<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 1998
REGISTRATION NO. 333-40513
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
COEUR D'ALENE MINES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
IDAHO
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
82-0109423
(I.R.S. EMPLOYER IDENTIFICATION NO.)
400 COEUR D'ALENE MINES BUILDING
505 FRONT AVENUE
COEUR D'ALENE, IDAHO 83814
208-667-3511
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DENNIS E. WHEELER
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
COEUR D'ALENE MINES CORPORATION
400 COEUR D'ALENE MINES BUILDING
505 FRONT AVENUE
COEUR D'ALENE, IDAHO 83814
208-667-3511
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
PLEASE SEND COPIES OF COMMUNICATIONS TO:
Arthur H. Bill, Esq.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If the delivery of this prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION, DATED JANUARY 21, 1998
[COEUR D'ALENE LOGO] $143,750,000
COEUR D'ALENE MINES
CORPORATION
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2005
Interest payable April 30 and October 31
------------------------
This Prospectus relates to $143,750,000 aggregate principal amount of
7 1/4% Convertible Subordinated Debentures due 2005 (the "Debentures") of
Coeur d'Alene Mines Corporation ("Coeur" or the "Company"), and the shares of
common stock, par value $1.00 per share (the "Common Stock"), of the Company
which are issuable from time to time upon conversion of the Debentures. Either
the Debentures or Common Stock issued upon conversion may be offered from time
to time for the account of holders of Debentures named herein (the "Selling
Debentureholders"). The Company will not receive any proceeds from this
offering. Prior to this offering, there has not been any public market for the
Debentures.
The Debentures are convertible into 8,237,822 shares of Common Stock on or
before October 31, 2005, unless previously redeemed, at a conversion price of
$17.45 per share (or approximately 57 shares per $1,000 principal amount of
Debentures), subject to adjustment in certain events. On January 20, 1998, the
last reported sale price of the Common Stock on the New York Stock Exchange
Composite Tape was $8.6875 per share. The Common Stock is traded under the
symbol "CDE."
The Debentures are redeemable, in whole or in part, at any time on or after
October 31, 2000, at the redemption prices set forth herein plus accrued
interest. The Debentures are required to be repurchased at the option of the
holder if a Designated Event (as defined herein) occurs, at 100% of the
principal amount thereof plus accrued interest. No assurance can be given that
the Company will have the financial resources necessary to repurchase the
Debentures upon the occurrence of a Designated Event.
The Debentures are unsecured and subordinate in right of payment to all
existing or future Senior Debt (as defined herein) and rank pari passu with the
Company's other outstanding convertible debentures. The Debentures are also
effectively subordinated to liabilities of the Company's subsidiaries. The
Indenture relating to the Debentures does not restrict the incurrence of Senior
Debt or other indebtedness by the Company or any subsidiary. See "Description of
Debentures."
See "Risk Factors" for information that should be considered by prospective
investors.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The Company has been advised by the Selling Debentureholders that the
Selling Debentureholders, acting as principals for their own account, directly,
through agents designated from time to time, or through dealers or underwriters
also to be designated, may sell all or a portion of the Debentures or shares of
Common Stock offered hereby from time to time on terms to be determined at the
time of sale. To the extent required, the principal amount of Debentures or the
number of shares of Common Stock to be sold, the names of the Selling
Debentureholders, the purchase price, the name of any such agent, dealer or
underwriter and any applicable commissions with respect to a particular offer
will be set forth in an accompanying Prospectus Supplement. The aggregate
proceeds to the Selling Debentureholders from the sale of Debentures and Common
Stock offered by the Selling Debentureholders hereby will be the purchase price
of such Debentures or Common Stock less any commissions. See "Plan of
Distribution" herein for indemnification arrangements between the Company and
the Selling Debentureholders.
The Selling Debentureholders and any broker-dealers, agents or underwriters
that participate with the Selling Debentureholders in the distribution of the
Debentures or shares of Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933, as amended (the "Securities Act"), in
which event any commissions received by such broker-dealers, agents or
underwriters and any profit on the resale of the Debentures or shares of Common
Stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
The Debentures were issued by the Company in October 1997 in connection
with an offering to "qualified institutional buyers" as defined in Rule 144A
under the Securities Act and to certain non-U.S. persons in reliance upon
Regulation S under the Securities Act.
The date of this Prospectus is January , 1998.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed with the Commission can be inspected and copied at
the Commission's public reference facilities at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material can be obtained by mail from the Commission's Public Reference
Section at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates
and such materials may be inspected and copied at the Commission's Web Site
(http://www.sec.gov). Such reports, proxy statements and other information also
can be inspected at the offices of the New York Stock Exchange, Inc. ("NYSE"),
20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-8641) pursuant to Section 12 or 13 of the Exchange Act are hereby incorporated
by reference in this Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1996 and amendments thereto filed on January 21 and January ,
1998 (the "Form 10-K").
2. Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30 and September 30, 1997 (the "Forms 10-Q").
3. Current Report on Form 8-K, as filed on April 30, 1996, and
amendments thereto filed on May 20, 1996, July 1, 1996 and January
, 1998.
4. Current Report on Form 8-K filed on October 16, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Debentures hereby shall be deemed to be
incorporated herein by reference and to be a part hereof from the respective
dates of filing of such documents.
Any statement contained in a document incorporated or deemed incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus and the Registration Statement of which it is a part to the
extent that a statement contained herein or in any other subsequently filed
document which is also incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or such Registration Statement.
The Company will provide without charge to each person, including a
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into such documents). Requests should be directed to William F. Boyd, Esq.,
Secretary, Coeur d'Alene Mines Corporation, 400 Coeur d'Alene Mines Building,
505 Front Avenue, Coeur d'Alene, Idaho 83814, telephone number (208) 667-3511.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the detailed information and financial statements (including
the notes thereto) incorporated by reference in this Prospectus.
THE COMPANY
OVERVIEW. Coeur d'Alene Mines Corporation ("Coeur" or the "Company") is an
international silver and gold producer engaged in the exploration, development
and operation of silver and gold mining properties and businesses primarily
located in the western United States, New Zealand, Chile and Western Australia.
Coeur has the highest amounts of silver production and silver reserves of any
primary silver producer located in the United States and certain of the silver
mines in which it has an interest are the lowest cost of production primary
silver mines in the United States.
Coeur has grown from a small domestic silver producer into an international
silver and gold producer through a focused strategy of acquiring and developing
producing or near-producing silver and gold properties as well as exploration
properties. Coeur's total assets have grown from $100.7 million at the end of
1986 to $560 million on September 30, 1997. Total production has increased from
approximately 6.3 million ounces of silver and 57,000 ounces of gold in 1992 to
approximately 9.5 million ounces of silver and 214,000 ounces of gold in 1996.
Production continued to increase in the first nine months of 1997 to
approximately 8.2 million ounces of silver and 213,209 ounces of gold, compared
to approximately 6.7 million ounces of silver and 145,604 ounces of gold during
the first nine months of 1996.
The Company actively explores for silver and gold on its existing
properties and elsewhere in the world. Mining exploration expenses for the nine
months ended September 30, 1997 were approximately $6.4 million, an increase of
approximately 23% over the first nine months of 1996. Total exploration expenses
for 1997 are expected to approximate $7.6 million compared to $7.7 million in
1996.
BUSINESS STRATEGY. The Company's business strategy is to capitalize on its
strong reserves and the expertise of its management to become a leading precious
metals company via long-term, profitable growth. The principal elements of the
Company's business strategy are as follows: (i) improve operating cost and
production profiles at Coeur's existing silver and gold mining operations; (ii)
increase the Company's low-cost silver production and reserves in order to
remain the nation's largest silver producer and one of the world's largest
primary silver producers; (iii) continue increasing the Company's gold
production and reserves in order to continue to provide its shareholders with an
interest in both metals, while lowering its cost of gold production; (iv)
opportunistically acquire operating mines and exploration and development
properties with a view to reducing the Company's operating and production costs
and expanding its production and reserves; (v) continue to explore for new
silver and/or gold assets primarily in North and South America, Mexico, and
Australia as well as at existing mine sites; (vi) focus on opportunities which
provide strong future exploration potential and immediate or near-term prospects
for low-cost silver and/or gold production; and (vii) preserve the Company's
financial ability to weather the industry's intrinsic cyclical nature and to
execute its strategic objectives.
PRINCIPAL MINING PROPERTIES. The Company's most significant mining
properties are:
- The Rochester Mine ("Rochester"), a silver and gold surface mining
operation located in northwestern Nevada. Rochester is 100% owned and
operated by Coeur and is the largest primary silver mine in the United
States. Silver and gold production in 1997 are expected to approximate
6.1 million ounces and 84,000 ounces, respectively.
- A 50% interest in Silver Valley Resources Corporation ("Silver Valley
Resources"), which owns and operates several mining properties in the
Coeur d'Alene Mining District of northern Idaho, including the Coeur and
Galena underground silver mines, which are historically among the largest
and lowest cost of production silver mines in the United States.
Operations at the Coeur Mine and the Galena Mine, which were suspended in
April 1991 and July 1992, respectively, due to low silver prices,
3
<PAGE> 5
resumed in June 1996 and May 1997, respectively. Production attributable
to Coeur's 50% interest in Silver Valley Resources is estimated at
approximately 1.8 million ounces of silver for 1997.
- The 100% owned Fachinal open pit and underground gold and silver mine
("Fachinal Mine") in Chile, which the Company developed and constructed
on schedule and under budget in October 1995, following its acquisition
of the property in 1990. The Fachinal Mine is expected to produce
approximately 2.6 million ounces of silver and 34,000 ounces of gold in
1997.
- The El Bronce underground gold and silver mine in Chile ("El Bronce
Mine"), in which the Company acquired a 51% operating interest in October
1994 and increased to 100% ownership in September 1996. Coeur is
evaluating its option to purchase the Boton de Oro gold mine, which is
adjacent to the El Bronce Mine and where Coeur is engaged in limited gold
production and underground exploration. The El Bronce Mine is expected to
produce approximately 122,000 ounces of silver and 55,000 ounces of gold
in 1997.
- A 25% interest in the Yilgarn Star Mine, a gold mine in Western
Australia, through a 50% ownership interest in Gasgoyne Gold Mines NL
("Gasgoyne") acquired in May 1996 and May 1997. The net gold production
attributable to Coeur's interest in the Yilgarn Star Mine is expected to
be approximately 41,000 ounces of gold in 1997.
- The Kensington property ("Kensington"), located north of Juneau, Alaska,
in which Coeur increased its participation from 50% to 100% in July 1995
and in which Coeur has invested a total of $118 million with a view to
developing the property into an underground gold mine. A production
decision at Kensington is subject to a realized price of gold through
spot or forward sales of at least $400 per ounce and the receipt of
required key permits. The U.S. Forest Service issued a supplemental
Environmental Impact Statement for Kensington on August 15, 1997, the
City and Borough of Juneau issued a Large Mine Permit for the project on
November 4, 1997, and the Company anticipates that it will receive the
remaining key permits by the end of 1997.
- The Golden Cross underground and surface gold mine in New Zealand, which
is 80% owned and operated by Coeur and is planned to be closed toward the
end of 1997 or early 1998. Estimated production in 1997, which will be
the mine's final year of production, is expected to be approximately
80,000 ounces of gold and 284,000 ounces of silver.
PRINCIPAL EXPLORATION PROJECTS. Coeur is conducting substantial silver and
gold exploratory activities. The Fachinal Mine reserve base and production is
expected to be enhanced by exploratory drilling in the Fachinal Mine area and at
the Furioso project in southern Chile. Exploratory activities to expand ore
reserves and production are underway at the El Bronce Mine and at the Boton de
Oro project in central Chile. Silver Valley Resources is engaged in silver
exploration projects at Vein 123 of the Galena Mine, at the Coeur Mine and
adjacent Caladay project and at the adjoining leased Sterling Mining Company,
Placer Creek Mining Company, Silver Buckle Mines, Inc. and American Silver
Mining Company properties in the Coeur d'Alene Mining District, which
historically has been one of the largest silver producing regions in the world.
Activities at the Galena Mine during 1997 have revealed a previously
undiscovered vein known as the 123 Vein. Gasgoyne is conducting exploratory
activities in Western Australia.
Coeur's most significant other exploration activities are being conducted
at (i) the Groete Creek property, a low-grade gold, potential bulk volume mining
property located near Georgetown, Guyana, 75% of which Coeur has the option to
purchase; (ii) the KM 66 property in the State of Durango, Mexico, which has
low-grade silver, bulk tonnage open pit mining potential, and which Coeur has
the option to purchase in its entirety; and (iii) several other gold and silver
exploration projects located throughout Chile, the more important of which is
the Puchuldiza gold project in northern Chile. No assurance can be given that
the Company's exploration projects will yield mineable ore reserves.
4
<PAGE> 6
THE DEBENTURES
Securities Offered......... $143,750,000 principal amount of 7 1/4% Convertible
Subordinated Debentures due 2005.
Maturity Date.............. October 31, 2005.
Interest Payment Dates..... April 30 and October 31, commencing April 30, 1998.
Conversion................. Convertible into Common Stock on or before October
31, 2005, unless previously redeemed, at a
conversion price of $17.45 per share, subject to
adjustment in certain events.
Optional Redemption........ Redeemable at the option of the Company, in whole
or in part at any time on or after October 31, 2000
at the redemption prices set forth herein plus
accrued interest. See "Description of
Debentures -- Optional Redemption of Debentures."
Repurchase at Option of
Holder Upon Occurrence of a
Designated Event......... The Debentures are required to be repurchased at
100% of their principal amount at the option of the
holder, if a Designated Event (as defined herein)
occurs. See "Description of
Debentures -- Repurchase at Option of Holder Upon
Occurrence of a Designated Event."
Subordination.............. The Debentures are subordinated to all Senior Debt
(as defined herein), which was approximately $9.2
million at October 31, 1997. The Debentures are
also effectively subordinated to liabilities of the
Company's subsidiaries. The Indenture will not
restrict the incurrence of Senior Debt or other
indebtedness by the Company or any subsidiary.
5
<PAGE> 7
SUMMARY FINANCIAL, OPERATING AND RESERVE DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- -------------------
1992 1993 1994 1995(6) 1996 1996 1997(7)
------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Income:
Sale of concentrates and dore...... $41,414 $67,990 $79,606 $89,239 $92,731 $62,920 $ 96,757
Less cost of mine operations....... 37,829 59,804 67,802 72,210 83,283 56,622 103,258
------- ------- ------- ------- ------- ------- --------
Gross profit (loss)................ 3,585 8,186 11,804 17,029 9,448 6,298 (6,501)(8)
Other income....................... 4,812 5,388 12,587 9,504 13,159 9,158 20,427
------- ------- ------- ------- ------- ------- --------
Total income....................... 8,397 13,574 24,391 26,533 22,607 15,456 13,926
Other expenses..................... 14,118 31,548 29,392 27,591 23,946 17,069 22,193
Writedown of mining
properties(1).................... -- -- -- -- (54,415) (54,415) --
Loss from continuing operations.... (1,488) (14,042) (4,736) (1,258) (54,570) (54,870) (8,265)
Income (loss) before cumulative
effect of change in accounting
method(2)........................ (759) (13,290) (3,943) 1,154 (54,570) (54,870) (8,265)
Cumulative effect of change in
accounting method(3)............. -- 5,181 -- -- -- -- --
Net income (loss).................. (759) (8,109) (3,943) 1,154 (54,570) (54,870) (8,265)
Net income (loss) attributable to
common shareholders.............. (759) (8,109) (3,943) 1,154 (62,967) (60,634) (16,164)
Income (loss) per share before
cumulative effect of change in
accounting method................ (0.05) (0.87) (0.26) 0.07 (2.54) (2.57) (0.38)
Net income (loss) per share(4)..... (0.05) (0.53) (0.26) 0.07 (2.54) (2.57) (0.38)
Net income (loss) attributable to
common shareholders.............. (0.05) (0.53) (0.26) (0.07) (2.93) (2.84) (0.74)
Ratio of earnings to fixed
charges(5)....................... -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.......................... $324,878 $325,249 $412,361 $445,646 $580,330 $ 560,113
Working capital....................... 179,370 104,883 170,087 105,597 179,626 128,182
Cash, equivalents and short-term
investments......................... 155,796 844,899 142,189 79,562 167,627 122,532
Long-term liabilities................. 134,427 133,241 234,009 184,789 202,566 193,475
Shareholders' equity.................. 180,991 170,849 160,292 239,832 346,198 329,107
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOW DATA:
Net cash provided by (used in)
operating activities............... $(3,007) $ 4,202 $ 7,898 $ 20,915 $ 7,784 $(1,567) $ 9,604
Capital expenditures................. 21,547 16,015 34,745 108,432 62,297 36,614 24,056
</TABLE>
6
<PAGE> 8
PRODUCTION DATA(9)
(In ounces)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------------- -------------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SILVER
Rochester Mine.......... 5,431,369 5,943,894 5,937,770 6,481,825 6,251,180 4,483,700 5,023,757
Golden Cross Mine....... -- 175,325 222,246 286,216 205,070 150,578 216,919
El Bronce Mine.......... -- -- 20,199 72,537 76,145 48,175 73,803
Fachinal Mine(10)....... -- -- -- 334,816 2,154,347 1,564,261 1,581,125
Coeur Mine(11).......... -- -- -- -- 833,267 486,049 925,908
Galena Mine(11)......... 822,904 -- -- -- -- -- 370,420
--------- --------- --------- --------- --------- --------- ---------
6,254,273 6,119,219 6,180,215 7,175,394 9,520,009 6,732,763 8,191,932
GOLD
Rochester Mine.......... 56,562 66,412 56,886 59,307 74,293 51,659 65,398
Golden Cross Mine....... -- 56,898 67,400 83,058 64,365 46,441 61,804
El Bronce Mine.......... -- -- 4,953 22,034 35,676 22,496 36,398
Fachinal Mine(10)....... -- -- -- 3,586 25,064 16,871 23,417
Galena Mine(11)......... 76 -- -- -- -- -- --
Yilgarn Star Mine....... -- -- -- -- 14,732 8,137 26,192
--------- --------- --------- --------- --------- --------- ---------
56,638 123,310 129,239 167,985 214,130 145,604 213,209
</TABLE>
OTHER PRODUCTION DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------------------------------------------
SILVER ORE GOLD ORE GRADE (OZ/TON) METAL RECOVERY % OPERATING COST ($/OZ)
ORE PROCESSED/ GRADE ----------------------- ------------------ ----------------------
MILLED (OZ/TON) OPEN PIT UNDERGROUND SILVER GOLD CASH(12) FULL
-------------- ---------- -------- ----------- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rochester Mine...... 8,127,691 1.181 0.010 -- 65.11% 93.38% $ 3.71 $ 4.25
Golden Cross Mine... 827,642 0.444 0.056 0.178 55.79 87.02 365.79 407.78
El Bronce Mine...... 229,735 0.394 -- 0.168 84.25 92.94 259.43 337.06
Fachinal Mine(10)... 591,074 4.292 0.048 -- 84.93 87.58 (10) (10)
Coeur Mine(11)...... 39,034 21.810 -- -- 97.88 -- 2.46 3.25
Yilgarn Star Mine... 90,823 -- -- 0.179 -- 95.1 214.92 261.99
</TABLE>
RESERVE DATA
(In ounces)
<TABLE>
<CAPTION>
TOTAL NET CONTAINED OUNCES OF ESTIMATED
PROVEN AND PROBABLE RESERVES(13)
(AMOUNTS IN THOUSANDS)
---------------------------------------
PROPERTY GOLD SILVER
- --------------------------------------------------------------- ----- -------
<S> <C> <C>
Rochester Mine................................................. 696 80,554
Golden Cross Mine.............................................. 80 284
El Bronce Mine................................................. 224 577
Fachinal Mine.................................................. 251 10,169
Kensington Property............................................ 1,896 --
Coeur Mine..................................................... -- 2,319
Galena Mine.................................................... -- 14,453
Yilgarn Star Mine.............................................. 225 --
----- -------
Total...................................................... 3,372 108,356
</TABLE>
- ---------------
(1) In July 1996, the Company wrote off its $53 million interest in the Golden
Cross Mine and the nearby Waihi East property in New Zealand, which
included accrual of the estimated future closure and remediation costs and
the
7
<PAGE> 9
entire carrying value of the Company's 80% interest in the property, as
well as $1.2 million relating to its Faride property in Chile.
(2) In May 1995, the Company sold the non-mining assets of Callahan Mining
Company which consisted primarily of its flexible hose and tubing division,
The Flexaust Company, and shares of a related subsidiary for approximately
$10.0 million payable in cash, of which approximately $4 million was paid
at the time of closing with the balance payable over the following five
years. The results of operations and the gain on sale of the Flexaust
manufacturing segment are not reflected in the results from continuing
operations. The Company recorded income from discontinued operations of
$2.4 million in 1995.
(3) See note (3) of the notes to the "Selected Consolidated Financial Data."
(4) Earnings per share are calculated based on the weighted average number of
common shares outstanding and those Common Stock equivalents that are
deemed to be dilutive. The 6% Convertible Subordinated Debentures due 2002
are considered to be Common Stock equivalents. Accordingly, such debentures
are assumed to be converted, and interest expense on such debentures, net
of tax expense, has been considered in the computation of earnings per
share, except in those instances where the effects of conversion would be
antidilutive.
(5) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before income taxes
and fixed charges, and fixed charges consist of interest and that portion
of rent deemed representative of interest. Earnings were insufficient to
cover fixed charges in the following amounts: $8.7 million in 1992, $21.9
million in 1993, $9.2 million in 1994, $8.3 million in 1995, $64.1 million
in 1996, $63.2 million in the nine months ended September 30, 1996 and
$11.3 million in the nine months ended September 30, 1997.
(6) Included in the results of operations for the year ended December 31, 1995
are (i) a gain of $4.4 million (included in other income) from the sale of
gold and silver purchased in the open market which was in turn delivered
pursuant to fixed price forward contracts during the year; and (ii) $2.4
million of income from discontinued operations (including the $2.2 million
after-tax gain from the related sale of certain non-mining assets in May
1995) during the year.
(7) Included in the results of operations for the nine months ended September
30, 1997 are (i) the receipt of $8.0 million of insurance proceeds for
business interruption and property damage at the Golden Cross Mine and (ii)
a gain of $5.3 million arising from the sale of gold purchased in the open
market which was delivered pursuant to fixed price forward contracts in the
first quarter of 1997.
(8) The gross loss from mining operations for the nine months ended September
30, 1997 amounted to approximately $6.5 million compared to a gross profit
from mining operations for the prior year's comparable period of $6.3
million. The decrease primarily is attributable to (i) substantially lower
silver and gold prices in the nine months ended September 30, 1997, during
which period the average silver and gold prices were $4.77 and $339.28 per
ounce, respectively, compared to $5.29 and $391.60 per ounce, respectively,
in the nine months ended September 30, 1996; (ii) the unprofitable
operations of the El Bronce Mine and the fact that the Company increased
its ownership of that mine from 50% to 100% in the third quarter of 1996,
which resulted in a proportionate increase in the cost of mine operations
during the nine months ended September 30, 1997; and (iii) the unprofitable
operation of the Fachinal Mine and the fact that the Company classified
that mine as an operating property for accounting purposes as of January 1,
1997, and therefore began recording cost of mine operation at that mine on
that date. Of the approximately $46.6 million increase in the cost of mine
operations in the nine months ended September 30, 1997 over the prior
year's comparable quarter, approximately $14.4 million, or 30.8%, were
non-cash expenses attributable to the 199.4% increase in depreciation,
depletion and amortization expense recorded in the nine months ended
September 30, 1997. Such increase in non-cash expenses primarily resulted
from the Company's increased El Bronce interest and the fact that no such
expenses were being recorded by Fachinal during 1996.
(9) Production figures are those attributable to the Company's ownership
interest. Production data includes (i) production for the Golden Cross Mine
since April 1993 when the Company acquired an 80% interest in that mine;
(ii) 51% of production for the El Bronce Mine from October 1994 through
August 1996 and 100% of production in and subsequent to September 1996;
(iii) production for the Fachinal Mine since October 1995 when initial
production commenced on a limited basis; (iv) 50% of production for the
Coeur Mine since June 1996 when production was resumed at that mine; (v)
50% of production for the Galena Mine since May 1997 when production was
resumed at that mine; and (vi) 17.5% (i.e., 35% of one-half) from May 1996
to May 1997 and 25% (i.e., 50% of one-half) in June 1997 of production for
the Yilgarn Star Mine.
(10) The Fachinal Mine was classified as a development stage property during
1995 and 1996. Operating costs, net of production revenues, were
capitalized. The property was classified as an operating property for
financial reporting purposes on January 1, 1997.
8
<PAGE> 10
(11) Operations at the Coeur and Galena Mines were suspended in April 1991 and
July 1992, respectively, due to then prevailing silver prices and those
mines were placed on a care and maintenance basis to conserve ore reserves.
Silver Valley Resources resumed operations at the Coeur Mine in June 1996
and plans to continue to mine existing ore reserves there until early 1999.
Silver Valley Resources is exploring the Coeur Mine in an attempt to
discover additional ore reserves in order to lengthen the mine life.
Operations at the Galena Mine resumed in May 1997.
(12) Excludes smelting and refining costs.
(13) Estimated reserve figures are for proven and probable reserves which do not
reflect loss of metal in the metallurgical process. The Company's net share
of silver and gold ounces reflect its interest in each mine or property.
Estimates are as of December 31, 1996, except with respect to the Yilgarn
Star Mine, which data is as of April 27, 1997. In the case of the Rochester
Mine, El Bronce Mine, Fachinal Mine and the Kensington Property, the
reserve estimates were verified by independent consulting geologists or
mining engineers. The Golden Cross Mine data is based on estimated
production during the year ended December 31, 1997, as closure of the mine
is expected during the last quarter of 1997 or the first quarter of 1998.
The Galena Mine and Coeur Mine reserve figures are based on the estimates
of Silver Valley Resources, of which the Company owns 50%. The Yilgarn Star
ore reserve data is based on the estimates of the operator. Based on
experience and certain metallurgical testing, the Company estimates
recovery rates are 55% of the silver and 85% of the gold contained within
the ore mined at the Rochester Mine, 87% of the gold and 54% of the silver
at the Golden Cross Mine, 84% of the silver and 93% of the gold at the El
Bronce Mine and 90% of the gold and 89% of the silver at the Fachinal Mine,
97% of the silver at the Coeur and Galena Mines and 95% of the gold at the
Yilgarn Star Mine; and based on metallurgical testing, the estimated
recovery rate at the Company's Kensington development property is 96% of
the gold. The prices used in preparing the above estimated ore reserves
range from $5.00 to $6.00 per ounce for silver and from $375 to $410 per
ounce for gold. The market prices of silver (as reported by Handy & Harmon)
and gold (London final) on January 20, 1998 were $5.72 and $291.15,
respectively. Use of significantly lower silver and gold prices in the ore
reserve estimation could materially reduce such reserve estimates. The
above ore reserve data does not include Coeur's share (based on its current
ownership interest) of the following additional mineralized material at
December 31, 1996, which material does not qualify as ore reserves:
<TABLE>
<CAPTION>
GOLD SILVER
TONS GRADE GRADE
(IN THOUSANDS) (OZ/TON) (OZ/TON)
-------------- -------- --------
<S> <C> <C> <C>
Rochester Mine................................ 9,941 0.007 1.11
El Bronce Mine................................ 1,269 0.34 0.8
Fachinal Mine................................. 1,582 0.08 4.59
Kensington Property........................... 9,050 0.12 --
Coeur Mine.................................... 83 -- 14.42
Galena Mine................................... 394 -- 8.43
Yilgarn Star Mine............................. 1,596 0.13 --
</TABLE>
9
<PAGE> 11
RISK FACTORS
Investors should carefully review the factors set forth below as well as
the other information included or incorporated by reference in this Prospectus.
The forward-looking statements dealing with future mining production and
operations, ore reserves and capital expenditure and exploration expense levels
contained or incorporated by reference in this Prospectus, and particularly
those involving estimates of 1997 silver and gold production, are expressly
qualified by the following cautionary statements. Each of the important factors
summarized below could cause actual production and operating results to
materially differ from those presented in the forward-looking statements.
PAST LOSSES AND ABSENCE OF EARNINGS TO SATISFY FIXED CHARGES
For the nine months ended September 30, 1997, two of the Company's
principal operating properties did not operate profitably. The Company reported
net losses for 1996 and the first nine months of 1997 and each of the five years
prior to 1995. In addition to depressed silver and gold market prices,
significantly contributing to those net losses were (i) the Company's deliberate
pursuit of a corporate policy of growth through the acquisition of mining
companies and properties and the financing of such growth to a significant
extent by incurring indebtedness and (ii) the Company's write-off of $53.0
million relating to its interests in the Golden Cross Mine and nearby Waihi East
property in New Zealand in July 1996. Annual interest expense, which prior to
1993 was less than $2 million, rose to $5.4 million in 1993, $11.4 million in
1994 and $9.7 million in 1995. As a result of the Company's call for redemption
of its 7% Convertible Subordinated Debentures due 2002 in December 1995, the
Company's interest expenses in 1996 and the first nine months of 1997 were
reduced to $3.6 million and $6.3 million, respectively. In the future, the
Company's interest expenses will be increased as a result of its issuance of
$143.75 million of the Debentures in October 1997 and reduced as a result of its
repayment on October 31, 1997 of $42.9 million principal amount of bank
indebtedness incurred in connection with construction of the Fachinal Mine and
the investment in Gasgoyne.
As a result of the losses discussed above, the Company has not achieved
earnings adequate to satisfy fixed charges (i.e., interest, preferred stock
dividends plus that portion of rent deemed representative of interest) in each
of the last five years and in the nine months ended September 30, 1997. The
amounts by which earnings were inadequate to cover fixed charges were
approximately $18.7 million in 1991, $8.7 million in 1992, $21.9 million in
1993, $9.2 million in 1994, $8.3 million in 1995, $64.1 million in 1996, $63.2
million in the nine months ended September 30, 1996, and $11.3 million in the
nine months ended September 30, 1997. Interest payable to holders of Debentures
through their maturity on October 31, 2005 will initially approximate $10.4
million per year, subject to reduction to the extent that Debentures are earlier
converted or redeemed. Other outstanding securities requiring the payment of
fixed charges include (i) 7,077,833 shares of Mandatory Adjustable Redeemable
Convertible Securities (the "MARCS") requiring the quarterly payment of
approximately $10.5 million of annual dividends per year through March 15, 2000,
when those shares mandatorily convert into Common Stock; (ii) $49.8 million
principal amount of the Company's 6% Convertible Debentures due 2002 (the "6%
Debentures") requiring the semi-annual payment of approximately $3.0 million of
interest per year; and (iii) $95 million principal amount of the Company's
6 3/8% Convertible Subordinated Debentures due 2004 (the "6 3/8% Debentures")
requiring the semi-annual payment of approximately $6.1 million of interest per
year. Prior to the mandatory conversion of the MARCS on March 15, 2000, the
MARCS are convertible at the option of the holder into Common Stock at a
conversion price of $25.713 per share. The 6% Debentures and 6 3/8% Debentures
are convertible prior to their maturity at conversion prices of $25.57 and
$25.77 per share, respectively.
The Company expects to satisfy its fixed charges, dividends on shares of
MARCS and other expense obligations in the future from cash flow from operations
and, in the event that cash flow from operations is insufficient, from working
capital, which amounted to approximately $128.2 million at September 30, 1997
and, if necessary, the sale of assets. The Company's net cash provided by
operating activities for the years ended December 31, 1995 and 1996 and the nine
months ended September 30, 1997 was approximately $20.9 million, $7.8 million
and $9.6 million, respectively. The availability of future cash flow from
operations or working capital to fund the payment of interest on the Debentures
and other fixed charges will be dependent upon numerous factors, including the
Company's results of operations, silver and gold prices, levels of
10
<PAGE> 12
production and costs of production at the Company's mining properties, the
amount of the Company's capital expenditures and expenditures for acquisitions,
developmental and exploratory activities, and the extent to which the
Debentures, the shares of MARCS or the Company's outstanding 6 3/8% Debentures
and 6% Debentures are converted or redeemed.
