- Annual Report (10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

_________________________


For the Fiscal Year Ended		Commission File Number
December 31, 2011		000-53474

STEELE RESOURCES CORPORATION


Nevada		75-3232682
(State of Incorporation)		(I.R.S. Employer Identification)

Principal Executive Offices:

3081 Alhambra Drive, Suite 208

Cameron Park, CA 95682

(530) 672-6225

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of Each Class	Name of Each Exchange on Which Registered
None	None

Securities registered pursuant to Section 12(g) of the Exchange Act:


Title of Each Class
Common Stock	$0.001 Par Value

Indicate by check mark if the registrant is a well-known seasoned issued, as defined in 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 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

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. (Check one):

[ ] Large accelerated filer

[ ] Accelerated filer

[ ] Non-accelerated filer (do not check if a smaller reporting company)

[X] 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 June 30, 2011 the aggregate value of the voting stock held by non-affiliates of the registrant, computed by reference to the average of the bid and ask price on such date was approximately $3,339,000.

As of April 6, 2012, the Registrant had outstanding 51,292,705 shares of common stock.

Transitional Small Business Disclosure Format: Yes [ ] No [X]

Documents Incorporated by Reference

Certain exhibits required by Item 15 have been incorporated by reference from Steele Resources’ previously filed Form 8-K’s, Form 10-Q’s and Form 10-K’s.

TABLE OF CONTENTS


	Page of Report

PART I	5
ITEM 1. BUSINESS	5
ITEM 1A. RISK FACTORS	11
ITEM 2. PROPERTIES	16
ITEM 3. LEGAL PROCEEDINGS	24
ITEM 4. MINE SAFETY DISCLOSURES	24
PART II	25
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.	25
ITEM 6. SELECTED FINANCIAL DATA	28
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	28
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	36
ITEM 8. FINANCIAL STATEMENTS	37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	38
ITEM 9A. CONTROLS AND PROCEDURES	38
ITEM 9B. OTHER INFORMATION	39
PART III	40
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	40
ITEM 11. EXECUTIVE COMPENSATION	44
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	48
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION AND DIRECTOR INDEPENDENCE	50
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES	51
PART IV	54
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	54
SIGNATURES	55

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K or incorporated by reference may contain certain “forward-looking” statements as such term is defined by the Securities and Exchange Commission in its rules, regulations and releases, which represent the registrant’s expectations or beliefs, including but not limited to, statements concerning the registrant’s operations, economic performance, financial condition, growth and acquisition strategies, investments, and future operational plans. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intent,” “could,” “estimate,” “might,” “plan,” “predict” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements.

These statements may be found under “Management’s Discussion and Analysis or Plan of Operations” and “Business,” as well as in this annual report generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this annual report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this annual report will in fact occur. In addition to the information expressly required to be included in this annual report, we will provide such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.

These risks and uncertainties and other factors include, but are not limited to, those set forth under Item 1A “Risk Factors”. All subsequent written and oral forward-looking statements attributable to the Company or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Except as required by federal securities laws, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Given these risks and uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements.

ADDITIONAL INFORMATION

Descriptions of agreements or other documents contained in this report are intended as summaries and are not necessarily complete. Please refer to the agreements or other documents filed or incorporated herein by reference as exhibits. Please see the exhibit index at the end of this report for a complete list of those exhibits.

PART I

ITEM 1.

BUSINESS

Corporate Overview

Steele Resources Corporation (formerly Steele Recording Corporation) ("SRC", the "Company", "we", or "our") is a U.S. exploration and mining company, incorporated in the state of Nevada on February 12, 2007. On June 17, 2010 the Company entered into and consummated a Plan and Agreement of Reorganization between the Company and Steele Resources, Inc. and certain stockholders of Steele Resources, Inc. (the “Reorganization”). Pursuant to the Reorganization, the Company acquired all of the issued and outstanding shares of Steele Resources, Inc., a Nevada Corporation (“SRI”), formed in May 2010. From an accounting perspective, SRI was the acquirer.

The primary business of the Company is carried on through its wholly-owned subsidiary, SRI, which is an exploration and mining company focused on identifying and developing advanced stage precious metal exploration projects which show potential to achieve full production. The overall business strategy is to identify, explore and, if warranted, develop and operate mineral exploration properties and to provide mine exploration and operations services to mining properties located initially in the Western United States. The initial business strategy is to evaluate properties which have considerable amounts of exploration already completed and have potential and inferred resources identified. Presently, we have three projects: our Mineral Hill Gold Mine project located in Montana; our Copper Canyon Mine, a copper-cobalt project in Idaho; and our Billali Mine, a silver-gold project located in New Mexico. See “Item 2. Properties” for more information about our properties. Information about the Company and its properties, including a link to our most recent financial reports filed with the Securities and Exchange Commission (“SEC”), can be viewed on our website at www.steeleresources.com .

The initial business strategy is to service the niche market between speculative exploration and large scale production. This niche market lies between, at one end, relatively small companies which have conducted preliminary mineral exploration on their properties and, at the other end, companies which conduct major mining operations which could generally be defined as properties having gold mineral reserves in excess of 2,000,000 ounces. Within this niche market, SRI believes there are a large number of projects in the United States that have excellent potential but do not meet the size requirements for development by the major operators in the mining industry.

The Company continually seeks to identify exploration properties which offer the best potential for producing significant gold and silver reserves and offer favorable conditions, if warranted, for the future efficient development of the property to reach a production stage. Once suitable projects are identified, SRI will contract services to perform further exploration drilling, prepare feasibility studies, mine modeling, on-site construction and advance stage project engineering with the goal of establishing, if warranted, a producing mine project. Exploration services would also include securing necessary permits, environmental compliance and remediation plans.

SRI will provide its mine exploration services in one of two ways. The first approach is for SRI to acquire part or all of the mineral rights to a designated property. In this approach SRI would prepare a comprehensive mining development plan including the tasks to be accomplished, the timetable for each phase of the plan and the nature and number of service providers to perform the tasks. The exploration plan would include a detailed budget, payment schedules and a percentage royalty from any gold or silver produced, if the property is found worthy of development. SRI would then assemble the necessary service providers to carry out the exploration and, if warranted, development plan. In this approach, SRI would fund the property exploration and possible development itself in which case it would own all or a substantial portion of all the mineral production, if any, which might be realized from that particular property with a royalty typically paid to the property owner or the mineral rights assignor. This approach would also typically include certain work requirements and expenditure requirements in order to maintain the exploration/mineral rights.

The second approach will be to contract with the property owner or mineral rights holder to provide the services listed above on a contract fee basis which would include a percentage royalty on any mineral production which is actually achieved. This approach would have SRI acting in the nature of a general contractor. SRI would prepare the same type of comprehensive mining exploration plan as described above and assemble the necessary service providers to carry out the plan.

Suitable projects will typically have the following characteristics:

properties located near existing mineral zones initially focusing in the USA;

properties having a considerable amount of exploration completed; and

properties not of sufficient size for the major mining companies to advance themselves.

Success in gold or other mineral exploration is dependent upon a number of factors including, but not limited to, quality of management, quality and availability of geological data and the expertise to interpret it, availability of trained miners and equipment and availability of exploration capital. The exploration process can be long and costly. Due to these and other factors, the probability of our identifying individual prospects having commercially significant reserves cannot be predicted. The Company and SRI together represent a relatively new, exploration stage company. There is no assurance that a commercially viable mineral deposit exists on any of the Company's properties and further exploration will be required before an evaluation of the economic and regulatory feasibility of the properties can be determined.

Recent Developments

Joint Venture Agreement Governing Exploration and Development of Pony Project and A&P Project

In February, 2011, SRI entered into a Joint Venture Agreement (the “JV Agreement”) relating to the Mineral Hill Project with Innocent Inc. ("INCT"), a Nevada corporation engaged in the financing of exploration and potential development of mineral properties. Pursuant to the JV Agreement, INCT agreed to provide up to $5,000,000 to fund the exploration and development of the Mineral Hill Mining Project.

On August 31, 2011 SRI and INCT entered into an agreement to terminate the JV Agreement. At the time of termination INCT had funded $540,000 towards the Mineral Hill project, which SRI agreed to refund and carries as a liability on its balance sheet. SRC also granted INCT an 8% Net Profit Interest on the stockpiled material removed from the Mineral Hill property in consideration for the release of INCT's 50% interest in the JV Agreement. Subject to the repayment/assumption of the $540,000 and the 8% interest in the reclamation phase, SRI retains ownership of the mineral lease rights to the Mineral Hill property and is solely responsible for its ongoing funding and operations. SRC has agreed to repay the $540,000 to INCT from working capital generated through debt financing or through the private placement of our equity securities, and such other means as the Company may determine. The Company paid $15,128 for the 8% Net Profit Interest on the stockpiled material owed to INCT.

Billali Gold Mine Letter of Intent

On January 19, 2012, SRC entered into a Letter of Intent ("LOI") to acquire the Billali Gold and Silver Mine (the "Billali Mine") from the Billali Gold Mine, LLC, an advanced stage epithermal silver-gold quartz vein deposit in the Steeple Rock Mining District of New Mexico. This property consists of one patented claim and the Company believes has potential for near term production of silver and gold ore.

The district has several historical mines in the area and an estimated 151,000 oz of gold, 1,200,000 pounds of copper, 5,000,000 pounds of lead, and 4,000,000 pounds of zinc was mined from the district from 1880 to 1991. In total, approximately $10,000,000 worth of metals was mined district wide. At the Billali Mine, approximately 4,120 ounces of gold was produced grading at .19 opt gold and 12 opt silver.

Industry Overview

Gold Market

For centuries, gold has been desirable for its rarity, beauty and unique properties. Because gold is highly valued and in very limited supply, it has long been used as a medium of exchange or money. Because of gold’s perceived inherent value, its demand and, hence, its price, tends to increase when there is uncertainty in the markets for other “paper currencies” such as the US dollar or Euro. Due to the current recession, threats of terrorism and the huge debt burden of many countries, the spot market price of an ounce of gold has increased to historic levels having surpassed the $1,000 per ounce mark in 2008.

The following table presents the annual high, low and average afternoon fixing prices for gold over the past ten years, expressed in US dollars per troy ounce, on the London Bullion Market.


Gold Price (USD) on the London Bullion Market
Year	High	Low	Average
2005	$536	$411	$444
2006	$725	$525	$604
2007	$841	$608	$695
2008	$1,011	$713	$872
2009	$1,212	$810	$972
2010	$1,420	$1,058	$1,224
2011	$1,895	$1,319	$1,571

Source: London Metal Exchange

On March 30, 2012, the afternoon fixing price for gold on the London Bullion Market was $1,662 per troy ounce.

This current price level has made it more economically feasible to produce gold as well as making gold a more attractive investment for many. Accordingly, the gross margin per ounce of gold produced per the historical spot market price range above provides significant profit potential if we are successful in identifying, exploring and, if warranted, developing suitable projects.

Gold Mining Industry Participants

By industry standards, there are generally four types of mining companies. Typically, an “exploration stage” mining company is focused on exploration to identify new, commercially viable gold deposits. “Junior mining companies” typically have proven and probable reserves of less than one million ounces of gold, generally produce less than 100,000 ounces of gold annually and /or are in the process of trying to raise enough capital to fund the remainder of the steps required to move from a staked claim to production. “Mid-tier” and large mining (“major”) companies may have several projects in production plus several million ounces of gold in proven reserves.

SRC is currently characterized as an exploration company. To the extent that SRC is hired by a property owner (other than its own property) to carry out advanced stage exploration and development of a mining project, SRC would not be deemed a “mining company” but rather a mining service provider.

Competition

Of the four types of mining companies, we believe junior companies represent the largest group of gold mining companies. All four types of mining companies may have projects located in any of the gold producing continents of the world and many have projects located in the Western United States. As an exploration stage company, we will compete with other mineral resource exploration and development companies for financing and for acquisition of new mineral properties.

Many of our competitors have greater exploration, production, and capital resources than we do, and may be able to compete more effectively in any of these areas. For example, these competitors may be able to spend greater amounts on acquisition of desirable mineral properties, on exploration of their mineral properties and on development of their mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance the exploration and development of their mineral properties. Our inability to secure capital to fund exploration and, if warranted, development costs for our mineral properties would create a competitive cost disadvantage in the marketplace which would have a material adverse effect on our operations and potential profitability.

We also compete in the hiring and retention of key executives, skilled laborers, experienced subcontractors and other employees and contract personnel. Consequently, though unlikely, it is possible that we may not be able to hire or retain qualified geologists, miners or operators in the numbers or at the times desired.

Employees

As of December 31, 2011, we had five full-time employees. Employees include a CEO, a VP, a CFO, and an Operations Manager and a Senior Geologist. We anticipate hiring additional employees during the current year to work the Company's mining sites as our exploration development programs commence. While skilled equipment and operations personnel are in demand, we believe we will be able to hire the necessary workers to sustain our current exploration and any future development programs. Our employees are not expected to be subject to a labor contract or collective bargaining agreement. We consider our employee relations to be good.

Consulting services, relating primarily to geologic and geophysical interpretations, and relating to such metallurgical, engineering, and other technical matters as may be deemed useful in the evaluation and exploration activities, will be provided by independent contractors.

Government Controls and Regulations

Gold exploration, mining and processing operations are subject to various federal, state and local laws and regulations governing prospecting, exploration, development, production, labor standards, occupational health, mine safety, control of toxic substances, and other matters involving environmental protection and employment. United States environmental protection laws address the maintenance of air and water quality standards, the preservation of threatened and endangered species of wildlife and vegetation, the preservation of certain archaeological sites, reclamation, and limitations on the generation, transportation, storage and disposal of solid and hazardous wastes, among other things. There can be no assurance that all the required permits and governmental approvals necessary for any mining project with which we may be associated can be obtained on a timely basis, or maintained. Delays in obtaining or failure to obtain government permits and approvals may adversely impact our operations. The regulatory environment in which we operate could change in ways that would substantially increase costs to achieve compliance. In addition, significant changes in regulation could have a material adverse effect on our operations and ability to timely and effectively explore and, if warranted, develop mining properties.

Outlined below are some of the more significant aspects of governmental controls and regulations which materially affect the mining properties we will seek to explore.

