<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ---------------------
Commission file number 0-4846-3
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CONSOLIDATED SILVER CORPORATION
-----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Idaho 82-0288840
----------------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6500 Mineral Drive
Coeur d'Alene, Idaho 83814-8788
----------------------------------------- ------------------------------
(Address of principal executive offices) (Zip Code)
208-769-4100
-----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for at least the past 90 days. Yes XX . No .
---- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding November 10, 1995
----------------------------------------- -----------------------------
Common stock, par value $0.10 per share 9,455,683 shares<PAGE>
<PAGE> 2
CONSOLIDATED SILVER CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
I N D E X
---------
Page
----
PART I. - Financial Information
Item l - Balance Sheets - September 30, 1995 and December 31, 1994 3
- Statements of Loss and Retained Deficit - Three Months
and Nine Months Ended September 30, 1995 and 1994 4
- Statements of Cash Flows - Nine Months Ended
September 30, 1995 and 1994 5
- Notes to Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. - Other Information
Item 2 - Changes in Securities 8
Item 4 - Submission of Matters to a Vote of Security Holders 8
Item 6 - Exhibits and Reports on Form 8-K 8
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<PAGE> 3
PART I - FINANCIAL INFORMATION
CONSOLIDATED SILVER CORPORATION
Balance Sheets (Unaudited)
----------
<TABLE>
<CAPTION>
ASSETS
------
September 30 December 31
1995 1994
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 716,634 $ 753,486
Accounts receivable 1,481 500
Income tax refund receivable 16,074 13,439
Other current assets 2,651 597
----------- ----------
Total current assets 736,840 768,022
----------- ----------
Property, plant and equipment, at cost
Mining properties 231,672 231,672
Less - Accumulated depletion (231,672) (231,672)
Plant, equipment and facilities 1,303,120 1,297,686
Less - Accumulated depreciation (1,297,908) (1,297,686)
---------- ----------
5,212 - -
----------- ----------
Total assets $ 742,052 $ 768,022
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 41,350 $ 4,730
Property taxes payable 17,371 11,590
----------- ----------
Total current liabilities 58,721 16,320
----------- ----------
Preferred stock; $100 par value; authorized,
issued and outstanding, 12,500 shares - - 1,250,000
----------- ----------
Common stock; 10 cents par value; authorized,
10,000,000 shares; issued 1995 - 9,455,689,
issued 1994 - 8,205,689 945,569 820,569
Discount on common stock issued (190,709) (190,709)
Capital surplus 1,128,015 3,015
Retained deficit (1,199,520) (1,131,149)
---------- ----------
683,355 (498,274)
Less, common stock reacquired at cost, 6 shares 24 24
----------- ----------
683,331 (498,298)
----------- ----------
Total shareholders' equity 683,331 751,702
----------- ----------
Total liabilities and
shareholders' equity $ 742,052 $ 768,022
=========== ==========
The accompanying notes are an integral part of the financial statements.
</TABLE>
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<PAGE> 4
PART I - FINANCIAL INFORMATION (Continued)
CONSOLIDATED SILVER CORPORATION
Statements of Loss and Retained Deficit (Unaudited)
---------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
September 30 September 30 September 30 September 30
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Rental income $ 1,500 $ - - $ 4,500 $ - -
Transfer fees 256 52 604 240
Interest 9,459 7,460 29,235 19,339
Miscellaneous 20,000 - - 20,460 - -
----------- ----------- ----------- -----------
31,215 7,512 54,799 19,579
----------- ----------- ----------- -----------
Expenses:
General and administrative
expenses 66,576 21,419 122,833 62,103
Exploration 2,720 - - 2,720 - -
Depreciation 222 - - 222 - -
----------- ----------- ----------- -----------
69,518 21,419 125,775 62,103
----------- ----------- ----------- -----------
Net loss before
income tax benefit (38,303) (13,907) (70,976) (42,524)
Income tax benefit - - 501 2,605 11,189
----------- ----------- ----------- -----------
Net loss (38,303) (13,406) (68,371) (31,335)
Deficit at beginning of
period (1,161,217) (1,118,899) (1,131,149) (1,100,970)
----------- ----------- ----------- -----------
Deficit at end of period $(1,199,520) $(1,132,305) $(1,199,520) $(1,132,305)
=========== =========== =========== ===========
Net loss share of common
stock $ - - $ - - $ (0.01) $ - -
=========== =========== =========== ===========
Cash dividends per share $ - - $ - - $ - - $ - -
=========== =========== =========== ===========
Weighted average number of
common shares outstanding 8,414,016 8,205,683 8,233,461 8,205,683
The accompanying notes are an integral part of the financial statements.
