<PAGE>
[CONFORMED]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
(MARK
ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
----------------
COMMISSION FILE NUMBER 1-9620
LOGO
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 06-1199974
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
9100 EAST MINERAL CIRCLE 80112
ENGLEWOOD, COLORADO (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(303)643-5500
(REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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- --------------------------------------------------------------------------------
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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COMMON STOCK, $0.01 PAR VALUE (78,196,647 NEW YORK STOCK EXCHANGE, INC.
SHARES OUTSTANDING AT 3/17/94) THE TORONTO STOCK EXCHANGE
WARRANTS TO PURCHASE COMMON STOCK AMERICAN STOCK EXCHANGE
(4,066,649 OUTSTANDING AT 3/17/94) THE TORONTO STOCK EXCHANGE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES^^X^ NO^^^
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS REPORT OR ANY
AMENDMENTS TO THIS REPORT. ^^^
AS OF MARCH 17, 1994, THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S COMMON
STOCK HELD BY NON-AFFILIATES (USING NEW YORK STOCK EXCHANGE CLOSING PRICES) WAS
APPROXIMATELY $339,901,315.
PORTIONS OF THE FOLLOWING DOCUMENT ARE INCORPORATED BY REFERENCE INTO THIS
REPORT: REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 5, 1994 (PART III).
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<PAGE>
PART I
Definitions. As used herein, the term "reserves" means those estimated
quantities of a mineral deposit that, under presently anticipated conditions,
may be economically and legally mined and sold or processed for the extraction
of their constituent values. "Proven reserves" means reserves for which
quantity is computed from dimensions revealed in outcrops, trenches, workings
or drill holes, grade and/or quality are computed from the results of detailed
sampling and the sites for inspection, sampling and measurement are spaced so
closely and the geologic character is so well defined that size, shape, depth
and mineral content of reserves are well-established. "Probable reserves" means
reserves for which quantity and grade and/or quality are computed from
information similar to that used for proven reserves, but the sites for
inspection, sampling, and measurement are farther apart or are otherwise less
adequately spaced; the degree of assurance, although lower than that for proven
reserves, is high enough to assume continuity between points of observation.
"Proven/probable reserves" means reserves as to which the difference in degree
of assurance between the two classes of reserves cannot be readily defined. The
Company's proven/probable reserves are calculated through the use of mapping,
drilling, sampling, assaying and other standard evaluation methods. Unless
otherwise indicated, all ore reserves herein are given as of December 31, 1993.
Except as otherwise noted, stated tonnages and grades of ore reserves include
allowances for waste dilution but do not include allowances for losses in the
recovery process. References to "tons" and "ounces" are to short tons of 2,000
pounds avoirdupois and to troy ounces of 1.097 ounces avoirdupois,
respectively. References to "dollars", "US$", and "$" are to United States
dollars.
ITEM 1. BUSINESS.
INTRODUCTION
Amax Gold Inc. (the "Company," "Amax Gold" or "AGI" which terms include
subsidiaries, where indicated by the context) is a Delaware corporation engaged
in the mining and processing of gold and silver ore and in the exploration for,
and acquisition and development of, gold-bearing properties, principally in
North and South America. The Company's share of production from its operating
properties totaled 210,880 ounces during 1993. The Company's operating
properties consist of a 100% interest in the Sleeper mine in Humboldt County,
Nevada; a 100% interest in the Hayden Hill mine in Lassen County, California;
an indirect 90% interest in the Guanaco mine in Chile and a 100% interest in
the Wind Mountain mine in Washoe County, Nevada. The Company also retains a
nominal interest in the Waihi mine in New Zealand. In addition, the Company
owns a 100% interest in the Fort Knox gold project near Fairbanks, Alaska; an
indirect 50% interest in the Refugio gold project in Chile; and a 62.5% joint
venture interest in the Haile gold project in Lancaster County, South Carolina.
See map on page 2. The Company's share of reserves as of December 31, 1993 in
all its properties totaled approximately 7.4 million contained ounces of gold.
History of the Company. The Company was incorporated as a wholly-owned
subsidiary of AMAX Inc. ("Amax"), a New York corporation, 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. During 1992, the Company issued approximately 13.2 million shares
of its common stock and approximately 4 million warrants ("Warrants") to
purchase common stock in connection with the acquisition of the Fort Knox
project and issued another one million shares of common stock in connection
with acquisition of the Haile project. On January 14, 1993, the Company issued
3.15 million shares of unregistered common stock to the shareholders of a
privately held Chilean company to acquire an indirect 50% interest in the
Refugio project in central Chile.
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 Amax Gold outstanding
1
<PAGE>
[STRIP ART HERE]
2
<PAGE>
common stock, distributed approximately 21.8 million shares (approximately 28%)
of the 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. As
a result of the above stock distribution and the Cyprus Amax Merger, Cyprus
Amax acquired approximately 31.3 million shares of Amax Gold common stock,
which constitutes approximately 40% of the outstanding common shares of the
Company. Cyprus Amax has committed to purchase and the Company has agreed to
issue and sell an additional 3,000,000 shares of Amax Gold common stock at
$6.888 per share, with the proceeds of the sale to be used to retire
indebtedness owed by Amax Gold to Cyprus Amax. See "BUSINESS--AGREEMENTS WITH
CYPRUS AMAX--Stock Purchase Agreement." As a result of this share purchase,
Cyprus Amax's ownership of Amax Gold common stock will increase to
approximately 42%. This percentage ownership would increase to slightly under
50% upon conversion of all of the Cyprus-Amax $100 million line of credit to
Amax Gold common stock. See "BUSINESS--AGREEMENTS WITH CYPRUS AMAX--Line of
Credit" and NOTE 8 of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS under ITEM 8
of PART II herein. Cyprus Amax's nearly 50% ownership share would be reduced to
approximately 48% if all of the Warrants issued in connection with the Fort
Knox acquisition are exercised. This percentage would be further reduced to 45%
if the Put and Call Agreement between Cyprus Amax and the Company is fully
exercised by either party. See "BUSINESS--AGREEMENTS WITH CYPRUS AMAX--Put and
Call Agreement." The Company's common stock is listed on the New York Stock
Exchange (AU) and the Toronto Stock Exchange (AXG) and the Warrants are listed
on the American Stock Exchange (AUWS) and the Toronto Stock Exchange (AXGWT).
The Gold Industry. Gold has two principal uses: product fabrication and
bullion investment. Fabricated gold has a wide variety of end uses, including
jewelry manufacture (the largest fabrication component), electronics,
dentistry, industrial and decorative uses, medals, medallions and official
coins. The Company sells all of its refined gold to banks and other bullion
dealers, utilizing a variety of hedging techniques. Substantially all of the
Company's 1993 sales were export sales made in Europe by the Company's wholly-
owned subsidiary, Amax Precious Metals, Inc. ("APMI"). See "BUSINESS--REFINING,
SALES AND HEDGING ACTIVITIES" and NOTES 9 and 10 of NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS under ITEM 8 of PART II herein.
Gold Prices. The profitability of the Company's operations is significantly
affected by the market price of gold. The price of gold has fluctuated widely,
and is affected by numerous factors, including international economic trends,
currency exchange fluctuations, expectations for inflation, consumption
patterns (such as purchases of gold jewelry and the development of gold coin
programs), sales of gold bullion holdings by central bank or other large gold
bullion holders or dealers and political events in the Middle East and major
gold-producing countries such as South Africa and the CIS. Gold prices are also
affected by worldwide production levels, which have increased in recent years.
In addition, the 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.
<TABLE>
<CAPTION>
YEAR HIGH LOW
- ---- -------------------
(DOLLARS PER OUNCE)
<S> <C> <C>
1983........................................................ 510.10 372.60
1984........................................................ 404.60 307.30
1985........................................................ 340.70 282.00
1986........................................................ 441.10 327.00
1987........................................................ 497.10 392.10
1988........................................................ 487.00 394.00
1989........................................................ 418.90 358.10
1990........................................................ 422.40 346.80
1991........................................................ 403.20 344.30
1992........................................................ 359.30 329.70
1993........................................................ 407.00 326.30
</TABLE>
3
<PAGE>
SLEEPER MINE
The Sleeper mine, located in Humboldt County, Nevada, approximately 28 air
miles north of Winnemucca, is 100% owned by the Company, through its wholly-
owned subsidiary, Nevada Gold Mining, Inc. ("Nevada Gold"). The Company's land
holdings, which consist of unpatented mining claims, encompass approximately
8.25 square miles. The number of unpatented mining claims maintained by the
Company was substantially reduced in 1993. Current facilities occupy
approximately 2,000 acres of land. Access to the mine is by way of a six-mile
gravel road that connects to a county and state highway. Power is provided by
the local rural electric association. Water for mining and processing
operations at Sleeper is provided by a well system that dewaters the pits, and
potable water is supplied by truck. As it is currently operated, the mine is
free of royalty burden.
The property was discovered by an Amax geologist in 1982. Development of the
mine started in July 1985 and was completed in March 1986. From inception
through December 31, 1993, 1,454,726 ounces of gold have been produced at the
Sleeper mine. The following table presents operating data for the Sleeper mine
for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C> <C>
Tons mined(1)............... 18,608,500 18,466,900 16,247,200
Tons of ore milled.......... 899,791 896,788 623,302
Average mill-head grade (oz.
per ton)................... 0.078 0.106 0.219
Mill recovery (%)(2)........ 72.70 82.6 88.5
Tons of ore to heap leach... 6,327,600 8,610,600 8,305,700
Average grade to heap leach
(oz. per ton).............. 0.019 0.020 0.024
Ounces of gold produced(3)
Mill...................... 51,257 82,962 120,906
Heap leach(4)............. 48,761 61,611 62,440
---------- ---------- ----------
Total................... 100,018 144,573 183,346
========== ========== ==========
Ounces of silver
produced(3)................ 254,692 257,797 289,463
Cost per ounce of gold
produced
Cash production costs(5).. $ 317 $ 223 $ 188
Depreciation and
depletion(6)............. 132 99 71
---------- ---------- ----------
Total production costs.. $ 449 $ 322 $ 259
========== ========== ==========
</TABLE>
- --------
(1) Includes stripping.
(2) Mill recovery for any period is defined as the gold contained in the ore
processed compared to the gold produced in the form of dore bullion plus
(or minus) any increase (or decrease) in plant inventory. Plant inventory
is the amount of gold that is (i) present as adsorbed gold on activated
carbon or (ii) present in the refinery as electrowon gold and gravity
concentrates before being smelted into dore bullion.
(3) Production for any period is defined as gold or silver, as the case may be,
produced in the form of dore bullion plus, effective January 1, 1992, plant
inventory that is present in the mill carbon circuit. Gold and silver
production for 1992 reflects an additional 4,733 gold ounces and 9,282
silver ounces due to the cumulative effect of a change in accounting to
include production in the mill carbon circuit.
(4) Based on production experience, the Company estimates that processing of
ore by heap leaching will result in ultimate gold recovery of approximately
50% for crushed ore and 22% for run-of-mine (uncrushed) ore.
(5) Cash production costs include all operating costs at the mine site,
including overhead and Nevada net proceeds tax, before depreciation and
depletion, and net of credits for silver by-products.
(6)Depreciation is calculated primarily using the unit of production method.
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. 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
4
<PAGE>
December 31, 1993. See NOTE 7 of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
under ITEM 8 of PART II herein. A large portion of the remaining Sleeper ore
reserve contains high clay content material which is expected to have adverse
impacts on operating costs and recoveries.
The Company's proven/probable reserves at the Sleeper mine have been
confirmed by Derry, Michener, Booth & Wahl, Inc. ("DMBW"), independent
geological consultants, in a report dated February 7, 1994. Reserves for the
Sleeper mine are based upon a $400 per ounce gold price and variable cut-off
grades. Reserves represent in-place diluted grades and do not reflect losses in
the recovery process. No royalties are payable with respect to any of the
reserves presently identified.
SLEEPER MINE
PROVEN/PROBABLE ORE RESERVES
CONFIRMED BY DMBW
AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
GOLD GOLD
TONS AVG. GRADE CONTENT
(000) (OZ./TON) (000 OZ.)
----- ---------- ---------
<S> <C> <C> <C>
Mill Ore....................................... 1,331 0.115 153
Heap Leach Ore................................. 5,358 0.018 97
----- ----- ---
Total...................................... 6,689 0.037 250
===== ===== ===
</TABLE>
The net reduction of the Sleeper reserves from year-end 1992 to year-end 1993
is 500,400 contained ounces. Production accounts for 204,400 contained ounces,
with the balance of the reduction due to a variety of factors, including the
removal of suspected downhole contamination from the database, an increased
understanding of the problems associated with high clay and high pyrite
material, new exploration drilling, and new geostatistical parameters for the
reserve model. In comparison to the previous reserve model, the new model has
greater geological constraints and utilizes a dilution correction to more
closely match recent production.
Indications of mineralized material have been identified both beyond the
boundaries of the current pits and at depths below the currently planned pit
limits. The Company has conducted approximately 78,000 linear feet of drilling
to determine the continuity of a portion of the deep vein structure and has
completed a preliminary feasibility study on a more extensive underground
drilling program. There can be no assurance, however, that a further drilling
program will result in additions to the Company's reserves. If no new reserves
are established, the remaining life of the Sleeper mine is estimated at
approximately two years, exclusive of residual leaching after cessation of
mining operations.
The Company's total capital spending at the Sleeper mine for 1993 was $3.3
million, compared with $7.6 million for 1992. In 1994, total capital spending
is expected to be approximately $2 million, primarily for additions to the
dewatering system, tailings dam construction, and development drilling.
The Company has filed an application for a patent on certain of the
unpatented mining claims at the Sleeper mine. See "PROPERTIES--United States".
Certain mining claims, none of which are included in the calculation of the
Company's reserves, are owned by the Company subject to a royalty deed
providing for payment of a 3% royalty on net returns in the event of mining
from the claims. In January 1994, the Company made the final payment under a
promissory note and deed of trust previously encumbering these claims.
Nevada Gold has a gold bullion loan agreement under which 4,000 ounces of
gold ($1.6 million) were outstanding as of December 31, 1993. The Company has
verbally agreed to repay this loan in February 1995, but it may be prepaid at
any time. Collateral consists of a pledge of all of Nevada Gold's capital stock
and a mortgage of all of its assets (principally the Sleeper mine). See NOTE 8
of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS under ITEM 8 of PART II herein.
HAYDEN HILL MINE
The Company owns 100% of the Hayden Hill 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. Access to the mine is
by way of a four-mile gravel road that connects to a state highway. The
5
<PAGE>
Company controls approximately 6,300 acres through ownership of federal
patented and unpatented mining claims and fee lands and a lease of federal
unpatented mining claims, which has an indefinite term. The leased property is
subject to a gross receipts, net smelter return royalty ranging from 2% to 5%.
Approximately 75% of the current reserves are subject to this royalty. Five of
the patented mining claims, which are included in the calculation of ore
reserves, are owned by the Company subject to a promissory note and deed of
trust to a third party. The principal balance due on the note as of December
31, 1993 totalled $220,000, which is scheduled to be paid by December 31, 1995.
The Hayden Hill mine is an open-pit operation based on two pits, the Lookout
Zone and the Providence Zone, separated by approximately 1,000 feet. Power for
operations is provided by the local rural electric association. Water for
mining and processing operations is provided by two wells located in close
proximity to the mine. Potable water is supplied by truck. 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 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 reconfigured to operate as a heap leach operation
only, with the mill being maintained on a standby status. The mill may be run
intermittently if sufficient higher grade ore is encountered.
The following table presents operating data for the Hayden Hill mine for the
periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED INCEPTION TO
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
<S> <C> <C>
Tons mined(1)................................... 11,262,609 12,104,800
Tons of ore milled.............................. 423,884 563,248
Average mill-head grade (oz. per ton)........... 0.032 0.036
Mill recovery (%)............................... 90.7 88.7
Tons of ore to help leach(2).................... 4,993,742 2,619,993
Average grade to heap leach (oz. per ton)....... 0.017 0.017
Ounces of gold produced:
Mill.......................................... 11,570 17,191
Heap leach.................................... 41,468 11,624
---------- ----------
Total....................................... 53,038 28,815
========== ==========
Ounces of silver produced....................... 144,438 79,696
Cost per ounce of gold produced:
Cash production costs(3)...................... $ 470 $ 432
Depreciation and depletion.................... 149 152
---------- ----------
Total production costs...................... $ 619 $ 584
========== ==========
</TABLE>
- --------
(1) Includes stripping.
(2) The Company estimates that processing of ore by heap leaching will result
in ultimate gold recovery of approximately 60% to 65%.
(3) Cash production costs include all operating costs at the mine site,
including overhead and royalty, before depreciation and depletion, and net
of credits for silver by-products.
The 1993 year-end reserves stated below represent a reduction of 517,000
contained ounces of gold from the year-end 1992 reserve figures. The large
decrease in reserves resulted from elimination of questionable gold assays from
the database, more severe dilution corrections, restriction of range of
influence of high grade gold assays, revised costs related to metallurgical
recovery factors, and 1993 production. Production in 1993 accounts for 108,400
contained ounces, with the balance of the reduction due to reserve restatement.
The
6
<PAGE>
mineralization excluded from the proven/probable reserves as a result of the
mid-year reevaluation was reclassified as a geologic resource until such time,
if ever, that additional data from drilling and further mining establish
otherwise. The Company recognized a $64.1 million pre-tax ($41.9 million after-
tax) write-down of the asset as of June 30, 1993. See NOTE 7 of NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS under ITEM 8 of PART II herein.
The following table sets forth the proven/probable reserves at the Hayden
Hill mine. Reserves are based upon an assumed gold price of $400 per ounce and
a variable cut-off grade. Reserves represent in-place diluted grades and do not
reflect losses in the recovery process.
HAYDEN HILL MINE
PROVEN/PROBABLE ORE RESERVES
AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
GOLD GOLD
TONS AVG. GRADE CONTENT
(000) (OZ./TON) (000 OZ.)
------ ---------- ---------
<S> <C> <C> <C>
Heap Leach Ore................................ 18,800 0.024 451
</TABLE>
Construction of the mine was financed in part through a syndicated multi-
option financing facility under which Lassen Gold Mining, Inc. ("Lassen Gold"),
the Company's wholly-owned subsidiary that owns the mine, borrowed $67.5
million, solely for the construction and development of the Hayden Hill mine.
At December 31, 1993, $51.9 million remained outstanding under this loan
agreement. Collateral consists of a mortgage on all of the Hayden Hill mine
assets, a pledge of the Lassen Gold stock and a guarantee by the Company. See
NOTE 8 of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS under ITEM 8 of PART II
herein. Capital spending for Hayden Hill during 1993 was $3 million compared
with $45.8 million in 1992. Capital expenditures in 1994 are expected to be
approximately $7 million, primarily for heap leach pad expansion, overburden
stripping, crusher modifications, and development drilling.
Lassen Gold received a letter from the California Regional Water Quality
Control Board (the "Board") in January 1993, advising that certain violations
of waste discharge requirements were occurring at the Hayden Hill mine
pertaining to the tailings pond, process pond and heap leach pad. The alleged
violation regarding the tailings pond has since been corrected and the tailings
pond is no longer in use since shutdown of the mill. The Company has submitted
two reports to the Board and has continued to work with the Board in addressing
the remaining issues, which pertain to the flow rate between the two synthetic
liners underlying the heap leach pad and process pond. The Board has the
authority under the waste discharge requirements to require remediation and/or
repair or cessation of leaching operations in affected cells of the leach pad
and to require surface impoundments to be taken out of service, drained, and
liners repaired. The Company does not currently expect further enforcement
action by the Board. A staff representative of the Board has approved the
design and construction of two new cells of the leach pad and has approved
initial application of cyanide leach solutions on one of the new cells;
however, permit modifications may be required prior to construction of
additional leach pad cells. Lassen Gold has installed cyanide gas detection
wells to monitor for leaks under certain cells of the leach pad system and no
gas was detected during the initial monitoring of these wells. Under the facts
currently known, the Company does not anticipate any material adverse effect on
its financial condition or results of operations from this situation.
GUANACO MINE
The Company owns an indirect 90% interest in the Guanaco mine, which is
located in the Guanaco Mining District approximately 145 miles southeast of
Antofagasta, Chile. The project is held by Compania Minera Amax Guanaco (CMAG),
an indirect 90% owned Chilean subsidiary of the Company, which is also operator
of the project. Access to the project from Antofagasta is provided by the Pan
American Highway (approximately 120 miles south) and a newly constructed gravel
surface road (approximately 25 miles east). Power is supplied by an on-site
power plant. 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
7
<PAGE>
water. The developed water supply, while adequate for current operations, 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 additional water
supplies.
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 open pit design and the areas where the process plant, crusher
facilities and campsite are located. The ENAMI lease has an initial term
expiring in 2006, with provisions for five-year renewals thereafter, at the
Company's option. The lease is subject to various levels of royalties depending
on the level of production of ore, with the royalty on gold ranging from a 7%
gross royalty to a 3% gross royalty plus a 2% net profits royalty; there is a
gross royalty of 2% for all other metals. Negotiations with ENAMI to
restructure this lease are contemplated. In addition to this royalty, an
additional payment in adjustment of the purchase price is required to be paid
in July 1994 to the minority owners of the Guanaco project, based on reserves
in excess of 560,000 gold ounces, if any, including all reserves mined after
acquisition of the property in April 1992 and reserves established as of April
1, 1994. The additional payment is $7.77 per troy ounce for proven/probable
reserves in excess of 560,000 ounces. Based on the year-end 1993 reserves, the
additional payment due would be approximately $1.3 million. An advance of the
1994 additional payment has been made in the form of non-interest bearing
promissory notes in the aggregate amount of $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 in 1994. Preliminary discussions are
underway with the minority owners to possibly extend the April 1, 1994 date for
calculation of reserves. The property is also subject to a 1.1% net smelter
return royalty to the minority owners for gold produced in excess of the
additional ounces and for other metals. The promissory notes are secured by a
guarantee from the Company.
After acquiring its interest in Guanaco in April 1992, the Company designed a
new heap leach facility to process up to 2.2 million tons of ore per year. The
design includes three stages of crushing, permanent pad heap leaching and
Merrill Crowe zinc precipitation of gold. Construction commenced in June 1992,
spraying of the heap leach pads began in February 1993 and production was
achieved in April 1993. A three-year mining contract has been entered into with
an experienced mining contractor to drill, blast, load and transport all ore
and waste. The Company is responsible for supplying camp facilities to the
contractor, and the existing camp has been upgraded to service both the mining
contractor and CMAG employees.
The Guanaco mine started up more slowly than expected due to initial problems
with the crusher and the need to improve ore control procedures. Modifications
made to the crushing plant, as well as improved ore control procedures and more
ore under leach, resulted in a 36% increase in production in the fourth quarter
1993 over the prior quarter.
The following table presents operating data for the Guanaco mine for the
period from inception of production in April 1993 through December 31, 1993:
<TABLE>
<CAPTION>
INCEPTION TO
DECEMBER 31, 1993
-----------------
<S> <C>
Tons mined.............................................. 9,547,075
Tons of ore to heap leach(1)............................ 1,460,427
Average grade to heap leach (oz. per ton)............... .060
Ounces of gold produced(2).............................. 29,862
Ounces of silver produced............................... 136,687
Cost per ounce of gold produced:
Cash production costs(3).............................. $ 664
Depreciation and depletion............................ 142
----------
Total production costs.............................. $ 806
==========
</TABLE>
8
<PAGE>
- --------
(1) The Company estimates that processing of ore by heap leaching will result
in ultimate gold recovery of approximately 65% to 70%.
(2) Guanaco had limited production prior to start-up on April 1, 1993. Revenue
and related operating costs prior to April 1 were treated as capitalized
costs and excluded from the above.
(3) Cash production costs include non-mine site administration costs and all
operating costs at the mine site, including overhead and royalty, before
depreciation and depletion, and net of credits for silver by-products.
The Guanaco deposit contains gold mineralization in sub-horizontal mantos and
in steeply dipping vein-like zones within a silicified volcanic host rock. No
attempt has been made to quantify a silver reserve, but the current operation
is recovering about five times as much silver as gold. There are significant
drill intersections of sulfide copper, but these are largely below the gold pit
and the intersections are too widely spaced to quantify a resource. The 1993
year end reserve is based on the 1992 stated reserves less production. The
following table sets forth the proven/probable reserves at the Guanaco mine.
The reserves are based upon an assumed gold price of $375 per ounce and a cut-
off grade of 0.013 ounce of gold per ton. The Company has determined that
calculating the reserves at $400 per ounce would not materially change the
results. Reserves represent in-place diluted grades and do not reflect losses
in the recovery process.
GUANACO MINE
PROVEN/PROBABLE ORE RESERVES
AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
GOLD CONTENT
(000 OZ.)
--------------
GOLD AGI
TONS AVG. GRADE 90%
(000) (OZ./TON) TOTAL SHARE
------ ---------- ------ ------
<S> <C> <C> <C> <C>
Heap Leach Ore............................. 12,874 0.049 633 570
</TABLE>
Total capital costs to acquire and bring the mine into production were
approximately $64 million, including $36.9 million of capitalized acquisition
costs. Capital spending (including capitalized interest and fees) during 1993
was $7.7 million, and capital expenditures in 1994 are expected to be
approximately $3.5 million, primarily for water supply development, mine
definition drilling, camp and facilities upgrade, and crusher modifications.
Institutional financing has been used to fund a portion of the capital costs,
as well as the acquisition price for the property. SEE NOTE 8 of NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS under ITEM 8 of PART II herein.
WAIHI
The Company retains a nominal 33.53% joint venture interest in the Waihi
gold/silver mine located within the town of Waihi, approximately 80 miles
southeast of Auckland, on the North Island of New Zealand. On June 4, 1993, the
Company completed a transaction with a subsidiary of Poseidon Gold Limited, a
publicly traded Australian company, through which the Company realized all
future economic benefit from its 33.53% joint venture interest, effective April
30, 1993. SEE ITEM 3 "LEGAL PROCEEDINGS" and NOTE 7 of NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS under ITEM 8 of PART II herein.
9
<PAGE>
The following table presents operating data for the Waihi mine for the
periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1993(1) 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Tons mined....................................... 1,983,058 4,392,209 3,603,903
Tons or ore milled............................... 290,890 900,950 961,374
Average mill-head grade (oz. per ton)............ 0.097 0.093 0.094
Mill recovery(%)................................. 92.0% 89.9 89.8
Ounces of gold produced.......................... 25,846 76,126 80,240
AGI's share of ounces of gold produced(2)(3)..... 8,666 25,525 25,824
AGI's share of ounces of silver produced(2)(3)... 51,202 126,048 114,548
Cost per ounce of gold produced:
Cash production costs(4)....................... $233 $225 $184
Depreciation and depletion..................... 49 79 67
---- ---- ----
Total production costs....................... $282 $304 $251
==== ==== ====
</TABLE>
- --------
(1) Due to the completion of the transaction with Poseidon Gold Limited,
effective April 30, 1993, production and related operating data in the 1993
period represent amounts only through April 30, 1993.
(2) Prior to April 1991 the Company's share was 28.35%. In April 1991 the
Company acquired an additional interest in the Waihi Mine joint venture,
increasing its interest to 33.53%.
(3) Production for 1992 reflects an additional 1,616 gold ounces (Company share
542 ounces) and 10,671 silver ounces (Company share 3,578 ounces) due to
the cumulative effect of a change in accounting to include production in
the mill carbon circuit, effective January 1, 1992.
(4) Cash production costs include all operating costs at the mine site,
including overhead, before depreciation and depletion, and net of credits
for silver by-products.
WIND MOUNTAIN
Mining operations at the Company's 100% owned Wind Mountain mine were
conducted from April 1989 to January 1992. The Wind Mountain mine is located
approximately 75 air miles northeast of Reno and 100 air miles southwest of the
Company's Sleeper mine. Access to the mine is by way of a seven-mile gravel
road connecting to a state highway. 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. The number of
unpatented mining claims maintained by the Company was substantially reduced in
1993. Production is subject to a 5% net smelter return royalty. Mining ceased
at the end of January 1992 due to the depletion of mineral reserves. Since
cessation of mining, residual leaching from the leach pads has continued.
Precious metals precipitates are shipped to the Sleeper mine for processing
into dore. Power for operations at the Wind Mountain mine is provided by the
local public utility. Water for processing operations is provided by two wells
in close proximity to the mine. Potable water is supplied by truck.
The following table presents operating data for the Wind Mountain mine for
the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1993 1992 1991
------ --------- ----------
<S> <C> <C> <C>
Tons mined(1)....................................... -- 1,223,800 14,406,600
Tons to heap leach(2)............................... -- 1,169,200 11,785,200
Average grade (oz. per ton)......................... -- 0.014 0.016
Ounces of gold produced(3).......................... 19,296 54,690 91,063
Ounces of silver produced(3)........................ 86,515 297,403 405,149
Cost per ounce of gold produced:
Cash production costs(4).......................... $167 $114 $210
Depreciation and depletion(5)..................... -- 27 109
---- ---- ----
Total production costs.......................... $167 $141 $319
==== ==== ====
</TABLE>
10
<PAGE>
- --------
(1) Includes ore mined and waste.
(2) The processing of ore by heap leaching has resulted in a gold recovery rate
of 64% from inception.
(3) Production is in the form of precipitate.
(4) Cash production costs include all operating costs at the mine site,
including overhead and Nevada net proceeds tax, before depreciation and
depletion, and net of credits for silver by-products.
(5) The assets were fully depreciated as of the first quarter of 1992.
The Company intends to continue leaching operations as long as it is
economical to do so. Reclamation of the mine site commenced immediately after
mining ceased. A final reclamation plan has been approved by the federal Bureau
of Land Management. Reclamation work outside the area in which heap leach and
processing operations are continuing is approximately 95% complete. See ITEM 3
"LEGAL PROCEEDINGS."
FORT KNOX PROJECT
The Company owns indirectly a 100% interest in the Fort Knox project. The
Fort Knox project is located in the Fairbanks Mining District, 15 miles
northeast of Fairbanks, Alaska. Access to the property is via a paved highway
21 miles from the City of Fairbanks and then five miles by unpaved two-wheel
drive road. The location of the project near Fairbanks eliminates much of the
infrastructural problems and costs often associated with arctic projects.
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 locations.
The leases and option agreements have expiration dates ranging from 1995-2014,
with provisions for extension in some cases. A portion of the property is
encumbered by deeds of trust to third parties securing obligations as of
December 31, 1993 of approximately $900,000, all of which are due to be paid by
November 1997. All of the state mining claims are subject to a 3% royalty
(based on net income) payable to the State of Alaska. The 48 state mining
claims on which essentially all of the current reserves are located are free of
royalty burden except for the state royalty. On February 15, 1994, the lands
included in these 48 state mining claims were converted to a state mining lease
embracing approximately 1,148 acres; such conversion will facilitate ongoing
permitting, future property maintenance, and record keeping without increasing
the amount of any required assessment work, rent, or royalty. The other state
mining claims included in the project will continue to be held and maintained
as such for the foreseeable future. Additional net smelter return royalties
ranging from 3% to 6% burden some of these other state mining claims, and both
a 1% net smelter return royalty and a 10% overriding net profits interest
burden a few of the patented federal mining claims.
Simultaneously with the issuance of the state mining lease referred to above,
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). This
millsite permit thus covers all of the lands that are expected to be directly
affected by the development of the Fort Knox project. The grant made by the
millsite permit is appurtenant to the state mining lease described above and
was made for the purpose of facilitating the development and operation of the
Fort Knox project. Fair market rent in the amount of $102,000 must be paid
annually to the State of Alaska in order to keep the millsite permit in effect.
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.
The Fort Knox gold deposit occurs as porphyry-style mineralization of the
type usually associated with copper and molybdenum ore bodies. The ore is
hosted within the upper margins of a granitic intrusion in a stockwork of small
quartz veins and shear zones. The veins and shears are fractions of an inch to
10 inches
11
<PAGE>
wide with an erratic and widely spaced distribution. The gold occurs as fine
grains of free gold disseminated within and along the margins of the veins and
shears. In plan view, 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.
Geology is relatively simple and the rocks are only weakly altered. Grade is
usually related to the degree of fracturing and veining of the rocks. Because
of the low grade and erratic distribution of gold, mining is planned to be done
on a bulk tonnage basis.
The following table sets forth the proven/probable reserves for the Fort Knox
project, which are unchanged from the 1992 year-end reserves. Reserves are
based on a cut-off grade of 0.0112 ounce of gold per ton and a gold price of
$375 per ounce. The Company has determined that calculating the reserves at
$400 per ounce would not materially change the results. Reserves represent in-
place diluted grades and do not reflect losses in the recovery process. The
Company estimates that mill recovery will be approximately 90%.
FORT KNOX PROJECT
PROVEN/PROBABLE ORE RESERVES
AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
GOLD
GOLD AVG. CONTENT
TONS GRADE (000
(000) (OZ./TON) OZ.)
------- --------- -------
<S> <C> <C> <C>
Mill Ore........................................ 174,483 0.024 4,117
</TABLE>
Significant additional mineralization has been encountered both inside and
outside of the design pit; however, no assurance can be given such
mineralization will result in additional reserves.
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). According to the preliminary design, tailings from the operation
would be pumped to a tailings pond located adjacent to the milling facility.
Process water would be supplied from a water reservoir constructed downstream
from the tailing pond. The process facilities are designed as a "zero discharge
system." Power would be supplied by the public utility serving the area over a
newly constructed distribution line, most of which will be paid for by the
Company.
The mine and plant are designed to operate year round and to produce
approximately 300,000 to 350,000 ounces of gold per year with the higher rates
expected during the early years. 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 will be achieved. The
Company is currently reviewing the engineering study with respect to the
optimum mining and processing rate, taking into consideration project economics
and financing.
Initial permit applications were prepared and submitted to the various
regulatory agencies in 1992 and 1993. Most of these applications were submitted
to the State of Alaska, which appointed a project coordinator and an
interagency task force to coordinate all state permitting activities. This
group met throughout 1993, and on February 15, 1994, State agencies granted to
the Company most of the significant state regulatory authorizations (including
the solid waste disposal permit, dam construction permits, fish and game
permits, and reclamation plan approval) needed to go forward with the Fort Knox
project. Those state permits and authorizations not yet received (e.g., plan of
operations approval and air permit) are expected to be applied for and received
in due course, but no assurance can be given that this will occur.
A dredge and fill permit application also has been filed with the U.S. Army
Corps of Engineers under Section 404 of the Clean Water Act. As of March 1994,
the Corps was continuing to evaluate the application under the National
Environmental Policy Act to determine whether an Environmental Impact Statement
("EIS") must be prepared. The Company expects a decision from the Corps on this
issue in the first half of 1994, but no assurance can be given that this will
occur. Based on the current schedule, and assuming that
12
<PAGE>
the Corps of Engineers decides that an EIS is not required, the Company expects
all permits necessary to initiate construction to be issued during 1994. No
assurance can be given that this will occur, however. If the Corps of Engineers
decides that an EIS is required, no decision on the Company's dredge and fill
permit will be made by the Corps until such statement is prepared.
During 1994, if the dredge and fill permit is issued, the Company plans to do
detailed engineering for the project, upgrade the access road to the project
site, and complete the necessary permitting to commence construction. Total
capital requirements to construct and develop the property in accordance with
the preliminary design are currently estimated to be between $250 million and
$270 million, in addition to capitalized acquisition and development costs of
approximately $182 million at December 31, 1993. The Company needs to secure
financing to fund a significant portion of the future capital requirements.
Timing of development is dependent on the obtaining of such financing on
acceptable terms, on the obtaining of final permits, and on market conditions
and approval of the Company's Board of Directors. Capital expenditures are
expected to be approximately $12 million in 1994, as compared to approximately
$6.7 million in 1993.
REFUGIO PROJECT
In January 1993 the Company acquired an indirect 50% interest in the Refugio
project, which is located in the Maricunga Mining District in central Chile,
approximately 75 miles due east of Copiapo. The project is situated at between
13,800 feet and 14,800 feet above sea level. The property is held by Compania
Minera Maricunga ("CMM"), a Chilean contractual mining company, which is
indirectly owned 50% by the Company and 50% by Bema Gold Corporation ("Bema"),
a publicly traded company based in Vancouver, British Columbia.
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 will allow CMM to mine any extensions of 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 currently being evaluated.
The Company, through its 50% ownership of CMM, is responsible for payment of
a net smelter return royalty to the former owner of the Refugio property that
is expected to average 2.5% of the Company's share of production from the
currently defined ore reserves. A sliding scale net smelter return royalty
related to net profits and ranging from 2.5 to 5% (Company's share) is payable
on any production in excess of current reserves. No other royalties are payable
on the Company's share of production from the property.
The Refugio project encompasses the Verde, Pancho and Guanaco gold deposits,
which are disseminated gold porphyry deposits containing minor amounts of
copper. Gold mineralization is contained within a strong stockwork system
hosted by silicified intrusive rocks. The Verde deposit contains all the
current reserves and consists of oxide, mixed and unoxidized ore types. 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.
The reserves in the Verde deposit at the Refugio project, which are unchanged
from the 1992 year-end reserves, are set forth in the following table. The
proven/probable reserves are contained in a pit based upon a gold price of $300
per ounce and a variable cut-off grade based on the economics associated with
variable
13
<PAGE>
mining and processing costs. The reserves represent in-place diluted grades and
do not reflect losses in the recovery process. The Company expects the ultimate
recovery rate from the heap leaching process to range from 50% to 80% depending
upon the type of ore, with overall recovery estimated to be approximately 66%.
REFUGIO PROJECT
PROVEN/PROBABLE ORE RESERVES IN THE VERDE DEPOSIT
AS OF DECEMBER, 1993
<TABLE>
<CAPTION>
GOLD CONTENT
(000 OZ.)
-------------
GOLD AGI
TONS AVG. GRADE 50%
(000) (OZ./TON) TOTAL SHARE
------- ---------- ------ ------
<S> <C> <C> <C> <C>
Heap Leach Ore........................... 104,383 0.030 3,075 1,537
</TABLE>
The Verde deposit is open at depth and additional exploration potential exists
in the Guanaco and Pancho deposits.
A definitive feasibility study was completed for Bema in December 1992 for
the Verde deposit. The study was based on a gold price of $375 per troy ounce
and a mineable resource of 3.3 million ounces. This mineable resource contains
7% "mining possible" material within the $300 per ounce proven/probable reserve
pit, which the Company has not included as part of the reportable reserve in
the table above. The Company considers the $300 pit to be conservative, but has
elected for the time being not to have the reserves recalculated. Development
plans call for an open pit, heap leach operation capable of processing 33,000
tons of ore per day (11.9 million tons per year). Ores would be crushed, and
carbon adsorption, stripping and electrowinning would be used to recover gold
from the leach solutions. Electrowon cathodes would be smelted to dore bars for
shipment. 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. Access to the site from Copiapo would be by way of existing roads
that would be graded, widened and, in part, resurfaced. Power would be supplied
by on-site diesel powered generators.
In addition to the Company's $22.7 million of capitalized acquisition and
exploration costs, construction and development costs to bring the project into
production are estimated to total approximately $120-$140 million, of which
one-half would be the Company's share. The Company and its 50% partner are
attempting to secure financing to fund a significant portion of the required
future capital.
During 1993 the Company and Bema explored financing alternatives, continued
limited engineering studies, made progress with permitting and land issues, and
performed care and maintenance activities. Project development is expected to
take approximately two years from the start of final engineering. Timing of
development is dependent upon economic conditions and obtaining the necessary
financing on acceptable terms.
HAILE PROJECT
The Company owns a 62.5% joint venture interest in the Haile project, a gold
project 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. Access to the site is by way of a paved state highway. The Company
and Piedmont, through wholly owned 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.
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 known reserves are
contained partly on property that is jointly owned by the Company and Piedmont
and partly on property that is leased from a third party under a lease expiring
in 1996, with provisions for
14
<PAGE>
extension until 2001. The leased property is presently burdened by a 4% net
smelter return royalty; however, the lease and the royalty would be
extinguished upon consummation of the purchase agreement covering the leased
property at such time as all material permits for a new surface gold mine at
the site have been received. All of the property containing the known reserves
is encumbered by a mortgage securing indebtedness of approximately $110,000 as
of December 31, 1993, all of which is a debt obligation of the Company and is
due to be paid in 1994.
The Haile project is located in the Carolina Slate Belt, a northeast-
southwest trending belt of deformed Precambrian to Paleozoic metavolcanic and
metasedimentary rocks that extends from Alabama to Virginia. Numerous historic
gold occurrences are located in the Slate belt. In recent times, four
properties, including Haile, have been developed to the production stage.
Piedmont operated a small-scale gold heap leach operation at the site of the
Haile project prior to the formation of the joint venture in July 1992.
Piedmont suspended active mining activities at the site in August 1991, and
leaching and recovery of gold ended in late 1992. Piedmont has agreed to
indemnify the Company and its affiliates from environmental liabilities arising
from matters occurring or existing on the Haile project property prior to March
15, 1991 (the date of the option agreement under which the Company acquired its
interest in the project).
Ore grade mineralization on the Haile property is generally hosted within
silicified and pyritized fine-grained metasedimentary rocks near the folded and
faulted contact with overlying volcaniclastic and metavolcanic rocks. Current
reserves are contained in four separate deposits. The following table sets
forth the proven/probable reserves at the Haile Project, which are unchanged
from the year-end 1992 reserves and are based upon an assumed gold price of
$375 per ounce and a cut-off grade based on the economics associated with
variable mining and processing costs. The Company has determined that
calculating the reserves at $400 per ounce would not materially change the
results. Reserves represent in-place mineable estimates and do not reflect
losses in the recovery process. The Company estimates ultimate gold recoveries
will range from 65%-85%.
HAILE PROJECT
PROVEN/PROBABLE ORE RESERVES
AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
GOLD CONTENT
(000 OZ.)
--------------
GOLD AGI
TONS AVG. GRADE 62.5%
(000) (OZ./TON) TOTAL SHARE
----- ---------- ------ ------
<S> <C> <C> <C> <C>
Mill Ore................................. 6,849 0.101 689 431
</TABLE>
An updated status report and revised reserve estimate incorporating results
from the 1993 drilling program is expected to be completed early in the second
quarter of 1994. Development expenditures in 1993 were approximately $4.0
million, of which the Company's share was approximately $2.5 million, and
included 67,464 feet of core and reverse circulation drilling which identified
additional mineralization. There can be no assurance, however, that such
mineralization will result in additional reserves.
During the option period 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 studies,
hydrological and other technical studies. A preliminary feasibility study
estimating basic economic parameters has been completed and is scheduled to be
updated in the second quarter of 1994 by the status report referenced above.
Depending upon the results and conclusions reached in the updated status
report, the project may move into the engineering design phase or additional
development drilling may be conducted. In either case, environmental studies
and design work will continue to be a major focus of the venture.
15
<PAGE>
EXPLORATION AND ACQUISITION ACTIVITIES
Prior to the Cyprus Amax Merger, the Company conducted most of its
exploration programs in the United States and in Canada and Chile through
wholly-owned subsidiaries of the Company. The Company was also party to an
Exploration Services Agreement with Amax Exploration, Inc. ("Amax
Exploration"), a wholly-owned subsidiary of Cyprus Amax, under which Amax
Exploration has conducted some gold and silver exploration for the Company.
That agreement is expected to be terminated in conjunction with consummation of
an exploration joint venture agreement between the Company and Cyprus Amax,
which is currently under negotiation. See "BUSINESS--AGREEMENTS WITH CYPRUS
AMAX--EXPLORATION SERVICES AGREEMENT."
The Company's exploration activities have ranged from "grass roots"
reconnaissance programs and submittal examinations to drill evaluation of
advance stage projects. The Company's exploration objective continues to be the
acquisition and evaluation of near-surface gold deposits that can be mined by
open pit methods. During 1993 the Company's exploration efforts were focused on
prospects in Nevada, Idaho, Alaska and Chile.
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). The exploration budget for 1994 is approximately $4 million. The
Company changed its accounting policy for exploration expenditures effective
January 1, 1993. See NOTE 1 of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS under
ITEM 8 of PART II herein.
REFINING, SALES AND HEDGING ACTIVITIES
Refining arrangements are in place with third parties for the Sleeper, Wind
Mountain, Hayden Hill and Guanaco mine production. Because of the availability
of refiners other than those with whom such arrangements have been made, the
Company believes that no adverse effect would result if any of these
arrangements were terminated.
Substantially all of the Company's gold sales and hedging activities are
conducted through Amax Precious Metals, Inc., a wholly-owned subsidiary of the
Company. The Company employs a number of hedging techniques with the objective
of mitigating the impact of downturns in the gold market and providing adequate
cash flow for operations while maintaining significant upside potential in a
market upswing. At December 31, 1993, the Company had in place a number of
hedging contracts. See NOTE 9 of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
under ITEM 8 of PART II herein. During 1993 and 1992 the Company's hedging
efforts resulted in average realized prices of $392 an ounce and $402 an ounce,
respectively. This contrasts with an average COMEX price of approximately $360
an ounce for 1993 and $344 an ounce for 1992.
AGREEMENTS WITH CYPRUS AMAX
In connection with the change of ownership of the Company resulting from the
Cyprus Amax Merger, Amax Gold is in the process of negotiating various
agreements with Cyprus Amax. These include a services agreement, a gold
exploration joint venture agreement, a non-competition agreement and a $100
million financing arrangement. Cyprus Amax may also sell to Amax Gold certain
of its gold exploration and development properties, subject to the approval of
each company's Board of Directors and compliance with stock exchange and
possibly other regulatory requirements regarding related party transactions.
The services agreement would provide the Company with certain Cyprus Amax
general and administrative services in order to take advantage of the synergies
between the two companies. It is expected to provide both companies with cost
savings. The new exploration joint venture agreement would result in the two
companies pooling their efforts to discover and develop gold properties, with
Cyprus Amax providing 75% of initial funding for newly identified gold
exploration targets. This joint venture arrangement would have the benefits of
potentially broadening the Company's geographic reach, sharing key personnel,
reducing costs, and sharing the high risks associated with exploration.
Exploration projects that the Company held prior to the Cyprus Amax Merger will
continue to be evaluated entirely by the Company. The non-compete agreement
would define the terms under which either company would develop and ultimately
produce minerals that would be in competition with the other party. The $100
million financing arrangement is described below under "Line of Credit."
16
<PAGE>
Until the new services agreement and gold exploration joint venture agreement
are concluded, the existing Management Services Agreement and Exploration
Services Agreement described below will remain in effect with Cyprus Amax
succeeding to the rights and obligations of Amax under such agreements. The Put
and Call Agreement described below will also remain in place, with Cyprus Amax
succeeding to the rights and obligations of Amax under this agreement. The Tax
Sharing and Allocation Agreement and Non-Competition Agreement between the
Company and Amax have been terminated as described below.
Management Services Agreement. Pursuant to the terms of a management services
agreement (the "Management Services Agreement") entered into at the time of the
Company's formation, Amax agreed to provide a variety of managerial and other
services to the Company on a full cost-reimbursement basis. The agreement is
terminable by the Company or by Amax as of the end of any month on 180 days'
written notice. For 1993 and 1992, amounts charged to the Company by Amax
pursuant to the Management Services Agreement were approximately $5.2 million
and $5.5 million, respectively, including the cost of insurance coverage for
the Company and employee benefits provided to the Company's officers and
employees under benefit and pension plans maintained by Amax through the date
of the Cyprus Amax Merger. See NOTE 3 of NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS under ITEM 8 of PART II herein.
Exploration Services Agreement. Pursuant to an exploration services agreement
(the "Exploration Services Agreement") entered into at the time of the
Company's formation, Amax Exploration agreed to provide exploration services
for the Company. The agreement is effective until terminated by either party
with at least 180 days' prior notice. During 1993, the Company conducted its
exploration programs through wholly-owned subsidiaries of the Company using its
own personnel. Effective January 1, 1994, in order to reduce costs and realize
some of the 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. In the future, Cyprus Amax geologists
will conduct the Company's exploration for gold, either under the exploration
joint venture agreement or otherwise.
Put and Call Agreement. The Company and Amax entered into a put and call
agreement (the "Put and Call Agreement") under which Cyprus Amax (as successor
to Amax) may sell shares of Amax Gold common stock to the Company upon exercise
of the Warrants issued in connection with the acquisition of the Fort Knox
project. See "BUSINESS--INTRODUCTION--History of the Company." The Put and Call
Agreement has been approved by the Company's independent directors. A summary
of the terms of the Put and Call Agreement is set forth below:
(i) Put Option. Under the Put and Call Agreement, Cyprus Amax has a put
option (the "Put Option") whereby, upon exercise of any Warrants, Cyprus
Amax may require the Company to purchase a number of shares of Amax Gold
common stock from Cyprus Amax at the Exercise Price (the "Warrant Exercise
Price"), as determined pursuant to the provisions of the Warrant Agreement
dated January 6, 1992, entered into between the Company and Manufacturers
Hanover Trust Company as Warrant Agent, such number to be equal to the
number of shares of Amax Gold common stock which the Company is required to
issue upon exercise of such Warrants. Pursuant to the Warrant Agreement,
the initial Warrant Exercise Price is $21.00 per share and is subject to
customary anti-dilution adjustments upon the occurrence of, among other
things, stock dividends, stock splits, reclassifications, mergers and
similar events.
(ii) Call Option. In the event Cyprus Amax fails to exercise the Put
Option, the Company will have a call option (the "Call Option") whereby it
may require Cyprus Amax to sell shares of Amax Gold common stock (to the
extent then owned by Cyprus Amax) to the Company equal to the number of
shares of Amax Gold common stock which the Company is required to issue
upon exercise of such Warrants at a price equal to the Warrant Exercise
Price plus two-thirds of the excess of (x) the market price per share of
Amax Gold common stock over (y) the Warrant Exercise Price.
Tax Sharing and Allocation Agreement. The Company was formerly a party to a
tax sharing agreement with Amax which was terminated as of the close of
business on December 31, 1991. See NOTE 5 of NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS under ITEM 8 of PART II herein.
17
<PAGE>
Non-Competition Agreement. The Non-Competition Agreement formerly in effect
between the Company and Amax expired by its terms as of the effective date of
the Cyprus Amax Merger.