CASH FLOW; HOLDING COMPANY STRUCTURE
The Company does not currently generate sufficient cash flow from operating
activities to cover its interest obligations under presently outstanding debt
instruments. Assuming a continuation of the current low levels of precious
metals prices, the Company anticipates that it will not generate sufficient cash
flow to cover the interest obligation on outstanding debt instruments in the
future, including the Debentures. In the future, the ability of the Company to
pay interest accruing on and the principal amount of the Debentures will be
dependent upon the success of the Company's operations and the operations of
properties or businesses which may hereafter be acquired by the Company, as to
which there can be no assurance. In the event the Company's cash flow from
operating activities is not sufficient to fund its interest obligations, the
Company will rely upon working capital or the sale of assets to cover such
payments. In addition, the Company's operating assets are presently in
subsidiaries and it is expected that any businesses acquired will be operated
through subsidiaries. The payment of interest on and principal amount of the
Debentures will be effectively subordinated to all liabilities of the Company's
subsidiaries. The Debentures are also expressly subordinated in the right of
payment to all Senior Debt (as defined herein) of the Company.
CURRENTLY LOW MARKET PRICES OF SILVER AND GOLD
The market price of gold has declined to levels that are the lowest since
1985. The average market price of silver to date in 1997 is lower than the
annual average market prices experienced since 1993. The market prices of silver
(London final) and gold (as reported by Handy & Harmon) on January 20, 1998 were
$5.72 per ounce and $291.15 per ounce, respectively. The average market price of
silver declined from $5.19 per ounce in 1995 and $5.18 per ounce in 1996 to
$4.89 per ounce in 1997. The average market price of gold declined from $384.16
per ounce in 1995 and $387.70 per ounce in 1996 to $331.10 per ounce in 1997.
Overall world stability and declining inflation has resulted in a decrease in
the market price of gold. Furthermore, in recent years the central banks of
several countries and such multilateral organizations as the European Monetary
Institute and the International Monetary Fund have sold portions of gold held by
them as reserves and may sell additional amounts of gold in the future, which
could result in further declines in the market price of gold. If the currently
depressed levels of gold prices continue, the Company will need to reduce
production costs and/or expand minable ore reserves at the Fachinal and El
Bronce Mines to operate the mines profitably. Furthermore, in the event of the
continuation of such depressed price levels, the Company may elect to place such
mines on temporary standby and halt production there to conserve ore reserves
until gold prices increase. Furthermore, under certain circumstances asset
write-downs could be required. See "Possible Write-Downs Pursuant to Statement
of Financial Accounting Standards No. 121" below.
DEPENDENCE UPON SILVER AND GOLD PRICES
The results of the Company's operations and the market price of its Common
Stock are significantly affected by the market prices of silver and gold. Those
prices historically have fluctuated widely and are affected by many factors
beyond the Company's control, including interest rates, expectations regarding
inflation, currency values, global and regional political and economic
conditions and other factors. The suspension of mining operations at the Coeur
and Galena Mines in April 1991 and July 1992, respectively, during which months
the average price of silver was $3.97 and $3.95 per ounce, respectively, was
attributable to declining silver prices. The Company's decision to place its
Kensington Property into commercial production will be subject, among other
things, to there being a price of gold realized (through spot or forward sales)
of at least $400 per ounce. As stated above, the market prices of silver and
gold on January 20, 1998 were $5.72 per ounce and $291.15 per ounce,
respectively. No assurance can be given regarding market prices of silver and
gold in the future.
11
<PAGE> 13
UNCERTAINTY OF ORE RESERVE ESTIMATES
Although the Company has established criteria for reporting ore reserves in
conformity with standards of the Commission, there are numerous uncertainties
inherent in the estimation of ore reserves, including many geological and
economic factors beyond the Company's control. Reserve estimation is a
necessarily imprecise and subjective process and the accuracy of such estimates
is a function of the quality of available data and of engineering and geological
interpretation, judgment and experience. Assumptions about silver and gold
market prices are subject to great uncertainty and such prices have fluctuated
widely in the past. Declines in the market prices of silver or gold may render
reserves containing relatively lower grades of ore uneconomic to exploit. Should
the Company encounter mineralization or geologic formations at any of its mines
or projects different from those predicted by drilling, sampling and similar
examinations, reserve estimates may be adjusted and mining plans may be altered.
Such adjustments and alterations might adversely affect the Company's actual
production and operating results. Furthermore, if the prices realized by the
Company for the silver and gold it produces were to decline substantially below
the prices at which ore reserves were calculated for a sustained period of time,
the Company could experience reductions in reserves and asset write-downs. Under
such circumstances, the Company could discontinue the development of a project
or mining at one or more of its properties. Ore reserves at mining properties
operated by the Company are the subject of verification by independent
consulting geologists or mining engineers. Ore reserves at mining properties
operated by other companies in which Coeur has an ownership interest are
prepared by such other companies, reviewed by the Company and may not be subject
to such independent verification.
Silver and gold reserves at mining properties owned by the Company or in
which it has an ownership interest were calculated at December 31, 1996, except
that Yilgarn Star reserve data is as of April 27, 1997. Ore reserve
determinations are based upon varying prices ranging from $5.00 to $6.00 per
ounce for silver and from $375 to $410 per ounce of gold. Recently, silver and
gold prices have been significantly below those levels and prolonged declines in
such market prices could render ore reserves containing relatively lower grades
of silver and gold mineralization uneconomic to exploit and could materially
reduce the Company's mineable reserves. Should such reduction occur, material
write-downs of the Company's investment in mining properties might be required,
and there could be material delays in the development of new projects, increased
net losses and reduced cash flow.
POSSIBLE WRITE-DOWNS PURSUANT TO STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.
121
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("SFAS No. 121") entitled "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." SFAS No. 121 was effective for periods beginning after December 15, 1995,
and established new accounting standards for, among other things, the impairment
of the value of tangible long-lived assets. SFAS No. 121 requires a company to
review the recoverability of its assets by estimating the future undiscounted
cash flow expected to result from the use and eventual disposition of the asset.
In July 1996, as a result of deep-seated ground movement under the Golden
Cross Mine tailings impoundment area, the Company determined that its Golden
Cross Mine asset had been impaired and that because the undiscounted cash flow
from the project was estimated to be less than the project's carrying value, it
would be necessary under SFAS No. 121 to effect a $53 million write-off of the
asset.
While the Company does not believe that any of its other properties
presently requires a write-down pursuant to SFAS No. 121, a continuation of the
currently depressed levels of silver and gold market prices for a period of time
and/or a failure to reduce production costs or expand mineable ore reserves at
the Company's mining properties, particularly in the case of the Fachinal and El
Bronce Mines and the Kensington Property, could result in the need for the
Company to effect further asset write-downs pursuant to SFAS No. 121.
RISKS ASSOCIATED WITH POSSIBLE ACQUISITIONS
An important element of the Company's business strategy is the Company's
opportunistic acquisition of silver and gold mines, properties and businesses.
There can be no assurance that mining properties acquired by
12
<PAGE> 14
the Company can be developed profitably, or if profitable when acquired, that
profitability can be sustained. See "Past Losses and Absence of Earnings to
Satisfy Fixed Charges" above. In connection with future acquisitions, the
Company may incur indebtedness or issue equity securities, resulting in dilution
of the percentage ownership of existing shareholders. The Company intends to
seek shareholder approval for any such acquisitions only to the extent required
by applicable law, regulations or stock exchange rules.
RISKS AND COSTS ASSOCIATED WITH THE COMPANY'S EXPLORATION AND DEVELOPMENT
ACTIVITIES
Mineral exploration, particularly for silver and gold, involves many risks
and frequently is nonproductive. Once mineralization is discovered, it may take
a number of years until production is possible, during which time the economic
viability of any project may change. Substantial developmental expenditures are
required to establish ore reserves, extract the metals from the ore and, in the
case of new properties, to construct mining and processing facilities.
The Company expended approximately $54.4 million and $32.0 million
(excluding capitalized interest) in the years ended December 31, 1995 and 1996,
respectively, in connection with the exploration and development of its mining
properties. Furthermore, the Company plans to expend approximately $21.2 million
(excluding capitalized interest) in connection with exploration and other
developmental activities during 1997. In the event the Kensington Property is
placed into commercial production, the Company estimates that approximately $197
million of capital expenditures would be required over an approximate 18-month
period to construct the mine facilities.
RISKS ASSOCIATED WITH THE COMPANY'S MINING ACTIVITIES
Following the commencement of production, the mining business continues to
be subject to risks and hazards, including quantity of production, quality of
the ore, environmental hazards, industrial accidents, encountering unusual or
unexpected formations, cave-ins, flooding and periodic interruptions due to
inclement or hazardous weather conditions. Examples of such risks include the
ground movement discovered at the Golden Cross Mine tailings impoundment area,
requiring a $53.0 million write-off in 1996 and earlier-than-planned closure of
that mine, and the recent flooding that required the two-week closure of the El
Bronce Mine. Moreover, remedial environmental activity at the Golden Cross Mine
required payments of $12.1 million in 1996 and are estimated to require an
additional $5.1 million in 1997, and additional estimated costs associated with
the closure of the mine are expected to approximate $5.7 million (net of salvage
revenues), all of which have been accrued. The occurrence of events caused by
the above risks and hazards could result in damage to, or destruction of,
mineral properties or producing facilities, personal injury, environmental
damage, reduced production and delays in mining, asset write-downs, monetary
losses and possible legal liability. Insurance fully covering certain
environmental risks (including potential liability for pollution or other
hazards as a result of disposal of waste products occurring from exploration and
production) is not generally available to the Company or to other companies
within the industry. The Company has been recognized in recent years for its
commitment to environmental responsibility.
POSSIBLE DECLINES IN FUTURE PRODUCTION
The Company expects that future silver and gold production derived from the
mining of existing reserves at existing mines will decline as a result of the
exhaustion of reserves and possible closure of mines. The Company expects that
production from its existing mines will be less in 1998 than in 1997. It has
been and will continue to be the Company's business strategy to conduct silver
and gold exploratory activities at its existing mining and exploratory
properties as well as at new exploratory projects, and to acquire silver and
gold mining properties and/or businesses that possess mineable ore reserves and
are expected to become operational in the near future. No assurance, however,
can be given that the Company's silver and gold production will not decline in
the future.
13
<PAGE> 15
ENVIRONMENTAL AND OTHER GOVERNMENT REGULATION
General. The Company's mining activities are subject to extensive federal,
state and local laws governing the protection of the environment, prospecting,
development, production, taxes, labor standards, occupational health, mine
safety, toxic substances and other matters. Although such regulations have never
required the Company to close any mine and the Company is not presently subject
to any material administrative proceedings relating to such matters, the costs
associated with compliance with such regulatory requirements are substantial and
possible future legislation and regulations could cause additional expense,
capital expenditures, restrictions and delays in the development of the
Company's properties, the extent of which cannot be predicted. In the context of
environmental permitting, including the approval of reclamation plans, the
Company must comply with known standards and regulations which may entail
significant costs and delays. Although Coeur has been recognized for its
commitment to environmental responsibility and believes it is in substantial
compliance with applicable laws and regulations, amendments to current laws and
regulations, the more stringent implementation thereof through judicial review
or administrative action or the adoption of new laws could have a materially
adverse effect upon the Company. The Company expended approximately $2.9 million
and $3.1 million in connection with routine compliance activities at its
operating properties in 1995 and 1996, respectively, and expects to expend a
total of approximately $5.6 million for that purpose in 1997. The Company
expended approximately $12.1 million in connection with its ground remediation
activities at the Golden Cross Mine in 1996 and expects additional remediation
costs at that mine to approximate $5.1 million in 1997. Although the Company
believes that estimated additional costs associated with the closure of the
Golden Cross Mine will approximate $5.7 million, net of salvage revenues,
approval by the appropriate New Zealand regulatory authorities of the proposed
plan of closure has not been obtained and no assurance can be given that actual
costs required to be incurred in connection with the closure will not exceed
that amount. The Company had expended a total of approximately $10.6 million on
environmental and permitting activities at the Kensington Property through
December 31, 1996, and expects to expend a total of approximately $3.1 million
for that purpose in 1997.
EPA Regulations. Mining wastes are currently exempt to a limited extent
from the extensive set of Environmental Protection Agency ("EPA") regulations
governing hazardous waste. The EPA plans to develop a program to regulate mining
waste pursuant to its solid waste management authority under the Resource
Conservation and Recovery Act ("RCRA"). Certain processing and other wastes are
currently regulated as hazardous wastes by the EPA under RCRA. The EPA is
studying how mine wastes from extraction and beneficiation should be managed and
regulated. If the Company's mine wastes were treated as hazardous waste or such
wastes resulted in the mine facility being designated as a "Superfund" site
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA" or "Superfund") for cleanup, material expenditures would be required
for the construction of additional waste disposal facilities or for other
remediation expenditures. Under CERCLA, any owner or operator of a Superfund
site since the time of its contamination generally may be held liable and may be
forced to undertake remedial cleanup action or to pay for the government's
cleanup efforts. Additional regulations or requirements may also be imposed upon
the Company's tailings and waste disposal in Idaho and Alaska under the federal
Clean Water Act ("CWA") and in Nevada under the Nevada Water Pollution Control
Law which implements the CWA. Air emissions are subject to controls under
Nevada's, Idaho's and Alaska's air pollution statutes implementing the Clean Air
Act.
Natural Resources Laws. The Company is subject to federal and state laws
designed to protect natural resources. In March 1996, an action was filed in the
United States District Court for the District of Idaho by the United States
against various defendants, including the Company, asserting claims under CERCLA
and the Clean Water Act for alleged damages to Federal natural resources in the
Coeur d'Alene River Basin of northern Idaho as a result of releases of hazardous
substances from mining activities conducted in the area since the late 1800s. No
specific monetary damages are identified in the complaint. However, in July
1996, the Government indicated damages may approximate $982 million. The United
States asserts that the defendants are jointly and severally liable for costs
and expenses incurred by the United States in investigation, removal and
remedial action and the restoration or replacement of affected natural
resources. In 1986 and 1992 the Company had settled similar issues with the
State of Idaho and the Coeur d'Alene Indian Tribe, respectively,
14
<PAGE> 16
and believes that those prior settlements exonerate it of further involvement
with alleged natural resource damage in the Coeur d'Alene River Basin. The
Company intends to vigorously defend this matter and, in March 1997, filed a
motion for summary judgment which is pending decision by the court. At this
initial stage of the action, it is not possible to predict its ultimate outcome.
Proposed Mining Legislation and Regulations. Legislation is presently
being considered in the U.S. Congress to change the Mining Law of 1872 (the
"Mining Act") under which the Company holds mining claims on public lands. It is
possible that the Mining Act will be amended or be replaced by more onerous
legislation in the future. The legislation under consideration, as well as
regulations under development by the Bureau of Land Management, contain new
environmental standards and conditions, additional reclamation requirements and
extensive new procedural steps which would likely result in delays in
permitting. Among the bills under consideration are bills calling for an 8%
gross royalty, a 2.5% or 5% net smelter return royalty or a 3.5% net proceeds
royalty on the value of minerals mined on public lands, payable to the U.S.
Government. The Company believes that if and when any royalty is imposed, it
will not be a gross royalty. A significant portion of the Company's U.S. mining
properties are on public lands. Any reform of the Mining Act or regulations
thereunder based on these initiatives could increase the costs of mining
activities on unpatented mining claims, and as a result could have an adverse
effect on the Company and its results of operations. Until such time, if any, as
new reform legislation or regulations are enacted, the ultimate effects and
costs of compliance on the Company cannot be estimated.
FOREIGN ACTIVITIES
Reserves outside of the United States currently account for approximately
20% of the Company's total reserve base and foreign operations contributed
approximately 50% of total 1996 production. New Zealand, Australia and Chile are
the most significant foreign countries in which the Company directly or
indirectly owns or operates mining properties. The currency of New Zealand
dollars and Australian dollars is used in New Zealand and Australia,
respectively, and the currency of Chilean pesos is used in Chile. The Company
also conducts exploratory projects in Chile, Guyana and Mexico. Although the
governments and economies of these countries have been relatively stable in
recent years, the ownership of property in a foreign country generally is
subject to the possible risk of expropriation or nationalization with inadequate
compensation. Any foreign operation or investment may also be adversely affected
by exchange controls, currency fluctuations, taxation and laws or policies of
particular countries as well as laws and policies of the United States affecting
foreign trade, investment and taxation.
COMPETITION FOR MINERAL PROPERTIES
Mining companies are continually seeking to replace and expand their ore
reserves. The Company encounters strong competition from other mining companies
in connection with the acquisition of properties producing or capable of
producing silver and gold. Because some of those companies have greater
financial resources than the Company, the Company may be unable to acquire
attractive mining properties on terms it considers acceptable. As a result,
there can be no assurance that the Company will be able to replace and expand
current reserves through the acquisition of new properties.
FORWARD SALE AND PURCHASE CONTRACT ACTIVITIES
Coeur historically has sold silver and gold produced by its mines pursuant
to forward contracts and at spot prices prevailing at the time of sale. Entering
into forward sale contracts is a strategy used to mitigate some of the risks
associated with fluctuating precious metals prices. The Company continually
evaluates the potential benefits of engaging in these strategies based on the
then current market conditions. The Company currently is not a party to any
forward sale or purchase contracts other than through Silver Valley Resources
and Gasgoyne. At November 7, 1997, Silver Valley Resources had purchased
contracts in the open market requiring it to purchase 500,000 ounces of silver
attributable to Coeur's interest in Silver Valley Resources at an average cost
of $5.70 per ounce. The Company marks these contracts to market and,
accordingly, records any gain or loss on these contracts on a monthly basis. At
November 7, 1997, Gasgoyne had sold forward 196,200 ounces of gold attributable
to Coeur's interest in the Yilgarn Star Mine at an average minimum price
15
<PAGE> 17
of approximately $A 601 per ounce (or approximately $US 419 per ounce based on
currency exchange rates on November 7, 1997). The Company's future revenues will
be adversely affected in connection with the sale of its silver and gold
production in the future to the extent that is not covered by forward sale
contracts and silver and gold market prices decline.
During the first quarter of 1997, the Company recorded a $5.3 million gain
arising from the sale of gold purchased in the open market which was delivered
pursuant to fixed-price forward contracts. However, no assurance can be given
that the use of forward sale and purchase contract strategies in the future will
always benefit the Company. For example, the Company could lock in forward
deliveries at prices lower than the market price at the time of delivery. The
Company also could be subject to margin calls if the market price were to
significantly rise above the contracted forward delivery price. Furthermore, the
Company could fail to produce enough silver or gold to satisfy a forward
delivery obligation, possibly requiring the Company to purchase silver or gold
in the spot market at a higher price to fulfill its delivery obligation.
CURRENCY FLUCTUATIONS
The Company may enter into agreements which will require it to purchase
currencies of foreign countries in which it does business to ensure fixed
exchange rates. In the event that actual exchange rates vary from those set
forth in the hedge contracts, the Company will experience U.S. dollar
denominated operating costs that are either higher or lower than those that
would have been experienced had it not entered into the foreign exchange
contracts. To the extent the Company were to purchase foreign currency in excess
of its estimated requirements, it may experience foreign currency gains or
losses when the excess is converted into U.S. dollars.
DIVIDENDS
Although the Company paid an annual cash dividend to the holders of its
Common Stock in April of each of the years from 1989 through 1996, it has not
paid a dividend since. No assurance can be given as to whether the Company will
resume the payment of cash dividends on its Common Stock in the future.
CLASS ACTION LAWSUIT
On July 2, 1997 a suit was filed by a purchaser of the Company's common
stock in Federal District Court for the District of Colorado naming the Company
and certain of its officers and its independent auditor as defendants. Plaintiff
alleges that the Company violated the Securities Exchange Act of 1934 during the
period January 1, 1995 to July 11, 1996, and seeks certification of the law suit
as a class action. The class members are alleged to be those persons who
purchased publicly traded debt and equity securities of the Company during the
time period stated. On September 22, 1997 an amended complaint was filed in the
proceeding adding other security holders as additional plaintiffs. The action
seeks unspecified compensatory damages, pre-judgment and post-judgment interest,
attorney's fees and costs of litigation. The complaint asserts that the
defendants knew material adverse non-public information about the Company's
financial results which was not disclosed, and which related to the Golden Cross
and Fachinal Mines; and that the defendants intentionally and fraudulently
disseminated false statements which were misleading and failed to disclose
material facts. The Company believes the allegations are without merit and
intends to vigorously defend against them. On October 27, 1997, the Company, its
auditors and the individual defendants filed with the Court motions to dismiss
the amended complaint on the ground that it fails to state a valid claim. No
assurances can be given at this early stage of the action as to its ultimate
outcome.
16
<PAGE> 18
THE COMPANY
OVERVIEW. Coeur d'Alene Mines Corporation ("Coeur" or the "Company") is an
international silver and gold producer engaged in the exploration, development
and operation of silver and gold mining properties and businesses primarily
located in the western United States, New Zealand, Chile and Western Australia.
Coeur has the highest amounts of silver production and silver reserves of any
primary silver producer located in the United States and certain of the silver
mines in which it has an interest are the lowest cost of production primary
silver mines in the United States.
Coeur has grown from a small domestic silver producer into an international
silver and gold producer through a focused strategy of acquiring and developing
producing or near-producing silver and gold properties as well as exploration
properties. Coeur's total assets have grown from $100.7 million at the end of
1986 to $560 million on September 30, 1997. Total production has increased from
approximately 6.3 million ounces of silver and 57,000 ounces of gold in 1992 to
approximately 9.5 million ounces of silver and 214,000 ounces of gold in 1996.
Production continued to increase in the first nine months of 1997 to
approximately 8.2 million ounces of silver and 213,209 ounces of gold, compared
to approximately 6.7 million ounces of silver and 145,604 ounces of gold during
the first nine months of 1996.
The Company actively explores for silver and gold on its existing
properties and elsewhere in the world. Mining exploration expenses for the nine
months ended September 30, 1997 were approximately $6.4 million, an increase of
approximately 23% over the first nine months of 1996. Total exploration expenses
for 1997 are expected to approximate $7.6 million compared to $7.7 million in
1996.
The Company is an Idaho corporation organized in 1928. Its executive
offices are located at 505 Front Avenue, Coeur d'Alene, Idaho 83814. The
telephone number is (208) 667-3511.
BUSINESS STRATEGY. The Company's business strategy is to capitalize on its
strong reserves and the expertise of its management to become a leading precious
metals company via long-term, profitable growth. The principal elements of the
Company's business strategy are as follows: (i) improve operating cost and
production profiles at Coeur's existing silver and gold mining operations; (ii)
increase the Company's low-cost silver production and reserves in order to
remain the nation's largest silver producer and one of the world's largest
primary silver producers; (iii) continue increasing the Company's gold
production and reserves in order to continue to provide its shareholders with an
interest in both metals, while lowering its cost of gold production; (iv)
opportunistically acquire operating mines and exploration and development
properties with a view to reducing the Company's operating and production costs
and expanding its production and reserves; (v) continue to explore for new
silver and/or gold assets primarily in North and South America, Mexico, and
Australia as well as at existing mine sites; (vi) focus on opportunities which
provide strong future exploration potential and immediate or near-term prospects
for low-cost silver and/or gold production; and (vii) preserve the Company's
financial ability to weather the industry's intrinsic cyclical nature and to
execute its strategic objectives.
PRINCIPAL PROPERTIES
The Company's most significant properties are: (i) the Rochester Mine, a
silver and gold surface mining operation located in northwestern Nevada, which
is 100% owned and operated by Coeur, is the largest primary silver mine in the
United States and has significant gold production; (ii) a 50% interest in Silver
Valley Resources, which was formed in late 1994 and owns and operates the Coeur
and Galena underground silver mines in the Coeur d'Alene Mining District of
northern Idaho, historically among the largest and lowest cost of production
silver mines in the United States, and in which District Silver Valley Resources
is conducting extensive developmental and exploratory activities; (iii) the 100%
owned and operated Fachinal Mine, an open pit and underground gold and silver
mine located in southern Chile, which the Company developed and constructed on
schedule and under budget in October 1995 following its acquisition of the
property in 1990 and classified as an operating property for financial reporting
purposes on January 1, 1997; (iv) the 100% owned and operated El Bronce Mine, an
underground gold and silver mine located in northern Chile, in which the Company
acquired a 51% operating interest in October 1994 and 100% ownership in
September 1996; (v) a 25% interest in the Yilgarn Star Mine, a gold mine in
Western Australia, which interest results from the
17
<PAGE> 19
Company's ownership of 50% of the outstanding capital stock of Gasgoyne acquired
in May 1996 and May 1997; (vi) the Kensington Property, located northwest of
Juneau, Alaska, in which Coeur increased its ownership interest from 50% to 100%
in July 1995, is the subject of optimization and development activities with a
view to its ultimate construction as an underground gold mine; and (vii) the
Golden Cross Mine, an underground and surface gold mining operation located near
Waihi, New Zealand, which is 80% owned and operated by Coeur and is planned to
be closed during the last quarter of 1997 or the first quarter of 1998. The
Fachinal and El Bronce Mines are not currently profitable.
Coeur has a number of current projects which may result in increased future
production and ore reserve expansion. The Company also is implementing steps to
reduce its production costs at its mining properties. The following sets forth
information regarding the Company's pursuit of these strategies.
ROCHESTER MINE
The Rochester Mine, which commenced operations in August 1986, is a silver
and gold surface mine located approximately 25 miles northeast of Lovelock,
Nevada. The mine utilizes the heap-leaching process to extract both silver and
gold from ore mined using open-pit methods. Rochester is the largest primary
silver mine in the U.S. and is one of the largest in the world. Coeur estimates
that the Rochester Mine, which it has operated since 1986, will increase its
1997 gold production by approximately 13% to 84,000 ounces in 1997 over the
74,293 ounces of gold produced in 1996. Silver production in 1997 is expected to
approximate 6.10 million ounces compared to 6.25 million ounces in 1996.
Cash costs and full costs of production per ounce of silver equivalent at
the Rochester Mine in the nine months ended September 30, 1997 were $3.74 per
ounce and $4.34 per ounce, respectively, compared to $3.56 per ounce and $4.11
per ounce, respectively, in the prior year's comparable period. Historically low
strip ratios are expected through the remainder of the mine life, which should
favorably impact costs and cash flow.
In July 1995, the Company implemented an employee incentive program at the
Rochester Mine that rewards employees for operating improvements reflected in
cost savings and production increases. The program has resulted in the
achievement of leach pad, crusher and other operating improvements and
efficiencies that are estimated to have resulted in approximately $350,000 of
cost savings under budget and approximately $7.5 million of revenue from
production gains over budget during 1997.
SILVER VALLEY RESOURCES
Formation of Silver Valley Resources completed Coeur's six-year strategy to
expand the Company's interests in the Coeur d'Alene Mining District, which
historically has been one of the largest silver producing regions in the world.
Operations at the Coeur Mine and the Galena Mine were suspended in April 1991
and July 1992, respectively, due to low silver prices and the properties were
placed on a care and maintenance basis to conserve ore reserves. In July 1995,
Coeur, Callahan Mining Corporation, and Asarco, Inc. transferred their interests
in the Coeur and Galena Mines and Caladay project to Silver Valley Resources, an
entity created for that sole purpose, as a result of which Coeur and Asarco each
now own 50% of Silver Valley Resources.
Silver Valley Resources reopened the Coeur Mine in June 1996 and plans to
continue mining existing reserves through the third quarter of 1998. Exploration
at the Coeur Mine is ongoing in an effort to increase silver reserves and extend
the mine's life beyond 1999. Silver Valley Resources also resumed production at
the Galena Mine in May 1997.
Silver Valley Resource's cash costs and full costs of production per ounce
of silver for the nine months ended September 30, 1997 amounted to $3.35 and
$4.39 per ounce, respectively. Those costs include start-up costs at the Galena
Mine and are expected to decrease during the balance of 1997. The Coeur and
Galena Mines were not open during the prior year's comparable period.
Activities at the Galena Mine during 1997 revealed a previously
undiscovered vein known as the 123 Vein. The vein and associated structures have
been drilled on numerous levels over a vertical depth of 600 feet and are
believed to continue into lower levels of the mine. The vein has been
intersected by
18
<PAGE> 20
underground workings on two levels along a maximum horizontal length of up to
230 feet. Although a mineable ore reserve has not yet been identified, based on
the limited work done to date, the vein is believed by the Company to be
amenable to extraction due to its grade and width.
During 1996 and 1997, Silver Valley Resources entered into agreements with
Sterling Mining Company, Placer Creek Mining Company, Silver Buckle Mines, Inc.
and American Silver Mining Company pursuant to which Silver Valley Resources
obtained operating control of contiguous properties near the Coeur and Galena
Mines in the Coeur d'Alene Mining District in exchange for net profit royalty
interests. Silver Valley Resources silver reserves attributable to Coeur's 50%
ownership interest have been expanded, increasing 32% in 1995 and 22% in 1996.
Rehabilitation of the mine shaft at the Caladay project is nearing completion
and Silver Valley Resources plans to conduct extensive exploratory and
developmental activities at the Coeur, Galena and Caladay Mines as well as at
contiguous properties in the Coeur d'Alene Mining District with a view toward
the expansion of silver reserves there. Production for 1997 attributable to
Coeur's 50% interest in Silver Valley Resource is estimated at approximately 1.8
million ounces of silver.
FACHINAL MINE
The Fachinal Mine, which commenced initial production in October 1995 and
has both open pit and underground mining operations, completed its first full
year of pre-commercial operations in 1996. Following its opening and during
1996, unexpected operational problems were encountered and a lower than
anticipated ore grade in the open pit resulted in decreased ore reserves and
higher than expected cash costs of production that exceeded current market
prices. Production from higher-grade underground mining commenced in July 1996
and the property was classified as an operating property for financial reporting
purposes on January 1, 1997. Production from the higher-grade underground
operations has been increased to compensate for the lower open pit ore grades.
Furthermore, with respect to the open pit, an improved ore reserve mine model,
an increase in the pit slope to decrease waste tons mined and a reduction in
manpower have contributed to operational efficiencies. With respect to the
underground mining, an improved mine plan, a manpower reduction, improved
ventilation and drainage, improved safety program and improvements in contractor
performance have favorably affected production and cost performance. The amount
of tonnage processed at the mill has been increased without a decrease in metal
recovery and equipment has been added in the flotation plant to improve metal
recovery. While these actions have favorably impacted the Fachinal Mine's
operating performance, the cash costs of production continue to exceed the
current spot market price of gold. The Company intends to continue its
implementation of the operating improvements and to identify and implement
additional cost-reduction steps. Cash costs and full costs of production in the
nine months ended September 30, 1997 were $350.21 and $529.19 per ounce of gold,
which were higher than cost levels experienced in the first half of 1997.
Additional reserves must be found at Fachinal in order to achieve the economic
criteria upon which the decision to construct the mine was based. Such economic
criteria contemplated a mine plan that would provide (i) average silver and gold
grades of 3.54 and .077 ounces per ton, respectively; (ii) silver and gold
metallurgical recoveries of 89% and 93%, respectively; and (iii) cash operating
costs of $21.65 per metric tonne. For the nine months ended September 30, 1997,
silver and gold ore grades have averaged 4.03 ounces per ton and .059 ounces per
ton, respectively; silver and gold metallurgical recoveries have averaged 88.7%
and 90.2%, respectively; and cash operating costs have averaged $35.23 per
metric tonne.
The Fachinal Mine is expected to produce approximately 2.6 million ounces
of silver and 34,000 ounces of gold in 1997, increases of 19% and 36% over 1996
levels, respectively. Drilling is underway at Fachinal's underground and open
pit mines in an effort to replace the reserve base decreases. Additional
developmental activities are being conducted at the Furioso property, located
approximately 60 kilometers southwest of the Fachinal Mine, where the Company
believes additional high grade gold reserves may exist. An internal feasibility
study is being conducted by the Company to determine if the Furioso ore reserves
may be processed at existing Fachinal facilities. The Company has an option to
purchase 100% of the Furioso property at a price of $2.0 million on or prior to
June 30, 1999. No assurance can be given that the Company will exercise that
option. Emphasis is being directed at increasing underground higher grade
reserves to replace lower-grade
19
<PAGE> 21
open pit reserves in the production mix. See "Principal Exploration Projects"
below for additional information relating to exploratory activities in the
Fachinal Mine area.
