<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(x) Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
or
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ____ to ____
Commission File Number 1-9569
FMC Gold Company
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 88-0226676
--------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5011 Meadowood Way, Reno, Nevada 89502
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(702) 827-3777
-----------------------------
Registrant's telephone number,
including area code
Indicate by check mark whether 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 1996
--------------------------------------- -----------------------------------
Common Stock, par value $0.01 per share 73,526,895
<PAGE>
PART 1 - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
FMC Gold Company
- ----------------
Consolidated Statements of Operations (Unaudited)
- -------------------------------------------------
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months
Ended March 31
------------------
1996 1995
------- -------
<S> <C> <C>
Sales $17,805 $ 9,138
Costs and expenses
Cost of sales 17,290 9,009
Exploration costs 1,459 4,008
Selling, general and
administrative expenses 1,367 1,322
------- -------
Total costs and expenses 20,116 14,339
Operating loss (2,311) (5,201)
Interest income 1,241 1,641
------- -------
Loss before income taxes (1,070) (3,560)
Provision for income taxes - -
------- -------
Net loss $(1,070) $(3,560)
======= =======
Loss per common share $ (0.01) $ (0.05)
======= =======
Number of common shares used in
loss per share computations 73,488 73,484
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
FMC Gold Company
- ----------------
Consolidated Balance Sheets
- ---------------------------
(In thousands, except per share data)
March 31
1996 December 31
Assets (Unaudited) 1995
- ------ ----------- -----------
<S> <C> <C>
Current assets:
Loans due from FMC Corporation $ 78,500 $ 80,826
Trade receivables, net 177 4,859
Inventories (Note 2) 16,307 14,792
Other current assets 4,769 4,096
--------- ---------
Total current assets 99,753 104,573
--------- ---------
Property, plant and equipment, at cost 230,165 226,149
Less accumulated depreciation (117,349) (112,157)
--------- ---------
Net property, plant and equipment 112,816 113,992
Other assets 4,862 6,612
--------- ---------
Total assets $ 217,431 $ 225,177
========= =========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Outstanding checks in excess of bank balances $ 367 $ 1,651
Accounts payable, trade and other 4,944 7,108
Accrued and other liabilities 5,046 7,309
Amounts due to FMC Corporation 810 2,275
Income taxes payable 2,136 2,270
--------- ---------
Total current liabilities 13,303 20,613
--------- ---------
Other long-term liabilities 10,263 9,843
Stockholders' equity:
Preferred stock, $1.00 par value, authorized
100,000 shares; none issued or outstanding -- --
Common stock, $0.01 par value, authorized
150,000,000 shares; issued and outstanding
73,526,895 shares and 73,484,395 shares at
March 31, 1996 and December 31, 1995,
respectively 735 735
Capital in excess of par value 68,823 68,609
Retained earnings 124,307 125,377
--------- ---------
Total stockholders' equity 193,865 194,721
--------- ---------
Total liabilities and stockholders' equity $ 217,431 $ 225,177
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
FMC Gold Company
- ----------------
Consolidated Statements of Cash Flows (Unaudited)
- -------------------------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months
Ended March 31
------------------------
1996 1995
------------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,070) $ (3,560)
------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for depreciation 5,225 3,210
(Increase) decrease in assets:
Trade receivables 4,682 1,334
Inventories (1,515) (1,261)
Amounts due from FMC Corporation -- (590)
Other current assets (673) (553)
(Decrease) increase in liabilities:
Accounts payable, trade and other (2,164) 1,024
Accrued and other liabilities (2,263) 1,031
Amounts due to FMC Corporation (1,465) (594)
Income taxes payable (101) 10
Other long-term liabilities 420 (635)
------- --------
Net cash provided by (used in) operating activities 1,076 (584)
------- --------
Cash flows from investing activities:
Capital spending (4,059) (15,664)
Disposal of property, plant and equipment, net 10 399
(Increase) decrease in other assets 1,750 2
------- --------
Net cash used in investing activities (2,299) (15,263)
------- --------
Cash flows from financing activities:
Proceeds from sale of common stock 181 --
------- --------
(Decrease) in cash and cash equivalents (1,042) (15,847)
Cash and cash equivalents, beginning of period 79,175 118,386
------- --------
Cash and cash equivalents, end of period $78,133 $102,539
======= ========
</TABLE>
Supplemental disclosure of cash flow information:
- ------------------------------------------------
Cash and cash equivalents consist of cash (less outstanding checks in excess of
bank balances) and loans due from FMC Corporation.