</TABLE>
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<PAGE> 5
PART I - FINANCIAL INFORMATION (Continued)
CONSOLIDATED SILVER CORPORATION
Statements of Cash Flows (Unaudited)
------------
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
September 30 September 30
1995 1994
------------ ------------
<S> <C> <C>
Operating activities:
Net loss $ (68,371) $ (31,335)
Noncash elements included in net loss:
Depreciation 222 - -
Change in:
Accounts receivable (981) - -
Income tax refund receivable (2,635) (11,219)
Other current assets (2,054) (1,492)
Accounts and property taxes payable 42,401 (1,229)
------------ ------------
Net cash applied to operating activities (31,418) (45,275)
------------ ------------
Investing activities:
Property, plant and equipment (5,434) - -
------------ ------------
Net cash applied to investing activities (5,434) - -
------------ ------------
Net decrease in cash and cash equivalents (36,852) (45,275)
Cash and cash equivalents at beginning of period 753,486 785,987
------------ ------------
Cash and cash equivalents at end of period $ 716,634 $ 740,712
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
-5-
<PAGE> 6
PART I - FINANCIAL INFORMATION (Continued)
CONSOLIDATED SILVER CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1. Notes to the financial statements as of December 31, 1994, as
set forth in the Company's 1994 Annual Report on Form 10-K,
substantially apply to these interim financial statements and are
not repeated here.
Note 2. The financial information given in the accompanying unaudited
interim financial statements reflects all adjustments which are, in
the opinion of management, necessary to a fair statement of the
results for the interim periods reported. All such adjustments
are of a normal recurring nature. All financial statements
presented herein are unaudited. However, the balance sheet as of
December 31, 1994, was derived from the audited balance sheet
described in Note 1 above.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company's general financial condition declined during the nine-
month period ending September 30, 1995. Cash and cash equivalents decreased
from $753,486 at December 31, 1994 to $716,634 at September 30, 1995
principally due to cash requirements for general and administrative
costs and property care-and-maintenance expenses. Working capital also
decreased from $751,702 at December 31, 1994 to $678,119 at September 30,
1995 primarily due to an increase in current liabilities and a decrease in
cash and cash equivalents, as previously discussed.
The net loss of $38,303 for the three months ending September 30, 1995
increased $24,897, or 186%, compared to the $13,406 net loss for the same
period ended September 30, 1994. The increase in the net loss was primarily
due to a $45,157 increase in general and administrative expenses resulting
from increased labor and consulting fees, office administration costs, and
legal expenses; partially offset by a $23,703 increase in revenue
due to increased miscellaneous, interest and rental income. Miscellaneous
income increased $20,000 resulting from the non-refundable payments made by
Sunshine Precious Metals, Inc. in connection with the proposed sale of the
Company's Silver Summit mine which is subject to shareholder approval at its
annual meeting of November 14, 1995. Commencing in June 1995, the costs
associated with the care and maintenance of the Company's Silver Summit mine
were assumed by Sunshine Precious Metals, Inc.
For the first nine months of 1995, the Company incurred a net loss of
$68,371 compared to a net loss of $31,335 for the same period ended
September 30, 1994. The $37,036, or 118%, increase in the net loss is
principally due to a $60,730 increase in general and administrative expenses,
consisting of consulting and labor costs, office administration costs, and legal
fees. Additionally, the income tax benefit decreased 8,584. The increase
in costs was partially offset by a $20,460 increase in miscellaneous income
as described above, a $9,896 increase in interest income and a $4,500
increase in rental income.
On September 21, 1995, the Company issued 1,250,000 shares of common stock
to Hecla Mining Company (Hecla) in exchange for 12,500 shares of preferred stock
-6-
<PAGE> 7
PART I - FINANCIAL INFORMATION (Continued)
CONSOLIDATED SILVER CORPORATION
held by Hecla which represented the total outstanding shares of the Company's
preferred stock. Common stock held by Hecla at September 30, 1995 totals
7,418,300 shares which is approximately 78.45% of the Company's total
outstanding common stock. The preferred stock previously held by Hecla has
been canceled.
The Company sent out a notice and proxy statement to each of the Company's
shareholders on October 16, 1995 advising shareholders that the Company will
hold its annual meeting on November 14, 1995. At the meeting shareholders
will be asked to approve the sale of the Silver Summit mine to Sunshine
Precious Metals, Inc. (Sunshine), elect six directors, approve certain
amendments to the articles of incorporation, and approve the appointment
of the Company's independent auditors.
