SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
Commission File Number 0-16019
INTERNATIONAL PRECIOUS METALS CORPORATION
-----------------------------------------
(Exact name of Registrant as specified in its Charter)
Province of Ontario, Canada
---------------------------
(Jurisdiction of formation)
86-0766060
----------
Employer Identification Number
4633 South 36th Place, Phoenix, Arizona 85040
---------------------------------------------
(Address of principal executive offices)
(602) 414-1830
--------------
(Registrant's telephone number)
The registrant had 20,948,534 outstanding common shares as of
November 13, 1997
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___.
Currency
All dollar amounts set forth in this report are in Canadian dollars, except
where otherwise indicated. The following table sets forth the rates of exchange
for (i)the Canadian dollar, expressed in United States dollars, in effect at the
end of each of the periods indicated; (ii) the average of exchange rates in
effect on the last day of each month during such periods; and (iii) the high and
low exchange rates during each such periods, in each case based on the noon
buying rate in New York City for cable transfers in Canadian dollars as
certified for customs purposes by the Federal Reserve Bank of New York:
Nine Months
Ended
Sept 30 Year ended December 31,
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
Rate at end of period $0.7234 $0.7301 $ 0.7323 $ 0.7128 $ 0.7544 $ 0.7865
Average rate during period $0.7253 0.7334 0.7305 0.73 0.7729 0.8235
High $0.7487 0.7515 0.7527 0.7632 0.8046 0.8757
Low $0.7145 0.7215 0.7023 0.7103 0.7439 0.7761
On November 7, 1997, the noon buying rate for $1.00 Canadian was $.7095 United
States
2
INTERNATIONAL PRECIOUS METALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Canadian Dollars)
(Unaudited)
December 31, September 30
1996 1997
----------------- ------------------
ASSETS
CURRENT ASSETS
Cash $ 2,644,000 $ 815,000
Other assets (Note 5) 1,340,000 2,218,000
----------------- ------------------
Total current assets 3,984,000 3,033,000
----------------- ------------------
OTHER ASSETS
Acquisition of mineral rights (Note 6a) - 38,627,000
Deferred mineral exploration expenditures (Note 6) 13,050,000 17,116,000
Capital assets (Note 7) 1,030,000 1,822,000
----------------- ------------------
Total other assets 14,080,000 57,565,000
----------------- ------------------
Total assets $ 18,064,000 $ 60,598,000
================= ==================
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued charges $ 553,000 $ 1,514,000
Accrued interest payable - 443,000
Debentures (Note 8) 798,000 251,000
Vehicle and equipment loans 69,000 216,000
----------------- ------------------
Total current liabilities 1,420,000 2,424,000
----------------- ------------------
LONG TERM LIABILITIES
Vehicle and equipment loans 231,000 -
Deferred premium on flow-through shares 464,000 464,000
----------------- ------------------
Total long-term liabilities 695,000 464,000
----------------- ------------------
Total liabilities 2,115,000 2,888,000
----------------- ------------------
CONTINGENCIES AND COMMITMENTS (Note 10) - 24,068,000
SHAREHOLDERS' EQUITY
Share capital (Note 10) 47,590,000 68,733,000
Deficit (31,641,000) (35,091,000)
----------------- ------------------
Total stockholders' equity 15,949,000 33,642,000
----------------- ------------------
Total liabilities and stockholders' equity $ 18,064,000 $ 60,598,000
================= ==================
3
INTERNATIONAL PRECIOUS METALS CORPORATION
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(In Canadian Dollars)
(Unaudited)
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
1996 1997 1996 1997
----------------- ----------------- ------------------ -----------------
INCOME
Interest Income $ 39,000 $ 46,000 $ 74,000 $ 146,000
----------------- ----------------- ------------------ -----------------
Total Income 39,000 46,000 74,000 146,000
----------------- ----------------- ------------------ -----------------
EXPENSES
Debenture interest 6,000 - - -
Administrative 329,000 1,159,000 728,000 3,337,000
Amortization 43,000 105,000 - 259,000
----------------- ----------------- ------------------ -----------------
Total expenses 378,000 1,264,000 728,000 3,596,000
----------------- ----------------- ------------------ -----------------
