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, 1994
[ ] 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 (I.R.S. Employer Identification No.)
incorporation or organization)
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:
===============================================================================
Title of each class Name of each exchange on which registered
-------------------------------------------------------------------------------
Common Stock, $0.01 par value + New York Stock Exchange, Inc.
(81,295,607 shares outstanding at + The Toronto Stock Exchange
March 24, 1995) +
$3.75 Series B Convertible Preferred + New York Stock Exchange, Inc.
Stock, $1.00 par value (1,840,000 +
shares outstanding at +
March 24, 1995) +
Warrants to Purchase Common Stock +
(4,066,649 outstanding at + American Stock Exchange
March 24, 1995) + The Toronto Stock Exchange
===============================================================================
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. _____
The aggregate market value of voting stock held by non-affiliates at the closing
price of $5 3/8 on March 24, 1995, was approximately $251,583,500.
Portions of the following document are incorporated by reference into this Form
10-K: registrant's definitive Proxy Statement for the 1995 annual meeting of
stockholders to be filed within 120 days of the end of the fiscal year.
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
Amax Gold Inc. and its subsidiaries and affiliates 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 North, Central and
South America. The Company's share of production from its operating properties
in the United States and Chile totaled 240,885 ounces during 1994, and its
share of reserves as of December 31, 1994 in all its properties totaled
approximately 7.1 million contained ounces of gold.
The Company was incorporated in Delaware in 1987 and was a subsidiary of AMAX
Inc. ("Amax") until November 1993, when Amax was merged with and into Cyprus
Minerals Company, renamed Cyprus Amax Minerals Company ("Cyprus Amax"). Cyprus
Amax owns approximately 42.2 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
Sleeper mine in Humboldt County, Nevada; a 100 percent interest in the Hayden
Hill mine in Lassen County, California; an indirect 90 percent interest in the
Guanaco mine in Chile and a 100 percent interest in the Wind Mountain mine in
Washoe County, Nevada. In addition, the Company owns a 100 percent interest in
the Fort Knox gold project near Fairbanks, Alaska; a 50 percent interest in the
Refugio gold project in Chile; and a 62.5 percent joint venture interest in the
Haile gold project in Lancaster County, South Carolina. The location of Amax
Gold's operations and properties is shown on the map on page 2, and a
description of operations and properties is set forth below.
Unless otherwise indicated, the term "reserves" when used herein refers to
proven and probable reserves, and all reserve information is given as of
December 31, 1994. Except as otherwise noted, references to "tons" and "ounces"
are to short tons of 2,000 pounds and to troy ounces of 1.097 ounces
avoirdupois, 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. Cash production costs include all
operating costs at the minesite, including overhead, proceeds taxes and
royalties, and net of credits for silver by-product.
All of the Company's operating properties are open pit mines. Except for mining
equipment under the control of the contract miner at Guanaco, 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 for
higher recovery oxide and sulfide ores.
Heap leaching is a lower cost processing method principally applied 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 impermeable
leach pads. The ore is sprinkled with a weak cyanide solution which 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 the refiner for final processing.
The terms Amax Gold and the Company when used herein may refer collectively to
the parent Amax Gold Inc. and its subsidiaries and affiliates, or to one or more
of them, depending on the context.
1
APPENDIX
Graphic and Image Material
A map depicting the location of the Company's operating mines, development
properties, and exploration projects appears on page 2. The locations are
described in "Part I, Item 1 and 2. Business and Properties."
2
SLEEPER MINE
The Sleeper mine, located in Humboldt County, Nevada approximately 28 air miles
north of Winnemucca, is 100 percent owned by Amax Gold. The operation includes
an open pit mine, mill, heap leach pads and tailings disposal facilities.
Current facilities occupy approximately 2,000 acres of unpatented mining claims.
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
for mining and processing operations at Sleeper is provided by a well system
that dewaters the pits, and potable water is supplied by truck. No royalties
are payable on production from the Sleeper mine.
The property was discovered by an Amax geologist in 1982 and development of the
mine was completed in March 1986. Gold production in 1995 is expected to
decrease from 1994 levels. Mining is expected to be completed in 1996, with
production from residual leaching continuing into 1997.
The following table presents operating data for the Sleeper mine for the years
indicated.
Sleeper Mine
Operating Data
1994 1993 1992
---------- ---------- ----------
Tons mined 18,639,300 18,608,500 18,466,900
Tons of ore milled 802,534 899,791 896,788
Average mill-head grade (oz. per ton) 0.110 0.078 0.106
Mill recovery rate (%) 80.60 72.70 82.6
Tons of ore to heap leach 5,012,600 6,327,600 8,610,600
Average grade to heap leach (oz. per ton) 0.016 0.019 0.020
Ounces of gold produced
Mill 70,750 51,257 82,962
Heap leach 36,162 48,761 61,611
---------- ---------- ----------
Total 106,912 100,018 144,573
========== ========== ==========
Ounces of silver produced 142,597 254,692 257,797
Cost per ounce of gold produced
Cash production costs* $273 $317 $223
Depreciation and depletion 92 132 99
---------- ---------- ----------
Total production costs $365 $449 $322
========== ========== ==========
*During 1994, the Company changed its method of accounting for ore loaded on
heap leach pads, which increased 1994 cash production costs at the Sleeper mine
by $5 per ounce.
3
The Sleeper deposit lies within volcanic rocks believed to have been erupted
from a volcanic field of nested calderas. Ore occurs as high-grade veins,
breccias, stockworks and as mineralized vein fragments within alluvium (mined
out). The veins are localized along steeply-dipping fractures and faults. The
following table sets forth the proven and probable reserves at the Sleeper mine.
Sleeper Mine
Proven and Probable Ore Reserves
As of December 31, 1994
Gold Gold
Tons Avg. Grade Content
(000) (oz./ton) (000 oz.)
------ ---------- ---------
Mill Ore 1,214 0.089 108
Heap Leach Ore 2,573 0.018 47
------ ---------- ---------
Total 3,787 0.041 155
====== ========== =========
Reserve estimates were prepared by the Company and verified by Mineral Resources
Development, Inc. ("MRDI") in its report dated February 1995. Reserves are
based upon an assumed gold price of $400 per ounce and a variable cut-off grade.
The net reduction of the Sleeper reserves from year-end 1993 to year-end 1994 is
95,000 contained ounces. The reduction from mining and from processing
stockpiles was 149,300 ounces offset by a gain of 54,200 ounces resulting from
production experience and increased operating efficiencies. Based on production
experience, the Company estimates that processing of ore by heap leaching will
result in ultimate gold recovery of approximately 50 percent for crushed ore and
22 percent for run-of-mine uncrushed ore.
HAYDEN HILL MINE
The Company owns 100 percent of the Hayden Hill gold mine in Lassen County,
California, approximately 120 air miles northwest of Reno, Nevada. The Hayden
Hill operation is an open pit mine with three pits, heap leach pads and tailings
disposal facilities. 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. Access to the mine is
provided by a gravel 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. Approximately 75
percent of the current reserves are subject to a gross receipts net smelter
return royalty ranging from 2 percent to 5 percent.
The mine began production in June 1992. Milling operations were discontinued in
1993 due to the lack of an adequate supply of high-grade mill ore.
4
The following table presents operating data for the Hayden Hill mine for the
years indicated.
Hayden Hill Mine
Operating Data
1994 1993 1992
---------- ---------- ----------
Tons mined 12,922,500 11,262,609 12,104,800
Tons of ore milled - 423,884 563,248
Average mill-head grade (oz. per ton) - 0.032 0.036
Mill recovery (%) - 90.7 88.7
Tons of ore to heap leach 5,132,694 4,993,742 2,619,993
Average grade to heap leach (oz. per ton) 0.017 0.017 0.017
Ounces of gold produced:
Mill - 11,570 17,191
Heap leach 65,785 41,468 11,624
---------- ---------- ----------
Total 65,785 53,038 28,815
========== ========== ==========
Ounces of silver produced 137,570 144,438 79,696
Cost per ounce of gold produced:
Cash production costs* $406 $470 $432
Depreciation and depletion 105 149 152
---------- ---------- ----------
Total production costs $511 $619 $584
========== ========== ==========
*During 1994, the Company changed its method of accounting for ore loaded on
heap leach pads, which increased 1994 cash production costs at the Hayden Hill
mine by $39 per ounce.
The Hayden Hill deposit occurs within a Miocene-aged volcaniclastic sequence,
comprised of dacitic tuffs and breccias, lahars and tuffaceous lake bed
sediments. At its base, this mine sequence has siltstones which are
intercalated with sandstones and some andesites. The dacite breccia overlies
the basal units and averages approximately 200 feet thick. The deposit is
dominantly hosted by the dacitic breccia and overlying units, which were
extensively hydrothermally altered during the mineralizing event. The following
table sets forth the proven and probable reserves at the Hayden Hill mine.
Hayden Hill Mine
Proven and Probable Ore Reserves
As of December 31, 1994
Gold Gold
Tons Avg. Grade Content
(000) (oz./ton) (000 oz.)
------ ---------- ---------
Heap Leach Ore 14,324 0.027 381
====== ========== =========
Reserve estimates were prepared by the Company and verified by MRDI in its
report dated February 1995. Reserves are based upon an assumed gold price of
$400 per ounce and variable cut-off grades. The net reduction of the Hayden
Hill reserves from year-end 1993 to year-end 1994 is 69,600 contained ounces and
results from
5
1994 production of 87,200 ounces partially offset by an increase of
17,600 ounces resulting from production experience and increased operating
efficiencies. The Company estimates an ultimate heap leach gold recovery rate
of approximately 69 percent.
GUANACO MINE
The Company owns a 90 percent interest in and operates the Guanaco mine, which
is located in the Guanaco Mining District in northern Chile approximately 145
miles southeast of Antofagasta, Chile. Under existing shareholder arrangements,
the Company receives 100 percent of production until certain conditions are met.
The operation consists of an open pit mine, heap leach facilities capable of
processing up to 2.2 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. The Company has retained an
experienced mining contractor to drill, blast, load and transport all ore and
waste. The mining contractor provides its own equipment. Access to the mine
from Antofagasta is provided by the Pan American Highway (approximately 120
miles south) and a newly constructed 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 multiple wells adjacent to the minesite and from
nearby surface springs which also provide potable water.
The Guanaco property position is comprised 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 reserves are located on land covered by the ENAMI lease. The surface
area is owned by the Chilean government; however, the Company has filed
applications to purchase selected areas within the ENAMI lease, including the
area on which the operations are located. The ENAMI lease 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. In connection with the minority owner's sale of
its interest to a third party, the Company and the minority owner are
renegotiating certain terms of the original acquisition documents to eliminate
certain additional purchase price adjustments totaling approximately $1.4
million. The property remains subject to a 1.1 percent net smelter return
royalty to the minority owners for metals other than gold.
The Guanaco mine began production in April 1993. Production was hampered in
1993 by ordinary start-up delays and initial crusher throughput problems and in
1994 by process water shortages which were resolved in the fourth quarter. The
Company expects to operate at design capacity in 1995. Cash production costs
are expected to decrease as a result of higher production and operating
efficiencies.
6
The following table presents operating data for the Guanaco mine for the period
from commencement of production in April 1993 through December 31, 1993 and the
year ended December 31, 1994.
Guanaco Mine
Operating Data
1994 1993
---------- ---------
Tons mined 12,699,988 9,547,075
Tons of ore to heap leach 2,172,746 1,460,427
Average grade to heap leach (oz. per ton) 0.060 0.060
Ounces of gold produced 57,675 29,862
Ounces of silver produced 295,940 136,687
Cost per ounce of gold produced:
Cash production costs* $420 $664
Depreciation and depletion 147 142
---------- ---------
Total production costs $567 $806
========== =========
*During 1994, the Company changed its method of accounting for ore loaded on
heap leach pads, which decreased 1994 cash production costs at the Guanaco mine
by $65 per ounce.
The Guanaco deposit contains gold mineralization in steeply dipping vein-like
zones within a silicified volcanic host rock. The following table sets forth
the proven and probable reserves at the Guanaco mine.
Guanaco Mine
Proven and Probable Ore Reserves
As of December 31, 1994
Gold Content
(000 oz.)
Gold ----------------
Tons Avg. Grade AGI
(000) (oz./ton) Total 90% Share
------ ---------- ----- ---------
Heap Leach Ore 11,420 0.047 534 481
====== ========== ===== =========
Reserves were calculated by the Company. The reserves are based upon an assumed
gold price of $375 per ounce and a cut-off grade of 0.013 ounce of gold per ton.
The Company has determined that calculating the reserves at $400 per ounce would
not materially change the results. No attempt has been made to quantify a
silver reserve, but the current operation is recovering about five times as much
silver as gold. Beneath the designed gold pit, there are drill intersections of
sulfide copper; however, the intersections are too widely spaced to quantify a
resource at this time. The 1994 year end reserve is based on the 1993 stated
reserves less 1994 production.
WAIHI
The Company retains a nominal but not an economic 33.53 percent joint venture
interest in the Waihi gold and silver mine located within the town of Waihi,
approximately 80 miles southeast of Auckland, on the North Island of New
Zealand. In April 1993, the Company completed a transaction with a subsidiary
of Poseidon Gold
7
Limited, a publicly traded Australian company, through which the Company
realized all future economic benefit from its interest.
WIND MOUNTAIN
Mining operations at the Company's 100 percent owned Wind Mountain mine were
conducted from April 1989 to January 1992. The Wind Mountain mine is located
approximately 75 air miles northeast of Reno. Access to the mine is provided by
a seven-mile gravel road connecting to a state highway. The Company's holdings
at Wind Mountain encompass approximately 775 acres of unpatented mining claims,
all of which are leased from third parties under a lease that expires in 1999.
