NextSource Materials Inc. - Quarter Report: 2011 March (Form 10-Q)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

OR

Commission File Number 000-51151

ENERGIZER RESOURCES INC.

 (Name of registrant in its charter)

520 – 141 Adelaide Street West, Toronto, Ontario M5H 3L5

(Address of principal executive offices)

_______________________

(416) 364-4911

(Issuer’s telephone number)

_______________________

Securities registered under Section 12(b) of the Exchange Act:  None

Securities registered under Section 12(g) of the Exchange Act:  Common Stock, $0.001 par value per share

(Title of Class)

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 (§232.405 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 [ ]       No [x]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.

Large accelerated filer [ ]

Accelerated Filer [ ]

Non-accelerated filer [ ]

Smaller reporting company [x]

(Do Not Check if a Smaller Reporting Company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  []

No  [ X]       

As of May 10, 2011, there were 143,949,178 shares of the Registrant's common stock issued and outstanding.

Transitional Small Business Disclosure Format Yes      No   [X]

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Energizer Resources Inc.

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PART 1

FINANCIAL INFORMATION

As used in this annual report, "we", "us", "our", "Energizer Resources", "Company" or "our company" refers to Energizer Resources Inc. and all of its subsidiaries.

ITEM 1.  INTERIM CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

General

The accompanying reviewed interim unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q.  Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles.  Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the Company's annual report on Form 10-K for the year ended June 30, 2010.  In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.  Operating results for the period ended March 31, 2011 are not necessarily indicative of the results that can be expected for the year ending June 30, 2011.

All references to "dollars", "$" or "US$" are to United States dollars and all references to "CAD$" are to Canadian dollars. United States dollar equivalents of Canadian dollar figures are based on the noon exchange rate as reported by the Bank of Canada on the applicable date.

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ENERGIZER RESOURCES INC.

(An Exploration Stage Company)

Unaudited Interim Financial Statements

March 31, 2011

(Expressed in US Dollars)

Going concern (note 1)

5

Energizer Resources Inc. (An Exploration Stage Company)
Consolidated Interim Statements of Operations and Comprehensive Loss -  Unaudited
(Expressed in US Dollars)

6

7

Energizer Resources Inc. (An Exploration Stage Company)

Notes to Consolidated Interim Financial Statements ‑ Unaudited

March 31, 2011

(Expressed in US Dollars)

1.

Exploration Stage Company and Going Concern

Energizer Resources Inc. (formerly Uranium Star Corp.) (the "Company") was incorporated in the State of Nevada, United States of America on March 1, 2004 and reincorporated in the State of Minnesota on May 14, 2008.  The Company is an Exploration Stage Company, as defined by ASC Topic‑915, "Development Stage Entities".  During fiscal 2008, the Company incorporated Uranium Star (Mauritius) Ltd., a subsidiary in the country of Mauritius and Energizer Resources Madagascar Sarl (formerly Uranium Star Madagascar Sarl), a subsidiary in the country of Madagascar.  In fiscal 2009, the Company incorporated THB Venture Ltd., a company incorporated in Mauritius to hold the interest in Energizer Resources Minerals Sarl (formerly Uranium Star Minerals Sarl) which holds the Madagascar properties. The Company's principal business is the acquisition and exploration of mineral resources.  The Company has not yet fully determined whether its properties contain mineral reserves that are economically recoverable.

These consolidated interim financial statements have been prepared on a going concern basis, which assumes that the Company will continue to realize its assets and discharge its liabilities in the normal course of business.  The Company has yet to generate revenue from mining operations or pay dividends and is unlikely to do so in the immediate or foreseeable future.  The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations and the attainment of profitable operations.  As at March 31, 2011, the Company has accumulated losses of $50,313,494.  These factors raise substantial doubt regarding the Company's ability to continue as a going concern.  These consolidated interim financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2.

