UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the fiscal year December 31, 1995 or
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the transition period from ______________________ to
______________________
Commission File Number 0-9370
___________________
USMX, INC.
(Exact name of registrant as specified in its charter)
___________________
Delaware 84-1076625
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
141 Union Boulevard, Suite 100 80228
Lakewood, Colorado (Zip Code)
(Address of principal executive offices)
(303) 985-4665
Registrant's telephone
number, including area
code
Securities registered pursuant to Section 12(b) of the Act:None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
(Title of class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. Disclosure
contained herein __ Disclosure not contained herein X
The aggregate market value of the voting stock held by non-
affiliates of the Registrant was approximately $21,812,693.
This calculation is based on the closing price of the stock
as reported on The Nasdaq Stock Market on March 8, 1996.
The number of shares of the Registrant's $.001 par value
common stock outstanding as of March 8, 1996 was 14,643,519.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12 and 13 are anticipated to be included in
the definitive proxy statement.
<PAGE>
Table of Contents
Items 1 and 2. Business and Properties. 3
Introduction. 3
Summary of Drill-Defined Mineralization 4
History of Operations 5
The Illinois Creek Project 7
The Thunder Mountain Project 10
Montana Tunnels 12
Exploration 13
Competition 17
Markets 17
Government Contracts 18
Governmental Regulation 18
Employees 19
Financial Information about Foreign and
Domestic Operations and Export Sales. 19
Glossary of Terms 21
Item 3. Legal Proceedings. 25
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 5. Market For The Registrant's Common Equity
And Related Stockholder Matters. 26
Item 6. Selected Financial Data 27
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 28
Liquidity and Capital Resources 28
Results of Operations 29
Trends Which May Affect Future Results of
Operations 32
Item 8. Financial Statements and Supplementary Data 35
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 37
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K. 37
INDEX TO EXHIBITS 38
<PAGE>
PART I
Items 1 and 2. Business and Properties.
Introduction.
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 Report to the Company or USMX include all
subsidiaries of USMX, INC., unless the context otherwise
requires.
All of the Company's 1995 production (6,266 ounces of
gold) was from the Company's 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 Company's 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 Company is currently proceeding with
development of this property. It is the Company's goal to
commence mining at Illinois Creek in the fall of 1996. See
below in these Items and Item 7 for additional discussion
regarding the Company's plans and the associated risks.
The Company views exploration as an important means of
growth, and it typically actively explores several projects
annually. In 1995, the Company's 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.
<PAGE>
The following map depicts the location of the Company's
operating property, royalty interest, principal exploration
and development properties, and offices.
The original document contains a map of the western United States
and Alaska depicting the above items.
Summary of Drill-Defined Mineralization
Set forth below are the Company's estimates of the
amounts and grades of drill-defined mineralization that can
be economically recovered from the Company's principal
development projects. These figures are based on extensive
drilling and sampling on the Company's 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 estimates,
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.
Based on its analysis of the mineral deposits detailed
in the table below, it is the Company's present
determination that these properties can be mined on an
economic basis by the Company and that these estimates
constitute reserves as that term is typically used in the
mining industry. Although permitting required to initiate
mining operations in the United States has become extremely
complex and cannot be considered a certainty, the Company
projects that, in the normal course of property development,
it should be able to obtain the necessary permits to
commence mining operations on these properties. However,
there are strict requirements that must be satisfied in
order for the Company to be permitted to commence production
on its development properties and, therefore, no assurances
can be given in this regard.
<PAGE>
In its Securities Act Industry Guide 7, the U. S.
Securities and Exchange Commission defines the term,
"reserve", as , "that part of a mineral deposit which could
be economically and legally extracted or produced at the
time of the reserve determination." Insofar as the
necessary permits have not been obtained on the Company's
development properties, the estimates for those properties
set forth in the table below have not been classified as
"reserves". All references to estimates of drill-defined
mineralization in this Report must be qualified with the
caveat that all legal requirements for extraction of
minerals have not yet been satisfied.
The following table reflects drill-defined gold
mineralization at each of the Company's properties at
December 31, 1995.
Tons (000s) Grade (Oz. Contained
per ton) Ounces -
Property (1) Not Permitted
_____________________________________________________________________________
Illinois Creek 5,543 0.074 (3) 412,365 (4)
Dewey Dome portion of Thunder Mountain(2) 5,290 0.047 248,630
_____________________________________________________________________________
Total 660,995
=============================================================================
(1) The above estimates utilize in place grades and do not
reflect losses that will be incurred in the recovery
process. They do include allowance for dilution of ore in
the mining process. Recovery rates for each property, to
the extent they are known or estimated, are provided as part
of the discussion of each property below.
(2) While management believes this project will be
economically feasible, the Company is in the process of
completing feasibility studies to confirm its economic
viability.
(3) Gold equivalent grade
(4) Gold equivalent ounces
History of Operations
The Company's first producing mine, the Green Springs
Mine, commenced production in June 1988. The Company
completed mining, crushing and stacking operations at Green
Springs in June 1990. Reclamation of pits, haul roads and
waste dumps commenced in 1990 and continued through 1993.
Rinsing of the heaps was initiated during 1992 to meet final
closure requirements. During 1993, rinsing of the heaps and
reclamation of the heaps and the plant site were completed.
During the life of the Green Springs Mine, the Company
received several environmental and safety awards for this
operation while producing a total of 69,331 ounces of gold.
The Company was particularly gratified to receive the 1992
State of Nevada Governor's Award for Excellence in Mine
Reclamation in connection with several of the Company's
Nevada mines (described below), including the Green Springs
Mine. The award, made jointly by the State of Nevada, U.S.
Bureau of Land Management and U.S. Forest Service was given
to the Company in recognition of outstanding achievement in
innovative design, superior mine planning and commitment to
reclamation from project commencement to closure.
The Company commenced open pit mining at its Casino
Mine in Nevada in June 1990 and completed mining in May
1991. In July 1991, the Company commenced mining at the
Winrock Mine in Nevada. Mining and crushing were completed
at the Winrock Mine in June 1992. The Casino and Winrock
Mines shared a common heap leaching facility. The Company
produced a total of 48,953 ounces of gold from the
Casino/Winrock project prior to its sale on August 27, 1993.
In May 1990, the Company completed the purchase of the
Alligator Ridge Mine in Nevada, which included partially
leached gold ore on heaps, gold recovery facilities, a
mining fleet, a mill, and approximately 26,000 acres of
mineral interests in the Alligator Ridge trend. During its
tenure at the Alligator Ridge Mine, the Company produced
50,188 ounces of gold. Construction of the crushing and
gold recovery facilities at a satellite facility, designated
the Yankee Mine, was completed during the first quarter of
1992. The Company produced 26,220 ounces of gold at the
Yankee Mine between the time of initial gold production in
June 1992 and its sale on August 27, 1993. The Company's
Casino, Winrock, Alligator Ridge and Yankee Mines, together
with surrounding exploration prospects, were sold in two
separate transactions in 1993 for a total of $20 million
cash, plus the assumption by the buyer of all related
obligations, including reclamation liabilities.
<PAGE>
Effective November 1, 1992, the Company acquired from
Tenneco Corporation (Tenneco), the stock of Tenneco Minerals
Company-Utah (TMC-Utah), owner and operator of the
Goldstrike Mine located approximately 35 miles northwest of
St. George, Utah. Soon after the acquisition, the name of
this wholly owned subsidiary was changed to USMX of Utah,
Inc. Gold production from the Goldstrike Mine since
November 1, 1992, has been 77,182 ounces, including 6,266
ounces of gold produced in 1995. During 1995, the Company
was recognized for its reclamation efforts at the Goldstrike
Mine when it received the 1995 Earth Day Award from the
State of Utah Board and Division of Oil, Gas and Mining.
The Goldstrike property presently consists of
approximately 2,600 acres of unpatented mining claims.
Access to the Goldstrike Mine is by State Highway 212 to a
point approximately 21 miles northwest of St. George, then
by well-maintained gravel road over a distance of
approximately 14 miles. Mining operations at the Goldstrike
Mine were completed in October 1994. Leaching was completed
in December 1995. All disturbed areas at the Goldstrike
Mine were reclaimed during 1995 except for the heaps and the
plant site. Reclamation of one of the two heaps was begun
near the end of 1995. Rinsing of the second heap commenced
in January 1996 and is expected to continue into 1997. Once
rinsing of the second heap is complete, the heap will be
recontoured, covered with topsoil and seeded with various
native plant species. In addition, the process plant will
be dismantled and the plant site reclaimed. Management
believes that adequate provision has been made in the
accompanying consolidated financial statements for the cost
of completing the reclamation of the Goldstrike Mine.
The Company's investment in the Goldstrike Mine as of
December 31, 1995, was approximately $891,000, including
$91,000 in undepreciated property, plant and equipment and a
$800,000 certificate of deposit provided to the State of
Utah as reclamation surety.
The following table sets forth gold production at each
of the Company's mines over the past five years:
Gold Production (Ounces)
Mine 1995 1994 1993 1992 1991
____________________________________________________________________
Green Springs - - - 2,353 4,984
Casino/Winrock (1) - - 3,190 19,745 19,979
Alligator Ridge (1) - - 4,965 10,454 16,824
Yankee (1) - - 15,299 10,921 -
Goldstrike (2) 6,266 34,486 31,934 4,496 -
____________________________________________________________________
Total 6,266 34,486 55,388 47,969 41,787
====================================================================
(1) Sold August 27, 1993
(2) Acquired effective November 1, 1992
<PAGE>
The following table sets forth statistics regarding
gold production and sales and related per ounce information:
<TABLE>
<CAPTION>
Year Ended December 31, 1995 1994 1993 1992 1991
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Ounces of gold produced 6,266 34,500 55,400 48,000 41,800
Ounces of gold sold 6,900 35,600 50,400 47,400 43,800
Per ounce statistics:
Cash production costs incurred $233 $229 $289 $280 $242
Depreciation, depletion, amortization
and reclamation accruals - 48 38 51 48
________________________________________________________________________________
Production costs per ounce produced $233 $277 $327 $331 $290
________________________________________________________________________________
Gold sales revenue $388 $383 $360 $360 $376
________________________________________________________________________________
Production costs per ounce sold 212 269 359 335 276
Change in inventories and deferred
production costs 207 46 (37) (30) (21)
________________________________________________________________________________
Cost of gold sold 419 315 322 305 255
Mining taxes 2 3 3 2 7
Production royalties 55 19 17 17 11
________________________________________________________________________________
Costs applicable to sales 476 337 342 324 273
________________________________________________________________________________
Gross profit (loss) -88 46 18 36 103
================================================================================
</TABLE>
The Illinois Creek Project
Introduction
The Illinois Creek Project is a moderate grade, near
surface gold-silver deposit. It consists of two State of
Alaska Mining Leases, totaling 62,480 acres. The underlying
leaseholder is North Pacific Mining Corporation ("NPMC"), a
wholly owned subsidiary of Cook Inlet Region, Inc. ("CIRI"),
an Alaska Native Regional Corporation. The Illinois Creek
Project is located in the western interior of Alaska. It
lies approximately 57 miles southwest of Galena and 320
miles northwest of Anchorage.
The exploration and development phases have been
completed with the exception of permitting. All major
permit applications have been submitted and have been
reviewed by the State of Alaska. A 30-day public review
process is currently underway. A final decision on all
permits is expected in April 1996. No major federal permits
will be required. Assuming the grant of the necessary
permits, the Company intends to commence site development
and construction in late April 1996. Field construction is
anticipated to take approximately four months to complete.
History
The Illinois Creek Project is part of a large
polymetallic hydrothermal district covering 400 square miles
in the southern Kaiyuh Mountains. The area was first
explored by Anaconda Minerals as part of a joint venture
with CIRI in 1980. Subsequent to Anaconda Minerals'
activities, the area was explored by Goldmor Group, Ltd.,
NPMC, and Echo Bay in association with CIRI. The Company
commenced its exploration activities in August 1994. The
Company has drilled 61 core holes and 89 reverse circulation
holes, totaling approximately 31,000 feet. This drilling
succeeded in increasing the drill-defined mineralization to
about 412,000 contained equivalent ounces of gold and
provided geotechnical information necessary for pit design
and engineering.
The Company made initial payments to NPMC totaling
$100,000 in 1994 to evaluate the Illinois Creek property.
Pursuant to the Company's Agreement with NPMC, the Company
is required to make a $1 million, non-refundable payment to
NPMC in cash or USMX stock. The Company has elected to make
the payment in stock, which the Company has calculated will
amount to 449,754 shares. The Company will issue these
shares upon effectiveness of a registration statement
covering the resale of these shares. The Company expects to
file this registration statement in April 1996. In
addition, if the Company obtains the necessary permits and
there has been no material adverse change in the economics
of the project, the Company will be required to make an
additional payment to NPMC of $3 million in cash or USMX
stock in exchange for title to the underlying leases. If
the Company elects to pay all or part of this amount in
stock, it will also be required to provide for the
registration of the resale of the shares issued to NPMC.
The number of shares of USMX common stock to be issued to
NPMC will be based on a 30-day average of the price of the
USMX stock on The Nasdaq Stock Market. NPMC also has chosen
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 Company's
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
NPMC's 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 Company's Agreement with NPMC, the
Company has until December 16, 1997, to achieve Commercial
Production (as defined) from the property. 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.
Location, Access, Terrain and Climate
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 a Cost Reimbursement Agreement with AIDEA pursuant to
which AIDEA will undertake a feasibility analysis and
negotiate with the Company a proposed use and
indemnification agreement with respect to the lease of
aircraft equipment. Finalization of these arrangements in
the near future is essential to the Company's 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 cut into smaller pieces, transported to the site
using smaller aircraft and reassembled at the site.
The local area consists of moderate hills (elevations
ranging from 200 to 1,000 feet), the flood plains of the
Little Mud and Innoko Rivers, Illinois Creek, local warm
springs and California Creek south of the site, and the
wetlands to the west of the Project site along the Yukon
River. These wetlands are not expected to be affected by
the Project facilities.
The climate is sub-arctic and characterized by large,
seasonal extremes in temperature and daylight. Average
winter temperatures are -7 F to 20 F; mean summer
temperatures range from 35 F to 67 F. Regional extremes
are -63 F to 93 F. Precipitation averages 15 to 18 inches
annually, including 81 inches of snow. Snow depth at the
site ranges from 24 to 36 inches during a typical winter.
Historically, September is the heaviest rainfall month with
an average of 8.3 inches.
<PAGE>
Freeze-up on the Yukon River normally occurs in late
October to early November; breakup normally occurs in early
to mid May. Accordingly, the shipping schedule on the Yukon
River will typically be limited to a period between
approximately May 25 and September 25.
Drill-defined Mineralization
In February 1996, the Company completed a comprehensive
feasibility study pertaining to the Illinois Creek deposit.
Based on this study, the Company believes that the deposit
contains 5.54 million tons of mineable drill-defined
mineralization at a gold grade of 0.069 ounces of gold per
ton and 1.467 ounces of silver per ton, yielding a gold
equivalent grade of 0.074 ounces of gold per ton. The
calculation was based on a gold price of $400 per ounce and
a 0.025 ounce gold equivalent per operating ton cut off
grade. The average stripping ratio over the planned life of
the project is 2.79:1. An additional 479,000 tons of low
grade material exists within the limits of the ultimate pit
design. This material has an average equivalent grade of
0.024 ounces per ton. This indicates the presence of an
additional 11,369 equivalent ounces of gold that will be
leachable under present economic parameters.
Metallurgy
Metallurgical recovery from the run-of-mine ore is
projected to be approximately 85% of contained gold and 25%
of contained silver. Year round leaching will be conducted
if it proves to be economic. Gold production for 1996
should be approximately 20,000 ounces, assuming timely
receipt of permits and other regulatory approvals and
assuming a startup date of September 1. See Item 7.
Geology
The deposit occurs as a large gossan zone striking east-
northeast and dipping 40 to 70 degrees to the southeast, hosted
within a thick sequence of quartzites which are carbonate
rich. The gossan has been intersected by drilling over
strike length of 12,000 feet and to a depth of greater than
1,500 feet. Oxidation of the mineralization is complete to
a depth of at least 1,100 feet below the present surface.
Economic gold-silver mineralization is present in portions
of the gossan, and is associated with elevated levels of
copper and/or lead, hydrothermal or remobilized silica,
earthy hematite, and poorly defined structural features.
Supergene enrichment of both gold and silver in near surface
locations is also apparent.
Plan of Operations
The Company has retained Lyntek, Inc. to provide
detailed engineering, procurement and construction
management services. D. H. Blattner and Sons, Inc. has been
selected to complete all construction earthworks, and to
serve as the mining contractor.
Previous activities by other mining companies have
resulted in some infrastructure on the property including a
25 person camp, a 4,500 foot air strip suitable for DC-6 and
C-133 aircraft, a vehicle maintenance/sample preparation
building, and miscellaneous other buildings and pieces of
equipment. The existing airstrip is 6.5 miles by road from
the mine site and will be utilized by the Company for
transportation purposes. The vehicle maintenance/sample
preparation building is usable in its present condition.
Also, the existing personnel camp will be used by the
Company's exploration staff.
The Company plans to construct a 90-person camp north
of the airstrip. A well will provide potable water for the
camp. Water for process mining will come from a source
located near the mid-point of the main access road from the
airfield to the mine site. Electrical power will be
generated using diesel powered generator sets. Waste heat
from the generators will be used to heat the process
building. In addition to the process building, also to be
constructed are a modular assay laboratory, a truck
maintenance shop and a modular administration building.
Communications will be by satellite.
<PAGE>
The deposit will be developed as a conventional open-
pit mine. It will be operated on a seasonal basis. Mining
will be conducted during the warmest six months of the year,
normally May through October. Trucks and front-end loaders
will be used to mine, haul and stack the ore in a valley
fill lined impoundment. Heap leaching followed by carbon
adsorption/desorption/electrowinning will be used to extract
the gold. The process system is designed to recover the
annual scheduled amount of gold production in eight months.
Due to excessive costs of transporting burnt lime to the
site, lime will be produced on-site utilizing a local source
of dolomitic limestone. The Company has contracted for the
refurbishing and transport to the site of a diesel-fired
rotary kiln.
The mine operating schedule will be ten hours per
shift, two shifts per day, six days per week. Three crews
will rotate on a four-week on, two-week off schedule. The
Company currently expects to employ approximately 54 people
at Illinois Creek, with a like number of personnel to be
employed by the mine contractor.
Total pre-production capital costs, including
approximately $4.7 million in working capital, are currently
estimated at about $26.6 million, exclusive of property
acquisition costs of $4 million to be paid to NPMC as
outlined above. As of December 31, 1995, the Company's
investment in Illinois Creek was approximately $4 million.
See Item 7.
The Thunder Mountain Project
Introduction
The Company proposes to conduct gold and silver mining
activities at the Dewey Mine in the Thunder Mountain Mining
District in eastern Valley County, Idaho, approximately 100
miles northeast of Boise, Idaho. The proposed Dewey mining
operations are part of the Thunder Mountain Project and
consist of the development of a gold and silver ore deposit
located on patented mining claims administered by the Idaho
Department of Lands. The Company proposes to initiate
construction of the Dewey Mine facilities in the summer of
1997. In January 1996, the Company submitted a Notice of
Intent to Operate ("NOI") with the Idaho Department of
Lands, which is currently being reviewed. A feasibility
study will be ongoing throughout 1996 to refine the project
design and economics.
History
Gold was discovered in the Thunder Mountain area in
1894 at the site of what is now known as the Dewey Mine.
During the period from the initial discovery until 1942,
various operators reportedly produced approximately 31,000
ounces of gold and 16,000 ounces of silver from both
underground and surface placer workings. Renewed interest
in the district began in earnest during the early 1970s due
to rising gold prices. After exploration by several major
mining companies, a portion of the property, the Sunnyside
Mine area, was placed into production by Coeur d'Alene Mines
Corporation ("Coeur d'Alene") as an open pit, heap leach
operation in 1986. Between 1986 and 1990, Coeur d'Alene
reportedly produced 120,000 ounces of gold and 240,000
ounces of silver from the combined Sunnyside, Goldbug and
Lightning Peak pits. After reclaiming the property, Coeur
d'Alene terminated its leases with Thunder Mountain Gold,
Inc. in December 1990. At the adjacent Dewey Mine, the
Dewey Mining Company constructed a 450 ton per day mill and
the property was operated as an open pit mine (Golden Reef
Joint Venture) during 1981. In the mid 1980s, the Dewey
Mine became the subject of litigation which was resolved in
favor of the Dewey Mining Company late in 1991.
Effective July 9, 1993, the Company entered into an
Exploration and Option to Purchase Agreement ("Agreement")
with Dewey Mining Company, Thunder Mountain Gold, Inc. and
two individuals (the foregoing companies and individuals
described below collectively as "Owners"). The Owners
control approximately 5,500 acres in the Thunder Mountain
Mining District consisting of both patented and unpatented
mining claims. Pursuant to the terms of the Agreement, the
Company was granted the sole and exclusive right to explore
for and develop minerals on the property in exchange for
advance royalty payments totaling $100,000. In addition,
the Company committed to spend, and did spend, a minimum of
$500,000 evaluating the property prior to April 1, 1995.
<PAGE>
The Agreement requires that, before the Company can put
the property into commercial production, it must prepare and
deliver to the Owners a feasibility study regarding the
project. In 1995, the Company extended the term of the
agreement through April 30, 1996, by making an additional
advance royalty payment in the amount of $150,000. The
Company has the option to further extend the Agreement
through April 30, 1997, by paying an additional advance
royalty payment of $200,000. The Company intends to so
extend the Agreement. The Agreement further provides the
Company with the option for a final extension until April
30, 1998, in exchange for an additional advance royalty
payment of $250,000. The advance royalty payments may
be recovered by the Company for seven years after payment
should the Owners elect to receive royalties under options
(a) or (c) below. The Agreement terminates if the Company
fails to deliver a feasibility study to the Owners by the
end of the last year's extension under the Agreement or if
the Company exercises its right to terminate the Agreement
at any time.
Within 90 days after the Company provides the Owners
with a feasibility study, the Owners may elect to (a)
participate in subsequent efforts to the extent of a 30%
working interest, plus receive a 1.5% royalty, or (b)
receive a 30% net profits interest, or (c) receive a 5% net
returns royalty from production. If the Owners elect to
receive a 5% net returns royalty, the Company will be
obligated to make advance royalty payments of $200,000
within thirty days after commencement of Commercial
Production (as defined in the Agreement), and $250,000 each
year thereafter. If the Owners fail to notify the Company
of their election prior to the end of the 90 day election
period they will be deemed to have made an election to
receive a 5% net returns royalty.
The Agreement provides that, once the Owners have made
their election, the Company shall have one year within which
to achieve Commercial Production. If the Company fails to
achieve Commercial Production within one year, the Company
must either reconvey the property to the Owners or extend by
one year the time period within which Commercial Production
must commence by paying an advance royalty of $200,000 to
the Owners. If Commercial Production has not begun by the
end of the extension period, the Company may obtain one
final extension of one year within which to achieve
Commercial Production by paying the Owners an additional
advance royalty of $250,000.
In addition to the advance royalty payments and the
work commitments outlined above, the Company is obligated to
pay all fees necessary to maintain the unpatented mining
claims through August 31 of the calendar year in which the
extension year expires.
The area of the Company's primary activity lies
approximately 4,000 feet west of the Sunnyside deposit
previously mined by Coeur d'Alene. The results of the
Company's drilling during 1993 were favorable, including a
number of intersections that exceed 100 feet in thickness
and average in excess of 0.10 ounces of gold per ton. The
Company was also successful in extending the deposit along
strike into an area that was not previously drilled. During
1994, the Company drilled a total of 104 exploration and
development holes on the property, helping to define the
margins and high grade core of the Dewey deposit. As of
December 31, 1995, the Company has expended a total of $2.3
million on the property.
Location, Access, Terrain and Climate
The Dewey Mine lies within the Thunder Mountain
District in eastern Valley County, Idaho. Access to the
District is obtained via U.S. Highway 95 to Cascade, Idaho,
then east 42 miles to Landmark, Idaho on Forest Highway 22,
then north and east approximately 57 miles on U.S. Forest
Service roads to the property. The Thunder Mountain Mining
District is currently accessible by vehicle about seven
months out of the year from late May to late November.
Local elevations range from approximately 7,300 to
9,000 feet. The District forms a 5,980-acre enclave of
patented and unpatented land within the Frank Church
Wilderness Area administered by the Krassel District of the
Payette National Forest.
Due to the location of the property, and based on the
experience of operations previously conducted at the Dewey
Mine and at nearby existing operations, future mining
operations of the Company would be seasonal, but processing
may be conducted year around.
<PAGE>
Drill-defined Mineralization
The Company's internal engineering staff updated the
mine model in 1995. This work indicated the presence of
preliminary floating cone mineable open pit drill-defined
mineralization of 5,290,000 tons with an average grade of
0.047 ounces of gold per ton containing approximately
248,630 ounces of gold. The calculation was based on a
gold price of $400 per ounce and a 0.031 gold ounce per ton
operating cutoff grade. The estimated stripping ratio of
waste to ore for this mineralization is approximately
1.02:1. Further, metallurgical test work completed in 1995
indicated the material is amenable to heap leaching, and an
85% gold recovery factor was used in the mine model.
Additional potential is known to exist within the
Thunder Mountain property. The presence of other drill-
indicated gold mineralization has been identified by the
earlier exploration programs conducted by the Company as
well as other mining companies. During 1996, limited
exploration is planned at Thunder Mountain in conjunction
with the ongoing geotechnical and environmental work needed
to generate data for mine design and permitting. Geological
mapping and geochemical surveys will be completed on several
outlying targets to be tested in the future after issuance
of permits.
Plan of Operations
The Dewey Mine deposit is a bulk tonnage, heap-
leachable ore body and is located on several patented lode
mining claims in the central portion of the Thunder Mountain
Mining District. The Company is currently conducting a
feasibility study to determine the optimum design by which
to profitably exploit this deposit. It is presently
anticipated that conventional open pit/heap leach techniques
will be used. The fluid management system will be designed
as a zero discharge system. Due to the remote location of
the deposit, the Company will be required to generate its
own electrical power.
The Company plans to use a contract miner to develop
and operate the open pit mine. The preliminary production
schedule is for a six to eight month per year mining system,
two shifts per day, seven days per week. The number of mine
operating days is estimated at 210 to 240, depending on
weather. Processing would occur at least 250 days per year,
and perhaps would run throughout the year. The Company
would expect to employ approximately 75 to 100 people at the
Dewey Mine.
Geology
The Thunder Mountain Mining District is localized in
the central portion of a caldera complex underlain by
Challis Volcanics as well as graben-fill, pyroclastic-
derived sediments. The Dewey Dome ore deposit is hosted by
the pyroclastic sediments, and the Sunnyside, Goldbug and
Lightning Peak deposits mined by Coeur d'Alene were hosted
by the volcanics. Known concentrations of economic gold
mineralization are controlled by a combination of structure
and stratigraphy.
Permitting
During 1995, limited geotechnical and baseline
environmental work was conducted while the Company was re-
evaluating the project based on heap leaching of the ore for
recovering gold. On January 31, 1996, based on favorable
preliminary findings, the Company submitted a Notice of
Intent to Operate ("NOI") with the Idaho Department of Lands
and Payette National Forest. A feasibility study will be
ongoing throughout 1996 to refine the project design and
economics. Since permitting has only recently commenced, it
is difficult to predict when necessary permits might be
received. However, it seems reasonable to expect that
permit approvals are attainable in 1997, which may allow for
development of the project that same year.
Montana Tunnels
The Montana Tunnels property is located in the Colorado
Mining District, Jefferson County, Montana, 22 miles south
of Helena. Montana Tunnels consists of approximately 9,300
acres of patented ground plus about 1,000 acres of other
mineral rights. This property was developed and is operated
by Pegasus Gold Inc. ("Pegasus") pursuant to an agreement
with the Company. Mine and mill construction commenced in
March 1986, milling operations began in March 1987, and full
operating status was achieved by Pegasus in October 1987.
The Montana Tunnels Mine involves open pit mining
operations and conventional milling technology. The Montana
Tunnels ore is processed through a circuit which
incorporates crushing, grinding, and selective flotation to
produce lead and zinc concentrates, and a gravity circuit
for recovery of free gold. The majority of gold and silver
value is associated with the base metal concentrates.
Pegasus has supplied to the Company the operating
statistics for Montana Tunnels set forth in the following
table:
Year Ended December 31,
________________________
1995 1994
________________________
Ore milled (tons) 5,474,191 5,411,170
Payable metals:
Tons of lead 7,399 9,374
Tons of zinc 21,611 19,814
Ounces of gold 89,231 80,179
Ounces of silver 1,073,173 1,085,257
As of December 31, 1995, Pegasus estimates that the
Montana Tunnels Mine has proven and probable ore reserves of
approximately 24,000,000 tons.
The Company owns a net profits royalty interest in the
Montana Tunnels Mine. The Company is entitled to the
greater of a five percent net profits royalty interest or
minimum advance royalties of $60,000 per month until certain
construction, land acquisition and associated financing and
other costs have been recovered by Pegasus ("Payback"), and
a 50 percent net profits royalty interest thereafter.
Payback is defined in the agreement with Pegasus to occur
when 90 percent of net profits equals the sum of $250,000,
plus the project costs incurred subsequent to January 1,
1986, plus interest costs imputed on these costs until
September 30, 1987, the date of full operation status. Net
profits, as defined, include deduction from revenues of such
costs as direct operating and administration expenses,
allowable new capital expenditures, property payments,
management fees, interest on debt and equity financing,
repayment of gold loans, repayment of certain debt
obligations, and taxes other than income taxes. Based on
information provided by Pegasus, the Company estimates that,
as of December 31, 1995, the remaining net profit
recoverable costs were $26,539,000.
Depending on metal prices and production rates, Payback
could be achieved which would result in increased revenue to
the Company at some future date. However, even if Payback
is not achieved, the Company seems reasonably assured of
continued payments of $720,000 per year during the life of
the Montana Tunnels Mine, now estimated by Pegasus to
continue into the year 2000. During 1995, the Company
received minimum annual royalties of $720,000.
Exploration
Due to continued threat of adverse amendment to or
replacement of the U.S. mining laws as well as to other
existing regulations, the Company continued in 1995 to
direct its exploration activity to the evaluation of private
lands in the United States, and opportunities in Latin
America. Exploration for minerals, particularly for gold,
is highly speculative in nature, involves many risks and
frequently is nonproductive. There can be no assurance that
the Company's mineral exploration efforts will be
successful. Once mineralization is discovered, it usually
takes a number of years from the initial phases of
exploration until production is possible, during which time
the economic feasibility of production may change.
Substantial expenditures are required to establish ore
reserves through drilling, to determine metallurgical
processes to extract the metal from the ore and, in the case
of new properties, to construct mining and processing
facilities. As a result of these uncertainties, no
assurance can be given that the Company's exploration
programs will result in the expansion or replacement of
existing reserves.
<PAGE>
Cala Abajo, Puerto Rico
During 1992, 1993, and 1994, the Company acquired an
equity interest currently totaling approximately 80% of the
outstanding common stock of Southern Gold Resources (USA),
Inc., a Colorado corporation. On October 5, 1992, Southern
Gold was granted an exclusive exploration permit by the
Puerto Rican government covering 2,170 acres that include
the Cala Abajo copper/gold deposit in west-central Puerto
Rico. The prospecting permit may be extended year to year
for a maximum 10 year period and gives the Company the
exclusive right to conduct exploration and environmental
studies and to negotiate a mining lease covering the permit
area. Through June 1995, the Company incurred approximately
$1.0 million in drilling, metallurgical test work,
engineering and base line environmental studies and had
determined the existence of mineable drill-defined
mineralization of 52,649,000 tons of ore averaging 0.799%
copper and 0.013 ounces of gold per ton, resulting in an
equivalent copper grade of 1.134% copper. The estimate
contains approximately 847,000,000 pounds of copper and
685,000 ounces of gold. The overall stripping ratio is
approximately 1.13:1, including waste to be removed before
mining could begin.
In 1995, the Commonwealth of Puerto Rico amended its
mining law to prohibit open pit mining of metal deposits on
the island. The effect of the mining law, as currently
amended, was to render the Company's plan for development of
the Cala Abajo deposit uneconomic. Accordingly, the
Company's investment was written off during the year. The
Company is considering various strategies and responses to
the action by the Commonwealth of Puerto Rico.
Other United States Mineral Properties
The Company has additional mineral properties, located
in Utah, Montana, and Wyoming in the United States. These
additional properties are currently being explored solely by
the Company.
<TABLE>
<CAPTION>
Investment as of
Property State Status December 31, 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Goldstrike Area Utah Drilling scheduled $358,000
Baggs Creek/ Hidden Hand Montana Has small resource $68,000
Jack Springs Montana Has small resource -
Elk Creek Montana Available for joint venture $89,000
Hartville Wyoming Assembling land package $14,000
Round Top Alaska Part of Illinois Creek $45,000
</TABLE>
Mexico
The Company, through its wholly owned subsidiary, MXUS
S.A. de C.V. ("MXUS"), is currently investigating a number
of opportunities located primarily in the northern Mexican
states of Sonora, Chihuahua and Coahuila. The more
significant projects the Company is currently evaluating are
described below.
Amargosa
This property is located approximately 95 kilometers
southeast of Juarez in the state of Chihuahua. The property
is accessible from Juarez on Highway 2, southeast for 90
kilometers to El Porvenir, then via poorly maintained dirt
roads to the project. The Company controls by denouncement
approximately 15,100 acres. The Company must meet certain
minimum work requirements arising from Mexican mining law to
<PAGE>
maintain its rights to the properties. In addition, if the
properties are placed into production, the Company will be
obligated to pay net smelter return royalties varying from
2.75% to 3.25% on production from most of the properties.
A significant amount of exploration was conducted on
the Amargosa polymetallic massive sulfide targets in 1994.
Results of this drilling at Amargosa were geologically
interesting, but no significant economic widths were
encountered, or continuity between holes demonstrated by the
three holes drilled.
A strong magnetic anomaly was partially defined at the
edge of a ground geophysical survey. The anomaly, which is
as yet untested, occurs on the down-dropped side of a major
fault which may be the feeder fault for the massive sulfide
mineralization. This geologic setting is very similar to
that of several other major massive sulfide deposits around
the world, such as the Sullivan Mine in British Columbia.
Although this property continues to hold a great deal
of geologic interest, no economic mineralization has yet
been identified. Accordingly, management recorded an
impairment loss of $1.0 million in 1995. As of December 31,
1995, the Company's remaining investment in this property
was approximately $315,000.
Boludo Goldfields
Early in 1994, MXUS acquired by lease and purchase
option approximately 5,400 acres in the Boludo Goldfields
placer district located approximately 121 kilometers
southwest of Nogales in northwest Sonora. Access to the
property is via paved highway and well maintained dirt road.
During 1994, 328 backhoe pits were dug at Boludo by the
Company to test for placer gold. In addition, several drill
holes were put down in the hard rock targets. This drilling
failed to identify significant mineralization; however the
placer sampling identified a resource estimated to contain
about 10.5 million cubic yards with an average grade of
0.011 ounces gold per cubic yard or about 116,000 ounces of
contained gold. The original land package was trimmed back
to this resource area to reduce holding costs. In 1995, the
Company entered into an agreement with Resource Trend Pty
Ltd, an Australian mining company, which intends to place it
into production during 1996. The Company retained a royalty
interest on future production from the property. The
Company's investment in this project was approximately
$450,000 as of December 31, 1995.
Noche Buena
Noche Buena is a disseminated gold prospect located
approximately 45 kilometers northwest of the city of Caborca
in the state of Sonora. Access from Caborca is via Highway
2 north for 60 kilometers then west via dirt road for
approximately 10 kilometers. MXUS controls by denouncement
approximately 18,800 acres at Noche Buena that are subject
only to Mexican mineral property fees and taxes.
The Company has drilled 51 reverse circulation holes on
the property. Low grade gold mineralization was detected in
nearly every hole over a surface area of approximately 100
acres. This property was joint ventured to Kennecott
Exploration Company in 1995. As of December 31, 1995, the
Company's investment in Noche Buena was approximately
$366,000.
Samalayuca
Samalayuca is located approximately 40 kilometers south
of Juarez in the state of Chihuahua, and is accessed via
Highway 45 to the town of Samalayuca then via dirt roads
west a few kilometers to the property. The Company controls
by lease agreement and denouncement approximately 19,000
acres. The lease, executed on August 12, 1992, provides for
a twenty year term. If the exploration work is successful,
the owners will be paid a three percent net smelter return
royalty on base metals and a four percent net smelter return
royalty on precious metals produced and sold from the
property. The Company makes annual advance royalties of
$25,000 and must meet certain minimum work requirements.
<PAGE>
The property is a sediment hosted, stratabound
copper/silver property with primary chalcocite
mineralization. In the past (pre 1975), local miners
shipped copper bearing quartzite to the El Paso smelter as
flux. These miners were paid for the copper content of this
material which ranged from one to three percent. Mining
ceased when copper prices fell in the mid 1970s.
The Company has conducted short hole air track drilling
as well as limited rotary and core drilling since
acquisition of the property. Results of this work have been
inconclusive due to structural complexity and associated
oxidation and to depletion of copper values near the
surface.
During 1995, the property was leased to Phelps Dodge.
As of December 31, 1995, the Company had invested a total of
$523,000 in the property.
Sierra Mojada
This property is located approximately 200 kilometers
north of Torreon in the state of Coahuila. Access is via
improved dirt road north from Torreon or by railroad from
Monclova. The Company controls by denouncement
approximately 11,800 acres in the district.
Production from the district in the past has been
significant, consisting of copper, zinc, lead and silver.
The district was discovered in 1878 with most of the past
production occurring between 1890 and 1945. Currently,
oxide zinc is being mined by others in the district and
shipped to a smelter in Monterey, Mexico.
The exploration objective consists of defining new
polymetallic deposits similar to those previously exploited,
as well as evaluating the remaining resource in the current
mines.
The Company entered into an agreement with Kennecott
Exploration Company in 1994 to jointly explore and develop
their extensive concessions in the old Sierra Mojada mining
district. Kennecott conducted geophysics and drilling on
the properties in 1994 and 1995. Based on the work
performed, Kennecott elected not to continue with the
project. The Company plans to review the data generated by
Kennecott, reduce the size of the land package and seek to
interest other mining companies in the property. The
Company's investment in this project was approximately
$33,000 as of December 31, 1995.
Other Mexican Mineral Properties
The Company has additional mineral properties in Mexico
as follows.
<TABLE>
<CAPTION
Investment as of
Property State Status December 31, 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Altar, Los Apaches Sonora Available for lease $107,000
El Cajon/Las Cruces/Tecolote, Initial evaluation to
La Tribu/La Reserva Sonora be completed in 1996 $123,000
El Ocuca, Las Rastras, San Miguel Sonora Under lease $153,000
</TABLE>
Ecuador
In 1995, the Company acquired all of the outstanding
capital stock of Mega Minerals S.A., an Ecuadorian company.
The assets of the company at the time of acquisition
consisted of title to eight exploration concessions
comprising approximately 80,600 acres and the right to
acquire title to four additional exploration concessions
comprising approximately 5,900 acres. The twelve
<PAGE>
concessions are located in the Nambija-Zamora gold belt of
southern Ecuador. Initial exploration on these concessions
has yielded encouraging results. Follow-up geological
mapping and geochemical sampling of stream sediments
anomalous in base and precious metals have identified a two
kilometer by three kilometer zone of skarn type alteration
with associated base metals and gold mineralization. An
exploration program is being planned to further evaluate the
discovery. The Company's investment in Ecuador as of
December 31, 1995 totaled $222,000.
Chile
In 1995, USMX acquired its first exploration project in
Chile through its wholly-owned subsidiary, Compania Minera
USMX de Chile. The Putu property is located approximately
160 miles southwest of Santiago, Chile near the coastal city
of Constitution. Ten concessions totaling 7,410 acres were
staked by USMX to cover the Putu Gold Mine, as well as
several other small prospects. A magnetite rich, felsic
volcanic, exhalite horizon was previously mined for gold at
Putu by underground methods.
The Company is currently running a ground magnetic
geophysical program and soil geochemical survey over the
immediate mine area. Regional exploration has identified
other showings of the mineralized exhalite that upon
weathering have generated placer gold deposits which have
been mined by the local inhabitants.
The Putu project is located in a forested area near sea
level with very limited outcrop exposures, similar to the
Pacific Northwest of the United States. Following
completion of the survey work to be performed during the
first quarter of 1996, the data will be compiled and
reviewed to identify profitable drilling targets. The
Company's investment in Chile as of December 31, 1995, was
approximately $18,000.
Competition
The Company has been engaged primarily in the
exploration for, development, and operation of precious
metal properties. The Company's current objective is to
locate and acquire prospects that can be profitably mined by
open pit or underground methods. The search for this type
of deposit involves high risk, and development requires
relatively large capital outlays and a high degree of
operational expertise. The Company must compete for mineral
properties with many companies, including those which are
substantially larger and possess greater financial resources
than the Company.
The availability of mining prospects in the United
States is dependent on the Company's ability to negotiate
leases with property owners or locate claims pursuant to the
general mining laws of the United States Increased
governmental regulation of the location, exploration and
development of mineral prospects, coupled with the increased
withdrawal of public lands from mineral entry, as well as
potential federal legislation to revise or replace the
general mining laws of the U.S., could limit the
availability of mineral prospects and increase the cost of
those which are available. Due to the potential for adverse
changes to the general mining laws of the U.S., more onerous
reclamation standards and new mining claim fees, the Company
continues to focus much of its exploration efforts on
private lands in the United States and in Latin America.
Markets
If minerals are discovered under claims or leases in
which the Company owns an interest, the availability of a
ready market may depend on numerous factors not within the
Company's control, including the extent of production by
others, proximity and capacity of mills, and the effect of
state and federal regulations. To date, the Company has
made precious metal sales from its mines and has not been
dependent on any single customer for its products.
Typically, gold can be readily sold in several markets with
a multitude of buyers. The Company also uses forward sales
and option contracts in connection with its marketing
program.
<PAGE>
Government Contracts
No portion of the Company's business is subject to
renegotiation of profits or termination of contracts or
subcontracts at the election of the Government.
Governmental Regulation
The mining operations of the Company are subject to
inspection and regulation by the Mine Safety and Health
Administration of the Department of Labor ("MSHA") under
provisions of the Federal Mine Safety and Health Act of
1977. The Occupation and Safety Health Administration
("OSHA") also has jurisdiction over safety and health
standards not covered by MSHA.
All of the Company's exploration, development and
production activities are subject to regulation under one or
more of the various environmental laws. These laws address
emissions to the air, discharges to water, management of
wastes, management of hazardous substances, protection of
natural resources, protection of antiquities and reclamation
of lands which are disturbed. Many of the regulations also
require permits to be obtained for the Company's activities;
these permits normally are subject to public review
processes resulting in public approval of the activity. It
is possible that future changes in these laws or regulations
could have a significant impact on some portion of the
Company's business, causing those activities to be
economically reevaluated at that time.
