1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 8-K / A-1
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 11, 1994
HECLA MINING COMPANY
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-8491 82-0126240
- ----------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
6500 Mineral Drive, Coeur d'Alene, Idaho 83814-8788
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 208-769-4100
2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
Reference is made to Annex A to this Report on Form 8-K for
the financial statements of Equinox (including the executed Auditor's Report of
Deloitte & Touche).
3
(b) Pro Forma Financial Information.
Reference is made to Annex B to this Report on Form 8-K for
the pro forma financial information required to be filed in connection with the
Company's acquisition of Equinox.
(c) Exhibits.
1. Press Release of Hecla Mining Company, dated March 11, 1994.
2. Acquisition Agreement, dated as of December 29, 1993 by and
among Hecla, B.P.Y.A. 1193 Holdings Ltd., 105741 Ontario
Limited and Equinox (incorporated by reference to Exhibit 2 to
the Schedule 13D, dated January 7, 1994, filed by Hecla with
respect to Equinox).
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, hereunto duly authorized.
Dated: May 2, 1994
HECLA MINING COMPANY
By: /s/ Michael B. White
-----------------------------
Michael B. White
Vice President - General Counsel
& Secretary
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Annex A
EQUINOX RESOURCES LTD.
AUDITORS' REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
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[Deloitte & Touche letterhead]
AUDITORS' REPORT
To the Directors of
Equinox Resources Ltd.
We have audited the consolidated balance sheets of Equinox Resources Ltd. as at
December 31, 1993 and 1992 and the consolidated statements of loss and deficit
and changes in financial position for the year ended December 31, 1993, the two
months ended December 31, 1992 and the years ended October 31, 1992 and October
31, 1991. 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 out audits in accordance with generally accepted auditing
standards in Canada. Those standards require that we plan and perform an audit
to obtain reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31,
1993 and 1992 and the results of its operations and the changes in its
financial position for the year ended December 31, 1993, the two months ended
December 31, 1992 and the years ended October 31, 1992 and October 31, 1991 in
accordance with generally accepted accounting principles in Canada applied on a
consistent basis.
/s/ Deloitte & Touche
Chartered Accountants
Vancouver, Canada
February 28, 1994, except for Note 17 and 26
as to which the date is April 29, 1994
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EQUINOX RESOURCES LTD.
CONSOLIDATED BALANCE SHEETS
(IN CANADIAN DOLLARS)
DECEMBER 31, DECEMBER 31,
1993 1992
------------------------------------------
(restated: Note 4)
ASSETS
Current
Cash and term deposits $ 2,833,197 $ 863,080
Marketable securities (Note 6) 127,170 73,757
Accounts receivable 2,478,565 1,428,667
Inventory (Note 7) 2,600,854 2,061,437
Prepaid expenses 114,118 123,894
------------------------------------------
8,153,904 4,550,835
Investments (Note 8) 181,948 1,100,267
Fixed (Note 9) 45,210 27,369
Resource properties (Note 10) 13,449,042 11,724,446
------------------------------------------
$ 21,830,104 $ 17,402,917
==========================================
LIABILITIES
Current
Accounts payable $ 2,688,562 $ 3,238,266
Accrued reclamation costs 537,900 200,000
Production participating preferred
shares (Note 12) -- 347,000
------------------------------------------
3,226,462 3,785,266
Accrued reclamation costs 6,729,217 --
Production participating
preferred shares (Note 12) 1,622,650 1,064,000
------------------------------------------
11,578,329 4,849,266
------------------------------------------
SHAREHOLDERS' EQUITY
Capital stock (Notes 5,12,13 and 25)
Authorized
50,000,000 Common shares without par value
5,000,000 Class A preferred shares with
par value of $1.50 per share
5,000,000 Class B preferred shares
without par value
Issued
8,920,091 Common shares (1992- 15,577,750) 35,260,539 26,319,092
Deficit (25,008,764) (13,765,441)
------------------------------------------
10,251,775 12,553,651
------------------------------------------
$ 21,830,104 $ 17,402,917
==========================================
Commitments (Note 19)
Contingencies (Note 20)
Approved by the Board:
/s/ Ross J. Beaty
- -----------------------
Ross J. Beaty, Director
/s/ Pierre F. Masse
- -----------------------
Pierre F. Masse, Director
See accompanying notes to consolidated financial statements
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EQUINOX RESOURCES LTD.
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(IN CANADIAN DOLLARS)
YEARS ENDED
YEAR ENDED TWO MONTHS ENDED -------------------------------
DECEMBER 31 DECEMBER 31 OCTOBER 31 OCTOBER 31
1993 1992 1992 1991
-----------------------------------------------------------------
(restated: Note 4)
Revenue
Production revenue $ 14,092,749 $ 2,397,734 $ 1,142,747 $ --
Other (Note 22) 268,766 58,755 461,023 1,147,824
----------------------------------------------------------------
14,361,515 2,456,489 1,603,770 1,147,824
----------------------------------------------------------------
Expenses
Operating 11,576,367 2,590,924 1,795,228 --
Reclamation 5,117,110 -- -- --
Depreciation, depletion and amortization 2,236,586 403,622 369,619 51,209
Interest 258,654 9,292 6,763 47
Filing and transfer fees 80,138 13,181 35,374 28,237
General exploration 225,713 30,548 154,921 42,716
Legal, accounting and professional 207,045 -- 57,009 93,199
General and administration 1,159,363 179,209 657,359 945,994
Foreign exchange (gain) loss (187,909) (7,888) 32,056 (6,590)
Research 193,612 32,104 48,717 --
----------------------------------------------------------------
20,866,679 3,250,992 3,157,046 1,154,812
----------------------------------------------------------------
Loss before undernoted items (6,505,164) (794,503) (1,553,276) (6,988)
Write-off of resource properties, net (3,756,965) -- (4,618,266) (652,178)
Equity loss in investment (981,194) (8,718) (108,980) (37,742)
Write-down of marketable securities -- (8,580) -- --
Minority interest -- -- 22,172 --
----------------------------------------------------------------
Net loss for the period (11,243,323) (811,801) (6,258,350) (696,908)
Deficit, at beginning of period, as restated
(Note 4) (13,765,441) (12,953,640) (6,695,290) (5,998,382)
----------------------------------------------------------------
Deficit, at end of period $(25,008,764) $(13,765,441) $(12,953,640) $(6,695,290)
================================================================
Loss per share ($0.66) ($0.06) ($0.48) ($0.06)
================================================================
Weighted average number of shares
outstanding 16,982,115 14,165,506 12,986,691 11,603,057
================================================================
See accompanying notes to consolidated financial statements
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EQUINOX RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(IN CANADIAN DOLLARS)
YEARS ENDED
YEAR ENDED TWO MONTHS ENDED ----------------------------
DECEMBER 31 DECEMBER 31 OCTOBER 31 OCTOBER 31
1993 1992 1992 1991
--------------------------------------------------------------
(restated: Note 4)
Operating activities
Net loss for the period $(11,243,323) $ (811,801) $(6,258,350) $ (696,908)
Items not involving cash
Depreciation, depletion
and amortization 2,236,586 403,622 369,619 51,209
Equity loss in investment 981,194 8,718 108,980 37,742
Write-off of resource properties, net 3,756,965 -- 4,618,266 652,178
Interest provision 211,650 -- -- --
Write-down of marketable securities -- 8,580 7,310 --
Minority interest -- -- (22,172) --
Loss (gain) on sale of assets 49,310 (4,621) (66,828) --
---------------------------------------------------------------
4,007,618 (395,502) (1,243,175) 44,221
Change in non-cash operating working capital
(Note 16) (2,329,243) 415,306 104,182 (569,085)
----------------------------------------------------------------
(6,336,861) 19,804 (1,138,993) (524,864)
----------------------------------------------------------------
Financing activities
Capital stock issued 8,941,447 4,270,467 1,265,944 7,340,549
Production participating preferred shares -- 1,411,000 -- --
Proceeds (repayment) of long-term debt -- -- (3,144,125) 5,284,070
Minority interest -- -- (22,172) 22,172
---------------------------------------------------------------
8,941,447 5,681,467 (1,900,353) 12,646,791
---------------------------------------------------------------
Investing activities
Purchase of fixed assets (26,901) -- (10,060) (43,368)
Resource property expenditures, net (5,868,684) (131,126) (443,271) (7,454,490)
Proceeds on sale of assets -- 14,621 108,255 1,248
Proceeds from sale of resource property 304,863 -- 111,900 --
Acquisition of net assets of Eastmaque,
net of cash -- (5,478,235) -- --
Purchase of investments and marketable
securities (62,875) (123,530) (675,437) (416,182)
Reclamation increase 5,072,541 -- -- --
---------------------------------------------------------------
(581,056) (5,718,270) (908,613) (7,912,792)
----------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents during the period 2,023,530 (16,999) (3,947,959) 4,209,135
Cash and cash equivalents at beginning of
period 936,837 953,836 4,901,795 692,660
---------------------------------------------------------------
Cash and cash equivalents at end of period $ 2,960,367 $ 936,837 $ 953,836 $ 4,901,795
===============================================================
Cash and cash equivalents include the
following:
Cash and term deposits $2,833,197 $863,080 $ 942,996 $ 4,862,995
Marketable securities 127,170 73,757 10,840 38,800
---------------------------------------------------------------
$ 2,960,367 $ 936,837 $ 953,836 $ 4,901,795
===============================================================
See accompanying notes to consolidated financial statements
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EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
------------------
1. Nature of operations
The Company, directly and through joint ventures, is in the process of
exploring its resource properties and, except for the American Girl
Mine (Note 10.b.), the Van Stone Mine (Note 10.c.), and the Oro Cruz
property (Note 10.d.), has not determined whether these properties
contain economically recoverable ore reserves.