Production is subject to a 5 percent net smelter return royalty. Since
cessation of mining in January 1992, residual leaching has continued. The leach
pads have not been irrigated with cyanide solution since the second quarter of
1994, and residual leaching is expected to end in 1995. Loaded carbon is
shipped to the Sleeper mine for stripping and processing into dore. Power for
operations at the Wind Mountain mine is provided by the local public utility.
Water for processing operations is provided by two wells in close proximity to
the mine. Potable water is supplied by truck.
Reclamation of the mine site commenced immediately after mining ceased. A final
reclamation plan has been approved by the federal Bureau of Land Management.
Reclamation work outside the area of heap leach and processing operations is
substantially complete.
The following table presents operating data for the Wind Mountain mine for the
years indicated.
Wind Mountain Mine
Operating Data
1994 1993 1992
------- ------ ---------
Tons mined - - 1,223,800
Tons to heap leach - - 1,169,200
Average grade (oz. per ton) - - 0.014
Ounces of gold produced 10, 513 19,296 54,690
Ounces of silver produced 72,609 86,515 297,403
Cost per ounce of gold produced:
Cash production costs $164 $167 $114
Depreciation and depletion - - 27
------- ------ ---------
Total production costs $164 $167 $141
======= ====== =========
FORT KNOX PROJECT
The Company owns a 100 percent interest in the Fort Knox project, located in the
Fairbanks Mining District, 15 miles northeast of Fairbanks, Alaska. Access to
the property is provided by paved highway for 21 miles from the City of
Fairbanks and then for five miles by unpaved two-wheel drive road.
The Fort Knox project covers approximately 32,000 acres and consists of two
state mining leases, approximately 1,400 state mining claims and 45 patented
federal mining claims. The Fort Knox property is held by deeds, mining leases,
option agreements, and mining locations. The leases and option agreements have
expiration dates ranging from 1995 to 2014, with provisions for extension in
some cases. Most of the current reserve is located
8
on approximately 1,150 acres of land held under a state mining lease and is
subject to a 3 percent royalty based on net income payable to the State of
Alaska. 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.
In the first quarter of 1994 the State of Alaska issued a millsite permit
covering approximately 7,500 acres, comprising all the lands expected to be
directly affected by the development of the Fort Knox project, and in May 1994
the U.S. Army Corps of Engineers issued a dredge and fill permit for the project
under Section 404 of the Clean Water Act. Construction and development plans
include an open pit mine, a conventional 36,000 tons per day (13.1 million tons
per year) process plant, a tailings storage facility and a water supply
reservoir. Process water will be supplied from a water reservoir constructed
downstream from the tailings pond. The process facilities are designed as a
"zero discharge system". Power will be supplied by the public utility serving
the area over a newly constructed distribution line, most of which will be paid
for by the Company.
The mine and plant are designed to operate year round and to produce
approximately 300,000 to 350,000 ounces of gold per year with the higher rates
expected during the early years. All permits for construction of Fort Knox have
been obtained. Capital required to construct the facilities and complete pre-
production stripping is estimated at $256 million. Financing efforts for the
project have commenced. Construction has begun with start-up expected in late
1996.
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.
Geology is relatively simple and the rocks are only 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, mining is planned to be done
on a bulk tonnage basis.
The following table sets forth the proven and probable reserves for the Fort
Knox project.
Fort Knox Project
Proven and Probable Ore Reserves
As of December 31, 1994
Gold Avg. Gold
Tons Grade Content
(000) (oz./ton) (000 oz.)
------- --------- ---------
Mill Ore 161,835 0.025 4,094
======= ========= =========
The current reserve was calculated using the same data used by the Company in
its slightly higher tonnage reserve which was verified by MRDI in its report
dated December 14, 1992. In 1994, MRDI made an independent evaluation of the
current reserve using conditional simulation and found it to be a reasonable
estimate of run of mine resources. The gold price is $375 per ounce with a
variable cut-off grade. The Company has determined that calculating the
reserves at $400 per ounce would not materially change the results. The Company
estimates that mill recovery will be approximately 90 percent.
9
REFUGIO PROJECT
In January 1993 the Company acquired a 50 percent interest in the Refugio
project, consisting of three gold deposits located in the Maricunga Mining
District in central Chile, approximately 75 miles east of Copiapo. The project
is situated at between 13,800 feet and 14,800 feet above sea level. The
property is held by Compania Minera Maricunga ("CMM"), a Chilean contractual
mining company, which is indirectly owned 50 percent by the Company and 50
percent by Bema Gold Corporation ("Bema"), a publicly traded company based in
Vancouver, British Columbia.
The Refugio property position comprises approximately 14,500 acres, consisting
of mineral rights, surface rights and water rights sufficient to allow
development of the project. The principal ore deposit is held by mining claims
which 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 major ore deposits found on CMM property
that extend onto surrounding mineral rights and to use the surrounding areas for
project needs. Surface rights that cover the known mineralization and the
proposed facilities are owned or controlled by CMM under a lease or applications
to purchase from Chilean governmental entities. Water extraction rights
expected to be sufficient to supply the project are owned by CMM.
CMM has commenced development of the Verde gold deposit with construction of an
open pit mine, three stage crushing and heap leach operation capable of
processing 33,000 tons of ore per day (11.9 million tons per year). Carbon
adsorption, stripping and electrowinning will be used to recover gold from the
leach solutions. Electrowon cathodes would be smelted to dore bars for
shipment. Potential production from the Verde deposit is estimated to range
from 200,000 to 250,000 ounces of gold per year for approximately 9.5 years of
which the Company's share would be 50 percent. Facilities will include a
permanent camp. Access to the site from Copiapo is provided by existing roads.
Power is supplied by on-site diesel powered generators. The Company expects
construction to be completed in 1995.
Capital required to construct the facilities is estimated at $127 million, of
which one-half is the Company's share. In February 1995, CMM borrowed $85
million drawn in gold under a project financing arrangement with a group of
banks. The remaining funds were contributed by the Company and Bema in
accordance with their ownership percentages of CMM.
The Company, through its 50 percent ownership of CMM, is responsible for payment
of a net smelter return royalty to the former owner of the Refugio property that
is expected to average 2.5 percent of the Company's share of production from the
currently defined ore reserves. A sliding scale net smelter return royalty
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.
The Refugio project 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. It is
open at depth and additional exploration potential exists in the Guanaco and
Pancho deposits. The Refugio property lies at the southern end of a 90 mile
long belt of late volcanic origin that contains a number of large disseminated
gold-silver deposits.
10
The reserves in the Verde deposit at the Refugio project are set forth in the
following table.
Refugio Project
Proven and Probable Ore Reserves in the Verde Deposit
As of December, 1994
Gold Content
(000 oz.)
Gold --------------
Tons Avg. Grade AGI 50%
(000) (oz./ton) Total Share
------- ---------- ----- -------
Heap Leach Ore 104,383 0.029 3,075 1,537
======= ========== ===== =======
The reserves were prepared by the Company and verified by MRDI in its report for
CMM dated December 1992 based upon a gold price of $400 per ounce and variable
cut-off grades. The Company expects the ultimate recovery rate from the heap
leaching process to range from 49 percent to 81 percent depending upon the type
of ore, with overall average recovery estimated to be approximately 66 percent.
HAILE PROJECT
The Company owns a 62.5 percent joint venture interest in the Haile gold
property in Lancaster County, South Carolina. The remaining 37.5 percent
interest is owned by Piedmont Mining Company, Inc. ("Piedmont"). The Company is
currently considering the sale of its interest in Haile.
The Haile project covers approximately 3,600 acres and consists entirely of fee
property, which is either owned by the venture participants, leased from third
parties or controlled by purchase agreements. The known reserves are contained
partly on property that is jointly owned by the Company and Piedmont and partly
on property that is leased from a third party under a lease expiring in 1996,
with provisions for extension until 2001. The leased property is presently
burdened by a 4 percent net smelter return royalty; however, the lease and the
royalty would be extinguished upon consummation of the purchase agreement
covering the leased property at such time as all material permits for a new
surface gold mine at the site have been received.
The Haile project is located in the Carolina Slate Belt, a northeast-southwest
trending belt of deformed Precambrian to Paleozoic metavolcanic and
metasedimentary rocks that extends from Alabama to Virginia. Numerous historic
gold occurrences are located in the Slate belt. In recent times, four
properties, including Haile, have been developed to the production stage.
Piedmont operated a small-scale gold heap leach operation at the site of the
Haile project prior to the formation of the joint venture in July 1992.
Piedmont suspended active mining activities at the site in August 1991, and
leaching and recovery of gold ended in late 1992. Piedmont has agreed to
indemnify the Company and its affiliates from environmental liabilities arising
from matters occurring or existing on the Haile project property prior to March
15, 1991 (the date of the option agreement under which the Company acquired its
interest in the project).
On March 29, 1995 the Company was served by Piedmont with a complaint alleging
breaches by the Company and its subsidiaries under various agreements. Based on
the facts currently known to the Company's management, the Company does not
expect this action to have any material effect on the Company's financial
condition or results of operations.
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.
11
Current reserves are contained in four separate deposits. The following table
sets forth the proven and probable reserves at the Haile project.
Haile Project
Proven and Probable Ore Reserves
As of December 31, 1994
Gold Content
(000 oz.)
Gold ---------------
Tons Avg. Grade AGI 62.5%
(000) (oz./ton) Total Share
----- ---------- ----- ---------
Mill Ore 8,736 0.089 780 488
===== ========== ===== =========
The reserves were prepared by the Company and verified by Derry, Michener, Booth
& Wahl in its audit of April 1, 1994 ore reserves. Reserves are based upon an
assumed gold price of $400 per ounce and a cut-off grade based on the economics
associated with variable mining and processing costs. The Company estimates
ultimate gold recoveries would range from 65 percent to 85 percent.
EXPLORATION
The Company entered into an Exploration Joint Venture Agreement with Cyprus Amax
(the "Exploration JV") effective January 1, 1994. Under the Exploration JV, the
Company and Cyprus Amax have agreed to pool their efforts for the principal
purpose of 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. The Company has the first right to
acquire the 75 percent interest of Cyprus Amax in any gold and silver properties
covered by the Exploration JV.
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.
During 1994 the Company's exploration efforts were focused on Cyprus Amax' Cerro
Quema property in Panama and the Company's Robertson property in Nevada,
together with continuing exploration near operating properties. Both properties
predate the Exploration JV, and the Company's exploration of Cerro Quema is
conducted pursuant to an option agreement with Cyprus Amax. Other exploration
activities have been conducted in British Columbia, China, Ghana and Australia.
Exploration expenditures were $6.2 million in 1994 compared to $5.2 million in
1993 and $6.7 million in 1992 (excluding 1992 exploration expenditures on the
Haile and Guanaco projects). Exploration expenditures for 1995 are anticipated
to be approximately $4 million.
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, utilizing a variety of
hedging techniques, and substantially all of the Company's 1994 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
12
development of gold coin programs), sales of gold bullion holdings by central
banks or other large gold bullion holders or dealers and political events in the
Middle East and major gold-producing countries such as South Africa and the CIS.
Gold prices are also affected by worldwide production levels, which have
increased in recent years. In addition, the price of gold has on occasion been
subject to rapid short-term changes because of market speculation.
The following table sets forth for the years indicated the high and low selling
prices of gold, first position, as provided by the Commodity Exchange, Inc.
("COMEX") in New York.
High Low
Year (dollars per ounce)
---- -------------------
1990 $422.40 $346.80
1991 403.20 344.30
1992 359.30 329.70
1993 407.00 326.30
1994 398.00 370.60
REFINING, SALES AND HEDGING ACTIVITIES
Refining arrangements are in place with third parties for the Sleeper, Wind
Mountain, Hayden Hill and Guanaco mine 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 1994 and 1993 the Company's hedging efforts resulted in
average realized prices of $401 an ounce and $392 an ounce, respectively. This
contrasts with an average COMEX price of approximately $384 an ounce for 1994
and $360 an ounce for 1993. See Note 8 to the Company's 1994 consolidated
financial statements for a description of hedging activities.
AGREEMENTS WITH CYPRUS AMAX
In connection with the change of ownership of the Company resulting from the
Cyprus Amax Merger, Amax Gold has entered into the following agreements with
Cyprus Amax.
Under credit arrangements Cyprus Amax agrees to make loans to the Company from
time to time until December 31, 2001 in an aggregate principal amount not to
exceed at any time outstanding $180 million, with $80 million subject to
approval of the Company's stockholders. The Company may elect to repay amounts
of outstanding indebtedness either by payment in cash or payment in shares of
convertible preferred stock.
Under the Exploration JV, the Company and Cyprus Amax have agreed to pool their
efforts for the principal purpose of 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. Properties held
by the parties prior to January 1, 1994 are excluded from the joint venture. A
subsidiary of Cyprus Amax has been appointed as Manager to manage, direct and
control exploration activities, with active participation by Amax Gold. The
Exploration JV will terminate December 31, 1995 unless the Company and Cyprus
Amax mutually agree to extend the agreement. Either party may withdraw upon
giving 60 days notice to
13
the other party. Amax Gold has the first right to acquire any gold property
covered by the Exploration JV and Cyprus Amax has the first right to acquire
properties containing deposits of minerals other than gold or silver.
Amax Gold and Cyprus Amax have entered into an agreement which gives the Company
the option to purchase the Cyprus Amax interest in the Cerro Quema advanced
stage gold exploration prospect in Panama. The purchase price is to be based on
estimated reserves to be established in a feasibility study funded by the
Company that has yet to be completed.
The Company and Cyprus Amax have agreed to provide a variety of managerial and
other services to each other on a full cost-reimbursement basis, terminable by
the Company or by Cyprus Amax on 180 days prior written notice.
