<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1994
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
AMAX GOLD INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 06-1199974
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
----------------
9100 EAST MINERAL CIRCLE
ENGLEWOOD, COLORADO 80112
(303) 643-5500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
PAUL J. HEMSCHOOT, JR., ESQ.
GENERAL COUNSEL
9100 EAST MINERAL CIRCLE
ENGLEWOOD, COLORADO 80112
(303) 643-5500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
----------------
COPIES TO:
PAUL HILTON, ESQ. F. ELLEN DUFF, ESQ.
LAURA A. BATTLE, ESQ. WILLIAM D. BREWER, ESQ.
DAVIS, GRAHAM & STUBBS WINSTON & STRAWN
370 SEVENTEENTH STREET 35 WEST WACKER DRIVE
DENVER, COLORADO 80202 CHICAGO, ILLINOIS 60601
(303) 892-9400 (312) 558-5600
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
From time to time after the effective date of this Registration Statement as
determined by the Registrant.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
----------------
CALCULATION OF REGISTRATION FEE
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(3) REGISTRATION FEE(3)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Subordinated Debt
Securities(4).............
Common Stock, par value
$.01 per share(5).........
Preferred Stock, par value
$1.00 per share(6)........
Warrants(7)................
- ------------------------------------------------------------------------------------------------
Total................. $200,000,000 100% $200,000,000 $68,966
</TABLE>
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- --------------------------------------------------------------------------------
(Footnotes on following page)
<PAGE>
(Continued from previous page)
(1) In U.S. dollars or the equivalent thereof in one or more foreign
currencies or currency units or composite currencies, including the
European Currency Unit.
(2) The proposed maximum initial offering price per unit will be determined,
from time to time, by the Registrant.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o). In no event will the aggregate initial offering
price of all securities issued from time to time pursuant to this
Registration Statement exceed $200,000,000.
(4) Subject to Footnote (3), there are being registered hereunder an
indeterminate principal amount of Subordinated Debt Securities as may be
sold from time to time by the Registrant. If any such Subordinated Debt
Securities are issued at an original issue discount, then the offering
price shall be in such greater principal amount as shall result in an
aggregate initial offering price of up to $200,000,000.
(5) Subject to Footnote (3), there are being registered hereunder an
indeterminate number of shares of Common Stock as may be sold from time to
time by the Registrant. There are also being registered hereunder an
indeterminate number of shares of Common Stock as may be issued upon
conversion of the Subordinated Debt Securities or Preferred Stock or upon
exercise of the Warrants.
(6) Subject to Footnote (3), there are being registered hereunder an
indeterminate number of shares of Preferred Stock as may be sold from time
to time by the Registrant.
(7) Subject to Footnote (3), there are being registered hereunder an
indeterminate number of Warrants as may be sold from time to time by
Registrant.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
<PAGE>
AMAX GOLD INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION PROSPECTUS HEADING
----------------------- ------------------
<S> <C>
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus................. Forepart of Registration Statement;
Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus............... Inside Front and Outside Back Cover
Pages
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges............................ The Company; Risk Factors; Ratio of
Earnings to Fixed Charges
4. Use of Proceeds.................... Use of Proceeds
5. Determination of Offering Price.... Plan of Distribution
6. Dilution........................... Not Applicable
7. Selling Security Holders........... Not Applicable
8. Plan of Distribution............... Plan of Distribution
9. Description of Securities to be
Registered......................... Description of Subordinated Debt
Securities; Description of Preferred
Stock; Description of Common Stock;
Description of Warrants
10. Interests of Named Experts and
Counsel............................ Experts; Legal Matters
11. Material Changes................... Not Applicable
12. Incorporation of Certain
Information by Reference........... Incorporation of Certain Information by
Reference
13. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities.................... Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THIS REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
JUNE , 1994
PROSPECTUS
[LOGO OF AMAX GOLD INC. APPEARS HERE]
SUBORDINATED DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
WARRANTS
Amax Gold Inc. (the "Company" or "Amax Gold") may offer from time to time (i)
subordinated debt securities ("Subordinated Debt Securities"), consisting of
debentures, notes, bonds and/or other unsecured subordinated evidences of
indebtedness in one or more series, (ii) shares of preferred stock, par value
$1.00 per share ("Preferred Stock"), in one or more series, (iii) shares of
common stock, par value $.01 per share ("Common Stock"), and (iv) warrants
("Warrants") to purchase Common Stock (the Subordinated Debt Securities,
Preferred Stock, Common Stock and Warrants are collectively referred to as the
"Securities"), at an aggregate initial offering price not to exceed
U.S.$200,000,000, at prices and on terms to be determined at the time of sale.
The accompanying Prospectus Supplement sets forth with regard to the particular
Securities in respect of which this Prospectus is being delivered (i) in the
case of Subordinated Debt Securities, the title, aggregate principal amount,
denominations (which may be in United States dollars, in any other currency,
currencies or currency unit, including the European Currency Unit), maturity,
rate, if any (which may be fixed or variable) or method of calculation thereof,
and time of payment of any interest, any terms for redemption at the option of
the Company or the holder, any terms for sinking fund payments, any conversion
or exchange rights, any modification of the covenants, any listing of such
Subordinated Debt Securities on a securities exchange and the initial public
offering price and any other terms in connection with the offering and sale of
such Subordinated Debt Securities, (ii) in the case of Preferred Stock, the
designation, aggregate principal amount, and stated value and liquidation
preference per share, initial public offering price, dividend rate (or method
of calculation), dates on which dividends shall be payable, any redemption or
sinking fund provisions, any conversion or exchange rights, whether the Company
has elected to offer the Preferred Stock in the form of depositary shares, any
listing of such Preferred Stock on a securities exchange, and any other terms
in connection with the offering and sale of such Preferred Stock; (iii) in the
case of Common Stock, the number of shares of Common Stock and the terms of the
offering and sale thereof; and (iv) in the case of Warrants, the number and
terms thereof, the number of shares of Common Stock issuable upon their
exercise, the exercise price, the periods during which the Warrants are
exercisable, any listing of such Warrants on a securities exchange and any
other terms in connection with the offering, sale and exercise of such
Warrants. The Prospectus Supplement will also contain information, as
applicable, about certain United States federal income tax considerations
relating to the Securities in respect of which this Prospectus is being
delivered.
