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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number 1-4350
ROYAL OAK MINES INC.
(Exact name of Registrant as specified in its charter)
ONTARIO, CANADA NONE
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
c/o Royal Oak Mines (U.S.A.) Inc.
5501 Lakeview Drive
Kirkland, Washington
U.S.A. 98033
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (206) 822-8992
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 filing requirements
for the past 90 days. Yes X No _
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common shares outstanding as of May 7, 1996 was 140,112,913. This includes
1,924,816 shares which are owned by a wholly-owned subsidiary of the Company and
may not be voted.
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INDEX
Page
PART 1. FINANCIAL INFORMATION........................................
Item 1. Consolidated Financial Statements of Royal Oak Mines Inc.
and Subsidiaries (All statements are unaudited except for
the December 31, 1995 Consolidated Balance Sheet, which
has been audited.).........................................
Consolidated Statements of Income - Three Months Ended
March 31, 1996 and 1995..................................
Consolidated Balance Sheets - March 31, 1996 and
December 31, 1995........................................
Consolidated Statements of Cash Flow - Three Months Ended
March 31, 1996 and 1995..................................
Notes to Consolidated Financial Statements (unaudited)......
Signatures............................................................
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
All tabular amounts are in thousands of Canadian Dollars.
<TABLE>
<CAPTION>
Consolidated Statements of Income
(unaudited - Cdn$ 000's except per share amounts)
Three months ended
March 31
1996 1995
======= =======
<S> <C> <C>
REVENUE $51,049 $47,386
------- -------
EXPENSES
Operating 42,029 44,064
Royalties and marketing 562 219
Administrative and corporate 2,149 1,622
Depreciation and amortization 5,235 3,282
Exploration 960 113
Recovery of loss on foreign currency contracts (767) --
------- -------
Total operating expenses 50,168 49,300
------- -------
OPERATING INCOME (LOSS) 881 (1,914)
Interest and Other Income, Net (note 3) 1,343 5,778
------- -------
NET INCOME BEFORE UNDERNOTED 2,224 3,864
Income and mining taxes - current (355) (316)
Income and mining taxes - deferred (540) --
Minority interest 27 --
Equity in loss of associated companies -- (45)
------- -------
NET INCOME 1,356 3,503
RETAINED EARNINGS - BEGINNING OF PERIOD 78,538 55,369
------- -------
RETAINED EARNINGS - END OF PERIOD $79,894 $58,872
======= =======
EARNINGS PER SHARE $0.01 $0.03
======= =======
Weighted average number of common shares outstanding (000's)131,817 114,499
======= =======
The accompanying notes are an integral part of the Consolidated Financial
Statements.
</TABLE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
(unaudited - Cdn$ 000's)
March 31December 31
1996 1995
======== =========
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $34,244 $139,410
Short-term investments 6,818 2,971
Receivables 7,408 7,138
Inventories (note 4) 74,562 46,136
Prepaid expenses 6,465 5,620
-------- --------
Total Current Assets 129,497 201,275
Property, Plant and Equipment, net 422,845 191,381
Long-Term Investments 12,894 36,307
-------- --------
TOTAL ASSETS $565,236 $428,963
======== ========
LIABILITIES
Current Liabilities
Accounts payable $16,162 $13,640
Accrued payroll 3,419 5,267
Current portion of deferred revenue 11,116 4,523
Income taxes payable 3,512 3,350
Other current liabilities 28,225 15,654
-------- -------
Total Current Liabilities 62,434 42,434
Deferred Revenue and Other Liabilities 41,015 40,800
Deferred Income Taxes 5,604 5,064
Minority Interest in Subsidiary Companies 332 170
-------- --------
TOTAL LIABILITIES 109,385 88,468
-------- --------
SHAREHOLDERS' EQUITY
Capital Stock (note 11)
Common Stock
Authorized - unlimited
Outstanding - 138,180,597 (Dec. 31, 1995 - 119,118,714) 375,957 261,957
Retained Earnings 79,894 78,538
-------- --------
TOTAL SHAREHOLDERS' EQUITY 455,851 340,495
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $565,236 $428,963
======== ========
The accompanying notes are an integral part of the Consolidated Financial
Statements.
