5. Joint Venture
On November 8, 2012, the Company and ISGC formed the Owyhee Gold Trust, LLC, (“OGT”) a limited liability company. The Company’s contribution for its membership units is its South Mountain Mine property and related mining claims located in southwestern Idaho in Owyhee County. As its initial contribution to OGT, ISGC will fund operations totaling $18 million; or $8 million if the Company exercises its option to participate pro-rata after ISGC expends $8 million. The Agreement specifies that the members have initial Ownership Interests (as defined) as 25% for the Company and 75% for ISGC. ISGC is also the manager of the joint venture. Upon payment of $3 million of qualifying expenditures not later than December 31, 2014, including the cancellation of the $1 million note dated April 30, 2012 (Note 4), ISGC will receive 2,000 units representing a vested 25% ownership. The Company accounts for its investment in the joint venture by the cost method as it does not have control or significant influence over the affairs of the joint venture.