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
November 13, 1998
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
<PAGE>
Item 5. Other Events
On November 13, 1998, 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 November
13, 1998.
<PAGE>
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: November 13, 1998 By: /s/ James H. Wood
---------------------
James H. Wood
Chief Financial Officer
Exhibit 99.1 Royal Oak Mines Inc. press release, dated November
13, 1998.
FOR IMMEDIATE RELEASE FROM KIRKLAND
November 13, 1998
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, 1998. All figures are reported in
thousands of Canadian dollars unless otherwise stated.
Third Quarter Highlights
Financial Position
<TABLE>
September 30, 1998 December 31,1997 September 30, 1997
------------------ ---------------- ------------------
<S> <C> <C> <C>
Cash 5,304 568 36,862
Total assets 840,329 843,386 783,375
Net debt(1) 468,600 274,135 226,665
Shareholders' equity 194,573 316,378 388,978
</TABLE>
(1)Net debt = Notes payable + current and non-current capital leases - cash
* Net cash used in operating activities of $5.4 million (4
cents per share) in Q3/98 compared with net cash provided by
operating activities of $34.6 million (25 cents per share) in
Q3/97.
* Operating loss of $12.0 million in Q3/98 compared with
operating loss of $0.2 million in Q3/97.
* Write-down of mine assets of $81.4 million in Q3/98.
* Net loss of $107.4 million (72 cents per share) in Q3/98,
due in part to an $86.4 million write-down of mine assets and
strategic investments, compared with net loss of $2.4 million (2
cents per share) in Q3/97.
* Gold production of 44,633 ounces from continuing operations
at Giant and Pamour/Nighthawk mines in Q3/98 compared with 48,630
ounces in Q3/97, a decrease of 8%. Total gold production from
all operations in Q3/97 (including Hope Brook and Colomac mines
that were closed in late 1997) was 94,505 ounces.
* Production of 40,096 ounces of gold and 11.1 million pounds
of copper contained in concentrates in the year-to-date period
from the Kemess South Mine is not included in the consolidated
operating results. Kemess reached commercial production on
October 7, 1998. Net deferred start-up costs during the
commissioning period have been capitalized.
<PAGE>
* Average cash cost for continuing operations of US$252 per
ounce, down 16% from US$299 per ounce in Q3/97. Average cash
cost for all operations in Q3/97 was US$310 per ounce.
* Average realized gold price of US$324 per ounce in Q3/98, a
premium of US$35 an ounce, or 12%, above average spot price of
US$289 per ounce. Average year-to-date realized price of US$337
per ounce, a premium of US$43 an ounce, or 15%, above average
spot price of US$294 per ounce.
Operating Results
<TABLE>
Three months ended September 30 Nine months ended September 30
1998 1997 1998 1997
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Gold production (ounces) 44,633 94,505 135,922 284,430
Revenue 21,890 53,926 66,940 160,772
Cash flow before changes in other
operating items (18,594) 4,208 (15,183) 5,825
Cash flow before changes in other
operating items per share (C$) (0.12) 0.03 (0.11) 0.04
Net loss (107,392) (2,362) (140,134) (62,564)
Net loss per share (C$) (0.72) (0.02) (0.98) (0.45)
Cash cost of production (US$/oz) 252 310 263 344
Average spot gold price (US$/oz) 289 324 294 339
Average realized gold price
(US$/oz) 324 412 337 410
Weighted average common shares
outstanding (millions) 148.940 138.910 142.274 138.880
Period-end common shares
outstanding (millions) 153.044 138.910 153.044 138.910
</TABLE>
Consolidated operating results for 1998 do not include
production from the Kemess South Mine. In the third quarter
during the start-up and commissioning period, Kemess produced
37,051 ounces of gold and 9.8 million pounds of copper contained
in concentrates. Total production since start-up was 40,096
ounces of gold and 11.1 million pounds of copper. The Kemess
South Mine commenced production in the concentrator on May 19,
1998 and reached commercial production on October 7, 1998.
Revenues from the sale of gold and copper contained in
concentrates during the start-up and commissioning period have
been netted against start-up costs. Net deferred start-up costs
have been capitalized on the consolidated balance sheet.
Operating results in the three months and nine months ended
September 30, 1998 compared with the same two periods in 1997
were impacted by the closure of the Hope Brook and Colomac mines
in September and December of 1997, respectively. Both mines
were placed on care and maintenance.