The recoverability of amounts shown for resource properties and
related deferred costs is dependent upon the discovery of economically
recoverable reserves, confirmation of the Company's interest in the
underlying mineral claims, the ability of the Company to obtain
necessary financing to complete the development, and future profitable
production from the properties or proceeds from disposition.
2. Basis of presentation
The Company received articles of amalgamation on December 8, 1992
whereby a new entity, Equinox Resources Ltd. ("New Equinox") was
formed by the amalgamation of Eastmaque Gold Mines Ltd. ("Eastmaque")
and Equinox Resources Ltd. ("Equinox") (Note 5). Significant
accounting policies of the amalgamated company are consistent with
those used by the predecessor companies.
3. Summary of significant accounting policies
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") in
Canada, which do not differ materially from GAAP in the United States,
except as disclosed in Note 17.
a) Principles of consolidation
These consolidated financial statements include the accounts
of the Company, its wholly-owned subsidiaries and its
60%-owned subsidiary, Equinox Resources (Wash.) Inc. ("Equinox
Washington"). The American Girl mine joint venture and the
Oro Cruz joint venture are accounted for on the proportionate
consoli-
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EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
dation basis. The Buckhorn mine joint venture is accounted
for on the cost basis. All inter-company transactions have
been eliminated.
b) Inventory
Inventory of gold bullion, silver bullion and mineral
concentrates are valued at the lower of cost and net
realizable value. Supplies are valued at the lower of average
production cost and replacement cost. Costs associated with
ore being leached are inventoried and amortized based on the
estimated gold to be recovered.
c) Fixed assets
Office and field equipment are recorded at cost and the
Company provides for depreciation on a straight-line basis
using a 20% annual rate.
d) Resource properties
Acquisition costs of resource properties together with direct
exploration and development expenditures thereon are deferred
in the accounts. When production is attained, these costs are
amortized using the unit of production method based upon
estimated proven recoverable reserves. When deferred
expenditures on individual producing properties exceed
estimated net realizable value, the properties are
written-down to the estimated value. Costs relating to
properties abandoned are written-off when the decision to
abandon is made.
e) Foreign exchange translation
Balances denominated in foreign currencies are translated into
Canadian dollars using the temporal method. Amounts stated in
U.S. dollars are translated into Canadian dollars as follows -
monetary assets and liabilities are translated at exchange
rates prevailing at the balance sheet date; non-monetary
items, income and expenses are translated at the prevailing
exchange rates on the date of the transaction. The net gain
or loss of the foreign currency translation is included in the
operations in the respective periods.
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EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
f) Reclamation costs
Current expenditures relating to ongoing environmental and
reclamation programs are charged against earnings as incurred.
Estimated future reclamation costs, where reasonably
determinable, are charged against earnings over the estimated
life of the mine.
g) Revenue recognition
Sales of precious metals and concentrate are recorded at the
estimated net realizable value when delivered. Revenue from
consulting is recorded when the services are rendered.
h) Loss per share
The calculations of loss per share are based upon the weighted
average number of common shares of the Company outstanding
each period.
4. Accounting policy change
During the year ended December 31, 1993, the Company changed its
method of recording inventory of gold bullion, from recording it at
net realizable value, to recording it at the lower of average
production cost and net realizable value.
This change, which has been applied retroactively with restatement of
prior periods, increased the net loss for the year ended December 31,
1993 by $540,000, the two month period ended December 31, 1992 by
$19,000, and the years ended October 31, 1992, and 1991 by $nil. As
at December 31, 1993, resource properties were increased by $148,000,
inventory decreased by $540,000 (December 31, 1992 - $19,000) and
deficit decreased by $373,000 (December 31, 1992 - $19,000).
5. Business combination
On December 8, 1992 Equinox amalgamated with Eastmaque under the
provisions of the Company Act of British Columbia to form a new
company, New Equinox. Both companies were involved in the exploration
and development of resource properties. This business combination has
been accounted for by the purchase method with New Equinox acquiring
Eastmaque and the results of operations of Eastmaque being included
from the date of amalgamation, December 8, 1992. The combination was
effected through
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EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
the issue of 229,394 common shares of Equinox during the year ended
October 31, 1992 and 2,265,378 common shares of New Equinox on
December 8, 1992 at a total deemed value of $4,544,402, the issue of
1,383,770 Class A preferred shares of New Equinox, the issue of
1,383,770 warrants (Note 13(d)), and costs of $137,439. The fair
value of the net assets of Eastmaque at the date of amalgamation was
as follows (restated: Note 4):
Cash $ 14,665
Accounts receivable 227,987
Inventory 2,208,734
Prepaid expenses 118,834
Note receivable 71,497
Resource properties 5,202,751
---------
7,844,468
Accounts payable (1,751,527)
---------
Total consideration $ 6,092,941
=========
6. Marketable securities
Marketable securities are recorded at the lower of cost and net
realizable value. As at December 31, 1993, the quoted market value
was $304,885 (1992 - $73,757).
7. Inventory
December 31 December 31
1993 1992
----------- -----------
(restated: Note 4)
Gold bullion $ 1,481,784 $ 493,226
Silver bullion 14,681 59,547
Supplies 758,436 762,198
Ore 345,953 701,977
Zinc concentrate -- 44,489
--------- ---------
$ 2,600,854 $ 2,061,437
========= =========
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EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
8. Investments
Investments, which are accounted for by the equity method, are as
follows:
December 31, 1993 December 31, 1992
----------------- -----------------
% Carrying % Carrying
Ownership Value Ownership Value
--------- ----- --------- -----
Pan American Minerals
Corp. 39.40 $ 1 38.41 $ 914,749
Bitterroot Resources
Ltd. 32.48 40,039 40.38 78,534
------- ---------
40,040 993,283
Advances 141,908 106,984
------- ---------
$181,948 $1,100,267
======= =========
The Company has granted a third party an option expiring December 15,
1994 to acquire 30.33% of its investment in Bitterroot Resources Ltd.
for $119,498.