The Company plans to use the estimated $730,000 in proceeds from the sale
of the Silver Summit mine to Sunshine and other available cash to invest in
silver exploration projects. In this regard, the Company has entered into an
agreement to acquire Hecla's right to earn a 50 percent interest in Minera
El Morro, S.A. de C.V., which holds the Ojo Caliente silver exploration
project in Zacatecas, Mexico. The agreement will be effective upon Shareholder
approval of the transaction with Sunshine. The other investor in the project is
Minera Portree de Zacatecas, S.A. de C.V., a Mexican exploration company. The
Company will acquire Hecla's interest in the project by reimbursing Hecla an
amount equal to all expenditures incurred by Hecla in its acquisition and for
exploration costs related to the Ojo Caliente Project. Hecla's expenditures on
the project are expected to be approximately $500,000. In addition, should the
Company decide to seek a partner to assist in developing the Ojo Caliente
Project or putting it into production, Hecla will have the first opportunity to
provide that assistance.
The Ojo Caliente Project includes at least four zones of mineralization
that have never been systematically explored. The main veins have been mapped
and sampled recently by Hecla. The geology is similar to veins in the nearby
Zacatecas District, which has produced more than 600 million ounces of silver.
Past underground silver production in the Ojo Caliente area occurred in the
1600s. Hecla's exploration activity during 1995 consisted of seven (7) drill
holes which tested two of the four vein systems. Results of the 1995 drilling
confirmed the presence of the target veins at depth. The Company plans to
continue the drilling program during 1996 to further explore the previously
drilled vein systems at depth and to explore the additional two vein systems.
The Company anticipates funding its payment to Hecla and the cost of future
exploration at the Ojo Caliente Project from a combination of existing cash,
including proceeds from the sale of the Silver Summit mine to Sunshine, and
future financings. However, there can be no assurance that the Company will be
able to complete one or more financings to raise additional funds.
Management continues to evaluate a number of other silver exploration
opportunities which may be available and believes the Company has sufficient
cash and cash equivalents at September 30, 1995, to meet its present and
intermediate financial requirements.
-7-
<PAGE> 8
PART II - OTHER INFORMATION
CONSOLIDATED SILVER CORPORATION
Item 2. CHANGES IN SECURITIES
On September 21, 1995, the Company issued 1,250,000 shares of common stock
to Hecla Mining Company (Hecla) in exchange for 12,500 shares of preferred stock
held by Hecla which represented the total outstanding shares of the Company's
preferred stock. Common stock held by Hecla at September 30, 1995 totals
7,418,300 shares which is approximately 78.45% of the Company's total
outstanding common stock. The preferred stock previously held by Hecla has
been canceled.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company sent out a notice and proxy statement to each of the Company's
security holders on October 16, 1995 advising that the Company will hold its
annual meeting on November 14, 1995. At the meeting, security holders will be
asked to consider and vote on the following issues:
(a) The sale of the Silver Summit mine to Sunshine Precious Metals,
Inc.
(b) The election of six directors to the Board of Directors.
(c) Approve certain amendments to the Amended Articles of
Incorporation.
(d) Appoint Coopers & Lybrand as the Company's independent auditors.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4 - Statement of Cancellation of Preferred Shares
10 - Purchase and Sale Agreement dated August 23, 1995, between
Hecla Mining Company and Consolidated Silver Corporation,
relating to the Ojo Caliente Project located in Zacatecas,
Mexico.
22 - Proxy Materials for Annual Meeting of Shareholders to be
held November 14, 1995 (Incorporated by reference).
27 - Financial Data Schedule
(b) Reports on Form 8-K
Report on Form 8-K dated September 21, 1995, relating to the
issuance of common stock to Hecla Mining Company in exchange
for preferred stock.
Items 1, 3, and 5 of Part II are omitted from this report as inapplicable.
-8-
<PAGE> 9
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSOLIDATED SILVER CORPORATION
--------------------------------------
(Registrant)
Date: November 14, 1995 By /s/ Ralph R. Noyes
----------------------------------
Ralph R. Noyes, President
Date: November 14, 1995 By /s/ S. E. Hilbert
----------------------------------
S. E. Hilbert, Chief Accounting
Officer
-9-
<PAGE> 10
EXHIBIT INDEX
-------------
Exhibit
No. Description
- -------- ------------------
4 Statement of Cancellation of Preferred Shares
10 Purchase and Sale Agreement dated August 23, 1995, between
Hecla Mining Company and Consolidated Silver Corporation,
relating to the Ojo Caliente Project in Zacatecas, Mexico.
