SUPPLEMENT TO PROSPECTUS DATED JUNE 25, 1996 OF USMX, INC.
Effective July 11, 1996 USMX, Inc. (the "Company")
completed the acquisition of leasehold and other property
interests in the Illinois Creek Project in Alaska from North
Pacific Mining Corporation (NPMC or the "Selling
Stockholder"), and issued to NPMC a total of 1,540,663
shares. The attached Prospectus relates to the offer by
NPMC of these Shares. See "Selling Stockholder" and "Plan
Distribution" in the Prospectus.
The Company also entered into credit agreements with NM
Rothschild & Sons Limited (the "Lender") for a $22 million
facility to finance the development and construction costs
of the Illinois Creek Project, effective July 11, 1996.
This facility is on the terms and conditions contemplated in
the commitment discussed in the attached Prospectus. The
final loan documentation included the following covenants,
which could affect the Company's operations and future
plans:
The Company's subsidiary, USMX of Alaska, Inc. ("AK"),
must deliver to the Lender, among other things, financial
information, reserve, hedging and operating reports, and
must use all commercially reasonable efforts to maintain,
develop and operate the Illinois Creek Project in accordance
with the present development plan and prudent mining
industry practices. AK must also comply with applicable
laws and maintain its property rights in the Project,
including payment of royalties which may become due to NPMC.
In addition, except for limited circumstances, without the
Lender's consent, AK may not incur any additional
indebtedness, permit any liens on the Project, assume or
guarantee indebtedness of others, invest in others, merge or
change its capital structure, sell the assets of the
Project, or permit Project reserves or future net cash flows
to decline materially from the present development plan. AK
must also achieve Mechanical Completion by July 31, 1997 and
Completion by November 30, 1997, as described on page 7 of
the attached Propectus.
The Company has also agreed with the Lender that, so
long as the 2.5 million Note made the Company is unpaid, or
any other obligation of the Company remains unsatisfied,
including the Company's Guaranty of the loan to AK, the
Company will, among other things, comply with all applicable
laws, provide the Lender with financial reports and continue
to engage principally in the mining business. In addition,
except for limited circumstances, without the Lender's
consent, the Company may not incur indebtedness (other than
indebtedness after Completion to develop mining properties
where the sole recourse of the lender is the mining property
being developed), permit any liens on the Project, assume or
guaranteed indebtedness of others, invest in others, merge
(unless after Completion and the Company is the survivor of
the merger) or change its capital structure, pay dividends
or sell the assets of the Project.
For additional details regarding this facility, the Project
and other important factors concerning the Company, see
"Risk Factors: in the attached Prospectus.
The date of this Supplement is July 17, 1996.
<PAGE>
1,540,663 Shares
USMX, INC.
Common Stock
____________________
This Prospectus relates to the offer of up to
1,540,663 shares (the "Shares") of common stock,
$.001 par value (the "Common Stock") of USMX, INC.
, a Delaware Corporation (the "Company") by North
Pacific Mining Corporation ("NPMC" or the "Selling
Stockholder"). The Company will not receive any
of the proceeds from the sale of the Shares by
NPMC. See "Selling Stockholder".
The Shares may be offered by NPMC from time to
time on terms not yet determined. The Shares may
be offered by NPMC from time to time in
transactions on the Nasdaq National Market, in
negotiated transactions or otherwise, at fixed
prices which may be changed, at market prices
prevailing at the time of sale, at prices related
to prevailing market prices or at negotiated
prices or otherwise. NPMC may effect such
transactions by selling the Shares to or through
broker-dealers, and such broker-dealers may
receive compensation in the form of discounts,
concessions or commissions from NPMC and/or the
purchasers of the Shares for whom such broker-
dealers may act as agents or to whom they sell as
principals, or both (which compensation as to a
particular broker-dealer might be in excess of
customary commissions). NPMC, and any agents or
broker-dealers that participate with NPMC in a
distribution of the Shares, may be deemed to be
"underwriters" within the meaning of the
Securities Act of 1933, as amended (the
"Securities Act"), and any commissions received by
them and any profit on their resale of the Shares
may be deemed to be underwriting commissions or
discounts under the Securities Act. See "Selling
Stockholder" and "Plan of Distribution. "
Expenses, not including brokerage commissions to
be incurred which may be incurred by NPMC in the
sale of the Shares, are estimated to be
approximately $25,000 and will be paid by the
Company.
The Common Stock is traded on the Nasdaq National
Market ("Nasdaq") under the symbol: "USMX". On
June 20, 1996, the last reported sales price of the
Common Stock as reported by Nasdaq was $2 9/16 per
share.
See Risk Factors commencing on page 5 for a
discussion of certain factors that should be
considered by prospective purchasers of the Common
Stock offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A FEDERAL
OFFENSE.
The date of this Prospectus is June 25, 1996
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with all
amendments and exhibits thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Shares offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, part of which has been omitted in accordance
with the rules and regulations of the Commission. For further information
about the Company and the Shares offered hereby, reference is made to the
Registration Statement and exhibits filed as a part thereof and otherwise
incorporated therein and which may be inspected and copied in the manner and
at the facilities described below. Statements made in this Prospectus as to
the contents of any document referred to herein are not necessarily
complete, and in each instance reference is made to such document for a more
complete description, and each such statement is qualified in its entirety
by such reference.
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 periodic reports, proxy statements and other information
with the Commission. The Registration Statement, including the exhibits
thereto, as well as such reports and other information filed by the Company
with the Commission, can be inspected, without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington D.C., 20549; and at the Commissions Regional offices
at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Reports and other information concerning the Company can also be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated by reference in this Prospectus: (1) the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
(2) the Company's Annual Report on Form 10-K/A filed with the Commission on
April 29, 1996, (3) the Companys Report on Form 8-K filed with the
Commission on April 29, 1996, (4) the Companys Proxy Statement dated May
24, 1996 concerning the Companys Annual Meeting of Stockholders to be held
June 24, 1996, and (5) all other documents subsequently filed pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and before the termination of this offering, which shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request, a copy of any or all documents incorporated into this Prospectus by
reference (other than exhibits incorporated by reference into such document
which are not specifically incorporated by reference into such documents).
Requests for documents should be submitted to USMX, Inc., 141 Union
Boulevard, Suite 100, Lakewood, Colorado 80228, Attention: Secretary
(telephone (303) 985-4665). The information relating to the Company
contained in this Prospectus does not purport to be comprehensive and should
be read together with the information contained in the documents
incorporated or deemed to be incorporated by reference herein.
<PAGE>
The Company
USMX, INC. (the "Company" or "USMX") is a Delaware corporation which
engages in the exploration for, and development and operation of precious
metal properties. The Company also evaluates base metal and non-metallic
opportunities. The Company conducts its operations directly and through
various operating subsidiaries. All references in this Prospectus to the
Company or USMX include all subsidiaries of USMX, INC., unless the context
otherwise requires.
