SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 17, 1995
Amax Gold Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 1-9620 061199974
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(State or other jurisdiction (Commission (IRS employer
of incorporation) File No.) Identification No.)
9100 East Mineral Circle, Englewood, Colorado 80112
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number,
including area code (303) 643-5500
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ITEM 5. OTHER EVENTS.
The Registrant may, at its option, report under this item
any events, with respect to which information is not otherwise called
for by this form, that the Registrant deems of importance to security
holders.
On October 17, 1995, the Registrant and Cyprus Amax Minerals
Company ("Cyprus Amax") announced that the Registrant will acquire,
subject to certain conditions, from Cyprus Amax its 50% interest in
the Kubaka gold project, located in the Magadan Region of the Russian
Federation. The Registrant will acquire the stock of Cyprus Magadan
Gold Corporation, a Delaware corporation wholly-owned by Cyprus Amax
("Cyprus Magadan"), which holds a 50% interest in Omolon Gold Mining
Company, a Russian closed joint stock company ("Omolon"), which in
turn holds a license to mine the Kubaka gold deposit and rights to
explore and develop the Evenskoye property. The other 50% of Omolon
is owned by Russian entities: Magadan Gold and Silver Joint Stock
Company, Geometal Joint Stock Gold Mining Company, Dukatsky Mining and
Beneficiation Complex, Elektrum Limited Liability Company, Rossiisky
Kredit Commercial Bank, and the Association of Native Peoples of the
Severo-Evensk District.
The purchase price will be payable in Common Stock, par
value $.01 per share (the "Common Stock"), of the Registrant as
follows: (i) $70 million payable at the closing of the acquisition by
the Company's issuance of 11,789,474 shares of Common Stock, valued at
$5.9375 per share (the average closing price for the ten trading days
preceding the public announcement); (ii) $25 million payable upon
commencement of commercial production at the Kubaka Project by the
Company's issuance of 4,210,526 shares of Common Stock, valued at
$5.9375 per share as calculated above; and (iii) $10 per ounce of the
Company's pro rata share of proven and probable gold reserves in the
event the Company (through Omolon or otherwise) acquires, on or before
June 30, 2004, the right to mine other deposits in the Russian
Federation (outside the area of the license), the exploration of which
has been funded with Omolon's exploration tax credits, which will be
payable (up to a maximum of $45 million) by the Company's issuance of
shares of Common Stock valued at the average closing price per shares
of Common Stock for the ten trading days preceding the date of
payment.
The acquisition is subject to the negotiation and execution
of definitive agreements, any necessary governmental approvals and the
approval of the stockholders of the Registrant.
The Audit Committee of the Board of Directors of the
Registrant, which is composed of the two directors who are not
associates, officers or employees of the Registrant or Cyprus Amax,
approved the terms of the acquisition at a meeting on October 12,
1995. Salomon Brothers Inc provided its opinion to the Audit
Committee that, as of such date, the acquisition was fair, from a
financial point of view, to the stockholders of the Registrant,
exclusive of Cyprus Amax. Immediately following the meeting of the
Audit Committee, the Board of Directors met and approved the terms of
the acquisition.
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The Kubaka project is located approximately 600 miles
northeast of the port city of Magadan in the Russian North East. The
Kubaka project has proven and probable ore reserves of approximately
5.0 million tons of ore, with an average grade of 0.46 ounces of gold
per ton with 2.3 million contained ounces of gold. Cyprus Magadan's
share is 50%. Also, there is an additional gold deposit at Kubaka of
0.4 million tons, with an average grade of 0.41 ounces of gold per ton
and 156,000 contained ounces of gold, and a gold and silver deposit at
Evenskoye of 2.3 million tons, with an average grade of 0.30 ounces of
gold per ton and 8.93 ounces of silver per ton, and .7 million
contained ounces of gold and 21.0 million contained ounces of silver.
Cyprus Magadan's share of these deposits is also 50%. Before the
deposits could be categorized as ore reserves, additional drilling,
metallurgical and other technical and economic feasibility analysis
would be required.
The mill at Kubaka is planned to process 1,930 tons of ore
per day. Based on currently available information, the estimated
recovery rate is 97%, the estimated cash production costs are $184 per
ounce and commercial production is scheduled to commence in the first
quarter of 1997.
The total capital cost of the Kubaka project currently is
estimated to be approximately $180 million. The shareholders of
Omolon have contributed $80 million as equity ($40 million from Cyprus
Magadan and $40 million from the Russian shareholders). The
additional $100 million will be provided under loan agreements between
Omolon and the European Bank for Reconstruction and Development and
the U.S. Overseas Private Investment Corporation. Cyprus Amax has
provided a completion guaranty which remains in place until the
project meets certain completion tests.
Following the closing of the acquisition, the Registrant
anticipates conducting exploration work in the region, and expects to
have the benefit of approximately $8 to $10 million of annual Russian
tax credits to apply toward its exploration in Russia.
On October 20, 1995, a purported derivative action was filed
in the Court of Chancery of Delaware on behalf of a purported
stockholder of the Registrant entitled Harbor Finance Partners v.
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Allen Born, et al., and v. Amax Gold, Inc., as nominal defendant,
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C.A. No. 14637, with respect to the proposed transaction described
herein. The complaint alleges that the individual defendants have
breached their fiduciary duty in connection with the sale of Cyprus
Magadan to Amax Gold, that the price to be paid for Cyprus Magadan
substantially exceeds its fair market value in an arms-length
transaction, and that by agreeing to the transaction, defendants have
wrongfully enabled Cyprus Amax to increase its control over the
Registrant and have caused the Registrant to waste its assets. The
complaint seeks, among other things, rescission of the proposed
transaction and damages in an unspecified amount. The Registrant
believes that the complaint is without merit, and the Registrant
intends to defend the matter vigorously.
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SIGNATURE
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.
Amax Gold Inc.
Date: October 30, 1995 By: Deborah J. Friedman
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Deborah J. Friedman
Vice President, General
Counsel and Secretary