SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
August 6, 1997
ROYAL OAK MINES INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Commission File Number 1-4350
ONTARIO, CANADA 98-0160821
- ------------------------------- ------------------------------
(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
- --------------------------------------- ---------------
(Address of principal executive offices) (Postal/Zip Code)
(425) 822-8992
- ----------------------------------------
Registrant's telephone number, including
area code
- --------------------------------------------------------------------------
Item 5. Other Events
On August 6, 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 August 6, 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: August 6, 1997 By: /s/ James H. Wood
James H. Wood
Chief Financial Officer
Exhibit 99.1 Royal Oak Mines Inc. press release, dated August 6, 1997
[Royal Oak Mines Inc. Press Release Letterhead]
FOR IMMEDIATE RELEASE FROM KIRKLAND
August 6, 1997
- -----------------------------------------------------------------------------
Royal Oak Announces Second Quarter Results and Closure of Colomac Mine
Royal Oak Mines Inc. (TSE and AMEX: RYO) announced today the unaudited
financial results for the three month and six month periods ended June 30,
1997. All figures are in thousands of Canadian dollars unless otherwise
stated.
<TABLE>
Second Quarter Highlights
Financial Position
June 30, 1997 December 31, 1996 June 30, 1996
<S> <C> <C> <C>
Cash 72,254 197,766 14,797
Total assets 763,876 821,630 580,118
Net debt (1) 173,576 46,876 (12,806)
Shareholders' equity 391,340 451,366 459,959
(1) Net debt = Notes payable + current and non-current capital leases - cash
</TABLE>
- Gold production of 104,845 ounces, up 23% from the first quarter
- Cash costs of US$351 per ounce, down 6% from the first quarter
- Cash flow before changes in other operating items of $2.1 million
in second quarter
- Realized gold price of US$406 per ounce in second quarter
- Kemess on track for start-up in April of 1998
- Hope Brook Mine shut-down scheduled for early August of 1997
- Colomac Mine shut-down scheduled for October of 1997
- Completed Namosi deal in Fiji, adding 4.3 million ounces of gold and
9.2 million pounds of copper to the Company's resources
<TABLE>
Operating Results
Three months ended Six months ended
June 30 June 30
1997 1996 1997 1996
------- ------ ------- -------
<S> <C> <C> <C> <C>
Gold production (ounces) 104,845 91,447 189,925 179,643
Revenue 58,979 54,797 106,463 105,846
Cash flow before changes in
other operating items 2,105 11,188 1,617 17,670
Cash flow before changes in
other operating items
per share (C$) 0.02 0.08 0.01 0.13
Net income (loss) (52,089) 3,749 (60,202) 5,105
Net income (loss) per share (C$) (0.38) 0.03 (0.43) 0.04
Cash cost of production (US$/oz) 351 315 358 331
Average spot gold price (US$/oz) 343 390 347 395
Average realized gold price (US$/oz) 406 439 405 431
Weighted average common shares
outstanding (millions) 138.884 138.196 138.864 135.006
Period-end common shares
outstanding (millions) 138.910 138.218 138.910 138.218
</TABLE>
Gold production in both the second quarter and first half of this year was
positively impacted by an 18% and 6% increase in ore milled, respectively,
compared to the same periods in 1996. In addition, a 1% and 4% improvement in
mill head grades contributed to improved operations in the two periods. Gold
production of 104,845 ounces in the second quarter of 1997 was 13,398 ounces,
or 15% higher than the 91,447 ounces produced in the same period a year
earlier, and 23% higher than in the first quarter of this year. In the first
six months of this year, gold production was 189,925 ounces, an increase of
10,282 ounces, or 6% higher than in the same period in 1996.
Revenue in the second quarter of this year was $59.0 million compared to $54.8
million in the same period of 1996, an increase of 8%. In the six month
period ended June 30, 1997, revenue of $106.5 million was 1% higher than
revenue of $105.8 million in the first half of 1996. The increase in revenue
in the two periods this year was mainly attributable to improved operations
and the increase in gold production.
The Company's average cash cost of production in the second quarter this year
was US$351 per ounce, an increase of 11% from the US$315 per ounce in the same
period last year. Improved operating performance in the second quarter this
year resulted in a 6% decrease in cash costs from US$372 per ounce in the
first quarter. The Company expects a further reduction in cash costs in the
third and fourth quarters of this year following closure of the Hope Brook and
Colomac mines, and as a result of cost saving measures implemented at the
other mines. In the six month period this year, cash costs of US$358 per
ounce were 8% higher than the US$331 per ounce recorded in the year-ago period
when costs were favourably impacted by temporary suspension of certain
operations at the Hope Brook and Pamour mines.