The quoted market value of the Company's investments are:
December 31 December 31
1993 1992
----------- -----------
Pan American Minerals Corp. $ 478,550 $ 170,100
Bitterroot Resources Ltd. 854,693 274,498
--------- -------
$ 1,333,243 $ 444,598
========= =======
9. Fixed
Net book value
------------------------------------
Accumulated December 31 December 31
Cost depreciation 1993 1992
---- ------------ ----------- -----------
Office and field
equipment $249,563 $204,353 $45,210 $27,369
======= ======= ====== ======
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EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
10. Resource properties
Resource properties consist of:
December 31 December 31
1993 1992
---------- -----------
American Girl mine $ 8,957,061 $ 4,229,314
Van Stone mine 9,660,994 9,879,786
Oro Cruz 1,384,768 1,040,356
---------- ---------
20,002,823 15,149,456
Accumulated depreciation,
depletion and write-downs 13,354,469 7,333,637
---------- ----------
6,648,354 7,815,819
Exploration properties 6,800,688 3,908,627
---------- ----------
$ 13,449,042 $ 11,724,446
========== ==========
a) Exploration properties consist of:
December 31 December 31
1993 1992
----------- -----------
Rosebud $ 5,566,159 $ 1,094,067
Zenda 662,000 1,500,000
J&L 33,001 1,156,846
Other 539,528 157,714
--------- ---------
$ 6,800,688 $ 3,908,627
========= =========
i) Rosebud
The Company had a 49% interest in certain unpatented
lode mining claims located near Pershing County,
Nevada.
During the year ended December 31, 1993, the Company
increased its interest to 100% by acquiring the
remaining 51% interest in the Rosebud property from
LAC Minerals (U.S.A.) Inc. ("LAC"), and all of LAC's
interest ranging from 52% to 100%, in surrounding
properties for US$5.5 million. Further, the Company
sold a 2.5% net smelter royalty for US$3.0 million,
and granted an option to sell an additional 1.5% net
smelter return royalty for US$2.5 million.
ii) Zenda
The Company has a 100% interest in certain mineral
claims known as Zenda property, located
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EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
near Bakersfield, California. During the year ended
December 31, 1993, the Company wrote-down the costs
to an estimated realizable value of $662,000.
iii) J&L property
The Company and Pan American Minerals Corp. ("Pan
American") each had a 50% leasehold interest in the
J&L property situated in the Revelstoke Mining
District of British Columbia. The Company also has a
39.40% equity interest in Pan American (Note 8).
During the year ended December 31, 1993, the Company
and Pan American did not make the annual rental
payment due under the lease agreement and they are
attempting to re-negotiate a new agreement.
Accordingly the costs have been written down to a
nominal value of $1.
During the year ended December 31, 1993, the Company
and Pan American each purchased a 50% interest in
certain of the claims comprising the J&L Property.
To acquire its interest the Company paid $10,000 and
issued 7,931 shares at a deemed value of $23,000.
iv) Other exploration properties
The Company has various interests ranging from 12% to
100% in certain properties in Canada, the United
States and Bolivia.
b) American Girl mine
The Company has a 50% joint venture interest, subsequently
decreased to a 47% interest in exchange for an increase to a
47% interest in the Oro Cruz joint venture, in the American
Girl mine located in Imperial County, California. The mine is
producing gold and is operated by the joint venture partner,
MK Gold Company. Proportionate consolidation has been used to
account for the Company's share of the joint venture (Note
11). Operations have been included since acquisition,
December 8, 1992 (Note 5).
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EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
c) Van Stone mine
The Van Stone mine is a lead-zinc property located in Stevens
County, Washington and owned by Equinox Washington, which is
owned 60% by the Company.
The initial production, started in April 1991, was suspended
in October 1991 due to depressed metal prices. Production
resumed in August 1992, and was again suspended in January
1993 following the continuation of unfavorable metal prices.
The operations will remain on a care and maintenance program
at a cost of approximately US$15,000 per month until zinc
prices reach a more favorable level.
As a result of recent metal prices, the Company in 1993
wrote-down its investment by $1,811,643 and in October 1992
wrote-down its investment in the Van Stone mine by $6,605,651
and also wrote-off $4,091,461 of long-term debt repayable only
from the production proceeds of the Van Stone mine for a net
write-down of $2,514,190.
d) Oro Cruz property
The Company has a 44% joint venture interest in certain
mineral claims known as the Oro Cruz property located near the
American Girl mine operations in California. Proportionate
consolidation has been used to account for the Company share
of the joint venture (Note 11). Operations have been included
since acquisition, December 8, 1992 (Note 5).
11. Joint Ventures
The Company conducts some of its mining operations through corporate
joint ventures. The following is a combined summary of the Company's
proportionate share of the financial statements of these joint
ventures which have been included in the Company's financial
statements.
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EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
December 31 December 31
1993 1992
----------- -----------
Current assets $ 1,421,999 $ 1,429,411
Current liabilities (1,881,445) (683,267)
Reclamation payable (3,996,184) --
Resource properties 10,341,829 5,250,342
Less accumulated
depletion (4,333,029) (123,841)
--------- ---------
Equity $ 1,553,170 $ 5,872,645
========= =========
Year Two Months Years ended
ended ended -------------------------------------
December 31 December 31 October 31 October 31
1993 1992 1992 1991
----------- ----------- ---------- ----------
Production
revenue $ 13,936,660 $ 675,556 $ -- $ --
Other revenue 22,987 5,414 -- --
----------- ------- ------- -------
13,959,647 680,970 -- --
Operating
expenses 10,476,454 760,811 -- --
Reclamation 2,339,508 -- -- --
Depreciation
and depletion 2,227,526 123,841 -- --
--------- ------- ------- -------
Loss for the
period $(1,083,841) $(203,682) $ -- $ --
========= ======= ======= =======
12. Production participating preferred shares
The Class A preferred shares (Note 13(a)) issued and outstanding are
as follows:
Number of shares Amount
---------------- ------
Issued on acquisition of
Eastmaque 1,383,770 $ 1,411,000
--------- ---------
Balance at December 31,
1992 1,383,770 1,411,000
---------
Amortization of discount 211,650
---------
Balance at December 31,
1993 1,383,770 $ 1,622,650
========= =========
The shares carry no coupon and are redeemable at any time by the
Company at par value. The preference shares are redeemable annually
from 25% of the American Girl and the Oro Cruz properties' net cash
flow. The total redemption
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19
EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
price of $2,075,655 has been discounted by 15% to determine the value
attributable to these Class A preferred shares on the acquisition of
Eastmaque. During the period ended December 31, 1993, amortization of
discount of $211,650 is included with interest expense.
After April 30, 1997 the Class A preferred shareholders have the right
to require the liquidation of the American Girl and Oro Cruz
properties for the redemption of any remaining outstanding preferred
shares.