All of the Companys 1995 production (6,266 ounces of gold) was from
the Companys Goldstrike Mine near St. George, Utah. Mining was completed
at the Goldstrike Mine in October 1994. The Company expects minimal future
production from the Goldstrike Mine. In addition to revenues from its
operations at the Goldstrike Mine in 1995, the Company also received the
minimum annual advance royalty of $720,000 in connection with operations of
the Montana Tunnels Mine.
The Companys principal focus in 1995 was on further exploration and
preliminary development of its Illinois Creek and Thunder Mountain
properties. In February 1996, the Company completed its feasibility study
of the Illinois Creek property and received a commitment for project
financing. The commitment is subject to certain conditions, including the
vesting of title in this property in the Company. The Company is currently
proceeding with development of this property, and in May 1996 received key
permits necessary for mining, heap leaching and dam construction. The Air
Quality Permit was received in June 1996. It is the Companys goal to
commence mining at Illinois Creek in the summer of 1996. There can be no
assurance that the Company will be successful. See Risk Factors.
The Company expects to complete the acquisition of NPMCs leasehold and
other property interests in the Illinois Creek Project in June 1996.
Pursuant to its Agreement with NPMC, the Company will issue to NPMC a total
of 1,540,663 Shares. This Prospectus relates to the offer by NPMC of the
Shares to be issued to it in connection with the property acquisition. The
Company will grant to NPMC a first perfected priority security interest in
the property, which will be subordinated to a lender providing financing for
the Project upon terms reasonably acceptable to NPMC. See Risk Factors.
If commercial production has not been achieved on the property by December
16, 1999, the Agreement with NPMC will terminate, and the property will
revert to NPMC. See, Selling Stockholder.
In May 1996 the Company borrowed $2,500,000 from Pegasus Gold
Corporation ("Pegasus"), a principal stockholder of the Company, which
obligation is secured by the Companys royalty interest in the Montana
Tunnels Property. The Montana Tunnels Property is owned and operated by
Pegasus. In June 1996 the Company and Pegasus agreed to the sale of the
Companys interest in the Montana Tunnels Property to Pegasus for
$4,500,000. The transaction is subject to the approval of the Companys
stockholders. Pending completion of the transaction, Pegasus has agreed to
provide the Company an additional $2,000,000 which will be deemed an
amendment to the terms of the outstanding $2,500,000 loan. See "Risk
Factors." Upon closing of the transaction, the Company will transfer to
Pegasus its interest in the Montana Tunnels Property, and will be relieved
of its obligation to repay these loans.
The Company views exploration as an important means of growth, and it
typically actively explores several projects annually. In 1995, the
Companys exploration efforts in the United States were concentrated on
expanding the mineralization at Illinois Creek and Thunder Mountain. In
addition, the Company continued its exploration efforts outside of the
United States, principally in Mexico.
Donald P. Bellum was elected Chairman of the Board of Directors and
Chief Executive Officer, effective May 1, 1996, and will become President on
July 1, 1996. James A. Knox will continue to serve as President until June
30, 1996. It is expected that Mr. Knox will thereafter remain an employee
of the Company and concentrate his activities in the areas of acquiring
mineral properties and mining operations for the Company.
The Companys executive offices are located at 141 Union Boulevard,
Suite 100, Lakewood, CO 80228, and its telephone number is (303) 985-4665.
<PAGE>
Summary Consolidated Financial Information
(amounts in thousands, except per share amounts and
operating data)
<TABLE>
<CAPTION> Three Months Ended
Years Ended December 31, March 31,
------------------------------------------------------------------- -------------------
1995 1994 1993 1992 1991 1996(5) 1995
Statement of Operations Data: ------- ------- --------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue (gold sales plus net
other income) $3,922 $14,866 $24,252(1) $18,043 $17,564 $257 $753
Gross profit (loss) (605) 1,641 880 1,658 4,505 - (67)
Prospecting costs 684 739 667 651 522 194 246
Abandonment and impairment of
mineral properties 4,431 261 938 21 502 - 28
Net income (loss) (6,906) 204 2,602 37 1,928 (478) (473)
Net income (loss) per share $(0.47) $0.01 $0.17 $0.00(2) $0.14 $(0.03) $(0.03)
Operating Data:
Ounces of gold sold 6,900 35,600 50,400 47,400 43,800 - 1,000
Average realized price per
ounce $388 $383 $360 $360 $376 - $386
Average market price per
ounce $384 $384 $360 $344 $362 $400 $379
Ounces of gold produced:
Goldstrike (4) 6,266 34,486 31,934 4,496 - - 2,168
Alligator Ridge area (3) - - 23,454 41,120 36,803 - -
Green Springs - - - 2,353 4,984 - -
------ ------ ------ ------ ------ -------- -------
Total 6,266 34,486 55,388 47,969 41,787 - 2,168
====== ====== ====== ====== ====== ======== =======
Cash costs per ounce:
Goldstrike (4) $233 $229 $305 $270 - - $186
Alligator Ridge area (3) - - 268 285 256 - -
Green Springs - - - 198 143 - -
------ ------ ------ ------ ------ -------- -------
Combined $233 $229 $289 $280 $242 - $186
====== ====== ====== ====== ====== ======== =======
Total cost per ounce:
Goldstrike (4) $233 $277 $326 $282 - - $187
Alligator Ridge area (3) - - 328 336 290 - -
Green Springs - - - 162 148 - -
----- ------ ------ ------ ------ -------- -------
Combined $233 $277 $327 $331 $290 - $187
===== ====== ====== ====== ====== ======== =======
December 31, March 31,
------------------------------------------------------------------- -------------------
1995 1994 1993 1992 1991 1996 1995
------ ------- ------- ------- -------- -------- -------
Financial Condition Data:
Working capital $5,094 $14,105 $19,362 $12,903 $11,427 $3,039 $12,747
Current assets $5,834 $14,923 $21,573 $16,427 $14,140 $3,543 $13,475
Total assets $17,469 $24,190 $28,808 $28,741 $26,195 $16,405 $23,576
Current liabilities $740 $818 $2,211 $3,524 $2,713 $504 $728
Long term liabilities $885 $361 $1,074 $3,290 $1,680 $535 $361
Stockholders' equity $15,844 $23,011 $25,523 $21,927 $20,052 $15,366 $22,487
___________
<FN>
(1) Includes gain from the sale of the Company's Alligator Ridge assets
totaling $5,000.
(2) Less than $0.01 per share
(3) Sold August 27, 1993. Includes the following mines: Alligator Ridge,
Casino/Winrock and Yankee
(4) The Goldstrike Mine was acquired effective November 1, 1992.
