.9% -2.6     2.1%-2.6

Expected volatility*

     67.0% -67.7     68.6%-69.7

Expected life (in years)

     5.5        5.5   

* For the six months ended June 30, 2011, volatility was estimated based on combining the Company's historical volatility with the historical volatilities of certain other comparable exploration stage mining companies.

 

The Company estimates expected forfeitures at the grant date and compensation expense is recorded only for those awards expected to vest. The estimate of expected forfeitures is reevaluated at the balance sheet date.

Option pricing models require the input of highly subjective assumptions, particularly as to the expected price volatility of the market value of the underlying stock. Changes in these assumptions can materially affect the fair value estimate and therefore it is management's view that the existing models do not necessarily provide a single reliable measure of the fair value of the Company's equity instruments.

Stock awards

The Company adopted the 2010 Company Stock Award Plan (the "Stock Award Plan") that was approved by the Board of Directors in June 2010. The Common Stock that may be issued pursuant to Stock Awards shall not exceed 2,000,000 shares of Common Stock. The Common Stock subject to the Stock Award Plan shall be authorized and unissued stock. Stock Awards may be granted to Employees, Directors, Officers and Consultants. Stock Awards may be granted as Restricted Stock Awards or Restricted Stock Units. During the six months ended June 30, 2011, we granted 210,000 Restricted Stock Awards to certain members of the executive management team and the Board of Directors. The Restricted Stock Awards vest 40% on the grant date (January 21, 2011), 30% on the 1st anniversary of the grant date, and 30% on the 2nd anniversary of the grant date. For the six months ended June 30, 2011, the Company recognized compensation expense of $87 related to the Restricted Stock Awards. Also during the six months ended June 30, 2011, we issued 180,000 Restricted Stock Units to certain members of the Board of Directors. The Restricted Stock Units will vest on the first anniversary of the grant date. The shares will be issued to the recipient on the earlier of their termination date or on the third anniversary of the grant date. For the six months ended June 30, 2011, the Company recognized compensation expense of $55 related to the Restricted Stock Units.


Stockholders' Equity
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Stockholders' Equity
6 Months Ended
Jun. 30, 2011
Stockholders' Equity  
Stockholders' Equity

7. STOCKHOLDERS' EQUITY

Preferred stock

The Company is authorized to issue 50 million shares of preferred stock, with a par value of $0.0001. There are no shares of preferred stock issued or outstanding as of June 30, 2011.

Stock Purchase Warrants

The Company adjusts the share-based payment liability to the fair value each reporting period. The fair value adjustment for the stock purchase warrants did not materially affect net loss or loss per share in the condensed consolidated statement of operations for the six months ended June 30, 2011.

The following table and related information summarizes the Company's stock purchase warrants at June 30, 2011 and the stock purchase warrant activity for the six months ended June 30, 2011:

 

     Number
Outstanding
    Weighted-Average
Exercise Price per Share
 

Warrants outstanding at December 31, 2010

     18,892,096      $ 2.99   

Expired

     (300,000     1.24   
  

 

 

   

 

 

 

Warrants outstanding at June 30, 2011

     18,592,096      $ 3.02   
  

 

 

   

 

 

 

All outstanding warrants were fully amortized in 2009 thus the Company recorded no compensation expense relating to vesting of grants [2010—$0]. The Company also recorded a gain of $129 in 2011 [2010—gain of $619] for the change in the fair value of the warrants that have exercise prices that are denominated in Canadian dollars.

The warrants outstanding at June 30, 2011 expire as follows: 2,999,996 November 2011, 10,800,000 March 2012 and 4,792,100 April 2012.


Derivative Instruments
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Derivative Instruments
6 Months Ended
Jun. 30, 2011
Derivative Instruments  
Derivative Instruments

8. DERIVATIVE INSTRUMENTS

Derivative Liabilities

The Company currently does not hold derivative instruments to manage its exposure to commodity prices. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. All derivative financial instruments are recognized in the balance sheet at fair value. Changes in fair value are recognized in earnings if they are not eligible for hedge accounting or other comprehensive income if they qualify for cash flow hedge accounting.

A Black-Scholes option-pricing model was used to obtain the fair value of the Company's stock purchase warrants. The fair value of outstanding derivative instruments not designed as hedging instruments on the accompanying condensed consolidated balance sheets were as follows:

 

Derivative Instruments

  

Balance Sheet Location

   June 30,
2011
     December 31,
2010
 

Stock purchase warrants

   Share-based payment liabilities    $ —         $ 129   

The effect of derivative instruments not designed as hedging instruments on the accompanying condensed consolidated statements of operations was a gain of $129 for the six months ended June 30, 2011.


Fair Value Measurements
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Fair Value Measurements
6 Months Ended
Jun. 30, 2011
Fair Value Measurements  
Fair Value Measurements

9. FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

 

   

Level 1, defined as observable inputs such as quoted prices in active markets for identical assets.

