FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTER ENDED August 31, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number 0-12132
SILVERADO GOLD MINES LTD.
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(Exact name of registrant as specified in its charter)
British Columbia, Canada
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(State or other jurisdiction of incorporation or organization)
98 -0045034
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(I.R.S. Employer I.D. No.)
Suite 505, 1111 West Georgia Street
Vancouver, British Columbia, Canada V6E 4M3
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(Address of Principal Executive Offices)
(604) 689-1535
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(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 24, 1997
- -------------------- ---------------------------------
(Common stock (npv)) 70,967,493
<PAGE>
<TABLE>
<CAPTION>
SILVERADO GOLD MINES LTD.
CONSOLIDATED BALANCE SHEETS As at
EXPRESSED IN U.S. DOLLARS August 31 November 30
1997 1996
------------- -------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 90,471 $ 1,925,469
Gold inventory (Note 2) 83,342 213,004
Accounts receivable 22,289 11,265
Prepaid expenses to related parties 430,617 479,959
Receivable from related parties 770,425 --
Deferred employment contract expense -- 350,000
------------- -------------
1,397,144 2,979,697
Mineral Properties and Development
Claims and options 2,326,971 2,327,025
Deferred exploration and development expenditures 13,088,532 11,286,816
------------- -------------
15,415,503 13,613,841
Less accumulated amortization (1,384,338) (1,384,338)
------------- -------------
14,031,165 12,229,503
Building, Plant and Equipment 4,474,278 4,423,428
Less accumulated depreciation (1,273,262) (920,246)
------------- -------------
3,201,016 3,503,182
Deferred Financing Fees 71,062 98,962
(net of amortization of $114,938, 1996 - $87,038) ------------- -------------
$ 18,700,387 $ 18,811,344
============= =============
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities (Note 4) $ 377,425 $ 351,154
Loans payable secured by gold inventory -- 66,511
Loans payable unsecured 15,000 --
Current portion of mineral claims payable -- 179,000
Capital lease obligations - current 30,310 64,939
------------- -------------
422,735 661,604
Long Term Liabilities
Capital lease obligations 92,214 92,214
Convertible debenture (Note 6) 2,000,000 2,000,000
------------- -------------
2,092,214 2,092,214
Shareholders' Equity
Share capital (Note 5)
Authorized: 100,000,000 common shares
Issued and outstanding: August 31, 1997 - 68,376,493 shares 41,660,366 38,553,063
November 30, 1996 - 56,406,493 shares
Deficit (25,474,928) (22,495,537)
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16,185,438 16,057,526
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$ 18,700,387 $ 18,811,344
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
SILVERADO GOLD MINES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT
EXPRESSED IN U.S. DOLLARS
Nine Months Ended
August 31 August 31
1997 1996
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<S> <C> <C>
Revenue from gold sales $ 141,772 $ 209,278
Mining and processing costs (130,368) (157,007)
Amortization of property and development costs -- (32,413)
------------- -------------
Income from Operations 11,404 19,858
Administrative Expenditures 1,857,042 1,272,965
Employment contract expense (Note 5c) 1,133,753 2,291,471
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Loss for the period (2,979,391) (3,544,578)
Accumulated deficit at beginning of period (22,495,537) (18,165,277)
------------- -------------
Accumulated deficit at end of period $ (25,474,928) $ (21,709,855)
============= =============
Loss per share $ (0.046) $ (0.085)
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
<TABLE>
<CAPTION>
Three Months Ended
August 31 August 31
1997 1996
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<S> <C> <C>
Revenue from gold sales $ 64,290 $ 110,630
Mining and processing costs (85,533) (77,889)
Amortization of property and development costs -- (32,413)
------------- -------------
Income (loss) from Operations (21,243) 328
Administrative Expenditures 631,360 471,584
Employment contract expense (Note 5c) 70,333 634,693
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Loss for the period (722,936) (1,105,949)
Accumulated deficit at beginning of period (24,751,992) (20,603,906)
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Accumulated deficit at end of period $ (25,474,928) $ (21,709,855)
============= =============
Loss per share $ (0.007) $ (0.025)
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
SILVERADO GOLD MINES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
EXPRESSED IN U.S. DOLLARS
Nine Months Ended
August 31 August 31
1997 1996
------------- -------------
<S> <C> <C>
CASH PROVIDED BY (USED FOR):
Operations:
Loss for the period $ (2,979,391) $ (2,438,629)
Items not involving cash:
Employment contract expense 1,133,753 1,656,778
Depreciation 353,016 100,281
Amortization of deferred financing fees 27,900 18,600
Changes in non-cash operating working capital:
Increase in accounts receivable (11,024) (7,255)
Increase in receivable from related parties (770,425) --
Decrease in gold inventory 129,662 79,118
Decrease (increase) in prepaid expenses from related parties 49,342 40,490
Increase (decrease) in accounts payable and accrued liabilities 64,108 (150,531)
------------- -------------
(2,003,059) (701,148)
Financing:
Shares issued for cash 2,285,713 2,830,000
Increase in unsecured loan 15,000 100,000
Decrease in loans payable secured by gold inventory (66,511) (36,516)
Decrease in payable to related parties -- (829,723)
Decrease in mineral claims payable (179,000) (211,000)