(5) Production at the Goldstrike Mine ended September 1995. There was no gold production
during the quarter ended March 31, 1996.
</FN>
</TABLE>
<PAGE>
RISK FACTORS
Purchasers of the Common Stock being offered hereby should carefully read this
entire Prospectus and the documents incorporated by reference herein.
Ownership of shares of the Common Stock involves certain risks. In determining
whether to purchase shares of Common Stock, prospective investors should
consider carefully the following factors in addition to the other information
contained in this Prospectus and the documents incorporated by reference
herein.
Gold Price Volatility
The Company's results of operations are significantly affected by changes in
the market price of gold. Gold prices fluctuate widely and are affected by
numerous industry factors, such as demand for precious metals, forward selling
by producers, central bank sales and purchases of gold, and production and cost
levels in major gold producing regions such as South Africa and the former
Soviet Union. Moreover, gold prices are also affected by macro-economic
factors such as expectations for inflation, interest rates, currency exchange
rates, and global or regional political and economic situations. The current
demand for and supply of, gold affect gold prices, but not necessarily in the
same manner as current demand and supply affect the prices of other
commodities. The potential supply of gold consists of new mine production plus
existing stocks of bullion and fabricated gold held by governments, financial
institutions, industrial organizations and individuals. As mine production in
any single year constitutes a very small portion of the total potential supply
of gold, normal variations in current production do not necessarily have a
significant effect on the supply of gold or on its price. If gold prices
should decline below the Company's cash costs of production of a producing
property or forecasted cash costs of a property in development and remain at
such levels for any sustained period, the Company could determine that it is
not economically feasible to continue or commence commercial production.
The volatility of gold prices is illustrated in the following graph depicting
the annual high, low and average London P. M. fix for the period 1985 through
1995:
(Graph as described in the paragraph above.)
The London P.M. Fix on June 20, 1996, was $384.30 per ounce.
<PAGE>
Profitability
Although the Company reported net income for each of the six years
ended December 31, 1994, the Company reported a net loss of $6.9
million for the year ended December 31, 1995. The Company also
reported a net loss of $478,000 for the quarter ended March 31, 1996 as
compared to net loss of $473,000 for the quarter ended March 31, 1995.
Future profitability is dependent upon construction of the Illinois
Creek Mine on schedule and within budget and upon that mine performing
in a manner consistent with operations planned by the Company. Future
profitability is also dependent upon the Company successfully locating,
acquiring, financing, constructing, and operating additional mines at a
cost that is sufficiently less than the prevailing price of the
commodity being mined, of which there can be no assurance.
Based on the Companys estimates of the amounts and grades of drilled-
defined mineralization that can be recovered from the Companys
Illinois Creek Project and Thunder Mountain Project, the Company has
determined to continue development of the Illinois Creek project and
has initiated the permitting process on its Thunder Mountain Project.
The drill-defined mineralization figures are based on extensive
drilling and sampling on the Companys properties and are based on
assumptions believed by the Company to be reasonable regarding
production costs, metallurgical recoveries and mineral prices.
Although the Company believes that it has carefully prepared these
estimated figures, there are numerous uncertainties inherent in this
process, including many factors beyond the control of the Company. The
accuracy of any such estimates is a function of the quality of
available data and of engineering and geological interpretation and
judgment. It can be expected that, as the Company conducts additional
evaluation, drilling and testing with respect to its properties, these
estimates will be adjusted and plans for mining could be revised.
Market price fluctuations of gold and silver, as well as increased
production costs or reduced recovery rates, may render drill-defined
mineralization containing relatively lower grades of mineralization
uneconomic and may ultimately result in a restatement of drill-defined
mineralization. Moreover, short term operating factors, such as the
need for sequential development of ore bodies and the processing of new
or different ore grades, may adversely affect the Companys cash flow
in any particular accounting period.
Financing for the Illinois Creek Project, Use of Working Capital,
and Need for Future Financings
The Companys working capital at May 31, 1996, was approximately
$800,000. It is the Companys goal to commence mining on the Illinois
Creek Mine in the summer of 1996. The Company estimates that the cost
necessary to develop the Illinois Creek Mine and place it into
production will be approximately $28.6 million, including approximately
$4.7 million in working capital and $4 million in property acquisition
costs which will be paid by the issuance of USMX Common Stock. This
Prospectus relates to the offer by NPMC of the Shares to be issued to
it in connection with the property acquisition. See Selling
Stockholder.
The Company intends to use its internal cash resources and the proceeds
from borrowings to finance the development and construction costs of
the Illinois Creek Project. . The Company has obtained a commitment
from NM Rothschild & Sons Limited (the Lender) for a $22 million
facility to finance the development and construction costs. The
Company will need to promptly finalize, and commence use of funds from
this facility, in order for the Company to commence mining in the
summer of 1996.
The Company will transfer its interest in the Illinois Creek
Project to its wholly-owned subsidiary, USMX of Alaska, Inc.
(AK) which will be the borrower of $19.5 million of the
$22 million facility. Under certain circumstances, the loan
to AK may be in the form of a gold loan, in which event the
maximum credit amount would be the number of ounces of gold
equal to $19,500,000 divided by the price of gold in London.
However, the Company will not convert the loan to a gold
loan unless the project has operated for a minimum period of
45 consecutive days at not less than 70% of the Pro forma
production capacity as set forth in the Project feasibility
report. Advances will be made by the lender solely to an
account dedicated to project operations and only if certain
conditions related principally to project operation, are
satisfactory to the Lender. In addition, AK will be
required to maintain a minimum balance in the Proceeds
Account equal to the sum of : (I) the greater of $1,500,000
or a formula amount based on the present value of future net
cash flow from the Project, (II) the lesser of $250,000 or
interest payable to the lender for the following three
months, (III) capital expenditures scheduled for the
following three months and, (IV) any other payments due to
the Lender for the following three months. It is expected
that AK will need to deposit approximately $1,500,000 for
deposit in the Proceeds Account by September 30, 1996 to
maintain the minimum balance.
<PAGE>
AK will not be able to make withdrawals from the Proceeds Account for
its general corporate purposes or dividends until Completion has
occurred. The requirements for Completion include the construction of
the Project facilities, which facilities and the equipment thereon must
be mechanically complete and electrically operable (Mechanical
Completion), the achievement of production amounts and grades, costs
and reserves similar to the development plan, and the absence of any
default in the credit agreement. The note evidencing the $19.5 million
obligation will bear interest, payable quarterly, at 2.25% above the
LIBOR until certain tests related to Project operations have been
completed to the satisfaction of the lender and 1.875% thereafter for
the remainder of the approximate four-year term of the loan. Principal
payments will be made in 8 amortized installments on September 30 and
December 31 of each year, commencing September 30, 1997.
