SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1939
For the Fiscal Year Ended Commission File Number
June 30, 1997 0-12570
AMERICAN EAGLE RESOURCES, INC.
(Exact name of registrant as specified in its charter.)
Delaware 95-3494141
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 859, Virginia City, Nevada 89440
-------------------------------------------------------------
(Address of principal executive offices)(Zip Code)
(702) 246-0761
---------------------------------
(Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT:
None None
(Title of Each Class) (Name of Each Exchange on Which
Registered)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
Common Stock, par value $0.01 None
(Title of Each Class) (Name of Each Exchange on Which
Registered)
Indicate by check mark whether the Company (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
Company was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes ___X____ No _________.
-
The aggregate market value of the voting stock held by non-affiliates of
the Company cannot be readily determined: see page 13 Item 5, Market for
Company's Common Equity and Related Stockholder Matters.
The number of shares of common stock of the Company outstanding at June
30, 1997 - 5,400,000.
TABLE OF CONTENTS
PART I Page
tem 1. Business: 4
a. General Development of Business 4
b. Financial Information about Industry Segments
5
c. Narrative Description of Business 5
Item 2. Properties: 9
a. General 9
b. Golden Eagle Mine (Formerly the Flowery Project) 9
c. Occidental Claims 13
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders: 13
PART II
Item 5. Market for Company's Common Equity and Related
Stockholder Matters. 14
a. Market Information 14
b. Holders 15
c. Dividends 15
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 16
Item 8. Financial Statements and Supplementary Data 20
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 20
PART III 21
Item 10. Directors and Executive Officers of the Registrant 21
Item 11. Executive Compensation 22
Item 12. Security Ownership of Certain Beneficial Owners
and Mgm 23
Item 13. Certain Relationships and Related Transactions 24
PART IV 25
Item 14. Exhibits, Financial Statement Schedules, & Reports on Form 8K 25
SIGNATURES 27
PART I
ITEM 1. BUSINESS:
A. GENERAL DEVELOPMENT OF BUSINESS
American Eagle Resources, Inc. (the "Company") is a Delaware corporation
that was engaged in the exploration of mining properties, and the development
and production of gold, silver and other metals. The Company presently has
ceased conducting any of those aforementioned activities, and is strictly in
the reclamation phase on its mining properties in Nevada. Any previous mining
activity was conducted through direct ownership of properties, either alone or
in joint ventures with others, and leasing of mineral properties. A
description of the principal properties of the Company is contained in Item 2,
Properties.
During the fiscal years ended June 30, 1997 and 1996, the Company
operated one mine, the Golden Eagle Mine, formerly, the Flowery Mine, (the
"Mine"), in Storey County, Nevada. For further details, see Item 1 (c),
Narrative Description of Business, and Item 2 (b), Properties - Golden Eagle
Mine.
The Company's executive offices are located at Six Mile Canyon Road,
Virginia City, NV 89440 (telephone number: (702) 246-0761).
The Company was originally named the Carpenter-Morrison Uranium and Oil
Company, Inc. and was incorporated under the laws of Utah in 1954. From the
late 1950's through 1974, the Company was inactive. In 1974, the Company
changed its name to International Land and Exploration Corporation, and in
1977 changed its name to Alhambra-Atlanta Gold Mines and Properties Inc. In
January, 1978 the Company was re-incorporated under the laws of Delaware and
in February, 1978 changed its name to Alhambra Mines, Inc.
In October, 1989 a Restated Certificate of Incorporation was filed with
the Secretary of State of Delaware. The Restated Certificate of Incorporation
of the Company was duly adopted pursuant to and in accordance with Section 303
of the Delaware General Corporation Law in connection with an Order Confirming
Amended Plan of Reorganization entered by the United States Bankruptcy Court,
District of Nevada, on August 16, 1989. Consistent with the plan, the name of
the Company was changed from Alhambra Mines, Inc. to American Eagle Resources,
Inc.
In 1991 the Company reduced its holdings in General Minerals of America,
Inc. ("GMA") to 750,000 shares. Since this no longer represented a majority
holding, GMA was not consolidated as a subsidiary in 1991 and the value of the
remaining shares were written down to zero.
In 1992 the Company was able to sell these remaining 750,000 shares for
$75,000. This resulted in a gain of the full $75,000 since the shares had
been written down to zero in the previous year.
As of June 30, 1997 the Company employed 7 (June 30, 1996 - 9) full-time
employees, one of whom is a director of the Company. In addition to utilizing
additional hourly employees when needed, the Company, on occasion, uses
outside consultants and specialists for technical advice on mining matters.
The Mine is 40% owned by the Company in a joint venture with Miramar Gold
Corporation.
DISCUSSION OF THE COMPANY'S BANKRUPTCY PROCEEDINGS.
- --------------------------------------------------------
On March 14, 1988 the Company filed a voluntary petition for
reorganization (Chapter 11) in the United States Bankruptcy Court for the
District of Nevada. The Company was authorized by the Court to continue
managing and operating its business as debtor-in-possession, subject to the
authority of the Bankruptcy Court.
On January 4, 1990 the Reorganized Debtor's application for Final Decree
was granted by the Bankruptcy Court. This was based on the fulfillment of all
the provisions of the Debtor's Amended Plan of Reorganization which was
approved by the Bankruptcy Court on August 16, 1989. Among other things, the
Amended Plan of Reorganization provided for the sale of 60% of all the
Company's assets for $1,000,000 and 1,000,000 shares of Miramar Mining
Corporation common stock, whose shares are listed for trading on the Vancouver
and Toronto Stock Exchanges, and the NASDAQ Stock Market; payments to secured
and unsecured creditors; 4,320,000 new shares of common stock to the parties
funding the Plan and issuance of 215,853 new shares of common re-organized
stock.
After implementation of the Plan, the Company eliminated much of its
debt, increased its working capital, eliminated its outstanding preferred
shares and had issued and outstanding 5,400,000 shares of common stock in the
reorganized Company.
B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
This item does not apply because the Company has only one business
segment.
B. NARRATIVE DESCRIPTION OF BUSINESS.
The sole business of the Company consisted of the exploration and
development of mining properties. During this fiscal year, the Company
leached the remaining ore that had been previously stacked, and in January,
1997, the Company went into their reclamation program full-time, ceasing any
mining or leaching activity.
In September, 1989 as stipulated in the May 29, 1989 purchase agreement
among Miramar Mining Corporation, its subsidiary Miramar Gold Corporation
("Miramar") and the Company, a joint venture agreement was formed for the
management and operation of the Mine and other assets jointly owned by Miramar
(60%) and the Company (40%). (See the discussion related to the Amended Plan
of Reorganization above.)
Under an agreement dated July 1, 1989 and subsequently amended in
February, 1990 the Company and Miramar Gold Corporation (the "Companies"),
operated the Mine through an independent contractor, Vaughan Construction
("Vaughan") until July 31, 1990 and continued to leach the ore placed on the
heap through October, 1990.
The Companies took control on November 1, 1990 as Operator of the Mine.
Mining and plant personnel who have many years experience at the Mine have
been employed by the Companies to handle the processing of the ores. Although
no new ore was mined in fiscal year 1992, mining recommenced in August, 1992.
PRODUCTION
- ----------
Mining stopped on January 11, 1996, and any activity since then consisted
of leaching previously stacked ore. In January, 1997, leaching the
aforementioned ore had finished, and the only activity at the site to fiscal
year-end has been the reclaiming of the land.
During the period from August, 1989 to July, 1990 a total of 228,960 tons
of ore and 521,806 tons of waste were mined from the Lady Bryan pit. Leaching
of this ore continued through July, 1991 and a total of 6,866 ounces of gold
and 79,931 ounces of silver were recovered from the heap leach.
In August, 1991 the Company received about 15,000 tons of old mine
tailings to be processed at Mine. The tails contained gold, silver, and
mercury. The Mine facility was chosen from a list of several permitted
operating facilities by the owners of the tailings. The tailings were
mandated to be removed and processed in accordance with an EPA order. In a
report to the EPA, the Company outlined the processing procedures and metal
contents of the tailings. All aspects of the project were fully discussed and
approved by various public agencies prior to processing.
Leaching of these tails continued through July, 1992 yielding a project
total of 751 ounces of gold and 17,165 ounces of silver.