13. Capital stock
a) Authorized
On December 8, 1992 the Company completed an amalgamation to
form a new company, Equinox Resources Ltd. (Note 5). In
connection with the amalgamation the authorized share capital
stock was changed from 20,000,000 common shares without par
value and 10,000,000 preferred shares without par value to
50,000,000 common shares without par value, 5,000,000 Class A
preferred shares with a par value of $1.50 per share, and
5,000,000 Class B preferred shares without par value.
b) Common shares
During the year ended December 31, 1993, the two months ended
December 31, 1992 and the year ended October 31, 1992, changes
in issued common shares were as follows:
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20
EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
Number of Shares Amount
---------------- ------
Issued as at October 31, 1991 12,512,160 $ 20,782,681
Shares issued for cash on
exercise of stock options 87,000 126,150
Shares issued on debenture
conversion 225,000 445,356
Shares issued for cash on
exercise of warrants 200,000 350,000
Shares issued for acquisition
of investment 229,394 376,206
Share issue costs -- (31,768)
---------- ---------
Issued as at October 31, 1992 13,253,554 22,048,625
Shares issued for cash on
exercise of stock options 36,000 52,200
Shares issued for property
acquisition 22,818 49,971
Shares issued on amalgamation
(Note 5) 2,265,378 4,168,296
---------- -----------
Issued as at December 31, 1992 15,577,750 26,319,092
Shares issued for cash on
exercise of stock options 294,000 459,300
Shares issued for property
acquisition 48,341 124,384
Shares issued for cash for a
private placement (net of
issue costs of $642,237) 3,000,000 8,357,763
---------- ----------
Issued as at December 31, 1993 18,920,091 $ 35,260,539
========== ==========
c) As at December 31, 1993, outstanding stock options were as
follows:
Number of Exercise
shares price Expiry date
------- ------ -----------
3,000 $7.50 January 25, 1995
55,000 $1.45 September 12, 1995
354,000 $1.45 February 19, 1996
344,000 $1.45 April 30, 1997
60,000 $2.50 June 7, 1997
25,000 $2.30 June 7, 1997
d) As at December 31, 1993 and December 31, 1992, warrants,
expiring August 31, 1996, to purchase 1,383,770 common shares
at $3.40 per share were outstanding. If the Company's shares
trade at a price of $5.00 per share for 20 consecutive trading
days,
-19-
21
EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
the warrant holders must exercise the warrant or lose the
right to exercise.
14. Related party transactions
During the respective periods, the Company charged management fees to
affiliated companies as follows:
Year Two Months Years ended
ended ended ------------------------------
December 31 December 31 October 31 October 31
1993 1992 1992 1991
----------- ----------- ---------- ----------
$64,500 $8,000 $207,700 $48,000
====== ===== ======= ======
15. Income taxes
Loss carry-forwards for U.S. income tax purposes of approximately
US$6,950,000 commence to expire in the year 2005 through 2008 unless
utilized (2005-US$50,000; 2006-US$2,900,000; 2007-US$1,300,000;
2008-US$2,700,000). No benefit in respect of the losses being carried
forward has been recorded in the accounts.
16. Changes in non-cash operating working capital
The net changes in non-cash working capital are as follows:
Year Two Months Years ended
ended ended --------------------------
December 31 December 31 October 31 October 31
1993 1992 1992 1991
----------- ----------- ---------- ----------
Accounts
receivable $ (1,049,898) $ (327,507) $ 206,738 $ (891,832)
Inventory (539,417) 283,418 (136,120) --
Prepaid
expenses 9,776 11,327 (3,185) (8,195)
Accounts payable (749,704) 448,068 36,749 330,942
--------- ------- ------- --------
$ (2,329,243) $ 415,306 $ 104,182 $ (569,085)
========== ======= ======= ========
17. Differences between Canadian and United States Generally Accepted
Accounting Principles
a) The consolidated financial statements of the Company have been
prepared according to Canadian Generally Accepted Accounting
Principles (GAAP) which differ in some respects to U.S. GAAP.
The material differences between Canadian and U.S. GAAP, and
their effect on
-20-
22
EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
the Company's financial statements are summarized below:
Consolidated Statement of Loss
Year Two Months Years ended
ended ended ----------------------------
December 31 December 31 October 31 October 31
1993 1992 1992 1991
----------- ----------- ---------- -----------
Net loss
Canadian GAAP $ (11,243,323) $ (811,801) $ (6,258,350) $(696,908)
Write-down of
Investment(i) -- (165,435) (153,290) (65,390)
Compensation
expense(ii) (12,000) -- (50,000) --
Reclamation(iii) 2,733,033 -- (1,241,912) (145,203)
---------- ------- --------- -------
U.S. GAAP $ (8,522,290) $ (977,236) $ (7,703,552) $ (907,501)
========== ======= ========= =======
Loss per common
share
U.S. GAAP $(0.50) $(0.07) $(0.59) $(0.08)
==== ==== ==== ====
Consolidated Balance Sheets
December 31 December 31
1993 1992
----------- -----------
Investments
Canadian GAAP $ 181,948 $ 1,100,267
Write-down to market
value(i) -- (744,649)
---------- ----------
U.S. GAAP $ 181,948 355,618
======= =========
Resources property
Canadian GAAP $ 13,449,042 $ 11,724,446
Increase in carrying
value(iii) -- 4,534,084
---------- ----------
U.S. GAAP $ 13,449,042 $ 16,258,530
========== =========
Reclamation payable
Canadian GAAP $ 7,267,117 $ --
Increase in reclamation (iii) -- 7,267,117
---------- ----------
U.S. GAAP 7,267,117 7,267,117
Less: current portion 537,900 --
---------- ----------
$ 6,729,900 $ 7,267,117
========== ==========
Deficit
Canadian GAAP $(25,008,764) $(13,765,441)
Write-down to market
value(i) -- (744,649)
Compensation expense(ii) (62,000) (50,000)
Increase in reclamation expense (iii) -- (2,733,033)
---------- ----------
U.S. GAAP $(25,070,764) $(17,293,123)
========== ===========
i) Investments
Under U.S. GAAP, the long term investments accounted
for under the equity method would be recorded at the
lower of cost, adjusted for changes in the investee's
equity, or estimated net realizable value. The
combined balance sheets and statements of loss and
deficit of the Company's long term investments are
presented below:
-21-
23
EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
Condensed Combined Balance Sheets
December 31 December 31
1993 1992
----------- -----------
Assets
Current assets $ 9,727 $ 16,972
Mineral properties 195,445 3,239,511
Other assets -- 2,083
------- ---------
$ 205,172 $3,258,566
======= =========
Liabilities and
Shareholders' Equity
Current Liabilities $ 211,997 $ 132,056
Shareholders' Equity (6,824) 3,126,510
------- ---------
$ 205,173 $3,258,566
======= =========
Condensed Combined Statements of Loss
Year Two Months Years ended
ended ended --------------------------
December 31 December 31 October 31 October 31
1993 1992 1992 1991
----------- ---------- ---------- ----------
General and
administration
expenses $ 153,527 $ 20,673 $ 80,798 $ 106,105
Write-down of
resource
properties 3,239,714 -- 148,757 --
--------- ------ ------- ---------
Loss for the
period $(3,393,241) $ (20,673) $ (229,555) $ (106,105)
========= ====== ======= ==========
ii) Compensatory stock option benefit
Under U.S. GAAP the excess of the market value over
the exercise price at the date stock options are
granted is recorded as compensation expense. The
amount of compensation expense for the periods is as
follows:
Year Two months Years ended
ended ended -------------------------
December 31 December 31 October 31 October 31
1993 1992 1992 1991
----------- ----------- ---------- ----------
$12,000 $ -- $ 50,000 $ --
======= ======= ======== =======
iii) Reclamation costs
(a) Under U.S. GAAP reclamation costs cannot be
netted against the value of acquired mineral
properties. The following are reclamation cost
accruals that were netted against mineral properties.
