<PAGE>
FORM 10-K/A No. 2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1996.
Commission file number 0-12132
-------
SILVERADO MINES LTD.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
British Columbia, Canada 98-0045034
- ------------------------ ----------
(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
Suite 505, 1111 West Georgia Street
Vancouver, British Columbia, Canada V6E 4M3 (604) 689-1535
- -------------------------------------------- --------------
(Address of Principal Executive Offices) (Registrant's telephone number)
Securities registered pursuant to section 12(b) of the Act:
None
- ----
The Company's Common Stock
Securities registered pursuant to trades on the NASDAQ Small Cap
section 12(g) of the Act: Market under the trading
Common Shares, no par value symbol GOLDF
- --------------------------- -------------------------------
(Title of Class) (Name of each exchange on which
registered)
- -------------------------------------------------------------------------------
Indicate by check mark the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the SECURITIES EXCHANGE ACT OF 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /x/ No / /
Indicate by check mark if the disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. / /
The aggregate market value of voting stock held by non-affiliates on January
28, 1997 was $25,647,744.
The number of shares outstanding on January 28, 1997 was 58,556,493
Documents incorporated by Reference: None.
<PAGE>
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The table below sets forth Silverado's working capital and liquidity for the
years indicated:
November 30,
1996 1995 1994
-----------------------------------
CASH AND CASH EQUIVALENTS $1,925,469 $ 155,849 $ 190,724
OTHER CURRENT ASSETS 1,054,228 652,574 2,180,299
---------- ----------- ----------
2,979,697 808,423 2,371,023
---------- ----------- ----------
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (351,154) (553,931)
LOANS PAYABLE SECURED BY GOLD INVENTORY (66,511) (717,792) -
PAYABLE TO RELATED PARTIES - (176,568) -
CURRENT PORTION OF MINERAL CLAIMS PAYABLE (179,000) (851,610) (200,000)
CURRENT PORTION OF CAPITAL LEASE OBLIGATION (64,939) (330,000) (169,765)
(203,203)
---------- ----------- ----------
(661,604) (2,279,173) (923,696)
---------- ----------- ----------
WORKING CAPITAL (DEFICIENCY) $2,318,093 $(1,470,750) $1,447,327
---------- ----------- ----------
---------- ----------- ----------
The major increase in the Company's working capital from a deficiency of
$1,470,750 at the end of 1995 to a surplus of $2,318,093 at the end of 1996
resulted from private placements and the exercise of options. The Company
further decreased its liabilities by executing and paying-off lease purchase
options on several large items of heavy mining equipment. Subsequent to year
end the Company's President, J.P. Tangen, relinquished his office to the
Company's previous President, Garry Anselmo, who assumed those duties on an
unpaid basis. This change is part of an overall strategy by the Company to
reduce its administrative overhead.
The decrease in revenues from gold sales from $3,053,000 in 1995 to $298,000
in 1996 is attributable to the Company's reduced production schedule from its
Nolan properties as it focused its primary efforts upon its extensive
Fairbanks claims in response to the large amount of competitive activity in
that area. As part of this process, the Company was able to further develop
its Ester Dome Project, develop two other properties for potential sale, and
to acquire, by location, the 53.86 square mile Chatanika property northwest
of Fairbanks. Long term liabilities consist of the long term portion of the
Company's remaining capital lease obligation, and the Company's two-million
dollar debenture which has a maturity of July 2, 1999, if not sooner
converted.
The Company intends to continue its efforts to define ore bodies on Ester
Dome so as to bring that property into production as soon as practical, and
simultaneously, continue its placer operations at Nolan Creek. The Company
intends to continue the solicitation of additional capital through either
equity or debt financing, and may also engage in joint venturing or other
similar arrangements conducive to accelerating production at Ester Dome.
There is, however, no commitment by any party to provide such financing at
this time, nor assurance that such capital will be available on terms
favorable to the Company. The Company has received $335,250 subsequent to
the year end as a result of options to purchase common stock being exercised.
<PAGE>
Management believes the Company has adequate funds to operate for the coming
fiscal year, and will continue its exploration and development programs as
additional funds become available.
OPERATING RESULTS
NOLAN GOLD PROJECT
In November, 1993, the Company commenced production of placer gold from
frozen bench deposits on the Mary's Bench portion of the Dionne Property.
Since then, almost 14,000 ounces of gold have been recovered. Information
gained during the early mining operations resulted in a management decision
to engage in the construction of a larger infrastructure including the
construction of a thirty man camp, a larger machine shop, the acquisition of
several pieces of earth moving equipment and a more aggressive drilling
program. These costs have yet to be fully defrayed by production. The
Company continued a limited production program in 1996 during the course of
reclamation activities, as it focused its primary efforts on expansion,
exploration, and development of its Fairbanks properties in response to
increased competitive activity in that area. The Company intends to
continue development of both placer and lode gold deposits at Nolan in 1997.
HAMMOND PROPERTY
In December 1994, the Company entered a lease with option to purchase an
additional property adjoining the Nolan Gold Project. This new property has
a history of gold production and the Company anticipates that it will add to
the potential for developing additional gold reserves. The property also has
lode gold and antimony potential, which the Company intends to further
explore and define in 1997.
ESTER DOME GOLD PROJECT
The Company has a 100 percent interest in the Ester Dome Gold Project. The
Company commenced a number of geophysical surveys in 1995 on gold-bearing
target areas selected from ACNC's data and Silverado's own previous drill
results, then expanded this data with an intensive trenching and drilling
program in 1996. To date, the Company has identified gold mineralization
over a length of 2,500 feet, widths up to 300 feet, and to a depth of 600
feet with grades up to 3.5 ounces per ton. The Company intends to further
define this ore body so as to be able to bring it into production as soon as
practical.