22 Proxy Materials for Annual Meeting of Shareholders to be held
November 14, 1995. Incorporated by reference from SEC Form
14A, Definitive Proxy Statement and Accompanying Materials,
filed October 17, 1995, File #000-04846.
27 Financial Data Schedule
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<PAGE> 1
Exhibit 4
CONSOLIDATED SILVER CORPORATION
STATEMENT OF CANCELLATION
PURSUANT TO IDAHO CODE SECTION 30-1-67
TO THE SECRETARY OF STATE, STATE OF IDAHO:
In accordance with Idaho Code Section 30-1-67, Consolidated Silver
Corporation, an Idaho corporation, hereby files this statement of
cancellation:
(a) The name of the corporation: CONSOLIDATED SILVER
CORPORATION.
(b) The number of redeemable shares canceled through redemption
or purchase, itemized by classes: Twelve thousand five hundred (12,500)
Shares of Preferred Stock, one hundred dollars ($100) per share par
value, canceled through purchase.
(c) The aggregate number of issued shares, itemized by classes,
after giving effect to such cancellation: Zero (0) Shares of Preferred
Stock; Nine million four hundred fifty five thousand six hundred eighty
nine (9,455,689) Shares of Common Stock, ten cents ($0.10) per share par
value.
(d) The amount, expressed in dollars, of the stated capital of
the corporation after giving effect to such cancellation: $1,000,000
stated capital, based upon 10,000,000 Shares of Common Stock authorized
at $0.10 per share par value:
(e) Number of shares the corporation will have authority to
issue, itemized by classes, after giving effect to such cancellation:
10,000,000 Shares of Common Stock.
IN WITNESS WHEREOF this Statement of Cancellation has been
executed by the Vice President and Assistant Secretary of Consolidated Silver
Corporation this 21st day of September, 1995.
CONSOLIDATED SILVER CORPORATION:
By: /s/ Michael B. White
---------------------------------
Michael B. White
Vice President
Attest: /s/ Nathaniel K. Adams
-----------------------------
Nathaniel K. Adams
Assistant Secretary
(Idaho Secretary of State date stamp, October 6, 1995, 10:44 a.m.)
<PAGE> 1
Exhibit 10
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (hereinafter referred to as
"Agreement") is made and effective this 23rd day of August, 1995, by and
between Hecla Mining Company, a Delaware corporation, whose address is 6500
Mineral Drive, Coeur d'Alene, Idaho 83814-8788 (hereinafter referred to as
"Hecla"), and Consolidated Silver Corporation, an Idaho corporation, whose
address is 6500 Mineral Drive, Coeur d'Alene, Idaho 83814-8788 (hereinafter
referred to as "Con Sil").
RECITALS AND DEFINITIONS
WHEREAS, Hecla's wholly-owned Mexican subsidiary, Minera Hecla, S.A. de
C.V. (hereinafter referred to as "Minera Hecla")(Minera Hecla and Hecla are
sometimes collectively referred to hereinafter as "Hecla") is a party to that
certain Contract dated April 27, 1995, with Minera Portree de Zacatecas, S.A.
de C.V. (hereinafter referred to as "Portree") a copy of which is attached
hereto as Exhibit A, incorporated herein by this reference (hereinafter
referred to as the "Ojo Caliente Agreement");
WHEREAS, Minera Hecla holds certain rights and obligations pursuant to
the Ojo Caliente Agreement, including, without limitation, the right to manage
the affairs of and to acquire certain capital stock in Minera El Morro, S.A.
de S.V., a Mexican corporate entity (hereinafter referred to as "Minera El
Morro"), formed pursuant to the Ojo Caliente Agreement to hold title to,
explore and develop the mineral potential of certain mining concessions and
other rights and properties described therein (hereinafter referred to as the
"Property");
WHEREAS, Hecla wishes to sell to Con Sil and Con Sil wishes to purchase
from Hecla all of Minera Hecla's rights, duties and obligations, and any and
all stock held by Minera Hecla in Minera El Morro pursuant to the Ojo Caliente
Agreement, all on the terms and conditions specified in this Agreement;
NOW, THEREFORE, the parties, intending to be legally bound, do hereby
agree as follows:
AGREEMENT
1. AGREEMENT OF PURCHASE AND SALE. Hecla hereby agrees to cause Minera
Hecla to sell and assign to Con Sil, and Con Sil does hereby agree to
purchase, or cause a wholly-owned subsidiary of Con Sil to purchase, and
assume from Hecla, all on the terms and conditions specified herein, all of
Minera Hecla's rights, duties and obligations pursuant to the Ojo Caliente
Agreement, and any and
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<PAGE> 2
all capital stock of Minera El Morro in the possession of Hecla or its
subsidiaries pursuant to the Ojo Caliente Agreement upon the Closing of this
Agreement.