SEE "RISK FACTORS" FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE
SECURITIES.
The Subordinated Debt Securities will be subordinated to all existing and
future Senior Indebtedness (as defined) of the Company. All or a portion of any
Subordinated Debt Securities may be issued in permanent global form.
The Company's outstanding Common Stock is listed on the New York Stock Exchange
(Symbol: "AU") and the Toronto Stock Exchange (symbol: "AXG"). Certain warrants
to purchase the Company's Common Stock are listed on the American Stock
Exchange and the Toronto Stock Exchange. Each Prospectus Supplement will
indicate if the Securities offered thereby will be listed on any securities
exchange.
The Company may sell Securities to or through one or more underwriters, and
also may sell Securities directly to other purchasers or through agents. Such
underwriters may include Salomon Brothers Inc. The accompanying Prospectus
Supplement sets forth the names of any underwriters or agents involved in the
sale of the Securities in respect of which this Prospectus is being delivered,
the principal amounts, if any, to be purchased by such underwriters and the
compensation, if any, of such underwriters or agents. See "Plan of
Distribution" herein.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is June , 1994
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
OR IN THE PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY UNDERWRITER, AGENT, DEALER OR OTHER PERSON. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES IN RESPECT OF WHICH THIS PROSPECTUS AND
THE ACCOMPANYING PROSPECTUS SUPPLEMENT ARE DELIVERED OR AN OFFER OF ANY
SECURITIES IN ANY JURISDICTION TO ANY PERSON WHERE SUCH AN OFFER WOULD BE
UNLAWFUL.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at its Regional
Offices located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can be obtained at prescribed
rates from the Public Reference Section of the Commission, 450 Fifth Street,
N.W. Plaza, Washington, D.C. 20549. The Company is also subject to the
information and reporting requirements of the securities regulatory
authorities of certain provinces of Canada and files similar reports, proxy
statements and other information with such authorities. The Common Stock is
listed on the New York and Toronto Stock Exchanges and certain warrants to
purchase Common Stock are listed on the American and Toronto Stock Exchanges.
Such reports, proxy statements and other information can also be inspected and
copied at the respective offices of these exchanges at the New York Stock
Exchange, 20 Broad Street, New York, New York 10005, the Toronto Stock
Exchange, 2 First Canadian Place, Toronto, Ontario, Canada M5X 1J2, and the
American Stock Exchange, 86 Trinity Place, New York, New York 10006-1881.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Securities offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all the information set forth in the Registration Statement,
certain parts of which have been omitted in accordance with the rules and
regulations of the Commission. Reference is hereby made to the Registration
Statement and the exhibits thereto for further information with respect to the
Company and the Securities. The Registration Statement and the exhibits
thereto can be obtained from or inspected and copied at the public reference
facilities maintained by the Commission as described in the prior paragraph.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed by the Company with the
Commission pursuant to the Exchange Act are incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1993.
2. Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1994.
3. Current Report on Form 8-K, dated March 7, 1994.
4. Registration Statement on Form 8-A, filed with the Commission on July
9, 1987, for the Company's Common Stock (File No. 1-9617); as amended
by Form 8, filed with the Commission on July 28, 1987.
2
<PAGE>
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Securities shall
be deemed to be incorporated herein by reference and to be a part hereof from
the date of filing of such documents.
Any statement contained herein, or in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein, shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein or in the
Prospectus Supplement modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will furnish without charge to each person, including any
beneficial owner of Securities, to whom this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the documents
incorporated by reference herein, except for the exhibits to such documents
(unless such exhibits are specifically incorporated by reference into such
documents). Requests should be directed to Investor Relations, 9100 East
Mineral Circle, Englewood, Colorado 80112. Telephone requests may be directed
to Investor Relations at (303) 643-5522.
3
<PAGE>
THE COMPANY
The Company is engaged in the mining and processing of gold and silver ore in
the United States and Chile, the sale of refined gold and silver bullion and
the exploration for, and acquisition and development of, gold-bearing
properties in North and South America. The Company's operating properties
consist of a 100% interest in the Sleeper mine, an open pit gold mine in
Humboldt County, Nevada; a 100% interest in the Hayden Hill mine, an open pit
gold mine in Lassen County, California; an indirect 90% interest in the Guanaco
mine, an open pit gold mine in the Guanaco Mining District approximately 145
miles southeast of Antofagasta, Chile; and a 100% interest in the Wind Mountain
mine, an open pit gold mine in Washoe County, Nevada, at which mining ceased on
January 30, 1992, although residual heap leach production has continued. The
Company, having realized all future economic benefit from its 33.53% interest
in the Waihi gold mine in New Zealand effective April 30, 1993, retains a
nominal interest in such mine. At December 31, 1993, the Company had
proven/probable gold reserves of approximately 268 million tons of ore
containing approximately 7.4 million ounces of gold. In 1993, the Company
produced approximately 210,900 ounces of gold and approximately 673,500 ounces
of silver.
The Company has two major gold development projects, Refugio and Fort Knox,
which are in advanced stages of development. The Refugio project is a large
scale, low grade gold deposit in central Chile in which the Company has an
indirect 50% interest. The Fort Knox project is a 100% owned, large scale, low
grade gold deposit located approximately 15 miles northeast of Fairbanks,
Alaska. Definitive feasibility studies have been completed with respect to both
of these projects. In addition, the Company has a 62.5% joint venture interest
in the Haile gold project in Lancaster County, South Carolina, which is in the
evaluation stage. Since these development projects are not on federal lands,
none of them would be subject to currently proposed legislation in Congress to
alter the General Mining Law. As a result of the Company's ongoing exploration
and development efforts, the Company also has the right to earn a 60% interest
in the Robertson property, an advanced-stage exploration prospect in Crescent
Valley, Nevada, by completing a bankable feasibility study by November 1994.
The Company was incorporated as a wholly-owned subsidiary of AMAX Inc., a New
York corporation ("Amax"), in April 1987 to acquire the gold interests of Amax
in the United States, Canada and the North Island of New Zealand. Amax sold
approximately 13% of the then outstanding shares of Common Stock of the Company
in the Company's initial public offering in July 1987. On November 15, 1993,
Amax was merged with and into Cyprus Minerals Company (the "Cyprus Amax
Merger"), which was renamed Cyprus Amax Minerals Company ("Cyprus Amax").