No income taxes were paid or refunded during the three month periods ended March
31, 1996 or 1995.
See accompanying notes to consolidated financial statements.
4
<PAGE>
FMC Gold Company
- ----------------
Notes to Consolidated Financial Statements (Unaudited)
- ------------------------------------------------------
Note 1: Financial Information
- ------------------------------
The consolidated balance sheet of FMC Gold Company and its subsidiaries ("FMC
Gold" or the "company") at March 31, 1996, and the related consolidated
statements of operations and of cash flows for the interim periods ended March
31, 1996 and 1995, have been reviewed by the company's independent accountants.
The review is discussed more fully in their report included herein. In the
opinion of management, such financial statements have been prepared in
conformity with generally accepted accounting principles and reflect all
adjustments necessary for a fair statement of the results of operations for the
interim periods. All such adjustments are of a normal recurring nature. The
results of operations for the three-month periods ended March 31, 1996 and 1995
are not necessarily indicative of the results of operations for the full year.
The accounting policies followed by the company are set forth in Note 1 to the
company's financial statements in the 1995 FMC Gold Company Annual Report, which
is incorporated by reference in the company's 1995 Annual Report on Form 10-K.
Note 2: Inventories
- --------------------
Inventories (at cost) consist of the following:
<TABLE>
<CAPTION>
(In Thousands)
March 31 December 31
1996 1995
-------- -----------
<S> <C> <C>
Gold and silver dore $ 1,338 $ 638
Work in process 12,114 11,368
Materials and supplies 2,855 2,786
------- -------
$16,307 $14,792
======= =======
</TABLE>
Gold and silver inventories are in the form of dore which is suitable for
delivery to precious metal treatment facilities. These inventories are
generally sold to and further processed by these facilities into forms suitable
for end uses.
Heap leach pad ore increased to $12.1 million at March 31, 1996, from $11.4
million at December 31, 1995. The increase represents the cost of loading ore on
the heap leach pads at the Beartrack mine, and includes labor, materials and
other production costs. Mining at the Beartrack operation commenced in August
1994, and at March 31, 1996, there were approximately 5.4 million tons of ore
under leach containing approximately 103,000 ounces of gold.
Note 3: Accounting Standards Adopted
- -------------------------------------
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of"
was adopted by the company effective January 1, 1996. SFAS No. 121 establishes
criteria for recognizing, measuring and disclosing impairments of long-lived
assets. The adoption of SFAS No. 121 did not have a material impact on the
company's consolidated financial position or results of operations.
The company also adopted SFAS No. 123, "Accounting for Stock-Based
Compensation," effective January 1, 1996. Upon adoption of SFAS No. 123, the
company has continued its current accounting for employee stock-based
compensation plans in accordance with Accounting Principles Board Opinion No.
25, as permitted under SFAS No. 123, and, if material, will disclose the pro
forma effect of the fair value accounting method in the notes to its December
31, 1996 consolidated financial statements.
5
<PAGE>
Note 4: Potential Sale of Company
- ----------------------------------
In September 1995, the company engaged the investment banking firm of CIBC Wood
Gundy Securities Inc. ("Wood Gundy") to act as its financial adviser in
connection with the possible sale of the company. On February 9, 1996, the
company announced that it would augment its previously-announced sale process to
include a range of options based on existing gold equity market conditions and
interest in individual properties. The company has retained J.P. Morgan & Co.,
Inc. to join Wood Gundy as financial advisers for this process. At this time,
there can be no assurance as to whether any transaction will result from the
company's work with Wood Gundy and J.P. Morgan & Co., Inc. or as to the value,
timing or structure of any such transaction. Management's decisions with respect
to the value or structure of a potential sale could have a material impact on
the valuation of the company and its assets.