Subject to satisfaction of the requirements for maintenance of the
Proceeds Account, advances will be made by the Lender to AK until the
first to occur of September 30, 1997, or Mechanical Completion. AK
will pay an establishment fee of $292,500 to the Lender, of which
$146,250 has been paid. AK will also be required to pay a commitment
fee of one-half of one percent of the difference between the principal
amount outstanding and the maximum credit amount.
It is expected that the final loan documentation will include several
financial and other covenants, including the maintenance of certain
operating and financial ratios, reserve requirements, limitations on or
prohibitions of dividends, indebtedness, liens, investments, mergers,
changes in capital structures and certain other items. AK will also be
required during the term of the Project loan to make hedging
arrangements for approximately 80% of annual production from the
Project on a three-year rolling basis.
The balance of the facility will be represented by a $2.5 million note
made by the Company which may be converted into Common Stock at the
conversion price of $3.40 per share at the option of the lender at any
time during the approximate four-year term of the note. The Company
may also require conversion if the note is not in default and the daily
closing price of the Common Stock exceeds $4.75 for 30 consecutive
trading days. A total of 735,294 shares of Common Stock (subject to
adjustment for certain events)will be reserved for issuance by the
Company upon conversion of the $2.5 million loan. During the term of
the convertible note evidencing this loan, the lender will have the
opportunity to profit from an increase in the market price of the
Common Stock with resulting dilution to the holders of Common Stock.
The existence of such convertible securities may adversely affect the
terms on which the Company can obtain additional financing, and the
holders of such convertible note can be expected to convert the
securities at a time when the Company may be able to obtain additional
capital by offering shares of the Common Stock on terms more favorable
to the Company than those provided by the conversion of this note.
The $2.5 million loan will bear interest at 2% above LIBOR and will be
payable no less frequently than semi-annually. It is expected that the
final loan documentation will include several financial and other
covenants, including the maintenance of certain operating and financial
ratios, limitations on or prohibitions of dividends, indebtedness,
liens, investments, mergers, changes in capital structure and certain
other items. Such restrictions could affect the Companys operations
and future plans.
<PAGE>
The Company will be required to deposit the entire proceeds of the $2.5
million loan into the Proceeds Account and such proceeds will not be
available for general corporate purposes. Payments may be made to the
Company from the Proceeds Account in an amount sufficient for the
Company to make interest payments. AK will not be permitted to repay
the $2.5 million to the Company or other advances by the Company in the
approximate amount of $3.4 million unless certain conditions are
satisfied, principally related to repayment of the notes to the Lender
and satisfactory operation of the Project.
It is expected that the Company will pledge to the Lender its stock in
its subsidiary as well as its notes from AK for advances made by the
Company. In addition, the Company will be a guarantor of the $19.5
million loan to AK until it has been demonstrated that the Illinois
Creek Project is operating in a manner satisfactory to the lender.
There can be no assurance when, or if, this will occur, and the Company
could have a substantial debt burden without other resources to make
repayment.
Closing of the total $22 million facility is subject to several
conditions, including completion of documentation satisfactory to the
Lender, and transfer of title to the property. The Company has agreed
with NPMC that, concurrent with the transfer of title to the Company,
NPMC will receive a first perfected priority security interest in the
property (subject to subordination to a lender providing financing for
the project upon terms reasonably acceptable to NPMC). If commercial
production has not been achieved on the property by December 16, 1999,
the Agreement with NPMC will terminate, and the property will revert to
NPMC.
The failure of the Company to complete this financing may jeopardize
severely the Companys ability to complete development of the Illinois
Creek Project. Moreover, since December 31, 1995, the Company has
utilized the substantial portion of its working capital for further
development of the Illinois Creek Project. Any delay in construction,
and future operation, of the Illinois Creek Project could create
significant liquidity problems for the Company. Moreover, even if the
Illinois Creek Project financing is completed, the Company will be
constrained in its other activities without additional funding. The
Company is presently considering alternatives to provide other funds,
but presently has no firm commitments for other funding.
In order to obtain additional funding for its operations, the Company
borrowed $2,500,000 in May 1996 from Pegasus Gold Corporation, a
principal stockholder of the Company. The loan bears interest at
8.75%, repayable in monthly installments of $60,000 over a 50 month
period, commencing June 1, 1996, and matures on July 1, 2000. The
Company is entitled to receive minimum monthly royalties of $60,000
from Pegasus for the Companys interest in the Montana Tunnels Property
owned by Pegasus. In lieu of monthly payments, Pegasus will retain the
$60,000 royalty payments it would otherwise make to the Company, and
the Companys interest in the Montana Tunnels Property will secure
repayment of this loan. If the royalty payments were not otherwise due
from Pegasus, the Company would be responsible for making these monthly
payments until the loan is repaid. The Company is also required to
repay the loan if it receives gross proceeds from any financing (other
than the proposed Illinois Creek Project financing) in excess of
$7,500,000, or if it sells its interest in the Montana Tunnels
Property.
In June 1996 the Company and Pegasus agreed to the sale of the
Companys interests in the Montana Tunnels Property to Pegasus for
$4,500,000. The transaction is subject to approval of the Companys
stockholders. Pending completion of the transaction, Pegasus has
agreed to provide the Company an additional $2,000,000 which will be
deemed an amendment to the terms of the outstanding $2,500,000 loan,
with a revised amortization schedule to be agreed upon. Upon closing
of the transaction, the Company will transfer its interest in the
Montana Tunnels Property to Pegasus, and the Company will be relieved
of its obligation to repay the amount loaned by Pegasus.
<PAGE>
In addition, in May 1966 the Company sold 168,273 shares of Alta Gold
Co. common stock and received proceeds of approximately $604,500 from
these sales. The Company presently owns 184,438 shares of Alta Gold
Co. common stock.
The Company has filed a Notice of Intent to Operate with the Idaho
Department of Lands describing the Companys proposed gold and silver
mining activities in the Thunder Mountain Project. If the Thunder
Mountain Project is sufficiently attractive to warrant continued
development and the necessary permits and financing are obtained, it is
possible that construction could commence in 1997. Management
estimates that substantial capital would be required for construction
of facilities and other development activities at Thunder Mountain.
The Company has no commitments for outside financing for the Thunder
Mountain Project.
The Companys ability to obtain outside financing for the Thunder
Mountain Project or other future projects will depend, among other
things, upon the price of gold and perceptions of future prices.
Therefore, availability of funding is dependent largely upon factors
outside the Companys control, and cannot be predicted. The Company
does not know from what specific sources it will be able to derive any
required funding. Any such financing, if available, could increase the
indebtedness of the Company or dilute current stockholders positions.
If the Company acquires such funding through debt, a substantial
portion of the Companys cash flow may need to be devoted to the
payment of principal and interest on such debt, which could render the
Company more vulnerable to competitive pressure or economic downturns.