Line of Credit. On February 11, 1994, a commitment letter was signed between
Cyprus Amax and Amax Gold to provide Amax Gold with a $100 million convertible
line of credit, portions of which will be designated as support for existing
Amax Gold debt and as replacement for Cyprus Amax guarantees for certain Amax
Gold debt. The outstanding indebtedness under the convertible line of credit
may be repaid by Amax Gold with the issuance of an Amax Gold convertible
preferred stock, which in turn can be converted into Amax Gold common stock at
$8.265 per share. The conversion price represents a 20% premium over the
average closing price of Amax Gold common stock for the 10 trading days
immediately prior to February 11, 1994. In addition, Amax Gold will have the
right to convert the convertible preferred stock into Amax Gold common stock at
a maximum price of $8.265 per share and a minimum price of $5.854 per share.
Cyprus Amax will have the right to replace the line of credit and any
outstanding indebtedness and/or preferred stock with the purchase of $100
million of Amax Gold common stock at a price of $8.265 per share. This
represents approximately 12.1 million shares of Amax Gold common stock. The
commitment is subject to the completion of formal documentation and
satisfaction of stock exchange and possibly other regulatory requirements.
Documentation is expected to be complete by the end of March, subject to
possible regulatory delays.
Stock Purchase Agreement. The February 11, 1994 commitment letter between
Cyprus Amax and Amax Gold also committed Cyprus Amax to purchase, and Amax Gold
agreed to issue and sell, an additional 3 million shares of Amax Gold common
stock at $6.888 per share. The proceeds from the sale of the stock will be used
to retire $20.7 million indebtedness owed to Cyprus Amax by Amax Gold. The
stock purchase is expected to be completed by the end of March in conjunction
with the completion of formal documentation of the Line of Credit facility
described above.
EMPLOYEES
At December 31, 1993, the Company and its consolidated subsidiaries employed
655 persons. The hourly employees of CMAG at the Guanaco mine are represented
by the Sociedad Contractual Minera Guanaco labor union and are covered by a
labor contract. None of the Company's U.S. employees are unionized and the
Company considers its employee relations to be good. In addition, the Company
may obtain general administrative and other services from Cyprus Amax. See
"BUSINESS--EXPLORATION AND ACQUISITION ACTIVITIES" and "--AGREEMENTS WITH
CYPRUS AMAX--MANAGEMENT SERVICES AGREEMENT" AND "EXPLORATION SERVICES
AGREEMENT."
COMPETITION
The Company competes with other companies in the acquisition of mineral
interests, the sale of refined gold and the recruitment and retention of
qualified employees. A number of these companies are larger than the Company in
terms of annual gold production and total reserves. Moreover, many of these
companies have been engaged in gold mining and exploration longer than the
Company. Management does not believe, however, that such competition has had a
material effect on the development of the Company's business or the sale of its
products.
REGULATION
The Company's mining and processing operations and exploration activities in
the United States and Chile are subject to various laws and regulations
governing the protection of the environment, exploration, development,
production, exports, taxes, labor standards, occupational health, waste
disposal, toxic substances, mine safety and other matters. 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, increase costs, cause a reduction in levels of
production and/or delay or prevent the development of new mining properties.
Failure to comply with laws and regulations may result in orders being issued
thereunder which may cause operations to cease or be curtailed or may require
installation of additional equipment. Violators may be required to compensate
those suffering loss or damage by reason of their mining activities and may be
fined if convicted of an offense under such legislation.
18
<PAGE>
United States: Numerous state and federal laws and regulations relative to
environmental protection and land use concerns affect the Company's domestic
operations. Revisions are often made to environmental regulations following
schedules dictated by laws previously enacted by the United States Congress. Of
particular importance to the Company, the 1990 amendments to the federal Clean
Air Act have created a schedule for new or modified regulations pursuant to
this act which may affect the Company's operations throughout the 1990s.
Bills pending in the United States Congress have the potential to
substantially alter the current mining law and several environmental laws which
have application to mining. Some versions of these bills could materially
impair the ability of the Company and others to develop mineral resources in
the United States.
Under the current terms of pending bills concerning mining law, the ability
of companies to obtain a patent on unpatented mining claims would be nullified
or substantially impaired. Moreover, such bills contain provisions for the
payment of royalties to the federal government in respect of production from
unpatented mining claims, which could materially and adversely affect the
potential for development of such claims and the economics of operating
existing mines on federal unpatented mining claims. The Company's Sleeper,
Hayden Hill and Wind Mountain mines are located in whole or in part on
unpatented mining claims.
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
development 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 are expected 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.
In 1993 the Company made capital and operating expenditures of approximately
$2.8 million and $4.2 million, respectively, to meet domestic environmental
protection requirements. These figures do not include environmental
expenditures at the Company's properties in Chile. The Company estimates that
its capital expenditures for domestic environmental control facilities in 1994
and 1995 at its mines and projects as presently existing will be approximately
$1.5 million and $1.2 million, respectively, based on existing environmental
requirements.
Chile. The Guanaco mine and Refugio project in Chile are subject to national
and local laws and regulations governing mineral exploration, development and
production. Such laws and regulations apply to acquisition and ownership of
mineral rights, labor, environmental protection, health and safety standards,
royalties, income taxes, exports and other matters.
The Chilean Constitution provides that all people have the right to live in
an environment free from contaminants. Under law, disposal of residues in the
ocean or rivers that affect fish is prohibited. To date, the
19
<PAGE>
Company's operations in Chile have not been unduly affected by environmental
requirements. In March 1994, the President of Chile approved the country's
first comprehensive environmental law which, among other things, establishes
(i) a comprehensive program for the issuance of permits for future exploration
and mining activities, (ii) the obligation to perform environmental impact
analyses, and (iii) a liability scheme for forms of environmental damage, and
contemplates the issuance of regulations which will impose operating standards.
The full impact of the new law on the mining industry is unclear at present.
FOREIGN OPERATIONS
For certain financial information concerning the Company's foreign sales and
operations, see NOTE 10 of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS under
ITEM 8 of PART II herein.
Foreign operations and investments such as those which the Company has in
Chile may be adversely affected by exchange controls, currency fluctuations,
taxation and laws or policies of particular countries or by political events in
those countries as well as by laws and policies of the United States affecting
foreign trade, investment and taxation. The Company has in place, through
Cyprus Amax, political risk insurance in the amount of $20 million for certain
defined political events relating to the Company's investment in the Guanaco
mine. No such insurance has yet been obtained for the Refugio project.
ITEM 2. PROPERTIES
The Company has acquired and maintains its properties in a manner that is
consistent with common mining industry practice and believes that its titles
are satisfactory.
United States. The Sleeper mine, the Wind Mountain mine and a major portion
of the Hayden Hill mine are located on federal unpatented lode and placer
mining claims. Some of the Company's undeveloped properties in the United
States also consist of federal unpatented mining claims owned by the Company or
its subsidiaries or leased from third parties. Unpatented claims are located
upon public land pursuant to procedures established by the federal mining law.
Requirements for the location of a valid mining claim on public land or
minerals depend on the type of claim being staked, but generally include
discovery of valuable minerals, erecting a monument and posting thereon a
location notice, marking the boundaries of the claim, and filing a certificate
of location with the county in which the claim is located and with the United
States Bureau of Land Management ("BLM"). If the statutes and regulations for
the location of a mining claim are complied with, the locator obtains a valid
possessory right to the contained minerals. To preserve an otherwise valid
claim, a claimant must also annually pay certain rental fees to the federal
government and make certain additional filings with the county and the BLM.
Failure to pay such fees or make the required filings may render the mining
claim void or voidable.
Because mining claims are self-initiated and self-maintained, they possess
some unique vulnerabilities not associated with other types of property
interests. It is impossible to ascertain the validity of unpatented mining
claims solely from public real estate records and it can be difficult or
impossible to confirm that all of the requisite steps have been followed for
location and maintenance of a claim. If the validity of an unpatented mining
claim is challenged by the government, the claimant has the burden of proving
the present economic feasibility of mining minerals located thereon. Thus, it
is conceivable that, during times of falling metal prices, claims which were
valid when located could become invalid if challenged. The patent procedure
permits claimants to purchase from the federal government fee title to claims
upon demonstrating that the mineral deposit on the claims can be mined at a
profit and satisfying other procedural requirements.
20
<PAGE>
The Company has obtained a title opinion from a Nevada law firm, in the form
of a mineral status report, on the Sleeper mine. The report covers those claims
at Sleeper on which the two pits being mined and the mill facilities are
located. However, because validity of title to unpatented mining claims depends
on factors not of record, such as the existence of a valuable mineral
discovery, such opinion does not opine on the "merchantability" of title as
that term is commonly used. A patent application was filed in October, 1990,
for particular claims at Sleeper. A Mineral Entry Final Certificate was issued
for such claims on June 17, 1991, and the Company is in the final stages of
completing the patenting process, but there can be no assurance that a patent
will be granted with respect to all or any of the claims covered by that
application.
The Company has obtained a title opinion from a California licensed attorney
on the patented and unpatented mining claims at the Hayden Hill mine, which
opinion covers those claims on which the Lookout and Providence pits and the
mill facilities are located. However, because validity of title to unpatented
mining claims depends on factors not of record, such as the existence of a
valuable mineral discovery, such opinion does not opine on the
"merchantability" of title to the unpatented claims, as that term is commonly
used. The Company has not filed a patent application for any of the claims at
the Hayden Hill mine.
The state mining claims included in the Fort Knox project are initiated and
maintained in ways very similar to federal unpatented mining claims; the
validity of such claims is thus subject to similar off-record contingencies. In
addition, it is possible that certain Alaskan litigation and legislation
pertaining to the Alaska Mental Health Trust could have an effect on part of
the lands included in the Fort Knox project. Based on the Company's current
understanding of the situation, however, it is unlikely this litigation and
legislation will materially adversely affect the Company's ability to develop
and operate the Fort Knox property in the manner contemplated by the Company.
Chile. All the ore reserves at the Guanaco mine and Refugio project are held
by exploitation concessions granted by judicial authorities under the Chilean
Mining Code. Holders of exploitation concessions have the exclusive right to
explore and exploit the mineral resources and to process and sell the products
obtained therefrom. The term of an exploitation concession is indefinite,
subject to the payment of a minimal annual fee. The concessions at the Guanaco
mine are owned by ENAMI, an entity of the Chilean government, and leased to
CMAG, the indirect 90% owned Chilean subsidiary of the Company. The concessions
covering the principal ore deposit at the Refugio project are owned by CMM, the
Chilean contractual mining company that is indirectly owned 50% by the Company.
Under the Chilean Mining Code, the mineral owner has the right to use the
surface, providing payment of reasonable compensation is made to the surface
owner. The surface area covering the Guanaco claims is owned by the Chilean
government; however, CMAG has filed applications to purchase selected areas. At
the Refugio project, the surface rights overlying the known mineralization and
the proposed facilities are owned or controlled by CMM under applications to
purchase or leases from Chilean governmental entities. The Chilean Constitution
and the Chilean Mining Code provide constitutional protections to the owners of
mining concessions against expropriation of property. Under the Mining Code, if
a property is expropriated, the amount of compensation that must be paid by the
government must reflect the net present value of the expected cash flow based
on demonstrated reserves. At both the Guanaco mine and Refugio project, the
Company has received satisfactory assurances of title from its Chilean counsel.
See also ITEM 1 "BUSINESS" above for a more complete description of the
Company's properties.
ITEM 3. LEGAL PROCEEDINGS
On May 12, 1992, a Notice of Violation (NOV) was issued to Lassen Gold by the
Director, Air and Toxics Division, Region IX of the United States Environmental
Protection Agency ("EPA"), for alleged violations of federal regulations
promulgated under the Clean Air Act (the "Act"). The NOV alleged that Lassen
Gold commenced construction of the Hayden Hill Mine, and of seven diesel
powered generators which supplied temporary power at the mine, without
federally enforceable final permits having been issued
21
<PAGE>
by the Lassen County Air Pollution Control District ("District"), and that
Lassen Gold failed to comply with certain notification requirements under
federal New Source Performance Standards (NSPS) regulations. In December 1992,
the Company and EPA negotiated a settlement of this matter for a civil penalty
of $125,000. This settlement will be effectuated by a consent decree to be
entered into between EPA, Lassen Gold and the U.S. Department of Justice.
Lassen Gold is presently awaiting governmental approval of the final form of
consent decree.
On June 4, 1993, the Company, certain other affiliated corporations and
several unnamed corporations and individuals were sued in the Nevada State
Court for Washoe County by TMB Associates ("TMB"), a Nevada general partnership
that is the lessor under an April 2, 1987 lease of unpatented federal mining
claims (as amended, the "Lease") which comprise a substantial part of the Wind
Mountain mine property position. The lawsuit involves the formation and
performance of, and alleged breach of duties with respect to, the Lease
pertaining to the exploration, development and mining of the Wind Mountain ore
deposit. The Company filed a motion to stay the litigation and to compel TMB to
proceed with arbitration, pursuant to an arbitration clause in the Lease
requiring any controversy to be settled by arbitration and imposing a one-year
limitation for commencing arbitration. In August 1993 the court granted the
Company's motion to stay the litigation pending arbitration and on February 1,
1994, the court denied TMB's motion for reconsideration. Unless TMB elects to
initiate arbitration, the court's latest action should end this litigation. At
this time, the Company's management does not anticipate any material adverse
effect on the Company's financial condition or results of operations from the
results of arbitration, if subsequently initiated by TMB.
On October 11, 1993, the Company and certain of its New Zealand subsidiaries,
and certain subsidiaries of Poseidon Gold Limited ("PosGold"), were named as
defendants in an action brought by Mineral Resources (N.Z.) Limited and a
subsidiary in the High Court of New Zealand, Auckland Registry, Commercial
List, claiming that the transaction between the Company and a subsidiary of
PosGold in June 1993 (described in NOTE 7 of the NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS under ITEM 8 of PART II herein) created a default under
the Waihi mine joint venture agreement. The plaintiffs also alleged breaches of
fiduciary duties by the defendants. As relief, the plaintiffs claim to be
entitled to obtain the entire venture interest of the Company's New Zealand
subsidiary that participates in the Waihi mine venture at a price to be
determined by an independent expert or alternatively to obtain a share of such
interest that would place the plaintiffs in an equal or majority position in
the venture. They also seek to have the Company relinquish all of its voting
shares in Waihi Financing Limited, which indirectly holds the Company's 33.53%
interest in the venture. The plaintiffs further claim a duty of the defendants
to account to the plaintiffs for losses suffered due to the alleged breach of
fiduciary duties, and they seek unspecified damages and costs. The Company,
through its New Zealand counsel, has entered a response generally denying the
plaintiffs' allegations. At this time, the litigation is in the discovery
stage, and the Company believes that it is remote that this litigation will
result in any material adverse effect on the Company's financial condition or
results of operations.
On March 10, 1994, the San Francisco, California, regional office of the
United States Forest Service for the Pacific Southwest Region notified the
Company that it considers the Company to be a Potentially Responsible Party
(PRP) under the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA), jointly and severally liable with other PRPs (unless
exempt from liability due to statutory defenses) for all response costs,
interest, and any natural resource damages attributable to an alleged release
and further threatened releases of hazardous substances at the Siskon Mine,
located in the Klamath National Forest, Siskiyou County, California. The Forest
Service stated that the alleged release of hazardous substances is present in
mill tailings located in the floodplain and riparian area of a creek, that the
tailings pose a threat of further release into surface water, and that other
hazardous substances have been discovered at the site. The Forest Service has
initiated a CERCLA response action to assess the alleged release of hazardous
substances, and has invited the Company, along with other PRPs, to participate.
The Company has until April 9, 1994 to respond to this letter. Amax Gold
Exploration, Inc., a wholly-owned subsidiary of the Company, conducted a
limited exploration drilling program at the Siskon Mine in the summer of 1991,
pursuant to an option and earn-in agreement that was terminated as of December
1991. Based upon a
22
<PAGE>
preliminary investigation, the Company believes that this drilling was not on
the portion of the property which the Forest Service has identified as affected
by the alleged release and threatened release of hazardous substances. Due to
the limited facts available at this time, the Company is unable to determine
the potential impact, if any, of this situation upon the Company's financial
condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
1993.
EXECUTIVE OFFICERS
As of March 18, 1994, the names, ages, and offices with the Company of all
executive officers of the Company were as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE
---- --- ------
<S> <C> <C>
Milton H. Ward.......... 61 Chairman of the Board, President and Chief Executive Officer
Roger A. Kauffman....... 50 Senior Vice President and Chief Operating Officer
Mark A. Lettes.......... 44 Vice President and Chief Financial Officer
Harry B. Carson......... 50 Vice President
Richard B. Esser........ 47 Vice President
Paul J. Hemschoot, Jr... 53 Vice President, Secretary and General Counsel
Neil K. Muncaster....... 58 Vice President
Andrew F. Pooler........ 35 Vice President
Pamela L. Saxton........ 41 Vice President and Controller
</TABLE>
There are no family relationships by blood, marriage or adoption among any of
the officers of the Company. All officers are elected until the meeting of the
Board of Directors immediately following the Company's annual meeting of
stockholders, or until their respective successors are chosen and qualified.
There is no arrangement or understanding between any of the above officers and
any other person pursuant to which he/she was selected as an officer, except
that Mr. Ward is an officer and Chairman of the Board of Cyprus Amax and Ms.
Saxton is an employee of Cyprus Amax. Both are compensated by Cyprus Amax for
services furnished to Cyprus Amax and AGI. Effective January 1, 1994, the
proportion of their time spent on Company matters is allocated and charged to
the Company.
Mr. Ward has been Chairman of the Board, President and Chief Executive
Officer of the Company since November 1993. He has been Chairman of the Board,
President and Chief Executive Officer of Cyprus Amax (formerly Cyprus Minerals
Company) since May 1992. Prior to joining Cyprus Amax, Mr. Ward had been
President and Chief Operating Officer of Freeport-McMoRan Inc. and Chairman and
Chief Executive Officer of Freeport McMoRan Copper & Gold Inc. since 1984.
Mr. Kauffman has been Senior Vice President and Chief Operating Officer of
the Company since February 1994. From 1986 to February 1994, he was Vice
President-Industrial Minerals for Hecla Mining Company.
Mr. Lettes has been Chief Financial Officer of the Company since January
1994. He has been Vice President of the Company since August 1989 in addition
to the office of Treasurer, which he held from May 1988 until February 1991. He
was also Director-Resource Development for Amax Mineral Resources Company from
January 1987 to August 1989.
Mr. Carson has been Vice President of the Company since May 1988. He also was
Vice President of Amax Minerals Resources Company from May 1988 to August 1989.
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<PAGE>
Mr. Esser has been Vice President of the Company since August 1989. From
December 1986 to July 1989, he was Vice President-Administration and Human
Resources for Amax Mineral Resources Company.
Mr. Hemschoot has been Secretary and General Counsel of the Company since
April 1987, and was elected a Vice President in May 1992. He was also Associate
General Counsel of Amax from August 1985 until June 1990.
Mr. Muncaster was elected a Vice President of the Company in February 1991.
Before that, he was Vice President, Exploration for Echo Bay Mines since 1986
when Echo Bay purchased the base and precious metals assets of Tenneco
Minerals.
Mr. Pooler was elected a Vice President of the Company in February 1992. From
May 1988 until February 1992, he was General Manager of the Wind Mountain mine.
Ms. Saxton has been Controller of the Company since May 1990 and was elected
a Vice President in May 1992. She also has been Assistant Controller of Cyprus
Amax since January 1994. From June 1989 until May 1990 she was Assistant
Controller of the Company. She joined Amax in September 1987 as Director of
Consolidations for Amax Mineral Resources Company and continued in that
capacity until June 1989.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is listed on the New York Stock Exchange (AU) and
the Toronto Stock Exchange (AXG). As of March 17, 1994, 78,196,647 common
shares were outstanding and the Company had approximately 12,800 shareholders
of record. Cyprus Amax owns approximately 40% of the Company's common stock.
The following table sets forth for the periods indicated the high and the low
sale prices per share of the Company's common stock as reported on the New York
Stock Exchange Composite Tape and the dividends paid on such stock.
Stock prices and Dividends per share
<TABLE>
<CAPTION>
COMMON STOCK
--------------
QUARTER HIGH LOW DIVIDENDS
------- ------- ------ --------- ---
<S> <C> <C> <C> <C>
1993--First..................................... $ 9 3/8 $7 3/4 $.02
Second....................................... 9 1/2 6 7/8 .02
Third........................................ 10 1/2 6 3/4 .02
Fourth....................................... 8 6 .02
1992--First..................................... 12 1/2 8 1/2 $.02
Second....................................... 11 1/2 8 7/8 .02
Third........................................ 11 5/8 9 1/8 .02
Fourth....................................... 9 7/8 7 5/8 .02
</TABLE>
On March 4, 1994, the Company's Board of Directors decided to eliminate the
quarterly dividend on the Company's common stock to reduce expenses.
As of March 17, 1994, 4,066,649 Warrants to purchase common stock of the
Company were outstanding and the Company had approximately 80 holders of
Warrants of record. The Warrants are listed on the American Stock Exchange
(AUWS) and the Toronto Stock Exchange (AXGWT). The Warrants were issued in
connection with the acquisition of the Fort Knox project. See ITEM 1
"BUSINESS--INTRODUCTION" under PART I herein.
24
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
AMAX GOLD INC. AND SUBSIDIARIES
FINANCIAL AND OPERATING HIGHLIGHTS
(IN MILLIONS EXCEPT PER SHARE AMOUNTS, PERCENTAGES,
PRODUCTION AND SALES OUNCES AND AMOUNTS PER OUNCE)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR:
Sales................... $ 81.9 $ 99.7 $ 128.2 $ 149.8 $ 121.6 $ 104.4 $ 67.0
Gross operating margin
(loss)................. (31.9) 16.6 38.0 63.1 59.4 66.2 47.0
Asset write-downs(1).... 87.7 -- -- 12.6 -- -- --
Earnings (loss) from
operations(1)(2)....... (116.0) 18.8 24.0 36.1 43.7 44.3 40.9
Earnings (loss) before
cumulative effect of
accounting changes,
net(1)(2).............. (89.0) 13.0 21.2 28.3 33.3 43.0 40.4
Net earnings
(loss)(1)(2)(3)........ (104.2) 11.5 21.2 28.3 33.3 43.0 40.4
Per common share:
Earnings (loss) before
cumulative effect of
accounting
changes(1)(2)(3)..... (1.14) .18 .35 .47 .55 .72 .67
Net earnings
(loss)(1)(2)(3)...... (1.34) .16 .35 .47 .55 .72 .67
Weighted average common
shares outstanding(4).. 77.8 73.7 60.0 60.0 60.0 60.0 60.0
Capital and cash
acquisition
expenditures........... 23.4 113.7 60.0 39.9 31.7 38.7 27.2
Refugio cash acquisition
and investment costs... 1.2 -- -- -- -- -- --
Cash dividends to common
shareholders........... 2.0 2.8 4.8 4.8 4.8 4.0 1.6
Dividends declared per
common share(4)........ .08 .08 .08 .08 .08 .067 .027
Special distributions to
Amax................... -- -- -- -- -- -- 32.0
AT YEAR-END:
Current assets.......... 37.9 47.1 41.7 42.4 23.6 32.3 19.3
Total assets............ 381.0 477.6 198.3 157.2 150.5 146.3 95.8
Current liabilities..... 37.6 46.9 28.2 21.2 16.5 20.0 9.1
Long-term debt.......... 136.5 103.1 24.1 8.4 31.3 57.2 57.7
Shareholders' equity.... 173.3 257.2 136.3 120.7 98.3 68.5 28.9
Working capital......... .3 .2 13.5 21.2 7.1 12.3 10.2
Book value per common
share.................. 2.22 3.45 2.27 2.01 1.64 1.14 .48
Long-term debt to
equity................. 79% 40% 18% 7% 32% 84% 200%
KEY OPERATING FACTORS
FOR THE YEAR:
Total ounces of gold
produced(5)............ 210,880 253,603 300,233 354,859 307,387 239,980 158,696
Total ounces of gold
sold................... 209,290 248,024 300,418 359,146 296,075 233,159 159,900
Average price per ounce
sold................... $ 392 $ 402 $ 427 $ 417 $ 411 $ 448 $ 419
Average cost per ounce
produced(6):
Cash production
cost(7).............. $ 388 $ 223 $ 195 $ 147 $ 132 $ 110 $ 74
Depreciation and
depletion............ 122 87 82 73 59 38 29
------- ------- ------- ------- ------- ------- -------
Total production
cost............... $ 510 $ 310 $ 277 $ 220 $ 191 $ 148 $ 103
======= ======= ======= ======= ======= ======= =======
</TABLE>
- --------
(1) In 1993 the Company recognized a $64.1 million pre-tax ($41.9 million after
tax) write-down of the Hayden Hill asset and 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. 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.
25
<PAGE>
(2) 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), $29.6
million in 1989 (or $.49 per common share), $44.0 million in 1988 (or $.74
per common share) and $36.2 million in 1987 (or $.60 per common share).
(3) The 1993 net loss 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 SFAS No. 106, "Postretirement Benefits Other Than Pensions."
(4) Adjusted for three-for-two common stock split effected in the form of a
stock dividend which was distributed in 1988.
(5) Gold production for the year ended December 31, 1992 reflects increased
production of 4,733 ounces at the Sleeper Mine and 542 ounces at the Waihi
Mine relating to the cumulative effect of a change in accounting to include
production in the mill carbon circuit, effective January 1, 1992.
(6) Average costs weighted by ounces of gold produced at each mine.
(7) Cash production costs include all operating costs at the mine site,
including overhead and, where applicable, Nevada net proceeds tax,
royalties and credits for silver by-products.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
1993 FINANCIAL SUMMARY
On November 15, 1993, Amax was merged with and into Cyprus Minerals Company.
The new entity, Cyprus Amax, retained approximately 40% of the outstanding
common shares of Amax Gold. In connection with the change of ownership, Amax
Gold is in the process of negotiating several agreements with Cyprus Amax,
specifically a $100 million financing arrangement, a gold exploration joint
venture agreement, a non-competition agreement and a services agreement.
Additionally, Amax Gold has made management changes, reduced staff levels and
relocated its headquarters office to the Cyprus Amax headquarters office. These
actions were taken to give Amax Gold more financial strength and flexibility to
satisfy its current debt obligations, position Amax Gold to advance its
development projects and provide savings in exploration and general and
administrative expenses.
Amax Gold reported a 1993 net loss of $104.2 million compared with net income
of $11.5 million in 1992 and $21.2 million in 1991. The 1993 results include
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 include an after tax
gain of $2.4 million from the realization of the future economic benefit from
its 33.53% interest in the Waihi Mine in New Zealand. The 1992 results include
after tax income of $8.9 million from exploration expenses for the Haile and
Guanaco expenditures that were capitalized and restored to earnings and an
after tax charge of $1.5 million for the cumulative effect of the adoption of a
new accounting standard for postretirement benefits other than pensions.
Excluding these special items, the 1993 net loss was $33.9 million compared to
net income of $4.1 million in 1992. The decline in results over the past three
years was due primarily to lower production and sales volumes and higher unit
production costs, particularly in 1993. To a lesser extent, lower average
realized sales prices over the past two years contributed to the decline in
operating results. A further discussion of the key factors affecting the 1993
results compared to 1992 and 1991 follows.
26
<PAGE>
RESULTS OF OPERATIONS FOR THE
THREE YEARS ENDED DECEMBER 31, 1993
Sales declined to $81.9 million for 1993 from $99.7 million in 1992 and
$128.2 million in 1991 as a result of declines in production and sales volumes
from the Sleeper, Wind Mountain and Waihi mines together with lower average
realized sales prices in 1993 and 1992. Somewhat offsetting these declines was
production from the Hayden Hill Mine, which commenced in June 1992, and the
Guanaco Mine, which commenced in April 1993. The start-up of production from
the Hayden Hill and Guanaco mines was intended to more than offset expected
decreases in production from the Sleeper Mine, due to declining mill head
grades, and the Wind Mountain Mine, due to the cessation of mining in January
1992 with continuing residual heap leach production. However, significantly
lower than expected production from both the Hayden Hill and Guanaco mines
resulted in reduced production and sales volumes in 1993 and 1992. Total
production and sales volumes for 1994 are expected to increase approximately
10-15% from the 1993 levels as the Hayden Hill and Guanaco heap leach
operations move towards design capacity.
The Sleeper Mine's 1993 production level of 100,018 gold ounces declined from
144,573 gold ounces in 1992 and 183,346 gold ounces in 1991 as a direct result
of lower mill head grades, which also affected the recovery rate. The 1993
average mill head grade at the Sleeper Mine was 0.078 ounce of gold per ton
compared to 0.106 ounce of gold per ton in 1992 and 0.219 ounce of gold per ton
in 1991. Heap leach production from Sleeper was also less in 1993 because of
fewer tons of ore being placed under spray. Production at the Wind Mountain
Mine decreased from 91,063 gold ounces in 1991 to 54,690 gold ounces in 1992
and 19,296 gold ounces in 1993 as a result of the completion of mining
activities in January 1992 with continuing residual heap leach production. Amax
Gold's 33.53% interest in the production from the Waihi Mine in New Zealand was
8,666 gold ounces in 1993 compared to 25,525 gold ounces in 1992 and 25,824 in
1991. In June 1993, Amax Gold 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. This transaction resulted in the
realization of an $8.8 million pre-tax ($2.4 million after tax) gain in 1993.
Amax Gold realized an average selling price of $392 per gold ounce in 1993
compared to $402 per gold ounce in 1992 and $427 per gold ounce in 1991. The
average realized price for each of the periods includes hedging benefits from
closing forward sales contracts and gold options at prices above market. The
average COMEX gold price for 1993 was $360 per ounce compared to $344 per ounce
in 1992 and $362 per ounce in 1991.
Costs applicable to sales rose to $79.7 million in 1993 from $52.8 million in
1992 and $57.5 million in 1991. Average gold unit cash production costs
increased to $388 per ounce in 1993 compared to $223 per ounce in 1992 and $195
per ounce in 1991. The 1993 increase was primarily the result of high unit cash
production costs of $664 per ounce at the Guanaco Mine, $470 per ounce at the
Hayden Hill Mine and $317 per ounce at the Sleeper Mine.
The high 1993 unit cash production costs at the Guanaco Mine were primarily
the result of the start-up phase of the heap leach operation together with
initial problems experienced with crusher throughput. Unit cash costs for the
Guanaco Mine are expected to decline in 1994 as heap leach production increases
toward design capacity. The Hayden Hill unit cash production costs were high
primarily due to a lower than expected ore grade. Hayden Hill's 1993 unit cash
production costs were $470 per gold ounce, up from the 1992 unit cash
production costs of $432 per gold ounce, due to abnormally high operating costs
in the first half of 1993 resulting from dilution in the grade of ore to the
mill, a lower than expected mill recovery and, to a lesser extent, severe
weather conditions. At the Sleeper Mine, unit cash production costs increased
to $317 per gold ounce in 1993 from $223 per gold ounce in 1992 and $188 per
gold ounce in 1991 primarily as a result of reduced production levels from
declining mill head grades. The Wind Mountain unit cash production costs of
$167 per gold ounce in 1993 rose from $114 per gold ounce in 1992 primarily as
a result of reduced 1993 production.
27
<PAGE>
While average unit production costs also increased in 1992 as compared with
1991, total costs applicable to sales declined in 1992 compared with 1991. This
was primarily the result of more sales of lower unit cost production from the
Wind Mountain Mine in 1992.
The Company's operating costs include estimated reclamation costs for each of
Amax Gold's mines which are accrued and charged over the expected mine life
using the unit of production method. The anticipated reclamation costs are
estimates based on current federal, state and Chilean laws and regulations
governing the protection of the environment. Changes in these laws and
regulations could impact these anticipated reclamation costs. See Note 13 of
Notes to Consolidated Financial Statements under Item 8 of Part II herein for a
further discussion.
Depreciation and depletion increased by $3.9 million in 1993 compared to
1992. On a unit basis, depreciation and depletion increased to $122 per ounce
in 1993 from $87 per ounce in 1992. The 1993 increases were primarily due to
the inclusion of the Guanaco Mine depreciation and depletion, which commenced
in April 1993, and a reduction in estimated recoverable ore reserves at the
Sleeper Mine as of December 31, 1992. Somewhat offsetting these 1993 increases
in depreciation and depletion was lower depreciation and depletion for the
Hayden Hill Mine in the last half of 1993 due to the Hayden Hill assets being
written down as of June 30, 1993. Additionally, total depreciation and
depletion for 1993 and 1992 were favorably impacted by the Wind Mountain assets
being fully depreciated in the first quarter of 1992, with continuing residual
heap leach production. For 1992 compared to 1991, total depreciation and
depletion declined by $2.9 million as a result of lower production volumes. On
a per ounce basis, however, total depreciation and depletion increased from $82
per ounce in 1991 to $87 per ounce in 1992 as a result of the commencement of
the Hayden Hill depreciation and depletion, which was partially offset by lower
depreciation and depletion at the Wind Mountain Mine.
The Hayden Hill Mine, which began commercial production in mid-June 1992,
experienced unacceptably high unit operating costs and reduced production
resulting from a lower than expected ore grade. Mining indicated that mill
grade ore occurred in thinner, less continuous structures than originally
interpreted. A major re-evaluation 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 reduced by approximately 409,000 contained gold ounces.
Mineralization excluded from the proven/probable reserves was reclassified as a
geologic resource until such time, if ever, that additional data from drilling
and further mining establish otherwise. The restated proven/probable reserves
as of December 31, 1993 were 18.8 million tons at an average grade of 0.024
ounce of gold per ton of ore containing 451,000 ounces of gold. During the last
half of 1993, the mine was reconfigured to operate as a heap leach operation
only, with the mill being maintained on a stand-by status. The mill may be run
intermittently if sufficient higher grade ore is encountered. As a result of
the downward revision of the Hayden Hill ore reserves and placing the mill on
stand-by status, Amax Gold recorded a $64.1 million pre-tax ($41.9 million
after tax) write-down of its Hayden Hill investment as of June 30, 1993.
Through the last half of 1993, the Hayden Hill Mine remained unprofitable as
modifications were made to increase heap leach production.
Mining experience and a reinterpretation of geologic data at the Sleeper Mine
during the fourth quarter of 1993 also led to a reduction in ore reserves. As
of December 31, 1993, the contained proven/probable ore reserves were reduced
to 6.7 million tons at an average grade of 0.037 ounce of gold per ton of ore
containing 250,000 ounces of gold. The change in tonnage and grade resulted in
a reduction of proven/probable reserves of approximately 296,000 contained gold
ounces. As a result, Amax Gold recorded a $23.6 million pre-tax ($15.6 million
after tax) write-down of its Sleeper investment as of December 31, 1993. In
addition, a portion of the remaining Sleeper ore reserve contains high clay
content material which is expected to have adverse impacts on operating costs
and recoveries.
In connection with the change in ownership from Amax to Cyprus Amax, Amax
Gold made management changes, reduced staff levels and relocated its
headquarters office to the Cyprus Amax headquarters office. The 1993 costs
relating to these restructuring activities were not significant.
28
<PAGE>
Exploration expenses for 1992 were net of $11.2 million of exploration
expenses on the Haile and Guanaco projects which were capitalized and restored
to earnings, representing $8.9 million of 1991 exploration expenses and $2.3
million of 1992 exploration expenses. Under the accounting policy in effect in
1992, Amax Gold charged exploration expenses against earnings until a property
became exploitable, at which time all of the prior year exploration expenses
for such property were capitalized and restored to earnings. Effective January
1, 1993, the Company changed this accounting policy whereby exploration
expenses are expensed in the period incurred until such time as a property
becomes exploitable, with subsequent expenditures being capitalized. For 1993,
the Company recognized a $13.4 million after tax charge (net of a deferred tax
benefit of $4.5 million) relating to the cumulative effect from such accounting
change for periods prior to 1993. Excluding the exploration expenditures on the
Haile and Guanaco projects for 1992 and 1991, exploration expenditures were
$5.2 million in 1993 compared to $6.7 million in 1992 and $5.1 million in 1991.
Interest expense rose to $8.5 million in 1993 from $2.3 million in 1992 and
$.4 million in 1991. These increases were primarily the result of a higher
average debt balance each year which was partially offset by the capitalization
of a portion of the 1992 interest expense while the Hayden Hill and Guanaco
mines were in the construction and development phase.
Income tax benefits of $33.8 million were recognized in 1993 as a result of
the deferred tax effects of asset write-downs combined with estimated tax
losses for 1993. The amount of 1993 tax loss was partially offset by the tax
effects of the gain on the Waihi transaction. The 1992 income tax provision
increased by $.9 million compared to the net income tax provision for 1991,
despite lower earnings for 1992. This was due to a $4.6 million tax benefit
being recognized in 1991 under a tax sharing agreement with Amax for which
there was no comparable amount in 1992. Beginning January 1, 1992, Amax Gold
was no longer included in the consolidated income tax return of Amax and, as a
result, the tax sharing agreement was terminated as of the close of business on
December 31, 1991. Excluding the 1991 benefit from the tax sharing agreement,
Amax Gold's effective tax rate for 1991 was 34% compared to 28% for both 1992
and 1993.
Accounting changes as a result of new accounting standards included Statement
of Financial Accounting Standards No. 112 which Amax Gold adopted in 1993,
effective January 1, 1993, and Statement of Financial Accounting Standards No.
106 which Amax Gold adopted in 1992, effective January 1, 1992. The cumulative
effect of the 1993 accounting change for periods prior to 1993 was $1.8 million
(net of a deferred tax benefit of $1 million). The cumulative effect of the
1992 accounting change for periods prior to 1992 was $1.5 million (net of a
deferred tax benefit of $.9 million).
LIQUIDITY AND FINANCIAL POSITION
For 1993 the Company had negative operating cash flow of $23.2 million
primarily due to lower mill head grades at the Sleeper and Hayden Hill mines,
high start-up costs for the heap leach production from the Guanaco Mine and
higher interest expenditures resulting from increased debt levels. The negative
operating cash flow for 1993, together with $24.6 million of capital, cash
acquisition and investment expenditures and $31.6 million of debt principal
repayments were funded with existing cash balances of $23.7 million, $59.2
million of additional borrowings and net cash proceeds from the Waihi
transaction of $7.8 million. At December 31, 1993, Amax Gold had working
capital of $.3 million compared to $.2 million at December 31, 1992.
For 1993, the $24.6 million of capital expenditures and Refugio cash
acquisition and investment costs exclude $21.1 million of Refugio acquisition
costs that were funded through the issuance of 3.15 million shares of Amax Gold
common stock. The 1993 capital and acquisition cash outlay consisted of $7.7
million of Guanaco construction and development costs, $6.7 million of Fort
Knox development costs, an aggregate of $6.5 million of sustaining capital at
the Sleeper, Hayden Hill and Waihi mines, $2.5 million of Haile development
costs and $1.2 million of Refugio cash acquisition and investment costs.
29
<PAGE>
Capital expenditures at the Sleeper, Hayden Hill and Guanaco mines for 1994
are currently estimated to be approximately $12.5 million. Fort Knox and
Refugio construction and development expenditures for 1994 are currently
estimated to be approximately $12 million and $26 million, respectively,
subject to securing the necessary financing.
In 1993, Amax Gold incurred borrowings of $59.2 million, of which $30 million
represented working capital gold loans, or 89,615 gold ounces (referred to as
"the Gold Loans"), $24.7 million represented borrowings from Amax under a
demand promissory note payable (referred to as "the Cyprus Note") and $4.5
million represented a refinancing of a portion of the Chilean short-term bridge
loans. Repayments of outstanding indebtedness in 1993 totalled $31.6 million,
which represented $15.6 million under the Hayden Hill financing, $10 million of
outstanding working capital gold loans (or 29,600 gold ounces), $1.5 million of
outstanding Chilean debt, which was assumed in connection with the 1992 Guanaco
acquisition, and $4.5 million of Chilean short-term bridge loans which were
refinanced through another Chilean bank. The $15.6 million repayment under the
Hayden Hill financing represented $9.6 million of scheduled amortization
payments and a $6 million voluntary prepayment utilizing a portion of the Waihi
transaction proceeds.
At December 31, 1993, Amax Gold had total outstanding debt obligations of
$151.6 million, representing $51.9 million under the Hayden Hill loan facility,
$34.2 million under Chilean short-term bridge loans, $9.2 million under Chilean
assumed debt, $30 million under the Gold Loans, $1.6 million (or 4,000 gold
ounces) under the Sleeper gold bullion loan agreement and $24.7 million under
the Cyprus Note.
Subsequent to December 31, 1993, various financing activities were undertaken
to provide Amax Gold with more financial strength and flexibility to meet its
outstanding debt obligations. In February 1994 a commitment letter was signed
between Amax Gold and Cyprus Amax to provide Amax Gold with a $100 million
convertible line of credit. The outstanding indebtedness under the $100 million
convertible line of credit may be repaid by Amax Gold issuing a like amount of
convertible preferred stock, which in turn could be converted into Amax Gold
common stock at $8.265 per share, which represents a 20% premium to the ten-day
average closing price immediately prior to the date the commitment letter was
signed. In addition, Amax Gold will have the right to convert the convertible
preferred stock into Amax Gold common stock at a maximum price of $8.265 per
share and a minimum price of $5.854 per share. Cyprus Amax will have the right
to replace the line of credit and any outstanding indebtedness and/or preferred
stock with the purchase of $100 million of Amax Gold common stock at a purchase
price of $8.265 per share, which represents approximately 12.1 million shares
of Amax Gold common stock.
With respect to the Cyprus Note, in February 1994 Amax Gold's Board of
Directors approved the purchase by Cyprus Amax of three million shares of its
common stock as repayment of $20.7 million of the outstanding indebtedness
under the Cyprus Note. This stock purchase is expected to be completed by the
end of March 1994. This share purchase, combined with the potential conversion
of the $100 million line of credit into Amax Gold common stock, would increase
Cyprus Amax's ownership of Amax Gold outstanding shares to slightly under 50%.
At December 31, 1993, the $24.7 million of outstanding indebtedness under the
Cyprus Note was classified as long-term based on the three million share
purchase approval in payment of $20.7 million of indebtedness and the deferral
by Cyprus Amax of the repayment of the remaining balance until 1995. The
remaining indebtedness to Cyprus Amax may also be settled through an additional
share purchase between Cyprus Amax and Amax Gold.
Also in March 1994, Amax Gold refinanced $34.2 million of Chilean bridge
loans with a $36 million U.S. term loan agreement with two financial
institutions, with scheduled amortization payments over a three-year term,
commencing in October 1994. This loan is collateralized by guarantees from Amax
Gold and, initially, from Cyprus Amax. At December 31, 1993, $33.2 million of
the Chilean bridge loans were classified as long-term based upon this
refinancing. In February 1994, Cyprus Amax also provided a guarantee for a
letter of credit which secures $9.2 million of Chilean assumed debt.
With respect to the Gold Loans, Cyprus Amax provided a guarantee in February
1994 for $10 million of the $30 million outstanding indebtedness which was
scheduled to be repaid in February 1994. The $10 million guarantee allowed Amax
Gold to extend the repayment of this loan to February 1995. It is expected that
the remaining $20 million of outstanding Gold Loans that are scheduled to be
repaid in 1994 will also
30
<PAGE>
be extended into 1995 as a result of the $100 million convertible line of
credit provided by Cyprus Amax. As a result of the 1994 refinancing activities,
the Gold Loans were classified as long-term debt at December 31, 1993.
Upon completion of definitive documentation for the $100 million convertible
line of credit, a portion of this credit line is expected to be designated as
support for $30 million of the outstanding indebtedness under the Hayden Hill
financing and as replacement for the Cyprus Amax guarantee on the new $36
million Guanaco U.S. term loan. The remaining portion under the line of credit
will provide Amax Gold with additional working capital to meet its on-going
obligations. Definitive documentation for the $100 million convertible line of
credit is expected to be completed by the end of March 1994, subject to
possible regulatory delays.
At December 31, 1993, Amax Gold had 4,000 gold ounces outstanding under the
Sleeper gold bullion loan agreement, or $1.6 million. Amax Gold has verbally
agreed to repay the outstanding $1.6 million under this loan in February 1995.
Principal repayment obligations for 1994 aggregate $15.1 million, which
includes $11.1 million of scheduled amortization payments under the Hayden Hill
financing, $3.0 million of scheduled amortization payments under the
outstanding Chilean assumed debt and $1.0 million of scheduled amortization
payments under the new Guanaco U.S. term loan.
Amax Gold and Cyprus Amax are currently in the process of negotiating an
exploration joint venture agreement, a non-compete agreement and a services
agreement. These agreements are being put in place in order to maximize the
value of the strategic alliance between the two companies. The exploration
joint venture agreement would result in the two companies pooling their efforts
to discover and develop gold properties, with Cyprus Amax providing 75% of
initial funding for newly identified gold exploration targets. The non-compete
agreement would clarify the terms under which either company could develop and
ultimately produce minerals which would be in competition with the other party.
The services agreement would provide for certain general and administrative
services between Cyprus Amax and Amax Gold in order to take advantage of the
synergies between the two companies and to provide both companies with cost
savings. Cyprus Amax may also sell to Amax Gold certain of its gold exploration
and development properties, subject to the approval of each company's Board of
Directors and compliance with stock exchange and possibly other regulatory
requirements regarding related party transactions.
In 1994 Amax Gold expects that its operating mines will generate positive
cash flow, conditioned upon the performance of the Hayden Hill, Sleeper and
Guanaco mines. With the support of Cyprus Amax through the $100 million
convertible line of credit and debt guarantees, Amax Gold will be able to
sustain its current operations, its operating mine capital requirements, its
current debt service requirements and, to the extent funds are available,
exploration and project development costs. Additional financings will be
required, however, to fund the total capital required to bring its Fort Knox,
Refugio and other development projects into production. While Amax Gold intends
to seek additional financings in 1994 to meet its long-term capital
requirements, there can be no assurance that all of the required financings can
be obtained in the time frame desired.
Total capital requirements to construct and develop the Fort Knox property in
accordance with the preliminary design are currently estimated to be between
$250 million and $270 million, in addition to $182 million of capitalized
acquisition and development costs as of December 31, 1993. Amax Gold intends to
seek financing to fund a significant portion of the required future capital. In
February 1994, certain Alaska state permits were received. Upon the issuance of
a finding of no significant impact by the U. S. Army Corps of Engineers, which
is expected to be received during the first half of 1994, the Company plans to
perform detailed engineering for the project, upgrade the access road to the
project site and complete the necessary permitting to commence construction.
Timing of the construction is dependent on obtaining the final permits,
securing financing on acceptable terms and the approval by the Company's Board
of Directors.
Total capital requirements to construct and develop the Refugio project are
estimated to be between $120 million and $140 million, of which Amax Gold's
share is $60 million to $70 million. This is in addition
31
<PAGE>
to Amax Gold's $22.7 million of capitalized exploration and acquisition costs
as of December 31, 1993. Amax Gold and its 50% partner are attempting to secure
financing to fund a significant portion of the required future capital. Each
partner is responsible for its own financing. Timing of development is
dependent on securing adequate financing.
The Haile joint venture will focus on an updated status report and revised
reserve estimate incorporating results from the 1993 drilling program, which is
expected to be completed in the second quarter of 1994. Depending upon the
results and conclusions reached in the updated status report, the project may
move into the engineering design phase or additional development drilling may
be conducted. Amax Gold's share of 1994 development costs on the Haile project
are estimated to be approximately $4 million.
OUTLOOK
Net losses are expected to continue to be realized in 1994, assuming an
average realized selling price of $395 per gold ounce. Depending upon the
performance of Hayden Hill, Sleeper and Guanaco, total production and sales
volumes for 1994 are expected to increase approximately 10-15% from the
production and sales volumes for 1993. However, total costs and operating
expenses (including depreciation and depletion) combined with exploration
expenditures and interest expense are expected to exceed the expected 1994
sales, resulting in a continuing net loss for 1994. Net losses are expected to
be higher in the first quarter of 1994 as the Hayden Hill and Guanaco heap
leach operations move toward design capacity. Additionally, the 1994
production, sales volumes and net results are expected to be slightly impacted
by declining residual heap leach production from the Wind Mountain operation.
Unit cash operating costs in 1994 are expected to decline from 1993 levels,
primarily as a result of expected increases in production from the Hayden Hill
and Guanaco operations. Depreciation and depletion unit costs in 1994 are also
expected to decline from 1993 levels primarily due to the write-down of the
Sleeper and Hayden Hill assets, which will result in lower unit depreciation
and depletion costs in 1994. However, the total average 1994 unit production
costs, which include the total average unit cash operating costs and
depreciation and depletion costs, are expected to exceed the 1994 average
realized price per ounce of gold sold, primarily due to lower production in the
first half of 1994 as the Hayden Hill and Guanaco operations move towards
design capacity. This is expected to result in an operating loss for 1994.
However, Amax Gold expects that its operating mines will generate positive cash
flow in 1994.
General and administrative and exploration expenses are expected to be lower
in 1994. Amax Gold made several management changes, reduced its staff,
relocated its headquarters office to the Cyprus Amax headquarters office and is
in the process of negotiating a services agreement and gold exploration joint
venture agreement with Cyprus Amax. These actions are expected to provide
savings in general and administrative and exploration expenses.
Amax Gold expects to realize a 1994 average selling price in the range of
$385 to $450 per gold ounce, depending upon the market price for gold. Amax
Gold has an active hedging program in place which is intended to provide some
protection against low gold market prices while maintaining most of the
potential benefit in the event of higher market prices. During the first
quarter of 1993, the COMEX market price for gold dropped to a new seven-year
low of $326 per ounce, then rose to a high of $407 per ounce on July 29, 1993.
As of March 10, 1994, the COMEX market price for gold was $387 per ounce. The
1993 increase in gold market prices has allowed Amax Gold to put in place new
hedge positions for a substantial portion of the forecast gold production for
1994 and 1995. Amax Gold believes that, given its current hedge positions, it
could realize the benefit from rising market prices for fiscal 1994 and 1995 up
to a market price of $450 per gold ounce. Amax Gold also believes it can
continue to obtain an average realized sales price for fiscal 1994 and 1995 of
at least $385 per ounce if gold market prices decline to as low as $320 per
ounce. However, Amax Gold's ability to sustain an average realized price
substantially above the market price for fiscal 1996 and beyond may be
significantly diminished as its current hedge positions are depleted and new
positions are put in place at lower prices.
Amax Gold's focus for 1994 will be to maximize the operating performance at
all of its mines while at the same time attempting to minimize capital and
operating cash outlays and to pursue additional financings to advance its
development projects at a rate that will yield attractive returns.