The Company and Cyprus Amax are parties to a put and call agreement under which
Cyprus Amax may sell shares of Common Stock of Amax Gold to the Company upon
exercise of certain common stock purchase warrants issued in connection with the
acquisition of the Fort Knox Project in 1992. The warrants, which expire in
January 1996, have a current exercise price of $21.00.
EMPLOYEES
At December 31, 1994, the Company and its consolidated subsidiaries employed 602
persons in addition to 123 contract miners at its Guanaco 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. None of the Company's
employees in the United States are organized and the Company considers its
employee relations to be good. The Company obtains certain administrative and
other services from Cyprus Amax.
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 which the Company has in Chile
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.
REGULATION AND ENVIRONMENTAL MATTERS
The Company's mining and processing operations and exploration activities in the
United States, Chile, Panama 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
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
14
regulations. Such compliance requires significant expenditures and increases the
Company's mine development and operating costs.
In May 1992, a notice of violation was issued to the Company by the Director,
Air and Toxics Division, Region IX of the United States Environmental Protection
Agency, alleging that the Company had commenced construction of the Hayden Hill
Mine, and of seven diesel powered generators which supplied temporary power at
the mine, without final permits and failed to comply with certain notification
requirements under federal new source performance standards regulations in
violation of regulations promulgated under the Clean Air Act. The settlement of
this matter has been effected by a consent decree entered into in December 1994
between EPA, the Company and the U.S. Department of Justice, which will expire
in December 1995.
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 PRPs, 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.
The Company has had no communication from the Forest Service since its response
to the Forest Service in July 1994. Based on facts currently known to
management, the Company does not anticipate that this matter will have any
material effect on the Company's financial condition or results of operations.
Executive Officers of the Registrant
As of March 24, 1995, the names, ages and offices of all executive officers of
the Company were as follows.
Name Age Office
---- --- ------
Milton H. Ward 62 Chairman of the Board and Chief Executive Officer
Roger A. Kauffman 51 President and Chief Operating Officer
Richard B. Esser 48 Vice President
Deborah J. Friedman 42 Vice President, General Counsel and Secretary
Mark A. Lettes 45 Vice President and Chief Financial Officer
David L. Mueller 44 Vice President and Controller
Neil K. Muncaster 59 Vice President
Andrew F. Pooler 36 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. Kauffman was elected President of the Company in February 1995 and has
served as Chief Operating Officer since February 1994. He served as Senior Vice
President from February 1994 until February 1995. From 1986 to February 1994, he
was Vice President-Industrial Minerals for Hecla Mining Company.
15
Mr. Esser has been Vice President of the Company responsible for human resources
matters since August 1989. Prior to August 1989, he held various management
positions in the Company's human resources department.
Ms. Friedman was elected Vice President, General Counsel and Secretary of the
Company in September 1994. From 1982 through 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 Chief Financial Officer of the Company in January 1994.
He has held various management positions in the Company's financial departments
since 1986, including Vice President since August 1989 and Treasurer from May
1988 to February 1991.
Mr. Mueller was elected Vice President and Controller 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.
Mr. Muncaster was elected Vice President of the Company in February 1991 and is
responsible for exploration. He was Vice President, Exploration for Echo Bay
Mines from 1986 to 1991.
Mr. Pooler was elected Vice President of the Company in February 1992 and is
responsible for the Company's operations in the continental U.S. 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 June 1993, the Company, certain other affiliated corporations and several
unnamed corporations and individuals were sued in the Nevada State Court for
Washoe County by TMB Associates ("TMB"), a Nevada general partnership that is
the lessor under an April 2, 1987 lease of unpatented federal mining claims (as
amended, the "Lease") which comprise a substantial part of the Wind Mountain
mine property position. The lawsuit involves the formation and performance of,
and alleged breach of duties with respect to, the Lease pertaining to the
exploration, development and mining of the Wind Mountain ore deposit. In 1993,
the court granted the Company's motion to stay the litigation and to compel TMB
to proceed with arbitration, pursuant to an arbitration clause in the Lease
requiring any controversy to be settled by arbitration and imposing a one-year
limitation for commencing arbitration. TMB initiated arbitration in 1994 and
discovery is proceeding. At this time, the Company's management does not
anticipate any material adverse effect on the Company's financial condition or
results of operations from the results of arbitration.
Certain of the Company's New Zealand subsidiaries and certain subsidiaries of
Poseidon Gold Limited ("PosGold") are defendants in an action brought by Mineral
Resources (N.Z.) Limited and a subsidiary in the High Court of New Zealand,
Auckland Registry, Commercial List, claiming that a transaction between the
Company and a subsidiary of PosGold in June 1993 in which the Company realized
all future economic benefit from an interest in a mine in New Zealand created a
default under the joint venture agreement and seeking to obtain the Company's
venture interest. The Company believes that it is remote that this
litigation will result in any material effect on the Company's financial
condition or results of operations.
See "Item 1 and 2. Business and Properties-Haile Project" for a description of a
dispute between the Company and its joint venture partner in the Haile project.
16
parties are awaiting final action on pre-trial motions and the Company believes
that it is remote that this litigation will result in any material adverse
effect on the Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is listed on the New York Stock Exchange (AU) and The
Toronto Stock Exchange (AXG). As of March 24, 1995, 81,295,607 shares of Common
Stock were outstanding with approximately 11,900 stockholders of record. Cyprus
Amax owns approximately 42.2 percent of the Company's outstanding Common Stock.
The Company's $3.75 Series B Convertible Preferred Stock is listed on the New
York Stock Exchange (AUPrB). As of March 17, 1995, 1,840,000 shares of Series B
Convertible Preferred Stock were outstanding with approximately 15 stockholders
of record.
The following table sets forth for the periods indicated the high and the low
sale prices per share of the Company's Common and Series B Convertible Preferred
Stock as reported on the New York Stock Exchange Composite Tape and the
dividends paid on such stock.
Stock Prices and Dividends Per Share
Common Stock Series B Convertible Preferred Stock
--------------------------- ------------------------------------
Quarter High Low Dividends High Low Dividends
------ ------- ------- --------- ---------- --------- -----------
1994
----
First $ 8 1/4 $6 1/4 $ - $ - $ - $ -
Second 8 1/4 6 5/8 - - - -
Third 7 7/8 6 1/8 - 55 5/8 50 -
Fourth 7 5/8 5 5/8 - 56 1/4 47 7/8 .9791
1993
----
First 9 3/8 7 3/4 .02 - - -
Second 9 1/2 6 7/8 .02 - - -
Third 10 1/2 6 3/4 .02 - - -
Fourth 8 6 .02 - - -
On March 4, 1994, the Company's Board of Directors decided to eliminate the
quarterly dividend on the Company's Common Stock to reduce expenses. Although
the Company's loan agreements do not directly limit the payment of dividends,
the agreements require the Company to comply with certain financial convenants
that may be affected by dividend payments.
The Series B Convertible Preferred Stock was issued on August 11, 1994. The
dividend paid on November 15, 1994 included the 94 day period from date of
issuance. Regular quarterly dividends are $.9375.
As of March 24, 1995, 4,066,649 warrants to purchase Common Stock of the Company
were outstanding with approximately 80 holders of record. The warrants are
listed on the American Stock Exchange (AUWS) and the
17
Toronto Stock Exchange (AXGWT). The warrants, issued in connection with the
acquisition of the Fort Knox project, expire in January 1996 and permit the
holder to purchase one share of Common Stock for $21.00.
18
ITEM 6. SELECTED FINANCIAL DATA
AMAX GOLD INC. AND SUBSIDIARIES
FINANCIAL AND OPERATING HIGHLIGHTS
(IN MILLIONS EXCEPT PER SHARE AMOUNTS, PERCENTAGES,
PRODUCTION AND SALES OUNCES AND AMOUNTS PER OUNCE)
YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
FOR THE YEAR:
Revenues $ 94.6 $ 81.9 $ 99.7 $ 128.2 $ 149.8
Gross operating margin (loss) (16.6) (31.9) 16.6 38.0 63.1
Asset write-downs/(1)/ 21.1 87.7 - - 12.6
Earnings (loss) from operations/(1)(2)/ (43.9) (116.0) 18.8 24.0 36.1
Earnings (loss) before cumulative effect of
accounting changes, net/(1)(2)/ (43.0) (89.0) 13.0 21.2 28.3
Net earnings (loss)/(1)(2)(3)/ (35.5) (104.2) 11.5 21.2 28.3
Per common share:
Earnings (loss) before cumulative effect of
accounting changes/(1)(2)(3)/ (.56) (1.14) .18 .35 .47
Net earnings (loss)/(1)(2)(3)/ (.47) (1.34) .16 .35 .47
Weighted average common shares outstanding/(4)/ 79.3 77.8 73.7 60.0 60.0
Capital and cash acquisition expenditures 23.0 23.4 113.7 60.0 39.9
Cash dividends to common stockholders - 2.0 2.8 4.8 4.8
Dividends declared per common share/(4)/ - .08 .08 .08 .08
Cash dividends to preferred stockholders 1.8 - - - -
Dividends declared per preferred share .9791 - - - -
AT YEAR-END:
Current assets 72.7 37.9 47.1 41.7 42.4
Total assets 403.2 381.0 477.6 198.3 157.2
Current liabilities 45.6 37.6 46.9 28.2 21.2
Long-term gold and currency financings 83.2 136.5 103.1 24.1 8.4
Stockholders' equity 245.5 173.3 257.2 136.3 120.7
Working capital 27.1 .3 .2 13.5 21.2
Book value per common share 3.10 2.23 3.49 2.27 2.01
Long-term debt to equity 34% 79% 40% 18% 7%
KEY OPERATING FACTORS FOR THE YEAR:
Total ounces of gold produced/(5)/ 240,885 210,880 253,603 300,233 354,859
Total ounces of gold sold 235,664 209,290 248,024 300,418 359,146
Average price per ounce sold $ 401 $ 392 $ 402 $ 427 $ 417
Average cost per ounce produced/(6)/:
Cash production cost/(7)/ $ 340 $ 388 $ 223 $ 195 $ 147
Depreciation and depletion 105 122 87 82 73
-------- -------- -------- -------- --------
Total production cost $ 445 $ 510 $ 310 $ 277 $ 220
======== ======== ======== ======== ========
/(1)/ In 1994, the Company recorded a $18.6 million ($14.4 million after tax)
write-down of the Hayden Hill mill to its estimated salvage value and a
$2.5 million ($2.1 after-tax) write-down of other assets which increased
the net loss by $16.5 million or $.21 per 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. The earnings
19
for 1990 include a $12.6 million write-down of Amax Gold's investment in
Canamax Resources Inc. recorded in the first half of 1990, which reduced
1990 net earnings per common share by $.21. The remaining Canamax
investment was sold to Amax during the second half of 1990 for $6.4
million in cash.
/(2)/ In 1994, the Company changed its method of accounting for the cost of ore
loaded on heap leach pads. The 1994 net loss is reduced by a $7.5 million
after tax benefit relating to the cumulative effect of this accounting
change. In September 1993, Amax Gold changed its exploration accounting
policy, effective January 1, 1993, 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. The 1992 net earnings include $8.9
million, or $.12 per common share, of after tax income related to prior
year exploration expenditures on the Haile and Guanaco projects that were
capitalized and restored to earnings.
/(3)/ 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". Net earnings for 1992 include a $1.5 million, or
$.02 per common share, after tax cumulative effect of the January 1, 1992
adoption of SFAS No. 106, "Postretirement Benefits Other Than Pensions".
/(4)/ Adjusted for three-for-two common stock split effected in the form of a
stock dividend which was distributed in 1988.
/(5)/ Gold production for the year ended December 31, 1992 reflects increased
production of 4,733 ounces at the Sleeper Mine and 542 ounces at the Waihi
Mine relating to the cumulative effect of a change in accounting to
include production in the mill carbon circuit, effective January 1, 1992.
/(6)/ Average costs weighted by ounces of gold produced at each mine.
/(7)/ Cash production costs include all operating costs at the mine site,
including overhead and, where applicable, Nevada net proceeds tax,
royalties and credits for silver by-products.
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SUMMARY
The Company recorded a net loss of $35.5 million in 1994, the first full year of
operations following the November 1993 merger of Amax Inc. with and into Cyprus
Minerals Company. During the period since the merger, the Company has made
management changes, significantly reduced staff, entered into exploration, non-
compete and service agreements with Cyprus Amax Minerals Company ("Cyprus Amax")
and successfully financed future growth. Gold production for 1994 was 240,885
ounces at an average cash production cost of $340 per ounce. The average price
of gold realized in 1994 was $401 per ounce compared to the average market price
of $384 per ounce.
RESULTS OF OPERATIONS
Amax Gold reported a net loss of $35.5 million in 1994 compared with a net loss
of $104.2 million in 1993 and net income of $11.5 million in 1992. The 1994
results include after-tax asset write-downs of $16.5 million partially offset by
the $7.5 million cumulative after-tax effect of a change in accounting for leach
pad inventory. The Company paid dividends of $1.8 million in 1994 on preferred
stock issued in August 1994. Results in 1993 include after-tax asset write-downs
of $57.5 million, a $15.2 million charge for the after-tax cumulative effect of
a change in accounting for exploration expenses and the adoption of a new
accounting standard for postemployment benefits, and an after-tax gain of $2.4
million from the realization of the future economic benefit from its 33.53
percent interest in the Waihi Mine in New Zealand. The 1992 results include
after-tax income of $8.9 million from exploration expenditures that were
capitalized and restored to earnings and an after-tax charge of $1.5 million for
the cumulative effect of the adoption of a new accounting standard for
postretirement benefits other than pensions.
Revenues increased to $94.6 million for 1994 compared to $81.9 million in 1993.