Note 5: Acquisitions and Divestitures
- --------------------------------------
On November 30, 1995, the company's 100 percent interest in FMC Paradise Peak
Corporation was sold to Arimetco, Inc. for $4 million in the form of cash and a
note receivable. The company ceased production at the Paradise Peak mine in
early 1995 and all remaining reclamation liability was assumed by Arimetco, Inc.
as of the date of sale.
In conjunction with the company's purchase of the remaining 14 percent interest
in the Beartrack joint venture from MINEX in 1994, payments are due to MINEX in
$1.0 million installments in 1996 and 1997, and $0.5 million installments in
1998 and 1999.
Note 6: Commitments and Contingent Liabilities
- -----------------------------------------------
See Part II, Item 1 - "Legal Proceedings" for details regarding ongoing
litigation affecting the company.
In order to minimize exposure to decreasing prices for portions of its gold
production, the company has periodically hedged future gold production by
entering into contracts, such as fixed forward sales contracts and put options.
Costs associated with the purchase of certain hedge instruments for open put
options included in other assets were $3.1 million as of March 31, 1996 and $3.4
million as of December 31, 1995. These costs were deferred and are recognized in
the period the revenues related to the hedged production are recorded.
Note 7: Subsequent Event
- -------------------------
In October 1995, the Department of Taxation of the State of Nevada filed a claim
against the company for Net Proceeds of Mine Tax of $1.5 million related to
Paradise Peak operations. In November 1995, the company entered into discussions
with the State of Nevada regarding the basis for the State's claim and
ultimately filed a petition for redetermination and requested an appearance
before a hearing officer of the State of Nevada Department of Taxation. A
hearing took place on March 14, 1996 at which the company presented its case. On
April 8, 1996, the company was notified that the State of Nevada had denied the
company's request for redetermination. The company is entitled to, and plans to,
appeal the State's decision. The company is unable to predict the outcome of the
appeal process, but plans to pay the State's claim, adjusted for a previous
year's credit, under protest, and has consequently accrued the amount of the net
payment.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
- -------------
FINANCIAL CONDITION
-------------------
Cash to meet the company's operating needs, finance capital expenditures and
fund exploration activities was provided from existing cash reserves, including
loans due from FMC Corporation ("FMC"). Any cash generated in excess of these
requirements is loaned to FMC at varying maturities, repayable on demand. As of
March 31, 1996, loans to FMC totaled $78.5 million, and management believes
FMC's cash on hand and available credit lines are more than adequate to allow
for repayment of these loans.
Known cash requirements for the remainder of 1996 are approximately $13 million
for planned capital expenditures, approximately $7 million for exploration costs
and $3.7 million for dividends (if declared), based on the current dividend
rate. The company expects to fund these requirements from existing cash and cash
equivalents (including loans due from FMC) and cash flow from operations.
On March 31, 1994, FMC increased its ownership interest in the company to 80
percent. Thereafter, the company has been included in FMC's consolidated federal
tax return. Under a tax-sharing agreement, the company pays to FMC amounts
generally equal to the tax the company would have been required to pay had it
filed a separate return, and FMC pays to the company amounts generally equal to
any tax benefits realized through carryover on a separate return basis.
During the quarter ended March 31, 1996, the company issued 42,500 shares of its
common stock at $4.25 per share in conjunction with the exercise of common stock
options. The company realized a related income tax benefit of $33,000 which was
credited to capital in excess of par value.
First Quarter of 1996 Compared with First Quarter of 1995
- ---------------------------------------------------------
Sales in the first quarter of 1996 were $17.8 million, $8.7 million higher than
last year's quarter, reflecting the addition of production from the Beartrack
mine. Realized gold prices increased to $402 per ounce from $378 per ounce in
1995. Net loss was $1.1 million, or $(0.01) per share, compared with a net loss
of $3.6 million, or $(0.05) per share in 1995.
First quarter production was 47,000 gold equivalent ounces compared with 24,000
gold equivalent ounces in the first quarter of 1995, reflecting the start-up of
the Beartrack mine. At the Beartrack mine, which began full scale production in
July 1995, first quarter 1996 production was 27,000 ounces. The mine moved 758
thousand tons of ore in the quarter at an average grade of 0.027 ounces per ton.