32
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Amax Gold Inc.:
We have audited the accompanying consolidated statements of financial
position of Amax Gold Inc. and Subsidiaries (the Company) as of December 31,
1993 and 1992, and the related consolidated statements of operations, changes
in capital stock, paid-in capital and retained earnings and cash flows for each
of the three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Amax Gold Inc. and Subsidiaries as of December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, during 1993
the Company changed its method of accounting for exploration expenditures and
postemployment benefits. As also discussed in Note 1 to the consolidated
financial statements, during 1992 the Company changed its method of accounting
for precious metals inventory, postretirement benefits and income taxes.
Coopers & Lybrand
Denver, Colorado
February 4, 1994 except for Note 8 for which the date is March 18, 1994.
33
<PAGE>
REPORT OF MANAGEMENT
Report on Financial Statements and on Internal Control
Amax Gold Inc. is responsible for the preparation of the consolidated
financial statements in the Annual Report on Form 10-K and for the integrity
and objectivity of the information presented. The consolidated financial
statements have been prepared in conformity with generally accepted accounting
principles and necessarily include amounts which are estimates and judgments.
The fairness of the presentation in these consolidated statements of Amax
Gold's operations, financial position, cash flows and changes in capital stock,
paid-in capital and retained earnings is audited and reported on by the
independent accountants.
To assist in carrying out the above responsibility, Amax Gold has internal
systems which provide for selection of personnel, segregation of duties and
maintenance of accounting policies, systems, procedures and related controls.
Although no cost-effective system can ensure the elimination of errors, Amax
Gold's systems have been designed to provide reasonable but not absolute
assurance that assets are safeguarded, that policies and procedures are
followed and that the financial records are adequate to permit the production
of reliable consolidated financial statements.
The Audit Committee of the Board of Directors, which is composed of directors
who are not officers or employees of Amax Gold, Cyprus Amax Minerals Company or
their subsidiaries, meets regularly with senior financial officers and the
independent accountants in connection with monitoring the adequacy and
integrity of Amax Gold's accounting, financial reporting and internal controls.
34
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1993 1992 1991
--------- ------- --------
<S> <C> <C> <C>
SALES............................................ $ 81,900 $99,700 $128,200
COSTS AND OPERATING EXPENSES--
Costs applicable to sales...................... 79,700 52,800 57,500
Depreciation and depletion..................... 25,700 21,800 24,700
Selling, general and administrative expenses... 8,400 8,500 8,000
--------- ------- --------
Total costs and operating expenses............. 113,800 83,100 90,200
--------- ------- --------
GROSS OPERATING MARGIN (LOSS).................... (31,900) 16,600 38,000
GAIN ON WAIHI TRANSACTION........................ 8,800 -- --
ASSET WRITE-DOWNS................................ (87,700) -- --
EXPLORATION EXPENSES, NET........................ (5,200) 2,200 (14,000)
--------- ------- --------
EARNINGS (LOSS) FROM OPERATIONS.................. (116,000) 18,800 24,000
Interest expense............................... (8,500) (2,300) (400)
Minority interest.............................. 1,100 -- --
Interest income................................ 700 1,600 1,700
Other.......................................... (100) (100) --
--------- ------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES......... (122,800) 18,000 25,300
Income tax (provision) benefit................. 33,800 (5,000) (8,700)
Benefit from tax sharing agreement............. -- -- 4,600
--------- ------- --------
EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES.............................. (89,000) 13,000 21,200
Cumulative effect of accounting changes, net of
income tax benefits of $5,500 in 1993 and $900
in 1992....................................... (15,200) (1,500) --
--------- ------- --------
NET EARNINGS (LOSS).............................. $(104,200) $11,500 $ 21,200
========= ======= ========
PER COMMON SHARE:
Earnings (loss) before cumulative effect of
accounting changes............................ $ (1.14) $ .18 $ .35
Cumulative effect of accounting changes........ (.20) (.02) --
--------- ------- --------
Net earnings (loss)............................ $ (1.34) $ .16 $ .35
========= ======= ========
DIVIDENDS DECLARED PER COMMON SHARE.............. $ .08 $ .08 $ .08
========= ======= ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING....... 77,758 73,695 59,995
========= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
35
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(DOLLARS IN THOUSANDS EXCEPT PAR VALUE OF STOCK)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
<S> <C> <C>
ASSETS
Cash and equivalents................................. $ 7,500 $ 23,700
Inventories.......................................... 16,600 15,100
Other assets......................................... 9,800 7,800
Receivables on open sales contracts.................. 4,000 500
-------- --------
CURRENT ASSETS..................................... 37,900 47,100
Property, plant and equipment, net................... 315,800 429,800
Refugio equity investment............................ 22,700 --
Other assets......................................... 4,600 700
-------- --------
TOTAL ASSETS....................................... $381,000 $477,600
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, trade.............................. $ 4,000 $ 6,700
Accounts payable, affiliates......................... 100 1,000
Accrued and other current liabilities................ 16,400 16,300
Reclamation reserve, current portion................. 2,000 2,000
Short-term debt...................................... -- 10,000
Current maturities of long-term debt................. 15,100 10,900
-------- --------
CURRENT LIABILITIES................................ 37,600 46,900
Long-term debt and unearned revenue.................. 111,800 103,100
Note payable to Cyprus Amax.......................... 24,700 --
Reclamation reserve, noncurrent portion.............. 8,600 2,300
Other noncurrent liabilities......................... 8,100 8,000
-------- --------
TOTAL LIABILITIES.................................. 190,800 160,300
-------- --------
Deferred income taxes................................ 16,900 60,100
-------- --------
Commitments and contingencies (Notes 9 and 13)....... -- --
-------- --------
Shareholders' equity:
Preferred stock, par value $1.00 per share,
authorized 10,000,000 shares, issued and
outstanding, none................................. -- --
Common stock, par value $.01 per share, authorized
200,000,000 shares, issued and outstanding
78,185,057 shares in 1993 and 74,503,819 shares in
1992.............................................. 800 700
Paid-in capital.................................... 150,700 125,500
Retained earnings.................................. 21,800 132,200
Cumulative translation adjustment.................. -- (1,100)
Common stock in treasury, at cost (1,991 shares in
1993 and 4,500 shares in 1992).................... -- (100)
-------- --------
TOTAL SHAREHOLDERS' EQUITY......................... 173,300 257,200
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......... $381,000 $477,600
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
36
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1993 1992 1991
--------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET EARNINGS (LOSS)........................... $(104,200) $ 11,500 $ 21,200
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Asset write-downs............................ 87,700 -- --
Depreciation and depletion................... 25,700 21,800 24,700
Cumulative effect of accounting changes...... 15,200 1,500 --
Increase in reclamation reserves............. 3,700 1,600 1,000
Increase (decrease) in deferred taxes........ (34,100) 4,700 3,000
Gain on Waihi transaction.................... (8,800) -- --
Minority interest............................ (1,100) -- --
Other, net................................... (600) 900 (700)
Capitalization of prior period exploration
costs....................................... -- (8,900) --
Decrease (increase) in working capital, net of
effect of investing and financing activities:
Accrued and other current liabilities........ 2,700 2,000 3,100
Receivables on open sales contracts.......... (3,500) 700 (100)
Inventories.................................. (2,300) (5,200) (100)
Accounts payable, trade...................... (2,000) (3,600) 4,400
Accounts payable, affiliates................. (900) (700) (2,000)
Other assets................................. (700) (400) (3,600)
--------- --------- --------
NET CASH (USED) PROVIDED BY OPERATING
ACTIVITIES.................................... (23,200) 25,900 50,900
--------- --------- --------
INVESTING ACTIVITIES
Net cash received on Waihi transaction........ 7,800 -- --
Capital and cash acquisition expenditures for
property, plant and equipment................ (23,400) (113,700) (60,000)
Refugio cash acquisition and investment costs. (1,200) -- --
Other......................................... (200) (200) --
Repayments from Amax under notes receivable... -- 15,400 13,900
Fort Knox acquisition costs, net of cash
acquired..................................... -- 300 (7,600)
--------- --------- --------
NET CASH USED BY INVESTING ACTIVITIES.......... (17,000) (98,200) (53,700)
--------- --------- --------
FINANCING ACTIVITIES
Proceeds from financings...................... 34,500 86,700 25,000
Advances from Cyprus Amax under notes payable. 24,700 -- --
Repayments of financings...................... (31,600) -- (7,900)
Cash dividends paid........................... (2,000) (2,800) (4,800)
Other......................................... (1,700) 2,800 (200)
--------- --------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES...... 23,900 86,700 12,100
--------- --------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
EQUIVALENTS................................... 100 (200) (300)
--------- --------- --------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS................................... (16,200) 14,200 9,000
Cash and equivalents at January 1.............. 23,700 9,500 500
--------- --------- --------
CASH AND EQUIVALENTS AT DECEMBER 31 (INCLUDING
RESTRICTED CASH OF $6,100 IN 1991)............ $ 7,500 $ 23,700 $ 9,500
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
37
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL STOCK,
PAID-IN CAPITAL AND RETAINED EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK COMMON
----------------- PAID-IN RETAINED STOCK IN
SHARES AMOUNT CAPITAL EARNINGS TREASURY
---------- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1990.... 59,999,982 $600 $ 9,900 $ 110,200 $(100)
Net earnings for the year
ended December 31, 1991...... -- -- -- 21,200 --
Cash dividends on common
stock........................ -- -- -- (4,800) --
---------- ---- -------- --------- -----
BALANCE AT DECEMBER 31, 1991.... 59,999,982 600 9,900 126,600 (100)
Net earnings for the year
ended December 31, 1992...... -- -- -- 11,500 --
Issuance of common shares for
acquisitions................. 14,173,253 100 112,500 -- --
Issuance of common shares
under dividend reinvestment
plan......................... 330,584 -- 3,100 (3,100) --
Cash dividends on common
stock........................ -- -- -- (2,800) --
---------- ---- -------- --------- -----
BALANCE AT DECEMBER 31, 1992.... 74,503,819 700 125,500 132,200 (100)
Net earnings (loss) for the
year ended December 31, 1993. -- -- -- (104,200) --
Issuance of common shares for
acquisitions................. 3,150,000 100 21,000 -- --
Issuance of common shares
under dividend reinvestment
plan......................... 523,989 -- 4,200 (4,200) --
Shares issued to non-employee
directors.................... 4,740 -- -- -- --
Issuance of treasury shares to
non-employee directors....... 2,509 -- -- -- 100
Cash dividends on common
stock........................ -- -- -- (2,000) --
---------- ---- -------- --------- -----
BALANCE AT DECEMBER 31, 1993.... 78,185,057 $800 $150,700 $ 21,800 $ --
========== ==== ======== ========= =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
38
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATED FINANCIAL STATEMENTS include the accounts of Amax Gold Inc. and
its more than 50% owned subsidiaries (hereinafter referred to as the Company).
Investments in 20 percent to 50 percent owned companies are accounted for by
the equity method. The Company includes its pro rata share of assets and
liabilities for investments in ventures on a proportionate consolidation basis.
All material intercompany balances and transactions have been eliminated.
PROPERTY, PLANT AND EQUIPMENT are carried at cost, including development
expenditures and capitalized interest. Maintenance and repairs are charged to
earnings. Expenditures for major betterments are capitalized. Gains and losses
on retirements are included in earnings. Depreciation and depletion are
computed using the unit of production method based on the estimated ounces of
gold to be recovered and an estimated salvage value for certain assets at the
end of their useful lives. Mobile equipment and assets which have a useful life
which is shorter than the mine life are depreciated on a straight-line basis
over estimated useful lives of one to five years. A provision for impairment is
provided when a determination has been made that the net book value of mining
assets will not be recovered through estimated undiscounted future cash flows.
EXPLORATION expenditures are charged against earnings in the period incurred.
Costs of acquiring exploration mineral rights are deferred and amortized
against earnings. Provisions for impairment of exploitable properties not being
developed are also charged to expense. The Company changed its accounting
policy, effective as of January 1, 1993, from that of subsequently capitalizing
and restoring to earnings prior period exploration expenses when a property
becomes exploitable, to a policy of expensing exploration expenditures in the
period incurred until such time that a property becomes exploitable, with
subsequent expenditures being capitalized. This change is believed to better
present income from mining activities and follows the predominant practice in
the mining industry with respect to accounting for exploration expenses. For
the year ended December 31, 1993, the Company recognized a $13.4 million, or
$.17 per common share, after tax charge (net of a deferred income tax benefit
of $4.5 million) relating to the cumulative effect from such accounting change
for periods prior to 1993. The effect of this accounting change on the 1993
period costs was to reduce the 1993 net loss by $4.3 million. The pro forma
unaudited results, assuming this 1993 accounting change had been applied
retroactively for the prior two fiscal years, are as follows (in millions
except per share amounts):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------
1992 1991
------ -------
<S> <C> <C>
Earnings from operations................................... $ 8.2 $ 24.7
Earnings before cumulative effect of accounting changes.... $ 6.4 $ 21.9
Net earnings............................................... $ 4.9 $ 21.9
Net earnings per common share.............................. $ .07 $ .36
</TABLE>
GOLD INVENTORY is stated at the lower of aggregate cost, computed on a last-
in, first-out (LIFO) basis, or market. Materials and supplies inventories are
stated at average cost less reserves for obsolescense. Effective January 1,
1992, the Company revised its procedures to measure precious metal production
in the mill carbon circuit. Previously, production was measured in the form of
dore bullion. As a result, costs applicable to the gold ounces in the mill
carbon circuit are included in inventory. This change results in a better
matching of production units with related costs and follows practices which are
prevalent in the mining industry. The cumulative effect of the accounting
change for prior years (to December 31, 1991) together with the effect of the
change for the year ended December 31, 1992 (aggregating approximately $.1
million) was not shown separately as the amounts were insignificant to the
Company's results of operations for fiscal 1992.
39
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
RECLAMATION, SITE RESTORATION AND CLOSURE COSTS for each producing mine are
estimated based primarily upon environmental and regulatory requirements and
are accrued and charged over the expected life of each of the Company's mines
using the unit of production method. Ongoing environmental and reclamation
expenditures are expensed as incurred.
UNEARNED REVENUE represents payments received for the future delivery of
mineral products to be mined. Upon delivery, sales are included in the
Company's statements of operations based on the per ounce ratable share of
payments received and expenses are included based on production costs.
FORWARD SALE CONTRACTS AND PUT AND CALL OPTION CONTRACTS are entered into
from time to time to hedge the effect of price changes on the Company's
precious metals that are produced and sold. The results of such activities are
included in sales at the time the hedged production is sold.
INTEREST RATE swaps, options and caps are entered into as a hedge against
interest rate exposure on the Company's financing facilities. The differences
to be paid or received on swaps, options and caps are included in interest
expense as payments are made or received.
INCOME TAXES are calculated using the liability method in accordance with the
provisions set forth in Statement of Financial Accounting Standards (SFAS) No.
109, which the Company adopted in 1992, effective January 1, 1992. Prior to
1992, income taxes were calculated in accordance with SFAS No. 96. The adoption
of SFAS No. 109 in 1992 had no effect on the Company's net earnings. See Note 5
for a further discussion.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS are calculated in accordance with
the provisions set forth in SFAS No. 106, which the Company adopted in 1992,
effective January 1, 1992. See Note 4 for a further discussion.
POSTEMPLOYMENT BENEFITS are calculated in accordance with the provisions set
forth in SFAS No. 112, which the Company adopted in 1993, effective January 1,
1993. See Note 4 for a further discussion.
CASH AND EQUIVALENTS include cash and all highly liquid investments with an
original maturity of three months or less. The Company invests cash in time
deposits maintained in high credit quality financial institutions. To date,
this concentration of credit risk has not affected the Company's operations.
Cash flows from hedged production of gold are included in cash flows from
operating activities.
2. ACQUISITIONS
In January 1993, the Company acquired an indirect 50% interest in a Chilean
company which, in turn, purchased the Refugio gold development project in
Chile. To acquire this interest, the Company issued 3.15 million unregistered
shares of common stock of the Company. The acquisition cost approximated $22.2
million, representing $21.1 million in stock and $1.1 million in cash
acquisition costs.
3. TRANSACTIONS WITH AFFILIATES
On November 15, 1993, AMAX Inc. (Amax), a New York corporation which owned
approximately 68% of the Company's outstanding common stock, was merged with
and into Cyprus Minerals Company, a Delaware corporation. Immediately prior to
the merger, Amax distributed to Amax shareholders from the shares then held by
Amax approximately 28% of the Company's outstanding common stock. As of
December 31, 1993, the merged company, called Cyprus Amax Minerals Company
(Cyprus Amax), owned approximately 31.3 million common shares, or approximately
40% of the Company's outstanding common stock.
40
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
In connection with the change in ownership, the Company is in the process of
negotiating several agreements with Cyprus Amax, including an exploration joint
venture agreement, a non-compete agreement and a services agreement. The
exploration joint venture agreement would result in the two companies pooling
their efforts to discover and develop gold properties, with Cyprus Amax
providing 75% of initial funding for newly identified gold exploration targets.
The non-compete agreement would clarify the terms under which either company
could develop and ultimately produce minerals which would be in competition
with the other party. The services agreement would provide for general
administrative services between Cyprus Amax and the Company.
For the years ended December 31, 1993, 1992 and 1991, Amax supplied
management services and employee benefits to the Company on a full cost
reimbursement basis. These services and employee benefits included insurance
coverage for the Company, employee benefit plans (medical and life insurance
benefits) and employee pension and thrift plan benefits. In October 1993, the
Company established separate medical and life insurance coverage for its
employees. Additionally, on November 15, 1993, a separate defined benefit
pension plan and thrift plan for Company employees became effective. For the
period from January 1, 1993 through November 14, 1993, and for the years ended
December 31, 1992 and 1991, Amax charged the Company approximately $.4 million,
$1.3 million and $1.0 million for pension costs. For the years ended December
31, 1993, 1992, and 1991, Amax also charged the Company $4.8 million, $4.2
million and $4.1 million for services, insurance and employee benefits other
than pensions.
The Company made advances to Amax during the years ended December 31, 1993,
1992 and 1991 under a demand promissory note receivable bearing interest at the
sum of the federal funds rate plus 3/16%. At December 31, 1993, all amounts had
been fully repaid. The annualized interest rate on outstanding amounts during
the years ended December 31, 1993, 1992 and 1991 was 3.2%, 3.7% and 6.1%
respectively. Interest income on these advances was $.2 million, $.5 million
and $1.2 million for the years ended December 31, 1993, 1992 and 1991,
respectively.
Amax made loans to the Company during the year ended December 31, 1993 under
a demand promissory note payable, bearing interest at the sum of the federal
funds rate plus 3/16%. See Note 8 for a further discussion.
4. EMPLOYEE BENEFITS
PENSION PLAN
Effective November 15, 1993, substantially all Company employees were covered
by a non-contributory defined benefit pension plan. The plan provides
retirement benefits for employees based generally on years of service and
compensation during the last years of employment. Pursuant to the Amax and
Cyprus Amax merger agreement, a distribution of the Company's share of pension
plan assets will be made from the Cyprus Amax pension plan based on the
Company's proportionate share of pension plan liabilities. The pension plan
assets are expected to be received on May 15, 1994 and will be used to fund the
Company's pension plan. During the period from November 15, 1993 through May
15, 1994, the pension plan assets will earn interest at a rate of 6% per annum,
pursuant to the Amax and Cyprus Amax merger agreement. On-going funding for the
Company's defined benefit pension plan will be made in accordance with the
requirements of ERISA.
41
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
Net annual pension cost (including the cost incurred during the period the
Company was included in the Amax pension plan) includes the following
components:
<TABLE>
<CAPTION>
1993
----
<S> <C>
Service cost........................................................ $1.0
Interest cost....................................................... .4
Expected return..................................................... (.1)
Net amortization of prior service cost and losses................... .3
----
Net periodic expense................................................ $1.6
====
</TABLE>
The following table summarizes the funded status of the plan and the related
amounts recognized in the Company's statement of financial position at December
31:
<TABLE>
<CAPTION>
1993
-----
<S> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of $2.2
million.......................................................... $ 3.3
=====
Projected benefit obligation....................................... $(7.0)
Estimated plan assets at fair value................................ 2.1
-----
Estimated plan assets less than projected benefit obligation....... (4.9)
Unrecognized prior service cost.................................... 1.6
Unrecognized net loss.............................................. 2.1
-----
Accrued pension cost............................................... $(1.2)
=====
</TABLE>
The expected long-term rate of return on plan assets and compensation
increases assumed were 10% and 5.25%, respectively. The discount rate assumed
was 7.5% in determining the actuarial present value of benefit obligations and
8.5% in determining the 1993 net periodic expense.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company also provides certain health care and life insurance benefits for
retired employees in the United States. Effective January 1, 1992, the Company
adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions", which requires companies to accrue such benefits during the
employees' period of service. Prior to 1992, the Company charged these costs to
expense as paid. As of January 1, 1992, the Company recognized the full amount
of its estimated accumulated postretirement benefit obligation as a cumulative
effect of an accounting change. This cumulative amount represented the present
value of the estimated future benefits payable to current retirees and a pro
rata portion of estimated benefits payable to currently active employees after
their retirement. The pre-tax charge to 1992 earnings for the cumulative effect
was $2.4 million, with a net earnings effect of $1.5 million.
Net periodic postretirement benefit costs for the years ended December 31,
1993 and 1992 were insignificant.
42
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
The following table sets forth the status of the plans and the related
amounts recognized in the Company's statement of financial position at December
31:
<TABLE>
<CAPTION>
1993 1992
----- -----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................. $ .4 $ .3
Fully eligible active plan participants.................. .1 .1
Other active plan participants........................... 1.0 .8
----- -----
Total accumulated postretirement benefit obligation...... 1.5 1.2
Plan assets at fair value................................ -- --
----- -----
Accumulated postretirement benefit obligation in excess
of plan assets.......................................... (1.5) (1.2)
Unrecognized prior service cost.......................... (1.8) (2.0)
Unrecognized net loss.................................... .5 .4
----- -----
Accrued postretirement benefit cost...................... $(2.8) $(2.8)
===== =====
</TABLE>
The accumulated postretirement benefit obligation was determined using a
weighted average annual discount rate of 7.5% in 1993 and 8.5% in 1992. The
assumed health care cost trend rate used in 1993 was 14.5% declining gradually
to 6.2% for 2008 and thereafter.
A one percent increase each year in the health care cost trend rate used
would have resulted in an insignificant increase in the 1993 aggregate service
and interest expense components and the accumulated postretirement benefit
obligation at December 31, 1993.
POSTEMPLOYMENT BENEFITS
The Company also has a number of postemployment plans covering severance,
disability income and continuation of health and life insurance for disabled
employees. Effective January 1, 1993, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". The pre-tax charge to 1993
earnings for the cumulative effect of this accounting change was $2.8 million,
with a net earnings effect of $1.8 million.
5. INCOME TAXES
Beginning January 1, 1987, the Company was included in the consolidated
federal income tax return of Amax and made tax payments to Amax under a tax
sharing agreement. Under this tax sharing agreement, the Company was not
charged for its use of Amax's existing federal net operating loss and
investment tax credit carryforwards. The agreement did not include any foreign
taxes required to be paid by the Company. On December 31, 1991, the Company and
Amax amended the tax sharing agreement such that the federal income tax
liability originally charged to the Company by Amax from 1987 to 1991 will be
final and will not be affected by audit adjustments, claims for refund,
carrybacks, carryovers or amended returns. The tax sharing agreement was
terminated as of the close of business on December 31, 1991. As a result of the
issuance of the Company's common stock upon the consummation of the Fort Knox
acquisition in 1992, the Company was no longer included in the consolidated
federal income tax return of Amax or Cyprus Amax, effective January 1, 1992.
43
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
The income tax provision (benefit) for the years ended December 31, 1993,
1992 and 1991 was based on earnings (loss) before income taxes and cumulative
effect of accounting changes as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------- ----- -----
<S> <C> <C> <C>
United States....................................... $(108.8) $13.3 $26.0
Foreign............................................. (14.0) 4.7 (.7)
------- ----- -----
$(122.8) $18.0 $25.3
======= ===== =====
</TABLE>
The total income tax provision (benefit) for the years ended December 31,
1993, 1992 and 1991 was included in the financial statements as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------ ---- ----
<S> <C> <C> <C>
Income tax provision (benefit)......................... $(33.8) $5.0 $4.1
Cumulative effect of accounting changes................ (5.5) (.9) --
------ ---- ----
Total net income tax provision (benefit)............... $(39.3) $4.1 $4.1
====== ==== ====
</TABLE>
The income tax provision (benefit) for the years ended December 31, 1993,
1992 and 1991 consisted of the following:
<TABLE>
<CAPTION>
1993 1992 1991
------ ---- -----
<S> <C> <C> <C>
Current:
Federal and state................................... $ -- $ .1 $ 4.8
Foreign............................................. .3 .2 1.1
------ ---- -----
.3 .3 5.9
------ ---- -----
Deferred:
Federal and state................................... (39.2) 3.4 2.1
Foreign............................................. (.4) .4 .7
------ ---- -----
(39.6) 3.8 2.8
------ ---- -----
Benefit from tax sharing agreement.................... -- -- (4.6)
------ ---- -----
Total net income tax provision (benefit).............. $(39.3) $4.1 $ 4.1
====== ==== =====
Cash payments (refunds):
Federal and state taxes............................. $ (.5) $ .6 $ 2.0
Foreign taxes....................................... .1 .2 1.1
------ ---- -----
$ (.4) $ .8 $ 3.1
====== ==== =====
</TABLE>
The sources of significant temporary differences for the years ended December
31, 1993, 1992 and 1991 consisted of the following:
<TABLE>
<CAPTION>
1993 1992 1991
------ ----- ----
<S> <C> <C> <C>
Exploration and development costs and depreciation... $(29.7) $12.0 $2.8
Deferred tax benefit from current year net operating
loss................................................ (8.8) (6.8) --
Other................................................ (3.7) (1.4) --
------ ----- ----
Total temporary differences.......................... (42.2) 3.8 2.8
Valuation allowance.................................. 2.6 -- --
------ ----- ----
Total deferred taxes................................. $(39.6) $ 3.8 $2.8
====== ===== ====
</TABLE>
44
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
The components of the net deferred tax liabilities at December 31, 1993 and
1992 were as follows:
<TABLE>
<CAPTION>
1993 1992
----- -----
<S> <C> <C>
Deferred tax assets:
Current--
Liabilities and reserves...................................... $ 1.0 $ 1.1
Inventory..................................................... 1.4 .9
Non-current--
Net operating loss carryforwards.............................. 22.4 12.5
Less: Valuation adjustment.................................... (2.6) --
Alternative minimum tax credits............................... 2.8 2.9
Postretirement benefits other than pensions................... 1.0 1.0
Postemployment benefits....................................... 1.0 --
Other liabilities and reserves................................ 3.3 1.3
----- -----
Total deferred tax assets................................... 30.3 19.7
----- -----
Deferred tax liabilities:
Current--
Inventory..................................................... .1 .1
Non-current--
Exploration and development costs and depreciation............ 35.0 77.8
Other liabilities and reserves................................ 9.8 --
----- -----
Total deferred tax liabilities.............................. 44.9 77.9
----- -----
Net deferred tax liabilities................................ $14.6 $58.2
===== =====
</TABLE>
The valuation allowance of $2.6 million has been provided to reduce Chilean
tax assets because it is likely that a portion of the Chilean tax assets will
not be realized.
The differences between the Company's provision (benefit) for income taxes
and taxes at the statutory rate for the years ended December 31, 1993, 1992 and
1991 were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------ ----- -----
<S> <C> <C> <C>
Tax at statutory rate.................................... $(41.7) $ 6.1 $ 8.6
Excess of alternative minimum tax over tax at regular
statutory rate.......................................... -- -- 4.4
State income taxes, net of federal benefit............... (1.4) .8 --
Percentage depletion..................................... (.5) (2.7) (4.7)
Exploration and development costs and depreciation....... -- -- (2.0)
Foreign exploration...................................... -- (.8) 1.9
Waihi transaction gain................................... 3.7 -- --
Valuation allowance for foreign losses with no expected
tax benefit............................................. 5.1 -- --
Other, principally non-recurring items................... 1.0 1.6 .5
------ ----- -----
Income tax............................................... (33.8) 5.0 8.7
Benefit from tax sharing agreement....................... -- -- (4.6)
------ ----- -----
Income tax provision (benefit)........................... (33.8) 5.0 4.1
------ ----- -----
Income taxes on cumulative effect of accounting changes
at statutory rate....................................... (7.0) (.8) --
State income taxes, net of federal benefit............... (.2) (.1) --
Valuation allowance for foreign losses with no expected
tax benefit............................................. 1.7 -- --
------ ----- -----
Income tax benefit on cumulative effect of accounting
changes................................................. (5.5) (.9) --
------ ----- -----
Total income tax provision (benefit)..................... $(39.3) $ 4.1 $ 4.1
====== ===== =====
</TABLE>
45
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
At December 31, 1993, the Company had federal tax net operating loss
carryforwards of $53.5 million and alternative mininum tax net operating loss
carryforwards of $26.7 million expiring in the years 2002-2008 and alternative
minimum tax credit carryforwards of $2.8 million with no expiration. At
December 31, 1993, the Company also had Chilean tax net operating loss
carryforwards of $28 million with no expiration.
The Omnibus Budget Reconciliation Act of 1993 increased the U.S. federal
corporate tax rate from 34% to 35%. The rate change had no effect on the net
recorded deferred tax accounts of the Company.
Net income tax on a separate company basis for the year ended December 31,
1991 would have been substantially the same as the amounts reflected above in
income tax, excluding the benefit from the tax sharing agreement.
6. INVENTORIES
Inventories at December 31, 1993 and 1992 consisted of the following:
<TABLE>
<CAPTION>
1993 1992
----- -----
<S> <C> <C>
Precious metals, refined and in-process....................... $ 9.0 $ 7.3
Materials and supplies........................................ 7.6 7.8
----- -----
$16.6 $15.1
===== =====
</TABLE>
The market value of the precious metals inventory at December 31, 1993 was
$12.6 million, with the excess replacement cost (at market value) over the LIFO
basis being $3.6 million.
7. PROPERTY, PLANT AND EQUIPMENT AND WRITE-DOWNS
The components of property, plant and equipment at December 31, 1993 and 1992
were as follows:
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Mining plants and equipment............................ $ 163.2 $ 150.4
Mining properties...................................... 159.9 120.1
New Zealand joint venture mining properties, plant and
equipment............................................. -- 14.9
Development properties and construction-in-progress.... 197.9 253.8
------- -------
521.0 539.2
Less:
Accumulated depreciation, depletion and 1993 write-
downs............................................... (205.2) (109.4)
------- -------
$ 315.8 $ 429.8
======= =======
</TABLE>
Asset write-downs
The Hayden Hill Mine, which began commercial production in June 1992,
experienced unacceptably high unit operating costs due to lower than
anticipated mill head grades. A re-evaluation of the operation completed in
July 1993 resulted in the downward revision of proven/probable ore reserves of
approximately 409,000 contained gold ounces. During the last half of 1993, the
mine was reconfigured to operate as a heap leach operation only, with the mill
being maintained on stand-by status. As a result of the downward revision of
the Hayden Hill ore reserves and the stand-by status of the mill, the Company
recorded a $64.1 million pre-tax ($41.9 million after-tax) write-down of the
Hayden Hill assets on June 30, 1993. At December 31, 1993, the net book value
assigned to the Hayden Hill mill was approximately $24 million. The Company is
depreciating a portion of this mill over the life of the Hayden Hill mine based
on
46
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
usage. At the end of the Hayden Hill mine life, a residual value for the mill
of approximately $20 million is expected which would be classified as an idle
asset until the mill is either utilized at another Company operation or sold.
Mining experience and a reinterpretation of geologic data at the Sleeper Mine
during the fourth quarter of 1993 also led to a reduction in proven/probable
ore reserves of approximately 296,000 contained gold ounces. As a result, Amax
Gold recorded a $23.6 million pre-tax ($15.6 million after-tax) write-down of
its Sleeper assets as of December 31, 1993.
Waihi Transaction
In June 1993, the Company completed a transaction which resulted in the
realization of all future economic benefit from the Company's 33.53% interest
in the Waihi Mine in New Zealand, effective April 30, 1993. The Company
received cash proceeds of US$15.4 million from the transaction and a commitment
to deliver a total of 15,500 ounces of gold over a 5-year period. Following the
transaction, the Company sold forward, on a spot-deferred forward basis (which
allows the Company to defer the delivery of the gold ounces to a later date at
a renegotiated gold price) the 15,500 gold ounces at an average price of $365
per ounce. During the year ended December 31, 1993, the Company recognized a
US$8.8 million pre-tax gain on the transaction (including the 15,500 gold
ounces sold forward at $365 per ounce).
The Company's statement of cash flow for the year ended December 31, 1993
reflects the net cash received from the transaction of $7.8 million, which
includes the following:
<TABLE>
<S> <C>
Cash proceeds received upon completion of transaction............. $15.4
Cash proceeds for gold ounces received and sold in December 1993.. .6
Less:
Cash and cash equivalents for New Zealand companies previously
reflected in the consolidated statement of financial position.. (8.0)
Transaction costs............................................... (.2)
-----
Net cash received from transaction.............................. $ 7.8
=====
</TABLE>
8. DEBT AND UNEARNED REVENUE
The following tables summarize the outstanding borrowings under bank loans
and gold loan facilities at December 31, 1993 and 1992 and related principal
repayments based on the 1993 balances:
<TABLE>
<CAPTION>
AMOUNT OUTSTANDING AT AMOUNT OUTSTANDING AT
DECEMBER 31, 1993 DECEMBER 31, 1992
------------------------- -------------------------
CURRENT NONCURRENT TOTAL CURRENT NONCURRENT TOTAL
------- ---------- ------ ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Unearned Revenue:
Nevada Gold Mining, Inc.. $ -- $ 1.6 $ 1.6 $ -- $ 1.6 $ 1.6
Debt:
Lassen Gold Mining, Inc.. 11.1 40.8 51.9 9.4 58.1 67.5
Compania Minera Amax
Guanaco................. 4.0 39.4 43.4 1.5 43.4 44.9
Amax Gold Inc............ -- 30.0 30.0 10.0 -- 10.0
----- ------ ------ ----- ------ ------
Total unearned revenue and
debt...................... 15.1 111.8 126.9 20.9 103.1 124.0
----- ------ ------ ----- ------ ------
Note payable to Cyprus
Amax...................... -- 24.7 24.7 -- -- --
----- ------ ------ ----- ------ ------
$15.1 $136.5 $151.6 $20.9 $103.1 $124.0
===== ====== ====== ===== ====== ======
</TABLE>
47
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
<TABLE>
<CAPTION>
YEAR
ENDED
DECEMBER PRINCIPAL
31, REPAYMENTS
-------- ----------
<S> <C>
1994......................................................... $ 15.1
1995......................................................... 78.6
1996......................................................... 29.9
1997......................................................... 28.0
1998......................................................... --
------
$151.6
======
</TABLE>
The above named obligors, other than the Company, are wholly-owned
subsidiaries of the Company except for Compania Minera Amax Guanaco, which is a
90% owned subsidiary.
The market value of the total outstanding debt and unearned revenue as of
December 31, 1993 was $5 million higher than the carrying value of $151.6
million.
Nevada Gold Mining, Inc.
As of December 31, 1993, 4,000 ounces of gold, or $1.6 million, remained
outstanding under a gold bullion loan agreement for Nevada Gold Mining, Inc.
(Nevada Gold), a wholly-owned subsidiary of the Company that owns the Sleeper
Mine. The Company has made a verbal agreement to repay the outstanding $1.6
million under this loan in February 1995. Collateral consists of a pledge of
all of Nevada Gold's capital stock and a mortgage of all its assets
(principally the Sleeper Mine). Interest, payable quarterly, is based on the
cost of borrowing gold by the gold lender plus commitment and agency fees.
During the years ended December 31, 1993, 1992 and 1991, the annualized
interest rate was .7%, 1.8% and 1.0%, respectively. During the years ended
December 31, 1993, 1992 and 1991, the Company paid $.1 million, $.2 million and
$.4 million in interest expense and fees, respectively.
Lassen Gold Mining, Inc.
At December 31, 1993, $51.9 million remained outstanding under a financing
agreement for Lassen Gold Mining, Inc. (Lassen Gold), a wholly-owned subsidiary
of the Company that owns Hayden Hill. During 1993, Lassen Gold made $15.6
million in principal repayments under this financing, of which $9.6 million
represented the scheduled amortization payments and $6 million represented a
voluntary prepayment utilizing a portion of the Waihi transaction proceeds (as
discussed in Note 7). Collateral for this financing consists of a mortgage on
all of the Hayden Hill Mine assets, a pledge of the Lassen Gold stock and a
guarantee by the Company. The final maturity date for the facility is December
31, 1997.
Interest, payable quarterly, is currently based on the London Interbank
Offered Rate plus .45%. The annualized interest rate on such loan for the years
ended December 31, 1993, 1992 and 1991 was 5.3%, 5.5% and 5.6% respectively.
During the years ended December 31, 1993, 1992 and 1991, the Company paid $3.5
million, $3.1 million and $.6 million, respectively, in interest expense and
fees on such loan.
48
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
Compania Minera Amax Guanaco
At December 31, 1993, Compania Minera Amax Guanaco (Amax Guanaco), a 90%
owned Chilean subsidiary of the Company that owns the Guanaco project, had
$34.2 million of indebtedness outstanding under Chilean short-term bridge loans
and $9.2 million of outstanding debt owed to a Chilean governmental development
agency. During 1993, Amax Guanaco made $1.5 million of scheduled amortization
payments under the debt to the Chilean governmental agency. The final maturity
date for the $9.2 million of debt to the Chilean governmental agency is August
31, 1996.
At December 31, 1993, $35.9 million of the outstanding aggregate Chilean debt
was collateralized by a stand-by letter of credit and $7.5 million was
collateralized by the Company's 90% interest in Amax Guanaco and a guarantee
from the Company. Additionally, the stand-by letter of credit was
collateralized by a guarantee from the Company.
For the years ended December 31, 1993 and 1992, the annualized interest rate
for the Chilean loans was 9.4% and 8.4%, respectively. During the years ended
December 31, 1993 and 1992, interest expense and fees paid on these financings
totalled $5 million and $1.4 million, respectively. During the years ended
December 31, 1993 and 1992, $.5 million and $2.8 million, respectively, of
interest expense and fees on these financings were capitalized. The capitalized
interest and fees are being amortized over the life of the project.
In March 1994, the $34.2 million of outstanding Chilean short-term bridge
loans were refinanced by a $36 million U.S. term loan agreement. The final
maturity date for this new loan agreement is October 1997, with semi-annual
amortization payments commencing in October 1994. This loan is collateralized
by guarantees from the Company and, initially, Cyprus Amax. Amounts outstanding
under this term loan bear interest at the LIBOR interest rate plus 1.25%. At
December 31, 1993, $33.2 million of the short-term Chilean bridge loans were
classified as long-term based on this March 1994 refinancing. In February 1994
Cyprus Amax also provided a guarantee for a letter of credit which secures the
$9.2 million of debt to the Chilean governmental development agency.
Amax Gold
At December 31, 1993, the Company had borrowed 89,615 gold ounces which were
sold for $30 million. At December 31, 1993, these ounces were scheduled to be
repaid during 1994 as follows:
<TABLE>
<CAPTION>
GOLD AMOUNT (IN
MATURITY DATE OUNCES THOUSANDS)
------------- ------ ----------
<S> <C> <C>
February 1994.......................................... 30,303 $10,000
August 1994............................................ 15,129 5,000
December 1994.......................................... 44,183 15,000
------ -------
89,615 $30,000
====== =======
</TABLE>
While the December 31, 1993 market value of the total outstanding ounces
borrowed is $5 million higher than the $30 million carrying value (using the
spot market price for gold), the Company has contractual agreements with the
lenders which set the gold price upon repayment equal to the carrying value
plus a 4% average annualized effective rate of interest.
In February 1994, Cyprus Amax provided a guarantee on $10 million (or 30,303
gold ounces) of the outstanding gold loans. This guarantee allowed the Company
to extend the repayment of this obligation to February 1995. Additionally, in
February 1994, a commitment letter was signed between the Company and
49
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
Cyprus Amax to provide the Company with a $100 million convertible line of
credit. The outstanding indebtedness under this line of credit may be repaid by
the Company issuing a like amount of convertible preferred stock, which in turn
could be converted into Company common stock at $8.265 per share, which
represents a 20% premium to the ten-day average closing price of the Company's
common stock immediately prior to the date the commitment letter was signed. In
addition, the Company will have the right to convert the convertible preferred
stock into Company common stock at a maximum price of $8.265 per share and a
minimum price of $5.854 per share. Cyprus Amax will have the right to replace
the line of credit and any outstanding indebtedness and/or preferred stock with
the purchase of $100 million of Company common stock at a purchase price of
$8.265 per share.
Upon completion of definitive documentation for the $100 million convertible
line of credit, a portion of this credit line is expected to be designated as
support for $30 million of outstanding indebtedness under the Lassen Gold
financing and as replacement for the Cyprus Amax guarantee on the new $36
million Guanaco U.S. term loan. The remaining line of credit will provide the
Company to meet its on-going obligations, including the support of the $30
million of outstanding gold loans. At December 31, 1993, the $30 million of
outstanding gold loans were classified as long-term based on the 1994
refinancing activities.
Note Payable to Cyprus Amax
Amax made loans to the Company during the year ended December 31, 1993 under
a demand promissory note payable, bearing interest at the sum of the federal
funds rate plus 3/16%. At December 31, 1993, $24.7 million was outstanding and
payable to Cyprus Amax. The annualized interest rate and the interest expense
on outstanding amounts was 3.1% and $.1 million, respectively, for the year
ended December 31, 1993. In February 1994 the Company's Board of Directors
approved the purchase by Cyprus Amax of three million shares of its common
stock as repayment of $20.7 million of outstanding amounts under the demand
promissory note. This share purchase is expected to be completed by the end of
March 1994. This share purchase, combined with the potential conversion of the
$100 million line of credit into Company common stock, would increase Cyprus
Amax's ownership of the Company's outstanding shares to slightly under 50%. At
December 31, 1993, the $24.7 million of outstanding debt was classified as
long-term based upon the approval for Cyprus Amax to purchase three million
shares in payment of $20.7 million of indebtedness and the deferral by Cyprus
Amax of the repayment of the remaining balance until 1995.
9. HEDGE CONTRACTS
Precious Metal Hedge Contracts include forward sales contracts, spot deferred
forward sales and put and call options. Realization under these contracts is
dependent upon the counterparties performing in accordance with the terms of
the contracts. The Company does not anticipate nonperformance by the
counterparties.
Forward sales contracts require the future delivery of gold at a specified
price. Forward sales contracts that are made on a spot deferred basis allow the
Company to defer the delivery of gold under a forward sales contract to a later
date at a renegotiated market price, as long as certain conditions are
satisfied. Various factors influence the decision to close a spot deferred
forward sales contract or to roll the contract forward to a later date. A put
option gives the put buyer the right, but not the obligation, to sell gold to
the put seller at a predetermined price on or before a predetermined date. A
call option gives the call buyer the right, but not the obligation, to buy gold
from the call seller at a predetermined price on or before a predetermined
date.
As of December 31, 1993, the Company's outstanding hedge contracts were as
follows:
<TABLE>
<CAPTION>
AVERAGE
GOLD PRICE
OUNCES PER OUNCE PERIOD
------- --------- ------
<S> <C> <C> <C>
Forward sales contracts(1)................ 320,100 $405 Jan. 1994-Feb. 1994
Option contracts:
Purchased put options................... 265,500 386 Jan. 1994-Dec. 1995
Sold put options........................ 82,800 343 Jan. 1994-Dec. 1994
Purchased call options.................. 58,000 400 Jan. 1994-Dec. 1994
Sold call options....................... 402,000 449 Jan. 1994-Dec. 1995
</TABLE>
- --------
(1) Represents the net forward sales position which was made primarily on a
spot deferred forward basis which allows the Company to defer the delivery
of gold ounces to a later date at a renegotiated gold price.
50
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
The market value of the Company's forward contracts and put and call option
contracts at December 31, 1993 was approximately $6.1 million. Future market
valuations for these contracts are dependent on gold market prices, option
volatility and interest rates, which can vary significantly. These contracts
will be utilized in the future to hedge against declines in gold market prices
for the Company's future gold production while maintaining benefits in the
event of higher gold market prices.
Interest Rate Hedge Contracts entered into by the Company consist of interest
rate swap, option and cap agreements to reduce the impact of changes in
interest rates on its financing facilities. At December 31, 1993, the Company
had interest rate swap agreements outstanding with commercial banks having a
total principal amount of $60 million, as follows:
<TABLE>
<CAPTION>
FIXED
BORROWINGS INTEREST RATE PERIOD
---------- ------------- ------
<S> <C> <C>
$10 million...................... 5.08% January 1994
$10 million...................... 4.91% January 1994
$10 million...................... 4.44% January 1994-July 1994
$10 million...................... 6.54% January 1994-November 1994
$10 million...................... 5.95% January 1994-March 1996
$10 million...................... 4.85% January 1994-March 1996
</TABLE>
As of December 31, 1993, the Company would pay approximately $.3 million to
terminate these interest rate swap agreements, given the market interest rates
as of such date. The Company may be exposed to nonperformance by the other
parties to such agreements, thereby subjecting the Company to current interest
rates on its financings. However, the Company does not anticipate
nonperformance by the counterparties.
10. DOMESTIC AND FOREIGN OPERATIONS
The Company's foreign operations consist of the Guanaco Mine and Refugio gold
project in Chile. Effective April 30, 1993, the Company realized the future
economic benefit from its interest in the Waihi Mine in New Zealand. The
components of the Company's domestic and foreign operations were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------ ------
<S> <C> <C> <C>
Sales--
United States................................... $ 69.2 $ 90.2 $116.7
Foreign......................................... 12.7 9.5 11.5
------- ------ ------
$ 81.9 $ 99.7 $128.2
======= ====== ======
Earnings (loss) from operations--
United States................................... $(104.7) $ 14.5 $ 24.9
Foreign......................................... (11.3) 4.3 ( .9)
------- ------ ------
$(116.0) $ 18.8 $ 24.0
======= ====== ======
Net earnings (loss)--
United States................................... $ (84.0) $ 7.5 $ 23.6
Foreign......................................... (20.2) 4.0 (2.4)
======= ====== ======
$(104.2) $ 11.5 $ 21.2
======= ====== ======
Assets--
United States................................... $ 294.6 $401.1 $180.2
Foreign......................................... 86.4 76.5 18.1
------- ------ ------
$ 381.0 $477.6 $198.3
======= ====== ======
</TABLE>
51
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
Substantially all of the Company's 1993, 1992 and 1991 sales were made in
Europe, through a wholly-owned subsidiary of the Company. The Company's sales
to major customers which exceeded 10% of total sales were $38 million to two
customers during 1993, $46.4 million to three customers during 1992 and $57.1
million to three customers during 1991. The Company believes that the loss of
any of these customers would have no material adverse impact on the Company
because of the active worldwide market for gold.
11. COMMON STOCK
In February 1992, the Company's Board of Directors approved a Dividend
Reinvestment Plan whereby stockholders of the Company may elect to reinvest
quarterly dividend payments on all or a portion of the shares held in the name
of such electing shareholders in additional shares of the Company's common
stock. Three million shares of the Company's common stock are reserved for
issuance pursuant to this plan. During 1993, the Company issued 523,989
additional shares of common stock pursuant to this plan, of which 523,637
shares were issued to Amax or Cyprus Amax.
Earnings per common share have been calculated on the basis of the average
common shares outstanding. At December 31, 1993, outstanding Company warrants
were not considered in the earnings per share calculation as these were anti-
dilutive.
12. STOCK OPTION PLAN
In October 1992, the Company's Board of Directors approved a stock option
plan (the "Plan") for officers and salaried employees of the Company, and
reserved three million shares of common stock for issuance pursuant to the Plan
during its ten-year term. The Plan was approved by the stockholders of the
Company in May 1993. The Plan is administered by a compensation committee of
the Company's Board of Directors. These directors are not eligible for options
awarded under the Plan.
On December 3, 1992, 315,825 stock options were granted at $8.75 per share,
which represent the fair market value at the date of grant. These options are
exercisable during the period which began November 15, 1993 and ends ten years
from the date of grant. There were no stock options exercised or granted in
1993.
13. CONTINGENCIES
Lassen Gold received a letter from the California Regional Water Quality
Control Board (the Board) in January 1993, advising that certain violations of
waste discharge requirements were occurring at the Hayden Hill Mine pertaining
to the tailings pond, process pond and heap leach pad. The alleged violation
regarding the tailings pond has since been corrected and the tailings pond is
no longer in use since the shutdown of the mill. The Company has submitted two
reports to the Board and has continued to work with the Board in addressing the
remaining issues, which pertain to the flow rate between the two synthetic
liners underlying the heap leach pad and process pond. The Board has the
authority, under the waste discharge requirements, to require remediation
and/or repair or cessation of leaching operations in affected cells of the
leach pad and to require surface impoundments to be taken out of service,
drained, and liners repaired. The Company does not currently expect further
enforcement action by the Board. A staff representative of the Board has
approved the design and construction of two new cells of the leach pad and has
approved initial application of cyanide leach solutions on one of the new
cells; however, permit modifications may be required prior to construction of
additional leach pad cells. Lassen Gold has installed cyanide gas detection
wells to monitor for leaks under certain cells of the leach pad system and no
gas was detected during the initial monitoring of these wells. Under the facts
currently known, the Company does not anticipate any material adverse effect on
its financial condition or results of operations from this situation.
52
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
The Company is currently accruing reclamation liabilities for the following
operations:
<TABLE>
<CAPTION>
RECLAMATION COSTS
TOTAL ACCRUED
ANTICIPATED -------------------
RECLAMATION COST CURRENT NON-CURRENT
---------------- ------- -----------
<S> <C> <C> <C>
Sleeper Mine......................... $ 8.0 $-- $6.6
Hayden Hill Mine..................... 5.9 -- 2.0
Wind Mountain Mine................... 2.0 2.0 --
----- ---- ----
Total................................ $15.9 $2.0 $8.6
===== ==== ====
</TABLE>
The anticipated reclamation costs for the Sleeper, Hayden Hill and Wind
Mountain mines are estimates based on current federal and state laws and
regulations governing the protection of the environment. The reclamation
accrual for the Wind Mountain Mine is shown as current due to the expectation
that residual heap leach production will subside in 1994, which is expected to
result in the commencement of the final reclamation activities. The anticipated
costs of reclamation for the Guanaco Mine, given current Chilean laws and
regulations governing the protection of the environment, are not expected to be
significant. Changes in the federal, state and Chilean laws and regulations
could impact these anticipated reclamation costs.