2. CONSIDERATION. Con Sil shall pay to Hecla in cash at Closing the
aggregate amount of all of expenditures incurred by Hecla or Minera Hecla in
(i) the acquisition of the Ojo Caliente Agreement, (ii) pursuant to the Ojo
Caliente Agreement, and (iii) for the benefit of Minera El Morro's Property,
subject to Section 7(a) of this Agreement (the "Purchase Price"), in
consideration of Hecla's grant of its rights pursuant to the Ojo Caliente
Agreement. Hecla's expenditures through the dates indicated therein are
summarized in Exhibit B, attached hereto and incorporated herein by this
reference.
3. CLOSING. The closing of the transactions contemplated by this
Agreement shall take place within three (3) business days after the later to
occur of: (i) Con Sil's shareholder meeting and (ii) Con Sil's closing of
the Sunshine Agreement (as that term in hereinafter defined), in accordance
with Section 8(b) of this Agreement, but in any event no later than November
15, 1995, at Hecla's Coeur d'Alene, Idaho offices, or such other time and
place as may be mutually agreed upon by Hecla and Con Sil. At Closing, Hecla
shall deliver to Con Sil (i) a fully executed and acknowledged assignment and
assumption, in a form registrable by all applicable governmental authority,
conveying Minera Hecla's rights in the Ojo Caliente Agreement; (ii) any and
all stock held by Minera Hecla in Minera El Morro to Con Sil; and (iii) a
summary of Hecla's expenditures to the date of Closing, presented in
substantially the same form as Exhibit B. All taxes assessed on the
transaction and all registration and recording fees shall be paid by Con Sil.
4. COOPERATION IN STRUCTURING TRANSACTION. Hecla and Con Sil shall
cooperate with each other in structuring and in closing the transactions
contemplated herein in a manner which will minimize taxes payable to all
jurisdictions on the transfers of Minera Hecla's rights in the Ojo Caliente
Agreement and shares of stock from Minera Hecla to Con Sil, and Con Sil shall
have the right to form such subsidiary companies as are necessary, proper or
convenient to the completion of such transfers, and each of Hecla and Con Sil
shall cause their respective subsidiary companies to take all such actions as
are necessary, proper and convenient in completion thereof.
5. REPRESENTATIONS AND WARRANTIES OF HECLA. Hecla represents and
warrants to Con Sil:
(a) That it and its affiliates are corporations duly incorporated
and in good standing in their respective states or jurisdictions of
their incorporation;
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<PAGE> 3
(b) That it has the capacity to enter into this Agreement with
respect to the transactions contemplated herein and that all corporate
and other actions required to authorize it to enter into and perform
this Agreement have been properly taken or shall be properly taken prior
to Closing;
(c) That entering into and performing this Agreement will not
breach any other agreement or arrangement to which it is a party;
(d) That this Agreement has been duly executed by its authorized
representatives, and is valid and binding upon it in accordance with its
terms;
(e) That the Ojo Caliente Agreement is valid and binding, no
default exists with respect to Hecla's performance thereof, and Minera
Hecla may assign its interest therein in accordance with the terms
thereof.
6. REPRESENTATIONS AND WARRANTIES OF CON SIL. Con Sil represents and
warrants to Hecla:
(a) That it is a corporation duly incorporated and in good
standing in its state of incorporation;
(b) That it has the capacity to enter into this Agreement with
respect to the transactions contemplated herein and that all corporate
and other actions required to authorize it to enter into and perform
this Agreement have been properly taken or shall be properly taken prior
to Closing;
(c) That entering into and performing this Agreement will not
breach any other agreement or arrangement to which it is a party;
(d) That this Agreement has been duly executed by its authorized
representatives, and is valid and binding upon it in accordance with its
terms.
7. HECLA'S COVENANTS. Between the effective date of this Agreement and
the Closing:
(a) Hecla shall expend no more than an aggregate total of eight
hundred thousand dollars ($800,000): (i) in the acquisition of the Ojo
Caliente Agreement; (ii) pursuant to the Ojo Caliente Agreement; and
(iii) for the benefit of Minera El Morro's Property. Any expenditures
by Hecla in excess of the amount specified herein shall not be payable
pursuant to Section 2 of this Agreement.