In June, 1992 Miramar purchased, on behalf of the Companies, all the
mobile equipment necessary to resume production at the Mine at a rate of
40,000 tons per month. During the remainder of June and throughout July,
1992, this equipment was assembled at the Mine site to be ready for production
commencement date in the first week of August, 1992.
Production commenced on August 3, 1992 at the Mine. As of September 18,
1992 a total of 80,000 tons of ore had been mined from the Lady Bryan Pit (see
section on drill program below for more details on ore zones) and 55,000 tons
crushed and stacked on the existing leach pad. Delays in getting the material
onto the leach pad because of under performance by the crushing plant,
resulted in a temporary suspension of mining operations for the winter in
November, 1992. This allowed the remainder of the ore to be crushed, stacked
and loaded on the leach pad prior to the onset of winter. As production
filled up the existing leach pad, an already permitted extension to the
existing pad was constructed to the north. The pregnant solutions are
processed in a Merrill-Crowe plant on site to recover precious metals as
precipitates. The precipitates are smelted on site to produce dore (a mix of
gold and silver, plus some contaminants) which is shipped to a refinery for
processing into pure gold and silver prior to sale.
During the year ended June 30, 1994, mining of the Bonanza Zone commenced
and 172,032 tons of ore were mined, crushed and stacked on the leach pad with
an average grade of 0.085 oz/ton gold and 0.67 oz/ton silver. This material
contains 14,600 ounces of gold and 116,000 ounces of silver. Leaching
operations during that period recovered 5,199 ounces of gold and 52,199 ounces
of silver for sale. Mining of the Bonanza Zone and leaching of the material
stacked on the leach pad are continuing.
During fiscal 1994, the extension to the leach pad was completed,
providing sufficient pad space for the remainder of the Bonanza Zone mining. A
limited exploration program was carried out during the year in a previously
untested area between the Berry and Bonanza zones, without intersecting
significant mineralization.
During fiscal 1995, mining of the Bonanza Zone continued and the leaching
of the previously stacked ore and the Bonanza ore also continued.
Fiscal 1996 saw mining stopped on January 11, 1996, but leaching of the
previously stacked ore continued. During the 1996 fiscal period, mining
activity in general was greatly reduced.
EXPLORATION AND DEVELOPMENT ACTIVITIES
- -----------------------------------------
In describing the Company's business and properties, use of the word
"Reserves" means that part of a mineral deposit which it is anticipated could
-----
be economically and legally extracted or produced based on the current monthly
average metal prices quoted and known production costs. "Proven Reserves"
---------------
means those unmined reserves that have been outlined accurately in all three
dimensions by drilling or underground sampling. Drill-hole spacing must be
less than one-half the length of the mineralized interval in the hole; sample
spacing underground must follow the same rules. "Probable Reserves" means
-----------------
those unmined reserves that have been outlined in two dimensions by less
closely spaced drilling and sampling and require geologic interpretation to
establish extent and grade. Probable ore is where there is little risk of
failure of continuity because the geologic factors are known and correctly
understood. "Possible Reserves" means those that consist of a mineralized
------------------
area which has been drilled, sampled, or exposed in only one dimension, with
reasonable projections based on geologic knowledge, including geophysical and
geochemical surveys. "Inferred Reserves" means undrilled, unsampled,
------------------
potential reserves based solely on geologic data, including geophysical,
geochemical, and/or structural factors.
DRILL PROGRAM
- --------------
Mining stopped in January, 1996 and no drill programs have been
undertaken since that time.
In June and July, 1991, the Companies engaged in an extensive drill
program on the Mine Property. Based on the recommendations in the July, 1990
technical report prepared by John Schilling, an independent geological
consultant and retired Director of the Nevada Bureau of Mines and Geology (the
"Schilling Report"), drilling was done with the focus on expanding proven
reserves before recommencing production at an expanded rate.
The Mine Property encompasses all of the Flowery Lode and was drill
tested with 106 reverse circulation drill holes during 1991. This drilling
tested three of the better understood mineralized portions of the Flowery
Lode; the Lady Bryan, the Berry and the North Bonanza zones. Drilling was
conducted on close spaced centers, generally in the order of 50 feet, to
establish mineable reserves in these three areas. Representative samples of
the drill cuttings were collected and sent for assay under the supervision of
independent consulting engineers, Mineral Resources Development, Inc. of San
Mateo, California.
ORE RESERVES
- -------------
Based on these drill holes and prior drilling by previous owners, an ore
reserve estimate has been made for the three zones drilled. This reserve
classifies ore as either crusher grade ore, above an economic cut-off grade of
0.025 oz/ton gold, or run-of-mine ore, above an incremental cost cut-off grade
of 0.010 oz/ton gold. The total of all such reserves is the geologic reserve.
Conceptual pits were then outlined for each of the three zones drill tested,
and ore blocks within the pit are classified as a mineable reserve and those
outside as non-mineable resources. A calculated dilution factor of 20% was
applied to the mineable reserve to yield a diluted mineable reserve.
In 1992 the Lady Bryan, Berry and Bonanza zones contained a geologic
reserve of 1.65 million tons grading 0.055 oz/ton gold and 0.44 oz/ton silver
, of which 1.00 million tons grading 0.063 oz/ton gold and 0.46 oz/ton silver
fell within the conceptual pit outlines. When dilution and stripping were
taken into account, the diluted mineable ore reserve was calculated to be 1.21
million tons grading 0.052 oz/ton gold and 0.3 oz/ton silver at a stripping
ration of 3.36:1.
Operational practice showed some small reductions in head grade versus
that calculated in the reserve report, but also a significant increase in
tonnage and greater continuity in the ore zones than was predicted in the ore
reserve report.
A feasibility study for the mining of the Bonanza Zone at the Mine was
completed, based on 32 holes drilled by the Company during 1991 and an
additional 24 holes completed in late 1992. The revised ore reserves for the
Bonanza Zone were 361,715 tons grading 0.064 oz/ton gold and 0.97 oz/ton
silver for a gold equivalent grade of 0.076 oz/ton. This reserve contained
22,964 oz of gold and 350,000 oz of silver. The stripping ratio was estimated
at 3.44:1.
Ore reserves at the Mine are contained in three ore zones along the
Flowery Lode; Lady Bryan, Berry and Bonanza. Total mineable reserves were
estimated in early 1993 at 1,038,000 tons with a gold equivalent grade of
0.064 oz/ton, containing 66,564 ounces of gold equivalent. The overall strip
ratio was estimated at 4.0:1.
Mining operations in fiscal 1996 and 1995 have reduced this reserve by
the amounts mined from the Bonanza Zone which totaled 163,565 tons with 0.048
oz/ton gold and 0.837 oz/ton silver in fiscal 1995 and 80,065 tons with .057
oz/ton gold and 0.662 oz/ton silver in the current year.
No mining has occurred ( only leaching) at the site since January 11,
1996, thus reserves remain at the levels discussed in the previous paragraph.
ADDITIONAL POTENTIAL
- ---------------------
During the latter part of August, 1992, a number of drill holes were
completed to test the potential for extensions to the Lady Bryan Zone. This
included six holes drilled to the south of the outlined Lady Bryan reserve,
and nine holes to the southwest. This drilling has somewhat limited the
potential for extensions to the south and indicated a fairly high grade ore
shoot to the southwest. During fiscal 1995, it has been determined that
further exploration and mining of the Lady Bryan Zone is not profitable given
the costs of moving the required equipment and mining the area with current
metals prices.
A total of 24 holes were also drilled in the North Bonanza Zone
confirming and better delineating a high grade ore shoot.
ITEM 2. PROPERTIES:
A. GENERAL
The Company's office is located at the minesite. Properties held are
described below.
B. GOLDEN EAGLE MINE (FORMERLY THE FLOWERY PROJECT)
The Golden Eagle Mine (formerly the Flowery Project), (the "Mine") is
situated in the Flowery Mining District of Storey County, Nevada,
approximately four miles east of Virginia City.
The Flowery District was discovered in the 1860's and has been
intermittently explored and mined to the present day. From 1924 to 1930, two
underground mines in the district produced approximately 100,000 troy ounces
of gold from 550,000 short tons.