During the past three years, the United States Congress
considered a number of proposed amendments to the General
Mining Law of 1872, as amended (the "General Mining Law"),
which governs mining claims and related activities on
federal lands. In 1992, a holding fee of $100 per claim was
imposed on unpatented mining claims located on federal
lands. In October 1994, a one-year moratorium on the
processing of new patent applications was approved. That
moratorium has been extended pending reform of the General
Mining Law. In addition, a variety of legislation is now
pending before the United States Congress to amend further
the General Mining Law. The proposed legislation would,
among other things, change the current patenting procedures,
impose royalties, and enact new reclamation, environmental
controls and restoration requirements. The royalty
proposals range from a 2% royalty on "net profits" from
mining claims to an 8% royalty on modified gross income/net
smelter returns. The extent of any such changes is not
presently known and the potential impact on the Company as a
result of future congressional action is difficult to
predict. Although a majority of the Company's existing and
planned operations are on other than federal lands, the
proposed changes to the General Mining Law could adversely
affect the Company's ability to economically develop mineral
resources on federal lands.
Environmental Regulations
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 Company's 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.
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.
<PAGE>
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.
Employees
The number of persons employed by the Company at March
8, 1996 was thirty-three.
Financial Information about Foreign and Domestic Operations
and Export Sales.
The Company had no production from foreign mining
operations and did not make export sales during 1995.
During 1991, the Company incorporated USMX Mining, Inc.
under the British Columbia Company Act in anticipation of a
potential acquisition in the Province of British Columbia
that was not consummated. USMX Mining, Inc. had no material
assets or obligations as of December 31, 1995.
During 1992, 1993, 1994 and 1995, MXUS S. A. de C. V.,
a wholly owned subsidiary of the Company, acquired the
exploration rights to several properties in Mexico located
in the states of Chihuahua, Sonora, Coahuila and Jalisco.
The Company expended approximately $987,000,000 in Mexico in
1995 on these properties and on general reconnaissance. As
of December 31, 1995, the Company's investment in Mexican
properties amounted to approximately $2.1 million.
In 1992, the Company caused the incorporation of a
Costa Rican subsidiary, USMX de Costa Rica S. A., to
facilitate potential acquisitions in Costa Rica. To date,
no material expenditures or obligations have been incurred
by this subsidiary.
In 1994, the Company caused the formation of a Chilean
subsidiary, Compania Minera USMX de Chile Limitada, to
facilitate exploration in Chile. To date, no material
expenditures or obligations have been incurred by this
subsidiary.
<PAGE>
In 1995, the Company purchased the outstanding capital
stock of Mega Minerals, S.A., an Ecuadorian company. As of
December 31, 1995, the Company had invested approximately
$222,000 in mining concessions and exploration thereof.
Glossary of Terms
The following terms are described to aid in
understanding this report.
Air Track Drilling
See Drilling.
Anomaly
An anomaly is a geochemical, geophysical or other observed
condition, indicated by differing empirical physical data,
that may indicate the presence of mineralization in
underlying bedrock.
Base Metals
A family of metallic elements, including copper, lead and
zinc.
Caldera Complex
A large, basin-shaped volcanic depression created by
subsidence, representative of a volcanic vent, which is
characterized by a diverse assemblage of volcanic intrusive
and extrusive rocks.
Carbon Adsorption
A process in which soluble complexes of gold and silver
physically adhere without chemical reaction to the molecular
surfaces of activated carbon particles. The process is used
to collect gold and silver from a leach solution. The
Company uses activated carbon made from coconut shells.
This carbon contains five to six million square feet of
molecular surface area per pound.
Cash Costs
Include all site costs incurred for mining, crushing, pad
loading, leaching, processing and mine site general and
administrative functions. Such costs exclude royalties and
mining taxes which costs are triggered not by the production
of gold but by its sale. Also excluded are depreciation of
equipment, amortization of previously capitalized costs and
accrual of reclamation costs. Revenues from the sale of by-
products (principally silver) are deducted from cash costs.
Contained Ounces
The estimated number of ounces of precious metals contained
in an orebody which is a gross measurement of ounces in the
ground. The ounces ultimately recovered from the ore
(recoverable ounces) will be less than contained ounces due
to inherent inefficiencies in recovery methods.
Cutoff Grade
The lowest grade of mineralized material that can be mined
and processed economically.
Denouncement
A process under Mexican mining law by which an exploration
concession may be obtained from the Mexican government. The
exploration concession is granted for a period of six years.
If a mineable resource is delineated, then an exploitation
concession with a term of fifty years can be obtained.
Dilution
An estimate of the amount of waste or low grade mineralized
rock that is unintentionally mined as part of normal mining
practices in extracting ore.
Dore
Unrefined bullion that is an alloy of gold and silver and
various impurities which will be further refined to almost
pure metals.
Drill-Defined Mineralization
Ore reserves, except that all legal requirements for
extraction of minerals have not yet been satisfied.
Drilling
Air Track Drilling
Small diameter, short hole, percussion drilling using
compressed air.
Core Drilling
Drilling using a hollow diamond-studded bit that cuts out a
rock core. This core is extracted from inside the drill rod
for geological examination and assay.
Infill Drilling
Drilling between existing holes to better define the geology
or to improve the reliability of the ore reserve
calculation.
<PAGE>
Rotary Drilling
Drilling with a bit that breaks the rock into chips. The
chips are continually flushed from the hole (outside the
drill pipe) and are collected in sequence for geological
examination and assay.
Reverse Circulation Drilling
A type of rotary drilling that uses a double walled drill
pipe. Compressed air, water or other drilling medium is
forced down the space between the two pipes to the drill
bit, and the drilled chips are flushed back up to the
surface through the center tube of the drill pipe.
Flotation
A milling process for mineral concentration based on the
selective adhesion of minerals to air bubbles in a water and
ground-ore mixture. Air and specific chemicals are
introduced into the mixture. The finely ground minerals
float to the surface forming a metal rich concentrate that
is skimmed off the surface. The resulting concentrates are
shipped to a smelter where the final products are produced.
Graben
A block, generally long compared to its width, that has been
downthrown along faults relative to the rocks on either
side.
Grade
The metal or mineral content of rock, ore or drill samples.
With respect to precious metals, grade is generally
expressed as troy ounces per ton of rock.
Gravity Concentration
A method of recovering precious metals and other heavy
constituents from ore in which the ore may be physically
reduced in size, combined with water and then processed
utilizing gravity to separate the heavier precious metals
from the waste material.
Heap Leaching
A low cost leaching process in which ore is placed in a heap
on an impermeable pad. The solvent, which in the case of
gold is a weak cyanide solution, is sprinkled over the heap
and is later collected after percolating through the ore and
dissolving the metals, allowing subsequent gold recovery.
Hydrothermal Alteration
Changes in rocks or minerals caused by heated solutions.
Joint Venture
An arrangement whereunder two or more parties agree to
jointly participate in the evaluation of a mineral property.
Leaching
The extraction of a soluble metallic element from ore by
dissolving the metal in a solvent.
Leach Pad
An impermeable foundation or pad used as a base for ore
during heap leaching. The pad prevents the leach solution
from escaping from the circuit.
Massive Sulfide Mineralization
A sulfide deposit characterized by a concentration of
interconnected sulfides totaling in excess of 30% of the
total rock, as opposed to a disseminated or veinlike
deposit.
Mill
A plant where ore is ground, often to fine powder, and the
minerals and metals are concentrated and extracted by
physical or chemical processes.
Mineable
That portion of a mineral deposit from which it is
economically feasible to extract ore.
Mineral
A naturally occurring, usually inorganic and crystalline
substance with characteristic physical and chemical
properties that are due to its atomic arrangement.
Mineralization
Mineral bearing rock. Mineralization generally refers to
the presence of gold, silver, or other minerals and metals
which may not qualify as a commercially mineable orebody
without completion of additional evaluation.
<PAGE>
Net Profits Royalty (Net Profits Interest)
A royalty based on the pretax profit (proceeds) remaining
after recapture of certain operating, capital and other
costs. The type and manner of computation of such capital
and other costs may vary considerably.
Net Smelter Return Royalty (Net Returns Royalty)
A royalty based on the actual sale price received for the
subject metal less the cost of smelting and/or refining the
material at an off-site refinery or smelter along with off-
site transportation costs.
Orebody
A mineral deposit that can be mined at a profit under
existing economic conditions.
Ore Reserves
That part of a mineral deposit which could be economically
and legally extracted or produced at the time of the reserve
determination.
Proven Ore Reserves
Reserves for which (a) quantity is computed from dimensions
revealed in outcrops, trenches, workings or drill holes;
grade is computed from the results of detailed sampling and
(b) the sites for inspection, sampling and measurement are
spaced so closely and the geologic character is so well
defined that size, shape, depth and mineral content of
reserves are well-established.
Probable Ore Reserves
Reserves for which quantity and grade are computed from
information similar to that used for proven reserves, but
the sites for inspection, sampling, and measurement are
farther apart or are otherwise less adequately spaced. The
degree of assurance, although lower than that for proven
reserves, is high enough to assume continuity between points
of observation.
Ounce
Troy ounce which is equivalent to 31.103 grams. A troy
ounce is approximately 9.7% heavier than an avoirdupois
ounce. Accordingly, there are 14.58 troy ounces in an
avoirdupois pound as opposed to 16 avoirdupois ounces.
Oxide Ore
Mineralized rock in which some of the original minerals have
been oxidized. Significant for heap leach operations since
oxidation often changes the original minerals to a more
soluble form, and may also permit a more complete permeation
of cyanide solutions throughout the mineralized rock so that
particles of gold in the ore may be more readily dissolved
in the leaching process.
Patented Mining Claim
A mining claim, usually comprising about 20 acres in area,
to which the U.S. Government has conveyed title to the
owner.
Placer Deposit
A surficial mineral deposit formed by mechanical
concentration of mineral particles from weathered debris,
and which contains heavy minerals and metals such as gold.
Polymetallic
A type of deposit that contains a suite of minerals or
metals that may be valuable. Often copper, lead, zinc,
silver and gold may occur together.
Pyroclastic Rock
A rock consisting of unreworked solid material explosively
or aerially ejected from a volcanic vent.
Recoverable Ounces
Those ounces contained in ore which can be ultimately
produced and shipped from the mine.
Recovery Rate
The percentage of a metal recovered in a mineral separation
process. Recovery rates vary considerably depending on
physical, metallurgical and economic circumstances.
Refining
A process for removing impurities from metals by introducing
air and fluxes into the molten metal. The impurities are
removed as gas or slag.
Reserve
See Ore Reserves
<PAGE>
Reverse Circulation Drilling
See Drilling.
Run of Mine Ore
Ore that is loaded onto heaps directly from the mine without
having been crushed.
Stratabound
A situation in which mineralization is essentially contained
in or confined to a particular sedimentary or volcanic unit.
Strike
The compass direction that the long axis of a geological
feature takes as it intersects the horizontal.
Stripping Ratio
The tonnage ratio between waste and ore in an open pit mine.
Sulfide
A mineral compound characterized by the linkage of sulfur
with a metal. Gold mineralization characterized by the
presence of sulfides is often more difficult to leach, and
therefor less economic.
Supergene Enriched Deposit
A deposit in which the mineralization has been concentrated
due to oxidation and movement by groundwater with subsequent
reprecipitation in a reducing environment at or near the
water table.
Unpatented Mining Claim
That portion of public mineral lands which a party has
staked or marked out in accordance with federal and state
mining laws to acquire the exclusive right to explore for
and exploit the minerals which may occur on such lands.
Working Interest
The interest in a mineral property which entitles the owner
of such interest to participate in the exploration,
development, and operation of a mineral property, and to
share in the revenues generated and related costs incurred.
<PAGE>
Item 3. Legal Proceedings.
There are currently no legal proceedings to which the
Company is a party.
Item 4. Submission of Matters to a Vote of Security Holders.
<PAGE>
No matter was submitted to a vote of the Company's
stockholders during the fourth quarter of the fiscal year
covered by this Report.
PART II
Item 5. Market For The Registrant's Common Equity And
Related Stockholder Matters.
The Company's common stock trades on The Nasdaq
National Market tier of The Nasdaq Stock MarketSM under the
symbol "USMX" and the Toronto Stock Exchange under the
symbol "USM". The Nasdaq Stock MarketSM is the principal
market on which the Company's shares are traded. The
following table shows the high and low prices and the volume
traded of the Company's shares on The Nasdaq Stock MarketSM
for 1994 and 1995. The closing price of the Company's
common shares on December 29, 1995, on The Nasdaq Stock
MarketSM was $1.97.
High Low Volume
1994
First Quarter $4.75 $3.75 1,214,100
Second Quarter 4.25 2.94 948,100
Third Quarter 4.25 2.38 1,332,000
Fourth Quarter 4.19 2.38 1,423,200
1995
First Quarter 2.75 2.06 1,082,500
Second Quarter 2.94 2.13 1,648,700
Third Quarter 2.63 1.97 1,881,700
Fourth Quarter 2.06 1.75 1,347,100
At March 8, 1996, the approximate number of holders of
record of the Company's Common Stock was approximately
4,000. This number does not include beneficial owners
holding shares through nominee or "street" names. No cash
dividends have been paid by the Company. It has been the
Company's policy to use funds derived from its earnings for
exploration, development and other business activities. The
Company currently intends to continue this policy and does
not anticipate paying cash dividends in the near future.
Any determination to pay cash dividends in the future will
be made by the Company's Board of Directors after
consideration of the Company's financial condition, business
prospects and other relevant factors. At present, the
Company must first obtain the prior written consent of a
bank pursuant to a Secured Revolving Credit Agreement before
paying dividends or returning any capital or making any
distribution of assets to the Company's stockholders. In
addition, pursuant to the terms of the financing commitment
with respect to the Illinois Creek Project, the Company is
prohibited from paying dividends until the financing is
repaid.
<PAGE>
Item 6. Selected Financial Data
The selected financial data should be read in
conjunction with the Consolidated Financial Statements and
the notes thereto which appear elsewhere in this Report.
<TABLE>
<CAPTION>
(Amounts in thousands except per share data) December 31,
Summary of Financial Condition Data 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working capital $5,094 $14,105 $19,362 $12,903 $11,427
Current assets $5,834 $14,923 $21,573 $16,427 $14,140
Total assets $17,469 $24,190 $28,808 $28,741 $26,195
Current liabilities $740 $818 $2,211 $3,524 $2,713
Long term liabilities $885 $361 $1,074 $3,290 $1,680
Stockholders' equity $15,844 $23,011 $25,523 $21,927 $20,052
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
Summary of Operations Data 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------
<S>
Revenue (gold sales revenue plus net <C> <C> <C> <C> <C>
other income) $3,922 $14,866 $24,252(1)$18,043 $17,564
Net income (loss) ($6,906) $204 $2,602 $37 $1,928
Net income (loss) per share ($0.47) $0.01 $0.17 $0.00 $0.14
<FN>
(1) Includes gain from the sale of the Company's Alligator
Ridge assets totaling $5,000
</FN>
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
Working capital at December 31, 1995, was $5.1 million.
Cash and cash equivalents amounted to $5.2 million. Cash
and cash equivalents decreased during 1995 by $6.8 million
primarily as a result of investment in property and
equipment of approximately $5.7 million, including deferred
exploration costs of $1.5 million and development costs of
$4.2 million ($3.1 million at Illinois Creek, Alaska, $0.7
million at Thunder Mountain, Idaho, and $0.4 at Cala Abajo,
Puerto Rico), and cash used in operations of $1.3 million.
These were partially offset by proceeds from the sale of
property and equipment of $449,000, principally proceeds
from the sale of the Company's interest in the Kinsley
Mountain project in Nevada.
The Company completed its feasibility study of the
Illinois Creek Project in February 1996. It is the
Company's goal to commence mining in the summer of 1996.
The Company estimates that the costs necessary to develop
the Illinois Creek Mine and place it into production will be
approximately $26.6 million including approximately $4.7
million in working capital and $4.0 milllion in property
acquisition costs which may be paid by the issuance of USMX
common stock. The Company intends to use its internal cash
resources and the proceeds of a $22 million facility to
finance the development and construction costs. The
commitment for this facility is subject to several
conditions, including a satisfactory due diligence report
from an independent engineering firm, receipt of necessary
permit approvals and completion of documentation
satisfactory to the lender.
In order for the Company to commence mining at the
Illinois Creek Mine in the summer of 1996, the facility must
be obtained in the spring of 1996 and the Company must
continue to make substantial development expenditures. The
Company's working capital is expected to decrease
substantially as the Company expends funds on the Illinois
Creek Project.
The Company is considering the use of internal sources
of capital other than its cash resources, including its
Montana Tunnels net profits interest and its holdings in
Alta Gold Co. common stock. The Company has also retained a
Canadian investment banking firm as its financial advisor
for the purpose of formulating and implementing a plan to
assist the Company in raising additional funds to partially
fund the Illinois Creek and Thunder Mountain Projects and
for strategic acquisitions. The Company has no firm
commitment for additional financing.
The Company has filed a Notice of Intent to Operate
with the Idaho Department of Lands describing the Company's
proposed gold and silver mining activities in the Thunder
Mountain Project. Management estimates that the project
would require substantial capital to place it into
production, including working capital. If the project is
sufficiently attractive to warrant continued development and
the necessary permits are obtained, construction could begin
in 1996 with the earliest completion date in 1997.
Management believes that the Company will probably need to
obtain additional capital to place Thunder Mountain into
production.
The Company's balance sheet at December 31, 1995,
reflects a total of $1.2 million in accrued reclamation
liabilities associated with its acquisition and operation of
the Goldstrike Mine. Reclamation activities in 1996 will
focus primarily on recontouring, topsoiling and planting
heap number one and the completion of rinsing and
commencement of recontouring and topsoiling of heap number
two as well as the dismantling of the process plant and
reclamation of the plant site. The goal is to gain
acceptance of the Company's final closure plan by midyear
and to achieve final closure by mid 1997. This reclamation
is expected to be financed with internally available cash
balances, cash generated from the sale of gold produced as a
by product of heap rinsing and cash previously provided to
the State of Utah as reclamation surety.
<PAGE>
Results of Operations
The Company realized a net loss for the year ended
December 31, 1995, of $6,906,000 compared with net income of
$204,000 for 1994 and $2,602,000 for 1993. The loss for
1995 includes mineral property abandonments and impairments
of $4,431,000. The 1994 results include a $497,000 income
tax credit. This credit is primarily the result of the
difference between the estimated 1993 federal income tax
provision and the actual liability reflected on the income
tax returns which were prepared and filed after the 1993
financial statements had been issued. The 1993 results
include a gain of approximately $5,000,000 from the sale of
the Company's Alligator Ridge assets in two separate
transactions during the year, additional 1992 federal income
taxes of $396,000 and property abandonments totaling
$938,000.
Fluctuations in the Company's results of operations
from year to year arise primarily from four factors: (1)
changes in the volume of gold sold and the selling price of
gold, (2) changes in the cost of gold sold, (3) the cost of
mineral properties abandoned during any given period, and
(4) asset dispositions.
Change in the Volume of Gold Sold and Selling Price of Gold
The following table analyzes the variance in gold sales
revenue for the years ended December 31, 1995, 1994, and
1993:
<TABLE>
<CAPTION>
________________________________________________________________________________________
Revenue Variance Analysis
Year Ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ounces of gold sold 6,900 35,575 50,429
Average price realized per ounce $388 $383 $360
Change in revenue attributable to:
More (less) ounces sold ($10,972,000) ($5,342,000) $1,105,000
Higher (lower) price 35,000 820,000 2,000
- ----------------------------------------------------------------------------------------
Increase (decrease) in gold sales revenue
compared to the preceding year ($10,937,000) ($4,522,000) $1,107,000
________________________________________________________________________________________
</TABLE>
Change in Costs Applicable to Sales
Cost of gold sold
Cost of gold sold was $2,890,000 or approximately $419
per ounce in 1995 compared to $11,203,000 or approximately
$315 per ounce in 1994 and $16,226,000 or approximately $322
per ounce in 1993. The fluctuation in the cost of gold sold
is a result of the change from period to period in the mix
of production from the Company's mines and the change in the
cost of production throughout the life of each mine as
illustrated in the table below.
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------
Alligator Gold-
Goldstrike Goldstrike Ridge(1) strike(2) Total
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ounces of gold produced 6,266 34,486 23,454 31,934 55,388
Ounces of gold sold 6,900 35,575 19,299 31,130 50,429
Per ounce statistics:
Cash production costs incurred $233 $229 $268 $305 $289
Depreciation, depletion, amortiza-
tion and reclamation accruals - 48 60 21 38
- ---------------------------------------------------------------------------------------
Production cost per ounce produced $233 $277 $328 $326 $327
=======================================================================================
Gold sales revenue $388 $383 $360 $360 $360
- ---------------------------------------------------------------------------------------
Production cost per ounce sold $212 $269 $399 $334 $359
Change in inventories and deferred
production costs 207 46 (13) (52) (37)
- ---------------------------------------------------------------------------------------
Cost of gold sold 419 315 386 282 322
Mining taxes 2 3 3 3 3
Production royalties 55 19 19 16 17
- ---------------------------------------------------------------------------------------
Costs applicable to sales 476 337 408 301 342
- ---------------------------------------------------------------------------------------
Gross profit (loss) ($88) $46 ($48) $59 $18
=======================================================================================
<FN>
(1) Sold August 27, 1993.
(2) The Goldstrike Mine was acquired effective November 1, 1992.
</FN>
</TABLE>
Cash production costs per ounce of gold produced at the
Company's Goldstrike Mine increased to $233 for 1995 from
$229 for 1994 despite the fact that no mining, crushing or
pad loading costs were incurred after October 1994 because a
significant portion of processing costs are fixed and,
therefore, do not decrease as production decreases. As the
result of a reduction of the estimated remaining recoverable
ounces of gold at the Goldstrike Mine, change in inventories
and deferred production costs increased to $207 per ounce
sold for 1995 from $46 in 1994.
Mining Taxes and Royalties
During 1995, the Company incurred $14,000 in mining
taxes compared to $106,000 in 1994 and $149,000 in 1993.
The decrease in mining taxes in 1995 and 1994 is
attributable to the decrease in ounces sold compared to the
previous year as a result of declining production at the
Goldstrike Mine. Also, the Company incurred $379,000 in
royalty expense for 1995 compared to $665,000 in 1994 and
$882,000 in 1993. The increase in production royalties per
ounce of gold sold is attributable to the monthly minimum
royalty paid at Goldstrike through January of 1996.
Cost of Mineral Properties Abandoned and Provisions for
Impairments of Investments in Mineral Properties
The Company periodically reviews the carrying values of
its properties. In 1995, management determined that
properties with an aggregate historical cost of $758,000 no
longer held sufficient promise to justify the cost of
maintenance. The properties abandoned in 1995 were Tule
Canyon ($65,000), Divide ($63,000) and three other
properties ($202,000) in the United States and La Cienega
($111,000), Jalisco Copper ($164,000) and four other
properties ($153,000) in Mexico. Property abandonments were
$261,000 and $938,000 in 1994 and 1993, respectively. The
properties abandoned in 1994 were the Ancho Canyon, New
Mexico ($221,000) and the South Pass, Wyoming ($40,000)
placer properties, both of which were acquired during the
year. The properties abandoned in 1993 were the Tombstone,
Arizona project ($509,000), Green Springs ($183,000), Cedar
Mountain ($113,000), Emigrant Springs ($89,000) and three
other properties ($44,000).
<PAGE>
In 1995, the Commonwealth of Puerto Rico adopted
legislation which amended the mining law to prohibit future
mining of metallic deposits by open pit methods. Although
the Company is considering various strategies and responses,
the effect of the mining law, as currently amended, is to
render the Company's plan for development of the Cala Abajo
deposit uneconomic. As a result, in 1995 the Company
reduced the carrying value of this property to zero and
recorded an impairment loss of $1.0million.
Gold production at the Company's Goldstrike Mine in
Utah declined sharply in August and September of 1995. This
decline in gold recovery triggered a reevaluation of the
estimated remaining recoverable gold ounces in the heaps.
As a result, the carrying value of Deferred mining and
processing costs was reduced to the fair market value of the
remaining gold bullion and dore at the refinery and the
Company recorded an impairment loss of $1.6 million.
Because exploration efforts to date have not yet
yielded an economic deposit at the Amargosa polymetallic
prospect in Chihuahua, Mexico, management determined in the
fourth quarter of 1995 to reduce the carrying value of this
property by $1.0 million.
Asset Dispositions
In April 1994, the Company sold its interest in the
Kinsley Mountain Project in Elko County, Nevada to Alta Gold
Co. ("Alta"). In addition to the $20,000 previously
received, the Company received $380,000 in cash and Alta
restricted common stock with a then market value of
$200,000. In April 1995, the Company received a final cash
payment of $400,000 and additional Alta restricted common
stock with a then market value of $200,000. The Company
received, and retained at December 31, 1995, a total of
352,711 shares of Alta restricted common stock. The cash
proceeds and discounted value of the stock received were
recorded as a reduction to the carrying value of the
property on the Company's books. In 1995, the Company
recorded a loss on this transaction of $1,000.
During 1993, the Company sold its mining assets located
at Alligator Ridge in White Pine County, Nevada in two
separate transactions for a total of $20 million cash, plus
the assumption by the buyer of all related obligations,
including reclamation liabilities. After deducting the net
book value of the assets sold of approximately $15 million,
the Company recorded gains from these sales totaling
approximately $5.0 million during 1993. The net book value
of the assets sold comprised $8.3 million in deferred
mining, crushing, pad loading and processing costs
associated with ounces of gold in various stages of
production, plus $8.9 million remaining investment in
property, plant and equipment, less recorded reclamation
liabilities of $2.2 million.
Other Factors
General and administrative expenses were higher in 1995
than 1994 principally due to legal and other professional
fees paid relative to the Cala Abajo project and to salaries
and related expenses of additional corporate staff. General
and administrative expenses in 1994 were comparable to those
incurred in 1993.
Prospecting costs in 1995 were lower than 1994 as a
result of the concentrated effort by the Company's
exploration staff to complete development drilling at the
Illinois Creek, Alaska property. Prospecting costs in 1994
were slightly higher than in 1993 due to expanded
investigation of various Latin American properties in 1994.
Higher interest rates in 1995 compensated for
decreasing cash balances during the year. As a result,
interest income for 1995 was comparable to 1994. Interest
income was higher in 1994 than 1993 due to higher interest
rates in 1994.
Income tax expense primarily represents current and
deferred federal regular and alternative minimum taxes. The
entire income tax benefit of $118,000 for 1995 is the result
of an adjustment to federal income taxes receivable related
to 1993 net operating losses carried back to prior years.
See Note 10 to the Consolidated Financial Statements for a
reconciliation of the provision for income taxes for 1995,
1994 and 1993 to the statutory federal income tax rate.
<PAGE>
Trends Which May Affect Future Results of Operations
As previously stated, fluctuations in the Company's
results of operations arise primarily from four factors: (1)
changes in the volume and selling price of gold, (2) changes
in the cost of gold sold, (3) the cost of mineral properties
abandoned during any given period and (4) asset
dispositions. The following is management's view of trends
in these factors.
Change in the Volume of Gold Sold and Selling Price of Gold
Volume
The Company expects minimal production from its
Goldstrike Mine in 1996. The Company's principal focus is
on the development of its Illinois Creek and Thunder
Mountain Projects. The Company is also actively involved in
exploration activities and periodically considers
acquisition opportunities. It is the Company's goal to
commence mining at the Illinois Creek Mine in the summer of
1996. If this can be achieved by the target date of
September 1, the Company forecasts production at the
Illinois Creek Mine of approximately 20,000 ounces of gold
in 1996. Based on the Company's feasibility study (which is
currently being reviewed by an independent engineering firm,
and subject to revision) the Company projects that
approximately 60,000 ounces of gold could be produced in
1997. The Company projects that the drill-defined
mineralization consists of 5.54 million tons grading 0.074
ounces per ton gold equivalent or approximately 412,000
contained equivalent ounces of gold. Metallurgical recovery
from the run-of-mine ore is projected to be approximately
85% of contained gold and 25% of the contained silver.
The Company's ability to achieve the forecasted gold
production will be dependent upon many factors, some of
which, such as the price of gold and climate conditions, are
beyond the control of the Company. No assurance can be
given that the indicated amount of gold will be recovered.
As with any development project, there is no operating
history upon which to base estimates of future cash
operating costs and capital requirements. Estimates of
mineralization, metallurgical recovery, 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 reviews 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. Accordingly, actual cash
operating costs and economic returns of the Illinois Creek
Project and other projects that may be undertaken by the
Company may materially differ from the costs and returns
initially estimated.
The Company has obtained a commitment for a $22 million
facility to finance development and construction costs on
the Illinois Creek Project. 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. Closing is subject to several conditions,
including completion of a satisfactory due diligence report
from an independent engineering firm, the Company's receipt
of necessary permit approvals, and completion of
documentation satisfactory to the lender.
The Illinois Creek Project has required extensive
planning by the Company, due in particular to the special
logistical aspects of gaining access to the site.
Transportation of equipment, construction materials,
supplies and personnel to the site will involve various
modes of transportation. Most goods are to be staged in
Seattle, Washington, loaded into containers, and shipped by
barge to Anchorage, Alaska. Materials will then be
transported from Anchorage to Galena using trucks, barges
and railroads. From Galena, the goods will be flown to the
site using various aircraft.
<PAGE>
Major components of some of the larger mining equipment
will be flown to the site using C-133 aircraft. There is
only one such airworthy aircraft currently available for use
by the Company. In addition, there is one additional C-133
available to supply spare parts if needed. The Company is
in the process of finalizing arrangements for use of these
aircraft, which requires special permission. 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 cut into smaller pieces,
transported to the site using smaller aircraft and
reassembled at the site. If substantial delays occur, the
Company would not be able to commence mining in the summer
of 1996. Due to weather conditions, mining operations
cannot be conducted year-round. Therefore, if mining
operations are not started in 1996 the earliest operations
could commerce would be late spring of 1997.
It is the Company's goal to initiate construction of
the Dewey Mine facilities in the Thunder Mountain Mining
District, Idaho, in the summer of 1997. In January 1996 the
Company submitted a Notice of Intent to Operate with the
Idaho Department of Lands, which is currently being reviewed
by that agency and other state and federal agencies,
including the U.S. Forest Service. The Company is presently
conducting a data sufficiency review of prior studies
pertaining to the Project area and previous operations
conducted near the Project area. The Company intends to
thereafter retain an independent environmental consulting
firm to coordinate the submission of an environmental impact
statement. The views of several governmental agencies, as
well as any public comments received, are expected to be
considered in connection with the review of the
environmental impact statement. Although the Company
forecasts that it has a realistic prospect of obtaining the
necessary permits in 1997, there can be no assurance that
this will be achieved.
A feasibility study by the Company will be ongoing
throughout 1996 to refine the Project design and economics.
It is presently anticipated that conventional open pit/heap
leaching techniques will be used. The Company will also be
conducting additional metallurgical work, finalizing the
acquisition of adjacent land, and making preliminary
arrangements for facility construction and mining
operations.
The Company's operations will be subject to all of the
operating hazards and risks normally incident to operation
of mineral properties, such as unusual or unexpected
geological formations, environmental hazards, industrial
accidents, labor disputes, equipment incapability or
failures, and inclement weather conditions. 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. Moreover, the
Company's mining operations will be subject to extensive
federal, state and local laws and regulations governing
production, taxes, labor standards, occupational health,
waste disposal, protection and remediation of the
environment, reclamation, mine safety, toxic substances and
other matters.
Compliance with such laws and regulations has increased
the cost of planning, designing, drilling, developing,
constructing, operating and closing other mines and
facilities previously operated by the Company. In addition,
the Company has expended significant resources, both
financial and managerial, to comply with environmental
protection regulations and permitting requirements and
anticipates that it will continue to do so in the future.
Although the Company believes that it has made adequate
provision to comply with such regulations, there can be no
assurance that additional significant costs and liabilities
will not be incurred to comply with current and future
environmental protection regulations. Moreover, it is
possible that future developments, such as increasingly
strict environmental protection laws, regulations and
enforcement policies, and claims for damages to property and
persons resulting from the Company's operations, could
result in substantial costs and liabilities in the future.
<PAGE>
Price of Gold
Another significant uncertainty facing the Company
which could potentially impact its financial position,
profitability and liquidity in the short term is the price
of gold. The gold price is a function of a number of
factors including investors' expectations with respect to
inflation, the strength of world currencies, decisions by
central banks regarding their gold reserves, and supply and
demand factors, none of which is under the control of
Company management. After trending downward over the past
several years, making a six year low during the fourth
quarter of 1992, the price of gold rebounded in 1993
reaching a high of $403 on August 3, 1993. The average
market price of gold was $384 an ounce during 1995 and 1994
compared to $360 an ounce during 1993.
Change in the Cost of Gold Sold
The cost of gold sold which is planned to be produced
at the Company's Illinois Creek Mine is estimated on the
basis of the projected life of mine average cost of
approximately $320 per ounce of gold including $80 per ounce
of gold representing amortization of the Company's planned
total capital investment in the mine and $240 per ounce of
gold cash cost.
Cost of Mineral Properties Abandoned
The cost of mineral properties abandoned in any period
is a function of the results of the Company's exploration
efforts and economic considerations. The Company currently
expects to invest approximately $1.5 million during 1996 for
property acquisition and exploration. The Company makes
every effort to maximize the results of its exploration
efforts. However, exploration for economically recoverable
metals involves significant risk. Accordingly, while it is
probable there will be abandonment losses in the future, it
is not possible to predict either the timing or amount.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
USMX, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1995 and 1994,
For the years ended December 31, 1995, 1994 and 1993
Page
--------------
Independent Auditors' Reports 35
Consolidated Financial Statements:
Consolidated Statements of Financial Position F-1, F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Stockholders' Equity F-4
Consolidated Statements of Cash Flows F-5, F-6
Notes to Consolidated Financial Statements F-7 thru F-20
<PAGE>
Independent Auditors' Report
To the Stockholders and Board of Directors
USMX, INC.:
We have audited the accompanying consolidated statements of
financial position of USMX, INC. and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended
December 31, 1995. These consolidated financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of USMX, INC. and subsidiaries as of
December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity
with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial
statements, the Company changed its method of accounting for
income taxes in 1993 to adopt the provisions of the
Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 109, Accounting for
Income Taxes.
KPMG Peat Marwick LLP
Denver, Colorado
March 1, 1996
<TABLE>
USMX, INC. and Subsidiaries
Consolidated Statements of Financial Position
(Amounts in thousands)
<CAPTION>
December 31,
----------------------
1995 1994
<S> ------- -------
Assets <C> <C>
Current assets:
Cash and cash equivalents $5,226 $12,014
Deferred mining and processing costs - 2,344
Consumable inventories - 34
Federal income taxes receivable 381 274
Other 227 257
------- -------
Total current assets 5,834 14,923
------- -------
Property, plant and equipment, at cost:
Undeveloped mineral properties 2,913 4,660
Mineral properties under development 6,344 2,521
Developed mineral properties 921 921
Mine buildings and equipment 2,451 2,417
Vehicles, furniture and equipment 662 691
------- -------
13,291 11,210
Less accumulated depreciation,
depletion and amortization (3,475) (3,418)
------- -------
Net property, plant and equipment 9,816 7,792
------- -------
Other assets 1,819 1,475
-------- -------
Total assets $17,469 $24,190
======== =======
</TABLE>
<PAGE>
<TABLE>
USMX, INC. and Subsidiaries
Consolidated Statements of Financial Position
(Concluded)
(Amounts in thousands except shares)
<CAPTION>
December 31,
----------------------
1995 1994
------- -------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $312 $197
Accrued salaries 73 32
Accrued reclamation 304 493
Other accrued liabilities 51 96
------- ------
Total current liabilities 740 818
------- ------
Long term liabilities:
Estimated reclamation liability 885 361
------- ------
Total long term liabilities 885 361
------- ------
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock, $.001 par value, 20,000,000
shares authorized, none issued - -
Common stock, $.001 par value, 45,000,000
shares authorized, 14,644,000 shares issued
and outstanding as of December 31, 1995,
14,786,000 shares issued and outstanding
as of December 31, 1994 15 15
Additional paid-in capital 15,583 15,860
Treasury stock, at cost - (16)
Retained earnings 246 7,152
------- -------
Total stockholders' equity 15,844 23,011
------- -------
Total liabilities and stockholders' equity $17,469 $24,190
======= =======
<FN>
The accompanying notes are a part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
USMX, INC. and Subsidiaries
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
<CAPTION>
Years Ended December 31,
----------------------------
1995 1994 1993
------ ------- -------
<S> <C> <C> <C>
Sales of gold $2,678 $13,615 $18,137
Costs applicable to sales:
Cost of gold sold 2,890 11,203 16,226
Mining taxes 14 106 149
Production royalties 379 665 882
------ ------ ------
3,283 11,974 17,257
------ ------ ------
Gross profit (loss) (605) 1,641 880
General and administrative expenses 2,548 2,185 2,048
Prospecting costs 684 739 667
Asset abandonments, write downs and impariments 4,431 261 938
------ ------ ------
Loss from operations (8,268) (1,544) (2,773)
Other income:
Royalty income (received from related party) 720 720 720
Interest income 525 518 321
Other, net (1) 13 5,074
------ ------ ------
1,244 1,251 6,115
------ ------ ------
Income (loss) before income taxes and cumulative
effect of change in accounting principle (7,024) (293) 3,342
Income taxe expense (benefit) (118) (497) 1,472
Income before cumulative effect of change in ------ ------ ------
accounting principle (6,906) 204 1,870
Cumulative effect on prior years (to December 31,1992)
of change in method of accounting for income taxes - - 732
------ ------ ------
Net income (loss) ($6,906) $204 $2,602
======= ====== ======
Net Income (loss) per common share:
Net Income (loss)Income before cumulative effect of change
in accounting principle ($0.47) $0.01 $0.12
Cumulative effect of change in accounting principle - - 0.05
------- ------ ------
Net income (loss) per common share ($0.47) $0.01 $0.17
======= ====== ======
Weighted average common and common equivalent shares
outstanding 14,755 14,860 15,714
======= ====== ======
<FN>
The accompanying notes are a part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
USMX, INC. and Subsidiaries
Consolidated Statements of Stockholders' Equity
<CAPTION>
Common Stock
--------------------
(Amounts in thousands except shares) Additional
Number of Paid-in Treasury Retained
Shares Amount Capital Stock Earnings
----------- ------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 14,962,000 $15 $17,566 $- $4,346
Shares issued as compensation 28,000 - 50 - -
Exercise of stock options 638,000 1 1,156 - -
Previously issued shares submitted in partial payment
for options exercised - - - (213) -
Treasury stock retired (39,000) - (213) 213 -
Net income - - - - 2,602
- ---------------------------------------------------- ----------- ------ -------- -------- -------
Balance at December 31, 1993 15,589,000 16 18,559 - 6,948
Shares issued as compensation 2,000 - 7 - -
Exercise of stock options 198,000 - 314 - -
Previously issued shares submitted in partial payment
for options exercised - - 14 (14) -
Repurchase of common stock - - - (3,215) -
Treasury stock retired (1,003,000) (1) (3,213) 3,213 -
Income tax benefit arising from the disqualifying
disposition of incentive stock options - - 179 - -
Net income - - - - 204
- ---------------------------------------------------- ----------- ------- -------- -------- -------
Balance at December 31, 1994 14,786,000 15 15,860 (16) 7,152
Shares issued as compensation 3,000 - 11 - -
Exercise of stock options 3,000 - 6 - -
Repurchase of common stock - - - (278) -
Treasury stock retired (148,000) - (294) 294 -
Net loss - - - - (6,906)
- ---------------------------------------------------- ----------- ------- -------- -------- --------
Balance at December 31, 1995 14,644,000 $15 $15,583 $ - $246
- ---------------------------------------------------- ----------- ------- -------- -------- --------
<FN>
The accompanying notes are a part of these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
<PAGE>
USMX, INC. and Subsidiaries
Consolidated Statements of Cash Flows
(Amounts in thousands)
<CAPTION>
Years Ended December 31,
-----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash from sales of precious metals $2,678 $13,615 $18,137
Cash paid to suppliers and employees (4,831) (12,279) (19,156)
Mining taxes paid (14) (106) (149)
Royalties paid in cash (379) (665) (923)
Royalties received 720 720 720
Interest received 525 518 321
Other income, net (1) 13 76
Income taxes paid, net of refunds received 11 1,311 (2,352)
-------- -------- --------
Net cash provided by (used in) operating activities (1,291) 3,127 (3,326)
-------- -------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (5,674) (4,221) (4,311)
Proceeds from sales of property and equipment 449 380 20,111
Investment in certificates of deposit, net - (171) (1,362)
Aquisition of Goldstrike property - - (708)
Other, net - 80 -
------- ------- -------
Net cash provided by (used in) investing activities (5,225) (3,932) 13,730
------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock 6 314 944
Repurchase of common stock (278) (3,215) -
------- ------- -------
Net cash provided by (used in) financing activities (272) (2,901) 944
------- ------- -------
Net increase (decrease) in cash and cash equivalents (6,788) (3,706) 11,348
Cash and cash equivalents at beginning of year 12,014 15,720 4,372
------- ------- -------
Cash and cash equivalents at end of year $5,226 $12,014 $15,720
------- ------- -------
Supplemental Disclosure of Noncash
Investing and Financing Activities
The Company received $400,000 and $380,000 cash, plus 184,438 and 168,273
shares of Alta Gold Co. common stock, in 1995 and 1994 respectivly, as payment
for purchase of the Company's interest in the Kinsley Mountain Property.
Payment received $ 560 $ 540 $ -
Discounted market value of common stock received 160 160 -
------- -------- --------
Cash Received (included in proceeds from sale of property and equipment above) $ 400 $ 380 $ -
------- -------- --------
</TABLE>
<PAGE>
<TABLE>
USMX, INC. and Subsidiaries
Consolidated Statements of Cash Flows
(Concluded)
<CAPTION>
(Amounts in thousands) Years Ended December 31,
-----------------------------------------
1995 1994 1993
----------- --------- ----------
<S> <C> <C> <C>
Reconciliation of Net Income to Net Cash
Provided by Operating Activities
Net income (loss) $ (6,906) $ 204 $ 2,602
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization charged to costs and expenses 134 1,484 1,684
Cost of mineral properties abandoned 2,928 261 541
Other, net (15) 14 50
Changes in operating assets and liabilities:
(Increase) decrease in deferred mining and processing costs 2,344 1,647 (2,356)
Decrease (increase) in consumable inventories 34 27 (30)
Depreciation, depletion and amortization
included in ending inventories
(Increase) decrease in federal income taxes receivable (107) 744 (1,018)
Increase (decrease) in accounts payable 116 (1,044) 221
Increase (decrease) in accrued salaries 41 (153) (33)
Decrease in federal income taxes payable - - (615)
Increase (decrease) in other accrued liabilities (45) (35) 32
Decrease in royalties payable - - (41)
Increase (decrease) in accrued and estimated reclamation 335 (874) (326)
Decrease in deferred income taxes - - (92)
Other changes in assets and liabilities, net (150) 233 303
----------- ---------- ----------
Net cash provided by (used in) operating activities $ (1,291) $ 3,127 $ (3,326)
=========== ========== ==========
<FN>
The accompanying notes are a part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
USMX, INC. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. - The Company
USMX, INC. (the "Company") 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 situations. The
Company conducts its operations directly and through various
operating subsidiaries. All references herein to the
Company include all subsidiaries of USMX, INC.
