SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
SILVERADO MINES LTD.
(Exact name of Registrant as specified in charter)
<TABLE>
<S> <C> <C>
British Columbia, Canada 1041 98-0045034
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification No.)
</TABLE>
--------------------
Suite 505
1111 West Georgia Street
Vancouver, British Columbia,
Canada V6E 4M3
(604) 689-1535
(Address, including zip code, and telephone
number, including area code, of
Registrant's principal executive offices)
--------------------
J. P. Tangen, Esq.
499 St. Patricks Road
Fairbanks, AK 99701
(800) 665-4646
(Name, address, including zip code
and telephone number, including area
code, of Agent for Service and
Authorized Representative in the U.S.)
--------------------
It is requested that copies of all correspondence be sent to:
Donna A. Key, Esq., Key & Mehringer, P.C., 555 Seventeenth Street, Suite 3405,
Denver, Colorado 80202, telephone number (303) 295-2300, facsimile number (303)
295-1645.
--------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each class of Amount to Proposed maximum offering Proposed maximum Amount of
securities to be registered be registered price per unit (1) aggregate offering price registration fee
<S> <C> <C> <C> <C>
Common Stock, no par value 1,100,000 Shares $0.44 $484,000 $147
<FN>
(1) Registration fee is based on the closing sale price reported by Nasdaq on
April 7, 1997 (a date within five business days prior to the initial filing
hereof) pursuant to Rule 457(c).
</FN>
</TABLE>
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement becomes
effective on such date as the Securities and Exchange Commission acting pursuant
to said Section 8(a) may determine.
<PAGE>
Silverado Mines Ltd.
<TABLE>
Cross Reference Sheet
<CAPTION>
Form S-4
Item No. Caption Sections in Prospectus
<S> <C> <C>
A. Information about the Transaction
1 Forefront of the Registration Statement and
Outside Front Cover Page of Prospectus.......... Outside Front Cover Page
2 Inside Front and Outside Back Cover Pages of
Prospectus...................................... Inside Front Cover Pages;
Table of Contents
3 Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information................... Risk Factors; Prospectus Summary;
Selected Financial Data
4 Terms of the Transaction........................ Prospectus Summary;
Terms of the Transaction
5 Pro Forma Financial Information................. Not Applicable
6 Material Contracts with the Company Being
Acquired........................................ Not Applicable
7 Additional Information Required for Reoffering
by Persons and Parties Deemed to Be Underwriters Not Applicable
8 Interest of Named Experts and Counsel........... Not Applicable
9 Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.. Information about Silverado;
Indemnification of Directors and Officers
B. Information about the Registrant
10 Information with Respect to S-3 Registrants..... Not Applicable
11 Incorporation of Certain Information by
Reference....................................... Not Applicable
<PAGE>
12 Information with Respect to S-2 or S-3 Prospectus Summary;
Registrants..................................... Information about Silverado
13 Incorporation of Certain Information by
Reference...................................... Documents Incorporated by Reference
14 Information with Respect to Registrants Other
Than S-3 or S-2 Registrants..................... Not Applicable
C. Information about the Company Being Acquired
15 Information with Respect to S-3 Companies....... Not Applicable
16 Information with Respect to S-2 or S-3 Companies Not Applicable
17 Information with Respect to Companies Other
Than S-3 or S-2 Companies....................... Information Concerning Kintana
D. Voting and Management Information
18 Information if Proxies, Consents or
Authorizations are to be Solicited.............. Not Applicable
19 Information if Proxies, Consents or
Authorizations are not to be Solicited or in an
Exchange Offer.................................. Terms of the Transaction;
Approval of the Transaction
20 Indemnification of Directors and Officers....... Indemnification of Directors and Officers
21 Exhibits and Financial Statement Schedules...... Exhibits and Financial Statement Schedules
22 Undertakings.................................... Undertakings
</TABLE>
<PAGE>
Subject to Completion - Preliminary Prospectus dated April 8, 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SILVERADO MINES LTD.
1,100,000 Shares of Common Stock
An aggregate of 1,100,000 shares (the "Shares") of Common Stock, no par
value (the "Common Stock"), of Silverado Mines Ltd. (hereafter "Silverado") are
offered to the shareholders of Kintana Resources Ltd. (hereafter "Kintana"). The
expenses related to the filing of the registration statement to which this
offering relates are being paid by Silverado.
The securities offered hereby involve a high degree of risk. See "Risk
Factors" for a discussion of certain material risks in connection with an
investment in Silverado and the securities offered hereby.
The Common Stock is traded in the over-the-counter market and is quoted on
the Nasdaq automated quotation system under the symbol "GOLDF." On April 7, 1997
the closing sale price of the Common Stock reported by Nasdaq was $0.44.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REFERENCE TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is April __, 1997
<PAGE>
Prospectus - Table of Contents
Available Information.........................................................3
Documents Incorporated by Reference...........................................3
Prospectus Summary............................................................5
Information Concerning Silverado..............................................6
Risk Factors...............................................................6
Selected Financial Data....................................................9
Historical Per Share Data.................................................10
Description of Silverado Securities.......................................10
Provisions of Canadian Laws Affecting U.S. Shareholders...................11
Restrictions on Resale of the Shares......................................12
Price Range of Common Stock...............................................13
Experts...................................................................14
Indemnification of Directors and Others...................................14
Information Concerning Kintana...............................................14
Risk Factors..............................................................15
Description of Kintana Securities.........................................15
Selected Financial Data...................................................16
Management's Discussion and Analysis of
Financial Condition and Results of Operations ............................16
Terms of the Transaction .................................................17
Approval of the Transaction...............................................21
-2-
<PAGE>
AVAILABLE INFORMATION
---------------------
Silverado is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("the 1934 Act"), and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at its principal office at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: in Denver, 1801 California Street, Suite 4800,
Denver, Colorado 80202; in Chicago, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; in New York, 7 World Trade Center, Suite 1300, New
York, New York 10048; in Miami, 1401 Brickell Avenue, Suite 200, Miami, Florida
33131; and in Los Angeles, 5670 Wilshire Boulevard, 11th Floor, Los Angeles,
California 90036. Copies of such materials can be obtained at prescribed rates
by written request addressed to the Commission, Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, copies of such
documents and other information are provided to Nasdaq and can be inspected at
the Nasdaq offices maintained at the National Association of Securities Dealers,
Inc., 1735 "K" Street, Washington, D.C. 20549. The Commission maintains a Web
site that contains reports, proxy and information statements and other
information regarding the Company and the address of such Web site is
(http://www.sec.gov).
Silverado has filed with the Commission in Washington, D.C. a Registration
Statement on Form S-4 (together with all amendments, supplements, and exhibits
thereto, referred to as the "Registration Statement") under the Securities Act
of 1933, as amended, with respect to the Common Stock offered hereby.
Information set forth herein concerning Kintana has been provided by Kintana and
information concerning Silverado has been provided by Silverado. As permitted by
the rules and regulations of the Commission, this Prospectus does not contain
all of the information set forth in the Registration Statement and the exhibits
thereto. For further information with respect to Silverado and the Common Stock
offered hereby, reference is made to the Registration Statement, including the
exhibits filed or incorporated as a part thereof, copies of which can be
inspected at, or obtained at prescribed rates from, the Public Reference Section
of the Commission at the address set forth above.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
This prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference) are
available upon request from Shareholder Relations, Silverado Mines Ltd., Suite
505, 1111 West Georgia Street, Vancouver, British Columbia, Canada, V6E 4M3,
telephone (604) 689-1535. In order to ensure timely delivery of the documents,
any request should be made by May __, 1997 (To be inserted after effective date:
the date which is five business days prior to the date of shareholder action.)
Any person receiving a copy of this Prospectus may obtain without charge,
upon written or oral request, a copy of any and all of the documents referred to
below incorporated by reference herein (not including exhibits to those
documents, unless such exhibits are specifically incorporated by reference into
the information that the Prospectus incorporates). Requests for such documents
should be directed
-3-
<PAGE>
to Shareholder Relations, Silverado Mines Ltd., Suite 505, 1111 West Georgia
Street, Vancouver, British Columbia, Canada, V6E 4M3, telephone (604) 689-1535.
The following document(s) filed by Silverado with the Commission are
incorporated into this Prospectus by reference:
(1) Annual Report on Form 10-K/A No.1 for the fiscal year ended November
30, 1996; and
(2) Quarterly Report on Form 10-Q for the quarter ended February 28, 1997;
and
(3) All other reports filed pursuant to Section 13(a) or 15(d) of the 1934
Act since the end of the fiscal year covered by the 1996 Form 10-K.
Any statement contained in any documents incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that statements contained herein,
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein, modify or supersede such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
This Prospectus is accompanied by Silverado's Form 10-K/A No. 1 for the
year ended November 30, 1996 and Form 10-Q for the quarter ended February 28,
1997.
-4-
<PAGE>
PROSPECTUS SUMMARY
------------------
To Shareholders of Kintana:
This Prospectus relates to shares of the no par value common stock (the
"Common Stock") of Silverado Mines Ltd. to be distributed to you in connection
with the Purchase Agreement dated March 6, 1997 entered into between Kintana and
Silverado. The following is a brief summary of certain information contained
elsewhere in this Prospectus and in the documents incorporated herein by
reference. Certain capitalized terms used in this Summary are defined elsewhere
in this Prospectus. Reference is made to, and this Summary is qualified in its
entirety by, the more detailed information contained in this Prospectus and the
documents incorporated in this Prospectus by reference.
The securities offered involve a high degree of risk. Factors which may
affect Silverado's business and the securities offered hereby include
uncertainty of revenues from gold production, operating losses and deficit, the
limited extent of proven reserves on its properties, risks inherent in mining
operations, dependence on management, and possible need for additional capital.
See "Risk Factors."
Silverado is engaged in the acquisition, exploration and development of
resource properties. Silverado was incorporated under the laws of British
Columbia, Canada, in June 1963, and operates in the United States through a
wholly-owned subsidiary, Silverado Mines (US), Inc., incorporated in the State
of Alaska in 1981. Silverado's executive offices are located at Suite 505, 1111
West Georgia Street, Vancouver, British Columbia, Canada V6E 4M3, telephone
(604) 689-1535 and (800) 665-4646.
Kintana was previously engaged in the exploration and development of
mineral properties before it became inactive in June of 1994. Kintana was
incorporated on September 20, 1982 under the laws of British Columbia, Canada,
under the name Can-Ex Resources Ltd., and its name was changed to Kintana
Resources Ltd. in December 1990. Its mailing address is and its executive
offices are located at 1111 West Georgia Street, Suite 505, Vancouver, British
Columbia, V6E 4M3, telephone number (604) 689-1535.
On March 6, 1997, Kintana and Silverado entered into a Purchase Agreement
(the "Agreement", which Agreement is incorporated herein by reference), pursuant
to which, among other things, Silverado will issue to Kintana 1,100,000 shares
of its Common Stock in exchange for all of Kintana's assets and liabilities,
including all right, title and interest in the Eagle Creek Property located near
Fairbanks, Alaska, and certain accounts payable aggregating approximately (Cdn)
$173,300. Under the Agreement, Kintana will distribute the Silverado shares to
its shareholders and will dissolve. Prior to the execution of the Agreement, the
Eagle Creek Property was held by Can-Ex Resources (U.S.), Inc., ("Can-Ex"), a
wholly-owned subsidiary of Kintana. On February 4, 1997 and in contemplation of
this transaction, Can-Ex transferred all of its assets and liabilities,
including the Eagle Creek Property, to Kintana. The value of the consideration
to be paid by Silverado under the Agreement was based upon the net of the fair
market value of the assets and liabilities of Kintana, based in large part upon
an independent valuation of the Eagle Creek Property near Fairbanks, Alaska. The
primary factor
-5-
<PAGE>
considered by the parties in determining the number of shares of Silverado to be
issued as consideration for the Agreement was the market price of the Silverado
shares. For purposes of the transaction, the Silverado shares were valued by the
Silverado Board of Directors at $0.375 per share, which was the closing bid
price for Silverado common stock on March 5, 1997, the day before the effective
date of the Agreement.
Pursuant to a resolution of the Board of Directors of Kintana, the
1,100,000 shares of Silverado stock will be distributed to shareholders of
Kintana on a pro rata basis. Shareholders of Kintana will receive 0.74 shares of
Silverado Common Stock for each share of Kintana common stock held. Following
the effective date of the Registration Statement of which this Prospectus is a
part, approval of the Agreement and of the Board of Directors' resolution
providing for distribution of these shares to Kintana shareholders will be
submitted to the Kintana shareholders at an Annual General Meeting of
Shareholders to be held on Wednesday, May 21, 1997. Kintana shareholders will
not be required to give up any shares of Kintana in order to receive the
Silverado shares. Kintana shareholders have dissenters' rights of appraisal in
connection with this transaction (see "Kintana Information Circular"). No
federal, state or provincial regulatory requirements (other than those regarding
issuance of securities) must be complied with, nor approvals obtained, to
complete this transaction. See "Terms of the Transaction - Federal Income Tax
Consequences of the Transaction" for a description of the tax consequences of
the transaction.
INFORMATION CONCERNING SILVERADO
--------------------------------
Information concerning the business, operations, history, management and
financial condition of Silverado is incorporated by reference to reports filed
by Silverado with the U.S. Securities and Exchange Commission. See
"Incorporation by Reference." The discussion of certain matters and summary
information concerning Silverado set forth herein should be read in conjunction
with the more detailed discussion and Consolidated Financial Statements
contained in those documents.
Risk Factors
------------
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following factors in
evaluating Silverado and its business.
Financial Condition; Substantial Losses.
----------------------------------------
During the year ended November 30, 1996, and continuing through the quarter
ended February 28, 1997, the Company focused its activities on the Fairbanks
area, exploring and drilling several sites on its Ester Dome property, and
continuing preliminary exploratory work on other claims. During 1996 and the
first quarter of 1997, the Company generated $8,827,200 in additional capital
through sales of securities, thereby addressing its previous working capital
deficiency of $1,470,750. See Form 10-K, "Note 1(a) to Consolidated Financial
Statements." Silverado generated revenue from gold sales of $1,515,762,
$3,053,289, and $298,124 during the 1994, 1995 and 1996 fiscal years,
respectively. Silverado incurred significant losses during the three year period
ended November 30, 1996, and had accumulated a deficit of $22,495,537 as of
November 30, 1996 and $24,104,219 as of February 28, 1997. The major increase in
the Company's working capital from a deficiency of $1,470,750 at November 30,
1995 to a surplus of $2,318,093 at
-6-
<PAGE>
November 30, 1996, and a surplus of $874,865 as of February 28, 1997, resulted
from sales of securities. The Company further decreased its liabilities by
executing and paying-off lease purchase options on several large items of heavy
mining equipment. Management currently is seeking sources of debt and equity
capital to provide capital to sustain operations until revenues are sufficient
to do so; however, there can be no assurance that any capital will be available
to the Company from outside sources.