LOSS FOR THE PERIOD 339,000 1,218,000 654,000 3,450,000
DEFICIT, BEGINNING OF PERIOD 29,496,000 33,337,000 29,181,000 31,105,000
COSTS OF ISSUING SHARES 356,000 536,000 356,000 536,000
----------------- ----------------- ------------------ -----------------
DEFICIT, END OF PERIOD 30,191,000 35,091,000 30,191,000 35,091,000
LOSS PER SHARE (Note 11) $ 0.03 $ 0.07 $ 0.06 $ 0.19
================= ================= ================== =================
Weighted Average Number of
Common Shares Outstanding 10,875,705 17,886,423 10,875,705 17,886,423
================= ================= ================== =================
4
INTERNATIONAL PRECIOUS METALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In Canadian Dollars)
(Unaudited)
Nine months ended
September 30, September 30,
1996 1997
----------------- -----------------
NET INFLOW(OUTFLOW) OF CASH RELATED TO
THE FOLLOWING ACTIVITIES
OPERATING:
Loss for the period from continuing operations
(less write-off of mineral exploration expenditures) $ (654,000) $(3,450,000)
Debenture and interest converted for common shares - (525,000)
Items not affecting cash (2,811,000) 259,000
----------------- -----------------
(3,465,000) (3,716,000)
----------------- -----------------
Changes in non-cash working capital components affecting
operations:
Prepaids, deposits and accounts receivable (217,000) 113,000
Accounts payable and accrued charges 46,000 1,159,000
----------------- -----------------
(171,000) 1,272,000
----------------- -----------------
Mineral exploration expenditures (2,407,000) (4,066,000)
----------------- -----------------
Cash used in continuing operations (2,578,000) (2,794,000)
Discontinued petroleum operations - -
----------------- -----------------
Cash used in operating activities (6,043,000) (6,510,000)
INVESTING:
Investment in related companies - (1,359,000)
Related party advances (20,000) 368,000
Furniture, fixtures, and capital assets (1,077,000) (1,051,000)
Acquisition of mineral rights to property - (38,627,000)
----------------- -----------------
Cash (used in) provided by investing activities (1,097,000) (40,669,000)
----------------- -----------------
FINANCING:
Debentures - (547,000)
Loan for acquisition of mineral rights - 23,625,000
Issue of shares for cash (net of security deposit) 8,872,000 21,668,000
Costs of issuing shares (357,000) -
Vehicle and equipment loans - 604,000
----------------- -----------------
Cash provided by financing activities 8,515,000 45,350,000
----------------- -----------------
INCREASE (DECREASE) IN CASH DURING PERIOD 1,375,000 (1,829,000)
CASH, BEGINNING OF PERIOD 480,000 2,644,000
----------------- -----------------
CASH, END OF PERIOD $ 1,855,000 $ 815,000
================= =================
5
INTERNATIONAL PRECIOUS METALS CORPORATION
CONSOLIDATED STATEMENTS OF DEFERRED MINERAL EXPLORATION EXPENDITURES
(In Canadian Dollars)
(Unaudited)
Nine months ended
September 30, September 30,
1996 1997
--------------------- ---------------------
PROPERTY
- --------
United States of America
------------------------
Engineering & Consulting $ 2,354,000 $ 3,115,000
Exploration - 762,000
Option Fees 4,000 21,000
--------------------- ---------------------
Total $ 2,358,000 $ 3,898,000
--------------------- ---------------------
Canada
-------------
Engineering & Consulting - -
Exploration 49,000 168,000
Option Fees - -
--------------------- ---------------------
Total 49,000 168,000
--------------------- ---------------------
Grand Total $ 2,407,000 $ 4,066,000
Cumulative Mineral Property Costs
Deferred, beginning of period 5,851,000 13,050,000
--------------------- ---------------------
Cumulative Mineral Property Costs
Deferred, end of period $ 8,258,000 $ 17,116,000
===================== =====================
6
INTERNATIONAL PRECIOUS METALS CORPORATION
Notes to Consolidated Financial Statements
1. Presentation of Interim Information
In the opinion of the management of International Precious Metals
Corporation ("IPM" or the "Company"), the accompanying unaudited condensed
consolidated financial statements include all normal adjustments considered
necessary to present fairly the financial position as of September 30,
1997, and cash flows and the results of operations for the nine months
ended September 30, 1996 and 1997. Interim results are not necessarily
indicative of results for a full year.