In the third quarter of 1998, gold production from continuing
operations at the Giant and Pamour/Nighthawk mines was 44,633 ounces,
a decrease of 8% from production of 48,630 ounces in the same period
of 1997. Total gold production in the third quarter of 1997, including
production from the Hope Brook and Colomac mines, was 94,505
ounces.
<PAGE>
In the nine months ended September 30, 1998 gold production from
continuing operations was 135,922 ounces, a decrease of 7% from
production of 145,917 ounces in the same period of 1997. Total
gold production in the year to date period of 1997 was 284,430
ounces.
Revenue in the third quarter of 1998 was $21.9 million compared
with $53.9 million in the same period of 1997. The decrease in
revenue in the third quarter this year reflected a decrease in
gold production of 49,872 ounces, mainly due to the closure of
the Hope Brook and Colomac mines, and a decrease of 21% in the
average realized gold price from US$412 per ounce to US$324 per
ounce. Revenue in the third quarter of 1998 included hedging
gains of $2.4 million compared with $12.3 million in the same
period of 1997.
Revenue in the nine months ended September 30, 1998 was $66.9
million compared with $160.8 million in the same period of 1997.
The decrease in revenue in the year-to-date period of 1998 was
due to a decrease in gold production of 148,508 ounces, and a
decrease of 18% in the realized gold price from US$410 per ounce
to US$337 per ounce. Revenue in the period this year included
hedging gains of $8.3 million compared with $30.8 million in the
same period of 1997.
In the third quarter of 1998, the average cash cost of
production for continuing operations at the Giant and
Pamour/Nighthawk mines was US$252 per ounce, a decrease of 16%
from the US$299 per ounce reported in the same period of 1997.
The significant reduction in cash cost was attributed to
sustained cost-cutting measures implemented in the fourth
quarter of 1997 and a 9% decrease in the value of the Canadian
dollar against the U.S. dollar. In the third quarter of 1997,
the Company reported an average cash cost for all operations of
US$310 per ounce, which reflected the impact of the high cost
Hope Brook and Colomac mines that were subsequently closed
toward the end of the year.
In the nine-month period this year, the average cash cost of
production for continuing operations was US$263 per ounce, a
decrease of 17% from the US$316 per ounce in the same period of
1997. In the period ended September 30, 1997 the average cash
cost for all operations was US$344 per ounce.
In the third quarter of 1998, the Company reported an operating
loss of $12.0 million primarily due to the impact of declining
gold prices on revenue, a depreciation and amortization expense
of $6.2 million and a loss of $6.4 million after terminating
currency and commodity contracts. In the third quarter of 1997
there was an operating loss of $0.2 million.
The Company reported an operating loss of $25.9 million in the
nine-month period ended September 30, 1998 compared with an
operating loss of $21.3 million in the same period of 1997. The
Company recorded depreciation and amortization expense of $16.9
million and $15.9 million in the two periods, respectively, and
losses on currency and commodity contracts of $9.9 million and
$14.1 million in each period.
In the third quarter of 1998, the Company reported pre-tax
charges against income of $81.4 million representing a write
down of mine assets, and a $5.0 million write-down of long-term
investments. There was no write-down in the third quarter of
1997. In the year-to-date period of 1998, the combined write-
down of $86.4 million compared with a write down of $39.7
million in the same period of 1997.
The Company reported a net loss of $107.4 million, or 72 cents a
share, in the third quarter of 1998 compared with a net loss of
$2.4 million, or 2 cents a share, in the same period last year.In the nine
<PAGE>
months ended September 30, 1998 the net loss was $140.1 million,
or 98 cents a share, compared with a net loss of $62.6 million,
or 45 cents a share, in the same period of 1997.
Cash used in operations before net change in other operating
items in the third quarter of 1998 was $18.6 million, or 12
cents a share, compared with cash flow of $4.2 million, or 3
cents a share in the same period of 1997. In the third quarter
of this year, net cash used in operating activities was $5.4
million, or 4 cents a share, compared with net cash provided by
operating activities of $34.6 million, or 25 cents a share.
In the nine-month period ended September 30, 1998 cash used in
operations before net change in other operating items was $15.2
million, or 11 cents a share, compared with cash flow of $5.8
million, or 4 cents a share, in the nine-month period of 1997.
Net cash used in operating activities was $78.8 million, or 55
cents a share, in the period ended September 30, 1998 compared
with $37.2 million, or 27 cents a share, in the same period a
year earlier.