Note 2. - Summary of Significant Accounting Policies
Consolidation and basis of presentation
The consolidated financial statements include the
accounts of the Company and its wholly-owned and majority
owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in
consolidation. Management makes various estimates and
assumptions in determining the reported amounts of assets,
liabilities revenues and expenses, and in the disclosure of
commitments and contingencies. These estimates and
assumptions will change with the passage of time and the
occurrence of future events, and actual results will differ
from the estimates.
Cash and Cash Equivalents
The Company considers cash in banks and all highly
liquid investments, purchased with a maturity of three
months or less, to be cash equivalents.
Production Costs
Production costs incurred are charged to Deferred
mining and processing costs as incurred. Cost of gold sold
is based on the currently estimated life of mine average
cost. The amount carried in the Company's balance sheet for
Deferred mining and processing costs is the lower of the
difference between production costs incurred to date and the
amount charged to Cost of gold sold to date or net
realizable value.
Mineral Properties
The Company's policy is to charge to operations, costs
associated with identifying prospective mineral properties
and to capitalize the costs of acquiring, exploring and
developing unproven mineral properties. For properties
subsequently placed into production, the applicable
capitalized costs are amortized using the units-of-
production method, based on the ratio of tons of ore mined
or processed during the year to the estimated total proven
and probable ore reserves of the project.
Capitalized costs related to sold or abandoned
properties are charged against operations at the time the
property is sold or abandoned. Proceeds from rentals and
option fees relating to undeveloped mineral properties in
which the Company has an economic interest are credited
against capitalized property costs and no gain is recognized
until all costs have been fully recovered.
The Company periodically reviews the carrying value of
its properties by comparing the net book value of each
property to the estimated undiscounted future cash flow from
the property. If the net book value exceeds the
undiscounted future cash flow, an impairment is recorded.
Changes in estimates and assumptions that underly
management's estimate of future cash flow from the Company's
mineral properties can materially impact future carrying
values and operating results.
<PAGE>
Note 2. - Summary of Significant Accounting Policies
(continued)
Depreciation and Amortization
Mine buildings and equipment are depreciated using the
units-of-production method based on the ratio of tons of ore
mined or ounces of gold produced during the period to the
estimated total proven and probable reserves of the related
property. Vehicles, furniture and office equipment are
depreciated using the straight-line and the declining
balance methods over estimated useful lives of two to five
years. The cost of normal repairs and maintenance is
charged to operations as incurred. Significant expenditures
which increase the life of an asset are capitalized and
depreciated over the estimated remaining useful life of the
asset. Upon retirement or disposition of property and
equipment, related gains or losses are recorded in
operations.
Reclamation Costs
The Company records a liability for the estimated cost
to reclaim mined land by recording charges to production
costs for each ton of ore mined. The amount charged is
based on management's estimate of reclamation costs to be
incurred. The estimate is based on the work which is to be
performed as set forth in the reclamation plan approved by
the agencies responsible for granting the related mining
permits. The accrued reclamation liability is reduced as
reclamation expenditures are made. Certain reclamation work
is performed concurrently with mining. However, the
majority of reclamation expenditures is made after mining
operations cease.
Revenue Recognition and Hedging Transactions
The Company recognizes revenue as precious metals are
sold. In order to protect against the impact of falling
gold prices, the Company enters into hedging transactions,
the goal of which is to provide a minimum price for future
production, and allow the Company to take advantage of short
term increases in the gold price. Hedging transactions
include spot deferred and forward sales contracts and option
contracts. Contracted prices on spot deferred and forward
sales and options are recognized in gold sales as production
is delivered to meet the commitment.
Income Taxes
The Company follows Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, ("SFAS 109"). Under the asset
and liability method of SFAS 109, deferred income taxes are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred
taxes of a change in tax rates is recognized in income in
the period that includes the enactment date.
By-product Revenues
Revenues from sales of by-products (principally silver)
are treated as a reduction of the cost of sales.
Net Income (loss) per Common Share
Net income (loss) per common share is based on the
weighted average number of shares of common stock and common
stock equivalents outstanding during the year, unless they
are anti-dilutive.
<PAGE>
Note 2. - Summary of Significant Accounting Policies
(concluded)
Reclassifications
Certain amounts in the accompanying consolidated
financial statements for the years ended December 31, 1994
and 1993, have been reclassified to conform to the
classifications used in 1995.
Note - Deferred mining and processing costs
Deferred mining and processing costs in the
accompanying consolidated statements of financial position
represent mining, crushing, pad loading and processing costs
associated with ounces of gold in various stages of
production as follows:
Inventoried Ounces of
Gold at
December 31,
---------------------
1995 1994
---------------------
Gold bullion and dore - 1,200
Gold in process - 9,100
Gold in crusher stockpile - -
---------------------
Total estimated ounces in process - 10,300
=====================
During 1995 the Company recorded an impairment related
to Deferred mining and processing costs of $1,620,000 (see
Note 7.)
Note 4. - Undeveloped Mineral Properties
The Company views exploration as an important means of
growth, and it typically actively explores several projects
annually. Deferred costs at December 31, 1995 and 1994
associated with undeveloped mineral properties in various
countries were as follows:
Deferred Exploration Costs in
Undeveloped Mineral Properties
------------------------------
1995 1994
------------------------------
United States $ 584,000 $ 2,000,000
Mexico 2,081,000 2,660,000
Chile 18,000 -
Ecuador 230,000 -
------------------------------
Total $ 2,913,000 $ 4,660,000
==============================
<PAGE>
Note 5. - Mineral Properties Under Development
At December 31, 1995 and 1994, the Company had two
mineral properties in various stages of feasibility and
development as follows:
Mineral Properties Under
Development
-----------------------------
1995 1994
-----------------------------
Illinois Creek, Alaska $ 4,037,000 $ 955,000
Thunder Mountain, Idaho 2,307,000 1,566,000
-----------------------------
Total $ 6,344,000 $2,521,000
=============================
Illinois Creek, Alaska
The Illinois Creek Project is a moderate grade, near
surface gold-silver deposit. It consists of two State of
Alaska Mining Leases, covering 62,480 acres. The project is
located in the western interior of Alaska approximately 57
miles southwest of Galena and 320 miles northwest of
Anchorage. The exploration and development phases have been
completed with the exception of permitting. A final
decision from the State of Alaska on all permits is expected
in April 1996. No major federal permits will be required.
Assuming the grant of the necessary permits, the Company
intends to commence site development and construction in
late April 1996. Field construction is anticipated to take
approximately four months to complete.
Pursuant to an agreement with the current owner of the
underlying leases (the "Agreement"), the Company made
initial payments to the owner of $100,000 in 1994 to
evaluate the Illinois Creek property. The Company is
required to make a $1 million, non-refundable payment to the
owner in cash or common stock of the Company. The Company
has elected to make the payment in stock, which the Company
and the owner have agreed will amount to 449,754 shares.
The Company will issue these shares upon effectiveness of a
registration statement covering the resale of these shares.
The Company expects to file this registration statement in
April 1996. In addition, if the Company obtains the
necessary permits and there has been no material adverse
change in project economics, the Company will be required to
make an additional payment to the owner of $3 million in
cash or common stock in exchange for title to the underlying
leases. If the Company elects to pay all or part of this
amount in stock, it will also be required to provide for the
registration of the resale of the shares issued to the
owner. The number of shares of common stock to be issued to
the owner will be based on a 30-day average of the price of
the Company's stock on The Nasdaq Stock Market. In addition
to these payments, the owner will receive a 5% net returns
royalty.
Also, 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
Company's February 1996 feasibility report, then the owner
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 the owner's 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) from the property. This period may be extended at
the option of the Company for two additional one year
periods upon payment by the Company of substantial advance
royalties 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. See Note 17.
<PAGE>
Note 5. - Mineral Properties Under Development (Concluded)
Thunder Mountain, Idaho
The Company proposes to conduct gold and silver mining
activities at the Dewey Mine in the Thunder Mountain Mining
District in eastern Valley County, Idaho, approximately 100
miles northeast of Boise, Idaho. The proposed Dewey mining
operations are part of the Thunder Mountain Project and
consist of the development of a gold and silver ore deposit
located on patented mining claims administered by the Idaho
Department of Lands.
Effective July 9, 1993, the Company entered into an
Exploration and Option to Purchase Agreement ("Agreement")
with Dewey Mining Company, Thunder Mountain Gold, Inc. and
two individuals (the foregoing companies and individuals
described below collectively as "Owners"). The Owners
control approximately 5,500 acres in the Thunder Mountain
Mining District consisting of both patented and unpatented
mining claims. Pursuant to the terms of the Agreement, the
Company was granted the sole and exclusive right to explore
for and develop minerals on the property in exchange for
advance royalty payments totaling $100,000. In addition,
the Company committed to spend, and did spend, a minimum of
$500,000 evaluating the property prior to April 1, 1995.
The Agreement requires that, before the Company can put
the property into commercial production, it must prepare and
deliver to the Owners a feasibility study regarding the
project. In 1995, the Company extended the term of the
agreement through April 30, 1996, by making an additional
advance royalty payment in the amount of $150,000. The
Company has the option to further extend the Agreement
through April 30, 1997, by paying an additional advance
royalty payment of $200,000. The Company intends to so
extend the Agreement. The Agreement further provides the
Company with the option for a final extension until April
30, 1998, in exchange for an additional advance royalty
payment of $250,000. The advance royalty payments made may
be recovered by the Company for seven years after payment
should the Owners elect to receive royalties under options
(a) or (c) below. The Agreement terminates if the Company
fails to deliver a feasibility study to the Owners by the
end of the last year's extension under the Agreement or if
the Company exercises its right to terminate the Agreement
at any time.
Within 90 days after the Company provides the Owners
with a feasibility study, the Owners may elect to (a)
participate in subsequent efforts to the extent of a 30%
working interest, plus receive a 1.5% royalty, or (b)
receive a 30% net profits interest, or (c) receive a 5% net
returns royalty from production. If the Owners elect to
receive a 5% net returns royalty, the Company will be
obligated to make advance royalty payments of: (I) $200,000
within thirty days after commencement of Commercial
Production (as defined in the Agreement), and $250,000 each
year thereafter. If the Owners fail to notify the Company
of their election prior to the end of the 90 day election
period they will be deemed to have made an election to
receive a 5% net returns royalty.
The Agreement Provides that, once the Owners have made
their election, the Company shall have one year within which
to achieve Commercial Production. If the Company fails to
achieve Commercial Production within one year, the Company
must either re-convey the property to the Owners or extend
by one year the time period within which Commercial
Production must commence by paying an advance royalty of
$200,000 to the Owners. If Commercial Production has not
begun by the end of the extension period, the Company may
obtain one final extension of one year within which to
achieve Commercial Production by paying the Owners an
additional advance royalty of $250,000.
In addition to the advance royalty payments and the
work commitments outlined above, the Company is obligated to
pay all fees necessary to maintain the unpatented mining
claims through August 31 of the calendar year in which the
extension year expires.
<PAGE>
Note 6. - Developed Mineral Properties
The Company's investment in developed mining properties
at December 31, 1995 and 1994 is as follows:
Developed Mineral Properties
------------------------------
1995 1994
------------------------------
Goldstrike Mine $ 365,000 $ 365,000
Montana Tunnels 556,000 556,000
------------------------------
Total $ 921,000 $ 921,000
==============================
Goldstrike Mine
Effective November 1, 1992, the Company acquired from
Tenneco Corporation (Tenneco), the stock of Tenneco Minerals
Company-Utah (TMC-Utah), owner and operator of the
Goldstrike Mine located approximately 35 miles northwest of
St. George, Utah. Soon after the acquisition, the name of
this wholly owned subsidiary was changed to USMX of Utah,
Inc. Gold production from the Goldstrike Mine since
November 1, 1992, has been 77,182 ounces, including 6,266
ounces of gold produced in 1995.
Mining operations at the Goldstrike Mine were completed
in October 1994. Leaching was completed in December 1995.
All disturbed areas at the Goldstrike Mine were reclaimed
during 1995 except for the heaps and the plant site.
Reclamation of one of the two heaps was begun near the end
of 1995. Rinsing of the second heap commenced in January
1996 and is expected to continue into 1997. Once rinsing of
the second heap is complete, the heap will be re-contoured,
covered with topsoil and seeded with various native plant
species. In addition, the process plant will be dismantled
and the plant site reclaimed.
Montana Tunnels
The Company owns a net profits interest in this
property (see Note 13.) and, accordingly, the carrying value
has been classified as a producing mineral property in the
Company's consolidated statements of financial position.
The Company's investment is amortized using the units of
production method, based on the ratio of tons of ore mined
to the estimated total proven and probable ore reserves as
reported to the Company by the operator, Pegasus Gold Inc.
("Pegasus").
Sale of Alligator Ridge Area Assets
In 1993, the Company sold all of its unpatented mining
claims, mill sites, fee lands, mineral leases, easements and
other interests in real property owned by it in the area
known as Alligator Ridge in White Pine County, Nevada, along
with all related equipment, machinery, goods, supplies and
other personal property used by the Company. The assets
were sold to the same buyer in two separate transactions for
a total of $20 million in cash plus assumption by the buyer
of all obligations and liabilities associated with or
arising out of the operation of the assets, including all
reclamation liabilities. The Company recorded gains from
these sales of approximately $5.0 which is included in other
net in the accompanying consolidated statements of
operations.
<PAGE>
Note 7. - Asset abandonments, write downs and impairments
Goldstrike Mine
Gold production at the Company's Goldstrike Mine in
Utah declined sharply in August and September of 1995. This
decline in gold recovery triggered a reevaluation of the
estimated remaining recoverable gold ounces in the heaps.
It was determined that it was no longer economically
feasible to add cyanide to the system and the rinsing of the
heaps commenced in October. As a result, the carrying value
of Deferred mining and processing costs was reduced to the
fair market value of the remaining gold bullion and dore at
the refinery and the Company recorded an impairment loss of
$1,620,000.
Note 7. - Asset abandonments, write downs and impairments
(Concluded)
Cala Abajo
In October 1992, the government of Puerto Rico granted
an Exclusive Exploration Permit covering the Cala Abajo
copper-gold deposit to the Company's majority owned
subsidiary, Southern Gold Resources (USA), Inc. (Southern
Gold). In June 1995, the Commonwealth of Puerto Rico adopted
legislation which amended the island's mining law to
prohibit future mining of metallic deposits by open pit
methods. Although the Company is considering various
strategies and responses, the effect of the mining law, as
currently amended, is to render the Company's plan for
development of the Cala Abajo deposit uneconomic. As a
result, the Company reduced the carrying value of the
property to zero and recorded an impairment loss of
$1,039,000 during 1995.
Amargosa
During 1995 the Company wrote down the carrying value
of the Amargosa property by $1,000,000 to $315,000.
Although the property remains geologically promising, to
date, no significant economic mineralization has been
encountered. The Company anticipates further exploration of
the Amargosa property, possibly in joint venture with
another mining company.
Note 8. - Revolving Bank Credit Agreement
In order to provide a source of short-term financing,
the Company entered into a revolving credit agreement
("Agreement") with The Colorado National Bank of Denver
("Bank") effective as of June 24, 1992. Under the terms of
the Agreement, the Company may borrow up to $3 million at
the Bank's prime rate plus three quarters of a percent.
The amount which the Company may borrow under the
Agreement is limited to the lesser of $3 million or the
borrowing base amount, as defined in the Agreement. The
borrowing base amount is the sum of a calculated present
value of the Company's interest in the Montana Tunnels
royalty, gold bullion and dore in the hands of outside
refiners and U. S. Treasury Bills and U. S. Treasury Notes
which the Company may elect to include in the borrowing base
less any amounts outstanding under the Agreement. At
December 31, 1995, the borrowing base was $1,379,000.
Interest on any borrowings is payable monthly with principal
due upon expiration of the annual agreement.
The Agreement contains certain financial covenants
including the maintenance of minimum levels of tangible net
worth and cash flow, and limitations on the incurrence of
additional indebtedness. In addition, the Company must
first obtain the prior written consent of the Bank before
paying dividends or refunding any capital or making any
distributions of assets to the Company's stockholders. At
December 31, 1995, $1,051,000 of this facility was being
used to secure letters of credit provided by the Company as
reclamation surety in connection with the Goldstrike Mine in
Washington County, Utah. The balance of the facility was
unused at that date. The Agreement has been extended to
December 1997.
<PAGE>
Note 9. - Sales of Property and Equipment
In April 1994, the Company sold its interest in the
Kinsley Mountain Project in Elko County Nevada to Alta Gold
Co. ("Alta"). In April 1995, the Company received a final
cash payment of $400,000 and Alta restricted common stock
with a market value of $200,000 based on the average closing
price of the stock over the 30 trading days prior to
issuance. The payment was in addition to cash of $400,000
and Alta restricted common stock with a market value of
$200,000 previously received. The cash proceeds and
discounted value of the stock received were recorded as a
reduction to the carrying value of the property on the
Company's books. During 1995, the carrying value of the
property was reduced to zero and a $1,000 loss was recorded.
Note 10. - Stock Options
The Company has two stock option plans, the ("1987
Plan") and the Non-discretionary Plan for Non-Employee
Directors ("Directors' Plan"), which cover a total of
1,700,000 shares of common stock available for grant to
employees and directors of the Company.
Under the 1987 Plan, the Company may grant incentive
stock options as well as non-incentive stock options.
Incentive stock options granted under the 1987 Plan are
exercisable at prices equal to the market value of the
common stock at the date of grant. The option prices of non-
incentive stock options granted under the 1987 Plan may be
less than the market value of the common shares as of the
grant date. Options expire at such time as the Option
Committee of the Board of Directors determines, but no later
than ten years from the grant date.
The Directors' Plan was established in 1992 to afford
non-employee directors an opportunity for investment in the
Company and the incentive advantages inherent in stock
ownership of the Company. Options granted under the
Directors' Plan are exercisable at prices equal to the
market value of the common stock at the date of grant and
are exercisable in full on the date of grant.
Shares acquired pursuant to the Directors' Plan may not
be sold, transferred or otherwise disposed of for a period
of at least six months following the date of grant. Under
the terms of the Directors' Plan, the directors who elected
to participate were each issued options to purchase 10,000
shares of the Company's common stock upon adoption of the
plan. Thereafter, each non-employee director who elects to
participate is automatically granted an option to purchase
10,000 shares of the Company's common stock upon joining the
Board. In addition, on October 1 of each year each
participant is automatically granted an option to purchase
an additional 5,000 shares. Options granted under the
Directors' Plan expire ten years from the date of grant
except that an option will expire, if not exercised, ninety
days after the optionee ceases to be a director of the
Company.
<PAGE>
Note 10. - Stock Options (Concluded)
Changes in stock options for the years ended December
31, 1993, 1994 and 1995, are as follows:
Option
Shares Price Per
Share
-----------------------------
Outstanding at December 31, 1992 1,073,200 $1.13-4.75
Exercised (630,150) 1.44-4.75
Granted 314,500 3.06-5.50
-----------------------------
Outstanding at December 31, 1993 757,550 $1.13-5.50
Exercised (198,300) 1.13-3.06
Expired or canceled (39,000) 3.06-5.50
Granted 275,000 2.69-4.13
-----------------------------
Outstanding at December 31, 1994 795,250 $1.16-5.50
Exercised (3,000) 2.06
Expired or canceled (791,750)(1) 1.16-5.50
Granted 1,137,250(1) 1.16-5.50
-----------------------------
Outstanding at December 31, 1995 1,137,750(2) $1.16-5.50
=============================
(1) During 1995, option terms to acquire 724,750 shares were
extended to ten years from the original date of grant. For
accounting purposes the extension was treated as the cancellation of
the existing options and the granting of new options.
(2) Of the options outstanding at December 31, 1995, options to
acquire 826,250 shares were exercisable on that date at an average
option price of $2.90 per share. The remaining options are
exercisable on various dates between March 1996 and October 1998.
Note 11. - Employees' Benefit Plans and Incentive Bonus
Arrangements
Effective July 1, 1987, the Company adopted an Employee
Savings and Investment Plan under section 401(k) of the
Internal Revenue Code, which covers all full-time employees.
The plan is a defined contribution plan and allows employee
contributions of up to ten percent of pre-tax compensation,
limited to the maximum deferral allowed by the Internal
Revenue Service.
The Company may contribute at least ten percent and not
more than one hundred percent of the amount contributed by
the employees, up to a maximum of six percent of pre-tax
compensation. For 1995, 1994 and 1993, the Board of
Directors has set the Company's contribution at fifty
percent of the first six percent of employee contributions.
For 1995, 1994 and 1993, the Company's contributions were
approximately $57,000, $59,000, and $111,000, respectively.
Participants vest in the Company's contributions based upon
years of service, and are fully vested after four years of
service.
<PAGE>
Note 11. - Employees' Benefit Plans and Incentive Bonus
Arrangements(Concluded)
Effective January 1, 1992, the Company adopted an
incentive stock bonus plan for substantially all employees
involved in its Nevada operations. Under the terms of the
plan, a stock bonus was payable on the earlier of December
31, 1994, or the last day of the calendar quarter in which a
covered employee's employment with the Company was
terminated. For each calendar quarter worked by a covered
employee, the employee accrued a bonus of the number of
shares of the Company's stock determined by dividing five
percent of the employees' gross base salary for the quarter
by the average closing price per share for the last ten
trading days of the quarter. The cost associated with each
quarterly-determined bonus was treated as a non-cash cost of
production. For the years ended December 31, 1994 and 1993,
approximately $11,000 and $61,000, respectively, was accrued
under the plan. As a result of the sale of the Company's
Alligator Ridge area assets in August 1993, all but three of
the covered employees were terminated. The Company issued a
total of 27,810 shares of its common stock to the terminated
employees and 5,434 shares of its common stock to the three
remaining employees as final payments due under the
incentive stock bonus plan.
The Company has an Exploration Discovery Bonus Plan
under which bonuses are paid in cash or in shares of the
Company's stock to certain employees for discoveries of ore
deposits that the Company's Board of Directors determines
can be operated at a profit. The bonus is based on the net
present value of the deposit and is calculated using a
sliding scale ranging from 2% for deposits with a net
present value of up to $10 million, to 0.85% of the first
$100 million of net present value plus 0.25% of that portion
of the net present value of the deposit that exceeds $100
million. Under the terms of the plan, 70% of each discovery
bonus is divided equally among the Company's explorationists
and the remainder is to be shared among those individuals
designated by the Company's President as playing an
especially important role in the discovery. No bonuses were
paid in 1995 or 1994 under the plan. The Company paid
Exploration Discovery Bonuses totaling approximately $71,000
in 1993.
Note 12. - Commitments and Contingencies
Reclamation Surety
Pursuant to the mining reclamation and bonding
regulations of the State of Utah, Department of Natural
Resources and the Bureau of Land Management, in 1993 the
Company provided reclamation surety for the Goldstrike Mine
in the amount of $2,251,000. In October 1995, the Company
was advised that, as a result of the reclamation work
accomplished by the Company at the Goldstrike Mine, the
required surety had been reduced by approximately $400,000
to $1,851,000. The required surety is in the form of a
certificate of deposit in the amount of $800,000 and letters
of credit in the amount of $1,051,000. The certificate of
deposit is reflected in Other assets in the accompanying
Consolidated Statements of Financial Position.
Operating Leases
The Company leases office space and vehicles under
operating leases which expire through 1998.
Effective as of June 15, 1992, the Company entered into
a new lease for its corporate offices in Lakewood, Colorado.
The initial term of the lease expires September 30, 1998,
with an option to renew for an additional five year period
at the market rate in effect at the time of renewal. The
lease provides for base rent of $7,690 per month with an
annual $780 per month increase effective July 1 of each year
beginning in 1997. In addition, the Company is obligated to
reimburse the landlord for the Company's proportionate share
of increases in real estate taxes and operating expenses.
<PAGE>
Note 12. - Commitments and Contingencies (Concluded)
The following table sets forth the future minimum lease
payment obligations as of December 31, 1995:
Minimum
Year Lease Payments
-------------------------
1996 $100,000
1997 $98,000
1998 $79,000
1999 $0
2000 $0
Rent expense was $113,000, $139,000 and $303,000 for
the years ended December 31, 1995, 1994 and 1993,
respectively.
Note 13. - Transactions With Affiliates
As of December 31, 1995, Pegasus owned 4,826,000 shares
(33.0%) of the Company's outstanding common stock. In
January 1986, the Company entered into a revised agreement
with Centennial Minerals Ltd., a subsidiary of Pegasus for
the development of the Montana Tunnels property. Pursuant
to the agreement, Pegasus developed the property, acquired a
100 percent working interest in the project, and commenced
mine and mill operations in March 1987. The operations at
Montana Tunnels achieved defined operating status on October
1, 1987. Under the agreement, the Company will receive the
greater of a minimum advance royalty of $60,000 per month or
a five percent net profits interest until Pegasus recovers
payout of capital and other defined costs estimated by the
Company, based on information provided by Pegasus, to
approximate $26.5 million as of December 31, 1995.
After certain construction, land acquisition,
associated financing and other costs are recovered by
Pegasus ('Payback'), the Company is entitled to fifty
percent of the profits. Depending upon metal prices and
production rates, the mine could achieve payback which would
result in increased income to the Company at some future
date. However, even if payback is not achieved, the Company
seems reasonably assured of continued income of $720,000 per
year during the life of the mine, now estimated by Pegasus
to continue into the year 2000. For each of the years ended
December 31, 1995, 1994 and 1993, the Company received
$720,000 in royalty income from the Montana Tunnels
property.
In March 1995, the Company acquired all of the
outstanding capital stock of Mega Minerals S.A., an
Ecuadorian company. The Company assumed obligations of
approximately $120,000, and agreed to pay the seller a 10%
net proceeds royalty on any production from the concessions
after recovery of all capital expenditures. A director and
principal shareholder of the seller is also a director of
the Company. The assets of Mega Minerals S.A. consist of
eight exploration concessions and the rights to acquire four
additional exploration concessions, all located in the
Nambija-Zamora gold belt of southern Ecuador.
<PAGE>
Note 14. - Income Taxes
Total income tax expense (benefit) for the years ended
December 31, 1995, 1994 and 1993, was $(118,000),
$(497,000), and $1,472,000 respectively. The entire income
tax benefit of $118,000 for the year ended December 31,
1995, is the result of an adjustment to federal income taxes
receivable related to 1993 net operating losses carried back
to prior years. Income tax expense (benefit) consists of the
following:
Current Deferred Total
------------------------------------------
Federal tax provision $(118,000) $- $(118,000)
State tax provision - - -
------------------------------------------
Year ended December 31, 1995 $(118,000) $- $(118,000)
==========================================
Federal tax provision $(416,000) $- $(416,000)
State tax provision (81,000) - (81,000)
------------------------------------------
Year ended December 31, 1994 $(497,000) $- $(497,000)
==========================================
Federal tax provision $715,000 $640,000 $1,355,000
State tax provision 117,000 - 117,000
------------------------------------------
Year ended December 31, 1993 $832,000 $640,000 $1,472,000
==========================================
For the year ended December 31, 1993, deferred income
tax expense of $640,000 results from the utilization of net
operating loss carryforwards previously recorded as a
deferred tax asset.
The Company's effective tax rate for the years ended
December 31, 1995, 1994 and 1993, differs from the federal
statutory tax rate for the following reasons:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------
<S> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 34.0%
Provision for Supreme Court reversal of the
Hill Case - - 2.9%
Revision of prior year's estimated tax 1.7% 211.9% 9.0%
Cost of sales for tax purposes less than
financial statements (9.0%) (184.5%) 22.8%
Exploration and development deducted for
tax purposes not for financial statements (40.4%) 77.4% (10.5%)
Royalty payments deducted for tax purposes
not for financial statements - 22.3% -
Mineral property disposal, tax gain greater
than financial statement gain 8.6% (44.4%) -
Statutory depletion over cost basis - 16.2% (15.4%)
Use of alternative minimum tax rate (.4%) 29.4% -
State provision and other 7.2% 7.6% 1.2%
-------------------------------------
1.7% 169.9% 44.0%
=====================================
</TABLE>
<PAGE>
Note 14. - Income Taxes (Concluded)
The tax effects of temporary differences that give rise
to significant portions of the deferred tax assets and
deferred tax liabilities at December 31, 1995 and 1994 are
presented below:
<TABLE>
<CAPTION>
Deferred tax assets: 1995 1994
----------------------------
<S> <C> <C>
Reclamation liabilities, accrued for financial
reporting purposes $439,000 $316,000
Deferred mining and processing costs, due to additional costs
deferred for tax purposes. 90,000 197,000
Alternative minimum tax credit carryforwards 157,000 157,000
Net operating loss carryforwards 3,343,000 1,417,000
Other 8,000 4,000
----------------------------
Total gross deferred tax assets 4,037,000 2,091,000
Less valuation allowance (3,612,000) (365,000)
----------------------------
Total deferred tax assets 425,000 1,726,000
----------------------------
Deferred tax liabilities:
Mineral properties, principally due to the capitalization of
exploration and development costs for financial reporting
purposes. (296,000) (1,635,000)
Plant and equipment, principally due to accelerated tax
depreciation of certain assets. (129,000) (91,000)
----------------------------
Total gross deferred tax liabilities (425,000) (1,726,000)
----------------------------
Net deferred tax asset (liability) $ - $ -
============================
</TABLE>
As of December 31, 1995, the Company has net operating
loss carryforwards for federal income tax purposes of
approximately $9,036,000 which are available to offset
future federal taxable income, if any, through 2010. In
addition, the Company has net operating loss carryforwards
for alternative minimum tax purposes of approximately
$5,081,000 which are available to offset future alternative
minimum taxable income, if any, through 2010.
Note 15. - Quarterly Data (Unaudited)
Quarterly earnings data for the years ended December
31, 1995 and 1994, follow:
<TABLE>
<CAPTION>
(Amounts in thousands, except per share data)
- ------------------------------------------------------------------------------------
1995 Quarters First Second Third Fourth
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $386 $392 $ - $1,900
Costs applicable to sales 453 460 128 2,242
- ------------------------------------------------------------------------------------
Gross (loss) (67) (68) (128) (342)
Operating expenses 834(1) 2,363(1) 2,412(1)(2) 2,054(1)
- ------------------------------------------------------------------------------------
Loss from operations (901) (2,431) (2,540) (2,396)
- ------------------------------------------------------------------------------------
Loss before income taxes (534) (2,109) (2,240) (2,141)
- ------------------------------------------------------------------------------------
Net Loss (473) (1,951) (2,195) (2,287)
====================================================================================
Loss per common share: $(0.03) $(0.13) $(0.15) $(0.16)
====================================================================================
<FN>
(1) Operating expenses include the cost of mineral property
abandonments and write downs of $28,000, $1,443,000, $21,000
and $1,319,000, for the first through fourth quarters
respectively.
(2) As discussed in Note 3. to the financial statements,
operating expenses for the third quarter include an impairment
loss of $1,620,000 related to the Goldstrike Mine.
</FN>
</TABLE>
<PAGE>
Note 15. - Quarterly Data (Unaudited) (Concluded)
<TABLE>
<CAPTION>
(Amounts in thousands, except per share data)
- -----------------------------------------------------------------------------
1994 Quarters First Second Third Fourth
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $1,872 4,627 $3,697 $3,419
Costs applicable to sales 1,749 3,920 3,164 3,141
- -----------------------------------------------------------------------------
Gross profit 123 707 533 278
Operating expenses 675 797 790(1) 923(1)
- -----------------------------------------------------------------------------
Loss from operations (552) (90) (257) (645)
- -----------------------------------------------------------------------------
Income (loss) before income taxes (269) 206 68 (298)
- -----------------------------------------------------------------------------
Net income (loss) (279) 216 389(2) (122)(2)
=============================================================================
Income (loss) per common share: $(0.02) $0.02 $0.02 $(0.01)
=============================================================================
<FN>
(1) Operating expenses for the second and third quarters include the cost
of property abandonments of $40,000 and $221,000, respectively.
(2) As discussed in Note 10. to the financial statements, the income tax
provision for the third and fourth quarters include a benefit of $321,000
and $176,000, respectively. The benefit arises from the difference between
the tax calculated on the 1993 tax return and the estimated tax liability
recorded in the financial statements in 1993. There were certain elections
and estimates used to prepare the tax return that were not anticipated when
the 1993 tax provision was originally prepared.
</FN>
</TABLE>
Note 16. - New Accounting Standards
Statement of Financial Accounting Standards No. 121,
"Accounting for Impairment of Long-Lived Assets to be
Disposed of" (SFAS 121) was issued in March, 1995, by the
Financial Accounting Standards Board. It requires that long-
lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS
121 is required to be adopted for fiscal years beginning
after December 15, 1995. Adopting this statement by the
Company is not expected to have a significant effect on the
financial statements.
Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), was
issued by the Financial Accounting Standards Board in
October 1995. SFAS 123 establishes financial accounting and
reporting standards for stock-based employee compensation
plans as well as transactions in which an entity issues its
equity instruments to acquire goods or services from non-
employees. This statement defines a fair value based method
of accounting for employee stock options or similar equity
instruments, and encourages all entities to adopt that
method of accounting for all of their employee stock
compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using
the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25). Entities electing to
continue to follow APB 25 must make pro forma disclosures of
net income and earnings per share, as if the fair value
based method of accounting defined by SFAS 123 had been
applied. SFAS 123 is applicable to fiscal years beginning
after December 15, 1995. The Company currently accounts for
its equity instruments using the accounting prescribed by
APB 25. The Company does not currently expect to adopt the
accounting prescribed by SFAS 123; however, the Company will
include the disclosures required by SFAS 123 in future
financial statements.
<PAGE>
Note 17. - Subsequent Event
In February 1996, the Company received a commitment
from N. M. Rothschild & Sons Limited, London ("Rothschild"),
to underwrite a $22 million facility to finance development
and construction costs of the Company's Illinois Creek
Project (the "Project", See Note 6.) and to provide the
related initial working capital requirements. The
commitment is subject to several conditions, including a
satisfactory due diligence report from an independent
engineering firm, receipt of necessary permit approvals and
completion of documentation. The facility includes a $19.5
million project loan facility, a $2.5 million convertible
debenture and a 100,000 ounce margined gold hedging facility
to provide for project hedging requirements. The Company
currently estimates initial total capital costs of the
Project to be approximately $26.6 million, including
costs of property acquisition, construction, initial working
capital, financing and initial reclamation bonding, but
excluding costs incurred through December 31, 1995, of
approximately $4.0 million.
The project loan facility will be an amortizing term
loan facility available in gold ounces and/or US Dollars and
is to be repaid in thirteen equal quarterly installments
commencing June 30, 1997. The project loan may, at the
Company's option, be converted from a gold loan to a dollar
loan and vice versa, with the prior approval of Rothschild.
The project loan facility bears interest at the base rate
plus a margin. The base rate is LIBOR, in the case of
drawings in US Dollars, and LIBOR less the London Gold
Lending Rate, in the case of drawings in gold ounces. The
margin is 2.25% per annum until the Project has reached
Completion and 1.875% thereafter. Until the Project has
achieved Completion through the passing of a Completion Test
(and satisfaction of other conditions), the Company will
unconditionally guarantee all obligations under the project
loan. After Completion, the project facility will become
non-recourse to the Company, except for ongoing
environmental warranties.
The convertible debenture bears interest at the rate of
LIBOR plus 2% and, if not converted, matures June 30, 2000.
The debenture is convertible at the discretion of Rothschild
any time prior to the maturity date into shares of the
Company's common stock at the rate of $3.40 per share. The
Company will have the right to require conversion of the
debenture if the share price of the Company's common stock
trades above $4.75 for more than 30 consecutive days.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
There were no disagreements with the Company's
principal independent accountants on any matter of
accounting principles or practices, financial statement
disclosures, or auditing scope or procedure.
PART III
Items 10, 11, 12 and 13 constituting Part III of this
Form 10-K have been omitted from this Annual Report pursuant
to the provisions of Instruction G(3) to Form 10-K, as the
Company intends to file a definitive proxy statement
pursuant to Regulation 14A under the Securities Exchange Act
of 1934 within 120 days after the close of its last fiscal
year.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
(a)(1) Consolidated Financial Statements.
See Item 8.
(2) Consolidated Financial Statement Schedules.
See Item 8.
(3) Exhibits.
The exhibits listed on the accompanying Index to
Exhibits are filed as part of this Annual Report.
(b) Reports on Form 8-K.
The Company filed no report on Form 8-K during the
fourth quarter of the fiscal year covered by this Report
<PAGE>
INDEX TO EXHIBITS
NUMBER DESCRIPTION
Exhibit 3.1 Certificate of Incorporation of the
Company, previously filed as an Exhibit to the
Company's Report on Form 10-K for the year
ended December 31, 1987, is incorporated herein
by this reference.
Exhibit 3.2 Bylaws of the Company, previously filed as
an Exhibit to the Company's Report on Form 10-K
for the year ended December 31, 1987, is
incorporated herein by this reference.
Exhibit 4 Specimen Certificate of the $.001 par value
common stock, previously filed as an Exhibit to
the Company's registration statement on Form S-
3 (No. 33-19699), is incorporated herein by
this reference.
Exhibit 10.2 The Company's 1987 Stock Option Plan, as
amended, previously filed as an Exhibit to the
Company's registration statement on Form S-8
(No. 33-49392), is incorporated herein by this
reference.
Exhibit 10.3 The Company's Savings and Investment Plan,
previously filed as an Exhibit to the Company's
Report on Form 10-K for the year ended December
31, 1987, is incorporated herein by this
reference.
Exhibit 10.7 Agreement, dated January 1, 1986, between
the Company and Centennial Minerals Ltd.,
previously filed as Exhibit 10.17 to the
Company's Report on Form 10-K for the year
ended May 31, 1986, is incorporated herein by
this reference.
Exhibit 10.7A Amendment of Agreement and Deed dated July
15, 1991, by and between Montana Tunnels
Mining, Inc., USMX, INC. and USMX of Montana,
Inc., previously filed as an Exhibit to the
Company's Report on Form 10-K for the year
ended December 31, 1991, is incorporated herein
by this reference.
Exhibit 10.33 Non-Discretionary Stock Option Plan,
previously filed as an Exhibit to the Company's
Report on Form 10-K for the year ended December
31, 1991, is incorporated herein by this
reference.
Exhibit 10.40 Asset Purchase Agreement, dated June 11,
1993, between the Company and Placer Dome U.S.
Inc., as amended, previously filed as an
Exhibit to the Company's Report on Form 10-K
for the year ended December 31, 1993, is
incorporated herein by this reference.
Exhibit 10.42 Employment Agreement, dated July 16, 1993,
between the Company and James A. Knox,
previously filed as an Exhibit to the Company's
Report on Form 10-K for the year ended December
31, 1993, is incorporated herein by this
reference.
<PAGE>
Exhibit 10.44 Exploration and Option to Purchase
Agreement, dated effective July 9, 1993,
between the Company and Dewey Mining Company
and Thunder Mountain Gold, Inc., Ronald C.
Yanke and Donald J. Nelson, previously filed as
an Exhibit to the Company's Report on Form 10-K
for the year ended December 31, 1994, is
incorporated herein by this reference.
Exhibit 10.45 Purchase and Sale Agreement, dated April
14, 1994, among the Company, Cominco American
Resources Incorporated and Alta Gold Co.,
previously filed as an Exhibit to the Company's
Report on Form 10-K for the year ended December
31, 1994, is incorporated herein by this
reference.
Exhibit 10.46 Agreement, dated effective December 16,
1994, between the Company and North Pacific
Mining Corporation, previously filed as an
Exhibit to the Company's Report on Form 10-K
for the year ended December 31, 1994, is
incorporated herein by this reference.
Exhibit 10.47 Post-Termination Agreement, dated February
16, 1996, between the Company and Bull Valley
L.L.C.
Exhibit 10.48 Exploration Discovery Bonus Plan, dated
effective September 1, 1989.
Exhibit 10.49 Mine Services and Earthworks Contract,
dated January 19, 1996, between the Company and
D.H. Blattner & Sons, Inc.
Exhibit 10.50 Purchase and Sale Agreement, dated March
20, 1995, among the Company, Mega Metals, Inc.;
Mega Minerals S.A.; Greg Pusey; John Dreier and
Gary McAdam.
Exhibit 22 Subsidiaries of the Company
Exhibit 24.1 Consent of KPMG Peat Marwick LLP
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
USMX, INC.
(Registrant)
Date: March 22,1996 By: /s/ James A. Knox
James A. Knox,
President
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Date: March 22, 1996 /s/ James A. Knox
James A. Knox, President,
Chief Executive Officer, and
Chairman of the Board of
Directors
Date: March 22, 1996 /s/ Paul L. Blair
Paul L. Blair, Vice President
- Operations for Latin America
Date: March 22, 1996 /s/ Dennis L. Lance
Dennis L. Lance, Vice
President - Exploration
Date: March 22, 1996 /s/ Donald E. Nilson
Donald E. Nilson, Vice
President - Finance,
Secretary, Chief Financial
Officer
Date: March 22, 1996 /s/ Paul B. Valenti
Paul B. Valenti, Vice
President - Operations
Date: March 22, 1996 /s/ Daniel J. Stewart
Daniel J. Stewart, Controller
Date: March 25, 1996 /s/ George J. Allen
George J. Allen, Director
Date: March 30, 1996 /s/ Phillips S. Baker
Phillips S. Baker, Director
Date: March 25, 1996 /s/James P. Geyer
James P. Geyer, Director
Date:
Donald P. Bellum, Director
Date: March 25, 1996 /s/ Terry P. McNulty
Terry P. McNulty, Director
Date: March 25, 1996 /s/ Werner G. Nennecker
Werner G. Nennecker, Director
Date: March 28, 1996 /s/ Gregory Pusey
Gregory Pusey, Director
Date: March 26, 1996 /s/ Robert Scullion
Robert Scullion, Director
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the fiscal year December 31, 1995 or
__ Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the transition period from ________ to __________
Commission File Number 0-9370
___________________
USMX, INC.
(Exact name of registrant as specified in its charter)
___________________
Delaware 84-1076625
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
141 Union Boulevard, Suite 100
Lakewood, Colorado 80228
(Address of principal executive offices) (Zip Code)
(303) 985-4665
Registrant's telephone number, including area code
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit 10.47 Post-Termination Agreement, dated February 16,
1996, between the Company and Bull Valley L.L.C.