Revenues were $99.7 million in 1992. The increase in 1994 revenue from 1993 is
a result of higher production and sales volumes from the Guanaco, Hayden Hill
and Sleeper mines and higher realized prices in 1994. The decrease in revenues
in 1993 from 1992 is a result of declines in production and sales volumes from
the Sleeper, Wind Mountain and Waihi mines together with lower realized sales
prices in 1993. Somewhat offsetting these declines in 1993 was production from
Hayden Hill, which commenced operations in June 1992, and Guanaco, which
commenced operations in April 1993. The Company sold 235,664 ounces of gold in
1994 compared to 209,290 ounces in 1993 and 248,024 ounces in 1992. Total
production and sales volumes for 1995 are expected to increase slightly from
1994 levels as the Hayden Hill and Guanaco heap leach operations are scheduled
to process ore at design capacity, more than offsetting declines in production
at Sleeper which is nearing the end of its mine life and Wind Mountain where
residual leaching is expected to end in 1995.
The Company realized an average selling price of $401 per ounce of gold in 1994,
$392 per ounce in 1993 and $402 per gold ounce in 1992. The average realized
price for each year includes hedging benefits from closing forward sales
contracts and gold options at prices above market. The average COMEX gold price
was $384 per ounce in 1994, $360 per ounce in 1993 and $344 per ounce in 1992.
Gold production was 240,885 ounces in 1994 compared to 210,880 ounces in 1993
and 253,603 ounces in 1992. The increase in gold production in 1994 was due to
increased production at Guanaco, Hayden Hill and Sleeper. The increase in
production at Guanaco was a result of operating for a full year in 1994 compared
to operating for a portion of a year in 1993, when the mine commenced production
in April. Guanaco experienced ordinary start-up delays and crusher throughput
problems in 1993, and process water shortages in 1994 which were resolved in the
fourth quarter. The increase in production at Hayden Hill in 1994 is primarily
due to the successful conversion of the mine to a heap leach only operation
during the last half of 1993. Increased production at Sleeper in 1994 compared
to 1993 is a result of higher mill grade and mill recovery rates in 1994. These
increases were partially
21
offset by expected lower residual heap leach production at Wind Mountain and the
elimination of the Company's share of production at Waihi in New Zealand. In a
transaction effective in April 1993, the Company realized the future benefit
from its 33.53 percent interest in the Waihi mine. Gold production declined in
1993 from 1992 primarily as a result of lower mill head grades and related
recovery rates at Sleeper, lower residual heap leach production at Wind Mountain
after completion of mining in January 1992 and four months of production at
Waihi in 1993 compared to a full year in 1992. These production decreases in
1993 compared to 1992 were partially offset by the commencement of operations at
Guanaco in April 1993 and by increased production at Hayden Hill during its
first full year of operations in 1993.
Cost of sales represent mining and processing costs for gold sold during the
year including labor, materials and supplies, repairs and maintenance, fuel and
utilities. The Company's operating costs also include estimated reclamation at
each of the Company's mines, which is accrued and charged over the expected mine
life using the units-of-production method. Reclamation costs are estimates
based on current federal, state and Chilean laws and regulations governing the
protection of the environment. Changes in these laws and regulations could
increase future reclamation costs.
Cash production costs decreased to $340 per ounce in 1994 from $388 per ounce in
1993. Cash production costs were $223 per ounce in 1992. The decrease in cash
production costs in 1994 compared to 1993 relates primarily to higher production
during a full year of operations at Guanaco and reduced operating costs and
higher production at Sleeper and Hayden Hill. Cash production costs per ounce
at Guanaco decreased to $420 in 1994 from $664 in 1993. The decrease in cash
costs at Guanaco is primarily a result of increased production due to a full
year of operations, although production was hampered by intermittent process
water shortages which were resolved in the fourth quarter. The decrease
includes a $65 per ounce benefit from the effect of changing the method of
accounting for inventory of ore loaded on heap leach pads in 1994. At Hayden
Hill, cash costs per ounce decreased substantially to $406 in 1994 from $470 in
1993, despite an additional $39 per ounce increase from the change in accounting
for heap leach inventory. Cash costs per ounce at Sleeper decreased to $273 in
1994 from $317 in 1993, despite a $5 increase in costs in 1994 relating to the
change in accounting for heap leach inventory. Cash production costs per ounce
in 1993 increased to $388 from $223 in 1992 primarily as a result of high costs
associated with start-up together with low crusher throughput at Guanaco, lower
expected grade and mill recovery rates in the first half of 1993 at Hayden Hill
and reduced production related to lower mill head grades at Sleeper. Cash
production costs are expected to be lower in 1995 than in 1994, due to higher
production levels from Guanaco and Hayden Hill, which are expected to operate at
design throughput in 1995. This increase in production is expected to be
partially offset by lower production at Sleeper, which is nearing the end of
expected mine life, and decreasing residual leach production from Wind Mountain.
Refugio is scheduled to commence production at the end of 1995 or early in 1996.
Depreciation and depletion decreased by $.4 million in 1994 compared to 1993.
The 1994 decrease was primarily a result of the write-downs of assets at Sleeper
in December 1993 and at Hayden Hill in June 1993, somewhat offset by a full year
of production at Guanaco in 1994. On a unit basis, depreciation and depletion
decreased to $105 per ounce in 1994 from $122 per ounce in 1993. Depreciation
and depletion has been favorably impacted by continuing residual heap leach
production at Wind Mountain after assets were fully depreciated in the first
quarter of 1992. For 1993 compared to 1992, total depreciation and depletion
increased by $3.9 million. On a per ounce basis, depreciation and depletion
increased to $122 per ounce in 1993 from $87 per ounce in 1992 as a result of
production at Guanaco starting in April 1993 and a reduction of recoverable
ounces at Sleeper which was partially offset by lower depreciation and depletion
at Hayden Hill following the asset write-down in June 1993.
General and administrative costs have been reduced over the last three years.
The primary reason for the decrease to $6.9 million in 1994 from $8.4 million in
1993 was a reduction of staff in 1994.
22
Asset write-downs were $21.1 million in 1994 and $87.7 million in 1993. The
asset write-down in 1994 consisted of $18.6 million ($14.4 million after tax)
for the Hayden Hill mill and $2.5 million ($2.1 million after tax) for other
assets. In 1993, the Company wrote down the Hayden Hill mill by $64.1 million
($41.9 million after-tax) to its then estimated salvage value in anticipation
that sufficient mill grade ore would be encountered to justify a future milling
operation or possible use of the mill at another Company property. The
additional write-down of the Hayden Hill mill in 1994 is the result of the lack
of higher grade ore amenable to milling operations and the unlikely use of the
mill at another of the Company's properties. In 1993, the Company also wrote
down Sleeper assets by $23.6 million ($15.6 million after tax) as a result of
reducing proven and probable reserves based on mining experience and
reinterpretation of geologic data.
Exploration expense was $6.2 million in 1994 compared to $5.2 million in 1993,
primarily reflecting increased activity in North, Central and South America,
partially offset by savings related to the Company's agreement to pool efforts
with Cyprus Amax to discover and develop new gold properties. Effective January
1, 1993, the Company changed its exploration accounting policy to expense
exploration costs as incurred. Exploration expense in 1992 was $9.0 million
before the effect of capitalizing $11.2 million for exploration expenditures
under the Company's previous exploration accounting policy.
Interest expense rose to $8.9 million in 1994 compared to $8.5 million in 1993
and $2.3 million in 1992. These increases were primarily the result of higher
interest rates in 1994 and a higher average debt balance in 1993. Interest in
1992 was partially offset by the capitalization of a portion of interest expense
while the Hayden Hill and Guanaco mines were in the construction and development
phase.
Interest income was $2.1 million in 1994 compared to $.7 million in 1993 and
$1.6 million in 1992. The change in interest income relates to cash from the
preferred share offering held prior to investing in capital projects.
In addition to the effects of changes in accounting for inventory in 1994 and
changes in exploration accounting in 1993 noted above, accounting changes as a
result of new accounting standards were made in 1993 and 1992. The cumulative
effect of the 1993 accounting change for postemployment benefits was a decrease
in net income of $1.8 million (net of a deferred tax benefit of $1 million).
The cumulative effect of the 1992 accounting change for postretirement benefits
was a decrease in net income of $1.5 million (net of a deferred tax benefit of
$.9 million).
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $27.1 million at December 31, 1994 compared to
$.3 million at December 31, 1993. During 1994, the Company's operating
activities used $3.1 million of cash and cash used in investing activities was
$24 million. Cash spent for property, plant and equipment at operating
properties in 1994 included $6.6 million at Guanaco, $4.6 million at Hayden Hill
and $1.1 million at Sleeper. In addition, 1994 capital expenditures at
development properties included $5.4 million at Fort Knox, $4.2 million at
Refugio and $1.1 million at Haile. Expenditures at Haile in 1995 will be
expensed as incurred as a result of the Company's interest in selling its 62.5
percent of the property.
Net financing activities generated cash of $56.3 million. In August of 1994,
the Company received net proceeds of $88.3 million from the sale of convertible
preferred stock. The preferred stock was sold under a universal shelf
registration filed by the Company in June 1994 covering $200 million of equity
and/or subordinated debt securities. Currently $108 million is available under
the shelf registration. The Company sold three million shares of common stock
to Cyprus Amax and used the proceeds to repay $20.7 million outstanding under a
promissory note. Other financing activities in 1994 included financing costs of
$3.4 million, net debt repayments of $3.1 million and preferred stock dividends
of $1.8 million.
23
Capital expenditures for 1995 are expected to be approximately $193 million
including $133 million at Fort Knox, $54 million for the Company's share at
Refugio and $6 million at operating properties. Financing for Refugio has been
various financing alternatives for Fort Knox are under consideration. At
December 31, 1994, the Company had total outstanding debt obligations of $107.1
million, representing $40.9 million under the Hayden Hill loan facility, $35
million under the Guanaco loan, $6.1 million under Chilean assumed debt, $23.5
million under gold leases and $1.6 million (or 4,000 gold ounces) under the
Sleeper gold bullion loan agreement. Principal repayment obligations for 1995
aggregate $23.9 million.
During 1994, Cyprus Amax provided the Company with a $100 million line of credit
at favorable interest rates available until April 30, 1997, with certain equity
features. See Note 7 to the Company's 1994 consolidated financial statements.
A substantial portion of this credit line has been designated by the Company as
support for its other credit arrangements. In early 1995, availability was
extended until December 31, 2001, subject to approval by the stockholders of the
Company.
In February 1995, Cyprus Amax agreed, subject to approval by the stockholders of
the Company, to provide the Company with an additional $80 million line of
credit at favorable interest rates available until December 31, 2001, with
certain equity features. See Note 7 to the Company's 1994 consolidated
financial statements.
In February 1995, the joint venture company developing the Refugio project
borrowed $85 million drawn in gold under a project financing arrangement with a
group of banks. The Company's 50 percent share is $42.5 million. The remaining
funds expected to be required to construct Refugio have been contributed to the
joint venture company by the Company and its joint venture partner.
In March 1995, the Company arranged to borrow up to $40 million of the $80
million line of credit during the period prior to receipt of stockholder
approval, primarily to fund capital expenditures at Fort Knox. Under this
temporary arrangement, the equity features of the credit line are suspended and
the loan is secured by a 20 percent interest in the Company's Fort Knox project.
If stockholder approval is not received, the Company will have until October 15,
1995 to repay the loan. As of March 24, 1995, the Company has borrowed $5
million under this temporary arrangement.
Cash flows from operations for 1995 are expected to be sufficient to fund
operating and administrative expenses, exploration expenditures and interest
payments on outstanding debt. In order to meet all scheduled debt payments and
to fund capital development requirements, the Company will be required to borrow
money from Cyprus Amax under the lines of credit and obtain external debt or
equity financing.
24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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, 1994, and the results of their
operations and their cash flows for the year then ended, 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 audit. We conducted our audit
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 audit provides a
reasonable basis for the opinion expressed above.
As discussed in Note 5 to the consolidated financial statements, the Company
adopted a new method of accounting for heap leach ore costs, effective January
1, 1994.
Price Waterhouse LLP
Denver, Colorado
February 17, 1995
25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Amax Gold Inc.:
We have audited the accompanying consolidated balance sheet of Amax Gold Inc.
and Subsidiaries (the Company) as of December 31, 1993, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the two years in the period ended December 31, 1993. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Amax
Gold Inc. and Subsidiaries as of December 31, 1993, and the consolidated results
of their operations and their cash flows for each of the two years in the
period ended December 31, 1993 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, during 1993 the
Company changed its method of accounting for exploration expenditures and
postemployment benefits. As also discussed in Note 1 to the consolidated
financial statements, during 1992 the Company changed its method of accounting
for precious metals inventory, postretirement benefits and income taxes.