Federal Regulation of Mining Activity

Mining activities, including exploration, and possible future development and production activities are subject to environmental laws, policies and regulations. These laws, policies and regulations affect, among other matters, emissions to the air, discharges to water, management of waste, management of hazardous substances, protection of natural resources, protection of endangered species, protection of antiquities and reclamation of land. Mining properties are also subject to numerous other federal, state and local laws and regulations. At the federal level, the mines are subject to inspection and regulation by the Division of Mine Safety and Health Administration of the Department of Labor (“MSHA”) under provisions of the Federal Mine Safety and Health Act of 1977. The Occupation and Safety Health Administration (“OSHA”) also has jurisdiction over certain safety and health standards not covered by MSHA. Mining operations and all proposed exploration and development will require a variety of permits. In addition, any mining operations occurring on federal property are subject to regulation and inspection by the Bureau of Land Management (“BLM”). While we have considerable experience in the mine permitting process, permitting procedures are complex, costly, time consuming and subject to potential regulatory delay. We will seek to identify projects where existing permitting requirements and other applicable environmental protection laws and regulations would not pose a material hindrance to our ability to explore and possibly develop such mine properties. As part of our initial evaluation of suitable projects, we will ascertain a property’s regulatory compliance status and any issues affecting current or future permitting requirements. However, we cannot be certain that future changes in laws and regulations would not result in significant additional expenses, capital expenditures, restrictions or delays associated with the exploration and possible future development of our selected projects. We cannot predict whether we will be able to obtain new permits or whether material changes in permit conditions will be imposed. Granting new permits or the imposition of additional conditions could have a material adverse effect on our ability to explore and develop the mining properties which we are providing services for or in which we have an interest.

Legislation has been introduced in prior sessions of the U.S. Congress to make significant revisions to the U.S. General Mining Law of 1872 that would affect our exploration and potential development of unpatented mining claims on federal lands, including any royalty on gold production. It cannot be predicted whether any of these proposals will become law. Any levy of the type proposed would only apply to unpatented federal lands and accordingly could adversely affect the profitability of any future gold production from projects being explored by SRI on federal property.

Montana

In the State of Montana our exploration and mining operations will be under supervision of the Montana Department of Environmental Quality (“MDEQ”) which enforces Montana’s Environmental Policy Act and mining regulations. Exploration and mining activity at the Mineral Hills Project, which SRI intends to acquire, is currently conducted under a Small Miner Exclusion Statement (SMES). An SMES allows for expedited treatment for exploration/mining operations which affect no more than 25 square miles of property. While such a limitation makes mining under an SMES infeasible for large gold mining companies, SRC, by contrast, can operate efficiently in this smaller space as a small exploration company.

Idaho

The mining and exploration activities for the Copper Canyon property will be governed by the Bureau of Land Management and the US Forest Service. In Idaho, the BLM manages nearly 12 million acres of public lands, nearly one-fourth of the state's total land area. The Branch of Lands, Minerals & Water Rights administers the use and development of many of the resources found on these lands - including energy and mineral resources - along with managing real estate transactions involving public lands.

The Federal Land Policy and Management Act (1976) established the BLM’s multiple-use mandate to manage the public lands “in a manner that will protect the quality of scientific, scenic, historical, ecological, environmental, air and atmospheric, water resource, and archeological values; that, where appropriate, will preserve and protect certain public lands in their natural condition. The Lands, Minerals & Water Rights branch coordinates with BLM planning and resource specialists to manage surface resources, minerals and water rights to ensure that authorized uses of public lands do nothing to diminish their health and productivity or impair their use and enjoyment by present and future generations.

New Mexico

In connection with mining, milling and exploration activities, we are subject to extensive federal, state and local laws and regulations governing the protection of the environment, including laws and regulations relating to protection of air and water quality, hazardous waste management and mine reclamation as well as the protection of endangered or threatened species.

The required permits from the New Mexico Office of the State Engineer (OSE) and the New Mexico Environmental Department and from the Mining and Minerals Division under the NM Mining Act of 1993 have been issued. Safety at the Billali Mine is regulated by the Mine Safety and Health Administration (MSHA), a federal agency, and by the New Mexico Office of the State Mine Inspector.

With respect to the permits required for our projects mentioned above, we may be unable to obtain such permits in a timely manner, on reasonable terms, or at all. If we cannot obtain or maintain the necessary permits, or if there is a delay in receiving such permits, our timetable and business plan for development and mining of these properties could be adversely affected. See Item IA. “Risk Factors” for more information.

Environmental Regulations

Legislation and implementation of regulations adopted or proposed by the United States Environmental Protection Agency (“EPA”), the BLM and by comparable agencies in various states directly and indirectly affect the mining industry in the United States. These laws and regulations address the environmental impact of mining and mineral processing, including potential contamination of soil and water from tailings, discharges and other wastes generated by mining process. In particular, legislation such as the Clean Water Act, the Clean Air Act, the Federal Resource Conservation and Recovery Act (“RCRA”), and the National Environmental Policy Act require analysis and/or impose effluent standards, new source performance standards, air quality standards and other design or operational requirements for various components of mining and mineral processing, including gold-ore mining and processing. Such statutes also may impose liability on mine developers for remediation of waste they have created.

Gold mining and processing operations by an entity would generate large quantities of solid waste which is subject to regulation under the RCRA and similar state laws. The majority of the waste which is produced by such operations is “extraction” waste that EPA has determined not to regulate under RCRA's "hazardous waste" program. Instead, the EPA is developing a solid waste regulatory program specific to mining operations under the RCRA. Of particular concern to the mining industry is a proposal by the EPA entitled “Recommendation for a Regulatory Program for Mining Waste and Materials under Subtitle D of the Resource Conservation and Recovery Act” (“Strawman II”) which, if implemented, would create a system of comprehensive Federal regulation of the entire mine site. Many of these requirements would be duplicates of existing state regulations. Strawman II as currently proposed would regulate not only mine and mill wastes but also numerous production facilities and processes which could limit internal flexibility in operating a mine. To implement Strawman II the EPA must seek additional statutory authority, which is expected to be requested in connection with Congress' reauthorization of RCRA.

Mining projects also are subject to regulations under (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA" or “Superfund”) which regulates and establishes liability for the release of hazardous substances and (ii) the Endangered Species Act (“ESA”) which identifies endangered species of plants and animals and regulates activities to protect these species and their habitats. Revisions to “CERCLA” and “ESA” are being considered by Congress; however, the impact of these potential revisions on our business is not clear at this time

The Clean Air Act, as amended, mandates the establishment of a Federal air permitting program, identifies a list of hazardous air pollutants, including various metals and cyanide, and establishes new enforcement authority. The EPA has published final regulations establishing the minimum elements of state operating permit programs. We will be required to comply with these EPA standards to the extent adopted by the State in which development projects are located.

In addition, developing mine sites requires mitigation of long-term environmental impacts by stabilizing, contouring, resloping, and revegetating various portions of a site. While a portion of the required work can be performed concurrently with developing the property, completion of the environmental mitigation occurs once removal of all facilities has been completed. These reclamation efforts are conducted in accordance with detailed plans which have been reviewed and approved by the appropriate regulatory agencies. The mine developer must insure that all necessary cash deposits and provision to cover the estimated costs of such reclamation as required by permit are made.

Any exploration and development of mining projects by SRC will be conducted in substantial compliance with federal and state regulations and be consistent with the need to remediate any environmental impact.

ITEM 1A. RISK FACTORS

You should carefully consider the following risk factors in evaluating our business before purchasing any of our common stock. We have described the risks we consider to be material. However, there may be additional risks that we view as not material or of which we are not presently aware. If any of the events described below were to occur, our business, prospects, financial condition, results of operations or cash flow could be materially adversely affected.

BUSINESS RISKS

SRC is a relatively new company with a limited operating history which makes the evaluation of its future business prospects difficult.

Prior to June 17, 2010 SRC was a shell company with no designated business or operations. As a result of the Reorganization SRC has only recently changed its business to focus on the natural resource sector which new business will be carried out primarily by its wholly-owned subsidiary, SRI. SRI is an exploration stage company which only recently was formed and commenced its business. Consequently, it has limited operating history and an unproven business strategy. SRI’s primary activities to date have been the design of its business plan and identifying potential advanced stage gold exploration projects which fit SRI’s project profile. As such we may not be able to achieve positive cash flows and our lack of operating history makes evaluation of our future business and prospects difficult. The Company has not generated any revenues from mining operations to date. The Company’s success is dependent upon the successful identification and future development of suitable mineral exploration projects. Any future success that we might achieve will depend upon many factors, including factors beyond our control which cannot be predicted at this time. These factors may include but are not limited to: changes in or increased levels of competition; unfavorable weather conditions; the availability of materials and equipment; the cost and time of bringing exploration stage projects into production; the amount and accuracy of gold reserves identified; and the market price of gold and other metals. These conditions may have a material adverse effect upon SRI’s and the Company’s business operating results and financial condition.

SRC expects its operating expenses to increase in the future with no assurance that revenues will be sufficient to cover those expenses which could delay or prevent SRC from achieving profitability.

As SRC’s business grows and expands, it will spend substantial capital and other resources on exploring and potentially developing its exploration projects, establishing strategic relationships and operating infrastructure. SRC expects its cost of revenues, property exploration, general and administrative expenses, to continue to increase. However, revenues are not expected in the near future to offset these expenses. Consequently if outside capital is not secured, there may be a material adverse effect on our business, cash flow and financial condition.

SRC will need to raise funds through debt or equity financings in the future, which would dilute the ownership of our existing stockholders and possibly subordinate certain of their rights to the rights of new investors or creditors.

We expect to raise additional funds in debt or equity financings if they are available to us on terms we believe reasonable to provide for working capital, carry out exploration programs or to make acquisitions. Any sales of additional equity or convertible debt securities would result in dilution of the equity interests of our existing stockholders, which could be substantial. Additionally, if we issue shares of preferred stock or convertible debt to raise funds, the holders of those securities might be entitled to various preferential rights over the holders of our common stock, including repayment of their investment, and possibly additional amounts, before any payments could be made to holders of our common stock in connection with an acquisition of the Company. Such additional debt, if authorized, would create rights and preferences that would be senior to, or otherwise adversely affect, the rights and the value of our common stock and would have to be repaid from future cash flow.

If SRC fails to raise additional capital to fund its business growth and project exploration, its new business could fail.

The Company anticipates having to raise significant amounts of capital to meet its anticipated needs for working capital and other cash requirements for the near term to explore our mining properties. The Company will attempt to raise such capital through the sale of common stock or debt instruments or securing commercial lines of credit. However, there is no assurance that the Company will be successful in raising or borrowing sufficient additional capital and we have no arrangements for future financing and there can be no assurance that additional financing will be available to us. If adequate funds are not available or are not available on acceptable terms, our ability to fund SRI’s exploration projects, take advantage of potential acquisition opportunities, possibly develop or enhance its properties in the future or respond to competitive pressures would be significantly limited. Such limitation could have a material adverse effect on the Company’s business and financial condition.

Gold exploration is highly speculative in nature, involves substantial expenditures and is frequently non-productive.

Success in gold or other mineral exploration is dependent upon a number of factors including, but not limited to, quality of management, quality and availability of geological data and the expertise to interpret it, availability of trained miners and equipment and availability of exploration capital. The exploration process can be long and costly. Due to these and other factors, the probability of our identifying individual prospects having commercially significant reserves cannot be predicted. It is likely that many of the projects considered will not contain any commercially viable reserves. Consequently, substantial funds may be spent on project evaluation which may identify only a few, if any, projects having commercial development potential. In addition, if commercially viable reserves are identified, significant amounts of capital will be required to mine and process such reserves.

We have not yet identified all properties that we intend to explore.

SRI has currently identified and acquired an interest in or signed a Letter-of-Intent relating to four groups of exploration projects, two located in Nevada and two located in Montana and one located in New Mexico. However, SRI has commenced exploration or development on only one of these projects. Therefore we are unable to determine the quantity of gold, if any, we may be able to recover. We, through our wholly-owned subsidiary, SRI, will continue to seek and identify additional suitable potential mineral resources, which is a subjective process depending in part on the quality of available data and the assumptions used and judgments made in interpreting such data. There is significant uncertainty in any resource estimate such that the actual deposits encountered or reserves validated and the economic viability of mining the deposits may differ materially from our expectations.

We may lose the mineral rights to properties if we fail to meet payment requirements or development or production schedules.

We expect to acquire rights to some of our mineral properties from leaseholds or purchase option agreements that may require the payment of option payments, rent, minimum exploration expenditures or other installment fees or specified expenditures. All of our projects require annual rent or payments to be paid by SRI. If we fail to make these payments when they are due, our mineral rights to the property may be terminated. This would be true for any other mineral rights which require payments to be made in order to maintain such rights.

Some contracts with respect to mineral rights we may acquire may require development or production schedules. If we are unable to meet any or all of the development or production schedules, we could lose all or a portion of our interests in such properties. Moreover, we may be required in certain instances to pay for government permitting or posting reclamation bonds in order to maintain or utilize our mineral rights in such properties. Because our ability to make some of these payments is likely to depend on our ability to generate internal cash flow or obtain external financing, we may not have the funds necessary to meet these development/production schedules by the required dates.

We may have to compete with other companies for favorable projects to explore.

Due to the current high market value for gold and silver many companies are attempting to explore properties which show potential for significant gold and silver reserves. Consequently, we will face competition from other companies for those projects showing the most favorable exploration results. While we intend to focus on smaller projects which do not meet the size/volume requirements of the established, large mining companies, we nonetheless expect competition from other companies, many of which are larger and better funded than SRC.

Consequently, if we are unable to secure projects meeting our desired project profile, we are more likely to end up with projects having a lower success potential and ultimately having a lower return on the project’s investment.

Mineral exploration and mining are highly regulated industries.

Mining is subject to extensive regulation by state and federal regulatory authorities. State and federal statutes regulate environmental quality, safety, exploration procedures, reclamation, employees’ health and safety, use of explosives, air quality standards, pollution of stream and fresh water sources, noxious odors, noise, dust, and other environmental protection controls as well as the rights of adjoining property owners. We will strive to verify that projects being considered are currently operating in substantial compliance with all known safety and environmental standards and regulations applicable to each State in which properties are located. However, there can be no assurance that our compliance review could be challenged or that future changes in federal or state laws, regulations or interpretations thereof will not have a material adverse effect on our ability to establish and sustain mining operations.

Gold mining has a number of risks.

The business of gold and silver mining is subject to certain types of risks, including environmental hazards, industrial accidents, and theft. While we will attempt to secure insurance consistent with industry practice, it is not possible to insure against all risks associated with the mining business, or prudent to assume that insurance will continue to be available at a reasonable cost. We may not obtain certain types of liability insurance on our projects because such coverage is not considered by management to be cost effective. If any project lacks insurance coverage, any losses would have to be absorbed by the Company or other participants which could have a significant adverse impact on the Company’s operations and revenues.