From 1979 to 1982 the Anaconda Copper Company conducted extensive
exploration and drilled 31 holes totaling 5,000 feet. Results of the drilling
indicated more than one million tons of mineralized material containing gold
and silver could be available by surface mining methods.
During July, 1986 the Company engaged Kiewit Mining and Engineering
Company of Reno, Nevada to prepare a technical economic feasibility study of
the Mine. Kiewit drilled thirteen additional holes totaling more than 2,000
feet. In addition, metallurgical testing was conducted to determine heap
leach procedures. In September, 1986 Kiewit reported that a deposit of
670,000 short tons of mineralized material containing 0.054 troy ounces of
gold per short ton and 0.43 troy ounces of silver per short ton existed at the
property. The feasibility report also indicates the possibility that the
project would be economically feasible with a gold price of more than $343.00
per troy ounce.
Kiewit reported that the mineralized material could be mined by open pit
methods and would require the removal of more than 2,000,000 short tons of
waste rock. The gold and silver value could be recovered using heap leach
technology. Production from the property commenced during October, 1987
however, the Company experienced a lower recovery grade mineralized material
than anticipated from the Kiewit study. The initial financing for the Mine
was depleted and additional working capital had to be borrowed.
On December 17, 1987 mining operations at the Mine were temporarily
suspended pending the results of a confirmation drilling program within the
mine pit to determine the extent and grade of the reserves. 110,000 short
tons of material which had been mined and heap leached between mid-October
1987 contained 0.026 troy ounces of gold per short ton, produced approximately
2,300 ounces of gold equivalent (gold and silver combined) with a yield of
approximately $1,064,000 which was substantially less than projected.
Results of the drilling program indicated there were in-pit proven
reserves of 150,000 tons grading at 0.051 gold and .50 silver; however, since
the Company lacked funding to make continued payments to its contract mining
company and to fund additional development and exploration programs necessary
to ensure a continuous mining operation, all mining operations were
discontinued.
A Mining and Exploration Potential report on the Mine Property was
commissioned by Red Lion Management Ltd. and prepared by Henkel and Associates
of Carson City, Nevada in December, 1988 stating an initial drill program
indicated ore reserves of approximately 250,000 tons having a grade of
approximately 0.05 ounces of gold per ton and 0.50 ounces of silver per ton.
On July 1, 1989 the Companies entered into an agreement with Vaughan
Construction ("Vaughan") a mining construction firm, for the operation of the
Mine. Leaching began in August, 1989 and recovered 297 ounces of gold and
3,940 ounces of silver from the ore placed on the pad in 1987. This resulted
in a net recovery of 2,270 ounces of gold and 26,188 ounces of silver from the
1987 operations. Between August, 1989 and July, 1990 a total of 228,960 tons
of ore and 521,806 tons of waste were mined by Vaughan from the Lady Bryan
pit.
In December, 1989 and January, 1990 a drill program was conducted at the
Mine. Results from the drilling confirmed certain geologic concepts
originally formulated by the Anaconda Company when it held the Mine Property
during 1979-82. Eight holes drilled in the Bonanza area encountered gold
mineralization of economic interest.
Miramar Gold Corporation, the Company's joint venture partner at the
Mine, entered into an agreement on January 30, 1990 with Dragon Consolidated
in which Miramar acquired all Dragon's rights and interests in the Mine.
Final payment was made on the underlying purchase option on the Otte Fee land,
which is now owned 60% by Miramar and 40% by the Company. In May, 1991
Miramar transferred a 40% interest in the 85 unpatented claims purchased from
Dragon to the Company. Fifty-seven new claims were staked by the Companies
during the 1990 fiscal year and an additional block of 63 claims in the same
area were staked in the 1991 fiscal year to expand the property holdings over
what is believed to be geologically favorable ground.
An extensive drill program consisting of 106 holes in three areas was
conducted by the Companies in June and July, 1991. The results of this
extensive program are summarized in an April, 1992 report by Kevin Russell,
Stephen P. Quin and Fred Holabird.
As a results of the favorable reserve calculations and an opportunity to
purchase the equipment of another Nevada mine which was closing down, the
Companies decided to commence production. It was then decided that the
Companies would operate the mine without using a contractor. In May, 1992 the
Companies purchased the majority of the equipment required to commence
production at a rate of 40,000 tons per month. This equipment included four
35 ton trucks, D9 sized bulldozer, 8 cubic yard loader, road grader, rotary
blast hole/RC drill rig and a complete crusher line. The Company also
acquired all the associated equipment necessary to commence production
including conveyors and an inventory of spare parts.
Staff was hired to assemble all necessary components of the mining
operation. The name of the project was changed from the Flowery Mine to the
Golden Eagle Mine.
Production commenced on August 3, 1992 at a rate of 40,000 tons of ore
per month to be mined, crushed, and stacked on the leach pad. A total of
80,000 tons of ore had been mined and delivered to the crusher, while 55,000
tons had been crushed and stacked on the leach pad. Production blast holes
generally confirmed or increased the reserve versus that predicted by the
exploration drilling. Delays in getting this material onto the leach pad
because of under performance by the crushing plant resulted in a temporary
suspension of mining operations for the winter in November 1992. This allowed
the remainder of the ore to be crushed, stacked and loaded on the leach pad
prior to the onset of winter. Leaching operations continued throughout the
winter and net production at June 30, 1993 was 2,821.11 oz of gold and
42,011.38 oz of silver. Mining of fresh ore recommenced in August, 1993 on
the Bonanza Zone. Heap leaching continued, resulting in the recovery of
precious metals from the ores stacked. During the year ended June 30, 1994,
172,032 tons were crushed and stacked on the leach pad and there was 5,199
ounces of gold and 52,199 ounces of silver leached from the heap. In 1995,
163,565 tons were crushed and stacked on the leach pad and there was 7,885
ounces of gold and 136,861 ounces of silver leached from the heap. While in
1996, only 80,065 tons were crushed and stacked on the leach pad and there
were 4,577 ounces of gold and 52,974 ounces of silver leached from the heap.
Fiscal 1997 saw 606 ounces of gold and 10,119 ounces of silver leached
from the heap. As there was no mining for this fiscal period, nothing was
crushed or stacked.
The Mine is currently comprised of six patented and 51 (June 30, 1996 -
73) unpatented mining claims and two patented mill sites. Most of the Mine's
claims are held under lease.
<TABLE>
<CAPTION>
SUMMARY OF THE MINE LEASES AS AT JUNE 30, 1997
Annual AdvanceMinimum Royalty Payment
-------------------------------------
Purchase Option
Lessor yes or no Expiry Date
- ------------------------ ------------------------------------- -------------------
<S> <C> <C> <C>
Davis yes 17,500 - 40,000 (1) 1999, extends as
long as producing
Chicago-Nevada no 5,000 - 10,000 (2) 1992, extends as
Gold Mining Co. +PPI percent long as producing
Miramar Lease N/A Related party (3)
</TABLE>
(1) The advance minimum royalty was re-negotiated in February, 1997 to $
10,000 semi- annually for gold prices of $ 350.00 per ounce and higher, and
revised downwards for prices below $ 350.00 During the year ended June 30,
1997, two payments of $ 15,000 each were made as a minimum payment as there
was no production from this claim.
(2) The advance minimum royalty was $5,000 per year, until such time as
this part of the property was put into production. When production commenced,
the advanced minimum royalty is increased to $10,000 per year. PPI percent
stands for the percentage increase in the Producer Price Index over the
preceding year. During the year ended June 30, 1997, a total of $ 10,000 was
paid.
(3) Miramar Gold Corporation is a joint venture partner with the Company
on the Mine. Miramar purchased the Dragon Consolidated (formerly North Lily)
leases during 1990. No advance minimum royalties will be made to Miramar
Gold, but production royalties are charged to the Joint Venture in the amount
of 7-1/2 percent, less amounts paid to others, as outlined in the Dragon lease
until all prepaid royalties are fully credited. As at June 30, 1993, all
prepaid royalties were fully credited and no further production credits have
been charged to the Joint Venture.
C. OCCIDENTAL CLAIMS
In 1994, the company re-evaluated the Occidental claims held. As the
focus of the Company's joint venture partner has turned to larger size
deposits as future mine targets, plans to mine these claims in the future were
no longer appropriate. These claims were also in a historic district in which
mining would create potentially high environmental costs. As a result the
Company has abandoned such claims.