MARSHALL DOME GOLD PROJECT
The Marshall Dome Gold Project was acquired by the Company in 1995. It
covers an area of two and one-half square miles, and is located eighteen
miles northeast of Fairbanks. On November 1, 1996, the Company entered into
an agreement in principle to vend this property to Homestake Mining Company
in return for annual cash payments, annual expenditures on the property, and
the payment of a Net Smelter Return to the Company in the event of the sale
of gold or other valuable minerals; but that agreement in principle has not
yet been consummated.
WHISKEY GULCH PROPERTY
This property, acquired by the Company in 1996 to further enhance the
desirability of its previously acquired Marshall Dome Property, above, is
part of the unconsummated agreement in principle with Homestake Mining.
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, the Company's activities are regulated
<PAGE>
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 the Company to cease or curtail operations due
to noncompliance with laws administered by those agencies. The operation of
mining properties also requires a variety of permits from government agencies.
Management believes that it has in place all required permits for the Company's
planned operations. Management knows of no areas of noncompliance with laws or
regulations which could close or curtail operations.
The Company has accrued a total of $70,000 for further reclamation on the Nolan
Gold Project. Additional remediation work takes place during the normal course
of mining. In the event of closure or abandonment, the additional cost of
reclamation would not be material. The Company posted bond of $1,500 in
January, 1995 with the ALASKA STATEWIDE BOND POOL to cover this event.
With regard to the Ester Dome Gold Project, in the case of closure or
abandonment, the Company estimates that any reclamation costs, net of recovery,
would be immaterial.
NATURE OF CLAIMS UNDER FEDERAL AND STATE LAW
The Company'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 and / or the payment of prescribed rental fees. While the
Company believes that all claims which it holds were properly located under
applicable law, no assurances can be given in that regard. To date, the Company
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 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 effect on the
Company, 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 the Company.
OTHER EXPENSES
YEARS ENDED NOVEMBER 30,
1996 1995 1994
--------------------------------------------
OTHER EXPENSES $4,077,978 $2,074,626 $2,286,068
The Company's total other expenses increased in 1996 as a direct result of
the increase in employment contract expenses (see Note 6(d)) which are in
part accrued, and related to a number of agreements for services in specialized
marketing and investor relations fields. Depreciation increased as a function
of re-instituting depreciation on the company's Grant Mine assets. Depreciation
on those assets was suspended during the time they were inoperative, as no
"wear and tear" was occurring and due to the fact that the carrying value
exceeded the salvage value, they were only being carried on the books at 45%
of their total cost, the remaining 55% having been contributed and paid for
by a former joint-venture partner. Management salaries increased reflecting
the effect of a full twelve month's salary for the company's new president,
and management services from related party (Tri-Con) increased as a function
of the increased level of work undertaken by Tri-Con on
<PAGE>
behalf of Silverado. Other interest and bank charges decreased substantially
as the company paid off several obligations on large pieces of mining
equipment. Interest on long term debt represents the semi-annual
installments on the Company's $2,000,000 convertible debenture.
As with most companies involved in the mining industry, the price of the
Company's product (mainly gold) has a significant impact upon the Company's
profitability. Similarly the Company's costs, as reflected in labor and
materials are also affected by inflation. During the fiscal year ended
November 30, 1996, the price of gold remained fairly stable, as did the rate
of inflation and, thus, neither item significantly affected the Company's
performance.
NEW ACCOUNTING STANDARDS
Statement of Financial Accountings Standards No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS TO BE DISPOSED OF (SFAS 121) was issued in
March, 1995, by the Financial Accounting Standards Board. It requires that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. SFAS 121
is required to be adopted for fiscal years beginning after December 15, 1995.
Management believes this statement will not have a material effect upon the
carrying value of the Company's assets.
Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION (SFAS 123), was issued by the Financial Accounting Standards Board
in October, 1995. SFAS 123 establishes financial accounting and reporting
standards for stock-based employee compensation plans. This statement defines a
fair value based method of accounting for employee stock option or similar
equity instruments, and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. However, it also
allows an entity to continue to measure compensation cost for those plans using
the intrinsic value based method of accounting prescribed by APB Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. Entities electing to remain with the
accounting in Opinion 25 must make proforma disclosures of net income and, if
presented, earnings per share, as if the fair value based method of accounting
defined by SFAS 123 had been applied. SFAS 123 is applicable to fiscal years
beginning after December 15, 1995. The Company currently accounts for its
equity instruments using the accounting prescribed by Opinion 25. The Company
does not currently expect to adopt the accounting prescribed by SFAS 123;
however, the Company will include the disclosures required by SFAS 123 in future
consolidated financial statements.
<PAGE>
SIGNATURES
PURSUANT to the requirements of Section 13 or 15(d) of the SECURITIES EXCHANGE
ACT OF 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SILVERADO MINES LTD.
BY: /s/ G.L. Anselmo November 10, 1997
- ---------------------------------- ------------------------------------
G.L. Anselmo, Chairman
Chief Financial Officer
<PAGE>
F-1
KPMG
Chartered Accountants
Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3 Canada
AUDITORS' REPORT
To the Shareholders of Silverado Mines Ltd.
We have audited the consolidated balance sheets of Silverado Mines Ltd. as at
November 30, 1996 and 1995, and the 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. 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 and 1995, and the results of its operations and the changes in its
financial position for each of the years in the three year period ended
November 30, 1996 in accordance with generally accepted accounting principles
in the United States. 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, Canada
January 17, 1997
COMMENTS BY AUDITORS FOR U.S. READERS
ON CANADA-U.S. REPORTING CONFLICT
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph following the opinion paragraph when the financial
statements are affected by the uncertainty of the Company's ability to continue
as a going concern, as discussed in Note 1(a). Our report to the shareholders
dated January 17, 1997 is expressed in accordance with Canadian reporting
standards which do not permit a reference to such uncertainty in the auditors'
report when the uncertainty is adequately disclosed in the financial statements
and accompanying notes.
