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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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 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 (Postal/Zip Code)
offices)
(425) 822-8992
Registrant's telephone number,
including area code
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 April 30, 1997 was 140,795,079. This
includes 1,924,816 shares which are owned by a wholly owned subsidiary of the
Company and may not be voted, and are not considered outstanding for
accounting matters, including earnings per share calculations.
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INDEX
Page
PART I - FINANCIAL INFORMATION........................................ 3
Item 1. Consolidated Financial Statements of Royal Oak Mines Inc.
and Subsidiaries (All statements are unaudited except for
the December 31, 1996 Consolidated Balance Sheet, which
has been audited.)
Consolidated Balance Sheets - March 31, 1997 and
December 31, 1996........................................ 4
Consolidated Statements of Income - Three Months Ended
March 31, 1997 and 1996.................................. 5
Consolidated Statements of Cash Flow - Three Months
Ended March 31, 1997 and 1996............................ 6
Notes to Consolidated Financial Statements (unaudited)...... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................14
PART II - OTHER INFORMATION...........................................18
Item 6. Exhibits and Reports on Form 8-K............................18
Signatures............................................................19
In this Report, unless otherwise indicated, all dollar amounts are expressed
in Canadian dollars.
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
All tabular amounts are in thousands of Canadian dollars, except as
indicated. (see Notes 1 and 7).
<TABLE>
Consolidated Balance Sheets
(unaudited - Cdn$ 000's)
March 31 December 31
1997 1996
(audited)
======== ===========
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $113,761 $197,766
Marketable securities 590 590
Receivables 50,858 17,492
Inventories (note 4) 82,965 61,844
Prepaid expenses 14,011 7,729
-------- ---------
Total Current Assets 262,185 285,421
Property, Plant and Equipment, net 494,181 482,733
Long-Term Investments 44,006 44,255
Deferred Charges and Other Assets 9,835 9,221
-------- --------
TOTAL ASSETS $810,207 $821,630
======== ========
LIABILITIES
Current Liabilities
Accounts payable $ 16,268 $21,094
Accrued payroll costs 3,579 3,514
Accrued reclamation costs 6,668 --
Deferred revenue and capital leases 14,722 13,508
Income and other taxes payable 4,478 3,894
Senior subordinated notes interest payable 3,189 10,180
Other current liabilities 27,968 20,383
-------- -------
Total Current Liabilities 76,872 72,573
Deferred Revenue and Other Liabilities 34,720 35,205
Deferred Reclamation Costs 12,084 17,622
Senior Subordinated Notes (note 12) 242,218 239,680
Deferred Income Taxes 843 5,064
Minority Interest in Subsidiary Companies 105 120
-------- --------
TOTAL LIABILITIES 366,842 370,264
-------- --------
SHAREHOLDERS' EQUITY
Capital Stock (note 11)
Common stock
Authorized - unlimited
Outstanding - 138,870,263
(Dec. 31, 1996 - 138,845,263) 378,925 378,813
Retained Earnings 64,440 72,553
-------- -------
TOTAL SHAREHOLDERS' EQUITY 443,365 451,366
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $810,207 $821,630
======== ========
The accompanying notes are an integral part of the Consolidated Financial Statements.
</TABLE>
<TABLE>
Consolidated Statements of Income
(unaudited - Cdn$ 000's except per share amounts)
Three months ended
March 31
------------------
1997 1996
======== ========
<S> <C> <C>
REVENUE $ 47,484 $ 51,049
-------- --------
EXPENSES
Operating 43,052 42,029
Royalties and marketing 424 562
Administrative and corporate 2,652 2,149
Depreciation and amortization 5,792 5,076
Reclamation 1,130 159
Exploration and other 1,347 960
Provision for (Recovery of) loss on foreign
currency contracts 2,518 (767)
-------- --------
Total operating expenses 56,915 50,168
-------- --------
OPERATING INCOME (LOSS) (9,431) 881
OTHER INCOME (EXPENSE)
Interest and other income, net (note 3) 1,952 1,382
Interest expense (118) (39)
Senior subordinated notes interest (6,344) --
Senior subordinated notes interest
capitalized 4,420 --
Foreign currency translation on senior
subordinated notes (2,538) --
-------- --------
NET INCOME (LOSS) BEFORE UNDERNOTED (12,059) 2,224
Income and mining taxes - current (326) (355)
Income and mining taxes - deferred 4,221 (540)
Minority interest 36 27
Equity in income of associated companies 15 --
-------- --------
NET INCOME (LOSS) (8,113) 1,356
RETAINED EARNINGS - BEGINNING OF PERIOD 72,553 78,538
-------- --------
RETAINED EARNINGS - END OF PERIOD $ 64,440 $ 79,894
======== ========
EARNINGS PER SHARE $(0.06) $0.01
======== ========
Weighted average number of
common shares outstanding (000's) 138,845 131,817
======== ========
The accompanying notes are an integral part of the Consolidated Financial Statements.
