<PAGE>
RULE 424(b)(2)
REGISTRATION NO. 33-53963
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THIS PRELIMINARY PROSPECTUS SUPPLEMENT AND THE INFORMATION CONTAINED HEREIN +
+ARE SUBJECT TO COMPLETION OR AMENDMENT AND PROSPECTIVE PURCHASERS ARE +
+REFERRED TO THE RELATED FINAL PROSPECTUS SUPPLEMENT FOR DEFINITIVE +
+INFORMATION ON ANY MATTER CONTAINED HEREIN. NEITHER THIS PRELIMINARY +
+PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS SHALL CONSTITUTE AN +
+OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY +
+SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, +
+SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION +
+UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
DATED JULY 26, 1994
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus Dated July 21, 1994)
1,500,000 SHARES
[LOGO OF AMAX GOLD INC. APPEARS HERE]
$ SERIES B CONVERTIBLE PREFERRED STOCK
(LIQUIDATION PREFERENCE $50.00 PER SHARE)
The $ Series B Convertible Preferred Stock, par value $1.00 per share (the
"Convertible Preferred Stock"), of Amax Gold Inc. (the "Company" or "Amax
Gold") is convertible at the option of the holder at any time, unless
previously redeemed, into shares of common stock, par value $0.01 per share
(the "Common Stock"), of the Company at an initial conversion price of $ per
share of Common Stock (equivalent to a conversion rate of shares of Common
Stock for each share of Convertible Preferred Stock), subject to adjustment in
certain events. The outstanding Common Stock is listed on the New York Stock
Exchange and the Toronto Stock Exchange under the symbols "AU" and "AXG,"
respectively. On July 25, 1994 the last reported sale price of the Common Stock
on the New York Stock Exchange Composite Transactions Tape was $7.375 per
share.
The Convertible Preferred Stock is redeemable at any time on and after ,
1997, at the option of the Company, in whole or in part, for cash, initially at
a redemption price of $ per share of Convertible Preferred Stock, and
thereafter at prices declining ratably annually to $50.00 per share on and
after , 2004, plus accrued and unpaid dividends. Dividends on the Convertible
Preferred Stock will accrue and are cumulative from the date of issuance and
are payable quarterly in arrears on , , and of each year,
commencing , 1994. The Convertible Preferred Stock will not be entitled to
the benefit of any sinking fund. See "Description of Convertible Preferred
Stock."
The Company has applied for listing of the Convertible Preferred Stock on the
New York Stock Exchange.
SEE "RISK FACTORS" FOR CERTAIN RISK FACTORS RELEVANT TO AN INVESTMENT IN THE
CONVERTIBLE PREFERRED STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Share..................................... $ $ $
Total(3)...................................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $650,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 225,000 additional shares of Convertible Preferred Stock at the Price to
Public, less the Underwriting Discount, solely to cover over-allotments, if
any. If the Underwriters exercise such option in full, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
The shares of Convertible Preferred Stock are offered subject to receipt and
acceptance by the Underwriters, to prior sale and to the Underwriters' right to
reject any order in whole or in part and to withdraw, cancel or modify the
offer without notice. It is expected that the shares of Convertible Preferred
Stock will be delivered at the office of Salomon Brothers Inc, Seven World
Trade Center, New York, New York 10048, or through the facilities of The
Depository Trust Company, on or about August , 1994.
SALOMON BROTHERS INC GOLDMAN, SACHS & CO.
The date of this Prospectus Supplement is August , 1994.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CONVERTIBLE
PREFERRED STOCK OR THE COMPANY'S OUTSTANDING COMMON STOCK AT LEVELS ABOVE
THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY
BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto appearing
elsewhere or incorporated by reference in this Prospectus Supplement and the
accompanying Prospectus. Unless the context otherwise requires, all references
in this Prospectus Supplement to the "Company" and "Amax Gold" refer to Amax
Gold Inc. and its consolidated subsidiaries. Except as otherwise specified, all
information in this Prospectus Supplement assumes no exercise of the
Underwriters' over-allotment option.
THE COMPANY
The Company is engaged in the mining and processing of gold and silver ore in
the United States and Chile, the sale of refined gold and silver bullion and
the exploration for, and acquisition and development of, gold-bearing
properties in North and South America. At December 31, 1993, the Company had
proven/probable gold reserves of approximately 268 million tons of ore
containing approximately 7.4 million ounces of gold. In 1993 the Company's
share of production from its operating properties was approximately 210,900
ounces of gold and approximately 673,500 ounces of silver.
The Company's operating properties consist of a 100% interest in the Sleeper
Mine, an open pit gold mine in Humboldt County, Nevada; a 100% interest in the
Hayden Hill mine, an open pit gold mine in Lassen County, California; an
indirect 90% interest in the Guanaco mine, an open pit gold mine in the Guanaco
Mining District approximately 145 miles southeast of Antofagasta, Chile; and a
100% interest in the Wind Mountain mine, an open pit gold mine in Washoe
County, Nevada, at which mining ceased on January 30, 1992, although residual
heap leach production has continued. The Company, having realized all future
economic benefit from its 33.53% interest in the Waihi gold mine in New Zealand
effective April 30, 1993, retains a nominal interest in such mine. The Company
has two significant gold projects in development: the Refugio project located
in central Chile, in which the Company has an indirect 50% interest, and the
Fort Knox project located approximately 15 miles northeast of Fairbanks,
Alaska, in which the Company has a 100% interest. In addition, the Company has
a third development project under evaluation, a 62.5% joint venture interest in
the Haile gold project, located in South Carolina. Since these development
projects are not on federal lands, none of them would be subject to currently
proposed legislation in Congress to alter the General Mining Law. Reserves
associated with the Refugio project (50% share) and the Fort Knox project
accounted for approximately 77% of the Company's contained ounces from
proven/probable gold ore reserves at December 31, 1993.
The Company was incorporated as a wholly-owned subsidiary of AMAX Inc., a New
York corporation ("Amax"), in April 1987 to acquire the gold interests of Amax
in the United States, Canada and the North Island of New Zealand. Amax sold
approximately 13% of the then outstanding shares of Common Stock of the Company
in the Company's initial public offering in July 1987. On November 15, 1993,
Amax was merged with and into Cyprus Minerals Company (the "Cyprus Amax
Merger"), which was renamed Cyprus Amax Minerals Company ("Cyprus Amax").
Immediately prior to the Cyprus Amax Merger, Amax, which at that time held
approximately 68% of the outstanding shares of the Company's Common Stock,
distributed approximately 21.8 million shares (approximately 28%) of the
Company's Common Stock (together with all of the outstanding shares of common
stock of Alumax Inc., a Delaware corporation that controlled Amax's aluminum
business) in a distribution to its shareholders. Immediately following the
stock distribution and the Cyprus Amax Merger, Cyprus Amax held approximately
31.3 million shares of Amax Gold Common Stock, which constituted approximately
40% of the then outstanding shares of Common Stock of the Company. Subsequent
to the Cyprus Amax Merger, the Company and Cyprus Amax entered into a $100
million double convertible revolving line of credit (the "DOCLOC Agreement"),
under which the Company can issue up to 12,099,213 shares of Common Stock to
Cyprus Amax, and
S-3
<PAGE>
a stock purchase agreement providing for the purchase of 3,000,000 shares of
the Company's Common Stock by Cyprus Amax (the "Stock Purchase Agreement"),
both of which agreements were approved by the Company's stockholders on July
26, 1994. Cyprus Amax's acquisition of the 3,000,000 shares of Common Stock
under the Stock Purchase Agreement will increase its share of the Company's
outstanding shares of Common Stock to approximately 34.3 million shares (or
approximately 42.2% prior to giving effect to this offering). The issuance of
Common Stock under the DOCLOC Agreement could potentially increase Cyprus
Amax's share of the Company's outstanding shares of Common Stock to
approximately 46.4 million shares (or approximately 49.7% prior to giving
effect to this offering). See "Recent Developments--Stockholder Approval of the
DOCLOC Agreement and the Stock Purchase Agreement."
Recognizing the need to expand and diversify its resource base, in 1991 the
Company undertook a strategy to more actively seek advanced-stage exploration
projects both in the United States and in other countries where the geology and
investment climate were favorable to gold mining. In 1992, the Company acquired
a 100% interest in the Fort Knox project and a 90% interest in the Guanaco
project (which has since been developed into the Guanaco mine). In 1992, the
Company also acquired a 62.5% interest in the Haile project. In 1993, the
Company acquired an indirect 50% interest in the Refugio project. The
acquisition of these properties added approximately 6.1 million contained
ounces of gold to the Company's reserves. The Company is now focusing its
efforts on developing the Refugio and Fort Knox projects and optimizing the
operation of its four currently producing mines, while advancing the evaluation
of the Haile project.
The Refugio project is a large scale, low grade ore deposit located in
central Chile. The property is held by Compania Minera Maricunga, a Chilean
mining company ("CMM"), which is indirectly owned 50% by the Company and 50% by
Bema Gold Corporation, a publicly traded company based in Vancouver, British
Columbia ("Bema"). The Company is responsible for day-to-day operating
decisions with respect to the project. The Refugio project encompasses the
Verde, Pancho and Guanaco deposits, which are disseminated gold porphyry
deposits containing trace amounts of copper. All of the current reserves for
the Refugio project are contained in the Verde deposit which has
proven/probable gold reserves of 104.4 million tons of ore, with an average
grade of 0.030 gold ounces per ton or 3.1 million contained ounces of gold (of
which the Company's share is 50%). Feasibility studies have been completed on
the Verde deposit which contemplate construction of an open pit mine and heap
leach operation. The feasibility studies show potential production from the
Verde deposit of 200,000 to 250,000 ounces of gold per year (of which the
Company's share is 50%) at cash operating costs averaging approximately $200 to
$230 per ounce of gold over the mine life, with the higher production rate and
lower unit operating cost expected in the early years of production. The
Company has spent $23.3 million of capitalized acquisition and development
costs as of June 30, 1994. The Company estimates the additional cost of
developing the mine and related facilities at approximately $120 million to
$130 million (of which the Company's share would be 50%). CMM is seeking
project financing for a significant portion of its capital requirements and is
currently negotiating a term sheet with several banks for approximately $85
million of the estimated funding requirements. The Company expects project
development to take approximately two years. Development is dependent, in part,
upon obtaining the necessary financing on acceptable terms.
The Fort Knox project is a large scale, low grade ore deposit located on
state and private lands approximately 15 miles northeast of Fairbanks, Alaska.
The Fort Knox project has proven/probable gold reserves of 174.5 million tons,
with an average grade of 0.024 gold ounces per ton or 4.1 million contained
ounces of gold. The Company has completed detailed feasibility studies which
contemplate the construction of a mine and process plant capable of producing
between 300,000 and 350,000 ounces of gold per year at cash operating costs
ranging from $220 to $240 per ounce of gold over the mine life, with the higher
production rate and lower unit operating costs expected in the early years of
production.
S-4
<PAGE>
In May 1994, the U.S. Army Corps of Engineers issued the required dredge and
fill permit under Section 404 of the Clean Water Act for construction and
operation of the Fort Knox project. With the issuance of that permit, the
Company has all permits needed to proceed with the next phase of the project
development during 1994. This phase of development will involve completion of
detailed engineering, upgrading access roads to the project site and initial
site preparation. Those state permits and authorizations which have not yet
been received (e.g., Plan of Operations approval and air permits) are expected
to be applied for and received in due course, but no assurance can be given
that such permits will be issued in the time period and with the terms and
conditions contemplated by the Company. The Company estimates the additional
cost of developing the mine and related facilities at approximately $250
million to $270 million, in addition to capitalized acquisition and development
costs of approximately $183 million at June 30, 1994. The Company intends to
secure institutional financing to fund a significant portion of its future
capital requirements. Development is dependent on obtaining such financing on
acceptable terms, obtaining final permits, market conditions and receiving the
approval of the Company's Board of Directors.
In addition to the Refugio and Fort Knox projects, the Company has a 62.5%
joint venture interest in the Haile gold deposit in Lancaster County, South
Carolina, which is in the evaluation stage.
The Company's primary exploration objective continues to be acquisition and
evaluation of near surface gold deposits that can be mined by open pit methods.
Effective as of January 1, 1994, the Company has entered into an exploration
joint venture agreement with Cyprus Amax (the "Exploration JV") under which the
Company and Cyprus Amax will pool their efforts for the principal purpose of
discovering and developing future gold prospects. Cyprus Amax will provide 75%
and the Company will provide 25% of the initial exploration funding for any
newly identified gold targets. The Exploration JV is expected to broaden the
geographic reach of the Company's gold exploration program and reduce its costs
by sharing key personnel and spreading the high risks associated with
exploration. Cyprus Amax's 75% interest in gold prospects developed through the
Exploration JV will be available for Amax Gold to purchase prior to a decision
to place such prospects in production, but only at the then fair market value
of such interest (which may be determined by mutual agreement). Exploration
projects that the Company held prior to the Cyprus Amax Merger will continue to
be evaluated entirely by the Company utilizing the services of Cyprus Amax
geologists under a services agreement. During 1994, the Company's exploration
efforts outside the Exploration JV will be focused on the Robertson property,
an advanced-stage exploration prospect located in Crescent Valley, Nevada, in
which the Company has a right to acquire a 60% interest from a third party by
completing a bankable feasibility study by November 1994. The Company is also
evaluating a Cyprus Amax advanced-stage exploration prospect in Panama under an
option to acquire Cyprus Amax's interest in the prospect upon completion of a
feasibility study.
The Company employs a hedging strategy with the objective of mitigating the
impact of downturns in the gold market while maintaining significant upside
potential in market upswings. The Company has historically been able to
maintain an average realized gold price above the average Commodity Exchange,
Inc. ("COMEX") gold market price without engaging in the type of forward
selling that would eliminate much of the upside potential in the event of a
price increase. The Company's hedging efforts resulted in average realized
prices of $392 per ounce and $402 per ounce for 1993 and 1992, respectively.
This contrasts with average COMEX prices of approximately $360 per ounce and
$344 per ounce for 1993 and 1992, respectively.
RISK FACTORS
SEE "RISK FACTORS" FOR CERTAIN RISK FACTORS RELEVANT TO AN INVESTMENT IN THE
CONVERTIBLE PREFERRED STOCK.
S-5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Preferred Stock Offered. 1,500,000 shares of $ Series B Convertible Preferred Stock.
See "Description of Convertible Preferred Stock."
Dividends............... Annual cumulative dividends of $ per share of Convertible
Preferred Stock will accrue from the date of original issuance
and are payable quarterly out of funds legally available
therefor on each , , and , commencing , 1994
when, as and if declared by the Board of Directors. See "De-
scription of Convertible Preferred Stock--Dividends."
Liquidation Preference.. $50.00 per share, plus accrued and unpaid dividends. See "De-
scription of Convertible Preferred Stock--Liquidation Rights."
Conversion Rights....... Convertible at any time at the option of the holder, unless
previously redeemed, into Common Stock at an initial conver-
sion price of $ per share of Common Stock (equivalent to a
conversion rate of shares of Common Stock for each share
of Convertible Preferred Stock), subject to adjustment in cer-
tain events. See "Description of Convertible Preferred Stock--
Conversion Rights" and "Price Range of Common Stock and Divi-
dends."
Redemption at Option of
the Company............. Redeemable at any time on and after , 1997 at the option
of Amax Gold, in whole or from time to time in part, initially
at a redemption price of $ per share for the 12-month pe-
riod commencing , and thereafter at prices declining
ratably on an annual basis to $50.00 per share on and after
, 2004, plus in each case accrued and unpaid dividends to,
but excluding, the redemption date. See "Description of Con-
vertible Preferred Stock--Redemption at Option of the Compa-
ny."
Voting Rights........... Except as required by law, holders of shares of the Convert-
ible Preferred Stock will not be entitled to vote in the elec-
tion of directors unless dividends on the Convertible Pre-
ferred Stock are in arrears for the equivalent of at least six
full quarterly dividends, in which case holders of the Con-
vertible Preferred Stock will be entitled, voting as a class
together with holders of shares of any other series of pre-
ferred stock ranking on a parity as to the payment of divi-
dends (other than the holder of the Company's $2.25 Series A
Convertible Preferred Stock, par value $1.00 per share (the
"Series A Preferred Stock"), which has its own voting rights
in the event that dividends thereon are in arrears for at
least three semi-annual dividend payments), to elect two addi-
tional directors until such dividend arrearage is eliminated.
In addition, the affirmative consent of the holders of at
least two-thirds of the outstanding Convertible Preferred
Stock, voting separately as a class, will be required for the
issuance of any class or series of stock of the Company rank-
ing senior to the Convertible Preferred Stock as to dividends
or liquidation rights, for amendments to the Company's Re-
stated Certificate of Incorporation or By-laws affecting ad-
versely the rights of holders of the Convertible Preferred
Stock and to effect any reclassification of the Convertible
Preferred Stock. See "Description of Convertible Preferred
Stock--Voting Rights."
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
Ranking................. The Convertible Preferred Stock will be senior to the Common
Stock with respect to dividends and upon liquidation, dissolu-
tion or winding up. The Convertible Preferred Stock will be on
parity with the Series A Preferred Stock. See "Description of
Convertible Preferred Stock-- Dividends" and "--Liquidation
Rights."
Use of Proceeds......... The Company intends to use the net proceeds from the sale of
the Convertible Preferred Stock for the continued development
of the Refugio and Fort Knox gold projects, to repay an esti-
mated $13.0 million of indebtedness (including $8.0 million
owed to Cyprus Amax) and for other general corporate purposes,
possibly including additional repayments of indebtedness owed
to Cyprus Amax. See "The Company--Refugio Project" and "--Fort
Knox Project." Pending the application of the net proceeds,
the Company expects to invest such proceeds in short-term, in-
terest-bearing instruments or other investment-grade securi-
ties. See "Use of Proceeds."
Listing................. The Company has applied for listing of the Convertible Pre-
ferred Stock on the New York Stock Exchange. The Company's
Common Stock is listed on the New York Stock Exchange ("AU")
and the Toronto Stock Exchange ("AXG"). Certain warrants to
purchase shares of the Company's Common Stock are listed on
the American Stock Exchange and the Toronto Stock Exchange.
Proposed NYSE Symbol....
</TABLE>
S-7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share amounts and ratios)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- ----------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales.................. $ 51,700 $ 41,500 $ 81,900 $ 99,700 $128,200 $149,800 $121,600
Gross operating margin
(loss)................ (4,900) (15,500) (31,900) 16,600 38,000 63,100 59,400
Asset write-downs(1)... -- (64,100) (87,700) -- -- (12,600) --
Gain on Waihi transac-
tion(2)............... -- 8,800 8,800 -- -- -- --
Exploration expenses,
net(3)................ (1,400) (1,600) (5,200) 2,200 (14,000) (9,400) (12,100)
Earnings (loss) from
operations(1)(2)(3)... (6,300) (72,400) (116,000) 18,800 24,000 36,100 43,700
Net earnings
(loss)(1)(2)(3)(4).... (9,000) (70,300) (104,200) 11,500 21,200 28,300 33,300
PER SHARE DATA:
Net earnings (loss) per
common
share(1)(2)(3)(4)..... $ (.12) $ (.91) $ (1.34) $ .16 $ .35 $ .47 $ .55
Dividends declared per
common share.......... -- .04 .08 .08 .08 .08 .08
Weighted average common
shares outstanding.... 78,197 77,502 77,758 73,695 59,995 59,995 59,995
OTHER FINANCIAL DATA:
Depreciation and deple-
tion.................. $ 13,400 $ 13,500 $ 25,700 $ 21,800 $ 24,700 $ 26,000 $ 18,100
Capital and cash
acquisition
expenditures(5)....... 8,500 13,500 23,400 113,700 60,000 39,900 31,700
Refugio cash
acquisition and
investment costs(6)... 600 1,100 1,200 -- -- -- --
Ratio of earnings to
fixed charges and
preferred stock
dividends(7).......... -- -- -- 3.06x 19.85x 69.13x 37.92x
<CAPTION>
JUNE 30, 1994 DECEMBER 31,
--------------------- ------------------------------------------------
AS
ACTUAL ADJUSTED(8) 1993 1992 1991 1990 1989
-------- ----------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets......... $ 33,200 $ 92,100 $ 37,900 $ 47,100 $ 41,700 $ 42,400 $ 23,600
Total assets........... 375,200 434,100 381,000 477,600 198,300 157,200 150,500
Current liabilities.... 41,900 41,900 37,600 46,900 28,200 21,200 16,500
Long-term debt......... 135,800 122,800 136,500 103,100 24,100 8,400 31,300
Shareholders' equity... 164,600 236,500 173,300 257,200 136,300 120,700 98,300
Working capital
(deficit)............. (8,700) 50,200 300 200 13,500 21,200 7,100
</TABLE>
- --------
(1) In June 1993, the Company recognized a $64.1 million pre-tax ($41.9 million
after-tax) write-down of the Hayden Hill asset, and at December 31, 1993,
the Company recognized a $23.6 million pre-tax ($15.6 million after-tax)
write-down of the Sleeper asset, which increased the 1993 net loss by $57.5
million, or $.74 per common share. The earnings for 1990 include a $12.6
million write-down of Amax Gold's investment in Canamax Resources Inc.
("Canamax") recorded in the first half of 1990, which reduced 1990 net
earnings per common share by $.21. The remaining Canamax investment was
sold to Amax during the second half of 1990 for $6.4 million in cash.
(2) During the second quarter of 1993, the Company completed a transaction
which resulted in the realization of all future economic benefit from its
33.53% interest in the Waihi mine, effective April 30, 1993. The Company
recognized an $8.8 million pre-tax ($2.4 million after-tax) gain on such
transaction.
(3) In September 1993, Amax Gold changed its exploration accounting policy,
effective January 1, 1993, such that prior period exploration expenses
would no longer be capitalized and restored to earnings when a property
became exploitable. The 1993 net loss includes a $13.4 million, or $.17 per
common share, after-tax charge relating to the cumulative effect of this
accounting change. The 1992 net earnings include $8.9 million, or $.12 per
common share, of after-tax income related to prior year exploration
expenditures on the Haile and Guanaco projects that were capitalized and
restored to earnings. The pro forma unaudited net earnings and net earnings
per common share, assuming this 1993 exploration accounting change had been
applied retroactively for the fiscal years prior to 1993, were $4.9 million
in 1992 (or $.07 per common share), $21.9 million in 1991 (or $.36 per
common share), $30.5 million in 1990 (or $.50 per common share) and $29.6
million in 1989 (or $.49 per common share).
S-8
<PAGE>
(4) Net loss for 1993 includes a $13.4 million, or $.17 per common share,
after-tax charge relating to the cumulative effect of the January 1, 1993
change in the Company's exploration accounting policy discussed in footnote
(3) above. The 1993 net loss also includes a $1.8 million, or $.03 per
common share, after-tax cumulative effect of the January 1, 1993 adoption
of Statement of Financial Accounting Standards (SFAS) No. 112, "Employers'
Accounting for Postemployment Benefits." Net earnings for 1992 include a
$1.5 million, or $.02 per common share, after-tax cumulative effect of the
January 1, 1992 adoption of Statement of Financial Accounting Standard No.
106, "Postretirement Benefits Other Than Pensions."
(5) Capital and cash acquisition expenditures for the six month period ended
June 30, 1994 and the year ended December 31, 1993 consist of $3.8 million
and $7.7 million, respectively, of Guanaco capital construction and
development costs; $1.5 million and $6.7 million, respectively, of Fort
Knox development costs; an aggregate of $2.6 million and $6.5 million,
respectively, of sustaining capital at Sleeper, Hayden Hill and Waihi, and
$.6 million and $2.5 million, respectively, of Haile development costs.
(6) Refugio cash acquisition and investment costs for 1993 exclude $21.1
million of capital acquisition costs that were funded through the issuance
of Common Stock.
(7) For purposes of computing the ratio of earnings to fixed charges and
preferred stock dividends, earnings consist of pre-tax earnings before
cumulative effect of accounting changes and the 10% minority interest in
the losses of Compania Minera Amax Guanaco, excluding the Canamax equity
losses and Canamax write-down (described in footnote (1) above),
amortization of capitalized interest and fixed charges. Fixed charges
consist of total interest and bank fees, whether expensed or capitalized,
and one-third of rents, which management believes is a reasonable
approximation of an interest factor. For the six month period ended June
30, 1994, earnings were inadequate to cover fixed charges by $10.5 million
due to continuing operating losses. For the six month period ended June 30,
1993 and the year ended December 31, 1993, earnings were inadequate to
cover fixed charges by $74.7 million and $121.8 million, respectively, due
to the asset write-downs described in footnote (1) above and operating
losses. See "Risk Factors--Recent Losses" and "--Absence of Earnings to
Satisfy Fixed Charges and Dividends on Preferred Stock." Prior to the
offering of the Convertible Preferred Stock made hereby, there has been no
preferred stock outstanding, but 2,000,000 shares of Series A Preferred
Stock have been reserved for issuance to Cyprus Amax in connection with the
DOCLOC Agreement.
(8) As adjusted to give effect to the offering of the Convertible Preferred
Stock made hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds."