The Company's mining and exploration activities are subject to various
federal, state and Chilean laws and regulations governing the protection of the
environment which are continually changing and generally becoming more
restrictive. The Company conducts its operations so as to protect the public
health and environment. The Company has made, and expects to make in the
future, significant expenditures to comply with such laws and regulations.
14. QUARTERLY DATA (UNAUDITED)
Quarterly earnings data for the years ended December 31, 1993 and 1992
follow:
<TABLE>
<CAPTION>
1993 QUARTERS(1) FIRST SECOND THIRD FOURTH
- ---------------- ------ ------ ----- ------
<S> <C> <C> <C> <C>
Sales........................................... $ 18.4 $ 23.1 $20.6 $ 19.8
Costs and operating expenses.................... 24.9 32.1 29.2 27.6
------ ------ ----- ------
Gross operating loss............................ (6.5) (9.0) (8.6) (7.8)
Gain on Waihi transaction....................... -- 8.8 -- --
Asset write-downs............................... -- (64.1) -- (23.6)
Exploration expenses............................ (.5) (1.1) (1.5) (2.1)
------ ------ ----- ------
Loss from operations............................ (7.0) (65.4) (10.1) (33.5)
------ ------ ----- ------
Loss before income taxes and cumulative effect
of accounting changes.......................... (8.5) (67.6) (11.7) (35.0)
------ ------ ----- ------
Loss before cumulative effect of accounting
changes........................................ (6.0) (49.1) (7.4) (26.5)
Cumulative effect of accounting changes, net of
income tax benefit............................. (15.2) -- -- --
------ ------ ----- ------
Net loss........................................ $(21.2) $(49.1) $(7.4) $(26.5)
====== ====== ===== ======
Per common share:
Loss before cumulative effect of accounting
changes...................................... $ (.07) $ (.63) $(.10) $ (.34)
Cumulative effect of accounting changes....... (.20) -- -- --
------ ------ ----- ------
Net loss...................................... $ (.27) $ (.63) $(.10) $ (.34)
====== ====== ===== ======
Dividends declared per common share............. $ .02 $ .02 $ .02 $ .02
====== ====== ===== ======
</TABLE>
- --------
(1) Restated for the September 1993 change in exploration accounting policy,
effective as of January 1, 1993 and the adoption of SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". These restatements
resulted in increasing the net loss by $16 million (or $.21 per common
share) for the 1993 first quarter and decreasing the net loss by $4.2
million (or $.05 per common share) for the 1993 second quarter.
53
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE INDICATED AND
EXCEPT PER SHARE AMOUNTS AND AMOUNTS PER OUNCE)
<TABLE>
<CAPTION>
1992 QUARTERS(2) FIRST SECOND THIRD FOURTH
- ---------------- ----- ------ ----- ------
<S> <C> <C> <C> <C>
Sales.............................................. $27.2 $22.7 $22.4 $27.4
Costs and operating expenses....................... 20.2 16.3 18.8 27.8
----- ----- ----- -----
Gross operating margin (loss)...................... 7.0 6.4 3.6 (.4)
Exploration expenses, net.......................... (3.4) 9.1 (1.6) (1.9)
----- ----- ----- -----
Earnings (loss) from operations.................... 3.6 15.5 2.0 (2.3)
----- ----- ----- -----
Earnings (loss) before income taxes and cumulative
effect of accounting change....................... 4.1 15.8 1.2 (3.1)
----- ----- ----- -----
Earnings (loss) before cumulative effect of
accounting change................................. 3.8 11.7 .6 (3.1)
Cumulative effect of accounting change, net of
income tax benefit................................ (1.5) -- -- --
----- ----- ----- -----
Net earnings (loss)................................ $ 2.3 $11.7 $ .6 $(3.1)
===== ===== ===== =====
Per common share:
Earnings (loss) before cumulative effect of
accounting change............................... $ .05 $ .16 $ .01 $(.04)
Cumulative effect of accounting change........... (.02) -- -- --
----- ----- ----- -----
Net earnings (loss).............................. $ .03 $ .16 $ .01 $(.04)
===== ===== ===== =====
Dividends declared per common share................ $ .02 $ .02 $ .02 $ .02
===== ===== ===== =====
</TABLE>
- --------
(2) Restated for the January 1, 1992 adoption of SFAS No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions", which resulted
in a net earnings decline of $1.7 million (or $.02 per common share) for
the 1992 first quarter and $.1 million for the 1992 third quarter.
54
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Directors of the Registrant will be contained under
the captions "INFORMATION CONCERNING DIRECTORS AND NOMINEES," "OTHER
INFORMATION CONCERNING DIRECTORS" and "COMPLIANCE WITH EXCHANGE ACT SECTION
16(A)" in the Company's definitive Proxy Statement for the 1994 Annual Meeting
of Stockholders and is incorporated herein by reference. See also "EXECUTIVE
OFFICERS" under PART I herein.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to Executive Compensation will be contained under
the captions "OTHER INFORMATION CONCERNING DIRECTORS," and "INFORMATION
CONCERNING EXECUTIVE OFFICERS' COMPENSATION" in the Company's definitive Proxy
Statement for the 1994 Annual Meeting of Stockholders and except for the Report
of the Compensation Committee of the Registrant's board of directors regarding
executive compensation and the Performance Graph contained therein, is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to Security Ownership of Certain Beneficial Owners
and Management will be contained under the captions "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS " and "SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS"
in the Company's definitive Proxy Statement for the 1994 Annual Meeting of
Stockholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to Certain Relationships and Related Transactions
will be contained under the captions "INFORMATION CONCERNING DIRECTORS AND
NOMINEES" "OTHER INFORMATION CONCERNING DIRECTORS," and "TRANSACTIONS WITH
CYPRUS AMAX" in the Company's definitive Proxy Statement for the 1994 Annual
Meeting of Stockholders and is incorporated herein by reference. See also ITEM
1 "BUSINESS--INTRODUCTION," "--EXPLORATION AND ACQUISITION ACTIVITIES," and "--
AGREEMENTS WITH CYPRUS AMAX" under PART I herein.
55
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
10-K
PAGE
----
<S> <C>
1. Financial Statements
Report of Independent Accountants................................. 33
Report of Management.............................................. 34
Consolidated Statements of Operations............................. 35
Consolidated Statements of Financial Position..................... 36
Consolidated Statements of Cash Flows............................. 37
Consolidated Statements of Changes in Capital Stock, Paid-in
Capital and Retained Earnings.................................... 38
Notes to Consolidated Financial Statements........................ 39
2. Financial Statement Schedules
Report of Independent Accountants on Schedules.................... S-1
II--Amounts Receivable from Related Parties and Underwriters,
Promoters and Employees Other Than Related Parties............... S-2
IV--Indebtedness of and to Related Parties--Not Current........... S-3
V--Property, Plant and Equipment.................................. S-4
VI--Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Equipment.................................... S-5
IX--Short-Term Borrowings......................................... S-6
X--Supplementary Income Statement Information..................... S-7
All other schedules have been omitted since they are either not required, are
not applicable, or the required information is shown in the financial
statements or related notes.
3. Exhibits
See Exhibit Index
</TABLE>
(b) Reports on Form 8-K
A report on Form 8-K was filed with the Securities and Exchange
Commission on November 15, 1993, reporting a change in control of the
Company.
56
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Amax Gold Inc.
/s/ Paul J. Hemschoot, Jr.
March 18, 1994 By__________________________________
(PAUL J. HEMSCHOOT, JR. VICE
PRESIDENT, SECRETARY AND GENERAL
COUNSEL)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED:
SIGNATURE TITLE DATE
Chairman of the
/s/ Milton J. Ward Board, President
- ------------------------------------- and Chief Executive
(MILTON J. WARD) Officer (principal
executive officer)
and Director
/s/ Mark A. Lettes Vice President and
- ------------------------------------- Chief Financial
(MARK A. LETTES) Officer (principal
financial officer)
March 18, 1994
/s/ Pamela L. Saxton Vice President and
- ------------------------------------- Controller
(PAMELA L. SAXTON) (principal
accounting officer)
* Director
- -------------------------------------
(ALLEN BORN)
* Director
- -------------------------------------
(GERALD J. MALYS)
* Director
- -------------------------------------
(TIMOTHY J. HADDON)
*
- ------------------------------------- Director
(ROCKWELL A. SCHNABEL)
* Director
- -------------------------------------
(VERNON F. TAYLOR, JR.)
* Director
- -------------------------------------
(RUSSELL L. WOOD)
/s/ Paul J. Hemschoot, Jr.
*By_________________________________
PAUL J. HEMSCHOOT, JR., AS
ATTORNEY-IN-FACT
57
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of Amax Gold Inc. is
included in this Form 10-K on page 33 which includes an explanatory paragraph
for a change in accounting method for exploration expenditures and
postemployment benefits in 1993, and a change in accounting method for precious
metals inventory, postretirement benefits and income taxes in 1992. In
connection with our audit of such financial statements, we have also audited
the related consolidated financial statement schedules listed in the index on
page 56 of this Form 10-K.
In our opinion, the consolidated financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information required to be
included therein.
COOPERS & LYBRAND
Denver, Colorado
February 4, 1994 except for Note 8 for which the date is March 18, 1994.
S-1
<PAGE>
SCHEDULE II
AMAX GOLD INC. AND SUBSIDIARIES
SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES
AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES
OTHER THAN RELATED PARTIES
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- --------------------------------------------------------------------------------
DEDUCTIONS ENDING BALANCE
- --------------------------------------------------------------------------------
BEGINNING AMOUNTS AMOUNTS NOT
NAME OF DEBTOR BALANCE ADDITIONS COLLECTED WRITTEN OFF CURRENT CURRENT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1993
AMAX Inc. (a)........ $ -- $84,700 $(84,700) $ -- $ -- $ --
======= ======= ======== ===== ======= =====
1992
AMAX Inc. (a)........ $15,400 $57,800 $(73,200) $ -- $ -- $ --
======= ======= ======== ===== ======= =====
1991
AMAX Inc. (a)........ $29,300 $30,200 $(44,100) $ -- $15,400 $ --
======= ======= ======== ===== ======= =====
</TABLE>
- --------
(a) During 1993, 1992 and 1991, Amax Gold Inc. advanced funds to AMAX Inc.
under demand promissory notes receivable. Interest on the notes was at the
Effective Federal Funds Rate plus 3/16%.
S-2
<PAGE>
SCHEDULE IV
AMAX GOLD INC. AND SUBSIDIARIES
SCHEDULE IV--INDEBTEDNESS OF AND TO RELATED
PARTIES--NOT CURRENT
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- --------------------------------------------------------------------------------
BALANCE AT --INDEBTEDNESS OF-- BALANCE
NAME OF PERSON BEGINNING ADDITIONS DEDUCTIONS AT END
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993
Cyprus Amax Minerals Co................. $ -- $31,200 $(6,500) $24,700
===== ======= ======= =======
</TABLE>
- --------
During 1993, Amax Gold Inc. borrowed funds from Cyprus Amax Minerals Company
under demand promissory notes payable. At December 31, 1993, Cyprus Amax
Minerals Company owned approximately 40% of Amax Gold's outstanding common
stock. In February 1994 approval was granted for Cyprus Amax Minerals Company
to purchase three million shares of Amax Gold's common stock at $6.888 per
share to repay approximately $20.7 million of the above indebtedness. Interest
on the notes was at the Effective Federal Funds Rate plus 3/16%. During 1992
and 1991 Amax Gold Inc. did not have any indebtedness to related parties.
S-3
<PAGE>
SCHEDULE V
AMAX GOLD INC. AND SUBSIDIARIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ---------------------------------------------------------------------------------
BALANCE BALANCE
OF ADDITIONS OTHER AT END
BEGINNING AT CHANGES ADD OF
CLASSIFICATIONS OF PERIOD COST(A) RETIREMENTS (DEDUCT)(B) PERIOD
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993
Mining plants and
equipment................ $150,400 $ 17,000 $ (4,200) $ -- $163,200
Mining properties......... 120,100 56,600 (3,800) (13,000) 159,900
New Zealand joint venture
mining properties, plant
and equipment............ 14,900 200 (13,000) (2,100) --
Development properties and
construction-in-progress. 253,800 (50,400) -- (5,500) 197,900
-------- -------- -------- -------- --------
$539,200 $ 23,400 $(21,000) $(20,600) $521,000
======== ======== ======== ======== ========
1992
Mining plants and
equipment................ $ 94,400 $ 60,400 $ (800) $ (3,600) $150,400
Mining properties......... 48,800 69,000 -- 2,300 120,100
New Zealand joint venture
mining properties, plant
and equipment............ 14,700 800 -- (600) 14,900
Development properties and
construction-in-progress. 76,800 (16,500) -- 193,500 253,800
-------- -------- -------- -------- --------
$234,700 $113,700 $ (800) $191,600 $539,200
======== ======== ======== ======== ========
1991
Mining plants and
equipment................ $ 79,700 $ 15,000 $ (300) $ -- $ 94,400
Mining properties......... 43,600 5,400 (200) -- 48,800
New Zealand joint venture
mining properties, plant
and equipment............ 13,300 1,800 -- (400) 14,700
Development properties and
construction-in-progress. 39,100 37,800 (100) -- 76,800
-------- -------- -------- -------- --------
$175,700 $ 60,000 $ (600) $ (400) $234,700
======== ======== ======== ======== ========
</TABLE>
- --------
Note:
(a) Additions for mining plants and equipment, mining properties and joint
venture mining properties, plant and equipment include transfers from
construction-in-progress. The construction-in-progress additions reflect
the amounts transferred.
(b) Other changes include foreign exchange adjustments, properties acquired
with stock or with the assumption of debt and intercompany transfers of
equipment. Prior to 1993 other changes included prior year exploration
costs that were capitalized and restored to earnings. The accounting policy
for exploration was changed in 1993 so that exploration is now expensed in
the period incurred until such time that a property becomes exploitable,
with subsequent expenditures being capitalized. Other changes for 1993
include the cumulative effect from this accounting change for periods prior
to 1993. Mining properties for 1992 includes $2.3 million transferred from
other noncurrent assets.
S-4
<PAGE>
SCHEDULE VI
AMAX GOLD INC. AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- -------------------------------------------------------------------------------
BALANCE BALANCE
AT ADDITIONS OTHER AT END
BEGINNING AT CHANGES ADD OF
CLASSIFICATIONS OF PERIOD COST(A) RETIREMENTS (DEDUCT)(B) PERIOD
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993
Mining plants and
equipment................ $ 71,700 $13,100 $ (4,100) $10,100 $ 90,800
Mining properties......... 30,900 12,200 (3,800) 75,100 114,400
New Zealand joint venture
mining properties, plant
and equipment............ 6,800 400 (6,400) (800) --
-------- ------- -------- ------- --------
$109,400 $25,700 $(14,300) $84,400 $205,200
======== ======= ======== ======= ========
1992
Mining plants and
equipment................ $ 59,200 $13,200 $ (700) $ -- $ 71,700
Mining properties......... 24,300 6,600 -- -- 30,900
New Zealand joint venture
mining properties, plant
and equipment............ 5,100 2,000 -- (300) 6,800
-------- ------- -------- ------- --------
$ 88,600 $21,800 $ (700) $ (300) $109,400
======== ======= ======== ======= ========
1991
Mining plants and
equipment................ $ 42,600 $16,800 $ (200) $ -- $ 59,200
Mining properties......... 18,000 6,300 -- -- 24,300
New Zealand joint venture
mining properties, plant
and equipment............ 3,700 1,600 -- (200) 5,100
-------- ------- -------- ------- --------
$ 64,300 $24,700 $ (200) $ (200) $ 88,600
======== ======= ======== ======= ========
</TABLE>
- --------
Note:
(a) Depreciation and depletion have been computed using the unit of production
method based on the estimated ounces of gold to be recovered and an
estimated salvage value for certain assets at the end of their useful
lines. Mobile equipment and assets which have a useful life which is
shorter than the mine life are depreciated on a straight-line basis over
estimated useful lives of one to five years.
(b) Other changes consist primarily of foreign exchange adjustments. Other
changes for 1993 also include the cumulative effect of a change in
accounting policy concerning exploration expenses for all periods prior to
1993. Other changes for 1993 also include $87,700 related to property
write-downs.
S-5
<PAGE>
SCHEDULE IX
AMAX GOLD INC. AND SUBSIDIARIES
SHORT-TERM BORROWINGS
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- --------------------------------------------------------------------------------
MAXIMUM AVERAGE WEIGHTED
BALANCE WEIGHTED AMOUNT AMOUNT AVERAGE
AT END AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
CATEGORY OF AGGREGATE OF INTEREST DURING DURING DURING
SHORT-TERM BORROWINGS PERIOD RATE PERIOD PERIOD(3) PERIOD(4)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993
Gold loans (1)........... $ -- -- % $30,000 $26,400 3.9%
======= === ======= ======= ===
1992
Gold loans (2)........... $10,000 4.1% $10,000 $ 8,700 3.7%
======= === ======= ======= ===
</TABLE>
- --------
(1) At December 31, 1993 Amax Gold Inc. had $30 million in borrowings
(representing 89,615 gold ounces which were sold for $30 million) that were
scheduled to be repaid in 1994. In February 1994 the repayment of $10
million (or 30,303 gold ounces) was extended to 1995. The repayment of the
remaining $20 million (or 59,312 gold ounces) is expected to be extended
beyond 1994 or refinanced on a long-term basis.
(2) Represented 29,600 outstanding gold ounces which were sold for $10 million.
During 1991 Amax Gold did not have any short-term borrowings.
(3) The sum of the amounts outstanding at each month-end divided by the total
number of months amounts were outstanding.
(4) The total interest expense applicable to the amounts outstanding at each
period (day or month-end) divided by the average balance owing for those
periods.
S-6
<PAGE>
SCHEDULE X
AMAX GOLD INC. AND SUBSIDIARIES
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B
- --------------------------------------------------------------------------------
CHARGED TO
ITEM COSTS AND EXPENSES
- --------------------------------------------------------------------------------
<S> <C>
1993
Maintenance and repairs...................................... $17,600
-------
Royalties.................................................... 1,400
-------
Taxes, other than payroll and income taxes--
Net proceeds tax........................................... 500
Sales and use tax.......................................... 1,500
Property tax............................................... 1,200
Franchise tax.............................................. 100
-------
3,300
-------
$22,300
=======
1992
Maintenance and repairs...................................... $10,200
-------
Royalties.................................................... 1,400
-------
Taxes, other than payroll and income taxes--
Net proceeds tax........................................... 1,400
Sales and use tax.......................................... 800
Property tax............................................... 1,000
Franchise tax.............................................. 200
-------
3,400
-------
$15,000
=======
1991
Maintenance and repairs...................................... $12,500
-------
Royalties.................................................... 1,500
-------
Taxes, other than payroll and income taxes--
Net proceeds tax........................................... 1,800
Sales and use tax.......................................... 800
Property tax............................................... 500
Franchise tax.............................................. 100
-------
3,200
-------
$17,200
=======
</TABLE>
S-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
EX-3(i) Restated Certificate of Incorporation of the
Registrant, dated May 21, 1987, as amended up to and
including June 24, 1992, filed as Exhibit 1 to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992 (File No. 1-9620) and
incorporated herein by reference.
EX-3(ii) By-laws of the Registrant, adopted on April 2, 1987,
as amended up to and including July 30, 1991, filed as
Exhibit 3(b) to Registration Statement No. 33-43383
and incorporated herein by reference.
EX-4(a) Specimen of Warrant Certificate, filed as Exhibit 4 to
Registrant's Current Report on Form 8-K dated January
6, 1992 (File No. 1-9620) and incorporated herein by
reference.
EX-4(b) Warrant Agreement, dated as of January 6, 1992,
between Amax Gold Inc. and Manufacturers Hanover Trust
Company, as Warrant Agent, filed as Exhibit 28(k) to
Registrant's Current Report on Form 8-K dated January
6, 1992 (File No. 1-9620) and incorporated herein by
reference.
EX-10(a) Management Services Agreement, dated as of June 30,
1987, between AMAX Inc. and Registrant, filed as
Exhibit 10.2 to Registration Statement No.
33-14588 and incorporated herein by reference.
EX-10(b) Amendment to Management Services Agreement, dated as
of November 7, 1989, between AMAX Inc. and Registrant,
filed as Exhibit 7 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1989 (File
No. 1-9620) and incorporated herein by reference.
EX-10(c) Exploration Services Agreement, dated as of June 30,
1987, among AMAX Inc., Registrant and Amax
Exploration, Inc., filed as Exhibit 10.4 to
Registration Statement No. 33-14588 and incorporated
herein by reference.
EX-10(d) Put and Call Agreement dated as of January 2, 1992,
between Registrant and AMAX Inc., filed as Exhibit
28(c) to Registrant's Registration Statement No. 33-
43383 and incorporated herein by reference.
EX-10(e) AMAX Inc.'s Corporate Separation Policy for Subsidiary
Executives, filed as Exhibit 21 to AMAX Inc.'s Annual
Report on Form 10-K for the year ended December 31,
1990 (File No. 1-229-2) and incorporated herein by
reference.
EX-10(f) Registrant's Directors' Deferred Compensation Plan,
filed as Exhibit 10.14.2 to Registration Statement No.
33-22645 and incorporated herein by reference.
EX-10(g) Registrant's Excess Benefit Plan, effective as of
November 15, 1993.
EX-10(h) Registrant's Deferred Compensation Plan, effective as
of November 15, 1993.
EX-10(i) Registrant's 1992 Stock Option Plan, filed as Exhibit
A to Registrant's definitive Proxy Statement for the
1993 Annual Meeting of Stockholders (File No. 1-9620),
which Exhibit A is incorporated herein by reference.
EX-10(j) Registrant's Performance Share Plan, filed as Exhibit
B to Registrant's definitive Proxy Statement for the
1993 Annual Meeting of Stockholders (File No. 1-9620),
which Exhibit B is incorporated herein by reference.
</TABLE>
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EX-10(k) Gold Bullion Loan Agreement, dated March 31, 1987,
between Nevada Gold Mining, Inc. and various banks,
filed as Exhibit 10.12.1 to Registration Statement No.
33-14588 and incorporated herein by reference.
EX-10(l) Deed of Trust and Security Agreement, dated March 31,
1987, between Nevada Gold Mining, Inc. and First
American Title Company of Nevada, filed as Exhibit
10.12.2 to Registration Statement No. 33-14588 and
incorporated herein by reference.
EX-10(m) Pledge and Trust Agreement, dated March 31, 1987,
between AMAX Inc. and various banks, filed as Exhibit
10.12.3 to Registration Statement No.
33-14588 and incorporated herein by reference.
EX-10(n) Assignment and Assumption Agreement relating to Gold
Bullion Loan Agreement, dated May 27, 1987, filed as
Exhibit 10.12.4 to Registration Statement No. 33-14588
and incorporated herein by reference.
EX-10(o) Agreement, dated May 27, 1987, between AMAX Inc. and
Registrant, relating to the Consideration for the
Assignment and Assumption Agreement, filed as Exhibit
10.12.5 to Registration Statement No. 33-14588 and
incorporated herein by reference.
EX-10(p) Amendment and Supplement to Gold Bullion Loan
Agreement, dated as of September 2, 1987, between
Nevada Gold Mining, Inc. and various banks, filed as
Exhibit 44 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1987 (File No. 1-9620)
and incorporated herein by reference.
EX-10(q) Amendment to Pledge and Trust Agreement, dated as of
September 2, 1987, between Nevada Gold Mining, Inc.
and various banks, filed as Exhibit 45 to Registrant's
Annual Report on Form 10-K for the year ended December
31, 1987 (File No. 1-9620) and incorporated herein by
reference.
EX-10(r) Supplemental Deed of Trust and Security Agreement,
dated as of September 2, 1987, between Nevada Gold
Mining, Inc. and First American Title Company of
Nevada, filed as Exhibit 46 to Registrant's Annual
Report on Form 10-K for the year ended December 31,
1987 (File No. 1-9620) and incorporated herein by
reference.
EX-10(s) Amendment and Consent, dated as of February 28, 1991,
to the Gold Bullion Loan Agreement, the Deed of Trust
and Security Agreement and the Pledge and Trust
Agreement, referenced above as Exhibits 10(k), 10(l)
and 10(m), respectively, filed as Exhibit 37 to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1991 (File No. 1-9620) and
incorporated herein by reference.
EX-10(t) Amendment and Consent, dated as of December 11, 1992,
to the Gold Bullion Loan Agreement and Pledge and
Trust Agreement, referenced above as Exhibits 10(k)
and 10(m), respectively, filed as Exhibit 30 to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992 (File No. 1-9620) and
incorporated herein by reference.
EX-10(u) Supplemental Deed of Trust and Security Agreement,
dated as of December 11, 1992, between Nevada Gold
Mining, Inc. and First American Title Company of
Nevada, filed as Exhibit 31 to Registrant's Annual
Report on Form 10-K for the year ended December 31,
1992 (File No. 1-9620) and incorporated herein by
reference.
</TABLE>
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EX-10(v) Mining Lease, dated as of April 2, 1987, between Amax
Exploration, Inc. and TMB Associates, relating to the
Wind Mountain mine, including Assignment to the
Company and related documents, filed as Exhibit 10.25
to Registration Statement No. 33-22645 and
incorporated herein by reference.
EX-10(w) Amendment to Mining Lease, dated August 4, 1988,
between TMB Associates and Registrant, amending the
Mining Lease referenced as Exhibit 10(v) above, filed
as Exhibit 46 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1990 (File No.
1-9620) and incorporated herein by reference.
EX-10(x) Lease dated August 22, 1983, between Joe Munkhoff and
Delphina Munkhoff and Tim Watt, d/b/a Fischer Watt
Mining Company, relating to the Hayden Hill mine,
with Addendums and Assignments to Lassen Gold Mining,
Inc., filed as Exhibit 32 to Registrant's Report on
Form 10-K for the year ended December 31, 1992 (File
No. 1-9620) and incorporated herein by reference.
EX-10(y) Bullion Loan Agreement, dated as of March 21, 1991,
between Lassen Gold Mining, Inc., Registrant, and
various banks relating to the financing of the Hayden
Hill mine, filed as Exhibit 1 to Registrant's From
10-Q for the Quarter ended March 31, 1991 (File No.
1-9620) and incorporated herein by reference.
EX-10(z) Deed of Trust, Mortgage, Security Agreement (Personal
Property Including Mineral Ore and Products Thereof),
Assignment of Production and Fixture Filing, dated as
of March 21, 1991, between Lassen Gold Mining, Inc.
and Ticor Title Insurance Company of California,
filed as Exhibit 2 to Registrant's Form 10-Q for the
Quarter ended March 31, 1991 (File No. 1-9620) and
incorporated herein by reference.
EX-10(aa) First Amendment to Deed of Trust described in Exhibit
10(z), dated as of September 30, 1991, between Lassen
Gold Mining, Inc. and Ticor Title Insurance Company
of California, filed as Exhibit 62 to Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1991 (File No. 1-9620) and incorporated
herein by reference.
EX-10(bb) Security Agreement, dated as of March 21, 1991,
between Lassen Gold Mining, Inc. and The Chase
Manhattan Bank, N.A., as Agent for various banks,
filed as Exhibit 3 to Registrant's Form 10-Q for the
Quarter ended March 31, 1991 (File No. 1-9620) and
incorporated herein by reference.
EX-10(cc) Guarantee and Pledge Agreement, dated as of March 21,
1991, between Registrant and The Chase Manhattan
Bank, N.A., as Agent for various banks, filed as
Exhibit 4 to Registrant's Form 10-Q for the Quarter
ended March 31, 1991 (File No. 1-9620) and
incorporated herein by reference.
EX-10(dd) Martha Hill Joint Venture Agreement, dated July 17,
1987, among Amax Gold Mines New Zealand Limited, AUAG
Resources Limited, Welcome Gold Mines Limited,
Goodman Mining Limited and Waihi Gold Mining Company
Limited, relating to the Waihi mine, filed as Exhibit
10.8.3 to Registration Statement No. 33-14588 and
incorporated herein by reference.
EX-10(ee) Modification, dated April 3, 1991, to the Martha Hill
Joint Venture Agreement, filed as Exhibit 2 to
Registrant's Form 10-Q for the Quarter ended June 30,
1991 (File No. 1-9620) and incorporated herein by
reference.
</TABLE>
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EX-10(ff) Share Sale Agreement dated 4 June 1993 between the
Registrant and Waihi Financing Limited, relating to
the Waihi mine.
EX-10(gg) Share Subscription Agreement dated 4 June 1993
between ACM (New Zealand) Limited, Waihi Financing
Limited and the Registrant, relating to the Waihi
mine.
EX-10(hh) Call Option Agreement dated 4 June 1993 between the
Registrant and Poseidon Gold Limited, relating to the
Waihi mine.
EX-10(ii) Deed of Guarantee dated 4 June 1993 between the
Registrant and Poseidon Gold Limited, relating to the
Waihi mine.
EX-10(jj) Deed of Indemnity dated 4 June 1993 between the
Registrant and ACM (New Zealand) Limited, relating to
the Waihi mine.
EX-10(kk) Letter dated June 4, 1993, from Poseidon Gold Limited
to the Registrant relating to the Waihi mine and the
transactions evidenced by Exhibits 10(ff) through
10(jj) above.
EX-10(ll) Amendment (dated May 16, 1991) to Leasing Agreement
between Empresa Nacional de Mineria ("ENAMI") and
Minera Guanaco Limitada covering Guanaco project
mineral claims--including transfer of Leasing
Contract from Sociedad Contractual Minera Guanaco to
Compania Minera Amax Guanaco and ENAMI, filed as
Exhibit 1 to Registrant's Form 10-Q for the Quarter
Ended June 30, 1992 (File No. 1-9620) and
incorporated herein by reference.
EX-10(mm) Lease Agreement dated June 21, 1946 between James P.
Beckwith and Haile Mines, Inc., covering the
principal mineral rights for the Haile project--
including Assignment of Interest in Lease dated May
1, 1992 by and between Mineral Mining Company, Inc.
and Lancaster Mining Company, Inc., filed as Exhibit
2 to Registrant's Form 10-Q for the Quarter ended
June 30, 1992 (File No. 1-9620) and incorporated
herein by reference.
EX-18 Letter dated September 15, 1993, from the Company's
independent accountants regarding their concurrence
that a newly adopted method of accounting for
exploration expenditures, expensing such expenditures
in the period incurred until such time as a property
becomes exploitable with subsequent expenditures
being capitalized, is preferable to the method
previously applied, filed as an exhibit to the
Registrant's Form 8-K dated September 15, 1993 (File
No. 1-9620) and incorporated herein by reference.
EX-21 Subsidiaries of Registrant.
EX-23(a) Consent of Coopers & Lybrand to the incorporation by
reference in Registrant's Registration Statements No.
33-43076, No. 33-43383, and No. 33-36612 of certain
reports of the firm described therein.
EX-23(b) Consent of Derry, Michener, Booth & Wahl to the
incorporation by reference in Registrant's
Registration Statements No. 33-43076, No. 33-43383,
and No. 33-36612 of certain reports of the firm
described therein.
EX-24 Powers of Attorney.
</TABLE>
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<PAGE>
APPENDIX
Graphic and Image Material
A map depicting the location of the Company's mines and projects appears on
page 2. The locations are described in Part I, Item 1. "Business."
<PAGE>
AMAX GOLD INC.
EXCESS BENEFIT PLAN
Effective as of November 15, 1993
<PAGE>
INTRODUCTION
The Amax Gold Inc. Excess Benefit Pension Plan (hereinafter the "Excess
Benefit Plan") was authorized by the Board of Directors of Amax Gold Inc. (the
"Company") to be effective as of November 15, 1993. The purpose of the Plan was
to provide a means of restoring the benefits of those employees of the Company
(as hereinafter defined) and its subsidiaries participating in the Amax Gold
Inc. Employees Retirement Plan (hereinafter the "Pension Plan") with respect to
whom benefits under the Pension Plan are limited by application of the
limitations imposed on qualified plans by the Employee Retirement Income
Security Act of 1974 (hereinafter "ERISA"), and Internal Revenue Code (the
"Code"), Section 415 enacted pursuant thereto, and for those employees whose
compensation exceeded the amount which may be taken into account under Section
401(a)(17) of the Code.
The Company intends to maintain the Plan (as hereinafter defined)
indefinitely. The Plan provides for the Company to pay all benefits and
administrative costs from its general assets.
<PAGE>
AMAX GOLD INC.
EXCESS BENEFIT PLAN
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE Page
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<C> <S> <C>
I DEFINITIONS...................................... 1
1.01 Definitions................................ 1
II AMOUNT AND PAYMENT OF
EXCESS RETIREMENT BENEFITS...................... 6
2.01 Amount of Benefits......................... 6
2.02 Vesting.................................... 7
2.03 Payment of Benefits........................ 7
2.04 Change of Beneficiary...................... 8
III GENERAL PROVISIONS............................... 9
3.01 Funding.................................... 9
3.02 Duration of Benefits....................... 10
IV ADMINISTRATION................................... 10
4.01 Modification, Amendment, Etc............... 10
4.02 Termination and Discontinuance............. 10
4.03 Special Provisions Upon Change of Control.. 11
4.04 Administration and Interpretation.......... 11
4.05 Appointment of Subcommittees............... 11
4.06 No Contract of Employment.................. 11
4.07 Facility of Payment........................ 12
4.08 Withholding Taxes.......................... 12
4.09 Nonalienation 12
4.10 Construction 12
4.11 Claims Procedure........................... 13
</TABLE>
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AMAX GOLD INC.
EXCESS BENEFIT PLAN
ARTICLE I
DEFINITIONS
1.01 DEFINITIONS. The following terms when capitalized herein shall have the
meanings assigned below.
AFFILIATED COMPANY. Means any company which is a member of a controlled
group of corporations (as defined in Section 414(b) of the Code) which also
includes the Company as a member; any trade or business under common
control (as defined in Section 414(c) of the Code) with the Company, any
organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Section 414(m) of the Code) which
includes the Company; and any other entity required to be aggregated with
the Company pursuant to regulations under Section 414(o) of the Code. For
purposes of this Plan, the definitions in Sections 414(b) and (c) of the
Code shall be modified as provided in Section 415(h) of the Code.
BENEFICIAL OWNER. Means, with respect to any securities, any person who,
directly or indirectly, has or shares the right to vote or dispose of such
securities or otherwise has "beneficial ownership" of such securities
(within the meaning of Rule 13d-3 and Rule 13d-5 (as such Rules are in
effect on November 15, 1993) under the Securities Act of 1934, as amended
the ("Exchange Act")), including pursuant to any agreement, arrangement or
understanding (whether or not in writing); provided, however, that (i) a
person shall not be deemed the Beneficial Owner of any security as a result
of any agreement, arrangement or understanding to vote such security (A)
arising solely from a revocable proxy or consent solicited pursuant to, and
in accordance with, the applicable provisions of the Exchange Act and the
rules and regulations thereunder or (B) made in connection with, or
otherwise to participate in, a proxy or consent solicitation made, or to be
made, pursuant to, and in accordance with, the applicable provisions of the
Exchange Act and the rules and regulations thereunder, in either case
<PAGE>
described in clause (A) or clause (B) above whether or not such agreement,
arrangement or understanding is also then reportable by such person on
Schedule 13D under the Exchange Act (or any comparable or successor
report), and (ii) a person engaged in business as an underwriter of
securities shall not be deemed to be the Beneficial Owner of any securities
acquired through such person's participation in good faith in a firm
commitment underwriting until the expiration of forty days after the date
of such acquisition.
Board of Directors. The Board of Directors of Amax Gold Inc.
-------------------
Change in Control. Means the occurrence of any of the following events:
------------------
(i) any person other than AMAX Inc., a New York corporation, or any
successor to AMAX Inc. by merger, consolidation or sale of
substantially all of its assets ("Amax or its Successor") is or
becomes the Beneficial Owner, directly or indirectly, of securities of
the Company representing 20 percent or more of the combined voting
power of the Company's then-outstanding securities (a "20% Beneficial
Owner"); provided however, that (a) the term "20% Beneficial Owner"
shall not include any Beneficial Owner who has crossed such 20 percent
threshold while Amax or its Successor owns more of the combined voting
power of the Company's then outstanding securities than such
Beneficial Owner or such Beneficial Owner crossed such 20 percent
threshold solely as a result of an acquisition of securities directly
from the Company, or solely as a result of an acquisitions by the
Company of Company securities until, in each case, such time
thereafter as such person acquires additional voting securities other
than directly from the Company and, after giving effect to such
acquisition, such person would constitute a 20% Beneficial Owner and
own more of the combined voting power of the Company's then
outstanding securities than Amax or its Successor owns; and (b) with
respect to any person eligible to file a Schedule 13G pursuant to Rule
133-1(b)(1)(ii) under the Exchange Act with respect to Company
securities (an "Institutional Investor"), there shall be excluded from
the number of securities deemed to be beneficially
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<PAGE>
owned by such person a number of securities representing not more than
10 percent of the combined voting power of the Company's then-
outstanding securities;
(ii) during any period of two consecutive years beginning after January 1,
1993, individuals who at the beginning of such period constitute the
Board of Directors of the Company together with those individuals who
first become Directors during such period (other than by reason of an
agreement with the Company in settlement of a proxy contest for the
election of directors) and whose election or nomination for election
to the Board was approved by a vote of at least two-thirds (2/3) of
the Directors then still in office who either were Directors at the
beginning of the period or whose election or nomination for election
was previously so approved (the "Continuing Directors"), cease for any
reason to constitute a majority of the Board of Directors of the
Company;
(iii) the stockholders of the Company approve a merger, consolidation,
recapitalization or reorganization of the Company, or a reverse stock
split of any class of voting securities of the Company, or the
consummation of any such transaction if stockholder approval is not
obtained, other than any such transaction which would result in at
least 75% of the total voting power represented by the voting
securities of the Company or the surviving entity outstanding
immediately after such transaction being beneficially owned by persons
who together owned at least 75% of the combined voting power of the
voting securities of the Company outstanding immediately prior to such
transaction, with the relative voting power of each such continuing
holder compared to the voting power of each other continuing holder
not substantially altered as a result of the transaction; provided
that, for purposes of this paragraph (iii), such continuity of
ownership (and preservation of relative voting power) shall be deemed
to be satisfied if the failure to meet such 75% threshold (or to
preserve such relative voting power) is due solely to the acquisition
of voting securities by an employee benefit plan of the Company or
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<PAGE>
such surviving entity or of any subsidiary of the Company or such
surviving entity;
(iv) the stockholders of the Company approve a plan of complete liquidation
or dissolution of the Company or an agreement for the sale or
disposition of all or substantially all the assets of the Company; or
(v) any other event which the Board of Directors of the Company determines
shall constitute a Change in Control for purposes of this Plan;
provided, however, that a Change in Control shall not be deemed to have
occurred if one of the following exceptions applies:
(1) Unless a majority of the Continuing Directors of the Company
determines that the exception set forth in this paragraph (1) shall
not apply, none of the foregoing conditions would have been satisfied
but for one or more of the following persons acquiring or otherwise
becoming the Beneficial Owners of securities of the Company: (A) any
person who has entered into a binding agreement with the Company,
which agreement has been approved by two-thirds (2/3) of the
Continuing Directors, limiting the acquisition of additional voting
securities by such person, the solicitation of proxies by such person
or proposals by such person concerning a business combination with the
Company (a "Standstill Agreement"); (B) any employee benefit plan, or
trustee or other fiduciary thereof, maintained by the Company, Amax or
its Successor or any subsidiary of the Company or of Amax or its
Successor; (C) any subsidiary of the Company or of Amax or its
Successor; or (D) the Company; or
(2) Unless a majority of the Continuing Directors of the Company
determines that the exception set forth in this paragraph (2) shall
not apply, none of the foregoing conditions would have been satisfied
but for the acquisition by the Company of another entity (whether by
the merger or consolidation, the
-4-
<PAGE>
acquisition of stock or assets, or otherwise) in exchange, in whole or
in part, for securities of the Company, provided that, immediately
following such acquisition, the Continuing Directors constitute a
majority of the Board of Directors of the Company, or a majority of
the board of directors of any other surviving entity, and, in either
case, no agreement, arrangement or understanding exists at that time
which would cause such Continuing Directors to cease thereafter to
constitute a majority of the Board of Directors or of such other board
of directors.
Notwithstanding the foregoing, unless a majority of the Continuing
Directors determines otherwise, no Change in Control shall be deemed to
have occurred with respect to a particular Participant if the Change in
Control results from actions or events in which such Participant is a
participant in a capacity other than solely as an officer, employee or
director of the Company.
Code. The Internal Revenue Code of 1986, as amended from time to time.
Committee. The Committee responsible for the administration of the Pension
Plan.
Company. Amax Gold Inc. or any successor by merger, consolidation, sale of
assets or otherwise, with respect to its employees and those of its
divisions, subsidiaries and Affiliated Companies which are designated as
participating companies, with respect to their employees, under the Thrift
Plan or Pension Plan.
Compensation. An employee's compensation as defined under the Pension
Plan.
Participant. Each participant in the Pension Plan whose annual benefit
exceeds the limitations imposed by Code Sections 415(b) or 415(e) and each
participant in the Pension Plan who qualifies as a member of a select group
of management employees or highly compensated employees as defined in ERISA
Section 201(2) whose benefit is limited by reason of the Code Section
401(a)(17) limitation on Compensation shall participate hereunder.
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<PAGE>
Pension Plan. The Amax Gold Inc. Employee Retirement Plan, as amended from
time to time.
Plan. The Amax Gold Inc. Excess Benefit Plan, as set forth herein or as
amended from time to time.
Plan Year. The calendar year.
Retirement Allowance. Annual payments under the Pension Plan.
ARTICLE II
AMOUNT AND PAYMENT OF
EXCESS RETIREMENT BENEFITS
2.01 Amount of Benefits. The benefits under Article II with respect to a
participant shall be a monthly payment for the life of the Participant
beginning at the Participant's Normal Retirement Date under the Pension
Plan equal to the excess, if any, of (i) the monthly retirement income
which would have been payable under Section 4.02(a) of the Pension Plan and
adjusted, as appropriate, under Section 4.03 of the Pension Plan for
Participants who meet the requirements thereunder, and adjusted under
Section 4.04 of the Pension Plan for Participants who meet the requirements
thereunder, determined without regard to the provisions contained in
Section 4.02(d) of the Pension Plan relating to the maximum limitation on
pensions and without regard to the limitation on Compensation contained in
Section 1.10 of the Pension Plan, over (ii) the amount of Excess Retirement
Benefits actually paid under Article IV of the AMAX, Inc. Excess Retirement
Benefit Plan, if any and (iii) the amount actually payable under the
Pension Plan, assuming benefits under the Pension Plan are payable for the
life of the Participant beginning at such Participant's Normal Retirement
Date.
2.02 Vesting.
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<PAGE>
(a) A Participant's vested Percentage in the benefits payable under this
Article II shall be the same as the Participant's vested percentage in his
Retirement Allowance.
(b) Notwithstanding any provision of this Plan to the contrary, in the event of
a Change in Control, all Participants shall become fully vested in the
benefits provided under this Plan.
2.03 Payment of Benefits.
(a) Following a Participant's retirement or other termination of employment
with the Company, other than by reason of death, the Participant shall
receive the benefit payable under Section 2.01 above in the same form and
at the same time as the Participant receives a Retirement Allowance under
the Pension Plan.
(b) In the event a Participant dies while in active service with the Company,
the Participant's surviving spouse, if any, shall receive a monthly payment
for the life of the surviving spouse equal to the excess, if any, of (i)
the monthly income that would have been payable to such spouse under
Section 4.05 of the Pension Plan, without regard to the provisions of
Section 4.02(d) of the Pension Plan relating to the maximum limitation on
pensions, and without regard to the limitation on Compensation contained in
Section 1.10 of the Pension Plan, over (ii) the amount actually payable to
such spouse under the Pension Plan.
(c) Notwithstanding the foregoing paragraphs (a) and (b) of this Section 2.02,
if the lump sum value of the benefits payable to or on behalf of a
Participant under this Article II, determined in accordance with Section
4.07(a) of the Pension Plan, is less than $50,000, then such lump sum
amount shall be paid to such Participant, or such Participant's spouse, as
the case may be, as soon as practicable following the date such benefits
would otherwise have commenced.
(d) Notwithstanding any provision of this Plan to the contrary, upon the
occurrence of a Change in Control the benefit that would become payable to
or on behalf of a
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<PAGE>
Participant under this Article II as if the Participant terminated
employment with the Company on the date of the Change in Control shall
become payable. All benefits previously payable and the benefits that
become payable under this Section 2.03(d) shall be paid in the lump sum
form, determined in accordance with Section 4.07(a) of the Pension Plan as
of the date of Change in Control
2.04 Change of Beneficiary. In the event the benefit is payable under this
Article II to the Participant in a form other than an annuity for the life
of the Participant following the Participant's retirement or other
termination of employment with the Company, other than by reason of death,
the Participant may, at any time, upon written notice to the Committee,
change the beneficiary under this Plan to anyone, including his estate. In
the event of a change of beneficiary under this Plan to anyone, including
his estate In the event of a change of beneficiary hereunder, no consent
of the beneficiary previously designated will be required. However,
payments under this Plan to any beneficiary named by the Participant shall
be payable in the same amount and for the same duration as the benefits
that would have been payable to the person named as beneficiary by the
Participant when his benefits under the Plan commence.
ARTICLE III
GENERAL PROVISIONS
3.01 Funding.
(a) All amounts payable in accordance with this Plan shall constitute a
contractual general unsecured obligation of the Company. Such amounts as
well as any administrative costs relating to the Plan, shall be paid out of
the general assets of the Company, to the extent not paid from the assets
of the Trust established pursuant to paragraph (b) below.
(b) The Company may establish a grantor trust for the benefit of Participants
with accounts under the Amax Gold, Inc. Defined Compensation Plan. Assets
to pay
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<PAGE>
benefit liabilities accruing under this Plan may be placed in the Trust and
shall be held separate and apart from other Company funds, and shall be
used exclusively for the purposes set forth in the Plan and the applicable
trust agreement, subject to the following conditions:
(i) the creation of the Trust shall not cause the Plan to be other than
"unfunded" for purposes of Title I of the Employee Retirement Income
Security Act of 1974;
(ii) the Company shall be treated as "grantor" of the Trust for purposes
of Section 577 of the Code; and
(iii) the agreement of the Trust shall provide that its assets may be used
upon the insolvency of the Company to satisfy claims of the Company's
general creditors, and that the rights of such general creditors are
enforceable by them under federal and state law.
3.02 Duration of Benefits. Benefits shall accrue under the Plan on behalf of a
Participant only for so long as the provisions of Sections 415 or
401(a)(17) of the Code actually limit the Retirement Allowance that is
payable under the Pension Plan.
ARTICLE IV
ADMINISTRATION
4.01 Modification, Amendment, Etc. The Board of Directors reserves the right to
modify, amend in whole or in part, discontinue benefit accrual under, or
terminate the Plan at any time. However, no modification or amendment
shall be made to Section 2.02(b), or 4.02 and no modification,
discontinuance, amendment or termination shall adversely affect the right
of any Participant to receive the benefits accrued as of the date of such
modification, discontinuance, amendment, or termination.
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<PAGE>
4.02 Termination and Discontinuance. If the Company terminates the Plan, or
discontinues benefit accruals thereunder, Participants shall continue to
vest in their accrued benefits in accordance with Section 2.02 and benefits
under the Plan shall be paid in the manner and at the times indicated in
Article II, unless the Board of Directors shall determine in its sole and
absolute discretion that Participants shall be fully vested in their
benefits, in which case benefits under the Plan shall be paid within 90
days of such determination. If benefit accruals have been discontinued
under the Plan, the Company may recommence such accruals at any time by
appropriate action.
4.03 Special Provisions Upon Change of Control. Notwithstanding the provisions
of Section 4.01 and Section 4.02, however, upon the occurrence of a Change
in Control and at all times thereafter, the Board of Directors of the
Company shall not discontinue, terminate, suspend or amend the Plan, in
whole or in part, in any manner that would adversely affect the right of
any Participant to receive the benefits otherwise provided under the Plan
as of the effective date of such action by the Board of Directors.
4.04 Administration and Interpretation. Full power and authority to construe,
interpret and administer the Plan shall be vested in the Committee. Any
interpretation of the Plan by the Committee or any administrative act by
the Committee shall be final and binding on all Participants. All rules
relating to the quorum of the Committee and to the conduct of its business
shall also apply to the Committee in administering this Plan.
4.05 Appointment of Subcommittees. The members of the Committee may appoint
from their number such subcommittees with such powers as they shall
determine, may authorize one or more of their number of any agent to
execute or deliver any instrument or instruments in their behalf, and may
employ such counsel, agents and other services as they may require in
carrying out their duties. Subject to the limitations of the Plan, the
Committee shall, from time to time, establish rules and regulations for the
administration of the Plan and the transaction of its business and
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<PAGE>
shall maintain or cause to be maintained all records which it shall deem
necessary for purposes of the Plan.
4.06 No Contract of Employment. The establishment of the Plan shall not be
construed as conferring any legal rights upon any person for a continuation
of employment, nor shall it interfere with the rights of the Company to
discharge any employee and to treat him without regard to the effect which
such treatment might have upon him as a Participant in the Plan.
4.07 Facility of Payment. In the event that the Committee shall find that a
Participant is unable to care for his affairs because of illness or
accident, the Committee may direct that any benefit payment due him, unless
a claim shall have been made therefor by a duly appointed legal
representative, be paid to his spouse, a child, a partner or other blood
relative, or to a person with whom he resides, and any such payment so made
shall be a complete discharge of the liabilities of the Company and the
Plan therefor.
4.08 Withholding Taxes. The Company and the Trustee shall have the right to
deduct from each payment to be made under the Plan and the Trust any
required withholding or other taxes.