December 31, 1993 December 31, 1992
----------------- -----------------
$ -- $4,534,084
==== ==========
(b) Under U.S. GAAP recognition of reclamation costs
is necessary even if a single amount cannot be
reasonably estimated. The recognition of reclamation
costs must be made using the lower limit of a range of
losses even if the upper limit of the range is
uncertain.
The following are adjustments to reclamation costs fo
the periods:
Year Two months Years ended
ended ended -------------------------
December 31 December 31 October 31 October 31
1993 1992 1992 1991
---------- ----------- ---------- ----------
$2,733,033 $ -- $(1,241,912) $(145,203)
========= ======= =========== =========
-22-
24
EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
iv) Segmented information
U.S. GAAP requires that if 10% or more of revenues is
derived from a single customer, the revenue from each
such customer should be disclosed. Under Canadian
GAAP, disclosure is governed by a company's economic
dependence on a customer. Customers comprising 10%
or more of total revenues for the respective periods
were as follows:
Year Two months Years ended
ended ended ---------------------------
December 31 December 31 October 31 October 31
1993 1992 1992 1991
-------- ------- ---------- ----------
Cominco Ltd. $ -- $ 1,183,734 $ 1,142,747 $ --
Standard
Chartered Bank 2,924,173 -- -- --
Republic Mase
Bank Ltd. 10,025,736 1,232,756 -- --
---------- --------- --------- -------
$12,949,909 $ 2,416,490 $ 1,142,747 $ --
========== ========= ========= =======
In the long term, the Company is not economically
dependent on any one customer for the sale of its
products. In the short term, the Company is
economically dependent on Cominco's smelter at
Trail, British Columbia for the sale of its lead and
zinc concentrate from the Van Stone mine.
v) Income taxes
The United States' Financial Accounting Standard
Board has issued Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes",
which became effective for fiscal years beginning
January 1, 1993. The Company has determined the
impact of the Statement on this reconciliation would
be immaterial.
vi) Under U.S. GAAP, the consolidated statement of
changes in financial position is called the
consolidated statement of cash flows and reflects
only cash transactions affecting financing and
investing activities, whereas Canadian GAAP requires
non-cash activities to be included. Under U.S. GAAP,
the following
-23-
25
EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
transactions would be excluded from the consolidated statement of changes in
financial position:
Year Two months Years ended
ended ended --------------------------
December 31 December 31 October 31 October 31
1993 1992 1992 1991
----------- ----------- ---------- ---------
Increase (decrease)
to cash
Financing activities
Capital stock
issued $ 124,384 $ 4,168,296 $ 821,562 $ 27,500
Proceeds
(repayment)
of long-term
debt -- -- (445,356) --
Production
participating
preferred shares -- 1,411,000 -- --
Investing activities
Purchase of
investment and
marketable
securities -- -- (376,206) --
Acquisition of net
assets of Eastmaque,
net of cash -- (5,579,296) -- --
Resource property
expenditures (124,384) -- -- (27,500)
In addition U.S. GAAP requires the disclosure of
amounts paid for rent, interest and income taxes, the
details of which are as follows:
Year Two months Years ended
ended ended --------------------------
December 31 December 31 October 31 October 31
1993 1992 1992 1991
----------- ----------- ---------- ----------
a. rent $ 47,234 $ 11,695 $ 87,113 $ 84,122
b. interest $ 38,348 $ 2,680 $ 31,670 $ 103,095
c. income and
capital taxes $364,737 $ 11,070 $ -- $ --
-24-
26
EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
18. Segmented information
The Company operates in one industry and two geographic locations.
Details of net income and identifiable assets are as follows:
Year Two months Years ended
ended ended --------------------------
December 31 December 31 October 31 October 31
1993 1992 1992 1991
----------- ----------- ---------- ----------
Revenue for the
period
Canada $ 211,345 $ 37,857 $ 422,771 $ 1,119,727
United States 14,150,170 2,418,632 1,180,999 28,097
---------- --------- --------- ---------
$14,361,515 $2,456,489 $ 1,603,770 $1,147,824
========== ========= ========= =========
Net loss for the
period
Canada $ (4,368,993) $ (108,429) $ (861,961) $ (496,095)
United States (6,874,330) (703,372) (5,396,389) (200,813)
--------- ------- --------- -------
$(11,243,323) $ (811,801) $ (6,258,350) $ (696,908)
========== ======= ========= =======
December 31 December 31
1993 1992
----------- -----------
Identifiable assets at the
end of the period
Canada $ 525,618 $ 2,350,257
United States 21,304,486 15,052,660
---------- ----------
$21,830,104 $17,402,917
========== ==========
19. Commitments
The Company is committed under operating leases to future minimum
lease payment as follows:
1994 $ 91,210
1995 91,170
1996 82,940
1997 82,940
-------
$ 348,260
=======
20. Contingencies
During the year ended October 31, 1992, the Company wrote-off loans of
$4,091,461 (US$3,550,000) as part of its write-down of the carrying
value of Van Stone mine as the repayment is only due from production
proceeds prior to December 31, 1999. Should operations recommence and
achieve positive cash flow over $3,850,000, the Company
-25-
27
EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
may be required to repay all of a portion of these loans, plus
interest at 16% on US$181,000.
21. Government assistance
During the year ended October 31, 1992, the Company commenced a
research project regarding a treatment process for contaminated mining
waste. In connection with this project the Company has received or
will receive $32,420 for the year ended December 31, 1993 (1992 -
$151,827) which has been applied to reduce the research expenses.
22. Other income
Year Two months Years ended
ended ended --------------------------
December 31 December 31 October 31 October 31
1993 1992 1992 1991
-------- ------- ---------- ----------
Consulting $ 102,454 $ -- $ 124,385 $1,022,588
Interest 118,312 4,979 128,938 125,236
Management fees 48,000 33,861 207,700 --
Other -- 19,915 -- --
------- ------ ------- ---------
$ 268,766 $ 58,755 $ 461,023 $1,147,824
======= ====== ======= =========
23. Pro forma financial information
Pro forma statements of loss have been presented to reflect the
acquisition of Eastmaque (Note 5) and its effect on the historical
statements of loss as if it had been acquired on November 1, 1991.