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<PAGE>
GOLD PRODUCTION AND PRODUCTION COSTS
The following table sets forth the ounces of gold production and production
costs for the Company's Sleeper mine, Wind Mountain mine, Hayden Hill mine,
Guanaco mine and Waihi mine; the Company's overall ounces of gold produced and
sold; and the Company's weighted average realized prices and weighted average
costs per ounce of gold produced for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------- --------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Sleeper Mine
Ounces of gold produced. 58,401 48,901 100,018 144,573 183,346 250,131 256,219
Average cost per ounce
produced
Cash production
cost(1)............... $ 243 $ 320 $ 317 $ 223 $ 188 $ 125 $ 109
Depreciation and
depletion(4).......... 92 134 132 99 71 60 52
-------- -------- -------- -------- -------- -------- --------
Total production cost.. $ 335 $ 454 $ 449 $ 322 $ 259 $ 185 $ 161
======== ======== ======== ======== ======== ======== ========
Wind Mountain Mine(2)
Ounces of gold produced. 6,591 11,601 19,296 54,690 91,063 81,733 30,903
Average cost per ounce
produced
Cash production
cost(1)............... $ 159 $ 152 $ 167 $ 114 $ 210 $ 197 $ 265
Depreciation and
depletion............. -- -- -- 27 109 113 107
-------- -------- -------- -------- -------- -------- --------
Total production cost.. $ 159 $ 152 $ 167 $ 141 $ 319 $ 310 $ 372
======== ======== ======== ======== ======== ======== ========
Hayden Hill Mine(3)
Ounces of gold produced. 33,350 27,152 53,038 28,815 -- -- --
Average cost per ounce
produced
Cash production
cost(1)............... $ 363 $ 556 $ 470 $ 432 $ -- $ -- $ --
Depreciation and
depletion(4).......... 105 187 149 152 -- -- --
-------- -------- -------- -------- -------- -------- --------
Total production cost.. $ 468 $ 743 $ 619 $ 584 $ -- $ -- $ --
======== ======== ======== ======== ======== ======== ========
Guanaco Mine(5)
Ounces of gold produced. 30,885 9,564 29,862 -- -- -- --
Average cost per ounce
produced
Cash production
cost(1)............... $ 426 $ 598 $ 664 $ -- $ -- $ -- $ --
Depreciation and
depletion(4).......... 146 143 142 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total production cost.. $ 572 $ 741 $ 806 $ -- $ -- $ -- $ --
======== ======== ======== ======== ======== ======== ========
Waihi Mine(6)
Ounces of gold produced. -- 8,666 8,666 25,525 25,824 22,995 20,265
Average cost per ounce
produced
Cash production
cost(1)............... $ -- $ 233 $ 233 $ 225 $ 184 $ 203 $ 223
Depreciation and
depletion(4).......... -- 49 49 79 67 73 71
-------- -------- -------- -------- -------- -------- --------
Total production cost.. $ -- $ 282 $ 282 $ 304 $ 251 $ 276 $ 294
======== ======== ======== ======== ======== ======== ========
Total ounces of gold
produced............... 129,227 105,884 210,880 253,603 300,233 354,859 307,387
Total ounces of gold
sold................... 128,750 106,045 209,290 248,024 300,418 359,146 296,075
Weighted average price
per ounce sold......... $ 402 $ 391 $ 392 $ 402 $ 427 $ 417 $ 411
Weighted average cost
per ounce produced(7)
Cash production
cost(1)............... $ 313 $ 380 $ 388 $ 223 $ 195 $ 147 $ 132
Depreciation and
depletion(4).......... 104 127 122 87 82 73 59
-------- -------- -------- -------- -------- -------- --------
Total production cost.. $ 417 $ 507 $ 510 $ 310 $ 277 $ 220 $ 191
======== ======== ======== ======== ======== ======== ========
</TABLE>
- --------
(1) Cash production costs include all direct and indirect operating costs
incurred at the mine sites, including overhead and, where applicable,
Nevada net proceeds tax, royalties and credits for silver by-products.
(2) All mining at the Wind Mountain mine ceased at the end of January 1992,
although the Company continues recovery of gold from residual heap
leaching.
S-10
<PAGE>
(3) Production commenced at the Hayden Hill mine in June 1992 as a mill and
heap leach operation. Beginning July 1993, the mine was reconfigured as a
heap leach operation and mill operations were suspended indefinitely.
(4) In September 1993, the Company changed its accounting policy for
exploration expenditures, effective January 1, 1993. Accordingly, the first
six months of 1993 were restated to reflect the adoption of this policy.
(5) Production commenced at the Guanaco mine in April 1993.
(6) Represents the Company's 33.53% share. During the second quarter of 1993,
the Company completed a transaction which resulted in the realization of
all future economic benefit from its interest in the Waihi mine, effective
April 30, 1993. Therefore, production and related production costs for the
six month period ended June 30, 1993 and the year ended December 31, 1993
only represent amounts through April 30, 1993.
(7) Average costs weighted by ounces of gold produced at each mine.
PROVEN/PROBABLE GOLD ORE RESERVES
The following table sets forth the Company's proven/probable gold ore
reserves at its operating mines and development properties as of December 31,
1993. Reserves are that part of a mineral deposit that can be economically and
legally extracted or produced at the time of reserve determination and are
customarily stated in terms of "ore" when dealing with metals. Reserves
represent in-place grades and do not reflect losses in the recovery process.
Ore reserves at the Sleeper mine, the Hayden Hill mine, the Guanaco mine and
the Haile project have been confirmed by DMBW, Inc. (Derry, Michener, Booth &
Wahl), independent consultants, and the ore reserves at the Fort Knox project
and the Refugio project have been calculated or confirmed by Mineral Resources
Development, Inc., independent consultants, both of which independent
consultants are experts in mining, geology and ore reserve determination.
<TABLE>
<CAPTION>
THE COMPANY'S
SHARE OF
AVERAGE GOLD CONTAINED
TONS ORE GRADE OUNCES
(000) (OZ. PER TON) (000 OZ.)
------- ------------- -------------
<S> <C> <C> <C>
OPERATING MINES
Sleeper Mine(1)
Mill ore.................................. 1,331 0.115 153
Heap leach ore............................ 5,358 0.018 97
------- ----- -----
Total.................................... 6,689 0.037 250
Hayden Hill Mine(2)
Heap leach ore............................ 18,800 0.024 451
Guanaco Mine
Heap leach ore............................ 12,874 0.049 570(3)
------- -----
Total of operating mines.................. 38,363 1,271
======= -----
DEVELOPMENT PROPERTIES
Fort Knox Project
Mill ore.................................. 174,483 0.024 4,117
Refugio Project(4)
Heap leach ore............................ 104,383 0.030 1,537(5)
Haile Project
Mill ore.................................. 6,849 0.101 431(6)
------- -----
Total of development properties........... 285,715 6,085
======= -----
Total contained ounces.................... 7,356
=====
</TABLE>
- --------
(1) At December 31, 1993, as a result of production experience and a
reinterpretation of geologic and metallurgical data at the Sleeper mine,
the Company reduced its proven/probable ore reserves at the mine. The
amounts presented represent the reduced reserves.
(2) In July 1993, DMBW, Inc. delivered a revised reserve report showing
reserves as of May 1, 1993 and, as a result of its first year's mining
experience and the revised reserve report, the Company restated its
proven/probable reserves at Hayden Hill to reclassify a significant portion
of the deposit as mineralized material. The amounts presented above
represent such reduced reserves as of May 1, 1993, less ore mined and
processed to finished product, as calculated by the Company.
(3) Represents the Company's 90% share of reserves determined as of December
31, 1992 (consisting of both in situ and stockpile ore) less ore mined and
processed to finished product during 1993, as calculated by the Company.
(4) Bema Gold Corporation, a publicly traded company based in Vancouver,
British Columbia and the Company's joint venture partner in the Refugio
project, reports the amount of reserves for the Refugio project in
accordance with Canadian law. The Company's reserve numbers are based on
United States securities laws and are somewhat lower than Bema's reported
reserves in contained ounces of gold because they do not include
mineralized material which does not satisfy the Commission's definition of
ore reserve.
(5) Represents the Company's 50% share.
(6) Represents the Company's 62.5% share.
S-11
<PAGE>
RISK FACTORS
Prospective purchasers of shares of the Convertible Preferred Stock offered
hereby should carefully read this Prospectus Supplement, the accompanying
Prospectus and the documents incorporated by reference herein and therein.
Ownership of shares of the Convertible Preferred Stock and of shares of Common
Stock issuable upon conversion thereof involves certain risks. In determining
whether to purchase shares of Convertible Preferred Stock, prospective
investors should consider carefully the following factors in addition to the
risk factors set forth in the accompanying Prospectus and the other information
contained in this Prospectus Supplement and the accompanying Prospectus.
RECENT LOSSES
The Company reported a net loss of $9.0 million for the first six months of
1994 and a net loss of $104.2 million for the year ended December 31, 1993. The
net loss for the year ended December 31, 1993 included after-tax charges of
$57.5 million for the write-downs of the Sleeper and Hayden Hill investments
and $15.2 million for the cumulative effects of an exploration accounting
change and the adoption of a new accounting standard for postemployment
benefits. Additionally, the 1993 results included an after-tax gain of $2.4
million from the realization of the future economic benefits from the Company's
33.53% interest in the Waihi mine in New Zealand. Excluding these special
items, the 1993 net loss was $33.9 million. While operating results have
improved substantially during the second quarter and first six months of 1994
over the same periods in 1993, the Company expects to continue to experience
net losses until the Company's existing development projects achieve commercial
production, absent a substantial increase in gold market prices. See "Recent
Developments--Recent Operating Performance."
ABSENCE OF EARNINGS TO SATISFY FIXED CHARGES AND DIVIDENDS ON PREFERRED STOCK
Earnings for the first six months of 1994 were insufficient to cover fixed
charges by approximately $10.5 million, primarily as a result of the recent
losses discussed under "--Recent Losses" above. Beginning in 1993, the Company
has satisfied fixed charges (e.g., interest, whether expensed or capitalized,
and rent expense) from existing cash balances and additional borrowings. In the
future, the Company expects to satisfy its fixed charges and other expenses
from cash flow from operations, and, to the extent cash flow from operations is
insufficient, from the net proceeds of the sale of the shares of Convertible
Preferred Stock offered hereby, from further sales of equity or subordinated
debt securities, or from borrowings from Cyprus Amax under the DOCLOC
Agreement. To the extent cash flow remains insufficient, the Company may
consider entering into joint venture arrangements on existing development
projects or disposing of non-strategic assets.
The availability of future net cash provided by operating activities to fund
the payment of dividends on the Convertible Preferred Stock will depend on
numerous factors that cannot now be predicted, including gold prices, the
results of operations at the Company's mines, the amount of the Company's
expenditures for new project development and the extent to which the
Convertible Preferred Stock is converted, among others. Dividends will be
payable on the Convertible Preferred Stock only when, as and if declared by the
Company's Board of Directors out of funds legally available therefor. While the
Company intends to pay dividends on the Convertible Preferred Stock, it is
expected that the Company will continue to incur losses until its existing
development projects achieve commercial production, absent a substantial
increase in gold market prices. Dividends on the Convertible Preferred Stock
may be paid only out of capital surplus (within the meaning of the Delaware
General Corporation Law) or net profits of the Company for the fiscal year in
which the dividend is declared and the preceding fiscal year. As of June 30,
1994 the Company had a capital surplus of approximately $163.8 million
(including $12.8 million of retained earnings and $151 million of paid in
capital) which could be used to pay dividends. Unpaid dividends do not accrue
interest. Dividends may be paid from a portion of the net proceeds of this
offering. In addition, under the most restrictive financial covenants of
existing loan documents, and after giving effect to the sale of the Convertible
Preferred Stock offered hereby, the Company would have had approximately $134.2
million available for the payment of dividends as of June 30, 1994.
S-12
<PAGE>
ABSENCE OF AN ESTABLISHED MARKET FOR THE CONVERTIBLE PREFERRED STOCK
Prior to the offering of the shares of Convertible Preferred Stock made
hereby, there has been no market for the Convertible Preferred Stock. The
offering price has been determined by agreement between the Company and the
Underwriters. See "Underwriting." The Company has made application to list the
Convertible Preferred Stock on the New York Stock Exchange, but there can be no
assurance that the New York Stock Exchange will accept the Convertible
Preferred Stock for listing.
RECENT DEVELOPMENTS
RECENT OPERATING PERFORMANCE
During the first six months of 1994, the Company recognized a net loss of
$9.0 million compared to a net loss of $70.3 million for the same period in
1993. The 1993 net loss included after-tax charges of $41.9 million for the
Hayden Hill write-down and $15.2 million related to the cumulative effects of
accounting changes. Additionally, the 1993 net loss included an after-tax gain
of $2.4 million related to the Waihi transaction. See "Risk Factors--Recent
Losses." Excluding these special items, the net loss for the first six months
of 1993 was $15.6 million. The $6.6 million reduction in net losses for the
first half of 1994 over the first half of 1993 is due to significantly higher
gold production and sales volumes, a higher average realized selling price for
gold, lower unit cash production costs and lower general and administrative
expenses. These 1994 operating improvements were somewhat offset by lower
deferred tax benefits.
Total gold production for the first half of 1994 was 129,227 ounces at an
average cash production cost of $313 per ounce compared to 105,884 ounces at an
average cash production cost of $380 per ounce for the first half of 1993. The
Company experienced substantial operating improvements between the first and
second quarters of 1994, with total weighted average cash production costs of
$357 per gold ounce in the first quarter compared to cash production costs of
$279 per gold ounce in the second quarter. The improved operating results for
the first half of 1994 reflect increased production and lower production costs
at the Hayden Hill, Sleeper and Guanaco mines, offset somewhat by declining
residual heap leach production from the Wind Mountain mine. The Hayden Hill
mine nearly achieved planned capacity as a heap leach operation only in the
second quarter of 1994. Mill head grades and mine efficiencies improved at the
Sleeper mine for the first half of 1994, resulting in higher production at
lower unit production costs. Although lower mill head grades at the Sleeper
mine are expected in the last half of 1994, which will result in somewhat lower
production and higher unit costs than in the first half of 1994, the fiscal
1994 results from the Sleeper mine are expected to show improvement from the
fiscal 1993 results. Guanaco's production for the first half of 1994 was higher
than the same period in 1993, principally because the Guanaco mine commenced
production in April 1993.
Despite the improvements in 1994 operating results compared to 1993, combined
with lower general and administrative expenses, net losses are expected to
continue to be realized in the last half of 1994.
DEVELOPMENT PROJECTS
The Company is currently in the process of arranging financing for its
Refugio and Fort Knox projects. With respect to financing the Refugio project,
the Company and a group of banks have been negotiating a term sheet for a
proposed project financing of $85 million, and the Company anticipates entering
into commitment letters with these banks in the near future, although there can
be no assurance that the Company will receive such financing. The Company has
had preliminary discussions with several banks concerning project financing for
the Fort Knox project.
S-13
<PAGE>
STOCKHOLDER APPROVAL OF THE DOCLOC AGREEMENT AND THE STOCK PURCHASE AGREEMENT
At a Special Meeting of Stockholders held on July 26, 1994, the stockholders
of Amax Gold approved the $100 million double convertible line of credit to be
provided by Cyprus Amax under the DOCLOC Agreement. Outstanding indebtedness
under the DOCLOC Agreement may be repaid by the Company issuing a like amount
of its $2.25 Series A Convertible Preferred Stock, which may be converted by
Cyprus Amax into a maximum of 12,099,213 shares of the Company's Common Stock
at $8.265 per share, a 20% premium over the average closing price per share of
the Common Stock for the ten-day period prior to the signing of the commitment
letter. Proceeds of the DOCLOC Agreement will be used primarily to support the
Company's debt amortization requirements and other working capital needs and
will be allocated as follows: (i) up to $36,000,000 to support the Company's
guaranty and release Cyprus Amax from its guaranty given to NM Rothschild &
Sons Limited and Citibank, N.A. in connection with the borrowing of AGI Chile
Credit Corp., Inc., a wholly-owned subsidiary of the Company, with respect to
the Guanaco Mine, under the Term Loan Agreement dated as of March 15, 1994;
(ii) up to $30,000,000 to support the Company's guaranty given to the Chase
Manhattan Bank (National Association) as Agent for the banks which are party to
the Bullion Loan Agreement dated as of March 21, 1991, in support of borrowings
of Lassen Gold Mining, Inc., a wholly-owned subsidiary of the Company operating
the Hayden Hill Mine; and (iii) the remaining amount for other working capital
purposes. On June 22, 1994, Amax Gold borrowed $8.0 million under the DOCLOC
Agreement. A portion of the proceeds of this offering will be used to repay the
$8.0 million borrowed. See "Use of Proceeds."
At the Special Meeting, stockholders also approved the Stock Purchase
Agreement which provides for the sale to Cyprus Amax of 3,000,000 shares of
Common Stock at a purchase price of $6.888 per share, with the proceeds of the
sale being used to retire approximately $20.7 million of the $26.0 million owed
to Cyprus Amax as of June 30, 1994 under a demand promissory note. Cyprus
Amax's acquisition of the 3,000,000 shares of Common Stock under the Stock
Purchase Agreement will increase its share of the Company's outstanding shares
of Common Stock to approximately 34.3 million shares (or approximately 42.2%
prior to giving effect to this offering). The issuance of Common Stock under
the DOCLOC Agreement could potentially increase Cyprus Amax's share of the
Company's outstanding shares of Common Stock to approximately 46.4 million
shares (or approximately 49.7% prior to giving effect to this offering).
Similar transactions with Cyprus Amax in the future would also require
stockholder approval in order to satisfy Section 203 of the Delaware General
Corporation Law (which requires the approval of 66 2/3% of the Company's
stockholders not affiliated with Cyprus Amax) and the rules of the New York
Stock Exchange.
OTHER TRANSACTIONS WITH CYPRUS AMAX
The Company has entered into an Exploration Joint Venture Agreement with
Cyprus Amax (the "Exploration JV") effective January 1, 1994. Under the
Exploration JV, the Company and Cyprus Amax have agreed to pool their efforts
for the principal purpose of discovering and developing future gold prospects,
with Cyprus Amax providing 75% and the Company providing 25% of the initial
exploration funding for such prospects. Properties held by the parties prior to
January 1, 1994 are excluded from the joint venture, except that Cyprus Amax
has made an initial contribution to the joint venture of several properties. A
subsidiary of Cyprus Amax has been appointed as Manager to manage, direct and
control exploration activities. The initial term of the Exploration JV is two
years, after which the agreement will terminate unless the Company and Cyprus
Amax mutually agree to extend the agreement. Either party may withdraw upon
giving 60 days' notice to the other party.
Additionally, the Company and Cyprus Amax have entered into an agreement
which gives the Company the option to purchase Cyprus Amax's interest in the
Cerro Quema advanced stage gold exploration prospect in Panama. The purchase
price is to be based on estimated reserves to be established in a feasibility
study funded by the Company that has yet to be completed.
S-14
<PAGE>
The Company and Cyprus Amax are currently negotiating a new services
agreement and a non-competition agreement that would replace similar agreements
in place with Amax at the time of the Cyprus Amax Merger.
The new services agreement would provide the Company with certain Cyprus Amax
general and administrative services and would replace the existing Management
Services Agreement currently in effect between the Company and Cyprus Amax,
which succeeded to the rights and obligations of Amax under such existing
agreement. Under the new services agreement, as under the existing Management
Services Agreement, services would be provided to the Company on a full cost-
reimbursement basis and the agreement could be terminated by either party as of
the end of any month subject to prior notice.
The non-competition agreement would define the terms under which either Amax
Gold or Cyprus Amax could develop and ultimately produce minerals that would be
in competition with the other party. As reflected in the current draft, Cyprus
Amax would not compete with Amax Gold for precious metals and Amax Gold would
not compete with Cyprus Amax for other minerals and metals. Cyprus Amax would
be required to offer to Amax Gold any opportunity with respect to the
development and production of precious metals which becomes available to Cyprus
Amax, and such offer would be open for the Company's acceptance for a period of
30 days. The initial term of the agreement would be three years and would
continue thereafter until the first of the following to occur: (i) the
agreement is terminated with the consent of Amax Gold; (ii) the agreement is
terminated by Cyprus Amax upon 180 days' prior notice to Amax Gold following
termination of the Exploration JV; or (iii) Cyprus Amax's shareholding in Amax
Gold falls to less than 25% of the outstanding voting shares of Amax Gold and
Cyprus Amax or Amax Gold terminates the agreement by notice to the other, which
notice would be effective 180 days after the delivery thereof or at the
expiration of the initial term of the agreement, whichever is later. For a
period of 36 months after termination, neither party would conduct business
within the other party's geographic area of interest. Because the non-
competition agreement is currently being negotiated, there can be no assurance
regarding its final terms and there is presently no contractual restriction on
Cyprus Amax competing with the Company in the development and production of
precious metals.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Convertible Preferred
Stock offered hereby are estimated to be approximately $71.9 million (or
approximately $82.8 million if the Underwriters' over-allotment option is
exercised in full).
The Company intends to use the net proceeds to be received from the sale of
the Convertible Preferred Stock for the continued development of the Refugio
and Fort Knox gold projects, to repay an estimated $13.0 million of
indebtedness (including $8.0 million owed to Cyprus Amax), and for other
general corporate purposes, possibly including additional repayments of
indebtedness owed to Cyprus Amax. See "The Company--Refugio Project" and "--
Fort Knox Project." After giving effect to such use of proceeds and the
repayment from the proceeds of the Stock Purchase Agreement of approximately
$20.7 million of indebtedness owed to Cyprus Amax, indebtedness owed to Cyprus
Amax will be approximately $5.3 million. Pending the application of the net
proceeds, the Company expects to invest such proceeds in short-term, interest-
bearing instruments or other investment-grade securities.
S-15
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is listed on the New York Stock Exchange under the
symbol "AU" and on the Toronto Stock Exchange under the symbol "AXG." The
following table sets forth, for the periods indicated, the high and low
reported last sale prices per share for the Common Stock reported on the New
York Stock Exchange Composite Transactions Tape.
<TABLE>
<CAPTION>
PRICE RANGE
---------------
HIGH LOW
------- -------
<S> <C> <C>
1991
First Quarter............................................. $15 3/4 $11 1/2
Second Quarter............................................ 15 12
Third Quarter............................................. 15 5/8 10 1/8
Fourth Quarter............................................ 12 5/8 10 1/8
1992
First Quarter............................................. 12 1/2 8 1/2
Second Quarter............................................ 11 1/2 8 7/8
Third Quarter............................................. 11 5/8 9 1/8
Fourth Quarter............................................ 9 7/8 7 5/8
1993
First Quarter............................................. 9 3/8 7 3/4
Second Quarter............................................ 9 1/2 6 7/8
Third Quarter............................................. 10 1/2 6 3/4
Fourth Quarter............................................ 8 6
1994
First Quarter............................................. 8 1/4 6 1/2
Second Quarter............................................ 8 1/8 6 3/4
Third Quarter (through July 25, 1994)..................... 7 5/8 7 1/4
</TABLE>
On July 25, 1994 the last reported sales price of the Common Stock on the New
York Stock Exchange Composite Transactions Tape was $7 3/8 per share. At July
22, 1994 there were approximately 12,389 holders of record of the Company's
Common Stock.
In March 1994 the Company eliminated the quarterly cash dividend of $.02 per
share of Common Stock which the Company had paid each quarter since February
1988. The Board of Directors of the Company decided that, in view of recent
operating losses and negative cash flow, it was in the best interests of the
stockholders of the Company to eliminate the dividend. Any determination to pay
future dividends on the Common Stock and the amount thereof would be made by
the Board of Directors and will depend on the Company's future earnings,
capital requirements, financial condition and other relevant factors. The Board
of Directors has no present intention of paying dividends on the Common Stock.
Although the Company's loan agreements do not directly limit the payment of
dividends, the agreements require the Company to comply with certain financial
covenants that may be affected by dividend payments, so long as the Company's
guarantee of the Hayden Hill borrowing remains in effect. These tests include
the maintenance of a minimum tangible net worth for the Company and its
consolidated subsidiaries and a maximum ratio of total liabilities to tangible
net worth of the Company and its consolidated subsidiaries from time to time.
Under the most restrictive of these tests, and after giving effect to the sale
of the Convertible Preferred Stock offered hereby, the Company would have had
approximately $134.2 million available for the payment of dividends as of June
30, 1994.
The Company's existing warrants are listed on the American Stock Exchange and
the Toronto Stock Exchange. There is no established trading market for the
Company's Series A Preferred Stock which may be issued to Cyprus Amax in
connection with the DOCLOC Agreement.
S-16
<PAGE>
CAPITALIZATION
(dollars in thousands, except per share amounts)
The following table sets forth the capitalization of the Company and its
consolidated subsidiaries at June 30, 1994, and as adjusted to give effect to
the issuance of the shares of Convertible Preferred Stock being offered hereby
and the application of the estimated net proceeds therefrom. See "Use of
Proceeds."
<TABLE>
<CAPTION>
AT JUNE 30, 1994
--------------------
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
Current maturities of long-term debt(1)................... $ 19,900 $ 19,900
======== ========
Long-term debt(2)......................................... $101,800 $ 96,800
-------- --------
Notes payable to Cyprus Amax(3)........................... 34,000 26,000
-------- --------
Shareholders' equity:
Preferred Stock, par value $1.00 per share, authorized
10,000,000 shares, no shares issued and outstanding, of
which 2,000,000 shares have been designated as Series A
Convertible Preferred Stock, no shares issued and
outstanding, and 1,725,000 shares have been designated
as Series B Convertible
Preferred Stock, no shares issued and outstanding and
1,500,000 shares issued and outstanding as adjusted.... -- 1,500
Common Stock, par value $.01 per share, authorized
200,000,000 shares, issued and outstanding 78,216,618
shares(4).............................................. 800 800
Paid-in capital......................................... 151,000 221,400
Retained earnings....................................... 12,800 12,800
Common Stock in treasury, at cost (1,991 shares)........ -- --
-------- --------
Total shareholders' equity................................ 164,600 236,500
-------- --------
Total capitalization...................................... $300,400 $359,300
======== ========
</TABLE>
- --------
(1) Includes $11.2 million of currently scheduled amortization payments on the
Hayden Hill loan, $3.1 million of currently scheduled amortization payments
on indebtedness to a Chilean governmental agency, $4 million of currently
scheduled amortization payments on a U.S. term loan for the Guanaco mine
and $1.6 million of currently scheduled amortization payments under the
Sleeper gold loan (representing 4,000 gold ounces).
(2) Long-term debt includes $35.3 million under the Hayden Hill loan, $32.0
million under a U.S. term loan for the Guanaco mine, $4.5 million of
indebtedness to a Chilean governmental agency and $30.0 million of working
capital gold loans (representing 85,020 gold ounces).
(3) Includes approximately $26.0 million of outstanding indebtedness to Cyprus
Amax under a demand promissory note payable. On July 26, 1994, the
Company's stockholders approved the purchase by Cyprus Amax of 3,000,000
shares of the Company's Common Stock to repay approximately $20.7 million
of the amounts outstanding under the promissory note payable. The remaining
$5.3 million outstanding under the promissory note payable was classified
as long-term debt based on Cyprus Amax's deferral of the remaining balance
until 1995.
(4) Excludes 3,000,000 shares of Common Stock reserved for issuance under the
Dividend Reinvestment Plan, of which 2,145,427 shares remain available for
issuance, 4,067,000 shares of Common Stock reserved for issuance upon
exercise of outstanding warrants which expire on January 8, 1996 and have
an exercise price of $21.00 per share, and a total of 5,005,000 shares of
Common Stock reserved for issuance under the Company's Stock Option Plan,
Performance Share Plan, Deferred Compensation Plan for Directors and Non-
Employee Director Stock Grant Plan. Also excludes shares of Common Stock
issuable upon conversion of the shares of Convertible Preferred Stock
offered hereby.
S-17
<PAGE>
THE COMPANY
GENERAL
The Company is engaged in the mining and processing of gold and silver ore in
the United States and Chile, the sale of refined gold and silver bullion and
the exploration for, and acquisition and development of, gold-bearing
properties in North and South America. At December 31, 1993, the Company had
proven/probable gold reserves of approximately 268 million tons of ore
containing approximately 7.4 million ounces of gold. In 1993 the Company's
share of production from its operating properties was approximately 210,900
ounces of gold and approximately 673,500 ounces of silver.