4.09 Nonalienation. Subject to any applicable law, no benefit under the Plan
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt to do so shall
be void, nor shall any such benefit be in any manner liable for or subject
to garnishment, attachment, execution of levy, or liability for or subject
to the debts, contracts, liabilities, engagements or torts of a
Participant.
4.10 Construction.
(a) The Plan shall be construed, regulated and administered under the laws of
the State of Colorado to the extent not preempted by the Employee
Retirement Income Security Act of 1974 or other federal law.
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<PAGE>
(b) When used herein the masculine pronoun shall include the feminine pronoun,
and the singular shall include the plural, where appropriate.
4.11 Claims Procedure:
(a) Filing and Initial Determination of Claim: Any Participant, beneficiary,
or his duly authorized representative may file a claim for a Plan benefit
to which the claimant believes that he or she is entitled. Such a claim
must be in writing and delivered to the Committee in person on by express
delivery service or certified mail, postage prepaid. Within 90 days after
receipt of such claim, the Committee shall send to the claimant by
certified mail, postage prepaid, notice of the granting or denying, in
whole or in part, of such claim, unless special circumstances require an
extension of time for processing the claim. In no event may the extension
exceed 90 days from the end of the initial period. If such extension is
necessary, the claimant will be given a written notice to this effect prior
to the expiration of the initial 90-day period. The Committee shall have
full discretion to deny or grant a claim in whole or in part. If notice of
the denial of a claim is not furnished in accordance with this paragraph
(a), the claim shall be deemed denied as of the 100th day after receipt of
such claim (or the 10th day after the expiration of any extension of time
of which claimant has been given written notice by the Committee) and the
claimant shall be permitted to exercise his right of review pursuant to
paragraphs (c) and (d) of this section.
(b) Duty of Committee Upon Denial of Claim: The Committee shall provide to
every claimant who is denied a claim for benefits written notice setting
forth in a manner calculated to be understood by the claimant:
(1) the specific reason or reasons for the denial;
(2) specific reference to pertinent Plan provisions on which the denial is
based;
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<PAGE>
(3) a description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such
material is necessary; and
(4) an explanation of the Plan's claim review procedure.
(c) Request for Review of Claim Denial: Within 60 days after receipt by the
claimant of written notification of the denial in whole or in part of his
claim (or, if notice of denial has not been given, within 60 days after the
date as of which the claim is deemed denied), the claimant or his duly
authorized representative, upon written application to the Committee in
person or by certified mail, postage prepaid may request a review of such
denial, may review pertinent documents and may submit issues and comments
in writing.
(d) Claims Reviewer: Upon receipt of notice of a request for review, the
Committee shall be the claims reviewer. The claims reviewer shall make a
prompt decision on the review. The decision on review shall be written in
a manner calculated to be understood by the claimant, and shall include
specific reasons for the decision and specific references to the pertinent
Plan provisions on which the decision is based. The decision on review
shall be made not later than 60 days after the Committee's receipt of a
request for a review, unless special circumstances require an extension of
time for processing in which case a decision shall be rendered not later
than 120 days after receipt of a request for review. If such extension is
necessary, the claimant shall be given written notice of the extension
prior to the expiration of the initial 60-day period. If notice of the
decision on the review is not furnished in accordance with this paragraph
(d), the claim shall be deemed denied as of the 70th day after claimant's
request for review (or the 10th day after the expiration of any extension
of time of which claimant has been given written notice by the Committee)
and the claimant shall be permitted to exercise his right to legal remedy
pursuant to paragraph (c) of this section.
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<PAGE>
(e) Legal Remedy: After exhaustion of the claims procedure as provided under
this Plan. nothing shall prevent any person from pursuing any other legal
remedy.
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<PAGE>
AMAX GOLD INC.
DEFERRED COMPENSATION PLAN
Effective as of November 15, 1993
<PAGE>
INTRODUCTION
The Amax Gold Inc. Deferred Compensation Plan (hereinafter the "Deferred
Compensation Plan") was authorized by the Board of Directors of Amax Gold Inc.
(the "Company") to be effective as of November 15, 1993. The purpose of the
Plan was to provide a means of restoring the contributions and, to the extent
possible, associated net income or net loss thereon of those employees of the
Company (as hereinafter defined) and its subsidiaries participating in the Amax
Gold Inc. Employee Thrift Plan (hereinafter the "Thrift Plan") with respect to
whom contributions under the Thrift Plan are limited by application of the
limitations imposed on qualified plans by the Employee Retirement Income
Security Act of 1974 (hereinafter "ERISA"), and Internal Revenue Code (the
"Code"), Section 415 enacted pursuant thereto, and for those employees whose
compensation exceeded the amount which may be taken into account under Section
401(a)(17) of the Code.
The Company intends to maintain the Plan (as hereinafter defined)
indefinitely and, in order to afford Plan Participants (as hereinafter defined)
and their beneficiaries maximum security, the Company has established a grantor
trust to aid it in accumulating the amounts necessary to satisfy its liability
to pay benefits attributable to Participant Contributions under the terms of
Articles II and III of the Plan. The Plan provides for the Company to pay all
benefits and administrative costs from its general assets to the extent not paid
by the grantor trust. The establishment of a grantor trust shall not affect the
Company's contingent liability to pay Plan benefits and administrative costs,
except that the Company's liability shall be offset by actual benefit and
administrative cost payments, if any, made by the trust.
<PAGE>
AMAX GOLD INC.
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE Page
----
<C> <S> <C>
I DEFINITIONS..................................... 1
1.01 Definitions............................... 1
II AMOUNT AND PAYMENT OF EXCESS THRIFT PLAN
AND DEFERRED COMPENSATION BENEFITS............. 9
2.01 Amount of Participant Contribution........ 9
2.02 Amount of Company Contribution............ 9
2.03 Adjustments............................... 10
2.04 Vesting................................... 11
2.05 Payment................................... 11
2.06 Forfeitures............................... 12
III INVESTMENT AND VALUATION OF INTERESTS
IN THE TRUST AND ACCOUNTS...................... 13
3.01 Initial Investment Funds.................. 13
3.02 Additional Investment Funds............... 13
3.03 Individual Records........................ 14
3.04 Valuations................................ 14
IV GENERAL PROVISIONS.............................. 15
4.01 Funding................................... 15
4.02 Duration of Benefits...................... 16
V ADMINISTRATION.................................. 16
5.01 Modification, Amendment, Etc.............. 16
5.02 Termination and Discontinuance............ 17
5.03 Special Provisions Upon Change of Control. 17
5.04 Administration and Interpretation......... 17
5.05 Appointment of Subcommittees.............. 18
5.06 No Contract of Employment................. 18
5.07 Facility of Payment....................... 18
5.08 Withholding Taxes......................... 18
5.09 Nonalienation............................. 19
5.10 Construction.............................. 19
5.11 Claims Procedure.......................... 19
</TABLE>
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<PAGE>
AMAX GOLD INC.
DEFERRED COMPENSATION PLAN
ARTICLE I
DEFINITIONS
1.01 DEFINITIONS. The following terms when capitalized herein shall have the
meanings assigned below.
ACCOUNT. The account established and maintained under the Plan for each
participant to reflect amounts credited under Article II of the Plan by
the Company for the benefit of each Participant and any earnings or losses
on amounts credited under Article III with respect to each Participant.
AFFILIATED COMPANY. Means any company which is a member of a controlled
group of corporations (as defined in Section 414(b) of the Code) which
also includes the Company as a member; any trade or business under common
control (as defined in Section 414(c) of the Code) with the Company, any
organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Section 414(m) of the Code) which
includes the Company; and any other entity required to be aggregated with
the Company pursuant to regulations under Section 414(o) of the Code. For
purposes of this Plan, the definitions in Sections 414(b) and (c) of the
Code shall be modified as provided in Section 415(h) of the Code.
BENEFICIAL OWNER. Means, with respect to any securities, any person who,
directly or indirectly, has or shares the right to vote or dispose of such
securities or otherwise has "beneficial ownership" of such securities
(within the meaning of Rule 13d-3 and Rule 13d-5 (as such Rules are in
effect on November 15, 1993) under the Securities Act of 1934, as amended
the ("Exchange Act")), including pursuant to any agreement, arrangement or
understanding (whether or not in writing); provided, however, that (i) a
person shall not be deemed the Beneficial Owner of any security as a
result of any agreement, arrangement or understanding to vote such
security (A) arising solely from
<PAGE>
a revocable proxy or consent solicited pursuant to, and in accordance with,
the applicable provisions of the Exchange Act and the rules and regulations
thereunder or (B) made in connection with, or otherwise to participate in,
a proxy or consent solicitation made, or to be made, pursuant to, and in
accordance with, the applicable provisions of the Exchange Act and the
rules and regulations thereunder, in either case described in clause (A) or
clause (B) above whether or not such agreement, arrangement or
understanding is also then reportable by such person on Schedule 13D under
the Exchange Act (or any comparable or successor report), and (ii) a person
engaged in business as an underwriter of securities shall not be deemed to
be the Beneficial Owner of any securities acquired through such person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
Board of Directors. The Board of Directors of Amax Gold Inc.
Change in Control. Means the occurrence of any of the following events:
(i) any person other than AMAX Inc., a New York corporation, or any
successor to AMAX Inc. by merger, consolidation or sale of
substantially all of its assets ("Amax or its Successor") is or
becomes the Beneficial Owner, directly or indirectly, of securities of
the Company representing 20 percent or more of the combined voting
power of the Company's then-outstanding securities (a "20% Beneficial
Owner"); provided however, that (a) the term "20% Beneficial Owner"
shall not include any Beneficial Owner who has crossed such 20 percent
threshold while Amax or its Successor owns more of the combined voting
power of the Company's then outstanding securities than such
Beneficial Owner or such Beneficial Owner crossed such 20 percent
threshold solely as a result of an acquisition of securities directly
from the Company, or solely as a result of an acquisitions by the
Company of Company securities until, in each case, such time
thereafter as such person acquires additional voting securities other
than directly from the Company and, after giving effect to such
acquisition, such person would constitute a 20% Beneficial Owner and
own
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<PAGE>
more of the combined voting power of the Company's then outstanding
securities than Amax or its Successor owns; and (b) with respect to
any person eligible to file a Schedule 13G pursuant to Rule 133-
1(b)(1)(ii) under the Exchange Act with respect to Company
securities (an "Institutional Investor"), there shall be excluded
from the number of securities deemed to be beneficially owned by
such person a number of securities representing not more than 10
percent of the combined voting power of the Company's then-
outstanding securities;
(ii) during any period of two consecutive years beginning after January
1, 1993, individuals who at the beginning of such period constitute
the Board of Directors of the Company together with those
individuals who first become Directors during such period (other
than by reason of an agreement with the Company in settlement of a
proxy contest for the election of directors) and whose election or
nomination for election to the Board was approved by a vote of at
least two-thirds (2/3) of the Directors then still in office who
either were Directors at the beginning of the period or whose
election or nomination for election was previously so approved (the
"Continuing Directors"), cease for any reason to constitute a
majority of the Board of Directors of the Company;
(iii) the stockholders of the Company approve a merger, consolidation,
recapitalization or reorganization of the Company, or a reverse
stock split of any class of voting securities of the Company, or the
consummation of any such transaction if stockholder approval is not
obtained, other than any such transaction which would result in at
least 75% of the total voting power represented by the voting
securities of the Company or the surviving entity outstanding
immediately after such transaction being beneficially owned by
persons who together owned at least 75% of the combined voting power
of the voting securities of the Company outstanding immediately
prior to such transaction, with the relative voting power of each
such continuing holder compared to the voting power of each other
continuing holder not substantially altered as a result of the
transaction; provided that, for purposes of this
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<PAGE>
paragraph (iii), such continuity of ownership (and preservation of
relative voting power) shall be deemed to be satisfied if the failure
to meet such 75% threshold (or to preserve such relative voting power)
is due solely to the acquisition of voting securities by an employee
benefit plan of the Company or such surviving entity or of any
subsidiary of the Company or such surviving entity;
(iv) the stockholders of the Company approve a plan of complete liquidation
or dissolution of the Company or an agreement for the sale or
disposition of all or substantially all the assets of the Company; or
(v) any other event which the Board of Directors of the Company determines
shall constitute a Change in Control for purposes of this Plan;
provided, however, that a Change in Control shall not be deemed to have
occurred if one of the following exceptions applies:
(1) Unless a majority of the Continuing Directors of the Company
determines that the exception set forth in this paragraph (1) shall
not apply, none of the foregoing conditions would have been satisfied
but for one or more of the following persons acquiring or otherwise
becoming the Beneficial Owners of securities of the Company: (A) any
person who has entered into a binding agreement with the Company,
which agreement has been approved by two-thirds (2/3) of the
Continuing Directors, limiting the acquisition of additional voting
securities by such person, the solicitation of proxies by such person
or proposals by such person concerning a business combination with the
Company (a "Standstill Agreement"); (B) any employee benefit plan, or
trustee or other fiduciary thereof, maintained by the Company, Amax or
its Successor or any subsidiary of the Company or of Amax or its
Successor; (C) any subsidiary of the Company or of Amax or its
Successor; or (D) the Company; or
-4-
<PAGE>
(2) Unless a majority of the Continuing Directors of the Company
determines that the exception set forth in this paragraph (2) shall
not apply, none of the foregoing conditions would have been satisfied
but for the acquisition by the Company of another entity (whether by
the merger or consolidation, the acquisition of stock or assets, or
otherwise) in exchange, in whole or in part, for securities of the
Company, provided that, immediately following such acquisition, the
Continuing Directors constitute a majority of the Board of Directors
of the Company, or a majority of the board of directors of any other
surviving entity, and, in either case, no agreement, arrangement or
understanding exists at that time which would cause such Continuing
Directors to cease thereafter to constitute a majority of the Board of
Directors or of such other board of directors.
Notwithstanding the foregoing, unless a majority of the Continuing
Directors determines otherwise, no Change in Control shall be deemed to
have occurred with respect to a particular Participant if the Change in
Control results from actions or events in which such Participant is a
participant in a capacity other than solely as an officer, employee or
director of the Company.
Code. The Internal Revenue Code of 1986, as amended from time to time.
Committee. The Committee responsible for the administration of the Thrift
Plan.
Company. Amax Gold Inc. or any successor by merger, consolidation, sale of
assets or otherwise, with respect to its employees and those of its
divisions, subsidiaries and Affiliated Companies which are designated as
participating companies, with respect to their employees, under the Thrift
Plan.
Company Contribution. The amount contributed by the Company pursuant to
Section 2.02.
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<PAGE>
Compensation. An employee's compensation as defined in the Thrift Plan for
purposes of Article III.
Investment Fund. The separate funds in which amounts allocable to
Participants and held in the Trust may be invested in accordance with
Article III.
Participant. Each participant in the Thrift Plan whose annual addition (as
defined in Section 415(c)(2) of the Code) in any Plan Year exceeds the
limitations imposed by Code Sections 415(c)(1) or 415(e) or each
participant in the Thrift Plan who qualifies as a member of a select group
of management or highly compensated employees as defined in ERISA Section
201(2) whose contributions to the Thrift Plan are limited by reason of
Section 401(a)(17), 401(a)(30), 401(k)(3)(A)(ii), 401(m)(2) or 402(g)(1) of
the Code.
Participant Contribution. The amount of compensation the receipt of which
a Participant elects to defer and instead have credited to the
Participants's Account pursuant to Article II, which election must be made
prior to the beginning of the period during which the compensation is
earned and for which amounts are contributed. A Participant shall not be
entitled to have a Participant Contribution made on his behalf for any Plan
Year unless (i) the Participant is precluded under Sections 415 401(a)(30),
401(k)(3)(a)(ii) or 402(g)(1) of the Code from making the maximum
permissible contribution under Sections 2.02, 2.03, or 3.01 of the Thrift
Plan for that Plan Year, or (ii) the Participant's compensation for
determining the contributions under Sections 2.02, 2.03, or 3.01 of the
Thrift Plan is reduced by reason of Section 401(a)(17) of the Code.
However, the maximum Participant Contribution the Participant can make for
the Plan year shall be the difference between (A) 15% of the Participant's
compensation (within the meaning of Section 1.11 of the Thrift Plan, but
without regard to the limitation imposed by Section 401(a)(17) of the Code)
for the Plan year, and (B) the Participant's actual contributions for the
Plan Year made pursuant to Sections 2.02 and 2.03 of the Thrift Plan, or
(C) such higher percentage of the Participant's compensation as may be
approved on an individual basis by the Compensation Committee of the Board
of Directors.
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<PAGE>
Plan. The Amax Gold Inc. Deferred Compensation Plan, as set forth herein
or as amended from time to time.
Plan Year. The calendar year.
Portfolio Committee. The Employee Benefits Portfolio Review Committee of
the Thrift Plan.
Thrift Plan. The Amax Gold Inc. Employee Thrift Plan, as amended from time
to time.
Trust. The grantor trust in which amounts allocable to Participants are
held, as provided in Article III.
Trustee. The trustee or trustees of the Trust.
Valuation Date. The last day of each calendar quarter of each Plan year,
or such other dates as the Committee determines necessary or appropriate to
value the Accounts of Participants.
ARTICLE II
AMOUNT AND PAYMENT OF EXCESS THRIFT PLAN
AND DEFERRED COMPENSATION BENEFITS
2.01 Amount of Participant Contribution. As of each Valuation Date, each
Participant's Account shall be credited with an amount equal to the
Participant Contributions, if any, for the period beginning on the day
after the next preceding Valuation Date and ending on the current Valuation
Date.
2.02 Amount of Company Contribution. As of each Valuation Date, each
Participant's Account shall be credited with an additional amount equal to
the sum of:
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<PAGE>
(a) An amount equal to the value of the contribution that would have been made
by the Company as of such day on behalf of the Participant under Article IV
of the Thrift Plan on account of the Participant Contribution if the
Participant Contribution had been made to the Thrift Plan pursuant to
Sections 2.02 and 2.03 thereof (assuming such Company contribution was not
limited by Sections 401(a)(17) or 415 of the Code); and
(b) An amount equal to the excess, if any, of the value of the contribution
that would have been made by the Company as of such day on behalf of the
Participant under Article IV of the Thrift Plan (based upon the
contributions actually made to the Thrift Plan by the Participant) without
regard to any limitation imposed by Sections 401(a)(17), 401(m)(2)(A) or
415 of the Code over the contribution actually made and allocated on behalf
of the Participant as of that date.
2.03 Adjustments. Notwithstanding the foregoing provisions of this Article II,
the amount credited to each Participant's Account as of each Valuation Date
shall be adjusted as of the last Valuation Date of each Plan Year, except
the first Plan Year which shall be a short Plan Year (or, in the case of a
Participant who terminates employment during a Plan Year, as of such
termination date), so that the total amount contributed to the Plan on the
Participant's behalf for that Plan Year equals the amount that would have
been so contributed had the amounts contributed under Sections 2.01 and
2.02 above been computed based on compensation and contributions made for
the entire Plan Year (or, in the case of a Participant who terminates
employment during a Plan Year, the portion of the Plan Year during which he
was so employed), rather than compensation and contributions made for the
period between Valuation Dates. If adjustments required by the foregoing
sentence require amounts held in the Trust with respect to a Participant's
Account to be reduced, the amount of such reduction shall be used to reduce
the Company's future contributions to the Trust for the benefit of other
Participants or that Participant.
2.04 Vesting. Each Participant shall be vested in his Account as follows:
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<PAGE>
(a) with respect to amounts credited pursuant to Section 2.01 (and earnings
thereon), the Participant shall at all times be fully vested;
(b) with respect to amounts credited pursuant to Section 2.02 (and earnings
thereon), the Participant shall be vested to the same extent he is vested
in his Company matching contributions subaccount in the Thrift Plan; and
(c) Notwithstanding any provision of this Plan to the contrary, in the event of
a Change in Control, all Participants shall become fully vested in the
benefits provided under this Article II and such benefits shall be paid in
a single sum as provided in Section 2.05.
2.05 Payment.
(a) Upon a Participant's termination of employment with the Company (and all
affiliated Companies) or upon a Change in Control, the Participant shall be
paid a benefit of a single lump sum equal to the balance credited to his
Account as of the next preceding Valuation Date, to the extent vested. To
the extent the Trustee pays the participant an amount equal to such
balance, the payment shall be a complete discharge of the Company's
obligation under this Article II with respect to that Participant. If the
Trustee pays the Participant an amount which is less than the vested
balance credited to his Account (computed using the amount credited to his
Account as of the next preceding Valuation Date) the Company shall pay the
Participant the difference between the amount paid by the Trustee and such
balance. Payment shall be made as soon as practicable following the
Participant's termination of employment or the Change in Control.
(b) Upon the death of a Participant while employed by the Company (or an
Affiliated Company) the Participant's beneficiary designated under the
Thrift Plan shall be paid a benefit of a single lump sum equal to the
balance credited to the Participant's Account as of the next preceding
Valuation Date, to the extent vested. To the extent the Trustee pays the
Participant's designated beneficiary an amount equal to such balance, the
payment shall be a complete discharge of the Company's obligation under
-9-
<PAGE>
this Article II with respect to that Participant. If the Trustee pays the
Participant's designated beneficiary an amount which is less than the
vested balance credited to the Participant's Account (computed using the
amount credited to his Account as of the next preceding Valuation Date) the
Company shall pay the beneficiary the difference between the amount paid by
the Trustee and such balance. Payment shall be made as soon as practicable
following the Participant's death.
2.06 Forfeitures. Upon termination of a Participant's employment with the
Company and all Affiliated Companies, any unvested portion of his Account
shall be forfeited and any amounts attributable thereto that are held in
the Trust shall be used to reduce the Company's obligations under the Plan
to other Participants. If a Participant who forfeits a benefit under the
Plan is subsequently reemployed by the Company or an Affiliated Company and
his unvested benefits that were forfeited under the Thrift Plan are
reinstated under the Thrift Plan as a result of such reemployment, the
forfeited benefits under this Plan shall also be reinstated and his Account
shall be credited on the Valuation Date next succeeding his reemployment
with an amount equal to such forfeited benefits.
ARTICLE III
INVESTMENT AND VALUATION OF INTERESTS
IN THE TRUST AND ACCOUNTS
3.01 Initial Investment Funds.
(a) The Company may establish a Trust pursuant to Section 4.01(b), and the
assets held in the Trust shall be subdivided, upon the direction and
authorization of the Portfolio Committee, into one or more Investment
Funds. Effective November 15, 1993, all amounts contributed by a
Participant pursuant to Section 2.01 of this Plan shall be invested in the
Investment Fund designated for this purpose by the Portfolio Committee.
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<PAGE>
(b) All amounts contributed by the Company pursuant to Section 2.02 of this
Plan shall be credited or debited with earnings or losses based upon the
performance of the Common Stock of the Company.
3.02 Additional Investment Funds.
The Committee may designate one or more other Investment Funds for the
investment of amounts described in Section 3.01(a). The Committee may
change the designation of Investment Funds from time to time, in its sole
discretion. In the event the Committee designates more than one Investment
Fund, each Participant shall file an investment election with the Committee
designating one or more of the Investment Funds in which the amounts
described in Section 3.01(a) of the Plan that are credited to his Account
shall be invested. The election shall be effective as soon as practicable
following receipt of the Participant's election by the Committee. A
Participant may change the Investment Funds in which the amounts described
herein are invested in accordance with such rules and procedures as the
Committee shall determine. Assets for which no effective investment
designation is made shall be invested in the Investment Fund designated for
this purpose by the Committee.
3.03 Individual Records. The Committee shall maintain, or cause to be
maintained, records showing the individual balances of each Participant's
Account and the amounts allocable to each Participant under this Plan and
under the Trust; provided, however, the Committee may delegate this
responsibility to the Trustee or another administrator. Maintenance of
such records shall not require any segregation of the funds of the Trust.
3.04 Valuations.
(a) On each Valuation Date each Participant's Account shall be allocated his
proportionate share of the increase or decrease (including earnings) in the
fair market value of that portion of the Investment Funds which is
allocable to him and which is invested in each Investment Fund as well as
any expenses paid from the assets of the Trust. Any
-11-
<PAGE>
portion of the Trust allocable to a Participant which is not invested in an
Investment Fund shall not be credited with any earnings.
(b) Immediately after any gain or loss or earnings are allocated to a
Participant under the Trust in accordance with Section 3.04(a), an equal
amount of gain or loss or earnings shall be credited to the Participant's
Account under the Plan.
(c) At least once a year, each Participant shall be furnished with a statement
setting forth the balance credited to his Account and the value of the
amount in the Investment Funds and/or in the Trust allocable to him.
ARTICLE IV
GENERAL PROVISIONS
4.01 Funding.
(a) All amounts payable in accordance with this Plan shall constitute a
contractual general unsecured obligation of the Company. Such amounts as
well as any administrative costs relating to the Plan, shall be paid out of
the general assets of the Company, to the extent not paid from the assets
of the Trust established pursuant to paragraph (b) below.
(b) The Company has established a grantor trust for the benefit of Participants
with Accounts under the Plan. The assets placed in the Trust shall be
comprised of all or any portion of amounts in Accounts and shall be held
separate and apart from other Company funds, and shall be used exclusively
for the purposes set forth in the Plan and the applicable trust agreement,
subject to the following conditions:
(i) the creation of the Trust shall not cause the Plan to be other than
"unfunded" for purposes of Title I of the Employee Retirement Income
Security Act of 1974;
-12-
<PAGE>
(ii) the Company shall be treated as "grantor" of the Trust for purposes
of Section 577 of the Code; and
(iii) the agreement of the Trust shall provide that its assets may be used
upon the insolvency of the Company to satisfy claims of the Company's
general creditors, and that the rights of such general creditors are
enforceable by them under federal and state law.
4.02 Duration of Benefits. Benefits shall accrue under the Plan on behalf of a
Participant only for Plan Years for which the provisions of Sections 415,
401(a)(17), 401(a)(30, 401(k)(3)(A)(ii), 401(m)(2), or 402(g)(1), of the
Code (relating to the maximum limitation on contributions under the Thrift
Plan) actually limit the contributions that can be made by or on the
Participant's behalf under the Thrift Plan.
ARTICLE V
ADMINISTRATION
5.01 Modification, Amendment, Etc. The Board of Directors reserves the right to
modify, amend in whole or in part, discontinue benefit accrual under, or
terminate the Plan at any time. However, no modification or amendment
shall be made to Section 2.04(c) or 5.02 and no modification,
discontinuance, amendment or termination shall adversely affect the right
of any Participant to receive the benefits accrued and the balance to the
credit of such Participant's Account as of the date of such modification,
discontinuance, amendment, or termination, as adjusted as a result of
changes in the value of the Investment Funds in which the amount in the
Trust allocable to the Participant is invested.
5.02 Termination and Discontinuance. If the Company terminates the Plan, or
discontinues benefit accruals thereunder, Participants shall continue to
vest in their accrued benefits and their Accounts in accordance with
Section 2.04 and Accounts under the Plan shall be paid in the manner and at
the times indicated in Article II, unless the Board of
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<PAGE>
Directors shall determine in its sole and absolute discretion that
Participants shall be fully vested in their Accounts, in which case
Accounts under the Plan shall be paid within 90 days of such determination.
If participant contributions have been discontinued under the Plan, the
Company may recommence such accruals at any time by appropriate action.
5.03 Special Provisions Upon Change of Control. Notwithstanding the provisions
of Section 6.01 and Section 6.02, however, upon the occurrence of a Change
in Control and at all times thereafter, the Board of Directors of the
Company shall not discontinue, terminate, suspend or amend the Plan, in
whole or in part, in any manner that would adversely affect the right of
any Participant to receive the benefits otherwise provided under the Plan
as of the effective date of such action by the Board of Directors.
5.04 Administration and Interpretation. Full power and authority to construe,
interpret and administer the Plan shall be vested in the Committee. Any
interpretation of the Plan by the Committee or any administrative act by
the Committee shall be final and binding on all Participants. All rules
relating to the quorum of the Committee and to the conduct of its business
shall also apply to the Committee in administering this Plan.
5.05 Appointment of Subcommittees. The members of the Committee may appoint from
their number such subcommittees with such powers as they shall determine,
may authorize one or more of their number of any agent to execute or
deliver any instrument or instruments in their behalf, and may employ such
counsel, agents and other services as they may require in carrying out
their duties. Subject to the limitations of the Plan, the Committee shall,
from time to time, establish rules and regulations for the administration
of the Plan and the transaction of its business and shall maintain or cause
to be maintained all records which it shall deem necessary for purposes of
the Plan.
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<PAGE>
5.06 No Contract of Employment. The establishment of the Plan shall not be
construed as conferring any legal rights upon any person for a continuation
of employment, nor shall it interfere with the rights of the Company to
discharge any employee and to treat him without regard to the effect which
such treatment might have upon him as a Participant in the Plan.
5.07 Facility of Payment. In the event that the Committee shall find that a
Participant is unable to care for his affairs because of illness or
accident, the Committee may direct that any benefit payment due him, unless
a claim shall have been made therefor by a duly appointed legal
representative, be paid to his spouse, a child, a partner or other blood
relative, or to a person with whom he resides, and any such payment so made
shall be a complete discharge of the liabilities of the Company and the
Plan therefor.
5.08 Withholding Taxes. The Company and the Trustee shall have the right to
deduct from each payment to be made under the Plan and the Trust any
required withholding or other taxes.
5.09 Nonalienation. Subject to any applicable law, no benefit under the Plan
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt to do so shall
be void, nor shall any such benefit be in any manner liable for or subject
to garnishment, attachment, execution of levy, or liability for or subject
to the debts, contracts, liabilities, engagements or torts of a
Participant.
5.10 Construction.
(a) The Plan shall be construed, regulated and administered under the laws of
the State of Colorado to the extent not preempted by the Employee
Retirement Income Security Act of 1974 or other federal law.
(b) When used herein the masculine pronoun shall include the feminine pronoun,
and the singular shall include the plural, where appropriate.
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<PAGE>
5.11 Claims Procedure:
----------------
(a) Filing and Initial Determination of Claim: Any Participant, beneficiary,
or his duly authorized representative may file a claim for a Plan benefit
to which the claimant believes that he or she is entitled. Such a claim
must be in writing and delivered to the Committee in person on by express
delivery service or certified mail, postage prepaid. Within 90 days after
receipt of such claim, the Committee shall send to the claimant by
certified mail, postage prepaid, notice of the granting or denying, in
whole or in part, of such claim, unless special circumstances require an
extension of time for processing the claim. In no event may the extension
exceed 90 days from the end of the initial period. If such extension is
necessary, the claimant will be given a written notice to this effect prior
to the expiration of the initial 90-day period. The Committee shall have
full discretion to deny or grant a claim in whole or in part. If notice of
the denial of a claim is not furnished in accordance with this paragraph
(a), the claim shall be deemed denied as of the 100th day after receipt of
such claim (or the 10th day after the expiration of any extension of time
of which claimant has been given written notice by the Committee) and the
claimant shall be permitted to exercise his right of review pursuant to
paragraphs (c) and (d) of this section.
(b) Duty of Committee Upon Denial of Claim: The Committee shall provide to
every claimant who is denied a claim for benefits written notice setting
forth in a manner calculated to be understood by the claimant:
(1) the specific reason or reasons for the denial;
(2) specific reference to pertinent Plan provisions on which the denial is
based;
(3) a description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such
material is necessary; and
(4) an explanation of the Plan's claim review procedure.
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<PAGE>
(c) Request for Review of Claim Denial: Within 60 days after receipt by the
claimant of written notification of the denial in whole or in part of his
claim (or, if notice of denial has not been given, within 60 days after the
date as of which the claim is deemed denied), the claimant or his duly
authorized representative, upon written application to the Committee in
person or by certified mail, postage prepaid may request a review of such
denial, may review pertinent documents and may submit issues and comments
in writing.
(d) Claims Reviewer: Upon receipt of notice of a request for review, the
Committee shall be the claims reviewer. The claims reviewer shall make a
prompt decision on the review. The decision on review shall be written in
a manner calculated to be understood by the claimant, and shall include
specific reasons for the decision and specific references to the pertinent
Plan provisions on which the decision is based. The decision on review
shall be made not later than 60 days after the Committee's receipt of a
request for a review, unless special circumstances require an extension of
time for processing in which case a decision shall be rendered not later
than 120 days after receipt of a request for review. If such extension is
necessary, the claimant shall be given written notice of the extension
prior to the expiration of the initial 60-day period. If notice of the
decision on the review is not furnished in accordance with this paragraph
(d), the claim shall be deemed denied as of the 70th day after claimant's
request for review (or the 10th day after the expiration of any extension
of time of which claimant has been given written notice by the Committee)
and the claimant shall be permitted to exercise his right to legal remedy
pursuant to paragraph (c) of this section.
(e) Legal Remedy: After exhaustion of the claims procedure as provided under
this Plan. nothing shall prevent any person from pursuing any other legal
remedy.
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<PAGE>
SHARE SALE AGREEMENT
AGREEMENT made 4 June 1993.
PARTIES
- -------
(1) AMAX GOLD, INC. a company duly incorporated in Delaware, United States of
America and having its principal office at 350 Indiana Street, Golden,
Colorado, United States of America ("Vendor")
AND
(2) WAIHI FINANCING LIMITED a company duly incorporated in New Zealand and
having its registered office at care of 171 Featherston Street,
Wellington, New Zealand ("Purchaser")
INTRODUCTION
- ------------
A. AHNZ is incorporated in New Zealand with an authorised share capital of
$10,000 divided into 10,000 ordinary shares of $1.00 each all of which
have been issued and are fully paid.
B. The Vendor is the registered holder of all but one, and beneficial owner
of all, of the Shares;
C. AHNZ is the registered holder of all but one, and beneficial owner of
all, of the issued shares in the capital of ARNZ;
D. ARNZ is the registered holder of all but one, and beneficial owner of
all, of the issued shares in the capital of AGMNZ;
E. AGMNZ is the legal and beneficial owner of a Participating Interest of
28.35% in the Martha Hill Joint Venture and is the registered holder and
beneficial owner of 33.51% of the issued shares in the capital of MML
which in turn holds 15.46% Participating Interest in the Martha Hill
Joint Venture;
F. The Vendor has agreed to sell the Shares to the Purchaser and, the
Purchaser has agreed to buy the Shares from the Vendor on the terms of
this Agreement;
<PAGE>
-2-
IT IS AGREED
- ------------
1. Definitions
-----------
1.1 Unless the context requires otherwise, in this Agreement:-
"Accrued Rights" means all accretions and rights to or arising from the
Shares at or after the Balance Date including (without limiting the
generality of the foregoing) all rights to receive dividends and to
receive or subscribe for shares, stock units, notes or options, declared,
paid or issued by AHNZ.
"Agreement" means this document, including the introduction, schedules,
appendices and any annexures.
"AHNZ" means Amax Holdings New Zealand Limited a company duly
incorporated in New Zealand and having its registered office at 18th
Floor, Price Waterhouse Centre, 66 Wyndham Street, Auckland, New Zealand.
"ARNZ" means Amax Resources New Zealand Limited a company duly
incorporated in New Zealand and having its registered office at 18th
Floor, Price Waterhouse Centre, 66 Wyndham Street, Auckland, New Zealand.
"AGMNZ" means Amax Gold Mines New Zealand Limited a company duly
incorporated in New Zealand and having its registered office at 18th
Floor, Price Waterhouse Centre, 66 Wyndham Street, Auckland, New Zealand.
"Articles" means the Articles of Association of AHNZ.
"Balance Date" means 30 April, 1993.
"Board" means the Board of Directors of AHNZ.
"Business Day" means a day that is not a Saturday, Sunday or any other
day which is a public holiday or a bank holiday in the place where an act
is to be performed.
"Companies Act" means the Companies Act 1955 of New Zealand (as amended).
"Completion" means performance of the acts set out in Clauses 4.2, 4.3
and 4.4.
"Completion Date" means the second Business Day after the Condition
Precedent has been satisfied or another date agreed to in writing by the
Vendor and the Purchaser.
"Condition Precedent" means the condition set out in clause 6.1.
<PAGE>
-3-
"Default Rate" means
(a) in relation to an amount of money (x + 2) per cent per annum where x
is the interest rate quoted by the ANZ Banking Group (New Zealand)
Limited ("the Bank") as its commercial lending rate for New Zealand
("published rate") as at the first Business Day of each calendar
month (to apply until the next published rate is quoted) or, should
there cease to be a published rate, the rate which the Bank
designates as being an appropriate substitute for the published rate
("the substitute rate"). A certificate signed by a manager or other
officer of the Bank stating the published rate or the substitute
rate at a particular date is conclusive evidence of the rate at the
particular date; and
(b) in relation to a quantity of gold (x + 2) per cent per annum where x
is equal to Y-Z and where
(i) Y is the arithmetic average of the London Interbank offered
rates for deposits in United States Dollars for a period of
30 days appearing on Reuters Screen page "LIBO" at or about
10 a.m. on the first Business Day of each month;
(ii) Z in the mean London Interbank forward rate for the purchase
of gold appearing on Reuters screen page "GOFO" at or about
10 a.m. on the first Business Day of each month;
which rate shall apply until the first Business Day of the next
following month.
"Delivery Date" means each of the Initial Delivery Date and each date
occurring at six monthly intervals after the Initial Delivery Date to and
including the date which occurs 54 months after the Initial Delivery
Date.
"Financial Statements" means the documents annexed as Schedule 1.
"Gold" means gold bullion of 0.995 fineness in unallocated form
acceptable in the London Bullion Market for transfer to an unallocated
metal account denominated in gold maintained with a member of the London
Bullion Market Association.
"Initial Delivery Date" means the date which is the latest of:
(a) the second Business Day after the date Completion occurs; or
<PAGE>
-4-
(b) the date which is six months after the date of this Agreement; or
(c) the second Business Day after the Vendor has notified the Purchaser
of the full details of the Vendor's Metal Account.
"Joint Venture Agreement" means the agreement dated 17 July, 1987 between
AGMNZ, Auag Resources Limited, Welcome Gold Mines Limited, Goodman Mining
Limited and Waihi Gold Mining Company Limited which agreement bears the
title on its cover page "Martha Hill Joint Venture Agreement" (as amended
from time to time).
"Liability" includes a present, prospective or contingent liability.
"Marketable Security" means:-
(a) a debenture, stock, share or bond of any Government, of any local
government authority or of any body corporate, association or
society, and a right or option in respect of shares in a body
corporate;
(b) any right, whether actual, prospective or contingent, of any person
to have issued to that person any marketable security as defined in
paragraph (a) above whether or not on payment of any money or other
consideration.
"MML" means Martha Mining Limited a company duly incorporated in New
Zealand and having its registered office at care of Waihi Gold Mining
Company Limited, Barrys Road, Waihi, New Zealand.
"Martha Hill Joint Venture" means the unincorporated contractual joint
venture governed by the Joint Venture Agreement.
"Mortgages" includes legal mortgages and charges, equitable mortgages and
charges (fixed and floating or both) liens, pledges and other security
interests in respect of property.
"ounce" means troy ounce.
"Participating Interest" has the same meaning as in the Joint Venture
Agreement.
"Parties" means the Parties to this Agreement.
"Promissory Note" means a note dated April 15, 1993 having a face value
of US$5 million drawn by AGI Chile Credit Corp., Inc in favour of AGMNZ.
<PAGE>
-5-
"Purchase Price" means the consideration stated in Clause 3.1.
"Settlement Statement" means the statement of certain assets and certain
liabilities of AHNZ on a consolidated basis which, in accordance with
clause 5.4 of clause 5.6, is the Settlement Statement.
"Shares" means all the issued ordinary shares in the capital of the AHNZ.
"Tax" includes all taxes, duties, fees, rates, charges, deductions,
withholdings and imposts whatsoever and wheresoever paid or imposed,
assessed, levied, deducted, withheld or imposed by any central government
or any other government, regional, municipal or local authority (New
Zealand or overseas) and includes interest on all or any of the foregoing
and additional amounts payable by way of penalty.
"Vendor's Bullion Bank" means the member of the London Bullion Market
Association with which the Vendor maintains the Vendor's Metal Account
from time to time.
"Vendor's Metal Account" means the account denominated in gold in
unallocated form maintained by the Vendor with a member of the London
Bullion Market Association details of which the Vendor has last notified
to the Purchaser prior to each Delivery Date.
2. Sale and Purchase
-----------------
2.1 Subject to the Condition Precedent having been satisfied the Vendor as
legal and beneficial owner sells to the Purchaser and the Purchaser
purchases from the Vendor the Shares together with all Accrued Rights
free from Mortgages and other encumbrances.
3. Purchase Price
--------------
3.1 The consideration for the Shares is the aggregate of $15 million and
15,500 ounces of Gold.
3.2 The Purchaser must pay or satisfy the Purchase Price as follows:-
(a) by paying the Vendor the sum of $15 million at Completion; and
(b) by causing 1550 ounces of Gold to be credited, free of Mortgages and
other encumbrances (other than as arise by agreement or operation of
law in favour of the Vendor's Bullion Bank), to the Vendor's Metal
Account
<PAGE>
-6-
at or before 3 p.m. London time on each and every Delivery Date.
4. Procedure at Completion
-----------------------
4.1 Completion will take place at 2 p.m. on the Completion Date at the office
of Chapman Tripp Sheffield Young, Solicitors, AMP Centre, Grey Street,
Wellington, New Zealand.
4.2 At Completion the Vendor must deliver to the Purchaser or the Purchaser's
nominees:-
(a) registrable transfers, of the Shares in favour of the Purchaser or
the Purchaser's nominees;
(b) certificates for the Shares and all shares held by AHNZ in ARNZ and
by ARNZ in AGMNZ and by AGMNZ in MML and all other documents of and
evidencing title to assets of AHNZ, ARNZ and AGMNZ;
(c) all seals, minute books, statutory books and registers, books of
account, trading and financial records, copies of taxation returns
and other documents and papers of AHNZ, ARNZ and AGMNZ;
(d) authorities directed to bankers of AHNZ, ARNZ and AGMNZ authorising
the operation of each of the bank accounts of these companies only
on the signature of persons named in a written direction given by
the Purchaser to the Vendor before Completion alone or two or more
jointly as specified in that direction;
(e) instruments in a form approved by the Purchaser's solicitors
executed under seal by the Vendor releasing AHNZ, ARNZ and AGMNZ
from all claims of any kind which the Vendor or any subsidiary or
affiliate of the Vendor (other than AHNZ, ARNZ and AGMNZ) may have
against it as and from Completion; and
(f) evidence to the satisfaction of the Purchaser that all management,
financial and administrative services arrangements and gold purchase
arrangements between the Vendor or Amax Precious Metals Inc or any
other subsidiary or affiliate of the Vendor and any of AHNZ, ARNZ
and AGMNZ have been terminated without Liability accruing to or
loss, cost or expense being incurred by AHNZ, ARNZ or AGMNZ.
4.3 At Completion the Vendor must procure:
(a) a direction in writing signed by all shareholders of AHNZ that the
Board register the transfers of the Shares notwithstanding any
contrary provision of the Articles;
<PAGE>
-7-
(b) that the Board approve of the transfers of the Shares for
registration;
(c) resignation from office as secretary of AHNZ, ARNZ and AGMNZ of the
persons who are secretary or secretaries thereof and from the Board
and the boards of directors of ARNZ, AGMNZ and MML of those of the
persons who are directors thereof as the Purchaser directs (in the
case of MML not being persons nominated by Welcome Gold Mines
Limited and Auag Resources Limited as directors of MML in accordance
with their respective rights to nominate directors of MML) effective
at Completion together with an acknowledgement from each such
person, in the form which the Purchaser requires, that he or she has
no claim of any nature against AHNZ, ARNZ, AGMNZ or MML for salary,
fees, compensation for loss of office or otherwise;
(d) appointment to office as secretary of AHNZ, ARNZ and AGMNZ and to
office as directors of AHNZ, ARNZ, AGMNZ and MML of the persons
nominated by the Purchaser (being in the case of MML a number of
persons not exceeding the number of directors of MML which AGMNZ has
the right to appoint);
(e) delivery into the control of the Purchaser of all keys and codes of
whatever nature required to enter or gain access to any property of
AHNZ, ARNZ or AGMNZ including all keys and combinations required to
unlock each safe deposit box at a bank, cupboards, safes, storage
rooms, filing cabinets and desk drawers, and all keys and codes
necessary to gain access to computer programmes;
(f) subject to clause 4.6, repayment to AGMNZ by means of cleared and
immediately available funds of the Promissory Note (upon payment of
which the Purchaser acknowledges AGI Chile Credit Corp., Inc shall
be released from all further liability in connection with the
Promissory Note); and
(g) the transfer into its name of any Shares held on its behalf by a
nominee or trustee.
4.4 At Completion the Purchaser must:-
(a) comply with clause 3.2(a); and
(b) subject to clause 4.6, pay to the Vendor, by way of adjustment of
the Purchase Price, an amount equal to 92.5% of the amount received
by AGMNZ, as contemplated in clause 4.3(f) upon repayment of the
Promissory Note less income Tax at the rate of 33% on any interest
included in that repayment in the currency in which that repayment
is effected.
<PAGE>
-8-
4.5 If Completion does not occur by 5.00 pm on the fourteenth day after the
date of this Agreement and that fact is not due to delay, failure or
default of the Vendor then the Purchaser must pay the Vendor interest on
the sum of $15 million at a rate equal to the Default Rate minus 2
percentage points computed from but not including that fourteenth day to
and including the date Completion occurs calculated with daily rests and
payable at Completion.
4.6 If the Vendor is unable to procure compliance with clause 4.3(f) at
Completion and at Completion gives the Purchaser a notice specifying a
time and date when compliance with clause 4.3(f) will occur (being a date
within 3 Business Days of Completion) and specifying the amount which
will be repaid on account of the Promissory Note and the currency in
which repayment will be made then:
(a) the Purchaser will be deemed to have waived compliance with clause
4.3(f) and the Vendor will be deemed to have waived compliance with
clause 4.4(b);
(b) the Vendor must at the time on the date specified in its notice to
the Purchaser under this clause comply with clause 4.3(f) by
procuring repayment in the amount and currency specified in that
notice; and
(c) contemporaneously with the Vendor complying with paragraph (b) above
the Purchaser must comply with clause 4.4(b).
5. Purchase Price Adjustment
-------------------------
5.1 The Vendor must procure that Price Waterhouse, as soon as reasonably
possible after Completion prepares (using the principles set out in
clause 5.1A and subject thereto usual accounting concepts and practices
consistently applied and the accounting concepts and practices adopted by
AHNZ in the previous three financial years consistently applied) and
audits a statement setting out the assets and liabilities of AHNZ and its
subsidiaries on a consolidated basis as at the Balance Date other than:
(a) the asset represented by the Promissory Note (including interest on
it) or the repayment of it (including that interest) and any income
Tax applicable to interest included in that repayment;
(b) the asset representing the investment of AGMNZ in MML or the assets
and liabilities arising from equity accounting for that investment;
(c) those assets of AGMNZ being the interest of AGMNZ in the property
and assets held under or for the purposes of the Joint Venture
Agreement (including its interest
<PAGE>
-9-
in any cash and investments of the Martha Hill Joint Venture and in
the products produced by the Martha Hill Joint Venture which at the
Balance Date had not been divided between the Participants in the
Martha Hill Joint Venture in accordance with the Joint Venture
Agreement);
(d) to the extent not covered by paragraph (c) above those assets of
AGMNZ representing its investment in or connected with the Martha
Hill Joint Venture (including security or performance deposits or
bonds) but, for the avoidance of doubt excluding cash, gold or
silver accumulated from the distributions which have actually been
made, on or prior to the Balance Date, by the Martha Hill Joint
Venture to the participants therein;
(e) future tax benefits and imputation credits;
(f) unrealised foreign exchange gains and losses and unrealised gains
and losses connected with transactions denominated in Gold;
(g) all liabilities of AGMNZ in its capacity as a Participant in the
Martha Hill Joint Venture (other than to pay Called Sums as defined
in the Joint Venture Agreement and other than in respect of Tax);
(h) Liability of AGMNZ to pay income Tax of $2.75 million and of MML to
pay income Tax of $1.50 million in consequence of the deduction,
prior to the Balance Date, by AGMNZ and MML of future tunnel capital
expenditure.
5.1A The statement to be prepared in accordance with clause 5.1 must be
prepared on the basis of the principles that:
(a) any Called Sum (as defined in the Joint Venture Agreement) paid
before the Balance Date but being in respect of expenditure expected
to be incurred after the Balance Date is a prepayment to be included
as an asset; and
(b) the amount of liability for income Tax for any period shall be the
actual amount of income Tax calculated to be payable for that period
and which is unpaid (but, for the avoidance of doubt, not the
deferred tax liability calculation for accounting purposes) and in
respect of the period from 1 January 1993 to the Balance Date the
calculation must be made treating that period as an income year for
the purposes of the Income Tax Act 1976.
5.2 When Price Waterhouse has completed the auditing of the Financial
Statements as at the Balance Date and the
<PAGE>
-10-
preparation and auditing of the statement as required by clause 5.1 the
Vendor must procure that the statement, audit certificate of Price
Waterhouse addressed to both the Vendor and the Purchaser and the audit
working papers of Price Waterhouse are delivered to the Purchaser for
review on behalf of the Purchaser by Deloitte Ross Tohmatsu.
5.3 The Purchaser shall have fourteen days from receipt of the documents
referred to in clause 5.2 to cause Deloitte Ross Tohmatsu to review those
documents and notify Price Waterhouse and the Vendor of any adjustment to
the statement comprised in those documents which Deloitte Ross Tohmatsu
considers should be made together with a statement as to the reasons for
requesting that adjustment.
5.4 If within the fourteen days referred to in clause 5.3 no adjustment has
been requested the statement comprised in the documents delivered to the
Purchaser under clause 5.2 will be the Settlement Statement.
5.5 If within the fourteen days referred to in clause 5.3 adjustments are
requested in accordance with clause 5.3 the Vendor and the Purchaser will
each procure that Price Waterhouse and Deloitte Ross Tohmatsu
respectively consult with each other with a view to agreeing on the
adjustments (if any) which ought to be made. If they are unable to reach
agreement within seven days those matters on which agreement has not been
reached shall be referred to Arthur Andersen & Co to resolve acting as an
expert only and not as an arbitrator. The parties must each endeavour to
ensure that Arthur Andersen & Co resolves the matters on which agreement
has not been reached within fourteen days of the reference being made.
5.6 The statement comprised in the documents referred to in clause 5.2
adjusted as agreed between Price Waterhouse and Deloitte Ross Tohmatsu or
as determined by Arthur Andersen & Co will be the Settlement Statement.