EL BRONCE MINE
The El Bronce Mine is an underground gold and silver mine in Chile of which
the Company owns 100%. In 1997, cash costs of production have increased
primarily because of lower ore grades due to narrower veins in the area mined.
Cash costs and full costs of production per ounce of gold were $335.58 and
$397.57 per ounce, respectively, in the nine months ended September 30, 1997,
compared to $296.84 and $322.55 per ounce in the prior year's comparable period.
In addition, near drought conditions occurred in the first quarter of 1997 and
heavy rainfall occurred in the second quarter of 1997. Heavy rains and flooding
resulted in a two-week closure of the mine in August 1997 and have contributed
to increases in cash costs of production to levels in excess of current market
prices. El Bronce Mine 1997 production is expected to approximate 122,000 ounces
of silver and 55,000 ounces of gold, increases of approximately 60% and 54%,
respectively, over 1996 production levels, due in large part to the increase in
the Company's ownership interest from 51% to 100% in September 1996. Ongoing
exploration efforts are being conducted to identify and, if successful, develop
wider veins in order to increase reserves as well as to lower costs.
In February 1997, Coeur acquired an option to purchase the Boton de Oro
operating gold mine adjacent to the El Bronce Mine, from which ore is already
being processed through Coeur's mill at El Bronce and where Coeur is engaged in
underground exploration of mineralization believed to be similar to El Bronce's
vein systems. A feasibility study is being prepared to evaluate the possible
incorporation of Boton de Oro's mineralization into El Bronce operations. The
option agreement entitles Coeur to purchase 100% of Boton de Oro on or prior to
February 7, 1998 at a price of $2.5 million. There can be no assurance that the
Company will exercise the purchase option. In addition, the agreement requires
Coeur to spend $500,000 to conduct exploratory activities on the property.
AUSTRALIAN INTERESTS
Through its wholly-owned subsidiary, Coeur Australia Limited ("Coeur
Australia"), Coeur owns 50% of the outstanding shares of Gasgoyne which in turn
holds a 50% interest in the Yilgarn Star Mine, which is expected to produce a
total of 41,000 ounces of gold attributable to Coeur's 25% interest in the mine
in 1997. By contract with the other 50% shareholder of Gasgoyne, Coeur has the
right to acquire its 25% share of gold production from this mine at a price
equivalent to the Yilgarn Star Mine's cost of production. Cash costs and full
costs of production per ounce of gold at the Yilgarn Star Mine amounted to
$259.78 and $409.22 per ounce, respectively, for the nine months ended September
30, 1997, compared to $259.46 and $351.43 per ounce for the prior year's
comparable period. The $351.43 and $409.22 full costs of production per ounce of
gold for the nine months ended September 30, 1996 and 1997, respectively,
included $65.28 and $112.19, respectively, of non-cash amortized goodwill.
Gasgoyne also has a 45% interest in the Awak Mas Gold Project in Indonesia which
it has entered into a contract to sell to the principal owner of that project.
The 225,000 ounces of Yilgarn Star Mine gold reserves as of April 27, 1997
which are attributable to Coeur's 25% interest in the mine represent an 81.2%
increase over the amount of Coeur's interest in Yilgarn Star Mine gold reserves
reported as of December 31, 1996. Such increase primarily is attributable to the
inclusion of reserve data for a nearby ore body known as the Southern Star Mine
and an increase in Coeur's ownership of Gasgoyne from 35% to 50%.
In addition to its 50% interest in the Yilgarn Star Mine, Gasgoyne is a
participant in a joint venture conducting exploratory activities in Western
Australia.
The Company currently is exploring a possible combination of Coeur
Australia with another Australian gold mining company. The proposed transaction
is in its preliminary stages and no assurance can be given that it will be
consummated.
20
<PAGE> 22
KENSINGTON PROPERTY
A production decision at the Kensington Property, in which Coeur had
invested a total of $118 million (including $25 million of capitalized interest)
at September 30, 1997, is subject to a realized price of gold through spot or
forward sales of at least $400 per ounce and the receipt of required key
permits, satisfactory completion of a project optimization study and approval by
the Company's Board of Directors. The U.S. Forest Service issued a decision
approving the Supplemental Environmental Impact Statement for the Kensington
Project on August 15, 1997. On October 2, 1997, a coalition of environmental
organizations filed an administrative appeal with the Forest Service challenging
the decision. On November 13, 1997, the appeal was denied. On November 4, 1997,
the Company received the City and Borough of Juneau Large Mine Permit for the
Kensington project. The Company anticipates that it will receive the remaining
key permits by the end of 1997. Currently, Coeur is working on a mine
optimization study intended to reduce the project's capital and operating costs,
and a development program designed to increase the current 1.9 million ounce
gold reserve. Coeur does not intend to develop Kensington unless the
optimization study and developmental program demonstrate the results required to
make Kensington an economically viable project. Based on the current mine
design, Kensington requires an average realized price of $400 per ounce over the
life of the project in order to generate the necessary return on investment.
After an approximate 18-month construction phase, Kensington, at currently
estimated mineable reserve levels of approximately 1.9 million ounces of gold,
could be expected to produce an average of approximately 200,000 ounces of gold
per year over the initial 10-year life of the mine. Coeur has not completed its
exploration of all of the identified veins on the Kensington Property or on the
adjacent Jualin exploratory property, and the Company plans to conduct a
development program at Kensington with a goal of expanding the current 1.9
million ounces of gold reserves.
GOLDEN CROSS MINE
Production costs at the Golden Cross Mine significantly declined in 1997.
Cash costs and full costs of production per ounce of gold in the nine months
ended September 30, 1997 amounted to $247.09 and $292.65 per ounce,
respectively, compared to $378.48 and $424.77 per ounce in the nine months ended
September 30, 1996, when costs and production were most unfavorably impacted by
remediation work.
Although the deep-seated ground movement below the Golden Cross Mine
tailings impoundment that necessitated the Company's 1996 write-off of the mine
appears to have stabilized, the limited tailings disposal capability requires
that the mine be closed during the last quarter of 1997 or the first quarter of
1998. In the second quarter of 1997, Coeur received its 80% share of a $10
million insurance recovery relating to business interruption and property damage
at the mine. The Company expended approximately $12.1 million in connection with
additional remediation activities at the mine in 1996 and expects additional
remediation costs at the mine will approximate $5.1 million in 1997. The Company
estimates that costs associated with the closure of the mine, net of salvage
revenues, will approximate $5.7 million.
FORWARD SALE AND PURCHASE CONTRACT ACTIVITIES
Coeur historically has sold a portion of its silver and gold production
pursuant to forward contracts and at spot prices prevailing in the open market
at the time of sale. Entering into forward sale contracts is a strategy used to
mitigate some of the risks associated with fluctuating precious metals prices.
For example, based on market prices prevailing on November 7, 1997, the average
price of gold that could be realized three years from that date was
approximately $347 per ounce compared to the spot market price of gold of $310
per ounce. The Company continually evaluates the potential benefits of engaging
in these strategies based on the then current market conditions. The Company
currently is not a party to any forward sale or purchase contracts other than
through Silver Valley Resources and Gasgoyne. At November 7, 1997, Silver Valley
Resources had purchased contracts in the open market requiring it to purchase
500,000 ounces of silver attributable to Coeur's interest in Silver Valley
Resources at an average cost of $5.70 per ounce. The Company marks these
contracts to market and, accordingly, records any gain or loss on these
contracts on a monthly basis. At November 7, 1997, Gasgoyne had sold forward
196,200 ounces of gold attributable to
21
<PAGE> 23
Coeur's interest in the Yilgarn Star Mine at an average minimum price of
approximately $A 601 per ounce (or approximately $US 419 per ounce based on
currency exchange rates on November 7, 1997).
ACQUISITIONS
The Company plans to continue its practice of acquiring silver and gold
mining properties and/or businesses that are operational or expected to become
operational in the near future. In addition to contributing to the Company's
reserve and production expansion potential, such properties and businesses must
be able to demonstrate a low cost of production.
PRINCIPAL EXPLORATION PROJECTS
Coeur is conducting extensive silver and gold exploratory activities at or
adjacent to its existing mining properties. In particular, exploratory drilling
on properties close to the Fachinal Mine in southern Chile indicates an
internally calculated geologic resource of 403,000 tons averaging 0.18 ounces of
gold equivalent per ton on four mineralized areas within the Fachinal District.
Drilling on the Laguna Vein at the Furioso project in southern Chile indicates
an estimated 129,180 tons of mineralized material averaging 0.62 ounces of gold
and 6.64 ounces of silver per ton and an internal feasibility study is currently
focusing upon the transportability of such mineralization to the Fachinal Mine
mill. Furthermore, exploratory activities at the Boton de Oro project close to
the El Bronce Mine in central Chile has indicated an internally calculated
resource of 1,610,000 tons averaging 0.10 ounces of gold and 0.18 ounces of
silver per ton that has the potential of expanding the El Bronce Mine resource
base and production. An internal feasibility study is analyzing the
transportation of Boton de Oro mineralization to the El Bronce Mine mill above
the approximately 3,000 tons per month currently being delivered.
Silver Valley Resources is engaged in exploration projects at the Coeur and
Galena Mines and adjacent Caladay project as well as on the leased Sterling
Mining Company, Placer Creek Mining Company, Silver Buckle Mines, Inc. and
American Silver Mining Company properties in the Coeur d'Alene Mining District
in northern Idaho, which historically has been one of the largest silver
producing regions in the world; and Gasgoyne is conducting exploratory
activities in Western Australia.
Coeur's most significant other exploration activities are being conducted
in Guyana, Mexico and Chile. At the Groete Creek property, a low-grade gold,
potential bulk volume mining property located near Georgetown, Guyana, Coeur has
completed an internally generated resource calculation that estimates 57.5
million tons of mineralized material averaging 0.03 ounces of gold per ton and
is drilling the deposit in an endeavor to further expand mineralized material
inventory. Coeur has an option to purchase 75% of the mineral rights at Groete
Creek on or prior to December 20, 1998 for $700,000. At the KM66 property in the
state of Durango, Mexico, which has low-grade silver, bulk tonnage open pit
mining potential, Coeur's continuing drilling program has indicated extensive
silver-zinc-lead mineralization. Coeur has an option to purchase 100% of the
mineral rights at the KM 66 property on or before January 2000 for $4.0 million.
Finally, Coeur has several other exploration projects located throughout Chile,
the most important of which is the Puchuldiza project. Preliminary drilling by
the Company at the Puchuldiza property in northern Chile, 100% of which is held
by Coeur under exploitation concessions, indicates a mineralized material
inventory of 33.7 million tons averaging 0.03 ounces of gold per ton. The
Company's proposed exploration program at that property is designed to expand
the mineralized material inventory and explore for possible high-grade
mineralization within the extensive low-grade deposit.
22
<PAGE> 24
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is listed on the NYSE Composite Tape and the
Pacific Stock Exchange. The following table sets forth, for the periods
indicated, the high and low closing sales prices of the Common Stock as reported
by the NYSE:
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C> <C>
1995: First Quarter.................................................... $18.500 $14.750
Second Quarter................................................... 21.500 17.500
Third Quarter.................................................... 20.875 17.250
Fourth Quarter................................................... 20.875 16.625
1996: First Quarter.................................................... 25.125 18.375
Second Quarter................................................... 22.250 18.375
Third Quarter.................................................... 19.375 13.750
Fourth Quarter................................................... 16.375 13.875
1997: First Quarter.................................................... 18.250 13.875
Second Quarter................................................... 16.000 12.500
Third Quarter.................................................... 16.3125 12.6875
Fourth Quarter................................................... 16.250 7.625
1998: First Quarter (through January 20, 1998)......................... 9.250 8.00
</TABLE>
No dividend on the Common Stock was paid in 1997. The Company paid per
share cash distributions and dividends of $.15 on its Common Stock on each of
April 19, 1996, April 21, 1995, April 15, 1994, April 16, 1993 and April 15,
1992; $.12 on April 12, 1991; and $.11 on each of April 20, 1990 and April 21,
1989.
On January 16, 1998, there were 7,426 record holders of the Company's
outstanding Common Stock.
23
<PAGE> 25
SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data
with respect to the Company and its subsidiaries and was derived from the
Company's Annual Report on Form 10-K for the year ended December 31, 1996, and
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, which
reports are incorporated by reference into this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995(6) 1996 1996 1997(7)
------- -------- ------- ------- -------- -------- --------
(THOUSANDS EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Income:
Sale of concentrates and dore.......... $41,414 $ 67,990 $79,606 $89,239 $ 92,731 $ 62,920 $ 96,757
Less cost of mine operations........... 37,829 59,804 67,802 72,210 83,283 56,622 103,258
------- -------- ------- ------- -------- -------- --------
Gross profit (loss).................... 3,585 8,186 11,804 17,029 9,448 6,298 (6,501)(8)
Other income........................... 4,812 5,388 12,587 9,504 13,159 9,158 20,427
------- -------- ------- ------- -------- -------- --------
Total income........................... 8,397 13,574 24,391 26,533 22,607 15,456 13,926
Other expenses............................. 14,118 31,548 29,392 27,591 23,946 17,069 22,193
Writedown of mining properties(1).......... 54,415 54,415 --
------- -------- ------- ------- -------- -------- --------
Total expenses............................. 14,118 31,548 29,392 27,591 78,361 71,484 22,193
------- -------- ------- ------- -------- -------- --------
Net loss from continuing operations before
income taxes............................. (5,721) (17,974) (5,001) (1,058) (55,754) (56,028) (8,267)
Provision (benefit) for income taxes....... (4,233) (3,932) (265) 200 (1,184) (1,158) (2)
------- -------- ------- ------- -------- -------- --------
Net loss from continuing operations........ (1,488) (14,042) (4,736) (1,258) (54,570) (54,870) (8,265)
Income from discontinued operations (net of
taxes)(2) 729 752 793 2,412 -- -- --
------- -------- ------- ------- -------- -------- --------
Income (loss) before cumulative effect of
change in accounting method.............. (759) (13,290) (3,943) 1,154 (54,570) (54,870) (8,265)
Cumulative effect of change in accounting
method(3)................................ -- 5,181 -- -- -- --
------- -------- ------- ------- -------- -------- --------
Net income (loss).......................... $ (759) $ (8,109) $(3,943) $ 1,154 $(54,570) $(54,870) $ (8,265)
======= ======== ======= ======= ======== ======== ========
Net income (loss) attributable to Common
Shareholders............................. $ (759) $ (8,109) $(3,943) $ 1,154 $(62,967) $(60,634) $(16,164)
======= ======== ======= ======= ======== ======== ========
Earnings per share data(4):
Net loss from continuing operations.... $ (0.10) $ (0.92) $ (0.31) $ (0.08) $ (2.54) $ (2.57) $ (0.38)
Income from discontinued operations
(net of taxes)....................... 0.05 0.05 0.05 0.15 -- -- --
------- -------- ------- ------- -------- -------- --------
Net income (loss) before cumulative
change in accounting method.......... (0.05) (0.87) (0.26) 0.07 (2.54) (2.57) (0.38)
Cumulative effect of change in
accounting method.................... 0.34
------- -------- ------- ------- -------- -------- --------
Net income (loss)...................... $ (0.05) $ (0.53) $ (0.26) $ 0.07 $ (2.54) $ (2.57) $ (0.38)
======= ======== ======= ======= ======== ======== ========
Net income (loss) attributable to Common
Shareholders:
Net loss from continuing operations.... $ (0.10) $ (0.92) $ (0.31) $ (0.08) $ (2.93) $ (2.84) $ (0.74)
Income from discontinued operations
(net of taxes)....................... 0.05 0.05 0.05 0.15 -- -- --
------- -------- ------- ------- -------- -------- --------
Income (loss) before cumulative change
in accounting method................. (0.05) (0.87) (0.26) 0.07 (2.93) (2.84) (0.74)
Cumulative effect of change in
accounting method.................... -- 0.34 -- -- -- -- --
------- -------- ------- ------- -------- -------- --------
Net income (loss)...................... $ (0.05) $ (0.53) $ (0.26) $ 0.07 $ (2.93) $ (2.84) $ (0.74)
======= ======== ======= ======= ======== ======== ========
Cash dividends paid per Common Share....... $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.15 --
======= ======== ======= ======= ======== ======== ========
Ratio of earnings to fixed charges(5)...... -- -- -- -- -- -- --
Weighted average number of shares of Common
Stock and equivalents used in
calculation.............................. 15,317 15,328 15,388 15,888 21,469 21,327 21,891
======= ======== ======= ======= ======== ======== ========
</TABLE>
24
<PAGE> 26
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------- -------------
1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................... $324,878 $325,249 $412,361 $445,646 $580,330 $ 560,113
Working capital................................ 179,370 104,883 170,087 105,597 179,626 128,182
Cash, equivalents and short-term investments... 155,796 844,899 142,189 79,562 167,627 122,532
Long-term liabilities.......................... 134,427 133,241 234,009 184,789 202,566 193,475
Shareholders' equity........................... 180,991 170,849 160,292 239,832 346,198 329,107
</TABLE>
- ---------------
(1) During July 1996, the Company determined that certain adjustments were
required to properly reflect the estimated net realizable values of certain
mining properties in accordance with FASB statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." A write-off of the Golden Cross Mine and the nearby Waihi East property
of approximately $53 million was effected due to increased expenditure
requirements related to remediation of ground movement which impacts the
tailings impoundment area and the ultimate viability of the mine. The
write-off includes amounts necessary to increase the Company's recorded
remediation and reclamation liabilities at Golden Cross to approximately
$7.02 million as of December 31, 1996. In addition, the Faride property in
Chile was written down by $1.2 million in July 1996 due to management's
decision not to exercise its final option payment on the project.
(2) On May 2, 1995, the Company sold the assets of its flexible hose and tubing
division, The Flexaust Company, and shares of a related subsidiary for
approximately $10.0 million, of which approximately $4 million was paid at
the time of closing and the balance is payable over the next five years. The
results of operations and the gain on sale of Flexaust manufacturing segment
are presented as "Discontinued Operations." The Company recorded a pre-tax
gain on the sale of approximately $3.9 million ($2.2 million net of income
taxes) during the second quarter of 1995.
(3) Effective January 1, 1993, the Company changed its method of accounting for
income taxes by adopting Statement of Financial Accounting Standards 109,
"Accounting for Income Taxes ("FAS 109")." FAS 109 requires an asset and
liability approach to accounting for income taxes and establishes criteria
for recognizing deferred tax assets. Accordingly, the Company adjusted its
existing deferred income tax assets and liabilities to reflect current
statutory income tax rates and previously unrecognized tax benefits related
to federal and certain state net operating loss carryforwards. FAS 109 also
contained requirements regarding balance sheet classification and prior
business combinations. Hence, the Company adjusted the carrying values of an
incremental interest in the Rochester Property acquired in 1988 and CDE
Chilean Mining Corp. acquired in 1990 to reflect the gross purchase value
previously reported net-of-tax. The cumulative effect of the accounting
change on prior years at January 1, 1993 was a nonrecurring gain of
$5,181,188, or $.34 per share, and was included in the Consolidated
Statement of Operations for the year ended December 31, 1993. Other than the
cumulative effect, the accounting change had no material effect on the
results of operations for the year ended December 31, 1993.
(4) Earnings per share is calculated based on the weighted average number of
common shares outstanding and those Common Stock equivalents that are deemed
to be dilutive. The 6% Convertible Subordinated Debentures due 2002 are
considered to be Common Stock equivalents. Accordingly, such debentures are
assumed to be converted, and interest expense on such debentures, net of tax
expense, has been considered in the computation of earnings per share,
except in those instances where the effects of conversion would be
antidilutive.
(5) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of income from continuing operations before income taxes and fixed
charges. Fixed charges consist of interest and that portion of rent deemed
representative of interest. Earnings were insufficient to cover fixed
charges in the following amounts: $8.7 million in 1992, $21.9 million in
1993, $9.2 million in 1994, $8.3 million in 1995, $64.1 million in 1996,
$63.2 million in the nine months ended September 30, 1996 and $11.3 million
in the nine months ended September 30, 1997.
(6) Included in the results of operations for the year ended December 31, 1995
are (i) a gain of $4.4 million (included in other income) from the sale of
gold and silver purchased in the open market which was in turn delivered
pursuant to fixed price forward contracts during the year; and (ii) $2.4
million of income from discontinued operations (including the $2.2 million
after-tax gain from the related sale of certain non-mining assets in May
1995) during the year.
(7) Included in the results of operations for the six months ended June 30, 1997
are (i) the receipt of $8.0 million of insurance proceeds for business
interruption and property damage at the Golden Cross Mine and (ii) a gain of
$5.3 million arising from the sale of gold purchased in the open market
which was delivered pursuant to fixed price forward contracts in the first
quarter of 1997.
(8) The gross loss from mining operations for the nine months ended September
30, 1997 amounted to approximately $6.5 million compared to a gross profit
from mining operations for the prior year's comparable period of $6.3
million. The decrease primarily is attributable to (i) substantially lower
silver and gold prices in the nine months ended September 30, 1997, during
which period the average silver and gold prices were $4.77 and $339.28 per
ounce, respectively, compared to $5.29 and $391.60 per ounce, respectively,
in the nine months ended September 30, 1996; (ii) the unprofitable
operations of the El Bronce Mine and the fact that the Company increased its
ownership of that mine from 50% to 100% in the third quarter of 1996, which
resulted in a proportionate increase in the cost of mine operations during
the nine months ended September 30, 1997; and (iii) the unprofitable
operation of the Fachinal Mine and the fact that the Company classified that
mine as an operating property for accounting purposes as of January 1, 1997,
and therefore began recording cost of mine operation at that mine on that
date. Of the approximately $46.6 million increase in the cost of mine
operations in the nine months ended September 30, 1997 over the prior year's
comparable quarter, approximately $14.4 million, or 30.8%, were non-cash
expenses attributable to the 199.4% increase in depreciation, depletion and
amortization expense recorded in the nine months ended September 30, 1997.
Such increase in non-cash expenses primarily resulted from the Company's
increased El Bronce interest and the fact that no such expenses were being
recorded by Fachinal during 1996.
25
<PAGE> 27
RATIO OF EARNINGS TO FIXED CHARGES
The Company's earnings were inadequate to cover fixed charges for each of
the last five years and the nine months ended September 30, 1997. The amounts by
which earnings were inadequate to cover fixed charges for such periods were
approximately $18.7 million in 1991, $8.7 million in 1992, $21.9 million in
1993, $9.2 million in 1994, $8.3 million in 1995, $64.1 million in 1996, $63.2
million in the nine months ended September 30, 1996, and $11.3 million in the
nine months ended September 30, 1997. The Company's net cash provided by
operating activities during the year ended December 31, 1996 was approximately
$7.8 million and during the nine months ended September 30, 1997 was
approximately $9.6 million. The availability in the future of cash flow from
operations or working capital to fund the payment of interest on the Debentures
and repayment of the principal amount of Debentures upon maturity will be
dependent upon numerous factors that cannot now be predicted, including gold and
silver prices and production levels, the amount of the Company's expenditures
for acquisitions as well as mining property developmental and exploratory
activities, the results of the Company's operations and the extent to which the
Debentures are converted or redeemed.
SELLING DEBENTUREHOLDERS
The Debentures being offered hereby were originally issued by the Company
to Lazard Freres & Co. LLC in October 1997 in connection with an offering of the
Debentures effected in accordance with Rule 144A and Regulation S under the
Securities Act. The following table sets forth information concerning the
principal amount of Debentures beneficially owned by each Selling
Debentureholder. Other than as a result of the ownership of Debentures or Common
Stock, none of the Selling Debentureholders has had any material relationship
with the Company within the past three years, except as noted herein. The
Debentures and shares of Common Stock offered by this Prospectus may be offered
from time to time by the Selling Debentureholders named below:
<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL AMOUNT PRINCIPAL $143,750,000
OF DEBENTURES AMOUNT OF PRINCIPAL AMOUNT
BENEFICIALLY DEBENTURES OF OUTSTANDING
NAME OWNED BEING OFFERED DEBENTURES
------------------------------------------ ---------------- ------------- ----------------
<S> <C> <C> <C>
MainStay Convertible Fund................. $ 14,300,000 $ 14,300,000 9.95%
President and Fellows of Harvard
College................................. 14,000,000 14,000,000 9.74
Argent Classic Convertible Arbitrage Fund
(Bermuda) L.P........................... 8,500,000 8,500,000 5.91
Societe Generale Secs CP.................. 6,800,000 6,800,000 4.73
Lipper Convertibles, L.P.................. 6,000,000 6,000,000 4.17
Phoenix Convertible Fund.................. 6,000,000 6,000,000 4.17
Forest Fulcrum Fund LP.................... 5,150,000 5,150,000 3.58
Forest Global Convertible Fund Series
A-5..................................... 4,400,000 4,400,000 3.06
Pacific Horizon Capital Income Fund....... 4,400,000 4,400,000 3.06
GLG Global Convertible Fund PLC........... 3,750,000 3,750,000 2.61
Bank of America Pension Plan.............. 3,500,000 3,500,000 2.43
Highbridge International LDC.............. 3,500,000 3,500,000 2.43
Swiss Bank Corporation -- London Branch... 3,000,000 3,000,000 2.09
Lipper Offshore Convertibles L.P.......... 2,500,000 2,500,000 1.74
New York Life Separate Account #7......... 2,500,000 2,500,000 1.74
D.E. Shaw Securities, L.P................. 1,650,000 1,650,000 1.15
TQA Vantage Fund, L.P..................... 1,200,000 1,200,000 *
Credit Suisse First Boston Corporation.... 1,125,000 1,125,000 *
K.A. Trading L.P.......................... 1,010,500 1,010,500 *
Argent Classic Convertible Arbitrage Fund
LP...................................... 1,000,000 1,000,000 *
Fortis Services Fund, Inc. -- Growth &
Income Series........................... 1,000,000 1,000,000 *
</TABLE>
26
<PAGE> 28
<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL AMOUNT PRINCIPAL $143,750,000
OF DEBENTURES AMOUNT OF PRINCIPAL AMOUNT
BENEFICIALLY DEBENTURES OF OUTSTANDING
NAME OWNED BEING OFFERED DEBENTURES
------------------------------------------ ---------------- ------------- ----------------
<S> <C> <C> <C>
Merrill Lynch Convertible Fund, Inc....... 1,000,000 1,000,000 *
Merrill Lynch World Income Fund, Inc...... 1,000,000 1,000,000 *
Pacific Life Insurance Company............ 1,000,000 1,000,000 *
Ramius Fund, Ltd.......................... 1,000,000 1,000,000 *
Security Insurance Company of Hartford.... 1,000,000 1,000,000 *
Susquehanna Capital Group................. 1,000,000 1,000,000 *
TQA Arbitrage Fund, L.P................... 950,000 950,000 *
D.E. Shaw Investments, L.P................ 750,000 750,000 *
Phoenix Home Life Convertible Fund........ 750,000 750,000 *
SoundShore Partners L.P................... 750,000 750,000 *
MainStay VP Convertible Fund.............. 700,000 700,000 *
TQA Leverage Fund, L.P.................... 675,000 675,000 *
TQA Vantage Plus Fund, Ltd................ 675,000 675,000 *
D.E. Shaw Portfolios International,
LLC..................................... 600,000 600,000 *
Reserve Convertible Securities Fund....... 550,000 550,000 *
Silverton International Fund Limited...... 500,000 500,000 *
Zazove Convertible Fund, L.P.............. 500,000 500,000 *
LLT Limited............................... 400,000 400,000 *
Michael Angelo, L.P....................... 400,000 400,000 *
Raphael, L.P.............................. 400,000 400,000 *
Bank of America Convertible Securities
Fund.................................... 260,000 260,000 *
Fortis Equity Portfolio, Inc. -- Fortis
Growth & Income Portfolio............... 250,000 250,000 *
LDG Limited............................... 250,000 250,000 *
Medici Partners L.P....................... 200,000 200,000 *
Worldwide Transactions Ltd................ 170,000 170,000 *
Pacific Innovation Trust Capital Income
Fund.................................... 140,000 140,000 *
Employee Benefit Convertible Fund......... 130,000 130,000 *
Forest Global Convertible Fund Series A... 50,000 50,000 *
Salomon Brothers Inc...................... 50,000 50,000 *
------------ ------------ ------
Total........................... $ 97,385,500 $ 97,385,500 67.75%
============ ============ ======
</TABLE>
- ---------------
* Less than 1%
Because the Selling Debentureholders may offer all or some of the
Debentures which they hold and/or shares of Common Stock issued upon conversion
thereof pursuant to the offering contemplated by this Prospectus, and because
there are currently no agreements, arrangements or understandings with respect
to the sale of any of the Debentures or shares of Common Stock that will be held
by the Selling Debentureholders after completion of this offering, no estimate
can be given as to the principal amount of Debentures or shares of Common Stock
that will be held by the Selling Debentureholders after completion of this
offering. See "Plan of Distribution."
The Company and the Selling Debentureholders are obligated to indemnify
each other against certain liabilities arising under the Securities Act. The
Company has agreed to pay the costs and expenses incurred in connection with the
preparation and filing under the Securities Act of the Registration Statement of
which this Prospectus forms a part.
27
<PAGE> 29
DESCRIPTION OF DEBENTURES
Debentures in the total principal amount of $143,750,000 were issued in
October 1997 pursuant to an Indenture (the "Indenture") between the Company and
Bankers Trust Company, as trustee (the "Trustee"). The terms of the Debentures
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act") as in
effect on the date of the Indenture. The Debentures are subject to all such
terms, and holders of the Debentures are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below.
GENERAL
The Debentures are general unsecured obligations of the Company limited to
$143,750,000 in aggregate principal amount. The Debentures bear interest at
7 1/4% per annum, payable semiannually on April 30 and October 31 in each year
to holders of record of Debentures at the close of business on the April 15 or
October 15 next preceding the interest payment date. The first interest payment
date will be April 30, 1998. Interest is computed on the basis of a 360-day year
of twelve 30-day months. The Debentures mature on October 31, 2005.
Holders must surrender the Debentures to a Paying Agent to collect
principal payments. The Company may pay principal and interest by its check and
may mail interest checks to a holder's registered address. The Trustee will act
as Conversion Agent, Paying Agent and Registrar. The Company may change the
Conversion Agent, Paying Agent or Registrar without prior notice to
Debentureholders. The Company or any of its subsidiaries may act as Conversion
Agent, Paying Agent or Registrar.
CONVERSION OF DEBENTURES
The holder of any Debenture is entitled at any time prior to the close of
business on October 31, 2005, subject to prior redemption, to convert such
Debenture (or portions thereof which are in denominations of $1,000 or integral
multiples thereof) at the principal amount thereof, into shares of Common Stock,
at the conversion price set forth on the cover page of this Offering Circular,
subject to adjustment as described below. No payment or adjustment will be made
on conversion of any Debenture for interest accrued thereon or dividends on any
Common Stock issued and the holder will lose any right to payment of interest on
the Debentures surrendered for conversion; provided, however, that upon a call
for redemption by the Company, accrued and unpaid interest to the redemption
date shall be payable with respect to Debentures that are converted after a
notice of redemption has been mailed and on or prior to the redemption date.
Debentures surrendered for conversion during the period from the regular record
date for an interest payment to the corresponding interest payment date (except
Debentures called for redemption as described in the preceding sentence) must be
accompanied by payment of an amount equal to the interest thereon which the
holder is to receive on such interest payment date. The Company is not required
to issue fractional shares of Common Stock upon conversion of Debentures and, in
lieu thereof, will pay a cash adjustment based upon the market price of the
Common Stock on the last business day prior to the date of conversion. In the
case of Debentures called for redemption, conversion rights will expire at the
close of business on the business day prior to the redemption date.