The Company's operating properties consist of a 100% interest in the Sleeper
Mine, an open pit gold mine in Humboldt County, Nevada; a 100% interest in the
Hayden Hill mine, an open pit gold mine in Lassen County, California; an
indirect 90% interest in the Guanaco mine, an open pit gold mine in the Guanaco
Mining District approximately 145 miles southeast of Antofagasta, Chile; and a
100% interest in the Wind Mountain mine, an open pit gold mine in Washoe
County, Nevada, at which mining ceased on January 30, 1992, although residual
heap leach production has continued. The Company, having realized all future
economic benefit from its 33.53% interest in the Waihi gold mine in New Zealand
effective April 30, 1993, retains a nominal interest in such mine. The Company
has two significant gold projects in development: the Refugio project located
in central Chile, in which the Company has an indirect 50% interest, and the
Fort Knox project located approximately 15 miles northeast of Fairbanks,
Alaska, in which the Company has a 100% interest. In addition, the Company has
a third development project under evaluation, a 62.5% joint venture interest in
the Haile gold project, located in South Carolina. Since these development
projects are not on federal lands, none of them would be subject to currently
proposed legislation in Congress to alter the General Mining Law. Reserves
associated with the Refugio project (50% share) and the Fort Knox project
accounted for approximately 77% of the Company's contained ounces from
proven/probable gold ore reserves at December 31, 1993.
The Company was incorporated as a wholly-owned subsidiary of Amax in April
1987 to acquire the gold interests of Amax in the United States, Canada and the
North Island of New Zealand. Amax sold approximately 13% of the then
outstanding shares of Common Stock of the Company in the Company's initial
public offering in July 1987. On November 15, 1993, Amax was merged with and
into Cyprus Minerals Company, which was renamed Cyprus Amax Minerals Company.
Immediately prior to the Cyprus Amax Merger, Amax, which at that time held
approximately 68% of the outstanding shares of the Company's Common Stock,
distributed approximately 21.8 million shares (approximately 28%) of the
Company's Common Stock (together with all of the outstanding shares of common
stock of Alumax Inc., a Delaware corporation that controlled Amax's aluminum
business) in a distribution to its shareholders. Immediately following the
stock distribution and the Cyprus Amax Merger, Cyprus Amax held approximately
31.3 million shares of Amax Gold Common Stock, which constituted approximately
40% of the then outstanding shares of Common Stock of the Company. Subsequent
to the Cyprus Amax Merger, the Company and Cyprus Amax entered into the DOCLOC
Agreement, under which the Company could issue up to 12,099,213 shares of
Common Stock to Cyprus Amax, and the Stock Purchase Agreement providing for the
purchase of 3,000,000 shares of the Company's Common Stock by Cyprus Amax, both
of which agreements have been approved by the Company's stockholders in
accordance with Delaware General Corporation Law and the rules of the New York
Stock Exchange. Cyprus Amax's acquisition of the 3,000,000 shares of Common
Stock under the Stock Purchase Agreement will increase its share of the
Company's outstanding shares of Common Stock to approximately 34.3 million
shares (or approximately 42.2% prior to giving effect to this offering). The
issuance of Common Stock under the DOCLOC Agreement could potentially increase
Cyprus Amax's share of the Company's outstanding shares of Common Stock to
approximately 46.4 million shares (or approximately 49.7% prior to giving
effect to this offering). See "Recent Developments--Stockholder Approval of the
DOCLOC Agreement and the Stock Purchase Agreement."
Recognizing the need to expand and diversify its resource base, in 1991 the
Company undertook a strategy to more actively seek advanced-stage exploration
projects both in the United States and in other
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countries where the geology and investment climate were favorable to gold
mining. In 1992, the Company acquired a 100% interest in the Fort Knox project
and a 90% interest in the Guanaco project (which has since been developed into
the Guanaco mine). In 1992, the Company also acquired a 62.5% interest in the
Haile project. In 1993, the Company acquired an indirect 50% interest in the
Refugio project. The acquisition of these properties added approximately 6.1
million contained ounces of gold to the Company's reserves. Reserves represent
in-place diluted grades and do not reflect losses in the recovery process. The
Company is now focusing its efforts on developing the Refugio and Fort Knox
projects and optimizing the operation of its four currently producing mines,
while advancing the evaluation of the Haile project.
OPERATING PROPERTIES
SLEEPER MINE
The Company owns 100% of the Sleeper mine, an open pit mine located in
Humboldt County, Nevada, approximately 28 air miles north of Winnemucca. The
Company's land holdings encompass approximately 30 square miles. Current
facilities occupy approximately 2,000 acres of land. The property was
discovered by an Amax geologist in 1984. Development of the mine started in
July 1985 and was completed in March 1986. From inception through December 31,
1993, the Company produced 1,454,726 ounces of gold from the Sleeper mine.
At December 31, 1993 the Company had proven/probable gold ore reserves of
approximately 6.7 million tons, with an average grade of 0.037 gold ounces per
ton or 250,000 contained ounces of gold. Reserves are based on a gold price of
$400 per ounce, with variable cut-off grades. During 1993, the Company produced
100,018 ounces of gold and 254,692 ounces of silver at the Sleeper mine. Cash
production costs were $317 per ounce of gold produced in 1993. For the first
six months of 1994, the Company produced 58,401 ounces of gold and 92,312
ounces of silver at the Sleeper mine. Cash production costs were $243 per ounce
of gold for the first six months of 1994.
A large portion of the remaining Sleeper ore reserve contains high clay
content material which is expected to have estimated adverse impacts on
operating costs and recoveries, the effects of which are included in the
current mine plan.
HAYDEN HILL MINE
The Company owns 100% of the Hayden Hill gold mine, an open pit gold mine in
Lassen County, California. Hayden Hill is approximately 120 air miles north-
northwest of Reno, Nevada, and 58 miles northwest of Susanville, California.
The Company controls approximately 6,300 acres through ownership of federal
unpatented mining claims and fee lands and a lease of federal unpatented mining
claims, which has an indefinite term.
The mine, which began production in mid-June 1992, was designed as a combined
mill and heap leach operation. It experienced unacceptably high unit operating
costs and reduced production as a result of lower than expected ore grade.
Mining experience indicated that mill grade ore occurred in thinner, less
continuous structures than originally interpreted by the statistical reserve
analysis. A major reevaluation of the operation was completed in July 1993.
Given the geologic complexity of the deposit as determined from mining
experience and a revised interpretation of geologic data, the proven/probable
reserves were restated as of June 30, 1993 to exclude a significant portion of
the deposit, eliminating the original differentiation between mill ore and heap
leach ore. During the last half of 1993, the mine was configured to operate as
a heap leach operation only, with the mill being maintained on a standby
status.
The Company's proven/probable gold reserves as of December 31, 1993 consisted
of approximately 18.8 million tons of ore, with an average grade of 0.024 gold
ounces per ton or 451,000 contained ounces of gold. Reserves are based on a
gold price of $400 per ounce, with variable cut-off grades. In 1993 the Company
produced 53,038 ounces of gold and 144,438 ounces of silver at the
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Hayden Hill mine. The cash production costs of gold produced totalled $470 per
ounce for 1993. For the first six months of 1994, the Company produced 33,350
ounces of gold and 66,011 ounces of silver at the Hayden Hill mine. Cash
production costs were $363 per ounce of gold for the first six months of 1994.
GUANACO MINE
The Company owns an indirect 90% interest in the Guanaco mine located in the
Guanaco Mining District, approximately 145 miles southeast of Antofagasta,
Chile. The property is held by Compania Minera Amax Guanaco (CMAG), an indirect
90% owned Chilean subsidiary of the Company which is also operator of the mine.
The Guanaco property position is comprised of approximately 25,000 acres,
consisting of leased mineral claims owned by ENAMI, an entity of the Chilean
government, and certain other mineral rights. Nearly all of the reserves are
located in the area covered by the ENAMI lease. The surface area is owned by
the Chilean government; however, CMAG has filed applications to purchase
selected areas within the ENAMI lease, including the area covered by the
current pit design and areas where the process plant, crusher facilities and
campsite are located. The ENAMI mineral lease has an initial term expiring in
2006, with provisions for five-year renewals thereafter, at the Company's
option.
First commercial production from the Guanaco mine was achieved in April 1993,
and the mine is gradually building to anticipated heap leach production of
between 60,000 and 90,000 ounces of gold per year. The water supply for mine
operations comes primarily from multiple wells adjacent to the minesite and
from nearby surface springs which also provide potable quality water. The
currently developed water supply is insufficient to achieve the optimum level
of production. The Company has water exploration and exploitation rights on an
extensive property position adjacent to the mine, and programs are currently
underway to develop or acquire additional water supplies. There can be no
assurance that such programs will provide a sufficient quantity of water at
acceptable costs or on a timely basis.
Reserves are based upon an assumed gold price of $375 per ounce and a cut-off
grade of 0.013 gold ounces per ton. The proven/probable gold reserves for the
Guanaco mine as of December 31, 1993 were approximately 12.9 million tons of
ore, with an average grade of 0.049 gold ounces per ton for a total of 633,000
contained ounces of gold, of which the Company's share was 570,000 contained
ounces of gold. Production at the Guanaco mine from April 1993 (inception) to
December 1993 was 29,862 ounces of gold produced and 136,687 ounces of silver
produced. The cash production costs of the gold produced were $664 per ounce in
1993. For the first six months of 1994, the Company produced 30,885 ounces of
gold and 171,771 ounces of silver at the Guanaco mine. Cash production costs
were $426 per ounce of gold for the first six months of 1994.
In addition to various royalty payments, an additional payment to adjust the
purchase price is required to be paid in July 1995 to the minority owners of
the Guanaco project, based on reserves established as of April 1, 1995. Based
on the year-end 1993 reserves, the additional payment due would be
approximately $1.3 million. An advance of the 1995 additional payment has been
made in the form of non-interest bearing promissory notes in the aggregate
amount of approximately $4 million. The Company has taken a pledge of the
remaining 10% interest in CMAG to secure the repayment of amounts that may not
be payable under such notes.
WIND MOUNTAIN MINE
The Company owns 100% of the Wind Mountain mine in Washoe County, Nevada. The
Wind Mountain mine is located approximately 75 air miles northeast of Reno and
100 air miles southwest of the Company's Sleeper mine. The Company's holdings
at Wind Mountain encompass approximately 775 acres of unpatented mining claims,
all of which are leased from third parties under a lease that expires in 1995.
Mining ceased at the end of January 1992 due to the depletion of mineral
reserves. Since cessation of mining, the Company continues residual leaching
from the leach pads.
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During 1993, the Company produced 19,296 ounces of gold (with cash production
costs of $167 per ounce) and 86,515 ounces of silver at the Wind Mountain mine.
For the first six months of 1994, the Company produced 6,591 ounces of gold and
56,212 ounces of silver at the Wind Mountain mine. Cash production costs were
$159 per ounce of gold for the first six months of 1994.
Contemporaneously with the continued recovery of gold, the Company is
proceeding with reclamation of the mine site, which is substantially complete
in all areas other than the process plant and the heap leach pads and ponds.
Once the recovery of residual gold becomes uneconomical, the heap leach piles
will be thoroughly rinsed, contoured and the remaining reclamation of the site
will be completed in accordance with a reclamation plan approved by the Nevada
Department of Environmental Protection and the U.S. Bureau of Land Management.
WAIHI MINE
In June 1993 the Company completed a transaction with a subsidiary of
Poseidon Gold Limited, a publicly traded Australian company, that is also a
participant in the Waihi mine joint venture. Through this transaction, the
Company realized all future economic benefit from the Company's 33.53% interest
in the Waihi gold mine in New Zealand, effective April 30, 1993. The Company
received cash proceeds of US$15.4 million from the transaction and received a
commitment to deliver a total of 15,500 ounces of gold in equal, semi-annual
installments over a five-year period commencing in December 1993.
The Company's share of ounces of gold and silver produced in 1993 was 8,666
ounces and 51,202 ounces, respectively. The cash production costs for the gold
produced at the Waihi mine were $233 per ounce in 1993.
DEVELOPMENT PROJECTS
REFUGIO PROJECT
In January 1993, the Company acquired an indirect 50% interest in the Refugio
gold project, which is located in the Maricunga Mining District in central
Chile, approximately 75 miles due east of Copiapo, for 3.15 million shares of
unregistered Common Stock and $1.1 million in cash. The project is situated at
between 13,800 feet and 14,800 feet above sea level. The property is held by
CMM, a Chilean contractual mining company, which is indirectly owned 50% by the
Company and 50% by Bema. The Company, through a shareholders agreement, is
responsible for most day-to-day decisions.
Property Position. The Refugio property position comprises approximately
14,500 acres, consisting of mineral rights, surface rights and water rights
sufficient to allow development of the project. The principal ore deposit is
held by mining claims which are owned by CMM. Essentially all of the mineral
rights surrounding the claims are held by a joint venture formed by Bema and
the former owner of the Refugio claims. CMM has agreements in place with this
joint venture that would allow CMM to mine major ore deposits found on CMM
property that extend onto surrounding mineral rights and to use the surrounding
areas for project needs.
Surface rights that cover the known mineralization and the proposed
facilities are owned or controlled by CMM under a lease or applications to
purchase from Chilean governmental entities, or agreements with Bema and the
former owner of the Refugio claims. Water extraction rights sufficient to
supply the project are controlled by CMM. In addition, exploration concessions
for water in more favorable locations closer to the project are controlled by
Bema and are being evaluated.
Geology. The Refugio project encompasses the Verde, Pancho and Guanaco gold
deposits, which are disseminated gold porphyry deposits containing trace
amounts of copper. The Verde deposit contains all of the current
proven/probable reserves. The Refugio property lies at the southern end of the
Maricunga Gold District in central Chile. The Maricunga District is a 90 mile
long belt of late volcanic origin that contains a number of large disseminated
gold-silver deposits.
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Reserves. Proven/probable reserves are contained in a planned pit based upon
an assumed gold price of $300 per ounce and variable cut-off grades based on
the economics associated with variable mining and processing costs. The Company
expects the ultimate recovery rate from the heap leaching process to be in the
range of 50% to 80% depending upon the type of ore, with overall recovery
estimated to be approximately 66%. The proven/probable gold reserves for the
Refugio project as of December 31, 1993 were approximately 104.4 million tons
of ore, with an average grade of 0.030 gold ounces per ton or 3.1 million
contained ounces of gold (the Company's share of which is approximately 1.5
million contained ounces).
Feasibility. A definitive feasibility study was completed for the Company's
joint venture partner Bema in December 1992 for the Verde deposit. The study,
based on a gold price of $375 per ounce, reported the amount of reserves for
the Refugio project in accordance with Canadian law. The Company's reported
reserve numbers are somewhat lower in contained ounces of gold than Bema's
reported reserves because the Company's reserve numbers do not include
mineralized material that does not satisfy the Commission's definition of ore
reserves. Potential production from the Verde deposit is estimated to range
from 200,000 to 250,000 ounces of gold per year, of which the Company's share
would be 50%, but no assurance can be given that such estimate will be
achieved. Cash production costs, including royalties, are estimated by the
Company to average approximately $200 to $230 per ounce over the project life,
with costs expected to be lower in the early years. There can be no assurance,
however, that project costs will not exceed these estimates. Project
development is expected to take approximately two years from the start of final
engineering. Timing of development is dependent upon economic conditions and
availability of acceptable project financing.
Capital Requirements. In addition to the Company's approximately $23.3
million of capitalized acquisition and development costs (as of June 30, 1994),
construction and development costs to bring the project into production are
estimated to total approximately $120 million to $130 million, of which one-
half would be the Company's share. There can be no assurance, however, that
project costs will not exceed these estimates. CMM is seeking commercial bank
project financing for a significant portion of the required future capital
under which the Company and Bema would each be responsible for supporting its
respective share until such time, if any, as the financing becomes non-
recourse. See "Recent Developments--Development Projects." Capital requirements
for 1994 are expected to be $12.3 million.
FORT KNOX PROJECT
In January 1992, Amax Gold acquired a 100% interest in the Fort Knox gold
project, a gold deposit occurring as porphyry-style mineralization, in exchange
for approximately 13.2 million shares of Common Stock and approximately 4
million warrants to purchase the Company's Common Stock. The Fort Knox project
is located in the Fairbanks Mining District, 15 miles northeast of Fairbanks,
Alaska. The location of the project near Fairbanks eliminates many of the
infrastructural problems and costs often associated with arctic or sub-arctic
projects.
Property Position. The Fort Knox project (including an exploration prospect
known as the Teryl Property) covers approximately 28,000 acres and consists of
approximately 1,075 state mining claims and 45 patented federal mining claims.
The Fort Knox property is held by way of deeds, mining leases, option
agreements, a joint venture agreement (affecting only the Teryl Property), and
mining claim locations.
The State of Alaska issued to the Company's operating subsidiary in Alaska a
millsite permit covering approximately 7,541 acres, comprising the 1,148 acres
within the mining lease and 6,393 adjoining acres (which adjoining acres
already are included in the state mining claims at Fort Knox or in certain
patented mining claims the surface of which was conveyed by the Company to the
State of Alaska immediately prior to the issuance of the millsite permit). The
issuance of this millsite permit secures for the project adequate lands on
which to construct all of the facilities necessary to bring a mine into
production on the Fort Knox property.
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Geology. The Fort Knox gold deposit occurs on a porphyry-style mineralization
of the type usually associated with copper and molybdenum ore bodies. The ore
is hosted within the upper margins of a granite intrusion in a stockwork of
small quartz veins and shear zones. The gold occurs as fine grains of free gold
disseminated within and along the margins of the veins and shears. Grade is
usually related to the degree of fracturing and veining of the rocks. The
deposit has a dimension of about 4,000 x 2,000 feet, elongated in an east-west
direction and extending to depths of 1,000 feet. Because of the low grade and
erratic distribution of gold, mining is planned to be done on a bulk tonnage
basis.
Reserves. Reserves are based on a gold price of $375 per ounce and a cut-off
grade of 0.0112 gold ounces per ton. The proven/probable gold reserves for the
Fort Knox project as of December 31, 1993 were approximately 174.5 million
tons, with an average grade of 0.024 gold ounces per ton or 4.1 million
contained ounces of gold. The Company estimates that mill recovery will be
approximately 90%.
Feasibility. A basic engineering study for the project has been completed.
The study has defined an open-pit mining operation and a conventional crushing,
grinding and cyanidation plant designed to treat 13 million tons of ore per
year (36,000 tons per day). The mine and process plant will be designed to
operate year round, and, at this processing rate, are expected to produce
approximately 300,000 to 350,000 ounces of gold per year, with the higher
production rate expected during the early years. Cash production costs
including royalties, severance taxes, and property taxes are estimated to
average between $220 and $240 per ounce of gold, with the lower unit cost being
incurred during the early years of operation. The engineering studies have
considered the effects that the arctic environment will have on the operation,
but no assurance can be given that such rates of production and cost estimates
will be achieved. The Company is currently reviewing the engineering study with
respect to the optimum mining and processing rate.
Permitting. In February 1994, the Company received most of the Alaska State
permits needed to proceed with development of the Fort Knox project. In May
1994, the U.S. Army Corps of Engineers issued the required dredge and fill
permit under Section 404 of the Clean Water Act for construction and operation
of the Fort Knox project. With the issuance of that permit, the Company has all
permits needed to proceed with the next phase of the project development during
1994. This phase of development will involve completion of detailed
engineering, upgrading access roads to the project site, and initial site
preparation. Those state permits and authorizations which have not yet been
received (e.g., Plan of Operations approval and air permits) are expected to be
applied for and received in due course, but no assurance can be given that such
permits will be issued in the time period and with the terms and conditions
contemplated by the Company.
Capital Requirements. Total capital requirements to construct and develop the
Fort Knox project in accordance with the current preliminary design are
estimated to be between $250 million and $270 million, in addition to
approximately $183 million of capitalized acquisition and development costs as
of June 30, 1994. The Company needs to secure financing to fund a significant
portion of the future capital requirements. Timing of development is dependent
on securing financing on acceptable terms, obtaining final permits, market
conditions and receiving the approval of the Company's Board of Directors.
Capital expenditures during 1994 are expected to be approximately $12 million,
as compared to approximately $6.7 million in 1993.
HAILE PROJECT
The Company owns a 62.5% joint venture interest in the Haile project, a gold
project located in an old mining district in Lancaster County, South Carolina.
The remaining 37.5% interest is owned by Piedmont Mining Company, Inc.
("Piedmont"). The Haile project is located approximately 50 miles north of
Columbia, and 4 miles north of the town of Kershaw. The Haile project covers
approximately 3,700 acres and consists entirely of fee property, which is
either owned by the venture participants, leased from third parties or
controlled by purchase agreements. The Company and Piedmont, through wholly
owned
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subsidiaries, have formed a joint venture to conduct further development
drilling and prepare a definitive feasibility study. A separate wholly owned
subsidiary of the Company is the manager of the joint venture.
Reserves. Proven/probable reserves at the Haile project are based upon an
assumed gold price of $375 per ounce and variable cut-off grades based on the
economics associated with variable mining and processing costs. The Company
estimates ultimate gold recoveries will range from 65% to 85%. The
proven/probable gold reserves for the Haile project as of December 31, 1993
were approximately 6.8 million tons of ore, with an average grade of 0.101 gold
ounces per ton and 689,000 contained ounces of gold (of which the Company's
62.5% share is 431,000 contained ounces).
Feasibility. Prior to the Company's acquisition of its interest in the Haile
project and since becoming manager, the Company has conducted an extensive
evaluation program. This program has included studies relating to reserve
delineation, metallurgical evaluation, environmental, hydrological and other
matters. In 1994 the focus is expected to be on further drilling and evaluation
work, ongoing permitting and property maintenance efforts. A number of
parameters have been identified that could improve project economics, but no
assurance can be given that the contemplated studies will succeed in doing so.
EXPLORATION ACTIVITIES
The Company's exploration activities have ranged from "grass roots"
reconnaissance programs and submittal examinations to drill evaluation of
advanced-stage projects. The Company's primary exploration objective continues
to be the acquisition and evaluation of near-surface gold deposits that can be
mined by open pit methods. During 1994 the Company's exploration efforts will
be focused on prospects in Nevada, Panama and Chile.
Prior to the Cyprus Amax Merger, the Company conducted most of its
exploration programs in the United States, Canada and Chile through wholly-
owned subsidiaries of the Company. Effective January 1, 1994, in order to
reduce costs and realize synergies from its new affiliation with Cyprus Amax,
the Company transferred most of its exploration personnel to Cyprus Amax but
retained its Vice President in charge of exploration. Cyprus Amax geologists
will conduct the Company's exploration for new gold either under the
Exploration JV or under a services agreement. The Company and Cyprus Amax
entered into the Exploration JV, effective January 1, 1994, under which the two
companies will pool their efforts for the principal purpose of discovering and
developing future gold properties. Cyprus Amax will provide 75% and the Company
will provide 25% of the initial exploration funding for any newly identified
gold targets. The Exploration JV is expected to benefit the Company by
broadening the geographic reach of its exploration program, sharing key
personnel, reducing costs and spreading the high risks associated with
exploration. Cyprus Amax's 75% interest in gold prospects developed through the
Exploration JV will be available for Amax Gold to purchase prior to a decision
to place such prospects in production, but only at the then fair market value
of such interest (which may be determined by mutual agreement). Properties held
by the parties prior to January 1, 1994 are excluded from the joint venture,
except that Cyprus Amax has made an initial contribution to the joint venture
of several properties. Therefore, exploration projects that the Company held
prior to the Cyprus Amax Merger, principally the Robertson property described
below, will continue to be evaluated solely by the Company utilizing the
services of Cyprus Amax geologists under a services agreement.
Exploration expenditures were $5.2 million in 1993 compared to $6.7 million
in 1992 (excluding exploration expenditures on the Haile and Guanaco projects
for 1992). Exploration expenditures for 1994 are currently anticipated to be
approximately $5.4 million.
The Company's separate exploration activities are currently focused on the
Great Basin in Nevada, particularly in the Crescent Valley area where the
Company has an opportunity to earn a 60% interest in the Robertson property,
which is located just north of Placer Dome Inc.'s Pipeline discovery, by
completing a bankable feasibility study for the project by November 1994. The
Company is also evaluating a Cyprus Amax advanced stage exploration prospect in
Panama under an agreement with
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Cyprus Amax that gives the Company an option (which expires in November 1995)
to acquire Cyprus Amax's interest in the prospect upon completion of a
feasibility study in a scope and form reasonably acceptable to both parties.
Upon completion of the feasibility study, the Company will have the option to
purchase this Panamanian prospect from Cyprus Amax for $25 per minable ounce of
gold contained in the proven/probable reserves identified in that feasibility
study and subsequent payments of $25 per recoverable ounce of gold in addition
to such minable reserves.
HEDGING ACTIVITIES
The Company employs a gold hedging strategy with the objective of mitigating
the impact of downturns in the gold market while maintaining significant upside
potential in market upswings. Hedging techniques used include: buying, selling
and/or delivering against gold "put" options; the purchase and sale of gold
"call" options; selling and/or delivering against fixed date and "spot-
deferred" forward sales contracts; and delivering against the Company's gold
loan facilities.
Since the Company's hedging program was initiated in late 1987, the Company
has historically been able to maintain an average realized gold price above the
average COMEX gold market price without engaging in such forward selling that
would eliminate much of the upside potential in the event of price increases.
The Company's hedging efforts resulted in average realized prices of $392 per
ounce and $402 per ounce for 1993 and 1992, respectively. This contrasts with
average COMEX prices of approximately $360 per ounce and $344 per ounce for
1993 and 1992, respectively.
The market value of the Company's forward contracts and put and call option
contracts at June 30, 1994 was approximately $8.9 million. Future market
valuations for these contracts are dependent on gold market prices, option
volatility and interest rates, which can vary significantly.
DESCRIPTION OF CONVERTIBLE PREFERRED STOCK
The authorized capital stock of the Company includes 10,000,000 shares of
preferred stock, $1.00 par value per share. No shares of preferred stock are
currently outstanding, but 2,000,000 shares of Series A Preferred Stock have
been authorized for issuance pursuant to the DOCLOC Agreement. See "Description
of Capital Stock--Series A Preferred Stock" in the Prospectus.
Shares of the Company's preferred stock may be issued from time to time in
one or more series. The Company's Board of Directors is authorized, without
shareholder approval, to fix the voting rights, dividend rights and terms, any
conversion rights, rights and terms of redemption (including sinking fund
provisions), liquidation preferences and any other rights, preferences and
restrictions of any series of preferred stock and the number of shares
constituting such series and designation thereof. The terms of such preferred
stock may affect adversely the voting power and other rights of the holders of
the Company's Common Stock and may make it more difficult to gain control of
the Company.