Exhibit 10.48 Exploration discovery Bonus Plan,dated effective
September 1, 1989.
Exhibit 10.49 Mine Services and Earthworks contract, dated
January 19, 1996, between the Company and
D.H. Blattner & Sons, Inc.
Exhibit 10.50 Purchase and Sale Agreement, dated March 20,
1995, among the Company, Mega Metals, Inc.;
Mega Minerals S.A.; Greg Pusey; John Dreier
and Gary McAdam.
Exhibit 22 Subsidiaries of the Company
Exhibit 24.1 Consent of KPMG Peat Marwick LLP
USMX OF UTAH INC
141 Union Blvd. Suite 100
Lakewood, CO. 80228
Bull Valley L.L.C.
c/o John Lee Carroll
515 Madison Avenue
32nd Floor
New York, NY 10022
Re: Post-Termination Agreement
Gentlemen:
The purpose of this letter is to set forth our agreement
with respect to the respective rights and obligations of Bull
Valley L.L.C. ("BVLLC") and USMX of Utah Inc. ("USMX/Utah")
subsequent to the January 31, 1996 termination of the Mineral
Lease, Sublease and Option to :Purchase, dated August 1, 1985
("Agreement"), pursuant to which a Quitclaim Deed and
Assignment of Agreements previously has been delivered by
USMX/Utah to Permian Exploration Account ("PEA"). Our
understanding is that BVLLC has succeeded to all right, title
and interest of PEA in the Agreement, and BVLLC hereby
confirms, represents and warrants that such is the case.
USMX/Utah and BVLLC hereby agree as follows:
1. USMX/Utah agrees to reimburse BVLLC for one-half of the
monthly rental payments (i.e., one-half of $2,000.00 per
month) paid by BVLLC pursuant to the Mining Lease with
Option to Purchase, between Paul Lamoreaux and Padre Mining
Company, Inc., as "Lessor", and John Lee Carroll, as
"Lessee", dated February 10, 1982 ("Lease"), which is
attached as Exhibit A to the Agreement. USMX/Utah shall
make such reimbursement payments to BVLLC upon receipt from
BVLLC of satisfactory documentation that such rental payment
has been made under the Lease.
2. USMX/Utah shall perform reclamation of the properties
subject to the Agreement ("Properties") as was required by
the Agreement immediately prior to its termination.
3. BVLLC shall provide and allow access to USMX/Utah to
the Properties for the purpose of performing the reclamation
described in paragraph 2 above and for purposes of
;processing and removing gold as described in paragraph 4
below.
4. USMX/Utah shall have the right, but not the obligation
to remove any gold remaining in the heaps situated on the
Properties, as may be recovered as a result of USMX/Utah's
reclamation activities, provided and on the condition that
it pays BVLLC 50% of the proceeds received from the sale of
any such gold removed from the Properties after January 31,
1996, after deducting from such proceeds the following
costs: rentals and royalties that may be payable (directly
by USMX/Utah or indirectly by USMX/Utah pursuant to
paragraph 1 above) to underlying landowners by USMX/Utah,
regardless of whether paid directly by USMX/Utah or through
PEA; transportation costs from the Properties to the place
or places of refining and sale processing and transportation
costs incurred as a result of shipping loaded carbon after
recovery of the gold and carbon on the Properties; and other
costs related to the transportation, disposition or sale of
that gold, including but not limited to umpiring fees, taxes
(other than income taxes) and sales commissions.
5. USMX/Utah and BVLLC acknowledge that USMX/Utah has no
rights or obligations of any nature whatsoever with respect
to the Properties other than as described in paragraphs 1,
2, 3 and 4 above, and that BVLLC has full freedom and
discretion to negotiate with third parties with respect to
the Properties in any manner it deems appropriate.
If the above correctly represents your understanding of
our agreement, please so indicate by signing on the space
provided below.
USMX OF UTAH INC.
By:
James A. Knox,
President
ACCEPTED AND AGREED this
day of February, 1996.
BULL VALLEY L.L.C.
By:
John Lee Carroll, President
EXPLORATION DISCOVERY BONUS PLAN OF USMX, INC.
Article 1: Purpose.
This Exploration Discovery Bonus Plan ("Plan") of USMX, Inc.
("USMX") is adopted by the Board of Directors ("Board") of USMX.
The purpose of this Plan is to provide a financial incentive for
Explorationists to discover commercially exploitable mineral
deposits by rewarding those Explorationists who contributed to
the discovery of an Economic Mineral Deposit by paying them a
discovery bonus ("Bonus") as hereinafter provided.
Article 2: Definitions.
2.1 "Common Stock" shall mean common stock in USMX.
2.2 "Continuous Commercial Production" shall mean the
systematic and uninterrupted process of mining, processing,
milling and marketing mineral products from an Economic Mineral
Deposit. Continuous Commercial Production shall not include mine
and mill construction, pilot plant testing, bulk sampling or
similar activities, but shall include operation of a seasonal
heap leach mine.
2.3 "Date of Commencement of Continuous Commercial
Production" shall mean the date when mineral treatment facilities
have operated for ninety (90) consecutive days at a rate of at
least eighty-five percent (85%) of the daily rate projected in
the feasibility study which was used to design the mine.
2.4 "Date of Initiation of Formal Feasibility Studies"
shall mean the date of a written memorandum from USMX's Vice
President of Exploration to its Vice President of Operations
which transfers a property possibly containing an Economic
Mineral Deposit from the corporation's Exploration Division to
its Mining Division.
2.5 "Discretionary Recipient" shall mean any individual(s)
designated by the President of USMX as a person who played an
especially important role in the discovery of an Economic Mineral
Deposit. In his sole discretion, the President may designate any
person whomsoever to receive a Bonus as a Discretionary
Recipient, regardless of whether or not the same individual is an
Eligible Participant and will also receive a Bonus as an Eligible
Participant.
2.6 "Economic Mineral Deposit" shall mean an ore deposit
which formal feasibility studies prepared or commissioned by USMX
determine can be placed into Continuous Commercial Production and
that Continuous Commercial Production will result in a profit
acceptable to USMX.
2.7 "Eligible Participant" shall mean an Explorationist who
is an Eligible Participant within the meaning of Section 4.2 of
this Plan.
2.8 "Explorationist" shall mean a person with exploration
expertise who is employed by USMX for the purpose of using such
expertise in the search for and development of Economic Mineral
Deposits and who is identified as an Explorationist as required
by Section 4.1 hereof.
2.9 "Net Present Value" (NPV) shall mean the net present
value to USMX of an Economic Mineral Deposit on the date when NPV
is calculated or recalculated by the Board (adjusted to reflect
economic ore reserves existing at the Date of Commencement of
Continuous Commercial Production as may be modified by subsequent
events, and utilizing economic factors current at the time of
such NPV calculation) using, in the Board's sole discretion, any
method which is generally accepted in the mining industry.
Revenues shall be based on spot or estimated spot metal prices.
The calculation or recalculation shall allow for the recapture of
all exploration and other costs, such as feasibility study, pilot
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<PAGE>
plant work, etc. expended by USMX on or in connection with the
Economic Mineral Deposit prior to the Date of Commencement of
Continuous Commercial Production (and, for purposes of the
calculation or recalculation, shall be deemed to have been spent
on the Date of Commencement of Continuous Commercial Production)
and the application of a provision for income taxes and financing
costs, and the Board shall have complete discretion in selecting
a reasonable discount factor to be used in connection with its
calculation or recalculation of Net Present Value. Any Eligible
Participant or Discretionary Recipient shall be entitled to
review relevant documents concerning the Board's calculations or
recalculation of NPV. Any Net Present Value calculated or
recalculated by the Board pursuant to this Plan shall be for the
sole purpose of establishing a Total Bonus Amount as provided in
Article 5 of this Plan.
2.10 "Period of Discovery" with respect to an Economic
Mineral Deposit included within a particular property shall mean
the period of time commencing with the date of acquisition by
USMX of the legal right to explore and develop the property and
ending with the Date of Initiation of Formal Feasibility Studies.
2.11 "Total Bonus Amount" with respect to a particular
Economic Mineral Deposit shall mean an amount established as
specified in Section 5.3 hereof.
Article 3: Administration.
3.1 General: The Plan shall be administered by the Board,
or a committee designated by the Board, which shall be empowered
to establish rules and regulations consistent herewith and to
make such other determinations as are necessary or advisable for
its administration. Acts of a majority of the Board (or a
committee designated by the Board) at a meeting, or acts approved
in writing by a majority of the Board (or a committee designated
by the Board), shall be valid acts of the Board.
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<PAGE>
3.2 Arbitration: Any controversy or claim arising out of
or relating to this Plan shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by
the Arbitrator(s) may be entered in any court having jurisdiction
thereof. With regard to each arbitrated claim or dispute, each
party shall be responsible for his, her or its own costs and
expenses paid or incurred for or in connection therewith,
including expert witness fees and travel and lodging expenses to,
from and at the place of the arbitration hearing, and attorneys'
fees. Any hearing shall be held in a location designated by the
Board.
3.3 Indemnification: In addition to such other rights of
indemnification as they may have as directors of USMX, the
members of the Board shall be indemnified by USMX against the
reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any
action, suit, or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of
any action taken or failure to act under or in connection with
this Plan or any payment hereunder, and against all amounts paid
in settlement thereof (provided such settlement is approved by
legal counsel selected by USMX), or paid in satisfaction of a
judgment in any such action, suit, or proceeding, except in
relation to matters as to which it shall be adjudged in such
action, suit, or proceeding that such member of the Board is
liable for gross negligence or misconduct in the performance of
his duties; provided that within ten (10) days after institution
of any such action, suit, or proceeding, a member of the Board
shall offer USMX in writing the opportunity, at its own expense,
to handle and defend the same.
Article 4: Eligible Participants/Subject Deposits.
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<PAGE>
4.1 Explorationists: Each and every individual employed by
USMX as its Vice President for Exploration shall constitute an
Explorationist for purposes of this Plan. USMX shall maintain a
roster containing the names of other employees that USMX
identifies, in its sole discretion, as Explorationists. Such
roster shall be maintained and periodically revised by the Vice
President - Exploration of USMX, subject to review by the Board.
4.2 Eligible Participants: To qualify as an Eligible
Participant with respect to an Economic Mineral Deposit included
within a particular property, an Explorationist must be employed
by USMX on a full-time basis for a minimum period of six (6)
consecutive months prior to the Date of Initiation of Formal
Feasibility Studies. In the event that the Period of Discovery
is less than six months, the Explorationist must be employed by
USMX on a full-time basis at the time when USMX acquires the
legal right to explore and develop the property and must remain
so employed for the entire Period of Discovery. Termination of
an Explorationist's employment for any reason other than cause
shall not preclude him or her from receiving a Bonus if he or she
is otherwise an Eligible Participant within the meaning of this
Section 4.2.
4.3 Application to Deposit: Unless otherwise determined by
the Board as specified in this Section 4.3, this Plan shall apply
only to the discovery by Explorationists of an Economic Mineral
Deposit included within a property which, at the time of acquisi-
tion by USMX of the legal right to explore and develop, did not
contain known economic mineralization as determined by USMX. In
the event that a particular property contained known economic
mineralization at the time of such acquisition as determined by
USMX, the Board shall have complete discretion to designate all
or any part of an Economic Mineral Deposit thereon or thereunder
as an Economic Mineral Deposit which is subject to this Plan.
Anything to the contrary herein notwithstanding, the operation or
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<PAGE>
disposition by USMX of any property or of any interest therein
shall be entirely at the discretion of USMX.
Article 5: Payment of Bonus.
5.1 General: Subject to the provisions of Section 6.4
hereof, at the sole discretion of the Board, a Bonus may be paid
in cash or in Common Stock or in any combination thereof. Except
as otherwise provided in Sections 5.4 or 5.5 below, payment of a
Bonus shall be made in installments as provided in Section 5.2
hereof. In connection with payment of all or any part of a
Bonus, USMX shall withhold amounts equal to the withholding tax
which an Eligible Participant is obligated to pay to state and
federal governments.
5.2 Installment Payments: Except as otherwise provided in
Sections 5.4 or 5.5 below, a Bonus shall be paid in three (3)
installments and the amount of each installment shall be estab-
lished on an anniversary of the Date of Commencement of
Continuous Commercial Production as hereinafter provided.
Eligible Participants shall collectively receive seventy percent
(70%) of the Total Bonus Amount for a particular anniversary of
the Date of Commencement of Continuous Commercial Production, and
the remaining thirty percent (30%) shall be received by the
Discretionary Recipients. Each installment payment required by
this Section 5.2 shall be made by USNX within thirty (30) days
after the amount thereof is established. In the event that
interruption occurs with respect to Continuous Commercial
Production, the anniversary dates shall be delayed for an
equivalent period of time.
5.2.1 First Bonus Installment: On the first
anniversary of the Date of Commencement of Continuous Commercial
Production, the Board shall calculate the NPV of an Economic
Mineral Deposit, and the Total Bonus Amount for the first
anniversary shall then be established by the table contained in
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<PAGE>
Section 5.3 hereof. As his or her first installment of Bonus,
each of the Eligible participants shall receive twenty-five
percent (25%) of the value obtained by dividing seventy percent
(70%) of the Total Bonus Amount for the first anniversary by the
total number of Eligible Participants. As his or her first
installment of Bonus, each Discretionary Recipient shall receive
twenty-five percent (25%) of the value obtained by dividing
thirty percent (30%) of the Total Bonus Amount for the first
anniversary by the total number of Discretionary Recipients.
5.2.2 Second Bonus Installment: On the second
anniversary of the Date of Commencement of Continuous Commercial
Production, the Board shall recalculate the NPV of the Economic
Mineral Deposit and the Total Bonus Amount for the second
anniversary shall then be established by the table contained in
Section 5.3 hereof. As his or her second installment of Bonus,
each of the Eligible Participants shall receive thirty-five
percent (35%) of the value obtained by dividing seventy percent
(70%) of the Total Bonus Amount for the second anniversary by the
total number of Eligible Participants. As his or her second
installment of Bonus, each Discretionary Recipient shall receive
thirty five percent (35%) of the value obtained by dividing
thirty percent (30%) of the Total Bonus Amount for the second
anniversary by the total number of Discretionary Recipients.
5.2.3 Third and Final Bonus Installment: On the third
anniversary of the Date of Commencement of Continuous Commercial
Production, the Board shall again recalculate the NPV of the
Economic Mineral Deposit and the Total Bonus Amount for the third
anniversary shall then be established by the table contained in
Section 5.3 hereof. As his or her third and final installment of
Bonus, each of the Eligible Participants shall receive an amount
calculated by first dividing seventy percent (70%) of the Total
Bonus Amount for the third anniversary by the total number of
Eligible Participants, and then subtracting from the result any
and all payments previously made to such Eligible Participant
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<PAGE>
pursuant to Subsections 5.2.1 and 5.2.2 hereof. As his or her
third and final installment of Bonus, each Discretionary
Recipient shall receive an amount calculated by first dividing
thirty percent (30%) of the Total Bonus Amount for the third
anniversary by the total number of Discretionary Recipients, and
then subtracting from the result any and all payments previously
made to such Discretionary Recipient pursuant to Subsections
5.2.l and 5.2.2 hereof.
5.3 Total Bonus Amount: The Total Bonus Amount on any
anniversary of the Date of Commencement of Continuous Commercial
Production or on a date referred to in Section 5.4 or 5.5 hereof
shall be established by the following table:
NPV OF ECONOMIC MINERAL
DEPOSIT TOTAL BONUS AMOUNT
Up to $10million (mm) .02 (NPV)
Greater than $10 mm -$50 mm $200,000 +.01 (NPV - $lOmm)
Greater than $50 mm -$100 mm $600,000 +.005 (NPV - $50mm)
Greater than $100 mm $850,000 +0.0025 (NPV - $100mm)
5.4 Payment Upon Sale or Exhaustion After Commencement of
Continuous Commercial Production: After the Date Of Commencement
of Continuous Commercial Production but before completion of any
or all of the installments of Bonus provided for in Section 5.2
hereof, in the event that USMX sells all or any part of its
ownership interest in a property which includes an Economic
Mineral Deposit or in the event that an Economic Mineral Deposit
is mined out, then the remaining Bonus payable to an Eligible
Participant or a Discretionary Recipient shall be calculated
pursuant to this Section 5.4. Upon sale of the interest in real
property or upon depletion of the Economic Mineral Deposit, as
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<PAGE>
the case may be, the Board shall determine the NPV of the
Economic Mineral Deposit (taking into consideration any interest
retained and/or value received or to be received from such
disposition) and the Total Bonus Amount shall then be established
by the table contained in Section 5.3 hereof. As his or her
final installment of Bonus, each Eligible Participant shall
receive an amount calculated by first dividing seventy percent
(70%) of such Total Bonus Amount by the total number of Eligible
Participants, and then subtracting from the result any and all
payments previously made to such Eligible Participant pursuant to
Subsections 5.2.1 and 5.2.2 hereof. As his or her final install-
ment of Bonus, each Discretionary Recipient shall receive an
amount calculated by first dividing thirty percent (30%) of such
Total Bonus Amount by the total number of Discretionary
Recipients, and then subtracting from the result any and all
payments previously made to such Discretionary Recipient pursuant
to Subsections 5.2.1 and 5.2.2 hereof. All such final install-
ments shall be paid within twelve (12) months after sale of the
interest in real property by USMX or depletion of the Economic
Ore Deposit as the case may be.
5.5 Payment Upon Sale Before Commencement of Continuous
Commercial Production: In the event that USMX sells all or any
part of its ownership in a property which includes an Economic
Mineral Deposit that is subject to this Plan after the Period of
Discovery but before the Date of Commencement of Continuous
Commercial Production, the entire Bonus payable to an Eligible
Participant or a Discretionary Recipient shall be calculated
pursuant to this Section 5.5. Upon sale of the interest in real
property, the Board shall determine the NPV of the Economic
Mineral Deposit (taking into consideration any interest retained
and/or value received or to be received from such disposition)
and the Total Bonus Amount shall then be established by the table
contained in Section 5.3 hereof. As his or her single payment of
Bonus, each Eligible Participant shall receive the value obtained
by dividing seventy percent (70%) of such Total Bonus Amount by
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<PAGE>
the total number of Eligible Participants. As his or her single
payment of Bonus, each Discretionary Recipient shall receive the
value obtained by dividing thirty percent (30%) of such Total
Bonus Amount by the total number of Discretionary Recipients.
The single payment of Bonus required by this Section 5.5 shall be
made within 12 months after sale of the interest in real property
by USMX.
Article 6: Stock Payments
6.1 Stock Subject to Plan: No Common Stock shall be issued
in payment of Bonuses pursuant to this Plan without approval of
the Board. Any shares so paid shall be shares of authorized but
unissued or reacquired Common Stock.
6.2 Price: The Board shall have the discretion to deter-
mine the price at which the Common Stock issued to Eligible
Participants under this Plan shall be valued, but in no event
shall the price be greater than the market price of freely
tradeable Common Stock on the date when the Common Stock is so
issued.
6.3 Stock Held for Investment: If shares of Common Stock
issued hereunder are not, at the time of such issuance, covered
by an effective registration statement under the Securities Act
of 1933, as amended, such shares shall be acquired by an
individual for his or her own account for investment and with no
view, at the time of such issuance, toward the distribution
thereof, and each such individual shall at the time of issuance
give a letter to such effect to USMX. In that event, each stock
certificate representing such unregistered shares issued pursuant
to this Plan shall have a legend imprinted thereon indicating any
restrictions on the transfer of such stock, which legend shall be
in such form as deemed desirable by counsel for USMX, and such
individual shall also agree that he or she will make no sale or
other disposition of such shares unless and until USMX shall have
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<PAGE>
received a satisfactory opinion of counsel that such sale or
other disposition may be made under the applicable provisions of
the Securities Act of 1933 and the applicable state securities
laws. USMX shall use its best efforts to register Common Stock
issued pursuant to this Plan within twelve (12) months after its
issuance.
6.4 Stock Issued to Officers or Directors: USMX shall not
issue Common Stock as payment of a Bonus to an individual if that
person is an officer or director of USMX and such payment in
Common Stock would subject him or her to liability under federal
or state securities law.
Article 7: Amendment; Termination
The Board may review, amend or discontinue this Plan at
any time, provided that such action shall not affect any Bonus
previously earned or paid hereunder.
Article 8: Governing Law
This Plan shall be construed and shall take effect in
accordance with the laws of the State of Colorado.
IN WITNESS WHEREOF, USMX has adopted this Plan this
day of August, 1990, effective as of September 1, 1989.
USMX, INC.
By:
Keith R. Hulley, President
ATTEST:
Dennis R. Lance, Secretary
-11-
ILLINOIS CREEK PROJECT
MINE SERVICES AND EARTHWORKS CONTRACT
C-300
SECTION I
INSTRUCTION AND INFORMATION FOR BIDDERS
<PAGE>
ILLINOIS CREEK PROJECT
MINE SERVICES AND EARTHWORKS CONTRACT C-300
SECTION I
INSTRUCTION AND INFORMATION FOR BIDDERS
Table of Contents
SECTION TITLE PAGE NO.
1.0 BIDDERS RESPONSIBILITY ON RECEIPT OF DOCUMENTS 3
2.0 ADDENDA 3
3.0 BIDS 3
4.0 SITE INSPECTION 3
5.0 PLANT SITE DATA 4
6.0 BIDDERS QUALIFICATION 4
7.0 SELECTION OF THE CONTRACTOR 5
8.0 PERFORMANCE GUARANTEE 5
9.0 ATTACHMENTS 5
<PAGE>
1.0 BIDDER'S RESPONSIBILITY ON RECEIPT OF DOCUMENTS
1.1 The letter of Invitation to Bid will list the Contract documents
enclosed therewith. It is the responsibility of the Bidder to verify
immediately upon receipt of the Invitation to Bid that the documents
listed therein are in fact furnished as represented and carry the
revision number or letter shown in the referring document.
1.2 If it is discovered by the Bidder that a document or an attachment
thereto is not enclosed or is not furnished in the same revision form
as represented by the Invitation to Bid or the referring contract
document, Bidder shall immediately notify USMX, Inc. ("Owner") in
writing.
1.3 Promptly upon determination of receipt of all enclosures, Bidder shall
acknowledge receipt of all bid documents.
2.0 ADDENDA
Owner may amend the documents issued with the Invitation to Bid at any time
prior to the closing time set therein for receipt of bids. Such revisions,
if any, will be made by an addendum issued in identical form to each
Bidder.
3.0 BIDS
3.1 Bids must be submitted in accordance with the Form of Proposal
furnished with this Invitation. Bids shall bear the official company
name and business address to be used in execution of the Contract
Agreement and shall be signed by a person duly authorized to bind the
corporation, partnership or other entity as named therein under
"Company Legal Status". The original and all copies of the Bid must
be identically signed.
3.2 Owner reserves the right to reject any or all Bids, including, but
without limitation, those which are incomplete, obscure, irregular,
have errors or omissions, or, for technical or commercial reasons are
considered nonresponsive to the intent of the Contract Documents.
3.3 Bids shall be submitted in the number of copies requested in the
Invitation to Bid and be addressed as directed therein. Bids received
will be privately opened. Bids received after the date specified in
the Invitation to Bid may be returned to the Bidder unopened.
4.0 SITE INSPECTION
4.1 Each Bidder may and is encouraged to visit the jobsite and fully
inform itself of all existing and potential conditions which may
affect the costs of mobilization of manpower, materials and supplies,
and of performance of the Work.
4.2 The site inspection should be preceded and/or by a complete review of
the General Terms and Conditions and other contract documentation with
particular attention to shipping, storage, safety regulations,
insurance requirements and scheduled performance of the Work.
<PAGE>
4.3 Arrangements for site visits must be made through the Owner.
5.0 PLANT SITE DATA
The plant site data for this project are summarized below:
Site Location: The Illinois Creek project is located in the western
interior of Alaska at a latitude of 64 degrees03 north and longitude 157.50
west. The project lies 57 miles southwest of Galena and 320 miles to the
west and northwest of Fairbanks and Anchorage, respectively. The work
will be limited to those areas contained within the preliminary millsite
boundary as shown on Figure 1 which is titled Millsite Permit Boundary ,
Revision B , dated November 21, 1995.
Item From To
Elevation: 200 FT(msl) <1000 FT (msl)
Temperature
-Average Summer 31 1 F 54 9 F
-Average Winter 4.7 F 18 9 F
-Report Extremes -75 F 92 F
Annual Precipitation 25 IN AVG 30 IN MAX
Annual Snow Pack 24 IN AVG 69 IN MAX
Annual Evaporation 20 IN AVG N/A
For more information please see the following documents:
USMX, INC., 1994 Year End Report, Illinois Creek Project, Alaska . It
is dated, December 15, 1994. Section 2.0
SRK, Inc., Illinois Creek Draft Heap Leach Design Report . It is dated
November 1995. Section 3.0.
6.0 BIDDERS QUALIFICATION
6.1 Owner reserves the right to request from Bidder at any time prior to
award of the Contract, any information considered necessary to further
ensure that the Bidder is adequately prepared and able to fulfill the
Contract. Such information may include past performance records,
lists of available key personnel, inventory of construction equipment,
descriptions of completed contracts, contracts to be performed
simultaneously with the contract, financial statements or any other
data pertinent to the selection and approval of a contractor to
perform the Work.
6.2 The successful Bidder must, prior to award of the Contract, be duly
qualified as required by government authorities to do business in the
State of locality of the Project.
<PAGE>
7.0 SELECTION OF THE CONTRACTOR
7.1 As soon as possible after the closing date set to receive bids, Owner
will select a contractor on the basis of price, organization,
availability of construction equipment, financial resources,
qualifications, construction capabilities, completion dependability,
experience, and such other factors as the Owner in its judgment
considers are to the best interest of the Project.
7.2 Commercial terms will always be a major consideration in the
evaluation of bids received. However, the lowest bid price will not
necessarily be the deciding factor in selection of a contractor to
perform the Work.
8.0 PERFORMANCE GUARANTEE
Owner may at any time prior to award of the Contract request a performance
and material payment bond, in which case award of the Contract will be
contingent upon the Bidder's ability to obtain same.
Cost of bond, if required, will be borne by the Owner as an added contract
expense.
9.0 ATTACHMENTS
The following documents contained in the Illinois Creek General Attachments
are made part of this Section of the Contract namely, Section I -
Instruction and Information for Bidders:
9.1 USMX, INC., 1994 Year End Report, Illinois Creek Project, Alaska .
It is dated December 15, 1994.
9.2 SRK, Inc., Illinois Creek Heap Leach Design Report . It is dated
November 1995.
9.3 USMX, INC., Figure 1, Revision B titled, Millsite Permit Boundary ,
November 21, 1995.
<PAGE>
ILLINOIS CREEK PROJECT
MINE SERVICES AND EARTHWORKS CONTRACT
C-300
SECTION II
GENERAL TERMS AND CONDITIONS
ILLINOIS CREEK PROJECT
MINE SERVICES AND EARTHWORKS CONTRACT C-300
SECTION II
GENERAL TERMS AND CONDITIONS
Table of Contents
SECTION TITLE PAGE NO.
1.0 DEFINITIONS 3
2.0 CONTRACT DOCUMENTS 5
3.0 CONTRACT TYPES 6
4.0 CONTRACTUAL RELATIONSHIP 6
5.0 DESIGNATION OF REPRESENTATIVES 6
6.0 OWNER'S RESPONSIBILITY 6
7.0 NONWAIVER OF DEFAULTS 7
8.0 NOTICE TO PROCEED 7
9.0 CONTRACTOR'S RESPONSIBILITY 7
10.0 INSPECTION, FITTING, CHANGES BY CONTRACTOR 8
11.0 SITE AND WORKING CONDITIONS 8
12.0 COMPLIANCE WITH LAW, PERMITS AND REGULATIONS 8
13.0 INSPECTION AND REJECTION OF MATERIALS AND
WORKMANSHIP 9
14.0 CLAIMS, ASSIGNMENTS, GARNISHMENT AND
ATTACHMENTS 9
15.0 SUBCONTRACTS 10
16.0 DRAWINGS PREPARED BY THE OWNER 10
17.0 CHANGED AND EXTRA WORK 11
18.0 CONTRACT TIME AND COMPLETION OF THE WORK 11
19.0 CORRECTION OF DEFECTIVE WORK 12
20.0 DELAYS 12
21.0 FORCE MAJEURE 13
22.0 SUSPENSION OR TERMINATION OF CONVENIENCE 13
23.0 TERMINATION FOR CAUSE 14
24.0 PATENTS AND SIMILAR RIGHTS 15
25.0 WARRANTY 16
26.0 CONTRACT PAYMENTS 16
27.0 WORK AUTHORIZATION 17
28.0 CONTRACT AMENDMENTS 17
29.0 BACKCHARGES BY OWNER 18
30.0 FINAL ACCEPTANCE OF THE WORK 19
31.0 RELEASE AND WAIVER OF CLAIMS 19
32.0 COST-REIMBURSABLE WORK-ACCOUNTING AND AUDITING 19
33.0 LOSS OR DAMAGE BY ACTIONS OF OTHERS 20
34.0 DISPUTES 20
35.0 NONDISCRIMINATION IN EMPLOYMENT 21
36.0 SECURITY, IDENTIFICATION AND SECRECY 22
37.0 HYGIENE, FIRST AID AND SAFETY 23
38.0 TOXIC AND HAZARDOUS MATERIAL CONTROL ACT 24
39.0 TAXES 25
40.0 TITLE, ADVANCE PAYMENTS 25
41.0 OWNER'S REMEDIES FOR DEFAULT OR DEFECTIVE WORK 25
42.0 INSURANCE 26
43.0 INDEMNIFICATION 28
44.0 GOVERNING LAW 28
45.0 GENERAL 29
46.0 ATTACHMENTS 29
1.0 DEFINITIONS
1.1 Wherever these words occur in the contract documents,
they shall have the following meaning:
a. "Owner"
USMX, INC.
b. "Engineer"
USMX, INC.
c. "Project"
The Illinois Creek project consists
of an open pit gold/silver mine, valley fill heap
leach facilities and related infrastructure. It
is located in the western interior of Alaska at
latitude 64.03= north and longitude 157.50= west
about 57 miles southwest of Galena, Alaska. The
Project is described more or less in the report by
USMX, INC., A1994 Year End Report, Illinois Creek,
Alaska@, December 15, 1994.
d. "Site"
The lands provided by Owner under, in or
through which the Work is to be executed or
carried out.
e. "Work"
The Work specified in the Contract
Agreement and referred to in the Contract
Documents all inclusively as the "Work".
f. "Bidder"
The party (or parties) submitting a
Proposal for executing the Work.
g. "Proposal" or ("Bid")
The written offer setting forth the
price(s) to perform the Work submitted by Bidder
to Owner.
h. "Contract"
The agreement entered into between Owner
and Contractor including all of the documents
listed under Section 2.0 hereof, and others, if
any, listed in the Contract Agreement or in a
subsequent Contract Amendment signed by Owner and
Contractor.
i. "Contract Agreement"
The principal document of the Contract,
signed by Owner and Contractor, that specifies the
scope of the Work, schedule for the Work and the
total Contract Price.
j. "Contractor"
The party (or parties) with whom Owner
has executed a Contract Agreement for the Work.
k. "Subcontractor"
The party which with the prior written
approval of the Owner has executed a subcontract
with Contractor for any part of the Work.
l. "Contract Price"
The total amount ("estimated" or "fixed
lump sum") stipulated in the Contract Agreement
subject to such additions or deductions as may be
made under the terms and conditions of the
Contract.
m. "Contract Unit Price(s)"
The fixed unit price(s) or rate(s)
established by the Proposal which, initially, is
applied to estimated measurements of volume, time
or other units of performance to establish an
estimated total Contract Price, and ultimately, to
actual measurements to establish a final total
Contract Price.
n. "Contract Amendment"
The document signed by Contractor and
Owner to amend the original Contract to provide
for changed or extra work and, accordingly,
increase or decrease the Contract Price.
o. "Specifications" and "Drawings"
Those specifications or drawings of a
technical and/or a contractual nature referred to
in the Contract.
p. "Mechanical Acceptance"
Any operable unit of equipment or
separable portion of the Work will be considered
to have attained mechanical acceptance when it has
been declared by Owner to be mechanically
operative to the extent that all deficiencies
which can be determined prior to the introduction
of raw materials have been corrected by the
Contractor.
q. "Final Acceptance"
Written final acceptance of the Work
will be issued by the Owner following final
inspection, mechanical acceptance and 100%
completion of the Work.
r. "Contract Documents"
The documents identified in Section 2.1
of the General Terms and Conditions.
s. "Notice to Proceed"
The written notice of Owner to
Contractor to commence the Work.
2.0 CONTRACT DOCUMENTS
2.1 The Contract Documents which comprise the entire
agreement between Owner and Contractor concerning the
Work consist of the following:
2.1.1 Invitation to Bid more fully described
in Section 46;
2.1.2 Section I - Instructions and Information
for Bidders included with Invitation to Bid;
2.1.3 Section II - General Terms and
Conditions,Rev. 2/29/96;
2.1.4 Section III - Contract Specification,
Rev.2/29/96;
2.1.5 Section IV - Form of Proposal included
with Invitation to Bid;
2.1.6 Section V - Contract Agreement, Rev.
2/29/96;
2.1.7 Contractor's Proposal dated
December 27, 1995, as modified by Attachments
described in Section 46;
2.1.8 Contract Amendments (as required),
2.1.9 Drawings, specifications and other
documents referred to as "Attachments" in any of
the above, provided that in the event of any
conflict among the Attachments (the "Attachments),
the Attachment bearing the latest date shall
prevail; and
2.1.10 Notice of Award dated January 19, 1996.
2.2 The Contract Documents are intended to describe
all obligations of Contractor and Owner, and the
responsibilities and authority of the Owner, and are
intended to be correlative and complementary. Any work
required by one document and not mentioned in another
shall be executed as though required by all documents.
Should there be any conflict among any of the above
documents and the Contract Agreement, the Sections I
through V of the Contract Agreement will prevail over
the other document; provided, however, that with
respect to matters in Section III - Contract
Specifications, the provisions of the Attachments shall
prevail , and with respect to matters in Attachment A
and Addendum A to Schedule II - General Terms and
Conditions, Attachment A and Addendum A shall prevail.
2.3 Questions by Contractor regarding any of the documents
shall be referred to the Owner.
2.4 Contractor shall, immediately on discovery, notify
Owner in writing of any apparent errors or
discrepancies in the Contract Documents. Owner will
not accept later excuses or claims based on alleged
errors not clarified in due time.
3.0 CONTRACT TYPES
3.1 Depending upon the nature of the services to be
contracted for and/or the status of design and
engineering at the time of award, a contract will fall
into one of the following categories (for purposes of
Contract Price and payment method):
a. Fixed Lump Sum(s)... (with a fixed total
Contract Price)
b. Fixed Unit Price(s)... (with an
estimated total Contract Price) with provision to
convert to Fixed Lump Sum when quantities are
defined.
c. A combination of Fixed Lump Sum(s) and
Fixed Unit Price(s)... (with an estimated total
Contract Price)
3.2 The Contract Documents will identify the contract
type and furnish payment terms and conditions for the
specific type of contract to be employed in the Work.
4.0 CONTRACTUAL RELATIONSHIP
4.1 In performance of the Contract, Contractor is and
shall operate as an independent contractor.
4.2 Nothing contained herein shall be construed as
constituting any other relationship with Owner, nor
shall it be construed as creating any relationship
whatsoever between Owner and Contractor's employees.
Contractor has sole authority and responsibility to
employ, discharge and otherwise control its employees,
and neither Contractor nor any of its employees are or
shall be deemed to be employees of Owner. Contractor
shall accept complete responsibility as a principal for
its agents and subcontractors.
5.0 DESIGNATION OF REPRESENTATIVES
5.1 Contractor shall designate in writing a competent
representative(s) who, on behalf of the Contractor,
will have complete charge and responsibility for the
Work.
5.2 The representatives of a party may be changed at
any time by notice given by that party to the other in
accordance with the NOTICES Section of the Contract
Agreement. The representatives designated from time to
time shall be available at all reasonable times.
6.0 OWNER'S RESPONSIBILITY
6.1 Owner shall be solely responsible for matters
pertaining to the evaluation, inspection, coordination
and scheduling of the Work, approval of progress
payment and general project management services. Owner
shall have the responsibility for pit design, and shall
provide to Contractor designated work areas, pit slopes
and dimensions, bench heights, and haul road
specifications. Owner shall perform all mine layout
and surveying. Without diminishing Contractor's
performance obligations, quality control, inspection
and reporting for items requiring adherence to
technical specifications, such as, but not limited to,
compaction tests and standards, shall be provided by
Owner.
7.0 NONWAIVER OF DEFAULTS
7.1 Failure by the Owner to, at any time, enforce or
require strict compliance with any terms or conditions
of the Contract will not constitute a waiver of, or
affect, or impair such terms or conditions in any way;
nor shall such failure affect the right of Owner to
avail itself at any time of such remedies as it may
have for any subsequent breach of such terms of
conditions by the Contractor.
8.0 NOTICE TO PROCEED
8.1 Contractor shall not commence the Work until
written Notice to Proceed has been received from the
Owner. No financial obligations to Contractor will be
incurred by Owner under this Contract until Owner
issues to Contractor a Notice to Proceed.
9.0 CONTRACTOR=S RESPONSIBILITY
9.1 Contractor shall furnish all equipment, work,
labor and material necessary to carry out the Work and
to provide a complete and workmanlike job. Anything
mentioned in the specifications and not shown on the
drawings or shown on the drawings and not mentioned in
the specifications shall be of like effect as if shown
and mentioned in both. In case of conflict, the
specifications shall govern. In case additional
information or other clarifications are necessary, the
matter shall be submitted to Owner whose interpretation
unless clearly unreasonable shall govern.
9.2 Contractor agrees to assume responsibility for
incorporating in the Work anything which, though not
mentioned in the drawings or specifications, could be
reasonably inferred by skilled and experienced persons
as necessary to accomplish the Work.
9.3 With the exception of those items and services, if
any, which this Contract expressly states will be
furnished by others, the supply of any item or service
necessary for Contractor's performance is the sole
obligation of Contractor including without limitation
the following:
a) transportation of all personnel, material,
and equipment to and within the Work Site;
b) prompt unloading, handling, and storage
of all material and equipment to be furnished or
used by Contractor;
c) clean-up and minimization of debris and
surplus material;
d) provision of utilities and heat;
e) weather and other protection for, and
make good of damage to Contractor's materials and
equipment and the Work until issue by Owner of
letter of Final Acceptance.
9.4 Contractor assumes and is responsible for
minimizing or, if possible, avoiding risks incident to
the Work including, without limitation, those for which
no extension of time is allowed.
10.0 INSPECTION, FITTING, CHANGES BY CONTRACTOR
10.1 Contractor is responsible for timely inspection of
any work at the Site done by others which may affect
Work or to which the Work must be joined to ascertain
its suitability for use in relation to Contractor's
Work and shall immediately advise Owner of any
deficiencies therein and Owner shall have a reasonable
time to have such deficiencies corrected, if such
correction is not the Contractor's responsibility.
Contractor is responsible for making such measurements
and adjustments to the Work as is required to insure
proper fit between the Work and any adjacent or
contiguous work.
11.0 SITE AND WORKING CONDITIONS
11.1 Except as may be otherwise specifically stated in
this Contract, Contractor shall be deemed to have
inspected, and to have assumed the risk of loss and
expense which may arise as a result of conditions at
Site including subsurface conditions, which, are or
could have been reasonably expected to occur during the
course of the Work, and including without limitation,
labor conditions at Site and the need to coordinate the
Work with that of others. OWNER MAKES NO
REPRESENTATIONS OR WARRANTIES WHATSOEVER EXPRESSED OR
IMPLIED WITH RESPECT TO THE SITE OR THE CONDITION
THEREOF OR OF ANY EQUIPMENT OR FACILITY THEREON,
INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE.
12.0 COMPLIANCE WITH LAW, PERMITS AND REGULATIONS
12.1 In performance of the Work, Contractor shall at
all times comply with, and shall defend, indemnify and
hold Owner, and any affiliates, lessors, partners,
joint venturers of Owner and their respective
employees, officers, directors, shareholders, agents,
representatives, successors and assigns harmless from
and against all demands, claims, cost, damage,
attorneys fees, settlements and expenses resulting from
any actual or claimed violation of any and all laws and
any and all rules, regulations and orders of public
authority applicable or pursuant hereto whether
Federal, State or Local including, but not limited to,
safety, building and wiring codes, wages, unemployment
compensation, workmen's compensation and social
security laws; and Contractor shall file all reports,
pay all taxes, fees and charges required by such laws,
rules, regulations or orders and shall without
reimbursement indemnify Owner and any affiliates,
lessors, partners, joint venturers of Owner and their
respective employees, officers, directors,
shareholders, agents, representatives, successors and
assigns against all liabilities and penalties by reason
of any failure on the part of Contractor to comply with
any such laws, orders, rules and regulations, to the
maximum extent permitted by law. Contractor certifies
compliance with the "Fair Labor Standards Act of 1938"
as amended and all invoices shall so certify.
12.2 Except as otherwise specified herein, Owner will
secure and pay for all permits, licenses and easements
for permanent structures and all necessary authorities,
permits, licenses, priorities and clearances required
to be produced by or in the name of the Owner for
prosecution of the Work, provided, however, Contractor
shall obtain all necessary contractor's licenses and
other permits normally obtained by a contractor in the
ordinary course of its business.
13.0 INSPECTION AND REJECTION OF MATERIALS AND WORKMANSHIP
13.1 The Work, including materials and workmanship,
performed is subject to inspection and tests by Owner
at any reasonable times, at any and all places where
such manufacture or performance is carried out.
Advance notice of readiness for inspection shall be
given as specified in the Contract within the time
specified or otherwise not less than two (2) nor more
than four (4) working days. Failure to make any
inspection or test or to discover any defects or to
object thereto shall not prejudice or operate as a
release or waiver of the rights of Owner including the
right to inspect or reject such Work at a later time,
nor shall it release Contractor. Unless otherwise
specified herein, Contractor shall furnish, at its
expense such facilities as may be necessary for the
making of such inspection and tests. Contractor shall
bear the expense of uncovering and recovering Work
specifically or customarily subject to prior inspection
hereunder if such Work is covered without Owner's
consent before an inspection is made.
13.2 If Owner orders the uncovering of Work not
specifically subject to prior inspection hereunder or
not customarily subject to inspection, Owner shall bear
the reasonable direct cost of uncovering and redoing
the affected Work unless any defects or non-compliance
with the Contract is found, in which case all costs
shall be borne by Contractor.
13.3 Owner reserves the right to expedite at
Contractor's expense, Contractor-furnished materials as
required to assist Contractor in meeting the specified
Contract completion date. Contractor's obligation
includes the furnishing of such information and such
access to Contractor's or its suppliers facilities as
Owner or its designees may require.