If the Company is not able to raise additional funds (and there can be
no assurance that it can, or that if it can, such funds will be on
terms acceptable to the Company) it will not be able to fund certain
exploration and development activities on its own.
Certain Illinois Creek Project Risks
Construction and operation of the Illinois Creek Project involve
numerous risks, including the following:
Mobilization/Transportation. The Illinois Creek Project site is
located in the southern Kaiyuh Mountains in the western interior of
Alaska. The project is located approximately 57 miles southwest of
Galena and 23 miles east of the Yukon River. It is equidistant from
Fairbanks and Anchorage which lie approximately 320 miles to the east
and southwest of the project, respectively.
Access to the site is by air. Equipment and supplies will be
transported to the site by land, sea and air. Equipment and supplies
will be transported from Seattle, Washington to Anchorage, Alaska by
barge. From Anchorage, it will travel by truck or rail to Nenana.
From Nenana, it will be moved down river on barge to Galena. From
Galena, it will be lifted by air to the site. The site will be
connected to the personnel camp and airport by a 6.5 mile road which
has been partially constructed.
A C-133 aircraft will be required to transport the large,
oversized mining equipment. The C-133 is a retired military plane
which has not been certified for commercial use by the FAA. The
Company has been assisted by the Alaska Industrial Development and
Export Authority ("AIDEA"), a political subdivision of the State of
Alaska, in obtaining a waiver from the FAA for use of the C-133. The
Company has entered into use and indemnification agreement with AIDEA
with respect to the lease of aircraft equipment. Finalization of these
arrangements in the near future is essential to the Companys
construction plans for the summer of 1996. In addition, there is only
one such airworthy aircraft currently available for use by the Company.
There is also one additional C-133 available to supply spare parts, if
needed. If the Company is unable to transport all of the components it
currently plans to transport using the C-133 aircraft, substantial
delays and additional costs could be incurred as the components would
have to be transported to the site over ice road during the winter of
1996/1997, delaying commencement of operations until summer of 1997.
<PAGE>
Weather. While historic weather patterns at the site indicate that
there should be no weather-induced construction delays, significant
periods of inclement weather could adversely affect the construction
schedule at Illinois Creek which would, in turn, delay initial
production and related cash flow from the project. The climate is
subarctic and characterized by large, seasonal extremes in temperature
and daylight.
Environment. Mining is subject to potential risks and liabilities
associated with pollution of the environment and the disposal of waste
products occurring as a result of mineral exploration and production.
See "Risk Factors - Regulation of Mining Activity. " The Illinois
Creed Project is being permitted as a "zero discharge facility." As
such, operation of the facility will require strict control of the
water balance to insure that no discharge occurs. Upon closure,
reclamation activities will be closely monitored and effluent from the
decommissioned facility will be required to meet strict water quality
standards.
Community Relations. The Company has established good relations with
residents of the local area. If the Company were unable to continue
this support, the Illinois Creek Project could be negatively impacted
Project Development Risks
The Company from time to time engages in the development of new ore
bodies. The Companys ability to sustain or increase its present level
of gold production is dependent in part on the successful development
of such new ore bodies and/or expansion of existing mining operations.
The economic feasibility of any such development project, and all such
projects collectively, is based on, among other things, estimates of
reserves, metallurgical recoveries, capital and operating costs of such
projects and future gold prices. Development projects are also subject
to the successful completion of feasibility studies, issuance of
necessary permits and receipt of adequate financing.
Development projects have no operating history upon which to base
estimates of future cash operating costs and capital requirements. In
particular, estimates of reserves, metal recoveries and cash operating
costs are to a large extent based on the interpretation of geologic
data obtained from drill holes and other sampling techniques and
feasibility studies which derive estimates of cash operating costs
based on anticipated tonnage and grades of ore to be mined and
processed, the configuration of the ore body, expected recovery rates
of metals from the ore, comparable facility and equipment costs,
anticipated climate conditions and other factors. As a result, it is
possible that actual cash operating costs and economic returns of any
and all development projects may materially differ from the costs and
returns initially estimated.
Exploration
Mineral exploration, particularly for gold, is highly speculative in
nature, involves many risks and frequently is unsuccessful. The
Company is seeking to expand its reserves through exploration and
development at the Illinois Creek, Alaska and Thunder Mountain, Idaho
properties as well as through exploration in other parts of North
America and in Latin America. There can be no assurance that the
Companys exploration efforts will result in the discovery of gold
mineralization. If reserves are developed, it may take a number of
years and substantial expenditures from the initial phases of drilling
until production is possible, during which time the economic
feasibility of production may change. No assurance can be given that
the Companys exploration programs will result in reserves.
<PAGE>
Competition and Scarcity of Mineral Lands
Although many companies and individuals are engaged in the mining
business, including, large established mining companies, there is a
limited supply of desirable mineral lands available for claim staking,
lease or other acquisition in the United States and other areas where
the Company contemplates conducting exploration and/or production
activities. The Company may be at a competitive disadvantage in
acquiring suitable mining properties as it must compete with these
other individuals and companies, many of which have greater financial
resources and larger technical staffs than the Company. As a result,
there can be no assurance the Company will be able to acquire
attractive properties.
Hedging Activities
Although the Company had no hedging activities in 1995, it has
historically used and plans to use in the future spot deferred
contracts in its hedging program to protect earnings and cash flows
from the impact of gold price fluctuations. The Company will be
required by the Lender on the Illinois Creek Project to hedge
approximately 80% of expected annual gold production from the Project
during the term of the Project loan. These transactions have been
designated as hedges of the price of future production and accounted
for as such. Spot deferred contracts are agreements between a seller
and a counterparty whereby the seller commits to deliver a set quantity
of gold, at an established date in the future and at agreed prices.
The established price is equal to the spot price for gold plus
"contango. " Contango is equal to the difference between the
prevailing market rate for dollar deposits less the gold lease rate,
for comparable periods, and represents compensation to the seller for
holding gold until a future date. Contango rates ranged from
approximately 0% to 5% during 1995.
At the scheduled future delivery date, the seller may, at the option of
the counterparty, deliver into the contract or defer the delivery to a
future date. This option allows the seller to maximize the price
realized by selling at the spot market price if such price at that time
were to be higher than the forward contract price. Each time the
seller defers delivery, the forward sales price is increased by the
then prevailing contango for the next period. Generally, the
counterparty will allow the seller to continue to defer contract
deliveries providing that there is sufficient scheduled production from
proven and probable reserves to fulfill the commitment.
Risk of loss with these spot deferred contracts arises from the
possible inability of a counterparty to honor contracts and from
changes in the Companys anticipated production of gold. However,
nonperformance by any party to such financial instruments is not
anticipated.