The condensed consolidated financial statements and notes are presented as
permitted by Form 10-Q and do not contain certain information included in
the Company's audited financial statements and notes for the year ended
December 31, 1996.
2. Business Organization
The Company is amalgamated under the laws of the Province of Ontario,
Canada. In 1995 the Company changed its name from International Platinum
Corporation to International Precious Metals Corporation. On October 23,
1995, The Company consolidated (reverse split) its issued and outstanding
capital by changing each common share into one-tenth of a common share.
Information pertaining to share capital, options, warrants and loss per
share for 1996 and 1997 have been stated on a post consolidated (reverse
split) basis.
3. Continuation of business
These consolidated financial statements have been prepared on a going
concern basis which assumes the realization of assets and the satisfaction
of liabilities and commitments in the normal course of business.
The Company is a development stage corporation and as all of the Company's
properties are presently in the exploration stage, the continuation of the
Company as a going concern is dependent upon its ability to obtain equity
financing to permit the further exploration and development of its
properties.
As well, it is the intention of the Company's management to seek joint
venture partners for several of the Company's properties. To achieve this
end, management has prepared detailed reports on each of the properties and
engaged independent consultants to market the Company's properties.
The consolidated financial statements do not give effect to adjustments, if
any, that may be necessary should the Company be unable to continue as a
going concern and be required to realize its assets and liquidate its
liabilities in other than the normal course of business. In this event, the
amounts realized on disposal of its assets may be substantially less than
their recorded amounts.
7
INTERNATIONAL PRECIOUS METALS CORPORATION
Notes to Consolidated Financial Statements
4. Significant accounting policies
(a) Basis of financial statement presentation
The accompanying consolidated financial statements are prepared in
accordance with the accounting principals generally accepted in Canada. The
major difference between these accounting principles and those generally
accepted in the United States is discussed in Note 11 of the Notes to the
Consolidated Financial Statements. These financial statements include the
accounts of its subsidiary, 1020632 Ontario Inc. (Georgia Lake).
Additionally, the accounts of Hellens-Eplett Mining Inc., Jamestown
Platinum (Pty) Limited and South Africa Mining (Pty) Limited, corporate
exploration joint ventures, have been included using the proportionate
consolidation method. The exploration operations of these joint ventures
were discontinued in 1995.
(b) Deferred mineral exploration expenditures
All direct expenditures related to the exploration and development of
mineral properties in which the Company has a continuing interest are
deferred, pending the determination of the economic viability of the
project. Costs related to projects terminated or abandoned are written-off;
costs related to successful projects will be capitalized and amortized over
the estimated life of the projects using a unit of production method.
(c) Deferred premium on flow through shares
The premium received on flow-through shares, representing the excess of the
price paid by an investor for flow-through shares over the market value
stipulated in the offering memorandum with respect to such shares, has been
deferred and is written-off or amortized as the related projects on which
the flow-through funds were expended are written-off or amortized.
(d) Amortization
Capital assets are stated at cost. Amortization is recorded at rates
calculated to charge the cost of vehicles and office equipment and fixtures
to operations over their estimated useful lives of five years on a straight
line basis. Amortization relating to machinery and equipment used directly
in the exploration of projects has been deferred. Maintenance and repairs
are charged to operations as incurred. Gains and losses on disposals are
calculated on the remaining net book value at the time of disposal and
included in income.