Details of the pro forma statement of loss are as follows:
-26-
28
EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
TWO MONTHS ENDED YEAR ENDED
DECEMBER 31, 1992 OCTOBER 31, 1992
---------------------------------------- ------------------------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
STATEMENT PRO FORMA STATEMENT STATEMENT PRO FORMA STATEMENT
OF INCOME ADJUSTMENTS OF INCOME OF INCOME ADJUSTMENTS OF INCOME
--------- ----------- --------- --------- ----------- ---------
Revenue
Production $2,397,734 (1) $639,140 $ 3,036,874 $ 1,142,747 (1) $ 13,799,989 $ 14,942,736
Other 58,755 (1) 1,466 40,142 461,023 (1) 32,533 324,056
(2) (20,079) -- -- (2) (169,500) --
---------- -------- ----------- ----------- ------------ ------------
2,456,489 620,527 3,077,016 1,603,770 13,663,022 15,266,792
---------- -------- ----------- ----------- ------------ ------------
Expenses
Depreciation, depletion and
amortization 403,622 (1) 402,947 578,380 369,619 (1) 5,643,726 2,817,303
(3) (228,189) (3) (3,196,042)
Filing and transfer fees 13,181 (1) 506 13,687 35,374 35,374
Foreign exchange loss (gain) (7,888) (7,888) 32,056 32,056
General and administration 183,830 (1) 46,214 209,965 716,877 (1) 121,881 669,258
(2) (20,079) (2) (169,500)
General exploration 30,548 30,548 154,921 154,921
Interest and financing charges 9,292 (1) 2,812 12,104 6,763 (1) 132,637 139,400
Legal, accounting and
professional -- (1) 4,316 4,316 57,009 57,009
Operating 2,590,924 (1) 488,236 3,079,160 1,795,228 (1) 9,212,055 11,007,283
Research 32,104 32,104 48,717 48,717
----------- -------- ----------- ----------- ------------ ------------
3,255,613 696,763 3,952,376 3,216,564 11,744,757 14,961,321
----------- -------- ----------- ----------- ------------ ------------
Loss before undernoted items (799,124) (76,236) (875,360) (1,612,794) 1,918,265 305,471
Equity loss in investment (8,718) (8,718) (108,980) (108,980)
Gain on sale of assets 4,621 (1) 5,892 10,513 66,828 (1) (9,416) 57,412
Write-off of resource properties,
net (4,618,266) (4,618,266)
Write-down of marketable
securities (8,580) (8,580) (7,310) (7,310)
Minority interest -- -- 22,172 22,172
---------- -------- ---------- ---------- ----------- ------------
Net loss before income taxes (811,801) (70,344) (882,145) (6,258,350) 1,908,849 (4,349,501)
Income taxes (1) 80,143
-- -- -- -- (4) (205,000) (124,857)
---------- -------- ---------- ----------- ----------- -----------
Net loss for the period $ (811,801) $(70,344) $ (882,145) $(6,258,350) $ 1,783,992 $(4,474,358)
========== ======= ========= ========== ========== ==========
Loss per share $(0.06) $(0.30)
====== ======
-27-
29
EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
The explanations of the pro forma adjustments are as follows:
(1) Adjusting for the operations of Eastmaque Gold Mines Ltd. for
the period to the date of acquisition. Only the American Girl
and the Oro Cruz properties have been included in the pro
forma. The other operations which have been abandoned or
terminated prior to the amalgamation date include the Kirkland
Lake Gold operations and related reclamation activities; all
general and administration costs related to the Vancouver
office, the exploration activities and property write-downs
related to the Nevada Joint Venture.
(2) Elimination of inter-company transactions.
(3) Reduction of amortization costs for the period due to the
lower valuation of the resource properties following the
amalgamation.
(4) Income tax effect of higher income before income taxes.
24. Comparative figures
Certain of the comparative figures have been reclassified to conform
with the current period's presentation.
25. Subsequent events
a) Subsequent to December 31, 1993, the Company issued 361,687
common shares for cash of $545,696 pursuant to the exercise of
stock options.
b) On February 25, 1994, the shareholders of the Company approved
the amalgamation with Hecla Mining Company ("Hecla"). Upon
completion of the transaction, the Company's common
shareholders will receive 0.3 Hecla common shares, holders of
the Company's Series "A" Production Participating Preferred
Shares will receive Hecla Production Notes with no material
change in the terms and conditions attached to such shares,
and the Company's options and warrants outstanding will become
exercisable for Hecla common shares based on the Equinox
common share conversion ratio.
-28-
30
EQUINOX RESOURCES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
ANNEX B
26. FOURTH QUARTER ACTIVITY
Material fourth quarter items which had an impact on the Company's 1993
financial statements are approximately:
(i) Reclamation $ 4,500,000
(ii) General and administrative 800,000
(iii) Write-off of resource property 3,750,000
(iv) Equity loss of investment 1,000,000
-----------
$10,050,000
===========
(i) The Company conducted a comprehensive review of its
properties which was substantially completed during the fourth
quarter of 1993. As a result of the review, the necessary
reclamation accruals and expense were recorded in that period.
(ii) General and administrative costs increased substantially in
the fourth quarter as the Company incurred substantial costs
related to the Hecla business combination and incurred costs,
including travel, related to its Bolivian property
acquisitions.
(iii) As a part of the Company's normal accounting procedures, a
review is periodically completed to determine the appropriate
carrying value of its resource properties. In 1993, this
review was performed during the fourth quarter and in early
1994. The write-downs of the Van Stone, J&L and Zenda
properties during the fourth quarter were considered
appropriate due to the continuing depressed metal prices and,
in the case of J&L, an inability to make progress in
negotiations with the mineral rights owner.
(iv) The investment in Pan American was written down to nominal
value to give recognition to Pan American's write-down
of its 50% interest in the J&L property and to be consistent
with the Company's own write-down of the J&L property.
-29-
31
ANNEX B
CONDENSED PRO FORMA COMBINED FINANCIAL INFORMATION
FOR ACQUISITION OF
EQUINOX RESOURCE LTD.
BY
HECLA MINING COMPANY
The following condensed pro forma combined balance sheet and
condensed pro forma combined statements of operations (collectively, the "Pro
Forma Financial Statements") were prepared by Hecla to illustrate the estimated
effects of the business combination to be accounted for as a pooling of
interests under U.S. generally accepted accounting principles ("GAAP").
Accordingly, the financial information of Hecla and Equinox has been combined
for all periods presented. All amounts in the Pro Forma Financial Statements
are stated in U.S. dollars unless otherwise stated. The Pro Forma Financial
Statements give retrospective effect to material differences between Hecla's
and Equinox's accounting policies which are expected to have a material impact
on the combined financial statements. The Pro Forma Financial Statements do
not purport to represent what the combined financial position or results of
operations actually would have been if the combination had occurred at the
beginning of the periods or to project the combined financial position or
results of operations for any future date or period.
The Pro Forma Financial Statements should be read in
conjunction with the historical consolidated financial statements, including
the notes thereto, of Hecla (prepared in accordance with U.S. GAAP) which are
included in Hecla's Form 10-K for the fiscal year ended December 31, 1993 and
of Equinox (prepared in accordance with Canadian GAAP), which are included
elsewhere in this document. Equinox's historical financial statements have
been restated into U.S. dollars and then adjusted to conform with U.S. GAAP
and Hecla's accounting policies, format and classification.
The Pro Forma Financial Statements are presented utilizing the
pooling-of-interests method of accounting whereby the recorded assets,
liabilities, shareholders' equity and results of operations of Hecla and
Equinox become the combined assets, liabilities, shareholders' equity and
results of operations. The Pro Forma Financial Statements also include pro
forma adjustments which are based upon available information and certain
assumptions that management of Hecla believes are reasonable in the
circumstances.