 

   

Level 2, defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

   

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The fair value of the share-based payment liability, as described in note 8, is based on unobservable inputs in which little or no market data exists, therefore, it is classified as Level 3. The following table summarizes the change in the fair value of the share-based payment liability categorized as Level 3:

 

Balance as of December 31, 2010

   $ 129   

Change in fair value 2011

     (129
  

 

 

 

Ending balance

   $ —     
  

 

 

 

At June 30, 2011 and December 31, 2010, the carrying amounts of cash and cash equivalents, restricted cash and trade payables represented fair value because of the short-term nature of these instruments.


Noncontrolling Interest
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Noncontrolling Interest
6 Months Ended
Jun. 30, 2011
Noncontrolling Interest  
Noncontrolling Interest

10. NONCONTROLLING INTEREST

On September 2, 2008, GeoCam shareholders approved a GeoCam capital increase for 2008 of CFA francs 30.34 billion, equivalent to approximately $67 million, to be issued in multiple cash calls made by the GeoCam Board of Directors. The capital increase was based on GeoCam's 2008 budget and Geovic's pre-2007 capital advances made for GeoCam. At March 31, 2010 all of the 2008 capital increase had been paid by or for the accounts of the shareholders of GeoCam, including Geovic, in their respective ownership interests prior to the capital increase.

In May 2010 GeoCam shareholders approved a capital increase equivalent to approximately $11 million for 2010. In December 2010 they approved an additional $13 million for the remainder of 2010 and part of 2011.

 

During the three months ended June 30, 2011 GeoCam completed 1 cash call, equivalent to approximately $3.1 million. In the cash call Geovic paid approximately $1.9 million, representing 60.5% of the cash call and the noncontrolling interest paid cash of approximately $1.2 million.

During the six months ended June 30, 2011 GeoCam completed 2 cash calls, equivalent to approximately $8.2 million. In the cash calls Geovic paid approximately $5.0 million, representing 60.5% of the cash calls and the noncontrolling interest paid cash of approximately $3.2 million.

At June 30, 2011 there are no approved cash calls remaining, however, the Company anticipates that another capital increase may be approved later this year.

The noncontrolling interest balance of approximately $11.7 million at June 30, 2011 [December 31, 2010 – $10.7 million] represents the balance from the capital increases contributed by the noncontrolling interest as described above. The difference between the original amounts contributed and the balance at June 30, 2011 represents the noncontrolling interest share of the actual expenditures from January 1, 2007 through June 30, 2011.


Income Taxes
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Income Taxes
6 Months Ended
Jun. 30, 2011
Income Taxes  
Income Taxes

11. INCOME TAXES

The Company had no unrecognized tax benefit as of June 30, 2011 or change in unrecognized tax benefits that would impact the effective rate. The Company does not anticipate a significant change to the total amount of unrecognized tax benefits over the next six months.

The Company files income tax returns in the U.S. federal jurisdiction, Cameroon, France, New Caledonia and Colorado. The Company has open tax years for the U.S. federal return from 2000 forward with respect to its net operating loss ("NOL") carryforwards, where the IRS may not raise tax for these years, but can reduce NOLs. Otherwise, with few exceptions, the Company is no longer subject to federal, state, or local income tax examinations for years prior to 2005. The Company has incurred losses since inception. Due to the full valuation allowance against its net deferred tax asset, management would expect that any adjustment resulting from the audit would not result in an adjustment to the Company's financial statements. In addition, the Company's ability to deduct NOL carryforwards may be subject to a limitation if the Company were to undergo an ownership change for purposes of Section 382 of the Internal Revenue Code of 1986, as amended.

The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. For the three and six months ended June 30, 2011, the Company recognized no potential interest or penalties with respect to unrecognized tax benefits.

There was no benefit from income taxes in the three and six months ended June 30, 2011 and during the same periods in 2010. The effective tax rate was 0% for the first three and six months of 2011 and for the same periods in 2010. Our effective rates differ from the statutory federal rate of 35% for certain items, such as state and local taxes, non-deductible expenses, change in valuation allowance offsetting foreign and domestic operating losses and foreign taxes at rates other than 35%.


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12. RELATED PARTY TRANSACTIONS

 

[a] On June 15, 2009, Geovic, Ltd., entered into an agreement with Mineral Services, LLC which was amended effective December 31, 2009 and June 15, 2010, related to project development, technical, financing, and marketing services. Mineral Services, LLC is owned by Michael Mason, a director of the Company. Total fees paid to Mineral Services, LLC under the agreement during the three and six months ended June 30, 2011 were $0 and $6 [2010 – $28 and $28]. Michael Mason became Chief Executive Officer of the Company on January 21, 2011 and, as a result, the consulting agreement was cancelled at that time.