5.7 On the second Business Day after the expiry of the period of 14 days
referred to in clause 5.3, if clause 5.4 operates or after the Purchaser
has been advised of the outcome of consultations between Price Waterhouse
and Deloitte Ross Tohmatsu or of the determination of Arthur Andersen &
Co (as the case requires):
(a) if the Settlement Statement discloses that the aggregate of the
assets shown therein exceeds the aggregate of the Liabilities shown
therein the Purchaser must pay to the Vendor by way of adjustment of
the Purchase Price an amount equal to 92.5% of the amount of that
excess; or
<PAGE>
-11-
(b) if the Settlement Statement discloses that the aggregate of the
Liabilities shown therein exceeds the aggregate of the assets shown
therein the Vendor must pay to the Purchaser by way of adjustment of
the Purchase Price an amount equal to the amount of that excess.
6. Condition Precedent
-------------------
6.1 The obligations of the Vendor and the Purchaser under this Agreement
connected with the sale or purchase of the Shares are subject to the
condition that the unconditional consent of the New Zealand Overseas
Investment Commission under the Overseas Investment Act 1973 and the 1985
Regulations made thereunder is obtained to the purchase of the Shares and
to any other matter in connection with this Agreement and the Purchaser's
business in New Zealand for which such consent is necessary or desirable.
The offer made under this Agreement is subject to the Overseas Investment
Regulations 1985. Notice of the offer has been given to the Overseas
Investment Commission as required by the Overseas Investment Regulations
1985, and will only become effective pursuant to Regulation 12 of those
Regulations.
6.2 The Purchaser will use reasonable endeavours to obtain the consent
referred to in clause 6.1 by 5 pm on the date 10 Business Days from the
date of this Agreement (the "Condition Date") (or such later date as
shall be notified by the Purchaser to the Vendor by 5 pm on the Condition
Date). If such consent has not been obtained by 5 pm on the Condition
Date (or such later date as is notified) or is refused then this
Agreement shall be at an end at that time on that date or at 5 pm on the
date of the refusal (as the case requires).
6.3 If by operation of clause 6.2 this Agreement is at an end then from the
time on the date specified in clause 6.2 this Agreement shall cease to
have any further force or effect save that the rights of each Party, and
the obligations of the other Party in connection with any prior breach of
any provision of this Agreement, will continue indefinitely and not be
affected or prejudiced by this Agreement being at an end and the Vendor
must immediately refund to the Purchaser all moneys (if any) paid by the
Purchaser under this Agreement (which obligation is also not affected or
prejudiced by this Agreement being at an end).
7. Warranties
----------
7.1 The Vendor warrants to the Purchaser in the terms of the warranties in
Schedule 2, each of which is a separate warranty in no way limited by any
other warranty and is to be read as if expressed to be subject to the
matters disclosed in Schedule 3 to the extent applicable and in the
<PAGE>
-12-
case of its application to AGMNZ is also to be read subject to clause
7.4.
7.2 Each warranty in Schedule 2 applies at:-
(a) the date set out at the commencement of this Agreement;
(b) the date Completion occurs; and
(c) each date between them.
7.3 Each warranty in Schedule 2 applies separately in respect of each of
AHNZ, ARNZ and AGMNZ. Accordingly each reference in Schedule 2 to AHNZ
is also a separate reference to each of ARNZ and AGMNZ and the
information in Schedule 3 and the Appendices to Schedule 2 includes all
information relevant to each of AHNZ, ARNZ and AGMNZ.
7.4 None of the warranties in Schedule 2 shall be taken to be untrue or
unfulfilled or to have been breached by reason of any act, fact, matter,
circumstance or omission relating to the Martha Hill Joint Venture or its
activities or affairs (including MML) where that act, fact, matter,
circumstance or omission (not being any Liability, or not giving rise to
any Liability, incurred by AGMNZ in breach of the Joint Venture Agreement
except by reason of entering into this Agreement or any other agreement
to which the Purchaser is a party):
(a) affects all of the participants in the Martha Hill Joint Venture in
proportion to their interests in the Martha Hill Joint Venture;
(b) is known to all of the participants in the Martha Hill Joint
Venture; or
(c) is known to the Manager of the Martha Hill Joint Venture.
This clause is not prejudiced by, and no implication contrary to this
clause is intended by, any reference to the Martha Hill Joint Venture in
Schedule 2.
8. Indemnity
---------
8.1 The Vendor indemnifies the Purchaser and agrees to keep the Purchaser
forever indemnified against all losses (whether through deficiency in the
assets or increase in Liabilities of AHNZ, ARNZ or AGMNZ or for any other
reason) and liabilities and the cost of all demands, actions and other
proceedings against the Purchaser (including legal costs on a Solicitor
and own client basis) directly or indirectly arising out of or in respect
of or resulting from any breach of warranty given by the Vendor
(determined applying the
<PAGE>
-13-
provisions of clause 7) or any breach or non-performance of the
obligations of the Vendor under this Agreement.
8.2 The Vendor will if requested by the Purchaser (in its absolute
discretion) pay to AHNZ, ARNZ or AGMNZ an amount equal to the deficiency
in the assets or increase in the Liabilities of AHNZ, ARNZ or AGMNZ (as
the case requires) for which the Vendor is liable to the Purchaser under
clause 8.1 rather than pay compensation to the Purchaser for its loss
occasioned by that deficiency or increase.
8.3 If any payment made by the Vendor to the Purchaser (or at its direction
under clause 8.2) pursuant to or in consequence of the operation of
clause 8.1 ("Indemnity Payment") is derived by the Purchaser or any other
person to whom the payment is made in a manner which is assessable income
pursuant to the Income Tax Act 1976 of any kind to the Purchaser or that
other person then the Vendor shall pay a further amount equal to the
amount of income Tax payable in respect of the Indemnity Payment
calculated without regard to:
(a) any other income; or
(b) any entitlement to any deduction or loss; or
(c) any losses carried forward pursuant to section 188 of the Income Tax
Act 1976; or
(d) any transfer of any loss pursuant to section 191A of the Income Tax
Act 1976
of or available to the Purchaser or that other person PROVIDED THAT any
further amount payable shall be reduced:
(i) to the extent of the amount of losses available to the
Purchaser or that other person at that time to be carried
forward pursuant to Section 188 of the Income Tax Act 1976
which, in the reasonable belief of the Purchaser or that
other person (as the case may be), would not be utilised
within the three income years (as defined in the Income
Tax Act 1976) following the date of derivation; or
(ii) to the extent that a deduction pursuant to the Income Tax
Act 1976 for all or part of the loss, liability or costs
which gave rise to the payment being made by Amax has been
obtained or can be obtained by the Purchaser or that other
person.
<PAGE>
-14-
8.4 The liability of the Vendor under this Clause 8 is limited to the extent
that:
(a) it will not be liable in connection with an amount of income Tax of
up to $2.75 million in the case of AGMNZ or $1.50 million in the
case of MML which is or becomes payable by AGMNZ or MML arising out
of the deduction, prior to the Balance Date, by AGMNZ or MML of
future tunnel capital expenditure;
(b) it will not be liable in respect of any claim arising out of a
breach of warranty where the circumstances likely to give rise to
the claim have not been notified to the Vendor in reasonable detail
prior to the expiration of 2 years from the date Completion occurs
except if the breach of warranty concerns the existence of Mortgages
or other encumbrances or concerns title to any asset being a
Marketable Security, or concerns title to any interest in any Joint
Venture Asset or the Participating Interest (each as defined in the
Joint Venture Agreement) of AGMNZ or arises under paragraph (77) of
Schedule 2;
(c) the Purchaser may only claim against the Vendor for amounts equal to
or exceeding $50,000 on each occasion on which a claim is made
(regardless of the number or magnitude of the individual matters
making up that claim); and
(d) in no circumstances shall the Vendor be liable for consequential
loss or damage except where that loss or damage arises directly out
of the wilful act or omission or gross negligence of the Vendor.
8.5 The Vendor acknowledges and agrees that the amount of the loss suffered
by the Purchaser where breach of warranty occurs and there is a
deficiency in assets or increase in Liabilities of AHNZ, ARNZ or AGMNZ
which would not have occurred had that breach of warranty not occurred is
an amount at least equal to that deficiency or that increase.
8.6 If so required by the Vendor the Purchaser must permit the Vendor at its
own cost and expense (including as to legal costs and expenses and as to
the internal management costs and expenses (including costs of employees
time) of the Purchaser, AHNZ, ARNZ or AGMNZ incurred in providing any
assistance to the Vendor) and subject to:
(a) the Vendor providing to the Purchaser a bank guarantee or other
security acceptable to the Purchaser for the amount of the
Purchaser's claim against the Vendor under clause 8.1, in the name
of the Purchaser, AHNZ, ARNZ or AGMNZ (as the case requires); and
<PAGE>
-15-
(b) clause 8.8;
to take the action the Vendor deems fit to negotiate, settle, compromise,
defend or otherwise contest any third party claim or suit giving rise to
the Purchaser's claim against the Vendor under clause 8.1 or to make any
counterclaim which the Purchaser, AHNZ, ARNZ or AGMNZ may have against
that third party and to take over the conduct of any proceedings
commenced by the Purchaser, AHNZ, ARNZ or AGMNZ in connection with any
such claim or suit.
8.7 Upon the Purchaser, or after Completion occurs, AHNZ, ARNZ or AGMNZ
becoming aware of circumstances likely to give rise to a claim being made
under clause 8.1 the Purchaser must promptly give notice to the Vendor of
those circumstances and must at the time of giving notice supply to the
Vendor all information and material regarding the circumstances and
likely claim as may be available to the Purchaser.
8.8 In exercising the rights conferred by clauses 8.6 or 9.3 the Vendor must:
(a) consult with the Purchaser regarding the appointment of legal
advisers (including Counsel) and must not appoint any legal adviser
to whose appointment the Purchaser has objected on reasonable
grounds;
(b) keep the Purchaser reasonably and promptly informed of all material
negotiations, any proposed settlement, compromise or counterclaim
and all material steps proposed to be taken to defend or otherwise
contest a claim or suit; and
(c) give reasonable consideration to the wishes of the Purchaser
regarding any negotiations, settlement, compromise, defence or other
contest or counterclaim (but without being obliged to accede to
those wishes);
9. Tax
---
9.1 If at any time the Commissioner of Inland Revenue or other competent
person or authority issues to AHNZ, ARNZ or AGMNZ an assessment in
respect of a financial year or period ending on or prior to the Balance
Date in which the Tax payable exceeds or is additional to the amount of
Tax on the same account previously notified as payable or provided for in
the Financial Statements for that financial year or period, then:
(a) the Purchaser must immediately provide or must cause AHNZ, ARNZ or
AGMNZ to immediately provide the Vendor with a statement of the
circumstances of the assessment;
<PAGE>
-16-
(b) unless the assessment is for income Tax of up to $2.75 million in
the case of AGMNZ or of up to $1.50 million in the case of MML
arising from the deduction, prior to the Balance Date, by AGMNZ and
MML of future tunnel capital expenditure, the Vendor must pay to the
Purchaser (by way of adjustment to the Purchase Price) the amount of
that excess or additional Tax within the time stipulated in the
assessment or by the Commissioner of Inland Revenue or other
competent person or authority; and
(c) in this Clause 9 "assessment" includes a notice, statement, letter,
account, or other document which notifies an assessment or
determination of Tax or an amendment of a previous assessment or
determination of Tax, or which requires payment of Tax.
9.2 Upon the Purchaser, or after Completion occurs, AHNZ, ARNZ or AGMNZ
becoming aware of circumstances which are likely to give rise to an
assessment the Purchaser must promptly notify the Vendor of those
circumstances.
9.3 If so required by the Vendor the Purchaser must permit the Vendor at its
own cost and expense, but in the name of AHNZ, ARNZ or AGMNZ (as the case
requires), and subject to the Vendor providing to AHNZ, ARNZ or AGMNZ a
bank guarantee or other security acceptable to the Purchaser for a
reasonable pre-estimate of costs for which AHNZ, ARNZ or AGMNZ may become
liable,
(a) to take the lawful action the Vendor deems fit to contest, avoid,
resist, appeal or compromise any assessment or anticipated
assessment or to postpone or defer (so far as legally possible) the
payment of any Tax; and
(b) to take over the conduct of any proceedings of whatever nature
commenced by AHNZ, ARNZ or AGMNZ in connection with the assessment
or anticipated assessment.
10. Continuing Obligations
----------------------
10.1 The Vendor must upon request by the Purchaser make available to the
Purchaser all records, documents and papers necessary to enable the
Purchaser to verify the Financial Statements, the statement comprised in
the documents delivered under clause 5.2 and the warranties in Schedule
2.
10.2 Each Party must on request provide the other Party all reasonable
assistance, including access to any relevant documents in its possession,
power or control (including in the case of the Purchaser the documents
referred to in clause 4.2(c) and future financial statements, taxation
returns, assessments and receipts for payments of Taxes of
<PAGE>
-17-
the Purchaser, AHNZ, ARNZ, AGMNZ and, where possible, MML), in connection
with
(a) in the case of the Purchaser any dispute between AHNZ, ARNZ or AGMNZ
and any person; or
(b) in the case of the Vendor
(i) investigating and exercising the rights conferred on it by
clauses 8.6 or 9.3; or
(ii) complying with any obligation imposed on it by the laws
(whether federal or state) of the United States of America
or New Zealand (as necessary for such compliance)
10.3 Each obligation, indemnity and warranty of a Party (except an obligation
fully performed at Completion) continues in force despite Completion.
10.4 No representation or warranty by the Vendor will be in any way affected
by any enquiries or investigations at any time made by or on behalf of
the Purchaser.
10.5 The Vendor undertakes to the Purchaser between the date of this Agreement
and the date Completion occurs:
(a) to procure to the extent that it has power that nothing occurs which
would render any of the warranties in Schedule 2 untrue or
unfulfilled or to be breached; and
(b) to procure that none of AHNZ, ARNZ and AGMNZ
(i) disposes of any asset other than in the ordinary course of
its ordinary business (but not including any Marketable
Security or any right, title, interest, claim or asset
connected with the Martha Hill Joint Venture);
(ii) incurs any liability for borrowed money;
(iii) declares or pays any dividend;
(iv) grants any Mortgage or other encumbrance;
(v) commences to engage in any business not engaged in by it
on the date of this Agreement;
(vi) alters its Memorandum or Articles of Association or
capital structure;
<PAGE>
-18-
(vii) issues any shares or options to subscribe for shares in
its capital or enters into any arrangement which may
oblige it to do so at any time;
(viii) enters into any agreement of any kind;
without the prior written consent of the Purchaser (which the
Purchaser may give or withhold in its absolute discretion).
11. Default
-------
11.1 In Clause 11:
(a) "Defaulting Party" has the meaning given to it in Clause 11.2; and
(b) "Other Party" means, where the Purchaser is the Defaulting Party,
the Vendor and, where the Vendor, AHNZ, ARNZ or AGMNZ is the
Defaulting Party, the Purchaser.
11.2 (1) The Vendor or Purchaser is a "Defaulting Party" for the purposes of
Clause 11 if any of the following apply:
(a) it fails to carry out any provision of this Agreement and does
not remedy that failure within 7 days after notice to it
requiring the failure to be remedied;
(b) it convenes a meeting of its creditors or proposes or enters
into a scheme of arrangement (except for the purpose of
reconstruction or amalgamation) or a composition with any of
its creditors;
(c) an application or order is made to or by a Court or a
resolution is passed for its winding-up or notice of intention
to propose such a resolution is given;
(d) a receiver, or receiver and manager is appointed in respect of
it or the whole or any part of its undertakings, property or
assets or any steps are taken for the appointment of such a
person;
(e) a person holding a security interest in its assets enters into
possession of or takes control of any of those assets or takes
any steps to enter into possession of or take control of any of
those assets;
<PAGE>
-19-
(f) is unable to pay its debts within the meaning of Section 218 of
the Companies Act or suspends payment of its debts;
(g) any step is taken to place it under statutory management or
steps are taken for the appointment of a statutory manager
under Part III of the Corporations (Investigation and
Management) Act 1989;
(h) a resolution is passed for the reduction of its capital or
notice of intention to propose such a resolution is given,
without the prior written consent of the Other Party;
(i) a warranty given by it in this Agreement is untrue, unfulfilled
or otherwise breached in a material respect;
(j) it becomes unlawful for it to perform its obligations under
this Agreement; or
(k) anything analogous to the matters or events mentioned in any of
paragraphs (b), (c), (d), (e), (f), (g), or (h) occurs in
relation to it in any other jurisdiction.
(2) AHNZ, ARNZ or AGMNZ is a Defaulting Party if any of the matters
or events mentioned in paragraphs (b), (c), (d), (e), (f), (g),
(h), and (k) of clause 11.2(1) occurs in relation to it.
11.3 The Purchaser may at any time prior to Completion having occurred
(without prejudice to its other rights and remedies under this Agreement
or at law) if the Vendor, AHNZ, ARNZ or AGMNZ becomes a Defaulting Party,
terminate this Agreement by giving notice in writing to the Vendor.
Termination pursuant to this clause 11.3 does not prejudice any claim
which a Party may have against another at the time of termination.
Failure to exercise a right of termination under this clause 11.3 and the
occurrence of Completion, notwithstanding that the Purchaser has actual
knowledge that the Vendor, AHNZ, ARNZ or AGMNZ is a Defaulting Party,
shall not prejudice any other rights or remedies of the Purchaser
(including its right to damages for breach of this Agreement or breach of
warranty or to be indemnified under this Agreement).
11.4 The Vendor may at any time prior to Completion having occurred (without
prejudice to its other rights and remedies under this Agreement or at
law) if the Purchaser becomes a Defaulting Party terminate this Agreement
by giving notice in writing to the Purchaser. Termination pursuant to
this clause 11.4 does not prejudice any claim which a Party may
<PAGE>
-20-
have against another at the time of termination. Failure to exercise a
right of termination under this clause 11.4 and the occurrence of
Completion notwithstanding that the Vendor has actual knowledge that the
Purchaser is a Defaulting Party shall not prejudice any other rights or
remedies of the Vendor (including its right to damages for breach of this
Agreement).
11.5 If the Other Party gives notice under Clause 11.2(1)(a) within 7 days
prior to the Completion Date, then the Completion Date is extended to
coincide with the expiry of the notice period.
11.6 A Defaulting Party, or where AHNZ, ARNZ or AGMNZ is a Defaulting Party
the Vendor, must on demand pay to the Other Party all of the costs and
disbursements (including legal costs on a solicitor and client basis)
incurred by the Other Party in connection with the breach or default
(including the giving of a notice under clause 11.2(1)(a)) and otherwise
in connection with the termination of this Agreement.
11.7 If the Purchaser rightfully terminates this Agreement under either clause
11.3 or its other rights under this Agreement or at law, the Vendor must,
without prejudice to any other rights and remedies of the Purchaser,
immediately refund to the Purchaser all moneys paid by the Purchaser to
the Vendor under this Agreement together with interest at the Default
Rate from the date of payment by the Purchaser to the date of refund by
the Vendor.
11.8 If the Vendor rightfully terminates this Agreement under either Clause
11.4 or its other rights under this Agreement or at law then:-
(a) the Vendor may either:-
(i) retain the Shares and institute legal proceedings against
the Purchaser for damages for breach of this Agreement; or
(ii) resell the Shares in such manner as it sees fit and
recover any deficiency in the Purchase Price (valued as
provided in paragraph (a) above) on the re-sale and any
costs and resulting expenses by way of further liquidated
damages; and
(b) the Vendor may retain any moneys paid under this Agreement pending
determination of damages and may apply that money in satisfaction or
part satisfaction of those damages.
<PAGE>
-21-
12. Interest on Money or Gold in Arrears
------------------------------------
If a Party fails to pay an amount of money payable under this Agreement
or to deliver a quantity of Gold deliverable under this Agreement on the
due date, the Party in default must pay to the Party entitled to payment
of that amount or receipt of that quantity interest at the Default Rate
on that amount or that quantity, calculated and payable daily, computed
from the due date until the amount is paid in full.
13. Governing Law
-------------
13.1 The law of this Agreement is the law of New Zealand.
13.2 The Parties submit themselves to the non-exclusive jurisdiction of the
Courts of New Zealand.
13.3 For the purposes of service of documents of any kind on the Vendor, the
Vendor hereby appoints Bell Gully Buddle Weir of 171 Featherston Street,
Wellington, New Zealand as the Vendor's representative in New Zealand and
the Vendor agrees with the Purchaser that service on Bell Gully Buddle
Weir (marked for the attention of: Mr. David McLay) of any notices or
documents required to be served on the Vendor shall be valid and
effective service on the Vendor of the notices and documents served.
14. Severability
------------
If a provision of this Agreement is illegal or void then that provision
is severed and the other provisions of this Agreement remain in force.
15. Variation
---------
15.1 The variation of a provision of this Agreement is not effective unless in
writing and executed by the Parties.
15.2 A Party's consent to a departure from a provision of this Agreement by
another Party is not effective unless in writing and executed by the
consenting Party.
16. Waiver
------
16.1 A Party's failure or delay to exercise a power or right does not operate
as a waiver of that power or right.
16.2 The exercise of a power or right does not preclude:-
(a) its future exercise; or
(b) the exercise of any other power or right.
<PAGE>
-22-
16.3 A waiver of a power or right is ineffective unless in writing and
executed by the waiving Party.
16.4 The waiver of a power or right is effective only in respect of the
specific instance to which it relates and for the specific purpose for
which it is given.
17. Further Assurance
-----------------
17.1 Each Party must at its own cost from time to time do all things
(including executing all documents) necessary or desirable to give full
effect to this Agreement.
18. Time of the Essence
-------------------
18.1 Time is of the essence of this Agreement.
18.2 The Parties may agree to vary any time requirement and any time
requirement so varied will be of the essence of this Agreement.
19. Stamp Duty
----------
All stamp duty and other government imposts and fees payable on or in
connection with this Agreement, and all other documents and matters
referred to in this Agreement, are payable by the Purchaser when due.
20. Notices
-------
20.1 A notice or other communication in connection with this Agreement by a
Party to another must be in writing and:-
(a) delivered by hand;
(b) sent to an address in New Zealand by registered post, postage
prepaid;
(c) sent to an address outside New Zealand by prepaid airmail; or
(d) sent by facsimile,
to the address or facsimile number for service described below.
20.2 A notice or other communication is sufficiently given if:-
(a) delivered by hand, upon delivery;
(b) mailed to an address in New Zealand, on actual delivery to that
address as evidenced by confirmation of the postage authority of
such delivery;
<PAGE>
-23-
(c) airmailed to an address outside New Zealand, seven days after
posting;
(d) sent by facsimile on the day it is sent if this is a Business Day
and it is sent no later than 4.00 p.m. (receiver's time) and
otherwise on the next Business Day after being sent, if following
transmission the sender receives a transmission confirmation report
or if the sender's facsimile machine is not equipped to issue a
transmission confirmation report then upon the sender receiving
acknowledgment of receipt in legible form from the addressee.
20.3 A Party who receives a notice or other communication by facsimile must
immediately acknowledge receipt to the sender.
20.4 Each Party's address or facsimile number for service is:-
in the case of the Vendor:-
Name: Amax Gold Inc.
(Attention: President and General Counsel)
Address: 350 Indiana Street
Golden, Colorado 80401-5081
Facsimile No: (1303) 273 0708
in the case of the Purchaser:-
Name: Waihi Financing Limited
(Attention: Mr P W O'Regan)
Address: C/- Chapman Tripp Sheffield Young
AMP Centre, Grey Street,
Wellington, New Zealand
Facsimile No: (644) 472 7111
20.5 A Party may change its address or facsimile number for service by giving
notice of that change to each other Party.
20.6 A certificate signed by or on behalf of a Party giving a notice or other
communication by any officer or employee of that Party stating the date
on which that notice or other communication was delivered or sent is
prima facie evidence of the date on which that notice or other
communication was delivered or sent.
<PAGE>
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21. Confidentiality
---------------
21.1 For the purposes of this clause 21 "Confidential Information" means:
(a) all information concerning the negotiations and dealings between the
Parties connected with this Agreement;
(b) the existence of this Agreement;
(c) the terms and provisions contained in this Agreement;
(d) so far only as concerns the Vendor, all information now or at any
time hereafter known to the Vendor concerning the business or
affairs of AHNZ, ARNZ, AGMNZ, MML or the Martha Hill Joint Venture
which has not entered the public domain (otherwise than by a breach
of this clause).
21.2 Each Party undertakes to keep, and to cause all of its subsidiaries and
affiliates and its and its subsidiaries and affiliates officers and
employees to keep, all Confidential Information strictly confidential,
except to the extent that disclosure is permitted under this clause 21.
21.3 Confidential Information may only be disclosed:
(a) if and to the extent that the other Party has consented to that
disclosure in writing (which consent it may give or withhold in its
absolute discretion);
(b) if and to the extent that a Court of competent jurisdiction or
applicable law (including rules and regulation of the United States
Securities and Exchange Commission or its equivalent in any other
applicable jurisdiction or of a stock exchange on which shares of a
Party or of a related corporation of a Party are listed) compels
disclosure to be made but only after written notice is given to the
other Party reasonably in advance of disclosure specifying the
requirements compelling disclosure and the Confidential Information
which it is proposed to disclose;
(c) in proceedings taken by a Party for the enforcement of this
Agreement;
(d) in the case of the Purchaser only to the participants in the Martha
Hill Joint Venture; or
(e) to a Party's employees, and professional advisers having a need to
know for the proper discharge of their duties, provided disclosure
is made on a confidential basis.
<PAGE>
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21.4 A Party seeking to rely on clause 21.3(b) must consult with the other
party concerning the wording of the proposed disclosure and the manner
thereof and must take reasonable account of the other Party's
requirements.
21.5 The provisions of this clause 21 will remain binding indefinitely
notwithstanding that this Agreement may be at an end for any reason.
21.6 Each Party acknowledges that damages is not an adequate remedy if it
breaches or attempts to breach this clause 21 but that the other Party
shall be entitled to an injunction or other appropriate equitable relief.
22. Interpretation
--------------
22.1 The singular includes the plural and the plural includes the singular.
22.2 A reference to a gender includes a reference to each other gender.
22.3 A reference to a person includes a reference to a firm, corporation or
other corporate body.
22.4 A reference to a statute, regulation, or provision of a statute or
regulation ("statutory provision") includes a reference to:-
(a) that statutory provision as amended or re-enacted from time to time;
and
(b) a replacement of a statutory provision.
22.5 A reference to writing includes a reference to printing, typing and each
other method of producing words in a permanent visible form.
22.6 Where a word or expression is given a particular meaning, other parts of
speech and grammatical forms of that word or expression have
corresponding meanings.
22.7 A reference to a deed, agreement (including this Agreement) or other
instrument or any provision thereof shall be deemed to include a
reference to that deed, agreement, instrument or provision as varied,
amended, supplemented, novated, assigned or replaced from time to time.
22.8 Unless otherwise specified references to monetary sums are in New Zealand
Dollars.
22.9 A reference to a month is a reference to a calendar month (whether or not
beginning on the first day of any month).
<PAGE>
-26-
22.10 The words "including", "such as" and "particularly" and similar
expressions do not imply any limitation.
22.11 Headings are for ease of reference and do not form part of or affect the
construction of this Agreement.
22.12 This Agreement binds in addition to the Parties, their respective legal
personal representatives and successors.
22.13 If an act must be done on a specified day which is not a Business Day
then the act must instead be done on the next Business Day.
22.14 References to time, unless otherwise specified, are to local time in
Wellington, New Zealand.
EXECUTED on the date set out at the commencement of this Agreement.
- --------
EXECUTED for and on behalf of )
AMAX GOLD, INC. by )
RICHARD DRIVER its attorney )
under power of attorney dated ) /s/ RC Driver
2 June 1993 (who by his ) ..........................
signature warrants that he has ) Attorney
no notice of the revocation of )
that power of attorney) in the )
presence of: )
/s/ John McLean
...............................
Witness John McLean
Solicitor
Wellington
EXECUTED for and on behalf of )
WAIHI FINANCING LIMITED by )
RICHARD CLEMENT DRIVER its attorney )
under power of attorney dated ) /s/ RC Driver
3 June 1993 (who by his ) ..........................
signature warrants that he has ) Attorney
no notice of the revocation of )
that power of attorney) in the )
presence of: )
/s/ A Miller
...............................
Witness Adrienne Miller
Solicitor
Wellington
<PAGE>
CERTIFICATE OF NON-REVOCATION OF
POWER OF ATTORNEY
I, RICHARD CLEMENT DRIVER, of Kenthurst, New South Wales, Australia, HEREBY
CERTIFY:
1. That be deed dated 2 June 1993 Amax Gold Inc. appointed me its attorney on
the terms and conditions set out in such deed; and
2. That at the date of this certificate I have not received any notice or
information of the revocation of such appointment.
SIGNED at Wellington this 4th day of June 1993.
/s/ RC Driver
- ----------------------------------------
Signature of attorney giving certificate
<PAGE>
CERTIFICATE OF NON-REVOCATION OF
POWER OF ATTORNEY
I, RICHARD CLEMENT DRIVER, of Kenthurst, New South Wales, Australia, HEREBY
CERTIFY:
1. That be deed dated 3 June 1993 Waihi Financing Limited appointed me its
attorney on the terms and conditions set out in such deed; and
2. That at the date of this certificate I have not received any notice or
information of the revocation of such appointment.
SIGNED at Wellington this 4th day of June 1993.
/s/ RC Driver
- ----------------------------------------
Signature of attorney giving certificate
<PAGE>
SCHEDULE 2
Clause 7
Warranties
Introduction and Information
(1) The statements made in the Introduction are true and correct in every
material particular.
The Shares
(2) The Vendor is the registered holder and beneficial owner of the Shares
which comprise all of the issued voting shares in the capital of AHNZ.
(3) The Shares are fully paid and free from all Mortgages and encumbrances
and the Vendor has power to transfer title to the Shares in accordance
with this Agreement
(4) There are no restrictions on the transfer of the Shares save that the
approval of the Board may be required in order to register the transfers.
(5) AHNZ has not granted to any person a right to subscribe for or acquire
any of AHNZ's unissued shares.
(6) No person has any pre-emptive right with respect to any of the Shares.
AHNZ
- ----
(7) The Memorandum and Articles of Association of AHNZ are in the form
comprised in Schedule 4.
(8) No resolution to alter AHNZ's Memorandum or Articles of Association has
been passed.
(9) AHNZ is not:-
(a) in liquidation and no resolution for its winding up has been passed
and no meeting of members or creditors has been convened for that
purpose;
(b) the subject of a winding up application which has been made to a
Court, and no event has occurred which would entitle any person to
apply to a Court to wind up AHNZ;
(c) a party to a composition or arrangement with any of its creditors;
(d) the recipient of a demand under section 218 of the Companies Act.
<PAGE>
-2-
(e) in receivership and none of its assets is in the possession of or
under the control of a mortgagee or chargee;
(f) subject to statutory management; or
(g) insolvent.
(10) AHNZ has not received from the Registrar of Companies any notice warning
of possible cancellation of registration of AHNZ.
(11) AHNZ has not since the Balance Date declared or paid a dividend or
effected any other distribution of profits or carried out or agreed to
carry out any alteration to its capital structures.
(12) No event has occurred which would entitle a person to take any proceeding
or step the effect of which would warrant an inspection or investigation
of the affairs of AHNZ under the Corporations (Investigation and
Management) Act 1989.
Litigation and Outstanding Undertakings; Preservation of Rights
- ---------------------------------------------------------------
(13) AHNZ:-
(a) has no unsatisfied fines, judgments or awards outstanding against it
and is not party to any undertaking or assurance given to any court,
arbitrator or government agency or tribunal which is still in force;
and
(b) is not engaged in or threatened with prosecution, litigation or
arbitration.
(14) The Vendor, after due and proper enquiry, is not aware of any facts or
circumstances which are likely to lead to prosecution, litigation or
arbitration involving AHNZ or any person for whose acts or defaults AHNZ
may be liable (other than litigation arising in consequence of the entry
or giving of effect to this Agreement or any other agreement to which the
Purchaser is a party).
(15) AHNZ is not involved in any proceeding before or investigation by any
governmental or statutory appointee, agency, tribunal, committee or board
of inquiry nor by any Royal Commission and no such proceeding or
investigation is pending or threatened against AHNZ.
(16) AHNZ's rights, contracts, agreements, options and arrangements described
in Appendices 1, 9, 10 and 11, are all of AHNZ's material rights,
contracts, agreements, options and arrangements (including for or in
connection with the forward sale or purchase, price protection or other
<PAGE>
-3-
hedging of gold or silver) and are unimpaired current and exercisable or
enforceable and:
(a) none of AHNZ's rights, contracts, agreements, options or
arrangements is likely to lapse by reason of any act, default or
neglect on the part of AHNZ;
(b) no claim or action which at the Balance Date AHNZ was entitled to
bring has become or prior to twelve months after the date Completion
occurs may become contractually or statutorily barred or impaired by
reason of time or delay, and
(c) no claim or action which at the Balance Date AHNZ was entitled to
defend resist or claim set-off against has been, or prior to twelve
months after the date Completion occurs may be advanced against AHNZ
for want of action by AHNZ in due time.
Subsidiaries and Associations with Others
- -----------------------------------------
(17) Except as shown in Appendix 2 AHNZ:-
(a) has no subsidiaries within the meaning of that expression in the
Companies Act;
(b) is not the holder or beneficial owner of any Marketable Security
(and in particular of any Marketable Security which is not fully
paid up);
(c) is not otherwise a member of a corporation; and
(d) is not a member of any partnership, joint venture, society or other
unincorporated association.
Area of Business
- ----------------
(18) AHNZ has never carried on business nor had a place of business, branch or
permanent establishment outside New Zealand.
Financial Matters
- -----------------
(19) The Financial Statements:-
(a) have been prepared in accordance with usual accounting concepts and
practices consistently applied and in accordance with the accounting
concepts and practices adopted by AHNZ in the previous three
financial years consistently applied;
(b) present a true and fair view of the profit or loss of AHNZ for the
accounting period expired on the date to
<PAGE>
-4-
which they are made up ("Accounts Date") and the state of affairs of
AHNZ as at the Accounts Date;
(c) accurately disclose the assets and Liabilities of AHNZ as at the
Accounts Date;
(d) provide fully for all Liabilities of AHNZ for Tax as at the Accounts
Date (other than Tax of up to $2.75 million which may be assessed in
respect of the deduction, prior to the Balance Date, by AGMNZ of
future tunnel capital expenditure);
(e) are not affected by any unusual or non-recurring item; and
(f) take account of all gains and losses whether realised or unrealised
arising from foreign currency transactions and transactions
denominated in Gold.
(20) Since the Balance Date no material change detrimental to the interests of
the Purchaser has taken place in the financial position or business
affairs of AHNZ.
(21) AHNZ is the beneficial owner of each of the assets included in the
Financial Statements as at the Balance Date except to the extent that an
asset of AHNZ (not including any shares in MML nor assets connected with
the Martha Hill Joint Venture) may have changed, been reduced, or
disposed of in the ordinary course of business of AHNZ after the Balance
Date.
(22) AHNZ has not since the Balance Date acquired any assets other than in the
ordinary course of business of AHNZ and on bona fide arms length
commercial terms.
(23) All Mortgages and other encumbrances affecting any of AHNZ's assets are
listed in Appendix 3, and
(a) there is no default under any Mortgage or encumbrance to which AHNZ
is a party or to which any property or asset of AHNZ is subject; and
(b) there has not occurred any event which with the passage of time,
giving of notice or satisfaction of any condition would constitute a
default.
(24) All guarantees, indemnities, undertakings, letters of comfort and
analogous obligations and assurances which AHNZ has given are listed in
Appendix 4.
(25) The provisions for accrued holiday pay and long service leave in the
Financial Statements as at the Balance Date are adequate, and the
provision for long service leave is calculated in respect of each
employee with more than five
<PAGE>
-5-
years service with AHNZ and its predecessors in business at the Balance
Date.
(26) AHNZ has no Liability to any person in respect of a pension, lump sum or
other allowance or benefit relating to or arising from cessation of
employment or termination of office.
(27) AHNZ does not have any debts or Liabilities other than those debts and
Liabilities disclosed in the Financial Statements as at the Balance Date
and debts and Liabilities which:
(a) have been incurred in the ordinary course of the ordinary business
of AHNZ between the Balance Date and the date Completion occurs, and
(b) are neither-
(i) of an unusual nature, nor
(ii) of an unusually large amount.
(28) There are no bills of exchange, promissory notes and other negotiable or
transferable instruments in respect of which AHNZ has any Liability
(other than cheques drawn by AHNZ in the ordinary course of business
which AHNZ has sufficient cash at bank to meet when presented).
(29) The trade debts owing at the Balance Date and the date Completion occurs
are good debts and have produced or will produce the full amount as shown
in the Financial Statements as at the Balance Date without deduction.
(30) There are no commitments on capital account of AHNZ outstanding exceeding
$10,000 in aggregate (other than commitments on capital account of the
Martha Hill Joint Venture).
(31) The total amount borrowed by AHNZ does not exceed any limitation on its
borrowing contained in its Memorandum or Articles of Association or in
any deed or agreement to which it is a party.
(32) [Omitted]
(33) The rate of depreciation applied in respect of each depreciable asset of
AHNZ in the Financial Statements has been consistently applied over the
previous accounting periods of AHNZ and is adequate to write down the
value of each fixed asset to its realisable value at the end of its
useful working life.
<PAGE>
-6-
Taxation Matters
- ----------------
(34) AHNZ has:-
(a) furnished full and accurate Tax returns as required by law for all
financial years ended on or prior to the Balance Date;
(b) paid or made provision in the Financial Statements for all Tax
levied or liable to be levied upon or in respect of income, profits
or gains derived up to and including the Balance Date;
(c) not had levied or charged against it any amount by way of penalty or
otherwise in respect of any period prior to the Balance Date which
is not provided for in the Financial Statements;
(d) no dispute or question outstanding with and is not subject to
investigation by the revenue authorities in New Zealand or elsewhere
(other than a question concerning the Liability of AGMNZ for income
Tax of up to $2.75 million arising from the deduction, prior to the
Balance Date, by AGMNZ of future tunnel capital expenditure);
(e) deducted amounts required by law to be deducted by AHNZ from
payments by AHNZ to employees and other persons and has paid those
amounts to the appropriate authority;
(f) no assets which it purchased for the purpose of profit making by
sale or for the carrying on or carrying out of any profit making
undertaking or scheme;
(g) made and will make a full and true disclosure of all information it
is obliged to disclose to all taxing authorities, agents,
departments and the Purchaser.
(35) All Tax which has fallen due for payment by AHNZ has been paid by the due
date.
(36) [Omitted]
(37) All documents in the enforcement of which AHNZ may be interested have
been duly stamped and no document belonging to AHNZ subject to ad valorem
stamp duty:-
(a) is unstamped or insufficiently stamped; or
(b) is liable to have additional duty assessed.
<PAGE>
-7-
Statutory Returns
- -----------------
(38) AHNZ has completed and lodged all returns and statements required to be
lodged by law with any agency, department, authority or commission and
the returns and statements so lodged were true and correct in every
material respect.
(39) The books, records and registers of AHNZ have been kept in accordance
with all statutory requirements.
Disclosures
- -----------
(40) The Vendor has disclosed to the Purchaser all facts, circumstances and
other information which the Vendor knows after due enquiry relating to
AHNZ and its operations and which would reasonably be material to a
purchaser of the shares in AHNZ for value.
(41) [Omitted]
(42) [Omitted]
Conduct of the Business
- -----------------------
(43) The business of AHNZ has been conducted in a normal and proper manner.
(44) No schemes or arrangements operated by or relating to AHNZ exist, which
provide to any officer, employee, independent contractor or agent of AHNZ
a commission, remuneration or other payment calculated by reference to
the whole or part of the turnover, profits or sales of AHNZ.
(45) AHNZ is not a party to any agreement pursuant to which it is or may be
bound to share its profits or pay any royalties or to waive or abandon
any rights to which it is entitled (other than royalties which may be
payable by Martha Hill Joint Venture).
Employment
- ----------
(46) Except as set out in Appendix 5 AHNZ does not pay wages or provide other
benefits (except those referred to in Appendix 6) to any employee at a
rate or in a manner exceeding that employee's entitlement under that
employee's employment agreement (particulars of which are set out in
Appendix 6) or the legislation, industrial awards and registered
industrial agreements applicable to that employee.
(47) Set out in Appendix 7 are all superannuation contributions, retirement
benefits pension and other superannuation or pension schemes and
arrangements whether legally enforceable or not relating to AHNZ.
<PAGE>
-8-
(48) Each scheme and arrangement set out in Appendix 7 is fully funded.
(49) There are no industrial disputes relevant to the conduct of the business
of AHNZ and the Vendor is not aware, after due and proper enquiry, of any
claims or other facts or circumstances which may result in an industrial
dispute (other than in connection with the Martha Hill Joint Venture).
(50) There are no claims for compensation or reinstatement as a consequence of
termination of employment of any former employee of AHNZ.
(51) The Vendor is not aware, after due and proper enquiry, of any other
claims respecting benefits conferred or to be conferred on employees of
AHNZ, their families or dependants or of any facts or circumstances which
are likely to lead to any such other claims.
Directors' and Officers' Remuneration etc.
- ------------------------------------------
(52) The remuneration, other entitlements and terms of employment or
engagement of each of the directors and other officers of AHNZ have been
fully disclosed in writing and will not be changed prior to Completion
without the prior written agreement of the Purchaser.
(53) Since the Balance Date AHNZ has not given or agreed to give any
remuneration or other entitlements or benefits to or for the benefit
directly or indirectly of any director or other officer except
remuneration and entitlements to which paragraph (52) applies.
(54) AHNZ has not at any time given any remuneration or other entitlements to
its directors in excess of the amount of directors' remuneration and
entitlements which would be an allowable deduction in the calculation of
the income Tax payable by AHNZ in the relevant year.
Insurance
- ---------
(55) All property (other than property in the nature of Joint Venture Assets
as defined in the Joint Venture Agreement) of AHNZ of an insurable nature
is insured for its full replacement value against loss or damage by fire,
storm, tempest, theft, malicious damage and other usual risks and AHNZ is
and at all times has been adequately covered by public risk insurance.
(56) All insurance required by law to be effected by AHNZ has been effected
and is current.
<PAGE>
-9-
(57) All current policies of insurance held by AHNZ (other than policies
effected by the Manager of the Martha Hill Joint Venture) are disclosed
in Appendix 8 and are in force and will be in force until 5.00 p.m. on
the Business Day following the date Completion occurs.
(58) After due and proper enquiry, the Vendor is not aware of anything which
would lead to any contracts of insurance to which AHNZ is a party or
insurance claim made by AHNZ being avoided, repudiated or denied.
(59) AHNZ has made and will make all notifications to and claims on insurers
and has served or given all notices required for the purposes of ensuring
that third parties meet their obligations in respect of guarantees,
performance bonds and bills of exchange and other negotiable instruments
in relation to which AHNZ is entitled to benefit or has any Liability in
the forms required and within the times required so as to confer on AHNZ
the maximum benefits available under each applicable policy of insurance,
guarantee or performance bond and the maximum benefits under or
indemnification in respect of Liability upon each applicable bill of
exchange or other negotiable instrument.
No contravention of any law
- ---------------------------
(60) To the best of the knowledge, information and belief of the Vendor, after
due and proper enquiry, within the five years preceding the date
Completion occurs AHNZ, its officers, agents and employees (during the
course of their duties in relation to AHNZ) have not permitted or omitted
to do any act or thing the commission or omission of which is or could be
in material contravention of any law and which could have a material
effect on the business, assets or Liabilities of AHNZ.
(61) AHNZ is not a party to any contract, arrangement or understanding which
is in breach of the Commerce Act 1987 or any other law.
Contracts
- ---------
(62) All agreements and arrangements binding on AHNZ not entered into in the
ordinary course of the ordinary business of AHNZ are described in
Appendix 9.
(63) There are no service, employment, consultancy or other similar agreements
with AHNZ requiring more than one month's notice of termination.
(64) There is no material agreement or arrangement to which AHNZ is a party in
respect of which any person is in default (without regard to any
requirement of notice or period of grace or both).
<PAGE>
-10-
(65) Except for the Martha Hill Joint Venture Agreement in accordance with
its own terms AHNZ is not party to any agreement or arrangement which may
be terminated by any other party by reason of a change in the ownership
of any of the Shares or by reason of the change being subject to the
consent of the other party which consent has not been obtained.
(66) There is no offer, tender or quotation given or made by AHNZ other than
in the ordinary course of business of AHNZ and still outstanding capable
of giving rise to a contract by unilateral act of a third party.
(67) All agreements and arrangements binding on AHNZ (except for any lease set
out in Appendix 14 and the contracts agreements and leases set out in
Appendix 1 and Appendix 9) which will not if performed in accordance with
their terms be completed within 12 months after the Balance Date are
listed in Appendix 10.
(68) [Omitted]
(69) The Vendor has disclosed to the Purchaser all information which the
Vendor knows relating to those contracts and agreements of AHNZ which
will or may not be fully performed at Completion which is material for
the purpose of enabling the Purchaser to assess whether or not such
contracts and agreements can be performed profitably by AHNZ.
(70) Except as set out in Appendix 11 or in AHNZ's Memorandum or Articles of
Association there is not any obligation binding on AHNZ to or in which -
(a) the Vendor; or
(b) any corporation in which the Vendor directly or indirectly has an
interest;
has any interest.
(71) The Vendor after due and proper enquiry is not aware of any reason or
circumstance which might cause any agreement or arrangement to which AHNZ
is a party to not be fully performed and completed in accordance with its
terms.
Licences, Permits etc.
- ----------------------
(72) AHNZ holds all permits, licences, authorities, rights to use and consents
necessary for carrying on the business of AHNZ (collectively "the
Permits").
(73) There is no circumstance or fact involving AHNZ or its affairs which may
result in the variation in any material respect or revocation of any of
the Permits.
<PAGE>
-11-
Authorities to Act
------------------
(74) There is no subsisting power of attorney, appointment of agent or other
authority to act on behalf of AHNZ given by AHNZ to any person.
Land
- ----
(75) All land and interests therein (other than as included in Joint Venture
Assets as defined in the Joint Venture Agreement) owned, leased occupied
or used by AHNZ are set out in Appendix 12.
(76) The buildings and other improvements constructed on or in the land (other
than as included in Joint Venture Assets as defined in the Joint Venture
Agreement) owned, leased, occupied or used by AHNZ are in good condition
and repair and fit for the purpose of carrying on AHNZ's business and the
land, buildings and other improvements are not subject to any defect or
anything else which may materially decrease their value;
(77) AHNZ has no Liability under the Resource Management Act 1991 or any other
legislation in connection with any real or personal property owned,
leased, occupied or used by AHNZ at any time prior to or at the date
Completion occurs (other than real or personal property which is included
in Joint Venture Assets as defined in the Joint Venture Agreement).
Promissory Note
- ---------------
(78) The true legal character of the transaction evidenced by the Promissory
Note is that of loan and repayment of the principal of the Promissory
Note will not attract income Tax.
<PAGE>
SHARE SUBSCRIPTION AGREEMENT
AGREEMENT made 4 June 1993
- ---------
PARTIES
- -------
(1) ACM (NEW ZEALAND) LIMITED a company duly incorporated in New Zealand and
having its registered office at 15th Floor, National Mutual Centre, 37-41
Shortland Street, Auckland, New Zealand ("Subscriber")
(2) WAIHI FINANCING LIMITED a company duly incorporated in New Zealand and
having its registered office at 171 Featherston, Street, Wellington, New
Zealand ("Company")
(3) AMAX GOLD, INC. a company duly incorporated in Delaware, United States of
America and having its principal office at 350 Indiana Street, Golden,
Colorado, United States of America ("Amax")
INTRODUCTION
- ------------
A. The Company and Amax are parties to the Share Sale Agreement.
B. Amax is the registered holder of all but one, and beneficial owner of all
of the Shares which comprise 100 ordinary shares of $1.00 each and all of
which are fully paid up.
C. The Company requires financial accommodation to enable it to pay or
satisfy the Purchase Price and Adjustments.
D. The Subscriber has (at the request of Amax) agreed to provide the Company
financial accommodation for the purposes mentioned in paragraph C above
by subscribing for Preference Shares in accordance with this Agreement.
IT IS AGREED
- ------------
1. DEFINITIONS
- -- -----------
1.1 Unless the context requires otherwise, in this Agreement:
"Adjustment" means each adjustment (if any) to the Purchase Price
required to be made under the Share Sale Agreement which results in an
amount being payable by the Company to Amax or where the context requires
the amount so payable by the Company or if that amount is in a currency
other than New Zealand dollars that amount converted to New Zealand
<PAGE>
-2-
dollars at the Spot Rate of Exchange on the day which is 2 Business Days
before the date for payment by the Company;
"Adjustment Subscription Date" means each date for payment of an
Adjustment;
"Agreement" means this document, including the introduction, schedules,
appendices and any annexures;
"AHNZ" means Amax Holdings New Zealand Limited, a company duly
incorporated in New Zealand and having its registered office at 18th
Floor, Price Waterhouse Centre, 66 Wyndham Street, Auckland, New Zealand;
"Conditions Precedent" means the conditions set out in clause 2.1;
"Convertible Securities" has the same meaning as is ascribed to the
expression convertible securities in Article 2.1 of the Articles of
Association of the Company;
"First Issue Date" means the date the Initial Preference Shares are
issued and allotted.
"First Subscription Date" means, subject to clauses 2.7 and 11.5, the
second Business Day after the Conditions Precedent have been satisfied or
another date agreed in writing by Amax and the Subscriber;
"Initial Preference Shares" means the number of Preference Shares which
is the nearest whole number to but does not exceed the number calculated
by dividing the Initial Subscription Amount by the aggregate of $1.00 and
the Premium Amount;
"Initial Subscription Amount" means the sum of $15 million;
"Issue Date" means each date on which Preference Shares are issued and
allotted pursuant to this Agreement.