Decrease in capital lease obligation (34,629) (84,173)
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2,020,573 1,768,588
Investments:
Mineral claims and options 54 (60,000)
Deferred exploration and development expenditures (1,801,716) (301,014)
Purchases of equipment (50,850) (3,413)
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(1,852,512) (364,427)
Increase (decrease) in cash and cash equivalents (1,834,998) 703,013
Cash and cash equivalents at beginning of period 1,925,469 155,849
------------- -------------
Cash and cash equivalents at end of the period $ 90,471 $ 858,862
============= =============
Supplemental cash flow information
Interest paid $ 80,000 $ 80,000
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SILVERADO GOLD MINES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS) (UNAUDITED) AUGUST 31, 1997
1. Basis of Presentation
The financial information at August 31, 1997, and for the nine month period
ended August 31, 1997 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, 1997 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,
1997 1996
----------- -----------
Accounts payable 287,420 118,858
Accrued interest 26,666 64,065
Accrued employment contract expense (Note 5c) 60,394 98,231
Accrued reclamation expenses 2,945 70,000
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$ 377,425 $ 351,154
=========== ===========
5. Share Capital
(a) Common Shares. Authorized: 100,000,000 common shares, without par
value.
(b) Directors Options. The Company has reserved 3,475,000 shares for
issuance, exercisable until August 14, 2004, in accordance with the terms
and conditions of its December 12, 1994, Stock Option Plan; and 450,000
shares for issuance, originally exercisable until June 1, 1997 but
subsequently extended to June 1, 2002, in accordance with the terms and
conditions of its June 1, 1992, Stock Option Plan.
(c) Employee Options. From time to time, the Company issues options for the
purchase of common shares to selected part time independent contract
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. The
<PAGE>
Company accounts for compensation arising from these options in accordance
with APB 25. If the market price of the Company's shares exceed the
exercise price of the options at the date the options are granted, then
this excess is accrued and expensed over the term of the employment
contracts, on a straight line basis. When the options are exercised, share
capital is credited based on the market price at the date the options were
granted. The Company has reserved 304,750 shares for issuance, exercisable
until October 21, 1998, in accordance with the terms and conditions of this
plan.
(d) Warrants and Forward Commitments. The Company has reserved a total of
4,200,000 shares for issuance with respect to a warrant for 600,000 shares
exercisable until March 6, 1998; a warrant for 2,000,000 shares exercisable
until April 3, 1999; a warrant for 1,000,000 shares exercisable until
August 22, 1999; and a warrant for 600,000 shares exercisable until
September 6, 1999.
(e) Other Share Transactions. The Company has reserved 1,000,000 shares for
issuance upon the potential conversion of a convertible debenture, and
709,725 shares for issuance under the terms of its 14-for-13 forward stock
split of May 21, 1997. The Company has also reserved 1,100,000 shares with
respect to its outstanding offer to purchase the assets and liabilities of
Kintana Resources Ltd.
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 an original Conversion Price of
$2.00 U.S. per share (the "Conversion Price"), subsequently modified to
$1.857 as a result of the Company's 14/13 "forward stock split" approved
May 21, 1997. 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 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.
<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 1997 v. 1996
- ------------------------
Revenue during the first nine months of 1997 was received from the on-going sale
of gold from the Company's existing gold inventory, though the majority of the
Company's cash was raised through equity funding of its activities by the
issuance of 3,500,000 additional shares of its stock under the provisions of
Regulation "S". Current liabilities continued to decrease from $661,604 and are
now at $422,735, primarily as a function of a reduction in the current portion
of mineral claims payable as the Company paid off its remaining obligations on
the Nolan Gold Property
Current assets decreased from $2,979,697 to $1,397,144 as a function of the
Company's continued commitment of resources to its drilling and exploration
programs on its Fairbanks, Alaska, properties - a process begun a year earlier.
In particular, the Company focused its resources on its "due diligence"
investigation of the Ryan Lode Gold Property, a prospective acquisition stated
to contain 742,500 ounces of proven gold reserves. Prepaid expenses remained
relatively constant, representing contractual payments to the Company's
principal Alaska contractor to fund the exploration and development work being
conducted on the Company's properties near Fairbanks, while receivables from
related parties increased as a function of the Company incurring legal expenses
on behalf of Kintana Resources Ltd. in anticipation of its purchase of Kintana
through issuance of shares (see Note 5 (e)). The Company's long term liabilities
consist primarily of a $2,000,000 convertible debenture.
Administrative expenditures increased by $584,077 primarily as a result of an
increase in management services expense, and an increase in depreciation and
amortization charges, attributable to the Grant Mine mill facilities. Employment
contract expenses decreased by $1,157,718 as few such contracts were issued (see
Note 5 (c)).