 

[b] Geovic held an option granted in 2006 to acquire the 0.5% ownership interest in GeoCam held by William A. Buckovic, an officer and director of the Company and Geovic. Under the option agreement, Geovic was obligated to pay all GeoCam capital increases on behalf of Mr. Buckovic to maintain his ownership interest in GeoCam. Effective September 2010, the Company exercised its right to acquire the 0.5% ownership interest in GeoCam by issuing 139,000 shares of the Company with an estimated fair value of approximately $85 to Mr. Buckovic. As the shares were issued for no cash proceeds nor generated any change in noncontrolling interest, no change in equity is reflected in the financial statements. As a result of exercising the right to purchase the 0.5% ownership interest in 2010, the Company fully owned the 60.5%. During the three and six months ended June 30, 2011 Geovic paid $0 in the cash calls on behalf of a related party [2010—$14 and $29].

 

[c] GeoCam entered into a professional and management services contract with Société Nationale d'Investissement du Cameroun ("SNI"), the holder of 20% and representative of other holders of an additional 19.5% of the outstanding shares of GeoCam. The services are for government relations and administrative matters related to project development. GeoCam has expensed $82 per quarter during 2011 for these services [2010 – $82 per quarter].

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13. COMMITMENTS AND CONTINGENCIES

 

[a] In November 2009, five management level consultants or employees of GeoCam filed litigation in Cameroon, claiming approximately $2.2 million as compensation and damages as a result of termination of their services by GeoCam in connection with a reduction in workforce in February and March 2009. In April 2010 the litigation was dismissed. In July 2010 the litigation was brought before another jurisdiction and, on June 3, 2011, the court before which four of the matters were pending entered judgments in favor of the four claimants totaling CFA 780,339,500 (approximately $1.7 million at August 1, 2011). The fifth matter has yet to be ruled on as of the date of this report. GeoCam has filed appeals in all four matters which stayed enforcement of the judgments pending resolution of the appeals. However, the Company believes all contractual and other obligations to the individuals were satisfied and that the appeals will ultimately be resolved favorable to GeoCam. Given the initial judgments, we believe it is reasonably possible that the outcome will be unfavorable to GeoCam, but we do not believe that an unfavorable outcome is probable, therefore, we have not accrued any amounts for these judgments in our condensed consolidated financial statements.

 

[b] In December 2009 the Company engaged a financial advisor in connection with the financing of the Nkamouna project. The Company agreed to pay a fixed retainer fee of $50 per month and a $0.8 million success fee upon completion. The terms of the agreement were based on the assumption that the completion would occur by December 2010. A replacement agreement with GeoCam was entered into August 2010 with substantially the same terms except the new agreement extended the date of the expected completion of financing.

 

[c] In January 2011, the Company engaged a financial advisor to advise it with respect to the Company's obligations in connection with financing of the Nkamouna Project and to assist in developing arrangements with strategic investors. The Company agreed to pay a fixed retainer fee of $50 per month plus reimbursement of expenditures, and a minimum success fee of $1.0 million based on a sliding scale depending on the size of any financing transaction.

 

(d) GeoCam has engaged legal counsel in connection with expected Project financing, payable monthly with fees limited to approximately GBP 0.5 million in 2011 (equivalent to approximately $0.8 million at June 30, 2011).

 

[e] GeoCam is obligated under its mining permit to provide persons living in the region of the permitted area with social, sports, education and health infra-structure to promote their well being. This obligation has been met by contracting with GeoAid International Inc. and/or its affiliate GeoAid Cameroon ("GeoAid"), non-profit international humanitarian organizations. During the three and six months ended June 30, 2011 the Company contributed $107 and $196 [2010—$141 and $186] to GeoAid. While the Company is not legally obligated to contribute a specific amount, the Company in 2011 and 2010 was a primary financial contributor to GeoAid.

 

[f] GeoCam, entered into purchase orders for mining equipment in 2008 for obligations totaling €615 and deposited €99 toward the purchases. In 2009, GeoCam requested delay of the delivery of the equipment to 2010 or thereafter. The sellers agreed to accept the delay and GeoCam would pay 6% per annum on a portion of the unpaid purchase price of the equipment delayed for delivery. No formal agreement to delay delivery has been completed. No liabilities were accrued in 2010 or 2011 for these commitments. In 2010, GeoCam utilized €55 of the deposits toward vehicle purchases.

 

[g] GeoCam received a letter from the Minister of Industry, Mines and Technological Development of the Republic of Cameroon on March 20, 2006 requesting payment of surface area taxes of approximately $500 and a penalty of the same amount for the period from 2003 to 2005. GeoCam has disputed this amount based on its interpretation of the Mining Convention signed on July 31, 2002 that GeoCam is only committed to pay this surface area tax once commercial exploitation begins.

GeoCam has further disputed the amount of surface area subject to tax which would reduce the estimated liability to approximately $470.

 

GeoCam deposited with the Cameroon tax authority approximately $100 on September 30, 2006 corresponding to the surface area tax for 2003. On November 30, 2006, GeoCam deposited with the Cameroon tax authority a further $300 corresponding to the surface area tax for 2004, 2005 and 2006.


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14. SUBSEQUENT EVENTS

The Company has evaluated all events occurring after the June 30, 2011 balance sheet date through the date of issuance of these condensed consolidated financial statements for necessary subsequent event disclosures. No items meet the requirements for subsequent event disclosures.