-30-
32
CONDENSED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1993
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS NOTED FOR EQUINOX HISTORICAL)
EQUINOX
-----------------------------------------------------------------
U.S. GAAP
ADJUSTMENT TO AND
HISTORICAL RESTATE INTO CONFORMING HISTORICAL HECLA PRO FORMA
(CANADIAN DOLLARS) U.S. DOLLARS ADJUSTMENTS AS ADJUSTED HISTORICAL COMBINED
------------------ -------------- ----------- ----------- ---------- ---------
Current assets:
Cash and cash
equivalents..................... $ 2,833 $ (693) $ $ 2,140 $ 37,891 $ 40,031
Investments....................... 127 (31) 96 27,540 27,636
Accounts and notes
receivable...................... 2,479 (607) 110(5) 1,982 16,859 18,841
Inventories....................... 2,601 (637) 34(5) 1,998 13,022 15,020
Other current assets.............. 114 (28) 2(5) 88 1,915 2,003
-------- ------- ----------- ----------- ---------- ---------
Total current assets............ 8,154 (1,996) 146 6,304 97,227 103,531
Investments......................... 182 (44) 216 (4) 354 6,211 6,565
Properties, plants and equipment,
net............................... 13,494 (2,936) (2,282)(1) 6,185 222,870 229,055
(2,091)(3)
Other noncurrent assets............. 70 (1) 432 6,570 7,002
362 (2)
-------- ------- ----------- ----------- ---------- ---------
Total assets.................... $ 21,830 $ (4,976) $(3,579) $13,275 $332,878 $346,153
-------- ------- ----------- ----------- ---------- ---------
-------- ------- ----------- ----------- ---------- ---------
Current liabilities:
Accounts payable and accrued
expenses........................ $ 3,226 $ (789) $ 265 (5) $ 2,702 $ 19,606 $ 22,308
-------- ------- ----------- ----------- ---------- ---------
Total current liabilities....... 3,226 (789) 265 2,702 19,606 22,308
Long-term debt...................... 1,623 (397) (706)(3) 520 49,489 50,009
Other noncurrent liabilities........ 4,217 4,217
Accrued reclamation costs........... 6,729 (1,647) 362 (2) 5,444 19,503 24,947
-------- ------- ----------- ----------- ---------- ---------
Total liabilities............... 11,578 (2,833) (79) 8,666 92,815 101,481
-------- ------- ----------- ----------- ---------- ---------
Shareholders' equity:
Preferred stock................... 575 575
Common stock...................... 35,261 (6,756) 28,505 8,661 10,080 (6)
Capital surplus................... 238,601 265,687 (6)
Retained earnings (deficit)......... (25,009) 4,613 (2,212)(1) (23,896) (6,878) (30,774)
(1,385)(3)
(119)(5)
216 (4)
Treasury stock and other............ (896) (896)
-------- ------- ----------- ----------- ---------- ---------
Total shareholders' equity...... 10,252 (2,143) (3,500) 4,609 240,063 244,672
-------- ------- ----------- ----------- ---------- ---------
Total liabilities and
shareholders' equity.......... $ 21,830 $ (4,976) $(3,579) $13,275 $332,878 $346,153
-------- ------- ----------- ----------- ---------- ---------
-------- ------- ----------- ----------- ---------- ---------
See Notes to Condensed Pro Forma Combined Balance Sheet.
31
33
NOTES TO CONDENSED PRO FORMA COMBINED BALANCE SHEET
(ALL AMOUNTS ARE IN U.S. DOLLARS UNLESS OTHERWISE INDICATED)
The Equinox Historical balance sheet at December 31, 1993 has been adjusted
to reflect (i) restatement of Canadian dollars to U.S. dollars (based on the
exchange rate as of December 31, 1993 of $0.755 U.S. dollar for each Canadian
dollar) and (ii) presentation in accordance with U.S. GAAP and the accounting
policies, format and classification utilized by Hecla. The following adjustments
were made to reflect the Equinox Canadian dollar balance sheets in conformity
with Hecla's presentation and U.S. GAAP:
(1) Equinox capitalizes exploration expenditures incurred on properties
identified as having development potential. Hecla expenses exploration costs
as incurred. Properties, plants and equipment was reduced $2,282,000 at
December 31, 1993 to reverse exploration costs which previously were
capitalized by Equinox. A reclamation bond for $70,000 was reclassed to
other noncurrent assets from properties, plants and equipment in connection
with this adjustment.
(2) Adjustments of $362,000 to other noncurrent assets and accounts payable and
accrued expenses reflect reclassifications of certain reclamation bonds and
existing accrued reclamation costs. Pursuant to U.S. GAAP, Hecla's
accounting policy is to accrue the minimum amount that can be estimated for
future reclamation costs over the operating life of the facility, based on
current environmental regulatory requirements. As a result of this policy,
accrued reclamation costs were increased to the following balances as of
December 31, 1992.
EQUINOX PROPERTY
--------------------
Van Stone Mine................................................... $1,300,000
J&L Property..................................................... 200,000
Buckhorn Mine.................................................... 1,315,000
Kirkland Lake.................................................... 157,000
----------
Total....................................................... $2,972,000
----------
----------
During the year ended December 31, 1993, Equinox accrued $2,084,000 for
reclamation costs associated with these properties.
(3) Reduction in the carrying value of the American Girl gold mine and Oro Cruz
gold project by $2,400,000 to reflect valuation of properties using Hecla's
methodology. Depreciation expense of $309,000 recorded by Equinox for the
three-month period ended December 31, 1993 was reversed. The reduction is
based upon a fourth quarter 1993 feasibility study which indicates that less
cash flow will be received from the property than originally anticipated. As
a result, the balance of production participating preferred shares payable,
which is based upon cash flows from operations, has decreased approximately
$706,000. The write-down was effective October 1, 1993.
(4) Reversal of a portion of the write-down of Equinox's investment in Pan
American Minerals Corporation as of December 31, 1993. Equinox recorded a
write-down to $1 in the year ended December 31, 1993.
(5) Equinox has a 23.56% interest in the Buckhorn mine. Equinox wrote off its
investment in Buckhorn in 1989. Since that date, Equinox has not included
its proportionate share of Buckhorn in its consolidated financial
statements, Hecla's policy is to consolidate such investments in its
financial statements. The amounts recorded to reflect Equinox's December 31,
1993 proportional share of Buckhorn's financial statements are as follows:
Accounts receivable.............................................. $ 110,000
Inventories...................................................... 34,000
Other current assets............................................. 2,000
Accounts payable and accrued expenses............................ 265,000
Retained earnings (deficit)...................................... (119,000)
32
34
(6) The exchange of each Equinox common share (without par value) for 0.3 of a
Hecla common share at December 31, 1993 results in the transfer of
$27,086,000 from common stock of Equinox to capital surplus of Hecla as
follows:
Net book value of Equinox shares outstanding.................... $28,505,000
Hecla shares exchanged (5,676,027 shares at December 31, 1993 at
$0.25 par value).............................................. (1,419,000)
-----------
Difference transferred to capital surplus....................... $27,086,000
-----------
-----------
33
35
CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
EQUINOX
HECLA HISTORICAL AS PRO FORMA PRO FORMA
HISTORICAL ADJUSTED(1) ADJUSTMENTS COMBINED
---------- --------------- ----------- ---------
Sales of Products......................... $ 81,847 $11,041 $ $ 92,888
---------- --------------- ----------- ---------
Costs of sales and other direct
production costs........................ 71,109 9,032 80,141
Depreciation, depletion, and
amortization............................ 10,292 3,543 (309)(3) 13,526
---------- --------------- ----------- ---------
81,401 12,575 (309) 93,667
---------- --------------- ----------- ---------
Gross profit (loss).................. 446 (1,534) (309) (779)
---------- --------------- ----------- ---------
Other operating expenses
General and administrative.............. 6,961 1,179 8,140
Exploration............................. 4,353 175 1,128 (2) 5,656
Research................................ 150 150
Depreciation and amortization........... 669 669
Provision for closed operations and
environmental matters................ 2,307 2,104 (2,084)(5) 2,327
Reduction in carrying value of mining
properties........................... 200 3,272 (2,605)(2) 2,561
1,694 (3)
---------- --------------- ----------- ---------
14,490 6,880 (1,867) 19,503
---------- --------------- ----------- ---------
Loss from operations................. (14,044) (8,414) 2,176 (20,282)
Other income (expense).................... 1,371 (661) 852 (4) 1,562
---------- --------------- ----------- ---------
Income (loss) before income taxes......... (12,673) (9,075) 3,028 (18,720)
Income tax benefit........................ 938 938
---------- --------------- ----------- ---------
Net income (loss)......................... (11,735) (9,075) 3,028 (17,782)
Dividend on preferred shares.............. (4,070) (4,070)
---------- --------------- ----------- ---------
Net income (loss) applicable to common
shareholders............................ $ (15,805) $(9,075) $ 3,028 $ (21,852)
---------- --------------- ----------- ---------
---------- --------------- ----------- ---------
Net income (loss) per common share........ $ (0.48) $ (0.57)
---------- ---------
---------- ---------
Weighted average common shares used in
computation............................. 32,915 38,010(6)
---------- ---------
---------- ---------
See Notes to Condensed Pro Forma Combined Statements of Operations.