KPMG
Chartered Accountants
Vancouver, Canada
January 17, 1997
<PAGE>
SILVERADO MINES LTD. F-2
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN U.S. DOLLARS
- -------------------------------------------------------------------------------
Years Ended November 30 1996 1995
- -------------------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents $ 1,925,469 $ 155,849
Gold inventory 213,004 389,119
Accounts receivable 11,265 1,010
Prepaid expenses to related parties 479,959 31,676
Deferred employment contract expense 350,000 230,769
--------------------------
2,979,697 808,423
Mineral Properties and Development (Note 2)
Claims and options 2,327,025 1,755,811
Deferred exploration and development expenditures 11,286,816 10,084,116
--------------------------
13,613,841 11,839,927
Less accumulated amortization (1,384,338) (1,260,834)
--------------------------
12,229,503 10,579,093
Building, Plant and Equipment (Note 3) 4,423,428 4,250,714
Less accumulated depreciation (920,246) (444,364)
--------------------------
3,503,182 3,806,350
Deferred Financing Fees
(net of amortization of $87,038: 1995 - $49,838) 98,962 136,162
--------------------------
$ 18,811,344 $ 15,330,028
--------------------------
--------------------------
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities
(Note 4) $ 351,154 $ 717,792
Loans payable secured by gold inventory 66,511 176,568
Current portion of mineral claims payable
(Note 2a) 179,000 330,000
Capital lease obligations - current (Note 9b) 64,939 203,203
Payable to related parties - 851,610
--------------------------
661,604 2,279,173
Long Term Liabilities
Mineral claims payable (Note 2a) - 200,000
Capital lease obligations (Note 9b) 92,214 194,569
Convertible debenture (Note 5) 2,000,000 2,000,000
--------------------------
2,092,214 2,394,569
Shareholders' Equity
Share capital (Note 6)
Authorized: 75,000,000 common shares
Issued and outstanding:
November 30, 1996 - 56,406,493 shares 38,553,063 28,775,211
November 30, 1995 - 37,431,493 shares
Capital surplus - 46,352
Deficit (22,495,537) (18,165,277)
--------------------------
16,057,526 10,656,286
--------------------------
$ 18,811,344 $ 15,330,028
--------------------------
--------------------------
See accompanying notes to consolidated financial statements
<PAGE>
SILVERADO MINES LTD. F-3
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
EXPRESSED IN U.S. DOLLARS
<TABLE>
- --------------------------------------------------------------------------------------------------
Years Ended November 30 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue from gold sales $ 298,124 $ 3,053,289 $ 1,515,762
Operating costs
Mining and processing costs 366,249 4,515,138 1,861,728
Amortization of property and development costs 123,504 431,384 418,336
Reclamation expense 31,993 29,397 70,000
Production related depreciation expense 28,660 97,300 -
------------------------------------------
550,406 5,073,219 2,350,064
------------------------------------------
Loss from Operations (252,282) (2,019,930) (834,302)
Other Expenses
Accounting and audit 69,331 62,891 110,312
Amortization of deferred financing fees 37,200 37,200 12,638
Corporate capital taxes (5,967) 32,014 -
Depreciation 447,222 86,346 16,556
Employment contract expense (Note 6) 1,910,060 223,273 604,090
Financing activities 35,159 18,900 88,551
General exploration 13,980 - -
Interest on long term debt 160,000 160,000 57,425
Legal 35,733 114,294 193,027
Loss on disposal of buildings, plant and equipment - - 222,188
Loss (gain) on foreign exchange (5,298) (5,332) (349)
Management salaries 263,000 184,349 -
Management services from related party 323,108 190,009 61,785
Office expenses 262,333 387,498 149,771
Other interest and bank charges (net) 4,908 82,928 41,525
Printing and publicity 371,281 410,195 391,318
Reporting and investor relations 26,833 24,447 190,623
Transfer agent fees and mailing expenses 129,095 65,614 146,608
------------------------------------------
4,077,978 2,074,626 2,286,068
Loss for the year (4,330,260) (4,094,556) (3,120,370)
Accumulated deficit at beginning of year (18,165,277) (14,070,721) (10,950,351)
------------------------------------------
Accumulated deficit at end of year $(22,495,537) $(18,165,277) $(14,070,721)
------------------------------------------
------------------------------------------
Loss per share (Note1(h)) $ (0.09) $ (0.11) $ (0.09)
------------------------------------------
------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SILVERADO MINES LTD. F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS
EXPRESSED IN U.S. DOLLARS
<TABLE>
- --------------------------------------------------------------------------------------------------------------
Years Ended November 30 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH PROVIDED BY (USED FOR):
Operations:
Loss for the period $(4,330,260) $ (4,094,556) $(3,120,370)
Items not involving cash:
Employment contract expense 1,910,060 223,273 597,689
Depreciation 475,882 183,646 16,556
Amortization of deferred financing fees 37,200 37,200 12,638
Loss on disposal of buildings, plant and equipment - - 222,188
Amortization of property and development costs 123,504 431,384 418,336
Changes in non-cash operating working capital:
Increase in accounts receivable (10,255) (1,010) -
Decrease (increase) in gold inventory 176,115 1,638,670 (1,582,189)
Increase in deferred employment contract expense (119,231) (230,769) -
Decrease (increase) in prepaid expenses to related parties (448,283) 120,835 67,489
Increase (decrease) in accounts payable and accrued liabilities (155,198) 513,257 (16,207)
------------------------------------------
(2,340,466) (1,178,070) (3,383,870)
Financing:
Shares issued for cash 7,610,000 1,104,600 199,050
Proceeds on issue of convertible debenture - - 2,000,000
Financing fees - - (186,000)
Increase (decrease) in loans payable secured by gold inventory (110,057) 176,568 -
