SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
October 16, 1997
ROYAL OAK MINES INC.
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(Exact name of registrant as specified in its charter)
Commission File Number 1-4350
ONTARIO, CANADA 98-0160821
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
c/o Royal Oak Mines (USA) Inc.
5501 Lakeview Drive
Kirkland, Washington
U.S.A. 98033
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(Address of principal executive offices) (Postal/Zip Code)
(425) 822-8992
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Registrant's telephone number, including
area code
Item 5. Other Events
On October 16, 1997, the Registrant issued the press release set
forth as Exhibit 99.1 hereto, which press release is hereby incorporated
herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(C) Exhibits
99.1 Royal Oak Mines Inc. press release, dated October 16, 1997.
SIGNATURE
Pursuant to the requirements of Section 12 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: October 16, 1997 By: /s/ James H. Wood
--------------------------
James H. Wood
Chief Financial Officer
Exhibit 99.1 Royal Oak Mines Inc. press release, dated October 16, 1997
[Royal Oak Mines Inc. Press Release Letterhead]
FOR IMMEDIATE RELEASE FROM KIRKLAND
October 16, 1997
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Royal Oak Announces Third Quarter Results
Royal Oak Mines Inc. (TSE and AMEX: RYO) announced today the unaudited
financial results for the three month and nine month periods ended September
30, 1997. All figures are reported in thousands of Canadian dollars unless
otherwise stated.
<TABLE>
Third Quarter and Year-to-Date Highlights
Financial Position
September 30, 1997 December 31, 1996 September 30, 1996
<S> <C> <C> <C>
Cash 36,862 197,766 233,042
Total assets 783,375 821,630 844,950
Net debt (1) 226,665 46,876 7,006
Shareholders' equity 388,978 451,366 472,114
(1) Net debt = Notes payable + current and non-current capital leases - cash
</TABLE>
* Strategic mine closures to improve future profitability of the Company
* Gold production of 94,505 ounces in third quarter, and 284,430 ounces
year-to-date
* Cash costs of US$310 per ounce, down 12% from second quarter and 17%
from first quarter
* Cash flow before changes in other operating items of $4.2 million in
third quarter, and $5.8 million year-to-date
* Realized gold price of US$412 per ounce in third quarter, and US$410
per ounce year-to-date
* Kemess on track for start-up in six months' time, in April of 1998
* Hope Brook Mine shut down in mid-August of 1997 on depletion of ore
reserves
* Colomac operations scheduled for closure at the end of October, 1997,
on completion of milling of stockpiled ore
<TABLE>
Operating Results
Three months ended Nine months ended
September 30 September 30
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Gold production (ounces) 94,505 104,012 284,430 283,655
Revenue 54,116 77,323 160,579 183,169
Cash flow before changes in
other operating items 4,208 22,515 5,825 40,185
Cash flow before changes in
other operating items
per share (C$) 0.03 0.16 0.04 0.30
Net income (loss) (2,362) 10,216 (62,564) 15,321
Net income (loss) per share (C$) (0.02) 0.07 (0.45) 0.11
Cash cost of production (US$/oz) 310 348 344 337
Average spot gold price (US$/oz) 324 385 339 392
Average realized gold price (US$/oz) 412 543 410 472
Weighted average common shares
outstanding (millions) 138.910 138.286 138.880 136.099
Period-end common shares
outstanding (millions) 138.910 138.680 138.910 138.680
</TABLE>
Gold production in the third quarter and for the year-to-date was impacted by
the closure of both the Hope Brook and Colomac mines. The closure of these
mines for economic reasons is expected to improve the future profitability of
the Company. Furthermore, the ore reserves at both Hope Brook and Colomac
were close to being depleted. As a result of these mine closures, gold
production in the third quarter of 94,505 ounces was 9% less than the 104,012
ounces produced in the same period a year earlier. Gold production in the
second quarter this year was 104,845 ounces. In the year-to-date period ended
September 30, 1997, gold production of 284,430 ounces was similar to the
283,655 ounces produced in the nine-month period in 1996.
Revenue in the third quarter of this year was $54.1 million compared to $77.3
million in the same period of 1996, a decrease of 30%. In the nine-month
period ended September 30, 1997, revenue of $160.6 million was 12% lower than
revenue of $183.2 million in the same period of 1996. The decrease in revenue
in the two periods this year mainly reflected lower realized gold prices, and
the lower gold production in the third quarter this year. Realized gold
prices in both the third quarter and year-to-date periods were significantly
lower, 24% and 13% respectively, than in the same periods last year. In the
third quarter last year, the Company took advantage of favourable conditions
in the gold market to realize $18.0 million from the one-time buy-back of call
options. The latter contributed to hedge gains of $31.8 million in the
nine-month period last year.
The cessation of mining operations at Hope Brook and Colomac in the third
quarter resulted in generally improved results in the period for the Company.