Our business will depend on certain key Company personnel, the loss of whom would adversely affect our chances of success.

The Company’s success depends to a significant extent upon the continued service of its senior management and key executives. We do not have “key person” life insurance policies on or employment agreements with any of our officers or other employees. The loss of the services of any of the key members of senior management, other key personnel or consultants, or our inability to retain high quality subcontractor and mining personnel may have a material adverse effect on our business and operating results.

We will incur increased costs and may have difficulty attracting and retaining qualified directors and executive officers as a result of being a public company.

SRC is a public “reporting company” with the SEC. As a public reporting company, we will incur significant legal, accounting, reporting and other expenses not generally applicable to a private company. We also will incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 as well as other rules implemented by the SEC. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage. As a result, we may experience difficulty attracting and retaining qualified individuals to serve on our board of directors or as executive officers. We cannot predict or estimate the amount of these continuing costs we will incur as a result of being a public company.

Our officers and directors have the ability to exercise significant influence over matters submitted for stockholder approval and their interests may differ from other stockholders.

Three officers and/or directors of the Company together hold approximately 47% of the outstanding common stock of the Company as of April 6, 2011. Accordingly, our directors and officers, whether acting alone or together, will have significant influence in determining the outcome of any corporate transaction or other matter submitted to our stockholders for approval, which could have a material effect on the approval or disapproval of mergers, acquisitions, consolidations or the sale of all or substantially all of our assets. As significant stockholders of the Company, these individuals will have significant influence in the election of directors as well as the power to prevent a change of control. The interests of these officers and directors may differ from the interests of the other stockholders.

A decline in the price of gold and other resources will adversely affect our chances of success.

The price of gold has experienced an increase in value over the past several years, generally reflecting among other things relatively low interest rates in the United States; worldwide instability due to terrorism; and a continuing global economic slump. Gold prices at historic highs closing at $1,895 per ounce on September 6, 2011 as reported on the Chicago Mercantile Exchange. We believe that the economic conditions causing these high market valuations will continue for the foreseeable future. However the price of gold and silver can be very volatile and is subject to numerous factors beyond our control including industrial and jewelry demand, inflation, the strength of the US dollar, interest rates and the amount of global economic instability. Any

significant drop in the price of gold or other natural resources could make some exploration projects no longer viable and will have a materially adverse effect on the results of our operations unless we are able to offset such a price drop by substantially increased production.

The Auditor’s Report for fiscal year 2011 states there is substantial uncertainty about the ability of SRC or SRI to continue its operations as a going concern.

In their audit report dated April 6, 2012 included in this annual report, the auditors have expressed an opinion that substantial doubt exists as to whether we can continue as an ongoing business.

Management may be unable to implement the business strategy.

The Company’s and SRI’s business strategy is to service the niche market between speculative exploration and large scale production, the latter of which is dominated by industry majors. SRI plans to identify and explore smaller exploration projects that have already been established as project worthy. There is no assurance that we will be able to identify and provide our services to such “project worthy” properties. In addition, even if we find and ultimately develop such project worthy properties, the time and cost of development may exceed our expectations or, when developed, the amount of gold or other precious metals recovered may fall significantly short of our expectations thus providing a lower return on investment or a loss to the Company.

SECURITIES RISKS

There is a limited active trading market for our common stock making our stock vulnerable to significant price and volume fluctuations.

There is currently a limited active trading market for our common stock which is listed and traded on the OTCQB (owned and operated by NASDAQ Stock Market, Inc). The OTCQB is not a listing service or exchange, but is instead a dealer quotation service for subscribing members. Consequently, the market for our common stock will depend to a certain extent on the number of market makers trading in our stock. The market price of our common stock may be significantly affected by factors such as actual or anticipated fluctuations in our operating results, the activities of our market makers, general market conditions and other factors. In addition, stock markets have from time to time experienced significant price and volume fluctuations that have particularly affected the market prices of the shares of exploration stage companies, which may adversely affect the market price of our common stock in a material manner.

Inadequate market liquidity may make it difficult to sell our stock.

There is currently a limited public market for our common stock as only a limited number of shares of our common stock are actively traded in the public market and we cannot give assurance that the market for our stock will develop sufficiently to create significant market liquidity and stable market prices. An investor may find it difficult or impossible to sell shares of our common stock in the public market because of the limited number of potential buyers at any time or because of fluctuations in our market price. In addition, the shares of our common stock are not eligible as a margin security and lending institutions may not accept our common stock as collateral for a loan.

The trading price of our common stock may decrease due to factors beyond our control. These factors may result in substantial losses to investors if investors are unable to sell their shares at or above their purchase price.

The trading price of our common stock is subject to significant fluctuations due to a number of factors, including:

our status as an exploration stage company with little operating history

no revenues to date, which may make risk-averse investors more inclined to sell their shares in the market more quickly and at greater discounts than may be the case with the shares of a seasoned issuer in the event of negative news or lack of progress and announcements of new projects by us or our competitors

the timing and development of services that we may offer

general and industry-specific economic conditions including the price of gold and silver

actual or anticipated fluctuations in our operating results

our capital commitments

the loss of any of our key management personnel

In addition, the financial markets have experienced recent extreme price and volume fluctuations. The market prices of securities in this industry have been highly volatile and may continue to be highly volatile in the future, some of which may be unrelated to the operating performance of particular companies. The sale or attempted sale of a large amount of common stock into the market may also have a significant impact on the trading price of our common stock. Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance

Unless an active trading market develops for our securities, investors may not be able to sell their shares.

Although we are a reporting company and our common shares are quoted on the OTCQB, there is not currently an active trading market for our common stock and an active trading market may never develop or, if it does develop, may not be maintained. Failure to develop or maintain an active trading market will have a generally negative effect on the price of our common stock, and a stockholder may be unable to sell his/her common stock or any attempted sale of such common stock may have the effect of lowering the market price and therefore causing a partial or complete loss. Furthermore, the OTC Bulletin Board is not an exchange and, because trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a national exchange or on the Nasdaq National Market, investors may have difficulty reselling any of the shares of our common stock they own.

ITEM 2.

PROPERTIES

Office Facilities

Our corporate offices are located at 3081 Alhambra Drive, Suite 208, Cameron Park, CA 95682. We are currently paying rent of $750 per month for our corporate offices. We believe this space is currently adequate however we expect to move into new office spaces located in Cameron Park, CA during the current year.

The Company has a lease for expanded corporate offices that is currently under construction. We anticipate that we will move to the new facility in 2012.

Mineral Properties/Interests

All of the properties currently leased or being purchased by SRI have a certain amount of prior exploration data available however none of the properties currently have any probable or proven reserves. Consequently, there is no assurance that a commercially viable mineral deposit exists on any of the properties and further exploration will be required before an evaluation of the economic and regulatory feasibility of the properties can be determined.

Mineral Hill Project

The Mineral Hill Exploration project is a gold project located 4-6 miles west of Pony, Montana in the Tobacco Roots Mountain Range in Madison County and includes 17 patented claims and 67 unpatented claims known as the Pony Exploration project (“the Pony Project”) and two patented mining claims known as the Atlantic and Pacific Mine ("the A&P Project") located in the Pony Mining District in Montana comprising approximately 1,800 acres (collectively the "Mineral Hill Project"), a discussion of both projects follows. The area has several historical mines in the area and an estimated 350,000 ounces of gold was mined from the district from 1890 to 1941. The Boss Tweed mine produced 44,223 oz of gold from 1904 to 1935, and $1,500,000 of ore was produced from the Clipper mine. The A&P mine produced 128,000 tons of ore from 1934 to 1941, and an estimated 5.8 million tons of ore remains according to Chicago Mining Corp. The average grade for the district is 0.25 opt Au and sampling programs by several companies including SRI has confirmed this value.

Property access includes BLM and U.S. Forest service dirt roads that exist throughout the entire district and pass through most if not all of the Mineral Hill Project claims. The roads are maintained well enough to allow exploration equipment such as drill rigs and water trucks, as well as privately owned vehicles to the priority sites marked for exploration and development. SRI has obtained appropriate road use permits with these agencies that stipulate the required road maintenance to support haulage activity.

Pony Project : On February 4, 2011, SRI entered into a Mineral Lease Agreement with Option to Purchase (the "Pony Lease")with a group of individual land owners in the state of Montana to acquire rights to 17 patented and 67 unpatented mining claims known as the Pony Exploration project (“the Pony Project”). The Pony Project currently contains two active mines operating under a Small Miner Exclusion Statement (SMES). The Pony Project is located in the Pony Mining District near Pony, Montana. Officers of SRC have met with Montana Department of Environmental Quality officials to discuss permitting for both mining and exploration activities. The Pony Lease provides for a six year lease period with an initial payment of $300,000 and annual lease payments of $500,000 for the next five years. The Lessors will also have a 2% NSR on the property. In addition the Lessors will receive a 1% NSR on any property developed by SRI located within one linear mile from any portion of the exterior boundary of the Pony Project. After the lease period expires, SRI will have the option to purchase the Pony Project for $190,000.

The property has no known mineral reserves. The Pony Project includes both patented and unpatented claims. There are 67 unpatented lode claims each representing 20 acres for a total of 1340 acres for the purposes of exploration. There are 17 federal patented lode claims plus fractions covering approximately 322.05 acres. The following is a list of the names, acreages, survey numbers (Sur) and Bureau of Land Management (NMC) numbers associated with the claims:


Claim Name	ID Number	Acreage	Claim type:
Golden	NMC 215959	20	Unpatented, lode
Way	NMC 215964	20	Unpatented, lode
Old	NMC 215963	20	Unpatented, lode
Joe	NMC 215960	20	Unpatented, lode
Gem#2	NMC 215958	20	Unpatented, lode
Mexi 1	NMC 215961	20	Unpatented, lode
Mexi 2	NMC 215962	20	Unpatented, lode
MN # 1 - 60	NMC 221240 - 221299	1200	Unpatented, lode
North Star	Sur#2600; ME#2097	20.26	Federal patented lode
Pony	Sur#5303; ME#3805	15.57	Federal patented lode
Mountain Cliff	#2629; Lot 3483A	16.87	Federal patented lode
Grouse	Sur#5997; ME#4080	18.64	Federal patented lode
Clipper Fractured	Sur#6080; ME#408	6.6	Federal patented lode
Standby	Sur#5998; ME#4081	10.93	Federal patented lode
Bill Nye	Sur#59999; ME#4081	14.33	Federal patented lode
MKT	Sur#8730; ME#0307	9.59	Federal patented lode
Willow Creek	Sur#6128; ME#4358	2.97	Federal patented lode
Ned	Sur#504; ME 1970;Lot 38	11.11	Federal patented lode
Policy	ME#2865; Lot 3586	20.22	Federal patented lode
Rustler	Sur#2617; ME#2078;Lot 46A	14.68	Federal patented lode
Strawberry	#780; ME#842; Lot 41	10.28	Federal patented lode
Strawberry East	Sur#551; ME#1735, Lot 39	10.33	Federal patented lode
Keystone	Sur#728; Lot 43	11.41	Federal patented lode
Iron Mine Lode	Sur#2598; ME#2016, Lot 44	18.37	Federal patented lode
Owls Roost	Sur#5684; ME#4048	15.76	Federal patented lode
Success	Sur#568	10.22	Federal patented lode
N J Isdell	#5683; ME#4048	2.56	Federal patented lode
Dead Pine	Sur#6021; ME#4348	10.23	Federal patented lode
Golden Chariot	Sur#4673; ME#3377	19.03	Federal patented lode
Iron Chief Lode	Sur#5302	19.82	Federal patented lode
Dividend	Sur#6213; ME 4086	17.64	Federal patented lode
Clipper No. 2 Lode	Sur#5405; ME#3977	14.63	Federal patented lode

Our exploration plan is to perform another 50 drill holes in targeted areas resulting in an estimated 25,000 feet of additional drilling results. The estimated 5,000 samples from this drilling program will be tested and analyzed allowing us to prepare extensive geological mapping and prepare feasibility studies for the project. Based on the reported historic production, the regional potential identified in historic geologic reports and SRI’s feasibility studies, SRI will prepare a Plan of Operations under the requirements of the SMES for the Pony Project.

A&P Project : In February, 2011 SRI entered into a Mineral Lease Agreement with Option to Purchase with a group of individual land owners in the state of Montana to acquire two patented mining claims known as the Atlantic and Pacific Mine ("the A&P Lease") located in the Pony Mining District in Montana. The A&P Lease provides for a five year lease period with an initial payment of $200,000 and an annual commitment of $100,000.00 for the next five years. The Lessors will also have a 2% NSR on the property during the lease term. After the lease period expires and all lease payments have been paid, full right and title of ownership to the A&P property shall be transferred to SRI.

The A&P was actively mined in the early 20th Century and produced 128,600 ounces of gold from 1934 to 1941. Chicago Mining also briefly pit mined the project in 1991. The A&P claim is contiguous with the larger Pony Project and is considered a key piece of the regional mineralization target. Historic reports by Chicago Mining and Newmont Mining indicated that those geologists believed the A&P to have significant gold resource potential.

There are presently two exploration projects within the Mineral Hill Project: the A&P target and the Mountain Meadow target.

The A&P target is a site of a small open pit and gloryhole mined in the early 20 ^th century. The historic workings go no deeper than 180 feet beneath the surface, however, the mineralized structures likely continue downward. Mining was halted due to WWII. Current plans are to drill beneath the workings to determine if high grade mineralization continues.

Mountain Meadow is approximately 3,000 feet east of the A&P target. Surface is covered with glacial till; therefore, the structural intersections that likely occur beneath the glacial deposit have never been visible from the surface. Since these structures are known to be mineralized to the west, north, and south, the current plan is to conduct a geophysical survey to identify the location of possible structural intersections and drill them.

To retain mineral rights to the property, the yearly maintenance fees must be paid as well as the appropriate lease payments to the owners of the claims as outlined in the definitive agreement.

[SELR_10K001.JPG]

The northern part of the Mineral Hill District is comprised of Archean metamorphics of the Pony Series which include gneisses and schist intruded by mafic/aplite/pegmatite dikes. The southern portion of the district is comprised of the Tobacco Root quartz-monzonite batholith which intruded into the surrounding Archean metamorphic rocks. The district contains both pre-Cambrian faults as well as region wide block faulting due to uplift of the Tobacco Root Mountains. The mineralization is always structurally controlled and occurs as quartz-sulfide vein deposits in shear zones and faults. Higher grades and tonnages usually occur at the intersections of the easterly trending structures and the subsidiary northerly trending structures. Several claims have historic workings on these structures at minimal depth, and mining activities ceased once WWII started. The mineralization likely continues at depth, a theory that will be tested during exploratory drilling. There are other potential sites covered by glacial material and never explored that are of high interest as well.