14.0 CLAIMS, ASSIGNMENTS, GARNISHMENT AND ATTACHMENTS
14.1 Contractor shall not assign this Contract or any
of its rights or obligations hereunder without the
prior written consent of Owner, which consent may be
withheld in Owner's sole discretion, and any assignment
attempted without such consent shall be void to the
extent it can be made so by contract. No assignment
shall be attempted without seven (7) days prior actual
notice to Owner (and any assignment without such notice
is void to the extent it can be made so by contract),
as a condition to the effectiveness of any assignment,
except as otherwise permitted by law notwithstanding
this provision, and in any case, as a condition to the
satisfaction of any claim including without limitation
any claim with respect to an assignment permitted by
law notwithstanding the foregoing prohibition. Owner
may require a hold harmless agreement, a full release
and indemnity and a bond satisfactory to Owner from
Contractor.
14.2 In any case, including an assignment effective
notwithstanding the foregoing prohibition, or in the
event of any claim, attachment or garnishment, Owner
shall have, in addition to any other rights under this
Contract, the right to take one or more of the
following actions:
a) with such notice, if any, as Owner deems
reasonable to make payment to Contractor as
exclusive agent of any garnishor, assignee or
claimant notwithstanding any such assignment,
garnishment or claim;
b) to set off a counterclaim against
Contractor or its assignee or any garnishor,
claimant or entity with respect to the amount
involved, notwithstanding the fact that such set
off or counterclaim may arise out of the
transaction or occurrence unrelated to this
Contract, whether it occurs or arises before or
after the date of such assignment or notice
thereof;
c) to recover in whole or part as Owner may
elect from Contractor or out of any amount
claimed, assigned, attached or garnished or out of
any amount theretofore or thereafter owed to
Contractor all damages, costs, and expenses
incurred in relation to such claim, assignment,
garnishment or attachment, including court costs
and attorneys' fees;
d) to withhold any and all amounts until it
is certain in its sole judgment to whom such funds
should be paid without liability on the part of
Owner, in any event, to pay such sum more than
once;
e) to exercise each and every right
stipulated in this Contract including the right to
withhold;
f) to require as a condition to payment a
full and complete release in favor of Owner, in
form and substance satisfactory to Owner from each
and every person or entity which in its sole
judgment may be a claimant to such payment or any
other payment paid or due or thereafter paid or
due to Contractor.
15.0 SUBCONTRACTS
15.1 Contractor shall not subcontract any part of the
Work (including the provisions of principal items of
materials or equipment) without the prior written
approval of the Owner, and in each individual instance,
the scope of the Work to be subcontracted will be
subject to the prior written approval of Owner.
Approval by Owner of a subcontract shall not relieve
Contractor of any of its obligations under the
Contract. Contractor shall furnish information
regarding its subcontractors as Owner may reasonably
request. No subcontract shall bind or purport to bind
Owner, but each subcontract shall contain a provision
permitting assignment to Owner upon Owner's written
request.
16.0 DRAWINGS PREPARED BY THE OWNER
16.1 Drawings issued by the Owner may be furnished in
various stages of development. For example: Rev. A,
B, C, etc. for preliminary drawings...or, Rev. 0, 1, 2,
etc. for drawings "Approved for Construction". All
drawings are subject to revision at any time. In all
instances the drawing which is assigned the highest
revision designation will be considered the Contract
drawing and the Work shall be performed by Contractor
in accordance with that drawing. Preliminary drawings
shall not be used to perform fabrication or
construction.
16.2 Contractor, on receipt of a revised drawing, is
responsible to immediately note what revisions have
occurred and to decide if those revisions will have any
impact on the cost or time required to perform the
Work. If Owner has not been notified as hereinafter
provided for changed and extra Work, it will be
understood by the parties that no adjustment is
required either to the Contract Price or to the
schedule established for performance of the Work.
17.0 CHANGED AND EXTRA WORK
17.1 Owner may order changes in the Work from time to
time. If Contractor anticipates such changes will
involve extra cost to Contractor or will adversely
affect the Work, Contractor shall so advise Owner in
writing not later than two (2) working days after the
change is ordered. Promptly thereafter, but in any
event within two weeks after the change is ordered,
Contractor shall notify Owner in such detail as is
reasonable of the effect of the change on time,
performance and/or cost of the Work. If such notices
are not so given it shall be deemed that no additional
compensation or other adjustment in favor of Contractor
is due Contractor. If such notices are given or if, in
the opinion of Owner, such change involves a reduction
in the amount of expense of Contractor, Owner and
Contractor shall endeavor to agree upon an adjustment
to the affected terms of the Contract, including the
Contract Price. Increases in the Contract Price or
reductions in Contractor's obligations agreed to by
Owner will only be effective if made by a Contract
Amendment signed by Owner and Contractor. The
adjustment to the Contract Price will be made on the
following basis:
(a) To the extent applicable, such
adjustment shall be made upon the basis of cost
provisions and unit prices set out in this
Contract.
(b) Other adjustments to the extent of any
not covered by the preceding subparagraph (a)
shall be limited to adjustments to take into
account only Contractor's direct costs plus a
reasonable amount to cover overhead and profit.
17.2 If so directed by Owner in writing, Contractor
shall proceed with the change prior to the time the
amount of any price or other required adjustment is
determined and the parties shall thereafter use
diligent, good faith efforts to reach mutual agreement
of the points on which they have not agreed. If the
point involves compensation, Owner may pay Contractor,
without prejudice to any claim by either party, the
amount of adjustment which, in Owner's judgment is
appropriate, based on the facts then known to it. This
provision shall not be construed to reduce or limit
Owner's rights or remedies under this or any other
provision including the right to recover overpayments.
17.3 Increases in the Contract Price to the extent they
are on cost reimbursable or unit price basis shall be
reimbursed as specifically provided in this Contract,
and in the absence of such a provision, promptly after
submission of an invoice satisfactory to Owner with
support satisfactory to Owner in the month following
that in which the costs are paid or units furnished, as
the case may be. Increases in the Contract Price to
the extent done on a fixed amount basis, including fee,
shall be paid in monthly installments which, in the
judgment of Owner are proportionate to the progress of
the changed part of the Work during the calendar month
preceding that in which each payment is made, and shall
be subject to a retention proportionate to the
retention otherwise specified in this contract.
18.0 CONTRACT TIME AND COMPLETION OF WORK
18.1 The Contract is effective (the AContract Time@)
from the Effective Date as set forth in the Contract
Agreement for the period set forth in the Contract
Agreement or until the completion of the Work specified
in the Contract Agreement, whichever is sooner, subject
to the Owner=s and Contractor=s rights to terminate
this Contract in accordance with Section 21, Section
22, and/or Section 23 or to their respective rights to
extend the Contract Time in accordance with Section 28.
The Work shall be completed by the time or times,
and in the sequence, specified in the Contract
Agreement or in Contractor's schedule approved in
writing by the Owner. To the extent there are no such
schedules, the times and sequences may be fixed by the
Owner whose judgment, if reasonable in relation to the
performance of the Contract Price, shall prevail.
The Contract Price shall be deemed to include all
sums required to meet such completion date. If so
directed by Owner, Contractor shall without additional
charge, work such overtime and shall take such other
action as is practically possible to avoid, or,
otherwise, to minimize the effects of delays.
18.2 No promise, representation or warranty shall be
deemed to be made to Contractor by reason of Owner's
specification of the time or times for completion.
19.0 CORRECTION OF DEFECTIVE WORK
19.1 Any Work not performed in accordance with the
drawings and specifications or with the intent thereof,
or of this Contract, and not approved in writing by a
representative of Owner, shall be corrected immediately
without delay in the progress of the Work at no
additional cost to Owner. Corrections to defective
Work must be done within the terms and conditions of
the Contract.
20.0 DELAYS
20.1 Contractor shall, in writing, promptly and in no
event later than three (3) working days after
Contractor should have foreseen the delay, advise, and
thereafter keep advised, Owner of the nature of,
reasons for, expected duration and other material
information concerning any delay or additional delay in
the Work. Without limitation, Contractor shall not be
excused from delay from any causes (a) foreseen or
foreseeable at the time the Contract Agreement is
signed or, (b) normal incident to the Work or (c) due
to any act or omission of the Contractor. Contractor
shall make diligent efforts to remove any preventing or
delaying cause and to fulfill all other obligations,
including any obligations which are hindered but not
prevented thereby, and shall resume performance as soon
as reasonably practical.
20.2 Except for delays falling within the categories
above mentioned, if the delay results from Force
Majeure as hereinafter defined or, from other reasons
including acts of Owner which as a matter of law
excuses Contractor from performance within the time
specified and if the Contractor complies with the
notice provisions of this Section, Contractor's time
for completion shall be extended to the extent of such
delay, but this shall be its sole remedy for such delay
except for delay caused by the direct default of Owner
in which event Contractor shall be entitled, to the
extent the costs are so caused, and provided that the
Contractor thereafter handles the matter as a change
under the provision of Section 17.0, Changed and Extra
Work, to recover its provable additional direct field
costs, but this shall be the limit of the Contractor's
remedy in such case.
21.0 FORCE MAJEURE
21.1 Neither party shall be considered in default in
the performance of its obligations hereunder to the
extent that performance of such obligations are
delayed, hindered, or prevented by Force Majeure.
Force Majeure shall be any cause beyond the control of
the parties hereto which they could not reasonably have
foreseen and guarded against. Force Majeure includes,
but not limited to, acts of God, strikes, lockouts,
fires, riots, civil commotion or civil unrest,
incendiarism, interference by civil or military
authorities, compliance with the regulations or orders
of any governmental authorities, and acts of war
(declared or undeclared).
22.0 SUSPENSION OR TERMINATION FOR CONVENIENCE
22.1 Owner reserves the right to suspend or terminate
the Contract at any time for its convenience. Such
suspension or termination will be made in writing and
may include the whole or any specified part of the
Contract.
22.2 If the Contract, or a specified part thereof, is
suspended for convenience of the Owner and such
suspension unreasonably delays the progress of the Work
and causes additional expense or loss to Contractor in
performance of the Work, not due to the fault or
negligence of the Contractor, the Contract Price will
be subject to adjustment in an amount equal to the
actual cost incurred plus field overhead (excluding
profit) by Contractor resulting from the suspension.
Such costs must be substantiated by written records or
otherwise proven to the satisfaction of the Owner.
Further, the time of performance of the Contract will
be subject to extension by the actual duration of the
suspension (if applicable) plus a reasonable additional
period for remobilization. The Contract will,
accordingly, be amended by Contract Amendment,
provided, however, that any claim by Contractor for any
adjustment hereunder must be asserted within thirty
(30) calendar days after receipt of written notice to
resume the Work.
22.3 If the Contract, or any specified part hereof, is
terminated for the convenience of the Owner, payment to
Contractor will be made promptly for that part of the
Work actually completed including: (a) engineering;
plus (b) material or equipment under fabrication in
Contractor's own plant; plus (c) materials or equipment
under fabrication in subcontractors' plants; plus (d)
materials or equipment which have already been shipped;
plus, (e) construction, if any, completed to date on
Site; less any payments previously made to the
Contractor. The reasonable value of each of the
foregoing categories against which the Contractor has
incurred costs prior to the effective termination date
will be established by: (i) the Contract Price(s);
(ii) any Contract Unit Prices or breakdown of the
Contract Price previously submitted by the Contractor;
(iii) written cost records submitted by Contractor and
accepted by Owner; or, a combination of the foregoing
data.
Contractor shall include in each subcontract the
right of unilateral written cancellation with or
without cause, by Contractor of all or any portion of
such subcontract. A reasonable cancellation charge to
Contractor by any subcontractor or vendor, and properly
due as a contractual obligation of Contractor to the
subcontractor or vendor for items fabricated but not
shipped, will be reimbursed to Contractor at actual
cost as part of the costs of termination, or, in lieu
thereof, Owner may elect to pay the fair market value
and take delivery on such completed or incompleted
fabricated items.
In addition thereto, the Contractor will be paid a
reasonable cancellation charge to cover costs, if any,
to terminate engineering and fabrication commenced by
its own forces prior to the effective termination date.
Material and equipment completely or partially
fabricated but not shipped may, at the option of the
Owner, be accepted by the Owner at fair market value
and deducted from the cancellation charges established
with Contractor.
23.0 TERMINATION FOR CAUSE
23.1 Should Contractor, in the opinion of Owner, at any
time refuse or neglect to supply or maintain a
sufficiency of properly skilled labor, or fail in any
respect to prosecute the Work or any separable portion
thereof with promptness and diligence, or fail in the
performance of any of the agreements on its part
contained herein, or should the Contractor become
insolvent or be placed in liquidation or under judicial
management or have a judgment or order entered against
it affecting a substantial part of its assets, Owner
may, after forty-eight (48) hours written notice to the
Contractor employ another Contractor and deduct the
cost thereof from any money due or thereafter to become
due Contractor under this Contract, and/or Owner may
terminate Contractor's right to proceed with the Work
or such part of the Work as to which such defaults have
occurred.
In the event of termination for cause, the
Contractor shall not be entitled to receive any further
payment until the Work is finished. If the expense of
finishing the Work plus compensation for additional
managerial and administrative services and such other
costs and damages with regard to completion of the Work
as the Owner may suffer exceeds the unpaid balance,
Contractor and its sureties, if any, shall promptly pay
the difference to Owner. Failure of Owner to exercise
any of the rights given under this clause shall not
excuse Contractor from compliance with the provisions
of the Contract nor prejudice in any way the right to
exercise any such rights in respect of any subsequent
failure by Contractor.
23.2 Upon termination of the Contract for cause it is
agreed:
23.2.1 That the obligations of Contractor
shall continue as to work already performed and to
materials furnished, and as to bona fide
obligations assumed by Contractor prior to the
date of termination.
23.2.2 That the Contractor shall be
entitled only to a pro rata compensation for the
Work already performed, including material for
which it has made firm contracts, it being
understood that the Owner shall be entitled to
that material. It is understood, however, that
Contractor's aforesaid pro-rata compensation shall
in no event exceed the reasonable costs of Work
done and materials supplied by Contractor to the
time of termination plus an equitable profit on
Work done prior to the date of termination, less
any amounts deducted in accordance with this
Section.
The following items will not be
considered in arriving at said equitable
allowance:
a. Anticipated profits applicable to
incomplete portions of the Work
b. Consequential damages.
c. Expenses of Contractor due to
failure of the Contractor or its vendors and
subcontractors to discontinue the Work with
reasonable promptness after written notice of
termination has been given to the Contractor.
d. Losses on other contracts or from
sales or exchange of capital assets.
23.3 No settlement payment will be made to Contractor
hereunder, until Contractor has submitted:
a final statement supported by vouchers; and
a signed form of release or other evidence
satisfactory to Owner that Contractor has paid in
full for all labor, materials, equipment, services,
subcontracts, applicable taxes, and other costs and
assessments due under this Contract.
23.4 Owner shall be entitled to deduct from any and all
monies owing to Contractor hereunder, any and all
damages or additional expenses caused by or arising out
of breach by the Contractor of any of its agreements,
covenants, warranties, and guarantees hereunder, or, of
any default by the Contractor.
23.5 In the event of termination for cause, written
notice will be given to Contractor in accordance with
the provisions set forth in the Contract Agreement
under NOTICES. Subject to the directions set forth in
the termination notice, Contractor shall immediately
discontinue the Work and the placing of orders for
further services, material and equipment and shall, as
directed, effect cancellation of all existing orders
and subcontracts and thereafter perform only such Work
as may be necessary to preserve and protect the Work
already in progress.
23.6 The termination provision set forth in this
Article shall be concurrent with and in addition to,
without prejudice to, and not in lieu of, or in
substitution for, any other rights or remedies at law
or in equity which the Owner may have for the
enforcement of its rights under the Contract and its
remedies for any default of the Contractor under the
conditions hereof.
23.7 If Owner should incorrectly and in good faith
terminate this Contract for default as herein provided
or for breach, this shall be deemed to be a termination
by Owner for reasons other than cause, and payment
shall be made as in the case of termination for
convenience. In no event shall the Owner's liability
or Contractor's recovery under this Article exceed the
total amount determined by application of Section 22.3
hereof.
24.0 PATENTS AND SIMILAR RIGHTS
24.1 Contractor shall indemnify and save harmless Owner
and any applicable lessors, partners or joint venturers
of Owner, and their respective employees, officers,
directors, shareholders, agents, representatives,
attorneys, successors and assigns from all cost,
damage, loss and expense as a result of any
infringement or claim of infringement of any patent or
proprietary right (including costs of litigation) and
for changes or replacement and related costs for
changes or replacement and related costs to avoid
infringements arising from performance of the Work. At
Owner's request, Contractor shall defend any suit or
action arising out of any such infringement or claim
but the Owner shall be entitled to be fully advised and
to participate in any such suit or action. No such
suit or action shall be settled, discontinued, nor
shall judgment be permitted to be entered if, in
Owner's sole opinion, its interest would be adversely
affected. Contractor's indemnification does not extend
to items manufactured to the Owner's design unless
originally submitted or suggested by the Contractor.
25.0 WARRANTY
25.1 In addition to any other Contractor warranties,
expressed or implied by law, Contractor warrants that
all items and services will be in accordance with this
Contract and conform to the Specifications, Drawings
and data which are part of it or with which it
obligates Contractor to comply; that, except with
respect only to any items, services or other Work
performed in accordance with specifications provided by
Owner, they will be fit for the use specified or
intended; and that all materials and workmanship shall
be of first quality and the best of their kinds.
Without limitation of Owner's other rights and
remedies, in cases where this warranty is breached, or
where defects or deficiencies appear prior to twelve
(12) months after date of letter of Final Acceptance
and Contractor does not within the time limits set by
Owner promptly begin and diligently complete the repair
of the defect in accordance with Owner's required
schedule, Owner at its option may either reject the
items in whole or in part in which case to the extent
of rejection the risk of loss, cost of repair, cost of
return and storage and other damages including costs of
replacement from such sources as Owner may elect will
be for the Contractor's account; or the Owner at its
option may repair all or part of the items not rejected
and charge to the Contractor damages including the
costs incurred for or in relation to repairs plus an
amount equal to the diminished value of the items as
repaired.
25.2 Contractor shall include in all subcontracts
entered into under this Contract an identical warranty
extending to Contractor and Owner, and as part of its
responsibilities hereunder shall enforce such
warranties to their fullest extent, however, Contractor
shall remain responsible for and not be excused from
its obligations pursuant to this Contract, including
its warranty obligations, in the event any
subcontractor fails to perform its obligations.
26.0 CONTRACT PAYMENTS
26.1 Contractor agrees to accept the Contract Price as
full compensation for all Work embraced in the Contract
and for all loss or damage arising out of the nature of
the Work, the action of the elements, or from any
unforeseen or unknown difficulties or obstructions
which may arise or be encountered in the prosecution of
the Work until its acceptance, and for all risks of
every description connected with the Work.
26.2 Owner will make partial payments as the Work
progresses. Payments will only be made on receipt of
invoices accurately prepared and properly supported in
accordance with procedures established by the Owner and
exhibits attached hereto.
26.3 Ten percent (10%) retention will be withheld from
each progress payment. The retention will be released
by Owner upon full completion of the Work by Contractor
and issue of Final Acceptance by Owner. Contractor,
shall, prior to release of retention by Owner, furnish
a release of claims form certifying that Contractor has
paid in full for all wages, materials, services, taxes,
social benefit laws and other like costs.
26.4 Payments may be withheld on account of suspected
or defective work not remedied, claims filed (or
reasonable evidence indicating the probability of
filing of claims) or, failure of Contractor to make
payments properly to his suppliers or for material or
labor. If the foregoing causes are removed, the
withheld payments will promptly be made. If the said
causes are not removed on written notice, Owner may
cause the same to be rectified at Contractor's expense.
Should any valid indebtedness arise after final payment
is made, the Contractor shall reimburse Owner for any
amount the Owner has paid or may pay to discharge any
such indebtedness or any claim affecting the title to
the Work or the Owner's property plus Owner's
attorneys' fees, costs and expenses.
26.5 Failure or lack of cooperation by the Contractor
to prepare or submit reports, progress schedules, or
plans for changes contemplated in his operations, or to
assist in preparation of same, promptly as required,
shall be cause for the Owner to withhold all or part of
the progress payment then pending until such time as
Contractor has met the requirement to the satisfaction
of the Owner.
26.6 Monies due Owner under the terms of the Contract
to compensate Owner for backcharges as provided in
Section 29.0 or other expenses incurred on behalf of
the Contractor will be recorded in writing, and
whenever possible, deducted as they occur from each
periodic progress payment to Contractor.
26.7 No payment except the final payment, shall be
evidence of performance of the Contract either wholly
or in part and no payment, including the final payment,
shall be construed to be an acceptance of defective
Work or improper material. The final payment shall not
relieve the Contractor from responsibility for the
discharge of claims or from making available to Owner
for examination and audit all records pertaining to
work performed on a cost-reimbursable or chargeable
basis.
27.0 WORK AUTHORIZATION
27.1 Owner will utilize a written Work Authorization to
direct Contractor to proceed in instances where the
processing of a formal Contract Amendment may delay
progress of the Work.
A Work Authorization will be used on occasions
where:
Work, minor in scope, must be immediately
authorized at the Site; or,
Construction must proceed concurrent with the
preparation of an estimate of cost to perform the
Work.
In some instances, the Work Authorization may be
utilized to direct Contractor to proceed pending
resolution of a dispute over whether or not the work
actually comprises a contract change or involves extra
work.
28.0 CONTRACT AMENDMENTS
28.1 The Contract Price established in the Contract
Agreement is not subject to change except as expressly
provided in the Contract or by amendment to the
Contract in the form of a Contract Amendment signed by
Contractor and Owner. Unit price and cost-plus type
contracts containing an estimated Contract Price will
in all cases prior to presentation of a final invoice
by Contractor, be summarized by Contract Amendment to
confirm the final Contract Price.
28.2 Amendments to the Contract shall bind Owner only
if made by a written document which both states that it
amends the Contract and is signed by a designated
representative of Owner.
28.3 The Contract Time can be extended or shortened by
mutual agreement, in writing by Owner and Contractor.
29.0 BACKCHARGES BY OWNER
29.1 Owner reserves the right in event of inability or
refusal on the part of a Contractor or subcontractor to
correct defective or incomplete work, or to perform any
part of the work in a timely manner, to perform such
work with its own forces or those of another contractor
and charge the resultant costs as a backcharge against
the Contract Price pursuant to the following
procedures:
a. Notification: Contractor will be
promptly notified by telephone, cable or other
form of direct communication, and, whenever
possible, through its appointed representative.
b. Opportunity: Whenever time will permit,
Contractor will be afforded a reasonable
opportunity to perform the work with its own
forces. However, Owner reserves for itself the
decision of how and when to proceed.
c. Written Notice: Contractor will be
notified in writing by a Notice of Backcharge.
d. Labor and Equipment: Labor and
construction equipment will be backcharged at
actual cost to Owner plus 25% administrative and
handling costs.
e. Owner Equipment: Equipment owned by
Owner and used for the backcharged work will be
charged at the full AED (Associated Equipment
Distributors) equipment rental rate for same or
equal equipment. Operators and other Owner-
employed labor will be charged at prevailing
project hourly rates plus 25% administrative and
handling costs.
f. Material and Subcontracts: Material and
subcontracts will be backcharged on the basis of
actual invoiced cost plus 20% administrative and
handling costs.
g. Other Costs: Except in the case of an
emergency or other unanticipated event which
causes a change in costs, Owner shall use
reasonable efforts to notify Contractor in advance
of other costs, if any, to be incurred by Owner.
If no agreement is concluded from such
notification, Owner will backcharge the Contract
Price as specified above for material and
subcontracts.
h. Records: All work performed as a
backcharge against the Contract will be recorded
by Owner on a daily basis. In instances where the
Contractor's representative is at the site, the
representative's signature will be requested. In
no event shall the absence of Contractor's
representative or his refusal to sign the
Backcharge Notice or any daily records delay
performance of work which Owner considers
necessary to continuation and completion of the
Project.
i. Payment: The sum total of the amounts
backcharged will be the total of all of the above
charges. Owner may deduct the backcharged amounts
periodically as they are incurred or in one final
sum when the work is complete and all costs have
been accounted for.
30.0 FINAL ACCEPTANCE OF THE WORK
30.1 Final Acceptance of the Work will be confirmed by
a formal letter of Final Acceptance issued by the Owner
and affirmed by signature of the Owner promptly after
Owner is satisfied that all requirements of the
Contract have been met with regard to performance of
the Work which shall include issuance of all government
approvals, permits or certifications; mechanical
acceptance, performance of equipment in accordance with
warranties; delivery of material, equipment and spare
parts; submittal of special guarantees and operating
procedures; submittal of final records for cost-plus
work (if any); and, presentation of a final release of
claims forms and any other items reasonably required by
Owner.
30.2 Contractor agrees that the Owner may retain the
final payment and/or the retained percentage provided
for in the Contract Agreement, to the full total or a
partial amount thereof as considered by Owner to be
reasonable to assure full compliance by the Contractor
with the Contract.
30.3 The Work performed hereunder may be accepted as a
whole or in separately defined parts, in which case any
funds retained will be reduced in accordance with the
pro rata value of those accepted parts. In the event
the letter of Final Acceptance covers all of the Work
the letter will state... "All work under the Contract
is accepted," and the letter will be marked "FINAL
ACCEPTANCE".
30.4 Contractor's warranties after Final Acceptance
will extend for twelve (12) months from date of Final
Acceptance.
31.0 RELEASE AND WAIVER OF CLAIMS
31.1 Owner will require as a prior condition to final
payment a full release and waiver of claims form and
reserves the right, at its discretion prior to any
interim progress payment(s) to Contractor, to require a
release and waiver of claims forms for (partial)
payment for monies earned under the Contract through a
specified date.
31.2 If at any time there is evidence of the existence
of any claim arising out of or in connection with the
performance, or default in performance, of this
Contract for which Owner might be or become liable, the
Owner shall have the right to discharge such claims and
assess all costs thereof against the balance due
Contractor.
32.0 COST-REIMBURSABLE WORK - ACCOUNTING AND AUDITING
32.1 If any part of the Work is performed on a cost-
reimbursable or chargeable basis, the Contractor shall
keep and require each of its subcontractors or vendors
to keep full and detailed accounts of all such costs in
a form acceptable to the Owner.
32.2 In the event that work is to be performed on a
reimbursable or chargeable basis, Owner will include as
part of the Contract, special terms and conditions
setting forth all chargeable and nonchargeable cost
items and procedures for the payment of costs and
Contractor's fees related thereto.
32.3 Contractor shall at all times cooperate with the
Owner to amend or change any accounting procedure for
cost-plus work found to be unsatisfactory, and
Contractor, after agreement on accounting procedures
with the Owner, shall not institute any new accounting
procedure without prior written approval of the Owner.
32.4 Contractor shall retain all reimbursable or
chargeable accounting records for a period of two (2)
years after Final Acceptance of the Work and during
execution of the Work shall, at any time, afford such
persons as Owner authorizes full access to audit and
books of account and supporting documents. On
completion of the Work, Contractor agrees that copies
of books or records for cost-reimbursable work will, on
request, be turned over to the Owner.
33.0 LOSS OR DAMAGE BY ACTIONS OF OTHERS
33.1 If the Contractor sustains damage or loss through
any delay, default, act or omission of any other
contractors, subcontractors, or their agents or
employees, Owner shall not be liable therefor; but
nothing herein contained shall be construed to limit
the Contractor from pursuing its legal remedies against
such other contractor or subcontractors, or their
agents or employees.
33.2 Contractor shall have no claim against the Owner
for damage or loss by reasons of delay, default, act or
omission of other contractors, subcontractors or their
agents or employees, but nothing herein contained shall
limit any rights of Contractor to recover therefor
against such other contractors, subcontractors or their
agents or employees. If the Contractor by any default,
negligence or misconduct on its part, damages any other
subcontractor or contractor, it hereby agrees to be
directly responsible to such other subcontractor or
contractor for any such damage and to save, defend,
indemnify and hold harmless Owner and any affiliates,
lessors, partners or joint venturers of Owner and their
respective employees, officers, directors,
shareholders, agents, representatives, attorneys,
successors and assigns for all such claims and damages.
34.0 DISPUTES
34.1 It is the general intention of the parties that
any dispute relating to this Contract shall be settled,
to the extent feasible, before a single forum selected
by Owner, and a decision by such forum with respect to
any such question or matter shall be binding on
Contractor, provided that it has been granted a
reasonable opportunity to be represented and heard. To
this end:
a. At Owner's written election, all
disputes and controversies of whatever nature
arising under this Contract that cannot be
resolved by mutual agreement, may be submitted to
arbitration in accordance with rules of the
American Arbitration Association to a panel of
three (3) arbitrators. The place of arbitration
shall be the municipality which, in the opinion of
Owner, is most reasonably convenient to the Site.
b. If Owner does not elect arbitration, or
if any dispute involves third parties, the dispute
shall at the option of the Owner be submitted to
the forum which in Owner's opinion can best
determine and settle most aspects of such dispute
and the decision of that forum shall be binding on
the parties, provided that they have been given
notice and the opportunity for adequate
representation.
c. In the event of any proceeding pursuant
to this Section, the parties shall take action to
see that proceedings before any other forum shall
be stayed pending completion of these proceedings.
The decision with respect to proceedings pursuant
to this Section shall be binding upon the parties.
The parties shall thereafter dismiss from the
other forum any claims to the extent such claims
are resolved by such decision.
d. Contractor hereby consents to such
service and to submit itself to such jurisdiction
as is necessary to effect the purposes of this
Section, and further hereby agrees to and consents
to such stays and other actions necessary to
effect the purposes hereof.
e. For the purposes of this Section, a
"forum" includes arbitration or administrative
proceeding.
f. In the event of any dispute or claim by
Contractor, Contractor shall continue the Work in
accordance with the Contract and its sole remedy
shall be to pursue the remedies hereinabove set
forth.
34.2 EACH OF CONTRACTOR AND OWNER ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER ANY OF
THE CONTRACT DOCUMENTS OR WITH RESPECT TO THE WORK WILL
BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND THAT IF
AND TO THE EXTENT THAT ANY PROCEEDING ARISING OUT OF
SUCH CONTROVERSY IS NOT SUBMITTED TO ARBITRATION AS
PROVIDED HEREIN, SUCH MATTER SHALL BE TRIED BY A JUDGE
AND WITHOUT A JURY.
35.0 NONDISCRIMINATION IN EMPLOYMENT
35.1 Contractor shall not discriminate against any
employee or applicant for employment because of race,
religion, color, sex, or national origin. Contractor
shall take affirmative action to insure that all
applicants are employed, and that employees are treated
during employment without regard to their race, color,
religion, sex, disability or national origin. Such
action shall include, but not be limited to the
following: employment, upgrading, demotion or
transfer; recruitment advertising; layoff or
termination; rates of pay or other forms of
compensation; and selection for training, including
apprenticeship. Contractor agrees to post in
conspicuous places, available to employees and
applicants for employment, notices setting forth the
provisions of this nondiscrimination clause.
Contractor shall, in all solicitations or
advertisements for employees placed by Contractor or on
Contractor's behalf, state that all employment is
without regard to race, religion, color, sex,
disability or national origin.
35.2 Contractor shall comply with all provisions of
Executive Order No. 11246 of September 24, 1965
(including amendments thereto), and of the rules,
regulations, and relevant orders of the Secretary of
Labor. Contractor shall furnish all information and
reports required by Executive Order No. 11246 of
September 24, 1965 (including any amendments thereto),
and by the rules, regulations, and orders of the
Secretary of Labor for purposes of investigation to
ascertain compliance with such rules, regulations, and
orders. In the event of Contractor's noncompliance
with the nondiscrimination clauses of this Contract,
this Contract may be cancelled, terminated, or
suspended, in whole or in part and Contractor may be
declared ineligible for further contracts in accordance
with procedures authorized in Executive Order No. 11246
of September 24, 1965 (including any amendments
thereto), and such other sanctions may be imposed and
remedies invoked as provided in Executive Order No.
11246 of September 24, 1965, or by rule, regulations,
or order of the Secretary of Labor, or as otherwise
provided by law. Contractor shall include the
provision of this Article in every subcontract or
purchase order unless exempted by rules, regulations,
orders of the Secretary of Labor issued pursuant to
Section 204 of Executive Order No. 11246 of September
24, 1965 (including any amendments thereto), so that
such provisions will be binding upon each subcontract
or purchase order as the Owner may direct as a means of
enforcing such provisions, including sanctions for
noncompliance; provided, however, that in the event
Contractor becomes involved in, or threatened with,
litigation with a subcontractor or vendor as a result
of such direction by the Owner, Contractor may request
the United States to enter into such litigation to
protect the interests of the United States. The
foregoing obligations of Contractor shall include its
obligation to comply with all amendments or additional
rules, regulations and orders relating to Executive
Order No. 11246 of September 24, 1965, adopted or
effective during the Contract Time.
36.0 SECURITY, IDENTIFICATION AND SECRECY
36.1 Entrance into the Site by Contractor's employees
and all other persons will be subject to strict
security rules and Contractor hereby agrees to comply
and to cause strict compliance therewith by its
subcontractors.
36.2 Contractor shall obtain written authorization from
the Owner to enter the Site with trucks and other
vehicles and shall use only the entrances designated by
Owner for the use of contractors employed on this
Project.
36.3 Contractor shall require its employees and the
employees of its subcontractors to, at all times while
on the Site, wear the identification furnished by
Owner.
36.4 Contractor agrees that it shall treat all designs,
data and other information acquired under this Contract
as confidential and shall not use the name of Owner or
of any officer, director, employee or affiliated entity
of Owner or of the Site in any press release,
announcement, advertisement or publication, either
verbal or in writing, or disclose any information
whatsoever that it may obtain under or pursuant to this
Contract to third parties or to the public without
having first obtained the written approval of Owner as
to the form and content of any such disclosure, release
or publication. Contractor further agrees not to use,
sell, give, disclose or otherwise make available to
third parties or to the public at any time any
knowledge or information relating to internal
proprietary techniques and methods used by Owner for
purposes of geological interpretation, extraction,
mining, processing of minerals or any other proprietary
information of Owner that Contractor may acquire and/or
develop during the course of the Work. The obligations
of confidentiality of Contractor under this Section
shall apply to each of the officers, employees, agents
and subcontractors of the Contractor and shall survive
the termination or expiration of this Contract and
shall be fully effective and binding for a period of
five years thereafter. Contractor on request of Owner
shall execute any agreements relating to
confidentiality or proprietary rights which Owner
requires.
37.0 HYGIENE, FIRST AID AND SAFETY
37.1 Contractor agrees to comply with all federal,
state and local laws, regulations, rules and orders as
amended from time to time and Contractor shall comply
with all applicable laws, ordinances, rules,
regulations, and orders of any public body having
jurisdiction over the safety of persons or property and
shall establish, erect and maintain all necessary
safeguards for such safety. Contractor shall train,
furnish, require, and assure that all employees follow
safe work procedures and wear appropriate and required
safety equipment. Contractor shall notify all persons,
whether on or off the Site, when prosecution of the
Work may affect them.
37.2 The Contractor has been provided a copy of the
Owner's safety manual. The Owner's safety manual
describes safety practices and procedures which Owner
believes assist in the creation of a safe working
environment. Owner and Contractor recognize that other
policies and procedures can also provide a safe working
environment and further recognize the possibility of a
need for additional policies and procedures specific to
this operation. For this reason, Contractor's
principal safety office shall familiarize him/herself
with, and shall thereafter be solely responsible for
determining which , if any, provisions thereof are
relevant, applicable or pertinent to the Work. The
Contractor's safety officer shall be responsible for
the development and implementation of all safety
procedures.
37.3 Contractor shall designate a responsible member of
its organization at the Site whose duty shall be the
prevention of accidents and compliance with all safety
requirements. This person shall be competent and
experienced in such matters and shall be the principal
safety officer unless otherwise designated in writing
by Contractor to Owner.
37.4 In the event of occurrence of a situation wherein
life or valuable property are in apparent imminent
danger, Contractor is hereby authorized without further
special instructions from the Owner, to act at its own
discretion to prevent injury to persons or damage to
property.
37.5 Contractor shall be responsible to provide its own
first aid facilities and safety equipment.
37.6 Contractor shall furnish to the Owner a detailed
written report of all injuries other than those
requiring only first aid treatment.
37.7 Contractor bears sole responsibility under the law
for the safety of its own personnel employed in the
Work and for persons entering the Site as agents or
visitors of the Contractor.
37.8 Contractor shall comply with the Federal Mine
Safety and Health Act of 1977 as now or hereafter
amended and with all regulations and health and safety
standards promulgated pursuant thereto (all of which
are described hereinafter as "the Act"). Any citation,
fine withdrawal order, abatement notice or other action
by the Mine Safety and Health Administration (MSHA)
arising in connection with the Contractor's performance
under this Contract, which may affect the Owner's
operations, shall constitute a breach of this Contract
and shall be sufficient cause for termination of this
Contract by the Owner at its sole option and without
limiting any other rights or remedies the Owner may
have.
Contractor agrees that its operations are subject
to the terms of the Act and that it will abide by all
provisions of said Act. It is recognized that
substantial penalties can be levied for violations of
the health and safety standards contained, or to be
promulgated in the future, in the Act. Contractor
agrees that it is fully and completely responsible for
payment of any and all fines which may be levied by
MSHA as a result of such violations and will provide
Owner proof of payment thereof. The Contractor shall
carry out the Work under the Contractor's individual
MSHA identification number.
Neither Contractor's compliance with the Act nor
any supervision by the Owner which may be required as
provided above shall derogate Contractor's status as an
independent contractor otherwise created in this
Contract.
37.9 Contractor shall defend, indemnify and hold
harmless Owner, and any of its affiliates, lessors,
partners or joint venturers of Owner and their
respective employees, officers, directors,
shareholders, agents, representatives, attorneys,
successors and assigns from all claims, damages, costs
and expenses, including attorneys' fees in any
proceeding brought against any of them, and from any
liability imposed or attempted to be imposed on any of
them by reason of any violation or alleged violation of
any law, rule or regulation in connection with or
arising out of any operation or activity over which
Contractor has management, supervision or control.
Owner shall cooperate with Contractor in the event that
Contractor chooses to contest any citation under the
Act or any other law, rules, orders, regulations,
order, penalty or other enforcement action or liability
in connection therewith in which Contractor is
obligated to Owner under the terms of this Section
37.0, it being further understood and agreed that any
expenses incurred by Owner in so cooperating will be
the obligation of Contractor.
37.10 Contractor shall advise Owner as promptly as
possible after receipt of any citation or order of
withdrawal, or amendment, modification, determination
or vacation thereof, issued as a result of any activity
conducted by Contractor pursuant to this Contract, but
in all cases, such notification to Owner shall be
within twenty-four (24) hours of issuance. Contractor
shall furnish Owner a copy of each such citation or
order of withdrawal or amendment, modification,
termination or vacation thereof at the time Contractor
notified Owner as required by this paragraph or as soon
as reasonably possible thereafter. Contractor shall
promptly furnish Owner with copies of all documents
filed with the Federal Mine Safety and Health Review
Commission ("Commission"), relating to the Work, as
well as with any Commission order or decisions which
may be issued, in connection with any such citation or
order.
37.11 Nothing in the terms of this Contract shall
be interpreted to impose civil or criminal liability of
any kind or nature whatsoever vicariously from
Contractor to Owner. Without limiting the
aforementioned provision, Contractor shall assist and
cooperate fully with Owner in defending or preparing to
defend any federal or state civil or criminal
enforcement action brought or which Owner believes may
be brought, against Owner, Owner's officers, directors
or agents, under the covenants of any federal or state
or local law, regulation or ordinance, resulting from
or connected with Contractor's performance or non-
performance under this Contract.
38.0 TOXIC AND HAZARDOUS MATERIAL CONTROL ACT
38.1 Contractor shall comply with all requirements of
applicable federal, state and local Health, Safety,
Environmental Protection Regulations and the Toxic and
Hazardous Material Control Acts and Regulations of
federal, state and local government agencies (such as
EPA, OSHA, MSHA, NRC and DOT).
38.2 Labels and Safety Data Sheets for all toxic or
hazardous material must be attached to or provided with
this Contract. Contractor's failure to conform to any
of the above requirements in any respect shall be
corrected promptly by the Contractor upon notice
thereof, and the cost of such correction(s) as well as
any related costs arising out of any action brought by
a governmental agency in connection with such failure
shall be for the account of Contractor.
39.0 TAXES
39.1 Unless otherwise specified in the Contract
Documents, all taxes which Contractor may be required
to pay or collect are for the account of Contractor and
shall be deemed to be included in the fixed Contract
Price(s) or Contract Unit Price(s) set out in the
Contract, whether or not they are required to be
separately stated.
40.0 TITLE, ADVANCE PAYMENTS
40.1 Title to all labor, material and plant equipment
furnished by Contractor shall pass to the Owner upon
delivery to the Site, the risk of loss shall not shift
to the Owner until Final Acceptance.
40.2 If payments are made by Owner prior to delivery or
installation, or if Owner supplies items to be included
in the Work, Owner may require that the goods in
process be marked or otherwise identified, and
Contractor shall execute such documents and take such
action as in Owner's opinion are necessary to give
Owner the exclusive right to take possession and title
thereto at any time, as well as a security interest
therein.
40.3 No advance payment shall operate to relieve
Contractor of risk of loss or any other obligations
under this Contract.
41.0 OWNER'S REMEDIES FOR DEFAULT OR DEFECTIVE WORK
41.1 In the event of any default or defective Work
which Contractor does not, in the sole judgment of
Owner, immediately begin, and thereafter proceed with
diligence to remedy upon notice from Owner, or in the
event of any defaults or defect which Owner in its sole
judgment determines to be a material default or defect,
or if Contractor for any reason (other than one for
which it is entitled to an extension of time provided
under "Delays") fails to proceed with the Work as
scheduled in accordance with this Contract, Owner may
take such action as in its sole judgment is advisable
to remedy or to avoid such default to defect including
proceeding with its own forces or those of others and
taking possession and use of all equipment and material
at the Site (all of which Contractor hereby agrees to
leave for such purpose), and Contractor shall reimburse
Owner for all additional costs which it may incur in
connection with or as a result of such action.
41.2 Alternatively, or in addition as Owner may from
time to time elect, upon such defaults or defects or
delay, or if the Contractor shall become bankrupt or
insolvent or have an order or judgment entered against
it which affects a substantial part of its assets, or
if Owner shall have reasonable grounds to believe that
Contractor is bankrupt or insolvent or unable to pay
its debts as they become due, Owner may also terminate
all or part of Contractor's further performance and/or
further rights hereunder, as Owner may elect, and, at
Owner's discretion proceed as provided in the preceding
paragraph.
41.3 In the event of any such default, defect, delay,
order or judgment, bankruptcy or insolvency, Contractor
shall not be entitled to any further payment until the
matter is remedied to the satisfaction of Owner and
shall then be paid only such amount as is reasonably
due for work properly done by Contractor less all
damages, loss and additional expense suffered by Owner
as a result of such default. If such damage, loss and
expense shall exceed the amount due the Contractor,
such amount shall be paid immediately to Owner by
Contractor. No remedy afforded to Owner either under
this Contract or as a matter of law shall be deemed to
be exclusive.
