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 14, 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 August 14, 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 August
14, 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: August 14, 1998
By: /s/ James H. Wood
-----------------------
James H. Wood
Chief Financial Officer
Exhibit 99.1 Royal Oak Mines Inc. press release, dated August 14,
1998.
FOR IMMEDIATE RELEASE FROM KIRKLAND
August 14, 1998
Royal Oak Announces Second Quarter Results
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, 1998. All figures are in thousands of
Canadian dollars unless otherwise stated.
Second Quarter Highlights
Financial Position
<TABLE>
June 30, 1998 December 31, 1997 June 30, 1997
------------- ----------------- -------------
<S> <C> <C> <C>
Cash 16,423 568 72,254
Total assets 903,876 843,386 763,876
Net debt (1) 433,761 274,135 173,576
Shareholders' 301,971 316,378 391,340
equity
</TABLE>
(1) Net debt = Notes payable + current and non-current capital
leases - cash
* On May 19, 1998 commenced production at Kemess gold-copper mine
* Cash flow before net change in other operating items of $2.5
million (2 cents per share) in Q2/98 compared with $2.1 million
(2 cents per share) in Q2/97.
* Operating loss of $17.1 million in Q2/98 mainly due to
provision for loss on foreign currency and commodity contracts
of $11.4 million and depreciation of $6.7 million compared with
operating loss of $11.9 million in Q2/97.
* Net loss of $35.0 million (25 cents per share) after write-off
of financing costs in Q2/98 compared with net loss of $52.1
million (38 cents per share) in Q2/97.
* Gold production of 45,732 ounces from continuing operations at
Giant and Pamour/Nighthawk mines in Q2/98 compared with 49,288
ounces in Q2/97, a decrease of 7%. Total gold production from
all operations in Q2/97 (including Hope Brook and Colomac mines
closed in late 1997) was 104,845 ounces.
<PAGE>
Royal Oak Mines, page 2 of 8
* Average cash cost from continuing operations of US$257 per
ounce in Q2/98, down 19% from US$316 per ounce in Q2/97.
Average cash cost from all operations in Q2/97 was US$351 per
ounce.
* Average realized gold price of US$342 per ounce in Q2/98, a
premium of US$42 per ounce, or 14% above average spot price of
US$300 per ounce.
* Completed debt financing of US$120 million of senior secured
debentures.
* Repaid US$46.3 million of principal and accrued interest of
senior secured debentures issued in January 1998.
Operating Results
<TABLE>
Three months ended Six months ended
June 30 June 30
------------------ ----------------
1998 1997 1998 1997
-------- ------- ------ -------
<C> <S> <S> <S> <S>
Gold production (ounces) 45,732 104,845 91,289 189,925
Revenue 22,621 58,872 45,050 106,846
Cash flow before net
change in other
operating items 2,481 2,105 3,411 1,617
Cash flow before net
change in other
operating items per
share (C$) 0.02 0.02 0.02 0.01
Net loss (35,002) (52,089) (32,742) (60,202)
Net loss per share (C$) (0.25) (0.38) (0.24) (0.43)
Cash cost of production
(US$/oz) 257 351 268 358
Average spot gold price
(US$/oz) 300 343 297 347
Average realized gold
price (US$/oz) 342 406 343 405
Weighted average common
shares outstanding
(millions) 138.940 138.884 138.940 138.864
Period-end common shares
outstanding (millions) 148.940 138.910 148.940 138.910
</TABLE>
Operating results in the three months and six months ended June
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 second quarter of 1998, gold production from continuing
operations at the Giant and Pamour/Nighthawk mines was 45,732
ounces, a decrease of 7% from the 49,288 ounces produced at these
mines in the same period of 1997. Total gold production in the
second quarter of 1997 (including production from the Hope Brook
and Colomac mines) was 104,845 ounces.
In the six months ended June 30, 1998 gold production from
continuing operations was 91,289 ounces, a decrease of 6% from
the 97,287 ounces produced in the same period of 1997. Total
gold production in the first half of 1997 was 189,925 ounces.
Revenue in the second quarter of 1998 was $22.6 million compared
with $58.9 million in the same period of 1997. The decrease in
revenue in the second quarter this year reflected a decrease in
gold production of 59,113 ounces, mainly due to the closure of
the Hope Brook and Colomac mines, and a decrease of 16% in the
average realized gold price from US$406 per ounce in the
<PAGE>
Royal Oak Mines, page 3 of 8
second quarter of 1997 to US$342 per ounce in the same period
this year. Revenue in the second quarter of 1998 included
hedging gains of $2.7 million compared with $10.0 million in the
same period last year.