(b) Hecla shall permit Con Sil and its representatives, at Con
Sil's sole risk and expense, to have full access to
-3-
<PAGE> 4
Minera El Morro's Property and all books and records in Hecla's
possession pertaining thereto;
(c) Hecla shall make its personnel and documents related the
transaction contemplated hereby reasonably available to Con Sil as it
may from time to time request;
(d) Hecla shall furnish such necessary information and reasonable
assistance as may be necessary to complete the transactions contemplated
herein;
(e) Hecla shall operate Minera El Morro's Properties and perform
its obligations under the Ojo Caliente Agreement in accordance with its
terms, consistent with past management practices and as a reasonably
prudent operator.
(f) Hecla shall report to Con Sil all significant activities,
exploration results and such other material developments which occur
with respect to the Ojo Caliente Agreement or concerning Minera El
Morro's Property.
(g) Hecla shall not amend, or take any steps to amend, the Ojo
Caliente Agreement, nor shall Hecla grant any interest in or otherwise
encumber the Ojo Caliente Agreement, except with the express written
consent of Con Sil, which consent shall not be unreasonably withheld.
(h) Hecla shall perform and complete prior to the Closing all
actions necessary to facilitate the assignment and assumption of the Ojo
Caliente Agreement and of any and all stock held by Minera Hecla in
Minera El Morro pursuant to the terms of this Agreement.
(i) Hecla shall not issue any press release or make other
publication of the terms of this Agreement without giving notice prior
to such release or publication together with a draft thereof to Con Sil,
and obtaining the written consent of Con Sil thereto, which consent
shall not be unreasonably withheld. Con Sil's consent shall not be
required for such press releases and announcements as may be required by
law or by any securities exchange on which Hecla's stock is traded, and
Con Sil shall nevertheless be provided with prior notice of such release
or publication together with a draft of any such press release.
8. CON SIL'S COVENANTS. Between the effective date of this Agreement
and the Closing:
(a) Con Sil shall furnish such necessary information and
reasonable assistance as may be necessary to complete the transactions
contemplated herein;
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<PAGE> 5
(b) Con Sil shall complete prior to the Closing a meeting of its
shareholders, and at such meeting its shareholders shall consider for
their approval the transaction documented by that certain Purchase
Agreement among Con Sil and Sunshine Precious Metals, Inc., dated July
1, 1995 (herein referred to as the "Sunshine Agreement"), and, if such
shareholder approval is obtained, Con Sil shall complete the closing of
the Sunshine Agreement;
(c) Con Sil shall report to Hecla all significant activities,
results and such other material developments which occur which may
effect Con Sil's obligations pursuant to this Agreement;
(d) Con Sil shall perform and complete prior to the Closing all
actions necessary to facilitate the assignment and assumption of the Ojo
Caliente Agreement and of any and all stock held by Minera Hecla in
Minera El Morro pursuant to the terms of this Agreement;
(e) Con Sil shall not issue any press release or make other
publication of the terms of this Agreement without giving notice prior
to such release or publication together with a draft thereof to Hecla,
and obtaining the written consent of Hecla thereto, which consent shall
not be unreasonably withheld. Hecla's consent shall not be required for
such press releases and announcements as may be required by law or by
any securities exchange on which Con Sil's stock is traded, and Hecla
shall nevertheless be provided with prior notice of such release or
publication together with a draft of any such press release.
9. HECLA'S CONDITIONS PRECEDENT TO CLOSING. Hecla shall not be
obligated to close the transactions contemplated by this Agreement unless and
until all of the following conditions precedent are met at or before the time
of Closing, unless waived in writing by Hecla:
(a) No outstanding material liens, encumbrances or other
liabilities shall exist against Hecla's interest in the Ojo Caliente
Agreement;
(b) Each of Con Sil's representations and warranties set forth in
Section 6 of this Agreement shall be true and correct;
(c) Con Sil shall have completed a meeting of its shareholders,
and at such meeting its shareholders shall have approved the Sunshine
Agreement;
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<PAGE> 6
(d) Con Sil shall have completed the closing of the Sunshine
Agreement in accordance with its terms and conditions.