The auditors' report of KPMG covering the November 30, 1996 consolidated
financial statements is supplemented by a report entitled "Comments by Auditors
for U.S. Readers on Canada - U.S. Reporting Conflict" that states that Canadian
reporting standards do not permit reference to uncertainties such as Silverado's
ability to continue as a going concern, as discussed in Note 1(a) to the
consolidated financial statements, when the uncertainties are adequately
disclosed in the financial statements and accompanying notes. Under United
States reporting standards such uncertainties would be described in the
auditors' report in an explanatory paragraph following the opinion paragraph.
Additional Financing Could Be Required.
-----------------------------------------
If major commercially minable gold or other mineral deposits were
discovered on the Company's properties, substantial additional capital would be
necessary to fund the significant expenses required to develop and achieve
commercial production from any such major deposit. It is unlikely that the
Company would have capital sufficient to fund these expenses and there is no
assurance that the substantial capital which would be required to bring any
major deposit to commercial production would be available from any source on
terms favorable to Silverado. See "Form 10-K - Business," and "- Properties."
Mining and Environmental Regulation.
------------------------------------
Mining activities in the U.S. are subject to regulation and inspection by
the Mining, Safety and Health Administration of the United States Department of
Labor. In addition, Silverado's activities are regulated by a variety of
federal, state, provincial and local laws and regulations relating to protection
of the environment and other matters. Many agencies have the authority to
require Silverado to cease or curtail operations due to non-compliance with laws
administered by those agencies. The operation of mining properties also requires
a variety of permits from governmental agencies, which can be costly and time
consuming. As of the date of this Prospectus, management believes it has
received all permits necessary to conduct the exploration and development work
planned for the Ester Dome Project during 1997 and all permits necessary for
1997 operations on the Nolan Gold Project. See "Form 10-K - Business."
Nature of Claims Under Federal and State Law.
---------------------------------------------
Silverado's properties consist of unpatented federal mining claims and
state mining claims. Titles to unpatented claims are subject to inherent
uncertainties, such as whether there has been a discovery of valuable minerals
on each claim and whether proper locating and filing prerequisites have been
met, and such title can only be maintained by the performance of adequate annual
assessment work. See "Form 10-K Properties." While Silverado believes that all
claims which it holds were properly located under applicable law, no assurances
can be given in that regard. To date, Silverado believes that it has conducted
and recorded all annual assessment work necessary to maintain the claims in good
standing. Changes to U.S. mining laws currently under consideration would, if
enacted, substantially affect all holders of unpatented federal mining claims by
imposing royalty fees on removal of minerals and fundamentally changing the
rights
-7-
<PAGE>
and status of unpatented claim holders. Although management believes that the
imposition of royalty fees as described above, at a minimal level, would not
have a material adverse affect on Silverado, it is impossible to predict the
extent to which mining or environmental legislation may be enacted or amended
nor the effect that such legislation could have on Silverado. See "Form 10-K
Properties."
Weather and Other Natural Delays.
---------------------------------
Certain of Silverado's proposed exploration activities on its properties
will be subject to seasonal interruptions as a result of inclement weather
conditions, especially in the early spring and early fall of each year, which
could affect Company operations. See "Form 10-K - Properties." Although they are
unpredictable, seasonal weather conditions are anticipated, and Silverado's
management strives to maintain enough flexibility in its work schedule so that
adjustments can be made in the event weather conditions mandate changes in
scheduled activities. However, prolonged and unusually severe conditions could
have an adverse affect on Silverado's operations.
Dependence on Management and Affiliates.
----------------------------------------
Silverado's operations are dependent upon the efforts and active
participation of its President, Chief Executive and Operating Officer, Garry L.
Anselmo. The loss of the services of Mr. Anselmo likely would have an adverse
effect on the Company until a suitable replacement could be found. The services
of Mr. Anselmo are provided to Silverado pursuant to an Operating Agreement with
Tri-Con Mining Ltd. ("Tri-Con"), an affiliated company, which is 75% owned by
Mr. Anselmo. Tri-Con, operating as mining exploration and development
contractors, has contracted with Silverado to provide administrative and
management services and to carry out Silverado's field work programs. During the
three year period ended November 30, 1996, Tri-Con charges to Silverado totaled
$10,960,119. Although Silverado believes that Tri-Con has other qualified
management and operations personnel available who are familiar with Silverado's
operations and properties and who would be capable of immediately undertaking
responsibility for Silverado's operations, the loss of Mr. Anselmo's services
likely would be extremely detrimental to Silverado.
Service and Enforcement of Legal Process.
-----------------------------------------
All of Silverado's officers and directors are residents of Canada, and,
therefore, service of process upon Silverado's officers and directors may be
difficult to effect within the United States. See "Form 10-K - Directors and
Executive Officers." Furthermore, because some of the assets of Silverado and
its subsidiaries are located outside of the United States, attempts by creditors
to collect on any judgment obtained in the United States against Silverado may
be limited to the realizable value of Silverado's assets within the United
States. There is doubt as to whether legal actions for civil liabilities under
the Securities Act of 1933 or the 1934 Act may be instituted in Canada. Subject
to certain time limitations, Canadian courts may enforce foreign final executory
judgments for liquidated amounts in civil matters obtained after due trial
before a court of competent jurisdiction (including competent jurisdiction
according to the rules of private international law currently prevailing in
Canada) which enforces similar Canadian judgments, provided that due service of
process has been effected, that such judgments are not contrary to Canada's law,
public policy or sovereignty and do not conflict with any other valid judgments
in the same matter between the same parties, and that an action between the same
parties in the same matter was not pending in any Canadian court at the time
suit was instituted in the foreign court.
-8-
<PAGE>
Selected Financial Data
A summary of selected financial information about Silverado is set forth below.
The summary set forth below is qualified by reference to Silverado's
consolidated Financial Statements, including the notes thereto, incorporated by
reference into this Prospectus.
<TABLE>
<CAPTION>
1st Quarter Years Ended as at November 30,
1997
Statement of Operations (Unaudited) 1996 1995 1994 1993 1992 (1)
------- ------- ------- ------- ------- -------
(In 000's except per share data)
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 58 $ 298 $ 3,053 $ 1,516 $ 0 $ 0
(Loss) Before Extraordinary Items ($1,609) ($4,330) ($4,095) ($3,120) ($1,152) ($1,050)
Extraordinary Item (2) $ 0 $ 0 $ 0 $ 0 $ 1,295 $ 0
Net Earnings (Loss) ($1,608) ($4,330) ($4,095) ($3,120) $ 143 ($1,050)
Earnings (Loss) Per Share (3)(4) ($ 0.03) ($ 0.09) ($ 0.11) ($ 0.09) $ 0.01 ($ 0.05)
</TABLE>
<TABLE>
<CAPTION>
1st Quarter As at November 30,
1997
Balance Sheet Data (Unaudited) 1996 1995 1994 1993 1992 (1)
------- ------- ------- ------- ------- -------
(In 000's except per share data)
<S> <C> <C> <C> <C> <C> <C>
Total Assets $17,595 $18,811 $15,140 $16,496 $15,929 $ 8,420
Gold Inventory (5) $ 191 $ 213 $ 389 $ 2,028 $ 446 $ 5
Long Term Obligations $ 2,092 $ 2,092 $ 2,395 $ 2,543 $ 0 $ 2,934
</TABLE>
(1) In 1993 Silverado changed its reporting currency and currency of
measurement to U.S. dollars and restated the 1990 through 1992 amounts to
U.S. dollars. See Note 1(b) to Consolidated Financial Statements.
(2) During fiscal 1993 Silverado recognized a gain of $1,294,614 on forgiveness
of debt as an extraordinary item.
(3) Loss per share before extraordinary item for 1993 was $(0.04).
(4) No dividends have been paid by Silverado during the past five years.
(5) Gold inventory is valued at the lower of weighted average cost and
estimated net realizable value.
-9-
<PAGE>
Historical Per Share Data
-------------------------
SILVERADO KINTANA
Fiscal Year Fiscal Year
ended ended
Nov.30, 1996 Nov. 30, 1996
------------ -------------
Book Value per
share at period end $0.28 ($0.29)
Cash dividends
declared per share $0.00 $0.00
Income (loss) per
share ($0.09) $0.01
The last sale price of Silverado Common Stock reported by Nasdaq on March
6, 1997, which was the date of the Agreement, and on March 5, 1997, which was
the last trading date preceding the date of the Agreement, was $0.375 and $0.375
per share, respectively.
As of March 31, 1997, the percent of outstanding shares of Silverado Common
Stock and Kintana common stock held by directors, executive officers and
affiliates of the respective companies was 5.8% and 29.2%, respectively. No vote
of Silverado shareholders is required to approve the transaction by Silverado.
Approval by a three quarters vote of the votes cast is required to approve the
sale of the assets by Kintana, and approval of a majority of the votes cast is
required to approve the winding up of Kintana.
Description of Silverado Securities
-----------------------------------
The Shares to be registered consist of Silverado no par value Common
Stock. Silverado's Common Stock is, and the shares offered hereby are eligible
to be, quoted on Nasdaq.
Authorized Capital. As of the date of this Prospectus, Silverado is
authorized to issue 75,000,000 shares of no par value Common Stock. The Company
is requesting shareholder approval at its Annual General Meeting, scheduled for
May 21, 1997, for an increase in its authorized capital to 100,000,000 shares.
No shares of Preferred Stock are authorized. No holder of any shares of Common
Stock has any preemptive right to subscribe for any of Silverado's securities.
Upon dissolution, liquidation or winding up of Silverado, the assets will be
divided pro rata on a share-for-share basis among holders of all outstanding
shares of Common Stock.
No Cumulative Voting. Each holder of Common Stock is entitled to one vote
per share with respect to all matters that are required by law to be submitted
to shareholders. Shareholders are not entitled to cumulative voting in the
election of directors. Accordingly, the holders of more than 50% of the shares
voting for the election of directors can elect 100% of the directors if they
choose to do so;
-10-
<PAGE>
and, in such event, the holders of the remaining shares voting for the election
of the directors will be unable to elect any person or persons to the Board of
Directors.
Issued, Outstanding and Reserved. As of April 7, 1997, Silverado had
64,071,493 shares of Common Stock issued and outstanding, and had reserved an
additional 10,254,750 shares of Common Stock, including 1,100,000 shares for
this proposed transaction, for issuance on exercise or conversion of outstanding
options and other convertible securities.
Registrar and Transfer Agent. The Registrar and Transfer Agent for
Silverado's Common Stock is Montreal Trust Company, 510 Burrard Street,
Vancouver, British Columbia, Canada V6C 3B9.
Provisions of Canadian Laws Affecting U.S. Shareholders
-------------------------------------------------------
There are no limitations on the right of nonresident or foreign owners to
hold or vote the Shares imposed by Canadian law or by the charter or other
constituent document of Silverado.
The Canadian Income Tax Act (the "Tax Act") provides in subsection 212(2)
that dividends and other distributions deemed to be dividends paid or deemed to
be paid by a Canadian resident company to a non-resident person shall be subject
to a non-resident withholding tax of 25 percent on the gross amount of the
dividend. Subject to certain exceptions, paragraph 212(1)(b) of the Tax Act
similarly imposes a 25 percent withholding tax on gross amount of interest paid
by a Canadian resident to a non-resident person.
Subsection 115(1) and Subsection 2(3) of the Tax Act provide that a
non-resident person is subject to tax at the rates generally applicable to
persons resident in Canada on any "Taxable capital gain" arising on the
disposition of shares that are listed on a prescribed stock exchange if:
(i) such non-resident, together with persons with whom he does not deal at
arm's length, has held 25% or more of the outstanding shares of any
class of stock of the corporation that issued the shares at any time
during the five years preceding such disposition; or
(ii) the shares disposed of were used by such non-resident in carrying on a
business in Canada.
Provisions in the Tax Act relating to dividend and interest payments by
Canadian residents to persons resident in the United States are subject to the
1980 Canada - United States Income Tax Convention (the "Convention"), as amended
by protocols signed on June 14, 1983, March 28, 1984, and March 17, 1995.
Article X of the Convention provides that the rate of non- resident withholding
tax on dividends shall not exceed five percent of the gross amount of the
dividends where the non-resident who is the beneficial owner of the shares is a
corporation which owns at least 10 percent of the voting stock of the
corporation paying the dividend. In other cases, the rate of non-resident
withholding tax shall not exceed 15 percent.
-11-
<PAGE>
The reduced rates of non resident withholding relating to dividends and
interest provided by the Convention do not apply if the recipient carries on
business or provides independent personal services through a permanent
establishment situated in Canada, and the share holding or debt claim is
effectively connected with that permanent establishment. In that case, the
dividends and interest as the case may be, are subject to tax at the rates
generally applicable to persons resident in Canada.
Article XIII of the Convention provides that gains realized by a United
States resident on the sale of shares such as those of the Company may be taxed
in both Canada and the United States. However, taxes paid in Canada by a United
States resident would, subject to certain limitations, be eligible for foreign
tax credit treatment in the United States, thereby minimizing the element of
double taxation.
Except as described above, there are no government laws, decrees,
regulations or treaties that materially restrict the export or import of
capital, including foreign exchange controls, or which impose taxes, including
withholding provisions, to which United States shareholders of Silverado are
subject.
Restrictions on Resale of the Shares
------------------------------------
The shares of Silverado Common Stock to be issued to the shareholders of
Kintana pursuant to the Agreement are being registered under the Securities Act
pursuant to the Registration Statement of which this Prospectus is a part.