The Convertible Preferred Stock has been authorized as a new series of
preferred stock, designated as the "$ Series B Convertible Preferred
Stock," consisting of up to 1,725,000 shares. The following summary description
of the terms and provisions of the Convertible Preferred Stock is qualified in
its entirety by reference to the Certificate of Designations creating the
Convertible Preferred Stock, a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus Supplement is a part. For a
discussion of material federal income tax considerations relevant to the
Convertible Preferred Stock, see "U.S. Federal Income Tax Considerations."
Dividends. Holders of shares of the Convertible Preferred Stock are entitled
to receive, when, as and if declared by the Board of Directors of the Company,
out of funds of the Company legally available therefor, an annual cash dividend
of $ per share, payable in equal quarterly installments on
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, , and , commencing , 1994 except that if such date
is a Saturday, Sunday or legal holiday, then such dividend will be payable on
the next succeeding day that is not a Saturday, Sunday or legal holiday.
Dividends on the Convertible Preferred Stock will accrue without interest and
be cumulative from the date of initial issuance. The amount of dividend payable
for the initial dividend period and for any period shorter than a full
quarterly dividend period will be computed on the basis of a 360-day year of
twelve 30-day months. Dividends will be payable to holders of record as they
appear on the stock transfer books of the Company on such record dates as are
fixed by the Company's Board of Directors.
If dividends are not paid in full upon the Convertible Preferred Stock, the
Series A Preferred Stock and any other preferred stock ranking on a parity as
to dividends with the Convertible Preferred Stock, or, in each case, declared
in full and sums set apart for the payment thereof, all dividends paid or
declared and set aside for payment upon shares of Convertible Preferred Stock,
Series A Preferred Stock and such other parity preferred stock will be paid or
declared and set aside for payment pro rata so that the amount of dividends
paid or declared and set aside for payment per share on the Convertible
Preferred Stock, Series A Preferred Stock and such other parity preferred stock
will bear to each other the same ratio that accrued and unpaid dividends per
share on the shares of Convertible Preferred Stock, Series A Preferred Stock
and such other parity preferred stock bear to each other. Except as set forth
above, unless all accrued and unpaid dividends (including the full dividend for
the then current dividend period) on the Convertible Preferred Stock have been
paid, or declared and sums set aside for the payment thereof, dividends (other
than in Common Stock) may not be paid, or declared and set aside for payment,
and other distributions may not be made upon the Common Stock or on any other
stock of the Company ranking junior to or on a parity with the Convertible
Preferred Stock (including the Series A Preferred Stock) as to dividends, and
neither Common Stock nor any other stock of the Company ranking junior to the
Convertible Preferred Stock as to dividends may be redeemed, purchased or
otherwise acquired for any consideration by the Company.
Liquidation Rights. In the event of any liquidation, dissolution or winding
up of the Company, the holders of shares of Convertible Preferred Stock are
entitled to receive a liquidation preference of $50.00 per share, plus an
amount equal to any accrued and unpaid dividends to the date of payment before
any payment or distribution of assets is made to holders of Common Stock or any
other stock that ranks junior to the Convertible Preferred Stock as to
liquidation rights. The holders of Convertible Preferred Stock, Series A
Preferred Stock and all series or classes of the Company's preferred stock
hereafter issued that rank on a parity as to liquidation rights with the
Convertible Preferred Stock are entitled to share ratably, in accordance with
the respective preferential amounts payable on such stock, in any distribution
of assets of the Company which is not sufficient to pay in full the aggregate
of the amounts payable thereon. After payment in full of the liquidation
preference of the shares of the Convertible Preferred Stock, the holders of
such shares will not be entitled to any further participation in any
distribution of assets by the Company. Neither a consolidation, merger or other
business combination of the Company with or into another corporation or other
entity nor a sale or transfer of all or part of the Company's assets for cash,
securities or other property will be considered a liquidation, dissolution or
winding up of the Company.
Voting Rights. The holders of the Convertible Preferred Stock will have no
voting rights except as described below or as required by law. In exercising
any such vote, each outstanding share of Convertible Preferred Stock will be
entitled to one vote, excluding shares held by the Company or any entity
controlled by the Company, which shares will not be able to vote.
Whenever dividends on the Convertible Preferred Stock are in arrears in an
aggregate amount equal to at least six quarterly dividends on such shares
(whether or not consecutive), the number of directors of the Company will be
increased by two, and the holders of the Convertible Preferred Stock, voting
separately as a class together with holders of shares of any other series of
preferred stock ranking on a
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parity as to the payment of dividends (other than the Series A Preferred Stock,
which has its own voting rights in the event that dividends thereon are in
arrears for at least three semi-annual dividend payments), will have the right
to elect two additional directors to the Company's Board of Directors until all
accrued and unpaid dividends on the Convertible Preferred Stock have been
declared and paid in full or payment has been set aside in full. The term of
office of all directors so elected will terminate immediately upon such payment
or setting aside for payment.
In addition, so long as any Convertible Preferred Stock is outstanding, the
Company will not, without the affirmative vote or consent of the holders of at
least 66 2/3% of all outstanding shares of Convertible Preferred Stock, voting
separately as a class, (i) amend, alter or repeal any provision of the
Certificate of Incorporation or By-laws of the Company so as to affect
adversely the relative rights, preferences, qualifications, limitations or
restrictions of the Convertible Preferred Stock, (ii) authorize or issue or
increase the authorized amount of any additional class or series of stock, or
any security convertible into stock of such class or series, ranking senior to
the Convertible Preferred Stock as to dividends or as to rights upon
liquidation, dissolution or winding up of the Company or (iii) effect any
reclassification of the Convertible Preferred Stock.
Redemption at Option of the Company. The Convertible Preferred Stock will not
be redeemable prior to , 1997. On and after such date, the Convertible
Preferred Stock will be redeemable at the option of the Company, in whole or
from time to time in part, at the following redemption prices per share, if
redeemed during the 12-month period commencing on , of the year indicated:
<TABLE>
<CAPTION>
PRICE PER
YEARS SHARE
----- ---------
<S> <C>
1997............................................................ $
1998............................................................
1999............................................................
2000............................................................
2001............................................................
2002............................................................
2003............................................................
2004 and thereafter............................................. 50.00
</TABLE>
plus in each case accrued and unpaid dividends to, but excluding, the date of
redemption.
If fewer than all of the outstanding shares of Convertible Preferred Stock
are to be redeemed, the Company will select those shares to be redeemed pro
rata or by lot or in such other equitable manner as the Company's Board of
Directors may determine. There is no mandatory redemption or sinking fund
obligation with respect to the Convertible Preferred Stock. In the event that
the Company has failed to pay accrued and unpaid dividends on the Convertible
Preferred Stock, it may not redeem less than all of the then outstanding shares
of the Convertible Preferred Stock until all such accrued and unpaid dividends
have been paid in full for all past dividend periods.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of shares of
Convertible Preferred Stock to be redeemed at the address shown on the
Company's stock transfer books. No fractional shares of Convertible Preferred
Stock will be issued upon any redemption of the Convertible Preferred Stock,
but in lieu thereof, an appropriate amount will be paid in cash based on the
value of the shares of Convertible Preferred Stock as determined in good faith
by the Company's Board of Directors. On and after the redemption date,
dividends will cease to accrue on the shares of Convertible Preferred Stock
called for redemption and all rights of the holders of such shares will
terminate, except the right to receive the redemption price without interest.
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Conversion Rights. Each share of Convertible Preferred Stock will, at the
option of the holder, be convertible into shares of Common Stock at any time,
at the conversion price set forth on the cover page of this Prospectus
Supplement (the "Conversion Price"), adjusted as described in the following
paragraphs, except that if shares of Convertible Preferred Stock are earlier
called for redemption, the conversion right with respect thereto will terminate
at the close of business on the date fixed for redemption and will be lost if
not exercised prior to that time, unless the Company defaults in payment of the
redemption obligation. Fractional shares of Common Stock will not be delivered
upon conversion, but a cash adjustment will be paid in respect of such
fractional interests based on the then current market price of the Common
Stock.
Convertible Preferred Stock surrendered for conversion after the close of
business on a record date for payment of dividends on such Convertible
Preferred Stock and before the opening of business on the next corresponding
dividend payment date (unless such Convertible Preferred Stock has been called
for redemption on a redemption date in that period) must be accompanied by
payment of an amount equal to the dividend thereon which is to be paid on such
dividend payment date. Subject to the foregoing, no payments or adjustments
will be made upon conversion on account of accrued dividends on the Convertible
Preferred Stock or for any dividends or distributions on any shares of Common
Stock delivered upon such conversion.
The Conversion Price is subject to adjustment upon certain events, including
(i) the issuance of Common Stock as a dividend or distribution on the Common
Stock (other than pursuant to the Company's Dividend Reinvestment Plan); (ii) a
combination, subdivision or reclassification of the Common Stock; (iii) the
issuance to all holders of Common Stock of rights, options or warrants
entitling them to subscribe for or purchase Common Stock at a price per share
less than the then current market price; and (iv) the distribution to all
holders of Common Stock of capital stock (other than Common Stock), evidences
of indebtedness of the Company, assets (excluding regular periodic cash
dividends), or rights, options or warrants to subscribe for or purchase
securities of the Company (excluding the dividends, distributions, rights,
options and warrants described above). No adjustment of the Conversion Price
will be required to be made unless such adjustment would require an increase or
decrease of at least one percent of such price; provided, however, any
adjustment not made will be carried forward and taken into account in any
subsequent adjustment. No adjustment to the Conversion Price will be made with
respect to rights, options or warrants issued pursuant to certain employee
benefit plans. Adjustments to the Conversion Price with respect to rights,
options or warrants hereafter adopted or issued generally will be readjusted
following the termination of such rights, options or warrants to take account
of those rights, options or warrants which were not exercised. The Company from
time to time may decrease the Conversion Price by any amount for any period of
at least 20 days, so long as the decrease is irrevocable during such period, in
which case the Company shall give at least 15 days' notice of such decrease. In
addition to the foregoing adjustments, the Company will be permitted to make
such reductions in the Conversion Price as it determines to be advisable in
order that any stock dividend, subdivision of shares, distribution of rights to
purchase stock or securities or distribution of securities convertible into or
exchangeable for stock made by the Company to its stockholders will not be
taxable to the recipients. See "U.S. Federal Income Tax Considerations--
Adjustment of Conversion Price."
Except as stated above, the Conversion Price will not be adjusted for the
issuance of Common Stock, or any securities convertible into or exchangeable
for Common Stock or carrying the right to purchase any of the foregoing, in
exchange for cash, property or services.
In case of any consolidation or merger to which the Company is a party (other
than a merger or consolidation in which the Company is the continuing
corporation and in which the Common Stock outstanding immediately prior to the
merger or consolidation is not exchanged for cash, securities or other property
of another corporation), or in case of any sale, lease or transfer to another
corporation of the property of the Company as an entirety or substantially as
an entirety, there will be no adjustment of
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<PAGE>
the Conversion Price, but each holder of then outstanding Convertible Preferred
Stock will have the right, at the holder's option, to convert such holder's
Convertible Preferred Stock into the kind and amount of securities, cash or
other property receivable upon such consolidation, merger, sale, lease or
transfer by a holder of the number of shares of Common Stock into which such
Convertible Preferred Stock might have been converted immediately prior to such
consolidation, merger, sale, lease or transfer, assuming such holder of Common
Stock failed to exercise such holder's rights of election, if any, as to the
kind or amount of securities, cash or other property receivable upon such
consolidation, merger, sale, lease or transfer (provided that, if the kind or
amount of securities, cash or other property receivable upon such
consolidation, merger, sale, lease or transfer is not the same for each non-
electing share, then the kind and amount of securities, cash or other property
receivable upon such consolidation, merger, sale, lease or transfer for each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). In the case of a cash merger
of the Company into another corporation or any other cash transaction of the
type mentioned above, the effect of these provisions would be that thereafter
each share of Convertible Preferred Stock would be convertible at the
Conversion Price in effect at such time into the same amount of cash per share
into which each share of Convertible Preferred Stock would have been
convertible had such share been converted into Common Stock immediately prior
to the effective date of such cash merger or transaction. Depending upon the
terms of such cash merger or transaction, the aggregate amount of cash into
which such shares of Convertible Preferred Stock would be converted could be
more or less than the liquidation preference with respect to such Convertible
Preferred Stock.
Transfer Agent and Registrar. The transfer agent and registrar for the
Convertible Preferred Stock is Chemical Bank, 450 West 33rd Street, New York,
New York 10001.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of material U.S. federal tax
considerations relevant to the purchase, ownership and disposition of the
Convertible Preferred Stock but does not purport to be a complete analysis of
all the potential tax effects thereof. Except with respect to certain foreign
shareholders, the discussion is limited to U.S. federal income tax or
withholding matters, and does not address the potential state, local and
foreign taxes that may be imposed on a holder. The discussion is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations,
and Internal Revenue Service ("IRS") rulings and judicial decisions now in
effect, all of which are subject to change at any time, possibly with
retroactive effect, by legislative, judicial or administrative action. Except
as otherwise indicated, references to Common Stock are to the Common Stock
issuable upon conversion of Convertible Preferred Stock into Common Stock.
The information provided herein is directed to investors who will hold the
Convertible Preferred Stock as a "capital asset" within the meaning of Section
1221 of the Code and assumes throughout that the Convertible Preferred Stock
and the Company's Common Stock will at all times be regularly traded on an
established securities market, within the meaning of applicable Treasury
regulations. In addition, the tax consequences to a particular holder
(including life insurance companies, tax-exempt organizations, financial
institutions, dealers in securities, foreign corporations and nonresident alien
individuals) may be affected by matters not discussed herein. The discussion
also does not address the tax consequences to subsequent holders of the
Convertible Preferred Stock and Common Stock.
The Company has not sought, nor does it intend to seek, a ruling from the IRS
as to any of the matters covered by the discussion, and there can be no
assurance that the IRS will not successfully challenge certain of the
conclusions reached in the discussion. BECAUSE THE U.S. FEDERAL TAX
CONSEQUENCES DISCUSSED BELOW DEPEND UPON EACH HOLDER'S PARTICULAR TAX STATUS,
AND DEPEND FURTHER UPON U.S. FEDERAL TAX LAWS, REGULATIONS, RULINGS AND
DECISIONS WHICH ARE SUBJECT TO CHANGE (WHICH CHANGES MAY BE RETROACTIVE IN
EFFECT),
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<PAGE>
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE
PARTICULAR TAX CONSEQUENCES OF AN INVESTMENT IN THE CONVERTIBLE PREFERRED STOCK
INCLUDING, BUT NOT LIMITED TO, THE APPLICATION AND EFFECT OF ANY STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS, AS WELL AS THE CONSEQUENCES OF ANY RECENT, PENDING
OR PROPOSED CHANGES IN THE APPLICABLE LAWS.
DIVIDENDS ON CONVERTIBLE PREFERRED STOCK
Distributions by the Company with respect to the Convertible Preferred Stock
will be characterized as dividends taxable as ordinary income to the extent of
the company's current or accumulated earnings and profits, if any, as
determined for U.S. federal income tax purposes. To the extent that a
distribution on the Convertible Preferred Stock to a holder exceeds the
holder's allocable share of the Company's current or accumulated earnings and
profits, such distribution will first be treated as a return of capital that
will reduce the holder's adjusted tax basis in such Convertible Preferred
Stock, and then, to the extent the distribution exceeds the holder's adjusted
tax basis in such Convertible Preferred Stock, the excess will be taxed as a
capital gain and will be long-term capital gain if the holder's holding period
for such Convertible Preferred Stock is more than one year.
Based on current projections, it appears that the Company will not have
current earnings during at least part of the period during which the
Convertible Preferred Stock will be outstanding. However, as of June 30, 1994
the Company had accumulated earnings of $12.8 million that could be used to pay
dividends on the Convertible Preferred Stock. The availability of accumulated
earnings and profits or current earnings and profits, if any, in future years
will, however, depend on future profits and losses which cannot be accurately
predicted. Thus, there can be no assurance that all or any portion of a
distribution of the Convertible Preferred Stock will be characterized as a
dividend for U.S. federal income tax purposes. Corporate shareholders will not
be entitled to claim the dividends received deduction with respect to
distributions that do not qualify as dividends. See the discussion regarding
the dividends received deduction below. For the remainder of this discussion,
the term "dividends" refers to a distribution paid entirely out of the
Company's current or accumulated earnings and profits, unless the context
otherwise requires.
Dividends received by a corporate holder of Convertible Preferred Stock will
generally qualify for the 70% dividends received deduction provided by Section
243(a)(1) of the Code if the holding period and other requirements of such
deduction are met, subject to the limitations in Sections 246 and 246A of the
Code. Under Section 246(b) of the Code, the aggregate dividends received
deduction allowed to such a corporate holder of the Convertible Preferred Stock
may not exceed 70% of the taxable income (with certain adjustments) of the
corporate stockholder. Under Section 246(c) of the Code, the 70% dividends
received deduction will not be available with respect to any dividends with
respect to Convertible Preferred Stock that is held for 45 days or less (90
days or less in the case of dividends which are attributable to a period or
periods aggregating more than 366 days). The length of time that a stockholder
will be deemed to have held the Convertible Preferred Stock for this purpose
will be reduced for periods during which the stockholder's risk of loss with
respect to the stock is diminished by reason of the existence of certain
options, contracts to sell, short sales or similar transactions. Moreover, the
70% dividends received deduction will not be available if the taxpayer's risk
of loss with respect to the Convertible Preferred Stock is considered
diminished by the holding of one or more positions in "substantially similar or
related property." Section 246A of the Code may proportionately reduce the
percentage of the 70% dividends received deduction available to a corporate
holder that incurs indebtedness (including the proceeds from a short sale)
"directly attributable" to a "portfolio stock" investment in another company
(such as the Convertible Preferred Stock). In addition, for purposes of
computing its alternative minimum tax liability, a corporate holder may, in
general, not be allowed the dividends received deduction for purposes of
computing the "adjusted current earnings" adjustment.
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<PAGE>
Section 1059 of the Code will require a corporate holder to reduce (but not
below zero) its basis in the Convertible Preferred Stock by the "nontaxed
portion" of any "extraordinary dividend" if the holder has not held the
Convertible Preferred Stock subject to a risk of loss for more than two years
before the date the Company declares, announces, or agrees to, the amount or
payment of such dividend, whichever is earliest. In addition, upon disposition
of such Convertible Preferred Stock, a holder will recognize gain to the extent
that the nontaxed portion of all extraordinary dividends has not been applied
to reduce basis because of the limitation on reducing basis below zero.
Generally, the nontaxed portion of an extraordinary dividend is the amount
excluded from income under Section 243 of the Code (relating to the dividends
received deduction). An extraordinary dividend on preferred stock, such as the
Convertible Preferred Stock, is a dividend that (i) equals or exceeds 5% of the
holder's adjusted tax basis in the stock (reduced for this purpose by the
nontaxed portion of any prior extraordinary dividend), treating all dividends
having ex-dividend dates within an 85-day period as one dividend, or (ii)
exceeds 20% of the holder's adjusted tax basis in the stock (determined for
this purpose without regard to any reduction for the nontaxed portion of prior
extraordinary dividends), treating all dividends having ex-dividend dates
within a 365-day period as one dividend. An extraordinary dividend would also
include any amount treated as a dividend in the case of a redemption that is
either non-pro rata as to all stockholders or in partial liquidation of the
Company, regardless of the relative size of the dividend and regardless of the
corporate holder's holding period for the Convertible Preferred Stock. A
stockholder may elect to determine whether a dividend on the Convertible
Preferred Stock is extraordinary by reference to the fair market value of the
stock on the day before the ex-dividend date (rather than by reference to the
stockholder's adjusted tax basis) for purposes of the 5% or 20% tests described
above if the holder is able to establish the fair market value of the
Convertible Preferred Stock as of such date to the satisfaction of the IRS.
Under Section 1059(e)(3) of the Code, the extraordinary dividend rules may
not apply with respect to "qualified preferred dividends." A qualified
preferred dividend is any fixed dividend payable with respect to preferred
stock which (i) provides for fixed preferred dividends payable no less often
than annually and (ii) is not in arrears as to dividends when acquired,
provided the actual rate of return, as determined under Section 1059(e)(3) of
the Code, on such stock does not exceed 15%. Where a qualified preferred
dividend exceeds the 5% (or 20%) threshold for extraordinary dividend status
described above, (i) the extraordinary dividend rules will not apply if the
taxpayer holds the stock for more than five years, and (ii) if the taxpayer
disposes of the stock before it has been held for more than five years, the
aggregate reduction in basis cannot exceed the excess of the qualified
preferred dividends paid on such stock during the period held by the taxpayer
over the qualified preferred dividends which would have been paid during such
period on the basis of the stated rate of return, as determined under Section
1059(e)(3) of the Code. The length of time that a taxpayer is deemed to have
held stock for purposes of Section 1059 of the Code is determined under
principles similar to those contained in Section 246(c) of the Code discussed
above.
REDEMPTION PREMIUM
If the redemption price of preferred stock exceeds its issue price by more
than a reasonable redemption premium, the entire amount of such excess will be
considered to be a constructive distribution to the holders and a dividend to
the extent of the corporation's current and accumulated earnings and profits
which is constructively received by the holders over a period of time. A
redemption premium is considered to be reasonable if it is in the nature of a
penalty for a premature redemption and if such premium does not exceed the
amount that the issuer would be required to pay for such redemption right under
market conditions existing at the time of issuance of the preferred stock.
While the issue is not free from doubt, the Company believes that the
redemption premium on the Convertible Preferred Stock is reasonable under this
standard.
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<PAGE>
REDEMPTION OF CONVERTIBLE PREFERRED STOCK
A redemption of the Convertible Preferred Stock will be a taxable event and
will be treated as a sale of such Convertible Preferred Stock by the holder if
the redemption (i) results in a "complete termination" of the holder's stock
interest in the Company under Section 302(b)(3) of the Code, (ii) is
"substantially disproportionate" with respect to the holder under Section
302(b)(2) of the Code, or (iii) is "not essentially equivalent to a dividend"
with respect to the holder under Section 302(b)(1) of the Code. In determining
whether any of these tests has been met, shares of stock considered to be owned
by the holder by reason of certain constructive ownership rules set forth in
Section 318 of the Code, as well as shares actually owned, generally must be
taken into account. A holder of Convertible Preferred Stock that is redeemed in
a redemption that meets one of the tests described above generally will
recognize taxable gain or loss equal to the difference between the amount of
cash and the fair market value of property (other than stock of the Company or
a successor thereto) received by the holder and the holder's tax basis in the
Convertible Preferred Stock redeemed. If the Convertible Preferred Stock is
held as a capital asset, such gain or loss will be capital gain or capital loss
and will be long-term capital gain or capital loss if the holder has held the
Convertible Preferred Stock for more than one year. If a redemption does not
meet any of the tests described above, the cash and the fair market value of
property received by the holder generally will be taxed as a dividend to the
extent paid out of the Company's current or accumulated earnings and profits.
If a redemption of the Convertible Preferred Stock is treated as a distribution
that is taxable as a dividend, the holder's basis in the redeemed Convertible
Preferred Stock will be transferred to the holder's remaining shares of the
Company's stock (if any).
CONVERSION OF CONVERTIBLE PREFERRED STOCK INTO COMMON STOCK
No gain or loss will be recognized upon conversion of Convertible Preferred
Stock solely into shares of Common Stock. However, gain realized upon the
receipt of cash paid in lieu of fractional shares of Common Stock will be taxed
immediately, as if the holder had received the Common Stock attributable to
such fractional interest and then had the Common Stock redeemed for cash.
Except to the extent of basis attributable to the fractional shares of Common
Stock redeemed, the adjusted tax basis for the shares of Common Stock received
upon the conversion will be equal to the adjusted tax basis of the Convertible
Preferred Stock converted, and, provided the Convertible Preferred Stock is
held as a capital asset, the holding period of the shares of Common Stock will
include the holding period of the Convertible Preferred Stock converted.
ADJUSTMENT OF CONVERSION PRICE
Section 305(c) of the Code and the Treasury regulations thereunder treat as a
dividend certain constructive distributions of stock with respect to preferred
stock. Certain adjustments to the conversion price of the Convertible Preferred
Stock, such as adjustments to reflect taxable distributions of cash or property
on any of the outstanding Common Stock of the company, will be treated as a
constructive distribution of stock valued by the increase in the proportionate
interest in the Company held by the holders of the Convertible Preferred Stock
which results thereby, and will be treated as a dividend to the holders of the
Convertible Preferred Stock to the extent of the current or accumulated
earnings and profits of the Company. Adjustments to reflect nontaxable stock
splits or distributions of stock, stock warrants or stock rights will, however,
generally not be so treated. The failure to adjust fully the conversion price
for the Convertible Preferred Stock to reflect distributions of stock, stock
warrants or stock rights with respect to the Common Stock may result in a
taxable dividend to holders of the Common Stock.
BACKUP WITHHOLDING AND INFORMATION REPORTING
General Rules
Under Section 3406 of the Code and applicable Treasury regulations, a
noncorporate holder of Convertible Preferred Stock or Common Stock who is not
otherwise exempt from backup withholding
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may be subject to backup withholding at a rate of 31% with respect to dividends
paid on, or the proceeds of a sale or exchange of, the Convertible Preferred
Stock or the Common Stock. Generally, backup withholding applies only when the
taxpayer (i) fails to furnish or certify his correct taxpayer identification
number to the payor in the manner required, (ii) is notified by the IRS that he
has failed to report payments of interest or dividends properly, or (iii) under
certain circumstances, fails to certify under penalty of perjury that he has
furnished a correct taxpayer identification number and that he has not been
notified by the IRS that he is subject to backup withholding for failure to
report interest or dividend payments. Under Treasury regulations currently in
force, backup withholding generally will not apply to dividends paid with
respect to Convertible Preferred Stock or Common Stock to a holder at an
address outside the United States.
Sales of Convertible Preferred Stock and Common Stock
Under Treasury regulations currently in force, the payment of the proceeds of
a sale of shares of Convertible Preferred Stock or Common Stock to or through
the United States office of a broker is subject to information reporting and
possible backup withholding at a rate of 31% unless the owner establishes an
exemption in the manner required by the IRS. The payment of the proceeds of a
sale of Convertible Preferred Stock or Common Stock to or through the foreign
office of a broker generally will not be subject to backup withholding.
However, information reporting requirements will apply to a payment of proceeds
from the sale of shares of Convertible Preferred Stock or Common Stock through
a foreign office of a broker that is a United States person or a "U.S. related
person," unless the broker has documentary evidence in its files that the owner
is a non-United States holder and the broker has no actual knowledge to the
contrary. For this purpose, a U.S. related person is (i) a "controlled foreign
corporation" for U.S. federal income tax purposes or (ii) a foreign person 50%
or more of whose gross income from all sources for certain periods is
effectively connected with the conduct of a United States trade or business.