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flow
(unaudited - Cdn$ 000's)
Three months ended
March 31
1996 1995
======== =======
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Consolidated net income for the period $1,356 $3,503
Items not affecting cash:
Depreciation and amortization 5,235 3,282
Deferred income tax 540 --
Recovery of loss on foreign currency contracts (767) --
Other 118 (361)
------- -------
CASH FLOW 6,482 6,424
Net change in non-cash working capital (note 5) (16,133) (5,037)
------- -------
Net cash provided by (used in) operating activities (9,651) 1,387
------- -------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Increase in deferred revenue, net 5,985 4,425
Issue of common shares (note 11) 114,000 14,506
Other 1,430 (72)
------- -------
Net cash provided by financing activities 121,415 18,859
------- -------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Investment in Kemess capital assets through purchase of
companies (note 8) (201,976) --
Decrease in long-term investments (note 8) 26,882 --
Investment in capital assets through purchase of
Consolidated Professor Mines Limited (note 9) (13,252) --
Investment in other capital assets, net (19,428) (7,697)
Investment in exploration and non-producing properties, net(2,066) (2,223)
Change in other assets (3,243) (320)
------- -------
Net cash used in investing activities (213,083) (10,240)
------- -------
INCREASE (DECREASE) IN CASH AND SHORT-TERM
INVESTMENTS DURING PERIOD (101,319) 10,006
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD 142,381 178,937
------- -------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $41,062 $188,943
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $39 $52
Income taxes $355 $316
Cash consists of cash and short-term investments.
The accompanying notes are an integral part of the Consolidated Financial
Statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(tabular amounts in thousands of Canadian dollars unless otherwise stated)
1. Interim Financial Statement Accounting Policies
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with Canadian generally accepted accounting principles
("Canadian GAAP") which, in the case of Royal Oak Mines Inc. (the "Company"),
differ in certain material respects from United States generally accepted
accounting principles ("U.S. GAAP"), as described in Note 7. Also, they do not
include all of the disclosures required by generally accepted accounting
principles for annual statements. In the opinion of management all adjustments
considered necessary for fair presentation have been included in these
statements. Operating results for the three months ended March 31, 1996, are
not necessarily indicative of the results that may be expected for the full year
ending December 31, 1996. For further information, see the Company's
Consolidated Financial Statements, including the accounting policies and notes
thereto, included in the Annual Report and Form 10-K for the year ended December
31, 1995.
The calculations of net earnings per share are based upon the weighted average
number of common shares of the Company outstanding each period. Where
outstanding convertible property materially dilute earnings per share, fully
diluted earnings per share are disclosed.
2. Presentation
Certain amounts for 1995 have been reclassified to conform with the current
year's presentation.
3. Interest and other income, net
<TABLE>
<CAPTION>
Three months ended
March 31
1996 1995
---- ----
<S> <C> <C>
Interest income $1,024 $2,518
Gain on sale of securities 446 3,022
Other, net (127) 238
------ ------
Interest and other income, net $1,343 $5,778
====== ======
</TABLE>
4. Inventories
March 31 December 31
1996 1995
-------- -----------
Bullion in process $17,755 $18,574
Stores and operating supplies 56,807 27,562
-------- -------
Inventories $74,562 $46,136
======== =======
The increase in stores and operating supplies resulted from the need to bring in
up to one year's supply of operating and maintenance materials over a winter
road to the Colomac mine site during the first quarter. Due to the remote
nature of the Colomac mine, the most effective way to manage the stores and
operating supplies inventory is to transport them over a winter ice road from
January to March. The freight costs associated with this inventory have been
included in the cost of the inventory and will be expensed throughout the year
as the inventory is utilized.
5. Net change in non-cash working capital.
Three months ended
March 31
1996 1995
---- ----
Cash provided by (used in):
Receivables $(270) $(36)
Inventories (28,426) (25,038)
Prepaid expenses (845) (621)
Accounts payable, accrued payroll and
other current liabilities 13,246 20,871
Income taxes payable 162 (213)
-------- -------
Net change in non-cash working capital $(16,133) $(5,037)
======== =======
6. Reclamation and Environmental Remediation
The Company's current and proposed mining and exploration activities are subject
to various laws and regulations governing the protection of the environment.