However, because some shareholders of Kintana may be affiliates of Kintana,
under Rule 145 of the Securities Act they may be deemed to be "underwriters" of
Silverado Common Stock issued in this transaction. Therefore, such persons will
not be able to resell the Silverado Common Stock received by them unless the
Silverado Common Stock is registered for resale under the Securities Act, is
sold in compliance with an exemption from the registration requirements of the
Securities Act or is sold in compliance with certain of the provisions of Rule
144 under the Securities Act.
Pursuant to Rule 145 under the Securities Act, the sale of Silverado Common
Stock acquired in this transaction by shareholders who are affiliates of Kintana
will be subject to certain restrictions. Such persons may sell Silverado Common
Stock only if: (i) Silverado has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding twelve months; (ii)
the Silverado Common Stock is sold in a "broker's transaction," which is defined
in Rule 144 under the Securities Act as a sale in which (a) the seller does not
solicit or arrange for orders to buy the securities, (b) the seller does not
make any payment other than to the broker, (c) the broker does no more than
execute the order and receive a nominal commission and (d) the broker does not
solicit customer orders to buy securities; and (iii) such sale and all other
sales made by such person within the preceding three months do not collectively
exceed the greater of (x) 1% of the outstanding shares of Silverado Common Stock
and (y) the average weekly trading volume of Silverado Common Stock on Nasdaq
during the four-week period preceding the sale.
The Silverado shares to be issued to Kintana shareholders pursuant to the
Agreement will be issued under the British Columbia Securities Act (the "B.C.
Act") in reliance on registration and
-12-
<PAGE>
prospectus exemptions provided under the B.C. Act. Kintana shareholders wishing
to sell their Silverado shares will be subject to the following restrictions
imposed by the B.C. Act:
(i) if the seller is an insider of Silverado, other than a director or
senior officer of Silverado, the seller's insider report filings are
up to date;
(ii) if the seller is a director of a senior officer of Silverado, the
seller's insider report filings are up to date and Silverado is up to
date in its continuous disclosure filing requirements under the B.C.
Act;
(iii)the trade by the seller is not a distribution from the holdings of a
control person (as those terms are defined in the B.C. Act);
(iv) no unusual effort is made to prepare the market or create a demand for
the security; and
(v) no extraordinary commission or other consideration is paid by or on
behalf of the seller in respect of the trade.
Except for the differences described above, there are no material differences
between the rights of the holders of the Shares offered hereby to the Kintana
shareholders and the rights of other Silverado shareholders.
Price Range of Common Stock
---------------------------
Silverado's Common Stock is traded in the over-the-counter market and
quoted on the Nasdaq Small-Cap Market under the symbol "GOLDF". (NOTE: Prior to
August, 1995, the Company traded on the Nasdaq Small-Cap Market under the symbol
"SLVRF".) The following table sets forth, for each of the periods shown, the
high and low bid sales prices for Silverado's Common Stock, as reported by
Nasdaq. The prices shown represent inter-dealer quotations without retail
markups, markdowns, or commissions and do not necessarily represent actual
transactions.
Quarter Ended High Bid Low Bid
------------- -------- -------
February 28, 1995 $ .94 $.63
May 31, 1995 $ 1.00 $.63
August 31, 1995 $ 1.00 $.69
November 30, 1995 $ .88 $.47
Quarter Ended High Bid Low Bid
------------- -------- -------
February 29, 1996 $ .88 $ .38
May 31, 1996 $ .75 $ .47
August 31, 1996 $ .66 $ .41
November 30, 1996 $ .72 $ .50
Quarter Ended High Bid Low Bid
------------- -------- -------
February 28, 1997 $ .66 $ .34
-13-
<PAGE>
Experts
-------
The consolidated balance sheets of Silverado Mines Ltd. as at November 30,
1996 and 1995, and the related consolidated statements of operations and
accumulated deficit, cash flows, and changes in share capital and capital
surplus for each of the years in the three-year period ended November 30, 1996,
which appear in Silverado Mines Ltd.'s Annual Report on Form 10-K for the year
ended November 30, 1996, have been incorporated by reference herein in reliance
upon the report, dated January 17, 1997, of KPMG, independent auditors,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
Indemnification of Directors and Others for Securities Act Liabilities.
-----------------------------------------------------------------------
The Company Act of the Province of British Columbia, Canada ("Company
Act"), provides that a company may, with the approval of the court, indemnify a
director or former director of a company against all costs, charges and expenses
in any action to which he or she is made a party by reason of being or having
been a director. Part 15 of Silverado's Articles (a governing document similar
to the Bylaws of a U.S. corporation) also provides for indemnification of
Silverado's directors, officers, employees and agents, subject always to the
Company Act, in certain circumstances.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling Silverado
pursuant to the foregoing provisions, Silverado has been informed that in the
opinion of the Securities Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
INFORMATION CONCERNING KINTANA
------------------------------
Kintana was incorporated on September 20, 1982 as Can-Ex Resources Ltd.
under the Company Act of British Columbia. Effective December 14, 1990, the
company changed its name to Kintana Resources Ltd. Kintana was formed for the
purpose of acquiring, exploring and developing mineral properties. From its
inception until its stock ceased trading in June 1994, Kintana acquired,
explored and developed properties in both the U.S. and Canada. Ultimately,
Kintana was unable to raise sufficient capital to continue its projects. At that
time, it ceased filing timely financial statements and as a direct result, it
received a "Cease Trade Order" from the B.C. Securities Commission in June 1994.
Those financial statements have since been prepared by management in accordance
with Canadian generally accepted accounting principles and audited by KPMG.
Those statements demonstrate that Kintana does not, in fact, have the fiscal
resources to maintain or develop any of its properties, or to fund any
operational expenses. It's primary asset is the Eagle Creek Gold Property near
Fairbanks, Alaska, which has been recently valued at US $565,000 by an
independent geologist, and which it contemplates conveying to Silverado in
exchange for 1,100,000 shares of Silverado Common Stock.
-14-
<PAGE>
Risk Factors
------------
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following factors in
evaluating Kintana and its business.
Kintana's audited financial statements are included herein as part of the
"Kintana Information Circular", and comprise the consolidated balance sheets of
Kintana as at November 30, 1996, 1995 and 1994 and the consolidated statements
of operations and deficit, deferred exploration and development expenditures and
changes in financial position for the years then ended. These financial
statements have been prepared in accordance with Canadian generally accepted
accounting principles, consistently applied. The ability of Kintana to continue
any operations is dependent upon obtaining capital to fund its existing
liabilities, its new liabilities as they come due, and to fund any operations on
its properties. There is no commitment for such capital at this time.
Description of Kintana Securities
---------------------------------
Until June 1994, Kintana's common stock was listed for trading on the
Vancouver Stock Exchange, at which time the company was delisted from that
exchange. No trading in Kintana shares has occurred since June 29, 1994. As of
March 20, 1997, there were 54 holders of record of Kintana's common stock. No
dividends have ever been declared on Kintana's common stock. There are no
restrictions in Kintana's Articles that currently limit Kintana's ability to pay
dividends on its common stock or that may limit future payment of dividends.
Kintana intends to liquidate and dissolve if the Agreement and dissolution are
approved by the shareholders of Kintana at the Extraordinary General Meeting
scheduled for May 21, 1997.
-15-
<PAGE>
Selected Financial Data
(Prepared in accordance with Canadian generally accepted accounting principles)
Statement of Operations (In Canadian Dollars)
- ---------------------------------------------
Years Ended November 30,
------------------------
1996 1995 1994
---------- ---------- ----------
Revenue $ -- $ -- $ --
(Loss) Before Extraordinary Item $ (15,159) $ (17,175) $ (22,435)
Extraordinary Item 1,2 $ 22,728 $ -- $ (387,258)
Net Earnings (Loss) $ 7,569 $ (17,175) $ (409,693)
Earnings (Loss) Per Share $ 0.01 $ (0.01) $ (0.27)
(1) During fiscal 1994, Kintana recognized a loss of ($387,258) on the write
down of mineral properties and development.
(2) During fiscal 1996 Kintana recognized a gain of $22,728 on settlement of
debt.
Balance Sheet Data (In Canadian Dollars)
- ----------------------------------------
As at November 30,
------------------
1996 1995 1994
---------- ---------- ----------
Total Assets $ 53,805 $ 34,990 $ 18,010
Total Liabilities $ 493,879 $ 482,633 $ 448,478
Deficiency in Assets $ (440,074) $ (447,643) $ (430,468)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
If approved by the shareholders of Kintana, all assets of Kintana will be
distributed to its shareholders and the affairs of the company will be wound up.
Kintana has been essentially dormant since its stock ceased trading in June of
1994 by order of the British Columbia Securities Commission. It has no revenues,
no tangible assets other than the Eagle Creek property, and no liquid assets.
Kintana's management believes if this transaction is not approved, the Company
will be unable to maintain its
-16-
<PAGE>
options on the subject property causing it to lose the property and become
completely insolvent. Because Kintana has no cash, Tri-Con Mining Ltd., an
affiliated company, has paid the required annual amounts of $10,000 to keep the
property options in good standing for the past three years, and prior to that,
they were made by the American Copper and Nickel Company, a joint-venture
partner of Silverado. It is unlikely these affiliates will continue to make
these payments on behalf of Kintana.
TERMS OF THE TRANSACTION
------------------------
Description of Transaction
- --------------------------
On March 6, 1997, Kintana and Silverado entered into a Purchase Agreement
(the "Agreement", which Agreement is incorporated herein by reference), pursuant
to which, among other things, Silverado will issue to Kintana 1,100,000 shares
of its Common Stock in exchange for all of Kintana's assets and liabilities,
including all right, title and interest in the Eagle Creek Property located near
Fairbanks, Alaska, and certain accounts payable aggregating approximately
$173,300. Under the Agreement, Kintana will distribute the Silverado shares to
its stockholders and will dissolve. Prior to the execution of the Agreement, the
Eagle Creek Property was held by Can-Ex Resources (US), Inc., ("Can-Ex") a
wholly-owned subsidiary of Kintana. On February 4, 1997 and in contemplation of
this transaction, Can-Ex transferred all of its assets and liabilities,
including the Eagle Creek Property, to Kintana. The value of the consideration
to be paid by Silverado under the Agreement was based upon the net of the fair
market value of the assets and liabilities of Kintana. The primary factor
considered by the parties in determining the number of shares of Silverado to be
issued as consideration for the Agreement was the market price of the Silverado
shares. For purposes of the transaction, the Silverado shares were valued by the
Silverado Board of Directors at $0.375 per share.
Pursuant to a resolution of the Board of Directors of Kintana, the
1,100,000 shares of Silverado stock will be distributed to shareholders of
Kintana on a pro rata basis. Shareholders of Kintana will receive .74 shares of
Silverado Common Stock for each share of Kintana common stock held. Following
the effective date of the Registration Statement of which this Prospectus is a
part, approval of the Agreement and of the Board of Directors' resolution
providing for distribution of these shares to Kintana shareholders in
liquidation of Kintana will be submitted to the Kintana shareholders at an
Extraordinary General Meeting of Shareholders to be held on Wednesday, May 21,
1997. Kintana shareholders will not be required to give up any shares of Kintana
in order to receive the Silverado shares. Kintana shareholders have dissenters'
rights in connection with this transaction pursuant to which a shareholder is
entitled to be paid the fair value of his shares if the holder dissents to the
Agreement, the resolution is passed by the shareholders and Kintana proceeds
with the Agreement (see "Kintana Offering Circular"). No federal, state or
provincial regulatory requirements (other than those regarding issuance of
securities) must be complied with, nor approvals obtained, to complete this
transaction.
The Eagle Creek Property consists of 77 State mineral claims with a total
area of 4.8 square miles, located 11 miles north of Fairbanks, Alaska. The
property was formerly a producer of antimony and is situated in a 20 mile long
belt of lode and placer gold deposits. It is currently being explored as a
-17-
<PAGE>
gold prospect. Silverado acquired the property in 1976. From 1984 to 1988
Silverado explored several geochemical/geophysical targets and discovered gold
bearing veins and disseminated gold mineralization of economic interest. The
property was assigned to Can-Ex on August 4, 1989 for a retained 15 percent net
profits interest from production to a maximum of $5,000,000.
Valuation of Property
- ---------------------
Silverado has valued the Eagle Creek Property at $565,000 based upon the
Valuation of the Eagle Creek Mineral Property, Fairbanks Mining District, Alaska
dated March 21, 1994, prepared by Giles R. Peatfield, Ph.D., P.Eng., and as
updated by Dr. Peatfield's letter dated May 13, 1996 (the ("Peatfield
Valuation"). Dr. Peatfield is a consulting Geological Engineer, is a graduate of
the University of British Columbia (B.A. Science, Geological Engineering, 1966)
and of Queen's University at Kingston (Ph.D., 1978). He is a Fellow of the
Geological Association of Canada, and is a Member of the Canadian Institute of
Mining and Metallurgy, the Association of Professional Engineers and
Geoscientists of British Columbia. Dr. Peatfield has practiced as an exploration
geologist for more than 25 years, both as an employee of a major mining company
and as an independent consultant. Dr. Peatfield has no interest, direct or
indirect, in the Eagle Creek Property or in the securities of either Silverado
or Kintana.
In March 1994 Silverado retained Dr. Peatfield to prepare an independent
valuation (the "1994 Valuation") of the Eagle Creek Property. Dr. Peatfield
updated the 1994 Valuation by letter dated May 13, 1996 (the "1996 Valuation").
The 1994 and 1996 Valuations are collectively referred to as the "Valuation".
The 1996 Valuation revised the valuation estimates stated in the 1994 Valuation
based on the following developments since March 1994: (i) the region in which
the property is located has experienced a marked upswing in exploration
activity; (ii) a significant gold discovery had been reported within 12
kilometers of the Eagle Creek Property; (iii) an aeromagnetic map has been
released showing magnetic trends converging on the Eagle Creek Property; and
(iv) property interests along the northeasterly aeromagnetic trend have been
acquired by Placer Dome U.S. Inc. The developments resulted in Dr. Peatfield's
1996 Valuation reflecting a valuation almost double the amounts stated in the
1994 Valuation.
Dr. Peatfield's Valuation was intended to be used to establish Fair Market
Value. For purposes of the Valuation, Fair Market Value means the highest price,
expressed in money terms, which would be obtainable in an open and unrestricted
market between knowledgeable, prudent and willing parties dealing at arm's
length, who are fully informed and under no compulsion to deal. Based on a
process of averaging the results of a number of separate valuations, it is the
opinion of Dr. Peatfield that the Fair Market Value of the Eagle Creek Property
is in the range of $325,000 to $565,000.