The Company is typically required by the counterparties to maintain a
margin account. Should the cumulative liquidation cost of the
Companys spot deferred positions exceed the cumulative value of such
positions by an amount in excess of the margin account, the Company
could be subject to margin call. The liquidation cost is what the
Company would have to pay on the liquidation date to purchase fixed
forward delivery contracts to meet its spot deferred deliveries. The
cost of fixed forward delivery contracts is based on the spot price on
the liquidation date plus contango through the delivery date.
Dependence on Key Personnel
The Company is dependent on the service of certain key officers and
employees, including its Chief Executive Officer. Competition in the
mining industry for qualified individuals is intense, and the loss of
any of these key officers or employees, if not replaced, could have a
material adverse effect on the Companys business and its operations.
The Company currently does not have key person insurance.
Regulation of Mining Activity
Mining is subject to potential risks and liabilities associated with
pollution of the environment and the disposal of waste products
occurring as a result of mineral exploration and production.
Environmental liability may result from mining activities conducted by
others prior to the Companys ownership of a property. Insurance for
environmental risks (including potential liability for pollution or
other hazards as a result of the disposal of waste products occurring
from exploration and production) is not generally available at a
reasonable price to the Company or other companies within the industry.
To the extent the Company is subject to environmental liabilities, the
payment of such liabilities would reduce funds otherwise available to
the Company and could have a material adverse effect on the Company.
<PAGE>
In the context of environmental permitting, including the approval of
reclamation plans, the Company must comply with standards, laws and
regulations which may entail greater or lesser costs and delays
depending on the nature of the activity to be permitted and how
stringently the regulations are implemented by the permitting
authority. It is possible that the costs and delays associated with
compliance with such laws, regulations and permits could become such
that the Company would not proceed with the development of a project or
the operation or further development of a mine. Laws and regulations
involving the protection and remediation of the environment are
constantly changing and are generally becoming more restrictive. The
Company has made, and expects to make in the future, significant
expenditures to comply with such laws and regulations.
Pending bills which affect environmental laws applicable to mining
include versions which may substantially alter the Clean Water Act,
Safe Drinking Water Act, Endangered Species Act and a bill which will
introduce additional protection of wetlands (Wetlands Protection and
Management Act). Adverse developments and operating requirements in
these acts could impair the ability of the Company as well as others to
develop mineral resources. Revisions to current versions of these
bills could occur prior to passage.
The Environmental Protection Agency ("EPA") continues the development
of a solid waste regulatory program specific to mining operations under
the Resource Conservation and Recovery Act ("RCRA"). Of particular
concern to the mining industry is a proposal by the EPA titled
Recommendation for a Regulatory Program for Mining Waste and Materials
Under Subtitle D of the Resource Conservation and Recovery Act"
("Strawman II") which, if implemented, would create a system of
comprehensive federal regulation of the entire mine site. Many of
these requirements would be duplicative of existing state regulations.
Strawman II as currently proposed would regulate not only mine and mill
wastes but also numerous production facilities and processes which
could limit internal flexibility in operating a mine. To implement
Strawman II as proposed, the EPA must seek additional statutory
authority, which is expected to be requested in connection with
Congress reauthorization of RCRA.
The Company is also subject to regulations under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980
("CERCLA" or "Superfund") which regulates and establishes liability for
the release of hazardous substances and (ii) the Endangered Species Act
("ESA") which identifies endangered species of plants and animals and
regulates activities to protect these species and their habitats.
Revisions to CERCLA and ESA are being considered by Congress; the
impact on the Company of these revisions is not clear at this time.
Mining Risks and Insurance
The business of gold mining is generally subject to a number of risks
and hazards, including environmental hazards, industrial accidents,
labor disputes, the encounter of unusual or unexpected geological
conditions, slope failures, changes in the regulatory environment and
natural phenomena such as inclement weather conditions, floods,
blizzards and earthquakes. Such occurrences could result in damage to,
or destruction of, mineral properties or production facilities,
personal injury or death, environmental damage, delays in mining,
monetary losses and possible legal liability. The Company maintains
insurance against risks that are typical in the gold mining industry
and in amounts that the Company believes to be reasonable, but which
may not provide adequate coverage in certain unforeseen circumstances.
However, insurance against certain risks (including certain liabilities
for environmental pollution or other hazards as a result of exploration
and production) is not generally available to the Company or to other
companies within the industry.
<PAGE>
Title to Properties
Certain of the Companys mineral rights consist of unpatented mining
claims. Unpatented mining claims are unique property interests that
are generally considered to be subject to greater title risk than other
real property interests. The greater title risk results from the
unpatented mining claims being dependent on strict compliance with a
complex body of federal and state statutory and decisional law, much of
which compliance involves physical activities on the land, and from the
lack of public records which definitively control the issues of
validity and ownership.
No Dividends
The Company anticipates that it will use its earnings, if any, to
finance its operations and growth. The Company does not anticipate
paying dividends and, because of certain debt covenants, is restricted
from paying any dividends to its stockholders.
Volatility of Price for Common Stock
The market prices for shares of the Common Stock have been highly
volatile in recent years. The market price may be highly volatile in
the future depending on news announcements of the Company, gold price
volatility and changes in general market conditions.
USE OF PROCEEDS
The Shares offered in this Prospectus will be sold by NPMC. The
Company will not receive any proceeds from the sale of the Shares.
DETERMINATION OF OFFERING PRICE
The Shares may be sold by NPMC from time to time at prices and on terms
not yet determined. Sales, which may or may not involve, cash
consideration, or sales on Nasdaq may be made directly to other
purchasers or through one or more underwriters, brokers or dealers.
See "Plan of Distribution."
SELLING STOCKHOLDER
The Shares which are being offered or which may be offered solely by
this Prospectus consist of up to 1,540,663 Shares to be acquired by
NPMC pursuant to the Companys agreement with NPMC with respect to the
Illinois Creek property in Alaska. The Company made initial payments
to NPMC totaling $100,000 in 1994 to evaluate the Illinois Creek
property. The Company entered into an agreement with NPMC effective
December 16, 1994, which was amended on February 5, 1996 (the
Agreement). Pursuant to the Companys agreement with NPMC, the
Company agreed to make a $1 million, non-refundable payment to NPMC in
cash or Common Stock. The Company elected to make the payment in the
Common Stock, for which NPMC is entitled to receive 449,754 Shares.
The Company also agreed that, upon obtaining the necessary permits and
if no material adverse economic change had occurred, the Company would
make a production decision and agreed to issue to NPMC an additional $3
million in cash or Common Stock. The Company has received the key
permits related to this Project, and believes that no adverse economic
change has occurred with respect to the Project economics. Therefore,
the Company made a production decision and agreed to issue to NPMC an
additional 1,090,909 Shares. The Company agreed to file a registration
statement relating to the resale of these Shares. The Registration
Statement, of which this Prospectus is a part, relates to this
aggregate of 1,540,663 Shares to be issued by the Company to NPMC
pursuant to the Agreement.