Coopers & Lybrand
Denver, Colorado
February 4, 1994 except for
note 8 for which the date
is March 18, 1994
26
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, Chief Executive Officer
Roger A. Kauffman
President and Chief Operating Officer
Mark A. Lettes
Vice President and Chief Financial Officer
27
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share amounts)
Year Ended December 31,
1994 1993 1992
-------- --------- -------
Revenues $ 94,600 $ 81,900 $99,700
Costs and operating expenses:
Costs of sales 79,000 79,700 52,800
Depreciation and depletion 25,300 25,700 21,800
General and administrative 6,900 8,400 8,500
-------- --------- -------
Total costs and operating expenses 111,200 113,800 83,100
-------- --------- -------
Gross operating margin (loss) (16,600) (31,900) 16,600
Asset write-downs (21,100) (87,700) -
Exploration (6,200) (5,200) 2,200
Gain on Waihi transaction - 8,800 -
-------- --------- -------
Earnings (loss) from operations (43,900) (116,000) 18,800
Interest expense (8,900) (8,500) (2,300)
Interest income 2,100 700 1,600
Minority interest 1,100 1,100 -
Other - (100) (100)
-------- --------- -------
Earnings (loss) before income taxes and
cumulative effect of accounting changes (49,600) (122,800) 18,000
Income tax (provision) benefit 6,600 33,800 (5,000)
-------- --------- -------
Earnings (loss) before cumulative
effect of accounting changes (43,000) (89,000) 13,000
Cumulative effect of accounting changes,
net of income tax (provision) benefit
of $(2,000) in 1994, $5,500 in 1993
and $900 in 1992 7,500 (15,200) (1,500)
-------- --------- -------
Net earnings (loss) (35,500) (104,200) 11,500
Preferred stock dividends (1,800) - -
-------- --------- -------
Earnings (loss) attributable to
common shares $(37,300) $(104,200) $11,500
======== ========= =======
Per common share:
Earnings (loss) before cumulative
effect of accounting changes $ (.56) $ (1.14) $ .18
Cumulative effect of accounting changes .09 (.20) (.02)
-------- --------- -------
Net earnings (loss) $ (.47) $ (1.34) $ .16
======== ========= =======
Dividends declared per common share $ - $ .08 $ .08
======== ========= =======
Weighted average common shares outstanding 79,272 77,758 73,695
======== ========= =======
The accompanying notes are an integral part of these statements.
28
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31,
(Dollars in thousands except par value of stock)
1994 1993
--------- ---------
ASSETS
Cash and equivalents $ 36,700 $ 7,500
Inventories 28,600 16,600
Other 7,000 9,800
Receivables on open sales contracts 400 4,100
--------- ---------
Total current assets 72,700 38,000
Property, plant and equipment, net 313,300 333,500
Other 17,200 9,600
--------- ---------
Total assets $403,200 $381,100
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, trade $ 4,000 $ 4,100
Accounts payable, affiliates 600 100
Accrued and other current liabilities 15,100 16,400
Reclamation reserve, current portion 2,000 2,000
Current maturities of gold and currency financings 23,900 15,100
--------- ---------
Total current liabilities 45,600 37,700
Long-term portion of gold and currency financings 83,200 111,800
Payable to Cyprus Amax - 24,700
Reclamation reserve, noncurrent portion 11,100 8,600
Deferred income taxes 10,000 16,900
Other 7,800 8,100
--------- ---------
Total liabilities 157,700 207,800
Commitments and contingencies (Notes 8 and 13) - -
Shareholders' equity:
Preferred stock, par value $1.00 per share,
authorized 10,000,000 shares,
of which 2,000,000 shares have been designated as
Series A
Convertible Preferred Stock, no shares issued and
outstanding and
1,840,000 shares have been designated as Series B
Convertible Preferred
Stock, issued and outstanding 1,840,000 shares in
1994 and none in 1993 1,800 -
Common stock, par value $.01 per share, authorized
200,000,000 shares,
issued and outstanding 81,267,708 shares in 1994 and
78,185,057
shares in 1993 800 800
Paid-in capital 258,400 150,700
Retained earnings (deficit) (15,500) 21,800
Common stock in treasury, at cost (1,991 shares in
1994 and 1993) - -
--------- ---------
Total shareholders' equity 245,500 173,300
--------- ---------
Total liabilities and shareholders' equity $403,200 $381,100
========= =========
The accompanying notes are an integral part of these statements.
29
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31,
(Dollars in thousands)
1994 1993 1992
-------- --------- ---------
Cash Flows from Operating Activities:
Net earnings (loss) $(35,500) $(104,200) $ 11,500
Adjustments to reconcile net earnings
(loss)
to net cash (used in) provided by
operating activities:
Depreciation and depletion 25,300 25,700 21,800
Asset write-downs 21,100 87,700 -
Increase in reclamation reserve 2,500 3,700 1,600
Cumulative effect of accounting
changes (7,500) 15,200 1,500
Increase (decrease) in deferred taxes (6,600) (34,100) 4,700
Deferred hedging costs (3,900) 1,100 (1,700)
Minority interest (1,100) (1,100) -
Other, net (600) (600) 900
Gain on Waihi transaction - (8,800) -
Capitalization of prior period
exploration costs - - (8,900)
Decrease (increase) in working capital:
Receivables on open sales contracts 3,700 (3,500) 700
Accounts payable, affiliates 500 (900) (700)
Accrued and other current liabilities 400 2,700 2,000
Inventories (800) (2,300) (5,200)
Other assets (400) (1,900) 1,300
Accounts payable, trade (200) (1,900) (3,600)
-------- --------- ---------
Net cash (used in) provided by
operating activities (3,100) (23,200) 25,900
-------- --------- ---------
Investing Activities
Capital expenditures (23,000) (24,600) (113,400)
Other (1,000) (200) (200)
Net cash received on Waihi transaction - 7,800 -
Repayments from Amax under notes
receivable - - 15,400
-------- --------- ---------
Net cash used in investing activities (24,000) (17,000) (98,200)
-------- --------- ---------
Financing Activities
Net proceeds from sale of convertible
preferred stock 88,300 - -
Proceeds from financings 72,900 34,500 86,700
Advances from Cyprus Amax 9,300 24,700 -
Repayments of financings (72,000) (31,600) -
Repayments to Cyprus Amax (34,000) - -
Deferred financing costs (3,400) - -
Other (3,000) (1,700) 2,800
Cash dividends paid:
Preferred (1,800) - -
Common - (2,000) (2,800)
-------- --------- ---------
Net cash provided by financing
activities 56,300 23,900 86,700
-------- --------- ---------
Effect of exchange rate changes on cash
and equivalents - 100 (200)
-------- --------- ---------
Net increase (decrease) in cash and
equivalents 29,200 (16,200) 14,200
Cash and equivalents at January 1 7,500 23,700 9,500
-------- --------- ---------
Cash and equivalents at December 31 $ 36,700 $ 7,500 $ 23,700
======== ========= =========
The accompanying notes are an integral part of these statements.
30
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
Retained Common
Preferred Stock Common Stock Paid-In Earnings Stock in
Shares Amount Shares Amount Capital (Deficit) Treasury
---------- ------- ---------- ------ -------- --------- --------
Balance at December
31, 1991 - $ - 59,999,982 $600 $ 9,900 $ 126,600 $(100)
Net earnings - - - - - 11,500 -
Issuance of common shares:
Acquisitions - - 14,173,253 100 112,500 - -
Dividend reinvestment
plan - - 330,584 - 3,100 (3,100) -
Cash dividends on
common stock - - - - - (2,800) -
--------- ------- ---------- ------ -------- --------- --------
Balance at December
31, 1992 - - 74,503,819 700 125,500 132,200 (100)
Net loss - - - - - (104,200) -
Issuance of common shares:
Acquisitions - - 3,150,000 100 21,000 - -
Dividend reinvestment
plan - - 523,989 - 4,200 (4,200) -
Non-employee directors - - 4,740 - - - -
Issuance of treasury
shares to non-employee
directors - - 2,509 - - - 100
Cash dividends on
common stock - - - - - (2,000) -
--------- ------- ---------- ------ -------- --------- --------
Balance at December
31, 1993 - - 78,185,057 800 150,700 21,800 -
Net loss - - - - - (35,500) -
Issuance of common shares:
Employee thrift plan - - 75,151 - 500 - -
Repayment of Cyprus
Amax debt - - 3,000,000 - 20,700 - -
Non-employee directors - - 7,500 - - - -
Issuance of preferred
stock 1,840,000 1,800 - - 86,500 - -
Preferred stock
dividends - - - - - (1,800) -
--------- ------- ---------- ------ -------- --------- --------
Balance at December
31, 1994 1,840,000 $1,800 81,267,708 $800 $258,400 $ (15,500) $ -
========= ======= ========== ====== ======== ========= ========
The accompanying notes are an integral part of these statements.
31
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
Consolidated financial statements include the accounts of Amax Gold Inc. and its
more than 50 percent owned subsidiaries (hereinafter referred to as the
Company). Investments in 20 percent to 50 percent owned companies are accounted
for by the equity method. Investments in ventures where the Company can take
its production in-kind and is responsible for its pro rata share of assets and
liabilities are included on a proportionate consolidation basis. All material
intercompany balances and transactions have been eliminated. Certain 1993 and
1992 amounts have been reclassified to conform to the 1994 presentation.
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. Revenues resulting
from the sale of hedged production of gold are included in cash flows from
operating activities.
INVENTORIES
Gold inventory is valued at the lower of aggregate cost, computed on a last-in,
first-out (LIFO) basis, or market. Materials and supplies are valued at average
cost less reserves for obsolescence. During the fourth quarter of 1994 the
Company changed its method of accounting for the costs of ore loaded on heap
leach pads to recognize such costs as work-in-process inventory. Previously,
the Company expensed these costs as incurred. The change, made retroactive to
January 1, 1994, results in a better matching of revenues and cost of sales and
conforms with predominant mining industry practice.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost, including development
expenditures and capitalized interest. 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 which have a useful life shorter than the
mine life are depreciated on a straight-line basis over estimated useful lives
of one to five years. Impairment is provided when the net book value of mining
assets exceeds the related estimated undiscounted future cash flows.
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 and result in a hedge against future gold price
fluctuations but can limit realized prices to the amounts received when the
borrowed gold is sold. To offset any limit on realized prices, the Company may
enter into offsetting hedging agreements.
32
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
The Company also borrows gold from banks and sells the gold on the open market
under gold leases. Gold leases bear interest at a relatively low gold rate but
also require the Company to buy gold from the lender at a specified future price
and date. The combined interest cost of a gold lease is the gold interest rate
and the difference between the price of gold at the gold lease inception and the
price of gold when the gold lease is repaid. Gold leases do not provide hedging
benefits for the Company or limit upside participation in rising prices.
Currency financings represent borrowings in hard currency, typically U.S.
dollars. The terms, including interest rates, are negotiated with the lenders
based on market conditions at the time of the loan.
HEDGING ACTIVITIES
Advance payments for the future delivery of mineral production are deferred
until the designated delivery date. Upon delivery, sales are included in the
Company's statements of operations based on the per ounce ratable share of
payments received and expenses are included based on production costs.
Forward sale contracts and put and call option contracts are entered into from
time to time to hedge the effect of price changes on the Company's precious
metals that are produced and sold. The results of gold hedging activities are
included in sales at the time the hedged production is sold. Silver hedging
results are reflected in the by-product credit.
Interest rate swaps, options and caps are entered into as a hedge against
interest rate exposure on the Company's financing facilities. The differences
to be paid or received on swaps, options and caps are included in interest
expense as incurred or realized.
POSTRETIREMENT BENEFITS
Postretirement benefits other than pensions are calculated in accordance with
the provisions set forth in Statement of Financial Accounting Standards (SFAS)
No. 106, which the Company adopted effective January 1, 1992. SFAS No. 106
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, which the Company adopted effective January 1, 1993.
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.
EXPLORATION
Exploration expenditures are charged against earnings in the period incurred.
During the second quarter of 1993, the Company changed its accounting policy,
effective as of January 1, 1993, to discontinue the practice of subsequently
capitalizing and restoring to earnings prior period exploration expenses when a
property becomes exploitable. The Company believes the change better presents
income from mining activities and follows the predominant mining industry
practice.
RECLAMATION
Reclamation, site restoration and closure costs for each producing mine are
estimated based primarily upon environmental and regulatory requirements and are
accrued and charged over the expected life of each of the
33
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
Company's mines 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, which the Company adopted effective January 1, 1992. 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 bases of assets and
liabilities and gives immediate effect to changes in income tax laws upon
enactment. The income statement effect is derived from changes in deferred
income taxes on the balance sheet.
2. TRANSACTIONS WITH AFFILIATES
In November 1993, AMAX Inc. (Amax), a New York corporation which owned
approximately 68 percent of the Company's outstanding common stock, was merged
with and into Cyprus Minerals Company, a Delaware corporation. Immediately
prior to the merger, Amax distributed to Amax shareholders from the shares then
held by Amax approximately 28 percent of the Company's outstanding common stock.
As of December 31, 1994, the merged company, called Cyprus Amax Minerals Company
(Cyprus Amax), owned approximately 34 million common shares, or approximately 42
percent, of the Company's outstanding common stock.
The Company has entered into several 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. A non-compete agreement in
process clarifies terms under which either company would generally provide
opportunity for the other to develop minerals in its own interests but could
also develop and produce minerals which would be in competition with the other
party. A services agreement provides for general administrative services
between Cyprus Amax and the Company.
For the years ended December 31, 1994, 1993 and 1992, management services and
insurance were supplied to the Company on a full cost reimbursement basis. For
the years ended December 31, 1993 and 1992, employee benefit plans (medical and
life insurance benefits) and employee pension and thrift plan benefits were also
provided. In October 1993, the Company established separate medical and life
insurance coverage for its employees. Additionally, on November 15, 1993, a
separate defined benefit pension plan and thrift plan for Company employees
became effective. For the period from January 1, 1993 through November 14,
1993, and for the year ended December 31, 1992, Amax charged the Company
approximately $.4 million and $1.3 million, respectively, for pension costs.
For the years ended December 31, 1994, 1993, and 1992, the Company was charged
$4.8 million, $4.8 million and $4.2 million, respectively, for reimbursable
costs.
Interest income on advances to Amax under a demand promissory note receivable
was $.2 million and $.5 million for the years ended December 31, 1993 and 1992,
respectively.
Amax made loans to the Company during the year ended December 31, 1993 under a
demand promissory note payable. See Note 7 for a further discussion.