Outlook
Margaret K. Witte, president and chief executive officer of
Royal Oak, commenting on the outlook for the Company, said, "We
are very pleased with operations at our Kemess South Mine. The
mine has now been in commercial production for over a month and
operating performance is meeting our expectations. In 1998, the
Company expects to produce a total of approximately 278,000
ounces of gold from all operations at an estimated cash cost of
US$240 per ounce, net of copper by-product revenue credit of
US$0.75 cents a pound. The Company has produced a total of
176,018 ounces of gold to September 30, 1998 including 40,096
ounces from Kemess during the start-up and commissioning period.
We are pleased that our Timmins and Yellowknife operations are
generating positive cash flow.
Because of continued weakness in the gold price and little
encouraging news on the horizon, the Company decided to revalue
its assets at a gold price of US$300 per ounce. This valuation
resulted in an extensive write-down on all our assets, except
for our large Kemess property position, in the third quarter.
The Company does not anticipate a further write-down of assets
at the end of this year.
We are working actively with our financial advisors to refinance
the US$120 million of short-term Senior Secured Debentures with
a long-term conventional project finance facility at a
significantly lower interest rate. We expect to complete this
transaction early in the New Year."
For further information:
Investor Relations
Royal Oak Mines Inc.
Voice Mail: (425) 822-8992, or
Facsimile: (425) 822-3552, or
Web site: http//www.royal-oak-mines.com
<PAGE>
<TABLE>
Royal Oak Mines Inc.
Consolidated Balance Sheets
(unaudited - Cdn$ 000's)
September 30 December 31
1998 1997
(audited)
======== =========
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 5,304 $ 568
Marketable securities 560 9,875
Receivables 11,340 30,923
Inventories 14,170 21,120
Prepaid expenses 6,268 3,967
-------------- --------------
Total Current Assets 37,642 66,453
Property, Plant and Equipment, net 724,574 730,314
Long-Term Investments 7,437 12,145
Reclamation and Other Deposits 13,914 14,332
Deferred Charges and Other Assets 56,762 20,142
-------------- --------------
TOTAL ASSETS $ 840,329 $ 843,386
============== ==============
LIABILITIES
Current Liabilities
Accounts payable $ 29,543 $ 123,586
Accrued payroll costs 3,843 2,599
Deferred revenue 18,495 20,085
Obligation under commodity contracts 30,305 --
Capital leases 4,702 4,531
Taxes payable 2,761 1,723
Long-term debt interest payable 6,041 10,326
Accrued unrealized loss on derivatives -- 21,327
Other current liabilities 18,367 9,135
------------- -------------
Total Current Liabilities 114,057 193,312
Deferred Revenue 23,193 23,330
Other Liabilities 56,219 57,427
Long-Term Debt 449,759 250,338
Deferred Income Taxes 2,532 2,532
Minority Interest in Subsidiary Companies (4) 69
------------- -------------
TOTAL LIABILITIES 645,756 527,008
------------- -------------
SHAREHOLDERS' EQUITY
Share Capital
Authorized - unlimited
Outstanding 153,043,927
(Dec. 31, 1997 - 138,940,263) 397,369 379,040
Deficit (202,796) (62,662)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 194,573 316,378
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 840,329 $ 843,386
============= =============
</TABLE>
<PAGE>
<TABLE>
Royal Oak Mines Inc.