8
INTERNATIONAL PRECIOUS METALS CORPORATION
Notes to Consolidated Financial Statements
(e) Foreign currency translation
Monetary assets and liabilities in foreign currencies have been translated
into Canadian dollars at the exchange rates prevailing at the balance sheet
date. Other assets and liabilities, revenue and expenses arising from
foreign currency transactions have been translated at the exchange rate
prevailing at the date of the transaction. Gains and losses arising from
these translation policies are included in income.
5. Other assets
September 30
------------------
Related parties 1996 1997
- Advances (Note 9) $ 323,000 $ --
- Investment in common shares of
MG Gold Corporation, at cost -- 707,000
- Investment in common shares of
Namibian Copper Mines Inc., at cost 409,000 1,061,000
Prepaids, deposits and sundry receivables 440,000 450,000
------- -------
$1,172,000 $2,218,000
========== ==========
The advances to related parties are unsecured, non-interest bearing and
have no specific terms of repayment.
9
INTERNATIONAL PRECIOUS METALS CORPORATION
Notes to Consolidated Financial Statements
6. Deferred mineral exploration expenditures
Presented below is a discussion of the status of each of the Company's
significant mineral properties.
(a) Black Rock and Black Rock Extended
The Company holds rights to unpatented mining claims on federal land
administered by the U.S. Bureau of Land Management located approximately 92
miles west of Phoenix, Arizona (the "Black Rock Property"). On May 9, 1997,
the Company entered into an agreement (the "Property Purchase Agreement")
with Omega Investment Corporation, an affiliate of Phoenix International
Mining, Inc.("Omega"), pursuant to which International Precious Metals of
Arizona ("IPMA"), a wholly owned subsidiary of the Company, agreed to pay
an aggregate of US$27,000,000 to Omega, consisting of US$17,000,000 in cash
and 1,000,000 common shares of the Company valued at US$10.00 per share, to
acquire all of the rights to the unpatented mining claims comprising the
Black Rock Property which the Company does not presently own. As the first
two payments under the Property Purchase Agreement, IPMA and the Company on
May 9, 1997 paid to Omega US$500,000 plus 4,000,000 common shares (of which
3,000,000 common shares will be held by Omega to secure the obligation of
IPMA and the Company to make the second payment). Pursuant to an agreement
made by the Company, Omega and IPMA as of July 29, 1997 (the "Extension
Agreement"), (i) the last date for the second payment was extended from
July 15, 1997 to October 15, 1997, (ii) the Company and IPMA will pay to
Omega US$5,000 plus a number (initially 500 and increasing periodically to
1,500 as specified below) of common shares of the Company per day for each
day from July 15, 1997 to the date of the second payment and (iii) the
Company and IPMA will issue and transfer to Omega an additional 3,000,000
common shares of the Company as further collateral security for the second
payment. The number of common shares payable is 500 for each day from July
15 through August 15, 1,000 for each day from August 16 through September
15, and 1,500 for each day from September 16 through October 15. IPM is
currently negotiating with Omega for an extension of time for the second
payment. Upon receipt of the second payment, Omega is obligated to return
3,000,000 common shares of the Company. (The Extension Agreement is filed
as an exhibit to the Company's Report on Form 10-Q for the quarter ended
June 30, 1997 and is incorporated herein by reference, and the descriptions
of the Extension Agreement herein are qualified by reference to the full
text of the Extension Agreement.) The Company expects to raise cash for the
second payment through private placements of its securities, but its
ability to do so will depend on factors beyond its control, including
economic and market conditions.
In May 1997, the Company acquired rights to an additional 40 square miles
north of and contiguous to the Black Rock Property by staking and filing
lode claims (each relating to a 40-acre area) and placer claims (each
relating to a 160- acre area) with respect to that area. Aerial
photography, regional and detailed geological mapping, sampling, a
geophysical survey and compilation of existing and new data is currently
under way to generate potential drill targets in the area.