42.0 INSURANCE
42.1 Contractor shall comply with all state and federal
social security and unemployment insurance laws.
Before commencing the Work, Contractor and its
subcontractors shall be qualified under the Workmen's
Compensation Law of the state where the Project will be
constructed and shall at all times comply therewith.
42.2 Contractor shall procure and maintain, during the
period that this Contract remains in force, insurance
coverage with limits of not less than those set forth
in this clause. Owner shall have the right to review
the adequacy of such coverage on annual basis and
require Contractor to obtain such additional types and
amounts of coverage as it determines to be necessary or
advisable. Any increase in the cost of insurance due
to such determination of Owner shall be a reimbursable
expense of Contractor hereunder. Contractor will
require all insurance companies, issuing policies of
insurance of Contractor, to certify to Owner, prior to
commencement of any Work, that such policies have been
issued and are currently in effect. In the event any
Work to be performed under this Contract is further
sublet, the Contractor will require the same insurance
coverage, from subcontractors. Contractors will submit
the Insurance Certificate of their subcontractors for
approval of the Owner.
Policies issued for Contractor shall be endorsed
to include, for the benefit of the Owner, the
following:
(a) A ten (10) day advance written notice in
the event of cancellation, non-renewal or material
change of any policy.
(b) Except as to Worker's Compensation
insurance, the Owner shall be named as an
additional insured.
(c) Contractor's insurance shall be primary
and any insurance maintained by Owner shall be
considered excess and noncontributory.
The minimum coverages and policy limits shall be:
Insurance Coverage Policy Limits
Worker's Compensation Statutory
1.Employer's Liability $1,000,000 each accident
Comprehensive General $1,000,000 Bodily Injury
Liability including coverage (per occurrence)
for independent Contractors,
Products and Completed $500,000 Property Damage
Operations (extending for at (per occurrence); or
least twenty-four (24) months $1,000,000 Combined
after completion of Single Limit
operations), Blanket or Broad
Form Contractual, insuring
the indemnification provision
under Article 43 hereof.
Personal Injury Liability,
Broad Form Property Damage,
and where an exposure exists
the explosion, collapse and
underground (XCU) hazard
exclusions deleted
1.Comprehensive Automobile $500,000 per person;
Liability including coverage $1,000,000 per occurrence
for owned, non-owned and Bodily Injury.
hired vehicles. $500,000 per occurrence
Property Damage; or
$1,000,000 Combined
Single Limit
Owner, by requiring the foregoing minimum
insurance coverages, will not be deemed to limit any of
the other obligations or liabilities of Contractor.
Deductibles, if any, will be for the account of
Contractor.
42.3 The Comprehensive General Liability Policy shall
include Contractor coverage for Completed Operations,
Blanket Contractual and Independent Contractors with
respect to the Work. Contractor shall also furnish a
standard endorsement to its Comprehensive General
Liability Policy naming Owner and any affiliates,
lessors, partners or joint venturers of Owner and their
respective employers, officers, directors,
shareholders, agents, representatives, attorneys,
successors and assigns, as additional insureds.
42.4 Contractor will procure and maintain until
acceptance of the Work, all risk and Installation
Floater Insurance to include Owner as parties insured
thereunder. Such insurance will cover physical loss or
damage to Contractor's Work, materials and equipment,
including consumable supplies that are part of, result
from, or are used in the Work. Such insurance will not
cover construction equipment, tools and facilities
owned, leased or rented by Contractor which do not
become a permanent part of the Work.
42.5 Neither Contractor nor Owner, shall be liable one
to another nor to the insurance carriers of such
parties for any loss or damage to property resulting
from or occurring in the course of the Work to the
extent that reimbursement shall be made for any such
loss or damage through or by reason of insurance
provided for the purpose and, for this purpose, hereby
waive any claim by or right of subrogation by insurers,
one to another.
42.6 A copy of any insurance company report made by
Contractor to its insurance company relative to bodily
injury or illness of its employees or property damage
incurred in the field, must be furnished without delay
to the Owner.
43.0 INDEMNIFICATION; SURVIVAL
43.1 State laws regarding indemnification vary
considerably, particularly with regard to
indemnification against the indemnitee's negligence.
This Section 43 shall be so read and applied as to
conform in all respects to applicable local law.
43.2 Contractor hereby agrees to defend, indemnify and
save harmless Owner, and any affiliates, lessors,
partners or joint venturers of Owner and their
respective employees, officers, directors,
shareholders, agents, representatives, attorneys,
successors and assigns, and anyone to whom any of them
may be liable and at their behalf, against all costs,
liability and expenses for personal injuries, including
death resulting therefrom, and against all costs,
liability and expenses for property damage, and
including attorneys' fees and other costs of defense
caused or alleged to have been caused by any act or
omission, negligent or otherwise, on the part of
Contractor, or its subcontractors, or persons directly
or indirectly employed by them and arising out of, or
in any way connected with the performance of this
Contract.
43.3 In those jurisdictions where permitted by local
law, Contractor also agrees to defend, indemnify and
save harmless Owner and any affiliates, lessors,
partners or joint venturers, and their respective
employees, officers, directors, shareholders, agents,
representatives, attorneys, successors and assigns,
anyone to whom Owner may be liable and at Owner's and
Owner's request to defend on and on their behalf,
against all costs, liability and expenses for personal
injuries, including death resulting therefrom, and
against all costs, liability and expenses for property
damage, and including attorney's fees and other costs
of defense, caused or alleged to have been caused by
the concurrent negligence of Contractor or its
subcontractors or persons directly or indirectly
employed by them and arising out of, or in any way
connected with the performance of this Contract.
43.4 In those jurisdictions where paragraph three above
is unenforceable under local law, the parties agree
that paragraph three is separable and severable from
paragraphs one and two and from all other provisions of
this Contract, and the paragraph three does not
constitute the main or essential feature of this
Contract and that the obligations of indemnification
assumed by the Contractor under paragraph two thereof
shall remain in full force and effect. If any claims
are made or any suit or other proceeding is brought
against Owner or any of its officers, directors or
employees, or any other indemnified person based on a
claim for which Contractor's indemnity is applicable,
Contractor at the election of Owner, or any other
indemnified person as the case may be, shall either
defend the persons against whom such claims, suit or
proceedings have been brought or assume the expense,
but not the direction, of the defense thereof and pay
or otherwise satisfy and discharge any and all
judgments which may be entered against Owner or any
other indemnified person.
43.5 The representations, warranties and
indemnification obligations of Contractor shall survive
the expiration or other termination of this Contract,
subject to any applicable laws regarding statutes of
limitation.
44.0 GOVERNING LAW
44.1 This Contract shall be construed and enforced, and
all rights and liabilities hereunder shall be
determined in accordance with the laws of the State of
Colorado. Whenever possible, each provision of this
Contract shall be interpreted in such a manner as to be
effective and valid under applicable law, and if any
provision of this Contract shall be or becomes
prohibited or invalid in whole or in part for any
reason whatsoever, that provision shall be ineffective
only to the extent of such prohibition or invalidity
without invalidating the remaining portion of that
provision or the remaining provisions of this Contract.
The parties specifically charge the trier of fact to
give effect to the intent of the parties, even if in
doing so, reformation of a specific provision of the
Contract is required consistent with the foregoing
stated intent.
45.0 GENERAL
45.1 The headings used in this Contract are for
convenience and shall not be used in any manner to
construe, limit, define or interpret any term or
provision of this Contract. This Contract has been
fully reviewed and negotiated between the parties and
no uncertainty or ambiguity in any term or provision
shall be construed strictly against Owner or Contractor
under any rule of construction or otherwise.
45.2 All rights and remedies of a party pursuant to
this Contract shall be cumulative and non-exclusive and
may be exercised singularly or concurrently.
46.0 ATTACHMENTS
Attachments 46.1 and 46.2 are hereby attached to and made
part of this Section II - General Terms and Conditions. The
remaining documents listed below as items 46.3 et seq. are
hereby incorporated in and made a part of this Section II
General Terms and Conditions by this reference. Contractor
acknowledges receipt of each of the items listed in this
Section 46.
46.1 Attachment A - AIllinois Creek Project Schedule of
Required Insurance@, February 22, 1996.
46.2 Addendum A
46.3 Illinois Creek Project, Invitation to Bid, Mine
Services and Earthworks Contract, No. C-300 dated
December 12, 1995.
46.4 Addenda No. 1 and 2, "Engineer's Estimate of
Quantities", dated December 12, 1995.
46.5 Addendum No. 3, "Miscellaneous Questions," dated
December 22, 1995.
46.6 Addendum No. 4, "Correction to Addendum No. 3"
dated December 27, 1995.
46.7 Contractor's Proposal dated December 27, 1995, but
excluding therefrom Exhibit Z.
46.8 Letter from Brad Luhman of D.H. Blattner & Sons,
Inc. dated January 9, 1996 and titled, "Mine Services &
Earthwork Revised Bid."
46.9 Addendum No. 5., "Bid Review and Request for
Additional Information:, dated January 12, 1996.
46.10 Letter from Brad Luhman of D.H. Blattner &
Sons dated January 16, 1996, and titled "Additional
Information Requested on January 12, 1996."
46.11 Letter from James Sittner of USMX to Mr.
Scott Blattner of D.H. Blattner & Sons, Inc. dated
January 19, 1996 titled "Illinois Creek Project, Notice
of Award for Mine Services and Earthworks Contract, No.
C-300."
46.12 Addendum No. 6, "Engineer's Estimate of
Quantities", dated February 6, 1996.
46.13 Letter from Brad Luhman of D.H. Blattner to
Jim Sittner of USMX dated February 21, 1996, titled
"...Revised Pricing."
46.14 Fax from Brad Luhman of D.H. Blattner & Sons,
Inc. to Don Hilleary of USMX dated February 23, 1996,
"Year 6 Bid Sheet".
46.15 Letter from Brad Luhman of D.H. Blattner &
Sons, Inc. dated February 27, 1996 to James Sittner of
USMX, Inc., titled Illinois Creek Project, Mine
Services and Earthwork Adjusted Pricing Schedule.
46.16 Letter from James Sittner of USMX, Inc. dated
February 27, 1996 to Scott C. Blattner, titled Notice
to Proceed, Illinois Creek Project, Mine Service and
Earthworks Contract C-300.
Addendum A
to Illinois Creek Project
Mine Services and Earthworks Contract C-300
Section II - General Terms and Conditions
The following provisions are added to the General Terms and
Conditions as if inserted therein in the Sections and with the
paragraph numbers indicated, unless otherwise provided:
5.35.3 Owner hereby designates Mr. James A. Sittner,
Owner's Manager of Development, as an Owner=s
representative. Owner hereby designates Mr. Stephen
Dieker as a General Manager for the Project as an
additional Owner=s representative. From time to time,
Owner may also designate as additional representatives
from Steffen, Robertson and Kirsten (U.S.), Inc.,
Lyntek, Inc. and other engineering consulting firms
various individuals to act on Owner's behalf with
respect to determinations regarding compliance by
Contractor with certain specifications, terms and
provisions of this Contract. The names of such
representatives and their specific responsibilities and
authority will be provided in writing by notice given
to Contractor in accordance with the NOTICES provisions
of this Contract.
5.4 Owner hereby designates Mr. Robert R. Monok,
Owner's Construction Manager, and Mr. James A. Smith,
Owner's Operations Manager, as additional
representatives. Mr. Monok shall act as a
representative of Owner in regards to the earthworks
portion of the Contract during
construction/development. Mr. Smith shall act as a
representative of Owner under this Contract in regards
to the mine services portion of this Contract during
operations.
11.2 Contractor shall conduct operations on the Site so
as to avoid disturbance or destruction of archeological
sites, including any artifacts found at the Site. If
Contractor discovers such an archeological site or
artifact, Contractor shall immediately discontinue work
at the Site, except for noninvasive surface
exploration, and shall notify Owner of its discovery.
Work at the Site shall not be resumed without
compliance with applicable law.
11.3 Contractor shall not permit its employees, agents,
contractors or subcontractors to fish or hunt on the
Site.
11.4 Contractor shall take all precautions consistent
with good industry practice to prevent and suppress
forest, brush and grass fire.
11.5 Contractor shall protect all lease and claim
boundary and survey monuments, witness corners,
reference monuments and bearing trees against damage,
destruction or obliteration. Any boundary markers,
witness corners or monuments damaged or obliterated by
Contractor shall be reestablished by the Owner in
accordance with applicable law and/or accepted survey
practices of the Federal Bureau of Land Management at
the expense of Contractor.
12.3 Contractor shall to the extent practicable, not
allow controlled drugs or substances (other than
medically prescribed drugs) to be brought to or
consumed on the Site.
15.2 Contractor shall invite, and consider in good
faith, proposals or bids from NPMC, CIRI, and their
affiliates for any subcontract. NPMC and CIRI shall be
given as much advance notice as is reasonably
practicable (but in no event less than fifteen (15)
days unless an emergency situation is present) prior to
notice being given to other potential bidders for all
proposed subcontract work to be performed pursuant to
this Contract.
The following additional sentence is added at the end of
paragraph 26.3
The retention portion of this paragraph does not
apply to the mine services portion of this Contract for
Work done during the operations phase.
26.8 The Contract Unit Prices payable in respect of the
Work in any calendar year or portion thereof commencing
on or after January 1, 1997 shall be adjusted effective
as of the first day of such calendar based on the
following method:
The base price for all price adjustments shall be
the Contract Unit Prices contained in the Contract for
each Area of Activity. Adjustment to those Contract
Unit Prices shall be made using the December Producer
Price Indices, U.S. Department of Labor, Bureau of
Labor Statistics. Indices for December, 1995 will be
the base component for computing future adjustments.
Labor adjustments will be determined by use of Alaska
Department of Labor, "Alaska Economic Trends" Table 2,
Average Hourly Earnings for the Mining Industry.
Adjustments will be made effective as of January 1 of
any year as soon as is reasonably practical following
the receipt by Owner of the Indices.
The following components will be subject to price
adjustments. The average percent of each Contract Unit
Price dollar components is established below. The sum
of the averages during the base period is 100%.
<TABLE>
<CAPTION>
COMPONENT INDEX INITIAL
COMPONENT
AVERAGE
PERCENTAGE
<S> <C> <C>
1. Equipment Replacement Mining Machinery and Equipment 17%
Cost Industry Code 3532
2. Equipment Operating Tires and Inner Tubes 22%
Expense Truck/Bus, Including Off Highway
(Tires 10% and Parts 90%) Product Code 3011-2
Mining Machinery and Equipment
Parts and Attachments
Product Code 3532-9
3. Fuel, Oil, Grease Actual Cost as Verified by Each Party 7%
4. Explosives Actual Cost as Verified by Each Party 5%
5. Direct Labor Alaska Department of Labor 25%
Average Hourly Wage for Mining Industry
6. Indirect Labor Alaska Department of Labor 9%
Average Hourly Wage for the Mining Industry
7. G&A Profit Not to be Adjusted 15%
TOTAL 100%
<FN>
Adjustments to Unit Prices will be made by the following formulas:
A=(B/C) XD
Where:
A = Total adjusted component average percentage
B = Component index for latest December period.
C = Component index for December, 1995, the base period
D = Contract initial Component average percentage.
This formula will be applied to each component and the results for each component
will be computed. The new adjusted percentage total will be the multiplier used
to adjust Contract Unit Price items. An example follows:
</FN>
</TABLE>
<TABLE>
<CAPTION>
COMPONENT PERCENTAGE PERCENTAGE ADJUSTED
(D) (B/C) MINING
PERCENTAGE
<C> <C> <C> <C>
1 17% 151.4/145.7=103.9% 17.7%
2 22% Tires - 10% 22.5%
95.2/95.1=100.1%
Parts - 90%
137.4/134.3=102.3
3 7% 83.5/82.5=101.2 7.1%
4 5% No Adjustment = 100% 5%
5 25% 26.63/25.85=103.0% 25.8%
6 9% 26.63/25.85=103.0% 9.3%
7 15% No Adjustment = 100% 15%
ADJUSTED
TOTAL 102.4%
</TABLE>
This adjusted total would then be multiplied
against the mining unit prices for the following 12
month period. For example, 1996 loading unit price for
ore is $0.17/ton. Using the above adjustment, 1997
loading price would be $0.17 X 1.024=$0.174/ton.
27.2 Payments to Contractor will not be made against a
Work Authorization during the construction/development
phase of this Project. Such costs will be accrued
until the added work and the cost of same is
incorporated into the Contract by Contract Amendment
which Owner and Contractor shall finalize and execute
whenever the aggregate of the costs accrued equal or
exceed $50,000 or, whenever the aggregate costs are
less than $50,000, not less frequently than once per
month.
27.3 Payments to Contractor will be made against a duly
processed Work Authorization signed by Owner or Other
Work@ done during operations phase of this Project as
defined in Section III - Contract Specifications,
Section 2.9 - Other Work of this Contract.
30.5 Anything in this Contract to the contrary
notwithstanding, in the event any lenders providing
financing for the Project require a certification by an
independent technical consultant for the funding of
amounts due on Mechanical Acceptance or Final
Acceptance, it shall be a condition to such Mechanical
Acceptance and/or Final Acceptance that such
certification shall have been obtained by Owner.
34.2 Without limiting the foregoing provisions of
paragraph 34.1, Contractor agrees that in the event of
any litigation to resolve a dispute involving NPMC,
Owner and Contractor, such litigation shall, at the
election of Owner, be brought and carried out in the
Superior Court for the State of Alaska, Third Judicial
District, sitting at Anchorage; or the United States
District Court for Alaska at Anchorage. Contractor
hereby expressly submits and consents in advance to
such jurisdiction and hereby waives any claim that
either of such courts is an inconvenient or improper
forum based on venue. Contractor shall require that
any of its subcontractors also consent to the
jurisdiction and appropriateness of any proceedings in
any of the foregoing courts.
35.3 Contractor shall comply with Owner=s agreement
with NPMC which is a wholly owned subsidiary of CIRI
regarding its hiring practices. Contractor shall
adhere to the following standards:
Contractor shall give sixty (60) days advance
notice to Owner and NPMC or any other entity designated
by Owner, of all anticipated job openings; and in
hiring employees for work on the Project, Contractor
shall give first preference to equally qualified and
available local residents and shall then give a
preference to equally qualified and available CIRI
Shareholders and members of their immediate families.
38.3 Owner agrees that the Contractor has no discretion
or control under the Contract regarding the release,
transportation or disposal of chemicals or chemically
treated residue used in Owner's leaching operations,
and has not authority to make decisions or implement
actions or mechanisms to prevent and abate damage
caused by disposal, transportation and release of those
chemicals. In the event that Contractor is found to be
a responsible party with regard to the site under the
Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. 9601, et. seq., or become
liable under any other law applicable to the handling,
disposal, or treatment of chemicals used only by
Owner's leaching operations, Owner agrees to indemnify,
defend at Owner's cost and expense and hold harmless
Contractor from said liability except insofar as such
liability is determined to have been caused by the sole
negligence, gross negligence or intentional misconduct
of Contractor.
38.4 Hazardous substances transported in lots in excess
of 100 pounds or 100 gallons (and the estimated
quantities thereof) shall be disclosed by Contractor by
written notice to Owner prior to their being brought on
the Site. At the end of each calendar year, Contractor
shall notify Owner of all hazardous substances and
hazardous wastes, and the quantities thereof brought
to, stored on, used on, or transported from the Site by
it.
40.4 In the event either Contractor or Owner proposes
to use equipment of the other, the parties shall enter
into a written equipment lease agreement, which shall
include among other things usual and customary
provisions relating to maintenance, indemnities similar
to those contained herein and provisions regarding the
identification of the legal owner of the equipment.
42.7 Contractor and each of its subcontractors shall
procure and maintain at its expense and in a form
reasonably acceptable to Owner the types, and the
greater of the minimum insurance coverages as are
required by Sections 42.1 through 42.6 of Section II,
General Terms and Conditions, of this Contract or as
are required by the Illinois Creek Schedule of Required
Insurance (Attachment AA@).
42.8 Contractor shall require such insurers as Owner
may require to designate lenders providing financing
for the Project to name such lenders as "loss payee" on
Contractors' Builders' Risk Policies.
The following 43.5 replaces in its entirety 43.5 in the
preceding portion of Section II - General Terms and Conditions.
43.5 The indemnification obligations of Contractor
shall survive the expiration or other termination of
this Contract, subject to applicable laws regarding
statutes of limitation. The representations and
warranties of Contractor shall survive the expiration
or other termination of this Contract, in the case of
representations for twenty four (24) months and in the
case of warranties for 12 months following Final
Acceptance.
43.6 Anything in this Contract to the contrary
notwithstanding, the indemnification obligations of
Contractor set forth in this Contract shall not apply
with respect to any person or entity to be indemnified
to the extent such person or entity is determined by a
decision binding on such person or entity to have been
guilty of (a) gross negligence or intentional
misconduct or (b) if and to the extent that this
Contract is deemed to be a construction contract within
the meaning of Section 45.45.900 of Alaska Statutes or
any replacement therefor, sole negligence. The
foregoing shall not affect the validity of any
insurance or agreement issued by an insurer obtained by
Contractor for the benefit of Owner or others as
provided hereunder.
47.0 ASSIGNMENT OF CONTRACT BY OWNER.
47.1 Owner may transfer or assign the Contract to any
joint ventures or partnerships between it and NPMC,
any of its subsidiaries, affiliates or any successors
by merger and also to any lenders providing financing
for the Project.
<PAGE>
ILLINOIS CREEK PROJECT
MINING AND EARTHWORKS CONTRACT
C-300
SECTION III
CONTRACT SPECIFICATION
<PAGE>
ILLINOIS CREEK PROJECT
MINING AND EARTHWORKS CONTRACT C-300
SECTION III
CONTRACT SPECIFICATION
Table of Contents
SECTION TITLE PAGE NO.
1.0 INTRODUCTION 3
2.0 SCOPE OF WORK 3
3.0 WORK INCLUDED IN SPECIFICATION 9
4.0 WORK EXCLUDED IN SPECIFICATION 10
5.0 MATERIAL FURNISHED BY OWNER 10
6.0 MATERIALS FURNISHED BY CONTRACTOR 11
7.0 SCHEDULING THE WORK 11
8.0 MATERIAL CONTROL 12
9.0 MEASUREMENT FOR PAYMENT 12
10.0 SITE FACILITY AND CLEAN UP 13
11.0 EXECUTION 13
12.0 ATTACHMENTS 30
<PAGE>
1.0 INTRODUCTION
1.1 This Section of the Illinois Creek Mine Services
and Earthworks Contract -- namely, Section III,
Contract Specification -- establishes the Scope of Work
for the Contract. The Contract Specification is
coordinated with the Form of Proposal and is
supplemented by the specific drawings, specifications
and other documents which are made part of this
Contract and which are listed in Section 12.0
"Attachments".
1.2 Work for which the Contractor shall be responsible
is summarized below by Areas of Activity (AOA). A
complete listing of the project by AOA showing areas of
responsibility is listed in Section 12.0 "Attachments".
2.0 SCOPE OF WORK
2.1 General.
This specification covers the furnishing of all
supervision, labor, equipment, temporary facilities,
tools, materials and supplies required to perform the
contract mine services and other earthwork at the
Illinois Creek Project site. Years noted shall be
based on the one year periods commencing with the date
of the Contract unless otherwise noted.
2.2 Mobilization/Demobilization (AOA-8810)
Contractor shall be responsible for all the Work
required to mobilize and demobilize its equipment,
manpower, tools, material, and supplies from their
respective points of origin to the point of departure
stated in the Contractor's Form of Proposal.
2.3 Earthwork Construction/Development (AOA-0000)
Contractor shall be responsible for all Work
necessary to (1) clear, grub and/or chip all trees and
brush; (2) remove and stockpile all chipped organic
material including the peaty and mossy organic mat; (3)
remove and stockpile topsoil; (4) rip, drill, blast,
cut rock and/or common material; (5) prepare
foundations; (6) fill embankments; (7) compact fill,
(8) install culverts, geotextile and rip rap; and (9)
grade, finish and trim earthwork so that the completed
earthwork construction/development conforms to the
grades, elevations, lines, and pertinent cross sections
as shown on the attached construction drawings,
specifications and other documents.
2.3.1 On-Site Infrastructure (AOA-2000).
Plant Site Access/Transportation (AOA-
2100). Work shall include completing the
construction of the main access road from the
existing airstrip to the mine plant area. This
Work includes the installation of any drainage
ditches, culverts, geotextile and base course
material required to develop an all weather road
capable of handling Contractor's and Owner's
equipment required to move personnel, equipment
and supplies from the existing air strip to the
mine plant site on a sustained basis. Work shall
include maintaining the existing gravel airstrip
during the construction period in 1996 in its
current good condition and so that it is capable
of handling C-133, C-130, DC-6 and light cargo
airplanes. Contractor shall maintain the airstrip
in its current condition from and after 1996 based
on a reasonable price to be negotiated in good
faith by Owner and Contractor.
<PAGE>
General Plant Site Work (AOA-2200).
Work includes site preparation at the plant site
which contains the process plant, assay
laboratory, maintenance shop, warehouse,
administration office, ready line, fresh water
pond and laydown yard. Site preparation includes
work necessary to clear, grub, remove and
stockpile the existing organic mat and topsoil,
cut underlying silt layer down to the competent
gravel zone which lies about one foot below the
silt layer and rough grade the area.
2.3.2 Crusher Site (AOA-4000).
ROM Stockpile and Retaining Wall (AOA-
4100). Work includes all earthwork necessary by
Contractor to construct a suitable run-of-mine
(ROM) stockpile area capable of storing up to
15,000 tons of dolomitic limestone and 25,000 tons
of ore. Work will also include the construction
of an appropriate retaining wall if necessary to
feed material to contractor's portable crushing
and screening plant.
Portable Crushing, Screening and Wash
Plant (AOA-4700). Work includes providing a
portable plant capable of handling 15,000 tons of
dolomitic limestone per year (90% passing 3" x
1.5") and 83,800 tons and 71,100 tons of ore grade
overliner material for the leach pad (80% passing
1") in Years 1 and 3, respectively. It is
expected that overliner material will require very
little crushing as it can be obtained from the
very friable, high grade gossan zone. The
overliner will need to be processed during a three
month period. Work will include all earthwork
necessary to prepare an appropriate crusher site
near the Owner's lime kiln complete with
appropriate product stockpile area.
2.3.3 Process Site (AOA-5000).
Modified Valley Fill Leach Pad (AOA-
5410). Work shall include all earthwork
construction required to construct the modified
valley fill leach pad as summarized below and
further defined in the SRK Report titled,
AIllinois Creek Heap Leach Design Report",
November 1995. The leach pad will be construction
on a hillside. Downstream containment of the ore
and process solution will be accomplished through
the construction of an earthen embankment. A
trough will be excavated behind the upstream toe
of the embankment to serve as a barrow source for
initial construction and to increase the storage
capacity behind the embankment. The leach pad
will be built in three stages. The first stage
will be constructed in Year 1. It will consist of
excavating a trough approximately 80 feet wide by
1500 feet long to a nominal base elevation of 500
feed (msl), constructing a berm to the 530 foot
elevation and constructing a leach pad up slope of
the trough to the 570 foot elevation contour.
Stage two will be built in Year 3. It will
consist of increasing the crest of the berm to 550
foot elevation and extending the leach pad up
slope to the 635 foot elevation contour. Stage
three is optional and will be constructed only if
needed around Year 4. It will consist of
increasing the crest of the berm to the 570 foot
elevation.
<PAGE>
Lime Kiln Site (AOA-5630). Contractor
shall construct the lime kiln site earthworks so
that the completed site work shall conform to the
grades, elevations, lines and pertinent cross-
sections on the attached drawings or as specified
by the Owner. Earthworks shall be completed up
through rough grading and up to the point that the
site is ready for structural excavation. Such
work is to be done by others.
2.3.4 Stormwater Diversion System (AOA-6200).
Work shall include all earthwork
required to construct and maintain the stormwater
diversion system as summarized below and as
further defined in the SRK Report titled,
AStormwater Pollution Prevention Plan" dated
October 1995. The stormwater diversion system
will consist of a system of (1) a permanent
stormwater infiltration node; (2) temporary
stormwater collection ponds and pits; (3)
diversion ditches, channels and culverts; and (4)
other stormwater treatment/best management
practice (BMP) systems.
2.4 Contract Mining (AOA-3000).
During the operations phase of this Project,
Contractor shall be responsible for all Work required
to perform preproduction development and other contract
mining required in accordance with the terms set forth
in the Contract, as summarized below and as described
in more detail in the attached construction drawings,
specifications, documents and yearly production
schedule. If the Contract price to be charged for the
following work varies by pit, bench level, drill
pattern or powder factor, the prices must be clearly
stated in the Contractor's Form of Proposal.
2.4.1 Mine Preproduction Development (AOA-
3100).
Work shall include the following
elements as required to prepare mine site for
production:
Clear and grub and/or chip all trees and
brush,
Burn and/or otherwise dispose of
trees and brush, and
Remove and stockpile the equivalent of one
foot of peaty surface mat, topsoil and/or plant
growth medium.
2.4.2 Drill (AOA-3300).
Work shall include drilling and sampling
of the ore and/or waste zones as required.
2.4.3 Blast (AOA-3400).
Work shall include blasting and/or
ripping ore and/or waste zones as required.
<PAGE>
2.4.4 Load (AOA-3500).
Work shall include loading ore and/or
waste from 10-foot benches and/or 20-foot benches
as required.
2.4.5 Haul (AOA-3600).
Work shall include hauling ore to the
crusher or to the leach pad and end dumping it on
10-foot to 20-foot lifts as dictated by the Owner.
Work shall include hauling waste to the
appropriate waste dump as shown on the
construction drawings and/or dictated by the
Owner.
2.4.6 Pits, Roads & Dumps (AOA-3700).
Work shall include the construction,
development and maintenance of all mine access
roads, mine haul roads, waste dumps and topsoil
stockpiles. This Work includes watering all mine
roads, dumps and stockpiles as necessary to
maintain strict compliance with the terms and
conditions of the State Air Quality Permit held by
Owner. Owner will supply water to the Contractor
at a mutually agreed upon site near the crusher to
be used by the Contractor to fill its water
truck(s). This Scope of Work covers all Work
required by Contractor to maintain the various
mine areas including the highwalls, safety
benches, ramps, roads, pit working areas, waste
dumps, and topsoil stockpiles in a safe and
workman like manner.
2.4.7 Mine Support (AOA-3800).
The Work shall cover all other field
costs incurred by the Contractor during the course
of mining including but not limited to labor,
maintenance and operating supplies, fuel,
lubrication, tires and ground engaging components.
2.4.8 Mine General (AOA-3900).
This Scope shall cover all other Work
required of the Contractor by the Owner and
necessary to the completion of Work covered by
Section 2.4, AContract Mining". It includes but
is not limited to such items as any of the
Contractor's direct costs of production (such as,
supervision, equipment ownership and overhaul
expenses) and indirect costs (such as, field
facilities, other expenses, insurance, taxes,
general and administrative items and profit) which
have not been allocated to any other cost center.
2.5 Contract Crushing (AOA-4000).
During the operations phase of this Project, the
Contractor shall be responsible for all Work required
to perform contract crushing, screening, washing,
and/or the rehandling of any crushed product utilizing
the facilities and equipment provided by the
Contractor.
<PAGE>
2.5.1 Crushed Overliner Material (AOA-4201).
Contractor shall be responsible for
crushing ore grade overliner material for Owner as
previously specified in Section 2.3.2.
2.5.2 Dolomitic Limestone (AOA-4202).
Contractor shall be responsible for
crushing dolimitic limestone for Owner to be used
by Owner to feed Owner's lime kiln. Product
produced is to be as previously specified in
Section 2.3.2. Product is to be placed in a
stockpile for Owner.
2.5.3 Crushed Ore/Overliner Material
Rehandle (AOA-4730).
Contractor shall be responsible for
rehandling crushed overliner material and placing
it on the leach pad as specified by the Owner.
Overliner material shall be placed over the leach
pad liner in a two-foot lift. Contractor will use
extreme care in placing the overliner on and
spreading it over the synthetic liner. Contractor
will be held strictly responsible for any and all
costs incurred by Owner during the course of
repairing any liner damaged by Contractor.
2.5.4 Air Quality.
Contractor shall be responsible for
maintaining strict compliance with the terms and
conditions of the State Air Quality Permit held by
the Owner. Contractor shall provide water sprays
as necessary. Owner will provide a water supply
to Contractor at a point near the Contractor's
crusher site.
2.6 Contract Loading of Leach Pad (AOA-5420).
Contractor shall be responsible for all Work
required to load run-of-mine (ROM) and/or crushed ore
on the leach pad as shown on the construction drawings
and/or as directed by the Owner. The proposed plan is
to place the ore on the leach pad in horizontal lifts
ranging in height from 10 feet to 20 feet. Owner may
specify either one of two methods to load the leach pad
as follows:
2.6.1 End Dumping (AOA-5421).
Contractor will work off the top of the
new lift by dumping ore off the end of the new
lift and down on top of the previously leached
lift. Contractor will be responsible for ripping
the previously leached lift to a minimum depth of
three feet. Contractor will be responsible for
pushing ore off the top of the new lift, ripping
it and leveling it to ensure that the lift
elevations are maintained to within 3 inches of
the approved design in preparation for the Owner
to lay the leaching distribution and collection
piping system. Contractor shall clearly state
whether this Work item is to be considered a
separate charge or whether it is included in the
Contractor's ore haulage charge (see Section 2.4.5
AHaul").
<PAGE>
2.6.2 Push Up Dumping (AOA-5422).
Contractor shall work off the top of the
previously leached lift end dumping ore from its
trucks and pushing it up to the desired lift
height with a dozer and/or backhoe. Contractor
will be responsible for ripping the previously
leached lift parallel to the advancing face of the
new lift before dumping the ore on it. Trucks or
other wheeled vehicles will not be allowed to back
over the area after it has been ripped.
Contractor will be responsible for ripping and
leveling the new lift to ensure that the lift
elevations are maintained to within 3 inches of
the approved design in preparation for the Owner
to lay the leaching distribution and collection
piping system.
2.7 Contract Maintenance and Warehouse Services (AOA-7000).
Contractor shall be responsible for all mine
maintenance required to complete its Work and to
maintain in good working order any of the Owner's
facilities and/or equipment utilized by the Contractor.
A heated shop and warehouse will be required at the
mine plant site as well as the existing one located at
the airstrip. Owner and Contractor will share
maintenance and warehouse facilities as well as
purchasing maintenance and warehousing responsibilities
(see USMX Report titled, A1994 Year End Report,
Illinois Creek Project, Alaska", December 15, 1994,
Sections 11 and 18). Owner will provide general
maintenance service for the process plant, assay
laboratory, man camp, old man camp, administrative
building and infrastructure. Contractor will be
responsible for maintaining the maintenance
shop/warehouse and for providing labor necessary to
maintain Owner's and its own mobile equipment.
Contractor shall be responsible for unloading from
incoming aircraft, receiving, providing temporary
storage and protection for, and transporting to
appropriate installation site, as required, all
equipment, materials, and supplies furnished by Owner
as well as all equipment materials and supplies
furnished by Contractor.
2.8 Contractor's Indirect Costs (AOA-8800).
Contractor shall be responsible for bidding its
Work so that all of its indirect costs with the
exception of mobilization are allocated to one of the
direct areas of activity (AOA) defined in this Section
(Section 2.0 AScope of Work"). Such indirect costs
include but are not limited to the following: (1)
field construction facilities, (2) field construction
expenses, (3) Contractor's insurance, Contractor's
taxes, (4) Contractor's G & A, and (5) Contractor's
profit. This specification will not be used unless
Owner and Contractor mutually agree to an arrangement
which allows for Work to be allocated in this manner.
2.9 Other Work.
From time to time during the life of the Contract
, Owner may have other miscellaneous work requirements
for which it will request the services of the
Contractor. Contractor shall exercise its best efforts
to comply with all such requests. Such requests shall
be issued in writing by the Owner. Such other work
shall be conducted at the direction of the Owner and,
except as agreed to the contrary in writing by the
Owner and Contractor, shall be paid for in accordance
with the Contractor's unit prices and/or hourly rates
established in Section IV, AForm of Proposal" of this
Contract.
<PAGE>
3.0 WORK INCLUDED IN SPECIFICATION
The Work included in this specification shall include but is
not limited to the following:
3.1 Plan and organize the Work
3.2 Mobilize all materials as specified, construction
equipment, facilities and manpower necessary to
accomplish the Work in accordance with the drawings and
specifications (see Section 12.0 "Attachments") and
within the proposed schedule (see Section 7.0
"Scheduling Work").
3.3 Provide sufficient quantities of equipment for
each part of the Work bid to complete all items of Work
within the schedule. Contractor shall not remove
equipment from the Site without Owner's approval.
3.4 Unload, receive, provide temporary storage and
protection for, and transport to the installation site,
as required, all equipment and materials furnished by
Owner.
3.5 Coordinate survey control through the on-site
designated representatives of Owner. Owner will provide
for all survey work.
3.6 Notify Owner immediately of any discrepancies
encountered with drawings, specifications or major
survey control points.
3.7 Provide scheduling and cost control of the Work to
a standard that is acceptable to Owner.
3.8 Maintain all construction equipment in proper
working condition, including Owner's equipment utilized
by Contractor.
3.9 Maintain traffic flows in a controlled and safe manner.
3.10 Repair damages to the Work caused by weather or
construction.
3.11 Provide onsite transportation for contract
personnel in a manner that is acceptable to the Owner.
3.12 Provide quantity takeoffs from survey information
to establish payment quantities. Quantity information
shall be in such format and detail as is acceptable to
the Owner.
3.13 Clean up the working areas to the satisfaction of
the Owner and demobilize all materials, construction,
equipment, and facilities from the Site once the Work
is completed.
3.14 In case of accident furnish first aid to injured
and provide extrication of injured to the nearest
medical center or obtain medical assistance. Owner and
Contractor will work together to staff their respective
work forces with adequately trained Emergency Medical
Technicians (EMT) and to establish air medivac
services.
<PAGE>
3.15 Provide a bi-monthly report to Owner detailing
material purchases, work in progress, completed items,
equipment received, job status and work planned for
next month. Provide in depth discussion of problems or
delays which may arise in meeting contractual
completion dates.
3.16 Contractor shall work closely with Owner to
coordinate the installation of the pregnant solution
pump. Pipe connections, pump installation as well as
all trenching leading to and from the sump will be done
by Owner or by Contractor as AOther Works".
Installation shall be directed by the Owner.
4.0 WORK EXCLUDED IN SPECIFICATIONS
The following items are specifically excluded from
Contractor's Scope of Work.
4.1 Primary control and construction surveys.
4.2 Concrete foundations.
4.3 Liner installation and trenching.
4.4 Man Camp, mine plant site, lime kiln and valley
fill leach pad piping and trenching, including the
installation of the pregnant solution pumps.
4.5 Structural excavation, including trenching for
concrete foundations and fine grading of mine plant,
man camp and lime kiln areas.
5.0 MATERIAL EQUIPMENT AND OTHER ITEMS FURNISHED BY OWNER
5.1 Camp facilities for Contractor's employees
including room and board while they are on site. The
existing camp can handle approximately 30 people. The
new camp will be able to service 90 people.
5.2 Maintenance/Warehouse facilities. Contractor will
be able to share the use of the existing
maintenance/warehouse facilities at the airstrip until
the new facilities are constructed.
5.3 Office facilities both in the administration building
and in the maintenance/warehouse.
5.4 Outside communication capabilities.
5.5 Lot - Leach Pad and Pond Leak Detection Piping and
Sumps.
5.6 Contractor should state which if any of the
Owner's mobile equipment and/or facilities it will
need.
<PAGE>
6.0 MATERIAL FURNISHED BY CONTRACTOR
6.1 Contractor shall furnish all dozers, scrapers,
excavators, cranes, trucks, mixers, generators,
compressors, welders, fuel, lubricants, and all other
construction supplies, small tools, materials, and
equipment not provided by Owner.
6.2 Contractor shall furnish crushed screened material
for leak detection trench drain rock as specified by
the Owner.
7.0 SCHEDULING THE WORK
7.1 Completion of the following items of work on the
dates indicated is a contractual requirement.
Contractor shall furnish sufficient personnel,
equipment and supervision and shall work such hours,
including overtime, as necessary and as approved by
Owner, to complete the Work not later than the
following dates:
<TABLE>
<CAPTION>
AOA Scope of Work Description Early Start Date Late Finish Date
<S> <C> <C> <C>
- Invitation to Bid 11-27-95 N/A
- Bids due from Contractors N/A 12-27-95
- Contract Award Date 1-15-96 2-15-96
- Notice to Proceed 3-15-96 4-15-96
8810 Mobilize at Point of Departure 4-15-96 5-15-96
- Earthwork Construction
2000 On-Site Infrastructure 4-15-96 6-30-96
3100 Mine Site Development 6-01-96 8-31-96
4000 Crusher Site Development 6-15-96 7-01-96
5000 Process Site Development 4-15-96 8-31-96
5410 Modified Valley Fill Leach Pad 4-15-96 7-15-96
5630 Lime Kiln Site Development 6-15-95 7-01-96
6200 Stormwater Diversion System 6-15-95 7-31-96
</TABLE>
Field completion dates are based on a contract
award date of February 15, 1996.
7.2 Bidder, during bid preparations, shall satisfy
itself that it has planned and scheduled the Work to
the degree necessary to fairly price the Work.
Planning and scheduling shall include the possible
effects of weather, other contractors, confined spaces
and the remote site. Request for changes due to the
failure of Contractor to adequately plan and schedule
the work will not be considered.
7.3 The Contractor shall prepare a detailed bar chart
scheduled within one (1) week after receipt of Notice
to Proceed.
7.4 Contractor shall utilize accepted, effective
scheduling techniques throughout the course of the
Work. Owner will request periodic meetings with the
Contractor to review Contractor's progress, personnel,
deliveries, and future planning.
<PAGE>
8.0 MATERIAL CONTROL
8.1 Contractor shall be responsible for purchasing,
expediting, receiving, handling, transporting,
warehousing, and protecting all materials required to
complete the Work furnished by Contractor.
8.2 Contractor shall be responsible for unloading,
receiving, handling, transporting, warehousing, and
protecting all materials furnished by Owner.
8.3 No material, including material furnished by
Contractor, shall be removed from the jobsite without
written authorization from the Owner.
9.0 MEASUREMENT FOR PAYMENT
9.1 Measurement of Work Performed:
Progress payments to be made to the Contractor shall be
for Work actually performed based upon actual
measurements.
9.2 Quantity Measurement:
The measurement to be used to calculate the quantity of
Work completed will correspond to the unit of
measurement stated in Section 2.0 of the Contractor's
Form of Proposal. For example, measurement of the
volume of ore and waste for purposes of establishing
Work performed by Contractor shall be by Abank cubic
yard" determined by field surveys of pit excavations.