Significant Accounting Policies

Consolidated Interim Financial Statements

These unaudited consolidated interim financial statements have been prepared on the same basis as the annual financial statements and should be read in conjunction with those annual financial statements.  In the opinion of management, these unaudited consolidated interim financial statements reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

Fair Value of Marketable Securities Hierarchy

FASB Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009, the FASB has defined a new hierarchy for U.S. GAAP and established the FASB Accounting Standards Codification (ASC) as the sole source for authoritative guidance to be applied by nongovernmental entities. The adoption of the ASC changes the manner in which U.S. GAAP guidance is referenced, but it does not have any impact on the Company’s Unaudited Interim Consolidated Balance Sheet or Consolidated Statement of Operations.

Beginning July 1, 2008, the Company partially applied FAS 157 (ASC Topic–820) as allowed by FASB Staff Position ("FSP") 157‑2, (ASC Topic–820‑10) which delayed the effective date of ASC Topic–820 for non‑financial assets and liabilities.  As of July 1, 2008 the Company had applied the provisions of ASC Topic–820 to its financial instruments and the impact was not material.  On July 1, 2009, the Company adopted ASC Topic–820 to its non‑financial assets and liabilities. The adoption did not have a material impact on the unaudited interim consolidated financial statements.

The Company primarily applies the market approach for recurring fair value measurements and utilizes the best available information.  Accordingly, the Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.  The Company is able to classify fair value balances based on the observability of those inputs.

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Energizer Resources Inc. (An Exploration Stage Company)

Notes to Consolidated Interim Financial Statements ‑ Unaudited

March 31, 2011

(Expressed in US Dollars)

2. Significant Accounting Policies - continued Fair Value of Marketable Securities Hierarchy continued

ASC Topic–820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy defined by ASC Topic 820 are as follows:

Level 1 Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange traded derivatives, listed equities and U.S. government treasury securities.

Level 2 Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include non exchange traded derivatives such as over the counter forwards, options and repurchase agreements.

Level 3 Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management's best estimate of fair value from the perspective of a market participant. Level 3 instruments include those that may be more structured or otherwise tailored to customers' needs. At each balance sheet date, the Company performs an analysis of all instruments subject to ASC Topic–820 and includes in Level 3 all of those whose fair value is based on significant unobservable inputs.

As of March 31, 2011, all of marketable securities owned by the Company were Level 1 within the fair value hierarchy.

3. Recent Accounting Pronouncements Affecting The Company

In April 2010, the FASB issued ASU No. 2010-13, "Compensation – Stock Compensation (Topic 718): "Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency Market in Which the Underlying Equity Security Traded" ("ASU 2010-13"). ASU 2010-13 provides guidance on the classification of a share-based payment award as either equity or a liability. A share-based payment that contains a condition that is not a market, performance, or service condition is required to be classified as a liability. ASU 2010-13 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after July 1, 2011. The Company is currently evaluating the impact, if any, on its consolidated financial statements.

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Energizer Resources Inc. (An Exploration Stage Company)

Notes to Consolidated Interim Financial Statements ‑ Unaudited

March 31, 2011

(Expressed in US Dollars)

5.

Related Party Transactions

The following are the related party transactions for the nine‑month period ended March 31, 2011:

a)

The Company incurred a total of $48,810 (March 31, 2010: $41,113) in office administration and rent expense from a company related by common management.

b)

During the period, 1,100,000 (March 31, 2010: 1,500,000) stock options valued at $237,710 (March 31, 2010: $1,379,497) were issued to directors, officers and relatives of directors (Note 7).  Further 590,000 (December 31, 2009: Nil) stock options which were issued to directors, officers and relatives to directors were cancelled.

c)

A total of $Nil (March 31, 2010: 2,125,000) shares were issued to directors, officers and relatives of directors for services at a fair value of $Nil (March 31, 2010: $361,250).  A further, Nil (March 31, 2010: 250,000) share purchase warrants were issued to a director valued at $Nil (March 31, 2010: $113,125) and are exercisable at $0.58 per share for a period of two years from the date of issuance.

d)

The Company incurred $576,315 (March 31, 2010: $351,005) in administrative, management and consulting fees to directors, officers and relatives of directors.

The following are the related party balances as of March 31, 2011:

a)

Included in accounts payable and accrued liabilities is $120,000 (June 30, 2010: $30,000) due to related parties.

6.