Immediately prior to the Cyprus Amax Merger, Amax, which at that time held
approximately 68% of the Company's outstanding Common Stock, distributed
approximately 21.8 million shares (approximately 28%) of the Company's Common
Stock (together with all of the outstanding shares of common stock of Alumax
Inc., a Delaware corporation that controlled Amax's aluminum business) in a
distribution to its stockholders. Immediately following the stock distribution
and the Cyprus Amax Merger, Cyprus Amax indirectly held approximately 31.3
million shares of the Company's Common Stock, which constituted approximately
40% of the then outstanding shares of Common Stock of the Company. Subsequent
to the Cyprus Amax Merger, the Company and Cyprus Amax entered into a $100
million double convertible revolving line of credit (the "DOCLOC Agreement"),
under which the Company could issue up to 12,099,213 shares of Common Stock to
Cyprus Amax, and a stock purchase agreement providing for the purchase of
3,000,000 shares of the Company's Common Stock by Cyprus Amax (the "Stock
Purchase Agreement"), both of which agreements are subject to stockholder
approval. The issuance of Common Stock under these two agreements with Cyprus
Amax could potentially increase Cyprus Amax's share of the outstanding shares
of the Company's Common Stock to approximately 46.4 million shares (or
approximately 49.7% prior to any sale of Securities hereunder). See "Risk
Factors--Stock Ownership of Cyprus Amax."
The Company's Common Stock is listed on the New York and Toronto Stock
Exchanges and certain warrants to purchase the Company's Common Stock are
listed on the American and Toronto Stock Exchanges. The Company's executive
offices are located at 9100 East Mineral Circle, Englewood, Colorado 80112, and
its telephone number is (303) 643-5500.
4
<PAGE>
RISK FACTORS
Prospective purchasers of Securities should carefully read this Prospectus,
any Prospectus Supplement delivered herewith, and the documents incorporated by
reference herein and therein. Ownership of Securities involves certain risks.
In determining whether to purchase Securities, prospective investors should
consider carefully the following risk factors and the other information
contained in this Prospectus, in addition to the other risk factors and
information set forth in any Prospectus Supplement delivered herewith.
PROJECT DEVELOPMENT RISKS
The Company's principal development projects are an indirect 50% interest in
the Refugio gold project and a 100% interest in the Fort Knox gold project. In
addition, the Company has a 62.5% joint venture interest in the Haile gold
project. The Company has completed feasibility studies for the Refugio and Fort
Knox projects. There can be no assurance, however, that all of the remaining
permits and regulatory approvals required for development of these projects
will be issued in the time frame contemplated by the Company. Currently, the
Company estimates that the additional capital expenditures for the Refugio and
Fort Knox projects will total approximately $370 million to $410 million (of
which the Company's share is between $310 million and $340 million in addition
to capitalized acquisition and development costs of approximately $205 million
as of December 31, 1993). The Company's estimated capital expenditures for the
Refugio and Fort Knox projects are based upon currently available data and
could increase or decrease depending upon a number of factors beyond the
Company's control. In addition, the Company will not be able to commence
construction until financing has been arranged. There can be no assurance that
such financing can be arranged. Production will not commence until virtually
all of the capital expenditures have been incurred. If capital expenditures are
higher than currently estimated, additional financing may be required, and
there can be no assurance that such additional financing will be available.
Development projects have no operating history upon which to base estimates
of future cash operating costs. Particularly for development projects,
estimates of reserves and cash operating costs are, to a large extent, based
upon the interpretation of geologic data obtained from drill holes and other
sampling techniques, and feasibility studies which derive estimates of cash
operating costs based upon anticipated tonnage and grades of ore to be mined
and processed, the configuration of the ore body, expected recovery rates of
the gold from the ore, comparable facility and equipment operating costs,
anticipated climatic conditions and other factors. As a result, it is possible
that actual cash operating costs and economic returns may differ significantly
from those currently estimated. It is not unusual in new mining operations to
experience unexpected problems during the start-up phase. For example, the
Company experienced such problems at its Hayden Hill mine during the second
half of 1992 and the first half of 1993. See "--Reserve Estimates."
GOLD PRICE VOLATILITY
The profitability of the Company's operations can be significantly affected
by changes in the market price of gold. The market price of gold has fluctuated
widely and is affected by numerous factors beyond the Company's control,
including international economic trends, currency exchange fluctuations,
expectations for inflation, speculative activities, consumption patterns (such
as purchases of gold jewelry and the development of gold coin programs),
purchases and sales of gold bullion holdings by central banks or other large
gold bullion holders or dealers and global or regional political events,
particularly in major gold-producing countries such as South Africa and some of
the countries that formerly comprised the Soviet Union. Gold market prices are
also affected by worldwide production levels, which have increased in recent
years. The aggregate effect of these factors, all of which are beyond the
Company's control, is impossible for the Company to predict. In addition, the
market price of gold has on occasion been subject to rapid short-term changes
because of market speculation. The following table sets forth
5
<PAGE>
for the years indicated the high and low selling prices of gold, first
position, as provided by the Commodity Exchange, Inc. ("COMEX") in New York and
the approximate average selling price for such years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1994(1) 1993 1992 1991 1990 1989 1988 1987
------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High................................. $394 $407 $359 $403 $422 $419 $487 $497
Low.................................. $371 $326 $330 $344 $347 $358 $394 $392
Average.............................. $383 $360 $344 $362 $384 $382 $437 $447
</TABLE>
- --------
(1) Through May 31, 1994.
If the gold price is below the Company's cash production costs and remains
below such level for any sustained period, the Company could experience
additional losses and could determine that it is not economically feasible to
continue commercial production at some or all of its operations or to continue
the development of some or all of its projects. While the Company has
historically used hedging techniques successfully to reduce the Company's
exposure to such volatility, there can be no assurance that it will be able to
do so effectively in the future.