"Bank cubic yards", as used herein, means earth, rock
and/or overburden in place before drilling, blasting or
ripping. To compute tonnage, a factor of 12.9 cubic
feet per dry ton, in place, will be used for the ore
zone. A factor of 12.2 cubic feet per dry ton, in
place, will be used for the waste zone. A tonnage
factor of 18 cubic feet per dry ton, in place, will be
used for topsoil.
The Owner shall survey the excavation and backfill
progress on a weekly basis or more often if necessary
for the purpose of calculating volumes. The planned
elevations will be used as a basis for determining the
volume removed in bank cubic yards. Copies of survey
notes, plots and calculations will be furnished upon
request for verification purposes. If the parties fail
to agree on the volume removed as shown by the surveys
and calculations, an independent party shall be paid
for by the party whose contention regarding the
aggregate volume removed was furthest from the amount
determined by the independent party.
No additional allowance will be made for rock
removal, dewatering, site clearing and grading,
filling, compaction, disposal or removal of any
unclassified materials.
<PAGE>
10.0 SITE FACILITIES AND CLEANUP
10.1 Contractor shall furnish suitable security, first
aid, and safety facilities as approved by Owner.
Contractor is responsible for the safety of its
employees, including jobsite first aid, transportation
to and from doctor and arrangements for offsite medical
services.
10.2 Contractor shall furnish all necessary temporary
facilities such as toilets, drinking water, electric
power, air compressors, lighting, heaters gang boxes,
office trailers, telephones, radios, crew shacks, and
reprographic equipment.
10.3 Owner will be awarding other contracts for
construction on this Project. Contractor shall fully
cooperate with other contractors and carefully fit its
work to other work as may be directed by the Owner.
Contractor shall not commit or permit any act which
will interfere with the performance of work by any
other contractor, and shall store construction
materials and equipment in areas assigned by Owner.
10.4 Contractor shall arrange its work and shall store
and dispose of materials being used so as not to
interfere with the operations of other contractors. It
shall coordinate its work with others in an acceptable
manner and perform it in a proper sequence to that of
others.
10.5 Contractor shall keep the area in which it is
working clean of all debris. Upon leaving any area
after completion of work, Contractor shall remove from
premises all rubbish and unused materials.
11.0 GENERAL WORK SPECIFICATIONS AND METHODS OF EXECUTION
11.1 The following general specifications and methods
of execution shall apply to all the Work covered by
this Contract which is not covered by a specific
specification and/or method of execution.
11.2 Clearing and Grubbing
11.2.1 This work consists of clearing,
grubbing, removing and disposing of vegetation and
debris within the limits of the construction site.
11.2.2 Surface objects, tress, stumps,
roots and other protruding obstructions,
designated for removal shall be cleared and/or
grubbed, including mowing, as required.
11.2.3 Grass, grass roots and incidental
top soils shall not be left beneath a fill area,
nor shall this material be used as fill material.
11.2.4 Except in areas to be excavated,
holes resulting from the removal of obstructions
shall be backfilled with suitable material and
compacted.
<PAGE>
11.2.5 Burning, if permitted, shall be
done in accordance with applicable laws,
ordinances, and regulations. If perishable
material is burned, it shall be burned under the
constant care of the Contractor at such time and
in such manner that the surrounding vegetation,
other adjacent property, or anything designated to
remain will not be jeopardized.
11.2.6 Materials, debris and unburned
perishable materials may be disposed of by methods
and at locations approved by the Owner. If
disposal is by burying, the cover material shall
provide a cover at least 12 inches and shall be
graded and shaped to present a pleasing
appearance.
11.2.7 Trees, shrubbery, grass and other
vegetative ground cover outside the construction
area shall be preserved and protected from damage,
and the Contractor will be responsible for any
damage thereto resulting from construction
operations. Contractor shall take reasonable care
to avoid damage by its construction operations to
lands adjacent to the site. All vegetation and
ground cover not within the construction site
shall be preserved and protected as directed.
11.3 Chipping
Small trees, shrubbery and brush will be chipped
to form an organic mulch when directed by the Owner
and/or the Contract. Trees typically range from 3-
inches to 9-inches in diameter with minor larger trees
present. Larger trees may be chipped and/or
individually disposed of as approved by the Owner.
11.4 Remove and Stockpile Organic Material
In those areas where chipping is specified,
Contractor shall remove and stockpile all chipped and
organic material including the 3-inch to 9-inch peaty
surface mat. This material shall be stockpiled
separately from the topsoil as it will be used during
reclamation to construct a biomass channel to remove
heavy metals from the leach pad solutions.
11.5 Remove and Stockpile Topsoil
Enough topsoil will be removed and stockpiled to
cover the area to be reclaimed with one foot of topsoil
and/or plant growth medium such as the silt layer just
below the "A" horizon.
11.6 Excavation and Structural Fill
The work of this Section includes all earthwork
required for construction of the Project. Such
earthwork shall include, but not be limited to, the
loosening, removing, loading, transporting, depositing,
and compacting in its final location of all materials
wet and dry, as required for the purposes of completing
the Work specified in the Contract Documents, which
shall include, but not be limited to, the furnishing,
placing, and removing of sheeting and bracing necessary
to safely support the sides of all excavation; all
pumping, ditching, draining, and other required
measures for the removal or exclusion of water from
excavation; the supporting of structures above and
below the ground; all backfilling around structures and
all backfilling of trenches and pits; the disposal of
excess excavated materials; borrow of materials to make
up deficiencies for fills; and all other incidental
earthwork, all in accordance with the requirements of
the Contract Documents.
<PAGE>
The Contractor's attention is directed to the
provisions of Subpart P, Section 1926.652 of the OSHA
Safety and Health Standards for Construction, which
require that all banks and trenches over 5 feet high
shall be shored or sloped to the angle of repose.
11.6.1 Cut/Earth Excavation
Earth excavation shall consist of the
excavation and removal of suitable soils for use
as structural fill as well as the satisfactory
disposal of all vegetation, debris and deleterious
material encountered within the area to be graded
and/or in a borrow area.
Excavated areas shall be continuously
maintained such that the surface shall be smooth
and have sufficient slope to allow water to drain
from the surface.
11.6.2 Structural Fill
Structural fill shall consist of a
controlled fill constructed in areas indicated on
the grading plans.
Structural fill material shall consist
of soils that conform to the following physical
characteristics:
Sieve Size Percentage Passing
(Square Openings) by weight
3 inch 100
No. 4 50-100
No. 200 0-30
The plasticity index of materials to be
used as structural fill shall not exceed 10 as
determined in accordance with ASTM D4318.
The fill materials shall be free from
roots, grass, other vegetable matter, clay lumps,
rocks larger than 6 inches, or other deleterious
materials.
Site soils may be used for structural
fill, provided they meet the requirements of
Section 11.6.2.
The results of the soil investigation
indicate that adequate site soils exist which will
meet these requirements, selective excavation or
blending may be required.
11.6.3 When the quantity of suitable
material required for fill is not available within
the limits of the jobsite, the Contractor shall
import sufficient suitable materials for fill to
the lines, elevations and cross sections as shown
on the drawings form borrow areas. The Contractor
shall obtain from owners of said borrow areas the
right to excavate material, shall pay all expenses
in developing the sources including the cost of
right-of-way required for hauling the material.
<PAGE>
11.7 Construction
11.7.1 Building Area Preparation
Areas to receive fill and cut surfaces
at final grade shall be scarified to a depth of 12
inches. The scarified surface shall then be
compacted as specified in Section 11.7.2.
Scarification and moisture conditioning can be
deleted in areas in which bedrock is exposed at
the surface or as approved by Owner. Compaction
of the bedrock shall be by proof rolling.
11.7.2 Compaction
Fill shall be spread in layers not
exceeding 8 inches, watered as necessary, and
compacted to a density of not less than 95 percent
of maximum dry density. Moisture content at time
of compaction shall be maintained within the
limits of 2 percent below to 3 percent above
optimum moisture content.
Optimum moisture content and maximum dry
density for each soil type used shall be
determined in accordance with ASTM D1557.
11.7.3 Solution Ponds
Areas to receive fill and cut surfaces
at final grade shall be scarified to a depth of 8
inches, moisture conditioned and compacted to a
minimum 90% of maximum density per ASTM D1557.
Moisture content should be maintained within the
limits of 2 percent below to 3 percent above
optimum moisture content.
Areas of compacted subgrade to receive
the geomembrane liner material shall be free of
angular gravel, gravel over 2 inches in diameter
and hard objects within 4 inches of the surface.
These areas shall be graded to a continuous smooth
surface. Areas that require a thin lift of soil
to fill irregularities shall be compacted with at
least 4 passes of a 5 ton minimum weight smooth
drum or pneumatic roller. The top surface of the
completed pond shall be inspected to ensure that
it shall be free from depressions, cracks, sharp
or oversized rocks, and other foreign material
which might puncture the synthetic liner. This
surface treatment includes side slopes as well as
the bottom of the pond.
<PAGE>
11.7.4 Heap Leach Pad
This general specification 11.74 does
not apply at Illinois Creek. Please see
appropriate specification in the Attachments.
Areas to receive fill and cut surfaces
at final grade shall be scarified to a depth of 8
inches, moisture conditioned and compacted to a
minimum 95% of maximum dry density per ASTM D1557.
Moisture content should be maintained within the
limits of 2 percent below to 3 percent above
optimum moisture content.
Areas of compacted subgrade to receive
the geomembrane liner material shall be free of
angular gravel, gravel over 2 inches in diameter
and hard objects within 4 inches of the surface.
The prepared subgrade shall be covered with a
minimum thickness of 12 inches of a compacted clay
liner. The maximum particle size shall be 3/4
inches. The clay liner material shall have a
minimum of 30 percent passing the No. 200 sieve by
weight. The minus 200 mesh material may be
composed of either clay or silt. The clay liner
material shall be of a type that can be compacted
to have a maximum permeability of 1 x 10-6 cm/sec.
After compaction and removal of any oversize
material, the final surface preparation will be
provided by a heavy, smooth steel drum vibratory
roller. The clay liner shall be constructed of
material from a borrow area approved by the Owner.
These areas shall be graded to a continuous smooth
surface.
The top surface of the completed leach
pad shall be inspected to ensure that it shall be
free from depressions, cracks, sharp or oversized
rocks, and other foreign material which might
puncture the synthetic liner.
Areas that require fill shall be placed
in lifts no thicker than 10 inches when compacted,
moisture conditioned and compacted as previously
described.
11.7.5 Controlled Fill
Contractor shall not do this type of
Work when the atmospheric temperature is below 35
degrees. It shall be the responsibility of the
Contractor to protect all areas of completed work
by methods approved by the Owner. Any areas that
are damaged by freezing shall be reconditioned,
reshaped and compacted by the Contractor in
conformance with the requirements of this
specification without additional cost to the
Owner.
11.8 Standards
Without limiting the generality of other
requirements of the Specifications, all work specified
herein shall conform to or exceed the applicable
requirements of the following ASTM documents to the
extent that the provisions of such documents are not in
conflict with the requirements of this Section:
<PAGE>
. ASTM D 1557 Test Method for Determining Compaction by
Standard Proctor
. ASTM 698 Test Methods for Moisture-Density
Relations of Soils and Soil Aggregate
Mixtures, Using 5.5-lb. (2.49-KG) Rammer
and 12 in. (304.8 mm) Drop.
11.9 Quality Assurance
All soils testing will be done by a testing
laboratory of the Owner's choice at the Owner's
expense. Compaction and soil testing will be carried
out by an independent soils contractor who shall be
under the direction of the Owner, and, whenever
applicable any engineers retained by Owner to assure
compliance with any standards or requirements of this
Contract or law. Final acceptance of any earthworks
must be approved by both the soils contractor and
Owner.
11.10 Pipeline Trench Excavation
Unless otherwise shown or ordered by the Owner,
excavation for pipelines and utilities shall be open-
cut trenches. Trench widths shall be kept as narrow as
is practical for the method of pipe zone densification
selected by the Contractor, but shall have a minimum
width at the bottom of the trench equal to the outside
diameter of the pipe plus 36 inches. The minimum width
at the bottom of a trench to be used to install HDPE
pipe will be equal to the outside diameter of the pipe
plus 12 inches unless otherwise shown or ordered by the
Owner.
Except when pipe bedding is required, the bottom
of the trench shall be excavated uniformly to the grade
of the bottom of the pipe. The trench bottom shall be
given a final trim, using a string line for
establishing grade, such that each pipe section when
first laid will be continually in contact with the
ground along the extreme bottom of the pipe. Rounding
out the trench to form a cradle for the pipe will not
be required.
The maximum amount of open trench permitted in any
one location shall be 500 feet, or the length necessary
to accommodate the amount of pipe installed in the
single day, whichever is greater. All trenches shall
be fully backfilled at the end of each day or, in lieu
thereof, shall be covered by heavy steel plated
adequately braced and capable of supporting vehicular
traffic in those locations where it is impractical to
backfill at the end of each day. The above
requirements for backfilling or use of steel plate will
be waived in cases where the trench is located further
than 100 feet from any travelled roadway or occupied
structure. In such cases, however, barricades and
warning lights meeting OSHA requirements shall be
provided and maintained.
Where the Drawings indicate that trenches shall be
over-excavated, they shall be excavated to the depth
shown, and then backfilled to the grade of the bottom
of the pipe. Work specified in this Section, shall be
performed by the Contractor at its own expense.
<PAGE>
When ordered by the Owner, whether indicated
on the Drawings or not, trenches shall be over-
excavated beyond the depth shown. Such over-excavation
shall be to the depth ordered. The trench shall then
be backfilled to the grade of the bottom of the pipe.
All work specified in this Section shall be performed
by the Contractor at its own expense when the over-
excavation ordered by the Owner is less than 6 inches
below the limits shown. When the over-excavation
ordered by the Owner is 6 inches or greater below the
limits shown, additional payment will be made to the
Contractor for that portion of the work which is
located below said 6-inch distance. Said additional
payment will be made under separate unit price bid
items for over-excavation and bedding if such bid items
have been established; otherwise payment will be made
in accordance with a negotiated price.
Where pipelines are to be installed in embankment
or structure fills, the fill shall be constructed to a
level at least one foot above the top of the pipe
before the trench is excavated except as noted below.
11.11 Over-Excavation Not Ordered, Specified, or Shown
Any over-excavation carried below the grade
ordered, specified, or shown, shall be backfilled to
the required grade with the specified material and
compaction. Such work shall be performed by the
Contractor at its own expense.
11.12 Disposal of Excess Excavated Material
The Contractor shall remove and dispose of all
excess excavated material at its own expense.
All excess material, including rock and boulders
that cannot be used in embankments shall be disposed of
as directed by the Owner. APPROXIMATE LOCATION TO BE
DETERMINED AT THE JOBSITE MEETING. It is the
Contractor's responsibility to determine if sufficient
material is available for the completion of the
embankments before disposing of any materials. Any
shortage of suitable materials for completion of the
work caused by premature disposal of materials by the
Contractor shall be replaced by the Contractor at no
cost to the Owner.
11.13 Backfill - General
Backfill shall not be dropped directly upon any
structure or pipe. Backfill shall not be placed around
or upon any structure until the concrete has attained
sufficient strength to withstand the loads imposed.
Except for drainrock materials being placed in
over-excavation areas or trenches, backfill shall be
placed after all water is removed from the excavation.
11.14 Placing and Spreading of Backfill Materials
Backfill materials shall be placed and spread
evenly in layers. When compaction is achieved using
mechanical equipment the layers shall be evenly spread
so that when compacted each layer shall not exceed 10
inches in thickness.
<PAGE>
During spreading each layer shall be thoroughly
mixed as necessary to promote uniformity of material in
each layer. Pipe zone backfill materials shall be
manually spread around the pipe so that when compacted
the pipe zone backfill will provide uniform bearing and
side support.
11.15 Compaction of Fill, Backfill, and Embankment
Materials
Backfill materials shall be mechanically compacted
to the specified percentage of maximum density.
Equipment that is consistently capable of achieving the
required degree of compaction shall be used and each
layer shall be compacted over its entire area while the
material is at the required moisture content.
The Contractor shall submit a list of its proposed
compaction equipment and methods for approval by the
Owner 15 days prior to commencing its compaction
operations. If the Contractor's compaction equipment
and/or the methods are found by the Owner to be
insufficient to produce the specified compaction
results, the Contractor shall make adjustments of its
equipment at no cost to the Owner.
Materials shall be compacted by means of at least
2 passes from a flat plate vibratory compactor, except
when such materials are used for pipe zone. Backfill
vibratory compaction shall be used at the top of the
pipe zone or at vertical intervals of 24 inches,
whichever is least.
Flooding, ponding, or jetting shall not be used
for compaction.
11.16 Pipe and Utility Trench Backfill
The pipe zone is defined as the trench cross
sectional area between a line 6 inches below the bottom
of the pipe, i.e., the subgrade, to a level line 6
inches above the top of the pipe. The bedding for
flexible pipe is defined as that portion of pipe zone
backfill material between the subgrade and the bottom
of the pipe. The bedding for rigid pipe is defined as
that portion of the pipe zone backfill material between
the subgrade and a level line which varies from the
bottom of the pipe to the spring line as shown on the
Drawings.
Bedding shall be provided for all sewers, drainage
pipelines, and other gravity flow pipelines. For other
pipelines the bedding may be omitted if all the
following conditions exist:
.The pipe bears on firm, undisturbed native soil
which contains only particles that will pass a one-
inch sieve.
.The trench excavation is not through rock or
stones.
.The trench conditions match those specified by
the pipe manufacturer for installation of pipe
directly on the subgrade.
.The subgrade soils have, as a maximum, a
moisture content that allows compaction.
<PAGE>
Where bedding is required after compacting the
bedding the Contractor shall perform a final trim using
a string line for establishing grade, such that each
pipe section when first laid will be continually in
contact with the bedding along the extreme bottom of
pipe.
The pipe zone shall be backfilled with the
specified backfill material. the Contractor shall
exercise care to prevent damage to the pipeline
coating, cathodic bonds, or the pipe itself during the
installation and backfill operations.
11.17 Riprap Materials
The Contractor shall provide riprap material to
comply with the specifications as outlined herein.
Riprap shall consist of dense, natural rock fragments,
varying uniformly between 8 inches and 14 inches
maximum dimension unless otherwise specified. Stone
used for riprap shall be hard, durable, angular in
shape; resistant to weathering and to water action;
free from overburden, spoil, shale and organic
material; and shall meet the gradation requirements
specified. Neither breadth nor thickness of a single
stone should be less than one-third its length. Shale
and stone with shale seams are not acceptable.
The acceptability of the stone will be determined
by Owner prior to construction.
11.17.1 Surface Preparation
Where riprap is to be placed as
embankment protection, all receiving slopes shall
be graded to a uniform surface. At banks and
embankment, riprap shall be placed within the
limits shown on the Construction Drawings.
After surface preparations are completed
for the placement of either embankment or channel
protection riprap, the Owner's inspections and
approval of the lines and grades shall be secured
prior to placement of any riprap.
11.17.2 Placement
Riprap shall be placed progressively
from the bottom upward and in a manner approved by
the Owner. The finished rock mass shall be
homogeneous, well-graded and dense without voids.
Care shall be taken to prevent damage to the
geotextile fabric underlayment. Local surface
irregularities of the finished slopes shall not
vary from the planned slopes by more than 8 inches
measured at right angles to the slope. Care shall
be taken during excavation and riprap placement to
minimize sediment production in all stream
channels.
11.18 Corrugated Metal Pipe
All CMP pipe located all or partially above the
existing ground profile shall be anchored as shown on
the Drawings and directed by the Owner in the field.
<PAGE>
11.18.1 Pipe
Corrugated metal pipe shall conform to
the requirements of the "Standard Specifications
for Corrugated Metal Culvert Pipe" (AASHTO M-
36) and shall have a minimum plate thickness of 14
gage pipe shall be galvanized steel.
11.18.2 Fittings
All CMP shall be joined using standard
or two-piece corrugated bands which mesh with the
corrugations of the pipe ends. Bands shall be
tightened to manufacturer's recommendations.
Bolts shall be galvanized steel.
11.18.3 Laving Pipe
The pipe shall be installed as specified
herein and shown and the sections shall be closely
jointed to form a smooth flow line. Immediately
before placing each section of pipe in final
position for jointing, the bedding for the pipe
shall be checked for firmness and uniformity of
surface.
Proper implements, tools, and facilities
as recommended by the pipe manufacturer's standard
printed installation instructions shall be
provided and used by the contractor for safe and
efficient execution of the work. All pipe,
fittings, and accessories shall be carefully
lowered into the trench by means of derrick,
ropes, or other suitable equipment in such a
manner as to prevent damage to pipe and fittings.
Under no circumstances shall pipe or accessories
be dropped or dumped into the trench.
Cutting of the pipe shall be
accomplished in accordance with the pipe
manufacturer's standard procedures for this
operation. Pipe shall not be cut by any method
that may damage the pipe or will produce ragged,
uneven edges.
The pipe and accessories shall be
inspected for defects prior to lowering into the
trench. Any defective, damaged or unsound pipe
shall be repaired or replaced. All foreign matter
or dirt shall be removed from the interior of the
pipe before lowering into position in the trench.
Pipe shall be kept clean during and after laying.
11.19 Contract Mining Specifications
All mining operations are to be carried out in
accordance with good mining practice and in a
workmanlike manner. The mine is to be developed in
accordance with the Owner's mine design as indicated in
the Contract, as summarized below and as described in
more detail in the attached mine plans, drawings,
specifications, documents and yearly production
schedule.
<PAGE>
11.19.1 Efficiency Objective.
Contractor acknowledges that the primary
objective of mining is to minimize dilution of ore
with waste and to deliver material to the proper
location, in an orderly fashion, as directed by
Owner. Contractor will work with Owner to
accomplish this objective. Should any employee(s)
not cooperate to obtain Owner's objective, Owner
retain the right to remove such employee(s) from
any positions affecting Owner's objectives or for
safety related reasons.
11.19.2 Commencement Condition.
Owner's commitment to commence or
continue Work under this Contract is expressly
conditioned upon Owner obtaining all necessary
Federal and State permits required to commence
and/or continue Work on terms and conditions
satisfactory to Owner as determined in Owner's
sole discretion. Owner agrees to use all
reasonable efforts to obtain such approvals and in
the event of any significant delays, to keep
Contractor reasonably apprised of material
developments during, and upon termination of, such
efforts.
11.19.3 Schedule Determination and
Flexibility.
Owner will provide to Contractor its
proposed mining schedule for the Contract Time.
Contractor shall, as requested by Owner, follow
and maintain such schedule and any modifications
to schedule that may be specified by Owner within
ten (10) percent greater or lesser than the agreed
upon production rates on a monthly basis and
within five (5) percent on a yearly basis. Owner
shall give Contractor reasonable notice of the
mining rates to be followed, and/or any change to
aforementioned rate, to afford Contractor a
reasonable time period to make any adjustments in
its ability to perform the Work.
11.19.4 Mine Plan.
Owner and Contractor acknowledge that
the contract unit price(s) quoted in the
Contractor's Proposal apply specifically to the
Work proposed in the mine plan presented by Owner
at the time of the Contractor's Proposal. Changes
to the mine plan will not result in rate
escalations or reductions unless it is
demonstrated to both parties that such changes
have increased or decreased the haul lengths or
required Work per unit of production by at least
10% from the original mine plan. Such additional
or decreased haulage increments or unit work
requirements will be computed by a method
acceptable to both parties -- e.g., an acceptable
equipment vehicle simulation analysis. Contractor
acknowledges that the Owner plans to update the
mine plan at least once a year or more often as
necessary.
<PAGE>
11.19.5 Changes in Scope.
The schedule and production rate
parameters referred to in Section 11.19.3 above
are not intended by the parties to define a
minimum or maximum Scope of Work under this
Contract.
11.19.6 Clear and Grub
This Work shall consist of clearing,
grubbing, chipping, and/or burning as necessary to
remove and/or dispose of vegetation and debris
within the limits of the mine site.
11.19.7 Remove and Stockpile Topsoil
This Work shall consist of removing and
stockpiling the equivalent of one foot of peaty
surface mat, topsoil and/or plant growth medium.
11.19.8 Drill
Drill patterns shall be designed in a
manner to minimize dilution of ore grade material
and achieve sufficient fragmentation to facilitate
subsequent leaching. Owner reserves the authority
to approve all drill patterns to be used.
Contractor's drillers shall take samples
of drill cuttings, fill out sample tags, fill out
daily drill reports, and prepare the samples for
shipment to the assay lab. Samples retrieved by
the drillers or drill helpers will not include the
subdrill. Subdrill depths will be sufficient to
ensure that bench elevations are mined to + 1
foot. All ramps will be drilled to ramp grade.
Contractor's drills shall be of suitable design
and capability to perform the drilling work at the
operation. Drill hole diameter will be compatible
to pattern spacing and bench height. Contractor
acknowledges that minimizing material movement as
a result of drilling and blasting achieves the
primary efficiency objective. Unless stated
otherwise in the Contractor's Form of Proposal the
specified drill pattern for the base case against
which the Contractor's required Work per unit of
production will be calculated is a 15-foot by 15-
foot pattern, a 6 :-inch diameter hole and a 20-
foot bench.
No subdrilling will be allowed to
penetrate the limits of safety bench crests on the
bench below.
All drill patterns will be approved by
Owner. Should any area drilled not meet the
specified hole spacing, Owner will require the
Contractor, at its expense, to fill in gaps to
obtain samples and to assure bench grades will be
obtainable without the use of dozers.
<PAGE>
All pit benches which daylight will be drilled such that sampling
and blasting meet Owner's requirements for pattern
spacing and bench grade control. The Contractor
should be prepared to add additional blastholes
necessary to mine off benches.
All of the foregoing shall be subject to
Owner's request for control alternatives. Due to
the varied rock fabric, it may be necessary to
implement controlled blasting or other techniques
along the pit walls to prevent excessive breakage
beyond the final pit slope limit, but enable
cleaning to the final design toe to ensure that
catch bench widths are the maximum size possible
within the limits of pit slope and bench face
angles. When pre-splitting is required the hole
spacing is not to exceed in number of feet the
holes diameter in inches B e.g., the pre-split
hole spacing shall not exceed 7 feet given a 6 :-
inch diameter hole.
Contractor shall provide each drill with
a sample collecting device that is approved by
Owner. Owner shall have the right to require a
substitute sampling method if it can be shown that
the Contractor's sampling method does not give a
true indication of the metal values for the total
drill cuttings removed from the hole. Samples
will be taken for all holes drilled at drill
intervals requested by Owner. Contractor will
cooperate with Owner so as to promote Owner's
objective of having assay results within forty-
eight (48) hours after the samples are delivered
to the lab.
11.19.9 Blast
Blasting will be conducted in a safe and
workmanlike manner. The blast round shall be
designed in such a manner as to minimize dilution
of ore grade material and to maintain the
integrity of the pit walls and safety benches. It
will be Contractor's sole responsibility to clear
the area of all personnel and equipment. Blasting
times will be clearly posted at the entrance to
the pit and Owner's personnel will be notified the
morning of the blast as to the location and time.
Blasts will be scheduled whenever possible to
coincide with the end of the day shift.
Contractor will be required to sound an audible 5
minute and 1 minute warning prior to all shots.
Blasting will be controlled; excessive
material displacement will not be tolerated. FLY
ROCK WILL NOT BE TOLERATED. Contractor will use
whatever means necessary to confine shot
displacement and achieve desired breakage.
Explosive purchase, storage, handling
and permitting will be the Contractor's sole
responsibility. An area will be provided by Owner
for the placement of explosive storage facilities.
Contractor shall clearly state the
average powder factor to be used in calculating
its base price in the Contractor's Form of
Proposal.
<PAGE>
11.19.10 Load Ore and/or Waste
Contractor shall load ore and waste with
front end loaders unless otherwise specified.
Contractor will adhere strictly to Owner's
specification for Ore and Waste Control (see
Section 11.19.13) to ensure that ore dilution is
minimized. Work shall include loading ore and/or
waste from 10-foot and/or 20-foot benches as
directed by the Owner.
11.19.11 Haul
Ore and waste from the mine shall be
hauled to areas specified in the mine plan
drawings or as reasonably dictated by the Owner
after consultation with Contractor. Work shall
include hauling ore to the crusher or the leach
pad and end dumping it on 10-foot to 20-foot lifts
as dictated by the Owner. Work shall include
hauling waste to the appropriate waste dumps as
shown on the drawings.
11.19.12 Pits, Roads and Dumps
Mining will be done in such a manner as
to operate and maintain the various mine
works/areas of activity including highwalls,
safety benches, ramps, roads, pit working areas,
waste dumps and topsoil stockpiles in a safe and
workman like manner.
The pit design is summarized below and
described in more detail in the "Illinois Creek
Project, Preliminary 1995 Mine Plan" by USMX which
is dated November 1995, and in the letter to the
Contractor from the Owner's representative, James
A. Sittner, which is titled, "Illinois Creek
Project, September 20, 1995 Site Visit," which is
dated September 15, 1995.
There are four main pits at Illinois
Creek B namely, West Pit, Central Pit, Central Pit
Extension, and East Pit. Each pit will be
developed on 20-foot benches unless directed
otherwise by Owner. Owner may elect to require
Contractor to load ore from 10-foot benches in
order to minimize dilution. Contractor shall be
responsible for maintaining the pit floors free of
rock and other debris. Contractor shall clear all
bench toes and ensure that the bench is excavated
to the design limits. Over digging benches is
prohibited unless ordered by Owner. Safety
benches will be developed on 40-foot to 60-foot
intervals as determined by Owner. Bench face
angles will be kept as steep as practicable in
order to increase the width of the safety benches.
Safety benches will vary in width from 20-feet to
30-feet when double benching and from 30-feet to
50-feet when triple benching. The overall pit
slopes will vary from 45 degrees to 55 degrees depending on
ground conditions. Contractor is responsible for
inspecting all working areas at the mine site at
the start of each shift and more often if
necessary. Pit walls shall be scaled to MSHA
standards. Rocks, earth and any other loose
debris shall be pulled back from the pit edges to
prevent loose material from falling into the pit.
Contractor shall be responsible for all surface
water dewatering necessary to keep pit working
areas dry and free from snow and ice. The Owner
shall be responsible for any ground water
dewatering necessary to keep the ground water
table below the pit limits.
<PAGE>
Contractor shall be responsible for
developing and maintaining all haul roads and mine
access/service roads in the mine area which are
necessary to develop the mine and maintain the
proper production schedule. Roads will be
constructed using normal cut and fill techniques.
In the event that fill material is required to
surface a road, the Contractor shall use clean,
inert quartzite or dolomitic limestone borrowed
specifically for this purpose from areas approved
by Owner. All roads shall be developed as shown
in the attached "Illinois Creek Project,
Preliminary 1995 Mine Plan," or in conjunction
with Owner. Normal access/service road width will
be 18 feet. Two lane haul road width will be 65
feet, and one lane haul road width will be 42
feet. All mine roads shall be constructed with
appropriate safety berms and turn outs as approved
by Owner. Pit ramps grades shall not exceed 10
percent unless approved by Owner. Haulage road
grades shall not exceed 8 percent unless approved
by Owner. Contractor shall water roads as
necessary to minimize dust hazards and to adhere
to strict compliance with Owner's Air Quality
Permit Application a copy of which is attached.
Contractor acknowledges that adequate dust control
during hot, dry days may require watering roads at
rates over 90 gallons per minute.
Waste dump and topsoil stockpiles will
be located near the mine pits and other areas of
construction to minimize haulage and other Work.
The locations of topsoil stockpiles will be spread
over the top of the waste dumps in order to
minimize reclamation costs. Waste dumps will be
built in benches so that they blend into the
natural topography and so that their overall slope
does not exceed 3:1. Waste dumps will be graded
so that rain and snow melt run off will be
directed into the surface drainage system. Waste
dumps will be reclaimed as soon as practicable.
11.19.13 Ore and Waste Control
Ore control is critical to minimize
dilution. Mining of ore and material adjacent to
ore zones shall be performed during the day shift.
The following ore control procedures will be
observed in all pit mining:
1. Each blasthole on a level will
be numbered consecutively by blast round and
staked by the Contractor.
2. The drill operator will
collect, bag and identify a continuous sample
of drill cuttings from each blasthole with no
subdrilling material. Stakes, bags and tags
will be supplied by Contractor. Stakes shall
be 3/8" x 12" lathe; bags shall be 10" x 17"
olefin type; tags shall be of waterproof
material.
3. Owner will collect and assay all
samples.
4. The blasthole pattern will be
surveyed by Owner to record each blasthole
identification number, location and mining
level.
<PAGE>
5. Owner will merge the blasthole
assay information with the survey data and
prepare a detailed blasthole map.
6. Owner will determine the
outline of the ore and waste areas for each
blast round. Owner will prepare bench level
plans showing all ore and waste areas to be
excavated. Owner in consultation with the
Contractor shall determine whether an area is
to be ripped, blasted or smooth-wall blasted.
7. Owner will resurvey the area
after blasting and flag the material.
Flagging will consist of 4' wood lathe with
colored ribbon marking the boundary corners
and wire pin flags (with colored flags) as
delineating markers. The following colors
will denote material types:
a. Red & White - Ore,
b. Yellow - Open to Ripping,
c. Blue - Waste, and
d. Orange - No-Dig Area.
Other colors may be used to
designate special handling of material to be
mined.
8. Audible signals shall be
employed by the Contractor to ensure the
proper material destination is identified to
Contractors operators and Owner's
Representatives.
9. Weekly planning meetings will
be conducted with Owner's personnel and
Contractor's superintendent and pit operating
supervisors to discuss mining rates,
schedules, and plans of operations.
10. Ore zone mining will be under the
direct control of Owner at all times.
11. Some ore-waste fringe areas
will have a 4 hour delay for fringe sample
turn around. Other working areas will be
provided during these delays.
12. Owner's representative and
Owner's ore control personnel will be allowed
direct communications with Contractor's
loader operators and pit supervisors to
achieve Owner's ore control objectives.
13. Contractor will record the
number of truckloads of each material
category by origination and destination and
submit copies of the report daily to Owner.
<PAGE>
11.19.14 Surveying
Pit surveying is the sole responsibility
of the Owner, with the exception of bench
elevation control. Owner will perform the
following as control to pit operations:
1. A bench marker at each working area
will be established once per week.
2. The corners and design toes of
each bench will be located as mining clears
the previous bench.
3. Weekly crests of active mining
benches will be located for Owner records.
Month-end crests of active mining benches
will be located for volumes calculations and
payments.
4. Drill holes will be surveyed
prior to shooting the blasthole pattern.
5. Dig plans will be established
after blasting and prior to mining the
blasted material.
Contractor will provide and maintain the
following bench elevation control in the pit:
1. Elevation checks as needed and no
less than three (3) times daily of each
active mining face. On-going elevation
control will be the responsibility of the
Contractor.
2. Elevation control in the
active mining areas will be + 1 foot. (See
penalty clauses.)
3. Strict adherence to Owner's ore
control plan and markings. No dig areas are
to be observed at all times. (See penalty
clauses.)
4. Survey monuments will be
preserved in all working areas. (See penalty
clauses.)
<PAGE>
12.0 ATTACHMENTS
The following drawings, specifications, and other documents
identified below are incorporated herein and made part of
this Section III, Contract Specifications by this reference.
Contractor acknowledges receipt of each of the items listed
in this Section 12.0.
1. Drawings
a. USMX, INC., Figure 1-3, Rev. "A" titled, AMillsite
Permit Boundary," December 28, 1995 (Scale 1" to 2000').
b. USMX, INC., Drawing 1, Rev. "B" titled, "Mine Site
General Arrangement," November 21, 1995 (Scale 1" to
300').
c. USMX, INC., Drawing 2, Rev. "D" titled, "Regional
Site Layout," November 21, 1995 (Scale 1" - 2000').
d. USMX, INC., Drawing 3, Rev. "A" titled, "Mine Site
Reclamation and Areas of Disturbance, Year 1," November
21, 1995 (Scale 1" to 300').
e. USMX, INC., Drawing 4, Rev. "A" titled, "Mine Site
Reclamation and Areas of Disturbance, Year 2," November
21, 1995 (Scale 1" to 300').
f. USMX, INC., Drawing 5, Rev. "A" titled, "Mine Site
Reclamation and Areas of Disturbance, Year 3," November
21, 1995 (Scale 1" to 300').
g. USMX, INC., Drawing 6, Rev. "A" titled, "Mine Site
Reclamation and Areas of Disturbance, Year 4," November
21, 1995 (Scale 1" to 300").
h. USMX, INC., Drawing 7, Rev. "A" titled, "Mine Site
Reclamation and Areas of Disturbance, Year 5," November
21, 1995 (Scale 1" to 300").
i. USMX, INC., Drawing 8, Rev. "A" titled, "Mine Site
Reclamation and Areas of Disturbance, Year 6," November
21, 1995 (Scale 1" to 300").
j. USMX, INC., Drawing 1, Rev. "C" titled, "Phase 1
Leach Pad Grading Plan and Stage 1 Berm Construction,"
January 11, 1996 (Scale 1" - 100').
k. USMX, INC., Drawing 2, Rev. "C" titled, "Phase 1
Finished Leach Pad Configuration," December 15, 1995
(Scale 1" to 100').
l. USMX, INC., Drawing 3, Rev. "B" titled, "Stage 2
Berm Construction," November 21, 1995 (Scale 1" to
100').
m. USMX, INC., Drawing 4, Rev. "C" titled, "Phase 2
Finished Leach Pad and Optional Stage 3 Berm
Construction," January 11, 1996 (Scale 1" to 100').
n. USMX, INC., Drawing 5, Rev. "C" titled, "Heap
Leach Facility Cross Sections," January 10, 1996 (Scale
is variable).
o. USMX, INC., Drawing 6, Rev. "C" titled, "Heap
Leach Liner and Leak Detection Details," January 11,
1996 (Scale is variable).
p. USMX, INC., Drawing 7, Rev. "B" titled, "Ultimate
Heap Configuration Phase 2 Pad and Optional Stage 3
Berm," November 21, 1995 (Scale 1" to 100').
q. USMX, INC., Drawing 8, Rev. "B" titled, "Reclaimed
Heap Configuration," November 21, 1995 (Scale 1" to
100').
r. SRK, Inc., Figure 1, Rev. "A" titled, "Year 1
Illinois Creek Project," May 1995 (Scale 1" to 200').
Delivered to Bidders under separate cover on October 3,
1995.
s. SRK, Inc., Figure 2, Rev. "A" titled, Year 2
Illinois Creek Project," May 1995 (Scale 1" to 200').
Delivered to Bidders under separate cover on October
3, 1995.
t. SRK, Inc., Figure 3, Rev. "A" titled, "Year 3
Illinois Creek Project," May 1995 (Scale 1" to 200").
Delivered to Bidders under separate cover on October 3,
1995.
<PAGE>
u. SRK, Inc., Figure 4, Rev. "A" titled, "Year 4
Illinois Creek Project," May 1995 (Scale 1" to 200').
Delivered to Bidders under separate cover on October 3,
1995.
v. SRK, Inc., Figure 5, Rev. "A" titled, "Year 5
Illinois Creek Project," May 1995 (Scale 1" to 200').
Delivered to Bidders under separate cover on October 3,
1995.
w. SRK, Inc., Figure 6, Rev. "A" titled, "Year 6
Illinois Creek Project," May 1995 (Scale 1" to 200').
Delivered to Bidders under separate cover on October 3,
1995.
x. SRK, Inc., Figure 5, Rev. "A" titled, "Typical
Open Pit Mine Slope Geometry Configurations," January
1995.
y. SRK, Inc., Figure 6, Rev. "A" titled, "In-Pit Mine
Haul Road Design Typical Section (50 Ton Truck),"
January 1995.
z. SRK, Inc., Figure 7, Rev. "A", titled "Typical
Access Road Sections," January 1995.
aa. SRK, Inc., Figure 8, Rev. "A" titled, "Channel
Sections," November 22, 1995.
1. Specifications
a. SRK, Inc., for USMX, INC.
titled "Illinois Creek Project Technical Specifications
For Earthwork Construction Heap Leach Facility,"
January 1996.
b. SRK Inc. for USMX, INC.
titled "Illinois Creek Project Technical Specifications
for Synthetic Liner Installation Heap Leach Facility,"
January 1996.
c. USMX, INC., titled,
"Illinois Creek Project, Mine Services and Earthworks
Contract C-300, Section III - Contract Specification,
Section 11.0 General Work Specifications and Methods of
Execution," November 1995.
1. Documents
a. USMX, INC., "Illinois Creek Project Schedule of
Required Insurance," February 22, 1995.
b. USMX, INC., A1994 Year End Report, Illinois Creek
Project, Alaska," December 15, 1995. This document was
delivered to each Bidder on September 20, 1995.
c. Letter from Ms. Debra A. Barbee (Tanana Chiefs
Conference, Inc.) to Mr. Robin Tolbert (NPMC), March 6,
1995. Attached is a copy of the "Tanana Chiefs
Conference, Inc. - Human Resource Data Bank".
d. Letter from James A. Sittner (USMX) to Bidders
(D.H. Blattner & Sons, Brown & Root Civil, Cook Inlet
Region, Inc. and Alaska Interstate Construction, Inc.),
September 15, 1995. It is titled, "Illinois Creek
Project, September 20, 1995 Site Visit".
e. Steffen Robertson and Kirsten (U.S.), Inc.,
"Illinois Creek, Heap Leach Design Report", November
1995.
f. Steffen Robertson and Kirsten (U.S.), Inc.,
"Illinois Creek, Stormwater Pollution Prevention Plan",
November 1995.
g. USMX, INC., "Illinois Creek Project, Preliminary
1995 Mine Plan", November 1995. It contains
preliminary data pertaining to Work quantities,
production schedule, equipment requirements, and design
parameters. The final A1995 Mine Plan" will not be
completed by the time the Bids are due. The preliminary
plan consists of the following:
(1) Preliminary Design Parameters;
(2) Equipment Requirements;
(3) Contractor Parameter, Assumptions, and
Requirements; and
(4) Figures 1-6, Showing Illinois Creek Mine
Plan by Year.
<PAGE>
h. TRC Environmental Corporation, "Air Quality Permit
Application, USMX, INC., Illinois Creek Project,
Alaska," October 19, 1995.
i. USMX, INC., "Illinois Creek Project, Project
Description by Area of Activity," November 1995.
j. Letter from Robert Falletta (USMX) to Bidders
(D.H. Blattner & Sons, Brown & Root Civil, and Alaska
Interstate Construction, Inc.) titled "Illinois Creek
Project, Alaska Haulage Profile Data," October 3, 1995.
k. Letter from Robert Falletta (USMX) to Bidders
(Alaska Interstate Construction, Inc., Brown & Root
Civil, and D.H. Blattner & Sons) titled, "Illinois
Creek Project, Alaska 200 Scale Preliminary Mine Plan
Maps," October 4, 1995.