Mineral Properties

Green Giant Property, Madagascar, Africa

On August 22, 2007, the Company entered into a joint venture agreement with Madagascar Minerals and Resources Sarl ("MMR"), a Madagascar incorporated company.  A joint venture was established with the Company owning a 75% undivided interest and MMR owning a 25% interest in the Green Giant Property (formerly the Three Horses Property).   The properties are located in the District of Toliara and are referenced as TN 12306, P(R); TN 12814, P(R); TN 12887 P(R); TN 12888 P(R); TN 13020 P(R); TN 13021 P(R) as issued by the Bureau de Cadastre Minier de Madagascar ("BCMM") pursuant to the Mining Code 1999 (as amended) and its implementing decrees.

In order to acquire the 75% interest, the Company paid a total of $765,000, and issued 1,250,000 common shares and 500,000 common share purchase warrants.  Each now expired common share purchase warrant was exercisable at $1.00 per share.  On December 10, 2007, the Company issued 1,250,000 common shares valued at $375,000 based on the $0.30 per share quoted market price and 500,000 now expired common share purchase warrants valued at $60,560 using the Black-Scholes option pricing model.  Subsequently, the Company recognized an impairment loss of $1,200,560 which represents the total cash paid and the value of common shares and warrants issued.

On July 9, 2009, the Company entered into an agreement to acquire the remaining 25% interest for $100,000.  On acquisition of the remaining 25% the joint venture with MMR was terminated.  MMR retains a 2% net smelter return ("NSR"). The NSR on this 25% interest portion can be acquired by the Company for $500,000 in cash or common shares for the first 1% and $1,000,000 in cash or common shares for the second 1% at the Company's option.

Sagar Property ‑ Romanet Horst, Labrador Trough, Quebec, Canada

On May 2, 2006, the Company signed a letter of intent for an option to acquire a 75% interest in 200 claims located in northern Quebec, Canada.  The vendor had the right and option to sell the remaining 25% interest in the property. The vendor had previously acquired a 100% interest in the property, subject to a 1% NSR on certain claims, and a 0.5% NSR on other claims.  The vendor had the right to buy back half of the 1% NSR for $200,000 and half of the 0.5% NSR for $100,000.  In order to exercise its option, the Company issued 2,000,000 common shares, 2,000,000 now expired common share purchase warrants and incurred exploration expenditures greater than $2,000,000 on the property before September 1, 2008. On February 28, 2007 the vendor exercised its option to sell its remaining 25% interest to the Company for 1,000,000 common shares valued at $1,219,000 and 1,000,000 now expired common share purchase warrants valued at $752,985 using the Black-Scholes pricing model.  The Company now owns a 100% interest in the property.  Total exploration expenditures to date on this property are of $7,363,663 as at March 31, 2011.

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Energizer Resources Inc. (An Exploration Stage Company)

Notes to Consolidated Interim Financial Statements ‑ Unaudited

March 31, 2011

(Expressed in US Dollars)

6.

Mineral Properties - continued

Sagar Property - Romanet Horst, Labrador Trough, Quebec, Canada

On August 15, 2006, the Company acquired 19 mineral claims contiguous to the Sagar property for $5,385; 150,000 common shares valued at $103,500; and 75,000 now expired common share purchase warrants valued at $34,961 using the Black‑Scholes pricing model.  As at March 31, 2011, the cumulative impairment loss which represents the total cash paid and the value of common shares and warrants issued, was $143,846.

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Energizer Resources Inc. (An Exploration Stage Company)

Notes to Consolidated Interim Financial Statements ‑ Unaudited

March 31, 2011

(Expressed in US Dollars)

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Energizer Resources Inc. (An Exploration Stage Company)

Notes to Consolidated Interim Financial Statements ‑ Unaudited

March 31, 2011

(Expressed in US Dollars)

8.

Stock Options

On March 8, 2006, the Company filed a Form S‑8 Registration Statement in connection with its adopted 2006 Stock Option Plan ("the "2006 Plan") allowing for the direct award of stock or granting of stock options to acquire up to a total of 2,000,000 shares of common stock.  During December 2006, February 2007, September 2009, September 2010 and April 2011, the Stock Option Plan was amended to increase the stock option pool by an additional 20,000,000 common stock.  