ITEM 3. LEGAL PROCEEDINGS
There is nothing to report under this item.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
There is nothing to report under this item.
PART II
-------
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
A. MARKET INFORMATION
During reorganization, Alhambra Mines, Inc. common stock was consolidated
at a ratio of 100 to 1 for shares of American Eagle Resources, Inc. common
stock. Alhambra Mines preferred stock was converted to American Eagle
Resources, Inc. common stock at a ratio of 3.125 preferred to one common.
No quotations were obtained for American Eagle Resources, Inc. stock for
the fiscal years ended June 30, 1997 and June 30, 1996. As of this date, no
market has been established for this common stock.
B. HOLDERS
According to the records of the Company's stock transfer agent, as of
June 30, 1997, there were 644 holders of the Company's common stock.
C. DIVIDENDS
There have been no dividends declared on the common stock of the Company
during the Company's last three fiscal years and the Company anticipates that
for the foreseeable future any earnings will be reinvested in the Company's
operations.
ITEM 6. SELECTED FINANCIAL DATA.
Selected Financial Data - American Eagle Resources, Inc. (1993 - 1997):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Years Ended
June 30 1997 1996 1995 1994 1993
------------ ------------ ----------- ----------- ----------
$ $ $ $ $
Revenues 301,193 771,862 764,162 506,509 223,278
Net Income (391,169) (479,642) (470,535) (776,458) (580,451)
(Loss)
Net Income (0.07) (0.09) (.09) (.14) (.11)
(Loss) per
Common
Share
Total Assets 1,530,208 1,599,847 2,159,222 2,087,040 2,292,295
Long Term 2,570,915 2,521,426 2,526,112 2,035,196 1,435,747
Obligations
Working (373,237) (33,733) (111,854) (23,247) (6,988)
Capital
(Deficiency)
Total (1,457,510) (1,066,341) (586,699) (116,164) 660,294
Stockholder
Equity
(Deficiency)
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
In the following discussion, references to operation years 1997, 1996,
and 1995, refer to fiscal years ended June 30 unless otherwise indicated.
A. RESULTS OF OPERATIONS
1997 COMPARED TO 1996:
- ------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997
Increase
1997 1996 (Decrease)
-------- ---------- -----------
Net Loss $391,169 $ 479,642 ($88,473)
Primary Components:
- --------------------
Total Revenues $301,193 $ 771,862 ($470,669)
Costs and expenses:
Mine Operating and
Exploration costs $555,390 $ 538,406 $ 16,984
Depreciation and
Depletion 0 149,147 (149,147)
General &
Administrative 136,972 121,770 15,202
Impairment of long-
lived assets 0 442,181 (442,181)
Total Costs & $692,362 $1,251,504 (559,142)
======== ========== ===========
Expenses
</TABLE>
Much of the large swings in these various categories may be attributable
to the fact that since January 11, 1996 the Company has ceased any mining
operations, and, moreover, since January, 1997, the Company has been in a
reclamation phase- no mining or leaching. Hence the precipitous drop in
revenue, led by an 83% drop in mineral sales and royalties: 1996, $737,110 as
compared to 1997, $ 128,252. The fact that there was no mining or leaching on
the site dictated a sale of assets. American Eagle realized a gain in 1997
of $ 141,036, while in 1996, only $ 160. Finally, interest income decreased
slightly due to lower interest rates during the year, as the bank balances
remained equivalent to the previous year.
No ore was crushed or stacked in 1997. Compare this with 1996 where
80,065 tons of ore was crushed and stacked, or with 1995 where 163,595 tons of
ore was crushed and stacked.
During the year ended June 30, 1997, there was nothing added to the leach
heap. However, the final bit of leaching during the year of ore already
stacked produced 606 ounces of gold (1996 - 4,104 ounces) and 10,119 ounces of
silver (1996 - 47,347 ounces), of which American Eagle's share was 242 ounces
of gold and 4,048 ounces of silver. Realized prices of gold and silver were
higher in the previous year at $375 per ounce of gold (1996 - $387 per ounce)
---
and $4.82 per ounce of silver (1995 - $5.35 per ounce).
----
Mine operating costs increased by 3.16% from the prior year due in large
part to the increased reclamation activities and accruals for reclamation work
to be carried out, as well as the cessation of mining operations and leaching
in January 1996 and January 1997, respectively. The major focus of operations
after January 1996 was to continue leaching and processing the ore that had
been stacked on the leach heap. As of January 1997, the company's sole purpose
is to proceed with the reclamation process in accordance with the reclamation
plan that had been filed and accepted in the prior year with the Bureau of
Land Management in Nevada The Company has plans to complete the reclamation
work over the next few years.
General and administrative costs increased during the year by 12.49% as
the company shifted it's focus from mining/leaching operations to reclamation
of the land and all of it's associated costs. Couple this with the costs
incurred in selling the Company's various equipment, of which it sold
significantly more than the prior year. The administrative staff consists of
only two staff members.
Due to the cessation of mining operations during fiscal 1996, an
impairment allowance for long-lived assets was established as of June, 1996
which fully reserved the remaining net book value of property and equipment;
because of this impairment, depreciation and depletion is not recognized for
fiscal 1997. The impairment of long-lived assets was the most significant
change in the financial statements for fiscal year-end 1996; such a
write-down will not be evident in fiscal year-end 1997.
The working capital of the Company shows a large deficiency of $ 373,237
and 1996 working capital shows a deficiency of $ 33,733 due to a
re-classifying of an accounts receivable from current to long-term . This
large increase in working capital deficiency is due to an increase to the
reclamation liability of 259 % over the prior year as Mine's management
revised its estimate of total reclamation costs to be incurred. To a smaller
extent, accounts receivable dropped 100% as there was no mining of gold or
silver to be refined.
1996 COMPARED TO 1995:
- ------------------------
<TABLE>
<CAPTION>
1996
Increase
1996 1995 (Decrease)
-------------- -------------- ---------------
<S> <C> <C> <C>
Net Loss $ 479,642 $ 470,535 $ 9,107
Primary Components:
- -------------------
Total Revenues $ 771,862 $ 764,162 $ 7,700
Costs and Expenses:
Mine Operating and $ 538,406 $ 930,358 (391,952)
Exploration costs
Depreciation and
Depletion 149,147 172,861 (23,714)
General &
Administrative 121,770 110,142 11,628
Interest 0 21,336 (21,336)
Impairment 442,181 0 442,181
Bad Debt Expenses _________0_ ________0__ ________0
Total Costs & $ 1,251,504 $ 1,234,697 $ 16,807
Expenses ============= ============= =============
</TABLE>
The small increase in total revenue from 1996 to 1995 is due to a
combination of two factors in particular: Interest income was increased due
to higher bank balances during the year and interest being earned on the
increased deposits for reclamation, and the decrease in mineral sales is a
result of the cessation of mining operations in January 1996.
During the year ended June 30, 1996, there was 80,065 tons of ore added
to the leach heap which contained approximately 4,577 ounces of gold and
52,974 ounces of silver. Leaching during the year produced 4,104 ounces of
gold (1995 - 4,638 ounces) and 47,347 ounces of silver (1995 - 57,534 ounces),
of which American Eagle's share was 1,642 ounces of gold and 18,939 ounces of
silver. Realized prices of gold and silver were higher than in the previous
year at $387 per ounce of gold and $5.35 per ounce of silver.
Mine operating costs decreased by 42% from the prior year due to the
increased reclamation activities and accruals for reclamation work to be
carried out and the cessation of mining operations in January 1996. The
number of employees during the year was changed significantly, decreasing to 9
employees ( 1995- 20 ) due to the decision to cease mining operations. The
major focus of operations after January 1996 was to continue leaching and
processing the ore that had been stacked on the leach heap, and proceed with
the reclamation process in accordance with the reclamation plan that had been
filed and accepted in the prior year with the Bureau of Land Management in
Nevada. The Company has plans to complete the reclamation work over the next
several years.