<PAGE>
ILLINOIS CREEK PROJECT
MINE SERVICES AND EARTHWORKS CONTRACT
C-300
SECTION IV
FORM OF PROPOSAL
<PAGE>
TO: USMX, INC. ("Owner")
141 UNION BLVD., SUITE 100
LAKEWOOD, CO 80228
Attn: Mr. James A. Sittner
SUBJECT: Proposal for Illinois Creek Project - Mine Services and
Earthworks Contract C-300
The undersigned Bidder certifies that it has examined the
Invitation to Bid and all attachments listed therein for the
above subject Contract; that it has checked all prices shown in
this Bid and understands that neither Owner will not be
responsible for any errors or omissions made by the Bidder in the
preparation of this Bid.
It is understood that this Bid constitutes a firm offer which
cannot be withdrawn for ninety (90) calendar days after the date
set for closing of Bids. It is further understood that the
prices quoted herein will not be subject to any adjustment for
escalation for the calendar years 1995 through 1996.
Bidder agrees that the documents included with the Bid, a copy
each of which have been furnished to Bidder by Owner, are the
basis of this Bid, and further agrees that if this Bid is
accepted, said documents shall form part of the Contract
Agreement between the Contractor and Owner.
Bidder acknowledges receipt, understanding and full consideration
of the following addenda:
("None")
The undersigned Bidder agrees that if awarded the Contract, it
will commence the Work promptly upon receipt of notice to
proceed; it will perform the Work diligently and in accordance
with the Contract Documents, and will fully complete the Work
within the agreed time limits.
Company: Date Signed:
By (sign):
Business Address: Name (print):
Title:
Phone No.:
Contra. License & Classification: Company LegalStatus:
(corporation,partnership, etc.)
<PAGE>
ILLINOIS CREEK PROJECT
MINE SERVICES AND EARTHWORKS CONTRACT C-300
SECTION IV
FORM OF PROPOSAL
Table of Contents
SECTIO TITLE PAGE
N NO.
1.0 PREAMBLE 4
2.0 BID SCHEDULE 6
3.0 EQUIPMENT - CHANGED OR EXTRA WORK 7
4.0 MATERIAL PURCHASES - CHANGED OR EXTRA WORK 8
5.0 HOURLY RATES - CHANGED OR EXTRA WORK 9
6.0 EQUIPMENT TO BE USED 10
7.0 SUBCONTRACTORS, SUPPLIERS AND LABOR 11
8.0 SCHEDULE 12
9.0 ATTACHMENTS TO PROPOSAL 13
10.0 DESIGNATION OF REPRESENTATIVES 14
11.0 PERFORMANCE AND PAYMENT BOND 15
12.0 EXCEPTIONS AND QUALIFICATIONS 16
1.0 PREAMBLE
<PAGE>
1.1 The Bid Schedules in Section 2.0 of this Form of
Proposal are made up of eight parts as follows:
1.1.1 Mobilization/Demobilization.
1.1.2 Earthworks Construction/Development of
the following:
Onsite infrastructure including site
access, transportation, and general plant site
preparation;
Mine area including site preparation;
Crusher area including site
preparation, construction of an adequate run-of-
mine stockpile area, retaining wall and work
area for Contractor=s portable crushing,
screening and wash plant;
Process modified valley fill leach
pad area including site preparation, all cut,
structural fill, silt liner fill, drain rock,
leak detection system, and synthetic liner
foundation preparation;
Process lime kiln area including site
preparation;
Stormwater diversion system including
site preparation, permanent infiltration node,
temporary stormwater collection ponds,
diversion ditches and culverts, and other
stormwater BMP=s.
1.1.3 Contract Mining
Drill and sample all ore and waste;
Blast and/or rip ore and waste;
Load ore and waste from 10-foot or 20-
foot benches;
Haul ore to leach pad or crusher and
waste to dump;
Pits, roads and dumps construction and
maintenance;
Mine support;
Mine general and administration.
1.1.4 Contract Crushing
Crush overliner material for the
leach pad;
Crush and screen dolomitic limestone
to produce feed for the lime kiln;
Crushed ore rehandle.
1.1.5 Contract Loading of Leach Pad:
End dumping;
Pushup dumping.
1.1.6 Contract Maintenance and Warehouse
Services.
1.1.7 Indirect Contract Work.
1.1.8 Other Contract Work.
The Bidder must bid on all eight of these parts as
the Owner has elected to award only one contract for
this Work. The Bid Schedule in Section 2.0 of this
Form of Proposal shall apply if Owner elects to award
this Contract.
<PAGE>
1.2 Bidders who are qualified by experience, who have
demonstrated contract mine services and earthworks
construction capability, who have the appropriate
supervisory staff, and who have the financial capacity
are encouraged to bid on all parts of the Work as
partial bids will not be considered.
1.3 The Proposal shall include a price for each item
included in the part(s) bid.
1.4 The prices indicated by Bidder under Section 2.0,
Bid Schedule, shall include, but shall not be limited
to, all costs appropriate to the bid item including the
following:
! Labor,
! Supervision,
! Payroll Benefits,
! Taxes,
! Insurance,
! Travel and Subsistence (if
required),
! Construction Equipment,
! Small Tools and Consumables,
! Vehicles,
! Materials (as specified),
! Power, Water and Fuel,
! Overhead, and
! Profit.
1.5 Bidder shall allow in its prices for the
requirements of the Contract Documents, Site location,
project schedule, working conditions, and effects of
the weather. Price shall include the transportation of
all equipment and material to the job Site unless
otherwise stated.
1.6 Bidder shall allow in its prices for the provision
of sufficient quantities of equipment and labor for
each part of the Work bid to complete all work within
the Schedule. Equipment shall not be transferred from
one work location to another without Owner's prior
approval.
1.7 The rates quoted under Sections 4.0, 5.0, and 6.0
of the Proposal will be used only for work outside the
scope of the Contract and for which a unit or lump sum
price does not exist or cannot be established. On an
urgent basis these rates may be used to perform changed
or extra work on a time and materials basis under the
field Work Authorization procedures.
1.8 Mobilization shall include the transportation and
establishment of construction equipment, personnel,
temporary facilities and all supplies to the site of
the Work unless otherwise stated. Contractor shall
work with Owner to minimize all mobilization costs.
Owner will pay the cost of transporting Contractor=s
equipment, supplies and fuel from the agreed point of
departure to the mine site.
1.9 Demobilization shall include removal of all
mobilized item listed under 1.8 and final clean up of
all work areas.
<PAGE>
<TABLE>
2.0 BID SCHEDULE
QUANTITIES BY AREA OF ACTIVITY
<CAPTION>
QUANTITY UNIT UNIT TOTAL
PRICE PRICE
() () ($) ($)
<S> <C>
1 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 9
1 10
0
1 11
1
1 12
2
1 13
3
1 14
4
1 15
5
1 16
6
1 17
7
1 18
8
1 19
9
2 20
0
2 21
1
2 22
2
2 23
3
2 24
4
2 25
5
2 26
6
2 27
7
2 28
8
2 29
9
3 30
0
3 31
1
3 32
2
3 33
3
3 34
4
3 35
5
3 36
6
3 37
<FN>
YR = Year LS = Lump Sum LF = Linear Feet BCY = Bank Cubic Yards
MN = Month SF = Square AC = Acres BNR = Bid not Requested
Feet
DY = Day CY = Cubic TN = Tons NBI = No Bid Item
Yards
</FN>
</TABLE>
(Company or Signature)
<PAGE>
3.0 EQUIPMENT - CHANGED OR EXTRA WORK
The Bidder shall list, on separate attachments, in the
format below, equipment rates for the equipment that it
proposes to use in performing the Work. Rental rates quoted
shall be used for changed or extra work (if any) performed
on a reimbursable basis. Equipment rental rates shall
include full compensation for rental including, but not
limited to, maintenance, fuel, lubricants, overhead, taxes,
and profits. Operator's time shall be shown in Section 5.0
of Form of Proposal. Rental rates shall be based on one
(10) hour shift per day, 6 days per week, unless other wise
specified in Section 8.2.
Description Rental Rates
Capacity, Horsepower, Hourly Daily Weekly Monthly
etc.
(Company or Signature)
<PAGE>
4.0 MATERIAL PURCHASES
Contractor shall be reimbursed for material purchased by
written authority of the Owner for work performed outside
the scope of the base contract or as directed by the Owner
on the following basis.
Cost of Material plus % profit and overhead plus
appropriate taxes and freight.
(Company or Signature)
<PAGE>
5.0 HOURLY RATES - CHANGED OR EXTRA WORK
Contractor shall be reimbursed for labor hours expended on
the basis of the following hourly rates. Rates shown shall
include wages, benefits, taxes and insurance, small tools
and comsumables, overhead, subsistence, and profit. Shift
average rates shall include overtime and shift differentials
costs.
Classification Straight Time Over Time Sunday/Saturday Holiday
(Company or Signature)
<PAGE>
6.0 EQUIPMENT TO BE USED
The Bidder shall list, on separate attachments, in the
format below, for each part of the work being bid, the major
equipment that it proposes to use to perform the Work.
Equipment that will be used on multiple work areas shall be
listed only once under the section having primary usage.
Equipment No. HP Unit Wt. Model/Year Capacity
Description Condition
(Company or Signature)
<PAGE>
7.0 SUBCONTRACTORS, SUPPLIERS AND LABOR
7.1 Bidder shall indicate below all work intended to
be subcontracted to others. Include any design work to
subcontracted and enclose a resume for each key
supervisor.
7.2 Bidder shall indicate below all major suppliers of
equipment and materials including shop fabricators.
(Company or Signature)
<PAGE>
8.0 SCHEDULE
8.1 The Bidder shall prepare and submit a bar chart
schedule.
8.2 The Bidder plans to perform the Work on the following
basis:
(Company or Signature)
<PAGE>
9.0 ATTACHMENTS TO PROPOSAL
9.1 The Bidder shall submit the following attachments with
this Proposal:
9.1.1 Construction staff organization
chart for each part of the Work bid, including a
brief resume for each key employee. Owner
reserves the right to request replacement of any
candidate offered.
9.1.2 Personnel deployment graph
(coordinated with the above schedule) showing the
number of persons required to complete the various
categories of Work on schedule.
9.1.3 Resumes for representatives named
under Section "10.0 DESIGNATION OF
REPRESENTATIVES".
(Company or Signature)
<PAGE>
10.0 DESIGNATION OF REPRESENTATIVES
10.1 Bidder designates the following as its principal
representative who, on behalf of the Contractor, will
have complete charge of the Contract:
Name:
Capacity:
10.2 Bidder designates the following as its principal
representative who, on behalf of Contractor, will have
complete charge of the Work performed in the field:
Name:
Capacity:
Bidder shall submit with the Proposal a brief
resume of experience for each of the above named.
(Company or Signature)
<PAGE>
11.0 PERFORMANCE AND PAYMENT BOND
In the event of request for a bond:
Cost of Performance and Payment Bond
(to be paid as an additive amount to
the total Contract Price)
Name of Surety (not agent):
Address:
Contract: Phone No.
(Company or Signature)
<PAGE>
12.0 EXCEPTION AND QUALIFICATIONS
Recommended alternates, exceptions and qualifications taken
by Bidder to any of the documents furnished with this
Invitation, or clarifications to this Proposal shall be
stated below and, if none, Bidder shall state "NONE". (If
extensive, submit detailed letter.)
(Company or Signature)
<PAGE>
ILLINOIS CREEK PROJECT
MINE SERVICES AND EARTHWORKS CONTRACT
C-300
SECTION V
CONTRACT AGREEMENT
<PAGE>
ILLINOIS CREEK PROJECT
MINE SERVICES AND EARTHWORKS CONTRACT C-300
SECTION V
CONTRACT AGREEMENT
THIS AGREEMENT, by and between USMX, INC. of Lakewood, Colorado
(hereinafter referred to as "Owner"); and
D.H. Blattner & Sons, Inc.
16733 County Road #9
Avon, MN 56310
Phone: (612) 356-7351
Fax: (612) 356-7392
(hereinafter referred to as "Contractor").
WITNESSETH:
WHEREAS, Owner is constructing an open pit gold and silver mine
and related heap leach processing facilities located near
Illinois Creek, Alaska (hereinafter referred to as the "Project")
and work required by this contract is a part of the Project; and
WHEREAS, Contractor has submitted its proposal to Owner for
performance of certain services in connection with the Project;
and
WHEREAS, Owner has accepted the Proposal of Contractor and the
parties now desire to evidence their agreement for performance of
such services for the compensation specified herein.
NOW, THEREFORE, the parties hereto agree as follows:
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1.0 CONTRACT DOCUMENTS
The Work shall be performed in accordance with the following
documents, all of which together with attachments, if any,
referenced therein or in this Contract Agreement are hereby
incorporated as a part of the Contract, by reference, to the
same extent as if they were fully set forth herein, and, all
of which together with the Contract Agreement are referred
to all inclusively as the "Contract".
1.1 Invitation to Bid more fully described in Section 46 of
Section II - General Terms and Conditions;
1.2 Section I - Instructions and Information for Bidders
included with Invitation to Bid;
1.3 Section II - General Terms and Conditions, Rev.
2/29/96;
1.4 Section III - Contract Specification, Rev. 2/29/96;
1.5 Section IV - Form of Proposal included with Invitation
to Bid;
1.6 Section V - Contract Agreement. Rev. 2/29/96;
1.7 Contractor's Proposal, Dated
December 27, 1995, as modified by Attachments
described in Section 46 of Section II - General
Terms and Conditions;
1.8 Contract Amendments (as required);
1.9 Drawings, specifications, and other documents
referred to as "Attachments" in any of the above,
provided that in the event of any conflict among the
Attachments (the "Attachments"), the Attachment bearing
the latest date shall prevail; and
1.10 Notice of Award, Dated January 19, 1996.
The Contract Documents are intended to describe all
obligations of Contractor and Owner, and the
responsibilities and authority of the Owner, and are
intended to be correlative and complementary. Any work
required by one document and not mentioned in another shall
be executed as though required by all documents. Should
there be any conflict among any of the above documents and
the Contract Agreement, the Sections I through V of the
Contract Agreements will prevail over the other document;
provided, however, that with respect to matters in Section
III - Contract Specifications, the provisions of the
Attachments shall prevail, and with respect to matters in
Attachment A and Addendum A to Schedule II - General Terms
and Conditions, Attachment A and Addendum A shall prevail.
2.0 WORK TO BE PERFORMED
The Work covered by this Contract covers the furnishing of
all supervision, labor, equipment, temporary facilities,
tools, materials and supplies required to perform contact
mine services and earthworks at the Illinois Creek Project
site. The Contract Specification and Form of Proposal
provide a detailed definition of the areas of activity
included in the Scope of Work. The Work will be performed
as described in Contractor's Proposal.
3.0 SCHEDULE OF WORK
The parties hereby confirm that Contractor is prepared to
begin to mobilize all manpower, material, equipment and
supplies necessary to complete all the Work covered by this
Contract no later than 10 working days after receiving the
Notice of Award from Owner. Contractor shall not commence
the Work until it has received a written notice to proceed
from the Owner.
4.0 DESIGNATION OF REPRESENTATIVES
Pursuant to Section 5.0 of Section II - General Terms and
Conditions of the Contract the parties designate the
following representatives:
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For Owner: James A. Sittner
Robert R. Monok
James A. Smith
Stephen Dieker
For Contractor: Brad Luhman
Ed Colter
Robert Cameron
Owner reserves the right to request from Contractor the
removal of any representative, supervisor, or general
employee at any time for unacceptable behavior, non-
cooperation or any other reasonable cause.
All Contract notices and principal correspondence shall be
directed to the above representative or his duly appointed
alternate or replacement.
5.0 COMPENSATION TO BE PAID
Owner in consideration of satisfactory, timely and complete
performance by Contractor agrees to make payment to
Contractor at the fixed prices and rates established for the
Contract in the Form of Proposal.
6.0 INVOICING INSTRUCTIONS
Invoices, together with supporting documentation developed
in the field and approved by the Owner, shall be transmitted
in triplicate as requested to the Owner=s
representative/Owner at the Illinois Creek Mine Site. Until
a field office is established invoices may be sent to the
following address:
USMX, INC.
141 Union Boulevard, Suite 100
Lakewood, CO 80228
ATTN: James A. Sittner
A ten percent (10%) retention will be withheld by Owner from
each progress payment until the work is 100% complete and
accepted.
7.0 BONDING AND INSURANCE
Contractor's attention is directed to Section 42, of the
General Terms and Conditions of the Contract. Contractor
shall submit all required certificates of insurance for
itself and for each of its subcontractors naming Owner,
USMX, INC., and any affiliates, joint ventures or partners,
Northern Pacific Mining Corporation ("NPMC") and Cook Inlet
Region, Inc. ("CIRI") and their respective employees,
shareholders, officers, directors, agents, representatives,
attorneys, successors and assigns as additional insured on
each such policy.
8.0 SPECIAL TERMS OF AGREEMENT
NONE
9.0 EFFECTIVE DATE AND CONTRACT TIME
Effective date of this Agreement: The date on which signed
by Owner.
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The Contract is effective (the Contract Time) from the
aforementioned effective date for a period of six years, or
until the completion of the Work specified in the Contract
Agreement, whichever is sooner.
10.0 CONTRACT EXCLUSIVE
This Contract embodies the entire agreement between Owner
and Contractor. Contractor represents that, in entering
into this Contract, it does not rely on any previous oral,
written, or implied representation, inducement or
understanding of any kind or nature.
11.0 NOTICES
All notices and other required communications to the parties
shall be in writing and shall be addressed respectively as
follows:
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(a) To Owner: USMX, Inc.
141 Union Blvd. Suite 100
Lakewood, CO 80228
Fax :(303) 980-1363
Attn: James A. Sittner
(b) To Contractor: D.H. Blattner & Sons, Inc.
16733 County Rd. #9
Avon, MN 56310
Fax: (612) 356-7392
Attn: David H. Blattner
All notices shall be given (i) by personal delivery to the
addressee or (ii) by electronic communication, with a
confirmation of transmission and sent by personal delivery
or registered or certified mail, return receipt requested,
or (iii) registered or certified mail, return receipt
requested. All notices shall be effective and shall be
deemed delivered (i) if by personal delivery on the date of
delivery if delivered during normal business hours, and, if
not delivered during normal business hours, on the next
business day following delivery, (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 party.
12.0 TIME OF THE ESSENCE
Time is of the essence for the performance by Contractor of
all obligations to be performed by it pursuant to the
Contract.
IN WITNESS WHEREOF, the parties execute this Contract as follows:
CONTRACTOR
Thus done and signed at
By: (print name of signer) for and on behalf
of Contractor, on this day of , 1996.
D. H. Blattner & Sons, Inc.
(Company Name)
Witness By:
Capacity:
<PAGE>
OWNER
Thus done and signed at Lakewood, Colorado
By: (print name of signer) for and on behalf
of Owner, on this day of , 1996.
USMX, Inc.
(Company Name)
Witness By:
Capacity:
March 20, 1995
Mega Metals, Inc.
Mega Minerals S.A.
Mr. Gregory Pusey
Mr. John Drejer
Mr. Gary McAdam
1111 Washington Street
Golden, CO 80401
Gentlemen:
This letter is to set forth the terms of our binding agreement
("Letter Agreement") concerning certain mining concessions in
Ecuador.
1. Representations and warranties. You jointly and
severally (collectively, as "Sellers") represent and warrant to
USMX, Inc. ("USMX") as follows:
A. Gregory Pusey, John Dreier and Gary McAdam
("Individuals") collectively own the majority of all of the issued
and outstanding shares of stock of Mega Metals, Inc., a Colorado
corporation ("Mega Metals (U.S.)")
B. To the best of their knowledge, the Individuals own,
for the benefit of Mega Metals (U.S.), all of the issued and
outstanding shares of stock of Mega Minerals S.A., an Ecuadorian
company ("Mega Minerals (Ecuador)")
C. To the best of Sellers' knowledge, Mega Minerals
(Ecuador) has been validly formed and organized and is in good
standing, and none of its shares of stock are subject to any liens
or encumbrances or restrictions on transfer. Mega Minerals
(Ecuador) has no current or contingent liabilities, and its only
assets are a bank account, the balance of which is less than
$5,000, and the right to acquire certain mineral concessions
pursuant to the Jeffcock Agreement described in paragraph l.D
below.
D. Mega Metals (U.S.) is a party to a certain letter
agreement dated october 3, 1994 and subsequently amended
(collectively, the "Jeffcock Agreement"), copies of which letter
agreement and amendments are attached hereto as Exhibit A, with an
individual named Pippa Jeffcock, plus additional parties, and
Minera Revenge S.A., an Ecuadorian company partially owned by Ms.
Jeffoock. Ms. Jeffcock, Minera Revenge S.A. and associates shall
be described collectively herein as "Jeffcock". To the best of
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Sellers' knowledge, Jeffcock owns three concessions and may be able
to acquire up to an additional nine concessions from the Government
of Ecuador if those concessions are made available by the
Government. The twelve concessions described in this paragraph l.D
are described more specifically on Exhibit a hereto.
E. To the best of Sellers' knowledge, other than as
described in paragraph 1.11 below, each of the three concessions now
owned by Jeffcock is valid, in good standing, current in payments,
and free of all liens, encumbrances or claims thereto by third
parties, other than a possible claim by Black Swan Gold Mines Ltd.
Each of these concessions and the Jeffcock Agreement are fully
assignable to Mega Minerals (Ecuador) or to an Ecuadorian
subsidiary of USMX. The Jeffcock Agreement is in full force and
effect, and none of Sellers are subject to a declaration of default
thereunder.
F. To the best of Sellers' knowledge, none of the
properties or lands within the boundaries of the concessions
described in Exhibit B are subject to any environmental liabilities
or obligations. To the best of Sellers' knowledge, none of those
properties or lands are subject to any restrictions or impediments
to the exploration, development and mining thereof, other than as
specified in the documents granting the concessions.
G. To the best of Sellers' knowledge, Mega Minerals
(Ecuador) is at present not subject to Ecuadorian or United States
tax liabilities, contingent or otherwise, and to the best of
Sellers' knowledge, consummation of the terms contained by this
Letter Agreement will not give rise to any present tax liabilities
on the part of Mega Minerals (Ecuador) or USMX.
H. To the best of Sellers' knowledge, costs that are
currently pending and that are related to the concessions now owned
by Jeffcock or that have been made available to Jeffcock for
acquisition are as follows and collectively do not exceed $120,000:
(I) Approximately $45,000 for governmental fees
and taxes on the concessions;
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(ii) approximately $30,000 to be paid to Jeffcook
to effectuate the transfer of the Jeffcock
concessions described in this paragraph 1.1+ to
Mega Minerals (Ecuador); and
(iii) approximately $20,000 owing to Sellers'
Ecuadorian counsel.
2. USMX Right to Assignment of Stock or Assets. Sellers
hereby agree to assign to USMX or to its designee either:
A. All of the shares of stock of Mega Minerals
(Ecuador) (the "Stock"); or
B. all of Mega Minerals (Ecuador)`s right, title and
interest in and to the concessions owned by it and in and to the
Jeffoock Agreement (collectively, the "Assets")
At any time within 30 days after the date of this better
Agreement, USMX shall instruct Sellers in writing of whether it
elects to have the Stock or the Assets assigned. That notice also
shall specify whether the assignment, if of the Stock, is to be
made to USMX or to a separate United States USMY subsidiary, or, if
of the Assets, an Ecuadorian subsidiary of USMX. Sellers promptly
shall execute whatever instruments of transfer are reasonably
requested by USMX and its counsel in order to effectuate and
document the transfer of the Stock or the Assets, as the case may
be. Sellers also shall be solely responsible for satisfying all
requirements under the Jeffcock Agreement for delivery of shares of
stock of Mega Metals (U.S.) to Jeffoock. Sellers also shall be
solely responsible for satisfaction of the existing Suber bill for
consulting services.
3. Payments and Work Commitments by USMX. In consideration
of the assignment described in paragraph 2 above, and in reliance
upon Sellers' representations and warranties in paragraph 1 above,
usxx or its assigns agree to do the following:
<PAGE>
A. On or before April 5, 1995, USMX will use its
reasonable best efforts to pay the costs described in paragraph l.H
above, subject to the following conditions:
(i) USMX reasonably satisfying itself that the
representations and warranties in paragraph I
above are true, complete and accurate;
(ii) The total of those costs shall not exceed
$120,000; and
(iii) the payment or partial payment to Jeffcock
described in paragraph l.H(ii) shall not be
made unless and until all rights, titles and
interests in and to the concessions currently
owned by Jeffcock or currently available for
acquisition by Jeffcock have been transferred
to Mega Minerals (Ecuador) and Sellers'
Ecuadorian counsel has confirmed and
represented to USMX that such transfer has
been completed.
B. If USMX has not terminated this better Agreement
pursuant to paragraph 5 below before October 1, 1995, it shall be
obligated to expend before September 30, 1996 at least $100,000 in
exploring, prospecting and evaluating some or all of the lands
subject to the concessions. USMX shall be entitled to include in
such expenditures all out-of-pocket costs paid to third parties as
well as expenses and reasonable allocations of salaries and
benefits of USMX employees who devote time directly to those
concessions. USMX also shall be entitled to include in such
expenditures its costs of legal and environmental services related
directly to those concessions.
c. If USMX has not terminated this Letter Agreement
pursuant to paragraph 5 below before October 1, 1996, it shall be
obligated to expend by September 30, 1997 at least an additional
$100,000 in the manner described in paragraph 3.8 above. Any
amounts in excess of $100,000 expended by USMX during the period
<PAGE>
described in paragraph 3.5 above shall be credited against the
$100,000 requirement under this paragraph 3.C.
D. on a calendar quarter basis, USMX shall provide Mega
Metals (U.S.) with copies of all data produced by its operations on
the concessions during the previous quarter. Such data shall be
provided subject to the conditions and limitations set forth below
in paragraph 4.
E. If USMX has not terminated this better Agreement by
more than 30 days prior to the respective due dates of the $50,000
payments (or as such payments may be renegotiated) to be made as
provided in the Jeffcock Agreement, USMX shall pay same when due.
While this better Agreement is in effect, if other concessions are
made available to Jeffoock by the Government of Ecuador, USMX shall
pay for and acquire those concessions (but not including the Raloga
concession, unless USMX elects in writing to receive that
concession) at the price and on the terms provided for in the
Jeffoock Agreement.
F. If USMX places any of the properties subject to the
concessions into production, it shall pay Mega Metals (U.S.) ten
percent (10%) of Net Proceeds, as calculated in zxhibit C hereto
("NPI Royalty"), after USMX has recouped all monies it has expended
in performing this better Agreement, as well as all other monies it
has expended in exploring, developing those properties and in
conducting activities reasonably related to exploring, developing
and mining those properties. It is understood and agreed by
Sellers that at any time within three years after the date of this
Letter Agreement, USMX shall have the right to purchase the Ilpi
Royalty for $2,000,000. That purchase may be made in the form of
cash or in stock of USMX and/or its assigns, or a combination
thereof, with a total fair market value of $2,000,000 at the time
of USMX's notice of election to the owner of the NPI Royalty. If
USMX so elects and pays the purchase price, the NPI Royalty shall
be conveyed to USMYC free and clear of all liens and encumbrances.
USMX shall be entitled to release any of the concessions at any
time it so elects, subject to the reconveyance rights of Mega
Metals (U.S.), as provided in paragraph 4 below.
<PAGE>
0. USMX may utilize the bank accounts of Mega Minerals
(Ecuador) for the transfer of funds required under paragraphs 3.A
and 3.E above, provided that Sellers guarantee to USMX's
satisfaction that funds so provided by USMX shall remain secure and
shall be used solely for USMX's purposes under this Letter
Agreement.
4. USMX's Right of Termination. USMX shall have the right
at any time to terminate this Letter Agreement by delivering
written notice of same to Mega Metals (U.S.), in the manner
provided in paragraph 6.B below. Upon such notice being effective,
USMX shall have no further obligations or liabilities under this
Letter Agreement, other than those accrued as of the effective date
of that notice. Mega Metals (U.S.) shall have 20 business days
after USMX's notice in which to notify USMX in writing of whether
Mega Metals (U.S.) wishes to receive from USMX a reconveyance of
the Stock or the Assets, as the case may be. Within 10 business
days after receipt of notice of such election, USMX shall reconvey
to Mega Metals (U.S.) or its designee all of USMX's right, title
and interest in and to either the Stock or the Assets, as
appropriate, received by USMX pursuant to paragraph 2 above. USMX
shall warrant title to the same against all parties claiming by,
through or under USMX but not otherwise. Within 30 days after
termination, USMX also shall provide Mega Metals (U.S.) with copies
of all information regarding the concessions obtained by USMX
during the term of this better Agreement to the extent, if any,
that such information had not previously been provided pursuant to
paragraph 3.D above; provided, however, that USMX shall make no
express or implied representations or warranties of any nature
regarding that information, and any use of or reliance upon that
information by Mega Metals (U.S.), its successors or assigns, shall
be at their sole risk and expense.
5. Assignment. The parties shall have the right to assign
their respective interests in and under this better Agreement
without the approval or consent of the other parties. The
assigning party shall provide the other parties with a written
notice of the assignment and the name and address of the assignee
within five days after the assignment. If any of Sellers assign
<PAGE>
their individual interests under this Letter Agreement, USMX shall
only be required to send notices and payments to one address, as
provided in paragraph 6.B below.
6. Miscellaneous Provisions.
A. Dollars: All references in this better Agreement to
"dollars" or "$" shall refer to United States dollars.
B. Notices: All notices, payments and other required
communications ("Notices") to the parties shall be in writing, and
shall be addressed respectively as follows:
Sellers: Mega Metals, Inc.
Mega Minerals S.A.
Gregory Pusey
John Dreier
Gary McAdam
1111 washing on Street
Golden, CO 80401
USMX, Inc.: USMX, Inc.
141 Union Blvd., Suite 100
Lakewood, CO 80228
All Notices shall be given (i) by personal delivery to the party,
or (ii) by electronic communication, with a confirmation sent by
registered or certified mail return receipt requested, or (iii) by
registered or certified mail return receipt requested. All Notices
shall be effective and shall be deemed delivered (i) if by personal
delivery on the date of delivery if delivered during normal
business hours, and, if not delivered during normal business hours,
on the next business day following delivery, (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 party.
<PAGE>
c. Waiver: The failure of a party to insist on the
strict performance of any provision of this better Agreement or to
exercise any right, power or remedy upon a breach hereof shall not
constitute a waiver of any provision of this better Agreement or
limit the party's right thereafter to enforce any provision or
exercise any right.
D. Modification: No modification of this Letter
Agreement shall be valid unless made in writing and duly executed
by all of the parties hereto.
E. Force Majeure: Except tor tne onligatlon to make
payments when due hereunder and work required by Ecuadorian law or
terms of the concessions to maintain the concessions in good
standing, the obligations of USMX under this Letter Agreement,
including but not limited to its work commitment obligations under
paragraphs 3.B and 3.C above, shall be suspended and extended for
the period that performance is prevented by any cause, whether
foreseeable or unforeseeable, beyond its reasonable control,
including, without limitation, labor disputes (however arising and
whether or not employee demands are reasonable or within the power
of the participant to grant); acts of God; laws, regulations,
orders, proclamations, instructions or requests of any government
or governmental entity; judgments or orders of any court; inability
to obtain on reasonably acceptable terms any public or private
license, permit or other authorization; curtailment or suspension
of activities to remedy or avoid an actual or alleged, present or
prospective violation of federal, state or local environmental
standards; acts of war or conditions arising out of or attributable
to war, whether declared or undeclared; riot, civil strife,
insurrection or rebellion; fire, explosion, earthquake, storm,
flood, sink holes, drought or other adverse weather condition;
delay or failure by suppliers or transporters of materials, parts,
supplies, services or equipment or by contractors' or
subcontractors' shortage of, or inability to obtain, labor,
transportation, materials, machinery, equipment, supplies,
utilities or services; accidents; breakdown of equipment, machinery
or facilities; or any other cause whether similar or dissimilar to
the foregoing. USMX shall promptly give notice to Mega Metals
<PAGE>
(U.S.) of the suspension of performance, stating therein the nature
of the suspension, the reasons therefor, and the expected duration
thereof. USMX shall resume performance as soon as reasonably
possible.
F. Governing Law: This Letter Agreement shall be
governed by and interpreted in accordance with the laws of the
State of colorado, except for its rules pertaining to conflicts of
laws.
G. Further Assurances: Each of the parties shall take
from time to time such actions and execute such additional
instruments as may be reasonably necessary or convenient to
implement and carry out the intent and purpose of this Letter
Agreement.
H. Entire Agreement; Successors and Assigns: This
Letter Agreement contains the entire understanding of the parties
and supersedes all prior agreements and understandings between the
parties relating to the subject matter hereof.
I. Memorandum: At the request of either party, a
Memorandum or short form of this better Agreement, as appropriate,
which shall not disclose financial information contained herein,
shall be prepared and recorded by USMX. This Letter Agreement
shall not be recorded.
If the above correctly represents your understanding of our
agreement, please so indicate by signing in the appropriate space
below.
Very truly yours,
USMX, INC.
By:
James A. Knox,President
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EXHIBIT A
MEGA METALS, INC.
1111 WASNINGTON STREET, SUITE 117
GOLDEN, COLORAQO 80401
(303) 278-0828
October 3, 1994
Pippa Jeffcock
CIA. MINERA REVENGE S.A.
Reina Victoria 1539 y Colon
Edificto Banco do Guayaquil
P.O. Box 17 - 07 - 9354
Quito, Ecuador
Dear Pippa:
This letter sets forth the terms and conditions pursuant to
which Mega Metals, Inc., a corporation organized under the laws of
the State of Colorado, U.S.A. ("Mega") shall purchase the
properties of CIA. MINERA REVENGE S.A., a corporation organized
under the laws of Ecuador ("Revenge"). The properties are Listed
on the attached Exhibit "A". It is intended that the terms
included herein will be included in a fornal agreement between the
two corporate entities. It is our mutual desire and objective that
the format agreement be executed and consummated as promptly as
feasible to permit a closing cf the purchase on or about December
31, 1994 (the -Closing"). Both Mega and Revenge will use their
best efforts to finalize the formal agreement and effect the
closing on or before December 31, 1394. Our understandings are as
follows:
1. Upon your execution cf this letter, Mega will pay to
Revenge U.S. $15,000, to be utilized by Revenge for its
corporate operations prior to Closing. This sum will be
nonrefundable to Mega in the event Mega determines not to
proceed with the property purchase at Closing due solely
to Mega's inability or unwillingness (based on reasons
unrelated to Revenge's performance) to effect the
Closing.
2. At Closing, Mega will pay to Revenge (or to the persons
designated by Revenge listed in Exhibit "8", as directed
by Revenqe), U.S. $60,000. Additional installment
payments of U.S. $50,000 each shall be :Iad? six months
from the date of closing and twelve nonthe from the date
of closing.
<PAGE>
3. At Closing, Mega shall issue to Revenge shares of a new
series of Mega Pref erred Stock to be created specifically
for this transaction, which shares of Preferred Stock
shall rovide for a reference to common shareholders
upon liquidation of $400,000. The Preferred Stock will
also provide for a mandatory conversion into Mega's
common stock if and when Mega conducts an initial public
offerizig or other public financing of its common stock.
The conversion rate shall be calculated utilizing the
saute price per share paid by the public for the Mega
common stock.
4. Mega shall also have the option to purchase the stock of
Revenge and/or the use ot Revenge's name by paying to
Rovenge (or to the persons designated by Revenge listed
on Exhibit "C, as directed by Revenge), U.S. $5,625 at
Closing, U.S. $4,667.50 six months from the date of
Closing and U.S. $4,687.50 twelve months from the date of
Closing. Mega shall also issue shares of Mega Preferred
Stock with a liquidation preference of $35,000.
5 For each of the three months prior to Closing, commencing
October 3, 1994, Mega shall pay to Revenge the amount of
U.S. $2,000 for geological consulting work concerning
Rcvenge `s properties.
6. At the Closing, Mega and Revenge will cooperate in making
the necessary arrangements in order to enable Mega to
utilize the office space in Quito presently used by
Revenge, and to enter into arrangements to use the
services of the current secretary, administrative
assistant and Revenge's consultant, Wilson Larrea.
7. It is understood that Mega's desire to consummate the
purchase of the properties at Closing is, based upon your
representation (which will be confirmed in the final
agreement) that Revenge has clear title to the properties
to be conveyed to Mega (or that Mega is satisfied that
title can be issued to it), that the properties are in
good standing and that Revenge is in material compliance
with all applicable laws, rules and regulations
including, but not limited to, the Mining Law of Ecuador.
None of the properties to be conveyed by Revenge to Mega
shall be subject to any lien, claim or encumbrance.
Revenge shall provide such assurances and indemnification
regarding these properties as may be requested by Mega.
<PAGE>
8. Pending the Closing, Mega and its representatives shall
have, at all reasonable times, access to the premises and
to the books, records and properties of Revenge, and
Revenge shall furnish to Mega and its representatives
such information with respect to the properties and
business of Revenge, as Mega shall, from time to time,
reasonably request. In connection therewith, Mega and
its representatives shall be privileged to contact and
communicate with persons having business dealings with
Revenge or involvement with its properties. In addition,
Meqa may (but is under no obligation) conduct work on
Revenge 5 properties to assist in maintaining such
properties in good standing, and may assist Revenge in
filing reports required under applicabie laws. Revenge
shall cooperate with Mega in filing any reports which may
be due in order to preserve the title to, and good
standing of, the properties.
9. In the event Mega determines not to proceed with the
purchase of all of the properties listed on Exhibit "A",
any funds spent to maintain the properties (as set forth
in the preceding paragraph) or for consulting fees to
Revenge (as set forth in paraguaph 5), :nay be repaid to
Mega, at Revenge's option, during the 30 day period after
Mega notifies Revenge of its; decision. If Revenge does
not choose to repay Mega, then the funds shall be applied
to the purchase of one or more of the properties listed
on Exhibit "A", the purchase price to be apportioned
equally among such properties. The properties will be
selected at random.
10. Upon execution of this letter by Revenge, Mega will
commence its due diligence investigation and retain
counsel to prepare a formal agreement. In consideration
for the substantial expenditures of time, effort and
expense to be undertaken by Mega in connection with the
preparation and execution 0 the agreement, and the
various investigations and reviews referred to above, you
and Revenge will undertake and agree that
(a) Neither Revenge or you shall, between the date of
execution by you of this letter of intent and the Closing,
enter into or conduct any discussions with any prospective
purchaser of the stock, properties or other assets of
other assets of Revenge; and
<PAGE>
(b) You and Revenge shall use your best efforts to
preserve intact the properties, including title and
good standing thereof, as well as the good will of
persons having business relations with Revenge.
In the event the formal agreement is not executed by December
31, 1994 due to no fault of Revenge, then these obligations will
terminate.
If this letter meets with your approval, kindly so signify by
signing the enclosed duplicate copy of this letter, whereupon this
letter shall constitute an agreement between us.
Very truly yours,
MEGA METALS, INC.
By:
John Dreier, President
AGREEN AND CONFIRMED:
CIA. MINERA REVENGE S.A.
<PAGE>
3/20/95
EXHIBIT C
NET PROCEEDS CALCULATION
1. Income and Expenses. Net proceeds shall be calculated by
deducting from the gross revenues realized (or deemed to be
realized) from the sale (or deemed sale) of products, such costs
and expenses attributable to exploration, development, mining,
processing and the marketing of products as would be deductible
under generally accepted accounting principles and practices
consistently applied as employed by the manager of the properties,
including without limitation:
(a) All costs and expenses of replacing, expanding,
modifyinq, altering or changing from time to time the mining
facilities. Costs and expenses of improvements (such as haulage
ways or mill facilities) that are also used in connection with
workings other than the properties shall be charged to the
properties only in the proportion that their use in connection with
the properties bears to their total use.
(b) Ad valorem real property and unsecured personal
property taxes, and all taxes other than income taxes, applicable
to mining of the properties, including without limitation all state
mining taxes, sales taxes, severance taxes, royalties, license fees
and governmental levies of a similar nature.
(c) A reasonable allowance for overhead.
C-l
(d) All expenses incurred relative to the sale of
products, including an allowance for commissions at rates which are
normal and customary in the industry.
(e) Interest on monies borrowed or advanced for costs
and expenses, at an annual rate equal to two percentage points
above the Prime Rate, as published in the Money Rates column of The
Wall Street Journal from time to time, but in no event in excess of
the maximum permitted by law.
(f) An allowance for reasonable working capital and
inventory.
(g) Reasonably anticipated reclamation costs.
No deduction shall be made for income taxes depreciation,
amortization or depletion. If in any year after the beginning of
mining of the properties an operating loss relative thereto is
incurred, the amount thereof shall be considered as and be included
with outstanding costs and expenses and carried forward
determining Net Proceeds for subseguent periods. If products are
processed by USMX, or are sold to an affiliate of USMX, then, for
purposes of calculating Net Proceeds, such products shall be deemed
conclusively to have been sold at a price equal to fair market
value to arm's length purchaser FOB the concentrator for the
properties, and Net Proceeds relative thereto shall be calculated
without reference to any profits or losses attributable to smelting
or refining.
2. Payment of Net Proceeds. Payments of Net Proceeds shall
commence in the calendar quarter next following the calendar
quarter in which Net Proceeds are first realized, and shall be made
45 days following the end of each calendar quarter during which Net
Proceeds are realized, and shall be subject to adjustment, if
required, at the end of each calendar year.
SUBSIDIARIES OF USMX, INC.
FORM 10-K - December 31, 1995
EXHIBIT 22
Percent
Subsidiary Place of Owned
Incorporation
__________ _____________ _______
USMX of Alaska, Inc. Alaska 100%
USMX of Montana, Inc. Montana 100%
USMX of Nevada, Inc. Nevada 100%
USMX of Utah, Inc. Delaware 100%
USMX Mining, Inc. British Columbia 100%
MXUS S.A. de C.V. Mexico 100%
USMX de Costa
Rica C. V. Costa Rica 100%
Compania Minera USMX
de Chile Limitada Chile 100%
Southern Gold
Resources (USA), Inc. Colorado 80%
Mega Minerals S.A. Ecuador 100%
Consent of Independent Auditors
To the Stockholders and Board of Directors
USMX, INC.:
We consent to incorporation by reference in the registration
statements (File Nos. 33-16194, 33-16195, 33-38855, 33-49392
and 33-63559) on Form S-8 of USMX, INC. of our report dated
March 1, 1996, relating to the consolidated statements of
financial position of USMX, INC. and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholder' equity, and cash flows
for each of the years in the three-year period ended December
31, 1995, which report appears in the December 31, 1995 annual
report on Form 10-K of USMX, INC.
Our report refers to a change in the method of accounting for
income taxes in 1993.
KPMG Peat Marwick LLP
Denver, Colorado
March 28, 1996
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 10,365
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0
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<OTHER-SE> 22,472
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