The conversion price will be subject to adjustment in certain events,
including (i) the issuance of dividends (and other distributions) payable in
Common Stock on any class of capital stock of the Company, (ii) the issuance to
all holders of Common Stock of rights or warrants entitling them to subscribe
for or purchase Common Stock at less than the current market price (as defined
in the Indenture), (iii) subdivisions, combinations and reclassifications of
Common Stock, and (iv) distributions to all holders of Common Stock of evidences
of indebtedness of the Company or assets (including securities, but excluding
those rights, warrants, dividends and distributions referred to above and
dividends and distributions paid in cash out of the earned surplus of the
Company). No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% of the conversion price then in
effect; provided,
28
<PAGE> 30
however, that any adjustment that would otherwise be required to be made will be
carried forward and taken into account in any subsequent adjustment. In addition
to the foregoing adjustments, the Company will be permitted to make such
reductions in the conversion price as it considers to be advisable in order that
any event treated for federal income tax purposes as a dividend of stock or
stock rights will not be taxable to the holders of the Common Stock. In case of
certain consolidations or mergers to which the Company is a party or the sale or
transfer of all or substantially all of the assets of the Company, each
Debenture then outstanding would, without the consent of any Holders of
Debentures, become convertible only into the kind and amount of securities, cash
and other property receivable upon the consolidation, merger, sale or transfer
by a holder of the number of shares of Common Stock of the Company into which
such Debenture might have been converted immediately prior to such
consolidation, merger, sale or transfer, assuming such holder of Common Stock
failed to exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon the consolidation, merger,
sale or transfer (provided that if the kind or amount so receivable is not the
same for each non-electing share, then the kind and amount so receivable by each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares).
If the Company consolidates or merges into or sells, leases, conveys or
otherwise disposes of all or substantially all of its assets to any person, the
Debentures will become convertible into the kind and amount of securities, cash
or other assets which the holders of the Debentures would have owned immediately
after the transaction if the holders had converted the Debentures immediately
before the effective date of the transaction at the conversion price in effect
immediately prior to such effective date.
OPTIONAL REDEMPTION OF DEBENTURES
The Debentures are redeemable at the option of the Company, in whole or in
part, on or after October 31, 2000, at the redemption prices (expressed as
percentages of the principal amount) set forth below plus accrued interest to
the redemption date, if redeemed during the 12 month period beginning October 31
of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---------------------------------------------------------------- ----------
<S> <C>
2000............................................................ 103.62500%
2001............................................................ 102.71875%
2002............................................................ 101.81250%
2003............................................................ 100.90625%
2004 and thereafter............................................. 100.00000%
</TABLE>
In the event of redemption of less than all of the Debentures, the
Debentures will be chosen by lot for redemption by the Trustee as provided in
the Indenture. Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of Debentures to be
redeemed at its registered address. On and after the redemption date interest
ceases to accrue on Debentures or portions thereof called for redemption.
REPURCHASE AT OPTION OF HOLDER UPON OCCURRENCE OF A DESIGNATED EVENT
If at any time there occurs any Designated Event (as defined below) with
respect to the Company, each holder of Debentures shall have the right, at the
holder's option, to require the Company to repurchase all of such holder's
Debentures, or a portion thereof which is $1,000 or any integral multiple
thereof, on the date (the "Repurchase Date") that is 45 days after the date of
the Company Notice (as defined below), at 100% of their principal amount,
together with accrued interest to the date fixed for repurchase.
Within 30 days after the occurrence of a Designated Event, the Company is
obligated to mail to all holders of record of the Debentures a notice (the
"Company Notice") of the occurrence of such Designated Event and of the
repurchase right arising as a result thereof. The Company shall deliver a copy
of the Company Notice to the Trustee and shall cause a copy of such notice to be
published in a newspaper of general circulation in the Borough of Manhattan, The
City of New York. To exercise the repurchase right, holders of Debentures must
deliver on or before the 30th day after the date of the Company Notice
irrevocable
29
<PAGE> 31
written notice to the Company (or an agent designated by the Company for such
purpose) of the holder's exercise of such right, together with the Debentures
with respect to which the right is being exercised, duly endorsed for transfer.
A Designated Event shall be deemed to have occurred upon the consummation
of a purchase, merger or acquisition constituting a "Change in Control." As used
herein, a "Change in Control" of the Company shall be deemed to have occurred
when: (i) all or substantially all of the Company's assets are sold as an
entirety to any person or related group of persons; (ii) there shall be
consummated any consolidation or merger of the Company (A) in which the Company
is not the continuing or surviving corporation (other than a consolidation or
merger with a wholly owned subsidiary of the Company in which all shares of
Common Stock outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for the same consideration) or (B) pursuant to which
the Common Stock would be converted into cash, securities or other property, in
each case, other than a consolidation or merger of the Company in which the
holders of the Common Stock immediately prior to the consolidation or merger
have, directly or indirectly, at least a majority of the common stock of the
continuing or surviving corporation immediately after such consolidation or
merger, or (iii) any person, or any persons acting together which would
constitute a "group" for purposes of Section 13(d) of the Exchange Act (other
than the Company, any Subsidiary, any employee stock purchase plan, stock option
plan or other stock incentive plan or program, retirement plan or automatic
dividend reinvestment plan or any substantially similar plan of the Company or
any Subsidiary or any person holding securities of the Company for or pursuant
to the terms of any such employee benefit plan), together with any affiliates
thereof, shall beneficially own (as defined in Rule 13d-3 under the Exchange
Act) at least 50% of the total voting power of all classes of capital stock of
the Company entitled to vote generally in the election of directors of the
Company.
Notwithstanding the foregoing, a Change in Control as described above shall
not be deemed to have occurred if (i) the Current Market Price (as defined in
the Indenture) of the Common Stock is at least equal to 105% of the conversion
price of the Debentures in effect immediately preceding the time of such Change
in Control, or (ii) all of the consideration (excluding cash payments for
fractional shares) in the transaction giving rise to such Change in Control to
the holders of Common Stock consists of shares of common stock that are, or
immediately upon issuance will be, listed on a national securities exchange or
quoted in the National Association of Securities Dealers, Inc. National Market
System ("NASDAQ-NMS"), and as a result of such transaction the Debentures become
convertible solely into such common stock, or (iii) the consideration in the
transaction giving rise to such Change in Control to the holders of Common Stock
consists of cash, securities that are, or immediately upon issuance will be,
listed on a national securities exchange or quoted in the NASDAQ-NMS, or a
combination of cash and such securities, and the aggregate fair market value of
such consideration (which, in the case of such securities, shall be equal to the
average of the daily closing prices of such securities during the ten
consecutive trading days commencing with the sixth trading day following
consummation of such transaction) is at least 105% of the conversion price of
the Debentures in effect on the date immediately preceding the closing date of
such transaction.
The right to require the Company to repurchase Debentures as a result of
the occurrence of a Change in Control could create an event of default under
Senior Debt of the Company, as a result of which any repurchase could, absent a
waiver, be blocked by the subordination provisions of the Debentures. See
"Subordination." Failure by the Company to repurchase the Debentures when
required will result in an Event of Default with respect to the Debentures
whether or not such repurchase is permitted by the subordination provisions. The
Company's ability to pay cash to the holders of Debentures upon a repurchase may
be limited by certain financial covenants contained in the Company's Senior
Debt.
If any repurchase pursuant to the foregoing provisions constitutes an
"issuer tender offer" as defined in Rule 13e-4 under the Exchange Act, such
transaction would be subject to the requirements of Rule 13e-4, including the
filing of an Issuer Tender Offer Statement on Schedule 13D-4 with the Commission
and the furnishing of certain information contained therein to the
Debentureholders. The holders' repurchase right upon the occurrence of a
Designated Event could discourage the acquisition of the Company by a potential
acquiror.
30
<PAGE> 32
SUBORDINATION
The Debentures are subordinated and subject, to the extent and in the
manner set forth in the Indenture, to the prior payment in full of all Senior
Debt. Senior Debt is defined to include all indebtedness, whether now
outstanding or hereafter created, incurred, assumed or guaranteed by the Company
for money borrowed from others (including obligations under capitalized leases
or purchase money mortgages) or in connection with the acquisition by it or a
Subsidiary of any other business or entity, and, in each case, renewals,
extensions and funding thereof, other than (i) any such indebtedness as to
which, in the instrument creating or evidencing the same, it is provided that
such indebtedness is not superior in right of payment to the Debentures, (ii)
indebtedness of the Company to any Affiliate, (iii) the Company's 6% Convertible
Subordinated Debentures Due 2002 and the Company's 6 3/8% Convertible
Subordinated Debentures Due 2004 and (iv) the Debentures.
As of October 31, 1997, the Company had approximately $9.2 million of
Senior Debt outstanding. The Company's 6% Convertible Subordinated Debentures
Due 2002, of which $49.84 million principal amount is outstanding, and 6 3/8%
Convertible Subordinated Debentures Due 2004, of which $95 million principal
amount is outstanding, rank pari passu with the Debentures. The Company conducts
significant operations through its subsidiaries. The rights of the Company's
creditors, including the holders of the Debentures, to participate in the assets
of any subsidiary will be subject to prior claims of such subsidiary's
creditors. The Indenture will not restrict the incurrence of Senior Debt or
other indebtedness, secured or unsecured, by the Company or any subsidiary.
No payment of principal, if any, or interest on the Debentures may be made
and no Debentures may be purchased if the Company is then in default in the
payment of any Senior Debt or if at the time any other event of default under
the terms of any Senior Debt exists permitting acceleration thereof.
Furthermore, no Debentures may be purchased by the Company without the prior
approval of the syndicate of banks with whom the Company has its revolving
credit agreement. Upon any payment or distribution of assets of the Company in
the event of any insolvency, reorganization, liquidation or similar proceeding,
all Senior Debt must be repaid in full (including any interest thereon accruing
after the commencement of any proceeding) before the Holders of the Debentures
will be entitled to receive or retain any payment. If the Debentures are
declared due and payable before their stated maturity because of any Event of
Default, no payment may be made in respect of the Debentures unless and until
all Senior Debt shall have been paid in full.
By reason of such subordination, in the event of insolvency, creditors of
the Company who are holders of Senior Debt may recover more, ratably, than
Holders of Debentures, and creditors of the Company who are neither holders of
Senior Debt nor Holders of Debentures may recover less, ratably, than holders of
Senior Debt.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Company may not consolidate or merge with or into, or sell, lease,
convey or otherwise dispose of all or substantially all of its assets to,
another corporation, person or entity unless (i) the Company is the surviving
person or the successor or transferee is a corporation organized under the laws
of the United States, any state thereof or the District of Columbia, (ii) the
successor assumes all the obligations of the Company under the Debentures and
the Indenture and (iii) after such transaction no Event of Default exists.
COVENANTS
The Company shall not adopt any plan of liquidation which provides for,
contemplates or the effectuation of which is preceded by (i) the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company otherwise than substantially as an entirety and (ii) the distribution of
all the proceeds of such sale, lease, conveyance or other disposition unless the
Company makes provisions for satisfaction of the Company's obligation to pay
principal and interest on the Debentures.
31
<PAGE> 33
EVENTS OF DEFAULT AND REMEDIES
An Event of Default includes: (i) default in the payment of any interest,
continued for 30 days; (ii) default in the payment of principal or premium, if
any, when due; (iii) default in the payment of the repurchase price in respect
of any Debenture on the Repurchase Date in accordance with the Indenture; (iv)
default in the performance of any other covenant continued for 60 days after
written notice as provided in the Indenture; (v) default in respect of
indebtedness of the Company for money borrowed which results in acceleration of
the maturity of $1,000,000 or more of indebtedness, if such acceleration is not
rescinded or indebtedness discharged within 10 days after written notice to the
Company as provided in the Indenture; and (vi) certain events in bankruptcy,
insolvency or reorganization. If any Event of Default shall happen and be
continuing, the Trustee or the holders of 25% in principal amount of the
outstanding Debentures may declare the Debentures due and payable. At any time
after a declaration of acceleration with respect to the Debentures has been
made, but before a judgment or decree based on acceleration has been obtained,
the holders of a majority in principal amount of the outstanding Debentures may,
under certain circumstances, rescind and annul such acceleration.
The Indenture provides that the Trustee will be under no obligation,
subject to the duty of the Trustee during any Default to act with the required
standard of care, to exercise any of its rights or powers under the Indenture at
the request or direction of any of the holders, unless such holders shall have
offered to the Trustee reasonable indemnification. Subject to such provisions
for indemnification of the Trustee, the holders of a majority in principal
amount of the outstanding Debentures have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee.
The holders of a majority in principal amount of the outstanding Debentures
may on behalf of the holders of all Debentures waive compliance by the Company
with certain restrictive provisions of the Indenture. The holders of a majority
in principal amount of the outstanding Debentures may on behalf of the holders
of all Debentures waive certain past defaults except a default in payment of the
principal of (or premium, if any) or interest on, any Debenture or in respect of
a provision which under the Indenture cannot be modified or amended without the
consent of the holder of each outstanding Debenture affected thereby.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and upon becoming aware of any Default
or Event of Default, a statement specifying such Default or Event of Default.
A director, officer, employee or stockholder, as such, of the Company shall
not have any liability for any obligations of the Company under the Debentures
or the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of the Debentures by accepting a
Debenture waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Debentures.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Company may terminate its obligations under the Indenture at any time
by delivering all outstanding Debentures to the Trustee for cancellation. After
all the Debentures have been called for redemption, the Company may terminate
all of its obligations under the Indenture, other than its obligations to pay
the principal of and interest on the Debentures and certain other obligations,
at any time, by depositing with the Trustee money or non-callable U.S.
Government obligations sufficient to pay all remaining indebtedness on the
Debentures.
REGISTRATION AND TRANSFER OF DEBENTURES
Global Debenture; Book-Entry Procedures. The Debentures are represented by
a single global debenture (the "Global Debenture") issued to the Depository
Trust Company ("DTC") for its book-entry settlement system and are registered in
the name of Cede & Co., as nominee of DTC. Bankers Trust Company, as custodian
(the "Custodian"), acts as custodian of the Global Debenture for DTC. Because
32
<PAGE> 34
Cede & Co. is the holder of record of the Global Debenture, each person owning a
beneficial interest in the Global Debenture must rely upon the procedures of the
institutions having accounts with DTC to exercise or be entitled to any of the
rights of a holder of a Debenture.
DTC has advised the Company that it is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. DTC's participants include
securities brokers and dealers (including the Purchaser), banks, trust
companies, clearing corporations and certain other organizations, some of whom
(and/or their representatives) own DTC. Access to DTC's book-entry system is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly. Persons who are not participants may beneficially
own securities held by DTC only through participants.
Upon the original issuance by the Company of the Debentures represented by
the Global Debenture, DTC credited, on its book-entry registration and transfer
system, the respective principal amounts of the Debentures represented by the
Global Debenture to the accounts of participants. Ownership of beneficial
interests in the Global Debenture is limited to participants or persons that
hold interests through participants. Ownership of beneficial interests in the
Debentures represented by the Global Debenture is shown on, and the transfer of
that ownership may be effected only through, records maintained by DTC (with
respect to interests of participants in DTC), or by participants in DTC or
persons that may hold interests through such participants (with respect to
persons other than participants in DTC). A copy of the Notice of Transfer
Pursuant to Registration Statement, which must be delivered to the Trustee by
any Selling Debentureholder upon any sale of Debentures pursuant to this
Prospectus, is set forth as Appendix A to the Prospectus. The laws of some
states require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in the Global Debenture.
So long as DTC, or its nominee, is the registered owner of the Global
Debenture, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the Debentures represented by such Global Debenture for all
purposes under the Indenture. Owners of beneficial interests in Debentures
represented by the Global Debenture will be entitled to receive physical
delivery of Debenture in definitive form as provided below under "Definitive
Debentures."
Payments of principal of and interest and premium, if any, on the
Debentures represented by the Global Debentures registered in the name of DTC or
its nominee will be made by the Company through the Trustee to DTC or its
nominee, as the case may be, as the registered owner of the Global Debenture.
None of the Company, the Trustee, the Paying Agent, the Conversion Agent or the
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Debenture or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests. The Company expects
that DTC, upon receipt of any payment of principal, premium or interest in
respect of the Global Debenture, will immediately credit the accounts of the
related participants with payment in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the Global Debenture as
shown on the records of DTC. The Company also expects that payments by
participants to owners of beneficial interests in the Global Debenture will be
governed by standing customer instructions and customary practices, as is now
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
participants.
If DTC is at any time unwilling or unable to continue as depository of the
Global Debenture and a successor depository is not appointed by the Company
within 90 days, the Company will issue Debentures in fully registered,
certificated form ("Definitive Debentures") in exchange for the Debentures
represented by
33
<PAGE> 35
the Global Debenture. In addition, the Company may at any time and in its sole
discretion determine not to have a Global Debenture, and, in such event, will
issue Definitive Debentures in exchange for the Debentures represented by the
Global Debenture.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Debentures may be
amended or supplemented with the consent of the holders of at least a majority
in principal amount of such then outstanding Debentures, and any existing
default or compliance with any provision may be waived with the consent of the
holders of a majority in principal amount of the then outstanding Debentures.
Without the consent of any holder of the Debentures, the Company and the Trustee
may amend or supplement the Indenture or the Debentures to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Debentures in addition to
or in place of certificated Debentures, to provide for the assumption of the
Company's obligations to holders of the Debentures in the case of a merger or
acquisition, or to make any change that does not materially adversely affect the
legal rights of any holder of the Debentures. Without the consent of each holder
affected, the Company may not reduce the principal amount of Debentures the
holders of which must consent to an amendment of the Indenture; reduce the rate
or change the interest payment time of any Debenture; reduce the principal of or
change the fixed maturity of any Debenture or alter the redemption provision
with respect thereto; make any Debenture payable in money other than that stated
in the Debenture; make any change in the provisions concerning waiver of
Defaults or Events of Default by holders of the Debentures or rights of holders
to receive payment of principal or interest; make any change that adversely
affects the right to convert any Debenture; or make any change in the
subordination provisions that adversely affects the rights of any holder.
CONCERNING THE TRUSTEE
Bankers Trust Company is the Trustee under the Indenture. The Trustee is
trustee under an indenture in respect of $100 million principal amount of 6 3/8%
Convertible Subordinated Debentures Due 2002 issued by the Company in February
1994, which ranks pari passu with the Debentures.
The holders of a majority in principal amount of the then outstanding
Debentures have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee. The Indenture
provides that in case an Event of Default shall occur (which shall not be
cured), the Trustee will be required, in the exercise of its power, to use the
degree of care of a prudent man in the conduct of his own affairs. Subject to
such provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the holders of the
Debentures, unless they shall have offered to the Trustee security and indemnity
satisfactory to it.
34
<PAGE> 36
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue up to 60,000,000 shares of Common Stock,
par value $1.00 per share, of which, at September 30, 1997, 21,890,568 shares
were outstanding and 1,059,211 shares were held as treasury stock, up to
7,500,000 shares were reserved for issuance upon the conversion of the MARCS,
8,237,822 shares were reserved for issuance upon the conversion of the $143.75
million principal amount of outstanding Debentures, 3,686,457 shares were
reserved for possible issuance upon the conversion of the Company's $95 million
principal amount of outstanding 6 3/8% Convertible Subordinated Debentures due
2004, 1,955,416 shares were reserved for issuance upon conversion of the
Company's $49.8 million principal amount of outstanding 6 3/8% Convertible
Subordinated Debentures due 2002, 179,189 shares were reserved for issuance
under the Company's Executive Compensation Program and 200,000 shares were
reserved for issuance under the Company's Non-Employee Directors Stock Option
Plan.
The holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of shareholders, and upon giving
notice required by law, may cumulate their votes in elections of directors.
Subject to preferences that may be applicable to any shares of Preferred Stock
of the Company outstanding at the time, holders of Common Stock are entitled to
receive ratably such dividends as may be declared by the Board of Directors out
of funds legally available therefor and, in the event of the liquidation,
dissolution or winding up of the Company, are entitled to share ratably in all
assets remaining after payment of liabilities. Holders of Common Stock have no
preemptive rights and have no rights to convert their Common Stock into any
other security. The outstanding Common Stock is fully-paid and non-assessable.
The Company's Articles of Incorporation include a "fair price" provision
applicable to certain business combination transactions in which the Company may
be involved. The provision requires that an Interested Shareholder (the holder
of 10% or more of the Company's outstanding shares of Common Stock) not engage
in certain specified transactions (e.g., mergers, sales of assets, dissolution
and liquidation) unless one of three conditions is met: (i) a majority of the
directors who are unaffiliated with the Interested Shareholder and were
directors before the Interested Shareholder became an Interested Shareholder
approve the transaction; (ii) holders of 80% or more of the outstanding shares
of Common Stock approve the transaction; or (iii) the shareholders are all paid
a "fair price," i.e., generally the higher of the fair market value of the
shares or the same price as the price paid to shareholders in the transaction in
which the Interested Shareholder acquired its block. By discouraging certain
types of hostile takeover bids, the fair price provision may tend to insulate
current management against the possibility of removal. The Company is not aware
of any person or entity proposing or contemplating such a transaction.
The transfer agent and registrar for the Company's Common Stock, which is
listed on the New York Stock Exchange, is First Interstate Bank of Oregon, N.A.,
Portland, Oregon.
PREFERRED STOCK
The Company is authorized to issue up to 10,000,000 shares of Preferred
Stock, par value $1.00 per share, of which 7,077,833 shares of MARCS were issued
in March 1996. The Board of Directors has the authority to determine the
dividend rights, dividend rates, conversion rights, voting rights, rights and
terms of redemption and liquidation preferences, redemption prices, sinking fund
terms on any series of Preferred Stock, the number of shares constituting any
such series and the designation thereof. Holders of Preferred Stock have no
preemptive rights and have no rights to convert their Preferred Stock into any
other securities. While series may be designated and Preferred Stock may be
issued from time to time in the future, except upon exercise of the Rights (as
described below), the Company has no present plans to issue any such shares of
Preferred Stock.
MANDATORY ADJUSTABLE REDEEMABLE CONVERTIBLE SECURITIES (MARCS)
Holders of the 7,077,833 outstanding shares of MARCS, who have no
preemptive rights, are entitled to receive an annual cumulative cash dividend of
$1.488 per share, payable quarterly. The shares of MARCS
35
<PAGE> 37
rank prior to the Common Stock as to payment of dividends and distribution of
assets upon liquidation. The liquidation preference applicable to each share of
MARCS is equal to the sum of $21.25, which was the per share price received by
the Company upon the issuance thereof on March 13, 1996, plus the amount of
accrued and unpaid dividends thereon.
On March 15, 2000 (the "Mandatory Conversion Date"), unless either
previously converted at the option of the holder or redeemed by the Company,
each outstanding share of MARCS will mandatorily convert into (i) 1.111 shares
of Common Stock, subject to adjustment in certain events, and (ii) the right to
receive an amount in cash equal to all accrued and unpaid dividends thereon.
Shares of MARCS are not redeemable prior to March 15, 1999. At any time and
from time to time on and after March 15, 1999 until immediately prior to the
Mandatory Conversion Date, the Company may redeem any or all of the outstanding
shares of MARCS. Upon any such redemption, each holder will receive, in exchange
for each share of MARCS, the greater of: (a) the number of shares of Common
Stock equal to the sum of (i) $21.622, declining after March 15, 1999 to $21.25
until the Mandatory Conversion Date and (ii) all accrued and unpaid dividends
thereon, divided by the current market price of the Common Stock (determined in
accordance with the Certificate of Designations, Rights, Preferences and
Limitations relating to the MARCS) on the applicable date of determination, or
(b) .826 of a share of Common Stock.
At any time prior to the Mandatory Conversion Date, unless previously
redeemed, each of the shares of MARCS is convertible at the option of the holder
thereof into .826 of a share of Common Stock (equivalent to a conversion price
of $25.713 per share of Common Stock), subject to adjustment in certain events.
The number of shares of Common Stock a holder will receive upon redemption, and
the value of the shares received upon conversion will vary depending on the
market price of the Common Stock from time to time.
The holders of shares of MARCS, which are listed on the New York Stock
Exchange, have the right with the holders of Common Stock to vote in the
election of directors and upon each other matter coming before any meeting of
the holders of Common Stock on the basis of one vote for each share of MARCS
held. The holders of shares of MARCS and the holders of Common Stock vote
together as one class on such matters except as otherwise provided by law or by
the Company's Articles of Incorporation.
In the event that dividends on the shares of MARCS or any other series of
Preferred Stock are in arrears and unpaid for six quarterly dividend periods, or
if any other series of Preferred Stock is entitled for any other reason to
exercise voting rights, separate from the Common Stock, to elect any directors
of the Company ("Preferred Stock Directors"), the holders of the shares of MARCS
(voting separately as a class with holders of all other series of Preferred
Stock upon which like voting rights have been conferred and are exercisable),
with each share of MARCS entitled to one vote on this and other matters in which
holders of Preferred Stock vote as a group, will be entitled to vote for the
election of two directors, such directors to be in addition to the number of
directors constituting the Board of Directors immediately before the accrual of
such right. Such right, when vested, will continue until all dividends in
arrears and payable on the shares of MARCS and such other series of Preferred
Stock have been paid in full and the right of any other series of Preferred
Stock to exercise voting rights, separate from the Common Stock, to elect
Preferred Stock Directors of the Company terminates or has terminated, and, when
so paid and any such termination occurs or has occurred, such right of the
holders of the shares of MARCS will cease. The term of office of any director
elected by the holders of the shares of MARCS and such other series of Preferred
Stock will terminate on the earlier of (i) the next annual meeting of
shareholders at which a successor has been elected and qualified or (ii) the
termination of the right of holders of the shares of MARCS and such other series
of Preferred Stock to elect Preferred Stock Directors.
SERIES A JUNIOR PREFERRED STOCK
On May 24, 1989, the Board of Directors of the Company declared a dividend
distribution of one Right for each outstanding share of the Company's Common
Stock to shareholders of record at the close of business on June 16, 1989. Each
Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Preferred Stock at a purchase price of $100
in cash ("Purchase Price"), subject to adjustment. The description and terms of
the Rights are set forth in a Rights Agreement, dated as of May 24,
36
<PAGE> 38
1989 (the "Rights Agreement"), between the Company and First Interstate Bank of
Oregon, N.A., as Rights Agent. The Rights are not exercisable or detachable from
the Common Stock until ten days after any person or group acquires 20% or more
(or commences a tender offer for 30% or more) of the Company's Common Stock. If
any person or group acquires 30% or more of the Company's Common Stock or
acquires the Company in a merger or other business combination, each Right
(other than those held by the acquiring person) will entitle the holder to
purchase Preferred Stock of the Company or common stock of the acquiring company
having a market value of approximately two times the $100 exercise price. The
Rights expire on May 24, 1999, and can be redeemed by the Company at any time
prior to their becoming exercisable. Shares of Common Stock issued prior to the
expiration date of the Rights upon conversion of the Debentures will be
accompanied by Rights.
PLAN OF DISTRIBUTION
The Company, which received the proceeds from the original sale of the
Debentures in October 1997, will not receive any of the proceeds from this
offering. The Company has been advised by the Selling Debentureholders that the
Selling Debentureholders may sell all or a portion of the Debentures or shares
of Common Stock offered hereby from time to time directly by the Selling
Debentureholders or, alternatively, through underwriters, broker-dealers or
agents. Such Debentures may be sold in one or more transactions at fixed prices,
at prevailing market prices at the time of sale, at varying prices determined at
the time of sale, or at negotiated prices. Such sales maybe effected in
transactions (which may involve crosses or block transactions) (i) on any
national securities exchange or quotation service on which the Debentures may be
listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii)
in transactions otherwise than on such exchanges or services or in the
over-the-market, or (iv) through the writing of options. In connection with
sales of the Debentures or otherwise, the Selling Debentureholders may enter
into hedging transactions with broker-dealers, which may in turn engage in short
sales of the Debentures in the course of hedging the positions they assume. The
Selling Debentureholders may also sell Debentures short and deliver Debentures
to close out such short positions, or loan or pledge Debentures to
broker-dealers that in turn may sell such Debentures. To the extent required,
the aggregate principal amount of Debentures and/or number of shares of Common
Stock to be sold, the names of the Selling Debentureholders, the purchase price,
the name of any such agent, dealer or underwriter and any applicable commissions
with respect to a particular offer will be set forth in an accompanying
Prospectus Supplement. The aggregate proceeds to the Selling Debentureholders
from the sale of the Debentures and Common Stock offered by the Selling
Debentureholders hereby will be the purchase price of such Debentures and shares
of Common Stock less any broker's commissions.
There is no assurance that the Selling Debentureholders will sell any or
all of the Debentures or shares of Common Stock offered hereby.
The Company has been advised by Lazard Freres & Co. LLC that it is
presently making, and intends to continue making, a market in the Debentures;
however, it is not obligated to do so and any such market making may be
discontinued at any time. The Debentures have been designated as "PORTAL"
securities eligible for quotation in the National Association of Securities
Dealers PORTAL system. However, there can be no assurance that an active market
for the Debentures will develop.
In order to comply with the securities laws of certain states, if
applicable, the Debentures and shares of Common Stock will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the Debentures may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied with.
The Selling Debentureholders and any broker-dealers, agents or underwriters
that participate with the Selling Debentureholders in the distribution of the
Debentures or shares of Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act, in which event any commissions received by
such broker-dealers, agents or underwriters and any profit on the resale of the
Debentures or shares of Common Stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
37
<PAGE> 39
Pursuant to certain rules under the Exchange Act, any person who
participates in the offering of Debentures or shares of Common Stock made hereby
in one or more transactions that are distinguished from ordinary trading
transactions by the presence of special selling efforts and selling methods, may
not simultaneously engage in market making activities with respect to either the
Debentures or the Common Stock for a period of nine business days (two business
days in the case of Common Stock) prior to the commencement of such offering. In
addition, and without limiting the foregoing, each Selling Debentureholder will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of Debentures or
shares of Common Stock by the Selling Debentureholders.
The Company will pay all expenses incident to the offering and sale of the
Debentures and Common Stock to the public other than underwriting discounts and
selling commissions and fees. See "Selling Debentureholders."
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Freedman, Levy, Kroll & Simonds, Washington, D.C.
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 have
been audited by Ernst & Young LLP, independent auditors as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
38
<PAGE> 40
APPENDIX A
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
Bankers Trust Company
Four Albany Street, 4th Floor
New York, New York 10006
Attention: Corporate Trust and Agency Group
Re: Coeur d'Alene Mines Corporation (the "Company") 7 1/4% Convertible
Subordinated Debentures due 2005 (the "Securities")
Dear Sirs:
Please be advised that has transferred $ aggregate
principal amount of the above-referenced Securities pursuant to an effective
Registration Statement on Form S-3 (File No. 333-40513) filed by the Company.
We hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial owner of the Securities is named as a "Selling Securityholder" in the
Prospectus dated December , 1997 or in supplements thereto, and that the
aggregate principal amount of the Securities transferred are the Securities
listed in such Prospectus opposite such owner's name.
Dated:
Very truly yours,
[NAME]
By:
------------------------
(Authorized Signature)
39
<PAGE> 41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, ANY SELLING DEBENTUREHOLDER OR ANY OTHER PERSON. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Information
by Reference........................ 2
Prospectus Summary.................... 3
Risk Factors.......................... 10
The Company........................... 17
Price Range of Common Stock and
Dividends........................... 23
Selected Consolidated Financial
Data................................ 24
Ratio of Earnings to Fixed Charges.... 26
Selling Debentureholders.............. 26
Description of Debentures............. 28
Description of Capital Stock.......... 35
Plan of Distribution.................. 37
Legal Matters......................... 38
Experts............................... 38
Appendix A............................ 39
</TABLE>
$143,750,000
[COEUR D'ALENE MINES LOGO]
COEUR D'ALENE MINES CORPORATION
7 1/4% CONVERTIBLE
SUBORDINATED DEBENTURES
DUE 2005
------------------------
PROSPECTUS
------------------------
January , 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 42
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS.
<TABLE>
<S> <C> <C>
4 -- Form of Indenture, dated as of October 15, 1997, between the Registrant and
Bankers Trust Company, as Trustee (incorporated herein by reference to Exhibit No.