34
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
3. EMPLOYEE BENEFITS
PENSION PLAN
Substantially all employees are covered by a non-contributory defined benefit
pension plan. The plan provides retirement benefits for employees based
generally on years of service and compensation levels. Funding of the plan
will be made in accordance with the requirements of ERISA. Effective July 1,
1994, the Company amended its plan to a career average plan from a final pay
plan. The change has the effect of reducing the projected benefit obligation
and annual pension expense.
Net annual pension cost includes the following components:
1994 1993
----- -----
Service cost $ .8 $ 1.0
Interest cost .4 .4
Return on assets (.1) (.1)
Deferred gain (loss) (.2) -
Net amortization of prior service cost and losses .2 .3
----- -----
Net periodic expense $ 1.1 $ 1.6
===== =====
For the year ended December 31, 1992, the Company was charged $1.3 million for
pension costs by Amax.
The following table summarizes the funded status of the plan and the related
amounts recognized in the Company's financial statements at December 31:
1994 1993
----- -----
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $2.7 million in 1994 and $2.2 million
in 1993 $ 3.6 $ 3.3
===== =====
Projected benefit obligation $(3.6) $(7.0)
Estimated plan assets at fair value 2.1 2.1
----- -----
Estimated plan assets less than projected benefit
obligation (1.5) (4.9)
Unrecognized prior service cost (.9) 1.6
Unrecognized net loss .9 2.1
----- -----
Accrued pension cost $(1.5) $(1.2)
===== =====
The following assumptions were used in calculating the funded status of the plan
at December 31 and the pension cost for the subsequent year:
1994 1993
----- -----
Expected long-term rate of return on assets 9.0% 10.0%
Discount rate 8.75% 7.5%
Rate of increase in compensation levels 5.25% 5.25%
35
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company also provides certain health care and life insurance benefits for
retired employees in the United States. Effective January 1, 1992, the Company
adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions". As of January 1, 1992, the Company recognized the full amount
of its estimated accumulated postretirement benefit obligation as a cumulative
effect of an accounting change. This cumulative amount represented the present
value of the estimated future benefits payable to current retirees and a pro
rata portion of estimated benefits payable to currently active employees after
their retirement. The pre-tax charge to 1992 earnings for the cumulative effect
of the accounting change was $2.4 million, with a net earnings effect of $1.5
million.
Net periodic postretirement benefit costs for the years ended December 31, 1994,
1993 and 1992 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:
1994 1993
----- -----
Accumulated postretirement benefit obligation:
Retirees $ .4 $ .4
Fully eligible active plan participants .1 .1
Other active plan participants .9 1.0
----- -----
Total accumulated postretirement benefit obligation 1.4 1.5
Plan assets at fair value - -
----- -----
Accumulated postretirement benefit obligation
in excess of plan assets (1.4) (1.5)
Unrecognized prior service cost (1.7) (1.8)
Unrecognized net loss .3 .5
----- -----
Accrued postretirement benefit cost $(2.8) $(2.8)
===== =====
The accumulated postretirement benefit obligation was determined using a
weighted average annual discount rate of 8.75 percent in 1994 and 7.5 percent in
1993. The assumed health care cost trend rate used in 1994 was 12 percent
declining gradually to 6 percent for 2007 and thereafter.
A one percent increase each year in the health care cost trend rate used would
have resulted in an insignificant increase in the 1994 postretirement benefit
cost and the accumulated postretirement benefit obligation at December 31, 1994.
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. Effective January 1, 1993, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". The pre-tax charge to 1993
earnings for the cumulative effect of this accounting change was $2.8 million,
with a net earnings effect of $1.8 million.
36
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
4. INCOME TAXES
Income (loss) before income taxes consists of the following:
1994 1993 1992
------ ------- -----
Domestic $(32.9) $(108.8) $13.3
Foreign (16.7) (14.0) 4.7
------ ------- -----
$(49.6) $(122.8) $18.0
====== ======= =====
The income tax provision (benefit) consisted of the following:
1994 1993 1992
----- ------ -----
Current:
Federal $ - $ - $ .1
State - - -
Foreign - .3 .2
----- ------ -----
- .3 .3
Deferred:
Federal (5.3) (36.9) 3.0
State .7 (2.3) .4
Foreign - (.4) .4
----- ------ -----
(4.6) (39.6) 3.8
----- ------ -----
$(4.6) $(39.3) $ 4.1
===== ====== =====
The total income tax provision (benefit) is included in the financial statements
as follows:
1994 1993 1992
----- ------ -----
Income tax provision (benefit) $(6.6) $(33.8) $ 5.0
Cumulative effect of accounting changes 2.0 (5.5) (.9)
----- ------ -----
$(4.6) $(39.3) $ 4.1
===== ====== =====
The components of the deferred tax assets (liabilities) are as follows:
1994 1993
------ ------
Inventory $ (.3) $ 1.3
Property, plant and equipment (39.5) (35.0)
Postretirement benefits .9 1.0
Reserves, reclamation and other
liabilities 5.7 (4.5)
Net operating loss carryforwards 29.9 22.4
Minimum tax credits 2.8 2.8
Valuation allowance (9.5) (2.6)
------ ------
$(10.0) $(14.6)
====== ======
37
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
Net deferred tax liabilities are included in the balance sheet at December 31 as
follows:
1994 1993
----- ------
Assets:
Deferred income taxes:
Current $ - $ 2.3
Liabilities:
Deferred income taxes:
Noncurrent (10.0) (16.9)
------ ------
$(10.0) $(14.6)
====== ======
The following is a reconciliation between the amount determined by applying the
federal statutory rate of 34% to income (loss) before taxes and the income tax
provision (benefit):
1994 1993 1992
------ ------ -----
Income taxes at statutory rate $(16.9) $(41.7) $ 6.1
Increases (decreases) resulting from:
Foreign losses with no expected tax benefit 3.2 5.1 -
State income taxes, net of federal benefit (.4) (1.4) .8
Percentage depletion (.2) (.5) (2.7)
Waihi transaction gain - 3.7 -
Foreign exploration - - (.8)
Other .8 1.0 1.6
Change in valuation allowance 6.9 - -
------ ------ -----
Income tax provision (benefit) (6.6) (33.8) 5.0
------ ------ -----
Income tax provision (benefit) of cumulative
effect of accounting changes at statutory rate 3.2 (7.0) (.8)
State income taxes, net of federal benefit - (.2) (.1)
Foreign losses with no expected tax benefit (1.2) 1.7 -
Income tax provision (benefit) of cumulative
effect of accounting changes 2.0 (5.5) (.9)
------ ------ -----
$ (4.6) $(39.3) $ 4.1
====== ====== ======
The valuation allowance increased $6.9 million due to uncertainties of realizing
loss carryforwards in the future.
At December 31, 1994, the Company had federal tax net operating loss
carryforwards of $73 million and alternative minimum tax net operating loss
carryforwards of $43 million expiring in the years 2002-2009 and minimum tax
credit carryforwards of $3 million which do not expire. At December 31, 1994,
the Company also had Chilean tax net operating loss carryforwards of $67 million
with no expiration.
38
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
5. INVENTORIES
Inventories at December 31, 1994 and 1993 consisted of the following:
1994 1993
------ ------
Gold:
Finished goods $ 10.3 $ 9.0
Work-in-process 11.5 -
Materials and supplies 6.8 7.6
------ ------
$ 28.6 $ 16.6
====== =======
The market value of the finished goods inventory at December 31, 1994 was $14.4
million, with an excess replacement cost (at market value) over the LIFO basis
of $4.1 million.
During the fourth quarter of 1994, the Company changed its method of accounting
for the costs of ore loaded on heap leach pads, retroactive to January 1, 1994,
to record such costs as work-in-process inventory. Previously, the Company had
expensed these costs as incurred. The cumulative after-tax effect of the change
in accounting for inventory for periods prior to 1994 was a decrease in the net
loss of $7.5 million or $.09 per common share. The effect of the accounting
change in 1994 is a reduction in costs of sales of $.3 million. Assuming the
inventory accounting change had been applied retroactively, the unaudited pro
forma effect would be a reduction of net loss of $2.3 million ($.03 per share)
in 1993 and an increase in net earnings of $5.2 million ($.07 per share) in
1992.
6. PROPERTY, PLANT AND EQUIPMENT AND WRITE-DOWNS
The components of property, plant and equipment at December 31, 1994 and 1993
were as follows:
1994 1993
------ ------
Mining plants and equipment $166.7 $163.2
Mining properties 168.8 159.9
Development properties and construction-in-progress 224.1 215.6
------ -----
559.6 538.7
Less accumulated depreciation, depletion
and write-downs (246.3) (205.2)
------ -----
$313.3 $333.5
====== ======
ASSET WRITE-DOWNS
The Hayden Hill mine, which began commercial production in June 1992,
experienced unacceptably high unit operating costs due to lower than anticipated
mill head grades. A re-evaluation of the operation completed in July 1993
resulted in the downward revision of proven and probable ore reserves of
approximately 400,000 contained gold ounces. During the last half of 1993, the
mine was reconfigured to operate as a heap leach operation only, with the mill
being maintained on stand-by status. As a result of the downward revision of
the Hayden Hill ore reserves and the stand-by status of the mill, the Company
recorded a $64.1 million pre-tax ($41.9 million after-tax) write-down of the
Hayden Hill assets. At December 31, 1993, the net book value assigned to the
Hayden Hill mill was approximately $24 million. During the 1993 analysis, the
mill was not fully written down in anticipation that
39
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
sufficient mill grade ore would be encountered to justify a future milling
operation or possible use of the mill at another property.
After a successful year of full-scale heap leach only operation at Hayden Hill
in 1994, the Company has determined that a mill operation as originally designed
would not be economical. Given the favorable heap leach recoveries, lower heap
leach operating costs and the lack of higher grade ore amenable to future
milling operations, management no longer views milling as a viable option. As a
result, the Company recognized an additional $18.6 million pre-tax ($14.1
million after tax) write-down of Hayden Hill during the fourth quarter of 1994.
The Company also wrote down $2.5 million ($2.1 million after-tax) of other
assets in 1994.
Mining experience and a reinterpretation of geologic data at the Sleeper Mine
during the fourth quarter of 1993 also led to a reduction in proven and probable
ore reserves of approximately 300,000 contained gold ounces. As a result, the
Company recorded a $23.6 million pre-tax ($15.6 million after-tax) write-down of
its Sleeper assets as of December 31, 1993.
WAIHI TRANSACTION
During 1993, the Company realized an $8.8 million gain from the future economic
benefit of the Company's 33.53 percent interest in the Waihi Mine in New
Zealand. The Company received gross proceeds of $15.4 million and a receivable
of 15,500 ounces of gold to be paid over a 5-year period. Following the
transaction, the Company sold forward, on a spot deferred forward basis (which
allows the Company to defer the delivery of the gold ounces to a later date at a
renegotiated gold price) the 15,500 gold ounces at an average price of $365 per
ounce. The Company has renegotiated the spot-deferred forward price of the
remaining 10,850 ounces of gold receivable to $385 per ounce at December 31,
1994.
The Company's statement of cash flows for the year ended December 31, 1993
reflects the net cash received from the transaction of $7.8 million, net of cash
previously reflected in the Company's balance sheet and transaction costs.
EXPLORATION EXPENDITURES
During 1993, the Company changed its method of accounting for exploration
expenditures. Previously, the Company capitalized and restored to earnings
prior period exploration expense when a property became exploitable. For the
year ended December 31, 1993, the Company recognized a $13.4 million ($.17 per
common share) after-tax charge (net of a deferred income tax benefit of $4.5
million) relating to the cumulative effect for periods prior to 1993. The
effect of the accounting change was to reduce the 1993 net loss by $4.3 million.
Assuming this accounting change had been applied retroactively, unaudited
proforma earnings before cumulative effect of accounting changes, net earnings
and net earnings per share for 1992 would have been $6.4 million, $4.9 million
and $.07 per share, respectively.
7. GOLD AND CURRENCY FINANCINGS
The following tables summarize outstanding gold loan facilities and bank loans
and related principal repayments.
40
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
December 31, 1994 December 31, 1993
---------------------------- -----------------------------
Current Noncurrent Total Current Noncurrent Total
-------- ---------- ------ ------- ---------- ------
Gold Financings:
Nevada Gold Mining, Inc. $ 1.6 $ - $ 1.6 $ - $ 1.6 $ 1.6
Amax Gold Inc. - 23.5 23.5 - 30.0 30.0
Currency Financings:
Lassen Gold Mining, Inc. 11.3 29.6 40.9 11.1 40.8 51.9
Compania Minera Amax
Guanaco 3.0 3.1 6.1 4.0 39.4 43.4
AGI Chile Credit Corp., Inc. 8.0 27.0 35.0 - - -
------- ------- ------ ------- -------- ------
23.9 83.2 107.1 15.1 111.8 126.9
------- ------- ------ ------- -------- ------
Payable to Cyprus Amax - - - - 24.7 24.7
------- ------- ------ ------- -------- ------
$23.9 $83.2 $107.1 $15.1 $136.5 $151.6
Principal
Repayments
----------
1995 $ 23.9
1996 53.5
1997 29.7
------
$107.1
======
Other than the Company, the above named obligors are wholly owned subsidiaries
of the Company except for Compania Minera Amax Guanaco, which is a 90 percent
owned subsidiary.
The market value of the total outstanding gold and currency financings as of
December 31, 1994 was $.2 million lower than the carrying value of $107 million.
NEVADA GOLD MINING, INC.
As of December 31, 1994, 4,000 ounces of gold were outstanding under a gold
bullion loan agreement for Nevada Gold Mining, Inc. (Nevada Gold). The Company
has agreed to repay the outstanding balance in March 1995. Collateral consists
of Nevada Gold's Sleeper mine assets and capital stock. Interest, payable
quarterly, is based on the lender's cost of borrowing gold plus commitment and
agency fees. During the years ended December 31, 1994, 1993 and 1992, the
annualized interest rate was .2 percent, .7 percent and 1.8 percent,
respectively. During the years ended December 31, 1994, 1993 and 1992, the
Company paid $.1 million, $.1 million and $.2 million, respectively, in interest
expense and fees.