Revenue in the first half of 1998 was $45.1 million compared with
$106.8 million in the same period of 1997. The decrease in
revenue in the first half of this year was attributed to a
decrease in gold production of 98,636 ounces, and a decrease of
15% in the average realized gold price from US$405 per ounce in
the second half of 1997 to US$343 per ounce in the same period
this year. Revenue in the second half of 1998 included hedging
gains of $5.9 million compared with $18.5 million in the same
period last year.
In the second quarter of 1998, the Company reported an operating
loss of $17.1 million primarily due to a provision for loss on
foreign currency and commodity contracts of $11.4 million and
depreciation of $6.7 million. In the second quarter of 1997
there was an operating loss of $11.9 million. The Company
reported an operating loss of $13.9 million in the first half of
1998 compared with $21.1 million in the same period of 1997. The
Company recorded a provision for loss on foreign currency and
commodity contracts of $3.5 million and $10.3 million in the two
periods, respectively, and depreciation of $10.7 million and
$11.5 million in each period.
After a write-off of financing costs of $15.0 million, the
Company reported a net loss of $35.0 million, or 25 cents a
share, in the second quarter of 1998. This compared with a net
loss of $52.1 million, or 38 cents a share, in the same period of
1997. There was a net loss of $32.7 million, or 24 cents a
share, in the first half of 1998 compared with a net loss of
$60.2 million, or 43 cents a share, in the same period a year
ago.
In the second quarter of 1998, the average cash cost of
production for continuing operations at the Giant and
Pamour/Nighthawk mines was US$257 per ounce, a decrease of 19%
from the US$316 per ounce for these mines reported in the same
period of 1997. The significant reduction in cash cost was
attributable to sustained cost-cutting measures implemented in
the fourth quarter of 1997 and a 4% decrease in the value of the
Canadian dollar against the U.S. dollar. In the second quarter
of last year, the Company reported an average cash cost for all
operations of US$351 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 six-month period this year, the average cash cost of
production for continuing operations was US$268 per ounce, a
decrease of 17% from US$322 per ounce in the same period of 1997.
In the period ended June 30, 1997, the consolidated cash cost
for all operations was US$358 per ounce.
Cash flow before net change in other operating items in the
second quarter this year was $2.5 million, or 2 cents a share,
compared with $2.1 million, or 2 cents a share, in the same
period of 1997. In the second quarter of this year, net cash
used in operating activities was $43.5 million, or 31 cents a
share, compared with $5.6 million, or 4 cents a share, in the
year-ago period.
In the six-month period ended June 30, 1998 cash flow before net
change in other operating items was $3.4 million, or 2 cents a
share, compared with $1.6 million, or 1 cent a share, in the
first half of 1997. Net cash used in operating activities was
$78.8 million, or 57 cents a share, in
<PAGE>
Royal Oak Mines, page 4 of 8
the first half of 1998 compared with $71.9 million, or 52 cents a
share, in the period ended June 30, 1997.
Successful Start-up at Kemess Mine
Royal Oak's new Kemess gold-copper mine commenced production on
May 19, 1998. Commissioning and operations are proceeding as
planned. During the pre-production stripping phase of the
project, which commenced in July of 1997, over nine million tons
of overburden and waste were removed from the open pit. From the
commencement of operations in mid-May to August 11, 1998,
approximately 2.7 million tons of hypogene ore at a grade of
0.22% copper and 0.016 ounces of gold per ton has been mined.
The availability of the fleet of mobile equipment in the open pit
has exceeded 90%. The average strip ratio for the project is
estimated to be approximately 1.18 to 1 over the estimated 16-
year life of the mine.
The concentrator has processed approximately 2.2 million tons of
ore at a head grade of 0.211% copper and 0.016 ounces of gold per
ton during this period. Design throughput was reached after
approximately two months of operation. A sustainable milling
rate of between 50,000 and 60,000 tons per day has been achieved
for many consecutive days. Approximately 9,261 tons of
concentrate containing between 25% and 26% copper and between 1.3
and 1.7 ounces of gold per ton have been produced. The
concentrate is transported to the Far East for smelting and
refining to recover metal values.
Throughput has been curtailed somewhat during the month of August
as the Company is making design and operating modifications to
the flotation circuit in the concentrator to optimize gold and
copper recoveries. The Company estimates that 1998 projected
recoveries of 78% copper and 71% gold should be achieved by the
end of September 1998. The average life-of-mine recoveries are
estimated to be 82% copper and 78% gold.