</TABLE>
<TABLE>
Consolidated Statements of Cash Flow
(unaudited - Cdn$ 000's)
Three months ended
March 31
------------------
1997 1996
======== ========
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Consolidated net income (loss) for the period $ (8,113) $ 1,356
Items not affecting cash:
Depreciation and amortization 5,792 5,076
Reclamation 1,130 159
Deferred income tax (4,221) 540
Provision for (Recovery of) loss on
foreign currency contracts 2,518 (767)
Foreign currency translation on senior
subordinated notes 2,538 --
Deferred charges and other (132) 118
-------- --------
CASH FLOW (488) 6,482
Net change in other operating items (65,763) (10,148)
-------- --------
Net cash used in operating activities (66,251) (3,666)
-------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Issue of common shares 112 114,000
Capital lease payable (278) (80)
Deferred credits -- 1,510
-------- -------
Net cash provided by (used in) financing activities (166) 115,430
-------- -------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Investment in Kemess capital assets through
purchase of companies -- (201,976)
Decrease in long-term investments -- 26,882
Investment in capital assets through purchase of
Consolidated Professor Mines Limited -- (13,252)
Investment in other capital assets, net (15,310) (19,428)
Investment in exploration and
non-producing properties, net (1,691) (2,066)
Change in other assets (587) (3,243)
-------- --------
Net cash used in investing activities (17,588) (213,083)
-------- --------
INCREASE (DECREASE) IN CASH AND MARKETABLE
SECURITIES DURING PERIOD (84,005) (101,319)
CASH AND MARKETABLE SECURITIES AT
BEGINNING OF PERIOD 198,356 142,381
-------- --------
CASH AND MARKETABLE SECURITIES AT END OF PERIOD $114,351 $ 41,062
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 13,317 $ 39
Income taxes $ 40 $ 355
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 Statements 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, such statements 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, 1997, are not necessarily indicative of
the results that may be expected for the full year ending December 31,
1997. For further information, see the Company's Consolidated Financial
Statements, including the accounting policies and notes thereto, included
in the Annual Report to Shareholders and Annual Report on Form 10-K for the
year ended December 31, 1996.
The calculations of net earnings per share are based upon the weighted
average number of common shares of the Company outstanding during each
period (except as set forth in Note 11(b)). When outstanding convertible
instruments materially dilute earnings per share, fully diluted earnings
per share are disclosed.
2. Presentation
Certain amounts for 1996 have been reclassified to conform with the current
year's presentation.
3. Interest and Other Income, Net
<TABLE>
Three months ended
March 31
------------------
1997 1996
------ ------
<S> <C> <C>
Interest income $1,977 $1,024
Gain on sale of securities -- 446
Other, net (25) (88)
------ ------
Interest and other income, net $1,952 $1,382
====== ======
</TABLE>
4. Inventories
<TABLE>
March 31 December 31
1997 1996
------- -----------
<S> <C> <C>
Bullion in process $24,715 $25,687
Stores and operating supplies 58,250 36,157
------- -------
Inventories $82,965 $61,844
======= =======
</TABLE>
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 location 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 charged to operations throughout the year as the inventory is
utilized.