"Negative Adjustment" means the adjustment (if any) to the Purchase Price
required to be made under the Share Sale Agreement which results in an
amount being payable by Amax to the Company or where the context requires
the amount so payable by Amax;
"New Article" means an Article in the form set out in Schedule 1 duly and
effectively incorporated in the Articles of Association of the Company;
<PAGE>
-3-
"NZ Spot Gold Price" means on a date the price per ounce of gold fixed in
the afternoon by the London Bullion Market Association (known as the
London PM Fix) last preceding that date converted to New Zealand Dollars
at the Spot Rate of Exchange on that date;
"Parties" means the parties to this Agreement;
"Preference Shares" means redeemable preference shares in the capital of
the Company validly and effectively issued upon and subject to the terms
set out in the New Article having a par value of $1.00 each and issued at
a premium per share equal to the Premium Amount;
"Premium Amount" means $9,999.00;
"Relevant Adjustment Preference Shares" means in relation to an
Adjustment Subscription Date the number of Preference Shares which is the
nearest whole number to but does not exceed the number calculated by
dividing the Relevant Adjustment Subscription Amount by the aggregate of
$1.00 and the Premium Amount;
"Relevant Adjustment Subscription Amount" means in relation to an
Adjustment Subscription Date the Adjustment payable on that Adjustment
Subscription Date;
"Relevant Subsequent Preference Shares" means in relation to each
Subsequent Subscription Date a number of Preference Shares which is the
nearest whole number to but does not exceed the number calculated by
taking the product of the Relevant Subsequent Subscription Amount
multiplied by the NZ Spot Gold Price on the day which is two Business
Days before that Subsequent Subscription Date and dividing that product
by the aggregate of $1.00 and the Premium Amount;
"Relevant Subsequent Subscription Amount" means in relation to each
Subsequent Subscription Date 1550 ounces of Gold;
"Shares" means all of the issued voting shares in the capital of the
Company;
"Share Sale Agreement" means the agreement made on or about the date of
this Agreement between the Company and Amax for the purchase and sale of
all of the issued shares in the capital of AHNZ;
"Spot Rate of Exchange" means on a date the rate of exchange for the
purchase on a spot basis of United States Dollars
<PAGE>
-4-
with New Zealand Dollars quoted at or about 11 am on that date by ANZ
Banking Group (New Zealand) Limited;
"Subscription Date" means each of the Initial Subscription Date, each
Adjustment Subscription Date and each Subsequent Subscription Date;
"Subsequent Subscription Date" means each date which corresponds with a
Delivery Date;
"Terms of Issue" means in relation to a Preference Share the issue
thereof in accordance with the New Article credited as fully paid up to
an amount equal to the nominal value thereof (being $1.00) plus the
Premium Amount by way of share premium.
1.2 Expressions commencing with a capital letter which are not defined above,
shall unless the context otherwise requires, have the meanings ascribed
thereto in the Share Sale Agreement.
2. CONDITIONS PRECEDENT
- -- --------------------
2.1 The Obligations of the Parties under this Agreement concerning the
subscription for and issue of Preference Shares are subject to the
conditions that:
(a) the Share Sale Agreement has become unconditional;
(b) the unconditional consent of the New Zealand Overseas Investment
Commission under the Overseas Investment Act 1973 and the 1985
Regulations thereunder is obtained to the subscription by the
Subscriber from time to time for Preference Shares in accordance
with this Agreement and to any other matter in connection with this
Agreement and the Subscriber's business in New Zealand for which
such consent is necessary or desirable.
2.2 The Subscriber will use reasonable endeavours to obtain the consent
referred to in clause 2.1 by 5 pm on the date 10 Business Days from the
date of this Agreement (the "Condition Date") (or such later date as
shall be notified by the Subscriber to Amax by 5 pm on the Condition
Date). If such consent has not been obtained by 5 pm on the Condition
Date (or such later date as is notified) or is refused then this
Agreement shall be at an end at that time on that date or at 5 pm on the
date of the refusal (as the case requires).
<PAGE>
-5-
2.3 If the Share Sale Agreement is at an end by operation of clause 6.2 of
the Share Sale Agreement then this Agreement shall at the same time on
the same date be at an end.
2.4 If by operation of clauses 2.2 or 2.3 this Agreement is at an end then
from the time on the date specified in clauses 2.2 or 2.3 (as the case
requires) this Agreement shall cease to have any further force or effect
save that the rights of each Party, and the obligations of the other
Parties in connection with any prior breach of any provision of this
Agreement will continue indefinitely and not be affected or prejudiced by
this Agreement being at an end.
2.5 For the purposes of clause 6.2 of the Share Sale Agreement the Company
and Amax agree that notice given by the Subscriber under clause 2.2 of
this Agreement shall be deemed to have been a notice given by the Company
under clause 6.2 of the Share Sale Agreement.
2.6 If the Conditions Precedent have not been satisfied by the date which
would but for this clause be the Completion Date then the Company and
Amax agree that for all purposes of the Share Sale Agreement the
Completion Date will be the same day as the First Subscription Date.
2.7 If but for this clause the First Subscription Date would be a date
earlier than the Completion Date then the First Subscription Date will be
the same day as the Completion Date.
3. AGREEMENT TO SUBSCRIBE
- -- ----------------------
3.1 Subject to the Conditions Precedent having been satisfied and Completion
occurring simultaneously with compliance by the Subscriber with its
obligations under paragraph (a) below:
(a) with effect on the First Subscription Date the Subscriber applies
for and agrees to accept upon and subject to the Terms of Issue the
Initial Preference Shares and agrees to subscribe the Initial
Subscription Amount such subscription to be effected in accordance
with clause 3.2(a);
(b) with effect on each Adjustment Subscription Date the Subscriber
applies for and agrees to accept upon and subject to the Terms of
Issue the Relevant Adjustment Preference Shares and agrees to
subscribe the Relevant Adjustment Subscription Amount such
subscription to be effected in accordance with clause 3.2(a);
<PAGE>
-6-
(c) with effect on each Subsequent Subscription Date the Subscriber
applies for and agrees to accept upon and subject to the Terms of
Issue the Relevant Subsequent Preference Shares and agrees to
subscribe the Relevant Subsequent Subscription Amount such
subscription to be effected in accordance with clause 3.2(b); and
(d) the Subscriber in each of the cases mentioned in paragraphs (a) (b)
and (c) above, agrees to its name being entered in the register of
members of the Company in respect of Preference Shares upon the
issue and allotment thereof in accordance with this Agreement.
3.2 Subscription for Preference Shares must be effected as follows:
(a) on the First Subscription Date and on each Adjustment Subscription
Date respectively the Subscriber must pay to Amax on behalf of the
Company the Initial Subscription Amount or the Relevant Adjustment
Subscription Amount (or if the Adjustment is an amount which has
been converted to New Zealand dollars from another currency that
amount in that other currency) as applicable (which the Company
irrevocably directs the Subscriber to do and acknowledges that such
payment will discharge in full the Subscriber's obligations
regarding subscription for the Initial Preference Shares or the
Relevant Adjustment Preference Shares, as the case requires);
(b) on each Subsequent Subscription Date the Subscriber must cause to be
credited to the Vendor's Metal Account 1550 ounces of Gold on behalf
of the Company (which the Company irrevocably directs the
Subscriber to do and acknowledges that such crediting will discharge
in full the Subscriber's obligations regarding subscription for the
Relevant Subsequent Preference Shares).
3.3 Amax acknowledges that subscription by the Subscriber in accordance with
clause 3.2 will satisfy the obligations of the Company to Amax under
clauses 3.2(a), 3.2(b), 4.4(a), 4.4(b) and 5.7(a) of the Share Sale
Agreement in connection with payment of the corresponding amount of money
or crediting to the Vendor's Metal Account of the corresponding quantity
of Gold, by the Company under the Share Sale Agreement on the date which
corresponds with the respective dates on which subscription is so
effected by the Subscriber.
<PAGE>
-7-
3.4 Amax and the Company each agree that on each date on which subscription
is effected by the Subscriber in accordance with clause 3.2 they will
each do or cause to be done all things necessary for the effective issue
and allotment, upon and subject to the Terms of Issue, of the Initial
Preference Shares, each parcel of Relevant Adjustment Preference Shares
or each parcel of Relevant Subsequent Preference Shares (as the case
requires) including:
(a) in the case of Amax and the Company the taking of all steps
necessary:
(i) on or prior to the First Subscription Date to duly and
effectively incorporate the New Article in the Articles of
Association of the Company; and
(ii) to duly and effectively increase the share capital of the
Company in accordance with the Companies Act and the Articles
of Association of the Company to the extent necessary (and only
that extent) to accommodate the issue and allotment of
Preference Shares in accordance with this Agreement; and
(b) in the case of the Company to issue share certificates in the name
of the Subscriber for a number of Preference Shares respectively
equal to the Initial Preference Shares, each parcel of the Relevant
Adjustment Preference Shares or each parcel of the Relevant
Subsequent Preference Shares (as the case requires) and to enter the
name of the Subscriber in the register of members of the Company as
the holder of those Preference Shares.
4. ACTION ON FIRST SUBSCRIPTION DATE
- -- ---------------------------------
4.1 On the First Subscription Date and simultaneously with the doing or
procuring of all acts, matters and things to be done or procured under
the Share Sale Agreement and with compliance by the Company and the
Subscriber with their respective obligations under this Agreement to be
observed or performed on the First Subscription Date Amax must do or
procure in connection with the Company all those things which under
clauses 4.2 and 4.3 of the Share Sale Agreement Amax must do in
connection with AHNZ, ARNZ or AGMNZ (to the extent applicable to the
Company) as if references in those clauses to "AHNZ", "ARNZ" or "AGMNZ"
were to the Company and references to the "Purchaser" were to the
Subscriber (including the removal and appointment of directors and the
<PAGE>
-8-
secretary of the Company). The persons who are appointed as directors of
the Company under this clause shall, for the purposes of the New Article,
be taken to have been appointed by the Preference Shareholders (as
defined in the New Article) .
4.2 The Company irrevocably authorises and directs Amax to deliver to the
Subscriber at Completion all those things which under the Share Sale
Agreement Amax is to deliver to the Purchaser.
4.3 The Parties agree that any act, matter or thing done or procured to be
done in connection with Completion under the Share Sale Agreement or
under clause 3 in connection with the Initial Preference Shares or under
clause 4.1 shall be deemed for the purposes of both this Agreement and
the Share Sale Agreement not to have been done until all of the acts,
matters and things required to be done or procured thereunder have been
duly done or procured or waived by the Party intended to have the benefit
thereof.
4.4 If subscription for the Initial Preference Shares does not occur by 5 pm
on the fourteenth day after the date of this Agreement and that fact is
not due to delay, failure or default of the Company then the Subscriber
must pay the Company interest on the sum of $15 million at a rate equal
to the Default Rate minus 2 percentage points computed from but not
including that fourteenth day to and including the date subscription for
the Initial Preference Shares occurs calculated with daily rests and
payable at the same time as that subscription occurs. The Company
irrevocably directs the Subscriber to pay so much of the interest which
is payable under this clause as is equal to the interest payable by the
Company to Amax under clause 4.5 of the Share Sale Agreement to Amax on
the Company's behalf and acknowledges that such payment will satisfy the
Subscriber's obligation under this clause to the extent of such payment.
Amax agrees that payment by the Subscriber to it of an amount under this
clause will satisfy the Company's obligations under clause 4.5 of the
Share Sale Agreement to the extent of that amount.
5. WARRANTIES
- -- ----------
5.1 The provisions of clause 7 of the Share Sale Agreement (and consequently
of Schedules 2 and 3 to the Share Sale Agreement) shall apply to this
Agreement as if references therein to "the Vendor" were to Amax and to
"the Purchaser" were to the Subscriber, references to "this Agreement"
were to this Agreement and references to the Completion Date were
<PAGE>
-9-
to the First Subscription Date and to "the date Completion occurs" were
to the First Issue Date.
5.2 Amax further warrants to the Subscriber in the terms of Schedule 2 to
this Agreement, each of which is a separate warranty in no way limited by
any other warranty.
5.3 Each warranty in Schedule 2 applies at:
(a) the date of this Agreement;
(b) each Issue Date; and
(c) each date between them.
6. MATTERS AFFECTING SHARE SALE AGREEMENT
- -- --------------------------------------
6.1 Amax and the Company agree that:
(a) each approval of, expression of satisfaction with, consent to,
waiver of, agreement with or to and nomination or direction as to,
any act, matter or thing in connection with the Share Sale Agreement
by the Company, notwithstanding anything contained in the Share Sale
Agreement, shall be wholly ineffective for all purposes (including
for purposes of or connected with the Share Sale Agreement) unless
expressly concurred in by the Subscriber by notice in writing to
Amax and the Company;
(b) the Company may not settle or compromise any dispute or question
touching or concerning the Share Sale Agreement or any matter or
thing arising under or in connection with it without the prior
written consent, addressed to Amax and the Company, of the
Subscriber;
(c) the Subscriber may refuse or withhold any concurrence or consent
referred to in this clause in its absolute and unfettered
discretion.
6.2 Amax agrees that it will procure that the audit statement delivered to
the Company in accordance with Clause 5.2 of the Share Sale Agreement is
simultaneously delivered to the Subscriber.
6.3 The Company agrees that unless a direction given by the Subscriber is
unlawful it will promptly, if and as directed by the Subscriber, give all
such approvals, waivers, consents, nominations and directions under or in
connection
<PAGE>
-10-
with the Share Sale Agreement which the Subscriber directs the Company to
give.
7. UNDERTAKINGS
- -- ------------
7.1 Amax unconditionally and irrevocably undertakes to the Subscriber that,
from the date of this Agreement until all of the Preference Shares which
may be issued under this Agreement have been issued and have been
redeemed:
(a) it will do all things within its power to ensure that none of the
Company, AHNZ, ARNZ and AGMNZ ceases to be a related company of Amax
(within the meaning of "ceases to be a related company" in the Joint
Venture Agreement) except by entering into and giving effect to the
Share Sale Agreement and this Agreement and except by the granting
of an option over the Shares or a sale of the Shares to which, in
each case, the Subscriber has given its prior written consent (which
consent the Subscriber may refuse or withhold in its absolute
discretion);
(b) it will not:
(i) do or, to the extent that it has power, permit to be done
any act, matter or thing which would cause any of the
warranties in Schedule 2 of the Share Sale Agreement or
Schedule 2 of this Agreement to be untrue, unfulfilled or
breached in a material respect;
(ii) permit the issue of any further shares in the capital of
the Company (other than Preference Shares issued to the
Subscriber in accordance with this Agreement);
(iii) requisition a meeting of shareholders of the Company or
sign any entry in the minute book of the Company which
under section 362 of the Companies Act would operate as a
resolution;
(iv) except at Completion and in accordance with the Share Sale
Agreement, remove or appoint any person from or to office
as a director or secretary of the Company (other than any
director who, having regard to the New Article, may be
appointed or removed by the holders of ordinary shares in
the Company
<PAGE>
-11-
pursuant to the Articles of Association of the Company);
(v) exercise any vote nor sign any resolution so as to cause
or permit the Articles of Association of the Company to be
amended in any manner other than as necessary to
incorporate the New Article therein and permit the issue
to the Subscriber of Preference Shares in accordance with
this Agreement;
(vi) cause or permit the Company to:
(A) sell, transfer, lease or otherwise dispose of or
alienate any asset;
(B) acquire any asset nor incur any Liability (except in
each case under the Share Sale Agreement);
(C) grant or permit to come into existence or subsist any
Mortgage or other encumbrance over the whole or any
part of its assets or undertaking;
(vii) cause or permit the Company to issue any option to
subscribe for shares in the capital of the Company or any
other Convertible Securities;
(viii) cause or permit the Company to be wound up or to enter
into any scheme of arrangement or compromise or to reduce
its share capital or to make any distribution to its
shareholders other than dividends or by way of redemption
of Preference Shares;
(ix) terminate any trust under which any of the Shares are held
on its behalf;
(x) cause or permit the Company to appoint a Managing
Director;
without, in each case, the prior written consent of the Subscriber
(which consent the Subscriber may refuse or withhold in its absolute
discretion).
(c) without limiting or prejudicing clause 7.1(b) but subject to clause
7.4, it will do all things as a
<PAGE>
-12-
shareholder of the Company required to be done to enable the Company
to comply with its statutory obligations.
7.2 Amax will not be in breach of its obligations under clause 7.1(b) nor in
breach of any warranty in respect of or resulting from any act, matter or
thing done by the Company with the authority of a resolution of its Board
of Directors duly passed at a time when that Board is constituted by
persons a majority of whom have been appointed by the Subscriber pursuant
to the New Article at a meeting at which at least one director appointed
by the Subscriber under that Article was present.
7.3 The Subscriber agrees that it will not give notice to the Company under
the New Article seeking redemption of any of the Preference Shares,
except:
(a) as contemplated in clause 8; or
(b) to the extent that redemption can be funded by the Company solely
out of profit,
until after the last of the Subsequent Subscription Dates.
7.4 The Subscriber agrees, subject to Amax complying with clause 7.1, that
for so long as the Subscriber and Amax are shareholders in the Company
the Subscriber will be responsible to ensure that the Company complies
with its statutory obligations and to provide to the Company any funding
it may require for this purpose on commercial terms.
7.5 Should the Subscriber transfer any Preference Shares it will do so only
to a transferee which covenants in favor of Amax to comply with clauses
7.3 and 7.4 as if that transferee were the Subscriber.
8. NEGATIVE ADJUSTMENT
- -- -------------------
If at any time a Negative Adjustment occurs the Subscriber may give
notice in writing to the Company under the New Article requiring the
Company to, and if such a notice is given the Company and Amax agree to
do or procure the doing of all things within their power respectively
which are necessary to enable the Company to, redeem in accordance with
the New Article the lesser of the number of Preference Shares specified
for redemption in the Subscribers notice under this clause and the number
of the Preference Shares then on issue to the Subscriber which is the
nearest whole number to but does not exceed the number calculated by
<PAGE>
-13-
dividing the Negative Adjustment by the aggregate of $1.00 and the
Premium Amount.
9. INDEMNITY
- -- ---------
9.1 Amax indemnifies the Subscriber and agrees to keep the Subscriber forever
indemnified against all losses (whether through deficiency in the assets
or increase in Liabilities of the Company, AHNZ, ARNZ, or AGMNZ or for
any other reason) and liabilities and the cost of all demands, actions
and other proceedings against the Subscriber (including legal costs on a
Solicitor and own client basis) directly or indirectly arising out of or
in respect of or resulting from any breach of warranty given by Amax
(determined applying the provisions of clause 5) or any breach or non-
performance of the obligations of Amax under this Agreement or the Share
Sale Agreement.
9.2 Amax will if requested by the Subscriber (in its absolute discretion) pay
to the Company, AHNZ, ARNZ or AGMNZ an amount equal to the deficiency in
the assets or increase in the Liabilities of the Company, AHNZ, ARNZ or
AGMNZ (as the case requires) for which Amax is liable to AGMNZ under
clause 9.1 rather than pay compensation to the Subscriber for its loss
occasioned by that deficiency or increase. The Subscriber agrees that
compliance by Amax with clause 8.2 of the Share Sale Agreement shall
relieve Amax of obligations under this clause to the extent that such
obligation relates to the deficiency in assets or increases in
Liabilities in respect of which Amax has so complied with clause 8.2 of
the Share Sale Agreement.
9.3 The Subscriber agrees that the liability of Amax to the Subscriber under
clause 9.1 (as affected by clause 9.6) or otherwise for breach of
warranty or of this Agreement shall be reduced by any amount actually
paid by Amax to the Company pursuant to clause 8.1 of the Share Sale
Agreement or otherwise to compensate the Company for breach of warranty
or of the Share Sale Agreement in connection with the same circumstances
as those giving rise to Amax having such liability to the Subscriber.
9.4 If any payment made by Amax to the Subscriber (or at its direction under
clause 9.2) pursuant to or in consequence of the operation of clause 9.1
("Indemnity Payment") is derived by the Subscriber or any other person to
whom the payment is made in a manner which is assessable income pursuant
to the Income Tax Act 1976 of any kind to the Subscriber or that other
person then Amax shall pay a further amount equal to
<PAGE>
-14-
the amount of Income Tax payable in respect of the Indemnity Payment
calculated without regard to:
(a) any other income; or
(b) any entitlement to any deduction or loss; or
(c) any losses carried forward pursuant to section 188 of the Income Tax
Act of 1976; or
(d) any transfer of any loss pursuant to section 191A of the Income Tax
Act 1976
of or available to the Subscriber or that other person PROVIDED THAT any
further amount payable shall be reduced:
(i) to the extent of the amount of losses available to the
Subscriber or that other person at that time to be carried
forward pursuant to Section 188 of the Income Tax act of
1976 which, in the reasonable belief of the Subscriber or
that other person (as the case may be), would not be
utilized within the three income years (as defined in the
Income Tax Act 1976) following the date of derivation; or
(ii) to the extent that a deduction pursuant to the Income Tax
Act 1976 for all or part of the loss, liability or costs
which gave rise to the payment being made by Amax has been
obtained or can be obtained by the Subscriber or that
other person.
9.5 The liability of Amax under this Clause 9 is limited to the extent that:
(a) it will not be liable in connection with an amount of income Tax of
up to $2.75 million in the case of AGMNZ or $1.50 million in the
case of MML which is or becomes payable by AGMNZ or MML arising out
of the deduction; prior to the Balance Date, by AGMNZ or MML of
future tunnel capital expenditure;
(b) it will not be liable in connection with any action, proceeding,
claim or demand by Auag Resources Limited, Welcome Gold Mines
Limited, Mineral Resources Limited, ACM Gold Limited, Waihi Gold
Mining Company Limited or MML under the Joint Venture Agreement or
the Principals Deed relating to the Joint Venture Agreement dated
<PAGE>
-15-
17 July 1987 or any provision of the Joint Venture Agreement or that
Principals Deed having operation or effect, in any such case in
consequence of the making or completion of this Agreement or the
Share Sale Agreement (except if Amax is in breach of clause 7.1(a);
(c) it will not be liable in respect of any claim arising out of a
breach of warranty referred to in clause 5.1 where the circumstances
likely to give rise to the claim have not been notified to Amax in
reasonable detail prior to the expiration of 2 years from the First
Issue Date except if the breach of warranty concerns the existence
of Mortgage or other encumbrances or concerns title to any asset
being a Marketable Security, or concerns title to any interest in
any Joint Venture Asset or the Participating Interest (each as
defined in the Joint Venture Agreement) of AGMNZ or arises under
paragraph (77) of Schedule 2 of the Share Sale Agreement;
(d) the Subscriber may only claim against Amax for amounts equal to or
exceeding $50,000 on each occasion on which a claim is made
(regardless of the number or magnitude of the individual matters
making up that claim); and
(e) it will not in any circumstances be liable for consequential loss or
damage except where that loss or damage arises directly out of the
wilful act or omission or gross negligence of Amax.
9.6 Amax acknowledges and agrees that the amount of the loss suffered by the
Subscriber where breach of warranty or of the Share Sale Agreement occurs
and there is a deficiency in assets or increase in Liabilities of the
Company, AHNZ, ARNZ or AGMNZ which would not have occurred had that
breach of warranty or of the Share Sale Agreement not occurred is an
amount at least equal to that deficiency or that increase.
9.7 Amax agrees with the Subscriber to observe and comply with the provisions
of clause 9 of the Share Sale Agreement and the Subscriber agrees, while
it holds Preference Shares, to exercise all powers it may have in that
regard to procure that the Company also complies with clause 9 of the
Share Sale Agreement.
9.8 If so required by Amax the Subscriber must, to the extent it has power,
permit Amax, at its own cost and expense (including as to legal costs and
expenses and as to internal management costs and expenses (including
costs of employees
<PAGE>
-16-
time) of the Subscriber, the Company, AHNZ, ARNZ or AGMNZ incurred in
providing assistance to Amax) and subject to
(a) Amax providing to the Subscriber a bank guarantee or other security
acceptable to the Subscriber (having regard to any bank guarantee or
other security provided to the Company under clause 8.6 of the Share
Sale Agreement) for the amount of the Subscriber's claim against
Amax under clause 9.1; and
(b) clause 9.10
in the name of the Subscriber, the Company, AHNZ, ARNZ or AGMNZ (as the
case requires) to take the action which Amax deems fit to negotiate,
settle, compromise, defend or otherwise contest any third party claim or
suit giving rise to the Subscriber's claim against Amax under clause 9.1
or make any counterclaim which the Subscriber, the Company, AHNZ, ARNZ or
AGMNZ may have against the third party and to take over the conduct of
any proceedings commenced by the Subscriber, the Company, AHNZ, ARNZ, or
AGMNZ in connection with any such claim or suit.
9.9 Upon the Subscriber, or after the First Issue Date, the Company, AHNZ,
ARNZ or AGMNZ becoming aware of circumstances likely to give rise to a
claim being made under clause 9.1 the Subscriber must promptly give
notice Amax of those circumstances and must at the time of giving notice
supply to Amax all information and material regarding the circumstances
and likely claim as may be available to the Subscriber.
9.10 In exercising the rights conferred by clauses 9.8 Amax must:
(a) consult with the Subscriber regarding the appointment of legal
advisers (including Counsel) and must not appoint any legal adviser
to whose appointment the Subscriber has objected on reasonable
grounds;
(b) keep the Subscriber reasonably and promptly informed of all material
negotiations, any proposed settlement, compromise or counterclaim
and all material steps proposed to be taken to defend or otherwise
contest a claim or suit; and
(c) give reasonable consideration to the wishes of the Subscriber
regarding any negotiations, settlement, compromise, defence or other
contest or counterclaim (but without being obliged to accede to
those wishes);
<PAGE>
-17-
10. CONTINUING OBLIGATIONS
- --- ----------------------
10.1 Amax must upon request by the Subscriber make available to the Subscriber
all records, documents and papers necessary to enable the Subscriber to
verify the Financial Statements, the statement comprised in the documents
delivered under clause 5.2 of the Share Sale Agreement, the warranties in
Schedule 2 of the Share Sale Agreement and the warranties in Schedule 2
of this Agreement.
10.2 Amax and the Subscriber must provide the other of them all reasonable
assistance including access to any relevant documents in its possession,
power or control (including the documents referred to in clause 10.2 of
the Share Sale Agreement) in connection with:
(a) in the case of the Subscriber or the Company any dispute between the
Company, AHNZ, ARNZ or AGMNZ and any person; or
(b) in the case of Amax:
(i) investigating and exercising the rights conferred on it by
clauses 8.6 or 9.3 of the Share Sale Agreement or clause
9.8 of this Agreement; or
(ii) complying with any obligation imposed on it by the laws
(whether federal or state) of the United States of America
or New Zealand (but only as necessary for such
compliance).
10.3 Each obligation, indemnity and warranty of a Party (except an obligation
fully performed at Completion or on any Subscription Date) continues in
force despite Completion and despite subscription for and the issue of
Preference Shares under this Agreement.
10.4 No representation or warranty by Amax will be in any way affected by any
enquiries or investigations at any time made by or on behalf of the
Subscriber.
10.5 Amax undertakes to the Subscriber to comply with its undertaking in
clause 10.5 of the Share Sale Agreement.
<PAGE>
-18-
11. DEFAULT
- --- -------
11.1 In Clause 11:
(a) "Defaulting Party" has the meaning given to it in Clause 11.2; and
(b) "Other Party" means, where the Subscriber is the Defaulting Party,
Amax and, where Amax or on or prior to the First Issue Date the
Company is the Defaulting Party, the Subscriber.
11.2 (1) Amax, the Company or the Subscriber is a "Defaulting Party" for the
purposes of Clause 11 if any of the following apply:
(a) it fails to carry out any provision of this Agreement and
does not remedy that failure within 7 days after notice to
it requiring the failure to be remedied;
(b) it convenes a meeting of its creditors or proposes or
enters into a scheme of arrangement (except for the
purpose of reconstruction or amalgamation) or a
composition with any of its creditors;
(c) an application or order is made to or by a Court or a
resolution is passed for its winding-up or notice of
intention to propose such a resolution is given;
(d) a receiver, or receiver and manager is appointed in
respect of it or the whole or any part of its
undertakings, property or assets or any steps are taken
for the appointment of such a person;
(e) a person holding a security interest in its assets enters
into possession of or takes control of any of those assets
or takes any steps to enter into possession of or take
control of any of those assets;
(f) is unable to pay its debts within the meaning of Section
218 of the Companies Act or suspends payment of its debts;
(g) any step is taken to place it under statutory management
or steps are taken for
<PAGE>
-19-
the appointment of a statutory manager under Part III of
the Corporations (Investigation and Management) Act 1989;
(h) a resolution is passed for the reduction of its capital or
notice of intention to propose such a resolution is given,
without the prior written consent of the Other Party;
(i) a warranty given by it in this Agreement is untrue,
unfulfilled or otherwise breached in a material respect;
(j) it becomes unlawful for it to perform its obligations
under this Agreement; or
(k) anything analogous to the matters or events mentioned in
any of paragraphs (b), (c), (d), (e), (f), (g), or (h)
occurs in relation to it in any other jurisdiction.
(2) Amax is also a Defaulting Party for the purposes of clause 11 if it
or AHNZ, ARNZ or AGMNZ is a Defaulting Party for the purposes of
clause 11 of the Share Sale Agreement.
11.3 The Subscriber may at any time prior to Completion having occurred
(without prejudice to its other rights and remedies under this Agreement
or at law) if Amax or the Company becomes a Defaulting Party, terminate
this Agreement by giving notice in writing to Amax and the Company.
Termination pursuant to this clause 11.3 does not prejudice any claim
which a Party may have against another at the time of termination.
Failure to exercise a right of termination under this clause 11.3 and the
occurrence of Completion and subscription for and issue of Preference
Shares under this Agreement, notwithstanding that the Subscriber has
actual knowledge that Amax or the Company is a Defaulting party, shall
not prejudice any other rights or remedies of the Subscriber (including
its right to damages for breach of this Agreement or breach of warranty
or to be indemnified under this Agreement).
11.4 Amax may at any time prior to Completion having occurred (without
prejudice to its other rights and remedies under this Agreement or at
law) if the Subscriber becomes a Defaulting Party terminate this
Agreement by giving notice in writing to the Purchaser. Termination
pursuant to this clause 11.4 does not prejudice any claim which a Party
may
<PAGE>
-20-
have against another at the time of termination. Failure to exercise a
right of termination under this clause 11.4 and the occurrence of
Completion and receipt by Amax of the Initial Subscription Amount, any
Relevant Adjustment Subscription Amount (or an equivalent amount in
another currency) or any Relevant Subsequent Subscription Amount
notwithstanding that Amax has actual knowledge that the Subscriber is a
Defaulting Party, shall not prejudice any other rights or remedies of
Amax (including its right to damages for breach of this Agreement).
11.5 If the Other Party gives notice under Clause 11.2(1)(a) within 7 days
prior to the First Subscription Date, then the First Subscription Date is
extended to coincide with the expiry of the notice period.
11.6 A Defaulting Party, or where prior to the First Issue Date the Company is
a Defaulting Party Amax, must on demand pay to the Other Party all of the
costs and disbursements (including legal costs on a solicitor and client
basis) incurred by the Other Party in connection with the breach or
default (including the giving of a notice under clause 11.2(1)(a) and
otherwise in connection with the termination of this Agreement.
12. INTEREST ON MONEY OR GOLD IN ARREARS
- --- ------------------------------------
If a Party fails to pay an amount of money payable under this Agreement
or to deliver a quantity of Gold deliverable under this Agreement on the
due date, the Party in default must pay to the Party entitled to payment
of that amount or receipt of that quantity interest at the Default Rate
on that amount or that quantity, calculated and payable daily, computed
from the due date until the amount is paid in full. Interest payable by
the Company to Amax under the Share Sale Agreement must, if that interest
becomes payable by reason of a failure of the Subscriber to comply with
clause 3.2, be paid by the Subscriber to Amax on behalf of the Company
payment of which will satisfy the Subscriber's obligation to pay interest
to the Company under this clause.
13. GOVERNING LAW
- --- -------------
13.1 The law of this Agreement is the law of the New Zealand.
13.2 The Parties submit themselves to the non-exclusive jurisdiction of the
Courts of New Zealand.
13.3 For the purposes of service of documents of any kind on Amax, Amax hereby
appoints Bell Gully Buddle Weir of 171
<PAGE>
-21-
Featherston Street, Wellington, New Zealand as Amax's representative in
New Zealand and Amax agrees with the Purchaser that service on Bell Gully
Buddle Weir (marked for the attention of: Mr. David McLay) of any notices
or documents required to be served on Amax shall be valid and effective
service on Amax of the notices and documents served.
14. SEVERABILITY
- --- ------------
If a provision of this Agreement is illegal or void then that provision
is severed and the other provisions of this Agreement remain in force.
15. VARIATION
- --- ---------
15.1 The variation of a provision of this Agreement is not effective unless in
writing and executed by the Parties.
15.2 A Party's consent to a departure from a provision of this Agreement by
another Party is not effective unless in writing and executed by the
consenting Party.
16. WAIVER
- --- ------
16.1 A Party's failure or delay to exercise power or right does not operate as
a waiver of that power or right.
16.2 The exercise of a power or right does not preclude:-
(a) its future exercise; or
(b) the exercise of any other power or right.
16.3 A waiver of a power or right is ineffective unless in writing and
executed by the waiving Party.
16.4 The waiver of a power or right is effective only in respect of the
specific instance to which it relates and for the specific purpose for
which it is given.
17. FURTHER ASSURANCE
- --- -----------------
Each Party must at its own cost from time to time do all things
(including executing all documents) necessary or desirable to give full
effect to this Agreement.
18. TIME OF THE ESSENCE
- --- -------------------
18.1 Time is of the essence of this Agreement.
<PAGE>
-22-
18.2 The Parties may agree to vary any time requirement and any time
requirement so varied will be of the essence of this Agreement.
19. STAMP DUTY
- --- ----------
All stamp duty and other government imposts and fees payable on or in
connection with this Agreement, and all other documents and matters
referred to in this Agreement, are payable by the Subscriber when due.
20. NOTICES
- --- -------
20.1 A notice or other communication in connection with this Agreement by a
Party to another must be in writing and:-
(a) delivered by hand;
(b) sent to an address in New Zealand by registered post, postage
prepaid;
(c) sent to an address outside New Zealand by prepaid airmail; or
(d) sent by facsimile,
to the address or facsimile number for service described below.
20.2 A notice or other communication is sufficiently given if:-
(a) delivered by hand, upon delivery;
(b) mailed to an address in New Zealand, on actual delivery to that
address as evidenced by confirmation of the postage authority of
such delivery;
(c) airmailed to an address outside New Zealand, seven days after
posting;
(d) sent by facsimile on the day it is sent if this is a Business Day
and it is sent no later than 4.00 p.m. (receiver's time) and
otherwise on the next Business Day after being sent, if following
transmission the sender receives a transmission confirmation report
or if the sender's facsimile machine is not equipped to issue a
transmission confirmation report then upon the sender receiving
acknowledgement of receipt in legible form from the addressee.
<PAGE>
-23-
20.3 A Party who receives a notice or other communication by facsimile must
immediately acknowledge receipt to the sender.
20.4 Each Party's address or facsimile number for service is:-
in the case of Amax and the Company:-
Name: Amax Gold Inc.
(Attention: President and General Counsel)
Address: 350 Indiana Street
Golden, Colorado 80401-5081
Facsimile No: (1303) 273 0708
in the case of the Subscriber:-
Name: ACM (New Zealand) Limited
(Attention: Mr. Steven Dean)
Address: C/- Poseidon Gold Limited
100 Hutt Street
Adelaide, South Australia, 5000
Facsimile No: (618) 232 0198
20.5 A party may change its address or facsimile number for service by giving
notice of that change to each other Party.
20.6 A certificate signed by or on behalf of a Party giving a notice or other
communication by any officer or employee of that Party stating the date
on which that notice or other communication was delivered or sent is
prima facie evidence of the date on which that notice or other
communication was delivered or sent.
21. CONFIDENTIALITY
- --- ---------------
21.1 For the purposes of this clause 21 "Confidential Information" means:
(a) all information concerning the negotiations and dealings between the
Parties connected with this Agreement;
(b) the existence of this Agreement;
<PAGE>
-24-
(c) the terms and provisions contained in this Agreement;
(d) so far only as concerns Amax and, until the First Issue Date, the
Company, all information now or at any time hereafter known to Amax
concerning the business or affairs of the Company, AHNZ, ARNZ,
AGMNZ, MML or the Martha Hill Joint Venture which has not entered
the public domain (otherwise than by a breach of this clause).
21.2 Each Party undertakes to keep, and to cause all of its subsidiaries and
affiliates and its and its subsidiaries and affiliates officers and
employees to keep, all Confidential Information strictly confidential,
except to the extent that disclosure is permitted under this clause 21.
21.3 Confidential Information may only be disclosed:
(a) if and to the extent that the Subscriber (in the case of disclosure
by Amax at any time or by the Company before the First Issue Date)
or Amax (in any other case) has consented to that disclosure in
writing (which consent the Subscriber or Amax (as the case requires)
may give or withhold in its absolute discretion);
(b) if and to the extent that a Court of competent jurisdiction or
applicable law (including rules and regulation of the United States
Securities and Exchange Commission or its equivalent in any other
applicable jurisdiction or of a stock exchange on which shares of a
Party or of a related corporation of a Party are listed) compels
disclosure to be made but only after written notice is given to the
Subscriber or Amax (as the case requires) reasonably in advance of
disclosure specifying the requirements compelling disclosure and the
Confidential Information which it is proposed to disclose;
(c) in proceedings taken by a Party for the enforcement of this
Agreement;
(d) in the case of the Subscriber only to the participants in the Martha
Hill Joint Venture; or
(e) to a Party's employees, and professional advisers having a need to
know for the proper discharge of their duties, provided disclosure
is made on a confidential basis.
<PAGE>
-25-
21.4 A Party seeking to rely on clause 21.3(b) must consult with the
Subscriber or Amax (as the case requires) concerning the wording of the
proposed disclosure and the manner thereof and must take reasonable
account of the Subscriber's or Amax's (as the case may require)
requirements.
21.5 The provisions of this clause 21 will remain binding indefinitely
notwithstanding that this Agreement may be at an end for any reason.
21.6 Each Party acknowledges that damages is not an adequate remedy if it
breaches or attempts to breach this clause 21 but that each other Party
shall be entitled to an injunction or other appropriate equitable relief.
22. INTERPRETATION
- --- --------------
22.1 The singular includes the plural and the plural includes the singular.
22.2 A reference to a gender includes a reference to each other gender.
22.3 A reference to a person includes a reference to a firm, corporation or
other corporate body.
22.4 A reference to a statute, regulation, or provision of a statute or
regulation ("statutory provision") includes a reference to:-
(a) that statutory provision as amended or re-enacted from time to time;
and
(b) a replacement of a statutory provision.
22.5 A reference to writing includes a reference to printing, typing and each
other method of producing words in a permanent visible form.
22.6 Where a word or expression is given a particular meaning, other parts of
speech and grammatical forms of that word or expression have
corresponding meanings.
22.7 A reference to a deed, agreement (including this Agreement) or other
instrument or any provision thereof shall be deemed to include a
reference to that deed, agreement, instrument or provision as varied,
amended, supplemented, novated, assigned or replaced from time to time.
<PAGE>
-26-
22.8 Unless otherwise specified references to monetary sums are in New Zealand
Dollars.
22.9 A reference to a month is a reference to a calendar month (whether or not
beginning on the first day of any month).
22.10 The words "including", "such as" and "particularly" and similar
expressions do not imply any limitation.
22.11 Headings are for ease of reference and do not form part of or affect the
construction of this Agreement.
22.12 This Agreement binds in addition to the Parties, their respective legal
personal representatives and successors.
22.13 If an act must be done on a specified day which is not a Business Day
then the act must instead be done on the next Business Day.
22.14 References to time, unless otherwise specified, are to local time in
Wellington, New Zealand.
23. ASSIGNMENT
23.1 Except in accordance with this clause none of the Parties may assign the
benefit or burden of this Agreement.
23.2 After the First Issue Date ACMNZ may assign the benefit and burden of
this Agreement to any other company incorporated in New Zealand which is
a subsidiary of Poseidon Gold Limited and to which ACMNZ has assigned all
of the Preference Shares held by it immediately prior to the time the
assignment occurs.
23.3 An assignment by ACMNZ under clause 23.2 will only become effective upon
(a) the assignee covenanting to be bound by and to observe all of the
provisions of this Agreement binding on ACMNZ; and
(b) the parties other than Amax to any Deed of Guarantee or Deed of
Indemnity given in connection with this Agreement acknowledging to
Amax that they remain bound thereby as if references to ACMNZ in the
Deed of Guarantee or Deed of Indemnity were references to ACMNZ and
that assignee for the applicable periods.
EXECUTED on the date set out at the commencement of this Agreement.
- --------
<PAGE>
-27-
<TABLE>
<CAPTION>
<S> <C>
EXECUTED for and on behalf of AMAX
GOLD, INC. by RICHARD DRIVER its
attorney under power of attorney
dated 2 June 1993 (who by his
signature warrants that he has no
notice of the revocation of that /s/ RC Driver
power of attorney) in the presence --------------------------------------
of: Attorney
/s/ John McLean
- --------------------------------------
Witness John McLean
Solicitor
Wellington
EXECUTED for and on behalf of ACM
(NEW ZEALAND) LIMITED by P.W.
O'Regan and R.A. Fisher two of its
attorneys under power of attorney /s/ PW O'Regan
dated _________, 1993 (who by their --------------------------------------
respective signatures warrant that Attorney
neither of them has notice of the
revocation of that power of /s/ RA Fisher
attorney) in the presence of: --------------------------------------
Attorney
/s/ A. Miller
- --------------------------------------
Witness Adrienne Miller
Solicitor
Wellington
</TABLE>
<TABLE>
<S> <C>
EXECUTED for and on behalf of WAIHI
FINANCING LIMITED by Richard Clement
Driver its attorney under power of
attorney dated 3 June 1993 (who by
his signature warrants that he has
no notice of the revocation of that /s/ RC Driver
power of attorney) in the presence --------------------------------------
of: Attorney
/s/ John McLean
- --------------------------------------
Witness John McLean
Solicitor
Wellington
</TABLE>
<PAGE>
CALL OPTION AGREEMENT
THIS AGREEMENT made the 4th day of June 1993
- --------------
BETWEEN
- -------
(1) AMAX GOLD, INC. a company duly incorporated in Delaware, United States of
---------------
America and having its principal office at 350 Indiana Street, Golden,
Colorado, United States of America ("Amax")
(2) POSEIDON GOLD LIMITED a company duly incorporated in South Australia and
---------------------
having its registered office at 100 Hutt Street, Adelaide, South
Australia, Australia ("PGL")
WHEREAS
- -------
A. Amax is the registered holder of all but one, and beneficial owner of
all, of the Ordinary Shares.
B. Amax has agreed to grant an option to PGL to purchase the Ordinary Shares
upon the terms and subject to the conditions contained in this Agreement.
IT IS HEREBY AGREED as follows:
- -------------------
1. INTERPRETATION
- -- --------------
1.1 In this Agreement, unless the context otherwise requires:
"Agreement" means this document.
"Business Day" means a day that is not a Saturday, Sunday or any other
day which is a public holiday in the place where an act is to be
performed.
"Completion Date" means the date on which Completion occurs.
"Exercise Date" means the Business Day following the date the Exercise
Notice is given.
"Exercise Notice" means a notice from PGL to Amax given under clause 2.2.
"Expiry Time" means 5.00 p.m. on the Expiry Date.
"Expiry Date" means the date which is 20 years and 364 days after the
date of this Agreement.
<PAGE>
"Option" means the irrevocable option to purchase the Ordinary Shares
contained in Clause 2.1.
"Option Period" means the period from the Completion Date to the Expiry
Time.
"Ordinary Shares" means all of the shares in the capital of Waihi on
issue from time to time which are classified as ordinary shares in
accordance with the Articles of Association of Waihi.
"Parties" means the parties to this Agreement.
"Purchase Price" means an amount equal to the product of $1.00 multiplied
by the number of shares comprising the Ordinary Shares on the Exercise
Date.
"Share Sale Agreement" means an agreement made on or about the date of
this Agreement between Amax (as Vendor) and Waihi (as Purchaser) for the
sale and purchase of all of the issued shares in the capital of Amax
Holdings New Zealand Limited.
"Share Subscription Agreement" means an agreement made on or about the
date of this Agreement between Amax, Waihi and ACM (New Zealand) Limited
relating to subscription for redeemable preference shares in the capital
of Waihi.
"Waihi" means Waihi Financing Limited, a company duly incorporated in New
Zealand and having its registered office at 171 Featherston Street,
Wellington, New Zealand.
1.2 Expressions commencing with a capital letter which are not defined in
clause 1.1 shall, unless the context otherwise requires, have the
meanings ascribed thereto in the Share Sale Agreement.
2. GRANT OF OPTION
- -- ---------------
2.1 Grant: In consideration of the sum of ONE DOLLAR ($1.00) paid by PGL to
Amax (the receipt and adequacy of which is hereby acknowledged) Amax
hereby grants to PGL an irrevocable option to purchase the Ordinary
Shares upon the terms and subject to the conditions contained herein.
2.2 Exercise Notice: The Option shall be exercisable by PGL giving written
notice to Amax. The Exercise Notice may be given at any time but if
given later than 5 p.m. on the day preceding the Expiry Date shall be
wholly invalid and ineffective.
2.3 Exercise: On the Exercise Date PGL shall pay to Amax the Purchase Price
and, against receipt thereof, Amax shall:
-2-
<PAGE>
(a) deliver to PGL the share certificates for the Ordinary Shares; and
(b) forms of transfer for all the Ordinary Shares in favour of PGL (or
the nominee of PGL (if any) named in the Exercise Notice) duly
executed by the registered holders of the Ordinary Shares.
2.4 Effect of Exercise: If the Option is exercised:
(a) an irrevocable binding agreement for the sale to PGL (or its nominee
referred to in clause 2.3(b)) of the Ordinary Shares free of
Mortgages and other encumbrances in consideration of the Purchase
Price shall immediately arise without the necessity for any further
documentation; and
(b) Amax agrees forthwith upon request by PGL to execute or procure the
execution of all such other documents and to do or procure the doing
of all such things as may be reasonably necessary or desirable in
order to give effect to that sale of the Ordinary Shares.
3. EXPIRY OF OPTION
- -- ----------------
If the Option has not previously been exercised the Option shall expire:
(a) at the Expiry Time; or
(b) if the Share Subscription Agreement is terminated under clause 11.3
or 11.4 or under any other right in the Share Subscription Agreement
or at law prior to Completion occurring.
4. REPRESENTATIONS AND WARRANTIES
- -- ------------------------------
4.1 Amax represents and warrants as at the date of this Agreement and as at
each date thereafter until the Expiry Time or the completion of the sale
of the Ordinary Shares consequent on the exercise of the Option
(whichever occurs first) that:
(a) the Ordinary Shares are free and clear of all liens, encumbrances
and other adverse interests;
(b) Amax is the registered holder of all but one, and beneficial owner
of all, of the Ordinary Shares with
power to sell, and procure the transfer of, the Ordinary Shares;
(c) the Ordinary Shares comprise all of the issued ordinary shares in
the capital of Waihi; and
-3-
<PAGE>
(d) no consents or approvals (whether statutory or otherwise) are
required on Amax's part for the transfer of the Ordinary Shares to
PGL or its nominee (save for the approval of such transfer for
registration by the Board of Directors of Waihi).
4.2 The representations warranties and undertakings contained in this Clause
4 shall survive the exercise of the Option.
5. COVENANTS
- -- ---------
Amax agrees that it will not during the term of this Agreement sell,
transfer, mortgage, charge or otherwise encumber any Ordinary Shares or
any interest in any Ordinary Shares.
6. PAYMENTS
- -- --------
Any payments to be made hereunder shall be made in immediately available
funds during normal banking hours in Wellington New Zealand on the
Exercise Date. Payment must be made to Amax by payment to Bell Gully
Buddle Weir, Solicitors on behalf of Amax. Amax agrees that the receipt
of Bell Gully Buddle Weir for payment made to it on behalf of Amax shall
be a good discharge for PGL (and its nominee (if any)) for the amount so
paid.
7. NOTICES
- -- -------
7.1 A notice or other communication in connection with this Agreement by a
Party to another must be in writing and:-
(a) delivered by hand;
(b) sent to an address in New Zealand by registered post, postage
prepaid;
(c) sent to an address outside New Zealand by prepaid airmail; or
(d) sent by facsimile,
to the address or facsimile number for service described below.
7.2 A notice or other communication is sufficiently given if:-
(a) delivered by hand, upon delivery;
(b) mailed to an address in New Zealand, on actual delivery to that
address as evidenced by confirmation of the postage authority of
such delivery;
-4-
<PAGE>
(c) airmailed to an address outside New Zealand, seven days after
posting;
(d) sent by facsimile on the day it is sent if this is a Business Day
and it is sent no later than 4.00 p.m. (receiver's time) and
otherwise on the next Business Day after being sent, if following
transmission the sender receives a transmission confirmation report
or if the sender's facsimile machine is not equipped to issue a
transmission confirmation report then upon the sender receiving
acknowledgment of receipt in legible form from the addressee.
7.3 A Party who receives a notice or other communication by facsimile must
immediately acknowledge receipt to the sender.
7.4 Each Party's address or facsimile number for service is:-
in the case of Amax:-
Name: Amax Gold Inc.
(Attention: President and General Counsel)
Address: 350 Indiana Street
Golden, Colorado 80401-5081
USA
Facsimile No: (1303) 273 0708
in the case of PGL:-
Name: Poseidon Gold Limited
(Attention: Mr. Steven Dean)
Address: 100 Hutt Street
Adelaide, South Australia, 5000
Facsimile No: (618) 232 0198
7.5 A Party may change its address or facsimile number for service by giving
notice of that change to each other Party.
7.6 A certificate signed by or on behalf of a Party giving a notice or other
communication by any officer or employee of that Party stating the date
on which that notice or other communication was delivered or sent is
prima facie evidence of the date on which that notice or other
communication was delivered or sent.
-5-
<PAGE>
8. VARIATION
- -- ---------
8.1 The variation of a provision of this Agreement is not effective unless in
writing and executed by the Parties.
8.2 A Party's consent to a departure from a provision of this Agreement by
another Party is not effective unless in writing and executed by the
consenting Party.
9. WAIVER
- -- ------
9.1 A Party's failure or delay to exercise a power or right does not operate
as a waiver of that power or right.
9.2 The exercise of a power or right does not preclude:-
(a) its future exercise; or
(b) the exercise of any other power or right.
9.3 A waiver of a power or right is ineffective unless in writing and
executed by the waiving Party.
