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
March 31, 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 March 31, 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 March
31, 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: March 31, 1998 By: /s/ James H. Wood
-----------------------
James H. Wood
Chief Financial Officer
Exhibit 99.1 Royal Oak Mines Inc. press release, dated March 31, 1998.
FOR IMMEDIATE RELEASE FROM KIRKLAND
March 31, 1998
Royal Oak Announces 1997 Results of Operations
Royal Oak Mines Inc. (TSE and AMEX: RYO) announced today the
unaudited operating results for the fourth quarter and year ended
December 31, 1997. All figures are in thousands of Canadian
dollars unless otherwise stated.
Fourth Quarter and Year Highlights
Financial Position
December 31, 1997 December 31, 1996
Cash 568 197,766
Total assets 843,386 821,630
Net debt (1) 274,136 46,876
Shareholders' equity 316,378 451,366
(1) Net debt = Notes payable + current and non-current capital leases - cash
- - Strategic mine closures to improve future mine operating margins
- - Gold production of 66,919 ounces in fourth quarter, and 351,349
ounces for the year
- - Cash costs of US$274 per ounce in fourth quarter, and US$330 per
ounce for the year
- - Cash provided by operating activities of $104.5 million in fourth
quarter, and $67.3 million in 1997
- - Realized gold price of US$327 per ounce in fourth quarter, and
US$393 per ounce for the year
- - Construction of Kemess Mine over 92% complete and scheduled for
start-up in early May of 1998
- - Hope Brook Mine placed on care and maintenance
- - Colomac operations closed down in December of 1997, on completion
of milling of stockpiled ore, and placed on care and maintenance
Operating Results
Three months ended Twelve months ended
December 31 December 31
1997 1996 1997 1996
-------- ------- -------- -------
Gold production (ounces) 66,919 105,548 351,349 389,203
Revenue 30,395 71,999 191,167 255,168
Cash provided by
operating activities 104,472 15,900 67,251 57,259
Cash provided by
operating activities
per share (C$) 0.75 0.11 0.48 0.42
Net income (loss) (72,651) (21,306) (135,215) (5,985)
Net income (loss) per share (C$) (0.52) (0.15) (0.97) (0.04)
Cash cost of production (US$/oz) 274 357 330 343
Average spot gold price (US$/oz) 307 376 331 388
Average realized gold price (US$/oz)327 505 393 481
Weighted average common shares
outstanding (millions) 138.930 138.734 138.892 136.758
Period-end common shares
outstanding (millions) 138.940 138.845 138.940 138.845
In 1997, gold production was on budget at 351,349 ounces, but was
10% lower than the record 389,203 ounces produced in 1996. The
decrease in production in 1997 was mainly due to the permanent
closure of the Hope Brook Mine in September after depletion of
ore reserves, and the Colomac Mine in December for economic
reasons. Both mines have been placed on care and maintenance.
Gold production in the fourth quarter of 1997 was 66,919 ounces,
38,629 ounces less than the 105,548 ounces produced in the same
period a year earlier, and mainly reflects the closure of the
Hope Brook and Colomac mines.
Revenue of $191.2 million in 1997 included hedging gains of $33.7
million and was 25% less than record revenue of $255.2 million
reported in 1996 when hedging gains were $51.3 million. In the
fourth quarter of 1997, revenue was $30.4 million compared to
revenue of $72.0 million in the comparable period of 1996. The
decrease in revenue in both periods was due to the combined
impacts of lower production and lower average realized gold
prices. The average realized gold price in 1997 was US$393 per
ounce compared to the record US$481 per ounce in 1996. In the
fourth quarters of 1997 and 1996, the realized prices were US$327
per ounce and US$505 per ounce, respectively.
In 1997, the Company incurred a loss of $135.2 million, or 97
cents per share, compared to a loss of $6.0 million, or 4 cents
per share, in 1996. The loss in 1997 reflected a provision for
loss on currency and commodity contracts of $46.3 million,
(approximately $22 million of realized losses and approximately
$24 million of unrealized losses) of which $32.2 million was
incurred in the fourth quarter; a $34.1 million loss on
investments in gold mining companies, of which $33.0 million was
reported in the fourth quarter; and a write-down of $39.7 million
on the Colomac assets, which was reported in the second quarter.
In the fourth quarter of 1997, the Company incurred a loss of
$72.7 million, or 52 cents per share, compared to a loss of $21.3
million, or 15 cents per share, in the comparable period a year
ago.
In 1997, cash costs were US$330 per ounce, 4% lower than US$343
per ounce for the prior year. The reduction in cash costs
reflected closure of the high cost Colomac and Hope Brook mines
in the latter part of the year, as well as the implementation of
cost control measures such as reducing the workforce at the
Pamour and Giant mines in the fourth quarter. In the fourth
quarter of 1997, cash costs of US$274 per ounce were 23% lower
than the US$357 per ounce reported in the same period a year
earlier.