Holders should consult their tax advisors regarding their qualification for
exemption from backup withholding and the procedure for establishing any
applicable exemption. Any amounts withheld under the backup withholding rules
from a payment to a holder will be allowed as a refund or a credit against the
holder's U.S. federal income tax liability, provided that the required
information is furnished to the IRS.
SPECIAL TAX RULES APPLICABLE TO FOREIGN HOLDERS
As used herein in the discussion of U.S. federal income tax matters, a
"Foreign Holder" is a person who or which, for U.S. federal income tax
purposes, is a foreign corporation, a nonresident alien individual, a
nonresident alien fiduciary of a foreign estate or trust, or a foreign
partnership to the extent that one or more of its members is, for U.S. federal
income tax purposes, a foreign corporation, a nonresident alien individual or a
nonresident alien fiduciary of a foreign estate or trust. Foreign Holders
seeking benefits under applicable tax treaties or an exemption from United
States withholding tax for "effectively connected income," as described below,
will be required to comply with certain certification and other requirements in
order to establish their entitlement to such benefits or exemption.
Dividends
Dividends on the Convertible Preferred Stock or the Common Stock paid to a
Foreign Holder that are not effectively connected with a trade or business
carried on by such Foreign Holder in the United States will generally be
subject to a 30% United States withholding tax. Such rate of withholding may be
reduced to the extent provided by a tax treaty to which the United States is a
party if the recipient of the dividends is entitled to the benefits of the
treaty. A Foreign Holder that is eligible for a reduced rate of United States
withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts withheld by filing an appropriate claim for refund with the IRS.
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If the dividends on the Convertible Preferred Stock or the Common Stock are
effectively connected with a trade or business carried on in the United States
by a Foreign Holder, such dividends will be subject to tax at the rates and in
the manner applicable to United States persons. Effectively connected dividends
received by a corporate Foreign Holder may also, under certain circumstances,
be subject to an additional "branch profits tax" at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty.
Gain on Disposition of Convertible Preferred Stock or Common Stock
Subject to the discussion above under "Backup Withholding and Information
Reporting," Foreign Holders generally will not be subject to either U.S.
federal income tax or United States federal withholding tax on gain recognized
on a disposition of the Convertible Preferred Stock or the Common Stock unless
(i) the gain is effectively connected with a trade or business conducted by the
Foreign Holder within the United States or, alternatively, if a tax treaty
applies, the gain is attributable to a United States permanent establishment
maintained by the Foreign Holder (in which cases such gain will be subject to
tax at the rates and in the manner applicable to United States persons and the
branch profits tax described above may also apply if the holder is a foreign
corporation), (ii) in the case of an individual Foreign Holder, such holder is
present in the United States for at least 183 days in the taxable year of the
disposition and meets certain other requirements (and provided that such
individual's presence in the United States does not otherwise cause such
individual to be treated as a resident alien, and, thus, generally be taxed as
a United States person), or (iii) the gain is subject to tax under Section 897
of the Code as from the disposition of a United States real property interest.
In general, among other circumstances, gain recognized by a Foreign Holder on a
disposition of Convertible Preferred Stock or Common Stock will not be subject
to tax under Section 897 of the Code if the Foreign Holder, after taking into
account certain constructive ownership rules, does not own, and has not owned
within the five-year period ending on the date of the disposition, more than 5%
of either the outstanding Convertible Preferred Stock or the outstanding Common
Stock of the Company.
U.S. Federal Estate, Gift and Generation--Skipping Transfer Tax
Unless otherwise provided in an applicable estate tax treaty, shares of
Convertible Preferred Stock and Common Stock will be considered property
situated in the United States for U.S. federal estate tax purposes. The estate
of an individual stockholder who, at the time of death, was a nonresident alien
of the United States for U.S. federal estate tax purposes will be required to
file a United States estate tax return, and may incur liability for U.S.
federal estate tax. Gifts by non-resident alien individuals of Convertible
Preferred Stock and Common Stock will not be subject to U.S. federal gift tax
except in the case of certain stockholders who were previously citizens of the
United States.
Under certain circumstances, United States generation-skipping transfer tax
may apply as a result of certain transfers of Convertible Preferred Stock at
death by a nonresident alien individual stockholder to beneficiaries two or
more generations below (or more than 37 1/2 years younger than) the decedent (a
"skip person"), or to a trust having one or more skip persons as beneficiaries.
This tax, if applicable because of a transfer of Convertible Preferred Stock at
death, would be imposed in addition to the United States federal estate tax.
Moreover, under certain circumstances, United States generation-skipping
transfer tax may apply as a result of transfer by a nonresident alien
individual of Convertible Preferred Stock during his lifetime to a trust having
as its beneficiaries one or more skip persons who are citizens or residents of
the United States.
S-34
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to the Underwriters named below, and each of
the Underwriters has severally agreed to purchase from the Company, the
respective number of shares of Convertible Preferred Stock set forth opposite
its name below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
<S> <C>
Salomon Brothers Inc.....................................
Goldman, Sachs & Co. ....................................
---------
Total................................................ 1,500,000
=========
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the shares of
Convertible Preferred Stock offered hereby (other than those subject to the
over-allotment option described below) if any are purchased. In the event of a
default by any Underwriter, the Underwriting Agreement provides that, in
certain circumstances, the purchase commitments of the non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.
The Underwriters have advised the Company that they propose to offer the
shares of Convertible Preferred Stock to the public initially at the public
offering price set forth on the cover page of this Prospectus Supplement and
to certain dealers at such offering price less a concession not to exceed $
per share. The Underwriters may allow and such dealers may reallow a
concession not to exceed $ per share to certain other dealers. After the
initial public offering, the public offering price and such concessions may be
changed.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus Supplement, to purchase up
to 225,000 additional shares of Convertible Preferred Stock from the Company
at the same price per share as the initial 1,500,000 shares to be purchased by
the Underwriters. The Underwriters may exercise such option only to cover
over-allotments in the sale of the shares of Convertible Preferred Stock that
the Underwriters have agreed to purchase. To the extent that the Underwriters
exercise such option, each Underwriter will have a firm commitment, subject to
certain conditions, to purchase the same percentage of option shares as the
number of shares to be purchased by such Underwriter in the above table bears
to the total number of shares to be purchased by the Underwriters.
The Company and Cyprus Amax have each agreed that it will not, for a period
of 90 days after the date hereof, without prior written consent of the
Underwriters, offer, sell or contract to sell, or otherwise dispose of
directly or indirectly, or announce the offering of (i) shares of Common Stock
or any securities convertible into, or exchangeable for, shares of Common
Stock (other than the Convertible Preferred Stock offered hereby or pursuant
to existing stock option or other incentive or benefit plans of the Company
and other than upon conversion of the Convertible Preferred Stock offered
hereby or convertible securities outstanding on the date of this Prospectus
Supplement or issuances of Common Stock by the Company to Cyprus Amax pursuant
to the DOCLOC Agreement) or (ii) shares of any class of capital stock of the
Company (other than the Convertible Preferred Stock offered hereby or
issuances of Series A Preferred Stock by the Company to Cyprus Amax pursuant
to the DOCLOC Agreement) which is preferred as to the payment of dividends, or
as to the distribution of assets upon any liquidation or dissolution of the
Company, over shares of any other class of capital stock of the Company. This
restriction will not apply to agreements involving the issuance of Common
Stock in acquisition transactions to be consummated after the expiration of
such 90-day period pursuant to agreements entered into prior thereto.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or contribute to payments that the Underwriters may be
required to make in respect thereof.
S-35
<PAGE>
Salomon Brothers Inc has performed various investment banking services for
the Company in the ordinary course of business for which it has received
customary compensation.
LEGAL MATTERS
The validity of the shares of Convertible Preferred Stock offered hereby and
the shares of Common Stock issuable upon conversion thereof will be passed upon
for the Company by Davis, Graham & Stubbs, L.L.C., Denver, Colorado. Certain
legal matters for the Underwriters will be passed upon by Winston & Strawn,
Chicago, Illinois.
EXPERTS
The consolidated financial statements and the financial statement schedules
of the Company and its consolidated subsidiaries as of December 31, 1993 and
1992 and for each year in the three-year period ended December 31, 1993,
incorporated by reference in this Prospectus Supplement, have been incorporated
herein in reliance on the reports of Coopers & Lybrand, independent
accountants, as stated in their reports in the Company's 1993 Form 10-K, which
include an explanatory paragraph regarding a change in the method of accounting
for exploration expenditures and postemployment benefits in 1993, and a change
in the method of accounting for precious metals inventory, postretirement
benefits and income taxes in 1992, and have been so included and incorporated
in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.
The Company's ore reserves at the Sleeper mine, the Hayden Hill mine, the
Guanaco mine and the Haile project appearing herein have been confirmed by
DMBW, Inc. (Derry, Michener, Booth & Wahl), and such information has been
included herein in reliance upon the authority of such firm as experts in
mining, geology and ore reserve determination.
The Company's ore reserves at the Refuglo project and Fort Knox project
appearing herein have been confirmed by Mineral Resources Development, Inc. and
such information has been included herein in reliance upon the authority of
such firm as experts in mining, geology and ore reserve determination.
S-36
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
S-37
<PAGE>
PROSPECTUS
[LOGO OF AMAX GOLD INC. APPEARS HERE]
SUBORDINATED DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
WARRANTS
Amax Gold Inc. (the "Company" or "Amax Gold") may offer from time to time (i)
subordinated debt securities ("Subordinated Debt Securities"), consisting of
debentures, notes, bonds and/or other unsecured subordinated evidences of
indebtedness in one or more series, (ii) shares of preferred stock, par value
$1.00 per share ("Preferred Stock"), in one or more series, (iii) shares of
common stock, par value $.01 per share ("Common Stock"), and (iv) warrants
("Warrants") to purchase Common Stock (the Subordinated Debt Securities,
Preferred Stock, Common Stock and Warrants are collectively referred to as the
"Securities"), at an aggregate initial offering price not to exceed
U.S.$200,000,000, at prices and on terms to be determined at the time of sale.
The accompanying Prospectus Supplement sets forth with regard to the
particular Securities in respect of which this Prospectus is being delivered
(i) in the case of Subordinated Debt Securities, the title, aggregate
principal amount, denominations (which may be in United States dollars, in any
other currency, currencies or currency unit, including the European Currency
Unit), maturity, rate, if any (which may be fixed or variable) or method of
calculation thereof, and time of payment of any interest, any terms for
redemption at the option of the Company or the holder, any terms for sinking
fund payments, any conversion or exchange rights, any modification of the
covenants, any listing of such Subordinated Debt Securities on a securities
exchange and the initial public offering price and any other terms in
connection with the offering and sale of such Subordinated Debt Securities,
(ii) in the case of Preferred Stock, the designation, aggregate principal
amount, and stated value and liquidation preference per share, initial public
offering price, dividend rate (or method of calculation), dates on which
dividends shall be payable, any redemption or sinking fund provisions, any
conversion or exchange rights, whether the Company has elected to offer the
Preferred Stock in the form of depositary shares, any listing of such
Preferred Stock on a securities exchange, and any other terms in connection
with the offering and sale of such Preferred Stock; (iii) in the case of
Common Stock, the number of shares of Common Stock and the terms of the
offering and sale thereof; and (iv) in the case of Warrants, the number and
terms thereof, the number of shares of Common Stock issuable upon their
exercise, the exercise price, the periods during which the Warrants are
exercisable, any listing of such Warrants on a securities exchange and any
other terms in connection with the offering, sale and exercise of such
Warrants. The Prospectus Supplement will also contain information, as
applicable, about certain United States federal income tax considerations
relating to the Securities in respect of which this Prospectus is being
delivered.
SEE "RISK FACTORS" FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE
SECURITIES.
The Subordinated Debt Securities will be subordinated to all existing and
future Senior Indebtedness (as defined) of the Company. As of March 31, 1994,
the Company had approximately $153.0 million of existing Senior Indebtedness.
All or a portion of any Subordinated Debt Securities may be issued in
permanent global form.
The Company's outstanding Common Stock is listed on the New York Stock
Exchange (Symbol: "AU") and the Toronto Stock Exchange (Symbol: "AXG").
Certain warrants to purchase the Company's Common Stock are listed on the
American Stock Exchange and the Toronto Stock Exchange. Each Prospectus
Supplement will indicate if the Securities offered thereby will be listed on
any securities exchange.
The Company may sell Securities to or through one or more underwriters, and
also may sell Securities directly to other purchasers or through agents. Such
underwriters may include Salomon Brothers Inc. The accompanying Prospectus
Supplement sets forth the names of any underwriters or agents involved in the
sale of the Securities in respect of which this Prospectus is being delivered,
the principal amounts, if any, to be purchased by such underwriters and the
compensation, if any, of such underwriters or agents. See "Plan of
Distribution" herein.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is July 21, 1994.
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
OR IN THE PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY UNDERWRITER, AGENT, DEALER OR OTHER PERSON. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES IN RESPECT OF WHICH THIS PROSPECTUS AND
THE ACCOMPANYING PROSPECTUS SUPPLEMENT ARE DELIVERED OR AN OFFER OF ANY
SECURITIES IN ANY JURISDICTION TO ANY PERSON WHERE SUCH AN OFFER WOULD BE
UNLAWFUL.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at its Regional
Offices located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can be obtained at prescribed
rates from the Public Reference Section of the Commission, 450 Fifth Street,
N.W. Plaza, Washington, D.C. 20549. The Company is also subject to the
information and reporting requirements of the securities regulatory
authorities of certain provinces of Canada and files similar reports, proxy
statements and other information with such authorities. The Common Stock is
listed on the New York and Toronto Stock Exchanges and certain warrants to
purchase Common Stock are listed on the American and Toronto Stock Exchanges.
Such reports, proxy statements and other information can also be inspected and
copied at the respective offices of these exchanges at the New York Stock
Exchange, 20 Broad Street, New York, New York 10005, the Toronto Stock
Exchange, 2 First Canadian Place, Toronto, Ontario, Canada M5X 1J2, and the
American Stock Exchange, 86 Trinity Place, New York, New York 10006-1881.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Securities offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all the information set forth in the Registration Statement,
certain parts of which have been omitted in accordance with the rules and
regulations of the Commission. Reference is hereby made to the Registration
Statement and the exhibits thereto for further information with respect to the
Company and the Securities. The Registration Statement and the exhibits
thereto can be obtained from or inspected and copied at the public reference
facilities maintained by the Commission as described in the prior paragraph.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed by the Company with the
Commission pursuant to the Exchange Act are incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1993.
2. Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1994.
3. Current Report on Form 8-K, dated March 7, 1994.
4. Registration Statement on Form 8-A, filed with the Commission on July
9, 1987, for the Company's Common Stock (File No. 1-9617); as amended
by Form 8, filed with the Commission on July 28, 1987.
2
<PAGE>
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Securities shall
be deemed to be incorporated herein by reference and to be a part hereof from
the date of filing of such documents.
Any statement contained herein, or in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein, shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein or in the
Prospectus Supplement modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will furnish without charge to each person, including any
beneficial owner of Securities, to whom this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the documents
incorporated by reference herein, except for the exhibits to such documents
(unless such exhibits are specifically incorporated by reference into such
documents). Requests should be directed to Investor Relations, 9100 East
Mineral Circle, Englewood, Colorado 80112. Telephone requests may be directed
to Investor Relations at (303) 643-5522.
3
<PAGE>
THE COMPANY
The Company is engaged in the mining and processing of gold and silver ore in
the United States and Chile, the sale of refined gold and silver bullion and
the exploration for, and acquisition and development of, gold-bearing
properties in North and South America. The Company's operating properties
consist of a 100% interest in the Sleeper mine, an open pit gold mine in
Humboldt County, Nevada; a 100% interest in the Hayden Hill mine, an open pit
gold mine in Lassen County, California; an indirect 90% interest in the Guanaco
mine, an open pit gold mine in the Guanaco Mining District approximately 145
miles southeast of Antofagasta, Chile; and a 100% interest in the Wind Mountain
mine, an open pit gold mine in Washoe County, Nevada, at which mining ceased on
January 30, 1992, although residual heap leach production has continued. The
Company, having realized all future economic benefit from its 33.53% interest
in the Waihi gold mine in New Zealand effective April 30, 1993, retains a
nominal interest in such mine. At December 31, 1993, the Company had
proven/probable gold reserves of approximately 268 million tons of ore
containing approximately 7.4 million ounces of gold. In 1993, the Company
produced approximately 210,900 ounces of gold and approximately 673,500 ounces
of silver.
The Company has two major gold development projects, Refugio and Fort Knox,
which are in advanced stages of development. The Refugio project is a large
scale, low grade gold deposit in central Chile in which the Company has an
indirect 50% interest. The Fort Knox project is a 100% owned, large scale, low
grade gold deposit located approximately 15 miles northeast of Fairbanks,
Alaska. Definitive feasibility studies have been completed with respect to both
of these projects. In addition, the Company has a 62.5% joint venture interest
in the Haile gold project in Lancaster County, South Carolina, which is in the
evaluation stage. Since these development projects are not on federal lands,
none of them would be subject to currently proposed legislation in Congress to
alter the General Mining Law. As a result of the Company's ongoing exploration
and development efforts, the Company also has the right to earn a 60% interest
in the Robertson property, an advanced-stage exploration prospect in Crescent
Valley, Nevada, by completing a bankable feasibility study by November 1994.
The Company was incorporated as a wholly-owned subsidiary of AMAX Inc., a New
York corporation ("Amax"), in April 1987 to acquire the gold interests of Amax
in the United States, Canada and the North Island of New Zealand. Amax sold
approximately 13% of the then outstanding shares of Common Stock of the Company
in the Company's initial public offering in July 1987. On November 15, 1993,
Amax was merged with and into Cyprus Minerals Company (the "Cyprus Amax
Merger"), which was renamed Cyprus Amax Minerals Company ("Cyprus Amax").
Immediately prior to the Cyprus Amax Merger, Amax, which at that time held
approximately 68% of the Company's outstanding Common Stock, distributed
approximately 21.8 million shares (approximately 28%) of the Company's Common
Stock (together with all of the outstanding shares of common stock of Alumax
Inc., a Delaware corporation that controlled Amax's aluminum business) in a
distribution to its stockholders. Immediately following the stock distribution
and the Cyprus Amax Merger, Cyprus Amax indirectly held approximately 31.3
million shares of the Company's Common Stock, which constituted approximately
40% of the then outstanding shares of Common Stock of the Company. Subsequent
to the Cyprus Amax Merger, the Company and Cyprus Amax entered into a $100
million double convertible revolving line of credit (the "DOCLOC Agreement"),
under which the Company could issue up to 12,099,213 shares of Common Stock to
Cyprus Amax, and a stock purchase agreement providing for the purchase of
3,000,000 shares of the Company's Common Stock by Cyprus Amax (the "Stock
Purchase Agreement"), both of which agreements are subject to stockholder
approval. The issuance of Common Stock under these two agreements with Cyprus
Amax could potentially increase Cyprus Amax's share of the outstanding shares
of the Company's Common Stock to approximately 46.4 million shares (or
approximately 49.7% prior to any sale of Securities hereunder). See "Risk
Factors--Stock Ownership of Cyprus Amax."
The Company's Common Stock is listed on the New York and Toronto Stock
Exchanges and certain warrants to purchase the Company's Common Stock are
listed on the American and Toronto Stock Exchanges. The Company's executive
offices are located at 9100 East Mineral Circle, Englewood, Colorado 80112, and
its telephone number is (303) 643-5500.
4
<PAGE>
RISK FACTORS
Prospective purchasers of Securities should carefully read this Prospectus,
any Prospectus Supplement delivered herewith, and the documents incorporated by
reference herein and therein. Ownership of Securities involves certain risks.
In determining whether to purchase Securities, prospective investors should
consider carefully the following risk factors and the other information
contained in this Prospectus, in addition to the other risk factors and
information set forth in any Prospectus Supplement delivered herewith.
PROJECT DEVELOPMENT RISKS
The Company's principal development projects are an indirect 50% interest in
the Refugio gold project and a 100% interest in the Fort Knox gold project. In
addition, the Company has a 62.5% joint venture interest in the Haile gold
project. The Company has completed feasibility studies for the Refugio and Fort
Knox projects. There can be no assurance, however, that all of the remaining
permits and regulatory approvals required for development of these projects
will be issued in the time frame contemplated by the Company. Currently, the
Company estimates that the additional capital expenditures for the Refugio and
Fort Knox projects will total approximately $370 million to $410 million (of
which the Company's share is between $310 million and $340 million in addition
to capitalized acquisition and development costs of approximately $205 million
as of December 31, 1993). The Company's estimated capital expenditures for the
Refugio and Fort Knox projects are based upon currently available data and
could increase or decrease depending upon a number of factors beyond the
Company's control, including the timing of the receipt of necessary
governmental permits, climatic conditions and the availability and cost of
material and equipment when needed. In addition, the Company will not be able
to commence construction until financing has been arranged. There can be no
assurance that such financing can be arranged. The Company has had preliminary
discussions with several banks concerning financing for the Fort Knox project.
With respect to financing the Refugio project, the Company and a group of banks
have been negotiating a term sheet for a proposed project financing, and the
Company anticipates entering into commitment letters with these banks in the
near future, although there can be no assurance that the Company will receive
such commitment letters for a total amount sufficient to proceed with
construction of the project. Production will not commence until virtually all
of the capital expenditures have been incurred. If capital expenditures are
higher than currently estimated, additional financing may be required, and
there can be no assurance that such additional financing will be available.
Development projects have no operating history upon which to base estimates
of future cash operating costs. Particularly for development projects,
estimates of reserves and cash operating costs are, to a large extent, based
upon the interpretation of geologic data obtained from drill holes and other
sampling techniques, and feasibility studies which derive estimates of cash
operating costs based upon anticipated tonnage and grades of ore to be mined
and processed, the configuration of the ore body, expected recovery rates of
the gold from the ore, comparable facility and equipment operating costs,
anticipated climatic conditions and other factors. As a result, it is possible
that actual cash operating costs and economic returns may differ significantly
from those currently estimated. It is not unusual in new mining operations to
experience unexpected problems during the start-up phase. For example, the
Company experienced such problems at its Hayden Hill mine during the second
half of 1992 and the first half of 1993. See "--Reserve Estimates."
GOLD PRICE VOLATILITY
The profitability of the Company's operations can be significantly affected
by changes in the market price of gold. The market price of gold has fluctuated
widely and is affected by numerous factors beyond the Company's control,
including international economic trends, currency exchange fluctuations,
expectations for inflation, speculative activities, consumption patterns (such
as purchases of gold jewelry and the development of gold coin programs),
purchases and sales of gold bullion holdings by central banks or other large
gold bullion holders or dealers and global or regional political events,
particularly in major gold-producing countries such as South Africa and some of
the countries that formerly comprised
5
<PAGE>
the Soviet Union. Gold market prices are also affected by worldwide production
levels, which have increased in recent years. The aggregate effect of these
factors, all of which are beyond the Company's control, is impossible for the
Company to predict. In addition, the market price of gold has on occasion been
subject to rapid short-term changes because of market speculation. The
following table sets forth for the years indicated the high and low selling
prices of gold, first position, as provided by the Commodity Exchange, Inc.
("COMEX") in New York and the approximate average selling price for such years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1994(1) 1993 1992 1991 1990 1989 1988 1987
------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High................................. $394 $407 $359 $403 $422 $419 $487 $497
Low.................................. $371 $326 $330 $344 $347 $358 $394 $392
Average.............................. $383 $360 $344 $362 $384 $382 $437 $447
</TABLE>
- --------
(1) Through May 31, 1994.
If the gold price is below the Company's cash production costs and remains
below such level for any sustained period, the Company could experience
additional losses and could determine that it is not economically feasible to
continue commercial production at some or all of its operations or to continue
the development of some or all of its projects. While the Company has
historically used hedging techniques successfully to reduce the Company's
exposure to such volatility, there can be no assurance that it will be able to
do so effectively in the future.
RESERVE ESTIMATES
While the Company's ore reserves have been reviewed by independent
consultants, the ore reserve estimates presented in this Prospectus or
incorporated herein by reference are necessarily imprecise and depend to some
extent on statistical inferences drawn from limited drilling, which may, on
occasion, prove unreliable. Should the Company encounter mineralization or
formations at any of its mines or projects different from those predicted by
drilling, sampling and similar examinations, reserve estimates may have to be
adjusted and mining plans may have to be altered in a way that might adversely
affect the Company's operations. Moreover, short-term operating factors
relating to the ore reserves, such as the need for sequential development of
ore bodies and the processing of new or different ore grades, may adversely
affect the Company's profitability in any particular accounting period.
Declines in the market price of gold may also render ore reserves containing
relatively lower grades of gold mineralization, such as those currently
identified at the Company's Hayden Hill mine and at the Company's Refugio and
Fort Knox projects, uneconomic to exploit unless the utilization of forward
sales or other hedging techniques is sufficient to offset the effects of a drop
in the market price of the gold expected to be mined from such reserves.
Proven/probable reserves at the Company's mines and development projects were
calculated at December 31, 1993 based upon varying gold prices ranging from
$300 per ounce of gold for Refugio to $375 and $400 per ounce of gold for the
Company's other properties. If the Company's realized price per ounce of gold,
including hedging benefits, were to decline substantially below these levels
for an extended period, there could be material delays in the development of
new projects, increased net losses, reduced cash flow, reductions in reserves
and asset write-downs.
In July 1993, the Company determined, as a result of its first year's mining
experience and a thorough reevaluation of geologic data, that the mill grade
ore at the Hayden Hill mine occurs in thinner, less continuous structures than
was originally interpreted. As a result, the Company restated its proven/
probable reserves at Hayden Hill to reclassify a significant portion of the
deposit as mineralized material until such time, if ever, that additional data
from drilling and further mining establish otherwise. As a result of the
restatement of the Hayden Hill reserves and the decision to reconfigure the
mine as a heap leach operation and place the mill on standby status, the
Company recognized a $64.1 million pre-tax ($41.9 million after-tax) write-down
of the Hayden Hill asset as of June 30, 1993. In addition, after seven years of
operation, recent production experience and a reinterpretation of geologic and
metallurgical data at the Sleeper mine during the fourth quarter of 1993 led to
a reduction of the proven/probable ore reserves
6
<PAGE>
at that mine. As a result, Amax Gold recognized a $23.6 million pre-tax ($15.6
million after-tax) write-down of the Sleeper asset as of December 31, 1993. See
Note 7 to Consolidated Financial Statements in the Company's 1993 Form 10-K
incorporated by reference herein.