As anticipated, harsh winter weather had a negative impact on mining early in
the quarter. Production is expected to steadily increase during the warmer
spring and summer months.
The company's 30 percent share of production from the Jerritt Canyon mine was
20,000 ounces in 1996, down 2,000 ounces from the first quarter of 1995 due to
lower throughput resulting from inclement winter weather. Record snowfalls
caused a loss of 11 days of open pit mining and restricted open pit mining for
an additional 15 days. Improved mill recoveries helped offset most of the
impact of the lower throughput.
Production from the Paradise Peak mine ceased in the first quarter of 1995 and
the company sold the stock of FMC Paradise Peak Corporation to Arimetco, Inc. on
November 30, 1995.
Cost of sales increased $8.3 million to $17.3 million for the period, reflecting
the added costs from the Beartrack mine. Costs at the Beartrack mine were $7.8
million for the quarter. Cost of sales of $9.5 million at the Jerritt Canyon
mine were higher compared with the prior year by $0.9 million due to a shift in
production from open pit to underground mining as well as difficult winter
conditions.
7
<PAGE>
Average cash production costs of $252 per gold equivalent ounce in the first
quarter of 1996 increased from $221 per gold equivalent ounce in the first
quarter of 1995. Cash costs at Beartrack were affected by difficult winter
conditions, averaging $183 per gold equivalent ounce. Cash costs at Jerritt
Canyon increased from $228 per gold equivalent ounce to $343 per gold equivalent
ounce due to difficult mining conditions as a result of treacherous weather and
a shift in production from open pit to underground resources.
Exploration costs in the first quarter of 1996 were $1.5 million compared to
prior year spending of $4.0 million. In the first quarter of 1996, the lower
level of spending reflected the timing of spending as well as scaled-back
activities pending the outcome of the ongoing strategic review process that may
result in the sale of FMC Gold or its assets. The majority of the exploration
spending in the current quarter was focused on the company's El Penon project in
Chile. Exploration spending is expected to accelerate over the balance of the
year, with a significant portion of the projected spending directed at
activities in Chile and the Rossi project on the Carlin Trend in Nevada.
Selling, general and administrative expenses were level with prior year at $1.4
million, due to ongoing cost reduction efforts and lower allocations from FMC.
The company remains debt free with interest income of $1.2 million earned on
cash loaned to FMC. Interest income was $0.4 million lower than in 1994 due to
lower loan balances.
The company did not record a tax benefit in the current quarter on the pre-tax
loss as it can not utilize the benefit on a stand-alone basis. The current
quarter's results are not necessarily indicative of the expected full year
results. Should the company generate pre-tax earnings during 1996, it does not
expect to record a tax provision for earnings up to certain levels due to the
availability of net operating loss carryforwards from prior periods.
El Penon Project
- ----------------
The company's wholly-owned subsidiary, Minera FMC Limitada ("Minera FMC"), has
identified significant gold and silver mineralization at the El Penon project.
Although no feasibility study has been completed, early estimates based on an
internal geologic model indicate a potentially economic gold and silver
discovery. However, additional exploration and evaluation will be carried out to
determine if an economic opportunity can be developed.
The mineralized structure discovered to date is still open along strike and at
depth. The exposed strike length of the El Penon structure system is at least
2.2 miles and the structure continues under shallow cover. Geophysical evidence
exists for parallel structures in unexplored areas of the project. In 1996,
Minera FMC expects to spend approximately $3 million on exploration drilling and
may also spend $3 million of capital on construction of a decline to investigate
the major portions of the deeper mineralized resource.
The El Penon exploration property is located in an area of low, rolling hills in
Region II of northern Chile, approximately 100 miles southeast of Antofagasta.
Access is by a 25-mile-long gravel road that connects the property with the Pan-
American Highway. The property is comprised of approximately 230 square miles of
contiguous mineral concessions situated in the Atacama Desert at an elevation of
5,900 feet. The El Penon project is situated on land either owned by Minera FMC
outright or leased from a private Chilean company. In each case, to protect its
interest, Minera FMC has filed two layers of concessions overlying the base
ownership concession. Minera FMC has entered into option contracts to purchase
the concessions owned by the private Chilean company. In addition, Minera FMC
has granted a net smelter royalty to the private Chilean company on production
from the leased property. The royalty is on a sliding scale, depending on the
price of gold, ranging from 1 percent to 3 percent. No royalty is payable on
Minera FMC claimed land. Currently, approximately 80 percent of the known
mineralization is located on land where the mineral rights are owned by Minera
FMC outright.