Cash costs of US$310 per ounce in the third quarter were 11% lower than the
US$348 per ounce recorded in the same period last year, and were 12% lower
than the second quarter cash costs of US$351 per ounce. The Company expects a
further reduction in cash costs in the fourth quarter of this year, and
anticipates that cash costs at the Pamour and Giant mines will be under US$300
per ounce next year as a result of improved operating efficiencies and
cost-saving measures currently being implemented. For the nine-month period
ended September 30, 1997, cash costs of US$344 per ounce were comparable to
the US$337 per ounce reported in the same period a year ago.
Cash flow before changes in other operating items in the third quarter this
year was $4.2 million compared to $22.5 million in the same period of 1996.
Net cash provided by operating activities was $34.6 million, or 25 cents a
share, in the third quarter this year, compared to $25.6 million, or 19 cents
a share, in the same period of 1996. In the nine-month period this year, cash
flow before changes in other operating items was $5.8 million compared to
$40.2 million in the year-earlier period. Net cash used in operating
activities was $37.2 million, or 27 cents a share, compared to net cash
provided by operating activities of $41.2 million, or 30 cents a share, in the
same period of 1996.
Kemess Mine Scheduled to Commence Production in April, 1998
Our new Kemess Mine is scheduled to commence production in April of next
year. Construction is estimated to be approximately 65% complete.
Approximately $384 million of the estimated capital cost of $430 million has
now been committed in purchase orders for capital equipment and construction
contracts. As at the end of September, the B.C government had reimbursed the
Company approximately $100 million of its economic assistance package of up to
$166 million, and is current in its payments. The estimated average annual
life-of-mine production rate at Kemess is approximately 250,000 ounces of gold
at an estimated average cash cost of US$79 per ounce of gold (copper is
credited against operating costs at US$1.00 per pound). Mine life, based on
mineable ore reserves of approximately 4.1 million ounces of gold, is
estimated at approximately 16 years.
Outlook
Margaret K. Witte, President and CEO of Royal Oak commenting on the outlook
for the Company, said, "We are encouraged by the improvement in our operating
results in the third quarter after closing down our Hope Brook and Colomac
mines. We have made substantial reductions to our cash costs in successive
quarters this year and expect this trend will continue into next year. We are
on track to start production at our new Kemess mine in six months' time, in
April of next year. Kemess's low-cost production over a long reserve life
will improve the profitability of Royal Oak which we expect will increase
shareholder value. The exploration potential at Kemess is excellent. The
Company is confident that ore reserves can be increased and that mine life
will be extended beyond the current 16 years. We continue to defer the
development of our other capital projects in this weak gold market in order to
conserve cash to ensure completion of the construction of our Kemess Mine. We
are excited about the potential for continued growth of our Company from the
substantial cash flow that Kemess will generate."
For further information: or in Europe contact:
Mr. J. Graham Eacott Mr. David Williamson
Vice President, Investor Relations David Williamson Associates Limited
Royal Oak Mines International Investor Relations
5501 Lakeview Drive 15 St. Helen's Place, 3rd Floor
Kirkland, WA 98033-7314 London, England EC3A 6DE
Telephone: (425) 822-8992 Telephone: 011-44-171-628-3989
Facsimile: (425) 822-3552 Facsimile: 011-44-171-920-0563
www.royal-oak-mines.com
<TABLE>
Royal Oak Mines Inc.
Consolidated Balance Sheets
(unaudited - Cdn$ 000's)
September 30 December 31
1997 1996
(audited)
======== =========
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 36,862 $197,766
Marketable securities 590 590
Receivables 60,345 17,492
Inventories 34,540 61,844
Prepaid expenses 4,625 7,729
-------- --------
Total Current Assets 136,962 285,421
Property, Plant and Equipment, net 577,472 482,733
Long-Term Investments 58,989 44,255
Deferred Charges and Other Assets 9,952 9,221
--------- ---------
TOTAL ASSETS $783,375 $821,630
========= =========
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities $ 63,383 $ 59,065
Capital leases 3,601 2,514
Deferred revenue 10,978 10,994
--------- ---------
Total Current Liabilities 77,962 72,573
Deferred Revenue and Other Liabilities 33,358 32,757
Capital Leases 18,198 2,448
Deferred Reclamation Costs 22,236 17,622
Senior Subordinated Notes 241,728 239,680
Deferred Income Taxes 843 5,064
Minority Interest in Subsidiary Companies 72 120
--------- ---------
TOTAL LIABILITIES 394,397 370,264
--------- ---------
SHAREHOLDERS' EQUITY
Capital Stock
Common stock
Authorized - unlimited
Outstanding - 138,910,263
(Dec. 31, 1996 - 138,845,263) 378,989 378,813
Retained Earnings 9,989 72,553
--------- ----------
TOTAL SHAREHOLDERS' EQUITY 388,978 451,366
--------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $783,375 $821,630
========= ==========
</TABLE>
<TABLE>
Royal Oak Mines Inc.