10. CON SIL'S CONDITIONS PRECEDENT TO CLOSING. Con Sil shall not be
obligated to close the transactions contemplated by this Agreement unless and
until all of the following conditions precedent are met at or before the time
of Closing, unless waived in writing by Con Sil:
(a) No outstanding material liens, encumbrances or other
liabilities shall exist against Hecla's interest in the Ojo Caliente
Agreement;
(b) Each of Hecla's representations and warranties set forth in
Section 5 of this Agreement shall be true and correct;
(c) Hecla shall have received no notice of any breach of or
default in its performance of its obligations under any material term of
the Ojo Caliente Agreement;
(d) Con Sil shall have completed a meeting of its shareholders,
and at such meeting its shareholders shall have approved the transaction
documented by that certain Purchase Agreement among Con Sil and Sunshine
Precious Metals, Inc., dated July 1, 1995;
(e) Con Sil shall have completed the closing of the Sunshine
Agreement in accordance with its terms and conditions.
11. HECLA'S RIGHT OF OFFER. From and after Closing:
(a) If at any time during the exploration or development of the
Property Con Sil or Minera El Morro wish to sell, option, enter into a
farmout, lease, joint venture, or other agreement whereby Con Sil or
Minera El Morro would transfer or grant any portion of or all of its
rights in Minera El Morro or the Property to a third party (hereinafter
referred to as an "Opportunity"), Con Sil shall provide written notice
to Hecla of the Opportunity containing a detailed explanation of the
terms and conditions thereof. Hecla shall have sixty (60) days after
its receipt of such notice in which to provide Con Sil with a written
notice of its exercise of its right to enter into an agreement with Con
Sil or Minera El Morro on the terms contained in Con Sil's notice of
Opportunity to Hecla. In the event that Hecla elects to exercise its
right to acquire the Opportunity pursuant to this Section 11 of this
Agreement, Hecla and Con Sil shall promptly and in good faith proceed to
finalize and execute a written agreement setting forth the terms thereof
within thirty (30) days of Hecla's
-6-
<PAGE> 7
notice. In the event Hecla does not exercise its right under this
Section 11 of this Agreement within said sixty (60) day period Con Sil
or Minera El Morro may for a period of one hundred eighty (180) days
thereafter negotiate and enter into an agreement with any third party on
terms no more favorable to such third party as those offered to and
refused by Hecla. In the event Con Sil or Minera El Morro does not
enter into an agreement with a third party on such terms within one
hundred eighty (180) days of Hecla's refusal, Hecla's rights pursuant to
this Section 11 of this Agreement shall be automatically revived, and
Con Sil shall again be obligated to provide notice to Hecla of its or of
Minera El Morro's intention to enter into an agreement with third
parties as provided for herein.
(b) In the event that Con Sil or Minera El Morro cancels or
terminates, or receives notice of any cancellation or termination of a
sale, option, farmout, lease, joint venture, or other agreement whereby
a third party obtained or would obtain any portion of or all of Con
Sil's rights in Minera El Morro or its Property, Con Sil shall give
written notice of such cancellation or termination to Hecla, together
with a summary and copies of supporting documentation of all additions
to mineral reserves located on the Properties and feasibility studies
prepared with respect to the Properties as a whole. In the event that
Con Sil or Minera El Morro thereafter seek participation of a third
party in the manner described in Section 11(a) of this Agreement, Con
Sil or Minera El Morro shall first provide Hecla with the notices, and
Hecla may exercise the rights specified, therein.
(c) In the event that Con Sil or Minera El Morro intends to
abandon or otherwise surrender its interest in Minera El Morro or any of
its Property, without receiving any consideration therefor, Con Sil
shall first give written notice of its intention to Hecla prior to March
1 of the year in which Con Sil intends to abandon or surrender such
Property or interest, and offer to transfer or assign such Property or
interest to Hecla at no cost to Hecla other than as specified
hereinbelow, and Hecla shall have fifteen (15) business days to elect to
accept Con Sil's or Minera El Morro's transfer or assignment and pay the
cost of conveyancing and recording. Con Sil and Minera El Morro shall
provide any records in its possession as requested by Hecla that relates
to any Property or interest being abandoned by Con Sil and transferred
to Hecla. In the event Con Sil does not advise Hecla by March 1 of such
year of its intentions to abandon or surrender any of Minera El Morro's
Property or part(s) thereof, and in the absence of written consent from
Hecla thereto, Con Sil shall maintain and cause Minera El Morro to
maintain all its properties in good standing, make all filings and pay
all taxes, assessment, rental, advance royalty or other fees
-7-
<PAGE> 8
associated therewith necessary or convenient to keep all Minera El
Morro's Property in good standing until March 31 of the following year.
Furthermore, Con Sil shall perform or ensure the performance by Minera
El Morro of all reclamation work required by agreement or by local,
state or federal law, regulations or permits with respect to the
abandoned property transferred to Hecla pursuant to this Section 11 of
this Agreement.