8
<PAGE>
The main geologic feature of interest on the property is a 2.2-mile-long, north-
south trending, near vertical fault, hydrothermal vent, and vein structure that
penetrated Tertiary-age volcanic intrusives, lava flows and ignimbrites. The
system is exposed at the surface, and extends further under shallow cover. The
adularia-sericite alteration is typical of vein- and lode-type gold deposits
where gold is carried in solutions and emplaced in structurally prepared ground
near and in the structure system. At least three mineralizing episodes are
recognized at El Penon. There is potential for other, parallel structures on the
property, as indicated by geologic mapping and geophysical surveys.
Surface evaluations began at the project in August 1993, and drilling of 13
holes commenced later that year. A second round of 24 holes began in March 1994,
and led to commencement of a third program of 75 holes in September 1994, and a
fourth campaign of 76 holes in June 1995. A fifth program, consisting of 122
holes, was completed in October 1995. In total, 310 holes have been drilled in
five phases. During these drilling campaigns, the company spent over $7 million
and considers the El Penon project as an advanced-stage exploration project.
To date, exploration, including geochemical and geophysical surveys, geologic
mapping, trenching and drilling, has identified 13 target areas exhibiting gold
mineralization or geophysical anomalies. In six areas, known as a Quebrada
Orito, Cerro Amatista, Cerro Martillo, Discovery Wash, El Valle, and Tres
Tontos, significant intercepts of gold have been encountered in drilling. The
company defines a significant intercept to be one where gold mineralization of
.20 ounces of gold per ton over a contiguous intercept of 13 feet is
encountered.
At Quebrada Orito, the most heavily explored of 13 specific targets defined to
date, the core zone of mineralization extends over approximately 5,000 feet of
strike, and is still open along strike and down dip or at depth. Minera FMC has
drilled 167 individual exploration holes in this target, of which 62 holes have
intercepted significant mineralization which begins at the surface and ranges to
depths of approximately 825 feet below surface. Significant mineralization has
been encountered over true widths of approximately 15 feet to 90 feet, a
vertical extent of approximately 900 feet and a strike length of 5,000 feet.
Most of the mineralization is open in all directions. Preliminary metallurgical
testing shows that the gold and silver mineralization in the Quebrada Orito
deposit is well oxidized. These initial tests recovered more than 95 percent of
the gold and over 84 percent of the silver under direct cyanidation with grinds
of minus 65 mesh. In laboratory tests, the samples leached rapidly and cyanide
consumption was moderate. Preliminary drilling in other areas shows similar
characteristics, such as grades and style of mineralization, to Quebrada Orito,
although only a small percentage of the property has been explored.
Minera FMC has acquired an option to purchase water within six miles of the
property boundary. Under terms of the agreement, Minera FMC may purchase 150
gallons per minute from an existing well, together with surface rights. The
water is currently used for both exploration and development. The agreement also
grants to Minera FMC the right to purchase additional approved water rights. In
addition, Minera FMC has been granted approximately 536 square miles of
additional area to perfect new water rights. Minera FMC believes these water
rights would be able to provide sufficient supply for initial mine development
and future growth.
Rossi Project
- -------------
The Rossi property is located in the northern portion of the Carlin Trend, the
most prolific gold-producing district in the United States. The Rossi property
was initially joint ventured by FMC Gold from NL Baroid in 1986 with
disseminated shallow oxide gold mineralization the target of exploration.
However, deep sulfide gold mineralization was discovered on the property in 1990
and has been the focus of the company's exploration program ever since. FMC Gold
has spent more than $15 million in exploration and buying 100 percent of the
project from NL Baroid without royalties.