RESERVE ESTIMATES
While the Company's ore reserves have been reviewed by independent
consultants, the ore reserve estimates presented in this Prospectus or
incorporated herein by reference are necessarily imprecise and depend to some
extent on statistical inferences drawn from limited drilling, which may, on
occasion, prove unreliable. Should the Company encounter mineralization or
formations at any of its mines or projects different from those predicted by
drilling, sampling and similar examinations, reserve estimates may have to be
adjusted and mining plans may have to be altered in a way that might adversely
affect the Company's operations. Moreover, short-term operating factors
relating to the ore reserves, such as the need for sequential development of
ore bodies and the processing of new or different ore grades, may adversely
affect the Company's profitability in any particular accounting period.
Declines in the market price of gold may also render ore reserves containing
relatively lower grades of gold mineralization, such as those currently
identified at the Company's Hayden Hill mine and at the Company's Refugio and
Fort Knox projects, uneconomic to exploit unless the utilization of forward
sales or other hedging techniques is sufficient to offset the effects of a drop
in the market price of the gold expected to be mined from such reserves.
Proven/probable reserves at the Company's mines and development projects were
calculated at December 31, 1993 based upon varying gold prices ranging from
$300 per ounce of gold for Refugio to $375 and $400 per ounce of gold for the
Company's other properties. If the Company's realized price per ounce of gold,
including hedging benefits, were to decline substantially below these levels
for an extended period, there could be material delays in the development of
new projects, increased net losses, reduced cash flow, reductions in reserves
and asset write-downs.
In July 1993, the Company determined, as a result of its first year's mining
experience and a thorough reevaluation of geologic data, that the mill grade
ore at the Hayden Hill mine occurs in thinner, less continuous structures than
was originally interpreted. As a result, the Company restated its
proven/probable reserves at Hayden Hill to reclassify a significant portion of
the deposit as a geologic resource until such time, if ever, that additional
data from drilling and further mining establish otherwise. As a result of the
restatement of the Hayden Hill reserves and the decision to reconfigure the
mine as a heap leach operation and place the mill on standby status, the
Company recognized a $64.1 million pre-tax ($41.9 million after-tax) write-down
of the Hayden Hill asset as of June 30, 1993. In addition, after seven years of
operation, recent production experience and a reinterpretation of geologic and
metallurgical data at the Sleeper mine during the fourth quarter of 1993 led to
a reduction of the proven/probable ore reserves at that mine. As a result, Amax
Gold recognized a $23.6 million pre-tax ($15.6 million after-tax) write-down of
the Sleeper asset as of December 31, 1993. See Note 7 to Consolidated Financial
Statements in the Company's 1993 Form 10-K incorporated by reference herein.
6
<PAGE>
ENVIRONMENTAL RISKS
Mining is subject to potential risks and liabilities associated with
pollution of the environment and the disposal of waste products occurring as a
result of mineral exploration and production. Insurance against environmental
risks (including potential liability for pollution or other hazards as a result
of the disposal of waste products occurring from exploration and production) is
not generally available at a reasonable price to the Company or to other
companies within the industry. To the extent the Company is subject to
environmental liabilities, the payment of such liabilities would reduce funds
otherwise available to the Company and could have a material adverse effect on
the Company. Should the Company be unable to fully fund the cost of remedying
an environmental problem, the Company might be required to suspend operations
or enter into interim compliance measures pending completion of the required
remedy. The potential exposure may be significant and could have a material
adverse effect on the Company.
In the context of environmental permitting, including the approval of
reclamation plans, the Company must comply with standards, laws and regulations
which may entail greater or lesser costs and delays depending on the nature of
the activity to be permitted and how stringently the regulations are
implemented by the permitting authority. It is possible that the costs and
delays associated with compliance with such laws, regulations and permits could
become such that the Company would not proceed with the development of a
project or the operation or further development of a mine. Laws and regulations
involving the protection and remediation of the environment are constantly
changing and are generally becoming more restrictive. The Company has made, and
expects to make in the future, significant expenditures to comply with such
laws and regulations.
Pending bills which affect environmental laws applicable to mining include
versions which may substantially alter the Clean Water Act, Safe Drinking Water
Act, Endangered Species Act and a bill which will introduce additional
protection of wetlands (Wetlands Protection and Management Act). Adverse
developments and operating requirements in these acts could impair the ability
of the Company as well as others to develop mineral resources. Revisions to
current versions of these bills could occur prior to passage.
The Environmental Protection Agency ("EPA") continues the development of a
solid waste regulatory program specific to mining operations under the Resource
Conservation and Recovery Act ("RCRA"). Of particular concern to the mining
industry is a proposal by EPA titled "Recommendations for a Regulatory Program
for Mining Waste and Materials Under Subtitle D of the Resource Conservation
and Recovery Act" ("Strawman II") which, if implemented, would create a system
of comprehensive federal regulation of the entire mine site. Many of these
requirements would be duplicative of existing state regulations. Strawman II as
currently proposed would regulate not only mine and mill wastes, but also
numerous production facilities and processes which could limit internal
flexibility in operating a mine. To implement Strawman II as proposed, the EPA
must seek additional statutory authority, which is expected to be requested in
connection with Congress' reauthorization of the RCRA.
Operations at the Company's Guanaco mine and development of the Company's
Refugio project are subject to regulation under the laws of Chile. In March
1994, the country's first comprehensive environmental framework law became
effective. Among other things, this law (i) provides for the establishment of a
comprehensive program for the issuance of permits for future exploration and
mining activities, (ii) imposes the obligation to perform environmental impact
analyses for mining and exploration projects or activities, (iii) creates a
liability scheme for forms of environmental damage, and (iv) contemplates the
issuance of regulations which will impose operating standards. The full impact
of the new law on the mining industry in Chile is unclear at present.
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OTHER GOVERNMENTAL REGULATION
The Company's mining operations and exploration activities are subject to
extensive federal, state, local and foreign laws and regulations governing
prospecting, development, production, exports, taxes, labor standards,
occupational health, mine safety and other matters. The Company believes that
it is in substantial compliance with all such material laws and regulations.
New laws and regulations, amendments to existing laws and regulations, or more
stringent implementation of existing laws and regulations could have a material
adverse impact on the Company, prohibit, reduce or delay production at
operating mines or prevent the development of new mining properties.