12. SURVIVAL. The provisions of Section 11 of this Agreement shall be
deemed to survive the Closing of the transactions contemplated herein, and are
expressly agreed by the parties not to be merged into any closing document.
13. GENERAL.
(a) ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto and supersedes and replaces any and
all other agreements.
(b) NOTICES. All notices and other communications ("Notices")
to a party hereto shall be in writing and shall be addressed
respectively as follows:
If to Hecla: Hecla Mining Company
6500 Mineral Drive
Coeur d'Alene, Idaho 83814-8788
ATTN: Vice President - Metal Mining
If to Con Sil: Consolidated Silver Corporation
6500 Mineral Drive
Coeur d'Alene, Idaho 83814-8788
ATTN: President
All Notices shall be given either by personal delivery to the
party, or by electronic communication, with an original copy and
confirmation sent by registered mail return receipt requested, or by
registered mail return receipt requested. All Notices shall be
effective and shall be deemed delivered: (i) If by personal delivery on
the date of delivery during normal business hours, and if not delivered
during normal business hours, on the next business day following
delivery, and (ii) if by electronic communication on the next business
day following receipt of the electronic communication, and (iii) if
solely by mail on the next business day after actual receipt. A party
may change its address by Notice to the other parties hereto.
(c) TRANSFER. Subject to Section 11 hereof, Con Sil shall not
transfer or assign, and shall not allow Minera El Morro to transfer or
assign, any portion or all the Property in respect of which there exists
an obligation to Hecla
-8-
<PAGE> 9
hereunder unless the transferee or assignee first agrees in writing to
accept the obligations of Con Sil to Hecla under the terms of Section 11
of this Agreement.
(d) CONTINUING COOPERATION. Each of the parties hereto, upon
the request of the other party, shall do, execute, acknowledge and
deliver, or cause to be done, executed, acknowledged or delivered all
such further acts, documents, assignments, transfers, conveyances, and
assurances, both before and after Closing, as may be reasonably
necessary or desirable to effect complete consummation of the
transactions contemplated by this Agreement.
(e) CONTROLLING LAW; ATTORNEY FEES. The terms and conditions
of this Agreement shall be interpreted in accordance with the laws of
the State of Idaho, United States of America, and any dispute of fact or
law arising as a result of the transactions contemplated by this
Agreement shall be resolved by the appropriate Idaho state court or in
the United States District Court for the District of Idaho, and the
parties hereto do hereby submit and consent to the exclusive
jurisdiction of the above-mentioned courts for purposes of resolving any
dispute arising under this Agreement. The prevailing party in any
dispute arising in connection with this agreement shall be entitled to
an award of its reasonable attorneys' fees, expenses and costs.
(f) NO STRICT CONSTRUCTION. This Agreement and wording
contained herein have been arrived at by the mutual negotiation of the
parties. Accordingly, no provision of this Agreement shall be construed
against one party or in favor of another party merely by reason of
draftsmanship.
(g) EXECUTION IN COUNTERPARTS. This Agreement may be executed
in two or more counterparts, each of which shall be deemed to be an
original, but which together shall be deemed to constitute one and the
same instrument.
(h) SEVERABILITY. Each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by
or invalid under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provision
of this Agreement.
(i) CAPTIONS. The captions used in this Agreement are for
convenience of reference only and do not constitute a part of this
Agreement, and the captions shall not be construed to limit,
characterize, or in any way affect any provision of this Agreement.
-9-
<PAGE> 10
(j) CURRENCY. All references to money in this Agreement are
references to the lawful currency of the United States of America,
unless expressly stated otherwise herein.
IN WITNESS WHEREOF the parties have executed this Agreement effective as
of the day and year first above written.
HECLA MINING COMPANY CONSOLIDATED SILVER CORPORATION
By: /s/ J. T. Heatherly By: /s/ Gerald G. Carlson
----------------------------- ----------------------------
Name: J. T. Heatherly Name: Gerald G. Carlson
Title: Vice President Title: Vice President
ATTEST: ATTEST:
By: /s/ Michael B. White By: /s/ Nathaniel K. Adams
----------------------------- ----------------------------
Name: Michael B. White Name: Nathaniel K. Adams
Title: Secretary Title: Assistant Secretary
-10-
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 711
<SECURITIES> 0
<RECEIVABLES> 18
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 737
<PP&E> 1,535
<DEPRECIATION> (1,530)
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<BONDS> 0
<COMMON> 755
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 742
<SALES> 0
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<CGS> 0
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