ENVIRONMENTAL RISKS
Mining is subject to potential risks and liabilities associated with
pollution of the environment and the disposal of waste products occurring as a
result of mineral exploration and production. Environmental liability may
result from mining activities conducted by others prior to the Company's
ownership of a property. Insurance against environmental risks (including
potential liability for pollution or other hazards as a result of the disposal
of waste products occurring from exploration and production) is not generally
available at a reasonable price to the Company or to other companies within the
industry. To the extent the Company is subject to environmental liabilities,
the payment of such liabilities would reduce funds otherwise available to the
Company and could have a material adverse effect on the Company. Should the
Company be unable to fully fund the cost of remedying an environmental problem,
the Company might be required to suspend operations or enter into interim
compliance measures pending completion of the required remedy. The potential
exposure may be significant and could have a material adverse effect on the
Company.
In the context of environmental permitting, including the approval of
reclamation plans, the Company must comply with standards, laws and regulations
which may entail greater or lesser costs and delays depending on the nature of
the activity to be permitted and how stringently the regulations are
implemented by the permitting authority. It is possible that the costs and
delays associated with compliance with such laws, regulations and permits could
become such that the Company would not proceed with the development of a
project or the operation or further development of a mine. Laws and regulations
involving the protection and remediation of the environment are constantly
changing and are generally becoming more restrictive. The Company has made, and
expects to make in the future, significant expenditures to comply with such
laws and regulations.
Pending bills which affect environmental laws applicable to mining include
versions which may substantially alter the Clean Water Act, Safe Drinking Water
Act, Endangered Species Act and a bill which will introduce additional
protection of wetlands (Wetlands Protection and Management Act). Adverse
developments and operating requirements in these acts could impair the ability
of the Company as well as others to develop mineral resources. Revisions to
current versions of these bills could occur prior to passage.
The Environmental Protection Agency ("EPA") continues the development of a
solid waste regulatory program specific to mining operations under the Resource
Conservation and Recovery Act ("RCRA"). Of particular concern to the mining
industry is a proposal by EPA titled "Recommendations for a Regulatory Program
for Mining Waste and Materials Under Subtitle D of the Resource Conservation
and Recovery Act" ("Strawman II") which, if implemented, would create a system
of comprehensive federal regulation of the entire mine site. Many of these
requirements would be duplicative of existing state regulations. Strawman II as
currently proposed would regulate not only mine and mill wastes, but also
numerous production facilities and processes which could limit internal
flexibility in operating a mine. To implement Strawman II as proposed, the EPA
must seek additional statutory authority, which is expected to be requested in
connection with Congress' reauthorization of the RCRA.
Operations at the Company's Guanaco mine and development of the Company's
Refugio project are subject to regulation under the laws of Chile. In March
1994, the country's first comprehensive environmental framework law became
effective. Among other things, this law (i) provides for the establishment of a
comprehensive program for the issuance of permits for future exploration and
mining activities, (ii) imposes the obligation to perform environmental impact
analyses for mining and exploration projects or activities, (iii) creates a
liability scheme for forms of environmental damage, and (iv) contemplates the
issuance of regulations which will impose operating standards. The full impact
of the new law on the mining industry in Chile is unclear at present.
7
<PAGE>
OTHER GOVERNMENTAL REGULATION
The Company's mining operations and exploration activities are subject to
extensive federal, state, local and foreign laws and regulations governing
prospecting, development, production, exports, taxes, labor standards,
occupational health, mine safety and other matters. The Company believes that
it is in substantial compliance with all such material laws and regulations.
New laws and regulations, amendments to existing laws and regulations, or more
stringent implementation of existing laws and regulations could have a material
adverse impact on the Company, prohibit, reduce or delay production at
operating mines or prevent the development of new mining properties.
PROPOSED FEDERAL LEGISLATION
The U.S. Congress is actively considering a proposed major revision of the
General Mining Law, which governs mining claims and related activities on
federal public lands. The Senate and House of Representatives each has passed a
separate bill for mining law revisions and following conference committee
action, a law is presently anticipated before the end of 1994. The Company
anticipates that when this law is effective, it will impose a royalty upon
production of minerals from federal lands and will contain new requirements for
mined land reclamation and similar environmental control and reclamation
measures. It remains unclear to what extent such new legislation will affect
existing mining claims and operations. The effect of any revision of the
General Mining Law on the Company's United States operations cannot be
determined conclusively until such revision is enacted; however, such
legislation could materially increase costs at Hayden Hill, which is primarily
located on federal lands, and could impair the Company's ability to develop
future mineral prospects on unpatented mining claims. Because the Refugio, Fort
Knox and Haile projects are not on federal lands, none of these projects would
be subject to such currently proposed federal legislation.
FOREIGN OPERATIONS
Foreign operations and investments are subject to the risks normally
associated with conducting business in foreign countries, including foreign
exchange controls and currency fluctuations, limitations on repatriation of
earnings, foreign taxation, laws or policies of particular countries, labor
disputes and uncertain political and economic environments as well as risks of
war and civil disturbances or other risks which could cause production
difficulties or stoppages, restrict the movement of funds or result in the
deprivation or loss of contract rights or the taking of property by
nationalization or expropriation without fair compensation. Foreign operations
could also be impacted by laws and policies of the United States affecting
foreign trade, investment and taxation. The Company currently has significant
operations and a significant development project in Chile, a nominal interest
in a mine in New Zealand and an option on an exploration prospect in Panama.
EXPLORATION RISKS
Mineral exploration, particularly for gold, is highly speculative in nature,
involves many risks and frequently is nonproductive. There can be no assurance
that the Company's mineral exploration efforts will be successful. Once
mineralization is discovered, it usually takes a number of years from the
initial phases of exploration until production is possible, during which time
the economic feasibility of production may change. Substantial expenditures are
required to establish ore reserves through drilling, to determine metallurgical
processes to extract the metal from the ore and, in the case of new properties,
to construct mining and processing facilities. As a result of these
uncertainties, no assurance can be given that the Company's exploration
programs will result in the expansion or replacement of existing reserves, some
of which are being depleted by current production.
The Company has entered into an Exploration Joint Venture Agreement (the
"Exploration JV") with Cyprus Amax effective January 1, 1994, under which the
Company and Cyprus Amax will pool their efforts for the principal purpose of
discovering and developing future gold prospects, with Cyprus Amax providing
75% and the Company providing 25% of the initial exploration funding for such
prospects. Such Exploration JV is expected to broaden the geographic reach of
the Company's gold exploration
8
<PAGE>
program and reduce its cost by sharing key personnel and spreading the high
risks associated with exploration. Nevertheless, the Company will initially
have only a 25% interest in any prospects discovered through the Exploration
JV. Cyprus Amax's 75% interest in gold prospects developed through the
Exploration JV will be available for Amax Gold to purchase prior to a decision
to place such prospect in production, but only at the then fair market value
for such interest (which may be determined by mutual agreement). This could
ultimately increase the Company's cost of acquiring such prospects.
MINING RISKS AND INSURANCE
The business of gold mining generally is subject to a number of risks and
hazards, including environmental hazards, industrial accidents and rock falls,
labor disputes, flooding, interruptions due to inclement or hazardous weather
conditions and other acts of God. Such risks could result in damage to, or
destruction of, mineral properties or production facilities, personal injury,
environmental damage, process and production delays, monetary losses and
possible legal liability. While the Company maintains through Cyprus Amax, and
intends to continue to maintain, insurance consistent with industry practice
(currently the Company maintains an aggregate of $275 million of liability
insurance including excess liability insurance), no assurance can be given that
such insurance will continue to be available, be available at economically
acceptable premiums or be adequate to cover any resulting liability.
TITLE TO PROPERTIES
The validity of unpatented mining claims, which constitute a significant
portion of the Company's property holdings in the United States, is often
uncertain and may be contested. Three of the Company's properties--the Sleeper
mine, the Wind Mountain mine and a portion of the Hayden Hill mine--are located
on unpatented federal lode and placer mining claims. In addition, most of the
Company's exploration properties in the United States also consist of
unpatented federal mining claims or leases of such claims. Unpatented mining
claims are unique property interests and are generally considered subject to
greater title risk than patented mining claims and real property interests
owned in fee simple. Substantially all of the Fort Knox property is located on
Alaska State mining claims which are subject to certain title risks similar to
those affecting federal unpatented mining claims. In addition, these lands have
been included in a list of lands submitted to the Alaska State Legislature to
help reconstitute the Alaska Mental Health Trust (the "Trust") pursuant to
legislation enacted in May 1994 amending legislation enacted in June 1991. If
the Fort Knox lands are conveyed to the Trust, the conveyance would be subject
to all encumbrances or interests of record, including the upland mining lease,
millsite permit and other permits already issued by the State of Alaska, and
rentals and royalties would be payable to the Trust rather than to the State of
Alaska. The Trust could potentially assert its interests with respect to any
applications for future permits or rights (or applications for material
modifications, if any, to existing permits or rights) and could at some time
attempt to increase the amount of royalties payable with respect to production
from the Fort Knox property.
The Company has filed a patent application with the United States Bureau of
Land Management ("BLM") for certain claims at its Sleeper mine, and the BLM has
issued a Mineral Entry Final Certificate for these claims; however, there can
be no assurance that the BLM will grant a patent for such claims. The Company
has not filed a patent application for any of its other properties and, under
proposed legislation to change the General Mining Law, patents may not be
obtainable for such other properties. Although the Company has attempted to
acquire satisfactory title to its undeveloped properties, the Company does not
generally obtain title opinions until financing is sought to develop a
property, with the attendant risk that title to some properties, particularly
title to undeveloped properties, may be defective. Mining operations in Chile
are conducted under concession or mining leases issued pursuant to applicable
laws.
9
<PAGE>
SUBORDINATED NATURE OF DEBT SECURITIES
The Subordinated Debt Securities are subordinated to all of the Company's
existing and future Senior Indebtedness. As of March 31, 1994, the Company had
approximately $153.0 million of existing Senior Indebtedness. The Company may
issue additional Senior Indebtedness. The Common Stock and the Series A
Preferred Stock are junior to the Subordinated Debt Securities. The
Subordinated Debt Securities will be senior to any other class of capital stock
that the Company may issue. See "Description of Subordinated Debt Securities--
Subordination."
STOCK OWNERSHIP OF CYPRUS AMAX
As of March 31, 1994, Cyprus Amax held approximately 40% of the outstanding
shares of the Company's Common Stock. As a result of the DOCLOC Agreement and
the Stock Purchase Agreement, Cyprus Amax's share of outstanding shares of the
Company's Common Stock could potentially increase to approximately 49.7% prior
to any sale of Securities hereunder. Directors and officers of Cyprus Amax
comprise four of the six members of the Company's Board of Directors. Milton H.
Ward, Co-Chairman of the Board, President and Chief Executive Officer of Cyprus
Amax, is the Chairman of the Board, President and Chief Executive Officer of
Amax Gold; Mr. Gerald J. Malys, Senior Vice President and Chief Financial
Officer of Cyprus Amax, is a director of Amax Gold; Allen Born, Co-Chairman of
Cyprus Amax, is a director of Amax Gold; and Rockwell A. Schnabel, a director
of Cyprus Amax, is a director of Amax Gold.
The Company is also dependent upon Cyprus Amax with respect to the provision
of certain services to the Company including exploration, insurance,
accounting, cash management and other administrative services. These services
are provided by Cyprus Amax under agreements, some of which may be terminated
on 180 days prior notice. The Company rents its principal offices from Cyprus
Amax. The Company and Cyprus Amax are currently negotiating two agreements that
would replace certain agreements in place with Amax at the time of the Cyprus
Amax Merger, a new services agreement and a non-competition agreement.
The new services agreement would provide the Company with certain Cyprus Amax
general and administrative services and would replace the existing Management
Services Agreement currently in effect between the Company and Cyprus Amax,
which succeeded to the rights and obligations of Amax under such agreement.
Under the new services agreement, as under the existing Management Services
Agreement, services will be provided to the Company on a full cost-
reimbursement basis and the agreement may be terminated by either party as of
the end of any month on prior notice.
The non-competition agreement would define the terms under which either Amax
Gold or Cyprus Amax could develop and ultimately produce minerals that would be
in competition with the other party. As reflected in the current draft, Cyprus
Amax would not compete with Amax Gold for precious metals and Amax Gold would
not compete with Cyprus Amax for other minerals and metals. Cyprus Amax would
be required to offer to Amax Gold any opportunity with respect to the
development and production of precious metals which becomes available to Cyprus
Amax, and such offer would be open for the Company's acceptance for a period of
30 days. The initial term of the agreement would be three years and would
continue thereafter until the first of the following to occur: (i) the
agreement is terminated with the consent of Amax Gold; (ii) the agreement is
terminated by Cyprus Amax upon 180 days' prior notice to Amax Gold following
termination of the Exploration JV; or (iii) Cyprus Amax's shareholding in Amax
Gold falls to less than 25% of the outstanding voting shares of Amax Gold and
Cyprus or Amax Gold terminates the agreement by notice to the other, which
notice would be effective 180 days after the delivery thereof or at the
expiration of the initial term of the agreement, whichever is later. For a
period of 36 months after termination, neither party would conduct business
within the other party's area of interest. Because the non-competition
agreement is currently being negotiated, there is presently no contractual
restriction on Cyprus Amax competing with the Company in the development and
production of precious metals.
10
<PAGE>
Under the Exploration JV, effective January 1, 1994, the Company and Cyprus
Amax have agreed to pool their efforts for the principal purpose of discovering
and developing future gold prospects, with Cyprus Amax providing 75% and the
Company providing 25% of the initial exploration funding for such prospects.
Properties held by the parties prior to January 1, 1994 are excluded from the
joint venture, except that Cyprus Amax has made an initial contribution to the
joint venture of several properties. A subsidiary of Cyprus Amax has been
appointed as Manager to manage, direct and control exploration activities. The
initial term of the Exploration JV is two years, after which the agreement will
terminate unless the Company and Cyprus Amax mutually agree to extend the
agreement. Either party may withdraw upon giving 60 days' notice to the other
party.
Additionally, the Company and Cyprus Amax have entered into an agreement
which gives the Company the option to purchase Cyprus Amax's interest in the
Cerro Quema gold development project in Panama. The purchase price is to be
based on estimated reserves to be established in a feasibility study funded by
the Company that has yet to be completed.
As of March 31, 1994, the Company owed $25.4 million to Cyprus Amax,
primarily as a result of advances that were made by Amax to the Company prior
to the Cyprus Amax Merger, and Cyprus Amax had guaranteed $53.7 million of the
Company's indebtedness. In addition, pursuant to the Stock Purchase Agreement,
Cyprus Amax will purchase 3,000,000 shares of Common Stock at a purchase price
of $6.888 per share, the average closing price per share of Common Stock for
the ten-day period prior to the signing of the commitment letter. The proceeds
of the sale will be used to retire indebtedness owed by Amax Gold to Cyprus
Amax. Cyprus Amax has also entered into the DOCLOC Agreement to make available
to the Company a $100 million double convertible revolving line of credit.
Outstanding indebtedness under the DOCLOC Agreement may be repaid by the
Company issuing a like amount of its newly created $2.25 Series A Convertible
Preferred Stock, which may be converted by Cyprus Amax into a maximum of
12,099,213 shares of the Company's Common Stock at $8.265 per share, a 20%
premium over the average closing price per share of Common Stock for the ten-
day period prior to the signing of the commitment letter. The Company will have
the right to redeem such Convertible Preferred Stock with the Company's Common
Stock at a price per share equal to the greater of $5.854 or the average
closing price per share (up to $8.265) for a predetermined period prior to
redemption. Both the DOCLOC Agreement and the Stock Purchase Agreement provide
Cyprus Amax with demand registration rights with respect to shares of Common
Stock issued to Cyprus Amax. The ability of the Company to issue its Series A
Convertible Preferred Stock to repay indebtedness owed to Cyprus Amax under the
DOCLOC Agreement and to issue Common Stock upon conversion or redemption of
such Series A Convertible Preferred Stock and the issuance of the shares of
Common Stock to Cyprus Amax under the Stock Purchase Agreement are conditioned
upon the Company's obtaining the approval of its stockholders by the
affirmative vote of 66 2/3% of the shares of the Company's outstanding Common
Stock which are not owned by Cyprus Amax and the affirmative vote of 50% of all
outstanding shares of the Company's Common Stock at a special meeting of
stockholders. The acquisition by Cyprus Amax of 3,000,000 shares of Common
Stock under the Stock Purchase Agreement, combined with the potential issuance
of up to 12,099,213 shares of Common Stock under the DOCLOC Agreement, could
increase Cyprus Amax's ownership of the Company's outstanding shares of Common
Stock to approximately 49.7%.
11
<PAGE>
PROVEN/PROBABLE GOLD ORE RESERVES
The following table sets forth the Company's proven/probable gold ore
reserves at its operating mines and development properties as of December 31,
1993. Reserves are that part of a mineral deposit that can be economically and
legally extracted or produced at the time of reserve determination and are
customarily stated in terms of "ore" when dealing with metals. Reserves
represent in-place grades and do not reflect losses in the recovery process.
Ore reserves at the Sleeper mine, the Hayden Hill mine, the Guanaco mine and
the Haile project have been confirmed by DMBW, Inc. (Derry, Michener, Booth &
Wahl), independent consultants, and the ore reserves at the Fort Knox project
and the Refugio project have been calculated or confirmed by Mineral Resources
Development, Inc., independent consultants, both of which independent
consultants are experts in mining, geology and ore reserve determination.
<TABLE>
<CAPTION>
THE COMPANY'S
SHARE OF
AVERAGE GOLD CONTAINED
TONS ORE GRADE OUNCES
(000) (OZ. PER TON) (000 OZ.)
------- ------------- -------------
<S> <C> <C> <C>
OPERATING MINES
Sleeper Mine(1)
Mill ore................................ 1,331 0.115 153
Heap leach ore.......................... 5,358 0.018 97
------- ----- -----
Total................................. 6,689 0.037 250
Hayden Hill Mine(2)
Heap leach ore.......................... 18,800 0.024 451
Guanaco Mine
Heap leach ore.......................... 12,874 0.049 570(3)
------- -----
Total of operating mines.............. 38,363 1,271
======= -----
DEVELOPMENT PROPERTIES
Fort Knox Project
Mill ore................................ 174,483 0.024 4,117
Refugio Project(4)
Heap leach ore.......................... 104,383 0.030 1,537(5)
Haile Project
Mill ore................................ 6,849 0.101 431(6)
------- -----
Total of development properties....... 285,715 6,085
======= -----
Total contained ounces.................... 7,356
=====
</TABLE>
- --------
(1) At December 31, 1993, as a result of production experience and a
reinterpretation of geologic and metallurgical data at the Sleeper mine,
the Company reduced its proven/probable ore reserves at the mine. The
amounts presented represent the reduced reserves.
(2) In July 1993, DMBW, Inc. delivered a revised reserve report showing
reserves as of May 1, 1993 and, as a result of its first year's mining
experience and the revised reserve report, the Company restated its
proven/probable reserves at Hayden Hill to reclassify a significant
portion of the deposit as mineralized material. The amounts presented
represent such reduced reserves as of May 1, 1993, less ore mined and
processed to finished product, as calculated by the Company.
(3) Represents the Company's 90% share of reserves determined as of December
31, 1992 (consisting of both in situ and stockpile ore) less ore mined and
processed to finished product during 1993, as calculated by the Company.
(4) Bema Gold Corporation, a publicly traded company based in Vancouver,
British Columbia and the Company's joint venture partner in the Refugio
project, reports the amount of reserves for the Refugio project in
accordance with Canadian law. The Company's reserve numbers are based on
United States securities laws and are somewhat lower than Bema's reported
reserves in contained ounces of gold because they do not include
mineralized material which does not satisfy the Commission's definition of
ore reserve.
(5) Represents the Company's 50% share.
(6) Represents the Company's 62.5% share.
12
<PAGE>
USE OF PROCEEDS
Unless a Prospectus Supplement indicates otherwise, the Company intends to
use the net proceeds to be received from the sale of the Securities to finance
the Company's operations, for the continued development of its gold projects,
for repayment of indebtedness, including indebtedness to Cyprus Amax, which was
$25.4 million as of March 31, 1994, and for other general corporate purposes.
Pending the application of the net proceeds, the Company expects to invest such
proceeds in short-term, interest-bearing instruments or other investment-grade
securities.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the Company was as follows for the
three months ended March 31, 1994 and 1993, and the years ended December 31,
1993, 1992, 1991, 1990 and 1989:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------- ------------------------------
1994 1993 1993 1992 1991 1990 1989
------ ------ ---- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated ratio of earnings to
fixed charges (unaudited)....... -- -- -- 3.06x 19.85x 69.13x 37.92x
</TABLE>
For purposes of the ratio of earnings to fixed charges, "earnings" consist of
income before income taxes, before the cumulative effect of accounting changes
and the 10% minority interest in the losses of Compania Minera Amax Guanaco,
and excluding the Canamax Resources Inc. ("Canamax") equity losses and Canamax
write-downs, amortization of capitalized interest and fixed charges. "Fixed
charges" consist of total interest and bank fees, whether expensed or
capitalized, and one-third of rents, which management believes is a reasonable
approximation of an interest factor. For the three month periods ended March
31, 1994 and 1993, earnings were inadequate to cover fixed charges by $7.4
million and $9.0 million, respectively, due to operating losses. For the year
ended December 31, 1993, earnings were inadequate to cover fixed charges by
$121.8 million due to pre-tax asset write-downs of approximately $87.7 million
and operating losses.
13
<PAGE>
DESCRIPTION OF SUBORDINATED DEBT SECURITIES
The following description of the Subordinated Debt Securities sets forth the
material terms and provisions of the Subordinated Debt Securities to which any
Prospectus Supplement may relate (the "Offered Debt Securities"). The
particular terms of any Offered Debt Securities and the extent, if any, to
which such general provisions may apply will be described in the Prospectus
Supplement relating to such Offered Debt Securities.
The Subordinated Debt Securities will be general unsecured subordinated
obligations of the Company. The Subordinated Debt Securities will be issued
under an Indenture (the "Indenture") to be entered into between the Company and
the trustee named in the Indenture. A copy of the form of the Indenture will be
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The trustee under the Indenture (and any successor thereto under the
Indenture) is referred to herein as the "Trustee." The statements herein
relating to the Subordinated Debt Securities and the Indenture are summaries
only and do not purport to be complete. Such summaries make use of terms
defined in the Indenture. Wherever such terms are used herein or particular
provisions of the Indenture are referred to, such terms or provisions, as the
case may be, are incorporated by reference as part of the statements made
herein, and such statements are qualified in their entirety by such reference.
Certain defined terms in the Indenture are capitalized herein.
GENERAL
The Indenture does not limit the aggregate principal amount of Subordinated
Debt Securities which can be issued thereunder and provides that Subordinated
Debt Securities may be issued from time to time thereunder in one or more
series, each in an aggregate principal amount authorized by Amax Gold prior to
issuance. The Subordinated Debt Securities may be issued at various times with
different maturity dates and different principal repayment provisions, may bear
interest at different rates, may be payable in currencies other than United
States dollars, in composite currencies or in amounts determined by reference
to the price, rate or value of one or more specified commodities, currencies or
indices, and may otherwise vary, all as provided in the Indenture. Subordinated
Debt Securities of a series may be issued in registered form without coupons
("Registered Debt Securities"), in bearer form with or without coupons attached
("Bearer Debt Securities") or in the form of one or more global securities in
registered or bearer form (each a "Global Security"). Bearer Securities, if
any, will be offered only to non-United States persons and to offices located
outside the United States of certain United States financial institutions.
Unless otherwise indicated in a Prospectus Supplement, the Subordinated Debt
Securities will not benefit from any covenant or other provision that would
afford holders of such Subordinated Debt Securities protection in the event of
a highly leveraged transaction involving Amax Gold.
Reference is made to the applicable Prospectus Supplement for the following
terms of the Offered Debt Securities: (i) the title and aggregate principal
amount of the Offered Debt Securities; (ii) the date or dates on which the
Offered Debt Securities will mature; (iii) the rate or rates (which may be
fixed or variable) per annum, if any, at which the Offered Debt Securities will
bear interest or the method of determining such rate or rates; (iv) the date or
dates from which such interest, if any, will accrue and the date or dates at
which such interest, if any, will be payable; (v) the terms for redemption or
early payment, if any, including any mandatory or optional sinking fund or
analogous provision; (vi) the terms for conversion or exchange, if any, of the
Offered Debt Securities; (vii) whether such Offered Debt Securities will be
issued as Registered Debt Securities, Bearer Debt Securities or any combination
thereof, and any limitations on issuance of such Bearer Debt Securities and any
provisions regarding the transfer or exchange of such Bearer Debt Securities
(including exchange for registered Offered Debt Securities of the same series);
(viii) whether such Offered Debt Securities will be issued in the form of one
or more global securities and whether such global securities are to be issued
in temporary global form or
14
<PAGE>
permanent global form; (ix) information with respect to book-entry procedures,
if any; (x) the currency, currencies or currency unit or units in which such
Offered Debt Securities will be denominated and in which the principal of, and
premium and interest, if any, on such Offered Debt Securities will be payable;
(xi) whether, and the terms and conditions on which, Amax Gold or a holder may
elect that, or the other circumstances under which, payment of principal of (or
premium, if any) or interest, if any, on such Offered Debt Securities is to be
made in a currency or currencies or currency unit or units other than that in
which such Offered Debt Securities are denominated; (xii) each office or agency
where the Offered Debt Securities may be presented for registration of transfer
or exchange, if applicable; (xiii) the place or places where the principal of
(and premium, if any) or interest, if any, on the Offered Debt Securities will
be payable; (xiv) any additional covenants or events of default not currently
set forth in the Indenture that may be included in the terms of the Offered
Debt Securities; (xv) any index or formula to be used to determine the amount
of payments of principal of (and premium, if any) or interest, if any, on such
Offered Debt Securities, and any commodities, currencies, currency units or
indices, or value, rate or price, relevant to such determination; and (xvi) any
other specific terms of the Offered Debt Securities. Reference is also made to
the applicable Prospectus Supplement for information with respect to the price
(expressed as a percentage of the aggregate principal amount of the Offered
Debt Securities) at which the Offered Debt Securities will be issued, if other
than 100 percent.
No service charge will be made for any registration of transfer or exchange
of the Subordinated Debt Securities, but Amax Gold may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. (Section 3.5)
The Company has from time to time entered into, and will in the future enter
into, credit agreements to fund its operations. Such credit agreements may be
secured by the assets of the Company, secured by the assets of the Company's
subsidiaries and/or guaranteed by the Company or the Company's subsidiaries. To
the extent that such credit agreements are so secured or guaranteed, the
lenders under such credit agreements will have priority over the holders of the
Subordinated Debt Securities with respect to the assets of the Company or its
subsidiaries which secure such credit agreements and guarantees.