Depreciation and depletion was decreased over the prior year due to the
normal decreasing value in the assets and the lower number of ounces produced
for the fiscal year. General and administrative costs were increased during
the year due to extra time spent on reclamation supervision by Miramar
personnel which is charged to the mine. The administrative staff consists of
only two staff members. Interest costs were decreased due to the mine paying
off the silver loan during the year. There is no longer any debt carried by
the mine and there are no interest charges expected for the upcoming year.
The working capital of the Company shows a deficiency of $ 33,733 and
1995 working capital has been restated to show a deficiency of $ 111,854 due
to the reclamation accrual being reclassified to a current rather than a
long-term liability. Excluding the reclamation liability, working capital
increased by $ 59,952 due to the reduction of current accounts payable of $
47,538 and an increase in the current accounts receivable of $ 11,073
The most significant change in the balance sheet is the write-down of the
Property and Equipment of $ 442,181. Based on the Company's decision to cease
mining in January 1996, which resulted in a re-evaluation of the assets, it
was decided to write-down these assets, although leaching will continue over
the next few months.
(B) LIQUIDITY AND CAPITAL RESOURCES
Any cash flow during this fiscal year was attained through the sale of
the Company's assets, and to a lesser extent from either it's joint venture
partner or accounts receivable. This is in contrast to the previous two years
where the Company's sale of gold and silver and/or financing through it's
joint venture partner, Miramar, provided most of the cash flow. Now, though,
with mine management's decision to cease mining operations back in January
1996, any cash flow must come from Miramar, or the sale of any of the
Company's remaining assets. Because of the joint venture arrangements between
the two companies, Miramar represents it will not demand payment in fiscal
1998. Repayments will be made as cash flow permits. The company owns
approximately 2% of Miramar Mining Corporation- a related party. Miramar is a
mining company listed on NASDAQ and such investment is recorded in the
financial statements at cost due to its related party nature. The market
value of the shares is approximately $ 3,562,500 at June 30, 1997. Due to the
thinly traded nature of such shares, and their susceptibility to market
fluctuations, there is no assurance such fair value will be realized.
As the working capital deficiency for the fiscal year end 1997 is
$373,237 ( 1996, a deficiency of $ 33,733) , it would seem that the company
will require more assistance from Miramar to help pay some of it's current
liabilities, on top of selling more of it's assets. Ceasing mining operations
put an end to any cash flow from the sale of gold and/or silver.
The Company is in the process of evaluating various future business
directions. During fiscal 1997, the Company's management entered into
negotiations with various entities, including related parties, which could
ultimately result in a change in the Company's operating entities and a
reorganization of the corporate structure of the Company. The reorganization
contemplated includes 1) a transaction in which the Company's 40% interest in
the Golden Eagle Mine joint venture is sold or transferred, 2) to acquire
shares of the Company's common stock from related entities, 3) the liquidation
of a portion of the Company's investment in Miramar, and 4) to eliminate a
portion or all of the amounts due to related parties. Subsequently,
management plans to acquire or lease new properties and to continue in the
business of exploration, development , and production of precious metals. The
terms of such reorganization have not been finalized, nor can its impact on
the financial statements be determined at this time. Accordingly, no amounts
have been recorded in the financial statements which could result from these
proposed transactions. There can be no assurance that such transactions will
occur.
(C) IMPACT OF INFLATION
The price of gold, which is established by daily trading in world
commodity markets, determines in large measure the Company's profitability and
cash flow. This is particularly so in the short term, as the gold price can
change substantially in several days of trading, while the Company's mining
operations are governed by ore grades, waste to ore stripping ratios,
metallurgical recoveries and processing rates, none of which can be adjusted
easily in the short term. Operating costs in the mining industry over time
reflect the underlying rate of inflation in the general economy, as does the
price of gold. The latter, however, also responds rapidly to changes in
interest and exchange rates, political tensions and investor anxieties, all of
which are beyond the control of or influence by the Company.
(C) IMPACT OF FINANCIAL ACCOUNTING STANDARD BOARD PRONOUNCEMENTS NOT YET
ADOPTED
Federal Income Taxes - In February, 1992, the Financial Accounting
----------------------
Standards Board ("FASB") issued Statement of Financial Accounting Standards
-
("SFAS") No. 109, "Accounting for Income Taxes", which changes the accounting
for income taxes. Adoption of this standard is required for fiscal years
beginning after December 15, 1992, although earlier implementation is
permitted. The Company has adopted this standard for the first time for the
June 30, 1994 year end with the only affect being improved disclosure
concerning the tax position of the Company.
Earnings Per Share - The Financial Accounting Standards Board (FASB)
--------------------
recently issued SFAS No. 128 entitled " Earnings Per Share". This statement
establishes standards for computing and presenting earnings per share and is
effective for financial statements issued for periods ending after December
15, 1997. Earlier application of this statement is not permitted and upon
adoption requires restatement (as applicable) of all prior-period earnings per
share data presented.
In addition, the FASB issued SFAS 129 entitled " Disclosure of
Information about Capital Structure" in February 1997. This statement
establishes standards for disclosing information about an entity's capital
structure. The Company already complies with SFAS 129 and foresees no material
impact on the financial statements in adopting the statement for periods
ending after December 15, 1997.
On June 30, 1997, the FASB issued SFAS 130 entitled " Reporting
Comprehensive Income". This statement requires companies to classify items of
other comprehensive income by their nature in a financial statement and
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid- in capital in the equity section of a
statement of financial position, and is effective for financial statements
issued for fiscal years beginning after December 15, 1997. Management does
not believe this new FASB will have a material impact on the financial
statements of the company.
On June 30, 1997, the FASB issued SFAS 131 entitled " Disclosure About
Segments of an Enterprise and Related Information". This statement
establishes additional standards for segment reporting in the financial
statements and is effective for fiscal years beginning after December 15,
1997. Management has not determined the effect of this statement on its
financial statement disclosure.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Please see the exhibits attached to this document as noted under Part 4
Item #14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
There is nothing to report under this item.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table and biographical data summarize the principal
occupations and business experience for the last five years of each of the
directors of the Company post-reorganization.
<TABLE>
<CAPTION>
Name and Address Age Tenure Positions Held
- -------------------------------- --------------------------- ----------------------- -----------------------
<S> <C> <C> <C>
W.H. Berukoff 52 September, 1989 President, Member of
4826 Northwood Drive to Present Compensation Committee,
West Vancouver, Audit Committee & Pension
British Columbia Committee,Chief Executive
Canada V7S 3C2 Officer and Director
(Chairman of the
Board of Directors).
James E. McKay 50 September, 1992 Business Manager and
6155 Plumas St. to present Director
Reno, NV 89509
</TABLE>
W.H. Berukoff. Mr. Berukoff is President and a Director of the
Company. Mr. Berukoff is also President of Miramar Mining Corporation,
Miramar Gold Corporation, Miramar Con Mine, Ltd., Orcana Resources, Inc.,
Northern Orion Explorations Ltd., Red Lion Management Ltd., Red Lion Equities
Ltd., A.G.M. Steel Industries, A.G.M. Mining Systems, Laco Holdings Ltd.,
First Quay Holdings Ltd., and Tiger Resources Ltd. Mr. Berukoff has held his
position in these companies from 1973 to date except as to Miramar Con Mine
Ltd. which was acquired by Miramar in October 1993. Red Lion Equities Ltd.,
Miramar Mining Corporation, Miramar Con Mine Ltd. and Miramar Gold Corporation
are affiliated with the Company.
James E. McKay. Mr. McKay is the Business Manager and a Director of
the Company and is responsible for the technical and management operations of
the Company in Nevada. He has held this position since August, 1992. Mr.
McKay holds a Bachelor of Science Degree in Geological Engineering from the
University of Nevada and earned an M.B.A. from the University of Nevada in
1984. Mr. McKay has over 20 years minerals industry experience including the
position of on-site Manager and Project Geologist leading to Homestake Mining
Company's McLaughlin gold discovery. From 1989 until joining the Company, Mr.
McKay was a consultant to the minerals industry, specializing in project
management. From 1985 to 1989 Mr. McKay was a planning Analyst for Sierra
Pacific Power company.
No officer or director of the Company has any family relationship to any
other officer or director of the Company.
ITEM 11. EXECUTIVE COMPENSATION
The following table contains certain information regarding cash
compensation paid by the Company during the fiscal year ended June 30, 1997,
to certain executive officers and to all executive officers as a group.