34
36
CONDENSED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1992
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
EQUINOX
HECLA HISTORICAL AS PRO FORMA PRO FORMA
HISTORICAL ADJUSTED(1) ADJUSTMENTS COMBINED
---------- -------------- ----------- ---------
Sales of products.......................... $ 100,651 $ 970 $ $ 101,621
---------- -------------- ----------- ---------
Costs of sales and other direct production
costs.................................... 83,288 1,526 84,814
Depreciation, depletion, and
amortization............................. 13,493 281 13,774
---------- -------------- ----------- ---------
96,781 1,807 98,588
---------- -------------- ----------- ---------
Gross profit (loss).............. 3,870 (837) 3,033
---------- -------------- ----------- ---------
Other operating expenses
General and administrative............... 8,520 686 9,206
Exploration.............................. 7,659 131 396 (2) 8,186
Research................................. 1,317 41 1,358
Depreciation and amortization............ 819 32 851
Provision for closed operations and
environmental matters................. 12,670 938 (5) 13,608
Reduction in carrying value of mining
properties............................ 27,928 3,842 (979)(2) 30,791
---------- -------------- ----------- ---------
58,913 4,732 355 64,000
---------- -------------- ----------- ---------
Loss from operations............. (55,043) (5,569) (355) (60,967)
Other income (expense)..................... 5,512 (22) (41)(2)(4) 5,449
---------- -------------- ----------- ---------
Income (loss) before income taxes and
cumulative effect of changes in
accounting principles.................... (49,531) (5,591) (396) (55,518)
Income tax benefit......................... (345) (345)
---------- -------------- ----------- ---------
Income (loss) before cumulative effect of
changes in accounting principles......... (49,186) (5,591) (396) (55,173)
Cumulative effect of changes in accounting
principles (income taxes and post
retirement benefits other than
pensions)................................ (103) (103)
---------- -------------- ----------- ---------
Net income (loss).......................... $ (49,289) $ (5,591) $(396) $ (55,276)
---------- -------------- ----------- ---------
---------- -------------- ----------- ---------
Net income (loss) per common share:
Income (loss) before cumulative effect of
changes in accounting principles...... $ (1.59) $ (1.58)
Cumulative effect of changes
in accounting principles.............. (0.01) (0.01)
---------- ---------
$ (1.60) $ (1.59)
---------- ---------
---------- ---------
Weighted average common shares used
in computation........................... 30,866 34,778(6)
---------- ---------
---------- ---------
See Notes to Condensed Pro Forma Combined Statements of Operations.
35
37
CONDENSED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1991
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
EQUINOX
HECLA HISTORICAL AS PRO FORMA PRO FORMA
HISTORICAL ADJUSTED(1) ADJUSTMENTS COMBINED
---------- --------------- ------------ ---------
Sales of products.................... $117,568 $ $ $117,568
---------- --------------- ------------ ---------
Costs of sales and other direct
production costs................... 84,853 84,853
Depreciation, depletion, and
amortization....................... 21,161 21,161
---------- --------------- ------------ ---------
106,014 106,014
---------- --------------- ------------ ---------
Gross profit (loss)........ 11,554 11,554
---------- --------------- ------------ ---------
Other operating expenses
General and administrative......... 14,054 929 14,983
Exploration........................ 5,693 37 633 (2) 6,363
Research........................... 1,538 1,538
Depreciation and amortization...... 692 45 737
Provision for closed operations and
environmental matters........... 3,638 126 (5) 3,764
Reduction in carrying value of
mining properties............... 568 (527)(2) 41
---------- --------------- ------------ ---------
25,615 1,579 232 27,426
---------- --------------- ------------ ---------
Loss from operations....... (14,061) (1,579) (232) (15,872)
Other income (expense)............... (3,925) 1,086 634 (2,205)
---------- --------------- ------------ ---------
Income (loss) before income taxes.... (17,986) (493) 402 (18,077)
Income tax benefit................... (2,556) (2,556)
---------- --------------- ------------ ---------
Net income (loss).................... $(15,430) $ (493) $ 402 $(15,521)
---------- --------------- ------------ ---------
---------- --------------- ------------ ---------
Net income (loss) per common share... $ (0.51) $ (0.46)
---------- ---------
---------- ---------
Weighted average common shares used
in computation..................... 30,094 33,579 (6)
---------- ---------
---------- ---------
See Notes to Condensed Pro Forma Combined Statements of Operations.
36
38
NOTES TO CONDENSED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(ALL AMOUNTS ARE IN U.S. DOLLARS UNLESS OTHERWISE INDICATED)
(1) The Equinox historical statements of operations for the years ended
December 31, 1993, 1992 and 1991 have been adjusted to reflect (a)
translation of Canadian dollar amounts into U.S. dollars using the average
exchange rate for each period (approximately $0.775 U.S. dollar for each
Canadian dollar for the year 1993, $0.839 in the year 1992, and $0.871 in
the year 1991) and (b) presentation in accordance with U.S. GAAP and the
accounting policies, format and classification utilized by Hecla.
Prior to November 1, 1992, Equinox's fiscal year end was October 31.
Accordingly, the December 31, 1992 and 1991 condensed pro forma combined
statements of operations include the fiscal year results for Hecla for the
year ended December 31 and for Equinox for the fiscal year ended October
31. Subsequent to October 31, 1992, Equinox had a December 31 year end.
Accordingly, the year ended December 31, 1993 reflects operating results
from January 1 through December 31, 1993 for both Hecla and Equinox.
Equinox pro forma sales and net loss for the two month period ended
December 31, 1992 were $1,901,000 and $3,076,000, respectively. The net
loss was added to the combined December 31, 1992 deficit on a pro forma
basis.
(2) Equinox capitalizes exploration expenditures incurred and investments in
exploration companies where exploration expenditures were incurred on
properties identified as having development potential. Hecla expenses such
exploration related expenditures as incurred. Exploration has been
increased to expense amounts which were capitalized by Equinox. Subsequent
reductions in the carrying value of mining properties of Equinox have been
correspondingly reduced. Likewise, gains recognized on the subsequent sales
of certain Equinox exploration properties have been increased.
(3) Represents the write-down of the American Girl mine and Oro Cruz project
during 1993. See Note (3) to the Condensed Pro Forma Combined Balance
Sheet.
(4) Represents Equinox's proportionate share of the Buckhorn mine operating
results and the partial reversal of the 1993 writedown of Equinox's
investment in Pan American Minerals Corporation. See Notes (4) and (5) to
the Condensed Pro Forma Combined Balance Sheet.
(5) Represents conforming adjustment for reclamation costs as follows (see Note
(2) to the Condensed Pro Forma Combined Balance Sheet):
1993 1992 1991
----------- -------- --------
Van Stone............................ $ (938,000) $938,000 $
Buckhorn............................. (946,000)
J&L Property......................... (200,000) 126,000
----------- -------- --------
Total...................... $(2,084,000) $938,000 $126,000
----------- -------- --------
----------- -------- --------
Credit amounts represent reversals of reclamation costs recorded by Equinox
in fiscal years after the pro forma adjustment was made.
(6) Adjusted to reflect the increase in the number of shares of Hecla Common
Stock that would have been issued pursuant to the exchange ratio, for the
weighted average number of Equinox common shares outstanding during each
period.
37