The Kemess Mine is in substantial compliance with environmental
regulations. The impoundment of tailings from the concentrator
is operating successfully as a zero discharge system. Measures
adopted to control sediment in streams have been successfully
implemented, and the re-vegetation of areas disturbed during
construction is proceeding well.
The Company estimates that commercial production will be achieved
on or about September 30, 1998. As of June 30, 1998 all proceeds
from the sale of concentrates during the commissioning period
have been credited against Kemess capital costs.
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 the start-up of operations at our new Kemess
Mine. Our main focus at present is to increase the gold and
copper recoveries in the concentrator. We have already exceeded
the design throughput of the mill on a consistent basis. We are
gaining a better understanding of the mineralogy of the ore and
of the metallurgy of the flotation circuit and have made some
design and operating modifications that have resulted in
improvement in recoveries. We anticipate achieving design
recoveries on the hypogene ore by
<PAGE>
Royal Oak Mines, page 5 of 8
the time we start processing supergene ore near the end of
August. We expect commercial production to begin around the end
of September, at which time production is expected to reach full
capacity on an annualized basis.
At our Giant and Timmins operations, we are encouraged that
production costs continue to decrease as a result of cost cutting
measures we implemented toward the end of last year. Cash
costs at these operations continue to remain below the spot gold
price.
We are concerned about the continuing weakness in gold and copper
prices and their impact on cash flow from operations. If spot
gold and copper prices continue at current levels, the Company
will examine the carrying value of its assets to determine the
recoverability of its investments. The Company is working with
its financial advisors in seeking a long-term refinancing
alternative to ensure that it will be able to meet principal
payments on debt as they fall due and other financial obligations
beyond the end of this year."
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 EC2M 1QP
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
<PAGE>
Royal Oak Mines, page 6 of 8
<TABLE>
Royal Oak Mines Inc.
Consolidated Balance Sheets
(unaudited _ Cdn$ 000's)
June 30 December 31
1998 1997
(audited)
========= ==========
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 16,423 $ 568
Marketable securities 560 9,875
Receivables 8,891 30,923
Inventories 15,447 21,120
Prepaid expenses 4,933 3,967
--------- ----------
Total Current Assets 46,254 66,453
Property, Plant and Equipment, net 787,740 730,314
Long-Term Investments 12,424 12,145
Reclamation and Other Deposits 14,346 14,332
Deferred Charges and Other Assets 43,112 20,142
--------- ----------
TOTAL ASSETS $ 903,876 $ 843,386
========= ==========
LIABILITIES
Current Liabilities
Accounts payable $ 31,277 $ 123,586
Accrued payroll costs 3,087 2,599
Deferred revenue 12,865 20,085
Obligation under commodity contracts 19,203 --
Capital leases 5,588 4,531
Taxes payable 1,207 1,723
Long-term debt interest payable 11,437 10,326
Accrued unrealized loss on derivatives 2,454 21,327
Other current liabilities 7,682 9,135
--------- ----------
Total Current Liabilities 94,800 193,312
Deferred Revenue 14,515 23,330
Other Liabilities 63,272 57,427
Long-Term Debt 426,764 250,338
Deferred Income Taxes 2,532 2,532
Minority Interest in Subsidiary Companies 22 69
--------- ----------
TOTAL LIABILITIES 601,905 527,008
--------- ----------
SHAREHOLDERS' EQUITY
Share Capital
Authorized - unlimited
Outstanding - 148,940,263
(Dec. 31, 1997 - 138,840,263) 397,375 379,040
Deficit (95,404) (62,662)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 301,971 316,378
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 903,876 $ 843,386
========= =========
</TABLE>
<PAGE>
Royal Oak Mines, page 7 of 8
<TABLE>
Royal Oak Mines Inc.