PROPOSED FEDERAL LEGISLATION
The U.S. Congress is actively considering a proposed major revision of the
General Mining Law, which governs mining claims and related activities on
federal public lands. The Senate and House of Representatives each has passed a
separate bill for mining law revisions and following conference committee
action, a law is presently anticipated before the end of 1994. The Company
anticipates that when this law is effective, it will impose a royalty upon
production of minerals from federal lands and will contain new requirements for
mined land reclamation and similar environmental control and reclamation
measures. It remains unclear to what extent such new legislation will affect
existing mining claims and operations. The effect of any revision of the
General Mining Law on the Company's United States operations cannot be
determined conclusively until such revision is enacted; however, such
legislation could materially increase costs at Hayden Hill, which is primarily
located on federal lands, and could impair the Company's ability to develop
future mineral prospects on unpatented mining claims. Because the Refugio, Fort
Knox and Haile projects are not on federal lands, none of these projects would
be subject to such currently proposed federal legislation.
FOREIGN OPERATIONS
Foreign operations and investments are subject to the risks normally
associated with conducting business in foreign countries, including foreign
exchange controls and currency fluctuations, limitations on repatriation of
earnings, foreign taxation, laws or policies of particular countries, labor
disputes and uncertain political and economic environments as well as risks of
war and civil disturbances or other risks which could cause production
difficulties or stoppages, restrict the movement of funds or result in the
deprivation or loss of contract rights or the taking of property by
nationalization or expropriation without fair compensation. Foreign operations
could also be impacted by laws and policies of the United States affecting
foreign trade, investment and taxation. The Company currently has significant
operations and a significant development project in Chile, a nominal interest
in a mine in New Zealand and an option on an exploration prospect in Panama.
EXPLORATION RISKS
Mineral exploration, particularly for gold, is highly speculative in nature,
involves many risks and frequently is nonproductive. There can be no assurance
that the Company's mineral exploration efforts will be successful. Once
mineralization is discovered, it usually takes a number of years from the
initial phases of exploration until production is possible, during which time
the economic feasibility of production may change. Substantial expenditures are
required to establish ore reserves through drilling, to determine metallurgical
processes to extract the metal from the ore and, in the case of new properties,
to construct mining and processing facilities. As a result of these
uncertainties, no assurance can be given that the Company's exploration
programs will result in the expansion or replacement of existing reserves, some
of which are being depleted by current production.
The Company has entered into an Exploration Joint Venture Agreement (the
"Exploration JV") with Cyprus Amax effective January 1, 1994, under which the
Company and Cyprus Amax will pool their efforts for the principal purpose of
discovering and developing future gold prospects, with Cyprus Amax providing
75% and the Company providing 25% of the initial exploration funding for such
prospects. Such Exploration JV is expected to broaden the geographic reach of
the Company's gold exploration
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<PAGE>
program and reduce its cost by sharing key personnel and spreading the high
risks associated with exploration. Nevertheless, the Company will initially
have only a 25% interest in any prospects discovered through the Exploration
JV. Cyprus Amax's 75% interest in gold prospects developed through the
Exploration JV will be available for Amax Gold to purchase prior to a decision
to place such prospect in production, but only at the then fair market value
for such interest (which may be determined by mutual agreement). This could
ultimately increase the Company's cost of acquiring such prospects.
MINING RISKS AND INSURANCE
The business of gold mining generally is subject to a number of risks and
hazards, including environmental hazards, industrial accidents and rock falls,
labor disputes, flooding, interruptions due to inclement or hazardous weather
conditions and other acts of God. Such risks could result in damage to, or
destruction of, mineral properties or production facilities, personal injury,
environmental damage, process and production delays, monetary losses and
possible legal liability. While the Company maintains through Cyprus Amax, and
intends to continue to maintain, insurance consistent with industry practice,
no assurance can be given that such insurance will continue to be available, be
available at economically acceptable premiums or be adequate to cover any
resulting liability.
TITLE TO PROPERTIES
The validity of unpatented mining claims, which constitute a significant
portion of the Company's property holdings in the United States, is often
uncertain and may be contested. Three of the Company's properties--the Sleeper
mine, the Wind Mountain mine and a portion of the Hayden Hill mine--are located
on unpatented federal lode and placer mining claims. In addition, most of the
Company's exploration properties in the United States also consist of
unpatented federal mining claims or leases of such claims. Unpatented mining
claims are unique property interests and are generally considered subject to
greater title risk than patented mining claims and real property interests
owned in fee simple. Substantially all of the Fort Knox property is located on
Alaska State mining claims which are subject to certain title risks similar to
those affecting federal unpatented mining claims. In addition, these lands have
been included in a list of lands submitted to the Alaska State Legislature to
help reconstitute the Alaska Mental Health Trust (the "Trust") pursuant to
legislation enacted in May 1994 amending legislation enacted in June 1991. If
the Fort Knox lands are conveyed to the Trust, the conveyance would be subject
to all encumbrances or interests of record, including the upland mining lease,
millsite permit and other permits already issued by the State of Alaska, and
rentals and royalties would be payable to the Trust rather than to the State of
Alaska. The Trust could potentially assert its interests with respect to any
applications for future permits or rights (or applications for material
modifications, if any, to existing permits or rights) and could at some time
attempt to increase the amount of royalties payable with respect to production
from the Fort Knox property.
The Company has filed a patent application with the United States Bureau of
Land Management ("BLM") for certain claims at its Sleeper mine, and the BLM has
issued a Mineral Entry Final Certificate for these claims; however, there can
be no assurance that the BLM will grant a patent for such claims. The Company
has not filed a patent application for any of its other properties and, under
proposed legislation to change the General Mining Law, patents may not be
obtainable for such other properties. Although the Company has attempted to
acquire satisfactory title to its undeveloped properties, the Company does not
generally obtain title opinions until financing is sought to develop a
property, with the attendant risk that title to some properties, particularly
title to undeveloped properties, may be defective. Mining operations in Chile
are conducted under concession or mining leases issued pursuant to applicable
laws.
9
<PAGE>
STOCK OWNERSHIP OF CYPRUS AMAX
As of March 31, 1994, Cyprus Amax held approximately 40% of the outstanding
shares of the Company's Common Stock. As a result of the DOCLOC Agreement and
the Stock Purchase Agreement, Cyprus Amax's share of outstanding shares of the
Company's Common Stock could potentially increase to approximately 49.7% prior
to any sale of Securities hereunder. Directors and officers of Cyprus Amax
comprised four of the six members of the Company's Board of Directors. Milton
H. Ward, Co-Chairman of the Board, President and Chief Executive Officer of
Cyprus Amax, is the Chairman of the Board, President and Chief Executive
Officer of Amax Gold; Mr. Gerald J. Malys, Senior Vice President and Chief
Financial Officer of Cyprus Amax, is a director of Amax Gold; Allen Born, Co-
Chairman of Cyprus Amax, is a director of Amax Gold; and Rockwell A. Schnabel,
a director of Cyprus Amax, is a director of Amax Gold.