Dr. Peatfield's Valuation stated that the valuation of mineral properties
which do not contain known, clearly defined and demonstrably exploitable
reserves is a somewhat subjective process. There are numerous methods in common
use for such valuation, only some of which can logically be considered to be
valid. In the case of Dr. Peatfield's Valuation, a number of methods have been
used and results averaged to arrive at a final value, with a reasonable range of
values calculated.
-18-
<PAGE>
The following methods have been used in the Valuation:
Kilburn - Assigns a dollar value to a mineral property which does not
contain defined exploitable reserves. A "base cost" is assigned to the
property, which is the cost to explore for and stake a raw prospect, and
then characteristics for the property are defined, ranked and assigned a
value.
Option Terms - Involves estimating the present value of a hypothetical
stream of option payments factored by the probability of these payments
actually being made.
Target Deposit Analysis - Postulates what type of deposits might be found
on the property, assuming a net present value range for deposits of this
type, and assigns probabilities for the discovery of each deposit type on
this property.
Past Exploration Expenditures - Makes subjective judgments as to whether
the past work has been good value for money and tended to enhance or
detract from the ongoing exploration potential of the ground.
Recommended Next-Phase Program - Assumes there is some probability that the
work will progress to subsequent stages, and therefore the property has at
least this minimum value.
Staking and Examination Costs - Assumes that the worth of a property can be
measured by what one might reasonably pay to acquire the ground were it
open for staking, along with the cost of regional prospecting or
reconnaissance and an initial examination of the claims.
Dr. Peatfield's Valuation identified a lower limit and an upper limit for
each of these valuation methods. Dr. Peatfield then averaged the lower limit and
upper numbers and arrived at the range of $345,000 to $565,000 (using rounded
numbers) for the Fair Market Value of the Eagle Creek Property. The following
summarized Dr. Peatfield's estimates (all dollars are in U.S. Dollar amounts):
Valuation Method Lower Limit ($) Upper Limit ($)
---------------- --------------- ---------------
Kilburn 460,000 690,000
Option Terms 350,500 650,000
Target Deposit 300,000 600,000
Past Exploration 416,000 624,000
Recommended Work 280,000 420,000
Staking Costs 264,000 396,000
Average Values 345,000 563,333
Rounded Values 345,000 565,000
-19-
<PAGE>
After Dr. Peatfield's Valuation identified this range, Silverado made the
determination to pay $565,000 for the Eagle Creek Property.
Except for the payment by Tri-Con Mining Ltd., an affiliated company to
Silverado and Kintana, of the $10,000 annual fee on the Eagle Creek Property,
during the last three years there have been no transactions between Silverado
and its affiliates and Kintana and its affiliates. Silverado and Kintana have
two common directors, Garry L. Anselmo and James F. Dixon.
Silverado desires to re-acquire the Eagle Creek Property in order to
conduct activity on the site. The Eagle Creek Property is closely proximate to a
number of properties which Silverado is presently exploring and developing.
Given Silverado's present focus on the Fairbanks area, the Eagle Creek Property
would make an ideal property for Silverado to develop further in conjunction
with it's other activities in the immediate area. It should be noted that
Silverado originally owned the rights to the Eagle Creek options, but conveyed
them to Can-Ex Resources Inc., a wholly owned subsidiary of Kintana, in August
of 1989 in return for payment of 15% of any net profits Can-Ex might receive. At
that time, Silverado was focusing its primary efforts on its Nolan Property in
arctic Alaska, while Can-Ex had expectations of developing the Eagle Creek
Property forthwith.
To accomplish the reacquisition of Eagle Creek, Silverado will issue to
Kintana 1,100,000 shares of its Common Stock in exchange for all of Kintana's
assets and liabilities, including all right, title and interest in the Eagle
Creek Property, and certain accounts payable aggregating approximately $173,300.
Kintana, which will then possess nothing other than these Silverado shares, will
then distribute the shares to its shareholders and will dissolve.
Accounting Treatment
- --------------------
This transaction will be treated as a direct purchase of assets and
liabilities by Silverado from Kintana, which is considered to be a "related
party" by virtue of having two common directors. Accordingly, Silverado will
book the Eagle Creek Property at Kintana's asset value of (Cdn) $53,805, assume
responsibility for Kintana's accrued liabilities, and debit retained earnings
for the difference. (See "Kintana Information Circular".)
U.S. Federal Income Tax Consequences of the Transaction
- -------------------------------------------------------
Under Section 1032 of the Internal Revenue Code of 1986, as amended (the
"Code") Silverado will not recognize any gain or loss upon the issuance of the
1,100,000 shares of Silverado common stock to Kintana. Silverado agreed to issue
the shares as consideration under the Agreement.
Kintana will be required to file a U.S. Federal and Alaska State income tax
return to report the disposition of Eagle Creek. Kintana will realize a gain or
loss on the transaction based upon the Fair Market Value of the property or
shares, whichever best reflects value, and should a gain be realized it will be
taxed within the United States, as Kintana has no loss carry-forwards for U.S.
Federal and Alaska State income tax purposes.
-20-
<PAGE>
Amounts received by a U.S. citizen or a U.S. resident holder of Kintana
shares in a distribution and complete liquidation of Kintana would, generally,
be treated as received in full payment, in exchange for their stock in Kintana.
U.S. holders of Kintana shares should seek independent professional tax advice
as to their tax consequence.
A Canadian resident who is not a U.S. citizen or a U.S. resident,
generally, would have no U.S. tax consequences upon the receipt of Silverado
shares in the liquidation of Kintana.
The basis of the Silverado shares in the hands of the Kintana shareholders
will equal the fair market value of the shares at the time of issuance.
APPROVAL OF THE TRANSACTION
---------------------------
The shareholders of Kintana will be asked to approve the Agreement at the
Extraordinary General Meeting of Shareholders to be held at Kintana's offices,
Suite 505, 1111 West Georgia Street, Vancouver, British Columbia, on Wednesday
May 21, 1997, at 10:00 a.m. (Vancouver time).
The directors of Kintana approved the Agreement by unanimous consent
resolutions dated March 10, 1997. The Kintana shareholders have dissenters
rights of appraisal with respect to the Agreement and related transaction, as
described in the Kintana Information Circular. Shareholders of record of Kintana
on March 31, 1997, are entitled to vote on the Agreement. No votes were required
by the Silverado shareholders with respect to the Agreement.
-21-
<PAGE>
KINTANA RESOURCES LTD.
Suite 505 - 1111 West Georgia Street
Vancouver, British Columbia V6E 4M3
Telephone: (604) 689-1535
Notice of Extraordinary General Meeting of Members
--------------------------------------------------
to be held on May 21, 1997
--------------------------
Notice is hereby given that an extraordinary general meeting (the
"Meeting") of the members of Kintana Resources Ltd. (the "Company") will be held
at the Company's offices located at Suite 505 - 1111 West Georgia Street,
Vancouver, British Columbia on Wednesday, May 21, 1997, at the hour of 10:00
a.m. (Vancouver time) for the following purposes:
(a) To consider and, if deemed advisable, to approve:
1. as a special resolution, the sale by the Company of substantially all
of its assets, including in particular, the Company's interest in the
Eagle Creek Property, to Silverado Mines Ltd., under the terms of a
Purchase Agreement dated March 6, 1997; and
2. as an ordinary resolution, the dissolution and striking of the Company
from the British Columbia register of companies.
(b) To transact such other business as may properly come before the Meeting or
any adjournment or adjournments thereof.
The specific details of the matters proposed to be put before the Meeting
are set forth in the accompanying Information Circular dated April 15, 1997.
Take Notice that, pursuant to the Company Act (British Columbia) (the
"Company Act"), you may until 10:00 a.m. (Vancouver time) on May 19, 1997, give
a notice of dissent by registered mail addressed to the Company at Suite 505 -
1111 West Georgia Street, Vancouver, B.C., V6E 4M3, with respect to the special
resolution relating to the proposed sale of assets under the Purchase Agreement.
As a result of giving a notice of dissent, you may, on receiving a notice of
intention to act under section 231 of the Company Act, require the Company to
purchase all your shares of the Company in respect of which notice of dissent is
given. This right to dissent is described in greater detail in the Information
Circular. Failure to comply strictly with the requirements specified in the
Information Circular will result in the loss of the right of dissent.
<PAGE>
The Board of Directors has fixed April 15, 1997 as the record date for
determining the Members who are entitled to vote at the Meeting. A registered
holder of common shares of the Company who is unable to attend the Meeting in
person and who wishes to ensure that such holder's common shares will be voted
at the Meeting, is requested to complete, sign and date the enclosed form of
Proxy and deliver it by hand, fax or by mail in accordance with the instructions
set out in the form of Proxy and in the Information Circular.
DATED at Vancouver, British Columbia this 8th day of April, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael W. Hogen
--------------------
Michael W. Hogen, Secretary
<PAGE>
KINTANA RESOURCES LTD.
INFORMATION CIRCULAR
--------------------
Solicitation of Proxies
This Information Circular is furnished in connection with the solicitation
of proxies by the Management of Kintana Resources Ltd. (the "Company") for use
at an extraordinary general meeting of the Members of the Company to be held on
May 21, 1997 (the "Meeting"), and at any adjournment thereof, at the time and
place and for the purposes set forth in the accompanying Notice of Meeting.
While it is expected that the solicitation will be primarily by mail, proxies
may be solicited personally or by telephone by employees of the Company at
nominal cost. All costs of solicitation by Management will be borne by the
Company.
The Company has also made arrangements with Canadian brokerage houses and
other intermediaries to send proxy materials at the Company's expense to
unregistered members (beneficial shareholders) of the Company who have advised
their brokers that they wish to receive such material.
Appointment and Revocation of Proxies
The persons named as proxyholders in the accompanying form of proxy are
directors or officers of the Company and were designated by the Management of
the Company. A member wishing to appoint some other person (who need not be a
member) to represent him or her at the Meeting has the right to do so, either by
striking out the names of those persons named in the accompanying form of proxy
and inserting the desired person's name in the blank space provided in the form
of proxy or by completing another form of proxy. A proxy to be valid must be
deposited, together with the power of attorney or other authority, if any, under
which it is signed or a notarially certified copy thereof, at least 48 hours
(excluding Saturdays Sundays and holidays) before the time for holding the
Meeting, or adjournment thereof, at the office of the Company's Transfer Agent
and Registrar, Montreal Trust Company of Canada, 510 Burrard Street, Vancouver,
British Columbia, V6C 3B9.
A member who has given a proxy may revoke it by an instrument in writing
executed by the member or by his or her attorney authorized in writing or, where
the member is a corporation, by a duly authorized officer or attorney of that
corporation, and delivered to the said office of Montreal Trust Company, at any
time up to and including the last business day preceding the day of the Meeting,
or any adjournment thereof, or to the Chairman of the Meeting on the day of the
Meeting, or in any other manner permitted by law. A revocation of a proxy does
not affect any matter on which a vote has been taken prior to the revocation.
Advice to Beneficial Shareholders
Members who do not hold their shares in their own name (referred to herein
as "Beneficial Shareholders") are advised that only proxies from members of
record can be recognized and voted upon at the Meeting. Beneficial Shareholders
who complete and return a proxy must indicate thereon the person (usually a
brokerage house) who holds their shares as a registered member. Every
intermediary (broker)
<PAGE>
has its own mailing procedure and provides its own return instructions, which
should be carefully followed. The form of proxy supplied to Beneficial
Shareholders is identical to that provided to registered shareholders. However,
its purpose is limited to instructing the registered member (intermediary) how
to vote on behalf of the Beneficial Shareholder.
All references to shareholders or members in this Information Circular and
the accompanying form of proxy and appended Notice of Meeting are to members of
record unless specifically stated otherwise.
Voting of Proxies
Shares represented by properly executed proxies in favour of persons
designated in the enclosed form of proxy will be voted for the matters to be
transacted at the Meeting (as stated herein and in the Notice of Meeting), or
withheld from voting or voted against, if so indicated on the form of proxy.
If the instructions contained in a form of proxy are certain, the shares
represented by the proxy shall be voted on any ballot and, where a choice is
specified, in accordance with the specification so made. If no choice is
specified with respect to any matter referred to herein, it is intended on a
ballot to vote such shares in favour of each such matter.
The enclosed form of proxy when properly completed and delivered and not
revoked confers discretionary authority upon the person appointed proxy
thereunder to vote with respect to amendments or variations to matters referred
to herein and with respect to other matters which may properly come before the
Meeting. In the event amendments or variations to matters referred to herein are
properly brought before the Meeting, or any further or other business is
properly brought before the Meeting, it is the intention of the persons
designated in the enclosed form of proxy to vote in accordance with their best
judgement on such matters or business. At the time of the printing of this
Information Circular, the Management of the Company knows of no such amendment,
variation or other matter which may be presented at the Meeting.
Voting Securities And Principal Holders Thereof
The voting securities of the Company are entitled to one vote each, and the
number outstanding is 1,411,148 common shares. Only members of record at the
close of business on April 15, 1997 who either personally attend the Meeting or
who have completed and delivered a form of proxy in the manner and subject to
the provisions described herein will be entitled to vote or to have their shares
voted at the Meeting.
The presence in person or by proxy of at least two persons entitled to vote
and representing not less than 5% of the issued and outstanding shares is
necessary to convene the Meeting. Each ordinary resolution that will be placed
before the Meeting will require for its approval a simple majority of the votes
cast in respect of the resolution. Each special resolution that will be placed
before the Meeting will require for its approval a majority of not less than
three-quarters of the votes cast by members of the Company, in person or by
proxy, in respect of the resolution.
To the knowledge of the directors and senior officers of the Company, only
the following persons beneficially own, directly or indirectly, or exercise
control or direction over, voting securities carrying more than 10% of the
voting rights attached to all outstanding common shares of the Company.
<PAGE>
Percentage of
Number of Outstanding
Name & Address Voting Securities Voting Securities
- -------------- ----------------- -----------------
Tri-Con Mining Ltd. (1) 180,000 12.75%
#505 - 1111 West Georgia Street
Vancouver, BC V6E 4M3
(1) Tri-Con Mining Ltd. ("Tri-Con") is a private company, 75% of the shares of
which are held by Mr. Garry Anselmo. Mr. Anselmo is a director and
President of both the Company and Tri-Con.