There had been work done by several companies back in the 1980’s and early 1990’s. Caara Drilling drilled 24 holes in the A&P area, and Pathfinder Gold had drilled an unknown number of holes at the Boss Tweed property. We sent our geologist to investigate the property in October and November of 2010, and conducted a limited sampling program of the Mountain Cliff mine, the A&P mine, and a district wide sampling of waste rock and dump material to assess typical grades.

The source of water can be a reservoir two mile east of the property, or several streams that exist throughout the district. The source of power will initially be generator based. Ultimately, power lines from Mammoth to the west or Pony to the east could be established.

The property currently has no known reserves, only in-house resource calculations established by various companies as noted in Steele Resource’s technical report on the Mineral Hill Project. Therefore, to establish any reserves, sufficient drilling will be required, and until then, this property is exploratory in nature.

The sampling program to date has been restricted to rock chip sampling and grab sampling at various locations. The following methodology was used with respect to rock/soil sampling:

Rock/Soil Sampling Methodologies: Grab samples will be taken from a location, usually less than 1 foot across and can be a single piece of rock. Composite samples are taken over a large area and represent the average composition and grade of the rock and can’t define high grade from low grade zones. Chip channel samples are continuous chip samples taken in a line across a structure or rock. This allows the geologist to determine the widths of the mineralized zones and the presence of high grade zones within low grade halos. High grade samples focus on obviously mineralized rock that is known to grade high in gold, silver, etc. Soil samples are taken from material at least 12 to 18 inches beneath the surface if possible. Soil samples can be taken in a line or grid, with the grid allowing the identification of geochemical trends. All sample sites will be tagged by a metal tag, logged in a GPS unit (if possible), and the sample will be bagged and marked.

Sample preparation/analysis/security: Samples have been and will always be protected from contamination or disturbance from third parties by storage away from other activity at the drill site and only geologists, drillers or lab personnel touch the lab sample bags.

No samples will ever be collected or in any way handled by directors of the Company or any affiliates of the Company. The samples will be drilled, collected, transported, and processed by Company employees (i.e. drillers or geologist) or independent contractors.

Most drill samples in the future will be processed by independent 43-101 compliant assay laboratories. Samples will be picked up at the storage building or drill site by the lab personnel and transported by them or by a geologist directly to its sample preparation facility using chain-of-custody identification and tracking procedures. The lab will prepare the samples for assay and geochemical analysis. If the samples are wet, they will be dried in low temperature ovens. Then, depending on the type of analysis requested, the samples will be split, sieved, crushed, pulverized and analyzed at the lab. The lab will thus maintain custody of the samples the entire time. Finally, the lab will return pulps and coarse rejects back to SRI on a quarterly basis, which will be transported on pallets to the appropriate storage building for long term storage. Secure steel shipping containers are being investigated for use as safe, secure storage options.

For future verification of assay results: 10% of all samples for soil and drill cuttings/core will be duplicates. Also, all drill samples will have standards every 100 feet and blanks every 500 feet. These “standard” samples, which have a verified known, measured content of precious metals, will be sent to lab along with regular samples in each given shipping batch. Where higher gold values are possibly encountered in the drilling or the presence of visible gold is suspected by visual geologic logging, Steele Resources will request a screen fire metallic assay. In addition, selected samples at random will have the duplicate sent to a referee lab for additional confirmation.

SRI completed the reclamation phase of approximately 6,000 tons of stockpiled material at the A&P site that had previously been identified as a hazardous mining waste site. During September and October, 2011 SRI removed the stockpiled materials and sold the mineral ore grade to a third party processing facility for gross revenues of $531,000 in the fourth quarter of 2011.

SRI established a new mine portal and is currently engaged in the creation of a development drift which will enclose all operations as well as on-site crushing capability, all of which falls within the existing SMES authorization. We anticipate that the Mineral Hill Project will generate revenues during the initial twelve months of operations. SRC plans to raise the required working capital for this operation through the private placement of our equity securities, and such other means as the Company may determine.

Copper Canyon Exploration Project

On June 21, 2011 SRI entered into a Mineral Lease Agreement with Option to Purchase (the "Copper Lease") with the Salmon Canyon Copper Company (the "SCCC") near Salmon, Idaho to acquire rights to 10 unpatented mining claims known as the Salmon Canyon Exploration project (“the Copper Canyon Project”), which is a historic copper/cobalt mine. The Project currently contains one existing mine portal and extensive historic development. The Salmon Canyon Project is located in the Mineral Hill Mining District near Salmon, Idaho. The Copper Lease provides for a two year lease period with an initial payment of $25,000 with a second $25,000 due on November 1, 2011, a third payment of $50,000 due on May 1, 2012, with a final lease payment due on November 1, 2012 of $425,000. After the lease period expires on May 31, 2013, SRI has the right to purchase full right and title of ownership to the Copper Canyon property for $3,975,000. The Company has initiated the permitting process with the US Forest Service to permit access and exploration of the property; however, at December 31, 2011 none of the required permits have been issued by the US Forest Service. As of December 31, 2011, the Company and the Salmon Canyon Copper Company have agreed to reschedule the terms of the lease payments once the required permits are issued by the US Forest Service and that the Company is not in default of the payment terms of the Copper Lease.

The Salmon Canyon Project was evaluated by Behre-Dolbear and Company, a geological and engineering firm in the 1970’s. In their 1979, non-43-101 compliant technical report, the resources were estimated to be 464,700 tons at 1.2% Cu, 0.2% Co, 0.015 opt Au, and 0.3 opt Ag. An additional 448,000 tons of ‘possible’ ore and 360,000 tons of what was called geologic ore were postulated totaling 1,273,500 tons. The last evaluation of the property was in 1981 by Inspiration Development Company. In their final report it mentions further sampling and a drill program consisting of seven (7) diamond core drill holes. Forty-nine of eighty-three samples collected averaged 1.44% Cu, 0.036% Co, and 0.01 opt Au. The drilling intersected several mineralized zones warranting further drilling to confirm and define the mineral resources as estimated by Behre-Dolbear.

[SELR_10K003.GIF]

Proposed Property Acquisitions

Billali Gold Mine

The district has several historical mines in the area and an estimated 151,000 oz of gold, 1,200,000 pounds of copper, 5,000,000 pounds of lead, and 4,000,000 pounds of zinc was mined from the district from 1880 to 1991. In total, approximately $10,000,000 worth of metals was mined district wide. During this same time period, approximately 4,120 ounces of gold was produced grading at .19 opt gold and 12 opt silver was produced at the Billali Mine.

[SELR_10K005.GIF]

According to the December, 2011 43-101 report for the property, exploration drilling was conducted on the Billali claim and adjacent Summit Mine property by Nova Gold and Biron Bay Resources from 1990 to 1991. Over 200 diamond core holes were drilled with at least 28 holes on the Billali claim. Nine holes intersected high grade with six intersecting 3 to 15 foot intervals of gold and silver grading between 1.17 and 23.86 opt Ag and from .10 to .52 opt Au. MPH Consulting, a mining consulting Canadian firm, estimated an historical resource of at least 219,000 tons at 12.8 opt silver and .244 opt gold. This calculation included intercepts from the Norman King structure, however does not include high grade intercepts from the “New Zone” that holes B-91-15 and 16 intersected.

The gold and silver bearing quartz structures on the Summit Mine property continue onto the Billali claim as shown by surface expression and drilling. The mine superintendent at the Summit Mine has stated that production drifts have intersected 5 of the holes drilled and assay results from both onsite and at their concentrator in Lordsburg, NM, have confirmed the accuracy of the drill hole assays in both grade and dimension. This validates the drill hole results on the Billali claim as they were drilled by the same company during the same time period.

A mining permit is already approved and a 10X10 development drift has already intersected the targeted quartz structure. Future development will require the decline to turn along strike of the quartz vein and move over 1000 feet to the far end of the claim at the high grade intercepts from drilling and the boundary between the Summit Mine property and the Billali claim. Then vertical raises will target the ore and underground drilling can block out additional ore from nearby parallel structures identified from the drilling.

Property Dispositions

Comstock-Tyler Project: In April, 2011 SRI made the decision to abandon the claims related to the Comstock-Tyler project by not making the requisite annual payments to the BLM.

Fairview Hunter Mine Project: In July, 2011 SRI notified the property owner that the Company was terminating the lease purchase agreement.

ITEM 3.

LEGAL PROCEEDINGS

SRC was named in an amended complaint filed in District Court, Clark County Nevada, by Phyllis Wynn, individually and as the trustee for the Phyllis Wynn Family Trust. The Complaint appears to name approximately 81 defendants including Steele Recording Corporation. The Amended Complaint was filed September 23, 2009. It alleges 17 causes of actions including breach of contract and fraud against various other defendants and fraudulent conveyance to SRC and its former President and CEO Marlon Steele. The substance of the Complaint involves a real estate transaction not involving SRC. We have been informed by Mr. Steele that he does not believe the Plaintiff will prevail as to her claims regarding SRC and has answered with affirmative defenses including but not limited to the defense that the injuries and damages complained of did not occur as the result of any action on the part of SRC but as the sole, direct and proximate result of actions by Plaintiff and third parties not otherwise related to SRC. The litigation remains in the discovery stages. A former officer of SRC has agreed to indemnify the Company from any eventual costs or loss from this lawsuit.

ITEM 4.

MINE SAFETY DISCLOSURES

The planned operation of our mines will be subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). MSHA’s activities include the inspection of mines on a regular basis and the issuance of various citations and orders when it believes a violation has occurred under the Mine Act. Following passage of The Mine Improvement and New Emergency Response Act of 2006, MSHA has significantly increased its inspection program and the number of citations and orders charged against mining operations as well as the dollar penalties assessed.

SRI, as a potential gold and silver mine operator, will be required to report certain mine safety violations or other regulatory matters as mandated by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 4 of Regulation S-K. Any such violations or regulatory matters must be disclosed in Exhibit 95 to be included with a company’s Annual Report on Form 10-K.

Since SRI has only recently commenced limited mining operations at its Mineral Hill Project, its mining operations have not been inspected by MSHA nor has SRI received any citations or orders pertaining to any violation of the Mine Act relating to its mining activities at the Mineral Hill Project. The current limited mining operations at the Mineral Hills Project is conducted pursuant to an approved MSHA Training Program.

PART II

ITEM 5.

MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

Market for Our Common Stock

In 2007, our Common Stock was approved for quotation on the Over-the-Counter Bulletin Board (“OTCBB”) where it is traded under the symbol “SELR”. As of April 5, 2012 the closing bid price of our Common Stock was $0.12 per share.

Price Range of Our Common Stock

A public trading market having the characteristics of depth, liquidity and orderliness depends upon the existence of market makers as well as the presence of willing buyers and sellers, which are circumstances over which we do not have control. The following table sets forth the high and low closing prices reported by the OTCBB for our Common Stock in the periods indicated beginning June 17, 2010 when we consummated the Reorganization with SRI. The quotations below reflect inter-dealer selling prices, without retail mark-up, markdown or commission, and may not represent actual transactions.


SRC COMMON STOCK	Low	High
June 17, 2010* - June 30, 2010	$0.019	$0.250
July 1, 2010 - September 30, 2010	$0.170	$0.440
October 1, 2010 - December 31, 2010	$0.033	$0.195
January 1, 2011 - March 31, 2011	$0.048	$0.204
April 1, 2011 - June 30, 2011	$0.073	$0.280
July 1, 2011 - September 30, 2011	$0.029	$0.100
October 1, 2011 - December 31, 2011	$0.018	$0.169
*Date of Reorganization between SRC and SRI

Stockholders

As of December 31, 2011, there were approximately 80 holders of record of our Common Stock. This amount does not include stockholders whose shares are held in street name.

Dividend Policy

We have never declared or paid any cash dividends on our Common Stock. We currently anticipate that we will retain all future earnings for the expansion and operation of our business and do not anticipate paying cash dividends in the foreseeable future.

Transfer Agent

The transfer agent for SRC’s common stock is Island Stock Transfer, 15500 Roosevelt Boulevard, Suite 301 Clearwater, Florida 33760.

Our Common Stock is subject to the “penny stock regulation”

Our common stock is currently deemed to be “penny stock”. Penny stocks generally are equity securities with a price of less than $5.00 per share other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. Our securities may be subject to “penny stock rules” that impose additional sales practice requirements on broker-dealers who sell such securities to

persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase. Consequently, the “penny stock rules” may restrict the ability of broker-dealers to buy and sell our securities and may have the effect of reducing the level of trading activity of our common stock in the secondary market.

The Financial Industry Regulatory Authority sales practice requirements may limit stockholders’ ability to buy and sell our stock.

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for shares of our common stock.

Securities Authorized For Issuance Under Equity Compensation Plans

On February 8, 2011, our Board of Directors adopted the 2011 Equity Compensation Plan (the “2011 Plan”), and subsequently approved by a majority of the Company's stockholders. Under the terms of the 2011 Plan, SRC has allocated up to 3,333,333 shares of its common stock which can be utilized for various equity based incentives including Incentive Stock Options issued to employees and Nonstatutory Stock Options issuable to employees or consultants providing services to SRC; stock appreciation rights; stock bonuses; and an employee stock purchase plan; all on such terms as are determined by the board of directors. Our Board will administer the 2011 Plan. Under the 2011 Plan, options vest at a rate of at least 20% per year and have 10-year terms (except with respect to 10% stockholders which have five-year terms). However, in the case of options granted to officers, directors or consultants, the option may become fully exercisable, subject to reasonable conditions such as continued employment, at any time or during a period as established by the Company.

If an option holder terminates his/her employment with us or becomes disabled or dies, the option holder or his/her representative will have a certain number of months to exercise any outstanding options. If we sell substantially all of our assets or are a party to a merger or consolidation in which we are not the surviving corporation, then we have the right to accelerate unvested options or awards and will give the option holder written notice of the exercisability and specify a time period in which the option may be exercised or the issuance of the equity award. All options will terminate in their entirety to the extent not exercised on or prior to the date specified in the written notice unless an agreement governing any change of control provides otherwise.

During 2011 options to purchase 2,066,669 shares of common stock were approved by the Board of Directors.

Recent Sales of Unregistered Securities

In addition to sales of unregistered securities previously reported by SRC in its Form 10-Q’s and Form 8-K’s, during SRC’s most recent fiscal year ending December 31, 2011, the following securities were issued pursuant to exemptions from registration under the Securities Act. Each of the transactions listed below involved no public solicitations or advertising. Each transaction involved a limited number of Investors each of whom represented to SRC that the securities were being acquired for investment purposes only and not with an intention to resell or distribute such securities. Each of the Investors had access to information about SRC’s business and financial condition and was deemed capable of protecting his or her own interests. The shares issued in each transaction were issued pursuant to the private placement exemption provided by Section 4(2) of

the Securities Act. The securities are deemed to be “restricted securities” as defined in Rule 144 under the Securities Act and the stock certificates bear a legend limiting the resale thereof.

In January, 2011, the Company issued 150,003 shares of common stock in connection with $45,000 in promissory notes issued to two individuals, the shares were valued at $15,050. The Company also issued 100,000 shares of common stock in exchange for $9,000 of legal services.

The Company issued 166,667 shares of common stock in exchange for $25,000 of consulting fees in April, 2011.

In June, 2011, the Company issued: 82,500 shares of common stock to two individuals in exchange for $8,888 of professional and consulting services; and 50,000 shares were issued through a private placement of its common stock for $6,000.

In July, 2011, the Company issued 171,324 shares of common stock to one individual following the conversion of a note payable of $25,000 plus accrued interest of $698, issued in May, 2011.

In August, 2011, the Company issued 500,000 shares of common stock to an entity in exchange for $55,000 of professional and consulting services.

In September, 2011, the Company issued 150,000 shares of common stock to an individual in exchange for $6,000 of professional and consulting services.

In November, 2011, the Company issued 900,000 shares to one entity and to one individual, in exchange for $126,000 of professional and consulting services.

In December, 2011, the Company issued: 148,149 shares with the conversion of $20,000 in principal funded as part of our project financing; and 37,038 shares were issued through a private placement of its common stock for $5,000.

During SRC’s most recent fiscal year ending December 31, 2011, the following common stock was issued pursuant to an exemption from registration pursuant to Rule 144 under the Securities Act. Each of the transactions listed below involved conversions of outstanding Security Purchase Agreements between the Company and the respective note holders.

In June, 2011, the Company issued 1,032,312 shares of common stock to two entities following the conversion of $64,155 of notes plus accrued interest.

In July, 2011, the Company issued 2,039,983 shares of common stock to one entity following the conversion of one note and a partial conversion of another note valued at $48,800.

In August, 2011, the Company issued 1,116,349 shares of common stock to two entities following the partial conversion of two notes valued at $17,500.

In September, 2011, the Company issued 4,458,962 shares of common stock to two entities following the partial conversion of two notes valued at $46,500.

In October, 2011, the Company issued 493,151 shares of common stock to one entity following the partial conversion of a note valued at $3,600.

ITEM 6. SELECTED FINANCIAL DATA

SRC is not required to provide this information.

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

For more detailed financial information, please refer to the audited December 31, 2011 Financial Statements and Notes included in this Form 10-K.

Caution about forward-looking statements

Except for historical information, the following Management’s Discussion and Analysis contains forward-looking statements based upon current expectations that involve certain risks and uncertainties. Such forward-looking statements include statements regarding, among other things, (a) our estimates of mineralized material, (b) our projected sales and profitability, (c) our growth strategies, (d) anticipated trends in our industry, (e) our future financing plans, (f) our anticipated needs for working capital, (g) our lack of operational experience and (h) the benefits related to ownership of our common stock Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Report will in fact occur as projected.

We do not undertake to update the information in this Form 10-K if any forward-looking statement later turns out to be inaccurate. Details about risks affecting various aspects of SRC’s business are discussed throughout this Form 10-K and should be considered carefully.

Plan of Operation

The Company and its subsidiary Steele Resources, Inc., operate as an exploration and mining company which is focused on identifying and developing advanced stage precious metal exploration projects which show potential to achieve full production. The overall business strategy is to identify, explore and, if warranted, develop and operate mineral exploration properties and to provide mine exploration and operations services to mining properties located initially in the Western United States.

SRI’s business plan will be to evaluate properties which have considerable amounts of exploration already completed and potential resources identified yet are not of sufficient size and scope for development by the major mining companies. Based on management’s extensive experience in evaluating geological exploration data and exploration feasibility, SRI will seek to identify those exploration properties which offer the best potential for producing significant gold and silver or other mineral reserves and offer favorable conditions, if warranted, for the future efficient development of the property to reach a production stage. However, the Company and SRI together represent a relatively new, exploration stage company. There is no assurance that a commercially viable mineral deposit exists on any of the properties currently leased by SRI and further exploration will be required before an evaluation of the economic and regulatory feasibility of the properties can be determined.

Once suitable projects are identified, SRI will utilize its contract services division or will retain independent contractors in order to perform further exploration drilling, prepare feasibility studies, mine modeling, on-site construction and advance stage project engineering with the goal of establishing, if warranted, a producing mine project. Exploration services would also include securing necessary permits, environmental compliance and remediation plans.

Going Concern

The consolidated financial statements presented in this Report have been prepared under the assumption that the Company will continue as a going concern. The Company has incurred a net operating loss of $3,394,187 from May 27, 2010 (inception) through December 31, 2011 and had a working capital deficiency of $1,975,171 as of December 31, 2011. The Company does not have sufficient cash at December 31, 2011 to fund normal operations for the next 12 months. The Company has no recurring source of revenue and its ability to continue as a going concern is dependent on the Company’s ability to raise capital to fund its future exploration and working capital requirements. The Company’s plans for the long-term attainment and continuation as a going concern include financing the Company’s future operations through sales of its common stock, entering into debt or line of credit facilities, sales of gold produced in mining activities and the eventual profitable exploitation of its mining properties. Additionally, the current capital markets and general economic conditions in the United States are significant obstacles to raising the required funds. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company is currently investigating a number of alternatives for raising additional capital with potential investors, lessees and joint venture partners.

Results of Operation

We have not included a discussion and analysis of prior June 17, 2010 as those prior periods reflect SRC’s “shell company” status with minimal operations in the music recording business as management believes a discussion of SRC’s past operations (prior to the Reorganization) would not be helpful in evaluating our new line of business in the natural resources sector commenced as a result of the Reorganization. As of June 17, 2010, SRC was no longer a “shell company” and its business was no longer in the music recording industry. Our financial reporting commences as of May 27, 2010, which is the inception date of SRC’s wholly-owned subsidiary, SRI which initiated SRC's current mineral exploration business.

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operation and financial condition for the year ended December 30, 2011 as compared to the period from May 27, 2010 ("Inception") through December 31, 2010.

Overview

During the current year ended December 31, 2011, we generated revenues $531,126 which represents the first revenues realized since the Company’s inception on May 27, 2010. Total assets increased modestly from $32,146 as of December 31, 2010 to $82,441 as of December 31, 2011. Total liabilities increased significantly from $379,343 at December 31, 2010 to $1,999,896 at December 31, 2011 reflecting the significant increase in operating expenses occurring during 2011.

Results of Operations for the fiscal year ended December 31, 2011 compared to the period of Inception through December 31, 2010

Revenue

During the fiscal year ended December 31, 2011, the Company generated $531,126 through the sale of stockpiled ore at the Mineral Hill Gold Mine project. From the period of Inception through December 31, 2010, neither SRC nor its subsidiary SRI had any revenue from operations.

Operating Costs and Expenses

Costs applicable to revenues for the fiscal year ended December 31, 2011 were $342,025 and no such costs were incurred for the period from Inception through December 31, 2010. This increase is attributed to removal, crushing, and delivery of the stockpiled ore from the Mineral Hill project. Exploration and mine start-up costs for the fiscal year ended December 31, 2011 were $962,977 compared to $147,711 for the period from Inception

through December 31, 2010, an increase of $815,266 or 552%. The increase in exploration and mine start-up costs is the result of SRI’s initial mineral lease payments and the establishment of the portal and development drift at the Mineral Hill project.

General and administrative costs for the fiscal year ended December 31, 2011 were $998,574 and for the period of Inception through December 31, 2010 the expenses were $485,078, an increase of $513,496 or 106%. The increase in general and administrative expenses is attributed to the start-up costs of the organization; administrative costs related to several debt financing transactions during 2011; stock options expenses incurred; and a full year of operations versus the partial year reported from Inception through December 31, 2010. Professional fees for the fiscal year ended December 31, 2011 were $283,101 and for the period of Inception through December 31, 2010 the expenses were $153,088, an increase of $130,013 or 85%. The increase in professional fees is attributed to the increase in legal and accounting expenses related to a publicly reporting company; expenses related to the filing, and subsequently withdrawal, of a registration statement relating to a proposed secondary offering of stock; and additional consulting costs associated with the start-up costs and the Company's efforts to raise both equity and debt financings.

Interest expense increased from $18,233 for the period from Inception to December 31, 2010 to $534,466 for the fiscal year ended December 31, 2011. The increase was due to the significant increase in servicing cost associated with the debt financing generated by the Company, which increased from $217,648 from the period from Inception through December 31, 2010 to $1,374,700 for the fiscal year ended December 31, 2011.

Net Loss

We incurred a net loss $2,590,017 for the fiscal year ended December 31, 2011 compared to a net loss of $804,170 for the period from Inception through December 31, 2010, a change of $1,785,847 or 222%. The increase in net loss is the result of expenses relating to SRI’s initial mineral lease payments; costs associated with the removal, delivery and processing of stockpiled ore; the significant increase in mining costs at the Mineral Hill project; the increase in interest expense; and SRC’s increasing general business expenses relating to establishing the Company’s business, coupled with a lack of significant revenues to offset these expenses.

Liquidity and Capital Resources

At December 31, 2011, our cash balance was $23,107. We have limited cash on hand and we will be required to raise capital to fund our operations. Our ability to meet our current financial liabilities and commitments is primarily dependent upon the continued issuance of equity to new or existing investors or loans from existing stockholders and management or outside capital sources. Management believes that our Company's current cash and cash equivalents will not be sufficient to meet our working capital requirements for the next twelve month period. We have had negative cash flow from operating activities as we are in the exploration stage and have not yet begun to generate revenues from production. Our Company plans to raise the capital required to satisfy our immediate short-term needs and additional capital required to meet our estimated funding requirements for the next twelve months primarily through the private placement of our equity securities, by way of loans, and such other financing transactions as the Company may determine.

We expect exploration of suitable projects to commence during the next twelve months but do not expect revenues from this work to cover our current operating expenses which we expect to increase as we implement our business plan. Consequently, we will be dependent on outside sources of capital to sustain our operations and implement our business plan until operating revenues sufficient to cover our operating expenses. If we are unable to raise sufficient capital we will be required to delay or forego some portion of our business plan, which would have a material adverse effect on our anticipated results from operations and financial condition. There is no assurance that we will be able to obtain necessary amounts of capital or that our estimates of our capital requirements will prove to be accurate. Even if we are able to secure outside financing, it may not be available in the amounts or times when we require or on terms we find acceptable. Furthermore, such financing would likely take the form of bank loans, private placements of debt or equity securities or some combination of these. The issuance of additional equity securities would dilute the stock ownership of current investor while incurring

loans, lines of credit or debt by SRC would increase its cash flow requirements and possible loss of valuable assets if such obligations were not repaid in accordance with their terms.

Recent Financing Transactions

During the fiscal year ended December 31, 2011 we raised capital from the issuance of notes payable and through the private placement of common stock.

Debt Financing

In January 2011, the Company issued a convertible note for $32,500 to one entity. The note had an interest at 8% per annum with a conversion price at 50% of the average of the lowest three closing bid prices in the 10 trading days ending one day before notice of conversion is given. The note was converted by the note in July 2011 for 983,645 shares of common stock.

In January, 2011, the Company issued four promissory notes payable to two related party individuals for a total of $45,000. The notes bear simple interest at an annual rate of 8% per annum and were due May 15, 2011. In conjunction with the Notes, 150,000 shares of Common Stock were issued to the lenders. These shares were valued at $15,050 and recorded as a note discount. The Company has an agreement with the note holders to defer repayment of the principal and interest until the Company secures adequate financing.

In April 2011, the Company issued a convertible note for $37,500 to one entity. The note had an interest at 8% per annum with a conversion price at 50% of the average of the lowest three closing bid prices in the 10 trading days ending one day before notice of conversion is given. The Company repaid the note plus accrued interest in October, 2011

In May, 2011, the Company issued a note payable for $50,000 to the group of individuals from which we have the lease purchase agreement for as the Pony Lease, see "Item 2 Properties", covering the balance of the initial lease payment due. The note bears an interest rate of 12% as was due May 31, 2011. The Company is working with the note holders to extend the terms of the repayment until SRC secures adequate working capital.

In May, 2011, the Company issued a note payable for $80,000 to one of the individuals from which we have the lease purchase agreement for as the A&P Lease, see "Item 2 Properties", covering the balance of the initial lease payment due. The note bears an interest rate of 12% as was due May 31, 2011. The Company paid $34,000 towards interest and principle in December, 2011 and paid the balance of the note and interest in March, 2012.

In May 2011, the Company issued convertible notes for a total $35,000 to two individuals. The notes bear interest at 20% per annum, due September 13, 2011, with a conversion price of $0.15. In July 2011, one note holder converted $25,000 plus accrued interest into 171,324 shares of SRC common stock. The other note holder has extended the due date for the notes until the Company secures adequate financing.

In June 2011 the Company issued a convertible note for $37,500 to one entity. The note had an interest at 8% per annum with a conversion price at 50% of the average of the lowest three closing bid prices in the 10 trading days ending one day before notice of conversion is given. The Company repaid the note plus accrued interest in November, 2011

In June 2011, the Company issued two convertible notes for $52,500 to one entity with the proceeds to pay two notes of $50,000 issued in 2010. The notes bear interest at 6% per annum and are due June 3, 2011 and June 7, 2012. The conversion price was 65% of the average of the lowest three closing bid prices in the 15 trading days ending one day before notice of conversion is given. In June 2011, one of the notes was converted into 458,127 shares of the Company's common stock. In August and September, 2011 the second note plus accrued interest was converted into 725,772 shares of common stock.

In June, 2011, the Company issued a promissory note to an entity for $50,000. The note bears a simple interest at an annual rate of 5% and was due December 21, 2011. The note plus accrued interest was repaid in December, 2011.

In June 2011, the Company issued convertible notes for a total $20,000 to two individuals. The notes bear interest at 20% per annum and are due July 30, 2011. The conversion price is $0.15. One of the notes, plus accrued interest, was repaid in August, 2011. The other note holder has extended the due date for the notes until the Company secures adequate financing.

We issued a convertible promissory note in the principal amount of $25,000 in October, 2010. The conversion price shall be 45% of the average of the lowest three closing bid prices in the 10 trading days ending one day before notice of conversion is given. In June, 2011 the note was converted into 574,185 shares of SRC’s common stock.

The Company issued a convertible note for $65,000 to one entity in November, 2010. The note had a conversion price of 35% of the average of the lowest three closing bid prices in the 10 trading days ending one day before notice of conversion was given. The note, plus accrued interest, was converted in six tranches between July and October, 2011, for a total of 6,399,028 shares of common stock.

In July 2011, the Company issued a convertible note for $25,000 to one entity. The note bears interest at 12% per annum and is due July 14, 2012. The conversion price shall be the lower of $0.05 or 35% of the average of the lowest three closing bid prices in the 10 trading days ending one day before notice of conversion is given. The note, plus accrued interest, was repaid in October, 2011.

In August 2011, the Company issued a convertible note for $35,000 to one entity. The note bears interest at 8% per annum and is due April 23, 2012. The conversion price shall be 50% of the average of the lowest three closing bid prices in the 10 trading days ending one day before notice of conversion is given. The note, plus accrued interest, was repaid in March, 2012.

In August, 2011, the Company secured a total of $150,000 in project financing from one individual and one related party. The principal and interest of, up to, 100% of the principal, was to be repaid from the processing of stockpiled ore at the Mineral Hill Gold Mine project, see "Item 2 Properties", subject to the net profit (the "NPI") from the processed stockpile being adequate. In December, 2011, we did not make payments in accordance with the contract and we informed note holders that the NPI from the proceeds from the processed stockpile would not be sufficient to pay the principal and interest and that the Company would seek to repay them out of future mining operations at the Mineral Hill Gold Mine project. Some note holders requested indemnity for our defaulting on the terms of the notes. One of the note holders (a relative of an officer and director) requested to be repaid $25,000 in principal and requested 500,000 shares of common stock, valued at $70,000, in lieu of future interest. The repayment and the shares issued were completed in December, 2011.

In September, 2011, the Company secured a total of $75,000 in project financing from one individual. The principal and interest of, up to, 100% of the principal, was to be repaid from the processing of stockpiled ore at the Mineral Hill Gold Mine project, see "Item 2 Properties", subject to the net profit from the processed stockpile being adequate. In December, 2011, we did not make payments in accordance with the contract and we informed the note holder that the NPI from the proceeds from the processed stockpile would not be sufficient to pay the principal and interest and that the Company would seek to repay them out of future mining operations at the Mineral Hill Gold Mine project.

In October, 2011, the Company issued a note for $25,000 to one individual with an interest rate of 20%. The note was due November 13, 2011. The note and accrued interest was paid in December, 2011.

In October, 2011, the Company issued three convertible notes for $207,700 with interest rates of 12% and 20%. The notes are due on April 5, 2012 and April 13, 2012. The notes are convertible into common stock at prices of $0.0125 and $0.035 at the holders' discretion. There is no penalty for repayment prior to conversion.

In October, 2011, the Company secured a total of $20,000 in project financing from one individual. The principal and interest of, up to, 100% of the principal, was to be repaid from the processing of stockpiled ore at the Mineral Hill Gold Mine project, see "Item 2 Properties", subject to the net profit from the processed stockpile being adequate. In December, 2011, we did not make payments in accordance with the contract and we informed the note holder that the NPI from the proceeds from the processed stockpile would not be sufficient to pay the principal and interest and that the Company would seek to repay the note holder out of future mining operations at the Mineral Hill Gold Mine project. The note holder agreed to accept 148,149 shares of common stock as payment of the principal, issued in December, 2011, and the Company is working with the funding partner to schedule payment of the interest portion out of future mining operations at the Mineral Hill Gold Project.

In November, 2011, the Company issued a note for $50,000 to one individual with an interest rate of 10%. The note was due December 13, 2011. The note and accrued interest was paid in December, 2011.

In December, 2011, a convertible note for $250,000 was issued to an individual with an interest rate of 20% that is due June, 29, 2012. The note, plus accrued interest, is convertible into common stock, at the note holder's discretion, at $0.10 per share. The note holder will also receive one warrant for each share of common stock issued upon conversion. The warrants can be converted into common stock at $0.20 per share and are valid for two years from issuance

Issuance of Common Stock

In January, 2011, the Company issued 150,003 shares of common stock in connection with promissory notes issued to two individuals. In January, 2011, the Company issued 100,000 shares of common stock in exchange for $9,000 of legal services. The Company issued 166,667 shares of common stock in exchange for $25,000 of consulting fees in April, 2011. The Company issued 82,500 shares of common stock, to two individuals, in exchange for $8,888 of consulting fees in June, 2011. Through a private placement of its common stock, the Company issued 50,000 shares for $6,000 in June, 2011. In June, 2011, 1,032,312 shares of common stock were issued to three entities following the conversion of convertible notes. The Company issued 500,000 shares for $55,000 of consulting fees in August, 2011. The Company issued 150,000 shares of common stock in connection with a promissory note issued to one individual in September 2011. In the three months ending September 30, 2011, the Company issued 7,786,618 shares of common stock to one individual and two entities following the conversion of convertible notes.

In February, 2011, the Board of Directors of the Company approved the 2011 Equity Compensation Plan (the "Plan"); this was subsequently approved by a majority of the Company's shareholders. The purpose of the Plan is to provide a means by which eligible recipients of stock awards may be given an opportunity to benefit from increases in value of the common stock through the granting of the following stock awards: incentive stock options, nonstatutory stock options, stock bonuses and rights to acquire restricted stock. The Company, by means of the Plan, seeks to retain the services of the group of persons eligible to receive stock awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its affiliates. The Board shall administer the Plan unless and until the Board delegates administration to a Committee. Subject to the provisions relating to adjustments upon changes in stock, the stock that may be issued pursuant to stock awards shall not exceed in the aggregate three million three hundred thirty-three thousand three hundred and thirty-three (3,333,333) shares of Common Stock.

Tabular Disclosure of Contractual Obligations as of December 31, 2011


		Payment due by period
	Total	Less than 1 year	1-3 years	3-5 years	More than 5 years

Long-Term Debt Obligations	$995,700	995,700	-0-	-0-	-0-

Mineral Lease Obligations	3,525,000	700,000	2,225,000	600,000	-0-

Operating Lease Obligations	126,024	32,709	93,315	-0-	-0-

Total	$4,646,724	$1,728,409	$2,318,315	$600,000	-0-

Off-Balance Sheet Arrangements

Since SRI’s inception through December 31, 2011, we have not engaged in any off-balance sheet arrangements as defined in Item 303(a) of the SEC’s Regulation S-K.

Critical Accounting Policies

Use of Estimates and Assumptions

The preparation of financial statements in conformity with U.S. 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 revenues and expenses during the reporting period. 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.

Cash and Cash Equivalents

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

Income Taxes

Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying tax rates expected to be enacted for the year in which we expect the differences will reverse or settle. Based on the evaluation of available evidence, we recognize future tax benefits, such as net operating loss carryforwards, to the extent that we believe it is more likely than not that we will realize these benefits. We periodically assess the likelihood that we will be able to recover our deferred tax assets and reflect any changes in our estimates in the valuation allowance, with a corresponding adjustment to earnings as appropriate. In assessing a need for a valuation allowance, we look to the future reversal of existing taxable temporary differences and estimated future taxable income.

Exploration Stage Company

Effective May 27, 2010 (date of inception), SRC is considered an exploration stage company as defined in Industry Guide No. 7. SRC’s exploration stage activities consist of exploring and evaluating several mining properties located in Nevada, New Mexico and Montana. Sources of financing for these exploration stage activities have been primarily debt and equity financing.

Valuation of long-lived assets

Long-lived assets, consisting primarily of property and equipment, comprise a significant portion of our total assets. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Recoverability of assets is measured by a comparison of the carrying value of an asset to the future net cash flows expected to be generated by those assets. The cash flow projections are based on historical experience, management’s view of growth rates within the industry, and the anticipated future economic environment.

Factors we consider important that could trigger a review for impairment include the following:

(a)

significant underperformance relative to expected historical or projected future operating results,

(b)

significant changes in the manner of our use of the acquired assets or the strategy of our overall business, and

(c)

significant negative industry or economic trends.

When we determine that the carrying value of long-lived assets and related goodwill and enterprise-level goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any impairment based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model.

Deferred Reclamation Costs

In August 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations,” (now ASC 410-20) which established a uniform methodology for accounting for estimated reclamation and abandonment costs. The statement was adopted February 1, 2003. The reclamation costs will be allocated to expense over the life of the related assets and will be adjusted for changes resulting from the passage of time and revisions to either the timing or amount of the original present value estimate.

Prior to adoption of SFAS No. 143, estimated future reclamation costs were based principally on legal and regulatory requirements. Such costs related to active mines were accrued and charged over the expected operating lives of the mines using the units-of-production method based on proven and probable reserves. Future remediation costs for inactive mines were accrued based on management’s best estimate at the end of each period of the undiscounted costs expected to be incurred at a site. Such cost estimates included, where applicable, ongoing care, maintenance and monitoring costs. Changes in estimates at inactive mines were reflected in earnings in the period an estimate was revised.

Exploration Costs

Exploration costs are expensed as incurred. All costs related to property acquisitions are capitalized.

Mine Development Costs

Mine development costs consist of all costs associated with bringing mines into production, to develop new ore bodies and to develop mine areas substantially in advance of current production. The decision to develop a mine is based on assessment of the commercial viability of the property and the availability of financing. Once the decision to proceed to development is made, development and other expenditures relating to the project will be deferred and carried at cost with the intention that these will be depleted by charges against earnings from future mining operations. No depreciation will be charged against the property until commercial production commences. After a mine has been brought into commercial production, any additional work on that property will be expensed as incurred, except for large development programs, which will be deferred and depleted.

Reclamation Costs

Reclamation costs and related accrued liabilities, which are based on our interpretation of current environmental and regulatory requirements, are accrued and expensed, upon determination.

Based on current environmental regulations and known reclamation requirements, management has included its best estimates of these obligations in its reclamation accruals. However, it is reasonably possible that our best estimates of our ultimate reclamation liabilities could change as a result of changes in regulations or cost estimates.

Valuation of Derivative Instruments

ASC 815-15 requires bifurcation of embedded derivative instruments and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black Scholes model as a valuation technique. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as Adjustments to Fair Value of Derivatives. In addition, the fair values of freestanding derivative instruments such as warrants are valued using Black Scholes models.

Stock-Based Compensation

We currently account for the issuance of stock options to employees using the fair market value method according to ASC 718, Share-Based Payment .

Adopted Accounting Pronouncements

See Note 1 to the Financial Statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

SRC is not required to provide this information.

ITEM 8. FINANCIAL STATEMENTS

STEELE RESOURCES CORP.

FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Registered Public Accounting Firm	F-1

Consolidated Balance Sheet as of December 31, 2011 and 2010	F-2

Consolidated Statement of Operations for the fiscal year ended
December 31, 2011, from May 27, 2010 (Inception) Through
December 31, 2010 and from May 27, 2010 (Inception) Through
December 31, 2011	F-3

Consolidated Statement of Stockholders’ Deficit from May 27, 2010
(Inception) Through December 31, 2011	F-4

Consolidated Statement of Cash Flows for the fiscal year ended
December 31, 2011, from May 27, 2010 (Inception) Through
December 31, 2010 and from May 27, 2010 (Inception) Through
December 31, 2011	F-5

Notes to Consolidated Financial Statements	F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Steele Resources Corporation

We have audited the accompanying consolidated balance sheet of Steele Resources Corporation (an exploration stage Nevada corporation) and Subsidiary as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the year ended December 31, 2011, for the period from May 27, 2010 (Inception) through December 31, 2010 and for the period from May 27, 2010 (Inception) through December 31, 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards established by the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Steele Resources Corporation and Subsidiary as of December 31, 2011 and 2010, and the consolidated results of their operations and their cash flows for the year ended December 31, 2011, for the period from May 27, 2010 (Inception) through December 31, 2010 and for the period from May 27, 2010 (Inception) through December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred significant operating losses and negative cash flows from operations during the year ended December 31, 2011. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding those matters also are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Rose, Snyder & Jacobs LLP

Rose, Snyder & Jacobs LLP

Encino, California

April 6, 2012

F-1


STEELE RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED BALANCE SHEET

			December 31,
			2011		2010
ASSETS
Current assets
	Cash		$	23,107	$	623
	Prepaid expenses			1,618		1,336
Total Current Assets				24,725		1,959

Fixed assets (Note 3)				68,150		30,185
	Accumulated depreciation			(13,146)		(2,710)
Total Fixed Assets				55,004		27,475

Other long-term assets				2,712		2,712

Total Assets			$	82,441	$	32,146

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
	Accounts payable			282,607		66,126
	JV agreement refund payable			540,000		0
	Accrued expenses			239,291		108,412
Derivative Liability (Note 4)				128,000		52,250
	Notes payable (Notes 4 and 5)			714,998		145,755
	Notes payable - related parties (Note 5)			95,000		6,800
Total Current Liabilities				1,999,896		379,343

COMMITMENTS AND CONTINGENCIES (Note 6)
Stockholders' Deficit:
	Preferred stock, par value $0.001,
		5,000,000 shares authorized,
		-0- shares issued and outstanding		0		0
	Common stock, par value $0.001, 300,000,000 shares
		authorized, 45,057,075 and 33,461,267 shares
		issued and outstanding, respectively		26,863		14,433
	Additional paid-in-capital			1,449,869		442,540
	Accumulated deficit during exploration stage			(3,394,187)		(804,170)
Total Stockholders' Deficit				(1,917,455)		(347,197)
Total Liabilities and Stockholders' Deficit			$	82,441	$	32,146

The accompanying notes are an integral part of these financial statements.

F-2


STEELE RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS

		Year Ended		From May 27, 2010 (Inception) Through
		December 31, 2011		December 31, 2010		December 31, 2011

Revenue		$	531,126	$	0	$	531,126

Operating Costs and Expenses:

	Costs applicable to revenues		342,025		0		342,025
	Exploration and mine startup costs		962,977		147,771		1,110,748
	General and administrative		998,574		485,078		1,483,652
	Professional fees		283,101		153,088		436,189
Total operating expense			2,586,677		785,937		3,372,614

Loss from operations			(2,055,551)		(785,937)		(2,841,488)

Interest expense			(534,466)		(18,233)		(552,699)

Net loss		$	(2,590,017)	$	(804,170)	$	(3,394,187)

Net loss per share, basic and diluted ^*		$	(0.07)	$	(0.03)

Weighted average common shares outstanding ^*			37,672,589		29,880,856

*The weighted average common shares outstanding above considers the retroactive effect of the 1-for-3 reverse split that was effective on May 2, 2011

The accompanying notes are an integral part of these financial statements.

F-3


STEELE RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHJOLDERS' EQUITY
FROM MAY 27, 2010 (INCEPTION) THROUGH DECEMBER 31, 2011

		Common Shares		Additional Paid-in Capital	Accumulated Deficit	Total
		Number	$
Balance, May 27, 2010		0	$0	$0	$0	$0

Issuance of shares for cash		19,100,000	5,730	9,270		15,000

Recapitalization due to
	reverse merger with Steele
	Resources, Inc.	12,733,489	3,820	14,950		18,770

Issuance of shares:
	For cash (at $0.08, $0.10, $0.20, $0.05)	1,451,111	4,353	307,647		312,000
	For exploration costs	176,667	530	104,470		105,000

Issuance of warrants with notes payable		0	0	6,203		6,203

Net loss					(804,170)	(804,170)
Balance at December 31, 2010		33,461,267	$14,433	$442,540	($804,170)	($347,197)

Issuance of shares:
	For settlement of accrued legal fees	100,000	300	8,700		9,000
	With notes payable	150,003	450	14,600		15,050
	For consulting & professional fees	1,799,167	2,133	218,755		220,888
	For conversion of notes payable	9,460,230	9,460	216,793		226,253

Reclassification of derivatives liability		0	0	285,163		285,163

Creation of note discounts		0	0	130,388		130,388

For cash (at $0.126)		87,038	87	10,913		11,000

Share-based compensation		0	0	122,017		122,017

Net loss					(2,590,017)	(2,590,017)
Balance December 31, 2011		45,057,705	$26,863	$1,449,869	($3,394,187)	($1,917,455)

The accompanying notes are an integral part of these financial statements.

F-4


STEELE RESOURCES CORPORATION
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF CASH FLOWS

			Year Ended December 31, 2011		From May 27, 2010 (Inception) Through December 31, 2010		From May 27, 2010 (Inception) Through December 31, 2011
CASH FROM OPERATING ACTIVITIES:
Net loss			$	(2,590,017)	$	(804,170)	$	(3,394,187)
Adjustments to reconcile net loss to net cash used
in operating activates:
	Depreciation			10,436		2,710		13,146
	Amortization of note discount			364,894		14,208		379,102
	Shares issued for exploration costs			0		105,000		105,000
	Shares issued for services			229,888		0		229,888
	Stock-based compensation			122,017		0		122,017
Changes in operating assets and liabilities
	(Increase) in prepaid expenses			(282)		(1,336)		(1,618)
	Increase in accounts payable			217,731		65,696		283,427
	Increase in accrued expenses			138,382		108,412		246,794
	(Increase) in other assets			0		(2,712)		(2,712)

	NET CASH USED IN OPERATING ACTIVITIES			(1,506,951)		(512,192)		(2,019,143)

Investing Activities
	Purchases of fixed assets			(37,965)		0		(37,965)

	NET CASH USED IN INVESTING ACTIVITIES			(37,965)		0		(37,965)

Financing Activities
	Proceeds from issuance of common stock			11,000		327,000		338,000
	Cash acquired in reverse merger			0		19,200		19,200
	Cash from joint venture funding			540,000		0		540,000
	Cash from project funding partners			195,000		0		195,000
	Payments to project funding partners			(25,000)		0		(25,000)
	Cash from project funding partners - related party			50,000		0		50,000
	Proceeds from issuance of notes payable			1,083,200		190,000		1,273,200
	Payments on notes payable			(325,000)		0		(325,000)
	Proceeds from issuance of notes payable - related party			46,500		27,648		74,148
	Payments on notes payable - related party			(8,300)		(51,033)		(59,333)

NET CASH PROVIDED BY FINANCING ACTIVITIES				1,567,400		512,815		2,080,215

NET INCREASE IN CASH				22,484		623		23,107

CASH, BEGINNING				623		0		0

CASH ENDING			$	23,107	$	623	$	23,107

SUPPLEMENTAL CASH FLOW INFORMATION:
		Cash paid for interest	$	9,397	$	0	$	9,397
		Cash paid for income taxes		$0	$	0	$	0

SUPPLEMENTAL DISCLOSURE OF NON-CASH
	INVESTING AND FINANCING ACTIVITIES:
		Stock issued for conversion of notes payable	$	241,303	$	6,203	$	247,506
		Stock issued for services	$	229,888	$	105,000	$	334,888
		Equipment purchased with note payable	$	0	$	30,185	$	30,185

The accompanying notes are an integral part of these financial statements.

F-5

STEELE RESOURCES CORPORATION

(AN EXPLORATION STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Activity

Steele Resources Corporation (formerly Steele Recording Corporation) (the "Company", "SRC") was incorporated in the state of Nevada on February 12, 2007, at which time it was deemed a “shell company” carrying on minimal operations in the business of producing, acquiring, licensing and distribution of recorded music.

On June 17, 2010 the Company entered into and consummated a Plan and Agreement of Reorganization between the Company and Steele Resources, Inc. and certain stockholders of Steele Resources, Inc. (the “Reorganization”). Pursuant to the Reorganization, the Company acquired all of the issued and outstanding shares of Steele Resources, Inc., a Nevada Corporation (“SRI”). The primary business activity of SRC and its subsidiary consists of mining property acquisition, mineral exploration and development and mining services.

Although from a legal perspective, SRC acquired Steele Resources, Inc., from an accounting perspective, the transaction is viewed as a recapitalization of SRI accompanied by the equivalent of an issuance of stock by SRI for the net assets of SRC. This is because SRC did not have operations immediately prior to the merger and, following the merger, SRI is the operating company.

Basis of Presentation and Going Concern

The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern. The Company has incurred a net operating loss of $3,394,187 from May 27, 2010 (inception) through December 31, 2011 and had a working capital deficiency of $1,975,171 as of December 31, 2011. The Company does not have sufficient cash at December 31, 2011 to fund normal operations for the next 12 months. The Company has no recurring source of revenue and its ability to continue as a going concern is dependent on the Company’s ability to raise capital to fund its future exploration and working capital requirements. The Company’s plans for the long-term attainment and continuation as a going concern include financing the Company’s future operations through sales of its common stock, entering into debt or line of credit facilities, sales of gold produced in mining activities and the eventual profitable exploitation of its mining properties. Additionally, the current capital markets and general economic conditions in the United States are significant obstacles to raising the required funds. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company is currently investigating a number of alternatives for raising additional capital with potential investors, lessees and joint venture partners. Should Management fail to raise additional financing, the Company may curtail its operations.

The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. If the going concern basis was not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.

F-6

Principles of Consolidation

All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements in conformity with U.S. generally accepted accounting principles. Management believes the assumptions underlying the consolidated financial statements are reasonable.

Stock-Based Compensation

The Company accounts for stock options in accordance with FASB ACS 718-10. Under this guidance, share based compensation costs include amounts for all share-based payments based on the grant-date fair value, amortized on a straight-line basis over the options’ vesting period.

The Accounting Standards Codification

In June 2009, the Financial Accounting Standards Board (“FASB”) established the FASB Accounting Standards Codification (“ASC”) as the single source of authoritative GAAP to be applied by nongovernmental entities. The ASC is a new authoritative source that took existing accounting pronouncements and organized them by accounting topic. Relevant authoritative literature issued by the Securities and Exchange Commission (“SEC”) and select SEC staff interpretations and administrative literature was also in the ASC. All other accounting guidance not included in the ASC is nonauthorititave. The adoption of the ASC did not have an impact on our consolidated financial position, results of operations or cash flows.

Exploration Stage Enterprise

The Company is in the exploration stage of operation, as it devotes substantially all of its efforts to acquiring and exploring mining interests that management believes should eventually provide sufficient net profits to sustain the Company’s existence.

Cash and Cash Equivalents

The Company considers cash in banks, deposits in transit, and highly liquid debt instruments purchased with original maturities of three months or less to be cash and cash equivalents. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash balances.

Property and Equipment

Property and equipment are carried at cost. Depreciation is computed using straight line depreciation methods. Major additions and improvements are capitalized. Costs of maintenance and repairs which do not improve or extend the life of the associated assets are expensed in the period in which they are incurred. When there is a disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is reflected in net income.

Mining Exploration Costs

Exploration costs are expensed in the period in which they occur. The Company capitalizes costs for acquiring mineral properties and expenses costs to maintain mineral rights and leases as incurred. Should a property reach the production stage, these capitalized costs would be amortized using the units-of-production method on the basis of periodic estimates of ore reserves. Mineral properties are periodically assessed for impairment of value, and any subsequent losses are charged to operations at the time of impairment. If a property is abandoned or sold, its capitalized costs are charged to operations.

F-7

Income Taxes

The Company is expected to have net operating loss carryforwards that it can use to offset a certain amount of taxable income in the future. The Company is currently analyzing the amount of loss carryforwards that will be available to reduce future taxable income. The resulting deferred tax assets will be offset by a valuation allowance due to the uncertainty of its realization. The primary difference between income tax expense attributable to continuing operations and the amount of income tax expense that would result from applying domestic federal statutory rates to income before income taxes relates to the recognition of a valuation allowance for deferred income tax assets.

The Company has adopted Financial Accounting Standards Board (“FASB”) ASC 740-10 which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements and prescribes a recognition threshold of more likely than not as a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, a company must determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position and must assume that the tax position will be examined by taxing authorities. The Company’s policy is to include interest and penalties related to unrecognized tax benefits in income tax expense. Interest and penalties totaled $0 for the period from May 27, 2010 (inception) through December 31, 2011. The Company’s net operating loss carryforwards are subject to IRS examination until they are fully utilized and such tax years are closed.

The Company is no longer subject to income tax examinations by the IRS for tax years through 2007.

Net (Loss) Per Share

The Company calculates net income (loss) per share as required by Accounting Standards Codification subtopic 260-10, Earnings per Share (ASC 260-10”). Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During the periods when they are anti-dilutive, common stock equivalents, if any, are not considered in the computation.

Use of Estimates and Assumptions

F-8

New Accounting Pronouncements

In January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements” which is intended to enhance the usefulness of fair value measurements by requiring both the disaggregation of the information in certain existing disclosures, as well as the inclusion of more robust disclosures about valuation techniques and inputs to recurring and non-recurring fair value measurements. The amended guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disaggregation requirement for the reconciliation disclosure of Level 3 measurements, which is effective for fiscal years beginning after December 31, 2010 and for interim periods within those years. This ASU was adopted as of December 31, 2010 and did not have a material impact on our consolidated financial statements.

In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04, Fair Value Measurement (“ASU 2011-04”), which amended ASC 820, Fair Value Measurements (“ASC 820”), providing a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the disclosure requirements. ASU 2011-04 will be effective for us beginning January 1, 2012. The adoption of ASU 2011-04 is not expected to have a material effect on our consolidated financial statements or disclosures.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 requires the presentation of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. ASU 2011-05 will be effective for us beginning January 1, 2012. The adoption of ASU 2011-05 is not expected to have a material effect on our consolidated financial statements or disclosures.

In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment (“ASU 2011-08”), which amends the guidance in ASC 350-20, Intangibles—Goodwill and Other - Goodwill . ASU 2011-08 provides entities with the option of performing a qualitative assessment before calculating the fair value of the reporting unit when testing goodwill for impairment. If the fair value of the reporting unit is determined, based on qualitative factors, to be more likely than not less than the carrying amount of the reporting unit, the entities are required to perform a two-step goodwill impairment test. ASU 2011-08 will be effective for us beginning January 1, 2012. The adoption of ASU 2011-08 is not expected to have a material effect on our consolidated financial statements or disclosures.

NOTE 2. PROPERTIES

Mineral Hill Project

Pony Project : On February 4, 2011, SRI entered into a Mineral Lease Agreement with Option to Purchase (the "Pony Lease")with a group of individual land owners in the state of Montana to acquire rights to 17 patented and 67 unpatented mining claims known as the Pony Exploration project (“the Pony Project”). The Pony Project currently contains two active mines operating under a Small Miner Exclusion Statement (SMES). The Pony Project is located in the Pony Mining District near Pony, Montana. Officers of SRC have met with Montana Department of Environmental Quality officials to discuss permitting for both mining and exploration activities. The Pony Lease provides for a six year lease period with an initial payment of $300,000 and annual lease payments of $500,000 for the next five years. The Lessors will also have a 2% NSR on the property. In addition the Lessors will receive a 1% NSR on any property

F-9

developed by SRI located within one linear mile from any portion of the exterior boundary of the Pony Project. After the lease period expires, SRI will have the option to purchase the Pony Project for $190,000.

A&P Project : In February, 2011 SRI entered into a into a Mineral Lease Agreement with Option to Purchase with a group of individual land owners in the state of Montana to acquire two patented mining claims known as the Atlantic and Pacific Mine ("the A&P Lease") located in the Pony Mining District in Montana. The A&P Lease provides for a five year lease period with an initial payment of $200,000 and an annual commitment of $100,000 for the next five years. The Lessors will also have a 2% NSR on the property during the lease term. After the lease period expires and all lease payments have been paid, full right and title of ownership of the A&P property shall be transferred to SRI.

To retain mineral rights to the property, the yearly maintenance fees must be paid as well as the appropriate lease payments to the owners of the claims as outlined in the definitive agreement.

SRI completed the reclamation phase of approximately 6,000 tons of stockpiled material at the A&P site that had previously been identified as a hazardous mining waste site. SRI removed the stockpiled materials and sold the mineral ore grade to a third party processing facility for gross revenues of $531,000 in the fourth quarter of 2011.

SRI established a new mine portal and is currently engaged in the creation of a development drift which will enclose all operations as well as on site crushing capability, all of which falls within the existing SMES authorization. We anticipate that the Mineral Hill Project will generate revenues during the initial twelve months of operations. SRC plans to raise the required working capital for this operation through the private placement of our equity securities, and such other means as the Company may determine.