Consolidated Statements of Income (Loss)
(unaudited - Cdn$ 000's except per share amounts)
Three months ended Nine months ended
September 30 September 30
-------------------- ------------------
1998 1997 1998 1997
========= ========= ========= =========
<S> <C> <C> <C> <C>
REVENUE $ 21,890 $ 53,926 $ 66,940 $ 160,772
--------- --------- --------- ---------
EXPENSES
Operating 17,043 40,547 52,290 134,455
Care and maintenance 896 48 3,207 198
Royalties and marketing 285 357 888 1,228
Administrative and corporate 2,259 2,361 6,719 8,557
Depreciation and amortization 6,166 4,394 16,881 15,872
Reclamation 557 1,247 1,725 3,623
Exploration and other 298 1,299 1,217 3,965
Loss on foreign currency and
commodity contracts 6,418 3,880 9,914 14,138
--------- --------- --------- ---------
Total operating expenses 33,922 54,133 92,841 182,036
--------- --------- --------- ---------
OPERATING LOSS (12,032) (207) (25,901) (21,264)
OTHER INCOME (EXPENSE)
Interest and other income
(expense), net (2,168) (324) (3,023) 1,703
Interest expense (1,286) (140) (1,929) (327)
Long-term debt interest (14,719) (6,887) (33,327) (19,734)
Interest capitalized 11,453 5,568 29,638 15,532
Foreign currency translation
loss on long-term debt (1,874) -- (3,130) (2,048)
Write-down of long-term investment (5,000) -- (5,000) --
Write-off of financing costs -- -- (15,011) --
Write-down of mine assets (81,400) -- (81,400) (39,700)
--------- --------- --------- ---------
LOSS BEFORE UNDERNOTED (107,026) (1,990) (139,083) (65,838)
Income and mining taxes
- current (420) (313) (1,261) (952)
Income and mining taxes
- deferred -- -- -- 4,221
Minority interest 25 17 72 48
Equity in income of
associated companies 29 (76) 138 (43)
--------- --------- --------- ---------
NET LOSS (107,392) (2,362) (140,134) (62,564)
RETAINED EARNINGS (DEFICIT)
- BEGINNING OF PERIOD (95,404) 12,351 (62,662) 72,553
--------- --------- --------- ---------
RETAINED EARNINGS (DEFICIT)
- END OF PERIOD $(202,796) $ 9,989 $(202,796) $ 9,989
========= ========= ========= =========
LOSS PER SHARE $ (0.72) $ (0.02) $ (0.98) $ (0.45)
========= ========= ========= =========
Weighted average number of common
shares outstanding (000's) 148,940 138,910 142,274 138,880
========= ========= ========= =========
</TABLE>
<PAGE>
<TABLE>
Royal Oak Mines Inc.
Consolidated Statements of Cash Flow
(unaudited - Cdn$ 000's)
Three months ended Nine months ended
September 30 September 30
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net loss for the period $(107,392) $ (2,362) $(140,134) $ (62,564)
Items not affecting cash:
Depreciation and amortization 6,166 4,394 16,881 15,872
Amortization of deferred
financing costs 1,026 221 2,135 693
Reclamation 557 1,248 1,725 3,624
Deferred income tax -- -- -- (4,221)
Gain (loss) on foreign currency
and commodity contracts (7,036) 506 -- 10,381
Foreign currency translation on
long-term debt 1,874 -- 3,130 2,048
Write-down of mine assets 81,400 -- 81,400 39,700
Write-down of long-term investment 5,000 -- 5,000 --
Write-off of deferred financing
costs -- -- 15,011 --
Deferred charges and other (189) 201 (331) 292
--------- --------- --------- ---------
Cash flow (18,594) 4,208 (15,183) 5,825
Net change in other operating items 13,218 30,430 (63,609) (43,046)
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities (5,376) 34,638 (78,792) (37,221)
--------- --------- --------- ---------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Issue of share capital (6) -- (6) 177
Capital lease obligation 726 16,277 (221) 15,750
Long-term derivatives payable 10,102 -- 10,102 --
Issue of long-term debt 7,260 -- 240,369 --
Retirement of long-term debt -- -- (64,232) --
Issue costs of long-term debt (1,001) (129) (19,342) (129)
--------- --------- --------- ---------
Net cash provided by financing
activities 17,081 16,148 166,670 15,798
--------- --------- --------- ---------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
(Increase) decrease in long-term
investments (123) 2,741 (123) (15,105)
Proceeds from asset sales 988 -- 13,861 --
Investment in other capital
assets, net (23,001) (127,920) (103,147) (237,443)
B. C. Government assistance -- 40,097 -- 118,884
Investment in exploration and
non-producing properties, net (1,112) (454) (1,926) (4,522)
Change in other assets 424 (642) (1,122) (1,295)
--------- --------- --------- ---------
Net cash used in investing
activities (22,824) (86,178) (92,457) (139,481)
--------- --------- --------- ---------
DECREASE IN CASH AND MARKETABLE
SECURITIES DURING THE PERIOD (11,119) (35,392) (4,579) (160,904)
CASH AND MARKETABLE SECURITIES
AT BEGINNING OF PERIOD 16,983 72,844 10,443 198,356
--------- --------- --------- ---------
CASH AND MARKETABLE SECURITIES
AT END OF PERIOD $ 5,864 $ 37,452 $ 5,864 $ 37,452
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of capitalized
interest) $ 302 $ 7,964 $ 1,761 $ 11,386
Income taxes $ -- $ 25 $ -- $ 90
</TABLE>