Statement of Executive Compensation
1. Compensation of Executive Officers
----------------------------------
There is only one executive officer of the Company, namely Garry L.
Anselmo, the President and Chief Executive Officer. No direct cash compensation
has been paid to the executive officer to date and it is not anticipated that
any will be paid during the current fiscal year.
The following table, presented in accordance with the regulations to the
Securities Act (British Columbia), sets out all compensation awarded to, earned
by or paid to the Chief Executive Officer for the most recently completed
financial year.
Summary Compensation Table
<TABLE>
<CAPTION>
Year Annual Compensation Long Term Compensation All
Name & Principal ------------------- ---------------------- Other
Position Compensa-
Salary Bonus Other Securities Under Restricted tion ($)
($) ($) ($) Options (#) Shares ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Garry L. Anselmo 1996 $ -0- $ -0- $ -0- Nil Nil $ -0-
President & CEO
</TABLE>
There was no remuneration payment made, directly or indirectly, by the
Company pursuant to any other plan or arrangement with its executive officers or
by the Company to any of its directors for acting in their capacities as
directors of the Company and no such payments are anticipated to be made during
the current fiscal year. The Company does not have a pension plan and currently
has no plans with respect to future executive compensation.
2. Incentive Stock Options
-----------------------
The Company has not granted and there are no outstanding stock options or
other rights or securities convertible or exchangeable into common shares of the
Company.
<PAGE>
3. Compensation of Directors
-------------------------
Directors of the Company receive no fees on an annual or per meeting basis.
Interest of Insiders in Material Transactions
Other than transactions carried out in the normal course of business of the
Company, none of the directors or senior officers of the Company or any member
beneficially owning shares carrying more than ten percent of the voting rights
attached to the shares of the Company, nor an associate or affiliate of any of
the foregoing persons has since the commencement of the Company's last completed
financial year had any material interest, direct or indirect, in any
transactions which materially affected the Company or in any proposed
transaction which has or would materially affect the Company.
Interest of Certain Persons in Matters to Be Acted Upon
Other than as set forth in this Information Circular, no director or senior
officer of the Company , nor any associate or affiliate of any of the foregoing,
has any material interest, directly or indirectly, by way of beneficial
ownership of securities or otherwise, in any matter to be acted upon.
Particulars of Matters to Be Acted Upon
Description of Transaction
- --------------------------
On March 6, 1997, Kintana and Silverado entered into a Purchase Agreement
(the "Agreement", which Agreement is incorporated herein by reference), pursuant
to which, among other things, Silverado will issue to Kintana, 1,100,000 shares
of its Common Stock, in exchange for all of Kintana's assets and liabilities,
including all right, title and interest in the Eagle Creek Property located near
Fairbanks, Alaska, and certain accounts payable aggregating approximately
(Cdn)$173,300. Under the Agreement, Kintana will distribute the Silverado shares
to its stockholders and will dissolve. Prior to the execution of the Agreement,
the Eagle Creek Property was held by Can-Ex Resources (U.S.), Inc., a
wholly-owned subsidiary of Kintana ("Can-Ex"). On February 4, 1997 and in
contemplation of this transaction, Can-Ex transferred all of its assets and
liabilities, including the Eagle Creek Property, to Kintana. The value of the
consideration to be paid by Silverado under the Agreement was based upon the
difference between the fair market value of the assets and liabilities of
Kintana. The primary factor considered by the parties in determining the number
of shares of Silverado to be issued as consideration for the Agreement was the
market price of the Silverado shares. For purposes of the transaction, the
Silverado shares were valued by the Silverado Board of Directors at US$0.375 per
share.
Pursuant to a resolution of the Board of Directors of Kintana, the
1,100,000 shares of Silverado stock will be distributed to stockholders of
Kintana on a pro rata basis. Shareholders of Kintana will receive 0.74 shares of
Silverado Common Stock for each share of Kintana common stock held. Kintana
shareholders will not be required to give up any shares of Kintana in order to
receive the Silverado shares.
The Eagle Creek Property consists of 77 State mineral claims with a total
area of 4.8 square miles, located 11 miles north of Fairbanks, Alaska. The
property was formerly a producer of antimony and is situated in a 20 mile long
best of lode and placer gold deposits. It is currently being explored as a gold
<PAGE>
prospect. Silverado acquired the property in 1976. From 1984 to 1988 Silverado
explored several geochemical/geophysical targets and discovered gold bearing
veins and disseminated gold mineralization of economic interest. The property
was assigned to Can-Ex on August 4, 1989 for a retained 15 percent net profits
interest from production to a maximum of US$5,000,000.
Silverado has valued the Eagle Creek Property at US$565,000 based upon the
valuation of the Eagle Creek Mineral Property, Fairbanks Mining District, Alaska
dated March 21, 1994, prepared by Giles R. Peatfield, Ph.D., P.Eng., and as
updated by Dr. Peatfield's letter dated May 13, 1996 (the "Peatfield
Valuation"). Dr. Peatfield is a consulting Geological Engineer, is a graduate of
the University of British Columbia (B.A. Science, Geological Engineering, 1966)
and of Queen's University at Kingston (Ph.D., 1978). He is a Fellow of the
Geological Association of Canada, and is a Member of the Canadian Institute of
Mining and Metallurgy, the Association of Exploration Geochemists, and the
Association of Professional Engineers and Geoscientists of British Columbia. Dr.
Peatfield has practiced as an exploration geologist for more than 25 years, both
as an employee of a major mining company and as an independent consultant. Dr.
Peatfield has no interest, direct or indirect, in the Eagle Creek Property or in
the securities of either Silverado or Kintana.
Dr. Peatfield was selected by Tri-Con Mining Ltd. ("Tri-Con"), an affiliate of
both Silverado and Kintana as an independent engineer qualified to perform this
type of evaluation. The Peatfield Valuation was based in large part on the
recent resurgence of mining activity in the Fairbanks area. His valuation
produced a range of values from US$345,000 to US$565,000 for the Eagle Creek
Property. The amount agreed to be paid by Silverado for the Eagle Creek Property
is at the high end of that valuation range.
Except for the payment by Tri-Con of the US$10,000 annual property maintenance
fee on the Eagle Creek Property in each of the last three years, there have been
no transactions between Silverado or any of its affiliates with Kintana or any
of its affiliates.
Silverado wishes to reacquire the Eagle Creek Property in order to conduct
mineral exploration activity on the site. The Eagle Creek Property is closely
proximate to a number of properties which Silverado is presently exploring and
developing. Given Silverado's present focus on the Fairbanks area, the Eagle
Creek Property would make an ideal property for Silverado to develop further in
conjunction with its other activities in the immediate area.
Silverado and Kintana have two common directors; Mr. Garry Anselmo and Mr.
James Dixon.
Financial Statements
- --------------------
Attached to this Information Circular are the Company's consolidated
financial statements for the three year period ended November 30, 1996 together
with the auditors' report of KPMG, Chartered Accountants dated January 24, 1997.
Dissent Rights
- --------------
The proposed sale of the Eagle Creek Property gives rise to a right of
dissent under the B.C. Act (see "Rights of Dissenting Shareholders" hereunder).
If the Right of Dissent is exercised by any of the Company's members entitled so
to do, the Company would be required to purchase the dissenting members' shares
in the Company at the fair value of the shares. This could have an adverse
effect on the
<PAGE>
Company. The special resolution will, therefore, provide authority to the Board
of Directors of the Company not to proceed with the sale if, in the Board's
opinion, it is not in the best interests of the Company to do so.
The Board of Directors of the Company has unanimously approved the sale and
recommends that shareholders vote to approve the proposed sale of the Eagle
Creek Property.
RESOLUTIONS SUBMITTED TO THE MEETING
- ------------------------------------
In order to give effect to the Acquisition Agreement and business ancillary
thereto, shareholders will be asked to consider and approve the following:
1. AS A SPECIAL RESOLUTION, BE IT RESOLVED that the Property Sale
Agreement, as described in the Information Circular, and all
transactions contemplated thereunder be, subject to regulatory
approval, approved;
2. AS AN ORDINARY RESOLUTION, BE IT RESOLVED that on disposition of its
remaining assets and liabilities, the Company be dissolved pursuant to
section 282 of the Company Act (British Columbia);
Rights of Dissenting Shareholders
As indicated in the Notice of Meeting, any holder of the Company's shares
is entitled to be paid the fair value of his or her shares in accordance with
section 231 of the British Columbia Company Act (the "B.C. Act") if such holder
dissents to the Purchase Agreement, the relevant resolution is passed and the
Company proceeds with the Purchase Agreement.
A Shareholder is not entitled to dissent to the Purchase Agreement with
respect to such holder's shares if such holder votes any of those shares in
favour of the special resolution authorizing the Purchase Agreement. A brief
summary of the provisions of section 231 of the B.C. Act is set out below.
1. Section 231 of the Company Act
------------------------------
A dissenting Shareholder has until 10:00 a.m. (Vancouver time) on May 19,
1997 to give the Company a written notice of dissent pursuant to Section 231 of
the B.C. Act with respect to the special resolution authorizing the Purchase
Agreement. Any such notice must be given by registered mail and received by the
Company no later than the time and date stated above. After the relevant special
resolution is approved by the Shareholders and if the Company notifies the
dissenting Shareholder of its intention to act upon the special resolution, the
dissenting Shareholder is then required within 14 days after the Company gives
such notice, to send to the Company a written notice that such holder requires
it to purchase all of the shares in respect of which such holder has given
notice of dissent, together with the share certificate or certificates
representing those shares, whereupon the dissenting Shareholder is bound to sell
and the Company is bound to purchase those shares.
A dissenting Shareholder who has complied with the aforementioned
provisions of section 231, or the Company, may apply to the Supreme Court of
British Columbia for an order requiring such holder's shares to be purchased,
fixing the price and terms of the purchase and sale or ordering that they may be
<PAGE>
determined by arbitration, and the Court may make such order or direction as the
Court considers appropriate. There is no obligation on the Company to make
application to the Court. The dissenting Shareholder will be entitled to receive
the fair value of the Company shares held by such holder as of the day before
the date on which the special resolution to authorize the Purchase Agreement is
passed.
2. Addresses for Notice
All notices to the Company pursuant to section 231 of the B.C. Act should
be addressed to the attention of the Secretary and be sent by registered mail to
the Company at Suite 505 - 1111 West Georgia Street, Vancouver, B.C., V6E 4M3.
3. Strict Compliance with Dissent Provisions Required
The foregoing summary does not purport to provide a comprehensive statement
of the procedures to be followed by a dissenting shareholder who seeks payment
of the fair value of his Company shares. Section 231 of the B.C. Act requires
strict adherence to the procedures established therein and failure to do so may
result in the loss of all dissenters' rights. Accordingly, each shareholder who
might desire to exercise the dissenters' rights should carefully consider and
comply with the provisions of the section, the full text of which is set out in
Appendix I to this Information Circular, and consult such holder's legal
advisor.
Any notice of dissent in respect of the Purchase Agreement that is received
by the Company after 10:00 a.m. (Vancouver time) on May 19, 1997 will be
invalid.
Other Business
Management of the Company knows of no other matter to come before the
Meeting other than as set forth above and in the Notice of Meeting accompanying
this Information Circular. However, if any other matters properly come before
the Meeting, it is the intention of the persons named in the form of proxy
accompanying this Information Circular to vote the same in accordance with their
best judgment of such matters.
RECOMMENDATION OF THE DIRECTORS
The Board of Directors of the Company has reviewed the transactions
contemplated in this Information Circular, including, without limitation, the
Purchase Agreement and concluded each of them to be fair and in the best
interests of the Company and the Company's shareholders. The Board of Directors
unanimously recommends that the shareholders vote in favour of each of the
resolutions set out in this Information Circular.
<PAGE>
Approval and Certification
The contents and the sending of the Notice of the Extraordinary General
Meeting and this Information Circular have been approved by the Board of
Directors of the Company.
Dated at Vancouver, British Columbia, this 8th day of April, 1997.
CERTIFIED CORRECT ON BEHALF
OF THE BOARD OF DIRECTORS BY:
/s/ Garry L. Anselmo
--------------------
Garry L. Anselmo, Chairman
<PAGE>
Appendix I to Kintana Information Circular
- ------------------------------------------
Dissent procedure
231. (1) Where,
(a) being entitled to give notice of dissent to a resolution as
provided in section 37, 127, 150, 246, 268, 273 or 313, a member
of a company (in this Act called a "dissenting member") gives
notice of dissent;
(b) the resolution referred to in paragraph (a) is passed; and
(c) the company or its liquidator proposes to act on the authority of
the resolution referred to in paragraph (a),
the company or the liquidator shall first give to the dissenting member notice
of the intention to act and advise the dissenting member of his rights under
this section.
(2) On receiving a notice of intention to act in accordance with subsection
(1), a dissenting member is entitled to require the company to purchase all his
shares in respect of which the notice of dissent was given.
(3) The dissenting member shall exercise his right under subsection (2) by
delivering to the registered office of the company, within 14 days after the
company, or the liquidator, gives the notice of intention to act,
(a) a notice that he requires the company to purchase all his shares
referred to in subsection (2); and
(b) the share certificates representing all his shares referred to in
subsection (2);
and thereupon he is bound to sell those shares to the company and the company is
bound to purchase them.
(4) A dissenting member who has complied with subsection (3), the company,
or, if there has been an amalgamation, the amalgamated company, may apply to the
court, which may
(a) require the dissenting member to sell, and the company or the
amalgamated company to purchase, the shares in respect of which
the notice of dissent has been given;
(b) fix the price and terms of the purchase and sale, or order that
the price and terms be established by arbitration, in either case
having due regard for the rights of creditors;
(c) join in the application any other dissenting member who has
complied with subsection (3); and
(d) make consequential orders and give directions it considers
appropriate.
(5) The price to be paid to a dissenting member for his shares shall be
their fair value as of the day before the date on which the resolution referred
to in subsection (1) was passed, including any appreciation or depreciation in
anticipation of the vote on the resolution, and every dissenting member who has
complied with subsection (3) shall be paid the same price.