Additional information regarding options outstanding and exercisable as at December 31, 2010 is as follows:

The following were the Black-Scholes pricing model assumptions used to value the stock options issued:

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Energizer Resources Inc. (An Exploration Stage Company)

Notes to Consolidated Interim Financial Statements ‑ Unaudited

March 31, 2011

(Expressed in US Dollars)

9.

Warrants

The following table summarizes the continuity of the Company's warrants:

At March 31, 2011, the following share purchase warrants were outstanding:

10.

Loss Per Share

Basic and diluted loss per share is computed using the weighted average number of common stock outstanding.  Diluted EPS and the weighted average number of shares of common stock exclude all potentially dilutive shares since their effect is anti‑dilutive.  As at March 31, 2011 there were a total of 61,318,695 (March 31, 2010: 38,859,667) potentially dilutive stock options and warrants outstanding.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to "anticipates", "believes", "plans", "expects", "future" and similar statements or expressions, identify forward looking statements. Examples of forward-looking statements include, but are not limited to:  (a) projections of our revenues, capital expenditures, growth, prospects, dividends, capital structure and other financial matters; (b) statements of our plans and objectives; (c) statements of our future economic performance; (d) statements of assumptions underlying other statements and statements about us and our business relating to the future; and (e) any statements using the words "believes," "budget," "target," "goal," "anticipate," "expect," "plan," "outlook," "objective," "may," "project," "intend," "estimate," or similar expressions. Any forward-looking statements herein are subject to certain risks and uncertainties in the business of Energizer Resources Inc. (formerly Uranium Star Corp.) including but not limited to, reliance on key customers and competition in its markets, market demand, product performance, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of our company. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein.

Management’s Discussion and Analysis of Results of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the financial statements included herein. Further, this quarterly report on Form 10-Q should be read in conjunction with the our Financial Statements and Notes to Financial Statements included in its 2010 Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 27, 2010.

Our financial statements have been prepared in accordance with United States generally accepted accounting principles. We urge you to read this report in conjunction with the risk factors described herein.   

BACKGROUND

Company Overview

Energizer Resources Inc. was incorporated in the State of Nevada on March 1, 2004 and reincorporated in the State of Minnesota on May 14, 2008. Our fiscal year-end is June 30. On December 16, 2009, we effected a name change from "Uranium Star Corp" to "Energizer Resources Inc.". We are an exploration stage company engaged in the search for vanadium, uranium, gold and other minerals.  We have an interest in properties located in Madagascar and Canada (Province of Québec).  None of the properties in which we hold an interest has known mineral reserves of any kind at this time.  As such, the work programs planned by us are exploratory in nature.

We have not had any bankruptcy, receivership or similar proceeding since incorporation. There have been no material reclassifications, mergers, consolidations or purchases or sales of any significant amount of assets not in the ordinary course of business since the date of incorporation.

Summary of Our Business

We are an exploration stage company engaged in the search for vanadium, uranium, gold and other minerals. We have an interest in properties located in Madagascar and Canada (Province of Québec). None of the properties in which we hold an interest has known mineral reserves of any kind at this time.  As such, the work programs planned by us are exploratory in nature.

Our executive offices are currently located at 520–141 Adelaide Street West, Toronto, Ontario, Canada M5H 3L5. Our telephone number is (416) 364-4911. We maintain a website at www.energizerresources.com (which website is expressly not incorporated by reference into this filing). These offices are leased on a month-to-month basis, and our monthly rental payments are currently approximately CAD$5,000.

UNTIL WE CAN VALIDATE OTHERWISE, THE PROPERTIES OUTLINED BELOW HAVE NO KNOWN MINERAL RESERVES OF ANY KIND AND WE ARE PLANNING PROGRAMS THAT ARE EXPLORATORY IN NATURE.  