The Company is also dependent upon Cyprus Amax with respect to the provision
of certain services to the Company including exploration, insurance,
accounting, cash management and other administrative services. These services
are provided by Cyprus Amax under agreements, some of which may be terminated
on 180 days prior notice. New agreements are currently being negotiated between
the Company and Cyprus Amax to replace certain agreements in place with Amax at
the time of the Cyprus Amax Merger. In addition, the Company rents its
principal offices from Cyprus Amax. As of March 31, 1994, the Company owed
$25.4 million to Cyprus Amax, primarily as a result of advances that were made
by Amax to the Company prior to the Cyprus Amax Merger, and Cyprus Amax had
guaranteed $53.7 million of the Company's indebtedness. In addition, pursuant
to the Stock Purchase Agreement, Cyprus Amax will purchase 3,000,000 shares of
Common Stock at a purchase price of $6.888 per share, the average closing price
per share of Common Stock for the ten-day period prior to the signing of the
commitment letter. The proceeds of the sale will be used to retire indebtedness
owed by Amax Gold to Cyprus Amax. Cyprus Amax has also entered into the DOCLOC
Agreement to make available to the Company a $100 million double convertible
revolving line of credit. Outstanding indebtedness under the DOCLOC Agreement
may be repaid by the Company issuing a like amount of its newly created $2.25
Series A Convertible Preferred Stock, which may be converted by Cyprus Amax
into a maximum of 12,099,213 shares of the Company's Common Stock at $8.265 per
share, a 20% premium over the average closing price per share of Common Stock
for the ten-day period prior to the signing of the commitment letter. The
Company will have the right to redeem such Convertible Preferred Stock with the
Company's Common Stock at a price per share equal to the greater of $5.854 or
the average closing price per share (up to $8.265) for a predetermined period
prior to redemption. The ability of the Company to issue its Series A
Convertible Preferred Stock to repay indebtedness owed to Cyprus Amax under the
DOCLOC Agreement and to issue Common Stock upon conversion or redemption of
such Series A Convertible Preferred Stock and the issuance of the shares of
Common Stock to Cyprus Amax under the Stock Purchase Agreement are conditioned
upon the Company's obtaining the approval of its stockholders by the
affirmative vote of 66 2/3% of the shares of the Company's outstanding Common
Stock which are not owned by Cyprus Amax and the affirmative vote of 50% of all
outstanding shares of the Company's Common Stock at a special meeting of
stockholders. The acquisition by Cyprus Amax of 3,000,000 shares of Common
Stock under the Stock Purchase Agreement, combined with the potential issuance
of up to 12,099,213 shares of Common Stock under the DOCLOC Agreement, could
increase Cyprus Amax's ownership of the Company's outstanding shares of Common
Stock to approximately 49.7%.
SUBORDINATED NATURE OF DEBT SECURITIES
The Subordinated Debt Securities are subordinated to all of the Company's
existing and future Senior Indebtedness. The Company may issue additional
Senior Indebtedness. The Common Stock and the Series A Preferred Stock are
junior to the Subordinated Debt Securities. The Subordinated Debt Securities
will be senior to any other class of capital stock that the Company may issue.
See "Description of Subordinated Debt Securities--Subordination."
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USE OF PROCEEDS
Unless a Prospectus Supplement indicates otherwise, the Company intends to
use the net proceeds to be received from the sale of the Securities to finance
the Company's operations, for the continued development of its gold projects,
for repayment of indebtedness, including indebtedness to Cyprus Amax, and for
other general corporate purposes. Pending the application of the net proceeds,
the Company expects to invest such proceeds in short-term, interest-bearing
instruments or other investment-grade securities.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the Company was as follows for the
three months ended March 31, 1994 and 1993, and the years ended December 31,
1993, 1992, 1991, 1990 and 1989:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------- ------------------------------
1994 1993 1993 1992 1991 1990 1989
------ ------ ---- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated ratio of earnings to
fixed charges (unaudited)....... -- -- -- 3.06x 19.85x 69.13x 37.92x
</TABLE>
For purposes of the ratio of earnings to fixed charges, "earnings" consist of
income before income taxes, before the cumulative effect of accounting changes
and the 10% minority interest in the losses of Compania Minera Amax Guanaco,
and excluding the Canamax Resources Inc. ("Canamax") equity losses and Canamax
write-downs, amortization of capitalized interest and fixed charges. "Fixed
charges" consist of total interest and bank fees, whether expensed or
capitalized, and one-third of rents, which management believes is a reasonable
approximation of an interest factor. For the three month periods ended March
31, 1994 and 1993, earnings were inadequate to cover fixed charges by $7.4
million and $9.0 million, respectively, due to operating losses. For the year
ended December 31, 1993, earnings were inadequate to cover fixed charges by
$121.8 million due to pre-tax asset write-downs of approximately $87.7 million
and operating losses.
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DESCRIPTION OF SUBORDINATED DEBT SECURITIES
The following description of the Subordinated Debt Securities sets forth
certain general terms and provisions of the Subordinated Debt Securities to
which any Prospectus Supplement may relate (the "Offered Debt Securities"). The
particular terms of any Offered Debt Securities and the extent, if any, to
which such general provisions may apply will be described in the Prospectus
Supplement relating to such Offered Debt Securities.
The Subordinated Debt Securities will be general unsecured subordinated
obligations of the Company. The Subordinated Debt Securities will be issued
under an Indenture (the "Indenture") to be entered into between the Company and
the trustee named in the Indenture. A copy of the form of the Indenture will be
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The trustee under the Indenture (and any successor thereto under the
Indenture) is referred to herein as the "Trustee." The statements herein
relating to the Subordinated Debt Securities and the Indenture are summaries
only and do not purport to be complete. Such summaries make use of terms
defined in the Indenture. Wherever such terms are used herein or particular
provisions of the Indenture are referred to, such terms or provisions, as the
case may be, are incorporated by reference as part of the statements made
herein, and such statements are qualified in their entirety by such reference.