Increase (decrease) in payable to related parties (851,610) 851,610 (47,434)
Decrease in mineral claims payable (351,000) (70,000) -
Increase (decrease) in capital lease obligation (240,619) 85,072 -
------------------------------------------
6,056,714 2,147,850 1,965,616
Investments:
Mineral claims and options (571,214) (32,900) (474,504)
Deferred exploration and development expenditures (1,202,700) (617,118) (1,603,382)
Purchases of equipment (172,714) (354,637) (1,039,318)
------------------------------------------
(1,946,628) (1,004,655) (3,117,204)
Increase (decrease) in cash and cash equivalents 1,769,620 (34,875) (4,535,458)
Cash and cash equivalents at beginning of year 155,849 190,724 4,726,182
------------------------------------------
Cash and cash equivalents at end of the year $ 1,925,469 $ 155,849 $ 190,724
------------------------------------------
------------------------------------------
Supplemental cash flow information
Interest paid $ 242,562 $ 233,942 $ 39,776
------------------------------------------
------------------------------------------
Issue of shares for purchase of mineral property, a non-cash
financing and investing activity $ - $ 43,750 $ 12,500
------------------------------------------
------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SILVERADO MINES LTD. F-5
CONSOLIDATED STATEMENTS OF CHANGES IN SHARE CAPITAL
AND CAPITAL SURPLUS
(EXPRESSED IN U.S. DOLLARS)
Years ended November 30, 1996, 1995, and 1994
<TABLE>
Number of Share Capital
shares Capital Surplus
---------- ----------- -------
<S> <C> <C> <C>
Balance as at November 30, 1993 33,946,243 $25,899,869 $46,352
---------- ----------- -------
Year ended November 30, 1994
Shares issued:
Private placement for cash 700,000 654,150
On exercise of share options: 331,750
for cash 199,050
for employment contract services 288,622
For mineral property 50,000 12,500
---------- ----------- -------
1,081,750 1,154,322 -
---------- ----------- -------
Balance as at November 30, 1994 35,027,993 27,054,191 46,352
---------- ----------- -------
Year ended November 30, 1995
Shares issued:
On exercise of share options: 2,303,500
for cash 1,104,600
for employment contract services 572,670
For mineral property 100,000 43,750
---------- ----------- -------
2,403,500 1,721,020 -
---------- ----------- -------
Balance as at November 30, 1995 37,431,493 28,775,211 46,352
---------- ----------- -------
Year ended November 30, 1996
Shares issued:
On exercise of share options: 18,050,000
for cash 7,180,000
for employment contract services (Note 6 (d)) 2,121,500
Private placement for cash 925,000 430,000
Capital surplus reallocated 46,352 (46,352)
---------- ----------- -------
18,975,000 9,777,852 (46,352)
---------- ----------- -------
Balance as at November 30, 1996 56,406,493 $38,553,063 $ 0
---------- ----------- -------
---------- ----------- -------
</TABLE>
<PAGE>
RECONCILIATION OF THE SHARE CAPITAL AMOUNTS FOR
EMPLOYMENT CONTRACT SERVICE AMOUNT
TO THE STATEMENT OF OPERATIONS' EXPENSE AMOUNT
<TABLE>
1994 1995 1996
<S> <C> <C> <C>
FROM THE STATEMENT OF OPERATIONS
- --------------------------------
Employment contract expense 597,689.00 223,273.00 1,910,060.00
(1994 amount from cash flow statement)
FROM THE SHARE CAPITAL STATEMENT
- --------------------------------
On exercise of share options:
for employment contract services 288,622.00 572,670.00 2,121,500.00
FROM THE BALANCE SHEET
- ----------------------
Deferred contract services (or change in) 0 230,769.00 119,231.00
(1996 = 350,000-230,769=119,231)
---------------------------------------
Difference 309,067.00 (118,628.00) (92,209.00)
Balance of Accrued Employment Contract service 309,067.00 190,440.00 98,231.00
---------------------------------------
Difference from prior year 0 (118,627.00) (92,209.00)
---------------------------------------
</TABLE>
Page 1
<PAGE>
- -------------------------------------------------------------------------------
SILVERADO GOLD MINES LTD. F-6
NOTES TO CONSOLIDATES FINANCIAL STATEMENTS
(EXPRESSES IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements for the years ended November
30, 1996, 1995 and 1994 are prepared in conformity with accounting
principles generally accepted in the United States.
(a) CONTINUING OPERATIONS
During the year ended November 30, 1996, the Company focused its
activities on the Fairbanks area, explored and drilled several sites
on its Ester Dome property, acquired two new properties, and continued
production, on a limited basis, on other claims. The Company
generated $7,610,000 in additional capital through a private placement
and the exercise of options, thereby addressing its previous working
capital deficiency of $1,470,750. At November 30, 1996, the Company
had $2,979,697 in current assets, primarily cash, which management
believes will permit it to continue its present operations for the
next fiscal year. The ability of the Company to continue operations
and recover amounts recorded as mineral properties, development, and
buildings, plant and equipment is dependent on obtaining additional
capital to fund its liabilities as they come due and to fund its
operations, and exploration and development activities, the discovery
of recoverable ore on its properties, and the attainment of profitable
commercial operations.
(b) FUNCTIONAL CURRENCY
The Company's reporting currency, and currency of measurement, is the
U.S. dollar.
(c) BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of
Silverado Mines (U.S.), Inc., a wholly owned subsidiary. All
significant intercompany accounts and transactions have been
eliminated.
(d) GOLD INVENTORY
Gold Inventory is valued at the lower of weighted average cost and
estimated net realizable value. At November 30, 1996 and 1995, gold
inventory is valued at net realizable value. Any write-down of
inventory to net realizable value is included in mining and processing
costs.