These laws and regulations are continually changing and are generally becoming
more restrictive. The Company conducts its operations so as to protect its
employees, the general public and the environment and believes its operations
are in compliance with all applicable laws and regulations, in all material
respects. The Company has, and expects to in the future, comply with such laws
and regulations, including making all required expenditures.
Where estimated reclamation and closure costs are reasonably determinable, the
Company has recorded a provision for environmental liabilities, using the unit
of production method, based on management's estimate of these costs. Such
estimates are subject to adjustment based on changes in laws and regulations and
as new information becomes available.
7. Reconciliation to United States Generally Accepted Accounting Principles
Reconciliation of net income in accordance with Canadian GAAP to net income in
accordance with U.S. GAAP is as follows:
Three months ended
March 31
1996 1995
------ ------
Net income in accordance with Canadian GAAP $1,356 $3,503
Adjustments:
Depreciation and amortization (716) (942)
Income taxes 251 --
------ ------
Net income in accordance with U.S. GAAP $891 $2,561
====== ======
Earnings per share in accordance with U.S. GAAP:$0.01 $0.02
===== =====
The effects on the balance sheets of the Company at March 31, prepared in
accordance with U.S. GAAP, are:
March 31
1996 1995
---- ----
Increase (decrease):
Property, plant and equipment $ 66,995 $(7,103)
Prepaid expenses (pension asset) $(359) --
Deferred income taxes $ 79,254 --
Retained earnings $(12,618) $(7,103)
<R/>
8. Acquisition of Geddes Resources Limited, El Condor Resources Ltd. and St.
Philips Resources Inc.
On January 11, 1996, the Company acquired all of the outstanding shares of
Geddes Resources Limited ("Geddes"), El Condor Resources Ltd. ("El Condor") and
St. Philips Resources Inc. ("St. Philips") not already owned by the Company
pursuant to a series of signed agreements (the "Plan of Arrangement") on the
following terms:
Geddes: 0.30 shares of the Company for each share of Geddes.
El Condor: 0.95 shares of the Company plus $2.00 cash for each share of
El Condor.
St. Philips: $3.40 cash for each share of St. Philips.
The Company issued 19,011,883 common shares and paid approximately $56 million
in cash pursuant to the Plan of Arrangement. The January 11, 1996 closing price
on The Toronto Stock Exchange for the Company's common shares was $6.00. This
price was used to value the common shares issued under the Plan of Arrangement.
As at December 31, 1995, the Company's investment in Geddes, El Condor and St.
Philips amounted to approximately $26.9 million and was included in long-term
investments.
The following outlines the details of the purchase price and its allocation to
the assets and liabilities acquired:
El St.
Geddes Condor Philips Total
-------- ------- ------- --------
Purchase price:
Cash paid, including
open market purchases $ 3,220 $ 34,222 $ 38,562 $ 76,004
Issue of common shares 37,650 76,421 -- 114,071
-------- -------- -------- --------
40,870 110,643 38,562 190,075
Initial carrying value
of Geddes 9,192 -- -- 9,192
Transaction and other costs 2,290 680 679 3,649
-------- -------- -------- --------
52,352 111,323 39,241 202,916
Cash and cash equivalents
acquired from companies (561) (1) (378) (940)
-------- -------- -------- --------
Total $ 51,791 $111,322 $ 38,863 $201,976
======== ======== ======== ========
Allocated to:
Property, plant and
equipment $ 52,101 $112,087 $ 39,015 $203,203
Other assets 31 151 9 191
Total liabilities (341) (916) (161) (1,418)
-------- -------- -------- --------
Total $ 51,791 $111,322 $ 38,863 $201,976
======== ======== ======== ========
These transactions were linked to the resolution of the claim for compensation
from the Government of British Columbia (the "B.C. Government") which, in 1993,
appropriated the Windy Craggy property from Geddes and declared the area a
provincial park. Under the terms of an agreement among the B.C. Government, the
Company and Geddes, the B.C. Government has agreed to an economic assistance
package and compensation valued at up to $166 million. The majority of these
funds are payable to the Company over the next three years.