Certain defined terms in the Indenture are capitalized herein.
GENERAL
The Indenture does not limit the aggregate principal amount of Subordinated
Debt Securities which can be issued thereunder and provides that Subordinated
Debt Securities may be issued from time to time thereunder in one or more
series, each in an aggregate principal amount authorized by Amax Gold prior to
issuance. The Subordinated Debt Securities may be issued at various times with
different maturity dates and different principal repayment provisions, may bear
interest at different rates, may be payable in currencies other than United
States dollars, in composite currencies or in amounts determined by reference
to the price, rate or value of one or more specified commodities, currencies or
indices, and may otherwise vary, all as provided in the Indenture. Subordinated
Debt Securities of a series may be issued in registered form without coupons
("Registered Debt Securities"), in bearer form with or without coupons attached
("Bearer Debt Securities") or in the form of one or more global securities in
registered or bearer form (each a "Global Security"). Bearer Securities, if
any, will be offered only to non-United States persons and to offices located
outside the United States of certain United States financial institutions.
Unless otherwise indicated in a Prospectus Supplement, the Subordinated Debt
Securities will not benefit from any covenant or other provision that would
afford holders of such Subordinated Debt Securities protection in the event of
a highly leveraged transaction involving Amax Gold.
Reference is made to the applicable Prospectus Supplement for the following
terms of the Offered Debt Securities: (i) the title and aggregate principal
amount of the Offered Debt Securities; (ii) the date or dates on which the
Offered Debt Securities will mature; (iii) the rate or rates (which may be
fixed or variable) per annum, if any, at which the Offered Debt Securities will
bear interest or the method of determining such rate or rates; (iv) the date or
dates from which such interest, if any, will accrue and the date or dates at
which such interest, if any, will be payable; (v) the terms for redemption or
early payment, if any, including any mandatory or optional sinking fund or
analogous provision; (vi) the terms for conversion or exchange, if any, of the
Offered Debt Securities; (vii) whether such Offered Debt Securities will be
issued as Registered Debt Securities, Bearer Debt Securities or any combination
thereof, and any limitations on issuance of such Bearer Debt Securities and any
provisions regarding the transfer or exchange of such Bearer Debt Securities),
including exchange for registered Offered Debt Securities of the same series);
(viii) whether such Offered Debt Securities will be issued in the form of one
or more global securities and whether such global securities are to be issued
in temporary global form or
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<PAGE>
permanent global form; (ix) information with respect to book-entry procedures,
if any; (x) the currency, currencies or currency unit or units in which such
Offered Debt Securities will be denominated and in which the principal of, and
premium and interest, if any, on such Offered Debt Securities will be payable;
(xi) whether, and the terms and conditions on which, Amax Gold or a holder may
elect that, or the other circumstances under which, payment of principal of (or
premium, if any) or interest, if any, on such Offered Debt Securities is to be
made in a currency or currencies or currency unit or units other than that in
which such Offered Debt Securities are denominated; (xii) each office or agency
where the Offered Debt Securities may be presented for registration of transfer
or exchange, if applicable; (xiii) the place or places where the principal of
(and premium, if any) or interest, if any, on the Offered Debt Securities will
be payable; (xiv) any additional covenants or events of default not currently
set forth in the Indenture that may be included in the terms of the Offered
Debt Securities; (xv) any index or formula to be used to determine the amount
of payments of principal of (and premium, if any) or interest, if any, on such
Offered Debt Securities, and any commodities, currencies, currency units or
indices, or value, rate or price, relevant to such determination; and (xvi) any
other specific terms of the Offered Debt Securities. Reference is also made to
the applicable Prospectus Supplement for information with respect to the price
(expressed as a percentage of the aggregate principal amount of the Offered
Debt Securities) at which the Offered Debt Securities will be issued, if other
than 100 percent.
No service charge will be made for any registration of transfer or exchange
of the Subordinated Debt Securities, but Amax Gold may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Company has from time to time entered into, and will in the future enter
into, credit agreements to fund its operations. Such credit agreements may be
secured by the assets of the Company, secured by the assets of the Company's
subsidiaries and/or guaranteed by the Company or the Company's subsidiaries. To
the extent that such credit agreements are so secured or guaranteed, the
lenders under such credit agreements will have priority over the holders of the
Subordinated Debt Securities with respect to the assets of the Company or its
subsidiaries which secure such credit agreements and guarantees.
Amax Gold currently conducts substantial operations through subsidiaries, and
the holders of Subordinated Debt Securities will have a junior position to any
claims of creditors and any preferred stockholders of the Company's
subsidiaries. Claims of creditors of such subsidiaries, including trade
creditors, secured creditors, taxing authorities and creditors holding
guarantees, and claims of holders of any such preferred stock will generally
have priority as to the assets of such subsidiaries over the claims and equity
interest of the Company and, thereby indirectly, the holders of indebtedness of
the Company, including the Subordinated Debt Securities.
Offered Debt Securities may be sold at a discount (which may be substantial)
below their stated principal amount bearing no interest or interest at a rate
which at the time of issuance is below market rates. Any material United States
federal income tax consequences and other special considerations applicable to
any Offered Debt Securities will be described in the Prospectus Supplement
relating to any such Offered Debt Securities.
If any of the Offered Debt Securities are sold for any foreign currency or
currency unit or if the principal of (or premium, if any) or interest, if any,
on any series of the Offered Debt Securities is payable in any foreign currency
or currency unit, the restrictions, elections, tax consequences, specific terms
and other information with respect to such issue of Offered Debt Securities and
such foreign currency or currency unit will be set forth in the Prospectus
Supplement relating thereto.
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SUBORDINATION
The payment of the principal of (and premium, if any) and interest, if any,
on the Subordinated Debt Securities is expressly subordinated, to the extent
and in the manner set forth in the Indenture, in right of payment to the prior
payment in full of all Senior Indebtedness of the Company.
In the event of any dissolution or winding up, or total or partial
liquidation or reorganization of the Company, whether in bankruptcy,
reorganization, insolvency, receivership or similar proceeding, the holders of
Senior Indebtedness will be entitled to receive payment in full of all amounts
due or to become due on or in respect of all Senior Indebtedness before the
holders of the Subordinated Debt Securities are entitled to receive any payment
on account of principal (or premium, if any) or interest, if any, on the
Subordinated Debt Securities.