Liquidity and Capital Resources at August 31, 1997
- --------------------------------------------------
At August 31, 1997, the Company's cash position was reduced to $90,471 as it
funded an intensive drilling program on the Ryan Lode Property as part of its
"due diligence" investigation. During the quarter it received cash from
continued sales of existing gold inventory, and from shares issued in accordance
with the provisions of Regulation "S". The Company expects to replenish its cash
reserves through the issuance of additional shares in accordance with the
provisions of Regulation "D", though it may also vend some of its properties or
consider a joint-venture, or similar arrangement, with another company if it is
advantageous for it to do so.
<PAGE>
Results of Operations
- ---------------------
(a) Ryan Lode Property
The Company entered into an agreement with La Teko Resources Ltd. ("La
Teko") to complete a $12 million - 5 year buyout of La Teko's Ryan Lode
Property, located a mile southwest of the Company's Ester Dome Gold Project
in Fairbanks, Alaska. This property, consisting of 63 federal and state
claims, contains a known gold reserve of 742,500 proven ounces and 79,500
probable ounces, according to La Teko.
The Company believes it is in a unique position to process ore from this
property because of the close proximity of its existing mill facilities at
the Grant Mine, on Ester Dome. If the Company's due diligence investigation
confirms the deposit to the Company's satisfaction and eliminates any
environmental concerns, it will issue a notice of acceptance to La Teko
that it intends to proceed with acquisition and development of the
property.
(b) Ester Dome Gold Project
At Ester Dome, also near Fairbanks, Alaska, the Company is continuing to
define the St. Paul Gold Deposit through drilling and trenching programs.
Surface trenching has shown the St. Paul Gold Deposit to be at least 3,000
feet long and open to extension in all directions. Detailed drilling on a
700 foot long section of the deposit has shown intersections of 10 to 125
feet and average gold grades from 0.02 to 0.17 ounces per ton. The Company
intends to continue drilling this property for the purpose of proving-up
minable gold deposits which it can then put into production.
(c) Chatanika Property
This property, consisting of 774 mining claims and 24 prospecting sites,
was newly staked by the Company in late 1996 in response to aerial and
ground anomalies which it observed. The Company plans to continue ground
evaluation of these claims during the winter of 1997/98.
(d) Nolan Gold Project
At the Nolan Gold Project in northern Alaska, the Company completed
approximately 30 acres of reclamation, restoring most of the previously
disturbed ground. Because the Company's resources are presently fully
engaged at the Ryan Lode Property, it has postponed plans to further
develop its placer and lode deposits at this location until the spring of
1998.
Significantly, and as reported previously, the Company was successful in
reducing its cash cost of production (production cost exclusive of
depreciation and amortization) at Nolan to $292 per ounce. This reduction
was attributable to the amortization of initial start-up costs and the
effect of cost cutting measures the Company implemented as it became more
knowledgeable of the site.
(e) Hammond Property
This property, located adjacent to the Company's Nolan Gold Project in
northern Alaska, has a history of gold production which the Company plans
to further explore and define in the spring of 1998 in conjunction with its
activities on the Nolan Gold Project.
<PAGE>
OTHER INFORMATION
Item 5 Other Information:
- -------------------------
Subsequent to quarter end, the Company undertook the following actions to
replenish its cash reserves:
On September 5, 1997, the Company entered into a contract to issue 500,000 of
its shares with an option for 500,000 additional shares pursuant to a consulting
agreement.
During the period of September 8-24 1997, the Company issued 1,371,000 of its
shares, at a price of $0.20 per share, to an individual purchaser under the
provisions of Rule 506 of Regulation D. The shares were sold for cash with an 8%
finders fee payable.
On September 9, 1997, the Company renegotiated an outstanding 600,000 share
warrant from $0.60 to $0.20, in consideration for immediate exercise of the
warrant.
- --------------------------------------------------------------------------------
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 GOLD MINES LTD.
/s/ G.L. Anselmo
-------------------------
G.L. Anselmo
President / CEO / CFO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Nov-30-1997
<PERIOD-START> Jun-01-1997
<PERIOD-END> Aug-31-1997
<CASH> 90,471
<SECURITIES> 0
<RECEIVABLES> 792,714
<ALLOWANCES> 0
<INVENTORY> 83,342
<CURRENT-ASSETS> 1,397,144
<PP&E> 4,474,278
<DEPRECIATION> (1,273,262)
<TOTAL-ASSETS> 18,700,387
<CURRENT-LIABILITIES> 422,735
<BONDS> 0
0
0
<COMMON> 41,660,366
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18,700,387
<SALES> 141,772
<TOTAL-REVENUES> 141,772
<CGS> 130,368
<TOTAL-COSTS> 2,990,795
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,979,391)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,979,391)
<EPS-PRIMARY> (0.046)
<EPS-DILUTED> 0
</TABLE>