Cash flow before changes in other operating items in the second quarter this
year was $2.1 million compared to $11.2 million in the same period of 1996.
Net cash used in operating activities was $5.6 million, or 4 cents per share,
in the second quarter this year. This compared to cash provided by operating
activities of $19.3 million, or 14 cents per share in the same period in
1996. In the six month period this year, cash flow before changes in other
operating items was $1.6 million compared to $17.7 million in the year-ago
period. Net cash used in operating activities was $71.9 million, or 52 cents
per share, compared to cash provided by operating activities of $15.6
million, or 12 cents per share, in the same period of 1996. The primary use
of cash was investment in working capital for inventory items at the Colomac
Mine, and an increase in accounts receivable on the Kemess project prior to
receiving funds from the provincial government of British Columbia which have
now been paid.
Colomac Mine to Close in October
Based on current gold prices, high cash costs and diminishing ore reserves,
the Company plans to close the Colomac Mine in October when milling of
stockpiled ore is expected to be complete.
In the second quarter, a $39.7 million write-down was recorded, reducing the
value of the Colomac assets to their estimated realizable value. This
contributed to a net loss of $52.1 million, or 38 cents per share in the
second quarter, and a net loss of $60.2 million, or 43 cents per share in the
six-month period this year. In the same periods of 1996, net income was $3.7
million, or 3 cents per share, and $5.1 million, or 4 cents per share,
respectively. Interest payable on the Company's U.S.-denominated Senior
Subordinated Notes, which were issued in the third quarter of 1996, and the
foreign exchange translation effect on these Notes because of the weaker
Canadian dollar in the first quarter of this year, contributed to the loss in
the three-month and six-month periods ended June 30 this year.
Company Sets Strategy to Conserve Cash During Period of Weak Gold Prices
On May 15, 1997 the Company announced that it would continue to review its
high cash cost operations with a view to suspending or discontinuing
production from these operations in light of the current weak gold price. The
Company has set a criterion that its mines should produce positive cash flow
at a gold price of US$330 per ounce. As a result, the Company plans to
permanently close its Hope Brook and Colomac mines. The result of closing the
Hope Brook and Colomac mines is expected to result in reduced cash costs at
the corporate level from the Timmins and Yellowknife operations to the US$300
to US$310 per ounce range.
Royal Oak plans to produce a total of approximately 135,000 ounces of gold in
the third and fourth quarters of this year at an estimated cash cost of
US$312 per ounce, which is below the current spot price of gold. This is
expected to result in estimated production of 325,000 ounces of gold for 1997
at an estimated cash cost of approximately US$338 per ounce. The Company has
taken the necessary measures to reduce its cash costs of production at all
divisions to below the current spot gold price. Royal Oak has sold forward in
spot deferred contracts approximately 312,000 ounces of gold this year at a
price of US$395 per ounces. Through other gold hedging activities, the
Company expects to receive an average realized price this year in excess of
US$400 per ounce. In 1998, the Company expects to produce approximately
343,000 ounces of gold at an estimated cash cost of US$240 per ounce from its
Kemess, Timmins and Yellowknife operations.
In 1996, the Company embarked on an aggressive capital spending program as
part of its long-term growth strategy. Because of the need to conserve cash
under current gold market conditions, expenditures over the next two years on
certain projects, notably Matachewan and the Pamour expansion, have been
reduced and the construction schedule has been delayed.
Kemess on Track for Start-Up in Nine Months Time
Construction at the Kemess gold-copper mine, the Company's core asset, is
proceeding on schedule and is approximately 55% complete. Over $350 million
of the approximate $425 million capital cost has been committed in purchase
orders for capital equipment and construction contracts. The Kemess project
is fully funded from cash and securities in treasury of approximately C$109
million (at July 31, 1997); compensation, investment and economic assistance
from the B.C. government totalling up to C$166 million; and from cash expected
to be provided from current operations in the next three quarters, as well as
from approximately $90 million in permitted debt capacity and equipment
leasing packages. To date, the B.C. government has reimbursed Royal Oak
approximately C$79 million and is up to date in its payments. The Company
plans to commence production at Kemess in nine months time, in April of 1998.