AMAX GOLD INC.
At December 31, 1994, the Company had outstanding gold leases of 60,951 gold
ounces which were sold for $23.5 million and were originally scheduled to be
repaid during 1995. Due to the availability of the line of credit with Cyprus
Amax and the Company's intention to refinance the gold leases they have been
classified as long-term.
While the December 31, 1994 market value of the total outstanding ounces
borrowed is $.2 million lower than the $23.5 million carrying value (using the
spot market price for gold), the Company has contractual agreements with
41
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
the lenders which set the gold price upon repayment equal to the carrying
value plus a 5.6 percent average annualized effective rate of interest.
LASSEN GOLD MINING, INC.
The final maturity date for the facility is December 31, 1997. Interest,
payable quarterly, is currently based on the London Interbank Offered Rate
(LIBOR) plus 0.6 percent. The annualized interest rate for the years ended
December 31, 1994, 1993 and 1992 was 5.4 percent, 5.3 percent, and 5.5 percent,
respectively. During the years ended December 31, 1994, 1993 and 1992, the
Company paid $2.7 million, $3.5 million and $3.1 million, respectively, in
interest expense and fees on the loan. Collateral consists of a mortgage on the
Hayden Hill Mine assets, a pledge of the Lassen Gold Mining, Inc. stock and a
guarantee by the Company.
COMPANIA MINERA AMAX GUANACO
Compania Minera Amax Guanaco (Amax Guanaco) outstanding debt of $6.1 million is
owed to a Chilean governmental development agency. The final maturity date is
August 31, 1996. The Chilean debt is collateralized by a stand-by letter of
credit guaranteed by the Company. For the years ended December 31, 1994, 1993
and 1992, the annualized interest rate was 8.3 percent, 9.4 percent and 8.4
percent, respectively. During the years ended December 31, 1994, 1993 and 1992,
interest expense and fees paid totaled $1.6 million, $5 million and $1.4
million, respectively. During the years ended December 31, 1993 and 1992, $.5
million and $2.8 million, respectively, of interest expense and fees on these
financings were capitalized. The capitalized interest and fees are being
amortized over the life of the project.
AGI CHILE CREDIT CORP., INC.
In March 1994, AGI Chile Credit Corp., Inc. refinanced $34.2 million of
outstanding Chilean short-term bridge loans with a $36 million term loan
agreement. The final maturity date is October 1997. The loan is collateralized
by guarantees from the Company and, initially, Cyprus Amax. Amounts outstanding
bear interest at LIBOR plus 1.25 percent. For the year ended December 31, 1994,
the annualized interest rate was 7.7 percent. Interest expense and fees paid
totaled $3.6 million during 1994.
LINE OF CREDIT FROM CYPRUS AMAX
On April 15, 1994, the Company and Cyprus Amax signed an agreement, subsequently
approved by the Company's stockholders in July 1994, in which Cyprus Amax agreed
to provide 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 by the Company issuing up to two million shares of
$2.25 Series A Convertible Preferred Stock. The Company will have the right to
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. To effect a full redemption at prices below $8.265, the
Company may be required to redeem a portion of any outstanding convertible
preferred stock with cash up to a maximum of $29.2 million. Cyprus Amax will
have the right to replace the line of credit and any outstanding indebtedness
and/or convertible preferred stock with the purchase of up to 12,099,213 shares
of the Company's common stock at a purchase price of $8.265 per share, an
aggregate of $100 million.
A portion of the credit line is designated as support for indebtedness relating
to the Hayden Hill, Guanaco and Refugio projects and for general corporate
purposes.
42
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
In June 1994, the Company borrowed $8 million from Cyprus Amax under the $100
million credit line. In August 1994, the Company repaid Cyprus Amax a total of
$34 million outstanding under a demand promissory note payable and the line of
credit agreement. The repayment was made with $13.3 million in cash and $20.7
million proceeds from the sale to Cyprus Amax of three million shares of common
stock under a stock purchase agreement approved in July 1994.
On February 16, 1995, the Company and Cyprus Amax agreed to an additional $80
million line of credit, subject to approval by the Company's shareholders.
Outstanding amounts under the new credit line bear interest at LIBOR plus 0.3
percent and may be repaid by the Company issuing up to 1.6 million shares of
$2.25 Series C Convertible Preferred Stock. The Company will have the right to
redeem the convertible preferred stock by issuing up to 14,919,806 shares of
common stock at a maximum price of $5.362 per share and a minimum price of
$4.916 per share.
If the entire $180 million lines of credit were drawn and converted into the
Company's common stock and the outstanding Series B Convertible Preferred Stock
were converted, Cyprus Amax ownership would increase to approximately
51.4 percent.
REFUGIO FINANCING
In February 1995, Compania Minera Maricunga (CMM), a 50 percent-owned subsidiary
of the Company, received $85 million in financing for the Refugio project in
Chile. The loan was drawn in 223,684 ounces of gold which were sold for $380
per ounce. The loan is a five year amortizing term loan that can be transferred
between gold and U.S. dollars. The Company and the other 50 percent owner are
guarantors on a proportionate basis until after completion tests are passed, at
which time the loan becomes non-recourse to the Company. Interest on the
Company's share will be calculated at LIBOR for any U.S. dollar portion and at
the bank's gold base rate for any gold portion, plus 1.75 percent during the
construction phase or plus 2.5 percent after completion tests are passed.
8. HEDGE CONTRACTS
Precious metal hedge contracts include forward sales contracts, spot deferred
forward sales and put and call options. Realization under these contracts is
dependent upon the counterparties performing in accordance with the terms of the
contracts. The Company does not anticipate nonperformance 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 to defer the delivery of gold under a forward sales contract to a later
date at a renegotiated market price, as long as certain conditions are
satisfied. Various factors influence the decision to close a spot deferred
forward sales contract or to roll the contract forward to a later date. 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.
43
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otehrwise indicated and
except per share amounts and amounts per ounce)
As of December 31, 1994, the Company's outstanding hedge contracts were as
follows:
Average Price
Gold Ounces Per Ounce Period
----------- ------------- -------------------
Forward sales contracts/(1)/ 172,400 $441 Jan. 1995-Mar. 1995
Option contracts:
Purchased put options 329,000 396 Jan. 1995-Dec. 1999
Sold put options 39,000 381 Jan. 1995-Nov. 1995
Purchased call options 37,500 433 Jan. 1995-Dec. 1995
Sold call options 249,900 449 Jan. 1995-Dec. 1995
/(1)/ Represents the net forward sales position which was made primarily on a
spot deferred forward basis which allows the Company to defer the delivery
of gold ounces to a later date at a renegotiated gold price.
The Company also has outstanding compound put options for 274,000 ounces at $432
per ounce and compound call options for 12,000 ounces at $420 per ounce. If
exercised, these options expire through December 1999.
The market value of the Company's forward contracts, put and call option
contracts and compound options at December 31, 1994 was approximately $13
million. Future market valuations for these contracts are dependent on gold
market prices, option volatility and interest rates, which can vary
significantly. These contracts will be utilized in the future to hedge against
declines in gold market prices for the Company's future gold production while
maintaining benefits in the event of higher gold market prices.
Interest rate hedge contracts entered into by the Company consist of interest
rate swap, option and cap agreements to reduce the impact of changes in interest
rates on its financing facilities. At December 31, 1994, the Company's
outstanding interest rate swap was not significant.
9. PREFERRED STOCK
In August 1994, the Company sold publicly 1,840,000 shares of $3.75 Series B
Convertible Preferred Stock (Preferred Stock) for net proceeds of $88.3 million.
Outstanding 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 11,151,515 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 will accrue from the date of
issuance and are payable quarterly on each November 15, February 15, May 15 and
August 15, as and if declared by the Board of Directors.
44
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
10. 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 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.
The Company issued warrants to purchase 4,066,649 shares of common stock in
connection with the acquisition of the Fort Knox property. Each warrant permits
the holder to purchase one share of common stock at a price of $21.00 per share,
subject to adjustment upon the occurrence of certain events. The warrants are
currently exercisable and will expire on January 8, 1996.
In March 1994, the Company's Board of Directors eliminated the $0.02 quarterly
dividend on common stock.
In March 1994, the Company adopted a plan to grant common shares to non-employee
directors. The plan was approved by shareholders in May 1994. The Company
reserved 100,000 shares of common stock for issuance pursuant to this plan. In
August 1994, 7,500 shares were issued.
Earnings per common share have been calculated on the basis of the average
common shares outstanding. For the year ended December 31, 1994, outstanding
Company warrants were not considered in the earnings per share calculation as
these were anti-dilutive.
11. STOCK OPTION PLAN
The Company maintains a stock option plan (the "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 are
exercisable over a period of ten years from date of grant.
The following table summarizes activity under the Plan.
Number Average Price
of Options Per Share
---------- -------------
Options outstanding December 31, 1993 315,825 $8.75
Options granted in 1994 624,350 6.82
Options canceled in 1994 163,750 8.63
Options outstanding December 31, 1994 776,425 7.22
Options exercisable 167,475 8.75
---------- -------------
No options were exercised during 1994, 1993 or 1992. At December 31, 1994, 2.2
million common shares are reserved for future grants.
45
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
12. DOMESTIC AND FOREIGN OPERATIONS
The Company's foreign operations consist of the Guanaco Mine and Refugio
development project in Chile. Effective April 30, 1993, the Company realized
the future economic benefit from its interest in the Waihi Mine in New Zealand.
The components of the Company's domestic and foreign operations were as follows:
1994 1993 1992
------- ------- -------
Sales:
United States $ 74.9 $ 69.2 $ 90.2
Foreign 19.7 12.7 9.5
------ ------- -------
$ 94.6 $ 81.9 $ 99.7
====== ======= =======
Earnings (loss) from operations:
United States $(31.4) $(104.7) $ 14.5
Foreign (12.5) (11.3) 4.3
------ ------- -------
$(43.9) $(116.0) $ 18.8
====== ======= ======
Net earnings (loss):
United States $(25.1) $ (84.0) $ 7.5
Foreign (12.2) (20.2) 4.0
------ ------- -------
$(37.3) $(104.2) $ 11.5
====== ======= ======
Assets:
United States $308.3 $ 294.6 $401.1
Foreign 94.9 86.4 76.5
------- ------- -------
$403.2 $ 381.0 $477.6
====== ======= ======
Substantially all of the Company's 1994, 1993 and 1992 sales were made in
Europe, through a wholly owned subsidiary of the Company. The Company's sales
to major customers which exceeded 10 percent of total sales were $65 million to
four customers in 1994, $38 million to two customers during 1993 and $46 million
to three customers during 1992. 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.
46
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
13. COMMITMENTS AND CONTINGENCIES
The Company is currently accruing reclamation liabilities for the following
operations:
Reclamation Costs Accrued
Total Anticipated -------------------------
Reclamation Cost Current Non-Current
---------------- ---------- -------------
Sleeper Mine $10.4 $ - $ 7.8
Hayden Hill Mine 5.9 - 3.3
Wind Mountain Mine 2.0 2.0 -
----- ---- -----
Total $18.3 $2.0 $11.1
===== ==== =====
The anticipated reclamation costs for the Sleeper, Hayden Hill and Wind Mountain
mines are estimates based on current federal and state laws and regulations
governing the protection of the environment. The reclamation accrual for the
Wind Mountain mine is shown as current due to the expectation that residual heap
leach production will subside in 1995, which is expected to result in the
commencement of the final reclamation activities. The anticipated costs of
reclamation for the Guanaco mine, given current Chilean laws and regulations
governing the protection of the environment, are not expected to be significant.
Changes in the federal, state and Chilean laws and regulations could impact
these anticipated reclamation costs.
The Company's mining and exploration activities are subject to various federal,
state and Chilean laws and regulations governing the protection of the
environment which are continually changing and generally becoming more
restrictive. The Company conducts its operations so as to protect the public
health and environment. The Company has made, and expects to make in the
future, significant expenditures to comply with such laws and regulations.
47
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
14. QUARTERLY DATA (UNAUDITED)
Quarterly earnings data for the years ended December 31, 1994 and 1993 follow:
1994 Quarters/(1)/ First Second Third Fourth
------------------ ------- ------- ------- --------
Sales $23.8 $27.9 $23.7 $ 19.2
Costs and operating expenses 28.2 28.7 28.6 25.7
----- ----- ----- ------
Gross operating loss (4.4) (.8) (4.9) (6.5)
Asset write-downs - - - (21.1)
Exploration expenses (.3) (1.1) (2.2) (2.6)
----- ----- ----- ------
Loss from operations (4.7) (1.9) (7.1) (30.2)
----- ----- ----- ------
Loss before income taxes and
cumulative effect of accounting
change (6.7) (3.5) (8.2) (31.2)
----- ----- ----- ------
Loss before cumulative
effect of accounting change (5.2) (3.5) (6.9) (27.4)
Cumulative effect of accounting
change, net of income tax benefit 7.5 - - -
----- ----- ----- ------
Net earnings (loss) 2.3 (3.5) (6.9) (27.4)
Preferred stock dividends - - - (1.8)
----- ----- ----- ------
Earnings (loss) attributable to
common shares $ 2.3 $(3.5) $(6.9) $(29.2)
===== ===== ===== ======
Per common share:
Earnings (loss) before cumulative
effect of accounting change $(.07) $(.05) $(.09) $ (.36)
Cumulative effect of accounting
change .09 - - -
----- ----- ----- ------
Net earnings (loss) $ .02 $(.05) $(.09) $ (.36)
----- ----- ----- ------
Dividends declared per common share $ - $ - $ - $ -
===== ===== ===== ======
/(1)/ Restated for the fourth quarter change in inventory accounting policy,
retroactive to January 1, 1994, which resulted in a net earnings increase
of $8.1 million for the first quarter, $.2 million for the second quarter
and $.7 million for the third quarter.