5. Net Change in Other Operating Items
<TABLE>
Three months ended
March 31
------------------
1997 1996
-------- --------
<S> <C> <C>
Cash provided by (used in):
Receivables $(33,366) $ (270)
Inventories (21,121) (28,426)
Prepaid expenses (6,282) (845)
Accounts payable, accrued payroll
and other current liabilities 2,274 13,246
Deferred revenue (1,184) 5,985
Income taxes payable 584 162
Long-term reclamation
reclassified to current period (6,668) --
-------- --------
Net change in other
operating items $(65,763) $(10,148)
======== ========
</TABLE>
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 believes it has
complied, and expects in the future to 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:
<TABLE>
Three months ended
March 31
------------------
1997 1996
------- -------
<S> <C> <C>
Net income in accordance
with Canadian GAAP $(8,113) $ 1,356
Adjustments:
Depreciation and amortization (778) (716)
Income taxes -- 251
------- -------
Net income in accordance with U.S. GAAP $(8,891) $ 891
======= =======
Earnings (loss) per share
in accordance with U.S. GAAP $(0.07) $ 0.01
====== ======
</TABLE>
The effects on the balance sheets of the Company at March 31, prepared in
accordance with U.S. GAAP, are:
<TABLE>
March 31
--------------------
1997 1996
-------- --------
<S> <C> <C>
Increase (decrease):
Property, plant and equipment $ 3,944 $ 66,995
Prepaid expenses (pension asset) $ (552) (359)
Deferred income taxes $ 19,377 79,254
Retained earnings $(15,985) $(12,618)
</TABLE>
Statement of Financial Accounting Standards No. 109 requires that a
deferred tax liability be recognized for differences between the assigned
values and the tax bases of the assets and liabilities recognized in a
business combination involving a purchase of stock. Canadian GAAP does not
require similar recognition. Accordingly, during the three months ended
March 31, 1997, a difference between U.S. GAAP and Canadian GAAP arose for
the deferred tax liabilities associated with the excess of the assigned
values and the tax bases of assets acquired in the acquisition of Geddes
Resources Limited and Consolidated Professor Mines Limited. The effect of
these differences is to increase property, plant and equipment and deferred
income taxes by $21.0 million as of March 31, 1997.
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 an arrangement (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.
As a result of these transactions, the Company issued 19,011,883 common
shares of the Company 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 of the Company issued under the
Plan of Arrangement. At the time of acquisition, St. Philips, with its
wholly owned subsidiary, and El Condor jointly owned the Kemess South
property. El Condor owned 100% of the Kemess North property.
The following table outlines the details of the purchase price and its
allocation to the assets and liabilities acquired:
<TABLE>
El St.
Geddes Condor Philips Total
-------- -------- -------- --------
<S> <C> <C> <C> <C>
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
======== ======== ======== ========
</TABLE>
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"), consisting of approximately 20 million common
shares, at a cash price of $0.80 per share. By June 30, 1996, the Company
had purchased all shares tendered and acquired all remaining shares in
accordance with compulsory acquisition procedures, for a total purchase
price of $16.3 million. The purchase price, net of cash acquired on the
acquisition of $0.3 million, has been assigned as follows:
Capital assets $15.9 million
Miscellaneous net assets 0.1 million
-----
Purchase price, net of cash acquired $16.0 million
=====
10. Credit Line
The Company has a $28 million unsecured, revolving line of credit with a
major Canadian bank. This line will be used as necessary to finance
working capital for current operations. At March 31, 1997, the Company had
drawn $2.9 million in the form of letters of credit.
11. Capital Stock
(a) Changes in capital
<TABLE>
Number of
shares Amount
----------- --------
<S> <C> <C>
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
Company 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
=========== ========
Balance, December 31, 1996 140,770,079 $387,667
Issued for share purchase options 25,000 112
----------- --------
Balance, March 31, 1997 issued and
outstanding 140,795,079 387,779
Company shares held by Witteck Development
Inc. (see note 11(b)) (1,924,816) (8,854)
----------- --------
Balance, March 31, 1997 for financial
reporting purposes 138,870,263 $378,925
=========== ========
</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 common shares
of the Company. This investment has been recorded as a reduction of
capital stock on the balance sheet. Consequently, the common shares of the
Company that are held by Witteck may not be voted and have been excluded
from the determination of earnings per share information.
12. Long-Term Debt
On August 12, 1996, the Company completed the sale of US$175 million
principal amount of 11% Senior Subordinated Notes due 2006 (the "Notes").
The Notes were sold in a private placement to qualified institutional
buyers pursuant to Rule 144A under the Securities Act of 1933 and to
certain other accredited institutional buyers. On October 9, 1996, an
exchange offer was made to exchange the Notes for Series B 11% Senior
Subordinated Notes due 2006 (the "Series B Notes"), pursuant to a
Registration Statement on Form S-4 filed under the Securities Act of 1933,
as amended. This exchange offer expired on November 5, 1996, and all
US$175 million principal amount of Notes were exchanged for Series B Notes.
The Series B Notes are unsecured senior subordinated obligations of the
Company and, as such, will be subordinated in right of payment to all
existing and future senior indebtedness of the Company. The Series B Notes
are guaranteed by Kemess Mines Inc., a wholly owned subsidiary of the
Company. The Series B Notes and interest payments are denominated in U.S.
dollars.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
The Company recorded a net loss of $8.1 million ($0.06 per share) for the
first quarter of 1997, compared to net income of $1.4 million ($0.01 per
share) for the first quarter of 1996. Lower gold production and average
realized gold price in the first quarter of 1997 versus 1996, combined with
the foreign exchange impact of a weakening Canadian dollar adversely
affected operating results in the first quarter.