Consolidated Statements of Income (Loss)
(unaudited - Cdn$ 000's except per share amounts)
Three months ended Six months ended
June 30 June 30
------------------- ------------------
1998 1997 1998 1997
======== ======== ======== ========
<S> <C> <C> <C> <C>
REVENUE $ 22,621 $ 58,872 $ 45,050 $106,846
-------- -------- -------- --------
EXPENSES
Operating 17,016 50,930 35,247 93,908
Care and maintenance 974 76 2,311 150
Royalties and marketing 312 447 603 871
Administrative and corporate 2,214 3,544 4,460 6,196
Depreciation and amortization 6,711 5,925 10,715 11,478
Reclamation 584 1,246 1,168 2,376
Exploration and other 472 1,319 919 2,666
Provision for loss on foreign
currency and commodity
contracts 11,390 7,250 3,496 10,258
-------- -------- -------- --------
Total operating expenses 39,673 70,737 58,919 127,903
-------- -------- -------- --------
OPERATING LOSS (17,052) (11,865) (13,869) (21,057)
OTHER INCOME (EXPENSE)
Interest and other income
(expense), net (847) 314 (855) 2,027
Interest expense (346) (69) (643) (187)
Long-term debt interest (10,400) (6,503) (18,608) (12,847)
Interest capitalized 9,977 5,544 18,185 9,964
Foreign currency translation
loss on long-term debt (964) 490 (1,256) (2,048)
Write-off of financing costs (15,011) -- (15,011) --
Write-down of mine assets -- (39,700) -- (39,700)
-------- -------- -------- --------
LOSS BEFORE UNDERNOTED (34,643) (51,789) (32,057) (63,848)
Income and mining taxes -
current (421) (313) (841) (639)
Income and mining taxes -
deferred -- -- -- 4,221
Minority interest 16 (5) 47 31
Equity in income of
associated companies 46 18 109 33
-------- -------- -------- --------
NET LOSS (35,002) (52,089) (32,742) (60,202)
RETAINED EARNINGS (DEFICIT)-
BEGINNING OF PERIOD (60,402) 64,440 (62,662) 72,553
-------- -------- -------- --------
RETAINED EARNINGS (DEFICIT) - END
OF PERIOD $(95,404) $ 12,351 $(95,404) $ 12,351
======== ======== ======== ========
LOSS PER SHARE $ (0.25) $ (0.38) $ (0.24) $ (0.43)
======== ======== ======== ========
Weighted average number of common
shares outstanding (000's) 138,940 138,884 138,940 138,864
======== ======== ======== ========
</TABLE>
<PAGE>
Royal Oak Mines, page 8 of 8
<TABLE>
Royal Oak Mines Inc.
Consolidated Statements of Cash Flow
(unaudited - Cdn$ 000's)
Three months Six months
ended June 30 ended June 30
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
Net loss for the period $(35,002) $(52,089) $(32,742) $(60,202)
Items not affecting cash:
Depreciation and amortization 6,711 5,925 10,715 11,478
Amortization of deferred finance
costs 684 233 1,109 472
Reclamation 584 1,246 1,168 2,376
Deferred income tax -- -- -- (4,221)
Provision for unrealized loss on
foreign currency and
commodity contracts 13,575 7,357 7,036 9,875
Foreign currency translation on
senior subordinated notes 964 (490) 1,256 2,048
Write-down of mine assets -- 39,700 -- 39,700
Write-off of deferred finance costs 15,011 -- 15,011 --
Deferred charges and other (46) 223 (142) 91
-------- -------- -------- --------
Cash flow 2,481 2,105 3,411 1,617
Net change in other operating items (45,965) (7,713) (82,162) (73,476)
-------- -------- -------- --------
Net cash used in operating activities (43,484) (5,608) (78,751) (71,859)
-------- -------- -------- --------
CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES
Issue of share capital 18,335 65 18,335 177
Capital lease obligation (473) (249) (947) (527)
Issue of long-term debt 169,050 -- 233,109 --
Retirement of long-term debt (64,232) -- (64,232) --
Issue costs of long-term debt (25,775) -- (31,341) --
Deferred credits and other -- (18) -- (18)
-------- -------- -------- --------
Net cash provided by (used in)
financing activities 96,905 (202) 154,924 (368)
-------- -------- -------- --------
CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES
Increase in long-term investments -- (17,846) -- (17,846)
Proceeds from asset sales 8,606 -- 12,873 --
Investment in other capital
assets, net (43,700) (63,248) (80,146) (109,523)
B. C. Government assistance -- 47,822 -- 78,787
Investment in exploration and non-
producing properties, net (540) (2,377) (814) (4,068)
Change in other assets (1,427) (48) (1,546) (635)
-------- -------- -------- --------
Net cash used in investing activities (37,061) (35,697) (69,633) (53,285)
-------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND MARKETABLE
SECURITIES DURING THE PERIOD 16,360 (41,507) 6,540 (125,512)
CASH AND MARKETABLE SECURITIES AT BEGINNING
OF PERIOD 623 114,351 10,443 198,356
-------- -------- -------- --------
CASH AND MARKETABLE SECURITIES AT END
OF PERIOD $ 16,983 $ 72,844 $ 16,983 $ 72,844
======== ======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 2,716 $ 69 $ 16,726 $ 13,386
Income taxes $ -- $ 25 $ -- $ 65
</TABLE>