48
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
1993 Quarters First Second Third Fourth
------------- ------ ------ ------ ------
Sales $ 18.4 $ 23.1 $ 20.6 $ 19.8
Costs and operating expenses 24.9 32.1 29.2 27.6
------ ------ ------ ------
Gross operating loss (6.5) (9.0) (8.6) (7.8)
Gain on Waihi transaction - 8.8 - -
Asset write-downs - (64.1) - (23.6)
Exploration expenses (.5) (1.1) (1.5) (2.1)
------ ------ ------ ------
Loss from operations (7.0) (65.4) (10.1) (33.5)
------ ------ ------ ------
Loss before income taxes and cumulative
effect of accounting changes (8.5) (67.6) (11.7) (35.0)
------ ------ ------ ------
Loss before cumulative effect of
accounting changes (6.0) (49.1) (7.4) (26.5)
Cumulative effect of accounting
changes, net of income tax benefit (15.2) - - -
------ ------ ------ ------
Net loss $(21.2) $(49.1) $ (7.4) $(26.5)
====== ====== ====== ======
Per common share:
Loss before cumulative effect of
accounting changes $ (.07) $ (.63) $ (.10) $ (.34)
Cumulative effect of accounting changes (.20) - - -
------ ------ ------ ------
Net loss $ (.27) $ (.63) $ (.10) $ (.34)
====== ====== ====== ======
Dividends declared per common share $ .02 $ .02 $ .02 $ .02
====== ====== ====== ======
49
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
A change in the Registrant's certifying accountant was reported on Form 8-K
dated March 7, 1994.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item appears in the Company's Proxy Statement
for the 1995 Annual Meeting to be filed within 120 days after the end of the
fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears in the Company's Proxy Statement
for the 1995 Annual Meeting to be filed 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 appears in the Company's Proxy Statement
for the 1995 Annual Meeting to be filed within 120 days after the end of the
fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears in the Company's Proxy Statement
for the 1995 Annual Meeting to be filed within 120 days after the end of the
fiscal year.
PART IV
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
Reports of Independent Accountants 24
Report of Management 26
Consolidated Statements of Operations for each of the
three years in the period ended December 31, 1994 27
Consolidated Balance Sheet at December 31, 1994 and 1993 28
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31,1994 29
Consolidated Statements of Shareholder's Equity for each
of the three years in the period ended December 31, 1994 30
Notes to Consolidated Financial Statements 31
2. FINANCIAL STATEMENT SCHEDULES
Financial statement schedules are not included in this Form 10-K
because they are not applicable.
3. EXHIBITS
Exhibit
Number Exhibit
------- -------
3.1 Restated Certificate of Incorporation, dated May 21, 1987, as amended
up to and including June 24, 1992, filed as Exhibit 1 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992 (File
No. 1-9620) and incorporated herein by reference.
3.2 By-laws adopted on April 2, 1987, as amended up to and including July
30, 1991, filed as Exhibit 3(b) to Registrant's Registration Statement
No. 33-43383 and incorporated herein by reference.
4.1 Certificate of Designations for the $2.25 Series A Convertible
Preferred Stock, filed as Appendix D to the Registrant's definitive
Proxy Statement for the Special Meeting of Stockholders held July 26,
1994 and incorporated herein by reference.
4.2 Certificate of Designations for the $3.75 Series B Convertible
Preferred Stock, filed as Exhibit 4.3 to the Registrant's Report on
Form 8-K, dated August 4, 1994 and incorporated herein by reference.
10.1 Put and Call Agreement dated as of January 2, 1992, between Registrant
and AMAX Inc., filed as Exhibit 28(c) to Registrant's Registration
Statement No. 33-43383 and incorporated herein by reference.
10.2 Directors' Deferred Compensation Plan, filed as Exhibit 10.14.2 to
Registrant's Registration Statement No. 33-22645 and incorporated
herein by reference.
10.3 Excess Benefit Plan, effective as of November 15, 1993, filed as
Exhibit EX-10(g) to Registrant's Form 10-K for the year ended December
31, 1993 and incorporated herein by reference.
Exhibit
Number Exhibit
------- -------
10.4 Deferred Compensation Plan, effective as of November 15, 1993, filed
as Exhibit EX-10(h) to Registrant's Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference.
10.5 1992 Stock Option Plan, filed as Exhibit A to Registrant's definitive
Proxy Statement for the 1993 Annual Meeting of Stockholders (File No.
1-9620), and incorporated herein by reference.
10.6 Performance Share Plan, filed as Exhibit B to Registrant's definitive
Proxy Statement for the 1993 Annual Meeting of Stockholders (File No.
1-9620) and incorporated herein by reference.
10.7 Mining Lease, dated as of April 2, 1987, between Amax Exploration,
Inc. and TMB Associates, relating to the Wind Mountain mine, including
Assignment to the Company and related documents, filed as Exhibit
10.25 to Registration Statement No. 33-22645 and Amendment to Mining
Lease, dated August 4, 1988, between TMB Associates and Registrant,
amending the Mining Lease filed as Exhibit 46 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990 (File No. 1-
9620), each incorporated herein by reference.
10.8 Bullion Loan Agreement, dated as of March 21, 1991, between Lassen
Gold Mining, Inc., Registrant, and various banks relating to the
financing of the Hayden Hill mine, filed as Exhibit 1 and Guarantee
and Pledge Agreement, dated as of March 21, 1991, between Registrant
and The Chase Manhattan Bank, N.A., as Agent for various banks, filed
as Exhibit 4, both to Registrant's Form 10-Q for the quarter ended
March 31, 1991 (File No. 1-9620) and incorporated herein by reference.
10.9 Term Loan Agreement among AGI Chile Credit Corp., Inc., N.M.
Rothschild & Sons Limited and Citibank, N.A., including continuing
Corporate Guaranty of Amax Gold Inc. and continuing Corporate Guaranty
of Cyprus Amax Minerals Company, filed as Exhibit 10(c) to Form 10-Q
for the quarter ended March 31, 1994 and incorporated herein by
reference.
10.10 Exploration Joint Venture Agreement, effective January 1, 1994,
between the Registrant and Cyprus Amax, filed as Exhibit 10.1 to the
Registrant's Registration Statement No. 33-53963 and incorporated
herein by reference.
10.11 Revolving Credit Agreement, dated as of April 15, 1994, between the
Registrant and Cyprus Amax, filed as Appendix A to the Registrant's
definitive Proxy Statement for the Special Meeting of Stockholders
held July 26, 1994, and incorporated herein by reference; and
Amendment to Revolving Credit Agreement, dated as of March 10, 1994,
between the Registrant and Cyprus Amax.
10.12 Revolving Credit Agreement, dated as of March 10, 1995, between the
Registrant and Cyprus Amax.
10.13 Loan Agreement, dated as of November 23, 1994, among Compania Minera
Maricunga, as borrower, Amax Gold Inc. and Bema Gold Corporation, as
guarantors, and certain banks; and related documents.
18 Letter dated February 17, 1995, from the Company's independent
accountants regarding their concurrence that a newly adopted method of
accounting for the costs of ore loaded on heap leach pads to recognize
such costs as work-in-process inventory, is prefereable to the method
previously applied.
21 Subsidiaries of Registrant.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Coopers & Lybrand LLP.
23.3 Consent of Mineral Resources Development, Inc.
23.4 Consent of Derry, Michener, Booth & Wahl.
27 Financial Data Schedule.
50
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of 1994.
51
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.
By /s/ MARK A. LETTES
-------------------------------------
Mark A. Lettes, Vice President and
Chief Financial 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 March , 1995.
Signature Title
--------- -----
/s/ MILTON H. WARD Chairman of the Board, Chief Executive
------------------ Officer (principal executive officer) and
Milton H. Ward Director
/s/ MARK A. LETTES Vice President and Chief Financial Officer
------------------ (principal financial officer)
Mark A. Lettes
/s/ DAVID L. MUELLER Vice President and Controller (principal
-------------------- accounting officer)
David L. Mueller
/s/ ALLEN BORN Director
--------------
Allen Born
/s/ GERALD J. MALYS Director
-------------------
Gerald J. Malys
/s/ ROCKWELL A. SCHNABEL Director
------------------------
Rockwell A. Schnabel
/s/ VERNON F. TAYLOR, JR. Director
-------------------------
Vernon F. Taylor, Jr.
/s/ RUSSELL L. WOOD Director
-------------------
Russell L. Wood
52
EXHIBIT INDEX
Exhibit
Number Exhibit
------- -------
3.1 Restated Certificate of Incorporation, dated May 21, 1987, as amended
up to and including June 24, 1992, filed as Exhibit 1 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992 (File
No. 1-9620) and incorporated herein by reference.
3.2 By-laws adopted on April 2, 1987, as amended up to and including July
30, 1991, filed as Exhibit 3(b) to Registrant's Registration Statement
No. 33-43383 and incorporated herein by reference.
4.1 Certificate of Designations for the $2.25 Series A Convertible
Preferred Stock, filed as Appendix D to the Registrant's definitive
Proxy Statement for the Special Meeting of Stockholders held July 26,
1994 and incorporated herein by reference.
4.2 Certificate of Designations for the $3.75 Series B Convertible
Preferred Stock, filed as Exhibit 4.3 to the Registrant's Report on
Form 8-K, dated August 4, 1994 and incorporated herein by reference.
10.1 Put and Call Agreement dated as of January 2, 1992, between Registrant
and AMAX Inc., filed as Exhibit 28(c) to Registrant's Registration
Statement No. 33-43383 and incorporated herein by reference.
10.2 Directors' Deferred Compensation Plan, filed as Exhibit 10.14.2 to
Registrant's Registration Statement No. 33-22645 and incorporated
herein by reference.
10.3 Excess Benefit Plan, effective as of November 15, 1993, filed as
Exhibit EX-10(g) to Registrant's Form 10-K for the year ended December
31, 1993 and incorporated herein by reference.
10.4 Deferred Compensation Plan, effective as of November 15, 1993, filed
as Exhibit EX-10(h) to Registrant's Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference.
10.5 1992 Stock Option Plan, filed as Exhibit A to Registrant's definitive
Proxy Statement for the 1993 Annual Meeting of Stockholders (File No.
1-9620), and incorporated herein by reference.
10.6 Performance Share Plan, filed as Exhibit B to Registrant's definitive
Proxy Statement for the 1993 Annual Meeting of Stockholders (File No.
1-9620) and incorporated herein by reference.
10.7 Mining Lease, dated as of April 2, 1987, between Amax Exploration,
Inc. and TMB Associates, relating to the Wind Mountain mine, including
Assignment to the Company and related documents, filed as Exhibit
10.25 to Registration Statement No. 33-22645 and Amendment to Mining
Lease, dated August 4, 1988, between TMB Associates and Registrant,
amending the Mining Lease filed as Exhibit 46 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990 (File No. 1-
9620), each incorporated herein by reference.
53
EXHIBIT INDEX
Exhibit
Number Exhibit
------- -------
10.8 Bullion Loan Agreement, dated as of March 21, 1991, between Lassen
Gold Mining, Inc., Registrant, and various banks relating to the
financing of the Hayden Hill mine, filed as Exhibit 1 and Guarantee
and Pledge Agreement, dated as of March 21, 1991, between Registrant
and The Chase Manhattan Bank, N.A., as Agent for various banks, filed
as Exhibit 4, both to Registrant's Form 10-Q for the quarter ended
March 31, 1991 (File No. 1-9620) and incorporated herein by reference.
10.9 Term Loan Agreement among AGI Chile Credit Corp., Inc., N.M.
Rothschild & Sons Limited and Citibank, N.A., including continuing
Corporate Guaranty of Amax Gold Inc. and continuing Corporate Guaranty
of Cyprus Amax Minerals Company, filed as Exhibit 10(c) to Form 10-Q
for the quarter ended March 31, 1994 and incorporated herein by
reference.
10.10 Exploration Joint Venture Agreement, effective January 1, 1994,
between the Registrant and Cyprus Amax, filed as Exhibit 10.1 to the
Registrant's Registration Statement No. 33-53963 and incorporated
herein by reference.
10.11 Revolving Credit Agreement, dated as of April 15, 1994, between the
Registrant and Cyprus Amax, filed as Appendix A to the Registrant's
definitive Proxy Statement for the Special Meeting of Stockholders
held July 26, 1994, and incorporated herein by reference; and
Amendment to Revolving Credit Agreement, dated as of March 10, 1994,
between the Registrant and Cyprus Amax.
10.12 Revolving Credit Agreement, dated as of March 10, 1995, between the
Registrant and Cyprus Amax.
10.13 Loan Agreement, dated as of November 23, 1994, among Compania Minera
Maricunga, as borrower, Amax Gold Inc. and Bema Gold Corporation, as
guarantors, and certain banks; and related documents.
18 Letter dated February 17, 1995, from the Company's independent
accountants regarding their concurrence that a newly adopted method of
accounting for the costs of ore loaded on heap leach pads to recognize
such costs as work-in-process inventory, is prefereable to the method
previously applied.
54
EXHIBIT INDEX
Exhibit
Number Exhibit
------- -------
21 Subsidiaries of Registrant.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Coopers & Lybrand LLP.
23.3 Consent of Mineral Resources Development, Inc.
23.4 Consent of Derry, Michener, Booth & Wahl.
27 Financial Data Schedule.
55