FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTER ENDED August 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number 0-12132
SILVERADO MINES LTD.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
British Columbia, Canada
(State or other jurisdiction of incorporation or organization)
98 -0045034
(I.R.S. Employer I.D. No.)
Suite 505, 1111 West Georgia Street
Vancouver, British Columbia, Canada V6E 4M3
(Address of Principal Executive Offices)
(604) 689-1535
(Registrant's telephone number)
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 13(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for a shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class: Outstanding at September 3, 1996
52,056,493
(Common stock (npv))
1
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SILVERADO MINES LTD.
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN U.S. DOLLARS)
As at
August 31 November 30
1996 1995
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 1,223,135 $ 155,849
Gold inventory (Note 2) 356,279 389,119
Accounts receivable 8,452 1,010
Prepaid expenses 31,541 72,005
Receivable from related parties 250,802 --
------------ ------------
1,870,209 617,983
Mineral Properties and Development
Claims and options 2,208,160 1,755,811
Deferred exploration and
development expenditures 10,837,091 10,084,116
------------ ------------
13,045,251 11,839,927
Less accumulated amortization (1,293,247) (1,260,834)
------------ ------------
11,752,004 10,579,093
Building, Plant and Equipment 3,759,816 3,806,350
Deferred Financing Fees
(net of amortization of $77,738: 1995 - $49,838) 108,262 136,162
------------ ------------
$ 17,490,291 $ 15,139,588
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities (Note 4) $ 451,921 $ 527,352
Loans payable secured by gold inventory 66,511 176,568
Current portion of mineral claims payable 240,000 330,000
Capital lease obligations - current 88,575 203,203
Payable to related parties -- 851,610
------------ ------------
847,007 2,088,733
Long Term Liabilities
Mineral claims payable -- 200,000
Capital lease obligations 144,576 194,569
Convertible debenture (Note 6) 2,000,000 2,000,000
------------ ------------
2,144,576 2,394,569
Shareholders' Equity
Share capital (Note 5)
Authorized: 75,000,000 common shares
Issued and outstanding:
August 31, 1996 - 51,056,493 shares 36,162,211 28,775,211
November 30, 1995 - 37,431,493 shares
Capital surplus 46,352 46,352
Deficit (21,709,855) (18,165,277)
------------ ------------
14,498,708 10,656,286
------------ ------------
$ 17,490,291 $ 15,139,588
============ ============
See accompanying notes to consolidated financial statements
2
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SILVERADO MINES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(EXPRESSED IN U.S. DOLLARS)
Nine Months Ended August 31
1996 1995
------------- -------------
Revenue from gold sales $ 209,278 $ 2,477,784
------------- -------------
Operating costs
Mining and processing costs (157,007) (2,905,790)
Amortization of property and development costs (32,413) (321,484)
------------- -------------
Net Gain (Loss) 19,858 (749,490)
Write Down of Inventory to Net Realizable Value -- (145,410)
Miscellaneous Revenue -- 385,923
Administrative expenditures (1,272,965) (1,819,131)
Contracted services (Note 5) (2,291,471) (208,800)
Loss for the period (3,544,578) (2,536,908)
Accumulated deficit at beginning of period (18,165,277) (14,070,721)
------------- -------------
Accumulated deficit at end of period $ (21,709,855) $ (16,607,629)
============= =============
Loss per share $ (0.085) $ (0.071)
============= =============
Three Months Ended August 31
1996 1995
------------- -------------
Revenue from gold sales $ 110,630 $ 957,611
------------- -------------
Operating costs
Mining and processing costs (77,889) (1,386,217)
Amortization of property and development costs (32,413) (135,216)
------------- -------------
Net Gain (Loss) 328 (563,822)
Write Down of Inventory to Net Realizable Value -- (145,410)
Miscellaneous Revenue -- 339,405
Administrative expenditures (471,584) (999,026)
Contracted services (Note 5) (634,693) 190,963
Loss for the period (1,105,949) (1,177,890)
Accumulated deficit at beginning of period (20,603,906) (15,429,740)
------------- -------------
Accumulated deficit at end of period $ (21,709,855) $ (16,607,630)
============= =============
Loss per share $ (0.024) $ (0.033)
============= =============
See accompanying notes to consolidated financial statements
3
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SILVERADO MINES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN U.S. DOLLARS)
Nine Months Ended August 31,
1996 1995
------------- -------------
CASH PROVIDED BY (USED FOR):
Operations:
Net earnings (loss) for the period $ (3,544,578) $ (2,536,908)
Items not involving cash:
Contracted services 2,291,471 208,800
Depreciation 151,856 126,361
Amortization of deferred financing fees 27,900 27,900
Amortization of property and development costs 32,413 135,216
Changes in non-cash operating working capital: (179,040) 753,821
------------- -------------
(1,219,978) (1,284,810)
Financing:
Shares issued for cash 5,265,000 725,850
Shares issued for consulting services -- 97,157
Loans payable secured by gold inventory
and forward sales (110,057) --
Related parties (1,102,412) 320,662
Advances on gold -- 549,000
Decrease in mineral claims payable (290,000) --
Decrease in capital lease obligation (164,621) (128,637)
------------- -------------
3,597,910 1,564,032
Investments:
Mineral claims and options (452,349) (32,900)
Deferred exploration and
development expenditures (752,975) (210,709)
Purchases of equipment (105,322) (67,364)
------------- -------------
(1,310,646) (310,973)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,067,286 (31,751)
Cash and cash equivalents:
Beginning of period 155,849 190,724
End of period 1,223,135 158,973
------------- -------------
Supplemental cash flow information
Interest paid $ 160,000 $ 40,000
============= =============
See accompanying notes to consolidated financial statements
4
<PAGE>
SILVERADO MINES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed In U.S. Dollars) (Unaudited) August 31, 1996
1. Basis of Presentation
The financial information at August 31, 1996 and for the nine month periods
ended August 31, 1996 and August 31, 1995 included herein is unaudited;
however, such information reflects all adjustments (consisting solely of
normal recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim periods. These
consolidated financial statements are presented in accordance with
generally accepted accounting principles in the United States. The results
of operations for the nine month period ended August 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
2. Inventories
Gold inventory is valued at the lower of weighted average cost or estimated
net realizable value.