Year End 1997 Ore Reserves Reflect Lower Gold Prices
The Company reported estimated mineable ore reserves of 7.0
million ounces of gold at December 31, 1997 compared to 9.9
million at the end of the previous year. The decrease reflects a
gold price of $495 per ounce (US$350 per ounce) compared to $527
per ounce (US$390 per ounce) a year earlier. The Company
reported a total resource of approximately 19.5 million ounces of
gold at the end of 1997 compared to 17.3 million ounces at the
end of 1996. In addition, the Company reported an estimated
mineable copper ore reserve of 996 million pounds at Kemess at
the end of 1997, calculated at a copper price of US$0.95 per
pound, compared to 990 million pounds of copper, calculated at a
copper price of US$1.10 per pound, at the end of 1996. The
estimated total copper resource at the end of 1997 was 10.7
billion pounds and includes the resource at the Namosi deposit in
Fiji, which was not included in the resource of 1.6 billion
pounds of copper reported at the end of 1996.
Production and Cash Cost Estimates for 1998 and 1999
The Company expects to commence production at the Kemess Mine in
May of this year. In 1998, the Company plans to produce a total
of approximately 363,000 ounces of gold at an estimated cash cost
of US$208 per ounce, net of copper credits at US$0.80 per pound.
In 1999, when the Kemess Mine is expected to be in full
production, budgeted total production is approximately 477,000
ounces of gold at an estimated cash cost of US$182 per ounce, net
of copper credits at US$0.90 per pound. The Company currently
does not have any gold production sold forward.
Subsequent Events
Subsequent to the end of the year, on March 25, 1998 the Company
announced that it had obtained US$120 million, subject to various
approvals and completion of customary documentation, to refinance
and fund the completion of the Kemess Mine. The financing is in
the form of Senior Secured Notes arranged by Trilon Financial
Corporation of Toronto.
The Company has requested an extension to the filing date for its
Form 10-K from the Securities and Exchange Commission until the
financing has been completed.
Outlook
Commenting on the long-term outlook for Royal Oak, the Company's
President and Chief Executive Officer, Margaret Witte, said,
"Our operating results in 1997 reflected a challenging year as
we had to deal with the impact of significantly lower gold prices
than in the previous three years. The Company has taken
aggressive steps by shutting down unprofitable assets and writing
down currency positions due to the weak Canadian dollar.
Furthermore, the cost-cutting measures taken in the fourth
quarter of last year at the Pamour and Giant mines has continued
into the first quarter this year where cash costs are
approximately US$285 per ounce, and below the current price of
gold. Notwithstanding these difficulties, we are extremely
encouraged by the long-term outlook for the Company as we plan to
commence production in May at the low-cost, long-life Kemess
gold-copper mine. Kemess represents the anticipated turnaround
of Royal Oak, and the cash flow that the mine is expected to
generate, particularly when gold and copper prices return to
levels of the last three years, should enable the Company to grow
with less reliance on the capital markets than in the past. We
appreciate the support of our employees and the holders of our
securities during the past year, and look forward to sharing with
you the results of operations at Kemess over the next few
quarters."
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 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
Internet site: http://www.royal-oak-mines.com
ROYAL OAK MINES INC.
Consolidated Balance Sheets
(in thousands of Canadian dollars)
(Unaudited)
<TABLE>
December 31 December 31
1997 1996
=========== ===========
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 568 $197,766
Marketable securities 9,875 28,259
Receivables 30,923 17,492
Inventories 21,120 61,844
Prepaid expenses 3,967 7,729
----------- -----------
Total current assets 66,453 313,090
Property, Plant and Equipment 730,314 482,733
Long-term Investments 12,145 16,586
Reclamation and Other Deposits 14,332 --
Deferred Charges and Other Assets 20,142 9,221
------------ -----------
$843,386 $821,630
============ ===========
LIABILITIES
Current Liabilities
Accounts payable $108,888 $ 21,094
Accrued payroll costs 2,599 3,514
Deferred revenue 20,085 10,994
Capital leases 4,531 2,514
Income taxes payable 1,723 3,894
Senior subordinated notes interest payable 10,326 10,180
Accrued unrealized loss on derivatives 21,327 --
Retainage payable 14,698 --
Other current liabilities 9,135 20,383
------------ -----------
Total Current Liabilities 193,312 72,573
Deferred Revenue 23,330 22,897
Other Liabilities 57,427 29,930
Senior Subordinated Notes 250,338 239,680
Deferred Income Taxes 2,532 5,064
Minority Interest in Subsidiary Companies 69 120
------------ -----------
TOTAL LIABILITIES 527,008 370,264
------------ -----------
Contingencies and commitments
SHAREHOLDERS' EQUITY
Capital Stock
Common stock
Authorized - unlimited
Outstanding - 138,940,263
(1996 - 138,845,263) 379,040 378,813
Retained Earnings (Deficit) (62,662) 72,553
------------ -----------
TOTAL SHAREHOLDERS' EQUITY 316,378 451,366
------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $843,386 $821,630
============ ===========
</TABLE>
<TABLE>
ROYAL OAK MINES INC.