<R/>
The following shows pro forma what the results of operations would have been if
the acquisition had occurred at the beginning of the period:
Three months ended
March 31
1996 1995
---- ----
Revenue $51,049 $47,386
Net income $1,356 $2,421
Earnings per share - basic $0.01 $0.02
Earnings per share - fully diluted $0.01 $0.02
On April 29, 1996, the Company received the Project Approval Certificate
(formerly known as the Mine Development Certificate) for the Kemess South
Project, from the B.C. Government following resolution of environmental
assessment matters. The Kemess gold-copper project in north central British
Columbia is scheduled to commence production in April 1998. The mineable ore
reserves at year-end 1995 contained approximately 4.1 million ounces of gold and
one billion pounds of copper.
The Company is moving ahead with the development and construction of this
project. Engineering on the project is estimated to be 30% complete.
Construction contracts for the plant and infrastructure facilities are expected
to be awarded in the next few weeks. Construction on the project will commence
in early July.
The capital cost of the Kemess project has been estimated at $390 million,
including contingency and start-up costs. Financing for the Kemess project will
include up to $166 million by way of an economic assistance and compensation
package from the B.C. Government. The Company's wholly-owned subsidiary, Kemess
Mines Inc. (formerly known as Geddes Resources Limited) received the first of
two equal compensation payments of $14.5 million in April 1996, the final
payment being due in April 1997. The Company will fund the balance of the
capital cost from cash in treasury, future operating cash flow and debt. The
Company does not plan to issue any new equity in connection with this project.
The Company will apply for and seek to obtain all necessary permits, licences,
approvals and other authorizations as project development continues.
<R/>
9. Acquisition of Consolidated Professor Mines Limited
On February 5, 1996, the Company made a public offer to purchase all of the
outstanding common shares of Consolidated Professor Mines Limited ("Consolidated
Professor") at a cash price of $0.80 per share for a total purchase price of
approximately $16 million. At March 31, 1996, the Company had purchased
approximately 17.4 million shares for a total price of $13.3 million. The
Company announced on April 29, 1996, that more than 90% of the issued and
outstanding common shares of Consolidated Professor had been tendered to its
offer. The Company has taken up all the shares tendered and will acquire all
remaining shares in accordance with compulsory acquisition procedures.
The acquisition is part of the Company's strategic plan to increase ore reserves
and production at its Ontario Division. Consolidated Professor has a 100%
interest in the Duport Gold Project in the Kenora mining district in northwest
Ontario. The Company intends to review production plans and continue the mine
permitting process.
<R/>
10. Credit Line
The Company entered into a $28 million unsecured, revolving line of credit with
a major Canadian bank in the first quarter. This line will be used as necessary
to finance working capital for current operations. At March 31, 1996, no
amounts were outstanding under this facility.
11. Capital Stock
(a) Changes in capital
<TABLE>
<CAPTION>
Number of
shares Amount
----------- --------
<S> <C> <C>
Balance, December 31, 1994 114,494,747 $247,362
Exercise of warrants - Series 2 4,475,300 14,545
Issued for share purchase options 6,667 6
Share issue and other related costs -- (45)
----------- --------
Balance, March 31, 1995 issued and
outstanding 118,976,714 $261,868
=========== ========
Balance, December 31, 1995 121,043,530 $270,811
Issued to acquire Geddes and El
Condor (See note 8) 19,011,883 114,071
Issued for share purchase options 50,000 110
Share issue and other related costs -- (181)
----------- --------
Balance, March 31, 1996 issued and
outstanding 140,105,413 384,811
Conmpany shares held by Witteck Development
Inc. (see note 11(b)) (1,924,816) (8,854)
----------- --------
Balance, March 31, 1996 for financial
reporting purposes 138,180,597 $375,957
=========== ========
</TABLE>
(b) Company shares held by Witteck Development Inc.
During 1995, the Board of Directors and the shareholders approved the
acquisition of all of the shares of Witteck Development Inc. ("Witteck") whose
sole asset is an investment in the Company of 1,924,816 shares. This investment
has been recorded as a reduction of capital stock on the balance sheet.
Consequently, the shares of the Company that are held by Witteck have been
excluded from the determination of earnings per share information.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROYAL OAK MINES INC.
Date: July 18, 1996 By /s/ Margaret K. Witte
------------------------
Margaret K. Witte
President and Chief
Executive Officer
Date: July 18, 1996 By /s/ James H. Wood
------------------------
James H. Wood
Chief Financial Officer