The Company is continuously striving to optimize its gold and PGM recovery
techniques and advancing to large-scale testing. This test work is also
invaluable with regard to
10
INTERNATIONAL PRECIOUS METALS CORPORATION
Notes to Consolidated Financial Statements
establishing a head grade of the Black Rock Property mineralization. To
that end, the Company has under development fire assay procedures on raw
Black Rock Property samples, gravity concentrates and evaporative residues
from leach solutions. The fire assay development is yielding positive
results with gold and PGM produced as physical metal prills.
Non-destructive elemental determination has been used to verify elemental
composition of the metal prills recovered by fire assay procedures.
Examples of successful fire assay procedures for gold, platinum and rhodium
are shown in the electron microphotographs and elemental spectrographs
(plotted via Emission Dispersion Spectroscopy). Fire assay will eventually
be applied toward the Black Rock Property as the "yard stick" by which all
recovery procedures will be measured regarding amenability and efficiency.
IPM has launched further drilling and exploration work on the Black Rock
Property to more fully and completely define the extent of the precious
metal deposit. The new exploration drilling began March 17, 1997. The
reverse circulation drilling, on one kilometer spacings, drilling to
bedrock, will test material in areas previously unexplored by the Company
on the property. This drilling will also provide important data on the
surrounding eight square kilometers believed to make up the larger portion
of the observed geochemical anomaly.
(b) Big Trout Lake
The Company holds an interest in 223 claims, totaling 8,920 acres, on a
property located near Big Trout Lake in northwestern Ontario, Canada,
approximately 400 miles north of Thunder Bay. An expenditure of
approximately $200,000 is necessary to keep the property in good standing.
Since 1990, the company has limited its work on the property because of
financial constraints. Joint venture partners are being sought to assist
with the exploration funding for this prospect.
(c) Eagle Lake
The Company holds 327 claims, consisting of 10,320 acres, located 20 miles
west-southwest of Dryden, Ontario, Canada. All of these claims are in good
standing at least until 1999. Drilling from lake ice, 600 meters of core
drilling was completed in early 1997. Each of the two drill holes
intersected massive sulfides up to 10 meters in width, with no visible
precious metals. One distinct zone of sphalerite (zinc) with a true width
of 0.9 meters was also intersected. Assays are yet to be received. The
expenditures upon these claims will enable them to be held in good
standing. The Company has done limited work on the property since 1990, but
still holds an interest in the ground and, subject
11
INTERNATIONAL PRECIOUS METALS CORPORATION
Notes to Consolidated Financial Statements
to the availability of funds, plans to explore the property when conditions
are favorable.
(d) Georgia Lake
The Company holds 14 claims covering 710.7 acres located at the west end of
Georgia Lake, 144 kilometers northeast of Thunder Bay, in northwestern
Ontario, Canada. The claims are held under fourteen 10-year leases which
are in good standing until June 1, 2001 and thirteen additional leases
which are in default. This property is held by the Company as a strategic
reserve as it expects lithium to become of interest and value with the
advent of electric autos. Subject to the availability of funds the Company
intends to undertake further exploration on the property through additional
geological and other research and analysis, and, to the extent consistent
with this analysis, the design and implementation of a core drilling
program.
(e) Gold Hill
In 1995, the Company entered into a four year agreement for the rights to
explore the Gold Hill property. Additionally, within the terms of the
agreement the Company may purchase the rights to the property for
US$1,000,000
7. Capital assets
Accumulated
Amortization at Net
September 30, September 30,
Cost 1997 1997
--------------------------------------------
Machinery and equipment $734,000 $164,000 $570,000
Vehicles 734,000 118,000 616,000
Office Equipment and fixtures 790,000 154,000 636,000
--------------------------------------------
$2,258,000 $436,000 $1,822,000
============================================
At December 31, 1996, the costs of the Company's machinery and equipment,
vehicles and office equipment and fixtures, net of accumulated
amortization, were $337,000, $311,000 and $382,000, respectively.