4 to the Registrant's Current Report on Form 8-K filed on October 16, 1997)
5 -- Legal opinion, dated November 19, 1997, of Freedman, Levy, Kroll & Simonds
regarding legality of securities offered
10 -- Registration Rights Agreement, dated as of October 15, 1997, between the
Registrant and Lazard Freres & Co. LLC (incorporated herein by reference to
Exhibit 10(b) to the Registrant's Current Report on Form 8-K filed on October 16,
1997)
10(a) -- Mining Lease, effective as of June 1, 1997, between Silver Valley Resources and
American Silver Mining Company (filed herewith)
10(b) -- Mining Lease, effective as of April 23, 1996, between Silver Valley Resources
Corporation and Sterling Mining Company (filed herewith)
10(c) -- Mining Lease, effective as of March 21, 1997, between Silver Valley Resources
Corporation and Silver Buckle Mines, Inc. (filed herewith)
10(d) -- Mining Lease, effective as of March 21, 1997, between Silver Valley Resources
Corporation and Placer Creek Mining Company (filed herewith)
12 -- Statement re Computation of Ratios
23.1 -- Consent of Ernst & Young LLP (to be updated by amendment)
23.2 -- Consent of Freedman, Levy, Kroll & Simonds (included in Exhibit 5)
23.3 -- Consent of Independent Mining Consultants, Inc (filed herewith)
23.4 -- Consent of Snowden Associates Pty Ltd (filed herewith)
23.5 -- Consent of Micon International Limited (filed herewith)
23.6 -- Consent of Steffen, Robertson & Kirsten (Canada) Inc. (filed herewith)
24 -- Power of Attorney (included on Page II-4 as part of the signature page included in
this Registration Statement as originally filed)
26 -- Statement of Eligibility of Trustee on Form T-1
</TABLE>
II-1
<PAGE> 43
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in Coeur d'Alene, Idaho, on the 20th day of January,
1998.
COEUR D'ALENE MINES CORPORATION
By: /s/ DENNIS E. WHEELER
------------------------------------
Dennis E. Wheeler
Chairman of the Board,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or amendment thereto has been signed below by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------------- -----------------
<C> <S> <C>
/s/ DENNIS E. WHEELER Chairman of the Board of Directors, January 20, 1998
- ----------------------------------- President, Chief Executive Officer
DENNIS E. WHEELER and Director (Principal Executive
Officer)
* Senior Vice President, Chief
- ----------------------------------- Financial Officer, Treasurer and
JAMES A. SABALA Director (Principal Financial and
Accounting Officer)
* Director
- -----------------------------------
CECIL D. ANDRUS
* Director
- -----------------------------------
JOSEPH C. BENNETT
* Director
- -----------------------------------
JAMES J. CURRAN
* Director
- -----------------------------------
JEFFREY T. GRADE
* Director
- -----------------------------------
DUANE B. HAGADONE
* Director
- -----------------------------------
JAMES A. MCCLURE
*By: /s/ DENNIS E. WHEELER January 20, 1998
- -----------------------------------
Dennis E. Wheeler
</TABLE>
The power of attorney, dated November 18, 1997, was included in the
signature page (page II-3) contained in the Registration Statement as filed on
November 19, 1997.
II-2
<PAGE> 44
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <C> <S>
4 -- Form of Indenture, dated as of October 15, 1997, between the Registrant and
Bankers Trust Company, as Trustee (incorporated herein by reference to Exhibit
No. 4 to the Registrant's Current Report on Form 8-K filed on October 16, 1997)
5 -- Legal opinion, dated November 19, 1997, of Freedman, Levy, Kroll & Simonds
regarding legality of securities offered
10 -- Registration Rights Agreement, dated as of October 15, 1997, between the
Registrant and Lazard Freres & Co. LLC (incorporated herein by reference to
Exhibit 10(b) to the Registrant's Current Report on Form 8-K filed on October
16, 1997)
10(a) -- Mining Lease, effective as of June 1, 1997, between Silver Valley Resources and
American Silver Mining Company (filed herewith)
10(b) -- Mining Lease, effective as of April 23, 1996, between Silver Valley Resources
Corporation and Sterling Mining Company (filed herewith)
10(c) -- Mining Lease, effective as of March 21, 1997, between Silver Valley Resources
Corporation and Silver Buckle Mines, Inc. (filed herewith)
10(d) -- Mining Lease, effective as of March 21, 1997, between Silver Valley Resources
Corporation and Placer Creek Mining Company (filed herewith)
12 -- Statement re Computation of Ratios
23.1 -- Consent of Ernst & Young LLP (to be updated by amendment)
23.2 -- Consent of Freedman, Levy, Kroll & Simonds (included in Exhibit 5)
23.3 -- Consent of Independent Mining Consultants, Inc (filed herewith)
23.4 -- Consent of Snowden Associates Pty Ltd (filed herewith)
23.5 -- Consent of Micon International Limited (filed herewith)
23.6 -- Consent of Steffen, Robertson & Kirsten (Canada) Inc. (filed herewith)
24 -- Power of Attorney (included on Page II-4 as part of the signature page included
in this Registration Statement as originally filed)
26 -- Statement of Eligibility of Trustee on Form T-1
</TABLE>
<PAGE> 1
EXHIBIT 10(a)
TABLE OF CONTENTS
AMERICAN SILVER MINING LEASE
ARTICLE 1. DESCRIPTION OF THE PROPERTY.................................3
ARTICLE 2. GRANT OF LEASE..............................................3
ARTICLE 3. TERM OF LEASE...............................................3
ARTICLE 4...............................................................4
(A) POSSESSION AND CONTROL OF PROPERTY.............................4
(B) TIMBER.........................................................5
ARTICLE 5. MANNER OF WORK..............................................5
ARTICLE 6. WORK REQUIREMENTS...........................................5
ARTICLE 7. ROYALTIES...................................................5
(A) ROYALTY SCHEDULE...............................................6
(1) OPERATING EXPENDITURES....................................7
(2) EXPLORATION AND DEVELOPMENT EXPENDITURES................. 8
(B) COMMINGLING OF ORE.............................................8
(C) TREATMENT AT LESSEE'S PROCESSING FACILITIES....................9
(D) DISPUTES REGARDING ROYALTIES...................................9
(E) ADVANCE MINIMUM ROYALTY........................................9
ARTICLE 8. TAILINGS AND RESIDUE........................................9
<PAGE> 2
ARTICLE 9. CROSS MINING RIGHTS........................................10
ARTICLE 10. VERTICAL BOUNDARY PLANES..................................10
ARTICLE 11. RECORDS AND INSPECTION....................................11
ARTICLE 12. TAXES.....................................................12
ARTICLE 13. STATE AND FEDERAL LAWS AND REGULATIONS....................12
ARTICLE 14. PROTECTION FROM LIENS AND DAMAGES.........................12
ARTICLE 15. FORCE MAJEURE.............................................13
ARTICLE 16. DEFAULT...................................................13
ARTICLE 17. CANCELLATION..............................................14
ARTICLE 18. SURRENDER OF PROPERTY.....................................15
ARTICLE 19. REMOVAL OF EQUIPMENT......................................15
ARTICLE 20. TITLE AND PATENT..........................................15
ARTICLE 21. ARBITRATION OF DISPUTES...................................16
ARTICLE 22. RECORDATION OF SHORT FORM NOTICE..........................17
ARTICLE 23. NOTICES...................................................17
ARTICLE 24. INUREMENT.................................................18
ARTICLE 25. CONSTRUCTION..............................................18
<PAGE> 3
AMERICAN SILVER MINING LEASE
THIS MINING LEASE, effective as of the 1st day of June, 1997, regardless of
the actual times of signing and acknowledgment, between AMERICAN SILVER MINING
COMPANY, an Idaho corporation, hereinafter called Lessor, and SILVER VALLEY
RESOURCES CORPORATION, a Delaware Corporation, hereinafter called Lessee,
WITNESSETH:
ARTICLE 1. DESCRIPTION OF THE PROPERTY.
Lessor represents that it is the owner of 21 unpatented lode mining claims
situated in Shoshone County, Idaho, as described on Exhibit A which by this
reference is made a part of this Lease. Exhibit A also sets forth a description
of any water rights and property easements which may exist in conjunction with
the property ownership.
ARTICLE 2. GRANT OF LEASE.
The Lessor in consideration of the royalties herein reserved and the
covenants to be performed by Lessee, does hereby lease, let and demise unto
Lessee, its successors and assigns, all of the above described property
(hereinafter referred to as the "leased premises" or "demised premises").
ARTICLE 3. TERM OF LEASE
The primary term of this lease shall be twenty (20) years to commence on
June 1, 1997 and so long thereafter as ores or minerals from the leased premises
are being developed, mined, processed or marketed on a continuing basis.
Whenever the continued term of this Lease is dependent upon continuing
development, mining, processing or marketing by Lessee and there occur periods
(i) when there is no reasonable market for ores or minerals which are or could
be produced by Lessee from the leased premises, or (ii) when the continuing
development, mining, processing or marketing by Lessee of ores or minerals from
the leased premises is prevented or interrupted by a condition or happening of
force majeure, the term of this Lease shall nevertheless continue during such
periods, subject to termination by Lessor if the suspension of operations for
the enumerated causes has continued without interruption for at least
3
<PAGE> 4
five(5) years. When a satisfactory market becomes available, or upon cessation
of any period of force majeure, Lessee shall have a reasonable time thereafter
within which to resume development, mining, processing or marketing of ores and
minerals from the leased premises. No cessation of operations for one hundred
eighty (180) consecutive days or less, when such cessation is caused by any
other reason, shall be considered a break in the continuity of development,
mining, processing or marketing. A "reasonable market" shall not be deemed to
exist and Lessee may suspend operations during periods when the products of the
leased premises cannot be produced and sold at a profit by reason of low metal
prices or otherwise or when such products cannot be readily sold at prevailing
prices so that an unreasonable inventory thereof has accumulated or otherwise
would accumulate.
ARTICLE 4.
(a) POSSESSION AND CONTROL OF PROPERTY.
Lessee shall have, and it is hereby given and granted, the right to enter upon
and take over, at the beginning of the primary term hereof, the sole and
exclusive possession and control of the leased premises and the whole and every
part thereof, and, during the term of this lease, to remain in the sole and
exclusive possession and control thereof, and to investigate, measure, sample,
examine, test, develop, work, mine, operate, use, manage, and control the same
and the water and water rights appurtenant thereto, and to mine, extract and
remove from said property the ores and minerals therein and appurtenant and
belonging thereto, and to treat, mill, ship, sell or otherwise dispose of the
same and receive the full proceeds therefrom; and to erect, construct, maintain,
use and operate thereon and therein buildings, structures, machinery and
equipment. The time, nature, location and extent of such or any or all the above
activities and mining or mining operations and the cessation and resumption
thereof shall be at the sole discretion of Lessee, and may include, without
limitation, open pit, underground, strip, or solution mining methods, together
with the right to use so much of the surface as may be necessary, useful or
convenient for the enjoyment of all rights herein granted including construction
of a surface mine waste rock dump, if necessary, from development of Lessor's
property. Any surface mine waste dump constructed during the life of this lease
shall be reclaimed to industry standards by Lessee at lease termination.
4
<PAGE> 5
(b) TIMBER. Lessee shall have the right, pursuant to applicable law, to
manage and use timber upon the property in accordance with law. In addition, in
the event Lessee elects to seek patents for the property described on Exhibit A,
Lessee shall have the right to manage and harvest the timber situated thereon.
In either event Lessee shall account for the value of timber removed and the
value shall be treated just as proceeds from the sale of metal is treated and
accounted for under this lease.
ARTICLE 5. MANNER OF WORK.
Lessee agrees to cause all work, development and mining to be done in a
careful and minerlike manner, and to conform in all respects to the mining laws
and regulations of the United States and the State of Idaho.
ARTICLE 6. WORK REQUIREMENTS.
During the first five years of the primary term hereof Lessee shall perform
a minimum of $100,000 of work upon or for the benefit of the leased premises.
Thereafter, for each successive five year period during the initial 20 year term
Lessee shall perform at least $100,000 of work upon or for the benefit of the
leased premises. In the event work is performed in excess of the minimum during
any five year period, the excess may be carried forward to the credit of Lessee
for subsequent periods. Provided, however in the event commercial production is
commenced at any time within the initial 20 year term, and continues without
interruption as defined in Article 3, this Article 6 requiring minimum work
shall not be applicable.
The term "work" includes, but is not limited to:
Diamond drilling, drifting, shaft sinking, raising, rehabilitation of
existing underground openings in advance of any such work, surface mapping,
geochemical surveys, stratigraphic and structural investigations,
metallurgical and other physical, analytical work, mine engineering and
geological analysis which enhances the understanding of the geology, and
unpatented claim holding costs.
ARTICLE 7. ROYALTIES.
5
<PAGE> 6
(a) Royalty Schedule. Lessee shall pay Lessor a 20% Net Profits Royalty,
as defined in Exhibit B, on all development and production ores and minerals
extracted, milled and sold from the leased premises in accordance with Exhibit B
which is attached hereto and by this reference is made a part of this Lease.
The Net Profits Royalty shall be increased above twenty percent (20%), or
decreased to not less than twenty percent (20%), in accordance with the adjusted
quarterly average price of silver, as shown on the schedule which follows:
<TABLE>
<CAPTION>
Sliding Scale Royalty Payments
---------------------------------------------------
Net Profit Royalty Quarterly Average
Percentage Silver Price
------------------ -----------------
<S> <C>
20% less than $11.00
21% greater than $11.00
22% greater than $11.25
23% greater than $11.50
24% greater than $11.75
25% greater than $12.00
30% greater than $13.50
35% greater than $15.00
40% greater than $16.50
</TABLE>
The term "quarterly average price of silver" means the sum of all closing
prices as quoted by the Comex Metals Exchange for each day of the calendar
quarter that a quote is given, divided by the number of days quoted.
"Adjusted Price of Silver" shall be determined for each quarter of each
calendar year by multiplying the Handy and Harmon average quotation for that
quarter for silver in commercial bar form per Troy ounce of .999 fine refined
silver for nearby delivery at New York by an inflation factor. The inflation
factor to be applied shall be determined by dividing the Gross National
Production implicit price deflator index (as published by the U.S. Dept. of
Commerce) for 1997 by the Gross National
6
<PAGE> 7
Product implicit price deflator index for the calendar year previous of the
royalty year in question. Thus, for example, if the Handy and Harmon average
quarterly quotation during a quarter in 1999 should be $16.00 per Troy ounce,
and the Gross National Product implicit price deflators for 1997 and 1999 are
212.10 and 247.90 respectively, then the Adjusted Price of Silver for the
quarter in question is equal to $16.00 multiplied by 212.10 divided by 247.90
equals $13.69.
Obligation for quarterly payment of the Net Profits Royalty shall commence
after Lessee has recovered all operating, exploration and development
expenditures incurred by Lessee attributed to the leased premises following the
effective date of this lease. For the purpose of calculating these costs, all
applicable operating, exploration and development expenditures shall be
determined in accordance with generally accepted accounting principles for
metallic mining ventures within the United States applied on a consistent basis
("GAAP") which are incurred after the effective date of this lease, as follows
(calculation of Net Profits Royalty shall be determined exclusively under
Exhibit B after these operating, exploration and development expenditures have
been recovered):
(1) Operating expenditures include:
(i) Mining Costs. Costs incurred by Lessee in exploring for,
mining, extracting, removing and transporting to a mill ores
and minerals produced from the leased premises. Such costs
shall include, without limitation, those incurred for labor,
machinery operation, fuel, explosives and other materials,
exploration drilling, developmental or ore delineation
drilling, allowance for depreciation and amortization of
mining equipment and machinery acquired after the effective
date of this Lease. Mining costs shall not include depletion
or income taxes.
(ii) Milling and Processing Costs. Costs incurred in milling or
processing ores and minerals produced from the leased premises
at a mill or central processing facility utilized to process
ores and minerals produced from the leased premises, if any,
(hereinafter referred to as the "Mill").
7
<PAGE> 8
(iii) General and Administrative Costs. Costs incurred as a direct
result of the administration of the leased premises, and the
production of ores and minerals therefrom, including costs
incurred in connection with the marketing, selling, and
collection of proceeds from sale of ores and minerals produced
from the leased premises.
(iv) Taxes. All taxes levied against Lessee's operation of the
leased premises, excluding income taxes but including mining
and property taxes.
(2) Exploration and Development Expenditures. Costs incurred by Lessee
after the effective date hereof with respect to exploring and developing the
leased premises and all matters connected therewith including, but not limited
to, costs relating to geological, geochemical and geophysical studies,
exploration and developmental drilling, sampling and assaying, mine design and
development, acquisition of mining or processing equipment or machinery, direct
expenses of making application for and obtaining environmental and regulatory
permits from government agencies (including reasonable attorney's fees), costs
to patent the unpatented claims and any other costs which would be included
within mining costs and/or milling and processing costs if such costs were
incurred after the Commencement of Commercial Production.
If any of the costs otherwise includable in Lessee's costs as set
forth above are incurred partly for the benefit of any other properties or
interests of Lessee, only the portion of such costs reasonably attributable to
development and operation of the leased premises in accordance with GAAP shall
be included.
(b) Commingling of Ore.
Lessee may commingle ore from the leased premises with ore from other
properties, either before or after concentration or beneficiation, so long as
the data necessary to determine the weight and grade, both of the ore removed
from the leased premises and the ore with which it is commingled, are obtained
by Lessee. Lessee shall then use that weight and grade data to allocate Gross
Sales (as defined in Exhibit B) from the commingled ore between the leased
premises and the other properties from which the other commingled ore was
removed. All such weight, grade and allocation calculations by Lessee shall be
done in a manner recognized by the mining industry as practical
8
<PAGE> 9
and sufficient at that time. If, in Lessee's judgment, it is impractical to
determine which portions of any of the costs and expenses described in Paragraph
(a) above are directly attributable to ore removed from the leased premises,
Lessee may allocate all such costs and expenses on a straight-line, per-ton
basis among all ores that give rise to those expenses, in accordance with GAAP.
(c) Treatment at Lessee's Processing Facilities.
Lessee shall have the right to purchase and to treat concentrates and
smelting ores produced from the leased premises at its own or affiliated
company's metallurgical facility; provided, however, that any such purchase and
treatment shall be made under comparable terms as the metallurgical facility is
then offering to other shippers of concentrates and smelting ores on purchases
of like quantities and qualities.
(d) Disputes Regarding Royalties.
Lessor shall be deemed to have waived any right the Lessor may have
had to object to the royalty settlement made by Lessee in accordance with
Exhibit B for any calendar quarter, unless Lessor notifies Lessee in writing of
such objection within twelve (12) months after such royalty is due under this
Lease. If Lessor and Lessee are unable to resolve the question by agreement
within thirty (30) days after Lessee's receipt of Lessor's notice, the dispute
shall be resolved by arbitration, in accordance with the provisions of Article
21.
(e) Advance Minimum Royalty.
Commencing with the month this lease is executed and or each month
thereafter that this lease continues and while it remains unterminated, Lessee
shall pay an advance minimum royalty of $500 per month. This advance minimum
royalty shall be credited to the Net Profits Royalty obligation referred to
above in this Article 7. The royalty shall be paid during the month this lease
is executed on or before the last day of the month and thereafter on or before
the last day of each succeeding month. Also, the $500 sum, the "base amount",
shall be increased ten percent (10%) of the base amount, or $50.00, at the
commencement of each successive five year period.
ARTICLE 8. TAILINGS AND RESIDUE.
Tailings and other residue resulting from the milling or other
beneficiating of ores produced from the leased premises and subsequently
utilized in mining operations shall be the sole and
9
<PAGE> 10
exclusive property of Lessee prior to termination of this lease. Tailings and
other residue remaining underground in the leased premises shall become the
property of the Lessor upon termination of this lease. A separate written
agreement will be negotiated by the parties in good faith for the construction
of a surface mill tailings impoundment on the leased premises if determined
necessary by the Lessee. The terms of such agreement shall be consistent with
industry standards and the parties agree to submit to arbitration any matter to
which the parties can not agree during the negotiation of such an agreement.
ARTICLE 9. CROSS-MINING RIGHTS.
Lessee is hereby granted the right, if it so desires, to mine or remove
from the leased premises any ores, waste, water and other materials existing
therein or thereon or in any part thereof, through or by means of shafts,
openings or pits which may be sunk or made upon adjoining or nearby property
owned or controlled by Lessee, and may stockpile any ores, waste, or other
materials and/or concentrated products of ores or materials from the leased
premises or any part thereof, upon stockpile grounds situated upon any such
adjoining or nearby property; and Lessee may, if it so desires, use the leased
premises and any part thereof and any shafts, openings, pits and stockpile
grounds sunk or made thereon for the mining, removal and/or stockpiling of any
ores, waste, water and other materials and/or concentrated products of ores or
materials from any such adjoining or nearby property, or for any purpose or
purposes connected therewith, not, however, preventing or interfering with the
mining or removal of ore from the leased premises. If, after this lease expires
or terminates, Lessee is exploring, mining or developing adjacent properties
thereto, it may use any haulageways developed during the terms of the lease for
ingress and egress reasonably necessary to explore, develop or mine such
adjacent properties. The Lessee shall be responsible for haulageway maintenance
costs and liabilities resulting from its negligent acts. The Lessee's right of
ingress and egress shall not interfere with future development of the property
by the Lessor. This provision for ingress and egress to and from such adjacent
properties shall survive the expiration or termination of this lease.
ARTICLE 10. VERTICAL BOUNDARY PLANES.
In consideration of Lessee's execution of this mining lease, and the
reciprocal benefits received by reason of the terms of
10
<PAGE> 11
this Article by the Lessor and the Lessee, Lessor and Lessee hereby agree with
each other that any and all ores and minerals within the surface boundaries
extended downward vertically of any claim so held under lease and herein defined
as leased premises shall belong to such claim and work requirements in Article 6
and the royalties in Article 7 apply to these claims. American Silver shall
receive a net profit royalty of 11% on all development and production ores and
minerals extracted, milled and sold from the claims belonging to Silver Valley
Resources outlined in pink on the attached map of claims (Exhibit C) which
constitute portions of the former Silver Standard, Coeur d' Alene Consolidated,
and Triangle Companies. The definition of "net profits" contained in this lease,
applies to the 11% royalty, but as to this 11% there shall be no sliding scale
as set forth in Article 7.
It is understood that the concept of vertical boundaries applies only as
between Lessor and Lessee, and that neither party intends to, or will, give up
any extralateral rights to third parties. In the case of extralateral rights
extending from the leased premises, then Lessee will either lease the adjacent
property or mine it by exercising extralateral rights. In both cases, the Lessee
and Lessor interests shall be diluted proportionately based on the cost of
leasing or acquiring the adjacent property. For example, if it costs a twenty
percent (20%) NPR to lease an adjacent property of a third party, the Lessor in
our agreement would suffer a twenty percent (20%) reduction in its net profit
interest, and the Lessee in our agreement would suffer a twenty percent (20%)
reduction as below:
Net Profits = $100 from Third Party Property
Lessor Dilution
20% of 20% = $4 (or 4% Net Reduction)
Lessee Dilution
20% of 80% = $16 (or 16% Net Reduction)
ARTICLE 11. RECORDS AND INSPECTION.
Lessee's engineering progress maps and all factual exploration, development
and production data including drill core
11
<PAGE> 12
and assay results (but excluding interpretive information or data) from the
leased premises shall be available upon reasonable request for Lessor's
inspection. The Lessor may enter said property at reasonable times for the
purpose of inspecting the same, and Lessee shall facilitate such inspection in
reasonable ways, but Lessor shall enter upon said leased premises at Lessor's
own risk and so as not to hinder unreasonably the operations of Lessee; and the
Lessor shall indemnify and hold harmless the Lessee from any damage, claim or
demand by reason of injury to or the presence of the Lessor or the Lessor's
agents, representatives, licensees, or guests or any of them on the leased
premises or approaches thereto. Lessee shall furnish to Lessor an annual
progress report during the first quarter of each year summarizing the work and
expenditures which occurred during the previous year. Lessee will also send
brief quarterly updates describing the prior quarter's work.
ARTICLE 12. TAXES.
Lessee shall pay before they are delinquent all general property taxes and
governmental rental fees for unpatented claims assessed against the Lessor's
ownership in the leased premises during the term of this lease, beginning with
the year 1997. Lessee shall also pay, before they are delinquent, all taxes
levied or assessed against any or all personal property, machinery and equipment
placed upon the leased premises by the Lessee during the term of this lease and
beginning in the year 1997. As to severance tax and all other taxes that are now
or may be hereafter levied and computed on the amount or value of ores produced
from the leased premises, Lessee shall pay the same.
ARTICLE 13. STATE AND FEDERAL LAWS AND REGULATIONS.
Lessee shall comply with the Workmen's Compensation laws of Idaho and with
Social Security, Unemployment Insurance and all other state and federal laws and
regulations relating to Lessee's operations and shall save Lessor harmless from
any claim for damages or liability by reason thereof.
ARTICLE 14. PROTECTION FROM LIENS AND DAMAGES.
Lessee shall keep the leased premises and the whole and every part thereof
free and clear of liens for labor done or work performed upon the leased
premises or materials furnished to it
12
<PAGE> 13
for the development or operation thereof under this lease while the same is in
force and effect, and will save and keep harmless Lessor from all costs, loss or
damage which may arise by reason of injury to any persons employed by Lessee in
or upon the leased premises or any part thereof or which may arise by reason of
injury to any persons or damage to any property as the result of any work or
operations of the Lessee or of its possession and occupancy of the leased
premises. A lien upon the property shall not constitute a default if the Lessee
in good faith disputes the validity of the claim, in which event the existence
of the lien shall constitute a default only from and after the validity of the
lien has been adjudicated.
ARTICLE 15. FORCE MAJEURE.
If Lessee is unable to perform any of the terms or covenants of this lease
by reason of damage or delay resulting from disaster, labor disturbances,
shortage of labor, strikes, lockouts, act of God, or from any regulations or
restrictions of any governmental agency, or on account of any eventuality beyond
the reasonable control of Lessee, including state and federal environmental
statute or regulation, Lessee shall be excused from performance during the
period of such prevention and the time for performance of such obligations shall
be extended for a period equal to the period or periods of prevention. In the
event Lessee or its purchaser of concentrates or crude ore is, becomes or
believes it is about to become subject, at any time, to environmental
regulations (which shall include any governmental law, rule, order, regulation,
policy, proposal or restriction relating to environmental pollution) which will
prohibit or materially affect any operation Lessee is carrying out, or planning
to carry out hereunder, Lessee shall have the right to declare the existence of
a condition of force majeure during the period in which it is in good faith
seeking a feasible method to comply with, be exempted from, modify, obtain
necessary permits or licenses under, or prevent the enactment or promulgation of
said environmental regulations. Lessee agrees to use reasonable diligence to
remove causes of force majeure as may occur from time to time, but shall not be
required to settle strikes or other labor difficulties contrary to its own
judgment.
ARTICLE 16. DEFAULT.
The failure of Lessee to make or cause to be made any of the material
payments herein provided for or to keep or perform
13
<PAGE> 14
any material agreement on its part to be kept or performed according to the
terms and provisions of this lease, shall, at the election of the Lessor, work a
forfeiture hereof; provided, however, that in the event of a default on the part
of the Lessee, the Lessor shall give to the Lessee a written notice of its
intention to declare a forfeiture of this lease and to terminate the same on
account thereof, or of its intention to take other action to enforce this lease,
specifying the particular default or defaults relied upon by it, and Lessee
shall have a reasonable time (which in any case shall not be less than sixty
(60) days) after receipt of such notice in which to make good such default or
defaults, in which event there shall be no forfeiture therefor, and no other
action may be taken for enforcement. If Lessee disagrees that such default
occurred, it shall so advise Lessor in writing thirty (30) days after receipt of
the notice of default. If, within fifteen (15) days thereafter, the parties have
not resolved the dispute by mutual agreement, the issue of default shall then be
submitted to arbitration under Article 21 below. In the event that Lessor does
terminate this lease on account of a breach by Lessee, Lessee shall be under no
further obligation or liability hereunder to Lessor from and after the date of
such termination except for the performance of obligations and the satisfaction
of liabilities to Lessor or third parties or respecting the leased premises,
which have accrued to the date of such termination.
ARTICLE 17. CANCELLATION.
Notwithstanding any provision herein to the contrary, Lessee may at any
time upon 30 days' written notice, cancel and terminate this lease in its
entirety. Upon total cancellation and termination of this lease, Lessee shall be
under no further obligation of whatsoever kind or nature to the Lessor except
for the making of payments which have already accrued to the date of such
cancellation and termination, including governmental rental fees for unpatented
claims and for the payment of Lessee's proportion of the aforesaid property
taxes accrued while this lease was in effect. If Lessee shall have included any
part of the leased premises in a "producing group" for assessment purposes, and
taxes based on such assessment shall have been levied but shall not have been
paid at the time of cancellation and termination Lessee shall pay such taxes
before they are delinquent. Work requirements specified in Article 6 shall cease
upon the date such notice is given.
14
<PAGE> 15
ARTICLE 18. SURRENDER OF PROPERTY.
In the event of a valid forfeiture, cancellation, or other termination of
this lease, Lessee shall surrender to Lessor peaceable possession of the leased
premises and at the written request of Lessor shall deliver to the Lessor a
written relinquishment hereof, together with a copy, if requested by Lessor
within thirty (30) days after termination of this lease, of its engineering
progress maps showing any workings made or uncovered by Lessee on the
above-described leased premises. The Lessee's factual exploration, development
and production data including drill core and assay results (but excluding
interpretive information or data) from the leased premises shall be available
upon request to the Lessor.
ARTICLE 19. REMOVAL OF EQUIPMENT.
Lessee shall have and is hereby given and granted twelve (12) months after
a valid forfeiture, cancellation or other termination of this lease to remove
from said property all buildings, structures, warehouse stocks, merchandise,
materials, tools, hoists, compressors, engines, motors, pumps, transformers,
electrical accessories, metal or wooden tanks, pipes and connections, rails,
mine cars and any and all machinery, trade fixtures, and equipment erected or
placed in or upon said property by it, provided that such right of removal shall
not extend to foundations and mine timbers in place unless Lessor shall have
given his previous written consent thereto. If Lessee is hampered by snowdrifts,
washouts, inclement weather, or other climatic conditions, from completing the
removal of said property and equipment within the time specified, then Lessor
agrees to extend the time by a reasonable period if requested by Lessee.
ARTICLE 20. TITLE AND PATENT.
Lessor covenants that Lessor now holds title and possession of the leased
premises free and clear from all former grants, sales, liens, or encumbrances of
any kind, and that there are no delinquent taxes and all government rental fees
are current; that Lessor has no knowledge of any defects in title or adverse
claims and agrees to furnish Lessee such abstracts, deeds, or other evidences of
title as may be in Lessor's possession and control, and to allow and cooperate
with Lessee, at Lessee's option and initial expense, to have abstracts brought
to date and to take such steps and proceedings to search and perfect title as
Lessee
15
<PAGE> 16
shall deem advisable. All reasonable expense so incurred by Lessee shall apply
as a credit against royalties. Lessee shall have the right to seek to patent the
leased premises or any portion thereof in the name of Lessor if it so elects,
and the cost thereof may be charged as operating costs hereunder. Lessor agrees
to cooperate to a reasonable extent in any patent proceedings.
ARTICLE 21. ARBITRATION OF DISPUTES.
Any controversy, dispute or claim arising out of or from this lease, or
alleged breach thereof, shall be settled by arbitration pursuant to the Uniform
Arbitration Act of the State of Idaho (Sections 7-901, et.seq., Idaho Code)
as amended and as in effect on the date either party commences arbitration
proceedings. Said Act shall control the substantive and procedural aspects of
the proceedings unless otherwise agreed in this lease. Judicial review may be
had pursuant to said Act.
(a) Proceedings shall be initiated by the complaining party serving upon
the other party a complaint, as would be done in court proceedings.
The allegations regarding the circumstances giving rise to the issues
to be arbitrated shall be stated in detail and with particularity. The
party upon whom the complaint is served shall answer or otherwise
respond with a pleading just as is required by the Idaho Rules of
Civil Procedure for a court action. Except, however, the response
shall be served upon the initiating party within 30 days from the date
of service of the complaint.
(b) The parties shall agree upon an arbitrator, who shall be a retired
State of Idaho District Court judge (not a retired Magistrate) who is
neutral, competent and willing to serve and, if possible, who has
experience in cases involving mining and mining contracts. Should the
parties fail to reach agreement within 20 days from the date
proceedings are initiated, either party may apply to the court for
appointment of an arbitrator who meets the criteria set forth herein
pursuant to the provisions of section 7-903 Idaho Code.