(e) MINERAL PROPERTIES AND DEVELOPMENT
The Company confines its exploration activities to areas from which
gold has previously been produced or to properties which are
contiguous to such areas and have demonstrated mineralization.
Accordingly, the Company capitalizes costs of acquiring, exploring and
developing mineral claims and options until such time as the
properties are placed into production or abandoned; at that time costs
are amortized or written off. On an on-going basis, the Company
evaluates each property based on results to date to determine the
nature of exploration work that is warranted in the future. If there
is little prospect of further work on a property being carried out,
the deferred costs related to that property are written down to the
estimated amount recoverable. The "estimated amount recoverable" is
based on the future cash flows expected to result from production from
the property and its eventual disposition.
The amounts shown for mineral properties and development which have
not yet commenced commercial production represent costs incurred to
date, net of recoveries from developmental production, and are not
intended to reflect present or future values.
<PAGE>
- -------------------------------------------------------------------------------
SILVERADO GOLD MINES LTD. F-7
NOTES TO CONSOLIDATES FINANCIAL STATEMENTS
(EXPRESSES IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
- -------------------------------------------------------------------------------
Amortization of the deferred exploration and development costs of
properties in production is provided during periods of production
using the straight-line method based on an estimated economic life of
the ore reserves.
The Company's accounting policy for reclamation expenses is contained
in note 9(e).
(f) BUILDINGS, PLANT AND EQUIPMENT
Buildings, plant and equipment are stated at cost. Depreciation is
provided on buildings, plant and equipment using the straight-line
method based on an estimated life of 3 to 20 years. The Company
anticipates reactivating the grant mine, and as a result, has started
to again depreciate the assets accordingly.
(g) FOREIGN CURRENCIES
Monetary assets and liabilities denominated in foreign currencies are
translated into U.S. funds at the rate of exchange in effect at the
year end. Revenue and expense transactions are translated at the
average rates in effect during the year except depreciation of plant
and equipment and amortization of mineral properties and development
which are translated at historical rates. Foreign exchange gains and
losses are included in the determination of income.
(h) LOSS PER SHARE
Loss per share has been calculated based on the weighted average
number of shares outstanding during the year. Loss per share does not
include the effect of the potential conversions as their effect would
be anti-dilutive. The weighted average number of shares outstanding
is as follows:
Year to November 30, 1996 45,611,698
Year to November 30, 1995 35,678,501
Year to November 30, 1994 34,756,800
(i) REVENUE RECOGNITION
Gold sales are recognized when title passes to the purchaser.
(j) NEW ACCOUNTING STANDARDS
Statement of Financial Accountings Standards No. 121, ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS TO BE DISPOSED OF (SFAS 121) was
issued in March, 1995, by the Financial Accounting Standards Board. It
requires that long-lived assets and CERTAIN identifiable intangibles
to be held and USED BY an entity be REVIEWED for impairment whenever
events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. SFAS 121 is required to be adopted
for fiscal years beginning after December 15, 1995. Management
believes this statement will not have a material effect upon the
carrying value of the Company's assets.
Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION (SFAS 123), was issued by the Financial
Accounting Standards Board in October, 1995. SFAS 123 establishes
financial accounting and reporting standards for stock-based employee
compensation plans. This statement defines a fair value based method
of accounting for employee
<PAGE>
- --------------------------------------------------------------------------------
SILVERADO GOLD MINES LTD. F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1996, 1995, AND 1994
- --------------------------------------------------------------------------------
stock option or similar equity instruments, and encourages all entities
to adopt that method of accounting for all of their employee stock
compensation plans. However, it also allows an entity to continue to
measure compensation cost for those plans using the intrinsic value
based method of accounting prescribed by APB OPINION NO. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. Entities electing to remain
with the accounting in Opinion 25 must make proforma disclosures of
net income and, if presented, earnings per share, as if the fair value
based method of accounting defined by SFAS 123 had been applied.
SFAS 123 is applicable to fiscal years beginning after December 15,
1995. The Company currently accounts for its equity instruments using
the accounting prescribed by Opinion No. 25. The company does not
currently expect to adopt the accounting prescribed by SFAS 123;
However, the Company will include the disclosures required by SFAS 123
in future consolidated financial statements.
2. MINERAL PROPERTIES AND DEVELOPMENT
a. Mineral Properties
ESTER DOME PROPERTIES, FAIRBANKS MINING DISTRICT, ALASKA
--------------------------------------------------------
These properties, which include the Grant Mine, Range Minerals #1,
Range Minerals #2, St. Paul / Barelka, and Dobb's properties, make up
a contiguous group of claims.
MARSHALL DOME PROPERTY, FAIRBANKS MINING DISTRICT, ALASKA
---------------------------------------------------------
The Company acquired this property in 1995. It covers an area of two
and one-half square miles, and is located eighteen miles northeast of
Fairbanks.
WHISKEY GULCH PROPERTY, FAIRBANKS MINING DISTRICT, ALASKA
---------------------------------------------------------
The Company acquired four claims collectively known as "Whiskey Gulch"
in 1996. These claims are located very near the Company's Marshall
Dome property.
CHATANIKA PROPERTY, FAIRBANKS MINING DISTRICT, ALASKA
-----------------------------------------------------
The Company staked 774 mining claims and 24 prospecting sites in 1996.
This property covers an area of 53.86 square miles, and is located
approximately 20 miles northwest of Fairbanks.
NOLAN PROPERTIES, WISEMAN MINING DISTRICT, ALASKA
-------------------------------------------------
These properties, which include the Nolan Placer, Nolan Lode,
Thompson's Pup, Dionne (Mary's Bench), and Smith Creek properties,
make up a contiguous group of claims.
HAMMOND PROPERTY, WISEMAN MINING DISTRICT, ALASKA
-------------------------------------------------
The Company acquired this property, adjoining the Nolan Gold
Properties, in 1994.