12
INTERNATIONAL PRECIOUS METALS CORPORATION
Notes to Consolidated Financial Statements
8. Debentures
Accounts payable includes $186,000 in unpaid debenture interest, including
interest on a debenture discharged in 1994.
9. Related party transactions
Other assets (Note 5) relate to amounts from and investments in
corporations which have senior management in common with the Company.
In addition to items disclosed separately in the financial statements, the
following transactions took place in the normal course of business with
related parties. These transactions are measured at the exchange amount,
which is the amount of consideration established and agreed to by the
related parties.
(a) During the quarter ended September 30, 1997, the Company incurred legal
and secretarial fees provided by directors and senior officers of the
Company amounting to $34,000 ( 1996 $20,000). These fees have been charged
to administrative expense.
(b) During the quarter ended September 30, 1997, consulting fees were
charged by directors and senior officers of the Company amounting to
$139,000 (1996 $90,000). Of the total fees, $93,000 (1996 $64,000) has been
charged to administrative expenses and $46,000 (1996 $26,000) pertaining to
time spent overseeing the Black Rock exploration has been included in the
Company's deferred mineral exploration expenditures.
10. Contingencies
(a) Interest on debenture
In 1994, the Company negotiated a settlement of a $500,000 debenture plus a
portion of interest owing. As of September 30, 1997, the amount of the
interest owing is currently in dispute due to alternate methods used in
interest calculation. The Company is negotiating a settlement of this
dispute and an additional amount of $75,000 may become payable.
(b) Recovery of deferred mineral exploration expenditures
The recoverability of deferred expenditures is dependent upon various
factors, including the existence of economically recoverable reserves, the
ability to obtain the necessary financing to complete development of future
profitable operations or profitable disposal of the properties. Pending the
profitable operation or disposal of a property, cash requirements must be
provided by future debt or equity financing.
13
INTERNATIONAL PRECIOUS METALS CORPORATION
Notes to Consolidated Financial Statements
(c) Shareholders' Equity includes 3,000,000 common shares issued to Omega
pursuant to the terms and conditions of the Property Purchase Agreement, as
amended by the Extension Agreement. These shares are being held by Omega to
secure the payment by IPM of the balance of the purchase price for the
Black Rock Property and will be released to IPM for cancellation upon IPM
making such payment.
11. Differences between accounting principles generally accepted in Canada and
those in the United States
The financial statements are prepared in accordance with accounting
principles generally accepted in Canada. In these financial statements, the
major differences between accounting principles generally accepted in
Canada ("Canadian GAAP") and those in the United States ("US GAAP") are as
follows:
(a) The Company follows the practice of charging share issue cost to the
deficit account. Under U.S. GAAP, such costs would be charged to the share
capital account. Although this difference does not affect net shareholders'
equity, under U.S. GAAP the Company's share capital and deficit accounts
would be reduced as indicated below.
(b) The Company follows the practice of accounting for the premium on
flow-through shares as a deferred credit which is written-off or amortized
as the related project expenditures on which the flow through funds are
expended, are written off or amortized. Under U.S. GAAP, this premium would
be treated as a reduction of deferred mineral exploration expenditures.
Although this difference does not affect net loss, the deferred premium on
flow-through shares would be eliminated and deferred mineral exploration
expenditures would be reduced as indicated below.
(c) A business combination in 1986 was accounted for using the purchase
method of accounting. Under U.S. GAAP, this business combination would have
been accounted for as a pooling of interests. This difference does not
affect net loss for the nine months ended September 30, 1996 and 1997. The
deferred exploration expenditures would have been reduced by $605,000 as at
September 30, 1996 and 1997, and the Company's share capital account would
have been reduced by $676,000 as at September 30, 1996 and 1997.