9.4 The waiver of a power or right is effective only in respect of the
specific instance to which it relates and for the specific purpose for
which it is given.
10. FURTHER ASSURANCE
- --- -----------------
10.1 Each party must at its own cost from time to time do all things
(including executing all documents) necessary or desirable to give full
effect to this Agreement.
11. TIME OF THE ESSENCE
- --- -------------------
11.1 Time is of the essence of this Agreement.
11.2 The Parties may agree to vary any time requirement and any time
requirement so varied will be of the essence of this Agreement.
12. STAMP DUTY
- --- ----------
All stamp duty and other government imposts and fees payable on or in
connection with this Agreement, and all other documents and matters
referred to in this Agreement, are payable by PGL when due.
13. ASSIGNMENT
- --- ----------
The benefit of this Agreement may be assigned by PGL. Amax may not
assign its benefit or burden under this Agreement without the prior
written consent of PGL.
-6-
<PAGE>
14. COUNTERPARTS
- --- ------------
This Agreement may be signed in any number of counterparts, all of which
when taken together shall constitute one and the same instrument. Any
party may enter into this Agreement by executing any such counterpart.
15. CONFIDENTIALITY
- --- ---------------
15.1 For the purposes of this clause 15 "Confidential Information" means:
(a) all information concerning the negotiation and dealings between the
Parties connected with this Agreement;
(b) the existence of this Agreement; and
(c) the terms and provisions contained in this Agreement.
15.2 Each Party undertakes to keep, and to cause all of its subsidiaries and
affiliates and its, and its subsidiaries and affiliates, officers and
employees to keep, all Confidential Information strictly confidential,
except to the extent that disclosure is permitted under this clause 15.
15.3 Confidential Information may only be disclosed:
(a) if and to the extent that the other Party has consented to that
disclosure in writing (which consent it may give or withhold in its
absolute discretion);
(b) if and to the extent that a Court of competent jurisdiction or
applicable law (including rules and regulation of the United States
Securities and
Exchange Commission or its equivalent in any other applicable
jurisdiction or of a stock exchange on which shares of a Party or of
a related corporation of a Party are listed) compels disclosure to
be made but only after written notice is given to the other Party
reasonably in advance of disclosure specifying the requirements
compelling disclosure and the Confidential Information which it is
proposed to disclose;
(c) in proceedings taken by a Party for the enforcement of this
Agreement, or
(d) to a Party's employees, and professional advisers having a need to
know for the proper discharge of their duties, provided disclosure
is made on a confidential basis.
-7-
<PAGE>
15.4 The provisions of this clause 15 will remain binding indefinitely
notwithstanding that this Agreement may be at an end for any reason or
that the Option may have lapsed.
15.5 Each Party acknowledges that damages is not an adequate remedy if it
breaches or attempts to breach this clause 15 but that the other Party
shall be entitled to an injunction or other appropriate equitable relief.
16. INTERPRETATION
- --- --------------
16.1 The singular includes the plural and the plural includes the singular.
16.2 A reference to a gender includes a reference to each other gender.
16.3 A reference to a person includes a reference to a firm, corporation or
other corporate body.
16.4 A reference to a statute, regulation, or provision of a statute or
regulation ("statutory provision") includes a reference to:-
(a) that statutory provision as amended or re-enacted from time to time;
and
(b) a replacement of a statutory provision.
16.5 A reference to writing includes a reference to printing, typing and each
other method of producing words in a visible form.
16.6 Where a word or expression is given a particular meaning, other parts of
speech and grammatical forms of that word or expression have
corresponding meanings.
16.7 A reference to a deed, agreement (including this Agreement) or other
instrument or any provision thereof shall be deemed to include a
reference to that deed, agreement, instrument or provision as varied,
amended, supplemented, novated, assigned or replaced from time to time.
16.8 All references to monetary sums are in New Zealand Dollars.
16.9 A reference to a month is a reference to a calendar month (whether or not
beginning on the first day of any month).
16.10 The words "including", "such as" and "particularly" and similar
expressions do not imply any limitation.
16.11 Headings are for ease of reference and do not form part of or affect the
construction of this Agreement.
-8-
<PAGE>
16.12 This Agreement binds in addition to the Parties, their respective legal
personal representatives and successors.
16.13 If an act must be done on a specified day which is not a Business Day
then the act must instead be done on the next Business Day.
16.14 References to time, unless otherwise specified, are to local time in
Wellington, New Zealand.
IN WITNESS WHEREOF this Agreement has been executed the day and the year first
hereinabove written.
EXECUTED for and on behalf of )
AMAX GOLD, INC. by Richard )
Clement Driver RICHARD DRIVER )
its attorney under power of )
attorney dated 2 June 1993 ) /s/ RC Driver
(who by his signature warrants ) .................................
that he has no notice of the ) Attorney
revocation of that power of )
attorney) in the presence of: )
/s/ John McLean
.................................
Witness John McLean
Solicitor
Wellington
EXECUTED for and on behalf of )
POSEIDON GOLD LIMITED by )
PAUL W. O'REGAN and )
ROBERT FISHER, two of its )
attornies under power of ) /s/ PW O'Regan
attorney dated 31 May 1993 ) .................................
(who by their respective ) /s/ R Fisher
signatures warrant that ) .................................
neither of them has notice ) Attornies
of the revocation of that )
power of attorney) in the )
presence of: )
/s/ A. Miller
.................................
Witness Adrienne Miller
Solicitor
Wellington
-9-
<PAGE>
CERTIFICATE OF NON-REVOCATION OF
POWER OF ATTORNEY
I, RICHARD CLEMENT DRIVER, of Kenthurst, New South Wales, Australia, hereby
certify:
1. That by deed dated 2 June 1993 Amax Gold Inc. appointed me its attorney on
the terms and conditions set out in such deed; and
2. That at the date of this certificate I have not received any notice or
information of the revocation of such appointment.
SIGNED at Wellington this 4th day of June 1993.
/s/ RC Driver
- ----------------------------------------
Signature of attorney giving certificate
<PAGE>
CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
--------------------------------------------------
I, PAUL W. O'REGAN of Wellington, Solicitor, hereby certify that by Power of
Attorney dated 31 May 1993 POSEIDON GOLD LIMITED appointed me as its attorney on
and subject to the conditions set out in the said Power of Attorney and that, as
at the date hereof, I have not received any notice or information of the
revocation of the said Power of Attorney by any means whatsoever.
SIGNED at Wellington this 4th day of June 1993.
/s/ PW O'Regan
- ------------------------------
Paul W. O'Regan
<PAGE>
CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
--------------------------------------------------
I, ROBERT FISHER of Auckland, Solicitor, hereby certify that by Power of
Attorney dated 31 May 1993 POSEIDON GOLD LIMITED appointed me as its attorney on
and subject to the conditions set out in the said Power of Attorney and that, as
at the date hereof, I have not received any notice or information of the
revocation of the said Power of Attorney by any means whatsoever.
SIGNED at Wellington this 4th day of June 1993.
/s/ R Fisher
- -------------------------------
Robert Fisher
<PAGE>
DATED 4 June 1993
BETWEEN
POSEIDON GOLD LIMITED
(ACN 007 511 006)
AND
AMAX GOLD INC.
------------------------------
DEED OF GUARANTEE
------------------------------
------------------------------
BELL GULLY BUDDLE WEIR
SOLICITORS
WELLINGTON & AUCKLAND
DCS:234
<PAGE>
THIS DEED is made on the 4th day of June 1993
BETWEEN
(1) POSEIDON GOLD LIMITED (ACN 007 511 006) a duly incorporated company having
its principal office at 100 Hutt Street, Adelaide, South Australia
("Poseidon"); and
(2) AMAX GOLD INC. a duly incorporated company having its principal office at
350 Indiana Street, Golden, Colorado, United States of America ("AMAX").
RECITALS
A. Poseidon's wholly owned subsidiary, ACM (New Zealand) Ltd ("ACMNZ") has
entered into a Share Subscription Agreement dated 4 June 1993 with Amax and
WAIHI FINANCING LIMITED ("Waihi") whereby ACMNZ has agreed from time to
time to subscribe to and pay for redeemable preference shares in the
capital of Waihi.
B. ACMNZ has also entered into a Deed of Indemnity dated 4 June 1993 ("Deed of
Indemnity") with AMAX in which it has agreed to indemnify, hold harmless
and defended AMAX from all claims and losses as described therein.
C. In consideration for AMAX entering into the Share Subscription Agreement,
the contemporaneous Share Sale Agreement and Deed of Indemnity, Poseidon
has agreed to guarantee the performance of ACMNZ's obligations under the
Share Subscription Agreement and Deed of Indemnity.
NOW THIS DEED WITNESSES AND IT IS HEREBY AGREED AND DECLARED as follows:
GUARANTEE
1. POSEIDON hereby unconditionally and irrevocably guarantees to AMAX the
timely performance of all obligations due AMAX and prompt payment of all moneys
payable to AMAX under or pursuant to the Share Subscription Agreement and Deed
of Indemnity.
LIABILITY OF POSEIDON
2. IF ACMNZ shall default in the performance of its obligations or payment of
all or any of the payments guaranteed under clause 1 then, upon demand by AMAX,
Poseidon shall forthwith unconditionally perform or pay, or procure to be
performed or
<PAGE>
-2-
paid unconditionally, to AMAX those obligations or payments in respect of which
such default has been made.
NON-PREJUDICE OF GUARANTEE
3. THE liability of Poseidon under this Guarantee shall not be abrogated
prejudiced or affected by any of the following:
3.1 the granting of time credit or any indulgence or other concession to
ACMNZ by AMAX, or any compounding compromise release abandonment waiver
variation relinquishment or renewal of any documents of title assets or any
rights of AMAX against Poseidon or any other guarantor, or anything done or
omitted or neglected to be done by AMAX in the exercise of the authorities,
powers and discretion vested in it by this Guarantee, or any other dealing
matter or thing to which Poseidon has consented or ratified which but for
this provision might operate to abrogate prejudice or affect this
Guarantee;
3.2 any other person joining in this or giving any similar guarantee;
3.3 the liquidation, winding up, bankruptcy, receivership, creditors' or
official or statutory management, composition or arrangement with creditors
of ACMNZ or any other guarantor of ACMNZ or the death of any other
guarantor of ACMNZ;
3.4 the sale, restructuring, or transfer of share capital in ACMNZ;
3.5 the fact that the payments guaranteed or any part thereof may not be
or may cease to be recoverable or that ACMNZ or any other person purported
to be primarily liable to pay such sums of money may be discharged from all
or any of their respective obligations to make such payment for any reasons
other than that payment has been made or is not required to be made by
operation of an express provision in the Share Subscription Agreement, the
Share Sale Agreement, or the Deed of Indemnity or the expiration of the
Share Subscription Agreement or the Deed of Indemnity according to its own
terms;
3.6 any variation or assignment of the Share Subscription Agreement or
transfer of any or all of the Preference Shares issued pursuant to the
Share Subscription Agreement;
3.7 AMAX obtaining judgment against ACMNZ.
<PAGE>
-3-
GUARANTEE A DIRECT OBLIGATION
4. THIS Guarantee shall be a direct obligation to AMAX and not merely as a
surety and shall be treated as being in addition to and not in substitution for
or collateral to any other right which AMAX has or may have under or by virtue
of the Share Subscription Agreement, the Share Sale Agreement or the Deed of
Indemnity or any other agreement and in particular shall be independent of any
other agreement to the intent that this Guarantee may be enforced against
Poseidon without first having recourse to any such other agreement or rights and
without taking steps or proceeding against ACMNZ and such liability shall not be
affected or diminished by any of the matters hereinbefore mentioned or by any
other act indulgence or omission consented to or ratified by Poseidon which but
for this present provision would have operated to release Poseidon wholly or
partly from its liability hereunder to AMAX.
CONTINUING GUARANTEE
5. THIS Guarantee shall be a continuing guarantee and accordingly shall be
irrevocable and shall remain in full force and effect until the whole of all
payments to be made by ACMNZ have been paid in full and all performance of ACMNZ
satisfied under the Share Subscription agreement and the Deed of Indemnity.
DISCRETION AS TO EXERCISE OF RIGHTS
6. AS regards Poseidon AMAX may determine from time to time whether it shall
enforce or refrain from enforcing this Guarantee and may from time to time make
any arrangement or compromise with ACMNZ in relation to the payments and
performance guaranteed or any part thereof which AMAX shall consider expedient.
PAYMENTS
7. ALL money from time to time received by AMAX from any person or any source
(including any dividends upon the liquidation of ACMNZ or from any other person
or from the realisation of any security) and capable of being applied by AMAX in
reduction of ACMNZ's indebtedness in relation to the payments guaranteed shall
be regarded as a payment in gross without any right on the part of Poseidon to
stand in the place of AMAX in respect of or to claim the benefit of any money so
received as against ACMNZ until the whole of the guaranteed payments have been
paid or satisfied in full and unconditionally, so that in the event of Poseidon
going into liquidation AMAX shall be entitled to prove against it for the total
indebtedness of ACMNZ in relation to the payments guaranteed.
<PAGE>
-4-
8. ALL payments under this Guarantee shall be made without any set-off,
counterclaim or equity and free from, clear of and without deduction for any
taxes whatsoever, present or future. If Poseidon is compelled by the law of any
applicable jurisdiction, or by an order of any regulatory authority in such
jurisdiction, to withhold or deduct at source any sum or sums in respect of
taxes, duties, levies, imposts or charges from any amount payable to AMAX under
this Guarantee, Poseidon shall pay such additional amount or amounts as may be
necessary to ensure that the amount received by AMAX shall equal the full amount
payable under this Guarantee.
PROOF IN ACMNZ'S LIQUIDATION
9. IN the event of liquidation of ACMNZ, Poseidon shall not prove in such
liquidation in competition with AMAX and Poseidon hereby irrevocably authorises
AMAX on its behalf to prove all moneys which Poseidon has paid hereunder which
have not been repaid to Poseidon by ACMNZ and to retain and to carry to a
suspense account and appropriate at the discretion of AMAX any amount received
until AMAX shall have received one hundred cents in the dollar in respect of the
guaranteed payments. Poseidon hereby waives in favour of AMAX all rights
whatever against ACMNZ and any other party or their or its estate and assets so
far as necessary to give effect to anything contained in this guarantee.
RESTRUCTURING OF POSEIDON GROUP
10. IN the event that any restructuring by the Poseidon Gold Group (being that
group of companies of which Poseidon Gold Limited is the holding company)
results in circumstances where AMAX reasonably considers that ACMNZ may not be
able to perform and satisfy its obligations under the Deed of Indemnity,
Poseidon will procure, forthwith after receipt of notice from AMAX, that another
member of the Poseidon Group, satisfactory to AMAX acting reasonably, provides
AMAX with a guarantee, indemnity, letter of comfort or other similar arrangement
as may be agreed between such member of the Poseidon Gold Group and AMAX at the
time, to restore AMAX to the same position as it would have been in but for such
restructuring.
VOIDABLE PAYMENT
11. IF any payment in respect of the payments guaranteed made to AMAX (or to
any Receiver or other person appointed by AMAX) by or on behalf of ACMNZ shall,
on the subsequent liquidation, corporate reorganisation or other similar event
of or affecting ACMNZ be avoided or set aside by law, such payment shall not be
considered as discharging or diminishing the liability of Poseidon therefor and
this Guarantee shall continue to apply as
<PAGE>
-5-
if such payment had at all times remained owing by Poseidon or ACMNZ as the case
may be.
SUSPENSION OF RIGHTS
12. POSEIDON shall in respect of any sums paid by it hereunder and in respect
of any other rights which may accrue howsoever to it in respect of any sum so
paid rank and be entitled to enforce the same only after the payments guaranteed
have been duly paid to AMAX and satisfied in full, and in particular (both
without limiting the generality of this clause) until such time:
12.1 Poseidon shall not unless requested in writing by AMAX make or suffer
to be made any claim in competition with the claim of AMAX in respect of
the payments guaranteed; and
12.2 AMAX shall not be under any obligation to marshall in favour of
Poseidon any of the funds or assets that AMAX may be entitled to receive or
have claim upon.
INVALIDITY OF PROVISION
13. IF at any time any one or more of the provisions hereof is or becomes
invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired thereby. All other provisions of any statute shall
to the maximum extent permissible by law be deemed to be negatived or varied to
the extent that they are inconsistent with the terms and conditions herein
expressed.
INDEMNITY
14. ANY of the payments guaranteed which may not be recoverable pursuant to the
foregoing provisions on the basis of a guarantee shall nevertheless be
recoverable from Poseidon by AMAX on the basis of an indemnity and as a
separate, continuing and primary obligation. Poseidon hereby indemnifies AMAX
for and against any loss expenses or damage AMAX may sustain by reason of
ACMNZ's failure to promptly pay any of the payments guaranteed or by reason of
the non-performance by ACMNZ of any of the performance guaranteed pursuant to
the Share Subscription Agreement or Deed of Indemnity or by reason of the Share
Subscription Agreement or Deed of Indemnity being or becoming void or
unenforceable by AMAX for any reason other than expiration according to its own
terms PROVIDED THAT Poseidon shall not be liable for consequential loss or
damage except where the loss or damage arises directly out of the wilful act or
omission or gross negligence of Poseidon, AND PROVIDED FURTHER THAT if any of he
matters referred to in clause 17 of the Deed of Indemnity occur other than by
reason of lack of or inadequacy of power or authority of ACMNZ, inadequacy
<PAGE>
-6-
of execution by ACMNZ or incapacity of ACMNZ, Poseidon's liability shall be
limited to liability for ACMNZ's failure to comply with clauses 11 and 17 of the
Deed of Indemnity.
COSTS
15. POSEIDON agrees to pay AMAX all costs and expenses (including costs as
between solicitor and own client) sustained or incurred by AMAX in obtaining or
attempting to obtain payment of all or any of the moneys for which Poseidon may
from time to time be liable under the provisions of this Deed or enforcing or
attempting to enforce any remedy or power expressed or implied herein.
GOVERNING LAW
16. THIS guarantee shall be governed by and construed in accordance with New
Zealand law and the parties hereby submit to the non-exclusive jurisdiction of
the Courts of New Zealand and hereby waive any defence to the enforcement of
judgments rendered on such disputes. For the purposes of service of any
documents of any kind on Poseidon, Poseidon hereby appoints ACM (New Zealand)
Limited as Poseidon's representative in New Zealand and Poseidon agrees with
AMAX that service on ACM (New Zealand) Limited marked for the attention of Mr.
Cook of any notices or documents required to be served on Poseidon shall be
valid and effective service of such notices or documents on Poseidon.
INTERPRETATION
17. IN the interpretation of this Deed unless the context otherwise requires:
17.1 the singular number shall include the plural number and vice versa,
and words importing any gender include all other genders;
17.2 references to "person" include any company, association, society,
firm or other institution whether incorporated or unincorporated.
EFFECTIVE DATE
18. THIS Deed shall be in effect from such time as and for so long as the Deed
of Indemnity shall be in effect.
<PAGE>
-7-
IN WITNESS WHEREOF this Deed has been executed on the date first above written.
EXECUTED for and on behalf of )
POSEIDON GOLD LIMITED by being )
SIGNED, SEALED AND DELIVERED )
by PAUL W. O'REGAN and )
ROBERT FISHER, two of its ) /s/ PW O'Regan
attorneys under power of ) /s/ R Fisher
attorney dated 31 May 1993 )
(who by their execution )
warrant that neither of them )
has notice of the revocation )
of power of attorney) in )
the presence of: )
/s/ A Miller
- ------------------------------
Witness Adrienne Miller
Occupation: Solicitor
Address: Wellington
EXECUTED for and on behalf of )
AMAX GOLD, INC. by being )
DELIVERED by RICHARD CLEMENT )
DRIVER its attorney under )
power of attorney dated 2 June ) /s/ RC Driver
1993 (who by his signature )
warrants that he has no )
notice of the revocation of )
power of attorney) in the )
presence of: )
/s/ John McLean
- -----------------------------
Witness John McLean
Occupation: Solicitor
Address: Wellington
<PAGE>
CERTIFICATE OF NON-REVOCATION OF
POWER OF ATTORNEY
I, RICHARD CLEMENT DRIVER, of Kenthurst, New South Wales, Australia, HEREBY
CERTIFY:
1. That by deed dated 2 June 1993 Amax Gold Inc. appointed me its attorney on
the terms and conditions set out in such deed; and
2. That at the date of this certificate I have not received any notice or
information of the revocation of such appointment.
SIGNED at Wellington this 4th day of June 1993.
/s/ RC Driver
- ----------------------------------------
Signature of attorney giving certificate
<PAGE>
CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
--------------------------------------------------
I, PAUL W. O'REGAN of Wellington, Solicitor, hereby certify that by Power of
Attorney dated 31 May 1993 POSEIDON GOLD LIMITED appointed me as its attorney on
and subject to the conditions set out in the said Power of Attorney and that, as
at the date hereof, I have not received any notice or information of the
revocation of the said Power of Attorney by any means whatsoever.
SIGNED at Wellington this 4th day of June 1993.
/s/ PW O'Regan
- -------------------------------
Paul W. O'Regan
<PAGE>
CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
--------------------------------------------------
I, ROBERT FISHER of Auckland, Solicitor, hereby certify that by Power of
Attorney dated 31 May 1993 POSEIDON GOLD LIMITED appointed me as its attorney on
and subject to the conditions set out in the said Power of Attorney and that, as
at the date hereof, I have not received any notice or information of the
revocation of the said Power of Attorney by any means whatsoever.
SIGNED at Wellington this 4th day of June 1993.
/s/ R Fisher
- ----------------------------
Robert Fisher
<PAGE>
DATED 4 June 1993
BETWEEN
ACM (NEW ZEALAND) LIMITED
AND
AMAX GOLD INC.
----------------------------------------
DEED OF INDEMNITY
----------------------------------------
----------------------------------------
BELL GULLY BUDDLE WEIR
SOLICITORS
WELLINGTON & AUCKLAND
DCS:236
<PAGE>
DATED THE 4TH DAY OF JUNE 1993
BETWEEN
(1) ACM (NEW ZEALAND) LIMITED, a duly incorporated company having its principal
office at 15th Floor, National Mutual Centre, 37-41 Shortland Street,
Auckland, New Zealand ("ACMNZ");
(2) AMAX GOLD INC. a duly incorporated company having its principal office at
350 Indiana Street, Golden, Colorado, United States of America ("AMAX")
RECITALS
A. ACMNZ is the "Subscriber" under a Share Subscription Agreement dated 4 June
1993 ("Share Subscription Agreement") with Amax and Waihi Financing Limited
("Waihi") whereby ACMNZ has agreed from time to time to subscribe to and
pay for redeemable preference shares issued in the capital of Waihi.
B. ACMNZ, in satisfaction of an undertaking given to AMAX as a condition for
AMAX's entry into the Share Subscription Agreement, has agreed to execute
this Deed.
IN CONSIDERATION of AMAX at the request of ACMNZ entering into and becoming
bound by the Share Subscription Agreement, ACMNZ agrees for the benefit of AMAX
as follows:
DEFINITIONS
1. TO the extent any capitalised terms and expressions are used in this Deed
(including the recitals hereto) without specific definition, unless the context
otherwise requires those terms and expressions shall have the same meaning as
ascribed to them in the Share Subscription Agreement.
INTERPRETATION
2. IN the interpretation of this Deed unless the context otherwise requires:
2.1 the singular number shall include the plural number and vice versa,
and words importing any gender include all other genders;
<PAGE>
2.2 references to "person" include any company, association, society, firm
or other institution whether incorporated or unincorporated.
2.3 references to a "claim" include both oral and written demands or
notices of breach of contract, default or violation of duties under
statute, regulations or conditions of permits and licences.
2.4 the word "including" and similar expressions do not imply any
limitation; and
2.5 the word "AMAX" includes all related companies of AMAX Gold Inc within
the meaning of Section 2(5) of the Companies Act of 1955 New Zealand or any
corresponding legislation of any other jurisdiction applicable to AMAX Gold
Inc. other than Waihi, AHNZ, ARNZ, AGMNZ.
INDEMNITY
3. AS a separate, continuing and primary obligation, with effect (unless
otherwise provided) from the First Issue Date ACMNZ hereby agrees to indemnity
AMAX and to hold AMAX harmless and defended against all losses, claims or costs
suffered or incurred by AMAX whatsoever (including, without limitation, claims
made by any third party) directly or indirectly arising out of or in respect of
or resulting from:
3.1 the Share Subscription Agreement and other agreements entered into
contemporaneously with that agreement including the Share Sale Agreement,
and Call Option Agreement, this obligation to be effective upon execution
of this Deed;
3.2 the Joint Venture Agreement as amended and all ancillary agreements as
modified, amended or entered into subsequently including the Principal's
Deed, this obligation to be effective upon execution of this Deed.
3.3 the ownership and operation of the Martha Hill Gold Mine including the
Management Agreement with the Project Manager, approved budgets and
authorisations for expenditure, contracts with vendors, labour awards and
employment contracts and all other contracts and arrangements.
3.4 the statutory and regulatory obligations for operation of the Martha
Hill Gold Mine and mining licence including the provisions of the Mining
Act 1971 Resource Management Act 1991, Crown Minerals Act 1991, work
programmes, permits, regional and district council plans, orders and
consents;
3.5 any environmental liability connected with ownership and operation of
the Martha Hill Gold Mine, whether imposed administratively or judicially,
arising as a result of any
-2-
<PAGE>
environmental law, rule, regulation, permit, order or policy of any
governmental entity with jurisdiction, or arising under the common law,
relating to damage to or the protection, preservation, reclamation, or
rehabilitation of the environment, or arising out of conditions
constituting a nuisance, such as blasting, dust, or noise.
3.6 the actions and omissions of Waihi, AHNZ, ARNZ, AGMNZ, and MML done or
omitted after the First Issue Date or pursuant to or in accordance with the
Share Subscription Agreement, Share Sale Agreement, or with the consent or
ratification of ACMNZ;
3.7 the Guarantee and Indemnity Agreements in favour of Chase Manhatten
Bank Australia Limited to secure the financial obligations of AGMNZ and
MML, until these obligations are discharged by the release of AMAX, AGMNZ
and MML from said agreements;
3.8 the Carrick Joint Venture Exploration Licence but only in so far as
the act, fact, matter or circumstance of the claim occurs after the First
Issue Date;
3.9 AMAX continuing to hold shares in the capital of Waihi after the First
Issue Date or continuing to be a related company of AHNZ, ARNZ or AGMNZ
after the First Issue Date but, unless otherwise covered by another
paragraph of this clause, only if and to the extent that AMAX would not
have incurred that loss, claim or cost had it ceased to hold any shares in
Waihi on the First Issue Date or had it ceased to be such a related company
on the First Issue Date.
INDEMNITY IRREVOCABLE AND ENFORCEABLE
4. THIS indemnity is unconditional and irrevocable, and is a continuing
indemnity which other than as expressly limited in Clause 7, shall extend to all
losses, claims or costs (if any) from time to time and at any time suffered or
incurred by AMAX in the matters described in clause 3.
5. EACH of the AMAX related companies may enforce this Deed against ACMNZ as
envisaged by and pursuant to section 4 of the Contracts (Privity) Act 1982.
INDEMNITY NOT DISCHARGED
6. ACMNZ'S liability hereunder shall not be discharged or impaired by:
6.1 any amendment or variation consented to in writing by ACMNZ of the
agreements described in clause 3, or any assignment by ACMNZ or consented
to by ACMNZ;
-3-
<PAGE>
6.2 any granting of time or any other indulgence to ACMNZ or by ACMNZ to a
third party or any agreement by or on behalf of ACMNZ that AMAX will not
make any claim or initiate any proceedings against or otherwise seek
recourse from a third party under or in connection with the matters
described in clause 3;
6.3 any other act, event, neglect or omission which subject to the
provisions of this Deed would or might but for this clause operate to
decrease, impair or discharge ACMNZ's liability hereunder except to the
extent such act event neglect or omission was under the control of AMAX and
has caused ACMNZ's exposure hereunder to be increased, without ACMNZ's
consent.
ACMNZ'S LIABILITY LIMITED
7. ACMNZ'S liability or obligation to AMAX in connection with any losses,
claims or costs suffered or incurred by AMAX shall be reduced to the extent that
the circumstances of the claim, loss or cost are directly related to:
7.1 any amount which may become payable by AMAX pursuant to or in
consequence of breach of the Share Sale Agreement or Share Subscription
Agreement or the other agreements referred to in Clause 3.1 or the direct
and intended effect on Amax of the express provisions of such agreements
(not being the effect of a third party claim against Amax); or
7.2 any act, fact or omission which is not subject to either clause 7.2 of
the Share Subscription Agreement or clause 7.4 of the Share Sale Agreement
that is, or gives rise to a material breach of any provision of the Share
Subscription Agreement or Share Sale Agreement which is intended to be
binding upon or observed by AMAX; or
7.3 any undisclosed agreement arrangement or understanding to which AMAX
is or becomes a party to; or
7.4 any other act or omission of AMAX done or committed after the date of
this Deed not falling within clauses 7.1 or 7.2 of this Deed except as done
in accordance with the Share Subscription Agreement, Share Sale Agreement
or in compliance with a compulsion under relevant statutes or regulations
applying to AMAX, or which have been consented to or ratified by ACMNZ.
7.5 the making of the disclosure in paragraph (g) of Appendix (9) to
Schedule 2 to the Share Sale Agreement or the giving or the content of the
warranty in paragraph (8) of Schedule 2 to the Share Subscription
Agreement.
-4-
<PAGE>
NOTICE OF CLAIM
8. AMAX hereby undertakes that upon becoming aware of circumstances likely to
give rise to a claim being made under clause 3, AMAX must promptly give notice
to ACMNZ of those circumstances and must at the time of giving notice supply to
ACMNZ [all information and material regarding the circumstances and likely
claims as may be available to AMAX].
CONTROL OF DEFENSE
9. IF so required by ACMNZ, on the condition of ACMNZ providing to AMAX a bank
guarantee of other security acceptable to AMAX for the amount of AMAX's claim
against ACMNZ under clause 3, AMAX must permit ACMNZ (subject to clause 10) at
its own cost and expense (including legal costs and expenses and the internal
management costs and expense and cost of employees time incurred by AMAX in
providing any assistance to ACMNZ), to take the action ACMNZ deems fit to
negotiate, settle, compromise, defend or otherwise contest any third party claim
or suit giving rise to AMAX's claim against ACMNZ under clause 3 or to make such
counterclaim which AMAX may have against that third party and to take over the
conduct of any proceedings commenced by AMAX in connection with any such claim
or suit. PROVIDED THAT AMAX shall have the option to take over control of
negotiations, litigation and related action with respect to any particular third
party claim or suit, in which case ACMNZ shall have no liability in respect of
such third party claim or suit other than for the costs and expenses referred to
in this clause.
10. EACH Party must on request provide the other Party all reasonable
assistance, including access to any relevant documents in its possession power
or control (including the documents referred to in clause 3) in connection with
investigating and exercising the rights conferred by clause 9. ACMNZ must:
10.1 consult with AMAX regarding the appointment of legal advisors
(including Counsel) and must not appoint any legal adviser to whose
appointment AMAX has objected on reasonable grounds;
10.2 keep AMAX reasonably and promptly informed of all material
negotiations, any proposed settlement, compromise or counterclaim and all
material steps proposed to be taken to defend or otherwise contest a claim
or suit; and
10.3 give reasonable consideration to the wishes of AMAX regarding any
negotiations, settlement, compromise, defense or other contest or
counterclaim (but without being obliged to accede to those wishes).
-5-
<PAGE>
AMAX NEUTRAL
11. IF any claim is made on AMAX as a consequence of entering into the Share
Subscription Agreement, ACMNZ as a separate continuing and primary obligation
undertakes to AMAX:
11.1 that it will not seek to avoid, rescind or terminate the Share
Subscription Agreement nor seek by any means a reduction limitation or
modification of its obligations under the Share Subscription Agreement to
subscribe for redeemable preference shares in the capital of Waihi for the
reason only that the transactions contemplated by the Share Sale Agreement
and Share Subscription Agreement taken as a whole or by the Share
Subscription Agreement give rise to the operation of the provisions of
clause 6.03 and 6.05 of the Joint Venture Agreement;
11.2 that if by order of a Court of competent jurisdiction which is final
and binding, otherwise than at the instigation of AMAX, the Share
Subscription Agreement is declared to be void or otherwise to be a nullity
or is set aside or is modified and given effect to and notwithstanding the
foregoing AGMNZ must comply with clause 6.03 of the Joint Venture Agreement
on the grounds only that the Share Subscription Agreement has been entered
into resulting in the price determined by an independent expert pursuant to
clause 6.05 of the Joint Venture Agreement and payable to AGMNZ in
consequence of the operation of clause 6.03 of the Joint Venture Agreement,
for the direct and indirect interest of AGMNZ in the Martha Hill Joint
Venture, being less than the equivalent of NZ$15 million plus the value of
15,500 ounces of gold deliverable in equal half yearly instalments over 5
years as contemplated in the Share Subscription Agreement, ACMNZ shall pay
to AMAX the difference between that equivalent and that price;
PROVIDED THAT the rights of ACMNZ and the obligations of AMAX in connection with
a breach by AMAX of the undertaking in clause 7.1(a) of the Share Subscription
Agreement shall not be diminished, extinguished, limited or otherwise affected
by the undertakings in this clause.
NOTICES
12.1 A notice of other communication in connection with this Deed by or to
ACMNZ to or by AMAX must be in writing and:
12.1.1 delivered by hand;
12.1.2 sent by prepaid airmail; or
12.1.3 sent by international courier; or
12.1.4 sent by facsimile,
-6-
<PAGE>
to the address or facsimile number for service described below.
12.2 A notice or other communication is sufficiently given if:
12.2.1 delivered by hand, upon delivery;
12.2.2 airmailed to an address outside New Zealand, seven days after
posting;
12.2.3 couriered internationally, 3 days after dispatch;
12.2.4 sent by facsimile on the date it is sent if this is a Business
Day and it is sent no later than 4.00 pm (receiver's time) and
otherwise on the next Business Day after being sent, if following
transmission the sender receives a transmission confirmation
report or if the sender's facsimile machine is not equipped to
issue a transmission confirmation report then upon the sender
receiving acknowledgement of receipt in legible form from the
addressee.
12.3 A party who receives a notice or other communication by facsimile must
immediately acknowledge receipt to the sender.
12.4 Each party's address or facsimile number for service is:
in the case of AMAX:
Name: Amax Gold Inc.
(Attention: President and General Counsel)
Address: 350 Indiana Street
Colden
Colorado,80401-5081
Facsimile No: (303) 273 0708
in the case of ACMNZ:
Name: ACM (New Zealand) Limited
(Attention: Mr. Steven Dean)
Address: c/-Poseidon Gold Limited
100 Hutt Street
Adelaide, South Australia, 5000
Facsimile No: (618) 232 0198
-7-
<PAGE>
12.5 ACMNZ or AMAX may change its address or facsimile number for service by
giving notice of that change to the other of them.
12.6 A certificate signed by or on behalf of a party giving a notice or other
communication by any officer or employee of that party stating the date on which
that notice or other communication was delivered or sent is prima facie evidence
of the date on which that notice or other communication was delivered or sent.
FURTHER ASSURANCES
13. EACH party agrees to execute and deliver any documents, and to do all
things as may reasonably be required by the other party to obtain the full
benefit of this deed according to its true intent.
CONFIDENTIALITY
14. THE provisions of clause 21 of the Share Subscription Agreement shall
apply mutatis mutandis to this Deed and to the negotiations and dealings between
AMAX and ACMNZ connected with this Deed.
NO WAIVER
15. NO failure, delay or indulgence by either party in exercising any power
or right conferred on that party by this deed shall operate as a waiver of such
power or right. A single or partial exercise of any such power or right shall
not preclude further exercises of that power or right or the exercise of any
other power or right.
ASSIGNMENT
16. NEITHER party shall transfer, assign, create any charge over or deal in
any manner with the benefit or burden of this deed.
EXPIRATION OF DEED
17. EXCEPT as to ACMNZ's liability and obligation to AMAX under clause 11 of
this Deed, the indemnity contained in this Deed shall expire if the Share
Subscription Agreement or Share Sale Agreement is either declared to be void or
otherwise becomes a nullity or either of them is modified so as to deprive ACMNZ
of the benefit intended by those agreements under a final judgment entered by a
Court of competent jurisdiction or AMAX consents to the recission of the Share
Subscription Agreement or Share Sale Agreement; PROVIDED THAT any claims arising
from any fact matter circumstance or omission occurring after the date of this
Deed but prior to such expiration shall be preserved and the conditions of this
Deed shall survive expiration as to those claims.
-8-
<PAGE>
GOVERNING LAW
18. THIS Agreement shall be governed by and construed in accordance with the
law of New Zealand, and the parties hereby submit to the non-exclusive
jurisdiction of the courts of New Zealand and hereby waive any defence to the
enforcement of judgments rendered on such disputes.
IN WITNESS WHEREOF these presents have been executed the day and year first
hereinbefore written.
EXECUTED for and on behalf of )
ACM (NEW ZEALAND) LIMITED )
by being SIGNED SEALED and )
DELIVERED by P.W. O'Regan )
and R.A. Fisher two of its )
attorneys under power of ) /s/ PW O'Regan
attorney dated 31 May 1993 ) /s/ RA Fisher
(who by their execution )
warrants that neither of )
them has notice of the )
revocation of power of )
attorney) in the presence )
of: )
/s/ A Miller
- ------------------------------
Witness Adrienne Miller
Occupation: Solicitor
Address: Wellington
EXECUTED for and on behalf of )
AMAX GOLD INC. by being )
DELIVERED by Richard Clement )
Driver its attorney under )
power of attorney dated )
2 June 1993 (who by his ) /S/ RC Driver
or her execution warrants )
that he or she has no notion )
of the revocation of power )
of attorney) in the presence )
of: )
/s/ John McLean
- ------------------------------
Witness John McLean
Occupation: Solicitor
Address: Wellington
-9-
<PAGE>
CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
--------------------------------------------------
I, P.W. O'REGAN of Wellington, Solicitor, hereby certify that by Power of
Attorney dated 31 May 1993 ACM (NEW ZEALAND) LIMITED appointed me as its
attorney on and subject to the conditions set out in the said Power of Attorney
and that, as at the date hereof, I have not received any notice or information
of the revocation of the said Power of Attorney by any means whatsoever.
SIGNED at Wellington this 4th day of June 1993
- ------
/s/ PW O'Regan
- ------------------------------
P.W. O'Regan
-10-
<PAGE>
CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
--------------------------------------------------
I, R.A. FISHER of Auckland, Solicitor, hereby certify that by Power of Attorney
dated 31 May 1993 ACM (NEW ZEALAND) LIMITED appointed me as its attorney on and
subject to the conditions set out in the said Power of Attorney and that, as at
the date hereof, I have not received any notice or information of the revocation
of the said Power of Attorney by any means whatsoever.
SIGNED at Wellington this 4th day of June 1993
- ------
s/ RA Fisher
- ------------------------------
R.A. Fisher
-11-
<PAGE>
CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
--------------------------------------------------
I, RICHARD CLEMENT DRIVER, of Kenthurst, New South Wales, Australia, HEREBY
CERTIFY:
1. That by deed dated 2 June 1993 Amax Gold Inc. appointed me its attorney on
the terms and conditions set out in such deed; and
2. That at the date of this certificate I have not received any notice or
information of the revocation of such appointment.
SIGNED at Wellington this 4th day of June 1993
- ------
/s/ RC Driver
- ------------------------------
Signature of attorney
giving certificate
-12-
<PAGE>
The President June 4, 1993
Amax Gold Inc.
350 Indiana Street
Golden
Colorado
USA
Dear Sir
We refer to the transactions involving Amax Gold, Inc. ("Amax") Waihi Financing
Limited ("Waihi"), Amax Holdings New Zealand Limited ("AHNZ") and its
subsidiaries and ACM (New Zealand) Limited contemplated in the documents
entitled Share Sale Agreement and Share Subscription Agreement executed on or
about the date of this letter.
In this letter expressions which have an upper case initial letter have the same
meanings respectively as in the abovementioned documents.
Poseidon Gold Limited ("PGL") assures Amax that:
(a) within 6 months of the date of this letter it will ensure, subject to the
co-operation of Amax in its capacity as holder of ordinary shares in the
capital of Waihi, that the names of AHNZ and of its subsidiaries are
changed to names which do not include the word "Amax" or a visually or
phonetically similar word;
(b) if and for so long as Amax continues to hold any shares in the capital of
Waihi and PGL remains able, through its subsidiaries and persons appointed
to office as directors by it or any of its subsidiaries, to control the day
to day affairs of AHNZ or its subsidiaries, PGL will procure that (without
the consent of Amax) AHNZ and its subsidiaries do not become involved in
any business activity which they are not involved in on the date of this
letter other than,
(i) passive investment of surplus cash; and
(ii) normal developments of an existing business activity such as
proceeding from exploration activities to feasibility activities
and mining and processing activities;
(c) when to do so will not be likely to put at risk the validity and
enforceability of the Share Sale Agreement or the Share Subscription
Agreement it will assist Amax to obtain
<PAGE>
(i) a release of the Guarantee and Indemnity Agreements given by Amax
in favour of Chase Manhattan Bank Australia Limited securing
obligations of AGMNZ; and
(ii) a release of Amax from the Principals Deed by all other parties to
it;
(d) within a reasonable time after request by Amax it will procure that ACM
Gold Limited releases Amax from liability to ACM Gold Limited under the
Principals Deed.
(e) it will not take any steps to seek the winding up, dissolution or
liquidation of Waihi until after the last of the Subscription Dates
Yours faithfully
POSEIDON GOLD LIMITED
/s/Andrew Corletto
Andrew Corletto
Group Company Secretary - Corporate Counsel
<PAGE>
Subsidiaries of Amax Gold Inc.
------------------------------
(All 100% owned unless otherwise indicated)
Jurisdiction
Name of Subsidiary of Incorporation
------------------ ----------------
AGI Chile Credit Corp., Inc. Delaware
Amax Gold (B.C.) Ltd. British Columbia
Amax Gold de Chile Ltda. Chile
Amax Gold Exploration, Inc. Delaware
Amax Gold Exploration Canada Limited Canada
Amax Gold Refugio, Inc. Delaware
Amax Precious Metals, Inc. Delaware
Amax Holdings New Zealand Limited*** New Zealand
Amax Resources New Zealand Limited*** New Zealand
Amax Gold Mines New Zealand Limited*** New Zealand
Compania Minera Amax Guanaco* Chile
Compania Minera Maricunga** Chile
Electrum Resources Corp. Alaska
Fairbanks Gold Ltd. British Columbia
Fairbanks Gold Mining, Inc. Delaware
Guanaco Mining Company, Inc. Delaware
Haile Mining Company, Inc. Delaware
Lancaster Mining Company, Inc. Delaware
Lassen Gold Mining, Inc. Delaware
Luning Gold Inc. Nevada
Melba Creek Mining, Inc. Alaska
Nevada Gold Mining, Inc. Delaware
Waihi Financing Limited*** New Zealand
Wind Mountain Mining, Inc. Delaware
*90% ownership.
**50% ownership.
***100% of common shares of Waihi Financing Limited ("WFL") beneficially owned
by the Company; preference shares of WFL owned by ACM (New Zealand) Limited
("ACM"), a subsidiary of Poseidon Gold Limited, give ACM the right to appoint up
to three of the five authorized directors of WFL. Amax Holdings New Zealand
Limited is a wholly-owned subsidiary of WFL, and Amax Resources New Zealand
Limited and Amax Gold Mines New Zealand Limited are wholly-owned indirect
subsidiaries of WFL.
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Amax Gold Inc.'s
Registration Statements (File Nos. 33-43076, 33-43383 and 33-36612) of our
reports, 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, dated February 4, 1994, except
for Note 8, for which the date is March 18, 1994, on our audits of the
consolidated financial statements and financial schedules of Amax Gold Inc., as
of December 31, 1993 and 1992, and for the three years ended December 31, 1993,
1992 and 1991.
COOPERS & LYBRAND
Denver, Colorado
March 18, 1994
<PAGE>
March 15, 1994
Amax Gold, Inc.
9100 East Mineral Circle
Englewood, CO 80155
RE: Audit of Ore Reserves for Sleeper Mine
Gentlemen:
We hereby authorize the reference to the following described report prepared by
DMBW, Inc. (Derry, Michener, Booth & Wahl) ("DMBW") in an Annual Report on Form
10-K to be filed by Amax Gold Inc. ("AGI") with the Securities and Exchange
Commission ("SEC"):
Audit of December 31, 1993 Ore Reserves at the Sleeper Mine, Humboldt
County, Nevada, dated February 7, 1994, prepared for Amax Gold Inc.
We further consent to the incorporation by reference of said report in
Registration Statements No. 33-43076, No. 33-43383, and No. 33-36612, each filed
by AGI with the SEC, as well as reference to our firm under the caption
"Experts" in such Registration Statements, as such Registration Statements may
be amended.
Very truly yours,
DMBW, Inc.
(Derry, Michener, Booth & Wahl)
/s/ I.S. Parrish
By: I.S. Parrish Title: President
- ----------------- -----------------
[seal]
<PAGE>
AMAX GOLD INC.
--------------
Power of Attorney
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of Amax Gold
Inc., a Delaware corporation, hereby constitutes and appoints each of Milton H.
Ward, Paul J. Hemschoot, Jr., and Mark A. Lettes his true and lawful attorney
and agent, in the name and on behalf of the undersigned, to do any and all acts
and things and execute any and all instruments which the said attorney and agent
may deem necessary or advisable to enable Amax Gold Inc. to file its Form 10-K
in compliance with the Securities Exchange Act of 1934, as amended (the "Act"),
and any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director of Amax Gold Inc. to a Form 10-K to be
filed with the Securities and Exchange Commission with respect thereto, HEREBY
RATIFYING AND CONFIRMING all that the said attorneys and agents, or any of them,
has done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand.
Dated: March 15, 1994.
/s/ Allen Born
---------------------------
Allen Born
<PAGE>
AMAX GOLD INC.
--------------
Power of Attorney
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of Amax Gold
Inc., a Delaware corporation, hereby constitutes and appoints each of Milton H.
Ward, Paul J. Hemschoot, Jr., and Mark A. Lettes his true and lawful attorney
and agent, in the name and on behalf of the undersigned, to do any and all acts
and things and execute any and all instruments which the said attorney and agent
may deem necessary or advisable to enable Amax Gold Inc. to file its Form 10-K
in compliance with the Securities Exchange Act of 1934, as amended (the "Act"),
and any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director of Amax Gold Inc. to a Form 10-K to be
filed with the Securities and Exchange Commission with respect thereto, HEREBY
RATIFYING AND CONFIRMING all that the said attorneys and agents, or any of them,
has done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand.
Dated: March 15, 1994.
/s/ Timothy J. Haddon
-------------------------------
Timothy J. Haddon
<PAGE>
AMAX GOLD INC.
--------------
Power of Attorney
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of Amax Gold
Inc., a Delaware corporation, hereby constitutes and appoints each of Milton H.
Ward, Paul J. Hemschoot, Jr., and Mark A. Lettes his true and lawful attorney
and agent, in the name and on behalf of the undersigned, to do any and all acts
and things and execute any and all instruments which the said attorney and agent
may deem necessary or advisable to enable Amax Gold Inc. to file its Form 10-K
in compliance with the Securities Exchange Act of 1934, as amended (the "Act"),
and any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director of Amax Gold Inc. to a Form 10-K to be
filed with the Securities and Exchange Commission with respect thereto, HEREBY
RATIFYING AND CONFIRMING all that the said attorneys and agents, or any of them,
has done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand.
Dated: March 15, 1994.
/s/ Gerald J. Malys
----------------------------
Gerald J. Malys
<PAGE>
AMAX GOLD INC.
--------------
Power of Attorney
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of Amax Gold
Inc., a Delaware corporation, hereby constitutes and appoints each of Milton H.
Ward, Paul J. Hemschoot, Jr., and Mark A. Lettes his true and lawful attorney
and agent, in the name and on behalf of the undersigned, to do any and all acts
and things and execute any and all instruments which the said attorney and agent
may deem necessary or advisable to enable Amax Gold Inc. to file its Form 10-K
in compliance with the Securities Exchange Act of 1934, as amended (the "Act"),
and any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director of Amax Gold Inc. to a Form 10-K to be
filed with the Securities and Exchange Commission with respect thereto, HEREBY
RATIFYING AND CONFIRMING all that the said attorneys and agents, or any of them,
has done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand.
Dated: March 15, 1994.
/s/ Rockwell A. Schnabel
-----------------------------------
Rockwell A. Schnabel
<PAGE>
AMAX GOLD INC.
--------------
Power of Attorney
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of Amax Gold
Inc., a Delaware corporation, hereby constitutes and appoints each of Milton H.
Ward, Paul J. Hemschoot, Jr., and Mark A. Lettes his true and lawful attorney
and agent, in the name and on behalf of the undersigned, to do any and all acts
and things and execute any and all instruments which the said attorney and agent
may deem necessary or advisable to enable Amax Gold Inc. to file its Form 10-K
in compliance with the Securities Exchange Act of 1934, as amended (the "Act"),
and any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director of Amax Gold Inc. to a Form 10-K to be
filed with the Securities and Exchange Commission with respect thereto, HEREBY
RATIFYING AND CONFIRMING all that the said attorneys and agents, or any of them,
has done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand.
Dated: March 11, 1994.
/s/ Vernon F. Taylor, Jr.
-----------------------------------
Vernon F. Taylor, Jr.
<PAGE>
AMAX GOLD INC.
--------------
Power of Attorney
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of Amax Gold
Inc., a Delaware corporation, hereby constitutes and appoints each of Milton H.
Ward, Paul J. Hemschoot, Jr., and Mark A. Lettes his true and lawful attorney
and agent, in the name and on behalf of the undersigned, to do any and all acts
and things and execute any and all instruments which the said attorney and agent
may deem necessary or advisable to enable Amax Gold Inc. to file its Form 10-K
in compliance with the Securities Exchange Act of 1934, as amended (the "Act"),
and any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as Director of Amax Gold Inc. to a Form 10-K to be
filed with the Securities and Exchange Commission with respect thereto, HEREBY
RATIFYING AND CONFIRMING all that the said attorneys and agents, or any of them,
has done, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand.
Dated: March 11, 1994.
/s/ Russell L. Wood
-----------------------------
Russell L. Wood