Consolidated Statements of Income
(unaudited - Cdn$ 000's except per share amounts)
Three months ended Nine months ended
September 30 September 30
------------------ ------------------
1997 1996 1997 1996
======== ======== ======== ========
<S> <C> <C> <C> <C>
REVENUE $ 54,116 $ 77,323 $160,579 $183,169
-------- -------- -------- --------
EXPENSES
Operating 40,595 49,587 134,653 130,926
Royalties and marketing 357 807 1,228 2,215
Administrative and corporate 2,361 2,517 8,557 7,360
Depreciation and amortization 4,615 7,371 16,565 18,401
Reclamation 1,247 216 3,623 552
Exploration and other 1,299 1,424 3,965 3,833
Provision for (Recovery of) loss on currency
and commodity contracts 4,070 (621) 13,945 (1,597)
-------- -------- -------- --------
Total operating expenses 54,544 61,301 182,536 161,690
-------- -------- -------- --------
OPERATING INCOME (LOSS) (428) 16,022 (21,957) 21,479
OTHER INCOME (EXPENSE)
Interest and other income (expense), net (103) 1,663 2,396 4,166
Interest expense (140) (110) (327) (213)
Senior subordinated notes interest (6,887) (3,590) (19,734) (3,590)
Senior subordinated notes interest capitalized 5,568 1,926 15,532 1,926
Foreign currency translation on senior
subordinated notes -- 1,596 (2,048) 1,596
Write-down of mine assets -- -- (39,700) --
-------- -------- -------- --------
NET INCOME (LOSS) BEFORE UNDERNOTED (1,990) 17,507 (65,838) 25,364
Income and mining taxes - current (313) (361) (952) (1,084)
Income and mining taxes - deferred -- (6,814) 4,221 (8,820)
Minority interest 17 6 48 36
Equity in income (loss) of associated companies (76) (122) (43) (175)
-------- -------- -------- --------
NET INCOME (LOSS) (2,362) 10,216 (62,564) 15,321
RETAINED EARNINGS - BEGINNING OF PERIOD 12,351 83,643 72,553 78,538
-------- -------- -------- --------
RETAINED EARNINGS - END OF PERIOD $ 9,989 $ 93,859 $ 9,989 $ 93,859
======== ======== ======== ========
EARNINGS (LOSS) PER SHARE $ (0.02) $ 0.07 $ (0.45) $ 0.11
======== ======== ======== ========
Weighted average number of
common shares outstanding (000's) 138,910 138,286 138,880 136,099
======== ======== ======== ========
</TABLE>
<TABLE>
Royal Oak Mines Inc.
Consolidated Statements of Cash Flow
(unaudited - Cdn$ 000's)
Three months ended Nine months ended
September 30 September 30
------------------ ------------------
1997 1996 1997 1996
======== ======== ======== ========
<S> <C> <C> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Consolidated net income (loss) for the period $ (2,362) $10,216 $(62,564) $15,321
Items not affecting cash:
Depreciation and amortization 4,615 7,371 16,565 18,401
Reclamation 1,248 216 3,624 552
Deferred income tax -- 6,814 (4,221) 8,820
Provision for (Recovery of) unrealized loss
on currency and commodity contracts 506 (621) 10,381 (1,597)
Foreign currency translation on senior
subordinated notes -- (1,596) 2,048 (1,596)
Deferred charges and other 201 115 292 284
Write-down of mine assets -- -- 39,700 --
-------- -------- -------- --------
CASH FLOW 4,208 22,515 5,825 40,185
Net change in other operating items 30,430 3,098 (43,046) 1,063
-------- -------- -------- --------
Net cash provided by (used in) operating activities 34,638 25,613 (37,221) 41,248
-------- -------- -------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Issue of common shares -- 1,940 177 116,298
Capital lease obligation 16,277 (655) 15,750 284
Issuance of senior subordinated notes -- 239,981 -- 239,981
Cost of senior subordinated notes (111) (8,616) (129) (8,616)
Deferred credits and other -- (1,146) -- 340
-------- -------- -------- --------
Net cash provided by financing activities 16,166 231,504 15,798 348,287
-------- -------- -------- --------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Investment in Kemess capital assets through
purchase of companies -- -- -- (201,976)
(Increase) decrease in long-term investments 2,741 -- (15,105) 26,882
Investment in capital assets through purchase of
Consolidated Professor Mines Limited -- (15) -- (15,858)
Investment in other capital assets, net* (87,823) (41,972) (118,559) (74,188)
Investment in exploration and non-producing
properties, net (454) 657 (4,522) (5,035)
Change in other assets (660) (1,648) (1,295) (7,919)
-------- --------- --------- --------
Net cash used in investing activities (86,196) (42,978) (139,481) (278,094)
-------- --------- --------- --------
INCREASE (DECREASE) IN CASH AND MARKETABLE
SECURITIES DURING PERIOD (35,392) 214,139 (160,904) 111,441
CASH AND MARKETABLE SECURITIES AT BEGINNING OF PERIOD 72,844 39,683 198,356 142,381
-------- --------- --------- --------
CASH AND MARKETABLE SECURITIES AT END OF PERIOD $ 37,452 $253,822 $ 37,452 $253,822
======== ========= ========= ========
* Investment in capital assets is net of B.C. Government assistance
</TABLE>