<TABLE>
<CAPTION>
Cash Compensation Table
-----------------------
<S> <C> <C>
Name of Individual Capacities in Which Served Cash Compensation
- --------------------------------------------------------------------------------
W.H. Berukoff President and Chief Executive $0(1)
Officer and Chairman of the Board
(Beginning September, 1989)
James McKay Director $0(1)
(Beginning September, 1992)
All executive officers
as a group (2 persons) $0
==============================
There are no other Executive Officers.
<FN>
(1) No cash compensation was paid to Mr. Berukoff or Mr. McKay for the 1997 fiscal year.
</TABLE>
Stock Option Plans
------------------
There is no stock option plan in effect.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The Company has one class of stock, common. On June 30, 1997 there were
5,400,000 shares outstanding. Each share of stock is entitled to one vote.
As of June 30, 1997 the following persons were known to the Company to be
beneficial owners of more than five percent (5%) of the voting securities.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Amount and Nature
of Beneficial Percent
Ownership of
Title of Class Name of Beneficial Owner (number of shares) Class
- ------------------------------------------------------- ----------------- -----
Common Red Lion Equities Ltd. 3,456,028 (1) 64%
($0.01 par value) 311 West 1st Street
North Vancouver, B.C.
V7M 1B5
Common Miramar Gold Corporation 864,007 (2) 16%
324 S. Wells Avenue
Reno, NV 89502
</TABLE>
(1) With respect to the 3,456,028 shares listed as beneficially owned by
Red Lion Equities Ltd. ("Red Lion"), Red Lion has sole voting power with
respect to all the shares. Mr. W.H. Berukoff, an officer and director of the
Company is the principal shareholder, President and a director of Red Lion.
(2) With respect to the 864,007 shares listed as beneficially owned by
Miramar Gold Corporation ("Miramar"), Miramar has sole voting power with
respect to all the shares. Mr. W.H. Berukoff, an officer and director of the
Company is also the President and a director of Miramar.
As of June 30, 1997 the number of shares of any class of equity
securities of the Company, or any of its parents and subsidiaries,
beneficially owned by all directors of the Company, naming them, and by the
directors and officers of the Company as a group, without naming them, are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Amount and Nature
of Beneficial
Ownership Percent
Title of Class Name of Beneficial Owner (number of shares) of Class
- --------------------- ------------------------ ------------------ --------
Common Stock of W.H. Berukoff 3,456,028 (1) 64%
the Company
($0.01 par value)
Directors & 3,456,028 64%
Officers as a group
</TABLE>
(1) These shares are held in the names of Red Lion Equities Ltd., a
Canadian corporation.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In September, 1989 the Company entered into an agreement with Miramar
Gold Corporation ("Miramar Gold"), a Nevada corporation, for the operation of
mining properties and equipment. Miramar Gold is a wholly owned subsidiary of
Miramar Mining Corporation. Mr. W.H. Berukoff is President and Chairman of
the Board of Directors of the Company. He is also President and Chairman of
the Board of Directors of Miramar Gold and Miramar Mining Corporation.
Under the terms of the agreement Miramar Gold received 80% of the cash
flows and paid 60% of the expenses from mining operations until it had
received the sum of $1,000,000. Thereafter Miramar Gold receives 60% of the
cash flows and pays 60% of the expenses. As of September 30, 1994 Miramar
Gold had received the full $1,000,000.
At June 30, 1997 and 1996 the Company had a payable to Miramar Gold of
$2,570,915 and $2,521,426 for costs paid by Miramar Gold on behalf of the
Company.
Management fees for services relating to the Company were paid to Miramar
Gold in 1997 and 1996 in the amounts of $6,438 and $25,752.
At June 30, 1997 and 1996 the Company had a receivable of $53,261 from a
company controlled by the President of the Company.
During the year ended June 30, 1994, the Mine sold a loader to Miramar
Con Mine Ltd., a subsidiary of Miramar Mining Corporation, at fair market
value of $125,000. The Company recorded a gain of $47,287 for its 40% portion
of the gain on this sale.
During the year ended June 30, 1995, certain work was performed for
Miramar Con Mine Ltd., a related company to Miramar Gold Ltd. The payment for
this work was made in July 1994 in the form of gold bullion which was used to
repay the silver loan.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) (1) FINANCIAL STATEMENTS.
----------------------
Independent Auditors' Report
Balance Sheets as of June 30, 1997 and 1996
Statements of Operations for the years ended
June 30, 1997, 1996 and 1995
Statements of Stockholders' Deficiency
for the years ended June 30, 1997, 1996 and 1995
Statements of Cash Flows for the years ended
June 30, 1997, 1996 and 1995
Notes to Financial Statements
(2) Financial Statement Schedules.
--------------------------------
None.
(3) Exhibits required to be filed by Item 601 of Regulation S-K.
------------------------------------------------------------
There is nothing to report under this item.
(4) Financial Data Schedule
-------------------------
(b) Report on Form 8-K
---------------------
None.
<PAGE>
SIGNATURES
================
Pursuant to the Requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: September 26, 1997 AMERICAN EAGLE RESOURCES, INC.
By:"Walter H. Berukoff"
-------------------------------
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
Date: September 26, 1997 By:"Walter H. Berukoff
------------------------
President and Director
(Chief Executive Officer)
Date: September 26, 1997 By:"James E. McKay"
-------------------------
Director
<PAGE>
AMERICAN EAGLE RESOURCES, INC.
Financial statements as of June 30, 1997 and 1996
and for Each of the Three Years in the Period Ended
June 30, 1997 and Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
of American Eagle Resources, Inc.:
We have audited the accompanying balance sheets of American Eagle Resources,
Inc.
( the "Company") as of June 30, 1997 and 1996, and the related statements of
operations, stockholders' deficiency and cash flows for each of the three
years in the period ended June 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of June 30, 1997 and 1996,
and the results of its operations and its cash flows for each of the three
years in the period ended June 30, 1997 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, during the fiscal 1997 the Company ceased all leaching
and production at its sole operating mine site and moved into full reclamation
activities. In addition, recurring losses from operations and a stockholders'
capital deficiency raise substantial doubt about its ability to continue as a
going concern. Management's plans concerning these matters are also described
in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Deloitte & Touche LLP
Reno, Nevada
August 29, 1997
<TABLE>
<CAPTION>
AMERICAN EAGLE RESOURCES, INC.
BALANCE SHEETS
JUNE 30, 1997 AND 1996
____________________________________________________________________
<S> <C> <C>
ASSETS 1997 1996
CURRENT ASSETS:
Cash $ 36,311 $ 48,545
Accounts receivable - 47,506
Prepaid expenses 7,255 14,978
------------- --------------
Total Current assets 43,566 111,029
------------- --------------
PROPERTY AND EQUIPMENT - NET - -
------------- --------------
OTHER ASSETS:
investment in Miramar Mining Corp- at cost 1,058,125 1,058,125
(an affiliated company)
Restricted cash 364,056 366,232
Due from related parties 55,121 55,121
Other 9,340 9,340
------------- --------------
Total other assets 1,486,642 1,488,818
------------- --------------
TOTAL $ 1,530,208 $ 1,599,847
============= ==============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable 6,426 21,845
Accrued and other liabilities 2,617 9,316
Reclamation 407,760 113,601
------------- --------------
Total current liabilities 416,803 144,762
------------- --------------
DUE TO RELATED PARTIES 2,570,915 2,521,426
------------- --------------
Total liabilities 2,987,718 2,666,188
------------- --------------
STOCKHOLDERS' DEFICIENCY:
common stock, par value $.01 per share;
30,000,000 shares authorized,
5,400,000 shares issued and outstanding 54,000 54,000
Additional paid-in capital 15,088,360 15,088,360
Accumulated deficit (16,599,870) (16,208,701)
------------- --------------
Total stockholders' deficiency (1,457,510) (1,066,341)
------------- --------------
TOTAL $ 1,530,208 $ 1,599,847
============= ==============
</TABLE>
See notes to financial statements
<TABLE>
<CAPTION>
AMERICAN EAGLE RESOURCES, INC.