(c) Prehearing discovery shall not be allowed except upon order of the
arbitrator for good cause shown, the
16
<PAGE> 17
parties being in agreement that the expense and time associated with
discovery should be minimized, and that this desire should, however,
be balanced against the need for each party to be able to effectively
present its case.
(d) Each party to the arbitration proceedings shall bear one-half of the
arbitrator's fees and expenses, which shall be promptly paid by each
party monthly within 15 days from the submission by the arbitrator to
the parties of his reasonably detailed and itemized statement for
services rendered, which statement shall be submitted by the
arbitrator at the end of each month.
(e) Each party shall bear its own attorney's fees and costs of litigation
for the proceedings before the arbitrator. This subparagraph (e) is
not applicable to court proceedings, in which event the parties
recognize that applicable law shall govern and the matter will be
decided by the court.
ARTICLE 22. RECORDATION OF SHORT FORM NOTICE.
Lessor agrees to execute, upon request by Lessee, a short-form notice of
this lease, which notice shall be for purposes of recordation in the real
property records of Shoshone County, Idaho.
ARTICLE 23. NOTICES.
Any notices required or permitted to be given to the Lessor hereunder shall
be considered as delivered forty-eight (48) hours after the same shall have been
deposited in the United States mail, duly registered, with postage thereon
prepaid. All notices given hereunder shall be addressed to the respective
addresses given below:
If to Lessor,
American Silver Mining Company
E. 2503 17th Avenue
Spokane, WA 99223-5124
17
<PAGE> 18
and if to Lessee,
Silver Valley Resources Corporation
P.O. Box 440
Wallace, Idaho 83873
Said addresses for receiving notices may be changed by either party upon
two (2) days previous notice to the other party.
ARTICLE 24. INUREMENT.
These presents shall inure to the benefit of and be binding upon the
respective heirs, executors, administrators, successors and assigns of the
parties hereto.
ARTICLE 25. CONSTRUCTION.
Titles to the respective articles hereof shall not be deemed a part of this
lease but shall be regarded as having been used for convenience only.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the day and year first above written.
LESSOR
AMERICAN SILVER MINING COMPANY
By
-----------------------------------------
Attest:
- ------------------------
Secretary
STATE OF IDAHO )
) ss.
18
<PAGE> 19
COUNTY OF )
On this _____ day of _________, 1997, before me, ________________, the
undersigned, a Notary Public in and for the State of Idaho, personally appeared,
___________________, known to me to be the _____________ of American Silver
Mining Company and whose name is subscribed to the within instrument, and
acknowledged to me that he executed the same on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
---------------------------------
Notary Public for Idaho
Residing at
---------------------
My Commission expires
-----------
19
<PAGE> 20
LESSEE
SILVER VALLEY RESOURCES CORPORATION
By
-----------------------------------------
Attest:
- ------------------------
Secretary
STATE OF NEW YORK )
) ss.
COUNTY OF )
On this _____ day of __________, 1997, before me, ________________, the
undersigned, a Notary Public in and for the State of New York, personally
appeared, ___________________, known to me to be the _____________ of Silver
Valley Resources Corporation and whose name is subscribed to the within
instrument, and acknowledged to me that he executed the same on behalf of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
---------------------------------
Notary Public for New York
Residing at
---------------------
My Commission expires
-----------
20
<PAGE> 1
EXHIBIT 10(b)
TABLE OF CONTENTS
STERLING MINING LEASE
<TABLE>
<S> <C>
ARTICLE 1. DESCRIPTION OF THE PROPERTY ................ 3
ARTICLE 2. GRANT OF LEASE ............................. 3
ARTICLE 3. TERM OF LEASE .............................. 3
ARTICLE 4 ............................................. 4
(A) POSSESSION AND CONTROL OF PROPERTY ............ 4
(B) TIMBER ........................................ 4
ARTICLE 5. MANNER OF WORK ............................. 5
ARTICLE 6. WORK REQUIREMENTS ........................... 5
ARTICLE 7. ROYALTIES ................................... 5
(A) ROYALTY SCHEDULE .............................. 5
(1) OPERATING EXPENDITURES ................... 6
(2) EXPLORATION AND DEVELOPMENT EXPENDITURES.. 6
(B) COMMINGLING OF ORE ............................ 7
(C) TREATMENT AT LESSEE'S PROCESSING FACILITIES.... 7
(D) DISPUTES REGARDING ROYALTIES .................. 7
(E) ADVANCE MINIMUM ROYALTY ....................... 8
ARTICLE 8. TAILINGS AND RESIDUE ........................ 8
</TABLE>
<PAGE> 2
STERLING MINING LEASE CONT'D.
<TABLE>
<S> <C>
ARTICLE 9. CROSS MINING RIGHTS ......................... 8
ARTICLE 10. VERTICAL BOUNDARY PLANES ................... 9
ARTICLE 11. RECORDS AND INSPECTION. .................... 9
ARTICLE 12. TAXES. ..................................... 10
ARTICLE 13. STATE AND FEDERAL LAWS AND REGULATIONS...... 10
ARTICLE 14. PROTECTION FROM LIENS AND DAMAGES. ......... 10
ARTICLE 15. FORCE MAJEURE .............................. 11
ARTICLE 16. DEFAULT .................................... 11
ARTICLE 17. CANCELLATION ............................... 12
ARTICLE 18. SURRENDER OF PROPERTY ...................... 12
ARTICLE 19. REMOVAL OF EQUIPMENT ....................... 13
ARTICLE 20. TITLE AND PATENT. .......................... 13
ARTICLE 21. ARBITRATION OF DISPUTES .................... 13
ARTICLE 22. RECORDATION OF SHORT FORM NOTICE ........... 15
ARTICLE 23. NOTICES .................................... 15
ARTICLE 24. INUREMENT .................................. 16
ARTICLE 25. CONSTRUCTION ............................... 16
</TABLE>
2
<PAGE> 3
STERLING MINING LEASE
THIS MINING LEASE, effective as of the 23rd day of April, 1996,
regardless of the actual times of signing and acknowledgment, between STERLING
MINING COMPANY, an Idaho corporation, hereinafter called Lessor, and SILVER
VALLEY RESOURCES CORPORATION, a Delaware Corporation, hereinafter called
Lessee,
WITNESSETH:
ARTICLE 1. DESCRIPTION OF THE PROPERTY.
Lessor represents that it is the owner of 17 unpatented lode mining
claims situated in Shoshone County, Idaho, as described on Exhibit A which by
this reference is made a part of this Lease.
ARTICLE 2. GRANT OF LEASE.
The Lessor in consideration of the royalties herein reserved and the
covenants to be performed by Lessee, does hereby lease, let and demise unto
Lessee, its successors and assigns, all of the above described property
(hereinafter referred to as the "leased premises" or "demised premises").
ARTICLE 3. TERM OF LEASE.
The primary term of this lease shall be twenty (20) years to commence
on April 23, 1996. Upon written notice, which must be sent to Lessor at least
thirty (30) days prior to the expiration of the primary term in order to be
effective, Lessee may extend this lease for a successive term of twenty (20)
years and so long thereafter as ores or minerals from the leased premises are
being developed, mined, processed or marketed on a continuing basis. Whenever
the continued term of this Lease is dependent upon continuing development,
mining, processing or marketing by Lessee and there occur periods (i) when
there is no reasonable market for ores or minerals which are or could be
produced by Lessee from the leased premises, or (ii) when the continuing
development, mining, processing or marketing by Lessee of ores or minerals from
the leased premises is prevented or interrupted by a condition or happening of
force majeure, the term of this Lease shall nevertheless continue during such
periods, subject to termination by Lessor if the suspension of operations for
the enumerated causes has continued without interruption for at least five (5)
years. When a satisfactory
3
<PAGE> 4
STERLING MINING LEASE CONT'D.
market becomes available, or upon cessation of any period of force majeure,
Lessee shall have a reasonable time thereafter within which to resume
development, mining, processing or marketing of ores and minerals from the
leased premises. No cessation of operations for one hundred eighty (180)
consecutive days or less, when such cessation is caused by any other reason,
shall be considered a break in the continuity of development, mining, processing
or marketing. A "reasonable market" shall not be deemed to exist and Lessee may
suspend operations during periods when the products of the leased premises
cannot be produced and sold at a profit by reason of low metal prices or
otherwise or when such products cannot be readily sold at prevailing prices so
that an unreasonable inventory thereof has accumulated or otherwise would
accumulate.
ARTICLE 4.
(a) POSSESSION AND CONTROL OF PROPERTY.
Lessee shall have, and it is hereby given and granted, the right to enter upon
and take over, at the beginning of the primary term hereof, the sole and
exclusive possession and control of the leased premises and the whole and every
part thereof, and, during the term of this lease, to remain in the sole and
exclusive possession and control thereof, and to investigate, measure, sample,
examine, test, develop, work, mine, operate, use, manage, and control the same
and the water and water rights appurtenant thereto, and to mine, extract and
remove from said property the ores and minerals therein and appurtenant and
belonging thereto, and to treat, mill, ship, sell or otherwise dispose of the
same and receive the full proceeds therefrom; and to erect, construct,
maintain, use and operate thereon and therein buildings, structures, machinery
and equipment. The time, nature, location and extent of such or any or all the
above activities and mining or mining operations and the cessation and
resumption thereof shall be at the sole discretion of Lessee, and may include,
without limitation, open pit, underground, strip, or solution mining methods,
together with the right to use so much of the surface as may be necessary,
useful or convenient for the enjoyment of all rights herein granted including
construction of a surface mine waste rock dump, if necessary, from development
of Lessor's property. Any surface mine waste dump constructed during the life
of this lease shall be reclaimed to industry standards by Lessee at lease
termination.
(b) TIMBER. Lessee shall have the right, pursuant to applicable law,
to manage and use timber upon the property in
4
<PAGE> 5
STERLING MINING LEASE CONT'D.
accordance with law. In addition, in the event Lessee elects to seek patents for
the property described on Exhibit A, Lessee shall have the right to manage and
harvest the timber situated thereon. In either event Lessee shall account for
the value of timber removed and the value shall be treated just as proceeds from
the sale of metal is treated and accounted for under this lease.
ARTICLE 5. MANNER OF WORK.
Lessee agrees to cause all work, development and mining to be done
in a careful and minerlike manner, and to conform in all respects to the mining
laws and regulations of the United States and the State of Idaho.
ARTICLE 6. WORK REQUIREMENTS.
During the first three years of the primary term hereof Lessee shall
perform at least 1,500 feet of diamond drilling upon, toward or for the benefit
of the leased premises. Thereafter Lessee shall perform at least 1,500 feet of
diamond drilling or its equivalent upon, toward or for the benefit of the
leased premises for each five year period this lease is in effect. In the event
work is performed in excess of the minimum during any period, the excess may be
carried forward to the credit of Lessee for subsequent periods.
ARTICLE 7. ROYALTIES.
(a) Royalty Schedule. Lessee shall pay Lessor a 15% Net Profits
Royalty, as defined in Exhibit B, on all development and production ores and
minerals extracted, milled and sold from the leased premises in accordance with
Exhibit B which is attached hereto and by this reference is made a part of this
Lease. Obligation for quarterly payment of the Net Profits Royalty shall
commence after Lessee has recovered all operating, exploration and development
expenditures incurred by Lessee attributed to the leased premises following the
effective date of this lease. For the purpose of calculating these costs, all
applicable operating, exploration and development expenditures shall be
determined in accordance with generally accepted accounting principles for
metallic mining ventures within the United States applied on a consistent basis
("GAAP") which are incurred after the effective date of this lease, as follows
(calculation of Net Profits Royalty shall be determined
5
<PAGE> 6
STERLING MINING LEASE CONT'D.
exclusively under Exhibit B after these operating, exploration and development
expenditures have been recovered):
(1) Operating expenditures include:
(i) Mining Costs. Costs incurred by Lessee in
exploring for, mining, extracting, removing and
transporting to a mill ores and minerals produced
from the leased premises. Such costs shall
include, without limitation, those incurred for
labor, machinery operation, fuel, explosives and
other materials, exploration drilling,
develop-mental or ore delineation drilling,
allowance for depreciation and amortization of
mining equipment and machinery acquired after the
effective date of this Lease. Mining costs shall
not include depletion or income taxes.
(ii) Milling and Processing Costs. Costs incurred in
milling or processing ores and minerals produced
from the leased premises at a mill or central
processing facility utilized to process ores and
minerals produced from the leased premises, if any,
(hereinafter referred to as the "Mill").
(iii) General and Administrative Costs. Costs incurred
as a direct result of the administration of the
leased premises, and the production of ores and
minerals therefrom, including costs incurred in
connection with the marketing, selling, and
collection of proceeds from sale of ores and
minerals produced from the leased premises.
(iv) Taxes. All taxes levied against Lessee's operation
of the leased premises, excluding income taxes but
including mining and property taxes.
(2) Exploration and Development Expenditures. Costs incurred by
Lessee after the effective date hereof with respect to exploring and developing
the leased premises and all matters connected therewith including, but not
limited to, costs relating to geological, geochemical and geophysical studies,
exploration and developmental drilling, sampling and assaying, mine design and
development, acquisition of mining or processing equipment or machinery, direct
expenses of making application for and
6
<PAGE> 7
STERLING MINING LEASE CONT'D.
obtaining environmental and regulatory permits from government agencies
(including reasonable attorney's fees), costs to patent the unpatented claims
and any other costs which would be included within mining costs and/or milling
and processing costs if such costs were incurred after the Commencement of
Commercial Production.
If any of the costs otherwise includable in Lessee's costs as set
forth above are incurred partly for the benefit of any other properties or
interests of Lessee, only the portion of such costs reasonably attributable to
development and operation of the leased premises in accordance with GAAP shall
be included.
(b) Commingling of Ore.
Lessee may commingle ore from the leased premises with ore
from other properties, either before or after concentration or beneficiation,
so long as the data necessary to determine the weight and grade, both of the
ore removed from the leased premises and the ore with which it is commingled,
are obtained by Lessee. Lessee shall then use that weight and grade data to
allocate Gross Sales (as defined in Exhibit B) from the commingled ore between
the leased premises and the other properties from which the other commingled
ore was removed. All such weight, grade and allocation calculations by Lessee
shall be done in a manner recognized by the mining industry as practical and
sufficient at that time. If, in Lessee's judgment, it is impractical to
determine which portions of any of the costs and expenses described in
Paragraph (a) above are directly attributable to ore removed from the leased
premises, Lessee may allocate all such costs and expenses on a straight-line,
per-ton basis among all ores that give rise to those expenses, in accordance
with GAAP.
(c) Treatment at Lessee's Processing Facilities. Lessee shall
have the right to purchase and to treat concentrates and smelting ores produced
from the leased premises at its own metallurgical facility; provided, however,
that any such purchase and treatment shall be made under comparable terms as
the metallurgical facility is then offering to other shippers of concentrates
and smelting ores on purchases of like quantities and qualities.
(d) Disputes Regarding Royalties.
Lessor shall be deemed to have waived any right the Lessor
may have had to object to the royalty settlement made by
7
<PAGE> 8
STERLING MINING LEASE CONT'D.
Lessee in accordance with Exhibit B for any calendar quarter, unless Lessor
notifies Lessee in writing of such objection within twelve (12) months after
such royalty is due under this Lease. If Lessor and Lessee are unable to
resolve the question by agreement within thirty (30) days after Lessee's
receipt of Lessor's notice, the dispute shall be resolved by arbitration, in
accordance with the provisions of Article 21.
(e) Advance Minimum Royalty.
Commencing with the month this lease is executed and
for each month thereafter that this lease continues and while it remains
unterminated, Lessee shall pay an advance minimum royalty of $350 per month.
This advance minimum royalty shall be credited to the Net Profits Royalty
obligation referred to above in this Article 7. The royalty shall be paid during
the month this lease is executed on or before the last day of the month, and
thereafter on or before the last day of each succeeding month.
ARTICLE 8. TAILINGS AND RESIDUE.
Tailings and other residue resulting from the milling or other
beneficiating of ores produced from the leased premises and subsequently
utilized in mining operations shall be the sole and exclusive property of Lessee
prior to termination of this lease. Tailings and other residue remaining
underground in the leased premises shall become the property of the Lessor upon
termination of this lease. A separate written agreement will be negotiated by
the parties in good faith for the construction of a surface mill tailings
impoundment on the leased premises if determined necessary by the Lessee. The
terms of such agreement shall be consistent with industry standards and the
parties agree to submit to arbitration any matter to which the parties can not
agree during the negotiation of such an agreement.
ARTICLE 9. CROSS-MINING RIGHTS.
Lessee is hereby granted the right, if it so desires, to mine or
remove from the leased premises any ores, waste, water and other materials
existing therein or thereon or in any part thereof, through or by means of
shafts, openings or pits which may be sunk or made upon adjoining or nearby
property owned or controlled by Lessee, and may stockpile any ores, waste, or
other materials and/or concentrated products of ores or materials from the
leased premises or any part thereof, upon stockpile grounds
8
<PAGE> 9
STERLING MINING LEASE CONT'D.
situated upon any such adjoining or nearby property; and Lessee may, if it so
desires, use the leased premises and any part thereof and any shafts, openings,
pits and stockpile grounds sunk or made thereon for the mining, removal and/or
stockpiling of any ores, waste, water and other materials and/or concentrated
products of ores or materials from any such adjoining or nearby property, or
for any purpose or purposes connected therewith, not, however, preventing or
interfering with the mining or removal of ore from the leased premises. If,
after this lease expires or terminates, Lessee is exploring, mining or
developing adjacent properties thereto, it may use any haulageways developed
during the terms of the lease for ingress and egress reasonably necessary to
explore, develop or mine such adjacent properties. The Lessee shall be
responsible for haulageway maintenance costs and liabilities resulting from its
negligent acts. The Lessee's right of ingress and egress shall not interfere
with future development of the property by the Lessor. This provision for
ingress and egress to and from such adjacent properties shall survive the
expiration or termination of this lease.
ARTICLE 10. VERTICAL BOUNDARY PLANES.
In consideration of Lessee's execution of this mining
lease, and the reciprocal benefits received by reason of the terms of this
Article by the Lessor and the Lessee, Lessor and Lessee hereby agree with each
other that any and all ores and minerals within the surface boundaries extended
downward vertically of any claim so held under lease and herein defined as
leased premises shall belong to such claim.
ARTICLE 11. RECORDS AND INSPECTION.
Lessee's engineering progress maps and all factual exploration,
development and production data including drill core and assay results (but
excluding interpretive information or data) from the leased premises shall be
available upon reasonable request for Lessor's inspection. The Lessor may enter
said property at reasonable times for the purpose of inspecting the same, and
Lessee shall facilitate such inspection in reasonable ways, but Lessor shall
enter upon said leased premises at Lessor's own risk and so as not to hinder
unreasonably the operations of Lessee; and the Lessor shall indemnify and hold
harmless the Lessee from any damage, claim or demand by reason of injury to or
the presence of the Lessor or the Lessor's
9
<PAGE> 10
STERLING MINING LEASE CONT'D.
agents, representatives, licensees, or guests or any of them on the leased
premises or approaches thereto.
ARTICLE 12. TAXES.
Lessee shall pay before they are delinquent all general property
taxes and governmental rental fees for unpatented claims assessed against the
Lessor's ownership in the leased premises during the term of this lease,
beginning with the year 1996. Lessee shall also pay, before they are delinquent,
all taxes levied or assessed against any or all personal property, machinery and
equipment placed upon the leased premises by the Lessee during the term of this
lease and beginning in the year 1996. As to severance tax and all other taxes
that are now or may be hereafter levied and computed on the amount or value of
ores produced from the leased premises, Lessee shall pay the same.
ARTICLE 13. STATE AND FEDERAL LAWS AND REGULATIONS.
Lessee shall comply with the Workmen's Compensation laws of Idaho
and with Social Security, Unemployment Insurance and all other state and
federal laws and regulations relating to Lessee's operations and shall save
Lessor harmless from any claim for damages or liability by reason thereof.
ARTICLE 14. PROTECTION FROM LIENS AND DAMAGES.
Lessee shall keep the leased premises and the whole and every part
thereof free and clear of liens for labor done or work performed upon the
leased premises or materials furnished to it for the development or operation
thereof under this lease while the same is in force and effect, and will save
and keep harmless Lessor from all costs, loss or damage which may arise by
reason of injury to any persons employed by Lessee in or upon the leased
premises or any part thereof or which may arise by reason of injury to any
persons or damage to any property as the result of any work or operations of
the Lessee or of its possession and occupancy of the leased premises. A lien
upon the property shall not constitute a default if the Lessee in good faith
disputes the validity of the claim, in which event the existence of the lien
shall constitute a default only from and after the validity of the lien has
been adjudicated.
10
<PAGE> 11
STERLING MINING LEASE CONT'D.
ARTICLE 15. FORCE MAJEURE.
If Lessee is unable to perform any of the terms or covenants of this
lease by reason of damage or delay resulting from disaster, labor disturbances,
shortage of labor, strikes, lockouts, act of God, or from any regulations or
restrictions of any governmental agency, or on account of any eventuality beyond
the reasonable control of Lessee, including state and federal environmental
statute or regulation, Lessee shall be excused from performance during the
period of such prevention and the time for performance of such obligations shall
be extended for a period equal to the period or periods of prevention. In the
event Lessee or its purchaser of concentrates or crude ore is, becomes or
believes it is about to become subject, at any time, to environmental
regulations (which shall include any governmental law, rule, order, regulation,
policy, proposal or restriction relating to environmental pollution) which will
prohibit or materially affect any operation Lessee is carrying out, or planning
to carry out hereunder, Lessee shall have the right to declare the existence of
a condition of force majeure during the period in which it is in good faith
seeking a feasible method to comply with, be exempted from, modify, obtain
necessary permits or licenses under, or prevent the enactment or promulgation of
said environmental regulations. Lessee agrees to use reasonable diligence to
remove causes of force majeure as may occur from time to time, but shall not be
required to settle strikes or other labor difficulties contrary to its own
judgment.
ARTICLE 16. DEFAULT.
The failure of Lessee to make or cause to be made any of the material
payments herein provided for or to keep or perform any material agreement on its
part to be kept or performed according to the terms and provisions of this
lease, shall, at the election of the Lessor, work a forfeiture hereof; provided,
however, that in the event of a default on the part of the Lessee, the Lessor
shall give to the Lessee a written notice of its intention to declare a
forfeiture of this lease and to terminate the same on account thereof, or of its
intention to take other action to enforce this lease, specifying the particular
default or defaults relied upon by it, and Lessee shall have a reasonable time
(which in any case shall not be less than sixty (60) days) after receipt of such
notice in which to make good such default or defaults, in which event there
shall be no forfeiture therefor, and no other action may be taken for
enforcement. If Lessee disagrees that such default occurred, it
11
<PAGE> 12
STERLING MINING LEASE CONT'D.
shall so advise Lessor in writing thirty (30) days after receipt of the notice
of default. If, within fifteen (15) days thereafter, the parties have not
resolved the dispute by mutual agreement, the issue of default shall then be
submitted to arbitration under Article 21 below. In the event that Lessor does
terminate this lease on account of a breach by Lessee, Lessee shall be under no
further obligation or liability hereunder to Lessor from and after the date of
such termination except for the performance of obligations and the satisfaction
of liabilities to Lessor or third parties or respecting the leased premises,
which have accrued to the date of such termination.
ARTICLE 17. CANCELLATION.
Notwithstanding any provision herein to the contrary, Lessee may at
any time upon 30 days' written notice, cancel and terminate this lease in its
entirety. Upon total cancellation and termination of this lease, Lessee shall be
under no further obligation of whatsoever kind or nature to the Lessor except
for the making of payments which have already accrued to the date of such
cancellation and termination, including governmental rental fees for unpatented
claims and for the payment of Lessee's proportion of the aforesaid property
taxes accrued while this lease was in effect. If Lessee shall have included any
part of the leased premises in a "producing group" for assessment purposes, and
taxes based on such assessment shall have been levied but shall not have been
paid at the time of cancellation and termination Lessee shall pay such taxes
before they are delinquent. Work requirements specified in Article 6 shall cease
upon the date such notice is given.
ARTICLE 18. SURRENDER OF PROPERTY.
In the event of a valid forfeiture, cancellation, or other
termination of this lease, Lessee shall surrender to Lessor peaceable
possession of the leased premises and at the written request of Lessor shall
deliver to the Lessor a written relinquishment hereof, together with a copy, if
requested by Lessor within thirty (30) days after termination of this lease, of
its engineering progress maps showing any workings made or uncovered by Lessee
on the above-described leased premises. The Lessee's factual exploration,
development and production data including drill core and assay results (but
excluding interpretive information or data) from the leased premises shall be
available upon request to the Lessor.
12
<PAGE> 13
STERLING MINING LEASE CONT'D.
ARTICLE 19. REMOVAL OF EQUIPMENT.
Lessee shall have and is hereby given and granted twelve (12) months
after a valid forfeiture, cancellation or other termination of this lease to
remove from said property all buildings, structures, warehouse stocks,
merchandise, materials, tools, hoists, compressors, engines, motors, pumps,
transformers, electrical accessories, metal or wooden tanks, pipes and
connections, rails, mine cars and any and all machinery, trade fixtures, and
equipment erected or placed in or upon said property by it, provided that such
right of removal shall not extend to foundations and mine timbers in place
unless Lessor shall have given his previous written consent thereto. If Lessee
is hampered by snowdrifts, washouts, inclement weather, or other climatic
conditions, from completing the removal of said property and equipment within
the time specified, then Lessor agrees to extend the time by a reasonable
period if requested by Lessee.
ARTICLE 20. TITLE AND PATENT.
Lessor covenants that Lessor now holds title and possession of the
leased premises free and clear from all former grants, sales, liens, or
encumbrances of any kind, and that there are no delinquent taxes and all
government rental fees are current; that Lessor has no knowledge of any defects
in title or adverse claims and agrees to furnish Lessee such abstracts, deeds,
or other evidences of title as may be in Lessor's possession and control, and
to allow and cooperate with Lessee, at Lessee's option and initial expense, to
have abstracts brought to date and to take such steps and proceedings to search
and perfect title as Lessee shall deem advisable. All reasonable expense so
incurred by Lessee shall apply as a credit against royalties. Lessee shall have
the right to seek to patent the leased premises or any portion thereof in the
name of Lessor if it so elects, and the cost thereof may be charged as
operating costs hereunder. Lessor agrees to cooperate to a reasonable extent in
any patent proceedings.
ARTICLE 21. ARBITRATION OF DISPUTES.
Any controversy, dispute or claim arising out of or from this lease,
or alleged breach thereof, shall be settled by STERLING MINING LEASE CONT'D.
arbitration pursuant to the Uniform Arbitration Act of the State of Idaho
(Sections 7-901, et.seq., Idaho Code) as amended and as in
13
<PAGE> 14
STERLING MINING LEASE CONT'D.
effect on the date either party commences arbitration proceedings. Said Act
shall control the substantive and procedural aspects of the proceedings unless
otherwise agreed in this lease. Judicial review may be had pursuant to said
Act.
(a) Proceedings shall be initiated by the complaining
party serving upon the other party a complaint, as
would be done in court proceedings. The allegations
regarding the circumstances giving rise to the issues
to be arbitrated shall be stated in detail and with
particularity. The party upon whom the complaint is
served shall answer or otherwise respond with a
pleading just as is required by the Idaho Rules of
Civil Procedure for a court action. Except, however,
the response shall be served upon the initiating party
within 30 days from the date of service of the
complaint.
(b) The parties shall agree upon an arbitrator, who shall
be a retired State of Idaho District Court judge (not
a retired Magistrate) who is neutral, competent
and willing to serve and, if possible, who has
experience in cases involving mining and mining
contracts. Should the parties fail to reach agreement
within 20 days from the date proceedings are
initiated, either party may apply to the court for
appointment of an arbitrator who meets the criteria
set forth herein pursuant to the provisions of section
7-903 Idaho Code.
(c) Prehearing discovery shall not be allowed except upon order
of the arbitrator for good cause shown, the parties being
in agreement that the expense and time associated with
discovery should be minimized, and that this desire should,
however, be balanced against the need for each party to be
able to effectively present its case.
(d) Each party to the arbitration proceedings shall bear
one-half of the arbitrator's fees and expenses, which
shall be promptly paid by each party monthly within 15
days from the submission by the arbitrator to the
parties of his reasonably detailed and itemized
statement for services rendered, which statement shall
be submitted by the arbitrator at the end of each
month.
14
<PAGE> 15
STERLING MINING LEASE CONT'D.
(e) Each party shall bear its own attorney's fees and costs of
litigation for the proceedings before the arbitrator. This
subparagraph (e) is not applicable to court proceedings, in
which event the parties recognize that applicable law shall
govern and the matter will be decided by the court.
ARTICLE 22. RECORDATION OF SHORT FORM NOTICE.
Lessor agrees to execute, upon request by Lessee, a short-form
notice of this lease, which notice shall be for purposes of recordation in the
real property records of Shoshone County, Idaho.
ARTICLE 23. NOTICES.
Any notices required or permitted to be given to the Lessor hereunder
shall be considered as delivered forty-eight (48) hours after the same shall
have been deposited in the United States mail, duly registered, with postage
thereon prepaid. All notices given hereunder shall be addressed to the
respective addresses given below:
If to Lessor,
Sterling Mining Company
135 East Cameron
Kellogg, ID 83837
and if to Lessee,
Silver Valley Resources Corporation
P.O. Box 440
Wallace, Idaho 83873
Said addresses for receiving notices may be changed by either party
upon two (2) days previous notice to the other party.
15
<PAGE> 16
STERLING MINING LEASE CONT'D.
ARTICLE 24. INUREMENT.
These presents shall inure to the benefit of and be binding upon the
respective heirs, executors, administrators, successors and assigns of the
parties hereto.
ARTICLE 25. CONSTRUCTION.
Titles to the respective articles hereof shall not be deemed a part
of this lease but shall be regarded as having been used for convenience only.
IN WITNESS WHEREOF, the parties hereto have executed this agreement
as of the day and year first above written.
LESSOR
STERLING MINING COMPANY
By
---------------------------------
Attest:
- --------------------------------
Secretary
STATE OF IDAHO )
) ss.
COUNTY OF )
On this _____ day of April, 1996, before me, ________________, the
undersigned, a Notary Public in and for the State of Idaho, personally appeared,
___________________, known to me to be the _____________ of Sterling Mining
Company and whose name is subscribed to the within instrument, and acknowledged
to me that he executed the same on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
16
<PAGE> 17
STERLING MINING LEASE CONT'D.
------------------------------------
Notary Public for Idaho
Residing at
-------------------------
My Commission expires
---------------
LESSEE
SILVER VALLEY RESOURCES CORPORATION
By
---------------------------------
Attest:
- --------------------------------
Secretary
STATE OF IDAHO )
) ss.
COUNTY OF )
On this _____ day of April, 1996, before me, ________________, the
undersigned, a Notary Public in and for the State of Idaho, personally appeared,
___________________, known to me to be the _____________ of Silver Valley
Resources Corporation and whose name is subscribed to the within instrument, and
acknowledged to me that he executed the same on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
------------------------------------
Notary Public for Idaho
Residing at
------------------------
My Commission expires
--------------
17
<PAGE> 1
EXHIBIT 10(c)
TABLE OF CONTENTS
SILVER BUCKLE COMPANY LEASE
<TABLE>
<S> <C>
ARTICLE 1. DESCRIPTION OF THE PROPERTY.....................................................3
ARTICLE 2. GRANT OF LEASE..................................................................3
ARTICLE 3. TERM OF LEASE...................................................................3
ARTICLE 4...................................................................................4
(A) POSSESSION AND CONTROL OF PROPERTY.............................................4
(B) TIMBER.............................................................................5
ARTICLE 5. MANNER OF WORK................................................................5
ARTICLE 6. WORK REQUIREMENTS...............................................................5
ARTICLE 7. ROYALTIES.......................................................................6
(A) ROYALTY SCHEDULE...................................................................6
(1) OPERATING EXPENDITURES........................................................7
(2) EXPLORATION AND DEVELOPMENT EXPENDITURES......................................8
(B) COMMINGLING OF ORE.................................................................8
(C) TREATMENT AT LESSEE'S PROCESSING FACILITIES........................................9
(D) DISPUTES REGARDING ROYALTIES.......................................................9
(E) ADVANCE MINIMUM ROYALTY............................................................9
ARTICLE 8. TAILINGS AND RESIDUE..........................................................10
</TABLE>
<PAGE> 2
SILVER BUCKLE MINES, INC. LEASE CONT'D.