(6) The amalgamation or winding up of the company, or any change in its
capital, assets or liabilities resulting from the company acting on the
authority of the resolution referred to in subsection (1), shall not affect the
right of the dissenting member and the company under this section or the price
to be paid for the shares.
(7) Every dissenting member who has complied with subsection (3) may
(a) not vote, or exercise or assert any rights of a member, in
respect of the shares for which notice of dissent has been given,
other than under this section;
(b) not withdraw the requirement to purchase his shares, unless the
company consents; and
(c) until he is paid in full, exercise and assert all the rights of a
creditor of the company.
<PAGE>
(8) Where the court detennines that a person is not a dissenting member, or
is not otherwise entitled to the right provided by subsection (2), the court may
make the order, without prejudice to any acts or proceedings which the company,
its members, or any class of members may have taken during the intervening
period, it considers appropriate to remove the limitations imposed on him by
subsection (7).
(9) The relief provided by this section is not available if, subsequent to
giving his notice of dissent, the dissenting member acts inconsistently with his
dissent; but a request to withdraw the requirement to purchase his shares is not
an act inconsistent with his dissent.
(10) A notice of dissent ceases to be effective if the member giving it
consents to or votes in favour of the resolution of the company to which he is
dissenting, except where the consent or vote is given solely as a proxy holder
for a person whose proxy required an affirmative vote.
<PAGE>
KPMG Chartered Accountants
Box 10426 777 Dunsmuir Street
Vancouver, B.C. V7Y 1K3
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of Kintana Resources Ltd. as at
November 30, 1996, 1995, and 1994 and the consolidated statements of operations
and deficit, deferred exploration and development expenditures and changes in
financial position for the years then ended. 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 an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects. the financial position of the Company as at November 30,
1996, 1995 and 1994 and the results of its operations and the changes in its
financial position for the years then ended in accordance with generally
accepted accounting principles. As required by the Company Act (British
Columbia), we report that, in our opinion, these principles have been applied on
a consistent basis.
KPMG
Chartered Accountants
Vancouver, B.C.
January 24, 1997
<PAGE>
<TABLE>
KINTANA RESOURCES LTD.
CONSOLIDATED BALANCE SHEETS
November 30, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
---------- ---------- ----------
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ -- $ 29 $ 90
MINERAL PROPERTIES AND DEVELOPMENT (Note 2)
Claims and options 40,098 25,700 12,850
Deferred exploration and development expenditures 13,707 9,261 5,070
---------- ---------- ----------
53,805 34,961 17,920
---------- ---------- ----------
$ 53,805 $ 34,990 $ 18,010
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 175,221 $ 159,324 $ 151,350
Payable to related parties (Note 3(b)) 318,658 323,309 297,128
---------- ---------- ----------
493,879 482,633 448,478
DEFICIENCY IN ASSETS
Capital Stock (Note 4) 2,450,804 2,450,804 2,450,804
Deficit (2,890,878) (2,898,447) (2,881,272)
---------- ---------- ----------
(440,074) (447,643) (430,468)
---------- ---------- ----------
$ 53,805 $ 34,990 $ 18,010
========== ========== ==========
</TABLE>
Continuing operations (Note 1(a)).
See accompanying notes to consolidated financial statements.
Approved by the board:
- -------------------------------------- ---------------------------------
Director Director
<PAGE>
<TABLE>
KINTANA RESOURCES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
Years Ended November 30, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
ADMINISTRATIVE EXPENDITURES
Accounting and audit $ 8,239 $ -- $ 11,425
Foreign exchange 1,167 3,845 (24,507)
Interest and bank charges 29 8,035 19
Management services 166 5,000 30,000
Office supplies and support 5,558 -- 3,990
Reporting and investor relations -- 295 1,508
----------- ----------- -----------
15,159 17,175 22,435
Write down of mineral properties and development -- -- 387,258
Gain on settlement of debt 22,728 -- --
----------- ----------- -----------
Net income (loss) for the year 7,569 (17,175) (409,693)
Deficit at beginning of year (2,898,447) (2,881,272) (2,471,579)
----------- ----------- -----------
DEFICIT AT END OF YEAR $(2,890,878) $(2,898,447) $(2,881,272)
=========== =========== ===========
NET INCOME (LOSS) PER SHARE $ 0.01 $ (0.01) $ (0.27)
=========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements
<PAGE>
<TABLE>
KINTANA RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
Years Ended November 30, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN):
Operations:
Net income (loss) for the year $ 7,569 $ (17,175) $ (409,693)
Items not involving cash:
Write down of mineral properties and development -- -- 387,258
Gain on settlement of debt (22,728) -- --
Changes in non-cash operating working capital:
Accounts payable and accrued liabilities 38,625 7,974 (20,270)
Payable to related parties (4,651) 26,181 60,645
----------- ----------- -----------
18,815 16,980 17,940
Investments:
Mineral claims and options (14,398) (12,850) (12,850)
Deferred exploration and development expenditures (4,446) (4,191) (5,070)
----------- ----------- -----------
(18,844) (17,041) (17,920)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (29) (61) 20
Cash and cash equivalents:
Beginning of period 29 90 70
----------- ----------- -----------
End of period $ -- $ 29 $ 90
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
KINTANA RESOURCES LTD.
CONSOLIDATED STATEMENTS OF DEFERRED
EXPLORATION AND DEVELOPMENT EXPENDITURES
Years Ended November 30, 1996, 1995 and 1994
1996 1995 1994
----------- ----------- -----------
EXPLORATION AND DEVELOPMENT
Eagle Creek Property $ 4,446 $ 4,191 $ 5,070
Deferred exploration and development
at beginning of year 9,261 5,070 362,093
Write down of American Boy Property -- -- (362,093)
----------- ----------- -----------
DEFERRED EXPLORATION AND DEVELOPMENT
EXPENDITURES AT END OF YEAR $ 13,707 $ 9,261 $ 5,070
=========== =========== ===========
See accompanying notes to the consolidated financial statements.
<PAGE>
KINTANA RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1994, 1995 AND 1996
The Company was incorporated under the Company Act of British Columbia as Can-Ex
Resources Ltd. and is engaged in the exploration and development of mineral
properties. Effective December 14, 1990, the Company changed its name to Kintana
Resources Ltd.
1. Summary of Significant Accounting Policies
(a) Continuing Operations
The Company has a working capital deficiency of $493,879 and a deficiency in
assets of $440,074 at November 30, 1996. The Company's continuing operations are
dependent upon the existence of economically viable and recoverable ore reserves
in its mineral properties and the ability of the Company to obtain the necessary
capital to meet its obligations upon demand, to complete development and achieve
profitable production and sustained cash flow. Due to its failure to meet
requirements of the Vancouver Stock Exchange, the Company's shares were
suspended from trading in June, 1994.
(b) Basis of Consolidation
The consolidated financial statements include the accounts of its wholly owned
subsidiary, Can-Ex Resources (U.S.) Inc. ("Can-Ex").
(c) Mineral Properties and Development
The Company capitalizes costs of acquiring, exploring and developing mineral
claims and options, net of option payments received, until such time as the
properties are placed into production or abandoned; at that time costs are
amortized on a unit-of-production basis or written off.
The carrying value of mineral properties and development represents costs
incurred to date and does not necessarily reflect present or future values.
(d) Translation of foreign currencies
Monetary assets and liabilities denominated in foreign currencies are translated
into Canadian funds at the rate of exchange in effect at the year end. Mineral
properties and development are translated at the rates in effect when the
related expenditures are made.
<PAGE>
KINTANA RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1994, 1995 AND 1996
2. Mineral Properties and Development
The Company's mineral claims consist of the following:
(a) Alaska Property - Eagle Creek
Eagle Creek is a gold property located 11 miles north of Fairbanks, Alaska. The
property was originally acquired from Silverado Mines (U.S.) Inc. ("Silverado"),
a wholly owned subsidiary of Silverado Mines Ltd., a company related by virtue
of two common directors. On July 31, 1990, the Company granted to American
Copper & Nickel Company Inc. ("ACNC") a mining lease with an option to purchase
the Eagle Creek Property. In October, 1993, ACNC assigned and quitclaimed the
property back to the Company. The Company has the following obligations related
to this property:
(i) to pay the original vendors the balance of the $400,000 (U.S.)
purchase price by paying annual installments of $10,000 (U.S.) on or
before August 1 of each year; or in the event of commercial
production, royalties equal to 10% of net sales derived from
commercial mining operation on the property, until the purchase price
is fully paid;
(ii) to pay a royalty of 8% of net pre-tax profits from production after
recovery of all costs related to the exploration, development,
construction, mining and milling conducted on the property; and
(iii)to pay to Silverado 15% of net pre-tax profits which may be derived
from operations on the property after recovery by Can-Ex of all costs
of exploration, development, construction, mining and milling
conducted on the property, to a maximum of $5,000,000 (U.S.).
(b) British Columbia Property - American Boy
The Company elected not to maintain these claims, located in the Omineca Mining
Division northeast of Hazelton, British Columbia, and accordingly, they reverted
to the Crown in 1994. The Company wrote off costs aggregating $387,258 in 1994
relating to this property.
<PAGE>
KINTANA RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1994, 1995 AND 1996
3. Related Party Transactions
(a) Operations
The Company has had related party transactions with Tri-Con Mining Ltd. and its
subsidiaries (the "Tri-Con Group") which are controlled by a director of the
Company. The Tri-Con Group carries on business as mine operators, and mining,
exploration and development contractors and has been employed by the Company
under contract to carry out its field work and provide administrative and
management services. Substantially all of the Company's expenditures are
incurred by the Tri-Con Group on behalf of the Company.
Under the current contract, exploration field work is charged at cost plus 25%.
Cost includes a 12% mark-up for office overhead. Services of officers and
directors of the Tri-Con Group are charged at the rate of $52 per hour. In
addition, a management fee of $2,500 per month is normally charged by the
Tri-Con Group, however, this fee was suspended after January, 1995. Services of
officers and directors of the Tri-Con Group that are also officers and/or
directors of the Company are not charged. The aggregate amount charged by the
Tri-Con Group for services for the years 1996, 1995 and 1994 was $0 (U.S.),
$6,500 (U.S.) and $28,500 (U.S.) respectively.
(b) Payable to related parties - current
1996 1995 1994
-------- -------- --------
The Tri-Con Group $300,555 $280,250 $272,128
Silverado Mines Ltd. 18,103 43,059 25,000
-------- -------- --------
$318,658 $323,309 $297,128
======== ======== ========
4. Capital Stock
(a) Authorized share capital: 10,000,000 common shares, without par value.
(b) Issued: 1,486,148 (1995 - 1,486,148; 1994 - 1,486,148 ) common shares
(c) Escrowed shares: As at November 30, 1996, 1995 and 1994, 75,000 shares are
subject to an escrow agreement. These shares cannot be released without the
consent of regulatory authorities.
<PAGE>
KINTANA RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1994, 1995 AND 1996
5. Subsequent Event
On March 6, 1997, the Company and Silverado entered into a Purchase
Agreement (the "Agreement"), pursuant to which, among other things, Silverado
will issue to the Company 1,100,000 shares of its Common Stock, at an aggregrate
value of $412,500, in exchange for all of the Company's assets and liabilities,
including all right, title and interest in the Eagle Creek Property located near
Fairbanks, Alaska, and certain accounts payable aggregating approximately
$173,000. Under the Agreement, the Company will distribute the Silverado shares
to its stockholders and will dissolve. The value of the consideration to be paid
by Silverado under the Agreement was based upon the net of the fair market value
of the assets and liabilities of the Company.
Pursuant to a resolution of the Board of Directors of the Company, the
1,100,000 shares of Silverado stock will be distributed to stockholders on a pro
rata basis. Stockholders will receive, as a distribution 0.74 shares of
Silverado Common Stock for each share of the Company held. This transaction will
be submitted to the Company's stockholders at an Annual General Meeting of
Members to be held on May 21, 1997.
<PAGE>
PART II
-------
INFORMATION NOT REQUIRED IN PROSPECTUS
--------------------------------------
Item 20. Indemnification of Directors and Officers.
- ---------------------------------------------------
(a) The Company Act of the Province of British Columbia, Canada ("Company
Act"), provides that a company may, with the approval of the court, indemnify a
director or former director of a company against all costs, charges and expenses
in any action to which he or she is made a party by reason of being or having
been a director.
(b) Part 15 of Silverado's Articles (a governing document similar to the
Bylaws of a U.S. corporation) also provides for indemnification of Silverado's
directors, officers, employees and agents, subject always to the Company Act, in
the following circumstances:
PART 15 INDEMNITY AND PROTECTION OF DIRECTORS, OFFICERS AND EMPLOYEES
---------------------------------------------------------------------
15.1. Subject to the provisions of the Company Act, The Company shall
indemnify a Director or former Director of The Company and The Company may
indemnify a director or former director of a corporation of which The
Company is or was a shareholder and the heirs and personal representatives
of any such person against all costs, charges and expenses, including an
amount paid to settle an action or satisfy a judgment, actually and
reasonably incurred by him or them in a civil, criminal or administrative
action or proceeding to which he is or they are made a party by reason of
his being or having been a Director of The Company or a director of such
corporation, including any action brought by The Company or any such
corporation. Each Director on being elected or appointed shall be deemed to
have contracted with The Company on the terms of the foregoing indemnity.
15.2. Subject to the provisions of the Company Act, the Directors may
cause The Company to indemnify any officer, employee or agent of The
Company or of a corporation of which The Company is or was a shareholder
(notwithstanding that he may also be a Director) and his heirs and personal
representatives against all costs, charges and expenses whatsoever incurred
by him or them and resulting from his acting as an officer, employee or
agent of The Company or such corporation. In addition The Company shall
indemnify the Secretary and any Assistant Secretary of The Company if he is
not a full time employee of The Company and notwithstanding that he may
also be a Director and his respective heirs and legal representatives
against all costs, charges and expenses whatsoever incurred by him or them
and arising out of the functions assigned to the Secretary by the Company
Act or these Articles and the Secretary and Assistant Secretary shall on
being appointed be deemed to have contracted with The Company on the terms
of the foregoing indemnity.
15.3. The failure of a Director or officer of The Company to comply
with the provisions of The Company Act, the Memorandum or these Articles
shall not invalidate any indemnity to which he is entitled under this Part.