The estimated average life-of-mine production rate is 250,000 ounces of gold
and 60 million pounds of copper per year. Average life-of-mine cash costs are
estimated at US$205 per ounce of gold and $0.52 per pound of copper.
Higher copper prices have partially offset lower gold prices such that cash
flow from the Kemess Mine is not expected to be materially affected. At a
gold price of US$350 per ounce and a copper price of US$1.00 per pound,
average annual cash flow from Kemess is expected to be approximately C$90
million. Average annual cash flow is expected to increase by approximately
C$9 million for a US$25 per ounce increase in the gold price, and to increase
by approximately C$9 million for a US$0.10 per pound increase in the copper
price.
Outlook
Margaret K. Witte, President and CEO of Royal Oak, commenting on the outlook
for the Company, said, "Despite the current low gold price and the impact this
is having on many gold companies, we are extremely encouraged by the outlook
for Royal Oak. We are currently conserving cash on other development projects
to ensure that our capital development program at Kemess is fully funded. Our
large Kemess project is on track for start-up in April of next year. Low-cost
production and long reserve life at Kemess is the key to our future growth and
improved profitability and to maximizing shareholder value. We are excited
about the opportunities that we will be able to pursue based on the cash flow
that Kemess will generate."
For further information contact: or in Europe contact:
Mr. J. Graham Eacott Mr. David Williamson
Vice President, Investor Relations David Williamson Associates Limited
Royal Oak Mines International Investor Relations
5501 Lakeview Drive 8 Old Broad Street, 2nd Floor
Kirkland, WA 98033-7314 London, England EC2M 1QP
Telephone: (425) 822-8992 Telephone: 011-44-171-628-3989
Facsimile: (425) 822-3552 Facsimile: 011-44-171-920-0563
<TABLE>
ROYAL OAK MINES
Consolidated Balance Sheets
(unaudited - Cdn$ 000's)
June 30 December 31
1997 1996
(audited)
========== ===========
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 72,254 $197,766
Marketable securities 590 590
Receivables 66,344 17,492
Inventories 51,485 61,844
Prepaid expenses 8,362 7,729
-------- --------
Total Current Assets 199,035 285,421
Property, Plant and Equipment, net 493,558 482,733
Long-Term Investments 61,414 44,255
Deferred Charges and Other Assets 9,869 9,221
-------- --------
TOTAL ASSETS $763,876 $821,630
======== ========
LIABILITIES
Current Liabilities
Accounts payable $ 25,263 $ 21,094
Accrued payroll costs 3,102 3,514
Accrued reclamation costs 2,010 --
Deferred revenue and capital leases 8,893 13,508
Income and other taxes payable 4,816 3,894
Senior subordinated notes interest payable 9,831 10,180
Other current liabilities 16,376 20,383
-------- --------
Total Current Liabilities 70,291 72,573
Deferred Revenue and Other Liabilities 38,597 35,205
Deferred Reclamation Costs 20,988 17,622
Senior Subordinated Notes 241,728 239,680
Deferred Income Taxes 843 5,064
Minority Interest in Subsidiary Companies 89 120
-------- --------
TOTAL LIABILITIES 372,536 370,264
-------- --------
SHAREHOLDERS' EQUITY
Capital Stock
Common stock
Authorized - unlimited
Outstanding - 138,910,263
(Dec. 31, 1996 - 138,845,263) 378,989 378,813
Retained Earnings 12,351 72,553
-------- --------
TOTAL SHAREHOLDERS' EQUITY 391,340 451,366
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $763,876 $821,630
======== ========
</TABLE>
<TABLE>
ROYAL OAK MINES
Consolidated Statements of Income
(unaudited - Cdn$ 000's except per share amounts)
Three months ended Six months ended
June 30 June 30
--------------------- ---------------------
1997 1996 1997 1996
======== ======== ======== ========
<S> <C> <C> <C> <C>
REVENUE $ 58,979 $ 54,797 $106,463 $105,846
-------- -------- ------- --------
EXPENSES
Operating 51,006 39,310 94,058 81,339
Royalties and marketing 447 846 871 1,408
Administrative and corporate 3,544 2,694 6,196 4,843
Depreciation and amortization 6,158 5,954 11,950 11,030
Reclamation 1,246 177 2,376 336