<TABLE>
<S> <C>
ARTICLE 9. CROSS MINING RIGHTS............................................................10
ARTICLE 10. VERTICAL BOUNDARY PLANES......................................................11
ARTICLE 11. RECORDS AND INSPECTION.......................................................12
ARTICLE 12. TAXES.........................................................................12
ARTICLE 13. STATE AND FEDERAL LAWS AND REGULATIONS........................................12
ARTICLE 14. PROTECTION FROM LIENS AND DAMAGES.............................................13
ARTICLE 15. FORCE MAJEURE.................................................................13
ARTICLE 16. DEFAULT......................................................................15
ARTICLE 17. CANCELLATION.................................................................15
ARTICLE 18. SURRENDER OF PROPERTY.........................................................16
ARTICLE 19. REMOVAL OF EQUIPMENT..........................................................16
ARTICLE 20. TITLE AND PATENT..............................................................17
ARTICLE 21. ARBITRATION OF DISPUTES.......................................................17
ARTICLE 22. RECORDATION OF SHORT FORM NOTICE..............................................18
ARTICLE 23. NOTICES.......................................................................19
ARTICLE 24. INUREMENT.....................................................................20
ARTICLE 25. CONSTRUCTION..................................................................20
</TABLE>
2
<PAGE> 3
SILVER BUCKLE MINES, INC. LEASE
THIS MINING LEASE, effective as of the 21st day of March, 1997, regardless
of the actual times of signing and acknowledgment, between SILVER BUCKLE MINES,
INC, an Idaho corporation, hereinafter called Lessor, and SILVER VALLEY
RESOURCES CORPORATION, a Delaware Corporation, hereinafter called Lessee,
WITNESSETH:
ARTICLE 1. DESCRIPTION OF THE PROPERTY.
Lessor represents that it is the owner of 0 patented and 87 unpatented lode
mining claims situated in Shoshone County, Idaho, as described on Exhibit A
which by this reference is made a part of this Lease.
ARTICLE 2. GRANT OF LEASE.
The Lessor in consideration of the royalties herein reserved and the
covenants to be performed by Lessee, does hereby lease, let and demise unto
Lessee, its successors and assigns, all of the above described property
(hereinafter referred to as the "leased premises" or "demised premises").
ARTICLE 3. TERM OF LEASE.
The primary term of this lease shall be twenty (20) years to commence on
March 21, 1997. Upon written notice, which must be sent to Lessor at least
thirty (30) days prior to the expiration of the primary term in order to be
effective, Lessee may extend this lease for a successive term of twenty (20)
years and so long thereafter as ores or minerals from the leased premises are
being developed, mined, processed or marketed on a continuing basis. Whenever
the continued term of this Lease is dependent upon continuing development,
mining, processing or marketing by Lessee and there occur periods (i) when there
is no reasonable market for ores or minerals which are or could be produced by
Lessee from the leased premises, or (ii) when the continuing development,
mining, processing or marketing by Lessee of ores or minerals from the leased
premises is prevented or interrupted by a condition or happening of force
majeure, the term of this Lease shall nevertheless continue during such periods,
subject to termination by Lessor if the suspension of operations for the
enumerated causes has continued without interruption for at least five (5)
years. When a satisfactory
3
<PAGE> 4
SILVER BUCKLE MINES, INC. LEASE CONT'D.
market becomes available, or upon cessation of any period of force majeure,
Lessee shall have a reasonable time thereafter within which to resume
development, mining, processing or marketing of ores and minerals from the
leased premises. No cessation of operations for one hundred eighty (180)
consecutive days or less, when such cessation is caused by any other reason,
shall be considered a break in the continuity of development, mining, processing
or marketing. A "reasonable market" shall not be deemed to exist and Lessee may
suspend operations during periods when the products of the leased premises
cannot be produced and sold at a profit by reason of low metal prices or
otherwise or when such products cannot be readily sold at prevailing prices so
that an unreasonable inventory thereof has accumulated or otherwise would
accumulate.
ARTICLE 4.
(a) POSSESSION AND CONTROL OF PROPERTY.
Lessee shall have, and it is hereby given and granted, the right to enter upon
and take over, at the beginning of the primary term hereof, the sole and
exclusive possession and control of the leased premises and the whole and every
part thereof, and, during the term of this lease, to remain in the sole and
exclusive possession and control thereof, and to investigate, measure, sample,
examine, test, develop, work, mine, operate, use, manage, and control the same
and the water and water rights appurtenant thereto, and to mine, extract and
remove from said property the ores and minerals therein and appurtenant and
belonging thereto, and to treat, mill, ship, sell or otherwise dispose of the
same and receive the full proceeds therefrom; and to erect, construct,
maintain, use and operate thereon and therein buildings, structures, machinery
and equipment. The time, nature, location and extent of such or any or all the
above activities and mining or mining operations and the cessation and
resumption thereof shall be at the sole discretion of Lessee, and may include,
without limitation, open pit, underground, strip, or solution mining methods,
together with the right to use so much of the surface as may be necessary,
useful or convenient for the enjoyment of all rights herein granted including
construction of a surface mine waste rock dump, if necessary, from development
of Lessor's property. Any surface mine waste dump constructed
4
<PAGE> 5
SILVER BUCKLE MINES, INC. LEASE CONT'D.
during the life of this lease shall be reclaimed to industry standards by Lessee
at lease termination.
(b) TIMBER. Lessee shall have the right, pursuant to applicable law, to
manage and use timber upon the property in accordance with law. In addition, in
the event Lessee elects to seek patents for the property described on Exhibit A,
Lessee shall have the right to manage and harvest the timber situated thereon.
In either event Lessee shall account for the value of timber removed and the
value shall be treated just as proceeds from the sale of metal is treated and
accounted for under this lease.
ARTICLE 5. MANNER OF WORK.
Lessee agrees to cause all work, development and mining to be done in a
careful and minerlike manner, and to conform in all respects to the mining laws
and regulations of the United States and the State of Idaho.
ARTICLE 6. WORK REQUIREMENTS.
During the first five years of the primary term hereof Lessee shall perform
$125,000 of work upon, towards or for the eventual benefit of the leased
premises. Thereafter, for each five year period this lease is in effect, an
additional $125,000 of work upon, toward or for the eventual benefit of the
leased premises shall be performed.
The term "upon" means exploration or development work performed within the
exterior vertical boundaries of the leased premises. The work may include, but
is not limited to diamond drilling, drifting, shaft sinking, raising,
rehabilitation of existing underground openings in advance of any such work,
surface mapping, geochemical surveys, stratigraphic and structural
investigations, metallurgical and other physical analytical work, mine
engineering and geological analysis which enhances the understanding of the
geology and possible mineralization of the leased premises, and in addition all
unpatented claim holding costs.
5
<PAGE> 6
SILVER BUCKLE MINES, INC. LEASE CONT'D.
The term "toward" means the kind of work described above, but performed
within 1,000 feet of any exterior boundary of the leased premises.
The phrase "for the eventual benefit of" means the kinds of work described
above and shall also include seventeen and one-half percent (17 1/2%) of the
cost of shaft sinking which may not be within 1,000 feet of the exterior
boundary of the leased premises.
In the event work is performed in excess of the $125,000 minimum during any
period, the excess may be carried forward to the credit of the Lessee for the
next five year period, but not beyond the succeeding five year period.
ARTICLE 7. ROYALTIES.
(a) Royalty Schedule. Lessee shall pay Lessor a 20% Net Profits Royalty,
as defined in Exhibit B, on all development and production ores and minerals
extracted, milled and sold from the leased premises in accordance with Exhibit B
which is attached hereto and by this reference is made a part of this Lease.
The Net Profits Royalty shall be increased above twenty percent (20%), or
decreased to not less than twenty percent (20%), in accordance with the
quarterly average price of silver, as shown on the schedule which follows:
Sliding Scale Royalty Payments
-------------------------------------------
<TABLE>
<CAPTION>
Net Profit Royalty Quarterly Average
Percentage Silver Price
------------------ -----------------
<S> <C>
20% less than $11.00
21% greater than $11.00
22% greater than $11.25
</TABLE>
6
<PAGE> 7
SILVER BUCKLE MINES, INC. LEASE CONT'D.
<TABLE>
<S> <C> <C>
23% greater than $11.50
24% greater than $11.75
25% greater than $12.00
30% greater than $13.50
35% greater than $15.00
40% greater than $16.50
</TABLE>
The term "quarterly average price of silver" means the sum of all closing
prices as quoted by the Comex Metals Exchange for each day of the calendar
quarter that a quote is given, divided by the number of days quoted.
Obligation for quarterly payment of the Net Profits Royalty shall commence after
Lessee has recovered all operating, exploration and development expenditures
incurred by Lessee attributed to the leased premises following the effective
date of this lease. For the purpose of calculating these costs, all applicable
operating, exploration and development expenditures shall be determined in
accordance with generally accepted accounting principles for metallic mining
ventures within the United States applied on a consistent basis ("GAAP") which
are incurred after the effective date of this lease, as follows (calculation of
Net Profits Royalty shall be determined exclusively under Exhibit B after these
operating, exploration and development expenditures have been recovered):
(1) Operating expenditures include:
(i) Mining Costs. Costs incurred by Lessee in
exploring for, mining, extracting, removing
and transporting to a mill ores and minerals
produced from the leased premises. Such
costs shall include, without limitation,
those incurred for labor, machinery
operation, fuel, explosives and other
materials, exploration drilling,
develop-mental or ore delineation drilling,
allowance for depreciation and depletion of
mining equipment and machinery acquired
after the effective date of this Lease.
Mining costs shall not include amortization
or income taxes.
7
<PAGE> 8
SILVER BUCKLE MINES, INC. LEASE CONT'D.
(ii) Milling and Processing Costs. Costs incurred
in milling or processing ores and minerals
produced from the leased premises at a mill
or central processing facility utilized to
process ores and minerals produced from the
leased premises, if any, (hereinafter
referred to as the "Mill").
(iii) General and Administrative Costs. Costs
incurred as a direct result of the
administration of the leased premises, and
the production of ores and minerals
therefrom, including costs incurred in
connection with the marketing, selling, and
collection of proceeds from sale of ores and
minerals produced from the leased premises.
(iv) Taxes. All taxes levied against Lessee's
operation of the leased premises, excluding
income taxes but including mining and
property taxes.
(2) Exploration and Development Expenditures. Costs incurred by Lessee
after the effective date hereof with respect to exploring and developing the
leased premises and all matters connected therewith including, but not limited
to, costs relating to geological, geochemical and geophysical studies,
exploration and developmental drilling, sampling and assaying, mine design and
development, acquisition of mining or processing equipment or machinery, direct
expenses of making application for and obtaining environmental and regulatory
permits from government agencies (including reasonable attorney's fees), costs
to patent the unpatented claims and any other costs which would be included
within mining costs and/or milling and processing costs if such costs were
incurred after the Commencement of Commercial Production.
If any of the costs otherwise includable in Lessee's costs as set
forth above are incurred partly for the benefit of any other properties or
interests of Lessee, only the portion of such costs reasonably attributable to
development and operation of the leased premises in accordance with GAAP shall
be included.
(b) Commingling of Ore.
8
<PAGE> 9
SILVER BUCKLE MINES, INC. LEASE CONT'D.
Lessee may commingle ore from the leased premises with ore from other
properties, either before or after concentration or beneficiation, so long as
the data necessary to determine the weight and grade, both of the ore removed
from the leased premises and the ore with which it is commingled, are obtained
by Lessee. Lessee shall then use that weight and grade data to allocate Gross
Sales (as defined in Exhibit B) from the commingled ore between the leased
premises and the other properties from which the other commingled ore was
removed. All such weight, grade and allocation calculations by Lessee shall be
done in a manner recognized by the mining industry as practical and sufficient
at that time. If, in Lessee's judgment, it is impractical to determine which
portions of any of the costs and expenses described in Paragraph (a) above are
directly attributable to ore removed from the leased premises, Lessee may
allocate all such costs and expenses on a straight-line, per-ton basis among all
ores that give rise to those expenses, in accordance with GAAP.
(c) Treatment at Lessee's Processing Facilities.
Lessee shall have the right to purchase and to treat concentrates and
smelting ores produced from the leased premises at its own metallurgical
facility; provided, however, that any such purchase and treatment shall be made
under comparable terms as the metallurgical facility is then offering to other
shippers of concentrates and smelting ores on purchases of like quantities and
qualities.
(d) Disputes Regarding Royalties.
Lessor shall be deemed to have waived any right the Lessor may have had
to object to the royalty settlement made by Lessee in accordance with Exhibit B
for any calendar quarter, unless Lessor notifies Lessee in writing of such
objection within twelve (12) months after such royalty is due under this Lease.
If Lessor and Lessee are unable to resolve the question by agreement within
thirty (30) days after Lessee's receipt of Lessor's notice, the dispute shall be
resolved by arbitration, in accordance with the provisions of Article 21.
(e) Advance Minimum Royalty.
9
<PAGE> 10
SILVER BUCKLE MINES, INC. LEASE CONT'D.
Commencing with the month this lease is executed and for each month
thereafter that this lease continues and while it remains undertermined, Lessee
shall pay an advance minimum royalty of $500 per month. This advance minimum
royalty shall be credited to the Net Profits Royalty obligation referred to
above in this Article 7. The royalty shall be paid during the month this lease
is executed on or before the last day of the month, and thereafter on or before
the last day of each succeeding month. Also, the $500 sum, the "base amount",
shall be increased ten percent (10%) of the base amount, or $50.00, at the
commencement of each successive five year period.
ARTICLE 8. TAILINGS AND RESIDUE.
Tailings and other residue resulting from the milling or other
beneficiating of ores produced from the leased premises and subsequently
utilized in mining operations shall be the sole and exclusive property of Lessee
prior to termination of this lease. Tailings and other residue remaining
underground in the leased premises shall become the property of the Lessor upon
termination of this lease. A separate written agreement will be negotiated by
the parties in good faith for the construction of a surface mill tailings
impoundment on the leased premises if determined necessary by the Lessee. The
terms of such agreement shall be consistent with industry standards and the
parties agree to submit to arbitration any matter to which the parties can not
agree during the negotiation of such an agreement.
ARTICLE 9. CROSS-MINING RIGHTS.
Lessee is hereby granted the right, if it so desires, to mine or remove
from the leased premises any ores, waste, water and other materials existing
therein or thereon or in any part thereof, through or by means of shafts,
openings or pits which may be sunk or made upon adjoining or nearby property
owned or controlled by Lessee, and may stockpile any ores, waste, or other
materials and/or concentrated products of ores or materials from the leased
premises or any part thereof, upon stockpile grounds situated upon any such
adjoining or nearby property; and Lessee may, if it so desires, use the leased
premises and any part thereof and any shafts, openings, pits and stockpile
grounds sunk
10
<PAGE> 11
SILVER BUCKLE MINES, INC. LEASE CONT'D.
or made thereon for the mining, removal and/or stockpiling of any ores, waste,
water and other materials and/or concentrated products of ores or materials from
any such adjoining or nearby property, or for any purpose or purposes connected
therewith, not, however, preventing or interfering with the mining or removal of
ore from the leased premises. If, after this lease expires or terminates, Lessee
is exploring, mining or developing adjacent properties thereto, it may use any
haulageways developed during the terms of the lease for ingress and egress
reasonably necessary to explore, develop or mine such adjacent properties. The
Lessee shall be responsible for haulageway maintenance costs and liabilities
resulting from its negligent acts. The Lessee's right of ingress and egress
shall not interfere with future development of the property by the Lessor. This
provision for ingress and egress to and from such adjacent properties shall
survive the expiration or termination of this lease.
ARTICLE 10. VERTICAL BOUNDARY PLANES.
In consideration of Lessee's execution of this mining lease, and the
reciprocal benefits received by reason of the terms of this Article by the
Lessor and the Lessee, Lessor and Lessee hereby agree with each other that any
and all ores and minerals within the surface boundaries extended downward
vertically of any claim so held under lease and herein defined as leased
premises shall belong to such claim. It is understood that the concept of
vertical boundaries applies only as between Lessor and Lessee, and that neither
party intends to, or will, give up any extralateral rights to third parties. In
the case of extralateral rights extending from the leased premises, then Lessee
will either lease the adjacent property or mine it by exercising extralateral
rights. In both cases, the Lessee and Lessor interests shall be diluted
proportionately based on the cost of leasing or acquiring the adjacent property.
For example, if it costs a twenty percent (20%) NPR to lease an adjacent
property of a third party, the Lessor in our agreement would suffer a twenty
percent (20%) reduction in its net profit interest, and the Lessee in our
agreement would suffer a twenty percent (20%) reduction as below:
<TABLE>
<S> <C>
Net Profits = $100 from Third Party Property
</TABLE>
11
<PAGE> 12
SILVER BUCKLE MINES, INC. LEASE CONT'D.
<TABLE>
<S> <C>
Lessor Dilution
---------------
20% of 20% = $4 (or 4% Net Reduction)
Lessee Dilution
---------------
20% of 80% = $16 (or 16% Net Reduction)
</TABLE>
ARTICLE 11. RECORDS AND INSPECTION.
Lessee's engineering progress maps and all factual exploration, development
and production data including drill core and assay results (but excluding
interpretive information or data) from the leased premises shall be available
upon reasonable request for Lessor's inspection. The Lessor may enter said
property at reasonable times for the purpose of inspecting the same, and Lessee
shall facilitate such inspection in reasonable ways, but Lessor shall enter upon
said leased premises at Lessor's own risk and so as not to hinder unreasonably
the operations of Lessee; and the Lessor shall indemnify and hold harmless the
Lessee from any damage, claim or demand by reason of injury to or the presence
of the Lessor or the Lessor's agents, representatives, licensees, or guests or
any of them on the leased premises or approaches thereto.
ARTICLE 12. TAXES.
Lessee shall pay before they are delinquent all general property taxes and
governmental rental fees for unpatented claims assessed against the Lessor's
ownership in the leased premises during the term of this lease, beginning with
the year 1997. Lessee shall also pay, before they are delinquent, all taxes
levied or assessed against any or all personal property, machinery and equipment
placed upon the leased premises by the Lessee during the term of this lease and
beginning in the year 1997. As to severance tax and all other taxes that are now
or may be hereafter levied and computed on the amount or value of ores produced
from the leased premises, Lessee shall pay the same.
ARTICLE 13. STATE AND FEDERAL LAWS AND REGULATIONS.
12
<PAGE> 13
SILVER BUCKLE MINES, INC. LEASE CONT'D.
Lessee shall comply with the Workmen's Compensation laws of Idaho and with
Social Security, Unemployment Insurance and all other state and federal laws and
regulations relating to Lessee's operations and shall save Lessor harmless from
any claim for damages or liability by reason thereof.
ARTICLE 14. PROTECTION FROM LIENS AND DAMAGES.
Lessee shall keep the leased premises and the whole and every part thereof
free and clear of liens for labor done or work performed upon the leased
premises or materials furnished to it for the development or operation thereof
under this lease while the same is in force and effect, and will save and keep
harmless Lessor from all costs, loss or damage which may arise by reason of
injury to any persons employed by Lessee in or upon the leased premises or any
part thereof or which may arise by reason of injury to any persons or damage to
any property as the result of any work or operations of the Lessee or of its
possession and occupancy of the leased premises. A lien upon the property shall
not constitute a default if the Lessee in good faith disputes the validity of
the claim, in which event the existence of the lien shall constitute a default
only from and after the validity of the lien has been adjudicated.
ARTICLE 15. FORCE MAJEURE.
If Lessee is unable to perform any of the terms or covenants of this lease
by reason of damage or delay resulting from disaster, labor disturbances,
shortage of labor, strikes, lockouts, act of God, or from any regulations or
restrictions of any governmental agency, or on account of any eventuality beyond
the reasonable control of Lessee, including state and federal environmental
statute or regulation, Lessee shall be excused from performance during the
period of such prevention and the time for performance of such obligations shall
be extended for a period equal to the period or periods of prevention. In the
event Lessee or its purchaser of concentrates or crude ore is, becomes or
believes it is about to become subject, at any time, to environmental
regulations (which shall include any governmental law, rule, order, regulation,
policy, proposal or restriction relating to environmental pollution) which will
prohibit or
13
<PAGE> 14
SILVER BUCKLE MINES, INC. LEASE CONT'D.
materially affect any operation Lessee is carrying out, or planning to carry out
hereunder, Lessee shall have the right to declare the existence of a condition
of force majeure during the period in which it is in good faith seeking a
feasible method to comply with, be exempted from, modify, obtain necessary
permits or licenses under, or prevent the enactment or promulgation of said
environmental regulations. Lessee agrees to use reasonable diligence to remove
causes of force majeure as may occur from time to time, but shall not be
required to settle strikes or other labor difficulties contrary to its own
judgment.
14
<PAGE> 15
SILVER BUCKLE MINES, INC. LEASE CONT'D.
ARTICLE 16. DEFAULT.
The failure of Lessee to make or cause to be made any of the material
payments herein provided for or to keep or perform any material agreement on its
part to be kept or performed according to the terms and provisions of this
lease, shall, at the election of the Lessor, work a forfeiture hereof; provided,
however, that in the event of a default on the part of the Lessee, the Lessor
shall give to the Lessee a written notice of its intention to declare a
forfeiture of this lease and to terminate the same on account thereof, or of its
intention to take other action to enforce this lease, specifying the particular
default or defaults relied upon by it, and Lessee shall have a reasonable time
(which in any case shall not be less than sixty (60) days) after receipt of such
notice in which to make good such default or defaults, in which event there
shall be no forfeiture therefor, and no other action may be taken for
enforcement. If Lessee disagrees that such default occurred, it shall so advise
Lessor in writing thirty (30) days after receipt of the notice of default. If,
within fifteen (15) days thereafter, the parties have not resolved the dispute
by mutual agreement, the issue of default shall then be submitted to arbitration
under Article 21 below. In the event that Lessor does terminate this lease on
account of a breach by Lessee, Lessee shall be under no further obligation or
liability hereunder to Lessor from and after the date of such termination except
for the performance of obligations and the satisfaction of liabilities to Lessor
or third parties or respecting the leased premises, which have accrued to the
date of such termination.
ARTICLE 17. CANCELLATION.
Notwithstanding any provision herein to the contrary, Lessee may at any
time upon 30 days' written notice, cancel and terminate this lease in its
entirety. Upon total cancellation and termination of this lease, Lessee shall be
under no further obligation of whatsoever kind or nature to the Lessor except
for the making of payments which have already accrued to the date of such
cancellation and termination, including governmental rental fees for unpatented
claims and for the payment of Lessee's proportion of the aforesaid property
taxes accrued while this
15
<PAGE> 16
SILVER BUCKLE MINES, INC. LEASE CONT'D.
lease was in effect. If Lessee shall have included any part of the leased
premises in a "producing group" for assessment purposes, and taxes based on such
assessment shall have been levied but shall not have been paid at the time of
cancellation and termination Lessee shall pay such taxes before they are
delinquent. Work requirements specified in Article 6 shall cease upon the date
such notice is given.
ARTICLE 18. SURRENDER OF PROPERTY.
In the event of a valid forfeiture, cancellation, or other termination of
this lease, Lessee shall surrender to Lessor peaceable possession of the leased
premises and at the written request of Lessor shall deliver to the Lessor a
written relinquishment hereof, together with a copy, if requested by Lessor
within thirty (30) days after termination of this lease, of its engineering
progress maps showing any workings made or uncovered by Lessee on the
above-described leased premises. The Lessee's factual exploration, development
and production data including drill core and assay results (but excluding
interpretive information or data) from the leased premises shall be available
upon request to the Lessor.
ARTICLE 19. REMOVAL OF EQUIPMENT.
Lessee shall have and is hereby given and granted twelve (12) months after
a valid forfeiture, cancellation or other termination of this lease to remove
from said property all buildings, structures, warehouse stocks, merchandise,
materials, tools, hoists, compressors, engines, motors, pumps, transformers,
electrical accessories, metal or wooden tanks, pipes and connections, rails,
mine cars and any and all machinery, trade fixtures, and equipment erected or
placed in or upon said property by it, provided that such right of removal shall
not extend to foundations and mine timbers in place unless Lessor shall have
given his previous written consent thereto. If Lessee is hampered by snowdrifts,
washouts, inclement weather, or other climatic conditions, from completing the
removal of said property and equipment within the time specified, then Lessor
agrees to extend the time by a reasonable period if requested by Lessee.
16
<PAGE> 17
SILVER BUCKLE MINES, INC. LEASE CONT'D.
ARTICLE 20. TITLE AND PATENT.
Lessor covenants that Lessor now holds title and possession of the leased
premises free and clear from all former grants, sales, liens, or encumbrances of
any kind, and that there are no delinquent taxes and all government rental fees
are current; that Lessor has no knowledge of any defects in title or adverse
claims and agrees to furnish Lessee such abstracts, deeds, or other evidences of
title as may be in Lessor's possession and control, and to allow and cooperate
with Lessee, at Lessee's option and initial expense, to have abstracts brought
to date and to take such steps and proceedings to search and perfect title as
Lessee shall deem advisable. All reasonable expense so incurred by Lessee shall
apply as a credit against royalties. Lessee shall have the right to seek to
patent the leased premises or any portion thereof in the name of Lessor if it so
elects, and the cost thereof may be charged as operating costs hereunder. Lessor
agrees to cooperate to a reasonable extent in any patent proceedings.
ARTICLE 21. ARBITRATION OF DISPUTES.
Any controversy, dispute or claim arising out of or from this lease, or
alleged breach thereof, shall be settled by arbitration pursuant to the Uniform
Arbitration Act of the State of Idaho (Sections 7-901, et.seq., Idaho Code)
as amended and as in effect on the date either party commences arbitration
proceedings. Said Act shall control the substantive and procedural aspects of
the proceedings unless otherwise agreed in this lease. Judicial review may be
had pursuant to said Act.
(a) Proceedings shall be initiated by the complaining party serving upon
the other party a complaint, as would be done in court proceedings.
The allegations regarding the circumstances giving rise to the issues
to be arbitrated shall be stated in detail and with particularity. The
party upon whom the complaint is served shall answer or otherwise
respond with a pleading just as is required by the Idaho Rules of
Civil Procedure for a court action. Except, however, the response
shall be served upon the initiating party
17
<PAGE> 18
SILVER BUCKLE MINES, INC. LEASE CONT'D.
within 30 days from the date of service of the complaint.
(b) The parties shall agree upon an arbitrator, who shall be a retired
State of Idaho District Court judge (not a retired Magistrate) who is
neutral, competent and willing to serve and, if possible, who has
experience in cases involving mining and mining contracts. Should the
parties fail to reach agreement within 20 days from the date
proceedings are initiated, either party may apply to the court for
appointment of an arbitrator who meets the criteria set forth herein
pursuant to the provisions of section 7-903 Idaho Code.
(c) Prehearing discovery shall not be allowed except upon order of the
arbitrator for good cause shown, the parties being in agreement that
the expense and time associated with discovery should be minimized,
and that this desire should, however, be balanced against the need for
each party to be able to effectively present its case.
(d) Each party to the arbitration proceedings shall bear one-half of the
arbitrator's fees and expenses, which shall be promptly paid by each
party monthly within 15 days from the submission by the arbitrator to
the parties of his reasonably detailed and itemized statement for
services rendered, which statement shall be submitted by the
arbitrator at the end of each month.
(e) Each party shall bear its own attorney's fees and costs of litigation
for the proceedings before the arbitrator. This subparagraph (e) is
not applicable to court proceedings, in which event the parties
recognize that applicable law shall govern and the matter will be
decided by the court.
ARTICLE 22. RECORDATION OF SHORT FORM NOTICE.
18
<PAGE> 19
SILVER BUCKLE MINES, INC. LEASE CONT'D.
Lessor agrees to execute, upon request by Lessee, a short-form notice of
this lease, which notice shall be for purposes of recordation in the real
property records of Shoshone County, Idaho.
ARTICLE 23. NOTICES.
Any notices required or permitted to be given to the Lessor hereunder shall
be considered as delivered forty-eight (48) hours after the same shall have been
deposited in the United States mail, duly registered, with postage thereon
prepaid. All notices given hereunder shall be addressed to the respective
addresses given below:
If to Lessor,
SILVER BUCKLE MINES, INC.
P.O. Box 469
Wallace, Idaho 83873
19
<PAGE> 20
SILVER BUCKLE MINES, INC. LEASE CONT'D.
and if to Lessee,
Silver Valley Resources Corporation
P.O. Box 440
Wallace, Idaho 83873
Said addresses for receiving notices may be changed by either party upon
two (2) days previous notice to the other party.
ARTICLE 24. INUREMENT.
These presents shall inure to the benefit of and be binding upon the
respective heirs, executors, administrators, successors and assigns of the
parties hereto.
ARTICLE 25. CONSTRUCTION.
Titles to the respective articles hereof shall not be deemed a part of this
lease but shall be regarded as having been used for convenience only.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the day and year first above written.
LESSOR
SILVER BUCKLE MINES, INC.
By
---------------------------------
Attest:
- ------------------------
Secretary
20
<PAGE> 21
SILVER BUCKLE MINES, INC. LEASE CONT'D.
STATE OF IDAHO )
) ss.
COUNTY OF )
On this _____ day of _________, 1997, before me, ________________, the
undersigned, a Notary Public in and for the State of Idaho, personally appeared,
___________________, known to me to be the _____________ of Silver Buckle Mines,
Inc. and whose name is subscribed to the within instrument, and acknowledged to
me that he executed the same on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
---------------------------------
Notary Public for Idaho
Residing at
---------- -----------
My Commission expires
-----------
LESSEE
SILVER VALLEY RESOURCES CORPORATION
By
-----------------------------------
Attest:
- ------------------------
Secretary
STATE OF IDAHO )
) ss.
21
<PAGE> 22
SILVER BUCKLE MINES, INC. LEASE CONT'D.
COUNTY OF )
On this _____ day of __________, 1997, before me, ________________, the
undersigned, a Notary Public in and for the State of Idaho, personally appeared,
___________________, known to me to be the _____________ of Silver Valley
Resources Corporation and whose name is subscribed to the within instrument, and
acknowledged to me that he executed the same on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
---------------------------------
Notary Public for Idaho
Residing at
---------------------
My Commission expires
-----------
22
<PAGE> 1
EXHIBIT 10(d)
TABLE OF CONTENTS
PLACER CREEK MINING COMPANY LEASE
ARTICLE 1. DESCRIPTION OF THE PROPERTY.......................................3
ARTICLE 2. GRANT OF LEASE....................................................3
ARTICLE 3. TERM OF LEASE.....................................................3
ARTICLE 4.....................................................................4
(A) POSSESSION AND CONTROL OF PROPERTY...............................4
(B) TIMBER...............................................................5
ARTICLE 5. MANNER OF WORK..................................................5
ARTICLE 6. WORK REQUIREMENTS.................................................5
ARTICLE 7. ROYALTIES.........................................................6
(A) ROYALTY SCHEDULE.....................................................6
(1) OPERATING EXPENDITURES..........................................7
(2) EXPLORATION AND DEVELOPMENT EXPENDITURES........................8
(B) COMMINGLING OF ORE...................................................8
(C) TREATMENT AT LESSEE'S PROCESSING FACILITIES..........................9
(D) DISPUTES REGARDING ROYALTIES.........................................9
(E) ADVANCE MINIMUM ROYALTY..............................................9
ARTICLE 8. TAILINGS AND RESIDUE............................................10
<PAGE> 2
PLACER CREEK MINING COMPANY LEASE CONT'D.