<PAGE>
15.4. The Directors may cause The Company to purchase and maintain
insurance for the benefit of any person who is or was serving as a
Director, officer, employee or agent of The Company or as a director,
officer, employee or agent of any corporation of which The Company is or
was a shareholder and his heirs or personal representatives against any
liability incurred by him as such Director, director, officer, employee or
agent.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling The
Company pursuant to the foregoing provisions, The Company has been informed that
in the opinion of the Securities Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of any
action suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by a
controlling precedent and subject to possible conflict of laws questions
involving Canadian corporation law, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 21. Exhibits and Financial Statement Schedules.
- ----------------------------------------------------
(a) The following exhibits are filed with or incorporated by reference in
this Registration Statement.
Exhibit
Number Description
2.1 Purchase Agreement between the Registrant and Kintana Resources Ltd.
dated March 6, 1997.
5.1 Opinion of Davis & Company as to the legality of issuance of the
securities registered hereby.
13.1 Annual Report on Form 10/K/A No.1 for fiscal year ended November 30,
1996. Incorporated by reference.
13.2 Quarterly Report on Form 10-Q for quarter ended February 28, 1997.
Incorporated by reference.
23.1 Consent of Davis & Company. See Exhibit 5.1
23.2 Consent of KPMG.
23.3 Consent of KPMG.
<PAGE>
23.4 Consent of Giles R. Peatfield, Ph.D., P.Eng.
99.1 Valuation of the Eagle Creek Mineral Property, Fairbanks Mining
District, Alaska, by Giles R. Peatfield, Ph.D., P.Eng., as amended by
letter dated May 13, 1996.
(b) Financial Statement Schedules. None.
(c) Not applicable.
Item 22. Undertakings.
The undersigned Registrant hereby undertakes:
(a) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 1 of
this Form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request; and
(b) to supply by means of a post-effective amendment all information
concerning a transaction, and the Company being acquired involved
therein, that was not the subject of and included in the registration
statement when it became effective.
Insofar as indemnification of the Company for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Company, pursuant to the foregoing provisions or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action suit or proceeding) is, asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by a controlling precedent and subject to possible conflict of
laws questions involving Canadian corporation law, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Vancouver, Province of
British Columbia, Canada on April 14, 1997.
SILVERADO MINES LTD., Registrant
By /s/ Garry L. Anselmo, President
-----------------------------------
Garry L. Anselmo, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ J.P. Tangen Authorized Representative 4/14/97
- ---------------------- in the United States
J. P. Tangen
/s/ Garry L. Anselmo President, Principal Executive 4/14/97
- ---------------------- Officer, Principal Accounting and
Garry L. Anselmo Financial Officer, Chief Operating
Officer and Chairman of the
Board of Directors
/s/ James F. Dixon Director 4/14/97
- ----------------------
James F. Dixon
AGREEMENT
for the
PURCHASE AND SALE
of
MINING CLAIMS
THIS AGREEMENT FOR THE PURCHASE AND SALE OF MINING CLAIMS, made and effective
this sixth day of March, 1997 by and between Kintana Resources Ltd. a British
Columbia corporation whose address is 505 - 1111 West Georgia Street, Vancouver,
British Columbia, (Seller), and Silverado Mines Ltd. a British Columbia
corporation whose address is 505 - 1111 West Georgia Street, Vancouver, British
Columbia, (Buyer),
WITNESSETH:
WHEREAS, Seller is the owner of certain State of Alaska mining claims (the
Claims) located near Fairbanks, Alaska, subject to certain obligations to Buyer
as well as the interests of other parties the details of which are set forth in
Exhibit A attached hereto and incorporated herein by reference; and
WHEREAS, Seller wishes to sell and Buyer wishes to buy the Claims on the terms
hereinafter set forth, all subject to the express approval of the shareholders
of Kintana;
NOW THEREFORE, in consideration of these premises, and the mutual promises made
herein, the parties agree as follows:
1. GRANT Seller hereby grants unto Buyer all right, title and interest it has,
if any, in those certain State of Alaska mining claims more as extensively
described in Exhibit A.
2. PURCHASE PRICE The purchase price for the Claims shall be $565,000 composed
of the following items:
a) Buyer shall assume all assets and liabilities of Seller, and
b) Buyer shall distribute to Seller a number of shares of its no par
value, unrestricted, free-trading stock in accordance with the
provisions of the proxy statement distributed to the shareholders of
Seller in conjunction with an extra-ordinary meeting of the Members of
Kintana Resources Ltd. to be held on or about May 21, 1997, which
number of shares will be equal to the difference between the $565,000
and the total for which all liabilities of Kintana can be discharged,
assuming a value of the said stock to be $0.375 (U.S.) per share.
<PAGE>
3. DISSOLUTION OF KINTANA
Upon the conclusion of this transaction and the disposition of its
assets and liabilities, Kintana Resources Ltd. shall then be dissolved
pursuant to Section 282 of the Company Act of British Columbia.
4. MISCELLANEOUS
a) This Agreement constitutes the entire agreement between the parties
and supersedes and replaces all other agreements, oral or written
relating to the subject matter hereof.
b) This Agreement shall be interpreted in accordance with the laws of
British Columbia.
c) This Agreement shall inure to the benefit of and be binding upon the
Parties hereto and their respective successors and assigns.
d) Time is of the essence in this Agreement
IN WITNESS OF WHEREOF, the Parties have set their hands and seals on the day and
year first above written at Vancouver, British Columbia.
KINTANA RESOURCES LTD. SILVERADO MINES LTD.
By: /s/ Garry L. Anselmo By: /s/ Garry L. Anselmo
--------------------------- ---------------------------
Garry L. Anselmo, President Garry L. Anselmo, President
Davis & Company
Barristers & Solicitors - Patent & Trademark Agents
Established 1892
Stuart B. Morrow Vancouver Office
Direct Line (604) 643-2948 Telephone (604) 687-9444
E-Mail [email protected] Fax (604) 687-1612
File no. 73775-00001
April 10, 1997
The Board of Directors
Silverado Mines Ltd.
Suite 505 - 1111 West Georgia Street
Vancouver, BC V6E 4M3
Dear Sirs:
Re: Form S-4 Registration Statement - Opinion of Counsel
As Canadian counsel for Silverado Mines Ltd. (the "Company") a British Columbia
company, we have examined the Certificate of Incorporation, Articles of
Incorporation and minutes of he proceedings of the Company's directors and
shareholders and such other corporate records, documents and proceedings and
have considered such questions of law as we have deemed relevant for the purpose
of this opinion.
We have also, as such counsel, examined the Registration Statement on Form S-4
(the "Registration Statement") to be filed with the Commission on or about April
11, 1997, covering the allotment and reservation for issuance of 1,100,000
common shares in the capital of the Company (the "shares") to shareholders of
Kintana Resources Ltd. ("Kintana") pursuant to a Purchase Agreement between the
Company and Kintana dated March 6, 1997.
Based upon the foregoing, we are of the opinion that the Shares have been duly
allotted and reserved for issuance and that, upon issuance they will be duly and
validly issued as fully paid and non-assessable share in the capital of the
Company.
We acknowledge that we are referred to under the caption "Legal Matters"
included in the Registration Statement. We hereby consent to such use of our
name in the Registration Statement and to the filing of this opinion as an
Exhibit thereto. In giving this consent, we do not thereby admit that we come
within the category of persons whose consent is required under Section 7 of the
United States Securities Act of 1933 or the Rules and Regulation of the
Securities and Exchange commission promulgated thereunder.
Yours truly,
/s/ Davis & Company
- --------------------
Davis & Company
2800 Park Place - 666 Burrard Street, Vancouver, BC Canada V6C 2Z7
KPMG Box 10426 777 Dunsmuir Street Telephone (604) 691-3000
Chartered Accountants Vancouver BC V7Y 1K3 Canada Telefax (604) 691-3031
http://www.kpmg.ca
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Silverado Mines Ltd.
We consent to inclusion in the registration statement on Form S-4 of Silverado
Mines Ltd. of our report, dated January 24, 1997, relating to the consolidated
balance sheets of Kintana Resources Ltd. as at November 30, 1996, 1995 and 1994,
and the related consolidated statement of operations and deficit, deferred
exploration and development expenditures and changes in financial position for
each of the years in the three year period ended November 30, 1996.
/s/ KPMG
- ---------
Chartered Accountants
Vancouver, Canada
April 14, 1997
KPMG Box 10426 777 Dunsmuir Street Telephone (604) 691-3000
Chartered Accountants Vancouver BC V7Y 1K3 Canada Telefax (604) 691-3031
http://www.kpmg.ca
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Silverado Mines Ltd.
We consent to incorporation by reference in the registration statement on Form
S-4 of Silverado Mines Ltd. of our report, dated January 17, 1997, relating to
the consolidated balance sheets of Silverado mines Ltd. as at November 30, 1996
and 1995, and the related consolidated statements of operations and accumulated
deficit, of cash flows and changes in share capital and capital surplus for each
of the years in the three year period ended November 30, 1996, which report
appears in the November 30, 1996 annual report on Form 10-K of Silverado Mines
Ltd. and to the reference of our firm under the heading "experts" in the
prospectus.
Our auditors' report relating to the financial statements referred to in the
preceding paragraph is supplemented by a report entitled "Comments by Auditors
For U.S. Readers On Canada - U.S. Reporting Conflict" that states that Canadian
reporting standards do not permit reference to uncertainties such as the
Company's ability to continue as a going concern, as discussed in Note 1(a) to
the consolidated financial statements, when the uncertainties are adequately
disclosed in the financial statements and accompanying notes. Under United
States reporting standards such uncertainties would be disclosed in the
auditor's report in an explanatory paragraph following the opinion paragraph.
Chartered Accountants
Vancouver, Canada
April 14, 1997
Giles R. Peatfield, Ph.D., P.Eng.
Consulting Geologist
104-325 Howe Street
Vancouver, B.C. V6C 1Z7
Telephone: (604) 685-3441 Telecopier:
(604) 681-9855
07 April 1997
CONSULTING ENGINEER'S CONSENT
The Board of Directors
Silverado Mines Ltd.
505-1111 West Georgia Street
Vancouver, British Columbia
V6E 4M3
Gentlemen:
I hereby consent to the inclusion of my geological reports determining a
valuation of the Eagle Creek Mineral Property in the Fairbanks Mining District
of Alaska, USA, including all related letters, attachments and appendices to
those reports, in the Registration Statement to be filed by Silverado Mines Ltd.
Your very truly,
/s/ G.R. Peatfield
- -----------------------
Giles R. Peatfield,
Ph.D., P.Eng.
Giles R. Peatfield, Ph.D., P.Eng.
Consulting Geologist
104-325 Howe Street
Vancouver, B.C. V6C 1Z7
Telephone: (604) 685-3441 Telecopier:
(604) 681-9855
13 May 1996
Mr. A.M. Homenuke, P.Eng.
Silverado Mines Ltd.
505-1111 West Georgia Street
Vancouver, British Columbia
V6E 4M3
Dear Mr. Homenuke:
At your request, I have reviewed my report dated 21 March, 1994 regarding
the establishment of a "Fair Market Value" for the Eagle Creek mineral property
located in the Fairbanks mining district of Alaska. As there has been no serious
work on the property in the intervening years, I saw no need to do an in-depth
update of the report. However, there has been a marked upswing in exploration
activity in the region, and a significant gold discovery has been reported
within about 12 kilometres of the property.
This discovery, by Newmont on the True North property northeast of Eagle
Creek, is reported to contain 450,000 ounces of gold in reserves and 2,000,000
ounces in resources. This coupled with the recently released aeromagnetic map
showing magnetic trends converging on the Eagle Creek property, and the recent
acquisition by Placer Dome U.S. Inc. of property interests along the
northeasterly aeromagnetic trend tends to make the subject property more
prospective than I regarded it at the time of my report.
Accordingly, I have revised my valuation estimates for the Eagle Creek
property. The revised estimates are presented in the following table, which is
modeled after the one presented in my 1994 report, to which reference should be
made.
All amounts are in $US:
Valuation Method Mid-point(S) Lower Litnit (S) Upper Limit (S)
---------------- ------------ ---------------- ---------------
Kilburn method 575,000 460,000 690,000
Option terms method 500,000 350,500 650,000
Target deposit method 450,000 300,000 600,000
Past exploration method 520,000 416,000 624,000
Recommended work method 350,000 280,000 420,000
Staking costs method 330,000 264,000 396,000
Average values 454,167 345,000 563,333
Rounded values 455,000 345,000 565,000
<PAGE>
You will see that this has resulted in a valuation almost double that given
in my 1994 report. This requires some explanation, as follows:
1) In the case of the Lionel Kilburn method of valuation, I have increased the
value factors markedly based on the recently reported results at the True
North property and on the patterns revealed on the published aeromagnetic
map.
2) For the Option Terms method, I have increased the value based on the
thought that the ACNC decision may have been influenced by internal
politics. In any case, it is too far back in history, with regard to recent
developments, to be a valid criterion. I have assumed that the $US 500,000
payment would in fact be reasonable.
3) Given the recent success at the True North property, I have upgraded the
probability of exploration success at Eagle Creek to 1 percent (the one in
a hundred rule), and kept the expected after-tax NP V's for stock work and
lode deposits the same.
4) 1 have assumed that the $US 1,300,000 past expenditure would be reasonable
amount to do a similar amount of work today (in other words that inflation
would essentially balance inefficiencies in the original programs), and
have retained the notion that about 40 percent of the work would be useful
in ongoing programs.
5) In light of nearby successes and increased activity in the region, I have
increased the size of program I could reasonably recommend for the
property.
6) The cost of staking, holding and evaluating is strongly influenced by the
cost of work necessary to evaluate the ground; as such it is very similar
to item 5) above.
I hope that this letter, in conjunction with my March 1994 report, will be
suitable for your purposes. I feel it important to stress that while I would
regard any final figure in the range $US 325,000 to $US 575,000 to be a
reasonable valuation for the property, the concept of "Fair Market Value"
implies the highest price, expressed in money terms, which would be obtainable
in an open and unrestricted market between knowledgeable, prudent and willing
parties dealing at arm's length, who are frilly informed and under no compulsion
to deal. Whether or not these terms fit your own particular circumstances only
you can judge.
Yours very truly,
/s/ Giles R. Peatfield
----------------------
Giles R. Peatfield,
Ph.D., P.Eng.