(d) U.S. GAAP does not follow the practice of deferral of period costs such
as certain administrative expenses. This difference would have increased
the net loss and decreased the deferred exploration expenditures by
$290,000 for the year ended December 31, 1995. This difference does not
affect net loss for the nine months ending September 30, 1996 and 1997.
14
INTERNATIONAL PRECIOUS METALS CORPORATION
Notes to Consolidated Financial Statements
(a) Balance Sheet
September 30
------------------
1996 1997
---- ----
Deferred mineral exploration expenditures
Under Canadian GAAP $ 7,598,000 $17,116,000
Premium on flow-through shares - (b) above (464,000) (464,000)
Pooling - (c) above (605,000) (605,000)
Period costs - (d) above ---------- -----------
Under U.S. GAAP $6,529,000 $16,047,000
========== ===========
Deferred premium on flow through shares
Under Canadian GAAP $464,000 $464,000
Applied to deferred mineral exploration
expenditure - (b) above (464,000) (464,000)
-------- --------
Under U.S. GAAP $-- $--
======== ========
Share capital
Under Canadian GAAP $35,842,000 $68,733,000
Share issue Costs - (a) above -- (536,000)
Pooling - (c) above (676,000) (676,000)
-------- --------
Under U.S. GAAP $35,166,000 $67,521,000
=========== ===========
Deficit
Under Canadian GAAP $29,000,000 $35,091,000
Share issue costs - (a) above -- (536,000)
Pooling - (c) above (71,000) (71,000
Period costs - (d) above -- --
------- -------
Under U.S. GAAP $28,929,000 $34,484,000
=========== ===========
15
(b) Statement of loss and deficit:
September 30
------------------
1996 1997
---- ----
Net loss for the period under Canadian GAAP $350,000 $2,232,000
Pooling Adjustment - (c) above -- --
Period cost adjustment - (d) above -- --
------- ----------
Net loss for the period under U.S. GAAP $350,000 $2,232,000
======== ==========
Loss per share (Note 9) - under U.S. GAAP $.01 $.05
==== ====
ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, included elsewhere
herein.
Liquidity, Capital Resources and Limited Operations
From inception, July 22, 1980, the Company has financed virtually all of
its exploration activities through various equity financings, which
continue to be the Company's major
16
source of capital. Interest income realized from excess cash balances has
been applied to the Company's administrative costs. Exploration for
precious metals continues to be the Company's major activity. The Company
acquires its interests in various properties either by its own grass roots
exploration efforts, or by participation in the exploration of properties
owned by others, in which case the Company may earn an interest in the
properties by the expenditure of its funds on the properties or by making
payments or issuing its shares to the property owner. Conversely, the
Company may allow others to earn an interest in its properties by the
expenditure of their funds on the exploration of the Company's properties.
In 1996, proceeds from shares issued totaled $12,841,000 and exploration
activities resulted in expenditures of $3,290,000. At September 30, 1997,
the Company has cash resources of approximately $815,000.
Of the 20,913,534 common shares of the Company outstanding on September 30,
1997, 459,473 were "flow-through" shares. "Flow-through" shares are common
shares of the Company issued to investors under the terms of agreements
which provide that the funds received will be expended on Canadian
Explorations Expenditures ("CEE"), as defined in the Income Tax Act Canada,
and that unexpended funds will be held in trust. The CEE so incurred are
deductible for income tax purposes only by the shareholder and,
accordingly, are not available to the Company.
At September 30, 1997, the Company had working capital surplus of $609,000.
Current assets were $3,033,000, compared to current liabilities of
$2,424,000, for a current ratio of 1.25 to 1. This compares to current
assets of $3,984,000, and current liabilities of $1,420.000 at December 31,
1996, resulting in a current ratio of 3 to 1.
As discussed in Note 6(a), the Company is obligated to make a payment of
US$16,500,000 and expects to raise cash for such payment through private
placement of its securities. Other than such payment, the Company's
liquidity needs are generally being met from its available cash resources.