Further details regarding the our properties, although not incorporated by reference, including the comprehensive geological report prepared in compliance with Canada’s National Instrument 43-101 on our company’s Sagar property in Northern Quebec and our company’s Three Horses Property (now called Green Giant Property) in Madagascar can be found on the Company’s website: www.energizerresources.com (which website is expressly not incorporated by reference into this filing) or in the company’s filings on www.sedar.com (which website is expressly not incorporated by reference into this filing). The websites are expressly not incorporated by reference into this filing.

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Milestones

Green Giant Property, Madagascar

On August 22, 2007, we acquired a 75% interest in approximately 225 sq. kilometres of mineral permits in the District of Toliara, Madagascar. This interest is held by a limited liability company that was formed under the laws of Madagascar which held a 75% interest in the property.  The remaining 25% interest was held by Madagascar Minerals and Resources sarl.  Exploration programs have been carried out in the first quarter of 2007 and the first half of 2008 on the Green Giant Property as well as the Ianapera Coal Property located to the north of the Green Giant Property.

Drilling of 31 holes (4,073 meters) was carried out in the fourth quarter of 2008. Vanadium mineralization of potential economic consequence was intersected in a number of holes. In the first half of 2009 a series of 56 trenches were established, using mechanical excavators, over an 18 kilometre strike length of the property. Analytical results provided by XRF instrumentation indicated significant widths of vanadium mineralization in the majority of the trenches. The Company then proceeded to drill 54 diamond drill holes (8,931 meters) in the latter half of 2009 to delineate a vanadium resource on the Property. A further 46 diamond drill holes (8,952 meters) were emplaced on the property in 2010 to further enhance the resource delineation. A consulting engineering group has been retained to start preliminary economic assessments of the property. Metallurgical and mineralogical work is also being carried out.

On July 9, 2009, our company acquired the remaining 25% interest in the Madagascar property and now holds a 100% interest in the property.

A time domain airborne geophysical survey is anticipated to commence in the latter part of the 2nd quarter of the 2011 calendar year.  It is anticipated, although no assurances can be provided, that this will be followed by an additional drill program commencing in the 4th quarter of the 2011 calendar year.

Sagar Property – Romanet Horst, Labrador Trough, Québec, Canada

A drill program was completed for the Sagar Property in 2007. A total of 164 reverse circulation drill holes (2,625 meters) and 5,610 meters of diamond drill holes (46) were completed.  Additionally, in excess of 3,500 soil samples were collected and analyzed. Target areas on the Sagar Property have shown anomalous gold, copper and uranium mineralization. Future exploration activity will be designed to identify the potential source area of the Mistamisk Boulder Field, as well as other potential sources of gold and uranium mineralization.

Competitive Conditions

The mineral exploration and mining industry is competitive in all phases of exploration, development and production. We compete with a number of other entities and individuals in the search for, and acquisition of, attractive mineral properties. As a result of this competition, the majority of which is with companies with greater financial resources than us, our company may not in the future be able to acquire attractive properties on terms it considers acceptable.  Furthermore, we  compete with other resource companies, many of whom have greater financial resources and/or more advanced properties that are better able to attract equity investments and other capital.  Factors beyond our control may affect the marketability of minerals mined or discovered by our company.

Employees

As of March 31, 2011, we had nil total employees and nil full-time employees. We engage consultants to serve as officers and to perform professional and administrative functions of our company.

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MADAGASCAR PROPERTY

Property Description and Location

The Madagascar properties are comprised of 6 mineral permits consisting of 576 "squares", each square representing approximately 0.39 sq. kilometers. The properties are located in the District of Toliara and are referenced as TN 12,306,P(R); TN 12,814, P(R); TN 12,887 P(R); TN 12,888 P(R); TN 13,020 P(R); TN 13,021 P(R) as issued by the Bureau de Cadastre Minier de Madagascar ("BCMM") pursuant to the Mining Code 1999 (as amended) and its implementing decrees.  This property can be accessed by both air and road.

Green Giant Property Boundary (blue lines are creeks, red lines are property boundary, black lines are seasonal tracks)

Agreement

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On August 22, 2007, we entered into a joint venture agreement with Madagascar Minerals and Resources sarl ("MMR" or "Madagascar Minerals"), a company incorporated under the laws of Madagascar. The joint venture, to be known as the "Three Horses Joint Venture", was operated through a Madagascar limited liability company in which our company held 75% undivided interest and Madagascar Minerals held the remaining 25% interest.