In addition to the Shares, NPMC had the right to enter into a mining
venture agreement with the Company in which event the Company would
transfer to NPMC an undivided 25% interest in the Illinois Creek Mining
Leases, or to receive a 5% net returns royalty. NPMC chose to receive
a 5% net returns royalty on production from the Project.
<PAGE>
If the Company delineates the existence of additional ore reserves on
the lease known as the Illinois Creek Upland Mining Lease, which
increases the total proven ore reserves to at least one million ounces
of equivalent gold ore reserves beyond the mineralization stated in the
Companys February 1996 feasibility report, then NPMC will have the
right to elect to participate in subsequent mining operations with
respect to those additional reserves for a 25% working interest by
reimbursing the Company 120% of NPMCs 25% share of exploration,
development and capital costs incurred by the Company subsequent to
February 1996 which are directly related to the delineation and/or
production of the additional reserves.
Pursuant to the Agreement, the Company has until December 16, 1997 to
achieve commercial production as defined in the Agreement. This period
may be extended at the option of the Company for two additional one-
year periods upon payment by the Company of a $300,000 advance royalty,
adjusted for inflation, for each one-year extension. The Agreement
terminates on December 16, 1999 if the Company has not achieved
commercial production from the Property by that date. Except for this
transaction, NPMC has not had any material relationship with the
Company within the past three years.
NPMC does not own any Shares other than the Shares to be acquired as
described above. NPMC expects to offer for sale all of these Shares.
NPMC will own approximately 9.5% of the issued and outstanding Common
Stock. After this offering, and assuming the sale of all Shares, NPMC
will not own any Shares.
Under the terms of the Company's agreement with NPMC involving the
Illinois Creek Project, the Company agreed to register the Shares with
the Commission and to qualify the Shares for sale, as required, under
state securities laws. The Company agreed to bear all expenses (other
than underwriting discounts, selling commission, fees and expenses of
counsel and other advisors to NPMC) in connection with the
registration, qualification and sale of the Shares by NPMC.
PLAN OF DISTRIBUTION
The Shares offered pursuant to this Prospectus are to be sold for the
account of NPMC.
The Company has been advised by NPMC that the Shares may be sold by or
on behalf of NPMC through negotiated transactions or otherwise, at
prices and on terms related to the then-current market price or
otherwise, in market transactions or otherwise and with or without the
participation of underwriters, brokers or dealers. NPMC will be acting
independently of the Company in making decisions with respect to the
timing, manner and size of each sale.
NPMC may also from time to time offer the Shares through brokers,
dealers or agents, or through underwriters, who may receive
underwriting discounts, concessions or commissions from NPMC and/or the
purchasers for whom they act as agent. In that event, the offers or
sales may be made on one or more exchanges or in the over-the-counter
market (i) by a block trade in which a broker or dealer, engaged for
the purpose, will attempt to sell the Shares as agent but may position
and resell a portion of the block as principal to facilitate the
transaction, (ii) by purchases by a broker or dealer as principal and
resale by such broker or dealer for its own account, (iii) by ordinary
brokerage transactions or transactions in which the broker solicits
purchasers, (iv) in an underwritten transaction or (v) otherwise. In
the event that brokers or dealers are engaged by NPMC, such brokers or
dealers may arrange for other brokers or dealers to participate. As of
the date hereof, NPMC has advised the Company that NPMC has not entered
into any agreement or understanding for an underwritten offering or
with any dealer or broker for the offer or sale of the Shares. NPMC
may enter into such agreements or understandings in the future.
Any shares when qualified for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than pursuant to this
Prospectus.
<PAGE>
Under the Exchange Act and regulations thereto, any person engaged in a
distribution of Shares offered by this Prospectus may not
simultaneously engage in market-making activities with respect to the
Common Stock of the Company during the applicable "cooling off" periods
prior to the commencement of such distribution. In addition, and
without limiting the foregoing, NPMC 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 Common Stock
by NPMC. NPMC and any brokers/dealers who act in connection with the
sale of the Shares hereunder may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act of 1933, as amended.
In offering the Shares, NPMC and any broker-dealers and any other
participating broker-dealers who execute sales for NPMC may be deemed
to be "underwriters" within the meaning of the Securities Act in
connection with such sales, and any profits realized by NPMC and the
compensation of such broker-dealers may be deemed to be underwriting
discounts and commissions.
Any public offering of the Shares by NPMC will terminate on the earlier
of (a) three years from the date of this Prospectus or (b) the date on
which all Shares have been sold by NPMC. The Company has agreed with
NPMC to use its best efforts to keep the Registration Statement
effective through such offering period.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital consists of 45,000,000 shares of
Common Stock and 20,000,000 shares of preferred stock, $.001 par value
(the "Preferred Stock). As of the date of this Prospectus, there were
16,184,182 shares of Common Stock outstanding, including the 1,540,663
Shares to be acquired by NPMC.
Dividends may be declared and paid from the Common Stock out of legally
available surplus. Such dividends may be paid in cash, property or
shares of Common Stock. The Board of Directors of the Company may set
aside reserves out of funds available for dividends for any purpose the
Board of Directors of the Company determines in the Company's best
interest. At present, the Company is restricted pursuant to loan
covenants in the payment of dividends. The Company has no present
plans to pay dividends in the foreseeable future.
Each Share of Common Stock is entitled to share equally in dividends
from sources legally available therefore when, as, and if declared by
the Board of Directors of the Company and, upon liquidation or
dissolution of the Company, whether voluntary or involuntary, to share
equally in the assets of the Company available for distribution to the
holders of the Common Stock. Each holder of Common Stock is entitled
to one vote per share for all purposes. The holders of Common Stock
have no preemptive rights and there is no cumulative voting, redemption
right or right of conversion with respect to the Common Stock.
All outstanding shares of Common Stock are, and all Shares to be issued
by the Company pursuant to the agreement with NPMC will be, validly
issued, fully paid and nonassessable.
No shares of Preferred Stock have been issued. However, the Board of
Directors of the Company has the right to fix the rights, privileges
and preferences, including preference upon liquidation, of any class of
Preferred Stock to be issued in the future out of authorized but
unissued shares of Preferred Stock. The Board of Directors of the
Company may issue these shares after adopting and filing a certificate
of designations with the Secretary of State of the State of Delaware.
<PAGE>
Certain Potential Anti-Takeover Effects.