Revenue
- -------
Revenue from the sale of gold decreased 7% to $47.5 million during the
first quarter of 1997, compared to $51.0 million in the same period of
1996. A 3% decrease in the average realized price to US$411 per ounce in
the first quarter of 1997 from US$423 in the same period 1996, together
with a 4% decrease in production to 85,080 oz (88,196 in 1996) accounted
for the decrease.
The following table sets forth the Company s gold production, average
realized price and average cash production cost for the comparable periods.
<TABLE>
Three months ended
March 31
------------------
1997 1996
------ ------
<S> <C> <C>
Gold Production (oz)
Northwest Territories Division
-Giant Mine 22,848 21,661
-Colomac Mine 29,880 28,799
Ontario Division 25,151 23,197
Newfoundland Division 7,201 14,539
------ ------
85,080 88,196
====== ======
Average Spot Gold Price (US$/oz) $351 $400
Average Realized Gold Price (US$/oz) $411 $423
Cash cost (Cdn$/oz) $506 $477
Cash cost (US$/oz) $372 $348
</TABLE>
The decrease in gold production at Newfoundland resulted from the fact the
mill was temporarily shut down in January and February. Mining operations
continued during this period and ore was stockpiled. In 1996 the mill was
shut down for a similar period in March and April. This shutdown enabled
the Company to reduce operating costs. As previously announced, the
Company plans to permanently close the Hope Brook operations in the third
quarter of this year when economic ore reserves will be depleted.
Expenses
- --------
Operating expenses increased to $43.1 million in the first quarter of 1997
from $42.0 million in the same period 1996. This was principally due to
increased operating costs at the Colomac Mine, and higher-than-budgeted
repair and maintenance costs at certain of the other mines. Mining costs
incurred during January and February at the Hope Brook Mine have been
deferred and will be charged to operating costs as the ore mined during the
shutdown is milled during the balance of 1997. Operating costs on a per
ounce basis increased 7% to US$372 in the first quarter of 1997 from US$348
in the same period in 1996. In light of the current market conditions and
continuing weak gold prices the Company is currently evaluating all high
cash cost production areas with a view to suspending mining operations
which are unprofitable.
Royalty and marketing expenses declined in the first quarter of 1997
compared to the comparable period of 1996 as a result of the expiry of the
Hope Brook Royalty Agreement at the end of 1996. This decrease was partly
offset by increased royalties at the Timmins operations as a result of the
higher percentage of production coming from the Nighthawk Mine.
Administrative and corporate expenses increased in the first quarter of
1997 to $2.7 million from $2.1 million in the same period in 1996. This
increase is mainly attributable to the increase in costs associated with
staff additions and related costs at the corporate office to manage the
future growth of the Company.
Reclamation costs increased to $1.1 million in the first quarter of 1997
from $0.2 million in the same period in 1996. Management makes a provision
for future reclamation costs on the ultimate closure of a mine or
abandonment of a property. Estimated reclamation and site restoration
costs are charged against income on the unit-of-production method based
upon the estimated gold contained in total mineral inventory. Write-down
of reserve estimates in 1996, particularly at the Colomac Mine, have
increased this provision in 1997.
Exploration expenses increased in the first quarter of 1997 to $1.3 million
from $1.0 million in the same period in 1996. The Company has been
evaluating its exploration projects as part of its overall strategic plan
and to the extent that certain exploration costs are determined not to be
recoverable due to insufficient or lack of expected mineralized material or
otherwise, exploration costs have been charged to operations.
The gold price used in estimating the company s ore reserves at December
31, 1996 was $527 (US$390) per ounce of gold. The market price for gold is
currently below these levels. If the Company determines that its reserves
should be calculated at a significantly lower price than used at December
31, 1996, there would likely be a material reduction in the amount of gold
reserves. Should such a reduction occur, material write-downs of the
Company's investment in mining properties and/or increased amortization
charges may be required.
The Company enters into foreign currency contracts for protection from
fluctuation in the U.S. dollar-Canadian dollar exchange rate, and to
provide for a minimum Canadian dollar conversion rate for it's U.S. dollar
gold sales revenue. These contracts are marked-to-market on a monthly
basis. As a result of the weakening of the Canadian dollar in the first
quarter of 1997 from year-end 1996 exchange rates, the Company provided for
a loss on foreign currency contracts of $2.5 million. In the same period
in 1996 the Company provided for a recovery of $0.8 million.