Exploration and other 1,319 1,449 2,666 2,409
Provision for loss on currency
and commodity contracts 7,357 (209) 9,875 (976)
-------- -------- -------- --------
Total operating expenses 71,077 50,221 127,992 100,389
-------- -------- -------- --------
OPERATING INCOME (LOSS) (12,098) 4,576 (21,529) 5,457
OTHER INCOME (EXPENSE)
Interest and other income, net 547 1,121 2,499 2,503
Interest expense (69) (64) (187) (103)
Senior subordinated notes interest (6,503) -- (12,847) --
Senior subordinated notes interest
capitalized 5,544 -- 9,964 --
Foreign currency translation
on senior subordinated notes 490 -- (2,048) --
Write-down of mine assets (39,700) -- (39,700) --
-------- -------- -------- --------
NET INCOME (LOSS) BEFORE UNDERNOTED (51,789) 5,633 (63,848) 7,857
Income and mining taxes - current (313) (368) (639) (723)
Income and mining taxes - deferred -- (1,466) 4,221 (2,006)
Minority interest (5) 3 31 30
Equity in income of associated companies 18 (53) 33 (53)
-------- -------- -------- --------
NET INCOME (LOSS) (52,089) 3,749 (60,202) 5,105
RETAINED EARNINGS - BEGINNING OF PERIOD 64,440 79,894 72,553 78,538
-------- -------- -------- --------
RETAINED EARNINGS - END OF PERIOD $ 12,351 $ 83,643 $ 12,351 $ 83,643
======== ======== ======== ========
EARNINGS (LOSS) PER SHARE $ (0.38) $ 0.03 $ (0.43) $ 0.04
======== ======== ======== ========
Weighted average number of
common shares outstanding (000's) 138,884 138,196 138,864 135,006
======== ======== ======== ========
</TABLE>
<TABLE>
ROYAL OAK MINES
Consolidated Statements of Cash Flow
(unaudited - Cdn$ 000's)
Three months ended Six months ended
June 30 June 30
------------------- -------------------
1997 1996 1997 1996
======== ======== ======== ========
<S> <C> <C> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Consolidated net income (loss) for the period $ (52,089) $ 3,749 $ (60,202) $ 5,105
Items not affecting cash:
Depreciation and amortization 6,158 5,954 11,950 11,030
Reclamation 1,246 177 2,376 336
Deferred income tax -- 1,466 (4,221) 2,006
Provision for loss on currency and commodity
contracts 7,357 (209) 9,875 (976)
Foreign currency translation on senior
subordinated notes (490) -- 2,048 --
Deferred charges and other 223 51 91 169
Write-down of mine assets 39,700 -- 39,700 --
-------- -------- -------- -------
CASH FLOW 2,105 11,188 1,617 17,670
Net change in other operating items (7,713) 8,113 (73,476) (2,035)
-------- -------- -------- --------
Net cash provided by (used in) operating activities (5,608) 19,301 (71,859) 15,635
-------- -------- -------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Issue of common shares 65 359 177 114,359
Capital lease payable (249) 1,019 (527) 939
Deferred credits and other (18) (25) (18) 1,485
-------- ------- -------- --------
Net cash provided by (used in) financing activities (202) 1,353 (368) 116,783
-------- ------- -------- --------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Investment in Kemess capital assets through
purchase of companies -- -- -- (201,976)
(Increase)decrease in long-term investments (17,846) -- (17,846) 26,882
Investment in capital assets through purchase of
Consolidated Professor Mines Limited -- (2,592) -- (15,844)
Investment in other capital assets, net (15,426) (12,788) (30,736) (32,216)
Investment in exploration and non-producing
properties, net (2,377) (3,626) (4,068) (5,692)
Change in other assets (48) (3,027) (635) (6,270)
-------- -------- -------- --------
Net cash used in investing activities (35,697) (22,033) (53,285) (235,116)
-------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND MARKETABLE
SECURITIES DURING PERIOD (41,507) (1,379) (125,512) (102,698)
CASH AND MARKETABLE SECURITIES AT BEGINNING OF PERIOD 114,351 41,062 198,356 142,381
-------- -------- -------- --------
CASH AND MARKETABLE SECURITIES AT END OF PERIOD $ 72,844 $ 39,683 $ 72,844 $ 39,683
======== ======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 69 $ 47 $ 13,386 $ 86
Income taxes $ 25 $ 175 $ 65 $ 530
Cash consists of cash and short-term investments.
</TABLE>