Consolidated Statements of Income and Retained Earnings (Deficit)
(in thousands of Canadian dollars except per share amounts)
(Unaudited)
Year ended December 31
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
REVENUE $191,167 $255,168 $208,311
EXPENSES
Operating 160,522 181,869 182,024
Royalties and marketing 1,986 2,904 2,535
Administrative and corporate 9,617 9,339 8,549
Depreciation and amortization 22,200 24,900 13,645
Reclamation 4,054 2,663 1,250
Exploration and other 10,257 4,742 619
Provision for (Recovery of) loss
on foreign currency and commodity
contracts 46,294 (453) (5,244)
------------ ------------ ------------
Total operating expenses 254,930 225,964 203,378
------------ ------------ ------------
OPERATING INCOME (LOSS) (63,763) 29,204 4,933
OTHER INCOME (EXPENSE)
Interest and other income
(expense), net 4,549 6,053 12,701
Interest expense (704) (378) (298)
Senior subordinated notes interest (26,737) (10,089) --
Interest capitalized 22,906 5,362 --
Foreign currency translation on
senior subordinated notes (364) 190 --
Write-down of mine assets (39,700) (37,633) (891)
Gain (loss) on investments (34,112) 2,691 8,309
------------ ------------ ------------
INCOME (LOSS) before undernoted (137,925) (4,600) 24,754
Income and mining taxes
(recovery/(expense)) - current 2,279 (900) (1,542)
Income and mining taxes
(recovery/(expense)) - deferred 2,532 -- --
Minority interest 52 50 594
Equity in income (loss) of
associated companies (2,153) (535) (637)
------------ ------------ ------------
NET INCOME (LOSS) (135,215) (5,985) 23,169
RETAINED EARNINGS
- BEGINNING OF PERIOD 72,553 78,538 55,369
------------ ------------ ------------
RETAINED EARNINGS (DEFICIT)
- END OF PERIOD $ (62,662) $ 72,553 $ 78,538
============ ============ ============
EARNINGS (LOSS) PER SHARE - BASIC $ (0.97) $ (0.04) $ 0.20
============ ============ ============
EARNINGS (LOSS) PER SHARE
- FULLY DILUTED $ (0.97) $ (0.04) $ 0.20
============ ============ ============
Weighted average number of common
shares outstanding (000's) 138,892 136,758 117,900
============ ============ ============
</TABLE>
<TABLE>
ROYAL OAK MINES INC.
Consolidated Statements of Cash Flow
(in thousands of Canadian dollars)
(Unaudited)
Year ended December 31
-------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net (loss) income for the period $(135,215) $ (5,985) $ 23,169
Items not affecting cash:
Depreciation and amortization 22,200 24,900 13,645
Reclamation 4,054 2,663 1,250
Deferred income tax (2,532) -- --
Provision for (Recovery of)
unrealized loss on foreign currency
and commodity contracts 24,254 (453) (5,244)
Foreign currency translation on
senior subordinated notes 364 (190) --
Write-down of mine assets 39,700 37,633 891
Write-down of resource properties
and mine development 8,229 144 --
Equity loss and write-down of
long-term investments 3,424 535 637
Deferred charges and other 90 335 (593)
------------- ------------- -------------
(35,432) 59,582 33,755
Net change in other operating items 102,683 (2,323) (1,995)
------------- ------------- -------------
Net cash provided by operating
activities 67,251 57,259 31,760
------------- ------------- -------------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Issue of common shares 227 116,855 14,595
Capital lease obligation 19,404 1,711 --
Issue of senior subordinated notes -- 239,870 --
Issue costs of senior subordinated
notes and secured debt (254) (8,786) --
Accrued reclamation on acquisition
of Red Mountain -- -- 3,000
Deferred credits and other -- 290 (300)
------------- ------------- -------------
Net cash provided by financing
activities 19,377 349,940 17,295
------------- ------------- -------------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Investment in Kemess capital assets
through purchase of companies -- (201,976) --
Decrease in long-term investments 1,017 26,882 --
Proceeds from asset sales 7,075 -- --
Investment in capital assets through
purchase of Consolidated Professor
Mines Limited -- (16,100) --
Additions to property, plant and
equipment (421,343) (146,170) (66,018)
British Columbia Government assistance 131,833 22,326 --
Reclamation and other deposits (14,332) -- --
Investment in exploration and
non-producing properties, net (5,252) (7,697) (19,025)
Other assets (1,208) (820) (568)
------------- ------------- -------------
Net cash used in investing activities (302,210) (323,555) (85,611)
------------- ------------- -------------
INCREASE (DECREASE) IN CASH AND MARKETABLE
SECURITIES DURING PERIOD (215,582) 83,644 (36,556)
CASH AND MARKETABLE SECURITIES AT
BEGINNING OF PERIOD 226,025 142,381 178,937
------------- ------------- -------------
CASH AND MARKETABLE SECURITIES AT
END OF PERIOD $ 10,443 $ 226,025 $ 142,381
============= ============= ============
</TABLE>