EAGLE CREEK PROPERTY, FAIRBANKS MINING DISTRICT, ALASKA
-------------------------------------------------------
The Company assigned its interest and obligations related to this
property to Can-Ex Resources (U.S.), Inc. ("Can-Ex"), a related
company (see Note 8), and retained a 15 percent net profit interest
from production to a maximum of $5,000,000.
FRENCH PEAK PROPERTY, OMINECA MINING DISTRICT, BRITISH COLUMBIA
---------------------------------------------------------------
Anselmo Holdings Ltd., a related company, has a 10 percent net profits
interest in the property.
<PAGE>
- --------------------------------------------------------------------------------
SILVERADO GOLD MINES LTD. F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1996, 1995, AND 1994
- --------------------------------------------------------------------------------
PROPERTY COMMITMENTS
--------------------
Minimum aggregate future expenditures required in the next five years to
maintain the properties in good standing are as follows:
YEAR COMMITMENT
---- ----------
----------------------------------
1997 $393,920
1998 423,920
1999 363,920
2000 213,220
2001 268,240
----------------------------------
The Company is also required to pay $179,000 in 1997 with respect to the
Dionne (Mary's Bench) property. This amount is not at the discretion of
the Company, and accordingly, has been recorded as a liability in these
financial statements.
(b) CLAIMS AND OPTIONS AND DEFERRED EXPLORATION AND DEVELOPMENT EXPENDITURES
Cumulative claims and options and deferred exploration and development
expenditures are as follows:
<TABLE>
Net Book Value 1996 1996 Net Book Value
ALASKA Nov. 30, 1995 Expenditures Amortization Nov. 30, 1996
------ ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Ester Dome Gold Project $ 4,573,782 $ 595,426 $ - $ 5,169,208
Marshall Dome 138,531 40,497 - 179,028
Nolan Gold Project 4,118,636 508,055 (36,500) 4,590,191
Hammond Property 253,808 17,048 - 270,856
Eagle Creek Royalty Interest 126,320 7,027 - 133,347
Whiskey Gulch - 21,791 - 21,791
Chatanika - 12,861 - 12,861
BRITISH COLUMBIA
----------------
French Peak 261,110 - - 261,110
----------------------------------------------------------
9,472,187 1,202,705 (36,500) 10,638,392
----------------------------------------------------------
PLUS:
Cumulative net mineral
claims and option payments 1,106,906 571,209 (87,004) 1,591,111
----------------------------------------------------------
$10,579,093 $1,773,914 $(123,504) $12,229,503
----------------------------------------------------------
----------------------------------------------------------
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
SILVERADO GOLD MINES LTD. F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
- -------------------------------------------------------------------------------
3. BUILDINGS, PLANT AND EQUIPMENT
Buildings, plant and equipment primarily include the mill facility and
equipment of the Ester Dome/Grant Mine Gold Project and mining
equipment and camp facilities at the Nolan Gold Project.
<TABLE>
1996 1995
Cost Accumulated Net Book Net Book
Depreciation Value Value
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Grant Mine Mill Equipment $2,215,680 $(377,754) $1,837,926 $2,019,700
Nolan Gold Project Mining Equip 60,757 (14,483) 46,274 43,013
Mining Equipment 1,768,612 (419,837) 1,348,775 1,444,127
Other Equip, Leasehold Improv 378,381 (108,174) 270,207 299,510
----------------------------------------------------
Totals: $4,423,430 $(920,248) $3,503,182 $3,806,350
----------------------------------------------------
----------------------------------------------------
</TABLE>
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of:
1996 1995
---------------------
Accounts payable $118,858 $360,941
Accrued interest 64,065 66,411
Accrued employment contract expense 98,231 190,440
Accrued reclamation expense 70,000 100,000
---------------------
$351,154 $717,792
---------------------
---------------------
5. DEBENTURE
In July 1994, the Company issued a convertible callable debenture with
interest payable at the rate of 8.0% per annum on December 31 and June
30 each year. The debenture is unsecured and is due July 2, 1999,
subject to prior redemption or conversion. The debenture may be
converted in whole or in part by the holder into common shares of the
Company at a conversion price of $2.00 U.S. per share (the "Conversion
Price"). In addition, conversion of the debenture may be called by
the Company provided that the average trading price of the Company's
common Stock has exceeded 125% of the Conversion Price for the period
of 20 consecutive trading days. Financing fees paid related to the
debenture have been deferred and are being amortized on a straight
line basis over the debenture term of 60 months. The fair value of
the debenture is not significantly different than the carrying value.
<PAGE>
- -------------------------------------------------------------------------------
SILVERADO GOLD MINES LTD. F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
- -------------------------------------------------------------------------------
6. SHARE CAPITAL
(a) COMMON SHARES
Authorized: 75,000,000 (1995: 50,000,000) common shares, without par value.
(b) DIRECTORS' OPTIONS
Directors' options for 450,000 shares exercisable at Cdn. $0.37 per share
and which expire June 1, 1997, were outstanding at November 30, 1996, 1995
and 1994. During the year ended November 30, 1995, the Company authorized
the issuance of options to directors and officers to acquire 1,300,000
shares at $0.88 (U.S.) per share exercisable until August 14, 2004.
(c) WARRANTS
In conjunction with a private placement of 600,000 shares, the Company has
offered a warrant for 600,000 shares at $0.60 per share exercisable until
March 6, 1998, and a warrant for 600,000 shares at $0.70 per share
exercisable until September 6, 1999.