The consideration paid to Madagascar Minerals to acquire the 75% stake in the joint venture consisted of:

(i)

a signing fee of $15,000 within 15 days of the properties vesting in the joint venture;

(ii)

a payment of $750,000 within 15 days of the properties vesting in the joint venture; and

(iii)

the issuance of 1,250,000 of our common shares and 500,000 of our common share purchase warrants within 30 days of the properties vesting in the company created for the joint venture under Madagascar law. Each common share purchase warrant was exercisable at $1.00 per share for a period of 2 years from the date of issuance.

In the event that one or other of the parties was unable to make their contribution to funding, their interest will be diluted accordingly.  In the event that a joint venture party’s interest in the joint venture is diluted below 10%, then that interest will be exchanged with the majority shareholder for a 2% net smelter return ("NSR").  Furthermore, the remaining joint venture party may acquire that royalty as follows: the first 1% at US$1,000,000 in cash or our common shares; and the second 1% at US$1,500,000 in cash or our common shares; both at the option of the remaining shareholder.

On July 9, 2009, our company entered into a definitive agreement to acquire the remaining 25% interest of the "Three Horses Joint Venture" for cash consideration of $100,000. On acquisition of the remaining 25% the joint venture with MMR was terminated.  MMR retains a 2% NSR. We can acquire the NSR on this 25% interest portion at a price of $500,000 in cash or common shares for the first 1% and at a price of $1,000,000 in cash or common shares for the second 1% at our option.

Exploration Programs

The Green Giant Property consists of 576 squares, covering an area of approximately 225 square kilometers, and displays extensive gossans outcroppings at surface. An examination of part of the Property revealed several large areas covered with gossanous boulders, which are believed to overlie massive sulphide mineralization.  Phases of the exploration projects have been managed by Taiga Consultants Ltd. of Calgary, Canada.

We conducted a first phase of exploration from September to November 2007 that included the following activities:

·

Stream Sediment sampling of all stream on the property area

·

Detailed Geological mapping over selected startigraphic horizons

·

Reconnaissance geological mapping over the entire property

·

Soil sampling over selected target areas

·

Prospecting over selected target areas.

·

Limited trenching over selected targets

·

Construction of a cinder block base camp

·

Construction of a one kilometer long surfaced airstrip

·

Repair and surfacing of the access road from base camp to the airstrip

·

Airborne geophysical surveying over the Green Giant Property by Fugro Airborne Surveys Ltd

In the latter part of March 2008 to June 2008 a full field exploration program following up on the airborne geophysical survey and results of the 2007 exploration program was implemented.  This exploration consisted of the following:

·

Infill stream sediment sampling

·

Detailed Geological mapping over selected stratigraphic horizons

·

Prospecting over selected target areas

·

Grid emplacement over selected target areas

·

Ground-based magnetometer and frequency domain EM surveys

·

Soil sampling over selected target areas

After reviewing the analytical data from the March to June 2008 program, additional exploration was conducted from July 1, 2008 to September 30, 2008 in preparation for a drill program. This exploration consisted of the following:

·

Infill stream sediment sampling

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·

Detailed Geological mapping over selected stratigraphic horizons

·

Prospecting over selected target areas with the aid of a mobile XRF analyzer

Based on compiled analytical results obtained from the various exploration programs, a drill program was initiated on the property from September 30, 2008 to November 24, 2008. This exploration program consisted of the following:

·

Prospecting over selected target areas with the aid of a mobile XRF analyzer

·

Ground-based scintillometer surveying over selected target areas

·

Diamond drilling of 31 holes over 4,073 metres

The discovery of potentially significant vanadium mineralization from the 2008 exploration program resulted in the initiation of resource delineation drill program from September 1, 2009 to December 20, 2009. This exploration program consisted of the following:

·

XRF soil sample analyses (8,490 samples) on lines 200 meters apart and covering 18 kilometre strike length

·

Scintillometer surveying (112 line kilometres) on lines 200 meters apart over an 18 kilometre strike length