The Company's Senior Subordinated Notes are denominated in United States
dollars. Generally accepted accounting principles require the translation
of these Notes at the exchange rate in effect at the balance sheet date.
This resulted in the Company providing for a loss on translation of its
Senior Subordinated Notes of $2.5 million. These Notes are not repayable
until 2006 and the Company will continue to provide for any foreign
exchange gains or losses on these notes as exchange rates fluctuate in the
future. These Notes were issued in August 1996 and accordingly no similar
provision was necessary in the first quarter of 1996.
The Company provided for interest expense on these Notes of $6.3 million in
the first quarter of 1997, of which $4.4 million was capitalized.
Liquidity and Capital Resources
At March 31, 1997 the Company had cash, cash equivalents and marketable
securities of $114 million compared to $198.4 million at December 31, 1996.
During the first quarter of 1997 the Company reclassified $27.7 million of
marketable securities to Long-Term Investments as it considered these to be
strategic to the Company's future. If in the future the strategic nature
of these investments should change, in the opinion of management, they
would be reclassified to marketable securities.
Net cash used in operating activities was $66.3 million in the first
quarter of 1997 compared to $3.7 million in the same period in 1996. Net
changes to other operating items are set out in Note 5 to the Consolidated
Financial Statements. The primary uses of the cash invested in working
capital were an increase in inventory at the Colomac Mine as operating
supplies are transported to Colomac in the first quarter of each year over
a winter road; an interest payment associated with the Company's Senior
Subordinated Notes, and an increase in accounts receivable on the Kemess
project. In April, 1997 the Company's wholly-owned subsidiary, Kemess
Mines Inc., received from the Government of British Columbia the second of
two equal compensation payments of $14.5 million, the first of which was
received in April 1996.
The company remains confident in its capital cost estimate for the Kemess
project of $390 million, except for potential levies from the Government of
British Columbia to clear access for power line construction. Construction
is now approximately 50% complete. Steelwork for buildings and facilities
is being erected on foundations and major services have been installed.
Mining equipment is being delivered to site in preparation for the pre-
production stripping of the open pit in July of this year. Significant
progress is being made on construction of the tailings dam and on clearing
the corridor for installation of the power line. Approximately $325
million of the total capital cost has been committed in purchase orders and
construction contracts. The Company will focus on successful completion of
the Kemess project and on operating its lower cash cost mines to maximize
operating cash flow.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
With the exception of historical statements, the matters discussed in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
are based on numerous variables and assumptions that are inherently
uncertain and could cause actual results to be materially more or less
favorable than projected, including without limitation general economic and
competitive conditions and other factors. Among such factors are those
related to volatility in the price of gold, copper and other commodities,
changes in interest and foreign exchange rates, government regulation and
agency action, competing land claims, the accuracy of estimates of ore
reserves and mineral inventory, environmental costs and risks,
unanticipated processing, access, transportation of supplies, water
availability or other problems, other factors relating to the Company's
ability successfully to complete development projects within projected
capital budgets or to carry on mining operations within projected operating
budgets and the risk factors listed from time to time in the Company's
filings with the Securities and Exchange Commission, including without
limitation the Company s Annual Report on Form 10-K for the year ended
December 31, 1996, Part I:, Item 7, Risks and Uncertainties.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule.
(b) Reports on Form 8-K.
A report on Form 8-K was filed on February 13, 1997, regarding
a press release from Royal Oak Mines Inc., announcing the
1996 results of operations.
A report on Form 8-K was filed on February 26, 1997,
regarding a press release from Royal Oak Mines Inc.,
announcing a petition from the Tsay Keh Dene Band to
stay the Kemess project.
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: May 15, 1997 By /s/ Margaret K. Witte
------------------------
Margaret K. Witte
President and Chief
Executive Officer
Date: May 15, 1997 By /s/ James H. Wood
------------------------
James H. Wood
Chief Financial Officer
EXHIBIT INDEX
Exhibit Method of Filing
- ------- ----------------
27. Financial Data Schedule Filed herewith
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<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS
FOUND IN THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<CURRENCY> CANADIAN
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<PERIOD-END> MAR-31-1997
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<RECEIVABLES> 50,858
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0
0
<COMMON> 378,925
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<INCOME-TAX> (3,895)
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