WARRANTS:
<TABLE>
Amount
Cash Market credited to
Balance Issued Exercised Canceled Balance Exercise Received Price Share capital Exp
Nov 30, 95 in 1996 in 1996 in 1996 Nov 30, 96 Price on Issue on issue on issuance date
---------- --------- --------- -------- ---------- -------- -------- -------- ------------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- 600,000 - - 600,000 $0.60 - $0.63 - 3/98
- 600,000 - - 600,000 $0.70 - $0.63 - 9/99
------------------------------------------------------ -------- -------------------
- 1,200,000 - - 1,200,000 - -
--------- ---------
</TABLE>
(d) EMPLOYEE OPTIONS AND OTHER SHARE TRANSACTIONS
From time to time, the Company issues options for the purchase of common
shares to selected part time independent contractors as sole compensation
for contracted services. The options are exercisable either at the date
the options are granted, or in increments over the terms of the employment
contracts.
The Company accounts for stock compensation arising from these options in
accordance with APB 25. If the market price of the Company's shares
exceed the exercise price of the options at the date the options are
granted, then this excess is accrued and expensed as contracted services
over the term of the employment contracts on a straight line basis. When
the options are exercised, share capital is credited based on the market
price at the date the options were granted.
<PAGE>
- -------------------------------------------------------------------------------
SILVERADO GOLD MINES LTD. F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
- -------------------------------------------------------------------------------
EMPLOYEE OPTIONS AND SHARE TRANSACTIONS:
<TABLE>
Amount
Cash Market Credited to
Balance Granted Exercised Canceled Balance Exercise Received Price Share Capital Exp
Nov 30, 95 in 1996 in 1996 in 1996 Nov 30, 96 Price on Issue on Issue on Issuance Date
- ---------- ------- --------- -------- ---------- -------- ---------- -------- ------------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
800,000 - 800,000 - - $0.30 $ 240,000 $0.50 $ 400,000 n/a
214,750 - - 104,250 110,500 $0.60 - $1.47 - 2/97
250,000 - - 110,000 140,000 $0.94 - $0.94 - 7/97
20,000 - - - 20,000 $0.75 - $0.75 - 8/97
20,000 - - - 20,000 $0.75 - $0.75 - 8/97
- 1,000,000 1,000,000 - - $0.38 380,000 $0.53 530,000 n/a
- 400,000 400,000 - - $0.30 120,000 $0.53 212,000 n/a
- 300,000 300,000 - - $0.50 150,000 $0.75 225,000 n/a
- 150,000 150,000 - - $0.50 75,000 $0.63 94,500 n/a
- 50,000 50,000 - - $0.50 25,000 $0.50 25,000 n/a
- 500,000 500,000 - - $0.50 250,000 $0.59 295,000 n/a
- 500,000 500,000 - - $0.50 250,000 $0.50 250,000 n/a
- 500,000 500,000 - - $0.50 250,000 $0.50 250,000 n/a
- 500,000 500,000 - - $0.50 250,000 $0.63 315,000 n/a
- 500,000 500,000 - - $0.50 250,000 $0.50 250,000 n/a
- 1,000,000 1,000,000 - - $0.20 200,000 $0.53 530,000 n/a
- 300,000 300,000 - - $0.20 60,000 $0.50 150,000 n/a
- 700,000 700,000 - - $0.20 140,000 $0.50 350,000 n/a
- 1,000,000 1,000,000 - - $0.40 400,000 $0.50 500,000 n/a
- 1,000,000 1,000,000 - - $0.40 400,000 $0.50 500,000 n/a
- 3,000,000 3,000,000 - - $0.40 1,200,000 $0.50 1,500,000 n/a
- 1,100,000 1,100,000 - - $0.45 495,000 $0.50 550,000 n/a
- 900,000 900,000 - - $0.30 270,000 $0.50 450,000 n/a
- 3,000,000 3,000,000 - - $0.45 1,350,000 $0.50 1,500,000 n/a
- 20,000 - - 20,000 $0.50 - $0.53 - 10/97
- 100,000 - - 100,000 $0.45 - $0.59 - 10/98
- 180,000 - - 180,000 $0.50 - $0.63 - 11/97
- 50,000 - - 50,000 $0.50 - $0.56 - 11/97
- 50,000 - - 50,000 $0.60 - $0.56 - 11/97
- 2,000,000 850,000 - 1,150,000 $0.50 425,000 $0.50 425,000 7/97
- 1,000,000 - - 1,000,000 $0.60 - $0.56 - 9/97
- ----------------------------------------------------- ---------- ---------------------
1,304,750 19,800,000 18,050,000 214,250 2,840,500 $7,180,000 $9,301,500
- --------- ---------- ---------- ------- --------- ---------- ----------
</TABLE>
Subsequent to the year end, options to purchase 1,150,000 common shares at
$0.50 per share, described above, were amended to $0.12 per share, and
exercised for a total amount of $138,000.
Subsequent to the year end, options to purchase 1,000,000 common shares at
$0.60 per share, described above, were amended to $0.12 per share, and
exercised for a total amount of $120,000.
Subsequent to the year end, options granted to purchase 50,000 common shares
at $0.50 per share, and 50,000 shares at $0.60, were amended to 150,000
shares at $0.50, and 150,000 shares at $0.60, respectively. Each amended
option had a fair market value of $0.40.
<PAGE>
- -------------------------------------------------------------------------------
SILVERADO GOLD MINES LTD. F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
- -------------------------------------------------------------------------------
Subsequent to the year end, options were granted and exercised to
purchase 515,000 common shares at $0.15 per share, for a total amount
of $77,250.
As at January 31, 1997, the Company has reserved 5,469,750 shares for
issuance with respect to unexercised options in the Directors' and
Employees' Option Plans.
The Company has reserved 1,200,000 shares for issuance with respect to
the potential exercise of warrants.
The Company has reserved 1,000,000 shares for issuance upon the
potential conversion of a convertible debenture.
7. RELATED PARTY TRANSACTIONS
The Company has had related party transactions with Tri-Con Mining
Ltd., Tri-Con Mining, Inc., Tri-Con Mining Alaska Inc. (formerly
Tri-Con Mining, Arizona, Inc.), collectively the "Tri-Con Group"; and
Anselmo Holdings Ltd., all of which are controlled by a director of
the Company, and Kintana Resources Ltd., a company related by virtue
of common directors.