·

Trenching (140 trenches for 17,105 meters)

·

Diamond drilling of 54 diamond drill holes over 8,931 meters

The 2009 exploration program resulted in the delineation of two vanadium pentoxide (V­₂O₅) deposits (named the Jaky and Manga) on the Green Giant Property, characterized by two separate categories: oxide and primary. Within the oxide and primary zone of  the Jaky and Manga deposits, the total Indicated resources was calculated to be 21.74 Mt at 0.759% V­₂O₅ containing 363.8 Mlb of vanadium pentoxide. The total Inferred resource was calculated to be 4.15 Mt at a grade of 0.655% V­₂O₅ containing 59.8 Mlb of vanadium pentoxide. Based on these results, we  conducted an additional exploration program on the property from April 11, 2010 to July 25, 2010. This program consisted of the following activities:

·

Diamond drilling of 46 diamond drill holes over 8,952 meters

·

Prospecting over selected target areas with the aid of a mobile XRF analyzer (20 grab samples)

·

Geologic mapping over the Manga and Mainty deposits at 1:5000 scale

·

ERT ground geopshysical survey (5.64 km)

·

MAG ground geophysical survey (169.53 km)

·

Gradient Array EM ground geophysical survey (128.82 km)

2008 Diamond Drilling

Diamond drilling completed in 2008 on the Green Giant Property tested a series of gossans and EM conductors, however no Volcanic Massive Sulphide (VMS) mineralization of significance was encountered. Drilling did confirm the presence of a series of mineral occurrences highly enriched in vanadium and a number of associated anomalous elements, which were first seen in stream sediment sampling programs. Due to this unexpected result the focus of exploration shifted to vanadium mineralization part way through the 2008 drill program.

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Composited Vanadium Mineralization in 2008 Drill Holes

**Average of Drill Intercepts - 43.9m @ 0.36% V₂O₅

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The serendipitous discovery of potentially economic vanadium mineralization on the property changed the course of the 2008 diamond-drilling program.  Through a combination of prospecting, ground based scintillometer surveying, and analysis of airborne radiometrics, five vanadium-bearing trends were identified over the course of the 2008 exploration program.

Vanadium-bearing Trends

Based on positive early indications of the presence of potentially economic grades and volumes of vanadium on the Green Giant Property, another exploration program was initiated on the Green Giant Project in the spring of 2009. The program (completed between April 23 and July 16, 2009) consisted of an extensive X-Ray Fluorescence analysis (XRF) soil sampling program coupled with mechanical trenching and scintillometer surveys over known areas of vanadium enrichment and new areas, defined by the soil XRF survey.

After reviewing the analytical results from the spring 2009 exploration program, an additional exploration program was carried out between September and December 2009. This exploration program involved mechanical trenching, diamond drilling with accompanying litholgical, structural and geotechnical logging, specific gravity determination, point load tests and metallurgical sampling. All work was carried out under a well-supervised Quality Assurance and Quality Control program.

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The primary aim of the September to December 2009 drill program was to delineate reserves at the Jaky and Manga targets. A total of 8,931 meters (4509.2m in 30 drill holes at the Jaky target and 4,422m in 24 drill holes at the Manga target) of diamond drilling was completed. Selected drill holes were oriented with point load test and orientation measurements recorded.

Composited Vanadium Mineralization in 2009 Drill Holes

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Analytical results from the 2009 exploration program were given to our consulting engineering firm AGP Mining Consultants Inc. to calculate a vanadium pentoxide resource.  Based on the favourable resource calculation results, we conducted additional drilling between April 2010 and July, 2010. This program involved diamond drilling with accompanying lithological, structural and geotechnical logging, specific gravity determination, point load tests and metallurgical sampling. All work was carried out under a well-supervised Quality Assurance and Quality Control program.   The primary aim of this drilling was to delineate additional reserves at the Jaky and Manga targets, as well as targeting an additional target, the Mainty. A total of 8,952 meters of diamond drilling was completed in 46 holes.  Selected drill holes were oriented with point load test and orientation measurements recorded.  Drill hole results from the exploration program completed through April 2010 - July 2010 are as follows: