SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year-ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 1-9620
AMAX GOLD INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1199974
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
9100 EAST MINERAL CIRCLE 80112
ENGLEWOOD, COLORADO (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
(303) 643-5500
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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Title of each class Name of each exchange on which registered
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Common Stock, $0.01 par value (114,873,878 shares New York Stock Exchange, Inc.
outstanding at February 9, 1998) The Toronto Stock Exchange
$3.75 Series B Convertible Preferred Stock, $1.00 par New York Stock Exchange, Inc.
value (1,840,000 shares outstanding
at February 9, 1998)
======================================================================================================================
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 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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. X
-----
The aggregate market value of voting stock held by non-affiliates at the closing
price of $3 5/16 on February 9, 1998, was approximately $136,600,000.
Items 10, 11, 12 and 13 to be filed by amendment to the Company's Form 10-K
within 120 days after the end of the fiscal year.
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
Amax Gold Inc. (Amax Gold or the Company) and its subsidiaries are engaged in
the mining and processing of gold and silver ore and in the exploration for, and
acquisition and development of, gold-bearing properties, principally in the
Americas, Russia, Australia and Africa. The Company's share of production from
its operating properties totaled 729,831 ounces during 1997, and its share of
reserves as of December 31, 1997, in all its properties totaled approximately
228 million tons of ore reserves with an average grade of 0.031 ounces of gold
per ton, or 7.1 million contained ounces of gold.
The Company was incorporated in Delaware in 1987 and reincorporated in 1995.
Cyprus Amax Minerals Company (Cyprus Amax) owns approximately 58.8 percent of
the Company's outstanding Common Stock and has the right to acquire additional
shares under certain financing arrangements.
The Company's operating properties consist of a 100 percent interest in the Fort
Knox mine near Fairbanks, Alaska; a 50 percent interest in the Kubaka mine in
the Magadan Oblast situated in Far East Russia; and a 50 percent interest in the
Refugio mine in Chile. The Company also owns a 100 percent interest in the
Hayden Hill mine in Lassen County, California; and a 90 percent interest in the
Guanaco mine in Chile. Mining at Hayden Hill and Guanaco was completed during
1997 and residual leaching will continue during 1998 at both mines. In addition
the Company owns a 62.5 percent venture interest in the Haile property in
Lancaster County, South Carolina. The Company also owns the Sleeper mine in
Humboldt County, Nevada, and the Wind Mountain mine in Washoe County, Nevada,
which are in reclamation. The locations of Amax Gold's properties are shown on
the map on page 2, and descriptions are set forth below. Data relating to the
Company's domestic and foreign operations and export sales are included at Note
13 to the Consolidated Financial Statements.
Unless otherwise indicated, reserves represent proven and probable reserves, and
all reserve information is given as of December 31, 1997. Other mineralized
material represents a mineralized body with established geologic continuity that
requires additional work to qualify as reserves. Except as otherwise noted,
references to tons and ounces are to short tons of 2,000 pounds and to troy
ounces of 31.103 grams, respectively. Production is defined as gold or silver
produced in the form of dore plus any inventory in mill carbon circuits. Tons
mined include removal of waste required to access ore. Total cash costs include
all operating costs at the mine site, including overhead, proceeds taxes and
royalties, are net of credits for silver by-product and exclude reclamation
costs.
All of the Company's operating properties are open pit mines. Except for mining
equipment owned by contract miners at Refugio and mobile mining equipment leased
by the Company at Fort Knox, the Company owns its mining and processing
equipment, which is maintained in good operating condition. Ore is processed by
milling or heap leaching. Milling is the traditional process for recovering
gold from ore. After ore is crushed, the gold and silver are concentrated and
then smelted into dore, which is shipped to refiners for further processing.
The milling process is typically used to achieve higher recovery from oxide and
sulfide ores.
Heap leaching is a lower cost processing method applied principally to oxidized
ores. The heap leach recovery rate is generally lower than for milling. In the
heap leaching process, crushed and/or run-of-mine ore is loaded onto leach pads.
The ore is irrigated with a weak cyanide solution that penetrates the ore,
dissolving the gold and silver. The pregnant solution is collected and pumped
through activated carbon or a Merrill Crowe zinc precipitation plant to remove
the metals from the solution. After the gold and silver is stripped from the
carbon or processed from the zinc precipitate, it is smelted into dore, which is
shipped to refiners for further processing.
The terms Amax Gold and the Company when used herein may refer collectively to
Amax Gold Inc. and its subsidiaries and affiliates or to one or more of them
depending on the context.
[MAP OF AMAX GOLD LOCATIONS]
-2-
FORT KNOX MINE
The Fort Knox mine is located in the Fairbanks Mining District, 15 air miles
northeast of Fairbanks, Alaska.
Operations. Fort Knox achieved commercial production on March 1, 1997.
Construction of the mine was completed at a capital cost of approximately $373
million, which includes about $28 million in capitalized interest. The
operation includes an open pit mine, a conventional 36,000 tons per day (13.1
million tons per year) mill and process plant, a tailings storage facility and a
fresh water reservoir to supply process water. The process facilities are
designed as a zero discharge system. Power is supplied by the public utility
serving the area over a distribution line paid for by the Company. Access is
provided by paved highway for 21 miles from Fairbanks and then for five miles by
unpaved road. The mine and plant are designed to operate year round and to
produce approximately 300,000 to 400,000 ounces of gold per year depending on
the ore grade processed, with the higher grades expected during the early years.
The following table presents operating data for the Fort Knox mine for the
period from the commencement of commercial production on March 1, 1997, through
December 31, 1997.
Fort Knox Mine
(AGI 100% Share)
1997
- ---------------------------------------------------------------------
Tons mined 27,536,150
Tons of ore milled 10,584,156
Average mill head grade (oz. per ton) 0.034
Mill recovery rate (%) 89
Ounces of gold produced 320,522
Ounces of silver produced 15,958
Cost per ounce of gold produced:
Total cash costs $170
Reclamation 3
Depreciation and depletion 169
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Total production costs $342
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Property Position. The Fort Knox mine covers approximately 47,000 acres and
consists of two state mining leases, approximately 1,400 state mining claims,
seven patented federal mining claims, and the mineral rights to 38 patented
federal mining claims. The current reserve is located on approximately 1,150
acres of land held under a state mining lease that expires in 2014 and may be
renewed for a period not to exceed 55 years. This lease is subject to a 3
percent royalty payable to the State of Alaska based on net income. Claims
surrounding the current reserve are subject to net smelter return royalties
ranging from 3 percent to 6 percent on the state mining claims, and both a 1
percent net smelter return royalty and a 10 percent overriding net profits
interest on certain of the patented federal mining claims.
Geology and Ore Reserves. The Fort Knox gold deposit occurs as porphyry-style
mineralization of the type usually associated with copper and molybdenum ore
bodies. The ore is hosted within the upper margins of a granitic intrusion in a
stockwork of small quartz veins and shear zones. The veins and shears are
fractions of an inch to 10 inches wide with erratic and widely-spaced
distribution. The gold occurs as fine grains of free gold disseminated within
and along the margins of the veins and shears. In plan view, the deposit has a
dimension of about 4,000 by 2,000 feet, elongated in an east-west direction and
extending to depths of 1,000 feet. The geology is relatively simple and the
rocks are weakly altered. Grade is usually related to the degree of fracturing
and veining of the rocks. Because of the low grade and erratic distribution of
gold, the Company is mining on a bulk tonnage basis. The following table sets
forth the proven and probable reserves for the Fort Knox mine.
-3-
Fort Knox Mine
Proven and Probable Ore Reserves
As of December 31, 1997
Gold Gold
Tons Avg. Grade Content
(000) (oz./ton) (000 oz.)
- -----------------------------------------------------------------------------
Mill Ore 170,273 0.024 4,099
- -----------------------------------------------------------------------------
The December 31, 1997 Fort Knox reserves were calculated by the Company and
verified by Mineral Resources Development, Inc. in its report dated February
1998. Reserves are calculated using a gold price of $375 per ounce and a gold
cut-off grade of 0.0125 ounces per ton. The Company has determined that
calculating the reserves at $350 per ounce would not materially change the
results. Changes from the 1996 reserves reflect the production of gold during
1997 and the addition of approximately 450,000 contained ounces of reserves.
The Company estimates that mill recovery will continue to be approximately 90
percent.
In addition to proven and probable reserves, the Company has estimated 137.5
million tons of other mineralized material at an average grade of 0.022 ounces
per ton.
KUBAKA MINE
The Company indirectly owns a 50 percent interest in Omolon Gold Mining Company
(Omolon), which owns and operates the Kubaka mine. Kubaka is located in the
Russian Far East, approximately 200 miles south of the Arctic Circle and 600
miles northeast of the major port city of Magadan. Amax Gold completed the
acquisition of Kubaka from Cyprus Amax during May 1997. See Notes 6 and 7 to the
Consolidated Financial Statements for further discussion of the acquisition and
financing of the mine.
Operations. Commercial production was achieved at Kubaka on June 1, 1997.
Construction of the mine was completed at a total capital cost of approximately
$242 million. This amount includes certain financing costs, working capital and
about $14 million in capitalized interest. The operation consists of an open pit
mine, a conventional 1,900 tons per day (approximately 700,000 tons per year)
mill and process plant, a tailings storage facility and a reclaim water
retention facility to supply process water. Power is supplied by on-site diesel
generators. Facilities include a permanent camp with access from Magadan
provided by helicopter as well as by a winter road, which is generally open from
January through April. The Kubaka mine's remote location in the sub-Arctic
region requires the Company to plan for operations in extreme cold and to
provide all services and facilities on site. The mine and plant are designed to
produce approximately 400,000 to 450,000 ounces of gold per year, of which the
Company's share is 50 percent.
The following table presents operating data for the Kubaka mine for the period
from the commencement of commercial production on June 1, 1997, through December
31, 1997.
-4-
Kubaka Mine
Operating Data
(AGI 50% Share)
1997
- -----------------------------------------------------------------------
Tons mined 3,288,724
Tons of ore milled 186,092
Average mill head grade (oz. per ton) 0.725
Mill recovery rate (%) 97
Ounces of gold produced 129,970
Ounces of silver produced 127,090
Cost per ounce of gold produced
Total cash costs $175
Depreciation and depletion 100
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Total production costs $275
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Property Position. Omolon holds the license from the Russian government to
operate the Kubaka mine and to explore and develop the Evenskoye property, also
in the Magadan region (the Kubaka License). The Kubaka License is for a period
of 18 years, subject to extension of up to an additional two years, and limits
the ownership of a foreign party (i.e. the Company) in Omolon to a maximum of 50
percent. The Kubaka License establishes certain production requirements for
Kubaka, requires the payment of a 4 percent royalty on the total value of gold
extracted and requires Omolon to complete exploration activities, a feasibility
study and its assessment of the reserves at Evenskoye prior to December 31,
1998, or a later date, if extended.
Geology and Ore Reserves. The Kubaka ore deposit is an epithermal quartz-
adularia vein system hosted by volcanic rocks and their sedimentary derivatives.
Kubaka is older than, but otherwise very similar to, volcanic hosted epithermal
gold deposits found in the North American Western Cordillera.
Kubaka Mine
Proven and Probable Ore Reserves
As of December 31, 1997
Gold Content
Gold (000 oz.)
---------------------
Tons Avg. Grade The Company's
(000) (oz./ton) Total 50% Share
- ----------------------------------------------------------------------------
Mill Ore 4,203 0.522 2,196 1,098
- ----------------------------------------------------------------------------
The December 31, 1997 Kubaka reserves were calculated by the Company. Reserves
are calculated using a gold price of $375 per ounce and a gold cut-off grade of
0.044 ounces per ton. The Company has determined that calculating the reserves
at $350 per ounce would not materially change the results. Changes in reserves
from 1996 primarily relate to production. The Company estimates that mill
recovery will continue to be approximately 97 percent.
In addition to proven and probable reserves, the Company has estimated its share
of other mineralized material to be 2.7 million tons at an average grade of
0.330 ounces per ton.
-5-
REFUGIO MINE
The Company owns a 50 percent interest in the Refugio mine, located in the
Maricunga Mining District in central Chile, approximately 75 miles east of
Copiapo. The property, situated between 13,800 feet and 14,800 feet above sea
level, is held by Compania Minera Maricunga (CMM), a Chilean contractual mining
company indirectly owned 50 percent by the Company and 50 percent by Bema Gold
Corporation, a publicly traded company based in Vancouver, British Columbia.
Operations. The Refugio mine consists of an open pit mine and a three-stage
crushing and heap leach operation capable of processing 33,000 tons of ore per
day, or 11.5 million tons per year. The mine and plant are designed to produce
an estimated 200,000 to 250,000 ounces of gold per year, of which the Company's
share is 50 percent. Production commenced in April 1996; however, start-up was
delayed due to mechanical problems with the secondary and tertiary crushers and
the collapse of fill underlying the fine ore storage bin and commercial
production commenced on October 1, 1996. The Company is currently pursuing
insurance claims and claims against Refugio's construction contractor. During
the second and third quarters of 1997, abnormally severe winter weather resulted
in the suspension of mining and crushing operations for nearly three months,
which caused lower production and higher cash costs. Full production levels are
expected to be achieved during the first quarter of 1998. CMM has retained an
experienced mining contractor with its own equipment to drill, blast, load and
transport all ore and waste. Facilities include a permanent camp with access to
the site from Copiapo provided by road. Power is supplied by on-site diesel
powered generators. Water extraction rights expected to be sufficient to supply
the mine are owned by CMM.
The following table presents operating data for the Refugio mine for the year
ended December 31, 1997, and the period from commencement of commercial
production on October 1, 1996, through December 31, 1996.
Refugio Mine
Operating Data
(AGI 50% Share)
1997 1996
- ----------------------------------------------------------------------------
Tons mined 9,336,697 3,297,800
Tons of ore to heap leach 4,491,853 1,720,875
Average grade to heap leach (oz. per ton) 0.030 0.031
Heap leach recovery rate (%) 55 58
Ounces of gold produced 73,543 30,612
Ounces of silver produced 10,366 2,620
Cost per ounce of gold produced:
Total cash costs $341 $242
Reclamation 2 -
Depreciation and depletion 95 95
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Total production costs $438 $337
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Property Position. The Refugio property comprises approximately 14,500 acres,
consisting of mineral rights, surface rights and water rights expected to be
sufficient for the mine. The principal ore deposit is situated on mining claims
that are owned by CMM. Essentially all of the mineral rights surrounding the
claims are held by a joint venture formed by Bema and the former owner of the
Refugio claims. CMM has agreements in place with this joint venture that will
allow CMM to mine any extensions of its major ore deposits extending onto
surrounding mineral rights and to use the surrounding areas for project needs.
CMM owns or controls surface rights covering the known
-6-
mineralization and the currently anticipated mining operation under two leases
from the Chilean Army, which expire in 2001 and 2005 and may be extended for an
additional 10 years.
The Company, through its 50 percent ownership of CMM, is responsible for payment
of a net smelter return to the former owners of the Refugio property that is
expected to average 2.5 percent of total production from the currently defined
ore reserves. An additional sliding scale net smelter return related to net
profits and ranging from 2.5 to 5 percent is payable on the Company's share of
any production in excess of current reserves.
Geology and Ore Reserves. The Refugio property encompasses the Verde, Pancho
and Guanaco gold deposits, which are disseminated gold porphyry deposits
containing minor amounts of copper. Gold mineralization is contained within a
strong stockwork system hosted by silicified intrusive rocks. The Verde deposit
contains all the current reserves and consists of oxide, mixed and unoxidized
ore types and it is open at depth. Additional exploration potential also exists
in the Guanaco and Pancho deposits. The Refugio property lies at the southern
end of a 90-mile-long belt of Miocene-aged volcanic rocks that contains a number
of large disseminated gold-silver deposits. The following table sets forth the
proven and probable reserves in the Verde deposit.
Refugio Mine
Proven and Probable Ore Reserves in the Verde Deposit
As of December 31, 1997
Gold Content
(000 oz.)
Gold ---------------------
Tons Avg. Grade The Company's
(000) (oz./ton) Total 50% Share
- -----------------------------------------------------------------------------
Heap Leach Ore 100,793 0.029 2,920 1,460
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The December 31, 1997, Refugio reserves were calculated by CMM. The reserves
are confined to the Verde pit zone. The variable cut-off grades for pit design
and reserve summary were based on a $375 per ounce gold price and costs and
recoveries which vary by rock type and alteration. The Company has determined
that calculating the reserves at $350 per ounce would result in a decrease in
proven and probable reserves of approximately 10 percent. Changes in reserves
from 1996 relate to production. The Company expects the average ultimate
recovery rate for the reserve to be approximately 66 percent.
In addition to proven and probable reserves, the Company has estimated its share
of other mineralized material to be 154 million tons at an average grade of
0.026 ounces per ton.
HAYDEN HILL MINE
The Hayden Hill mine in Lassen County, California, is located approximately 120
miles northwest of Reno, Nevada.
Operations. The Hayden Hill operation is an open pit mine with two pits and heap
leach pads. Access to the mine is provided by a county road that connects to a
state highway. Power for operations is purchased from the local rural electric
association. Water for mining and processing operations is provided by two wells
located in close proximity to the mine. Potable water is supplied by truck.
Mining was completed in late 1997 and residual leaching is expected to continue
during 1998.
-7-
The following table presents operating data for the Hayden Hill mine for the
years indicated.
Hayden Hill Mine
Operating Data
1997 1996 1995
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Tons mined 8,727,325 8,275,944 8,522,982
Tons of ore to heap leach 6,194,712 5,505,849 5,538,965
Average grade to heap leach (oz. per ton) 0.031 0.028 0.024
Heap leach recovery rate (%) 59 68 60
Ounces of gold produced 112,202 103,502 80,031
Ounces of silver produced 325,494 320,574 227,125
Cost per ounce of gold produced:
Total cash costs $186 $229 $253
Reclamation 41 30 22
Depreciation and depletion 52 87 87
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Total production costs $279 $346 $362
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Property Position. The Company controls approximately 6,300 acres through
ownership of federal patented and unpatented mining claims and fee lands, and a
long-term lease of federal unpatented mining claims, which has an indefinite
term. Approximately 75 percent of the production is subject to a gross receipts
net smelter return royalty of approximately 2 percent. See Item 3 "Legal
Proceedings" for discussion of a related royalty dispute.
GUANACO MINE
The Company owns a 90 percent interest in and operates the Guanaco mine, located
in the Guanaco Mining District in northern Chile, approximately 145 miles
southeast of Antofagasta, Chile.
Operations. The operation consists of an open pit mine, heap leach facilities
capable of processing approximately 2.4 million tons of ore per year and
permanent camp facilities. The facility includes three stages of crushing,
permanent pad heap leaching and Merrill Crowe zinc precipitation of gold.
Access to the mine from Antofagasta is provided by the Pan American Highway
(approximately 120 miles south) and a gravel surface road (approximately 25
miles east). Power is supplied by an on-site power plant. The water supply for
mine operations comes primarily from nearby wells and from nearby surface
springs, which also provide potable water.
Mining was completed in July 1997 and residual leaching is expected to continue
during 1998. Based on a detailed study of the continuity of ore, costs and
production rates, a $35.5 million pre-tax write-down was recorded during the
fourth quarter of 1996. See Note 6 of the Consolidated Financial Statements for
further discussion.
-8-
The following table presents operating data for the Guanaco mine for the years
indicated.
Guanaco Mine
Operating Data
1997 1996 1995
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Tons mined 5,406,411 13,332,872 13,389,543
Tons of ore to heap leach 2,883,422 2,479,645 2,030,848
Average grade to heap leach (oz. per ton) 0.059 0.070 0.063
Heap leach recovery rate (%) 55 55 55
Ounces of gold produced 93,594 96,018 70,850
Ounces of silver produced 306,552 359,869 268,066
Cost per ounce of gold produced:
Total cash costs $229 $290 $375
Reclamation 18 4 -
Depreciation and depletion 102 156 151
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Total production costs $349 $450 $526
- --------------------------------------------------------------------------------------
Property Position. The Guanaco property position consists of approximately
25,000 acres consisting of mineral claims leased from Empresa Nacional de
Mineria (ENAMI), an entity of the Chilean government, and certain other mineral
rights. Nearly all of the production was mined from land covered by the ENAMI
lease, which expires in 2006 and may be extended by the Company for additional
five-year terms thereafter. The lease is subject to royalties varying with the
level of production, with the royalty on gold ranging from a 7 percent gross
royalty to a 3 percent gross royalty plus a 2 percent net profits royalty; there
is a gross royalty of 2 percent for all other metals. The property remains
subject to a 1.1 percent net smelter return royalty to the minority owners for
metals other than gold. The Company is in discussions with ENAMI regarding
continuation of the lease following cessation of production.
SLEEPER MINE
The Sleeper mine is located in Humboldt County, Nevada, approximately 28 miles
north of Winnemucca.
Operations. Operations at Sleeper were completed at the end of the third
quarter of 1996 and there was no reported production during 1997. Production at
Sleeper during 1996 and 1995 was 38,199 ounces and 82,062 ounces at a cash cost
of $247 per ounce and $325 per ounce, respectively. Reclamation activities have
commenced and are expected to be substantially completed by 2000. The operation
included an open pit mine, mill, heap leach pads and tailings disposal
facilities. Access to the mine is provided by a gravel road that connects to a
paved public highway. Power is purchased from the local rural electric
association. Water is provided by a well system that is currently being used to
fill the pits, and potable water is supplied by truck.
Property Position. Current facilities occupy approximately 2,000 acres of
unpatented mining claims. The Company has entered into an agreement with a third
party for further exploration of the Sleeper property. Currently, the third
party has earned a 50 percent interest in the property.
HAILE PROPERTY
The Company owns a 62.5 percent venture interest in the Haile property in
Lancaster County, South Carolina. The remaining 37.5 percent interest is owned
by Kershaw Gold Company, Inc., a wholly owned subsidiary of Piedmont Mining
Company, Inc. (Piedmont). The Company is involved in a dispute with Piedmont
regarding certain agreements. See Item 3. "Legal Proceedings." The Company has
not made a decision to develop the Haile property and is considering various
options with respect to its interest in Haile. Currently the Company has
capitalized approximately
-9-
$14.5 million of costs related to the Haile property.
Property Position. The Haile property covers approximately 3,600 acres and
consists entirely of fee property that is either owned by the venture
participants, leased from third parties under leases that can be extended to
2001 or controlled by purchase agreements. The leased property is subject to a
4 percent net smelter return royalty.
Geology and Ore Reserves. Ore grade mineralization on the Haile property is
generally hosted within silicified and pyritized fine-grained metasedimentary
rocks near the folded and faulted contact with overlying volcaniclastic and
metavolcanic rocks. Current reserves are contained in four separate deposits.
The following table sets forth the proven and probable reserves at the Haile
property.
Haile Property
Proven and Probable Ore Reserves
As of December 31, 1997
Gold Content
(000 oz.)
Gold ---------------------
Tons Avg. Grade The Company's
(000) (oz./ton) Total 62.5% Share
- ----------------------------------------------------------------------------
Mill Ore 8,736 0.089 780 488
- ----------------------------------------------------------------------------
The reserves were calculated by the Company and verified by Derry, Michner,
Booth & Wahl in its April 1994 audit. No changes were made to reserves during
1997, 1996 or 1995. Pits were designed on the basis of a $375 per ounce gold
price while ore within the pit was summarized using a gold price of $400 per
ounce. The Company estimates ultimate gold recoveries would range from 65
percent to 85 percent.
EXPLORATION
The Company's primary exploration objective continues to be the acquisition and
evaluation of near-surface gold deposits that can be mined by open pit methods.
The Company is continuing exploration activity on the Fort Knox and Refugio
properties and in the area of the Guanaco mine. The Company has increased its
exploration activities in the Russian Federation following the acquisition of
Kubaka. In connection with a reserve replenishment tax levied on Kubaka gold
sales, the Company can offset certain exploration expenditures that are
preapproved by the Russian agency responsible for exploration in the Magadan
region.
Pursuant to an Exploration Joint Venture Agreement effective since January 1994,
the Company and Cyprus Amax have agreed to pool their efforts for discovering
and developing future gold prospects, with Cyprus Amax providing 75 percent and
the Company providing 25 percent of the initial exploration funding for such
prospects. A Cyprus Amax subsidiary manages exploration activities, with equal
participation by Amax Gold in decisions affecting property acquisition and
divestiture. The Agreement was extended for one year and will terminate
December 31, 1998 unless extended by mutual agreement. Amax Gold has the first
right to acquire any gold property owned by the joint venture and Cyprus Amax
has the first right to acquire properties containing deposits of minerals other
than gold or silver. During 1997, the joint venture conducted exploration
activities principally in the Americas, Australia, Russia and Africa.
Exploration expenditures were $5.5 million in 1997 compared with $3.5 million in
1996. Exploration expenditures for 1998 are expected to be approximately $4
million.
-10-
GOLD MARKET AND PRICES
Gold has two principal uses: product fabrication and bullion investment.
Fabricated gold has a wide variety of end uses, including jewelry manufacture
(the largest fabrication component), electronics, dentistry, industrial and
decorative uses, medals, medallions and official coins. The Company sells all
of its refined gold to banks and other bullion dealers, using a variety of
hedging techniques. Substantially all of the Company's 1997 sales were export
sales made in Europe.
The profitability of the Company's operations is significantly affected by the
market price of gold. The price of gold has fluctuated widely and is affected
by numerous factors, including international economic trends, currency exchange
fluctuations, expectations for inflation, consumption patterns (such as
purchases of gold jewelry and the development of gold coin programs), sales of
gold bullion holdings by central banks or other large gold bullion holders or
dealers and global and regional political events, particularly in the Middle
East and Asia and major gold-producing countries such as South Africa and the
Commonwealth of Independent States (the former Soviet Union). Gold prices also
are affected by worldwide production levels and on occasion have been subject to
rapid short-term changes because of market speculation.
The following table sets forth for the years indicated the high and low closing
prices of gold, first position, as provided by the Commodity Exchange, Inc.
(COMEX) in New York.
High Low
------- -------
Year (dollars per ounce)
---- -------------------
1993 $407.00 $326.30
1994 398.00 370.60
1995 395.40 372.20
1996 414.70 368.00
1997 365.70 282.80
Declines in the market price of gold and related precious metals also may render
reserves containing relatively lower grades of mineralization uneconomic to
exploit. The prices used in estimating Amax Gold's ore reserves at December 31,
1997 ranged from $375 to $400 per ounce of gold. The market price was $290 per
ounce of gold at December 31, 1997, which was below the price at which Amax Gold
has estimated its reserves. However, Amax Gold has historically realized prices
that are an average of $32 per ounce above the market price of gold since the
inception of its hedging program in 1988. If Amax Gold were to determine that
its reserves and future cash flows should be calculated at a significantly lower
gold price, there would likely be a material reduction in the amount of gold
reserves. In addition, if the price realized by Amax Gold for its gold were to
decline substantially below the price at which ore reserves were calculated for
a sustained period of time, Amax Gold potentially could experience material
write-downs of its investment in its mining properties.
REFINING, SALES AND HEDGING ACTIVITIES
Refining arrangements are in place with third parties for the Company's
production. Because of the availability of refiners other than those with whom
such arrangements have been made, the Company believes that no adverse effect
would result if any of these arrangements were terminated.
The Company employs a number of hedging techniques with the objective of
mitigating the impact of downturns in the gold market and providing adequate
cash flow for operations while maintaining significant upside potential in a
market upswing. During 1997, 1996 and 1995 the Company's hedging efforts
resulted in average realized prices of $360 per ounce, $412 per ounce and $406
per ounce, respectively, compared with the average COMEX price of $331 per ounce
in 1997, $388 per ounce in 1996 and $384 per ounce in 1995.
-11-
AGREEMENTS WITH CYPRUS AMAX
Amax Gold has entered into the following agreements with Cyprus Amax.
Financing Arrangements with Cyprus Amax. During December 1997, the Company
completed a $40 million credit facility with a group of banks, which was used to
refinance the existing Refugio gold loan and for working capital and debt
service requirements. In May 1997, the Company completed a $71 million tax-
exempt industrial revenue bond financing for the solid waste disposal facility
at the Fort Knox mine. Cyprus Amax has guaranteed both loans and the Company
pays a 1.75 percent interest differential to Cyprus Amax as a guaranty fee on
the industrial revenue bond and a 0.75 percent interest differential on the
Refugio loan. The Company has also agreed to reimburse Cyprus Amax for any
payments made under the guaranties. Additionally, the Company agreed not to
borrow $40 million under an existing convertible line of credit with Cyprus Amax
as part of the Refugio refinancing. See Note 7 to the Consolidated Financial
Statements for further discussion of the terms of each loan.
Pursuant to a financing arrangement with Cyprus Amax, approved by the Company's
stockholders in September 1996, Cyprus Amax has guaranteed the Company's $250
million Fort Knox loan until economic completion of the Company's Fort Knox mine
and has provided the Company with a $250 million demand loan facility, in
exchange for which the Company (i) paid Cyprus Amax a financing and guaranty fee
of $10 million, (ii) pays Cyprus Amax 1.75 percent annually on amounts
outstanding under the Fort Knox loan, (iii) would reimburse Cyprus Amax for any
payments made or costs incurred under the Cyprus Amax guaranty, (iv) agreed to
make no additional borrowing under the convertible line of credit without the
prior consent of Cyprus Amax, and (v) granted Cyprus Amax a first priority
security interest in the collateral for the Fort Knox loan, and if requested,
would grant security interests in certain additional assets to the extent
available. All of these obligations to Cyprus Amax are payable in cash or, at
the election of Cyprus Amax, in shares of Common Stock, valued at the time of
issuance of the shares.
In April 1994, Cyprus Amax agreed to make loans to the Company under a revolving
credit agreement from time to time until December 31, 2001, in an aggregate
principal amount not to exceed at any time $100 million. The Company may elect
to repay amounts of outstanding indebtedness either by payment in cash or
payment in shares of its $2.25 Series A Convertible Preferred Stock and Cyprus
Amax may convert any indebtedness into Common Stock of the Company at a stated
conversion price. As stated above, the Company has agreed not to make
additional draws under this line of credit without the prior consent of Cyprus
Amax.
Stock Issuance Agreement. In September 1995, the Company and Cyprus Amax
entered into an Agreement Regarding Stock Issuance pursuant to which, with the
agreement of both parties, obligations owing from the Company to Cyprus Amax
from time to time may be paid in shares of Common Stock valued at the most
recent 30-day average closing price. Of the 879,500 shares issuable, 128,042
shares were issued to Cyprus Amax in 1995 as payment for $835,473 due Cyprus
Amax under a financing arrangement.
Acquisition Agreement. Pursuant to the Amended and Restated Agreement and Plan
of Merger and Reorganization, dated as of October 9, 1996 (the Acquisition
Agreement), the Company acquired Cyprus Amax's indirect 50 percent interest in
the Kubaka mine in May 1997. The Company issued 15.4 million shares of Common
Stock as payment and has an obligation to make a contingent payment in shares of
Common Stock (a) equal to $10 per gold equivalent ounce (up to a maximum of $45
million) of the Company's pro rata share of proven and probable reserves which
the Company acquires the right to mine in the Russian Federation, excluding
properties covered by the Kubaka License or acquired by the Company's joint
venture with Cyprus Amax, on or before June 30, 2004, and (b) valued at the then
current 10-day average stock price. See Note 6 to the Consolidated Financial
Statements for further discussion.
NOL Agreement. An agreement in principle to monetize a portion of the Company's
foreign tax net operating losses was entered into with Cyprus Amax in February
1998. In connection with the proposed transaction, the Company is expected to
record a gain of approximately $6.7 million.
-12-
Exploration Joint Venture Agreement. Under the Exploration Joint Venture
Agreement, the Company and Cyprus Amax have agreed to pool their efforts for the
principal purpose of discovering and developing future gold prospects. See
"Exploration."
Services Agreement. Pursuant to the Services Agreement, the Company and Cyprus
Amax provide a variety of managerial and other services to each other on a full
cost-reimbursement basis. The Company paid Cyprus Amax approximately $4.1
million for 1997 services, including insurance coverage, and Cyprus Amax paid
the Company approximately $1.3 million, including reimbursement for services for
the Kubaka mine prior to the closing of the Acquisition Agreement.
Employee Transfer Agreement. Pursuant to the Employee Transfer Agreement, the
Company and Cyprus Amax have amended their respective benefit plans to allow
employees to transfer between the companies with minimal effect on an employee's
benefits.
EMPLOYEES
At December 31, 1997, the Company and its consolidated subsidiaries employed
1,353 persons in addition to 260 contract miners at its Refugio mine. The
hourly employees at the Guanaco mine are represented by the Sociedad Contractual
Minera Guanaco labor union and are covered by a labor contract that expires at
the end of May 1999. The hourly employees at Refugio are represented by the
Sindicato de Trabajadores de Compania Minera Maricunga labor union and are
covered by a labor contract that expires at the end of February 2001. None of
the Company's employees in the United States are members of a labor union and
the Company considers its employee relations to be good. The Company obtains
certain administrative and other services from Cyprus Amax pursuant to the
Services Agreement.
COMPETITION
The Company competes with other companies in the acquisition of mineral
interests and the recruitment and retention of qualified employees. A number of
these companies are larger than the Company in terms of annual gold production
and total reserves and have been engaged in gold mining and exploration longer
than the Company. Management does not believe, however, that such competition
has had a material effect on the development of the Company's business or the
sale of its products.
FOREIGN OPERATIONS
Foreign operations and investments such as those that the Company has in Chile
and Russia may be adversely affected by exchange controls, currency
fluctuations, taxation and laws or policies of particular countries or by
political events in those countries as well as by laws and policies of the
United States affecting foreign trade, investment and taxation.
Certain of the Company's mineral rights, property interests, gold sales
contracts, tax agreements and other contractual rights and interests are subject
to foreign government performance, approvals, and licenses. Such governmental
actions are, as a practical matter, subject to the discretion of the applicable
governments or governmental officials. In addition, in the event of a dispute
arising from foreign operations, the Company may be subject to the exclusive
jurisdiction of foreign courts, may not be successful in subjecting foreign
persons to the jurisdiction of courts in the United States or may be hindered or
prevented from enforcing its rights with respect to a governmental
instrumentality because of the doctrine of sovereign immunity.
REGULATION AND ENVIRONMENTAL MATTERS
The Company's mining and processing operations and exploration activities in the
United States, Chile, Russia and other countries are subject to various laws and
regulations governing the protection of the environment, exploration,
development, production, exports, taxes, labor standards, occupational health,
waste disposal, toxic substances, mine safety and other matters. New laws and
regulations, amendments to existing laws and regulations, or more stringent
-13-
implementation of existing laws and regulations could have a material adverse
impact on the Company, increase costs, cause a reduction in levels of production
and/or delay or prevent the development of new mining properties. Amax Gold
expects to be able to comply with all existing environmental laws and
regulations. Such compliance requires significant expenditures and increases
the Company's mine development and operating costs.
In March 1994, the U.S. Forest Service notified the Company that it considers
the Company to be a Potentially Responsible Party (PRP) under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA), jointly and
severally liable with other PRP's, for damages attributable to alleged releases
of hazardous substances from the Siskon Mine, located in the Klamath National
Forest in Siskiyou County, California. The Company conducted a limited
exploration drilling program in the summer of 1991 on property at the Siskon
mine site which the Company believes is not involved in the alleged releases.
Based on facts currently known to management, the Company does not anticipate
that this matter will have a material effect on the Company's financial
condition or results of operations.
EXECUTIVE OFFICERS
As of December 31, 1997, the names, ages and offices of all executive officers
of the Company were as follows.
Name Age Office
- -------------------------------------------------------------------------------
Milton H. Ward 65 Chairman of the Board and Chief Executive Officer
S. Scott Shellhaas 49 President and Chief Operating Officer
Leland O. Erdahl 69 Vice President and Chief Financial Officer
Robert B. Blakestad 51 Vice President, Exploration
Larry D. Clark 51 Vice President
Deborah J. Friedman 45 Vice President, General Counsel and Secretary
Mark A. Lettes 48 Vice President, Trading
David L. Mueller 47 Vice President, Controller and Assistant Secretary
Andrew F. Pooler 39 Vice President
Mr. Ward was elected Chairman of the Board and Chief Executive Officer of the
Company in November 1993 and served as President from November 1993 until
February 1995. He has been Chairman of the Board, President and Chief Executive
Officer of Cyprus Amax since May 1992. Prior to joining Cyprus Amax, Mr. Ward
had been President and Chief Operating Officer of Freeport-McMoRan Inc. and
Chairman and Chief Executive Officer of Freeport McMoRan Copper & Gold Inc.
since 1984.
Mr. Shellhaas was elected President and Chief Operating Officer of the Company
in April 1996. From 1994 to 1996 he was President of Cyprus Foote Mineral
Company, from 1991 to 1994 he was President of Cyprus Northshore Mining
Corporation and from 1989 to 1991 he was Senior Vice President of Cyprus Amax's
South Pacific operations. He held various positions in Cyprus Amax's law
department from 1982 to 1989.
Mr. Erdahl was elected Vice President and Chief Financial Officer of the Company
in March 1997 and a Director of the Company in June 1997. Prior to joining the
Company and continuing to the present, Mr. Erdahl has served on the boards of
several companies since prior to 1992, including Hecla Mining Company, Canyon
Resources Corporation, Uranium Resources, Inc. and Original Sixteen to One Mine,
Inc. and as a trustee for John Hancock Mutual Fund.
Mr. Blakestad was elected Vice President, Exploration in May 1996. From 1990 to
1996, he held various management positions for Cyprus Amax's exploration
department, including Exploration Manager, South Pacific and Exploration
Manager, North America.
Mr. Clark was elected Vice President of the Company in April 1996. From 1988 to
1996, he held various management positions in Cyprus Amax's business
development, operating and law departments.
-14-
Ms. Friedman was elected Vice President, General Counsel and Secretary of the
Company in September 1994. From 1982 to 1993, she held various positions in the
law department of Cyprus Amax, including General Counsel and Associate General
Counsel. In 1994, she served as a legal consultant handling various matters for
Cyprus Amax.
Mr. Lettes was elected Vice President, Trading of the Company and appointed a
Director in the Cyprus Amax Treasury Department in August 1996. He has held
various management positions in the Company's financial departments since 1987,
including Chief Financial Officer from 1994 to 1996, Treasurer from May 1988 to
February 1991, and Vice President since August 1989.
Mr. Mueller was elected Vice President, Controller and Assistant Secretary in
October 1994. He was Director of Financial Reporting at Echo Bay Mines, Ltd.
from October 1990 until 1994. Prior to October 1990, he was a Senior Manager at
Ernst & Young LLP.
Mr. Pooler was elected Vice President of the Company in February 1992 and is
responsible for the Company's operations in the contiguous United States and in
Chile. From May 1988 until February 1992 he was General Manager of the Wind
Mountain mine.
Each executive officer holds office subject to removal at any time by the Board
of Directors of Amax Gold.
ITEM 3. LEGAL PROCEEDINGS
In October 1996, a purported derivative action was filed in the Court of
Chancery of Delaware on behalf of a purported stockholder of the Company titled
Harry Lewis v. Milton H. Ward, et al., C.A. No. 15255-NC, against Cyprus Amax,
- -------------------------------------
the directors of the Company, and the Company as a nominal defendant. The
complaint alleges, among other things, that the defendants engaged in self-
dealing in connection with the Company's entry in March 1996 into the demand
loan facility provided by Cyprus Amax, that Cyprus Amax controls the Company's
Board of Directors and management, that the terms of the transaction were not
negotiated by persons independent of Cyprus Amax, that the timing of the
transaction precluded the Company from seeking financing in the commercial or
public debt markets and prevented the Special Committee of the Board of
Directors of the Company that approved entry into the transaction from seeking
alternatives to the transaction. The complaint seeks, among other things, a
declaration that the demand loan facility is not entirely fair to the Company
and damages in an unspecified amount. The Company believes that the complaint
is without merit and intends to defend the matter vigorously.
In October 1995, a purported derivative action was filed in the Court of
Chancery of Delaware on behalf of a purported stockholder of the Company titled
Harbor Finance Partners v. Allen Born, et al. and v. Amax Gold Inc., as nominal
- -------------------------------------------------------------------------------
defendant, C.A. No. 14637, with respect to the proposed Kubaka transaction. The
- ---------
complaint alleged that the individual defendants breached their fiduciary duty
in connection with the Kubaka transaction. In connection with the settlement of
this action in June 1997, the number of shares of Common Stock issued by the
Company in connection with the Kubaka transaction was reduced by approximately
600,000. The settlement was recently approved by the Delaware Court of
Chancery.
Litigation was filed in United States District Court for the District of
South Carolina, Rock Hill Division, litigation filed by Kershaw Gold Company,
Inc., Piedmont Mining Company's subsidiary that owns 37.5 percent of the Haile
project, against the Company alleging that the Company tortiously interfered
with the performance by its subsidiaries, Lancaster Mining Company Inc. and
Haile Mining Company, of their obligations under certain agreements. Kershaw
alleged that, among other things, Amax Gold caused Lancaster to fail to complete
the exploration expenditures authorized in the 1994 venture budget and initiated
attempts to sell its interest in the Haile property without informing Kershaw.
The Company was awarded judgment notwithstanding the $9 million jury verdict in
the case. The plaintiff has appealed the decision to the U.S. Court of Appeals
for the Fourth Circuit.
The litigation described above is part of a lawsuit filed originally in South
Carolina Circuit Court in March 1995 by Piedmont Mining Company and Kershaw Gold
Company, Inc. against Amax Gold, Lancaster and Haile, alleging breach of
contract, fraud and tortious interference with contract rights. Pursuant to
motions filed by the defendants,
-15-
all claims of Piedmont and Kershaw were dismissed on the grounds that
jurisdiction was to be determined by arbitration, except the claim of Kershaw
against the Company described above. The plaintiff's motion for reconsideration
is pending.
Pursuant to certain agreements among Piedmont, Kershaw and the Company, Piedmont
and Kershaw indemnified the Company from all environmental and other liabilities
arising from Piedmont's operations or other conditions existing on the Haile
property prior to July 1, 1992. Following Piedmont's and Kershaw's continued
refusal to pay environmental costs that the Company believed were covered by the
indemnity, the Company submitted to arbitration its claim for $1.4 million, the
amount of such costs incurred through August 1995. The Company prevailed in this
matter and the $1.4 million arbitration award, including accrued interest, has
been received. In November 1997, the Company submitted to arbitration its claim
for $1.7 million, the amount of environmental costs from August 1995 through
October 1997 which the Company believes are covered by the indemnity and cash
contributions to property maintenance and operations which the Company has made
on behalf of Kershaw.
In September 1996, Joseph and Mark Munkhoff and Katherine Munkhoff Brake (the
"Munkhoffs") initiated arbitration against Amax, Amax Exploration Inc. and
Lassen Gold Mining Inc. seeking damages in connection with the calculation and
payment of a royalty payable to the Munkhoffs under a mining lease. Their leased
claims cover approximately 75% of the production from the Hayden Hill Mine. The
Munkhoffs allege that their royalty on all or part of the production should have
been calculated at a 5% rate rather than at the 2% rate utilized in royalty
calculations by Lassen, and that they are entitled to a royalty on the proceeds
of hedging activities. The Munkhoffs have not specified the amount of damages
they seek. The Company has denied the Munkhoffs' claims and does not believe
this matter will have a material adverse effect on the Company's financial
condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth
quarter of 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Amax Gold Inc.'s Common Stock is listed on the New York Stock Exchange (AU) and
The Toronto Stock Exchange (AXG); the $3.75 Series B Convertible Preferred Stock
is listed on the New York Stock Exchange (AUPrB). Stockholders of record as of
February 9, 1998: Common Stock, 7,757, Preferred Stock 76.
The following table sets forth for the periods indicated the high and the low
sale prices per share of the Company's Common Stock and $3.75 Series B
Convertible Preferred Stock as reported on the New York Stock Exchange Composite
Tape and the dividends paid on such stock.
-16-
Stock Prices and Dividends Per Share
Series B Convertible
Common Stock Preferred Stock
------------------- -----------------------------
Quarter High Low High Low Dividends
- ----------------------------------------------------------------
1997
- ----------
First $ 7 7/8 $ 5 7/8 $56 3/8 $51 1/2 $.9375
Second 6 7/8 5 5/8 54 51 1/4 .9375
Third 6 15/16 5 9/16 54 3/4 51 1/2 .9375
Fourth 6 7/8 1 15/16 55 1/2 34 .9375
1996
- ----------
First $ 9 5/8 $ 6 3/8 $66 5/8 $54 3/8 $.9375
Second 7 1/8 5 3/8 57 3/8 51 1/8 .9375
Third 6 5/8 5 1/4 53 3/4 49 3/4 .9375
Fourth 6 5/8 5 1/4 54 3/ 50 .9375
-17-
ITEM 6. SELECTED FINANCIAL DATA
AMAX GOLD INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(IN MILLIONS EXCEPT PER SHARE AMOUNTS, PERCENTAGES,
PRODUCTION AND SALES OUNCES AND AMOUNTS PER OUNCE)
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
FOR THE YEAR:
Revenues $ 259.5 $ 108.2 $ 96.6 $ 94.6 $ 81.9
Earnings (loss) from operations/(1)(2)(3)/ 1.9 (42.9) (19.7) (39.5) (116.0)
Loss before cumulative effect of
accounting changes, net/(1)(2)(3)/ (37.9) (39.2) (26.4) (38.6) (89.0)
Net loss/(1)(2)(3)(4)/ (33.4) (39.2) (26.4) (31.1) (104.2)
Per common share:
Loss before cumulative effect
of accounting changes/(1)(2)(3)(4)/ (.41) (.48) (.38) (.51) (1.14)
Net basic and diluted loss/(1)(2)(3)(4)/ (.37) (.48) (.38) (.42) (1.34)
Weighted average common shares outstanding 108.2 96.9 86.5 79.3 77.8
Capital and cash acquisition expenditures 30.8 187.7 206.2 23.0 23.4
Cash dividends to common stockholders - - - - 2.0
Dividends declared per common share - - - - .08
Cash dividends to preferred stockholders 6.9 6.9 6.9 1.8 -
Dividends declared per preferred share/(5)/ 3.75 3.75 3.75 .9791 -
AT YEAR-END:
Current assets 129.7 60.7 67.1 77.1 37.9
Total assets 870.6 762.2 613.0 407.6 381.0
Current liabilities 226.0 212.3 42.8 45.6 37.6
Long-term debt 345.7 272.6 238.2 83.2 111.8
Note payable to parent - - 5.0 - 24.7
Shareholders' equity 273.8 259.4 298.2 249.9 173.3
Working capital (deficit) (96.3) (151.6) 24.3 31.5 0.3
Book value per common share 1.71 1.77 2.43 2.04 2.22
Long-term debt to total capitalization 56% 51% 44% 25% 39%
KEY OPERATING FACTORS FOR THE YEAR:
Total ounces of gold produced 729,831 268,331 238,255 240,885 210,880
Total ounces of gold sold 720,889 262,975 238,094 235,664 209,290
Average realized price per ounce sold $ 360 $ 412 $ 406 $ 401 $ 392
Average cost per ounce produced/(6)/:
Total cash costs/(7)/ $ 198 $ 255 $ 313 $ 329 $ 375
Reclamation costs 10 16 13 11 13
Depreciation, depletion and amortization 123 110 91 105 122
- ------------------------------------------------------------------------------------------------------------
Total production costs per ounce $ 331 $ 381 $ 417 $ 445 $ 510
------------------------------------------------------------------------------------------------------------
/(1)/ During the first quarter of 1997, Amax Gold elected to change its method
of accounting for inventory from the last-in, first-out (LIFO) method to
a three-month rolling average method. In accordance with generally
accepted accounting principles when changing from the LIFO method, prior
years' results have been restated to reflect the effect of this change
in policy. The effect of this restatement on the years ended December
31, 1996 and 1995 was to increase the previously reported net loss by
$5.0 million and $2.5 million, or $.06 and $.02 per share, respectively.
The effect of this restatement on the year ended December 31, 1994 was
to decrease the previously reported net loss by $4.4 million or $.06 per
share. Additionally, as of January 1, 1997, the Company changed its
accounting policy to include depreciation and depletion in inventory,
which has
-18-
the effect of recording depreciation and depletion expense in the
statement of operations as gold is sold rather than as it is produced.
The cumulative effect of this accounting change is a $4.5 million
reduction of the net loss as of January 1, 1997.
/(2)/ In the fourth quarter of 1996, the Company recorded a $35.5 million pre-
tax write-down of the Guanaco mine and an unrelated $10 million deferred
tax benefit. These special items increased the net loss by $25.5
million, or $.26 per share. In 1994, the Company recorded an $18.6
million pre-tax ($14.4 million after-tax) write-down of the Hayden Hill
mill to its estimated salvage value and a $2.5 million pre-tax ($2.1
million after-tax) write-down of other assets that increased the net
loss by $16.5 million, or $.21 per common share. In 1993, the Company
recognized a $64.1 million pre-tax ($41.9 million after-tax) write-down
of Hayden Hill and a $23.6 million pre-tax ($15.6 million after-tax)
write-down of Sleeper, which increased the 1993 net loss by $57.5
million, or $.74 per common share.
/(3)/ Effective January 1, 1994, the Company changed its method of accounting
for the cost of ore loaded on heap leach pads to record such costs as
work-in-process inventory. The 1994 net loss is reduced by a $7.5
million, or $.09 per common share, after-tax benefit relating to the
cumulative effect of this accounting change. Effective January 1, 1993,
Amax Gold changed its exploration accounting policy such that prior
period exploration expenses would no longer be capitalized and restored
to earnings when a property became exploitable. The 1993 net loss
includes a $13.4 million, or $.17 per common share, after-tax charge
relating to the cumulative effect of this accounting change.
/(4)/ The 1993 net loss includes a $1.8 million, or $.03 per common share,
after-tax cumulative effect of the January 1, 1993, adoption of
Statement of Financial Accounting Standards (SFAS) No. 112, "Employers'
Accounting for Postemployment Benefits."
/(5)/ The Company issued 1.8 million preferred shares in August 1994.
Preferred share dividends were $1.8 million during the fourth quarter of
1994.
/(6)/ Average costs weighted by ounces of gold produced at each mine.
/(7)/ Effective January 1, 1996, the Company adopted the Gold Production Cost
Standard developed by the Gold Institute in order to facilitate
comparisons among companies in the gold industry. Cash production costs
reported in prior periods have been restated as cash operating costs and
total cash costs in accordance with the new standard. Cash operating
costs calculated under the new standard include all operating costs
(including overhead) at the mine sites, but exclude royalties,
production taxes and reclamation. Total cash costs include royalties and
production taxes, but exclude reclamation. Total production costs remain
unchanged and include reclamation and depreciation, depletion and
amortization. Total cash costs in 1996 exclude the impact of the write-
down of heap leach inventories at Guanaco.
-19-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Amax Gold reported a 1997 net loss of $33.4 million, or $.37 per share, on
revenue of $259.5 million compared with a 1996 net loss of $39.2 million, or
$.48 per share on revenue of $108.2 million and a 1995 net loss of $26.4
million, or $.38 per share on revenue of $96.6 million. The 1997 results
included a $4.5 million benefit for a first quarter inventory accounting change
while the 1996 results included a $35.5 million write-down of the Guanaco mine
and an unrelated $10 million deferred tax benefit. Excluding special items, the
1997 net loss was $37.9 million, or $.41 per share, compared with a 1996 net
loss of $13.7 million, or $.21 per share. See Note 5 to the Consolidated
Financial Statements for further discussion of the changes in accounting
policies during the first quarter of 1997.
The Company's operating income improved to $1.9 million for 1997 compared with
1996 and 1995 operating losses of $7.4 million and $19.7 million, respectively,
excluding special items and the Guanaco write-down. The improved operating
results were attributed to lower cash costs and higher production, partially
offset by significantly lower gold prices.
Revenue increased to $259.5 million in 1997 compared with $108.2 million in 1996
and $96.6 million in 1995. The improvement is a result of significantly higher
gold sales of 720,889 ounces in 1997 due to the commencement of commercial
production at Fort Knox and Kubaka and a full year of production at Refugio,
offset by the closure of the Sleeper mine. Gold sales were 262,975 ounces in
1996 and 238,094 ounces in 1995. The increased sales volume was partially
offset by a lower 1997 average realized price of $360 per ounce compared with
$412 per ounce for 1996 and $406 per ounce for 1995. These realized prices
compare with average spot gold prices of $331 per ounce in 1997, $388 per ounce
in 1996 and $384 per ounce in 1995. Amax Gold's average realized price exceeded
the average spot price in each year due to the positive impact of hedging
activities.
Gold production was a record 729,831 ounces, compared with 268,331 ounces in
1996 and 238,255 ounces in 1995. Fort Knox, Kubaka and Refugio contributed a
total of 524,035 ounces, or more than 70 percent of 1997 production. For 1998,
these three mines are expected to contribute more than 90 percent of the
Company's total production as Hayden Hill and Guanaco complete operations. Fort
Knox and Kubaka have outperformed expectations throughout 1997 as mill
throughput at both mines was higher than plan for the year, resulting in higher
than anticipated production. Commercial production was achieved at Fort Knox on
March 1, 1997, resulting in 320,522 ounces of production during 1997. At
Kubaka, commercial production commenced on June 1, 1997, and 129,970 ounces were
produced for Amax Gold's account during 1997. Operations at Refugio were
hampered by the abnormally severe winter weather in mid-1997, which resulted in
the suspension of crushing operations for nearly three months. The Company's 50
percent share of 1997 production at Refugio was 73,543 ounces compared with
30,612 ounces for 1996, when commercial production commenced on October 1, 1996.
Production at Refugio is expected to improve during the first quarter of 1998 as
the weather related problems and other operational inefficiencies are addressed.
Mining was completed at Guanaco during July 1997, which resulted in the decrease
in production to 93,594 ounces in 1997 compared with 96,018 ounces in 1996.
Production at Guanaco will decline substantially during 1998 as residual
leaching continues. Hayden Hill produced a record 112,202 ounces during 1997,
an eight percent increase over 1996 production of 103,502 ounces due to higher
ore grades, crusher throughput and recovery rate. Hayden Hill completed mining
in December 1997 and production is expected to decline substantially during 1998
as residual leaching commences. Production in 1996 was 13 percent higher than
1995 due to the addition of Refugio during the fourth quarter of 1996. During
1998, consolidated production is expected to be more than 750,000 ounces as Fort
Knox and Kubaka will have a full year of production.
The Company's cost of sales as a percentage of revenue declined to 61 percent in
1997 compared with 68 percent in 1996 and 84 percent in 1995, reflecting
significantly lower average total cash costs. Consolidated total cash costs fell
by 22 percent to $198 per ounce for 1997 from $255 per ounce in 1996 and $313
per ounce in 1995. Fort Knox's cash costs of $170 per ounce for 1997 were lower
than expected as crusher and mill throughput and ore grade were higher than
anticipated. As a result of higher mill throughput, Kubaka's 1997 cash costs of
$175 per ounce were also lower than anticipated. Refugio's 1997 cash costs of
$341 per ounce, compared with $242 per ounce for 1996, were higher primarily due
to the adverse impact of the abnormal winter weather, partially offset by a $1.4
million insurance payment received relating to business interruption caused by
the severe winter weather. Cash costs at Refugio are
-20-
expected to improve significantly during 1998. Cash costs continued to decline
at Guanaco during 1997 to $229 per ounce compared with $290 per ounce in 1996
and $375 per ounce in 1995 due to improved crusher throughput and reduced
spending. Cash costs at Hayden Hill improved to $186 per ounce in 1997 compared
to $229 per ounce and $253 per ounce in 1996 and 1995, respectively. Higher ore
grades at Hayden Hill, which resulted in increased production, were the main
factor in the improved cash costs. Cash costs at both Guanaco and Hayden Hill
are expected to increase during 1998 when production declines as operations are
scaled back in preparation for the mines' closure. Consolidated average total
cash costs for 1998 are anticipated to be similar to 1997 cash costs.
Depreciation and depletion nearly tripled to $88.4 million in 1997 compared with
1996, primarily as a result of increased production and sales. Additionally,
the Company's consolidated depreciation and depletion rate increased to $123 per
ounce in 1997 compared with $110 per ounce in 1996 due to the higher Fort Knox
rate of $169 per ounce. At year-end 1997, approximately 450,000 contained
ounces were added to the Fort Knox reserves, which will reduce the 1998
depreciation and depletion rate at the mine by about $20 per ounce. Lowering
the gold price used to calculate ore reserves from $400 per ounce at December
31, 1996, to $375 per ounce at December 31, 1997, did not have a significant
impact on Kubaka or Refugio reserves, however, higher than anticipated 1997 and
future capital spending will result in increased 1998 depreciation and depletion
rates at both mines. The consolidated depreciation and depletion rate for Amax
Gold is not expected to change significantly during 1998.
General and administrative expenses decreased by 23 percent to $6.4 million in
1997 compared with $8.3 million in 1996. The decline was mainly attributed to
the management fee the Company earns for operating the Kubaka project which is
recorded as an offset to general and administrative expenses.
Expanded exploration activities during 1997 resulted in higher exploration
expense of $5.5 million compared with $3.5 million in 1996. Spending at the
Company's three new mines as well as exploration drilling on the subsequently
abandoned Long Valley Project in California were the main factors causing the
increase. During 1998, the Company expects to reduce its exploration costs to
about $4 million due to lower gold prices.
Interest expense in 1997 was $42.5 million compared with $29.7 million in 1996.
The increase was attributed to higher average debt balances, which were
necessary to complete the Company's capital spending on construction projects.
Capitalized interest declined to $4.2 million in 1997 from $22.8 million in
1996, as the Fort Knox project was completed during the first quarter of 1997.
Interest income of $1.9 million in 1997 was slightly higher than 1996 and
primarily relates to interest received on a loan to the Company's Refugio joint
venture partner.
Other expense of $3.0 million was $2.0 million higher than 1996 due to the
absence of a $1.4 million arbitration award received during 1996 as well as
higher legal fees, as the Haile tortious interference case was tried during
August 1997.
LIQUIDITY AND CAPITAL RESOURCES
Amax Gold's 1997 operating cash flow of $68.0 million was about four times
higher than 1996 and more than 25 times higher than 1995 operating cash flow as
a result of lower cash costs and higher production. Due to the low gold prices,
the Company has tightened its spending in all areas in order to preserve cash.
Working capital was negative for the 1997 and 1996 year ends due in part to the
classification of the amount due under the Cyprus Amax demand loan facility as a
current liability. Additionally, current maturities of long-term debt also
contributed to the negative working capital and the Company is currently
considering restructuring opportunities.
Capital expenditures declined to $30.8 million in 1997 from $187.7 million in
1996 due to the completion of the Fort Knox project during the first quarter of
1997. Capital spending at Fort Knox, excluding capitalized interest, was
approximately $14 million in 1997 compared with $173 million in 1996, for a
total project cost of about $345 million, which excludes $28 million in
capitalized interest. The Kubaka acquisition was completed in May 1997, and
capital spending following the purchase, excluding capitalized interest, was
about $12 million. At Refugio, capital spending, excluding capitalized
interest, totaled about $5 million in 1997 compared with $12 million in 1996.
Most of the capital spent at Refugio during 1997 relates to operational
inefficiencies that are being addressed and are expected to be
-21-
remedied in the first part of 1998. Capital spending is expected to further
decline during 1998 as only sustaining capital projects will be completed in
order to preserve cash.
Net financing activities for 1997 used $24.6 million in cash as a result of loan
repayments. In May 1997, the Company completed a $71 million tax-exempt
industrial revenue bond financing for the solid waste disposal facility at the
Fort Knox mine. Proceeds were used to repay amounts borrowed to complete
construction of the Fort Knox mine under the Cyprus Amax demand loan facility.
A total of $49.5 million was borrowed and $106.2 million was repaid on the
demand loan facility during 1997, resulting in an outstanding balance of $73.3
million at December 31, 1997. The Company currently has available approximately
$70 million under the Cyprus Amax demand loan facility. During December 1997,
the Company refinanced its $34 million portion of the Refugio gold loan with
approximately $28 million borrowed under a new $40 million credit facility. The
decline in gold prices since the gold was borrowed in early 1995 resulted in a
gain of approximately $6 million, which will be amortized, net of approximately
$2 million in deferred financing costs, over the four remaining years of the
original loan life. In connection with the refinancing, the Company also
received repayment of $10 million from the other 50 percent owner of Refugio.
This amount, together with $10 million of the remaining proceeds from the new
facility, was lent to the 50 percent owned Company that operates the Kubaka mine
to fund debt service and working capital requirements. Scheduled 1997 Fort Knox
debt repayments of approximately $30.8 million and a Refugio gold loan repayment
of $4.3 million were made with 1997 cash flow from operations.
During 1998, Amax Gold's capital spending is expected to be approximately $15
million. With this lower capital spending and the anticipated higher production
and lower cash costs, the Company expects to generate sufficient funds for
general corporate purposes, capital expenditures and interest payments.
However, assuming the price of gold remains at current levels, the Company
anticipates borrowing additional amounts under the Cyprus Amax demand loan
facility for a portion of its 1998 debt service. The Company is currently
considering other opportunities to restructure its debt and capital.
The Company is participating in a Year 2000 Program established by Cyprus Amax
to oversee and coordinate Year 2000 conversion. The program includes
involvement from site and corporate personnel and communication with customers,
suppliers and financial institutions to address Year 2000 compliance. Projects
are underway to identify, evaluate and implement Year 2000 compliance solutions.
The total cost of Year 2000 projects for the Company is not expected to be
material and all critical applications are anticipated to be compliant by the
end of 1999.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
With the exception of historical matters, the matters discussed in this report
are forward-looking statements that involve risks and uncertainties that could
cause actual results to differ materially from projected results. Such forward-
looking statements include statements regarding expected dates for gold sales,
reserve additions, return to full production at Refugio, projected quantities of
future gold production, estimated reserves and recovery rates, anticipated
production rates, costs and expenditures, prices realized by the Company and
expected to be realized, expected future cash flows, anticipated financing
needs, growth plans and sources of financing and repayment alternatives and
possible business combinations. Factors that could cause actual results to
differ materially include, among others: risks and uncertainties relating to
general domestic and international economic and political conditions, the
cyclical and volatile price of gold, the political and economic risks associated
with foreign operations, cost overruns, unanticipated ground and water
conditions, unanticipated grade and geological problems, metallurgical and other
processing problems, availability of materials and equipment, the timing of
receipt of necessary governmental permits and approvals, the occurrence of
unusual weather or operating conditions, force majeure events, lower than
expected ore grades, the failure of equipment or processes to operate in
accordance with specifications or expectations, labor relations, accidents,
environmental risks, the results of financing efforts and financial market
conditions and other risk factors detailed in the Company's Securities and
Exchange Commission filings. Refer to the Risk Factors on pages 7 to 13 of
Amendment No. 1 to the Company's Registration Statement on Form S-3 (No. 333-
22598) as filed with the Securities and Exchange Commission on March 26, 1997,
for a more detailed discussion of risks. Many of such factors are beyond the
Company's ability to control or predict. Readers are cautioned not to put undue
reliance on forward-looking statements. The Company disclaims any intent or
obligation to update publicly these forward-looking statements, whether as a
result of new information, future events or otherwise.
-22-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF MANAGEMENT
The management of Amax Gold Inc. is responsible for the integrity and
objectivity of the financial statements and other financial information
contained in this Annual Report. The financial statements were prepared in
accordance with generally accepted accounting principles and include estimates
that are based on management's best judgment.
Amax Gold maintains an internal control system which includes formal policies
and procedures designed to provide reasonable assurance that assets are
safeguarded and transactions are properly recorded and executed in accordance
with management's authorization. Amax Gold's internal audit function audits
compliance with the internal control system and issues reports to Amax Gold's
management and the Audit Committee of the Board of Directors.
Amax Gold's financial statements have been audited by independent accountants,
whose appointment is ratified yearly by the shareholders at the annual
shareholders' meeting. The independent accountants conducted their audits in
accordance with generally accepted auditing standards. These standards include
an evaluation of the internal accounting controls in establishing the scope of
audit testing necessary to allow them to render an independent professional
opinion on the fairness of Amax Gold's financial statements.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with representatives of management and the
independent accountants to review their work and ensure that they are properly
discharging their responsibilities.
Milton H. Ward
Chairman and Chief Executive Officer
S. Scott Shellhaas
President and Chief Operating Officer
Leland O. Erdahl
Vice President and Chief Financial Officer
-23-
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Amax Gold Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Amax Gold
Inc. and its subsidiaries at December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 5 to the consolidated financial statements, the Company
changed its method of accounting for inventory in 1997.
Price Waterhouse LLP
Denver, Colorado
February 9, 1998
-24-
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Year-ended December 31,
(In millions except per share amounts)
1997 1996 1995
- -------------------------------------------------------------------------------
Revenues $259.5 $108.2 $ 96.6
Costs and operating expenses:
Cost of sales 157.3 74.0 80.8
Depreciation and depletion 88.4 29.8 21.5
Asset write-downs - 35.5 -
General and administrative 6.4 8.3 8.1
Exploration 5.5 3.5 5.9
- -------------------------------------------------------------------------------
Total costs and operating expenses 257.6 151.1 116.3
- -------------------------------------------------------------------------------
Income (loss) from operations 1.9 (42.9) (19.7)
Interest expense (42.5) (29.7) (13.3)
Capitalized interest 4.2 22.8 5.9
Interest income 1.9 1.6 3.0
Other (3.0) (1.0) (2.3)
- -------------------------------------------------------------------------------
Loss before income taxes and cumulative
effect of accounting change (37.5) (49.2) (26.4)
Income tax benefit (expense) (0.4) 10.0 -
- -------------------------------------------------------------------------------
Loss before cumulative effect of
accounting change (37.9) (39.2) (26.4)
Cumulative effect of accounting change 4.5 - -
- -------------------------------------------------------------------------------
Net loss (33.4) (39.2) (26.4)
Preferred stock dividends (6.9) (6.9) (6.9)
- -------------------------------------------------------------------------------
Loss attributable to common shares $(40.3) $(46.1) $(33.3)
- -------------------------------------------------------------------------------
Per common share:
Loss before cumulative effect of
accounting change $ (.41) $ (.48) $ (.38)
Cumulative effect of accounting change .04 - -
- -------------------------------------------------------------------------------
Net basic and diluted loss $ (.37) $ (.48) $ (.38)
- -------------------------------------------------------------------------------
Weighted average common shares outstanding 108.2 96.9 86.5
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
-25-
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31,
(In millions except share amounts)
1997 1996
- --------------------------------------------------------------------------------
ASSETS
Cash and equivalents $ 16.0 $ 11.1
Restricted cash 3.5 -
Inventories 57.1 28.5
Receivables 32.9 3.2
Other 20.2 17.9
- --------------------------------------------------------------------------------
Current assets 129.7 60.7
Property, plant and equipment, net 723.3 667.1
Other 17.6 34.4
- --------------------------------------------------------------------------------
Total assets $ 870.6 $762.2
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Cyprus Amax demand loan $ 73.3 $130.0
Current maturities of long-term debt 81.4 39.3
Accounts payable, trade 24.2 14.7
Accrued and other current liabilities 39.1 23.8
Reclamation reserve, current portion 8.0 4.5
- --------------------------------------------------------------------------------
Current liabilities 226.0 212.3
Long-term debt 345.7 272.6
Reclamation reserve, non-current portion 13.8 11.2
Other 11.3 6.7
- --------------------------------------------------------------------------------
Total liabilities 596.8 502.8
Commitments and contingencies (Notes 8 and 14) - -
Shareholders' equity:
Preferred stock, par value $1.00 per share, authorized
10,000,000 shares, 2,000,000 shares designated as
$2.25 Series A Convertible Preferred Stock,
no shares issued and outstanding; and 1,840,000 shares
designated as $3.75 Series B Convertible Preferred
Stock, issued and outstanding 1,840,000 shares 1.8 1.8
Common Stock, par value $.01 per share, authorized
200,000,000 shares, issued and outstanding 114,850,103
shares in 1997 and 99,308,979 shares in 1996 1.1 1.0
Paid-in capital 408.6 355.7
Accumulated deficit (130.8) (90.5)
Unearned equity - financing costs (6.9) (8.6)
- --------------------------------------------------------------------------------
Total shareholders' equity 273.8 259.4
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 870.6 $762.2
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
-26-
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year-ended December 31,
(In millions)
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net loss $ (33.4) $ (39.2) $ (26.4)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and depletion 88.4 29.8 21.5
Asset write-downs - 35.5 -
Increase (decrease) in reclamation reserve 6.1 (0.2) 2.8
Cumulative effect of accounting change (4.5) - -
Non-cash interest* - 5.2 -
Amortization of financing costs* 5.8 4.0 2.2
Decrease in deferred taxes 0.4 (10.0) -
Deferred hedging costs 9.8 0.5 (3.2)
Other, net 6.4 0.5 0.8
Decrease (increase) in working capital, net of businesses acquired:
Receivables (8.5) (0.5) 0.2
Accrued and other current liabilities 10.3 (0.1) (2.0)
Inventories 5.9 (8.5) 4.5
Other assets 5.7 (0.7) (0.5)
Accounts payable, trade (24.4) 0.2 2.7
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 68.0 16.5 2.6
- ------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Capital expenditures (30.8) (187.7) (206.2)
Net loans to/from joint venture partners - (2.0) (8.8)
Capitalized interest (4.2) (22.8) (5.9)
Increase in restricted cash (3.5) - -
Other - - 1.5
- ------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (38.5) (212.5) (219.4)
- ------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from financings 111.0 74.3 242.5
Repayments of financings (75.3) (8.1) (104.0)
Issuance of Common Stock to Cyprus Amax* - - 80.8
Advances from Cyprus Amax 49.5 130.0 5.0
Repayments to Cyprus Amax (106.2) (5.0) -
Cash acquired in connection with purchase of Kubaka investment 7.0 - -
Deferred financing costs (3.7) (2.8) (11.7)
Preferred dividends paid (6.9) (6.9) (6.9)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities (24.6) 181.5 205.7
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents 4.9 (14.5) (11.1)
Cash and equivalents at January 1 11.1 25.6 36.7
- ------------------------------------------------------------------------------------------------------------
Cash and equivalents at December 31 $ 16.0 $ 11.1 $ 25.6
- ------------------------------------------------------------------------------------------------------------
Non-cash Transaction:
Issuance of Common Stock for purchase of Kubaka, net of cash acquired:
Working capital, other than cash $ (10.3) $ - $ -
Property, plant and equipment (114.2) - -
Debt 79.5 - -
- ------------------------------------------------------------------------------------------------------------
$ (45.0) $ - $ -
- ------------------------------------------------------------------------------------------------------------
*During the fourth quarter of 1996, the Company issued $15.2 million in stock to
Cyprus Amax in payment of $5.2 million in interest and a $10 million guaranty
and financing fee. The guaranty and financing fee was recorded as unearned
equity and $3.1 million has been amortized through December 31, 1997.
Cash paid for interest (including interest capitalized) was $35.0 million, $17.9
million and $9.2 million in 1997, 1996 and 1995, respectively. There were no
income taxes paid during 1997, 1996 or 1995.
The accompanying notes are an integral part of these statements.
-27-
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In millions)
Preferred Stock Common Stock Paid-In Accumulated Unearned
--------------- ---------------
Shares Amount Shares Amount Capital Deficit Equity
- -----------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 1.8 $1.8 81.3 $0.8 $258.4 $ (11.1) $ -
Net loss - - - - - (26.4) -
Issuance of common shares:
Employee and director plans - - 0.1 - 0.7 - -
Repayment of Cyprus Amax debt,
including interest - - 15.0 0.2 80.7 - -
Preferred stock dividends - - - - - (6.9) -
- -----------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 1.8 1.8 96.4 1.0 339.8 (44.4) -
Net loss - - - - - (39.2) -
Issuance of common shares:
Employee and director plans - - 0.1 - 0.7 - -
Repayment of fees and
interest to Cyprus Amax - - 2.8 - 15.2 - (10.0)
Amortization of financing costs - - - - - - 1.4
Preferred stock dividends - - - - - (6.9) -
- -----------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 1.8 1.8 99.3 1.0 355.7 (90.5) (8.6)
Net loss - - - - - (33.4) -
Issuance of common shares:
Employee and director plans - - 0.2 - 1.0 - -
Kubaka acquisition - - 15.4 0.1 51.9 - -
Amortization of financing costs - - - - - - 1.7
Preferred stock dividends - - - - - (6.9) -
- -----------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 1.8 $1.8 114.9 $1.1 $408.6 $(130.8) $ (6.9)
- -----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
-28-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
1. NATURE OF OPERATIONS
Amax Gold Inc. and its subsidiaries (Amax Gold or the Company) are engaged in
the mining and processing of gold and silver ore and the exploration for, and
acquisition of, gold-bearing properties, principally in the Americas, Russia,
Australia and Africa. The Company's primary products are gold and silver
produced in the form of dore and then shipped to refiners for final processing.
The Company is currently 58.8 percent owned by Cyprus Amax Minerals Company
(Cyprus Amax).
The Company produces gold and silver using both the traditional milling process
and heap leaching. All of the Company's operating properties are open pit
mines. The Company's operating properties consist of a 100 percent interest in
the Fort Knox mine near Fairbanks, Alaska; a 50 percent interest in the Kubaka
mine in the Russian Federation; and a 50 percent interest in the Refugio mine in
Chile. The Company also owns a 100 percent interest in the Hayden Hill mine in
Lassen County, California; and a 90 percent interest in the Guanaco mine in
Chile. Mining was completed at Hayden Hill and Guanaco during 1997 and residual
leaching will continue during 1998 at both mines. In addition, the Company owns
a 62.5 percent venture interest in the Haile property in Lancaster County, South
Carolina. The Company also owns the Sleeper mine in Humboldt County, Nevada, and
the Wind Mountain mine in Washoe County, Nevada, which are in reclamation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Amax Gold and the
related entities that it controls. Investments in companies over which the
Company can exercise significant influence but not control are accounted for
using the equity method. Investments in joint ventures are accounted for using
proportionate consolidation, consistent with accepted mining industry practice.
All material intercompany balances and transactions have been eliminated.
Certain 1996 and 1995 amounts have been reclassified to conform to the 1997
presentation.
EARNINGS PER SHARE
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share", was issued in February 1997. SFAS No. 128 replaces the presentation of
primary earnings per share with a presentation of basic earnings per share. It
requires a reconciliation of the numerators and denominators of the basic and
diluted earnings per share computation. Basic earnings per share is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding for the period. For the year ended December 31,
1997, basic and diluted earnings per share were the same as primary earnings per
share. Outstanding Company stock options were not considered in the diluted
earnings per share calculation as these were antidilutive.
CASH AND EQUIVALENTS
Cash and equivalents include cash and highly liquid investments with an original
maturity of three months or less. The Company invests cash in time deposits
maintained in high credit quality financial institutions.
INVENTORIES
Gold inventory is valued at the lower of aggregate cost, computed using a three-
month rolling average method, or market. See Note 5 for discussion of the change
in inventory accounting method during 1997. Materials and supplies are valued
at average cost less reserves for obsolescence.
-29-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including development expenditures and
capitalized interest, are carried at cost. Expenditures for major improvements
are capitalized. Gains and losses on retirements are included in earnings.
Depreciation and depletion are computed using the units-of-production method
based on the estimated ounces of gold to be recovered and estimated salvage
values. Mobile equipment and assets that have useful lives shorter than the
mine life are depreciated on a straight-line basis over estimated useful lives
of one to five years.
Amax Gold follows Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." In the event that facts and circumstances indicate that the
carrying amount of an asset may not be recoverable and an estimate of future
undiscounted cash flows is less than the carrying amount of the asset, an
impairment loss will be recognized. The impairment is measured based on an
estimate of future discounted cash flows. See Note 6 for discussion of the
write-down of the Guanaco mine recorded in the fourth quarter of 1996 in
accordance with SFAS No. 121.
EXPLORATION
Exploration expenditures are charged against earnings in the period incurred.
GOLD AND CURRENCY FINANCINGS
The Company uses various gold and currency financings to fund its mining
activities. To finance investments with gold loans the Company borrows gold
from banks and sells the gold on the open market. Gold loans are recorded on
the balance sheet at the price received when the borrowed gold is sold. The
banks are repaid from future gold production, at which time revenues are
recorded. Gold loans bear relatively low interest rates, result in a hedge
against future gold price fluctuations and limit realized prices to the amounts
received when the borrowed gold is sold.
Currency financings represent borrowings in hard currency, typically U.S.
dollars. The terms, including interest rates, are negotiated with lenders based
on market conditions at the time the financing is arranged.
FOREIGN CURRENCY TRANSLATION
The U.S. dollar is the functional currency of all of the Company's foreign
subsidiaries. The financial statements of foreign subsidiaries are remeasured
in U.S. dollars based on a combination of both current and historical exchange
rates; gains and losses due to this remeasurement are reflected in the
consolidated statement of operations. For the year ended December 31, 1997,
translation losses were $1.0 million while for the years ended December 31, 1996
and 1995, translation losses were insignificant.
DERIVATIVE CONTRACTS
Forward sale and purchase contracts, generally on a spot deferred basis, put and
call option contracts and compound options are entered into to manage the effect
of price changes on the Company's precious metals that are produced and sold.
Premiums paid for purchased options and premiums earned on sold options are
deferred and recognized in income over the term of the related option. The
results of gold hedging activities are included in revenues at the time the
hedged production is sold. Silver hedging results are reflected as a by-product
credit. Gains and losses on derivative contracts that do not qualify as hedges
are recognized currently.
Interest rate swap options are entered into as a hedge against interest rate
exposure on the Company's floating rate financing facilities in order to fix
the Company's interest costs. The differences to be paid or received on swap
options are included in interest expense as incurred.
-30-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
POSTRETIREMENT BENEFITS
Postretirement benefits other than pensions are calculated in accordance with
the provisions set forth in SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," which requires the expected cost
of postretirement benefits other than pensions to be accrued during the years
the employee renders service.
POSTEMPLOYMENT BENEFITS
Postemployment benefits are calculated in accordance with the provisions set
forth in SFAS No. 112, "Employers' Accounting for Postemployment Benefits."
SFAS No. 112 requires the Company to expense postemployment benefits as they are
earned by the employee for services rendered, rather than as they are paid.
STOCK-BASED COMPENSATION
Amax Gold adopted SFAS No. 123 "Accounting for Stock-Based Compensation," in
1996 and has elected to continue to measure compensation cost using the
intrinsic value based method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." See Note 12 for further discussion
of net income and earnings per share as if the fair value based method of
accounting as defined in SFAS No. 123 had been applied.
RECLAMATION
Reclamation, site restoration and closure costs for each producing mine are
estimated based primarily on environmental and regulatory requirements and are
accrued over the expected life of each mine using the units-of-production
method. Ongoing environmental and reclamation expenditures are expensed as
incurred.
INCOME TAXES
Income taxes are calculated in accordance with the provisions set forth in SFAS
No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred income
taxes are determined using an asset and liability approach. This method gives
consideration to the future tax consequences associated with differences between
the financial accounting and tax basis of assets and liabilities and gives
immediate effect to changes in income tax laws. The income statement effect is
derived from current taxes payable and changes in deferred income taxes on the
balance sheet.
USE OF ESTIMATES
The preparation of Amax Gold's consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Management's estimates are made in
accordance with mining industry practice. Significant areas requiring the use
of management estimates relate to the determination of mineral reserves,
reclamation and environmental obligations, impairment of assets, postretirement
and other employee benefits, useful lives for depreciation, depletion and
amortization, and valuation allowances for deferred tax assets. Actual results
could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
As of December 31, 1997, Cyprus Amax owned approximately 68 million Common
Shares, or approximately 58.8 percent, of the Company's outstanding Common
Stock. As discussed below, the increase in Cyprus Amax's ownership resulted
from various financial transactions with Cyprus Amax. See also Note 6 for
discussions related to the Kubaka acquisition agreement.
-31-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
FINANCING ARRANGEMENTS
During December 1997, the Company completed a $40 million credit facility which
was used to refinance the existing Refugio gold loan and for working capital and
debt service requirements. In May 1997, the Company completed a $71 million
tax-exempt industrial revenue bond financing for the solid waste disposal
facility at the Fort Knox mine. Cyprus Amax has guaranteed both loans and the
Company pays a 1.75 percent interest differential to Cyprus Amax as a guaranty
fee on the industrial revenue bond and a 0.75 percent interest differential on
the Refugio loan. The Company has also agreed to reimburse Cyprus Amax for any
payments made under the guaranties. Additionally, the Company agreed not to
borrow $40 million under an existing convertible line of credit with Cyprus Amax
as part of the Refugio refinancing. See Note 7 for further discussion of the
terms of each loan.
Pursuant to a financing arrangement with Cyprus Amax, approved by the Company's
shareholders in September 1996, Cyprus Amax has guaranteed the Company's $250
million Fort Knox loan until economic completion of the Company's Fort Knox mine
and has provided the Company with a $250 million demand loan facility, in
exchange for which the Company (i) paid Cyprus Amax a financing and guaranty fee
of $10 million, (ii) pays Cyprus Amax 1.75 percent annually on amounts
outstanding under the Fort Knox loan, (iii) would reimburse Cyprus Amax for any
payments made or costs incurred under the Cyprus Amax guaranty, (iv) agreed to
make no additional borrowing under the $100 million convertible line of credit
without the prior consent of Cyprus Amax, and (v) granted Cyprus Amax a first
priority security interest in the collateral for the Fort Knox loan, and if
requested, would grant security interests in certain additional assets to the
extent available. All of these obligations to Cyprus Amax are payable in cash
or, at the election of Cyprus Amax, in shares of Common Stock, valued at the
time of issuance of the shares.
On November 1, 1996, Cyprus Amax elected to receive payment in shares of Common
Stock of an aggregate of $15.2 million for all accrued interest on the demand
loan and interest differential payments due through October 31, 1996, as well as
the $10 million financing and guaranty fee. On November 12, 1996, the Company
issued 2.8 million shares of Common Stock to Cyprus Amax as payment for such
obligations. As of December 31, 1997 and 1996, the Company had borrowed $73.3
million and $130 million under the demand loan at average rates of 8.1 percent.
Interest and interest differential expense accrued as of December 31, 1997 and
1996 totaled $7.1 million and $2.3 million, respectively. Funding is provided
solely at the discretion of Cyprus Amax and as of December 31, 1997 the Company
had approximately $70 million available under the demand loan. The Company
anticipates borrowing a portion of its scheduled 1998 debt service from Cyprus
Amax under the demand loan. The $10 million guaranty and financing fee was
recorded as unearned equity and is being amortized over the expected period of
the demand loan and Cyprus Amax guaranty. Through December 31, 1997, $3.1
million had been amortized.
In April 1994, Cyprus Amax provided the Company with a $100 million convertible
line of credit. Outstanding amounts under the credit line bear interest at
LIBOR plus 0.3 percent and may be repaid through the issuance of up to two
million shares of $2.25 Series A Convertible Preferred Stock. Amax Gold may
redeem the Convertible Preferred Stock by issuing up to 12,099,213 shares of
Common Stock at a maximum price of $8.265 per share and a minimum price of
$5.854 per share. Cyprus Amax may convert the line of credit, any outstanding
indebtedness and/or Convertible Preferred Stock to 12,099,213 shares of Amax
Gold Common Stock valued at $8.265 per share. No amounts were outstanding under
this credit line as of December 31, 1997 or 1996.
In March 1995, Cyprus Amax provided the Company with an additional $80 million
convertible line of credit. During 1995, the full amount was borrowed by the
Company and subsequently converted by Cyprus Amax to 14,919,806 shares of Amax
Gold Common Stock at $5.362 per share.
-32-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
OTHER AGREEMENTS
In September 1995, the Company and Cyprus Amax entered into an agreement
regarding stock issuance pursuant to which obligations owing from the Company to
Cyprus Amax under existing or future contractual arrangements may be paid in
shares of Common Stock with the consent of both parties. The stock will be
valued based on the most recent 30-day average closing price, and the maximum
number of shares of Common Stock that may be issued is 879,500 shares. In
September 1995, 128,042 shares of such Common Stock were issued to Cyprus Amax
as payment for $835,473 due under the $80 million convertible line of credit.
An agreement in principle to monetize a portion of the Company's foreign tax net
operating losses was entered into with Cyprus Amax in February 1998. In
connection with the proposed transaction, the Company is expected to record a
gain of approximately $6.7 million.
The Company has entered into several additional agreements with Cyprus Amax.
Under an exploration joint venture agreement the two companies pool efforts to
discover and develop new gold properties, with Cyprus Amax providing 75 percent
and the Company providing 25 percent of initial funding. Amax Gold was charged
$4.2 million, $2.5 million and $3.1 million under this agreement for the years
ended December 31, 1997, 1996 and 1995, respectively.
A services agreement governs the provision of and payment for general
administrative services between Cyprus Amax and the Company. For the years
ended December 31, 1997, 1996 and 1995, insurance, management and other services
were supplied to the Company on a full cost reimbursement basis. The Company
was charged $4.1 million, $3.4 million and $4.3 million for the years ended
December 31, 1997, 1996 and 1995, respectively, for reimbursable costs. As of
December 31, 1997 and 1996, the Company had outstanding amounts due to Cyprus
Amax of $0.5 million and $0.3 million, respectively, relating to such services.
Pursuant to an employee transfer agreement, the Company and Cyprus Amax have
amended their respective benefit plans to allow employees to transfer from the
Company to Cyprus Amax or from Cyprus Amax to the Company with minimal effect on
an employee's benefits.
4. INCOME TAXES
Income (loss) before income taxes consists of the following:
1997 1996 1995
- -------------------------------------------------------------------------------------------------
Domestic $(13.7) $ 3.5 $ (5.5)
Foreign (19.3) (52.7) (20.9)
- -------------------------------------------------------------------------------------------------
$(33.0) $(49.2) $(26.4)
- -------------------------------------------------------------------------------------------------
-33-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
1997 1996 1995
- -------------------------------------------------------------------------------------------------
The income tax (benefit) expense consists of the following:
1997 1996 1995
- -------------------------------------------------------------------------------------------------
Current:
Federal $ - $ - $ -
State - - -
Foreign - - -
- -------------------------------------------------------------------------------------------------
Deferred:
Federal - - -
State - (10.0) -
Foreign 0.4 - -
- -------------------------------------------------------------------------------------------------
0.4 (10.0) -
- -------------------------------------------------------------------------------------------------
$ 0.4 $(10.0) $ -
- -------------------------------------------------------------------------------------------------
The components of deferred tax (assets) liabilities are as follows:
1997 1996
- -------------------------------------------------------------------------------------------------
Deferred tax assets:
Reclamation liabilities $ (6.1) $ (5.8)
Postretirement benefits (1.0) (1.5)
Accrued liabilities (6.6) (8.7)
Net operating loss carryforwards (62.4) (53.4)
Minimum tax credit carryforwards (5.1) (2.8)
Other (0.4) (0.3)
- -------------------------------------------------------------------------------------------------
Total deferred tax assets (81.6) (72.5)
Valuation allowance 28.8 18.1
- -------------------------------------------------------------------------------------------------
Net deferred tax assets (52.8) (54.4)
Deferred tax liabilities:
Properties 53.2 54.4
- -------------------------------------------------------------------------------------------------
Net deferred tax liabilities $ 0.4 $ -
- -------------------------------------------------------------------------------------------------
The following is a reconciliation between the amount determined by applying the
federal statutory rate of 34 percent to the loss before taxes and the income tax
(benefit) expense:
1997 1996 1995
- -------------------------------------------------------------------------------------------------
Income taxes at statutory rate $(11.2) $(16.7) $(9.0)
Increases (decreases) resulting from:
Losses with no expected tax benefit 13.5 16.7 10.0
State income taxes, net of federal benefit - (10.0) (0.2)
Percentage depletion (2.3) - (0.8)
- -------------------------------------------------------------------------------------------------
Income tax (benefit) expense - (10.0) -
- -------------------------------------------------------------------------------------------------
State income taxes, net of federal benefit - - -
Foreign losses with no expected tax benefit 0.4 - -
$ 0.4 $(10.0) $ -
- -------------------------------------------------------------------------------------------------
-34-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
The valuation allowance increased $11 million in 1997 due to uncertainties of
realizing loss carryforwards in the future.
At December 31, 1997, the Company had federal tax net operating loss
carryforwards of $119 million and alternative minimum tax net operating loss
carryforwards of $83 million expiring in the years 2004 through 2012 and minimum
tax credit carryforwards of $5 million, which do not expire. At December 31,
1997, the Company also had Chilean tax net operating loss carryforwards of $105
million, which do not expire.
During 1996, $10 million of state deferred income taxes were reversed due to
revised mine economics.
The Company will file certain state income tax returns for 1997 on a combined
basis with Cyprus Amax. State tax expense and related liabilities have been
determined as if the Company filed separate income tax returns. The Company is
not included in the Cyprus Amax federal income tax return.
5. INVENTORIES
Inventories at December 31, 1997 and 1996, consisted of the following:
1997 1996
- ---------------------------------------------------------------------------
Gold:
Finished goods $23.3 $16.7
Work-in-process 3.6 3.1
Materials and supplies 30.2 8.7
- ---------------------------------------------------------------------------
$57.1 $28.5
- ---------------------------------------------------------------------------
During the first quarter of 1997, Amax Gold elected to change its method of
accounting for inventory from the last-in, first-out (LIFO) method to a three-
month rolling average method. In accordance with generally accepted accounting
principles when changing from the LIFO method, prior years' results have been
restated to reflect the effect of this change in policy. The effect of this
restatement on the years ended December 31, 1996 and 1995 was to increase the
previously reported net loss by $5.0 million and $2.5 million, or $.06 and $.02
per share, respectively. The effect on beginning retained earnings as of
January 1, 1995 was to increase retained earnings by $4.4 million.
Additionally, as of January 1, 1997, the Company changed its accounting policy
to include depreciation and depletion in inventory, which has the effect of
recording depreciation and depletion expense in the statement of operations as
gold is sold rather than as it is produced. The cumulative effect of this
accounting change is a $4.5 million reduction of the net loss as of January 1,
1997. On a pro forma basis this change would have reduced the 1996 net loss by
$2.3 million. Both accounting changes were made in order to better match
current costs with revenues and to conform with prevailing gold industry
practice.
-35-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
6. PROPERTY, PLANT AND EQUIPMENT AND WRITE-DOWNS
The components of property, plant and equipment at December 31, 1997 and 1996,
were as follows:
1997 1996
- -----------------------------------------------------------------------------
Mining plant and equipment $ 698.6 $ 197.5
Mining properties 405.9 231.3
Development properties and construction-in-progress 20.4 555.9
- ------------------------------------------------------------------------------
1,124.9 984.7
Less accumulated depreciation, depletion
and write-downs (401.6) (317.6)
- ------------------------------------------------------------------------------
$ 723.3 $ 667.1
- ------------------------------------------------------------------------------
ACQUISITION OF KUBAKA
During May 1997, the Company completed the acquisition of a Cyprus Amax
subsidiary that owns 50 percent of Omolon Gold Mining Company (Omolon). Omolon
owns and operates the Kubaka gold mine, located in Far East Russia. Kubaka
poured its first gold in February 1997 and achieved commercial production
effective June 1, 1997. The project was completed at a capital cost of
approximately $228 million, excluding about $14 million in capitalized interest.
Under terms of the transaction, Cyprus Amax received a total of approximately
15.4 million shares of Amax Gold common stock, increasing Cyprus Amax's
ownership of Amax Gold to approximately 58.8 percent. Additional Amax Gold
common stock may be issued to Cyprus Amax in the future if more reserves are
acquired in Russia outside of the Kubaka concession area.
The Kubaka acquisition has been recorded as a transfer between companies under
common control, which requires the transfer of the assets and liabilities
acquired at their net book values. Approximately $121.1 million in property,
plant and equipment and $10.4 million in net working capital were acquired,
offset by the assumption of $79.5 million in debt and the issuance of $52
million in equity. As of December 31, 1997, the Kubaka project was funded
through $86 million of equity contributions from the partners, on a pro rata
basis to their ownership interests, and borrowings of $147 million. Accounts
payable includes approximately $6 million of advances to Omolon by Cyprus Amax
for which Amax Gold agreed to reimburse Cyprus Amax under certain circumstances,
offset in part by approximately $3 million in accounts receivable, the net
amount the Company would expect to receive.
ASSET WRITE-DOWNS
As a result of a detailed study of the continuity of ore, costs and production
rates at the Company's Guanaco mine, the Company recorded a $35.5 million pre-
tax write-down during the fourth quarter of 1996. Included in the write-down
were $9.4 million of heap leach inventories, which were impaired due to lower
actual and expected future recovery rates. Mining was completed at Guanaco in
July 1997 with residual leaching continuing into 1998.
-36-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
7. LONG-TERM DEBT
At December 31 1997 1996
- ------------------------------------------------------------------------------------------------------------
Fort Knox project financing, 8.2% and 8.1% for 1997 and 1996, due 1998 - 2001 $222.2 $250.0
Kubaka project financing, 8.9% for 1997, due 1998 - 2001 58.8 -
Kubaka subordinated debt, 12.0% for 1997, due 1998 - 2000 7.0 -
Kubaka working capital line of credit, 12.0% for 1997, due 1998 7.5 -
Industrial Revenue Bond, 6.3% for 1997, due 2009 71.0 -
Credit facility, 7.0% for 1997, due 2002 40.0 -
Refugio gold loan, 5.4% and 6.9% for 1997 and 1996 - 38.3
Sale-leaseback, 8.6% and 8.4% for 1997 and 1996, due 1998 - 2004 20.6 23.6
- ------------------------------------------------------------------------------------------------------------
427.1 311.9
Less current portion 81.4 39.3
- ------------------------------------------------------------------------------------------------------------
$345.7 $272.6
- ------------------------------------------------------------------------------------------------------------
Scheduled debt maturities as of December 31, 1997, (in millions) were $81.4,
$73.2, $74.3, $81.5, $45.7 and $71.0 for the years 1998 through 2002 and
thereafter, respectively.
During December 1997, the Company refinanced the remaining $34 million balance
of the Refugio gold loan with approximately $28 million borrowed under a new $40
million credit facility. The new credit facility is a five year term loan with
a $40 million bullet payment due in December 2002. The loan bears interest at
LIBOR plus 1.0 percent. Cyprus Amax has guaranteed this loan and the Company
pays 0.75 percent to Cyprus Amax as a guaranty fee. The Company has also agreed
to reimburse Cyprus Amax for any payments made under the guaranty. The decline
in gold prices since the gold was borrowed under the original Refugio gold loan
in early 1995 resulted in a gain of approximately $6 million, which will be
amortized, net of approximately $2 million in deferred financing costs, over the
four remaining years of the original loan life.
During the second quarter, the Company completed a $71 million tax-exempt
industrial revenue bond financing for the solid waste disposal facility at the
Fort Knox mine. The 12-year variable rate bonds were issued by the Alaska
Industrial Development and Export Authority and are backed by a letter of credit
guaranteed by Cyprus Amax. The Company's interest rate on the bonds is currently
approximately 4.5 percent and an additional 1.75 percent interest differential
is paid to Cyprus Amax as a guaranty fee. Amax Gold has agreed to reimburse
Cyprus Amax for any payments made or costs incurred under the guaranty. The
Company received proceeds of approximately $66.3 million with the remaining
approximately $4.7 million maintained in an interest-bearing escrow account that
becomes available to the Company over the next three years as additional funds
are spent on the solid waste disposal facility. Through December 31, 1997,
approximately $3.5 million remained restricted. The Company expects to fund the
solid waste expansion and draw down the remaining amount during 1998. Proceeds
were used to repay amounts borrowed under the Cyprus Amax demand loan facility.
In connection with the Kubaka acquisition, the Company assumed approximately
$79.5 million in debt. Project financing of $130 million was provided by the
European Bank for Reconstruction and Development and the U.S. Overseas Private
Investment Corporation while a bank licensed to do business in Russia provided
$14 million in subordinated debt and a $15 million working capital line of
credit. Approximately $12.4 million of the project financing was repaid during
1997. Interest on the project financing is variable based upon LIBOR and
currently is approximately 9 percent with final maturity in December 2001. The
subordinated debt and working capital line of credit also have variable interest
rates based on LIBOR, which are both currently approximately 12 percent. The
-37-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
subordinated debt does not have a defined term for repayment but will be repaid
out of available cash, while the working capital line of credit expires in April
1998. These financings are guaranteed by Cyprus Amax and the Company agreed to
reimburse Cyprus Amax under certain circumstances for guaranty payments. As a
guaranty fee for the subordinated debt and the working capital line of credit,
Cyprus Amax receives a portion of the interest. Omolon also is seeking to
arrange additional working capital financing.
In August 1996, the Company completed a sale-leaseback of Fort Knox mobile
mining equipment for proceeds of $24.3 million, which were used primarily to
fund construction of the Fort Knox mine. Lease payments are due quarterly with
maturity in 2004. Interest rates on the equipment leases range from 7.7 percent
to 8.7 percent with approximately 73 percent of the equipment leases at 8.4
percent, maturing in 2001.
During October 1995, the Company completed a term loan agreement for $250
million to be used for construction of the Fort Knox mine and repayment of
certain existing debt obligations. The loan has a six-year term with repayments
beginning in 1997. As of December 31, 1997, the Company owes $23.1 million in
gold at $381 per ounce and the remaining $199.1 million in currency. Interest
on the loan is calculated at LIBOR for the dollar portion and at the bank's
lease rate for the gold portion, plus 2.25 or 2.0 percent at certain intervals
of construction or plus 1.75 percent after completion tests are passed.
Collateral for the loan includes the assets and production of the Fort Knox and
Hayden Hill mines and the stock of the subsidiaries owning the Sleeper and
Guanaco mines. The loan agreement places restrictions on proceeds of future
equity offerings and borrowings, restricts dividends and requires certain net
worth and cash ratios be maintained. Interest rate protection agreements must
be in place for at least 50 percent of any dollar portion of the borrowing. In
addition, Amax Gold must maintain gold reserve minimums and hedge a portion of
future production in order to obtain specified minimum cash flows.
In March 1996, as a result of projected higher capital costs to complete the
Fort Knox mine and other cash needs anticipated in 1996, the Company
renegotiated the Fort Knox loan and entered into certain other financial
arrangements with Cyprus Amax. See "Financing Arrangements" in Note 3 for
further discussion. Cyprus Amax has guaranteed the loan until economic
completion of the Fort Knox mine, as defined in the loan agreement, and the
Company has agreed not to borrow without the consent of Cyprus Amax under the
$100 million credit line previously provided by Cyprus Amax, which forms part of
the guaranty.
8. DERIVATIVE CONTRACTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
COMMODITY DERIVATIVE CONTRACTS
Precious metal contracts include forward sales and purchase contracts, spot
deferred forward sales, put and call options and compound options and are
entered into by the Company to manage the effect of price changes on the
Company's precious metals that are produced and sold. Realization under these
contracts is dependent upon the counterparties performing in accordance with the
terms of the contracts. The Company does not anticipate non-performance by the
counterparties.
Forward sales contracts require the future delivery of gold at a specified
price. Forward sales contracts that are made on a spot deferred basis allow the
Company, at the option of the counterparty, to defer the delivery of gold to a
later date at a renegotiated gold price. Forward purchase contracts, which
require the future purchase of gold at a specified price, were established to
take advantage of a rising market and are offset by purchased puts. Various
factors influence the decision to close a spot deferred forward sales contract
or to roll the contract forward to a later date.
-38-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
A put option gives the put buyer the right, but not the obligation, to sell gold
to the put seller at a predetermined price on or before a predetermined date. A
call option gives the call buyer the right, but not the obligation, to buy gold
from the call seller at a predetermined price on or before a predetermined date.
The Company also uses compound options to protect against decreases in gold
prices and to reduce the initial cash outlay needed to provide this protection.
The call portion of a compound option allows the Company to purchase a put. The
Company's risk in purchasing compound options is limited to the premium paid.
Historically, the Company's price risk management activities have utilized
principally derivative instruments and strategies that qualified for hedge
accounting. The Company increased its use of derivative instruments during 1997
and the total program has put the Company in the position whereby it is
partially protected from further downward pressure in the price of gold during
1998 and future years and at the same time will enable the Company to
participate in any upward price movement. Some of the instruments utilized in
this program do not qualify for hedge accounting and, consequently, must be
marked to market. At December 31, 1997, the mark to market gain on this program
was $5.0 million, which has been reflected in the 1997 results.
As of December 31, 1997, the Company's outstanding hedge contracts were as
follows:
Average
Realized Price
Gold Ounces Per Ounce Period
- -----------------------------------------------------------------------------------------------------
Forward sales/(1)/ 326,000 $399 Jan. 1998 - Dec. 2002
Purchased put options 126,000 $419 Jan. 1998 - Dec. 2000
/(1)/Primarily on a spot deferred forward basis, which allows for deferral
of the delivery of gold ounces to a later date at a renegotiated gold
price.
As of December 31, 1997, the Company's outstanding commodity derivative
contracts which are marked to market are as follows:
Average
Realized Price
Gold Ounces Per Ounce Period
- -----------------------------------------------------------------------------------------------------
Forward purchases 514,000 $327 Jan. 1998 - Dec. 1998
Purchased put options 448,000 $364 Jan. 1998 - Dec. 1998
Purchased compound put options 625,000 $325 Sept. 1998 - Dec. 2000
Sold put options 412,000 $337 Jan. 1998 - June 1998
Purchased call options 3,000 $315 Jan 1998
Purchased compound call options 300,000 $333 Sept. 1998 - Dec. 1998
Sold call options 199,000 $314 Jan. 1998 - June 1998
The market value of the Company's forward contracts and put and call options at
December 31, 1997 and 1996, was approximately $51.0 million and $25.1 million.
Market valuations for these contracts are dependent on gold market prices,
option volatility and interest rates, which can vary significantly.
-39-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
INTEREST RATE PROTECTION AGREEMENTS
As a requirement of the Fort Knox loan, the Company has entered into interest
rate swaps and swap option agreements to reduce the impact of changes in
interest rates. At December 31, 1997, the Company had interest rate swaps and
swap option sales contracts that if exercised between January 1998 and April
1998 would obligate the Company to pay a fixed rate of 5.97 percent over an
average term of 0.8 years on a principal amount of $205 million. The Company
also purchased swap options with the right to pay 6.9 percent over an average
term of 1.5 years on a principal amount of $138 million. Gains or losses
realized on these contracts will be amortized over the term of the loan. Amax
Gold would break even if required to terminate these interest rate swap
agreements, given market interest rates at December 31, 1997. Due to the
requirements placed on the Company as a condition of its Fort Knox borrowings,
the Company does not expect to close these contracts.
CREDIT RISK
Amax Gold is exposed to credit losses in the event of non-performance by
counterparties to financial instruments, but does not expect any counterparties
to fail to meet their obligations. The Company generally does not obtain
collateral or other security to support financial instruments subject to credit
risk but monitors the credit standing of counterparties.
The estimated fair values for financial instruments under SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments," are determined at
discrete points in time based on relevant market information. These estimates
involve uncertainties and cannot be determined with precision. The estimated
fair values of the Company's financial instruments, as measured on December 31,
1997 and 1996, are as follows:
1997 1996
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------
Cash and equivalents $ 18.7 $ 18.7 $ 11.1 $ 11.1
Long-term receivables 2.0 2.0 12.6 12.6
Long-term debt 345.7 345.7 272.6 272.6
Commodity derivative contracts 10.0 51.0 10.7 25.1
Interest rate protection agreements - - - -
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument:
CASH AND EQUIVALENTS
The carrying amounts approximate fair value because of the short maturity of
these instruments.
LONG-TERM RECEIVABLES
The fair value is estimated based on expected discounted future cash flows,
including applicable interest.
LONG-TERM DEBT
The fair value is estimated based on the quoted market prices for the same or
similar issues offered to the Company for debt of similar maturities.
-40-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
DERIVATIVE CONTRACTS
The fair value of options is estimated based on market prices, volatilities and
interest rates, while the fair value of forward sales and purchases are
estimated based on the quoted market price for the contracts at December 31,
1997 and 1996. The net asset of $10.0 million and $10.7 million recorded on the
financial statements as of December 31, 1997 and 1996, respectively, is
comprised of $14.7 million and $11.7 million in prepaid option costs, $0.8
million and $6.3 million in deferred option costs and net of $5.5 million and
$7.3 million in current deferred premiums, respectively.
INTEREST RATE PROTECTION AGREEMENTS
The fair value of interest rate protection agreements is estimated by obtaining
quotes from financial institutions and represents the cost to buy out the swaps
and options at December 31, 1997 and 1996. The Company does not expect to buy
out these agreements.
9. EMPLOYEE BENEFITS
PENSION PLAN
Substantially all employees in the United States are covered by a non-
contributory defined benefit pension plan. Benefits are based generally on
years of service and compensation levels prior to retirement. The Company makes
annual contributions to the plan in accordance with the requirements of the
Employee Retirement Income Security Act of 1974 (ERISA). Plan assets are
invested in a balanced fund and small capital equity fund.
Net annual pension cost includes the following components:
1997 1996 1995
- ------------------------------------------------------------------------
Service cost $ 0.5 $ 0.6 $ 0.5
Interest cost 0.3 0.3 0.3
Actual return on assets (0.2) (0.3) (0.5)
Deferred gain - 0.1 0.2
Net amortization of prior service
cost and losses - (0.1) (0.1)
- ------------------------------------------------------------------------
Net periodic expense $ 0.6 $ 0.6 $ 0.4
- ------------------------------------------------------------------------
-41-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
The following table summarizes the funded status of the plan and the related
amounts recognized in the Company's financial statements at December 31:
1997 1996
- ------------------------------------------------------------------------
Actuarial present value of accumulated
benefit obligation, including vested
benefits of $3.0 in 1997 and $2.8 in 1996 $ 4.1 $ 3.5
- ------------------------------------------------------------------------
Projected benefit obligation $(4.3) $(3.6)
Plan assets at fair value 3.0 2.4
- ------------------------------------------------------------------------
Plan assets less than projected (1.3) (1.2)
benefit obligation Unrecognized prior (0.6) (0.7)
service cost Estimated additional liability (0.4) -
Unrecognized net loss 1.3 0.8
- ------------------------------------------------------------------------
Accrued pension cost $(1.0) $(1.1)
- ------------------------------------------------------------------------
The following assumptions were used in calculating the funded status of the plan
at December 31 and the pension cost for the subsequent year:
1997 1996
- ------------------------------------------------------------------------
Expected long-term rate of return on assets 9.0% 9.0%
Discount rate 7.25% 7.75%
Rate of increase in compensation levels 5.0% 5.83%
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company also provides certain health care and life insurance benefits for
retired employees in the United States. The postretirement health care plans are
contributory in certain cases based upon years of service, age and retirement
date. The Company currently does not fund postretirement benefits and may modify
plan provisions at its discretion. Net periodic postretirement benefit costs
for the years ended December 31, 1997, 1996 and 1995, were insignificant.
The following table sets forth the status of the plan and the related amounts
recognized in the Company's financial statements at December 31:
1997 1996
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $ 0.9 $ 1.0
Active plan participants 0.7 1.0
- --------------------------------------------------------------------------------
Total accumulated postretirement benefit obligation 1.6 2.0
Plan assets at fair value - -
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation
in excess of plan assets (1.6) (2.0)
Unrecognized prior service cost (1.6) (1.4)
Unrecognized net loss 0.3 0.5
- --------------------------------------------------------------------------------
Accrued postretirement benefit cost $(2.9) $(2.9)
- --------------------------------------------------------------------------------
-42-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
The accumulated postretirement benefit obligation was determined using a
weighted average annual discount rate of 7.25 percent in 1997 and 7.75 percent
in 1996. The assumed health care cost trend rate for 1998 is 10.0 percent,
declining to 9.5 percent in 1999 and thereafter when Company costs associated
with the plan are capped. A one percent increase in the health care cost trend
rate used would have resulted in an insignificant increase in the 1997
postretirement benefit cost and the accumulated postretirement benefit
obligation at December 31, 1997.
POSTEMPLOYMENT BENEFITS
The Company also has a number of postemployment plans covering severance,
disability income, and continuation of health and life insurance for disabled
employees. At December 31, 1997 and 1996, the Company's liability for
postemployment benefits totaled $2.7 million and $3.9 million, respectively, and
is included in other liabilities.
10. PREFERRED STOCK
In August 1994, the Company sold publicly 1.8 million shares of $3.75 Series B
Convertible Preferred Stock (Preferred Stock) for net proceeds of $88.3 million.
The Preferred Stock is convertible at the option of the holder at any time at an
initial conversion price of $8.25 per share (equivalent to a conversion rate of
6.061 shares of Common Stock for each share of Preferred Stock), subject to
adjustment in certain events. If all of the Preferred Stock were to be
converted, an additional 11.2 million Common Shares would be issued.
The Preferred Stock is redeemable at the option of the Company at any time on or
after August 15, 1997, in whole or in part, for cash, initially at a redemption
price of $52.625 per share declining ratably annually to $50.00 per share on or
after August 15, 2004, plus accrued and unpaid dividends.
Annual cumulative dividends of $3.75 per share are payable quarterly on each
November 15, February 15, May 15 and August 15, as and if declared by the Board
of Directors.
11. COMMON STOCK
In February 1992, the Company's Board of Directors approved a Dividend
Reinvestment Plan whereby shareholders of the Company may elect to reinvest any
future Common Stock dividend payments in additional shares of the Company's
Common Stock. Three million shares of the Company's Common Stock are reserved
for issuance pursuant to this plan.
In 1994, the Company's shareholders approved a plan to grant Common Shares to
non-employee directors, under which 100,000 shares of Common Stock were reserved
for issuance. Through December 31, 1997, a total of 30,000 shares had been
issued.
During 1995, Amax Gold was reincorporated in Delaware and elected not to be
governed by Section 203 of the Delaware General Corporation Law, permitting the
Company to engage in business transactions with Cyprus Amax without requiring
the approval of 66 2/3 percent of all shareholders excluding Cyprus Amax and its
affiliates and associates. As a result of the reincorporation, Amax Gold's
treasury stock was canceled.
12. STOCK-BASED COMPENSATION PLANS
At December 31, 1997, the Company has two stock-based compensation plans, which
are described below. The Company applies APB Opinion 25 and related
interpretations in accounting for its plans. Accordingly, no
-43-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
compensation cost has been recognized for its fixed stock option plan. The
compensation cost that has been charged against income for its long-term
incentive plan was insignificant for 1997 and 1996. Had compensation cost for
the Company's two stock based compensation plans been determined based on the
fair value at the grant dates for awards under those plans consistent with the
method of SFAS No. 123, the difference in the Company's net loss and loss per
share would have been immaterial. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions used for grants in 1997 and 1996,
respectively: no dividend payments; expected volatility of 172 and 37 percent;
risk-free interest rates of 6.08 and 6.02 percent; and expected lives of 3.00
and 3.18 years.
The Company maintains a fixed stock option plan for officers and salaried
employees to purchase Common Shares. Options are exercisable at prices equal to
the market value on the date of grant. Options vest in two years and remain
exercisable until 10 years from date of grant. As of December 31, 1997, 1.9
million Common Shares are reserved for future grants.
A summary of the status of the Company's fixed stock option plan as of December
31, 1997 and 1996 and changes during the years ending on those dates is
presented below:
1997 1996
-------------------------- --------------------------
Weighted- Weighted-
Average Average
Fixed Options Shares Exercise Price Shares Exercise Price
- --------------------------------------------------------------------------------
Outstanding at
beginning of year 1,035,125 $7.16 1,060,000 $7.19
Granted 332,200 $6.25 50,000 $6.75
Exercised 12,400 $4.98 300 $8.75
Forfeited 283,025 $7.16 74,575 $7.21
- --------------------------------------------------------------------------------
Outstanding at
end of year 1,071,900 $6.91 1,035,125 $7.16
- --------------------------------------------------------------------------------
Options exercisable
at end of year 688,900 $7.21 738,925 $7.16
Weighted-average
fair value of
options granted
during the year 332,200 $5.46 50,000 $2.24
- --------------------------------------------------------------------------------
During 1993, Amax Gold implemented a long-term incentive plan. Under this plan,
officers of the Company may receive restricted stock awards based on the rate of
return received by investors in the Company's Common Stock, compared with that
of its peers in the gold industry. Such awards may be deferred, accelerated or
otherwise adjusted based upon a strategic and comparative performance
assessment. At December 31, 1997, cumulative shares awarded were 143,750 and
706,250 were authorized and unissued. On January 2, 1998, an additional 70,910
shares were awarded. The valuation of the shares issued under the performance
share plan as calculated under SFAS No. 123 approximates the amounts recorded as
compensation expense by the Company and is insignificant for the years ended
December 31, 1997 and 1996.
-44-
13. DOMESTIC AND FOREIGN OPERATIONS
The Company's foreign operations consist of the Kubaka mine in Russia and the
Guanaco and Refugio mines in Chile. The components of the Company's domestic and
foreign operations were as follows:
1997 1996 1995
- -------------------------------------------------------------------------------------
Revenues:
United States $163.3 $ 65.7 $ 68.2
Foreign 96.2 42.5 28.4
- -------------------------------------------------------------------------------------
$259.5 $108.2 $ 96.6
- -------------------------------------------------------------------------------------
Income (loss) from operations:
United States $ 6.0 $ (1.0) $ (7.1)
Foreign (4.1) (41.9) (12.6)
- -------------------------------------------------------------------------------------
$ 1.9 $(42.9) $(19.7)
- -------------------------------------------------------------------------------------
Net income (loss) attributable to common shares:
United States $(20.6) $ 6.6 $(12.4)
Foreign (19.7) (52.7) (20.9)
- -------------------------------------------------------------------------------------
$(40.3) $(46.1) $(33.3)
-------------------------------------------------------------------------------------
Identifiable assets:
United States $537.1 $630.8 $451.0
Foreign 333.5 131.4 162.0
- -------------------------------------------------------------------------------------
$870.6 $762.2 $613.0
-------------------------------------------------------------------------------------
Substantially all of the Company's 1997, 1996 and 1995 sales were made in Europe
through a wholly owned subsidiary of the Company. The Company's sales to major
customers that exceeded 10 percent of total sales were $138 million to three
customers during 1997, $95 million to four customers in 1996 and $58 million to
two customers in 1995. The Company believes that the loss of any of these
customers would have no material adverse impact on the Company because of the
active worldwide market for gold.
14. COMMITMENTS AND CONTINGENCIES
The Company estimates future reclamation and closure costs for properties
operated by the Company to be approximately $49.5 million based on currently
applicable federal, state and foreign laws and regulations. At December 31,
1997, $21.8 million has been accrued. Changes in applicable laws and
regulations could have a significant impact on estimates of future costs.
The Company used a gold price of $330 per ounce for 1998 and $375 per ounce for
1999 and beyond to evaluate any impairment of long lived assets. Management's
estimate of long-term gold prices may change if the gold price remains at the
current low level, which could result in an asset impairment.
Russian tax legislation is subject to varying interpretations and constant
changes, which may be retroactive. Further, the interpretation of tax
legislation by tax authorities as applied to the transactions and activity of
the Company may not
-45-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
coincide with that of management. As a result, transactions may be challenged by
tax authorities and the Company may be assessed additional taxes, penalties and
interest, which can be significant. Tax periods remain open to review by the tax
authorities for six years.
15. QUARTERLY DATA (UNAUDITED)
Quarterly earnings data for the years ended December 31, 1997 and 1996, follow:
1997 Quarters First Second Third Fourth
- -----------------------------------------------------------------------------------------------
Revenues $38.4 $ 73.3 $ 79.6 $ 68.2
Income (loss) from operations (0.9) 1.5 2.5 (1.2)
Loss before cumulative effect of accounting change (6.1) (9.2) (9.3) (13.3)
Net loss (1.6) (9.2) (9.3) (13.3)
Loss attributable to common shares (3.3) (10.9) (11.0) (15.1)
- -----------------------------------------------------------------------------------------------
Per common share:
Loss before cumulative effect of accounting change (.08) (.11) (.10) (.13)
Cumulative effect of accounting change .05 - - -
- -----------------------------------------------------------------------------------------------
Net basic and diluted loss $(.03) $ (.11) $ (.10) $ (.13)
-----------------------------------------------------------------------------------------------
1996 Quarters First Second Third Fourth
- -----------------------------------------------------------------------------------------------
Revenues $25.6 $ 25.6 $ 23.4 $ 33.6
Loss from operations (4.5) (4.0) (1.2) (33.2)
Net loss (5.5) (5.8) (2.5) (25.4)
Loss attributable to common shares (7.2) (7.5) (4.2) (27.2)
- -----------------------------------------------------------------------------------------------
Per common share:
Net basic and diluted loss $(.07) $ (.08) $ (.04) $ (.28)
- -----------------------------------------------------------------------------------------------
Fourth quarter 1996 results included a pre-tax charge of $35.5 million due to
the write-down of the Guanaco mine and an unrelated $10 million deferred tax
benefit.
-46-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
16. RESERVE DATA (UNAUDITED)
The following table presents proven and probable ore reserves by property at
December 31. Ore reserves are calculated by the Company and verified by
independent mining engineers with respect to the Fort Knox mine and Haile
property.
Ore Reserves/(1)/
(thousands, except average grades)
1997 1996 1995
--------------------------------------------- ----------- ------------
Contained Contained Contained
Average ounces ounces ounces
grade Contained (the (the (the
(ounces ounces Company's Company's Company's
Tons per ton) (100%) share) share) share)
- ------------------------------------------------------------------------------------------------------------
GOLD
Producing mines:
Fort Knox/(2)/ 170,273 0.024 4,099 4,099 4,079 4,094
Kubaka/(3)/ 4,203 0.522 2,196 1,098 1,332 -
Refugio/(4)/ 100,793 0.029 2,920 1,460 1,558 1,672
Guanaco/(5)/ - - - - 119 378
Hayden Hill - - - - 164 273
Sleeper - - - - - 48
---------------------------------------------------
Total producing mines 9,215 6,657 7,252 6,465
---------------------------------------------------
Other properties/(6)/:
Haile 8,736 0.089 780 488 488 488
---------------------------------------------------
Total gold 9,995 7,145 7,740 6,953
---------------------------------------------------
The following table presents the Company's share of other mineralized material
for each of the three new mines as of December 31, 1997, as calculated by the
Company.
Tons Average Grad
(000) (Ounces Per Ton)
- --------------------------------------------------------------------------------------------------------------
Fort Knox 137,500 0.022
Refugio 154,000 0.026
Kubaka 2,723 0.330
- --------------------------------------------------------------------------------------------------------------
294,223 0.027
- --------------------------------------------------------------------------------------------------------------
/(1)/ RESERVES. That part of a mineral deposit that could be economically and
legally extracted or produced at the time of the reserve determination.
Reserves have been calculated using a $375 per ounce gold price at all
properties except for Haile, for which a $400 per ounce gold price was
used. The Company has determined that calculating the Fort Knox and
Kubaka reserves at $350 per ounce would not materially change the
results;
-47-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
however, calculating the Refugio reserves at $350 per ounce would result
in a decrease in proven and probable reserves of approximately 10
percent.
PROVEN RESERVES. Reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes; grade
and/or quality are computed from the results of detailed sampling and (b)
the sites for inspection, sampling and measurement are spaced so closely
and the geologic character is so well defined that size, shape, depth and
mineral content of reserves are well established.
PROBABLE RESERVES. Reserves for which quantity and grade and/or quality
are computed from information similar to that used for proven reserves,
but the sites for inspection, sampling and measurement are farther apart
or are otherwise less adequately spaced. The degree of assurance, although
lower than that for proven reserves, is high enough to assume continuity
between points of observation.
These definitions comply with those issued by the Securities and Exchange
Commission, which are based on definitions used by the United States
Bureau of Mines and the United States Geological Survey.
OTHER MINERALIZED MATERIAL. A mineralized body that has been physically
delineated by drilling, underground work, surface trenching, etc., and
found to contain a sufficient amount of mineralized material with an
average grade of metal or metals to warrant further exploration
expenditures. The Company's reported mineralized material must be defined
by a conceptual mine plan and have established geologic continuity but
does not qualify as a commercially mineable ore body until final legal,
technical and economic factors have been resolved.
/(2)/ Commercial production at the Fort Knox mine commenced on March 1, 1997.
/(3)/ Amax Gold acquired the Kubaka mine from Cyprus Amax in May 1997.
Commercial production at the Kubaka mine commenced on June 1, 1997.
/(4)/ Commercial production at the Refugio mine commenced on October 1, 1996.
/(5)/ The Company owns a 90 percent interest in the Guanaco mine and under
existing shareholder arrangements receives 100 percent of production until
certain conditions are met. Based on management's belief that those
conditions would not be met, 100 percent of Guanaco's reserves were
included in the Company's reserve table for 1996 and 1995.
/(6)/ The Company has not yet reached a decision regarding whether to proceed
with development of the property.
The Company reports extractable (mineable) ore reserves. Reserves do not
reflect losses in the milling or heap leaching processes, but do include
allowance for ore dilution in the mining process.
-48-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
Recovery rates for 1997 were as follows:
Heap
Leach Mill
- -------------------------------------------------------------------------------
Refugio 55% -%
Fort Knox -% 89%
Kubaka -% 97%
Guanaco 55% -%
Hayden Hill 59% -%
- -------------------------------------------------------------------------------
17. SUBSEQUENT EVENT
On February 9, 1998, the Company announced that they entered into a merger
agreement with Kinross Gold Corporation (Kinross) providing for a combination of
their businesses. In the merger, each share of the Company's common stock will
be converted into 0.8 of a share of Kinross common stock. Cyprus Amax agreed to
contribute $135 million of cash and indebtedness to Kinross at the effective
time of the merger in exchange for approximately 35 million shares of Kinross
common stock. The merger will result in the current shareholders of Kinross
owning 50 percent of the new Kinross and the current shareholders of Amax Gold
(after giving effect to the infusion of the $135 million) owning 50 percent of
the new Kinross.
-49-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be filed by amendment to the
Company's Annual Report on Form 10-K within 120 days after the end of the fiscal
year.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be filed by amendment to the
Company's Annual Report on Form 10-K within 120 days after the end of the fiscal
year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be filed by amendment to the
Company's Annual Report on Form 10-K within 120 days after the end of the fiscal
year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be filed by amendment to the
Company's Annual Report on Form 10-K within 120 days after the end of the fiscal
year.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
10-K Page
---------
1. Financial Statements
Report of Independent Accountants 24
Consolidated Statement of Operations for
each of the three years in the period ended
December 31, 1997 25
Consolidated Balance Sheet at December 31, 1997
and 1996 26
Consolidated Statement of Cash Flows for each
of the three years in the period ended
December 31, 1997 27
Consolidated Statement of Shareholders'
Equity for each of the three years in the
period ended December 31, 1997 28
Notes to Consolidated Financial Statements 29 - 49
2. Financial Statement Schedules
Financial statement schedules are not included in this Annual Report
on Form 10-K because they are not applicable.
3. Exhibits
-50-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
3(ii) By-Laws, dated April 27, 1995, adopted on April 26, 1995, as amended and
restated effective June 21, 1995, filed as Exhibit 3(ii) to the Company's
Registration Statement on Form 8-B filed June 21, 1995 and incorporated
herein by reference.
4.1 Certificate of Designations for the $2.25 Series A Convertible Preferred
Stock, filed as Exhibit 4.1 to the Company's Registration Statement on
Form 8-B filed June 21, 1995 and incorporated herein by reference.
4.2 Certificate of Designations for the $3.75 Series B Convertible Preferred
Stock, filed as Exhibit 4.2 to the Company's Form 8-B filed June 21, 1995
and incorporated herein by reference.
10.1 Agreement regarding issuance of stock dated September 29, 1995 between
the Company and Cyprus Amax, filed as Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1995
and incorporated herein by reference.
10.2 Directors' Deferred Compensation Plan for Members of the Board of
Directors of Amax Gold Inc., filed as Exhibit 10.14.2 to the Company's
Registration Statement No. 33-22645 and incorporated herein by reference.
Second Amendment to the Deferred Compensation Plan for Members of the
Board of Directors of Amax Gold Inc. filed as Exhibit (10)(b) to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997, and incorporated herein by reference.
10.3 Amax Gold Inc. Excess Benefit Plan, filed as Exhibit EX-10(g) to the
Company's Annual Report on Form 10-K for the year-ended December 31, 1993
and incorporated herein by reference.
10.4 Amax Gold Inc. Deferred Compensation Plan, filed as Exhibit EX-10(h) to
the Company's Annual Report on Form 10-K for the year-ended December 31,
1993 and incorporated herein by reference.
10.5 Amax Gold Inc. 1992 Stock Option Plan, filed as Exhibit A to the
Company's Proxy Statement for the 1993 Annual Meeting of Stockholders and
incorporated herein by reference. First Amendment to the Amax Gold Inc.
1992 Stock Option Plan, filed as Exhibit (10)(c) to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, and
incorporated herein by reference.
10.6 Amax Gold Inc. Key Executive Long-Term Incentive Plan (formerly the Amax
Gold Performance Share Plan), filed as Exhibit B to the Company's Proxy
Statement for the 1993 Annual Meeting of Stockholders and incorporated
herein by reference. First and Second Amendments to the Amax Gold Inc.
Key Employee Long-Term Incentive Plan filed as Exhibit (10)(d) to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997, and incorporated herein by reference.
10.7 Term Loan Agreement, dated October 31, 1995, between Amax Gold Inc.,
Fairbanks Mining, Inc., Guanaco Mining Company, Inc., Lassen Gold Mining,
Inc., Melba Creek Mining Inc., Nevada Gold Mining, Inc. and a group of
banks, filed as Exhibit 10.2 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995 and incorporated herein by
reference; Amendment to Term Loan Agreement dated December 7, 1995;
Amendment to Term Loan Agreement dated March 19, 1996; and Cyprus Amax
Guaranty, dated as of March 19, 1996 by Cyprus Amax, in favor of the
administrative agent for the group of banks, filed as Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995
and incorporated herein by reference; Third Amendment Agreement, dated as
-51-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
of March 24, 1997, filed as Exhibit 10.8 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997, and incorporated
herein by reference.
10.8 Exploration Joint Venture Agreement, effective January 1, 1994, between
the Company and Cyprus Amax, filed as Exhibit 10.1 to the Company's
Registration Statement on Form S-3 (Registration No. 33-53963) and
incorporated herein by reference; and Amendment to Exploration Joint
Venture Agreement, dated December 29, 1995, between the Company and
Cyprus Amax, filed as Exhibit 10.8 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated herein by
reference; and Amendment to
Exploration Joint Venture Agreement dated as of December 15, 1997,
between the Company and Cyprus Amax.
10.9 Revolving Credit Agreement, dated as of April 15, 1994 between the
Company and Cyprus Amax, filed as Appendix A to the Company's Proxy
Statement for the July 26, 1994 Special Meeting of Stockholders and
incorporated herein by reference; and Amendment to Revolving Credit
Agreement, dated as of March 10, 1994, between the Company and Cyprus
Amax, filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K
for the year-ended December 31, 1994 and incorporated herein by
reference.
10.10 Loan Agreement, dated as of November 23, 1994, amended February 7 and 14,
1995, among Compania Minera Maricunga, as borrower, Amax Gold Inc. and
Bema Gold Corporation, as guarantors, and certain banks, and related
documents, as amended, filed as Exhibit 10.13 to the Company's Annual
Report on Form 10-K for the year-ended December 31, 1994 and incorporated
herein by reference; as amended by Letter Agreement, dated as of November
1, 1996, and Letter Agreement, dated as of December 19, 1996, filed as
Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference.
10.11 Credit Agreement, dated as of March 19, 1996, between the Company and
Cyprus Amax; Guaranty Fee Agreement, dated as of March 19, 1996, between
the Company and Cyprus Amax; and Reimbursement Agreement, dated as of
March 19, 1996, between the Company and Cyprus Amax filed as Exhibit
10.12 to the Company's Annual Report on Form 10-K for the year-ended
December 31, 1995 and incorporated herein by reference; Amendment
Agreement dated October 31, 1996, amending the Credit Agreement dated
March 19, 1996 between the Company and Cyprus Amax, filed as Exhibit
(10b) to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996 and incorporated herein by reference.
10.12 Services Agreement, dated as of January 1, 1994, between the Company and
Cyprus Amax, filed as Exhibit 10.13 to the Company's Annual Report on
Form 10-K for the year-ended December 31, 1995 and incorporated herein by
reference.
10.13 Amended and Restated Agreement and Plan of Merger and Reorganization,
dated as of October 9, 1996 among the Company, Amax Russia Corporation,
Cyprus Amax, Cyprus Gold Company and Cyprus Magadan Gold Company, filed
as Exhibit (10a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated herein by reference.
10.14 Loan Agreement, dated as of May 1, 1997, between Alaska Development
Export Authority and Fairbanks Gold Mining, Inc.; Reimbursement
Agreement, dated as of May 1, 1997, between Fairbanks Gold Mining, Inc.
And Union Bank of Switzerland, New York Branch; Guaranty, dated May 22,
1997, of Cyprus Amax in favor of Union Bank of Switzerland, New York
Branch; and Reimbursement Agreement, dated May 22, 1997, of the Company
in favor of Cyprus Amax, filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997, and incorporated
herein by reference.
10.15 Finance Agreement, dated as of June 30, 1995, between Omolon and Overseas
Private Investment Corporation ("OPIC"); First Amendment to Finance
Agreement, dated as of April 22, 1996, between Omolon Gold Mining Company
and OPIC, amending the Finance Agreement dated June 30, 1995 between
Omolon and OPIC; and Second Amendment to Finance Agreement, dated as of
January 28, 1997, between Omolon and OPIC, amending the Finance Agreement
dated June 30, 1995 between Omolon and OPIC,
-52-
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997, and incorporated herein by reference.
10.16 Loan Agreement, dated as of June 30, 1995, between Omolon and European
Bank for Reconstruction and Development ("EBRD"); Amendment Agreement to
Loan Agreement, dated November 7, 1995, between Omolon and EBRD, amending
the Loan Agreement dated June 30, 1995 between Omolon and EBRD; Second
Amendment Agreement to Loan Agreement, dated April 22, 1996, between
Omolon and EBRD, amending the Loan Agreement dated June 30, 1995 between
Omolon and EBRD; and Third Amendment to Loan Agreement, dated November
20, 1996, between Omolon and EBRD, amending the Loan Agreement dated as
of June 30, 1995 between Omolon and EBRD, filed as Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, and incorporated herein by reference.
10.17 Support Agreement, dated as of August 30, 1995, among Omolon, Cyprus
Amax, Cyprus Magadan Gold Corporation, EBRD and OPIC; and Amendment
Agreement to Support Agreement, dated as of January 28, 1997 among
Omolon, Cyprus Amax, Cyprus Magadan Gold Corporation and EBRD, amending
the Support Agreement dated as of August 30, 1995 among the parties,
filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997, and incorporated herein by reference.
10.18 Guaranty Agreement, dated as of August 30, 1995, among Cyprus Amax,
EBRD and OPIC; and Amendment Agreement to Cyprus Amax Guaranty, dated
January 30, 1997, among Cyprus Amax, EBRD and OPIC, amending the Guaranty
Agreement dated as of August 30, 1995 among the parties, filed as Exhibit
10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997, and incorporated herein by reference.
10.19 Loan Agreement, dated as of November 29, 1996, between Omolon and ABN
Amro Bank (Moscow) Ltd.; and Guaranty and Indemnity Agreement, dated as
of November 26, 1996, by Cyprus Amax in favor of ABN Amro Bank NV, filed
as Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997, and incorporated herein by reference.
10.20 Agreement, dated April 8, 197, between Omolon Gold Mining Company and ABN
Amro Bank (Moscow) Ltd.; and Guaranty and Indemnity Agreement, dated as
of April 1, 1997, by Cyprus Amax in favor of ABN Amro Bank NV, filed as
Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997, and incorporated herein by reference.
10.21 Loan Agreement, dated as of December 18, 1997, between Amax Gold Inc.,
various banks and other financial institutions and Standard Bank London
Limited as the agent for the lenders.
10.22 Guaranty Agreement, dated as of December 18, 1997, between Cyprus Amax
Minerals Company and Standard Bank London Limited.
10.23 Agreement dated March 24, 1997 between the Company and Leland O. Erdahl,
filed as Exhibit (10)(a) to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997, and incorporated herein by
reference. Amendment dated September 11, 1997 to Agreement between the
Company and Leland O. Erdahl, filed as Exhibit (10)(a) to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997,
and incorporated herein by reference.
10.24 Amax Gold Inc. Separation Plan for Key Employees, effective March 5,
1997.
10.25 Merger Agreement among Kinross Gold Corporation, Kinross Merger
Corporation, and Amax Gold Inc., dated February 9, 1998.
10.26 Stockholder Agreement dated as of February 9, 1998, among Kinross Gold
Corporation, Kinross Merger Corporation, Cyprus Amax Minerals Company and
each of the other persons identified on Exhibit A.
10.27 Restructuring Agreement dated as of December 18, 1997, between COMPANIA
MINERA MARICUNGA as borrower and the other parties and Banks named
therein.
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AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
21 Subsidiaries of the Company.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Mineral Resources Development, Inc.
23.3 Consent of Derry, Michner, Booth & Wahl.
27 Financial Data Schedule.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of 1997.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMAX GOLD INC.
Date: February 11, 1998 By /s/ Leland O. Erdahl
-----------------------------------------
Leland O. Erdahl
Vice President and Chief Financing Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on February 11, 1998.
Signature Title
- -------------------------------------- --------------------------------------
/s/ Milton H. Ward Chairman of the Board, Chief
- -------------------------------------- Executive Officer (principal
Milton H. Ward executive officer) and Director
/s/ Leland O. Erdahl Vice President, Chief Financial
- -------------------------------------- Officer (principal
Leland O. Erdahl financial officer) and Director
/s/ David L. Mueller Vice President, Controller and
- -------------------------------------- Assistant Secretary (principal
David L. Mueller accounting officer)
/s/ Richard H. Block Director
- --------------------------------------
Richard H. Block
/s/ Allen Born Director
- --------------------------------------
Allen Born
/s/ Gerald J. Malys Director
- --------------------------------------
Gerald J. Malys
/s/ Vernon F. Taylor, Jr. Director
- --------------------------------------
Vernon F. Taylor, Jr.
/s/ Russell L. Wood Director
- --------------------------------------
Russell L. Wood
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