Copper Canyon Exploration Project

On June 21, 2011 SRI entered into a Mineral Lease Agreement with Option to Purchase (the "Copper Lease") with from the Salmon Canyon Copper Company near Salmon, ID to acquire rights to 10 unpatented mining claims known as the Salmon Canyon Exploration project (“the Copper Canyon Project”), which is a historic copper/cobalt mine. The Project currently contains one existing mine portal and extensive historic development. The Salmon Canyon Project is located in the Mineral Hill Mining District near Salmon, Idaho. . The Copper Lease provides for a two year lease period with an initial payment of $25,000 with a second $25,000 due on November 1, 2011, a third payment of $50,000 due on May 1, 2012, with a final lease payment due on November 1, 2012 of $425,000. After the lease period expires on May 31, 2013, SRI has the right to purchase full right and title of ownership of the Copper Canyon property for $3,975,000. The Company has initiated the permitting process with the US Forest Service to permit access and exploration of the property; however, at December 31, 2011 none of the required permits have been received by the Company. Due to the delay in the permitting process both the Company and the SCCC have mutually agreed that none of the lease payments defined in the Copper Lease are outstanding. Both entities have agreed that the timing and amounts of future lease payments will be renegotiated once the exploration permits are received.

F-10

Proposed Property Acquisitions

Billali Gold Mine

NOTE. 3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 2011:


Vehicles	$	34,685
Machinery and equipment		5,292
Leasehold improvements		28,173
		68,150
Less: Accumulated Depreciation		(13,146)
	$	55,004

NOTE 4. DERIVATIVE INSTRUMENT LIABILITIES AND CONVERTIBLE NOTES

The Company reviews the terms of the conversion features on notes payable and records a discount on the note in an amount equal to the intrinsic value of the conversion feature, not to exceed the face amount of the note, if the embedded conversion feature is not accounted for as a liability. The initial amount of the note discount is recorded in additional paid-in capital on the date of issuance and is amortized to interest expense over the initial term of the note using the interest method. Upon conversion, the entire unamortized discount is recognized as interest expense due to the beneficial nature of the conversion feature.

In October 2010, the Company issued a convertible promissory note in the principal amount of $25,000 bearing interest at 16.9% per annum. The note was due and payable on or before April 5, 2011 and could be converted into shares of SRC’s common stock at a conversion rate based on 60% of the market value of SRC’s common stock at the time of conversion. In June, 2011 the note was converted into 574,185 shares of common stock. The investor was also issued warrants to purchase 33,334 shares of SRC common stock at an exercise price of $1.50/share maturing in October 2013. The sale was made to one entity in a private, negotiated transaction without any public solicitation.

In November 2010 the Company issued a convertible note for $65,000 to one entity. The note had an interest rate of 8% per annum and was due October 17, 2011. The note was convertible at a price that is 35% of the average of the lowest three closing bid prices in the 10 trading days ending one day before the notice of conversion is given. The note, plus accrued interest, was converted, in six tranches between July and October, 2011, for a total of 6,399,028 shares of common stock. The sale was made to one entity in a private, negotiated transaction without any public solicitation.

F-11

In September 2011, the Company issued a convertible note for $40,000 to one entity. The note bears interest at 8% per annum and is due June 21, 2012. The conversion price is 50% of the average of the lowest three closing bid prices in the 10 trading days ending one day before notice of conversion is given. The sale was made to one entity in a private, negotiated transaction without any public solicitation. The note plus accrued interest was repaid in March, 2012.

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In November 2011, the Company issued a convertible note for $53,000 to one entity. The note bears interest at 8% per annum and is due June 21, 2012. The conversion price is 50% of the average of the lowest three closing bid prices in the 10 trading days ending one day before notice of conversion is given. The sale was made to one entity in a private, negotiated transaction without any public solicitation.

As of December 31, 2011 the amount of accrued interest payable on these notes payable was $9,919.

These notes were evaluated using ASC 815-40 and it was determined that the embedded conversion should be accounted for as derivative instrument liabilities. Accordingly, they are to be marked to market each reporting period, with the corresponding non-cash gain or loss reflected in the Company’s current period statement of operations.

Fair Value Measurements

Assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon the level of judgment associated with the inputs used to measure the fair value. Level inputs, as defined by ASC 820-10, are as follows:

Level 1 - quoted in active markets for identical assets or liabilities.

Level 2 - other significant observable inputs for the assets or liabilities through cooboration with market data at the measurement date.

Level 3 - significant unobservable inputs that reflect management ’ s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

The following table summarizes fair value measurements by level at December 31, 2011 and 2010 for assets and liabilities measured at fair value on a recurring basis:


at December 31, 2011
	Level 1	Level 2	Level 3	Total

Derivative liability
Conversion features			($128,000)	($128,000)


at December 31, 2010
	Level 1	Level 2	Level 3	Total

Derivative liability
Conversion features			($52,250)	($52,250)

Derivative liability for conversion features for the year ended December 31, 2011 and 2010 were valued using the Black-Scholes Option pricing model with the following assumptions: expected life of 0.5 to 1 year, risk free interest rate of 1%, dividend yield of 0, and expected volatility of 0.1%.

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The following is a reconciliation of the derivatives liability


Value at May 27, 2010 (Inception)	$	0
Issuance of instruments		52,250
Relief from liability		0
Value at December 31, 2010	$	52,250
Issuance of instruments		360,916
Relief from liability		285,163
Value at December 31, 2011	$	128,000

For certain of the Company’s financial instruments, including cash, prepaid expenses, accounts payable and accrued expenses the carrying amounts approximate fair value due to their short maturities. The carrying amounts of the Company’s notes payable approximates fair value based on the prevailing interest rates.

NOTE 5. NOTES PAYABLE

In May, 2011, the Company issued a note payable for $50,000 to the group of individuals from which we have the lease purchase agreement for as the Pony Lease, covering the balance of the initial lease payment due. The note bears an interest rate of 12% as was due May 31, 2011. The Company is working with the note holders to extend the terms of the repayment until SRC secures adequate working capital.

In May, 2011, the Company issued a note payable for $80,000 to one of the individuals from which we have the lease purchase agreement for as the A&P Lease, covering the balance of the initial lease payment due. The note bears an interest rate of 12% as was due May 31, 2011. The Company paid $34,000 towards interest and principle in December, 2011 and paid the balance of the note and interest in March, 2012.

In August, 2011, the Company secured a total of $150,000 in project financing from one individual and one related party. The principal and interest of up to 100% of the principal, was to be repaid from the processing of stockpiled ore at the Mineral Hill Gold Mine project, subject to the net profit (the "NPI") from the processed stockpile being adequate. In December, 2011, we did not make payments in accordance with the contract and we informed note holders that the NPI from the proceeds from the processed stockpile would not be sufficient to pay the principal and interest and that the Company would seek to repay them out of future mining operations at the Mineral Hill Gold Mine project. Some note holders requested indemnity for our defaulting on the terms of the notes. One of the note holders (a relative of an officer and director) requested to be repaid $25,000 in principal and requested 500,000 shares of common stock, valued at $70,000, in lieu of future interest. The repayment and the shares issued were completed in December, 2011.

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In September, 2011, the Company secured a total of $75,000 in project financing from one individual. The principal and interest of up to 100% of the principal, was to be repaid from the processing of stockpiled ore at the Mineral Hill Gold Mine project, subject to the net profit from the processed stockpile being adequate. In December, 2011, we did not make payments in accordance with the contract and we informed the note holder that the NPI from the proceeds from the processed stockpile would not be sufficient to pay the principal and interest and that the Company would seek to repay them out of future mining operations at the Mineral Hill Gold Mine project.

In October, 2011, the Company issued a note for $25,000 to one individual with an interest rate of 20%. The note was due November 13, 2011. The note and accrued interest was paid in December, 2011.

In October, 2011, the Company secured a total of $20,000 in project financing from one individual. The principal and interest of up to 100% of the principal, was to be repaid from the processing of stockpiled ore at the Mineral Hill Gold Mine project, subject to the net profit from the processed stockpile being adequate. In December, 2011, we did not make payments in accordance with the contract and we informed the note holder that the NPI from the proceeds from the processed stockpile would not be sufficient to pay the principal and interest and that the Company would seek to repay the note holder out of future mining operations at the Mineral Hill Gold Mine project. The note holder agreed to accept 148,149 shares of common stock as payment of the principal, issued in December, 2011, and the Company is working with the funding partner to schedule payment of the interest portion out of future mining operations at the Mineral Hill Gold Project.

In November, 2011, the Company issued a note for $50,000 to one individual with an interest rate of 10%. The note was due December 13, 2011. The note and accrued interest was paid in December, 2011.

As of December 31, 2011 the amount of accrued interest payable on these notes payable was $6,857.

The components of the convertible notes payable are as follows:

as of December 31, 2011


	Principal Amount		Unamortized Discount		Net
Notes payable	$	395,000	$	0	$	395,000
Convertible notes payable	$	600,700	$	(185,702)	$	414,998

as of December 31, 2010:


	Principal Amount		Unamortized Discount		Net
Notes payable	$	106,800	$	0	$	106,800
Convertible notes payable	$	90,000	$	(44,245)	$	45,755

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NOTE 6. COMMITMENTS AND CONTINGENCIES

Office and Rental Property Leases

On October 1, 2010, the Company entered into a lease for office space located in Cameron Park, California, for a period of five years. Future minimum lease payments under operating leases are $32,709, $33,369, $34,035 and $25,911 for the years ended December 31, 2012, 2013, 2014, and 2015 respectively. The Company has leased office/warehouse space in Pony, Montana for its field operations. The monthly rent is $1,000. Total rental expense was $13,386 and $16,786 for the years ended December 31, 2011 and December 31, 2010, respectively.

Legal Matters

SRC was named in an amended complaint filed in District Court, Clark County Nevada, by Phyllis Wynn, individually and as the trustee for the Phyllis Wynn Family Trust. The Complaint appears to name approximately 81 defendants including Steele Resources Corporation. The Amended Complaint was filed September 23, 2009. It alleges 17 causes of actions including breach of contract and fraud against various other defendants and fraudulent conveyance to SRC and its former President and CEO Marlon Steele. The substance of the Complaint involves a real estate transaction not involving SRC. We do not believe the Plaintiff will prevail as to her claims regarding Steele Resources Corporation and have answered with affirmative defenses including but not limited to the following: (1) the injuries and damages complained of did not occur as the result of any action on the part of SRC but as the sole, direct and proximate result of actions by Plaintiff and third parties not otherwise related to SRC. A former officer of SRC has agreed to indemnify the Company from any eventual costs or loss from this lawsuit.

Contractual Matters

On February 4, 2011, SRI entered into a Mineral Lease Agreement with Option to Purchase (the "Pony Lease") with a group of individual land owners in the state of Montana to acquire rights to 17 patented and 67 unpatented mining claims known as the Pony Exploration project (“the Pony Project”). The Pony Project currently contains two active mines operating under a Small Miner Exclusion Statement (SMES). The Pony Project is located in the Pony Mining District near Pony, Montana. The Pony Lease provides for a six year lease period with an initial payment of $300,000 and annual lease payments of $500,000 for the next five years. The Lessors will also have a 2% NSR on the property. In addition the Lessors will receive a 1% NSR on any property developed by SRI located within one linear mile from any portion of the exterior boundary of the Pony Project. After the lease period expires, SRI will have the option to purchase the Pony Project for $190,000. In May, 2011, we issued a note payable for $50,000 covering the balance of the initial lease payment due. The note bears an interest rate of 12% as was due May 31, 2011. The Company is working with the note holders to extend the terms of the note until SRC secures adequate working capital.

In February, 2011 SRI entered into a into a Mineral Lease Agreement with Option to Purchase with a group of individual land owners in the state of Montana to acquire two patented mining claims known as the Atlantic and Pacific Mine ("the A&P Lease") located in the Pony Mining District in Montana. The A&P Lease provides for a five year lease period with an initial payment of $200,000 and an annual commitment of $100,000.00 for the next five years. The Lessors will also have a 2% NSR on the property during the lease term. After the lease period expires and all lease payments have been paid, full right and title of ownership of the A&P property shall be transferred to SRI. In May, 2011, the Company issued a note payable for $80,000 to one of the individual land owners covering the balance of the initial lease payment due. The note bears an interest rate of 12% as was due May 31, 2011. The Company paid $34,000 towards interest and principle in December, 2011 and paid the balance of the note and interest in March, 2012. The Company issued a note payable to the land owner in March, 2012, for $50,000

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covering the balance of the lease payment that was due for 2012; the note bears an interest rate of 12% and is due April 16, 2012.

On June 21, 2011 SRI entered into a Mineral Lease Agreement with Option to Purchase (the "Copper Lease") with from the Salmon Canyon Copper Company near Salmon, ID to acquire rights to 10 unpatented mining claims known as the Salmon Canyon Exploration project (“the Copper Canyon Project”), which is a historic copper/cobalt mine. The Copper Lease provides for a two year lease period with an initial payment of $25,000 with a second $25,000 due on November 1, 2011, a third payment of $50,000 due on May 1, 2012, with a final lease payment due on November 1, 2012 of $425,000. After the lease period expires on May 31, 2013, SRI has the right to purchase full right and title of ownership of the Copper Canyon property for $3,975,000. The Company has initiated the permitting process with the US Forest Service to permit access and exploration of the property; however, at December 31, 2011 none of the required permits have been issued by the US Forest Service. As of December 31, 2011, the Company and the Salmon Canyon Copper Company have agreed to reschedule the terms of the lease payments once the required permits are issued by the US Forest Service and that the Company is not in default of the payment terms of the Copper Lease.

On August 31, 2011, SRC and Innocent, Inc. negotiated a formal Termination of the Joint Venture Agreement (the “Termination Agreement”) of the Joint Venture Agreement established to fund the development of the Mineral Hill Project. Pursuant to the Termination Agreement SRC acknowledges its obligation to repay $540,000 paid to date by INCT to SRC under the terms of the JV Agreement. The Termination Agreement also allows SRC the option to assume the $540,000 owed to INCT note holders on terms negotiated between SRC and the note holders.

Tabular Disclosure of Contractual Obligations as of December 31, 2011:


		Payment due by period
	Total	Less than 1 year	1-3 years	3-5 years	More than 5 years

Long-Term Debt Obligations	$995,700	995,700	-0-	-0-	-0-

Mineral Lease Obligations	3,525,000	700,000	2,225,000	600,000	-0-

Operating Lease Obligations	126,024	32,709	93,315	-0-	-0-

Total	$4,646,724	$1,728,409	$2,318,315	$600,000	-0-

In conjunction with the mining claims held or leased by SRI, we are obligated to pay claim maintenance fees of approximately $12,000 for Mineral Hill over the next twelve months.

NOTE 7. COMMON STOCK

Issuance of Common Stock

The Company issued 166,667 shares of common stock in exchange for $25,000 of consulting fees in April, 2011.

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