<PAGE>
VALUATION OF THE EAGLE CREEK
MINERAL PROPERTY,
FAIRBANKS MINING DISTRICT, ALASKA
by
G.R. Peatfield, Ph.D., P.Eng.
for
Silverado Mines Ltd.
Vancouver, B.C. March, 1994
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY 1
CONCLUSION 1
1.0 INTRODUCTION AND TERMS OF REFERENCE 2
2.0 BRIEF PROPERTY DESCRIPTION AND HISTORY 2
3.0 VALUATION METHODOLOGY 3
3.1 General Statement 3
3.2 Kilburn Method 3
3.3 Option Terms Method 3
3.4 Target Deposit Analysis Method 4
3.5 Past Exploration Expenditures Method 4
3.6 Recommended Next-phase Program Method 4
3.7 Staking and Examination Costs Method 4
4.0 EAGLE CREEK PROPERTY VALUATION 4
4.1 Kilburn Method 4
4.2 Option Terms Method 5
4.3 Target Deposit Analysis Method 5
4.4 Past Exploration Expenditures Method 5
4.5 Recommended Next-phase Program Method 5
4.6 Staking and Examination Costs Method 5
4.7 Summary of Valuations 6
5.0 REFERENCES 6
6.0 STATEMENT OF QUALIFICATIONS OF G.R. PEATFIELD, Ph.D., P.Eng. 7
APPENDIX
GEOLOGICAL REPORT ON THE EAGLE CREEK PROPERTY, Fairbanks Mining District,
Alaska. by J.W. Murton, P.Eng. (Revised) January 1990.
<PAGE>
SUMMARY
In March 1994, Mr. A.M. Homenuke, P.Eng. of Silverado Mines Ltd. retained
G.R. Peatfield to prepare an "Independent Valuation" of the Eagle Creek mineral
property situated near Fairbanks, Alaska. The valuation is intended to be used
to establish a "Fair Market Value" for the property, which is to be the subject
of a non-arms-length transaction between the present owner (Kintana Resources
Ltd.) and Silverado. For this purpose, Fair Market Value means the highest
price, expressed in money terms, which would be obtainable in an open and
unrestricted market between knowledgeable, prudent and willing parties dealing
at arm's length, who are fully informed and under no compulsion to deal.
The Eagle Creek property consists of 77 mineral claims in the Fairbanks
mining district, situated about 12 miles west of the Fort Knox gold project of
AMAX Gold, and 12 miles northeast of the Ester Dome area, where significant lode
and placer gold production has been and continues to be realized. The Eagle
Creek claims cover an area of metasedimentary and intrusive rocks with numerous
shear zones and fault zones carrying significant gold values and locally
antimony mineralization. There has been some antimony production from a small
mine located near the centre of the present property.
Exploration work to date has outlined a large number of geochemically
anomalous areas, and trenching has uncovered several mineralized structures.
Drilling to date on the property has indicated the presence of numerous narrow
presumably structurally controlled zones of gold mineralization, with generally
rather low grades. Although several drill holes show long sections of anomalous
values, in the range of 100 to 500 or more parts per billion gold with elevated
arsenic and antimony contents, no significant zones of stockwork mineralization
have been outlined to date.
This report consists of a valuation of the mineral property employing
several different methods widely used for such analyses. These methods are
briefly described, and the assumptions used in each calculation are stated. All
dollar amounts in this report are in $US, unless specifically noted.
CONCLUSION
Based on a process of averaging the results of a number of separate
valuations, it is my opinion the Eagle Creek property has a Fair Market Value of
$US 250,000. Any figure in the range $US 190,000 to $US 310,000 would be
reasonable.
Very truly yours
/s/ G.R. Peatfield
------------------
G.R. Peatfield
Ph.D., P.Eng.
21 March, 1994
<PAGE>
1.0 INTRODUCTION AND TERMS OF REFERENCE
This report has been prepared for Silverado Mines Ltd., and is based on
information provided by the Company and believed to be accurate. While all
reasonable care has been taken in the completion of the report, G.R.
Peatfield, Ph.D., P.Eng. hereby disclaims any and all liability arising out
of its use or circulation, and cannot guarantee the accuracy of the
contained information. The use of this report or any part thereof shall be
at the user's sole risk.
Valuation of mineral properties which do not contain known, clearly defined and
demonstrably exploitable reserves is a somewhat subjective process. There
are numerous methods in common use for such valuation, only some of which
can logically be considered to be valid. In the case of this evaluation, a
number of methods have been used and results averaged to arrive at a final
value, with a reasonable range of values calculated.
2.0 BRIEF PROPERTY DESCRIPTION AND HISTORY
The geology of the Eagle Creek claims and surrounding area, as well as the
early exploration history of the property, have been well described by
Murton (1990), whose report is appended to this report.
More recently, the property was under option to American Copper & Nickel
Company, Inc. (ACNC), who completed an examination of the claims including
the drilling of a total of 29 holes aggregating 11,688 feet in the 1991,
1992 and 1993 field seasons. The holes are widely scattered, with one
concentration in an area considered to be favourable for bulk-tonnage
mineralization. Although several holes returned long sections of anomalous
gold and short sections with significant values, no potential orebody has
been indicated to date.
Details of the various transfers and option agreements respecting the Eagle
Creek property are available from Silverado Mines Ltd. and Kintana
Resources Ltd. I have not investigated title or ownership, nor do I pass
any judgement on the validity of the mineral claims.
3.0 VALUATION METHODOLOGY
3.1 General Statement
There are a large number of methods in general use to establish fair
market value for mineral properties, of which several are not
generally valid, and several others are not applicable in this case.
The best method, of course, is a discounted cash flow analysis which
allows one to calculate a net present value for the property. However,
this method requires a defined ore-body and usually a feasibility
study or at least an in-depth analysis of potential mining, milling
and other costs; this is not possible in the case of the Eagle Creek
property. Of the methods in general use the following, as described
below, are considered valid for this property and have been used in
this analysis. Glanville (I 986, and subsequent personal
communications) has considered a large number of methods; with the
exception of the first method below, all other methods considered
herein are based on his work or some variation thereof.
<PAGE>
3.2 Kilburn Method
Kilburn (1990) devised a method of assigning a dollar value to a
mineral property which does not contain defined exploitable reserves.
In the simplest of terms, his method involves assigning a "base cost"
to the property, which is the cost to explore for and stake a raw
prospect. His value in 1990 was $C 400 for a claim of 16 hectares or
40 acres. He then defined a number of characteristics for a property,
in the general categories of location with respect to off-property
deposits or favourable patterns; grade and amount of mineralization
known to exist on the property under evaluation; geophysical and/or
geochemical targets present on the subject property and their
relationship to one another; and geological patterns on the property
which may be regarded as favourable for the occurrence of ore. A total
of 19 subcategories, only some of which will be applicable to a given
property, were defined and a relative ranking scheme set out for these
subcategories. Finally, each subcategory was assigned a value factor,
by which the base cost would be multiplied. Core claims with evidence
of mineralization or high potential are distinguished from ground
which is acquired essentially for protection. Kilburn's method
requires considerable judgement and experience for optimum use, but
can be, if carefully applied, a reasonable method of assigning a
value. It is especially powerful if used to rate prospects one against
another, especially in a single area or political jurisdiction.
3.3 Option Terms Method
This is a difficult method to use, involving subjective judgements,
and is not generally favoured. In brief, it involves estimating the
present value of an hypothetical stream of option payments factored by
the probability of these payments actually being made. In most cases
this is very difficult, but in this specific case there is some
justification for using this method, as is detailed in a subsequent
section.
3.4 Target Deposit Analysis Method
This method involves postulating what type of deposit or deposits
might be found on the subject property, assuming a net present value
range for deposits of this type, and assigning probabilities for the
discovery of each deposit type on the property. Although somewhat
subjective, this method does have some basis in (hypothetical)
economic facts.
3.5 Past Exploration Expenditures Method
This is not a generally favoured method, because it involves
subjective judgements as to whether the past work has: a) been good
value for money, and b) tended to enhance or detract from the on-going
exploration potential of the ground. In this case it has been used,
but is not regarded as particularly definitive.
3.6 Recommended Next-phase Program Method
Again, this is not a favoured method, but it can give some measure of
the relative worth of a property. It is based on the assumption that
there is some probability that the work
<PAGE>
will progress to subsequent stages, and therefore that the property
has at least this minimum value.
3.7 Staking and Examination Costs Method
This method relies on the assumption that the worth of a property can
be measured by what one might reasonably pay to acquire the ground
were it open for staking, along with the cost of regional prospecting
or reconnaissance and an initial examination of the claims. Again, the
method is somewhat subjective but does have some basis in reasonable
exploration practice.
4.0 EAGLE CREEK PROPERTY VALUATION
4.1 Kilburn Method
The Eagle Creek property consists of 77 claims, of which 40 can be
taken to be prospective and the remaining 37 to be protection ground.
Translating Kilburn's $C 400 (1990) per 40 acre claim to $US (1994)
gives an approximate base cost of $300 per claim. This yields
aggregate base costs of $12,000 for the prospective ground and $
11,100 for the protection claims. Applying Kilburn's methodology,
although it does not fit perfectly in this case, gives multiplication
factors of 24 for the core claims and 3 for the surrounding ground,
for a total of $321,000 (rounded to $320,000). A reasonable range is
felt to be 20%, for lower and upper limits of $256,000 and $384,000.
4.2 Option Terms Method
In late 1993, ACNC declined to make a $500,000 option payment to
continue work on the claims, which in effect puts an upper limit on
the value of the property. However, it has been said that their
decision was not an easy one, and this suggests that they put a
reasonable value on the claims. I have arbitrarily chosen a value of
$350,000, with a range of + 30%, for lower and upper limits of
$245,000 and $455,000. This makes the upper limit just slightly less
than the payment which ACNC declined to make.
4.3 Target Deposit Analysis Method
The reasonable targets for the Eagle Creek property are either a
stockwork gold deposit such as the Fort Knox deposit near Fairbanks,
or a high-grade lode gold situation such as those in the Ester Dome
area to the southwest. I have arbitrarily chosen NPV values for a
stockwork style mine of $20 to $40 million, and for a lode situation
of $5 to $10 million. As well, I have assumed probabilities of
exploration success for both deposit types of 0.5%. This probability
figure is less than the usually accepted value of 1% (the old
one-in-a-hundred rule), based on the fact that the latest exploration
stage has had the effect of downgrading the property somewhat, without
producing significant new targets. The addition of the factored values
for the two target types yields a range of $125,000 to $250,000, with
a mid-point value of $187,500.
<PAGE>
4.4 Past Exploration Expenditures Method
Although past exploration expenditures are not usually regarded as a
particularly good valuation method, they can be indicative of general
value. In this case, total expenditures on the property are said to be
of the order of $1,300,000; it would appear to me that the effective
value of this expenditure would not exceed half this amount, or
$650,000. Of this value, I would consider that something less than
half would in fact be useful as a guide for future exploration. I have
arbitrarily chosen a value of $300,000, with a 20% range of $240,000
to $360,000.
4.5 Recommended Next-phase Program Method
Based on my present knowledge of the property, I would not be able to
recommend a next-phase program with a budget in excess of $200,000.
This yields a 20% range of $160,000 to $240,000.
4.6 Staking and Examination Costs Method
Assuming that the ground were open, the cost of acquisition,
registration and holding for a reasonable length of time would have a
present value of about $350 per claim. This added to reconnaissance
work and a reasonable first-phase examination costing something of the
order of $100,000 would yield a value of $130,000, with a 20% range of
$104,000 to $156,000.
4.7 Summary of Valuations
The following table shows the mid-point and the lower and upper limit
values for the various valuation methods considered, with the
calculated averages and a summary of the rounded values applicable for
this valuation. All amounts are in $US.
Valuation Method Mid-point(S) Lower Litnit (S) Upper Limit (S)
---------------- ------------ ---------------- ---------------
Kilburn method 320,000 256,000 384,000
Option terms method 350,000 245,000 455,000
Target deposit method 187,500 125,000 250,000
Past exploration method 300,000 240,000 360,000
Recommended work method 200,000 160,000 240,000
Staking costs method 130,000 104,000 156,000
Average values 247,917 188,333 307,500
Rounded values 250,000 190,000 310,000
<PAGE>
5.0 REFERENCES
Kilburn, Lionel C. (1990): Valuation of mineral properties which do not contain
exploitable reserves; Canadian Institute of Mining, Metallurgy and
Petroleum (CIM), CIM Bulletin, August 1990, pages 90 - 93.
Murton, J.W. (1990): Geological Report on the Eagle Creek Property, Fairbanks
Mining District, Alaska; Unpublished report for Can-Ex Resources Ltd.
(original report dated September 15, 1989, revised January 19, 1990), J. W.
Murton & Associates, 14 pages, 6 figures, 2 appendices.
Glanville, Ross (1986): The Valuation of Mining Properties; Speech to the United
Nations interregional seminar on electronic data processing in mineral
exploration and development, Sudbury, Ontario, October 22, 1986, 16 pages.
6.0 STATEMENT OF QUALIFICATIONS OF G. R. PEATFIELD, Ph.D., P.Eng.
I, Giles R. Peatfield, do hereby certify that:
1. I am a consulting Geological Engineer with an office at 104-325 Howe
Street, Vancouver, British Columbia, V6C 1Z7.
2. I am a graduate of the University of British Columbia (B.A.Sc., Geological
Engineering, 1966) and of Queen's University at Kingston (Ph.D., 1978).
3. I am a Fellow of the Geological Association of Canada, and a Member of the
Canadian Institute of Mining and Metallurgy, of the Association of
Exploration Geochemists, and of the Association of Professional Engineers
and Geoscientists of British Columbia.
4. I have practiced my profession as an exploration geologist for more than
twenty-five years, both as an employee of a major mining company and as an
independent consultant.
5. To complete this report, I have relied largely on data supplied to me by
Silverado Mines Ltd. and on discussions with Silverado personnel,
especially Mr. A.M. Homenuke, P.Eng.
6. I have no interest, direct or indirect, nor do I expect to receive any
interest in the Eagle Creek mineral property or in the securities of either
Silverado Mines Ltd. or Kintana Resources Ltd.
/s/ G.R. Peatfield
-------------------
G.R. Peatfield, Ph.D., P.Eng.
Dated at Vancouver, B.C. this 21st day of March, 1994.