9
<PAGE>
The Rossi property is geographically situated between the Antelope and Boulder
Creek drainages in the low rolling hills of the Sheep Creek Range, 26 miles
northwest of Carlin, Nevada. Access to the property is via all-season gravel
roads either through Boulder Valley or mining areas owned by the Newmont Gold
Company and Barrick Gold Corporation. The property is immediately adjacent to
the currently operating Dee Gold Mine (Rayrock Yellowknife Resource, Inc.) and
approximately 3.5 and 5 miles northwest of the Meikle (Barrick Gold Company) and
Post/Betze (Barrick Gold Company/Newmont Gold Company) deposits, respectively.
The land position encompasses 11.5 square miles of federally owned ground,
primarily secured by unpatented claims. FMC Gold controls 100 percent of the
precious metal-bearing ores.
Gold mineralization on the Rossi property is primarily hosted in the Devonian
Popovich Formation, which is also the host at the Meikle, Post/Betze, Gold
Quarry, Deep Star, Dee and Bootstrap deposits. The formation consists of
limestone and limey mudstone with horizons of fossil hash which seem especially
susceptible to mineralization. The Lower Popovich also displays sedimentary
features such as karsting and collapse brecciation. Mineralization and
alteration consists of intense silicification, quartz veining, argillization,
and decalcification. Gold is related to arsenian pyrite and silica accompanied
by anomalous silver, antimony, and mercury. The spatial distribution of gold is
controlled by a complex relationship between the intersection of possible wrench
fault-related structures and the presence of permissive host rocks. As is the
case in most of the deposits in the northern portion of the Carlin Trend,
intrusive filled structures are important keys to mineralization at Rossi.
Modeling of the mineralization has been accomplished by detailed surface mapping
of the structure and lithologic and geochemical analysis of cuttings from many
core and reverse circulation holes. A total of 103 holes have been drilled to an
average depth of 1,600 feet to test the deep mineralization.
Much of the deep exploration activity has been conducted in a region on the
property which is located in the southern portion of the claimblock referred to
as the "Resource Area". A total of 47 holes have been drilled in the Resource
Area, of which 24 holes have intercepted significant mineralization, defined as
having a grade greater than 0.2 ounces per ton gold over a minimum of 5.5 feet.
There are a total of 47 separate significant intercepts, which average .450
ounces of gold per ton over an average thickness of 18 feet. Within the target
area, gold mineralization has been identified at depths between approximately
700 feet and more than 2,700 feet below the surface.
There are at least five other areas of interest on the property; however, to
date, most of the work in these areas has been detailed surface mapping,
trenching, and surface geochemical surveys. Limited drilling indicates the
presence of sulfide mineralization similar to the main target area.
At this time, there is insufficient data to make an estimation of contained tons
or ounces of gold. Additional exploration and evaluation will be carried out to
determine if an economic opportunity can be developed. If developed, it is
expected that development will be through underground mining methods. It is
possible that the company could seek to enter into a joint venture as a means of
financing development costs.
10
<PAGE>
Operating Data
- --------------
Following is a summary of key operating data for the company for the three month
periods ended March 31, 1996 and 1995:
FMC Gold Company
----------------
Operating Data (Unaudited)
--------------------------
<TABLE>
<CAPTION>
Three Months
Ended March 31
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Heap-leach operation (Beartrack)
Tons of ore mined (thousands) 758 559
Ore grade (ounces per ton mined) 0.027 0.031
Milling operation (Jerritt Canyon
- FMC Gold Share)
Tons of ore processed (thousands) 198 206
Ore grade (ounces per ton milled) 0.125 0.129
Mill recoveries 87.4% 84.8%
Production (thousands of ounces)
Gold
Beartrack 27 -
Jerritt Canyon 20 22
Paradise Peak - 2
------ ------
Total 47 24
Silver 6 8
Cash cost of production ($ per gold
equivalent ounce) $ 252 $ 221
</TABLE>
INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------
A report by KPMG Peat Marwick LLP, the company's independent accountants, on the
financial statements included in Form 10-Q for the quarter ended March 31, 1996
is included on page 12.