The Tri-Con Group carries on business as operations and exploration
and development contractors, and has been employed by the Company
under continuous contract since 1972 to carry out all its field work
and to provide administrative and management services. Under the
current contract, work is charged at cost plus 8 percent for
operations, and cost plus 25 percent for exploration and development.
Cost includes a 12 percent charge for office overhead. Services of
the directors of the Tri-Con Group are charged at the rate of Cdn.
$100 per hour. Services of the Directors of the Tri-Con Group who
are also Officers and Directors of the Company are not charged.
The aggregate amounts paid to the Tri-Con Group each year by category,
including amounts relating to the Grant Mine Project and Nolan
properties, for disbursements and for services rendered by the Tri-Con
Group personnel working on the Company's projects, and including
interest charged on outstanding balances at the Tri-Con Group's
borrowing costs are as follows:
<TABLE>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operations and Field Services $ 715,558 $ 420,296 $ 149,108
Exploration and Development Services $ 596,561 $3,841,471 $5,503,955
Administrative and Management Services $ 323,108 $ 190,009 $ 61,785
---------- ---------- ----------
$1,635,227 $4,451,776 $5,714,848
Amount of total charges in excess of
Tri-Con costs incurred $ 163,493 $ 281,441 $ 396,798
Excess amount charged as a percentage
of actual costs incurred 11.1% 6.7% 7.5%
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
SILVERADO GOLD MINES LTD. F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
- -------------------------------------------------------------------------------
In 1989, the Company assigned its interest in and obligations related to
the Eagle Creek property to Can-Ex Resources (U.S.), Inc., a subsidiary of
Kintana Resources Ltd., for a net profit interest from production of 15
percent to a maximum of $5,000,000 U.S.
Anselmo Holdings Ltd. has a right to 10 percent of net profits derived from
the French Peak Property.
At November 30, 1996, $466,688 is receivable from the Tri-Con Group,
representing funds advanced for work in progress.
At November 30, 1995, $851,610 was payable to the Tri-Con Group.
8. INCOME TAXES
At November 30, 1996, the Company has the following losses carried forward
available to reduce future years' income for tax purposes. The tax effect
of these losses has not been recorded in the accounts.
Losses carried forward for U.S., income tax purposes are available until:
YEAR LOSSES CARRIED FORWARD
---- ----------------------
1997 987,000
1998 546,000
1999 667,000
2000 1,235,000
2001 2,749,000
2002 1,178,000
2003 1,524,000
2004 1,161,000
2005 742,000
2006 431,000
2007 747,000
2008 2,101,000
2009 1,960,000
2010 2,400,000
2011 326,000
-----------
OPERATING LOSSES CARRIED FORWARD FOR TAX PURPOSES: $18,754,000
The Company follows Financial Accounting Standards Board Statement No.
109, ACCOUNTING FOR INCOME TAXES. As indicated, the Company has
significant unrecognized loss carry forwards for income tax purposes.
As there is no certainty as to the utilization of the loss carry
forwards, the benefit attributable thereto is fully offset by the
valuation allowance.
9. COMMITMENTS AND CONTINGENCIES
<PAGE>
- -------------------------------------------------------------------------------
SILVERADO GOLD MINES LTD. F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
- -------------------------------------------------------------------------------
(a) On January 20, 1994, the Company entered into a lease agreement for office
premises for a term of 10 years commencing April 1, 1994, with an
approximate annual rate of $120,000 (Cdn) including operating costs.
(b) During 1994 and 1995 the Company entered into capital leases for mining
equipment with the following future minimum lease payments:
Year ending November 30 - 1997 $ 78,570
1998 78,570
1999 20,815
--------
Total minimum lease payments 177,955
Less: interest payable (20,802)
--------
157,153
Less: current portion (64,939)
--------
$ 92,214
--------
(c) The Company has entered into an unconsummated agreement in principle with
Homestake Mining Company to possibly vend its Whiskey Gulch and Marshall
Dome properties in return for annual cash payments, annual expenditures on
the properties, and a Net Smelter Return to the Company in the event of
the production and sale of gold or other valuable minerals.
(d) The Company has entered into compensation agreements with the three
directors of the Company. The agreements provide for severance
arrangements where a change of control of the Company occurs, as defined,
and the directors are terminated. The compensation payable to the
directors aggregates $6,200,000 plus the amount of annual bonuses and
other benefits that they would have received in the eighteen months
following the terminations, though this amount was subsequently reduced to
$4,200,000.
(e) The Company's operations are affected by federal, state, provincial and
local laws and regulations regarding environmental protection. The
Company estimates the cost of reclamation based primarily upon environmental
and regulatory requirements. These costs are accrued annually and the
accrued liability is reduced as reclamation expenditures are made. Details
of the Company's accrued reclamation liability at November 30, 1996 and
November 30, 1995 are as follows:
1996 1995
---- ----
Balance, beginning of year $ 100,000 $ 100,000
Cost incurred in year (61,993) (29,397)
Amount expensed in year 31,993 29,397
--------- ---------
Balance, end of year $ 70,000 $ 100,000
10. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with the
presentation adopted in 1996.
<PAGE>
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
The information required by Part III of this report:
Item 10 Directors and Executive Officers,
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners of Management, and
Item 13 Certain Relationships and Related Transactions
is incorporated herein by reference from the Company's definitive proxy
statement with respect to the 1997 Annual Meeting of the Shareholders to be held
in May, 1997. The Company's definitive proxy statement will be filed with the
Securities and Exchange Commission pursuant to Rule 14a-6(c) promulgated under
THE SECURITIES EXCHANGE ACT OF 1934 not later than 120 days after the end of the
fiscal year covered by this report.