Amax Gold currently conducts substantial operations through subsidiaries, and
the holders of Subordinated Debt Securities will have a junior position to any
claims of creditors and any preferred stockholders of the Company's
subsidiaries. Claims of creditors of such subsidiaries, including trade
creditors, secured creditors, taxing authorities and creditors holding
guarantees, and claims of holders of any such preferred stock will generally
have priority as to the assets of such subsidiaries over the claims and equity
interest of the Company and, thereby indirectly, the holders of indebtedness of
the Company, including the Subordinated Debt Securities.
Offered Debt Securities may be sold at a discount (which may be substantial)
below their stated principal amount bearing no interest or interest at a rate
which at the time of issuance is below market rates. Any material United States
federal income tax consequences and other special considerations applicable to
any Offered Debt Securities will be described in the Prospectus Supplement
relating to any such Offered Debt Securities.
If any of the Offered Debt Securities are sold for any foreign currency or
currency unit or if the principal of (or premium, if any) or interest, if any,
on any series of the Offered Debt Securities is payable in any foreign currency
or currency unit, the restrictions, elections, tax consequences, specific terms
and other information with respect to such issue of Offered Debt Securities and
such foreign currency or currency unit will be set forth in the Prospectus
Supplement relating thereto.
15
<PAGE>
SUBORDINATION
The payment of the principal of (and premium, if any) and interest, if any,
on the Subordinated Debt Securities is expressly subordinated, to the extent
and in the manner set forth in the Indenture, in right of payment to the prior
payment in full of all Senior Indebtedness of the Company. (Section 15.1)
In the event of any dissolution or winding up, or total or partial
liquidation or reorganization of the Company, whether in bankruptcy,
reorganization, insolvency, receivership or similar proceeding, the holders of
Senior Indebtedness will be entitled to receive payment in full of all amounts
due or to become due on or in respect of all Senior Indebtedness before the
holders of the Subordinated Debt Securities are entitled to receive any payment
on account of principal (or premium, if any) or interest, if any, on the
Subordinated Debt Securities. (Section 15.2)
In the event and during the continuation of any default in the payment of
principal of (or premium, if any) or interest on or other monetary obligation
with respect to any Senior Indebtedness beyond any applicable grace period with
respect thereto or, in the event that any event of default with respect to any
Senior Indebtedness shall have occurred and be continuing permitting the
holders of such Senior Indebtedness (or a trustee or other representative on
behalf of the holders thereof) to declare such Senior Indebtedness due and
payable prior to the date on which it would otherwise have become due and
payable, unless and until such event of default shall have been cured or waived
or shall have ceased to exist and, if any such Senior Indebtedness shall have
been accelerated, such acceleration shall have been rescinded or annulled, or
in the event any judicial proceeding shall be pending with respect to any such
default, then no Securities Payment shall be made. (Section 15.4)
The term "Senior Indebtedness" is defined in the Indenture as all amounts due
on and obligations in connection with any of the following, whether outstanding
at the date of execution of the Indenture, or thereafter incurred, assumed,
guaranteed or otherwise created (including, without limitation, interest
accruing on or after a bankruptcy or other similar event, whether or not an
allowed claim therein): (a) indebtedness, obligations and other liabilities
(contingent or otherwise) of the Company for money borrowed, or evidenced by
bonds, debentures, notes or similar instruments; (b) reimbursement obligations
and other liabilities (contingent or otherwise) of the Company with respect to
letters of credit or banker's acceptances issued for the account of the Company
and interest rate protection agreements and currency exchange or purchase
agreements; (c) obligations and liabilities (contingent or otherwise) related
to capitalized lease obligations of the Company; (d) indebtedness, obligations
and other liabilities (contingent or otherwise) of the Company related to
agreements or arrangements designed to protect the Company or any of its
subsidiaries against fluctuations in commodity prices, including, without
limitation, commodity futures contracts or similar hedging instruments; (e)
indebtedness of others of kinds described in the preceding clauses (a) through
(d) that the Company has assumed, guaranteed or otherwise assured the payment
of directly or indirectly; (f) any indebtedness of another person described in
the preceding clauses (a) through (e) secured by any mortgage, pledge, lien or
other encumbrance on any property owned or held by the Company; and (g) any and
all deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any indebtedness, obligations or liabilities
described in clauses (a) through (f); unless, in any case, the instrument
creating or evidencing such indebtedness, obligation, liability, guaranty,
assumption, deferral, renewal, extension or refunding provides that such
indebtedness, obligation, liability, guarantee, assumption, deferral, renewal,
extension or refunding is not senior in right of payment to the Subordinated
Debt Securities or that such indebtedness is pari passu with or junior to the
Subordinated Debt Securities. (Section 1.1)
CONVERSION OR EXCHANGE OF SUBORDINATED DEBT SECURITIES
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Subordinated Debt Securities, such series will be
convertible or exchangeable into Securities, Common Stock of the Company or
other securities or other property on the terms and conditions set forth
therein. (Article 14)
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COVENANTS
The Indenture requires the Company to covenant, among other things, with
respect to each series of Subordinated Debt Securities: (i) to duly and
punctually pay the principal of (and premium, if any) and interest, if any, on
such series of Subordinated Debt Securities; (ii) to maintain an office or
agency in each Place of Payment where Subordinated Debt Securities may be
presented or surrendered for payment, transferred or exchanged and where
notices to the Company may be served; (iii) if the Company shall act as its
own Paying Agent for any series of Subordinated Debt Securities, to segregate
and hold in trust for the benefit of the persons entitled thereto a sum
sufficient to pay the principal (and premium, if any) or interest, if any, so
becoming due; (iv) to deliver to the Trustee, within 120 days after the end of
each fiscal year, a written statement to the effect that the Company has
fulfilled all its obligations under the Indenture throughout such year; (v) to
preserve its corporate existence; (vi) to maintain its properties; and (vii)
to pay its taxes and other claims, in each case, as required by the Indenture.
In addition, the Prospectus Supplement with respect to any series of
Subordinated Debt Securities may describe additional covenants applicable to
such series which are not currently set forth in the Indenture. (Article 10)
EVENTS OF DEFAULT
Unless otherwise provided in the Prospectus Supplement with respect to any
series of Subordinated Debt Securities, the following are Events of Default
under the Indenture with respect to the Subordinated Debt Securities of such
series issued under the Indenture: (a) failure to pay principal of (or
premium, if any, on) any Subordinated Debt Security of such series when due;
(b) failure to pay interest, if any, on any Subordinated Debt Security of such
series when due, continued for 30 days; (c) failure to deposit any mandatory
sinking fund payment, when due, in respect of the Subordinated Debt Securities
of such series; (d) failure to perform any other covenant of the Company in
the Indenture (other than a covenant included in the Indenture for the benefit
of a series of Subordinated Debt Securities other than such series), continued
for 60 days after written notice as provided in the Indenture; (e) certain
events of bankruptcy, insolvency or reorganization; and (f) any other Event of
Default as may be established with respect to Subordinated Debt Securities of
such series (including, without limitation, any Event of Default arising out
of a default which results in the acceleration of certain indebtedness or a
default in the payment of any amounts due on certain indebtedness). (Sections
3.1 and 5.1) If an Event of Default in clause (a), (b), (c), (d) or (f) above
with respect to any outstanding series of Subordinated Debt Securities occurs
and is continuing, either the Trustee or the holders of at least 25% in
principal amount of all outstanding Subordinated Debt Securities of such
series (or of all outstanding Subordinated Debt Securities under the
Indenture) may declare the principal amount of all the Subordinated Debt
Securities of the applicable series to be due and payable immediately. If an
Event of Default described in clause (e) shall occur, the principal amount of
the Subordinated Debt Securities of all series ipso facto shall become and be
immediately due and payable without any declaration or other act on the part
of the Trustee, any holder or any other person. At any time after a
declaration of acceleration has been made, but before a judgment has been
obtained, the holders of a majority in principal amount of the outstanding
Subordinated Debt Securities of such series (or of all outstanding
Subordinated Debt Securities under the Indenture, as the case may be) may,
under certain circumstances, rescind and annul such acceleration. In addition,
the Prospectus Supplement with respect to any series of Subordinated Debt
Securities may describe additional Events of Default applicable to such series
which are not currently set forth in the Indenture. (Section 5.2)
The Indenture provides that the Trustee will, within 90 days after the
occurrence of a default in respect of any series of Subordinated Debt
Securities known to the Trustee, give to the holders of the Subordinated Debt
Securities of such series notice of all uncured and unwaived defaults known to
it; provided, however, that, except in the case of a default in the payment of
the principal of (or premium, if any) or any interest on, or any sinking fund
installment with respect to, any Subordinated Debt Securities of such series,
the Trustee will be protected in withholding such notice if it in good faith
determines that the withholding of such notice is in the interest of the
holders of the Subordinated Debt Securities of such
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series; and provided, further, that such notice shall not be given until at
least 30 days after the occurrence of a default in the performance, or breach,
of any covenant or warranty of the Company under the Indenture, other than for
the payment of the principal of (or premium, if any) or any interest on, or any
sinking fund installment with respect to, any Subordinated Debt Securities of
such series. For the purpose of this provision, "default" with respect to
Subordinated Debt Securities of any series means any event which is, or after
notice or lapse of time, or both, would become, an Event of Default with
respect to the Subordinated Debt Securities of such series. (Section 6.2)
The holders of a majority in principal amount of the outstanding Subordinated
Debt Securities of any series (or, in certain cases, of all outstanding
Subordinated Debt Securities under the Indenture) have the right, subject to
certain limitations, to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to the Subordinated Debt Securities
of such series (or of all outstanding Subordinated Debt Securities under the
Indenture, as the case may be). (Section 5.12) Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any of the holders of the Subordinated
Debt Securities unless they shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might
be incurred by it in compliance with such request. (Section 6.3)
The holders of a majority in principal amount of the outstanding Subordinated
Debt Securities of any series (or, in certain cases, of all outstanding
Subordinated Debt Securities under the Indenture) may on behalf of the holders
of all Subordinated Debt Securities of such series (or of all outstanding
Subordinated Debt Securities under the Indenture, as the case may be) waive any
past default under the Indenture, except a default in the payment of the
principal of (or premium, if any) or interest on any Subordinated Debt Security
or in respect of a provision which under the Indenture cannot be modified or
amended without the consent of the holder of each outstanding Subordinated Debt
Security affected. (Section 5.13) The holders of a majority in principal amount
of the outstanding Subordinated Debt Securities affected thereby may, on behalf
of the holders of all such Subordinated Debt Securities, waive compliance by
Amax Gold with certain restrictive provisions of the Indenture. (Section 10.9)
Amax Gold is required to furnish to the Trustee annually a statement as to
the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Section 10.4)
MODIFICATION
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the holders of a majority in principal amount
of each series of outstanding Subordinated Debt Securities affected thereby;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding Subordinated Debt Security affected
thereby, (a) change the stated maturity date of the principal of, or any
installment of interest on, any Subordinated Debt Security, (b) reduce the
principal amount of, or the premium (if any) or interest on, any Subordinated
Debt Security, (c) change the Place of Payment or currency, currencies, or
currency unit or units of payment of principal of, or premium (if any) or
interest on, any Subordinated Debt Security, (d) impair the right to institute
suit for the enforcement of any payment on or with respect to any Subordinated
Debt Security or (e) reduce the percentage in principal amount of outstanding
Subordinated Debt Securities the consent of whose holders is required for
modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults. (Section
9.2)
The Indenture provides that Amax Gold and the Trustee may, without the
consent of any holders of Subordinated Debt Securities, enter into supplemental
indentures for the purposes, among other things, of adding to the Company's
covenants, securing the Subordinated Debt Securities, adding additional Events
of Default or curing ambiguities or inconsistencies in the Indenture, provided
any such action to cure ambiguities or inconsistencies shall not adversely
affect the interests of the holders of the Subordinated Debt Securities or any
related coupons in any material respect. (Section 9.1)
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CONSOLIDATION, MERGER AND SALE OF ASSETS
Amax Gold, without the consent of any holders of outstanding Subordinated
Debt Securities, may consolidate with or merge into, or convey, transfer or
lease its assets substantially as an entirety to, any person, provided that the
person formed by such consolidation or into which Amax Gold is merged or which
acquires or leases the assets of Amax Gold substantially as an entirety is a
corporation, partnership or trust organized under the laws of any United States
jurisdiction and assumes by supplemental indenture the Company's obligations on
the Securities and under the Indenture, that after giving effect to the
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing, and that certain other conditions are met. (Section 8.1) Upon
compliance with these provisions by a successor person, Amax Gold will be
relieved of its obligations under the Indenture and the Subordinated Debt
Securities. (Section 8.2)
DISCHARGE AND DEFEASANCE
Unless the Prospectus Supplement in respect of any series of Subordinated
Debt Securities shall state otherwise, Amax Gold may terminate its obligations
under the Indenture with respect to Subordinated Debt Securities of any series,
other than its obligation to pay the principal of (and premium, if any) and
interest on such Subordinated Debt Securities and certain other obligations, if
(i) Amax Gold irrevocably deposits or causes to be irrevocably deposited with
the Trustee as trust funds money or Government Obligations maturing as to
principal and interest sufficient to pay the principal of, any interest on, and
any mandatory sinking funds in respect of, all outstanding Subordinated Debt
Securities of such series on the stated maturity of such payments or on any
redemption date, (ii) Amax Gold has delivered to the Trustee an opinion of
counsel to the effect that the holders of Subordinated Debt Securities of such
series will not recognize income, gain or loss for United States federal income
tax purposes as a result of such discharge and will be subject to United States
federal income tax on the same amount and in the same manner and at the same
time as would have been the case if such discharge had not occurred, (iii) Amax
Gold complies with any additional conditions specified to be applicable with
respect to the covenant defeasance of Subordinated Debt Securities of such
series, and (iv) no default or Event of Default with respect to the
Subordinated Debt Securities of such issue shall have occurred and be
continuing on the date of such deposit or, in so far as they relate to certain
events of bankruptcy or insolvency, at any time in the period ending on the
91st day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such period).
The terms of any series of Subordinated Debt Securities may also provide for
legal defeasance pursuant to the Indenture. In such case, if Amax Gold (i)
irrevocably deposits or causes to be irrevocably deposited money or Government
Obligations as described above and complies with the other provisions described
above (except that the opinion referred to in clause (ii) above must be based
on a ruling by the Internal Revenue Service or other change under applicable
federal income tax law), (ii) makes a request to the Trustee to be discharged
from its obligations on the Subordinated Debt Securities of such series and
(iii) complies with any additional conditions specified to be applicable with
respect to legal defeasance of Securities of such series, then Amax Gold shall
be deemed to have paid and discharged the entire indebtedness on all the
outstanding Subordinated Debt Securities of such series and the obligations of
Amax Gold under the Indenture and the Subordinated Debt Securities of such
series to pay the principal of (and premium, if any) and interest on the
Subordinated Debt Securities of such series shall cease, terminate and be
completely discharged, and the holders thereof shall thereafter be entitled
only to payment out of the money or Government Obligations deposited with the
Trustee as aforesaid, unless Amax Gold's obligations are revived and reinstated
because the Trustee is unable to apply such trust fund by reason of any legal
proceeding, order or judgment. (Articles 4 and 13)
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Subordinated Debt Securities are issuable in definitive form as Registered
Debt Securities, as Bearer Debt Securities or both. Unless otherwise indicated
in an applicable Prospectus Supplement, Bearer Debt Securities will have
interest coupons attached. Subordinated Debt Securities are also issuable in
temporary or permanent global form. (Section 3.1)
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Registered Debt Securities of any series will be exchangeable for other
Registered Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations. In addition, with
respect to any series of Bearer Debt Securities, at the option of the holder,
subject to the terms of the Indenture, such Bearer Debt Securities (with all
unmatured coupons, except as provided below, and all matured coupons in
default) will be exchangeable into Registered Debt Securities of the same
series of any authorized denominations and of a like aggregate principal amount
and tenor. Bearer Debt Securities surrendered in exchange for Registered Debt
Securities between a Regular Record Date or a Special Record Date and the
relevant date for payment of interest shall be surrendered without the coupon
relating to such date for payment of interest, and interest accrued as of such
date will not be payable in respect of the Registered Debt Security issued in
exchange for such Bearer Debt Security, but will be payable only to the holder
of such coupon when due in accordance with the terms of the Indenture. (Section
3.5)
In connection with its sale during the restricted period (as defined below),
no Bearer Debt Security (including a Subordinated Debt Security in permanent
global form that is either a Bearer Debt Security or exchangeable for Bearer
Debt Securities) shall be mailed or otherwise delivered to any location in the
United States (as defined under "--Limitations on Issuance of Bearer Debt
Securities") and a Bearer Debt Security may be delivered outside the United
States in definitive form in connection with its original issuance only if
prior to delivery the person entitled to receive such Bearer Debt Security
furnishes written certification, in the form required by the Indenture, to the
effect that such Bearer Debt Security is owned by: (a) a person (purchasing for
its own account) who is not a United States person (as defined under "--
Limitations on Issuance of Bearer Debt Securities"); (b) a United States person
who (i) is a foreign branch of a United States financial institution purchasing
for its own account or for resale or (ii) acquired such Bearer Debt Security
through the foreign branch of a United States financial institution and who for
purposes of the certification holds such Bearer Debt Security through such
financial institution on the date of certification and, in either case, such
United States financial institution certifies to Amax Gold or the distributor
selling the Bearer Debt Security within a reasonable time stating that it
agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"), and
the regulations thereunder, or (c) a United States or foreign financial
institution for purposes of resale within the "restricted period" as defined in
United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7). A financial
institution described in clause (c) of the preceding sentence (whether or not
also described in clauses (a) and (b)) must certify that it has not acquired
the Bearer Debt Security for purpose of resale, directly or indirectly, to a
United States person or to a person within the United States or its
possessions. In the case of a Bearer Debt Security in permanent global form,
such certification must be given in connection with notation of a beneficial
owner's interest therein in connection with the original issuance of such
Subordinated Debt Security or upon exchange of a portion of a temporary global
Subordinated Debt Security. (Section 3.3)
Subordinated Debt Securities may be presented for exchange as provided above,
and Registered Debt Securities may be presented for registration of transfer
(with the form of transfer endorsed thereon duly executed), at the office of
the Security Registrar or at the office of any transfer agent designated by
Amax Gold for such purpose with respect to any series of Subordinated Debt
Securities and referred to in the applicable Prospectus Supplement, without a
service charge and upon payment of any taxes and other governmental charges as
described in the Indenture. Such transfer or exchange will be effected upon the
Security Registrar or such transfer agent, as the case may be, being satisfied
with the documents of title and identity of the person making the request. Amax
Gold may appoint the Trustee as Security Registrar. (Section 3.5) If a
Prospectus Supplement refers to any transfer agents (in addition to the
Security Registrar) initially designated by Amax Gold with respect to any
series of Subordinated Debt Securities, Amax Gold may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that, if Subordinated Debt
Securities of a series are issued solely as Registered Debt Securities, Amax
Gold will be required to maintain a transfer agent in each Place of Payment for
such series and, if Subordinated Debt Securities
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of a series are issued as Bearer Debt Securities, Amax Gold will be required to
maintain (in addition to the Security Registrar) a transfer agent in a Place of
Payment located outside the United States for Bearer Securities of such series.
Amax Gold may at any time designate additional transfer agents with respect to
any series of Subordinated Debt Securities. (Section 10.2)
In the event of any redemption in part, Amax Gold shall not be required to
(i) issue, register the transfer of or exchange Subordinated Debt Securities of
any series during a period beginning at the opening of business 15 days prior
to the day of mailing or first publication, as the case may be, of the relevant
notice of redemption of Subordinated Debt Securities of that series for
redemption and ending on the close of business on (A) if Subordinated Debt
Securities of the series are issued only as Registered Debt Securities, the day
of mailing of the relevant notice of redemption and (B) if Subordinated Debt
Securities of the series are issued as Bearer Debt Securities, the day of the
first publication of the relevant notice of redemption except that, if
Securities of the series are also issued as Registered Debt Securities and
there is no publication, the day of mailing of the relevant notice of
redemption; (ii) register the transfer of or exchange any Registered Debt
Security, or portion thereof, called for redemption, except the unredeemed
portion of any Registered Debt Security being redeemed in part; or (iii)
exchange any Bearer Debt Security called for redemption, except to exchange
such Bearer Debt Security for a Registered Debt Security of that series and
like tenor which is simultaneously surrendered for redemption. (Section 3.5)
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and any premium) and interest on Bearer Debt Securities will
be payable, subject to any applicable laws and regulations in the designated
currency or currency unit, at the offices of such Paying Agents outside the
United States as Amax Gold may designate from time to time, at the option of
the Company, by check or by transfer to an account maintained by the payee with
a bank located outside the United States; provided, however, that the written
certification described above under "--Form, Exchange, Registration and
Transfer" has been delivered prior to the first actual payment of interest.
(Section 3.7) Unless otherwise indicated in the applicable Prospectus
Supplement, payment of interest on Bearer Debt Securities on any Interest
Payment Date will be made only against surrender to the Paying Agent of the
coupon relating to such Interest Payment Date. (Section 10.1) No payment with
respect to any Bearer Debt Security will be made at any office or agency of
Amax Gold in the United States or by check mailed to any address in the United
States or by transfer to any account maintained with a bank located in the
United States, nor shall any payments be made in respect of Bearer Debt
Securities upon presentation to Amax Gold or its designated Paying Agents
within the United States. Notwithstanding the foregoing, payments of principal
of (and any premium) and interest on Bearer Debt Securities denominated and
payable in U.S. dollars will be made at the office of Amax Gold's Paying Agent
in the United States, if (but only if) payment of the full amount thereof in
U.S. dollars at all offices or agencies outside the United States is illegal or
effectively precluded by exchange controls or other similar restrictions.
(Section 10.2)
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and any premium) and interest on Registered Debt Securities
will be made in the designated currency or currency unit at the office of such
Paying Agent or Paying Agents as Amax Gold may designate from time to time,
except that at the option of Amax Gold payment of any interest may be made by
check mailed to the address of the person entitled thereto as such address
shall appear in the Security Register. Unless otherwise indicated in an
applicable Prospectus Supplement, payment of any installment of interest on
Registered Debt Securities will be made to the person in whose name such
Registered Debt Security is registered at the close of business on the Regular
Record Date for such interest. (Section 3.7)
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporate Trust Office of the Trustee will be designated as a Paying Agent for
Amax Gold for payments with respect to
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Subordinated Debt Securities which are issuable solely as Registered Debt
Securities, and Amax Gold will maintain a Paying Agent outside the United
States for payments with respect to Subordinated Debt Securities (subject to
limitations described above in the case of Bearer Debt Securities) which are
issued solely as Bearer Debt Securities, or as both Registered Debt Securities
and Bearer Debt Securities. Any Paying Agents outside the United States and any
other Paying Agents in the United States initially designated by Amax Gold for
the Subordinated Debt Securities will be named in an applicable Prospectus
Supplement. Amax Gold may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent or approve a change in the office
through which any Paying Agent acts, except that, if Subordinated Debt
Securities of a series are issued solely as Registered Debt Securities, Amax
Gold will be required to maintain a Paying Agent in each Place of Payment for
such series and, if Subordinated Debt Securities of a series are issued as
Bearer Securities, Amax Gold will be required to maintain (i) a Paying Agent in
the United States for principal payments with respect to any Registered Debt
Securities of the series (and for payments with respect to Bearer Debt
Securities of the series in the circumstances described above, but not
otherwise), and (ii) a Paying Agent in a Place of Payment located outside the
United States where Securities of such series and any coupons appertaining
thereto may be presented and surrendered for payment. (Section 10.2)
All moneys paid by Amax Gold to a Paying Agent for the payment of principal
of and any premium or interest on any Subordinated Debt Security which remain
unclaimed at the end of three years after such principal, premium or interest
shall have become due and payable will (subject to applicable escheat laws) be
repaid to Amax Gold and the holder of such Subordinated Debt Security or any
coupon will thereafter look only to Amax Gold for payment thereof. (Section
10.3)
TEMPORARY GLOBAL SECURITIES
If so specified in the applicable Prospectus Supplement, all or any portion
of the Subordinated Debt Securities of a series which are issuable as Bearer
Debt Securities will initially be represented by one or more temporary global
Subordinated Debt Securities, to be deposited with a common depository in
London for the Euroclear System ("Euroclear") and CEDEL S.A. ("CEDEL") for
credit to the designated accounts. Not later than the date determined as
provided in any such temporary global Subordinated Debt Security and described
in the applicable Prospectus Supplement, each such temporary global
Subordinated Debt Security will be exchangeable for definitive Bearer Debt
Securities, definitive Registered Debt Securities or all or a portion of a
permanent global security, or any combination thereof, as specified in the
applicable Prospectus Supplement, but, unless otherwise specified in the
applicable Prospectus Supplement, only upon receipt of written certification in
the form and to the effect described under "--Form, Exchange, Registration and
Transfer." No Bearer Debt Security delivered in exchange for a portion of a
temporary global Subordinated Debt Security will be mailed or otherwise
delivered to any location in the United States in connection with such
exchange. (Section 3.4)
Unless otherwise specified in the applicable Prospectus Supplement, interest
in respect of any portion of a temporary global Subordinated Debt Security
payable in respect of an Interest Payment Date occurring prior to the issuance
of definitive Subordinated Debt Securities or a permanent global Subordinated
Debt Security will be paid to each of Euroclear and CEDEL with respect to the
portion of the temporary global Subordinated Debt Security held for its
account. Each of Euroclear and CEDEL will undertake in such circumstances to
credit such interest received by it in respect of a temporary global
Subordinated Debt Security to the respective accounts for which it holds such
temporary global Subordinated Debt Security only upon receipt in each case of
written certification in the form and to the effect described above under "--
Form, Exchange, Registration and Transfer" as of the relevant Interest Payment
Date regarding the portion of such temporary global Subordinated Debt Security
on which interest is to be so credited. (Section 3.4)
PERMANENT GLOBAL SECURITIES
If any Subordinated Debt Securities of a series are issuable in permanent
global form, the applicable Prospectus Supplement will describe the
circumstances, if any, under which beneficial owners of
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interests in any such permanent global Subordinated Debt Securities may
exchange such interests for Subordinated Debt Securities of such series and of
like tenor and principal amount in any authorized form and denomination. No
Bearer Debt Security delivered in exchange for a portion of a permanent global
Subordinated Debt Security shall be mailed or otherwise delivered to any
location in the United States in connection with such exchange. A person having
a beneficial interest in a permanent global Subordinated Debt Security, will,
except with respect to payment of principal of and any premium and interest on
such permanent global Subordinated Debt Security, be treated as a holder of
such principal amount of Outstanding Debt Securities represented by such
permanent global Subordinated Debt Security as shall be specified in a written
statement of the holder of such permanent global Subordinated Debt Security or,
in the case of a permanent global Subordinated Debt Security in bearer form, of
the operator of Euroclear or CEDEL which is provided to the Trustee by such
person. Principal of and any premium and interest on a permanent global
Subordinated Debt Security will be payable in the manner described in the
applicable Prospectus Supplement. (Section 2.5)
BOOK-ENTRY DEBT SECURITIES
The Subordinated Debt Securities of a series may be issued, in whole or in
part, in the form of one or more global Subordinated Debt Securities that would
be deposited with a depository or its nominee identified in the applicable
Prospectus Supplement. The specific terms of any depository arrangement with
respect to any portion of a series of Subordinated Debt Securities and the
rights of, and limitations on, owners of beneficial interests in any such
global Subordinated Debt Security representing all or a portion of a series of
Subordinated Debt Securities will be described in the applicable Prospectus
Supplement. (Section 2.6)
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES
In compliance with United States federal tax laws and regulations, Bearer
Debt Securities (including securities in permanent global form that are either
Bearer Debt Securities or exchangeable for Bearer Debt Securities) will not be
offered or sold during the restricted period (as defined in United States
Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)) (generally, the first 40
days after the closing date, and, with respect to unsold allotments, until
sold) within the United States or to United States persons (each as defined
below) other than to an office located outside the United States of a United
States financial institution (as defined in Section 1.165-12(c)(1)(v) of the
United States Treasury Regulations), purchasing for its own account or for
resale or for the account of certain customers, that provides a certificate
stating that it agrees to comply with the requirements of Section 165(j)(3)(A),
(B) or (C) of the Code and the United States Treasury Regulations thereunder,
or to certain other persons described in Section 1.163-5(c)(2)(i)(D)(1)(iii)(B)
of the United States Treasury Regulations. Moreover, such Bearer Debt
Securities will not be delivered in connection with their sale during the
restricted period within the United States. Any underwriters and dealers
participating in the offering of Bearer Debt Securities must covenant that they
will not offer or sell during the restricted period any Bearer Debt Securities
within the United States or to United States persons (other than the persons
described above) or deliver in connection with the sale of Bearer Debt
Securities during the restricted period any Bearer Debt Securities within the
United States and that they have in effect procedures reasonably designed to
ensure that their employees and agents who are directly engaged in selling the
Bearer Debt Securities are aware of the restrictions described above. No Bearer
Debt Security (other than a temporary global Bearer Debt Security) will be
delivered in connection with its original issuance nor will interest be paid on
any Bearer Debt Security until receipt by Amax Gold of the written
certification described above under "--Form, Exchange, Registration and
Transfer." Each Bearer Debt Security, other than a temporary global Bearer Debt
Security, will bear a legend to the following effect: "Any United States person
who holds this obligation will be subject to limitations under the United
States income tax laws, including the limitations provided in Sections 165(j)
and 1287(a) of the Internal Revenue Code."