The Company currently has certain provisions in its Certificate of
Incorporation and Bylaws which may be viewed as having "anti-takeover"
affects. These provisions may make it more difficult and time-
consuming to change majority control of the Company and of the Board of
Directors of the Company and could reduce the vulnerability of the
Company to an unsolicited offer to "take over" the Company. These
measures could have an adverse impact on the market value of the Common
Stock. Stockholders of the Company do not have cumulative voting
rights in the election of directors. The Company currently has
authorized but unissued shares of both Common Stock and Preferred Stock
that could be issued in such a way as to have anti-takeover effects.
The Board of Directors of the Company could create an issue of shares
of Preferred Stock with such voting or conversion rights which would
make divestment of the Company more difficult or costly.
In addition, the Certificate of Incorporation and/or Bylaws may be
deemed to have anti-takeover effects in that they provide for: (i) the
Board of Directors to be divided into three classes of directors, each
with a term of three years, (ii) 66 2/3% shareholder vote to remove
directors other than for cause, and (iii) a 66 2/3% stockholder vote to
amend certain provisions of the Certificate of Incorporation and
Bylaws.
LEGAL MATTERS
The legality of the Common Stock being offered hereby is being passed
upon for the Company by Bearman Talesnick & Clowdus Professional
Corporation. Attorneys employed by Bearman Talesnick & Clowdus
Professional Corporation beneficially own approximately 27,000 shares
of Common Stock.
EXPERTS
The consolidated financial statements of USMX, INC. and subsidiaries as
of December 31, 1995 and 1994, and for each of the years in the three-
year period ended December 31, 1995 have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm
as experts in accounting and auditing.
<PAGE>
No person has been
authorized to give any
information or to make any
representations in
connection with this
offering other than those 1,540,663 Shares
contained in this
Prospectus and, if given or
made, such other
information and
representations must not be
relied upon as having been
authorized by the Company. USMX, INC.
Neither the delivery of
this Prospectus nor any
sale made hereunder shall,
under any circumstances,
create any implication that Common Shares
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 PROSPECTUS
to its date. This
prospectus does not
constitute an offer to sell
or a solicitation of an
offer to buy any securities
other than the registered
securities to which it
relates or a solicitation
of an offer to buy any
securities other than the
registered securities to
which it relates or an
offer to any person in any
jurisdiction where such an
offer would be unlawful.
This Prospectus does not
constitute an offer to sell
or a solicitation of an
offer to buy such
securities in any
circumstances in which such
offer or solicitation is
unlawful.
TABLE OF CONTENTS
AVAILABLE INFORMATION 2
INFORMATION INCORPORATED BY
REFERENCE 2
RISK FACTORS 5
USE OF PROCEEDS 13
DETERMINATION OF OFFERING
PRICE 13
SELLING STOCKHOLDER 13
PLAN OF DISTRIBUTION 14
DESCRIPTION OF CAPITAL
STOCK 15
LEGAL MATTERS 16
EXPERTS 16
June 25, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses of the offering described in this
Registration Statement are as follows:
Registration Fee $ 1,459
Legal Fees and Expenses 10,000
Accounting Fees and Expenses 5,000
Blue Sky Fees and Expenses 4,000
Printing and Mailing 2,000
Expenses
Miscellaneous 2,000
TOTAL $24,459
Item 15. Indemnification of Directors and Officers.
The Delaware General Corporation Law provides for
indemnification by a corporation of costs incurred by
directors, employees, and agents in connection with an
action, suit, or proceeding brought by reason of their
position as a director, employee, or agent. The person
being indemnified must have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the
best interests of the corporation.
In addition to the general indemnification section, Delaware
law provides further protection for directors under Section
102(b)(7) of the General Corporation Law of Delaware. This
section was enacted in June 1986 and allows a Delaware
corporation to include in its certificate of incorporation a
provision that eliminates and limits certain personal
liabilities of a director for monetary damages for certain
breaches of the director's fiduciary duty of care, provided
that any such provision does not (in the words of the
statute) do any of the following:
"eliminate or limit the liability of a
director (i) for any breach of the
director's duty of loyalty to the
corporation or its stockholders, (ii)
for acts or omissions not in good faith
or which involve intentional misconduct
or a knowing violation of law, (iii)
under section 174 of this Title [dealing
with willful or negligent violation of
the statutory provision concerning
dividends and stock purchases and
redemptions], or (iv) for any
transaction from which the director
derived an improper personal benefit.
No such provision shall eliminate or
limit the liability of a director for
any act or omission occurring prior to
the date when such provision becomes
effective."
It is provided in Article Twelfth of the Registrant's
Certificate of Incorporation that the personal liability of
each director of the Registrant be eliminated and limited to
the full extent permitted under Delaware law, including
Section 102(b)(7) of the Delaware General Corporation Law.
With regard to employee benefit plans, the Delaware General
Corporation Law provides that a director's conduct for a
purpose he reasonably believed to be in the interest of the
participants and beneficiaries of the Plan is conduct
satisfying the subject indemnity provision. A director's
conduct for a purpose that he did not reasonably believe to
be in the interest of the participants in or beneficiaries
of the Plan shall be deemed as not satisfying the indemnity
provision.
The Registrant's Board of Directors is empowered to make
other indemnification as authorized by the Certificate Of
Incorporation, Bylaws or corporate resolution so long as the
indemnification is consistent with the Delaware General
Corporation Law. Under Article VI of the Registrant's
Bylaws, the Registrant is required to indemnify its
directors to the full extent permitted by the Delaware
General Corporation Law and any other provision of Delaware
law.
<PAGE>
Item 16. Exhibits.
Filed with S-3 and S-3A.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) to include any Prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) to reflect in the Prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
Registration Statement,
(iii) to include any material information with respect
to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement
provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required to be
included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 and are incorporated by
reference to the Registration Statement.
2. That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-
effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
(b) For purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plans
annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference
in the Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising out
of the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liability
(other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with
securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
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 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Lakewood, State of
Colorado, on June 21, 1996.
USMX, INC.
By: /s/ James A. Knox
----------------------------
James A. Knox, President
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Power of Attorney filed on May 10, 1996 with the Registrant on
Form S-3, which is hereby incorporated by reference, this Registration
Statement been signed below by James A. Knox as attorney-in-fact for the
following officers and directors of the Registrant:
Donald P. Bellum, Chief Executive Officer
Chairman of the Board of Directors and Director
James A. Knox, President and Director
Paul L. Blair, Vice President - Operations for
Latin America
Dennis L. Lance, Vice President - Exploration
Donald E. Nilson, Vice President - Finance,
Secretary, Chief Financial Officer
Paul B. Valenti, Vice President - Operations
Daniel J. Stewart, Controller
George J. Allen, Director
Phillips S. Baker, Director
James P. Geyer, Director
Terry P. McNulty, Director
Werner G. Nennecker, Director
Gregory Pusey, Director
Robert Scullion, Director
Dated June 21, 1996
/s/ James A. Knox
------------------------------
James A. Knox, Attorney-in-Fact