3. Deferred Production Expenditures
Costs associated with waste removal and preparation for gold recovery are
deferred and charged to production on a unit of production basis.
4. Accounts Payable
Accounts payable and accrued liabilities consists of:
August 31, November 30,
1996 1995
=========== ===========
Accounts payable 236,154 360,941
Accrued interest 26,739 66,411
Accrued contract services (Note 5) 129,142 --
Accrued reclamation expenses 59,886 100,000
=========== ===========
$ 451,921 $ 527,352
=========== ===========
5
<PAGE>
5. Share Capital
(a) Employee Options. From time to time the Company issues options for the
purchase of common shares to selected part time employees as sole
compensation for contracted services in accordance with the terms and
conditions of its April 20, 1994, Stock Option and Stock Bonus Plan.
On July 9, 1996, the Company's directors increased the number of
shares authorized under this plan from 12,100,000 to 21,100,000. At
August 31, 1996, 15,655,250 shares had been exercised.
(b) Directors Options. The Company has reserved 3,475,000 shares for
issuance in accordance with the terms and conditions of its December
12, 1994, Stock Option Plan. No changes have occurred in this original
authorization.
(c) Other Share Transactions. The Company has reserved 1,000,000 shares
for issuance upon the potential conversion of a convertible debenture.
6. Convertible Debenture
In July, 1994, the Company issued an 8% convertible callable debenture
which is unsecured and is due July 2, 1999, subject to prior redemption or
conversion. The debenture may be converted in whole or in part by the
holder into common shares of the Company at a Conversion Price of $2.00
U.S. per share (the "Conversion Price"). In addition, the Company may
require the holder to convert the debenture at the Conversion Price, in
whole or in part, if the average market price of the Company's shares has
exceeded 125% of the Conversion Price for a period of 20 consecutive
trading days. Financing fees paid related to the debenture have been
deferred and are being amortized on a straight line basis over the five
year term of the debenture.
7. Commitments and Contingencies
The Company has a lease agreement for office premises for a term of 10
years commencing April 1, 1994, with an approximate annual rate of $120,000
(Cdn.) including operating costs.
8. Subsequent Events
None.
6
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain factors which
have significantly affected the Company's financial position and operating
results during the period included in the accompanying condensed consolidated
financial statements.
Nine Months 1996 v. 1995
- ------------------------
Revenue during the first nine months of 1996 was derived from continued sales of
gold from the Company's gold inventory. Production from the Company's Nolan Gold
Project was reduced as the Company refocused its efforts on its Fairbanks
properties in response to the increased activity of several major mining
companies on closely proximate projects. Contracted services expense increased
as a function of the increased number of shares exercised under the Company's
1994 Stock Option and Bonus Plan (see Note 5). The total of current assets
remained relatively constant, though the cash portion of such assets increased
to $1.2 million, reflecting the company's efforts to reduce its liabilities and
improve its liquidity. Current liabilities were reduced primarily as a result of
a reduction in payables to related parties. Long term liabilities remained
relatively unchanged, and consist primarily of a $2.0 million convertible
debenture (see Note 6).
Liquidity and Capital Resources at August 31, 1996
- --------------------------------------------------
At August 31, 1996, the Company's cash position of $1.2 million was
significantly greater than at November 30, 1995. Funds were received from sales
of gold inventory and through the exercise of options.
Results of Operations
- ---------------------
(a) Ester Dome Gold Project
At Ester Dome, near Fairbanks, Alaska, the Company continued an intensive
program of trenching and sampling on the St. Paul Shear, preparatory to the
commencement of drilling.
(b) Marshall Dome Gold Project
At Marshall Dome, also near Fairbanks, Alaska, the Company has continued
reconnaissance surface exploration. The property is on a regional trend
with the True North Gold Deposit presently being developed by Newmont and
La Teko.
(c) Whiskey Gulch Property
The Company acquired this four-claim property in August of 1996. It is on
the geologic trend between the True North Deposits and the Company's
Marshall Dome Property, and immediately adjoins the True North Claims.
7
<PAGE>
(d) Nolan Gold Project
At the Nolan Gold Project in northern Alaska, the Company continued its
gold production activities and reclamation efforts. During the third
quarter, the Company realized the benefits of additional cost-control
measures implemented late last year by successfully producing gold at a
cash cost of $292 per ounce.
(e) Hammond Property
This property, located adjacent to the Company's Nolan Gold Project in
northern Alaska, has a history of gold production and the Company
anticipates that it will add to the potential for developing additional
gold reserves. The property also has lode gold and antimony potential.
OTHER INFORMATION
Item 4 None.
- ------
Item 5 None.
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Item 6 None.
- ------
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SILVERADO MINES LTD.
/J.P. Tangen/
- -------------
President / CEO / CFO
8
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