ARTICLE 9. CROSS MINING RIGHTS..............................................10
ARTICLE 10. VERTICAL BOUNDARY PLANES........................................11
ARTICLE 11. RECORDS AND INSPECTION.........................................12
ARTICLE 12. TAXES...........................................................12
ARTICLE 13. STATE AND FEDERAL LAWS AND REGULATIONS..........................12
ARTICLE 14. PROTECTION FROM LIENS AND DAMAGES...............................13
ARTICLE 15. FORCE MAJEURE...................................................13
ARTICLE 16. DEFAULT........................................................15
ARTICLE 17. CANCELLATION...................................................15
ARTICLE 18. SURRENDER OF PROPERTY...........................................16
ARTICLE 19. REMOVAL OF EQUIPMENT............................................16
ARTICLE 20. TITLE AND PATENT................................................17
ARTICLE 21. ARBITRATION OF DISPUTES.........................................17
ARTICLE 22. RECORDATION OF SHORT FORM NOTICE................................18
ARTICLE 23. NOTICES.........................................................19
ARTICLE 24. INUREMENT.......................................................20
ARTICLE 25. CONSTRUCTION....................................................20
2
<PAGE> 3
PLACER CREEK MINING COMPANY LEASE
THIS MINING LEASE, effective as of the 21st day of March, 1997, regardless
of the actual times of signing and acknowledgment, between PLACER CREEK MINING
COMPANY, an Idaho corporation, hereinafter called Lessor, and SILVER VALLEY
RESOURCES CORPORATION, a Delaware Corporation, hereinafter called Lessee,
WITNESSETH:
ARTICLE 1. DESCRIPTION OF THE PROPERTY.
Lessor represents that it is the owner of 0 patented and 61 unpatented lode
mining claims situated in Shoshone County, Idaho, as described on Exhibit A
which by this reference is made a part of this Lease.
ARTICLE 2. GRANT OF LEASE.
The Lessor in consideration of the royalties herein reserved and the
covenants to be performed by Lessee, does hereby lease, let and demise unto
Lessee, its successors and assigns, all of the above described property
(hereinafter referred to as the "leased premises" or "demised premises").
ARTICLE 3. TERM OF LEASE.
The primary term of this lease shall be twenty (20) years to commence on
March 21, 1997. Upon written notice, which must be sent to Lessor at least
thirty (30) days prior to the expiration of the primary term in order to be
effective, Lessee may extend this lease for a successive term of twenty (20)
years and so long thereafter as ores or minerals from the leased premises are
being developed, mined, processed or marketed on a continuing basis. Whenever
the continued term of this Lease is dependent upon continuing development,
mining, processing or marketing by Lessee and there occur periods (i) when there
is no reasonable market for ores or minerals which are or could be produced by
Lessee from the leased premises, or (ii) when the continuing development,
mining, processing or marketing by Lessee of ores or minerals from the leased
premises is prevented or interrupted by a condition or happening of force
majeure, the term of this Lease shall nevertheless continue during such periods,
subject to termination by Lessor if the suspension of operations for the
enumerated causes has continued without interruption for at least five (5)
years. When a satisfactory
3
<PAGE> 4
PLACER CREEK MINING COMPANY LEASE CONT'D.
market becomes available, or upon cessation of any period of force majeure,
Lessee shall have a reasonable time thereafter within which to resume
development, mining, processing or marketing of ores and minerals from the
leased premises. No cessation of operations for one hundred eighty (180)
consecutive days or less, when such cessation is caused by any other reason,
shall be considered a break in the continuity of development, mining, processing
or marketing. A "reasonable market" shall not be deemed to exist and Lessee may
suspend operations during periods when the products of the leased premises
cannot be produced and sold at a profit by reason of low metal prices or
otherwise or when such products cannot be readily sold at prevailing prices so
that an unreasonable inventory thereof has accumulated or otherwise would
accumulate.
ARTICLE 4.
(a) POSSESSION AND CONTROL OF PROPERTY.
Lessee shall have, and it is hereby given and granted, the right to enter upon
and take over, at the beginning of the primary term hereof, the sole and
exclusive possession and control of the leased premises and the whole and every
part thereof, and, during the term of this lease, to remain in the sole and
exclusive possession and control thereof, and to investigate, measure, sample,
examine, test, develop, work, mine, operate, use, manage, and control the same
and the water and water rights appurtenant thereto, and to mine, extract and
remove from said property the ores and minerals therein and appurtenant and
belonging thereto, and to treat, mill, ship, sell or otherwise dispose of the
same and receive the full proceeds therefrom; and to erect, construct, maintain,
use and operate thereon and therein buildings, structures, machinery and
equipment. The time, nature, location and extent of such or any or all the above
activities and mining or mining operations and the cessation and resumption
thereof shall be at the sole discretion of Lessee, and may include, without
limitation, open pit, underground, strip, or solution mining methods, together
with the right to use so much of the surface as may be necessary, useful or
convenient for the enjoyment of all rights herein granted including construction
of a surface mine waste rock dump, if necessary, from development of Lessor's
property. Any surface mine waste dump constructed
4
<PAGE> 5
PLACER CREEK MINING COMPANY LEASE CONT'D.
during the life of this lease shall be reclaimed to industry standards by Lessee
at lease termination.
(b) TIMBER. Lessee shall have the right, pursuant to applicable law, to
manage and use timber upon the property in accordance with law. In addition, in
the event Lessee elects to seek patents for the property described on Exhibit A,
Lessee shall have the right to manage and harvest the timber situated thereon.
In either event Lessee shall account for the value of timber removed and the
value shall be treated just as proceeds from the sale of metal is treated and
accounted for under this lease.
ARTICLE 5. MANNER OF WORK.
Lessee agrees to cause all work, development and mining to be done in a
careful and minerlike manner, and to conform in all respects to the mining laws
and regulations of the United States and the State of Idaho.
ARTICLE 6. WORK REQUIREMENTS.
During the first five years of the primary term hereof Lessee shall perform
$125,000 of work upon, towards or for the eventual benefit of the leased
premises. Thereafter, for each five year period this lease is in effect, an
additional $125,000 of work upon, toward or for the eventual benefit of
the leased premises shall be performed.
The term "upon" means exploration or development work performed within the
exterior vertical boundaries of the leased premises. The work may include, but
is not limited to diamond drilling, drifting, shaft sinking, raising,
rehabilitation of existing underground openings in advance of any such work,
surface mapping, geochemical surveys, stratigraphic and structural
investigations, metallurgical and other physical analytical work, mine
engineering and geological analysis which enhances the understanding of the
geology and possible mineralization of the leased premises, and in addition all
unpatented claim holding costs.
5
<PAGE> 6
PLACER CREEK MINING COMPANY LEASE CONT'D.
The term "toward" means the kind of work described above, but performed
within 1,000 feet of any exterior boundary of the leased premises.
The phrase "for the eventual benefit of" means the kinds of work described
above and shall also include seventeen and one-half percent (17 1/2%) of the
cost of shaft sinking which may not be within 1,000 feet of the exterior
boundary of the leased premises.
In the event work is performed in excess of the $125,000 minimum during any
period, the excess may be carried forward to the credit of the Lessee for the
next five year period, but not beyond the succeeding five year period.
ARTICLE 7. ROYALTIES.
(a) Royalty Schedule. Lessee shall pay Lessor a 20% Net Profits Royalty, as
defined in Exhibit B, on all development and production ores and minerals
extracted, milled and sold from the leased premises in accordance with Exhibit B
which is attached hereto and by this reference is made a part of this Lease.
The Net Profits Royalty shall be increased above twenty percent (20%), or
decreased to not less than twenty percent (20%), in accordance with the
quarterly average price of silver, as shown on the schedule which follows:
<TABLE>
<CAPTION>
Sliding Scale Royalty Payments
-------------------------------------------
Net Profit Royalty Quarterly Average
Percentage Silver Price
------------------ -----------------
<S> <C>
20% less than $11.00
21% greater than $11.00
22% greater than $11.25
</TABLE>
6
<PAGE> 7
PLACER CREEK MINING COMPANY LEASE CONT'D.
<TABLE>
<S> <C>
23% greater than $11.50
24% greater than $11.75
25% greater than $12.00
30% greater than $13.50
35% greater than $15.00
40% greater than $16.50
</TABLE>
The term "quarterly average price of silver" means the sum of all closing
prices as quoted by the Comex Metals Exchange for each day of the calendar
quarter that a quote is given, divided by the number of days quoted.
Obligation for quarterly payment of the Net Profits Royalty shall commence after
Lessee has recovered all operating, exploration and development expenditures
incurred by Lessee attributed to the leased premises following the effective
date of this lease. For the purpose of calculating these costs, all applicable
operating, exploration and development expenditures shall be determined in
accordance with generally accepted accounting principles for metallic mining
ventures within the United States applied on a consistent basis ("GAAP") which
are incurred after the effective date of this lease, as follows (calculation of
Net Profits Royalty shall be determined exclusively under Exhibit B after these
operating, exploration and development expenditures have been recovered):
(1) Operating expenditures include:
(i) Mining Costs. Costs incurred by Lessee in exploring for,
mining, extracting, removing and transporting to a mill ores
and minerals produced from the leased premises. Such costs
shall include, without limitation, those incurred for labor,
machinery operation, fuel, explosives and other materials,
exploration drilling, develop-mental or ore delineation
drilling, allowance for depreciation and depletion of mining
equipment and machinery acquired after the effective date of
this Lease. Mining costs shall not include amortization or
income taxes.
7
<PAGE> 8
PLACER CREEK MINING COMPANY LEASE CONT'D.
(ii) Milling and Processing Costs. Costs incurred in milling or
processing ores and minerals produced from the leased premises
at a mill or central processing facility utilized to process
ores and minerals produced from the leased premises, if any,
(hereinafter referred to as the "Mill").
(iii) General and Administrative Costs. Costs incurred as a direct
result of the administration of the leased premises, and the
production of ores and minerals therefrom, including costs
incurred in connection with the marketing, selling, and
collection of proceeds from sale of ores and minerals produced
from the leased premises.
(iv) Taxes. All taxes levied against Lessee's operation of the
leased premises, excluding income taxes but including mining
and property taxes.
(2) Exploration and Development Expenditures. Costs incurred by Lessee
after the effective date hereof with respect to exploring and developing the
leased premises and all matters connected therewith including, but not limited
to, costs relating to geological, geochemical and geophysical studies,
exploration and developmental drilling, sampling and assaying, mine design and
development, acquisition of mining or processing equipment or machinery, direct
expenses of making application for and obtaining environmental and regulatory
permits from government agencies (including reasonable attorney's fees), costs
to patent the unpatented claims and any other costs which would be included
within mining costs and/or milling and processing costs if such costs were
incurred after the Commencement of Commercial Production.
If any of the costs otherwise includable in Lessee's costs as set
forth above are incurred partly for the benefit of any other properties or
interests of Lessee, only the portion of such costs reasonably attributable to
development and operation of the leased premises in accordance with GAAP shall
be included.
(b) Commingling of Ore.
8
<PAGE> 9
PLACER CREEK MINING COMPANY LEASE CONT'D.
Lessee may commingle ore from the leased premises with ore from other
properties, either before or after concentration or beneficiation, so long as
the data necessary to determine the weight and grade, both of the ore removed
from the leased premises and the ore with which it is commingled, are obtained
by Lessee. Lessee shall then use that weight and grade data to allocate Gross
Sales (as defined in Exhibit B) from the commingled ore between the leased
premises and the other properties from which the other commingled ore was
removed. All such weight, grade and allocation calculations by Lessee shall be
done in a manner recognized by the mining industry as practical and sufficient
at that time. If, in Lessee's judgment, it is impractical to determine which
portions of any of the costs and expenses described in Paragraph (a) above are
directly attributable to ore removed from the leased premises, Lessee may
allocate all such costs and expenses on a straight-line, per-ton basis among all
ores that give rise to those expenses, in accordance with GAAP.
(c) Treatment at Lessee's Processing Facilities.
Lessee shall have the right to purchase and to treat concentrates and
smelting ores produced from the leased premises at its own metallurgical
facility; provided, however, that any such purchase and treatment shall be made
under comparable terms as the metallurgical facility is then offering to other
shippers of concentrates and smelting ores on purchases of like quantities and
qualities.
(d) Disputes Regarding Royalties.
Lessor shall be deemed to have waived any right the Lessor may have
had to object to the royalty settlement made by Lessee in accordance with
Exhibit B for any calendar quarter, unless Lessor notifies Lessee in writing of
such objection within twelve (12) months after such royalty is due under this
Lease. If Lessor and Lessee are unable to resolve the question by agreement
within thirty (30) days after Lessee's receipt of Lessor's notice, the dispute
shall be resolved by arbitration, in accordance with the provisions of Article
21.
(e) Advance Minimum Royalty.
9
<PAGE> 10
PLACER CREEK MINING COMPANY LEASE CONT'D.
Commencing with the month this lease is executed and for each month
thereafter that this lease continues and while it remains undertermined, Lessee
shall pay an advance minimum royalty of $500 per month. This advance minimum
royalty shall be credited to the Net Profits Royalty obligation referred to
above in this Article 7. The royalty shall be paid during the month this lease
is executed on or before the last day of the month, and thereafter on or before
the last day of each succeeding month. Also, the $500 sum, the "base amount",
shall be increased ten percent (10%) of the base amount, or $50.00, at the
commencement of each successive five year period.
ARTICLE 8. TAILINGS AND RESIDUE.
Tailings and other residue resulting from the milling or other
beneficiating of ores produced from the leased premises and subsequently
utilized in mining operations shall be the sole and exclusive property of Lessee
prior to termination of this lease. Tailings and other residue remaining
underground in the leased premises shall become the property of the Lessor upon
termination of this lease. A separate written agreement will be negotiated by
the parties in good faith for the construction of a surface mill tailings
impoundment on the leased premises if determined necessary by the Lessee. The
terms of such agreement shall be consistent with industry standards and the
parties agree to submit to arbitration any matter to which the parties can not
agree during the negotiation of such an agreement.
ARTICLE 9. CROSS-MINING RIGHTS.
Lessee is hereby granted the right, if it so desires, to mine or remove
from the leased premises any ores, waste, water and other materials existing
therein or thereon or in any part thereof, through or by means of shafts,
openings or pits which may be sunk or made upon adjoining or nearby property
owned or controlled by Lessee, and may stockpile any ores, waste, or other
materials and/or concentrated products of ores or materials from the leased
premises or any part thereof, upon stockpile grounds situated upon any such
adjoining or nearby property; and Lessee may, if it so desires, use the leased
premises and any part thereof and any shafts, openings, pits and stockpile
grounds sunk
10
<PAGE> 11
PLACER CREEK MINING COMPANY LEASE CONT'D.
or made thereon for the mining, removal and/or stockpiling of any ores, waste,
water and other materials and/or concentrated products of ores or materials from
any such adjoining or nearby property, or for any purpose or purposes connected
therewith, not, however, preventing or interfering with the mining or removal of
ore from the leased premises. If, after this lease expires or terminates, Lessee
is exploring, mining or developing adjacent properties thereto, it may use any
haulageways developed during the terms of the lease for ingress and egress
reasonably necessary to explore, develop or mine such adjacent properties. The
Lessee shall be responsible for haulageway maintenance costs and liabilities
resulting from its negligent acts. The Lessee's right of ingress and egress
shall not interfere with future development of the property by the Lessor. This
provision for ingress and egress to and from such adjacent properties shall
survive the expiration or termination of this lease.
ARTICLE 10. VERTICAL BOUNDARY PLANES.
In consideration of Lessee's execution of this mining lease, and the
reciprocal benefits received by reason of the terms of this Article by the
Lessor and the Lessee, Lessor and Lessee hereby agree with each other that any
and all ores and minerals within the surface boundaries extended downward
vertically of any claim so held under lease and herein defined as leased
premises shall belong to such claim. It is understood that the concept of
vertical boundaries applies only as between Lessor and Lessee, and that neither
party intends to, or will, give up any extralateral rights to third parties. In
the case of extralateral rights extending from the leased premises, then Lessee
will either lease the adjacent property or mine it by exercising extralateral
rights. In both cases, the Lessee and Lessor interests shall be diluted
proportionately based on the cost of leasing or acquiring the adjacent property.
For example, if it costs a twenty percent (20%) NPR to lease an adjacent
property of a third party, the Lessor in our agreement would suffer a twenty
percent (20%) reduction in its net profit interest, and the Lessee in our
agreement would suffer a twenty percent (20%) reduction as below:
Net Profits = $100 from Third Party Property
11
<PAGE> 12
PLACER CREEK MINING COMPANY LEASE CONT'D.
Lessor Dilution
---------------
20% of 20% = $4 (or 4% Net Reduction)
Lessee Dilution
---------------
20% of 80% = $16 (or 16% Net Reduction)
ARTICLE 11. RECORDS AND INSPECTION.
Lessee's engineering progress maps and all factual exploration,
development and production data including drill core and assay results (but
excluding interpretive information or data) from the leased premises shall be
available upon reasonable request for Lessor's inspection. The Lessor may enter
said property at reasonable times for the purpose of inspecting the same, and
Lessee shall facilitate such inspection in reasonable ways, but Lessor shall
enter upon said leased premises at Lessor's own risk and so as not to hinder
unreasonably the operations of Lessee; and the Lessor shall indemnify and hold
harmless the Lessee from any damage, claim or demand by reason of injury to or
the presence of the Lessor or the Lessor's agents, representatives, licensees,
or guests or any of them on the leased premises or approaches thereto.
ARTICLE 12. TAXES.
Lessee shall pay before they are delinquent all general property taxes and
governmental rental fees for unpatented claims assessed against the Lessor's
ownership in the leased premises during the term of this lease, beginning with
the year 1997. Lessee shall also pay, before they are delinquent, all taxes
levied or assessed against any or all personal property, machinery and equipment
placed upon the leased premises by the Lessee during the term of this lease and
beginning in the year 1997. As to severance tax and all other taxes that are now
or may be hereafter levied and computed on the amount or value of ores produced
from the leased premises, Lessee shall pay the same.
ARTICLE 13. STATE AND FEDERAL LAWS AND REGULATIONS.
12
<PAGE> 13
PLACER CREEK MINING COMPANY LEASE CONT'D.
Lessee shall comply with the Workmen's Compensation laws of Idaho and with
Social Security, Unemployment Insurance and all other state and federal laws and
regulations relating to Lessee's operations and shall save Lessor harmless from
any claim for damages or liability by reason thereof.
ARTICLE 14. PROTECTION FROM LIENS AND DAMAGES.
Lessee shall keep the leased premises and the whole and every part thereof
free and clear of liens for labor done or work performed upon the leased
premises or materials furnished to it for the development or operation thereof
under this lease while the same is in force and effect, and will save and keep
harmless Lessor from all costs, loss or damage which may arise by reason of
injury to any persons employed by Lessee in or upon the leased premises or any
part thereof or which may arise by reason of injury to any persons or damage to
any property as the result of any work or operations of the Lessee or of its
possession and occupancy of the leased premises. A lien upon the property shall
not constitute a default if the Lessee in good faith disputes the validity of
the claim, in which event the existence of the lien shall constitute a default
only from and after the validity of the lien has been adjudicated.
ARTICLE 15. FORCE MAJEURE.
If Lessee is unable to perform any of the terms or covenants of this lease
by reason of damage or delay resulting from disaster, labor disturbances,
shortage of labor, strikes, lockouts, act of God, or from any regulations or
restrictions of any governmental agency, or on account of any eventuality beyond
the reasonable control of Lessee, including state and federal environmental
statute or regulation, Lessee shall be excused from performance during the
period of such prevention and the time for performance of such obligations shall
be extended for a period equal to the period or periods of prevention. In the
event Lessee or its purchaser of concentrates or crude ore is, becomes or
believes it is about to become subject, at any time, to environmental
regulations (which shall include any governmental law, rule, order, regulation,
policy, proposal or restriction relating to environmental pollution) which will
prohibit or
13
<PAGE> 14
PLACER CREEK MINING COMPANY LEASE CONT'D.
materially affect any operation Lessee is carrying out, or planning to carry out
hereunder, Lessee shall have the right to declare the existence of a condition
of force majeure during the period in which it is in good faith seeking a
feasible method to comply with, be exempted from, modify, obtain necessary
permits or licenses under, or prevent the enactment or promulgation of said
environmental regulations. Lessee agrees to use reasonable diligence to remove
causes of force majeure as may occur from time to time, but shall not be
required to settle strikes or other labor difficulties contrary to its own
judgment.
14
<PAGE> 15
PLACER CREEK MINING COMPANY LEASE CONT'D.
ARTICLE 16. DEFAULT.
The failure of Lessee to make or cause to be made any of the material
payments herein provided for or to keep or perform any material agreement on its
part to be kept or performed according to the terms and provisions of this
lease, shall, at the election of the Lessor, work a forfeiture hereof; provided,
however, that in the event of a default on the part of the Lessee, the Lessor
shall give to the Lessee a written notice of its intention to declare a
forfeiture of this lease and to terminate the same on account thereof, or of its
intention to take other action to enforce this lease, specifying the particular
default or defaults relied upon by it, and Lessee shall have a reasonable time
(which in any case shall not be less than sixty (60) days) after receipt of such
notice in which to make good such default or defaults, in which event there
shall be no forfeiture therefor, and no other action may be taken for
enforcement. If Lessee disagrees that such default occurred, it shall so advise
Lessor in writing thirty (30) days after receipt of the notice of default. If,
within fifteen (15) days thereafter, the parties have not resolved the dispute
by mutual agreement, the issue of default shall then be submitted to arbitration
under Article 21 below. In the event that Lessor does terminate this lease on
account of a breach by Lessee, Lessee shall be under no further obligation or
liability hereunder to Lessor from and after the date of such termination except
for the performance of obligations and the satisfaction of liabilities to Lessor
or third parties or respecting the leased premises, which have accrued to the
date of such termination.
ARTICLE 17. CANCELLATION.
Notwithstanding any provision herein to the contrary, Lessee may at any
time upon 30 days' written notice, cancel and terminate this lease in its
entirety. Upon total cancellation and termination of this lease, Lessee shall be
under no further obligation of whatsoever kind or nature to the Lessor except
for the making of payments which have already accrued to the date of such
cancellation and termination, including governmental rental fees for unpatented
claims and for the payment of Lessee's proportion of the aforesaid property
taxes accrued while this
15
<PAGE> 16
PLACER CREEK MINING COMPANY LEASE CONT'D.
lease was in effect. If Lessee shall have included any part of the leased
premises in a "producing group" for assessment purposes, and taxes based on such
assessment shall have been levied but shall not have been paid at the time of
cancellation and termination Lessee shall pay such taxes before they are
delinquent. Work requirements specified in Article 6 shall cease upon the date
such notice is given.
ARTICLE 18. SURRENDER OF PROPERTY.
In the event of a valid forfeiture, cancellation, or other termination of
this lease, Lessee shall surrender to Lessor peaceable possession of the leased
premises and at the written request of Lessor shall deliver to the Lessor a
written relinquishment hereof, together with a copy, if requested by Lessor
within thirty (30) days after termination of this lease, of its engineering
progress maps showing any workings made or uncovered by Lessee on the
above-described leased premises. The Lessee's factual exploration, development
and production data including drill core and assay results (but excluding
interpretive information or data) from the leased premises shall be available
upon request to the Lessor.
ARTICLE 19. REMOVAL OF EQUIPMENT.
Lessee shall have and is hereby given and granted twelve (12) months after
a valid forfeiture, cancellation or other termination of this lease to remove
from said property all buildings, structures, warehouse stocks, merchandise,
materials, tools, hoists, compressors, engines, motors, pumps, transformers,
electrical accessories, metal or wooden tanks, pipes and connections, rails,
mine cars and any and all machinery, trade fixtures, and equipment erected or
placed in or upon said property by it, provided that such right of removal shall
not extend to foundations and mine timbers in place unless Lessor shall have
given his previous written consent thereto. If Lessee is hampered by snowdrifts,
washouts, inclement weather, or other climatic conditions, from completing the
removal of said property and equipment within the time specified, then Lessor
agrees to extend the time by a reasonable period if requested by Lessee.
16
<PAGE> 17
PLACER CREEK MINING COMPANY LEASE CONT'D.
ARTICLE 20. TITLE AND PATENT.
Lessor covenants that Lessor now holds title and possession of the leased
premises free and clear from all former grants, sales, liens, or encumbrances of
any kind, and that there are no delinquent taxes and all government rental fees
are current; that Lessor has no knowledge of any defects in title or adverse
claims and agrees to furnish Lessee such abstracts, deeds, or other evidences of
title as may be in Lessor's possession and control, and to allow and cooperate
with Lessee, at Lessee's option and initial expense, to have abstracts brought
to date and to take such steps and proceedings to search and perfect title as
Lessee shall deem advisable. All reasonable expense so incurred by Lessee shall
apply as a credit against royalties. Lessee shall have the right to seek to
patent the leased premises or any portion thereof in the name of Lessor if it so
elects, and the cost thereof may be charged as operating costs hereunder. Lessor
agrees to cooperate to a reasonable extent in any patent proceedings.
ARTICLE 21. ARBITRATION OF DISPUTES.
Any controversy, dispute or claim arising out of or from this lease, or
alleged breach thereof, shall be settled by arbitration pursuant to the Uniform
Arbitration Act of the State of Idaho (Sections 7-901, et.seq., Idaho Code)
as amended and as in effect on the date either party commences arbitration
proceedings. Said Act shall control the substantive and procedural aspects of
the proceedings unless otherwise agreed in this lease. Judicial review may be
had pursuant to said Act.
(a) Proceedings shall be initiated by the complaining party serving upon
the other party a complaint, as would be done in court proceedings.
The allegations regarding the circumstances giving rise to the issues
to be arbitrated shall be stated in detail and with particularity. The
party upon whom the complaint is served shall answer or otherwise
respond with a pleading just as is required by the Idaho Rules of
Civil Procedure for a court action. Except, however, the response
shall be served upon the initiating party
17
<PAGE> 18
PLACER CREEK MINING COMPANY LEASE CONT'D.
within 30 days from the date of service of the complaint.
(b) The parties shall agree upon an arbitrator, who shall be a retired
State of Idaho District Court judge (not a retired Magistrate) who is
neutral, competent and willing to serve and, if possible, who has
experience in cases involving mining and mining contracts. Should the
parties fail to reach agreement within 20 days from the date
proceedings are initiated, either party may apply to the court for
appointment of an arbitrator who meets the criteria set forth herein
pursuant to the provisions of section 7-903 Idaho Code.
(c) Prehearing discovery shall not be allowed except upon order of the
arbitrator for good cause shown, the parties being in agreement that
the expense and time associated with discovery should be minimized,
and that this desire should, however, be balanced against the need for
each party to be able to effectively present its case.
(d) Each party to the arbitration proceedings shall bear one-half of
the arbitrator's fees and expenses, which shall be promptly paid by
each party monthly within 15 days from the submission by the
arbitrator to the parties of his reasonably detailed and itemized
statement for services rendered, which statement shall be submitted by
the arbitrator at the end of each month.
(e) Each party shall bear its own attorney's fees and costs of litigation
for the proceedings before the arbitrator. This subparagraph (e) is
not applicable to court proceedings, in which event the parties
recognize that applicable law shall govern and the matter will be
decided by the court.
ARTICLE 22. RECORDATION OF SHORT FORM NOTICE.
18
<PAGE> 19
PLACER CREEK MINING COMPANY LEASE CONT'D.
Lessor agrees to execute, upon request by Lessee, a short-form notice of
this lease, which notice shall be for purposes of recordation in the real
property records of Shoshone County, Idaho.
ARTICLE 23. NOTICES.
Any notices required or permitted to be given to the Lessor hereunder
shall be considered as delivered forty-eight (48) hours after the same shall
have been deposited in the United States mail, duly registered, with postage
thereon prepaid. All notices given hereunder shall be addressed to the
respective addresses given below:
If to Lessor,
PLACER CREEK MINING COMPANY
P.O. Box 469
Wallace, Idaho 83873
19
<PAGE> 20
PLACER CREEK MINING COMPANY LEASE CONT'D.
and if to Lessee,
Silver Valley Resources Corporation
P.O. Box 440
Wallace, Idaho 83873
Said addresses for receiving notices may be changed by either party upon
two (2) days previous notice to the other party.
ARTICLE 24. INUREMENT.
These presents shall inure to the benefit of and be binding upon the
respective heirs, executors, administrators, successors and assigns of the
parties hereto.
ARTICLE 25. CONSTRUCTION.
Titles to the respective articles hereof shall not be deemed a part of
this lease but shall be regarded as having been used for convenience only.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the day and year first above written.
LESSOR
PLACER CREEK MINING COMPANY
By
---------------------------------
Attest:
- ------------------------
Secretary
20
<PAGE> 21
PLACER CREEK MINING COMPANY LEASE CONT'D.
STATE OF IDAHO )
) ss.
COUNTY OF )
On this _____ day of _________, 1997, before me, ________________,
the undersigned, a Notary Public in and for the State of Idaho, personally
appeared, ___________________, known to me to be the _____________ of Placer
Creek Mining Company and whose name is subscribed to the within instrument, and
acknowledged to me that he executed the same on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
---------------------------------
Notary Public for Idaho
Residing at
---------------------
My Commission expires
-----------
LESSEE
SILVER VALLEY RESOURCES CORPORATION
By
---------------------------------
Attest:
- ------------------------
Secretary
STATE OF IDAHO )
21
<PAGE> 22
PLACER CREEK MINING COMPANY LEASE CONT'D.
) ss.
COUNTY OF )
On this _____ day of __________, 1997, before me, ________________,
the undersigned, a Notary Public in and for the State of Idaho, personally
appeared, ___________________, known to me to be the _____________ of Silver
Valley Resources Corporation and whose name is subscribed to the within
instrument, and acknowledged to me that he executed the same on behalf of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
---------------------------------
Notary Public for Idaho
Residing at
---------------------
My Commission expires
-----------
22
<PAGE> 1
EXHIBIT 23.3
CONSENT AND CONFIRMATION
The undersigned firm hereby (i) consents to the reference to it in the
Annual Report on Form 10-K of Coeur d'Alene Mines Corporation (the "Company")
for the year ended December 31, 1996, (ii) confirms that the statements in that
filing relating to the ore reserve-review report, dated December 1996,regarding
the Rochester Mine are accurate and (iii) consent to the filing of this consent
and confirmation as an exhibit to that Form 10-K and the Company's Registration
Statement on Form S-3 (File no. 333-40513).
/s/ INDEPENDENT MINING CONSULTANTS, INC.
--------------------------------------------
INDEPENDENT MINING CONSULTANTS, INC.
Date: January 16, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT AND CONFIRMATION
The undersigned firm hereby (i) consents to the reference to it in the
Annual Report on Form 10-K of Coeur d'Alene Mines Corporation (the "Company")
for the year ended December 31, 1996, (ii) confirms that the statements in that
filing relating to the open pit mineral resource review report, dated November
1996, regarding Golden Cross Mine are accurate and (iii) consent to the filing
of this consent and confirmation as an exhibit to that Form 10-K and the
Company's Registration Statement on Form S-3 (File no. 333-40513).
/s/ SNOWDEN ASSOCIATES PTY LTD
--------------------------------------
SNOWDEN ASSOCIATES PTY LTD
Date: January 21, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT AND CONFIRMATION
The undersigned firm hereby (i) consents to the reference to it in the
Annual Report on Form 10-K of Coeur d'Alene Mines Corporation (the "Company")
for the year ended December 31, 1996, (ii) confirms that the statements in that
filing relating to the ore reserve-review report, dated January 1997, regarding
the Fachinal Mine are accurate and (iii) consent to the filing of this consent
and confirmation as an exhibit to that Form 10-K and the Company's Registration
Statement on Form S-3 (File no. 333-40513).
/s/ MICON INTERNATIONAL LIMITED
--------------------------------------
MICON INTERNATIONAL LIMITED
Date: January 14, 1998
<PAGE> 1
EXHIBIT 23.6
CONSENT AND CONFIRMATION
The undersigned firm hereby (i) consents to the reference to it in the
Annual Report on Form 10-K of Coeur d'Alene Mines Corporation (the "Company")
for the year ended December 31, 1996, (ii) confirms that the statements in that
filing relating to the ore reserve endorsement, dated February 1997,regarding
the Kensington property are accurate and (iii) consent to the filing of this
consent and confirmation as an exhibit to that Form 10-K and the Company's
Registration Statement on Form S-3 (File no. 333-40513).
/s/ STEFFEN, ROBERTSON & KIRSTEN
--------------------------------------
STEFFEN, ROBERTSON & KIRSTEN
Date: January 15, 1998