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As used herein, "United States person" means any citizen or resident of the
United States, any corporation, partnership or other entity created or
organized in or under the laws of the United States and any estate or trust the
income of which is subject to United States federal income taxation regardless
of its source, and "United States" means the United States of America
(including the states and the District of Columbia) and its possessions.
MEETINGS
The Indenture contains provisions for convening meetings of the holders of
Subordinated Debt Securities of a series. A meeting may be called at any time
by the Trustee, and also, upon request, by Amax Gold or the holders of at least
10% in principal amount of the Outstanding Debt Securities of such series, in
any such case upon notice given as described under "-Notices" below. Except for
any consent that must be given by the holder of each Outstanding Debt Security
affected thereby, as described under "-Modification" above, any resolution
presented at a meeting or adjourned meeting at which a quorum is present may be
adopted by the affirmative vote of the holders of a majority in principal
amount of the Outstanding Debt Securities of that series; provided, however,
that, except for any consent that must be given by the holder of each
Outstanding Debt Security affected thereby, as described under "-Modification"
above, any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action that may be made, given or
taken by the holders of a specified percentage, which is less than a majority
in principal amount of the Outstanding Debt Securities of a series, may be
adopted at a meeting or adjourned meeting duly reconvened at which a quorum is
present by the affirmative vote of the holders of such specified percentage in
principal amount of the Outstanding Debt Securities of that series. Except for
any consent that must be given by the holder of each Outstanding Debt Security
affected thereby, as described under "--Modification" above, any resolution
passed or decision taken at any meeting of holders of Subordinated Debt
Securities of any series duly held in accordance with the Indenture will be
binding on all holders of Subordinated Debt Securities of that series and any
related coupons. The quorum at any meeting called to adopt a resolution, and at
any reconvened meeting, will be persons holding or representing a majority in
principal amount of the Outstanding Debt Securities of a series. (Article 16)
NOTICES
Except as otherwise provided in the Indenture, notices to holders of Bearer
Debt Securities will be given by publication at least twice in a daily
newspaper in the City of New York and London or other capital city in Western
Europe and in such other city or cities as may be specified in such Securities.
Notices to holders of Registered Debt Securities will be given by mail to the
addresses of such holders as they appear in the Security Register. (Section
1.6)
THE TRUSTEE
The Indenture contains certain limitations on the right of the Trustee, to
the extent it is a creditor of Amax Gold, to obtain payment of claims in
certain cases and to realize on certain property received with respect to any
such claims, as security or otherwise. (Section 6.13) The Trustee is permitted
to engage in other transactions, except that, if it acquires any conflicting
interest within the meaning of the Trust Indenture Act of 1939, it must
eliminate such conflict or resign. (Section 6.8)
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DESCRIPTION OF PREFERRED STOCK
The Company's Restated Certificate of Incorporation currently authorizes the
issuance of 10,000,000 shares of preferred stock, par value $1.00 per share,
issuable in series. The Board of Directors of the Company is authorized to
approve the issuance of one or more series of preferred stock without further
authorization of the stockholders of Amax Gold and to fix the number of shares,
the designations, the relative rights and preferences and the limitations of
any such series.
No shares of preferred stock are currently outstanding, but Amax Gold has
reserved for issuance 2,000,000 shares of Series A Preferred Stock, issuable by
Amax Gold in repayment of outstanding indebtedness under the DOCLOC Agreement.
See "Description of Capital Stock--Series A Preferred Stock."
The applicable Prospectus Supplement sets forth the number of shares,
particular designation, relative rights and preferences and the limitations of
any series of Preferred Stock in respect of which this Prospectus is delivered.
The particular terms of any such series will include the following:
(i) The maximum number of shares to constitute the series and the
designation thereof;
(ii) The annual dividend rate, if any, on shares of the series, whether
such rate is fixed or variable or both, the date or dates from which
dividends will begin to accrue or accumulate, whether dividends will be
cumulative and whether such dividends shall be paid in cash, Common Stock
or otherwise;
(iii) Whether the shares of the series will be redeemable and, if so, the
price at and the terms and conditions on which the shares of the series may
be redeemed, including the time during which shares of the series may be
redeemed and any accumulated dividends thereon that the holders of shares
of the series shall be entitled to receive upon the redemption thereof;
(iv) The liquidation preference, if any, applicable to shares of the
series;
(v) Whether the shares of the series will be subject to operation of a
retirement or sinking fund and, if so, the extent and manner in which any
such fund shall be applied to the purchase or redemption of the shares of
the series for retirement or for other corporate purposes, and the terms
and provisions relating to the operation of such fund;
(vi) The terms and conditions, if any, on which the shares of the series
shall be convertible into, or exchangeable for, shares of any other class
or classes of capital stock of Amax Gold or another corporation or any
series of any other class or classes, or of any other series of the same
class, including the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same;
(vii) The voting rights, if any, of the shares of the series;
(viii) The currency or units based on or relating to currencies in which
such series is denominated and/or in which payments will or may be payable;
(ix) The methods by which amounts payable in respect of such series may
be calculated and any commodities, currencies or indices, or price, rate or
value, relevant to such calculation;
(x) Any listing of the shares of the series on a securities exchange; and
(xi) Any other preferences and relative, participating, optional or other
rights or qualifications, limitations or restrictions thereof.
Any material United States federal income tax consequences and other special
considerations to any offered Preferred Stock will be described in the
Prospectus Supplement relating to the offering and sale of such Preferred
Stock.
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<PAGE>
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue Warrants to purchase Common Stock. Each series of
Warrants will be issued under a separate warrant agreement (each a "Warrant
Agreement") to be entered into between the Company and a warrant agent (the
"Warrant Agent"). The Warrant Agent will act solely as an agent of the Company
in connection with the Warrants of such series and will not assume any
obligation or relationship of agency or trust for or with any holders or
beneficial owners of Warrants. The following sets forth certain general terms
and provisions of the Warrants offered hereby. Further terms of the Warrants
and the applicable Warrant Agreement will be set forth in the applicable
Prospectus Supplement.
The applicable Prospectus Supplement will describe the following terms of any
Warrants in respect of which this Prospectus is delivered: (i) the title of
such Warrants; (ii) the price or prices at which such Warrants will be issued;
(iii) the periods during which the Warrants are exercisable; (iv) the number of
shares of Common Stock for which each Warrant is exercisable; (v) the exercise
price for such Warrants, including any changes to or adjustments in the
exercise price; (vi) the currency or currencies, including composite
currencies, in which the exercise price of such Warrants may be payable; (vii)
if applicable, a discussion of material United States federal income tax
considerations; (viii) any listing of the Warrants on a securities exchange;
and (ix) any other terms of such Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Warrants.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized by its Restated Certificate of Incorporation to
issue 200,000,000 shares of Common Stock and 10,000,000 shares of preferred
stock. As of March 31, 1994, there were approximately 78.2 million shares of
Common Stock issued and outstanding and no shares of preferred stock issued and
outstanding, but 2,000,000 shares of preferred stock had been designated by the
Board of Directors of Amax Gold as "$2.25 Series A Convertible Preferred
Stock." All of the shares of Series A Preferred Stock have been reserved for
issuance under the DOCLOC Agreement. See "--Series A Preferred Stock."
COMMON STOCK
The Company's Restated Certificate of Incorporation authorizes the issuance
of 200,000,000 shares of Common Stock. A summary of the terms and provisions of
the Common Stock is set forth below.
Dividends. The holders of Common Stock are entitled to receive dividends
when, as and if declared by the Board out of funds legally available therefor,
provided that if any shares of the Series A Preferred Stock, the Preferred
Stock issued in connection with this Prospectus and the accompanying Prospectus
Supplement, or any other shares of preferred stock are at the time outstanding,
the payment of dividends on Common Stock or other distributions (including
purchases of Common Stock) will be subject to the declaration and payment of
all cumulative dividends on outstanding shares of the Series A Preferred Stock
and may be subject to the declaration and payment of all cumulative dividends
on outstanding shares of the Preferred Stock issued in connection with this
Prospectus and the accompanying Prospectus Supplement and any other shares of
preferred stock which are then outstanding.
Liquidation. In the event of the dissolution, liquidation or winding up of
Amax Gold, holders of Common Stock are entitled to share ratably in any assets
remaining after the satisfaction in full of the prior rights of creditors,
including holders of Amax Gold's indebtedness, and the aggregate liquidation
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preference of the Series A Preferred Stock, any Preferred Stock issued in
connection with this Prospectus and the accompanying Prospectus Supplement and
any other shares of preferred stock then outstanding.
Voting. The Company's stockholders are entitled to one vote for each share on
all matters voted on by stockholders, including election of directors. Shares
of Common Stock held by the Company or any entity controlled by the Company do
not have voting rights and are not counted in determining the presence of a
quorum. Directors are elected annually. Holders of Common Stock have no
cumulative voting rights.
No Other Rights. The holders of Common Stock do not have any conversion,
redemption or preemptive rights.
Transfer Agent. The transfer agent for the Common Stock is Chemical Bank, 450
West 33rd Street, New York, New York 10001.
Listing. Shares of the Company's outstanding Common Stock are listed on the
New York and Toronto Stock Exchanges.
SERIES A PREFERRED STOCK
The $2.25 Series A Convertible Preferred Stock was designated as a series of
preferred stock in connection with the DOCLOC Agreement. The Series A Preferred
Stock consists of 2,000,000 shares. A summary of the terms and provisions of
the Series A Preferred Stock is set forth below.
Dividends. The holders of shares of Series A Preferred Stock are entitled to
receive dividends at the annual rate of $2.25 per share, which is cumulative,
accrues without interest and is payable in cash in equal semi-annual
installments. Amax Gold may elect to pay any dividend due and payable in shares
of Common Stock in lieu of a dividend payment in cash, unless the holder of
Series A Preferred Stock delivers written notice stating that such holder
elects to receive cash.
Liquidation Preference. Upon the liquidation, dissolution or winding up of
the Company, the holders of Series A Preferred Stock are entitled to receive
from the assets of the Company an amount equal to the dividends accrued and
unpaid thereon to the date of final distribution to such holders, whether or
not declared, without interest, and a sum equal to $50.00 per share, and no
more. Payment to the holders of shares of Series A Preferred Stock will be made
before any payment is made or any assets distributed to holders of Common Stock
or any other class or series of Amax Gold's capital stock ranking junior as to
liquidation rights to the Series A Preferred Stock.
Redemption at the Option of Amax Gold. The Company, at its option, may at any
time redeem the Series A Preferred Stock, in whole or from time to time in
part, for that number of shares of Common Stock obtained by dividing $50.00 by
the lesser of (i) the Call Price (defined below) and (ii) the Conversion Price
(defined below), plus accrued and unpaid dividends, whether or not declared or
due, to the date fixed for redemption. The maximum number of shares of Common
Stock that Amax Gold may issue upon redemption and conversion of and the
payment of dividends on the Series A Preferred Stock is 12,099,213 shares,
subject to adjustment due to any adjustment in the Conversion Price. In the
case of the redemption of Series A Preferred Stock that would result in the
issuance of more than 12,099,213 shares of Common Stock, the Company would pay
an amount in cash in lieu of such shares of Common Stock in excess of
12,099,213 shares equal to the lesser of the Call Price or the Conversion Price
multiplied by the number of shares in excess of 12,099,213. Such cash payment
will be made in 12 consecutive substantially equal quarterly payments.
The "Call Price" with respect to a redemption of Series A Preferred Stock is
equal to the greater of (i) $5.854 (subject to adjustment in connection with
any adjustment in the Conversion Price) and (ii) the
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<PAGE>
average closing price per share of Common Stock as calculated for a ten day
trading period ending on the fifth trading day prior to the date the notice of
redemption is mailed.
Conversion. The holder of any shares of Series A Preferred Stock will have
the right, at the holder's option, to convert any or all shares of Preferred
Stock held by such holder into Common Stock at any time. Each share of Series A
Preferred Stock is convertible into that number of shares of Common Stock
obtained by dividing $50.00 by the Conversion Price in effect at the time. The
"Conversion Price" is $8.265 and is subject to adjustment upon payment by the
Company of a dividend or the making by the Company of a distribution on Common
Stock in shares of Common Stock, upon the subdivision, combination or issuance
by reclassification of Common Stock, or upon the issuance of rights, options or
warrants to purchase shares of Common Stock at a price per share less than the
current price per share. The maximum number of shares of Common Stock that Amax
Gold may issue upon redemption and conversion of and the payment of dividends
on the Series A Preferred Stock is 12,099,213 shares, subject to adjustment due
to any adjustment in the Conversion Price. No fractional shares of Common Stock
will be issued upon conversion but, in lieu thereof, an appropriate amount will
be paid in cash. No adjustment will be made to the Conversion Price unless such
adjustment would require an increase or decrease of at least 1% of such price.
Voting Rights. The shares of Series A Preferred Stock are not entitled to
vote except as described below or as required by law. Shares of Series A
Preferred Stock held by the Company or any entity controlled by Amax Gold do
not have voting rights and are not counted in determining the presence of a
quorum. If dividends on the Series A Preferred Stock are in arrears in an
amount equal to at least three semi-annual dividend payments, the number of
members of the Board will be increased by two and the holders of Series A
Preferred Stock, voting separately as a class, will have the right to vote for
and elect two additional directors of Amax Gold during the period that such
dividends remain in arrears.
The affirmative vote or consent of the holders of at least 66-2/3 percent of
all outstanding shares of Series A Preferred Stock is required for the Company
to (i) amend, alter or repeal any provision of the Restated Certificate of
Incorporation, as amended, or the Bylaws of the Company, as amended, so as to
affect adversely the relative rights, preferences, qualifications, limitations
or restrictions of the Series A Preferred Stock, (ii) authorize or issue, or
increase the authorized amount of, any additional class or series of stock, or
any security convertible into stock of such class or series ranking prior to
the Series A Preferred Stock in respect of the payment of dividends or upon
liquidation, dissolution or winding up of Amax Gold or (iii) effect any
reclassification of the Series A Preferred Stock.
No Preemptive Rights. The Series A Preferred Stock does not have any
preemptive or subscription rights in respect of any securities of the Company.
Cyprus Amax, however, does have the right to replace from time to time all or a
portion of the DOCLOC Agreement and any outstanding indebtedness and/or Series
A Preferred Stock with the purchase of up to 12,099,213 shares of Common Stock
at a purchase price of $8.265 per share (or $100 million if all 12,099,213
shares of Common Stock are purchased).
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$21 WARRANTS
The Company issued warrants to purchase 4,066,649 shares of Common Stock in
connection with the acquisition of the Fort Knox property (the "$21 Warrants").
Each of the $21 Warrants permits the holder to purchase one share of Common
Stock at a price of $21.00 per share, subject to adjustment upon the occurrence
of certain events described below. The $21 Warrants are currently exercisable
and will expire at 5:00 p.m., New York City time, on January 8, 1996. The $21
Warrant holders are not protected against dilution of their interests in Amax
Gold if Amax Gold should issue additional shares of Common Stock (other than by
way of stock dividends, stock splits, reclassifications, mergers and other
similar events described in the $21 Warrant Agreement) or preferred stock in
the future. No preemptive rights exist in respect of the $21 Warrants. No
commissions are to be paid to broker-dealers upon the exercise of the $21
Warrants, although Amax Gold may agree in the future to pay such commissions.
Shares of Common Stock will be issued upon surrender of the $21 Warrants and
payment of the exercise price in accordance with the terms of the $21 Warrant
Agreement.
Transferability. The $21 Warrants are transferable, subject, in the case of
certain stockholders who formerly held securities of the joint venturers which
owned the property, to certain agreements entered into between Amax Gold and
such stockholders. The $21 Warrants are currently listed on the Toronto Stock
Exchange and the American Stock Exchange.
Expiration. Unless exercised within the time provided for exercise, the $21
Warrants will automatically expire.
Purchase of Common Stock. There is no minimum number of shares of Common
Stock which must be purchased upon exercise of the $21 Warrants. The maximum
number of shares of Common Stock which can be purchased upon exercise of the
$21 Warrants is 4,066,649 shares.
Antidilution Provisions. The holders of the $21 Warrants in certain instances
are protected against dilution of their interests represented by the underlying
shares of Common Stock upon the issuance to holders of Common Stock of stock
dividends or other distributions of capital stock of the Company without
payment of consideration, upon the issuance of rights or warrants exercisable
for Common Stock at a price per share which is less than the current fair
market value per share, or upon the occurrence of stock splits,
reclassifications, mergers and other similar events described in the $21
Warrant Agreement. If such events were to occur, the exercise price and number
of shares of Common Stock issuable upon exercise of each $21 Warrant would be
adjusted in accordance with the provisions of the $21 Warrant Agreement.
No Voting Power. The holders of the $21 Warrants have no voting power and are
not entitled to dividends. In the event of a liquidation, dissolution, or
winding up of the Company, the $21 Warrant holders will not be entitled to
participate in the distribution of the Company's assets.
Listing. The $21 Warrants are listed on the American Stock Exchange and the
Toronto Stock Exchange. The shares of Common Stock issuable upon exercise of
the $21 Warrants have been listed on the New York Stock Exchange, subject to
notification of issuance.
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PLAN OF DISTRIBUTION
The Company may offer Securities to or through underwriters, through agents
or directly to other purchasers. Such underwriters may include Salomon Brothers
Inc.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices (which may be changed from time
to time), at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. Each Prospectus
Supplement will describe the method of distribution of the Securities offered
therein.
The Company may sell Securities directly, through agents designated from time
to time, through underwriting syndicates led by one or more managing
underwriters or through one or more underwriters acting alone. Each Prospectus
Supplement will set forth the terms of the Securities to which such Prospectus
Supplement relates, including the name or names of any underwriters or agents
with whom the Company has entered into arrangements with respect to the sale of
such Securities, the public offering or purchase price of such Securities and
the net proceeds to the Company from such sale, any underwriting discounts and
other items constituting underwriters' compensation, any discounts and
commissions allowed or paid to dealers, if any, any commissions allowed or paid
to agents, and the securities exchange or exchanges, if any, on which such
Securities will be listed. Dealer trading may take place in certain of the
Securities, including Securities not listed on any securities exchange.
Securities may be purchased to be reoffered to the public through
underwriting syndicates led by one or more managing underwriters, or through
one or more underwriters acting alone. The underwriter or underwriters with
respect to each underwritten offering of Securities will be named in the
Prospectus Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth
on the cover page of such Prospectus Supplement. Unless otherwise set forth in
the applicable Prospectus Supplement, the obligations of the underwriters to
purchase the Securities will be subject to certain conditions precedent and
each of the underwriters with respect to a sale of Securities will be obligated
to purchase all of its Securities if any are purchased. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
Securities may be offered and sold by the Company through agents designated
by the Company from time to time. Any agent involved in the offer and sale of
any Securities will be named, and any commissions payable by the Company to
such agent will be set forth, in the Prospectus Supplement relating to such
offering. Unless otherwise indicated in such Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its appointment.
Offers to purchase Securities may be solicited directly by the Company and
sales thereof may be made by the Company directly to institutional investors or
others who may be deemed to be underwriters within the meaning of the
Securities Act with respect to any resale thereof. The terms of any such sales
will be described in the Prospectus Supplement relating thereto.
The Company may also issue contracts under which the counterparty may be
required to purchase Securities. Such contracts would be issued for Securities
in amounts, at prices and on terms to be set forth in a Prospectus Supplement.
The anticipated place and time of delivery of Securities will be set forth in
the applicable Prospectus Supplement.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or agents to solicit offers by certain institutions to
purchase Securities from the Company pursuant to delayed delivery contracts
providing for payment and delivery at a future date. Institutions with which
such
30
<PAGE>
contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases such institutions must be approved by
the Company. Unless otherwise set forth in the applicable Prospectus
Supplement, the obligations of any purchaser under any such contract will not
be subject to any conditions except that (i) the purchase of the Securities
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject, and (ii) if the Securities are
also being sold to underwriters acting as principals for their own account, the
underwriters shall have purchased such Securities not sold for delayed
delivery. The underwriters and such other persons will not have any
responsibility in respect of the validity or performance of such contracts.
Any underwriter or agent participating in the distribution of the Securities
may be deemed to be an underwriter, as that term is defined in the Securities
Act, of the Securities so offered and sold and any discounts or commissions
received by them from the Company and any profit realized by them on the sale
or resale of the Securities may be deemed to be underwriting discounts and
commissions under the Securities Act.
Underwriters and agents may be entitled, under agreements entered into with
the Company, to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which such underwriters or agents may be required to
make in respect thereof. Certain of such underwriters and agents, including
their associates, may be customers of, engage in transactions with and perform
services for, the Company and its subsidiaries in the ordinary course of
business.
LEGAL MATTERS
The validity of the Securities offered will be passed upon for the Company by
Davis, Graham & Stubbs, L.L.C., Denver, Colorado. Certain legal matters will be
passed upon for the underwriters or selling agents, if any, by Winston &
Strawn, Chicago, Illinois.
EXPERTS
The consolidated financial statements and the related supplemental schedules
as of December 31, 1993 and December 31, 1992 and for each of the three years
in the period ended December 31, 1993, incorporated by reference in this
Prospectus from the Company's Annual Report on Form 10-K for the year ended
December 31, 1993, have been audited by Coopers & Lybrand, independent
accountants, as stated in their reports which are incorporated by reference
herein, which include an explanatory paragraph regarding a change in the method
of accounting for exploration expenditures and postemployment benefits in 1993,
and a change in the method of accounting for precious metals inventory,
postretirement benefits and income taxes in 1992, and have been so included and
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The Company's ore reserves at the Sleeper mine, the Hayden Hill mine, the
Guanaco mine and the Haile project set forth in the table under the heading
"Proven/Probable Gold Ore Reserves" have been confirmed by DMBW, Inc. (Derry,
Michener, Booth & Wahl) and such information has been included herein in
reliance upon the authority of such firm as experts in mining, geology and ore
reserve determination.
The Company's ore reserves at the Refugio project and Fort Knox project set
forth in the table under the heading "Proven/Probable Gold Ore Reserves" have
been confirmed by Mineral Resources Development, Inc. and such information has
been included herein in reliance upon the authority of such firm as experts in
mining, geology and ore reserve determination.
31
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32
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN OR INCORPO-
RATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN CONNEC-
TION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER OR DEALER. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT AND PRO-
SPECTUS, OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATES HEREOF. THIS PROSPEC-
TUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHO-
RIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED
TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITA-
TION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary.............................................. S-3
Risk Factors............................................................... S-12
Recent Developments........................................................ S-13
Use of Proceeds............................................................ S-15
Price Range of Common Stock and Dividends.................................. S-16
Capitalization............................................................. S-17
The Company................................................................ S-18
Description of Convertible Preferred Stock................................. S-25
U.S. Federal Income Tax Consequences....................................... S-29
Underwriting............................................................... S-35
Legal Matters.............................................................. S-36
Experts.................................................................... S-36
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 4
Risk Factors............................................................... 5
Use of Proceeds............................................................ 13
Ratio of Earnings to Fixed Charges......................................... 13
Description of Subordinated Debt Securities................................ 14
Description of Preferred Stock............................................. 25
Description of Warrants.................................................... 26
Description of Capital Stock............................................... 26
Plan of Distribution....................................................... 30
Legal Matters.............................................................. 31
Experts.................................................................... 31
</TABLE>
1,500,000 SHARES
AMAX GOLD INC.
$ SERIES B
CONVERTIBLE PREFERRED STOCK
(LIQUIDATION PREFERENCE $50.00 PER SHARE)
[LOGO OF AMAX GOLD INC. APPEARS HERE]
SALOMON BROTHERS INC
GOLDMAN, SACHS & CO.
PROSPECTUS SUPPLEMENT
DATED AUGUST , 1994