STATEMENTS TO OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997, 1996, AND 1995
____________________________________________________________________
1997 1996 1995
<S> <C> <C> <C>
REVENUES:
Mineral sales and royalties $ 128,252 $ 737,110 $ 757,085
Gain(loss) on sale of assets 141,036 160 (938)
Interest income and other 31,905 34,592 8,015
----------- ----------- -----------
Total 301,193 771,862 764,162
----------- ----------- -----------
COSTS AND EXPENSES:
Mine operating costs 555,390 538,406 930,358
Depreciation and depletion - 149,147 172,861
General and administrative 136,972 121,770 110,142
Interest - - 21,336
Impairment of long-lived assets - 442,181 -
----------- ----------- -----------
Total 692,362 1,251,504 1,234,697
----------- ----------- -----------
NET LOSS $ (391,169) $ (479,642) $ (470,535)
=========== =========== ===========
NET LOSS PER SHARE $ (0.07) $ ( 0.09) $ (0.09)
=========== =========== ===========
WEIGHTED AVERAGE
SHARES OUTSTANDING 5,400,000 5,400,000 5,400,000
=========== =========== ===========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
AMERICAN EAGLE RESOURCES, INC.
STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED JUNE 30, 1997, 1996, AND 1995
TOTAL
COMMON STOCK ADDITIONAL ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT PAID-IN CAPITAL DEFICIT DEFICIENCY
<S> <C> <C> <C> <C>
BALANCE JULY 1, 1994 5,400,000 $54,000 $15,088,360 $(15,258,524) $ (116,164)
Net Loss - - - (470,535) (470,535)
BALANCE JUNE 30,1995 5,400,000 $54,000 $15,088,360 $(15,729,059) $ (586,699)
Net Loss - - - $ (479,642) $ (479,642)
BALANCE JUNE 30, 1996 5,400,000 $54,000 $15,088,360 $(16,208,701) $(1,066,341)
Net Loss - - - $ (391,169) $ (391,169)
BALANCE JUNE 30, 1997 5,400,000 $54,000 $15,088,360 $(16,599,870) $(1,457,510)
<FN>
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
AMERICAN EAGLE RESOURCES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
________________________________________________________________________
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $(391,169) $(479,642) $(470,535)
ADJUSTMENT TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
DEPRECIATION AND DEPLETION - 149,147 172,861
IMPAIRMENT OF LONG-LIVED ASSETS - 442,181 -
(GAIN)LOSS ON SALE OF ASSETS (141,036) (160) 938
(INCREASE)DECREASE IN ACCOUNT RECEIVABLE 47,506 (11,073) 308
(INCREASE) DECREASE IN PREPAID EXPENSES 7,723 (796) 7,110
DECREASE IN OTHER ASSETS - - 15,148
INCREASE IN RELATED PARTY RECEIVABLE - (1,860) -
INCREASE(DECREASE) IN RECLAMATION LIABILITY 294,159 (27,509) 86,037
DECREASE IN ACCOUNTS PAYABLE (15,419) (32,909) 42,556
INCREASE(DECREASE) IN ACCRUED AND OTHER LIABILITIES (6,699) (14,629) 8,768
INCREASE(DECREASE) IN DUE TO RELATED PARTIES 49,489 (4,686) 545,989
----------- ---------- --------
TOTAL ADJUSTMENTS 235,723 497,706 794,603
----------- ---------- --------
NET CASH PROVIDED BY(USED IN)
OPERATING ACTIVITIES (155,446) 18,064 324,068
CASH FLOW FROM INVESTING ACTIVITIES:
(INCREASE) DECREASE IN RESTRICTED CASH 2,176 - (234,732)
PROCEEDS FROM SALE OF ASSETS 141,036 160 (938)
PURCHASE OF EQUIPMENT - - (5,765)
INCREASE IN MINERAL PROPERTIES - (17,679) -
---------- -------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 143,212 (17,519) (241,435)
---------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES-
DECREASE IN SILVER LOAN PAYABLE - - (55,521)
---------- ------- --------
NET INCREASE (DECREASE) IN CASH (12,234) 545 27,112
CASH, BEGINNING OF YEAR 48,545 48,000 20,888
---------- -------- --------
CASH, END OF YEAR $ 36,311 $ 48,545 $ 48,000
============= ========= ========
See notes to financial statements
<PAGE>
AMERICAN EAGLE RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1997, 1996, AND 1995
________________________________________________________________________
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - American Eagle Resources, Inc. (The "Company") is
primarily engaged in the exploration, development, and production of precious
metals. As of June 30, 1997 and 1996, the Company's only operating activity
was a 40% interest in the Golden Eagle Mine Joint Venture ( formerly, the
Flowery Mine)(the "Mine"), located in Storey County, Nevada. Revenues
generated from production at the Mine were primarily received from a single
refiner. During fiscal 1997, the Company ceased all leaching and production
and was in the reclamation phase at the Mine.
BASIS OF PRESENTATION - The financial statements include the accounts of
the Company and a proportionate share of the accounts of the Golden Eagle Mine
Joint Venture. All material intercompany balances and transactions have been
eliminated.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed above, the Company's
only operating activity has moved into the reclamation phase and no future
cash flows from operating activities are expected. The Company is currently
dependent upon its joint venture partner to continue to fund the cash needs of
the mine, which raises substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also
described below. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
FUTURE OPERATIONS - During fiscal 1997, the Company's management entered
into negotiations with various entities, including related parties, which
could ultimately result in a change in the Company's operating entities and a
reorganization of the corporate structure of the Company. The reorganization
contemplated includes: 1) a transaction in which the Company's 40% interest in
the Golden Eagle Mine Joint Venture is sold or transferred; 2) the acquisition
of shares of the Company's common stock from related entities; 3) the
liquidation of a portion of the Company's investment in Miramar; and 4) the
elimination of a portion or all of the amounts due to related parties.
Subsequently, management plans to acquire or lease new properties and to
continue in the business of exploration, development, and production of
precious metals. The terms of such reorganization have not been finalized,
nor can its impact on the financial statements be determined at this time.
Accordingly, no amount have been recorded in the financial statements which
could result from these proposed transactions. There can be no assurance that
such transactions will occur.
SIGNIFICANT ACCOUNTING POLICIES
RESTRICTED CASH - Restricted cash consists of interest bearing
certificates of deposit held as collateral for the performance of the
Company's reclamation activities.
PROPERTY AND EQUIPMENT - Property acquisition costs and mine development
costs incurred to expand capacity of operating mines, develop new ore bodies
or develop new areas substantially in advance of current production are
capitalized. When commercial production commences, depletion of such costs is
computed using the unit-of-production method, based on estimated recoverable
ore reserves. When a mining property is determined to be noncommercial,
nonproductive, or its value impaired, the remaining capitalized costs are
expensed to the extent that they exceed estimated net realizable value.
Building and equipment are depreciated using the straight-line method over
estimated useful lives of ten years and five years, respectively.
The Company ceased mining operations during fiscal 1996 and management does
not intend to further explore, expand, or develop the properties owned and
leased by the Golden Eagle Mine Joint Venture. Accordingly, an impairment
allowance of $442,181 was established as of June 30, 1996 which fully reserved
the remaining net book value of property and equipment.
REVENUE RECOGNITION - Revenue is recognized when gold shipments are made.
NET LOSS PER SHARE - The computation of net loss per share is based on the
Company's reported net loss and the weighted average number of shares of
common stock outstanding.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
RECLAMATION - Estimated reclamation costs are accrued over the estimated life
of the mine on a unit-of-production basis. During fiscal 1997, the mine's
management revised its estimate of total reclamation costs to be incurred.
This resulted in the accrual of $415,747 of additional expense on the
Company's books for the year ended June 30, 1997. Disbursements of $121,588
were applied to such accrual during fiscal 1997 resulting in an ending balance
of $407,760 at June 30, 1997.
IMPAIRMENT OF LONG-LIVED ASSETS - Statement of Financial Accounting Standards
("SFAS") No.121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of, was issued by the Financial Accounting
Standards Board ("FASB") in March 1995, and established accounting for the
impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used for long-lived assets and
certain identifiable intangibles to be disposed of. The Company adopted the
provisions of SFAS No, 121 during the year ended June 30, 1996. The Company
reviews the carrying values of its long-lived and identifiable intangible
assets for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of assets may not be recoverable.