11
<PAGE>
Independent Accountant's Report
-------------------------------
The Board of Directors
FMC Gold Company:
We have reviewed the accompanying condensed consolidated balance sheet of FMC
Gold Company and consolidated subsidiaries as of March 31, 1996, and the related
condensed consolidated statements of operations and of cash flows for the three-
month periods ended March 31, 1996 and 1995. These condensed consolidated
financial statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of FMC Gold Company and consolidated
subsidiaries as of December 31, 1995, and the related consolidated statements of
operations, cash flows and changes in stockholders' equity for the year then
ended (not presented herein); and in our report dated January 18, 1996, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1995 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
KPMG Peat Marwick LLP
Salt Lake City, Utah
April 15, 1996
12
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 1 LEGAL PROCEEDINGS
- ---------------------------
During the third quarter of 1994, the Pacific Rivers Council and the Wilderness
Society (collectively the "PRC"), in a lawsuit filed in Federal District Court
in Idaho (Pacific Rivers Council v. Thomas), sought an injunction against all
ongoing and future forest activities which may affect endangered salmon,
including mining, within various national forests in Idaho including the Salmon
National Forest in which the Beartrack property is located. In that lawsuit,
the PRC sought to require the U.S. Forest Service to consult under the
Endangered Species Act (the "Act") with the National Marine Fisheries Service
("NMFS") regarding existing land resource management plans for the subject
forests and their potential impacts on endangered Snake River salmon. On
January 12, 1995, the court in the PRC lawsuit entered an order enjoining, among
other things, all logging and announced mining activities in the Idaho national
forests (in which the Beartrack project is located). On January 25, 1995, the
court entered an order staying until March 15, 1995, the effectiveness of the
injunction in order to give the Forest Service time in which to complete
consultation with NMFS on the Land and Resource Management Plans for the
national forests in Idaho. On March 8, 1995, the Court entered an order
dissolving the injunction in recognition of the completion of that consultation.
The government defendants and the plaintiffs have subsequently negotiated a
stipulated dismissal of most of the lawsuit. Under the terms of the
stipulation, the parties stipulated to dismiss from this litigation all projects
which have undergone site-specific consultation. The company's Beartrack mine
was identified by the government defendants as a project for which consultation
has been completed. The court issued an Order on Pending Claims on December 11,
1995 regarding the remaining specified projects (not including the Beartrack
mine) which have not yet completed consultation. Under the terms of that Order,
the court has retained jurisdiction in this lawsuit for further proceedings
regarding those projects. The Beartrack mine is not subject to or a part of the
Court's order.
On October 12, 1994, the Sierra Club Legal Defense Fund, Inc., ("Sierra") on
behalf of certain other organizations, filed a lawsuit in Federal District Court
for the Western District of Washington at Seattle against NMFS and other federal
agencies for violation of the Act alleging the NMFS' biological opinion failed
to satisfy the requirements of the Act. Sierra, the federal agencies and the
company, as intervenor, each filed a motion for summary judgment. On November
9, 1995, the court ordered the federal agencies to reinitiate consultation under
Section 7 of the Act on the potential environmental impacts of the Beartrack
mine project on endangered salmon or the designated critical habitat for salmon.
The plaintiffs did not seek, and the court did not impose, any injunction or
other restriction on the operation of the Beartrack mine pending completion of
such consultation. If, upon remand, the Forest Service were to determine that
an activity associated with Beartrack mine operations could preclude the
development of reasonable and prudent alternatives to the project pending
completion of the reinitiated consultation, such activities could be required to
cease pending completion of consultation. Under the Act's regulations,
consultation must be completed within 135 days of the date consultation is
initiated. An extension of 60 days can be imposed by the agencies. Under the
relevant statutory and regulatory authorities, the results of a consultation can
range from no impact on the activities under review on the one hand to modest to
significant impacts on the other. In an extreme situation, a consultation could
result in the cessation of activities altogether, a potential result the company
believes to be remote in the case of the Beartrack mine, which has been in
operation and production since mid-1995. The company believes that the ongoing
operation of the Beartrack mine will not jeopardize endangered salmon or
adversely modify or destroy designated critical habitat, and that upon
completion of consultation the mine will be permitted to continue operation.