The Company in 1996 and 1997 made non-interest bearing loans to Namibian
Copper Mines Inc.("Namibian") to cover the operating expenses of Namibian,
including the salaries of its executive officers. At September 30, 1997,
the amount owed was converted to an investment in Namibian. The Company
owns 1,157,990 shares in Namibian. Namibian shares office space with the
Company. Several of the executive officers of Namibian also are executive
officers of the Company.
The Company is in default on an outstanding debenture in the amount of
$250,000 and is negotiating with the holder of the debenture. A failure of
such negotiations could have a negative effect on the liquidity and capital
resources of the Company.
17
Results of Operations
1997 Compared to 1996
---------------------
The loss for the nine months ended September 30, 1997 of $3,449,000 was
larger than the loss for 1996 of $654,000 due primarily to increases in
administrative expenses.
During 1996, the Company: (i) issued 2,484,000 common shares under private
placements ranging from $3.00 to $3.45 per share, resulting in proceeds of
$8,244,000; (ii) issued 2,103,000 common shares pursuant to the exercise of
warrants at prices ranging from $1.00 to $3.80 per share for cash
consideration of $3,004,000; (iii) issued 336,000 common shares under
private placements and pursuant to the exercise at prices ranging from
$1.20 to $3.00 per share for consideration of $792,000 to retire debentures
and interest; (iv) issued 424,475 common shares pursuant to the exercise of
options at prices ranging from $1.45 to $3.28 per share for cash
consideration of $773,000, and 15,834 common shares at prices ranging from
$1.45 to $2.50 per share pursuant to the exercise of options for services
valued at $27,000; and issued warrants providing the right to purchase of
2,700,000 common shares at prices ranging from US$2.82 to US$4.40 per share
in connection with the private placements.
During 1996 the Company repaid US$2,000,000 of debentures of a total of
US$2,400,000 of debentures issued to Phoenix in 1995.
Administration costs of $3,325,000 for the nine months ended September 30,
1997 have increased from $728,000 for the nine months ended September 30,
1996, primarily because of increased consulting fees and increased
compensation and office expenses relating to a major expansion of
exploration activities by the Company.
Impact of Inflation on the Company
The Company has no control over the prices of the precious metals for which
it explores. The prices of these commodities are determined by world
markets and are subject to volatile fluctuation over short periods of time.
To date, the major impact of inflation on the Company has been with respect
to costs which have increased moderately in recent years in North America,
where most of the Company's activities take place.
18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On April 28, 1997, IPM commenced legal proceedings against the Arizona
Department of Mines and Mineral Resources and Messrs. Nyal Niemuth and
Mason Coggin (collectively the "Department") claiming damages in the
approximate amount of $25,000,000. In conjunction with these legal
proceedings, on August 4, 1997, IPM filed an additional action seeking a
permanent injunction preventing the Department from commenting on the
Company's mining activities or the viability of the Company's Black Rock
Property. IPM was granted a permanent injunction on September 2, 1997.
Item 2. Changes in Securities
The Company in the third quarter of 1997, in a transaction pursuant to
Section 4(2) of the Securities Act, incurred an obligation to issue to
Omega up to 3,091,500 common shares of the Company pursuant to the
Extension Agreement.
Item 6: Exhibits and reports on Form 8-K
(a) The following exhibits are filed with this report:
27 Financial Data Schedule
(b) No reports were filed on Form 8-K this quarter.
19
SIGNATURES
Pursuant to the requirements 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.
INTERNATIONAL PRECIOUS METALS CORPORATION
November 14, 1997
/s/ Billie J. Allred
--------------------
Billie J. Allred
Chief Financial Officer
November 14, 1997
/s/Tanya Nelson
---------------
Tanya Nelson
Chief Accounting Officer
20
EXHIBIT INDEX
Exhibit Description Page
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27 Financial Data Schedule