RECLASSIFICATIONS - Certain amounts in the 1996 and 1995 financial statements
have been reclassified to be consistent with the presentation used in fiscal
year 1997.
RECENT PRONOUNCEMENTS OF THE FASB - The Financial Accounting Standards Board
(FASB) recently issued SFAS No. 128 entitled " Earnings Per Share". This
statement establishes standards for computing and presenting earnings per
share and is effective for financial statements issued for periods ending
after December 15, 1997. Earlier application of this statement is not
permitted and upon adoption requires restatement (as applicable) of all
prior-period earnings per share data presented.
In addition, the FASB issued SFAS 129 entitled, "Disclosure of Information
about Capital Structure" in February 1997. This statement establishes
standards for disclosing information about an entity's capital structure. The
Company already complies with SFAS 129 and foresees no material impact on the
financial statements in adopting the statement for periods ending after
December 15, 1997.
On June 30, 1997, the FASB issued SFAS 130 entitled "Reporting Comprehensive
Income". This statement requires companies to classify items of other
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement
of financial position, and is effective for financial statements issued for
fiscal years beginning after December 15, 1997. Management does not believe
this new FASB will have a material impact on the financial statements of the
Company.
On June 30, 1997, the FASB issued SFAS 131 entitled, "Disclosure About
Segments of an Enterprise and Related Information". This statement
establishes additional standards for segment reporting in the financial
statements and is effective for fiscal years beginning after December 15,
1997. Management has not determined the effect of this statement on its
financial statement disclosure.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at June 30:
</TABLE>
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Equipment and buildings $ 766,325 $ 930,525
Mineral properties 517,476 517,476
----------- ------------
1,283,801 1,448,001
Less accumulated depreciation
and depletion (841,620) (1,005,820)
Impairment allowance (442,181) (442,181)
----------- ------------
Net $ - $ - -
=========== ============
</TABLE>
Costs of mineral properties at June 30, 1997 and 1996 relate principally
to the Golden Eagle Mine.
3. INVESTMENT IN MIRAMAR MINING CORPORATION
The Company's investment in Miramar Mining Corporation ("Miramar")
represents an approximate 2% interest in that company. Miramar is a mining
company listed on the NASDAQ Stock Exchange and is a related party (see Note
5). At June 30, 1997 and 1996, this investment was recorded at cost, which
was less than market value. The market value of the investment at June 30,
1997 and 1996, respectively, based on quoted values of shares of stock of
Miramar that were traded on the NASDAQ, was $ 3,562,500 and $ 5,500,000. Due
to the related party nature of the investment, the investment is not recorded
above original cost basis. Due to the nature of marketable securities, and
their susceptibility to fluctuations in market conditions, their fair value
could change significantly in the next year.
4. INCOME TAXES
No provision for income taxes has been recorded in the accompanying
financial statements due to the net losses of the Company. At June 30, 1997,
the Company had net operating loss ("NOL") carryforwards and investment tax
credit carryforwards as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GENERATED NOL INVESTMENT EXPIRATION
DURING YEAR CARRY- TAX CREDIT DURING YEAR
NDED JUNE 30 FORWARDS CARRYFORWARDS ENDING JUNE 30
($) ($)
6/30/83 - 2,198 1998
6/30/84 - 21,688 1999
6/30/85 4,708,014 30,208 2000
6/30/86 1,665,695 38,474 2001
6/30/87 1,859,143 28,672 2002
6/30/88 2,900,049 - 2003
6/30/89 1,348,450 - 2004
6/30/90 396,275 - 2005
6/30/91 290,475 - 2006
6/30/92 433,404 - 2007
6/30/93 576,965 - 2008
6/30/94 688,394 - 2009
6/30/95 335,180 - 2010
6/30/96 62,189 - 2011
6/30/97 137,105 - 2012
---------- ---------
$15,401,338 121,240
=========== ===========
</TABLE>
The Company has not recognized a deferred tax asset relating to
these carryforwards.
The NOL carryforwards generated through the date of the Company's
reorganization in 1990 are subject to an annual limitation of $272,858. The
NOL carryforwards generated subsequent to such reorganization are allowed
without limitation. Therefore, total NOL carryforwards actually available to
offset future taxable income will be limited to approximately $ 6,500,000
before fully expiring during the year ending June 30, 2017. Subsequent
ownership changes could further reduce available NOL carryforwards. The
annual limitation, and therefore the NOL carryforwards available, are
increased by any recognized built-in gains during a taxable year as provided
by Internal Revenue Code Section 382.
The Company has adopted Financial Accounting Standards Board
Statement No. 109, Accounting for Income Taxes (SFAS 109). The Company had no
recorded deferred taxes before or after implementation of SFAS 109 and,
accordingly, there was no cumulative or current period effect from the
adoption of SFAS 109.
Deferred income taxes reflect the impact of temporary differences
between the amount of assets and liabilities recognized for financial
reporting purposes and such amounts recognized for tax purposes and the impact
of net operating loss carryforwards. The components of the Company's deferred
tax assets as of June 30, 1997 were as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
BENEFIT FROM NET OPERATING LOSS CARRYOVERS $ 5,236,455 $ 5,170,450
BENEFIT FROM INVESTMENT TAX CREDIT CARRYOVERS 121,240 129,120
OTHER 231,770 164,777
------------ ------------
TOTAL 5,589,465 5,464,347
VALUATION ALLOWANCE (5,589,465) (5,464,347)
------------ ------------
NET $ - $ -
</TABLE>
5. RELATED PARTY TRANSACTIONS
In September 1989, the Company entered into a joint venture agreement
with Miramar Gold Corporation ("Miramar Gold"), a Nevada corporation, for the
operation of mining properties and equipment (the Golden Eagle Mine Joint
Venture). Miramar Gold is a wholly-owned subsidiary of Miramar (see Note 3),
which has a 16% interest in the Company. Mr. W.H. Berukoff is President and a
member of the Board of Directors of the Company. He is also President and a
member of the Board of Directors of Miramar Gold and Miramar. Under the terms
of the agreement, the Company received 20% of the revenue and paid 40% of the
expenses from mining operations until Miramar had received the sum of $
1,000,000. Beginning in September, 1994, the Company received 40% of the
revenues and paid 40% of the expenses.
At June 30, 1997 and 1996, the Company had a payable to Miramar Gold of $
2,570,915 and $ 2,521,426, respectively, for costs paid by Miramar Gold on
behalf of the Company. The Company classifies this payable as non-current as
Miramar Gold has represented it will not demand payment in fiscal 1998.
Repayments will be made as cash flow permits.
Management fees for services rendered to the Company were paid to Miramar
Gold in 1997, 1996 and 1995 in the amount of $6,438, $ 25,752, and $ 29,033.
At June 30, 1997 and 1996, the Company had a receivable of $ 53, 261 from
Red Lion Management, (a major shareholder) which is controlled by the
President of the Company, as well as a receivable of $ 1,860, from other
companies that are controlled by the President of the Company. The Company
classifies these receivables as non-current as significant repayments are not
expected in fiscal 1998.
6. COMMITMENTS
At June 30, 1997 and 1996, as security for the performance of certain
reclamation procedures at a mining property, the Company is contingently
liable for its pro-rata portion in the amount of $247,000, under unused
letters of credit issued by a bank. These letters of credit are secured by
certificates of deposit that have been assigned to the bank.
The Company has entered into mining leases whereby it has been granted
the right to conduct exploration and other mining activities on agreed upon
land areas. Such leases, which are cancelable within one year, are generally
effective as long as minerals are produced in commercial quantities. Amounts
paid under mining leases during the years ended June 30, 1997,1996, and 1995
totaled $ 37,772, $ 57,587, and $ 57,664.
7. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL STATEMENTS
No fair market value was determinable for amounts due to and from related
parties. These arrangements are interest free and similar financing
arrangements could not be obtained by the Company currently.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 36,311
<SECURITIES> 1,058,125
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 43,566
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,530,208
<CURRENT-LIABILITIES> 416,803
<BONDS> 0
0
0
<COMMON> 54,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,530,208
<SALES> 128,252
<TOTAL-REVENUES> 301,193
<CGS> 0
<TOTAL-COSTS> 692,362
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (391,169)
<INCOME-TAX> 0
<INCOME-CONTINUING> (391,169)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (391,169)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