13
<PAGE>
The company sought and obtained from the U.S. Army Corps of Engineers (the
"Corps") a permit authorizing dredging and filling of wetlands in connection
with construction of the Beartrack mine under Section 404 of the Clean Water
Act. That permit was set to expire on October 11, 1994. On June 16, 1994, the
company sought an extension of the permit under applicable regulations. Under
those regulations, the filing of a request for extension operates to extend the
permit until the agency acts upon the request for extension. As of this time,
the Corps has not taken action upon the company's request.
On October 19, 1995, Dee Gold Mining Co., a Nevada General Partnership ("Dee")
filed an action against Baroid Drilling Fluids, Inc., a Delaware corporation
("Baroid") and FMC Minerals Corporation, a Delaware corporation ("FMC
Minerals"). Baroid and FMC Minerals jointly own certain mining property known as
the Rossi property. FMC Minerals owns the gold and precious minerals, Baroid
owns other minerals located on the property and the two share use of the
surface. Dee operates the Dee Gold Mine, which shares a common boundary with
the Rossi property. Dee's action seeks to condemn a portion of the Rossi
property for the purpose of excavating a layback so that gold, located on Dee's
side of the property line, can be mined from an open pit. The area sought to be
condemned contains a significant portion of the gold resource which FMC Minerals
located through its exploration activities on the Rossi property. Dee contends
that the condemnation for a layback is permitted by Nevada law which allows
private condemnation for mining purposes. FMC Minerals and Baroid deny this and
assert that the proposed activity by Dee will interfere with the exploration,
development and mining of the Rossi property.
The case is set for trial to commence August 20, 1996. The company believes
this action by Dee Gold Mining Co. is without merit and will vigorously defend
the matter. Because of an indemnity agreement, FMC Minerals' counsel represents
Baroid and FMC Minerals pays all defense costs. These costs will not increase
significantly as a result of the Baroid representation.
On February 16, 1996 the company settled a dispute with the subcontractor on the
Beartrack project. The subcontractor had made claims against the prime
contractor alleging overruns for work performed which exceeded the original
estimated costs for the project by approximately $8 million. These claims were
disputed by the prime contractor. Arbitration of the subcontractor's claims
against the prime contractor was concluded in February 1996, and the company
agreed to pay a settlement of $3.1 million as part of the overall arbitrated
settlement. The settlement was charged to property, plant and equipment and
will be depreciated over the remaining life of the Beartrack property.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(b) Reports on Form 8-K
-------------------
Form 8-K dated February 9, 1996 regarding FMC Gold Company's engagement of
J.P. Morgan Co., Inc. to join CIBC Wood Gundy Securities Inc. as financial
advisers in connection with a possible sale of FMC Gold Company or its
assets, and regarding the augmentation of its sale process to include a
range of options.
14
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FMC GOLD COMPANY
----------------------------
(Registrant)
Date: April 25, 1996
------------------------------- ----------------------------
Alan L. Lowe
Chief Financial Officer
15
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Number in Page Number in
Exhibit Table Description Document Numbering System
- ------------- ----------- -------------------------
<S> <C> <C>
15 Letter re: unaudited 1
interim financial
information
(KPMG Peat Marwick LLP)
27 Financial Data Schedule 2
</TABLE>
16
<PAGE>
Exhibit 15 Letter re: Unaudited Interim Financial Information
---------------------------------------
FMC Gold Company
Chicago, Illinois
Gentlemen:
Re: Registration Statements No. 33-35804 and No. 33-35805 on Form S-3 and
No. 33-65327 on Form S-8.
With respect to the subject registration statements, we acknowledge our
awareness of the incorporation by reference of our report dated April 15, 1996
related to our review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Act.
Very truly yours,
KPMG Peat Marwick LLP
Salt Lake City, Utah
April 25, 1996
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
FMC Gold Company Form 10-Q for period ended March 31, 1996 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 79
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 16
<CURRENT-ASSETS> 100
<PP&E> 230
<DEPRECIATION> 117
<TOTAL-ASSETS> 217
<CURRENT-LIABILITIES> 13
<BONDS> 0
<COMMON> 1
0
0
<OTHER-SE> 193
<TOTAL-LIABILITY-AND-EQUITY> 217
<SALES> 18
<TOTAL-REVENUES> 18
<CGS> 20
<TOTAL-COSTS> 20
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1)
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