In the event and during the continuation of any default in the payment of
principal of (or premium, if any) or interest on or other monetary obligation
with respect to any Senior Indebtedness beyond any applicable grace period with
respect thereto or, in the event that any event of default with respect to any
Senior Indebtedness shall have occurred and be continuing permitting the
holders of such Senior Indebtedness (or a trustee or other representative on
behalf of the holders thereof) to declare such Senior Indebtedness due and
payable prior to the date on which it would otherwise have become due and
payable, unless and until such event of default shall have been cured or waived
or shall have ceased to exist and, if any such Senior Indebtedness shall have
been accelerated, such acceleration shall have been rescinded or annulled, or
in the event any judicial proceeding shall be pending with respect to any such
default, then no Securities Payment shall be made.
The term "Senior Indebtedness" is defined in the Indenture as all amounts due
on and obligations in connection with any of the following, whether outstanding
at the date of execution of the Indenture, or thereafter incurred, assumed,
guaranteed or otherwise created (including, without limitation, interest
accruing on or after a bankruptcy or other similar event, whether or not an
allowed claim therein): (a) indebtedness, obligations and other liabilities
(contingent or otherwise) of the Company for money borrowed, or evidenced by
bonds, debentures, notes or similar instruments; (b) reimbursement obligations
and other liabilities (contingent or otherwise) of the Company with respect to
letters of credit or banker's acceptances issued for the account of the Company
and interest rate protection agreements and currency exchange or purchase
agreements; (c) obligations and liabilities (contingent or otherwise) related
to capitalized lease obligations of the Company; (d) indebtedness, obligations
and other liabilities (contingent or otherwise) of the Company related to
agreements or arrangements designed to protect the Company or any of its
subsidiaries against fluctuations in commodity prices, including, without
limitation, commodity futures contracts or similar hedging instruments; (e)
indebtedness of others of kinds described in the preceding clauses (a) through
(d) that the Company has assumed, guaranteed or otherwise assured the payment
of directly or indirectly; (f) any indebtedness of another person described in
the preceding clauses (a) through (e) secured by any mortgage, pledge, lien or
other encumbrance on any property owned or held by the Company; and (g) any and
all deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any indebtedness, obligations or liabilities
described in clauses (a) through (f); unless, in any case, the instrument
creating or evidencing such indebtedness, obligation, liability, guaranty,
assumption, deferral, renewal, extension or refunding provides that such
indebtedness, obligation, liability, guarantee, assumption, deferral, renewal,
extension or refunding is not senior in right of payment to the Subordinated
Debt Securities or that such indebtedness is pari passu with or junior to the
Subordinated Debt Securities.
CONVERSION OR EXCHANGE OF SUBORDINATED DEBT SECURITIES
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Subordinated Debt Securities, such series will be
convertible or exchangeable into Common Stock of the Company or other
securities (including rights to receive payments in cash or securities based on
the value, rate or price of one or more specified commodities, currencies,
currency units or indices) on the terms and conditions set forth therein.
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<PAGE>
COVENANTS
The Indenture requires the Company to covenant, among other things, with
respect to each series of Subordinated Debt Securities: (i) to duly and
punctually pay the principal of (and premium, if any) and interest, if any, on
such series of Subordinated Debt Securities; (ii) to maintain an office or
agency in each Place of Payment where Subordinated Debt Securities may be
presented or surrendered for payment, transferred or exchanged and where
notices to the Company may be served; (iii) if the Company shall act as its own
Paying Agent for any series of Subordinated Debt Securities, to segregate and
hold in trust for the benefit of the persons entitled thereto a sum sufficient
to pay the principal (and premium, if any) or interest, if any, so becoming
due; (iv) to deliver to the Trustee, within 120 days after the end of each
fiscal year, a written statement to the effect that the Company has fulfilled
all its obligations under the Indenture throughout such year; (v) to preserve
its corporate existence; (vi) to maintain its properties; and (vii) to pay its
taxes and other claims, in each case, as required by the Indentures. In
addition, the Prospectus Supplement with respect to any series of Subordinated
Debt Securities may describe additional covenants applicable to such series
which are not currently set forth in the Indenture.
EVENTS OF DEFAULT
Unless otherwise provided in the Prospectus Supplement with respect to any
series of Subordinated Debt Securities, the following are Events of Default
under the Indenture with respect to the Subordinated Debt Securities of such
series issued under the Indenture: (a) failure to pay principal of (or premium,
if any, on) any Subordinated Debt Security of such series when due; (b) failure
to pay interest, if any, on any Subordinated Debt Security of such series when
due, continued for 30 days; (c) failure to deposit any mandatory sinking fund
payment, when due, in respect of the Subordinated Debt Securities of such
series; (d) failure to perform any other covenant of the Company in the
Indenture (other than a covenant included in the Indenture for the benefit of a
series of Subordinated Debt Securities other than such series), continued for
60 days after written notice as provided in the Indenture; (e) certain events
of bankruptcy, insolvency or reorganization; and (f) any other Event of Default
as may be established with respect to Subordinated Debt Securities of such
series (including, without limitation, any Event of Default arising out of a
default which results in the acceleration of certain indebtedness or a default
in the payment of any amounts due on certain indebtedness). If an Event of
Default in clause (a), (b), (c), (d) or (f) above with respect to any
outstanding series of Subordinated Debt Securities occurs and is continuing,
either the Trustee or the holders of at least 25% in principal amount of all
outstanding Subordinated Debt Securities of such series may declare the
principal amount of all the Subordinated Debt Securities of the applicable
series to be due and payable immediately. If an Event of Default described in
clause (e) shall occur, the principal amount of the Subordinated Debt
Securities of all series ipso facto shall become and be immediately due and
payable without any declaration or other act on the part of the Trustee, any
holder or any other person. At any time after a declaration of acceleration has
been made, but before a judgment has been obtained, the holders of a majority
in principal amount of the outstanding Subordinated Debt Securities of such
series (or of all outstanding Subordinated Debt Securities under the Indenture,
as the case may be) may, under certain circumstances, rescind and annul such
acceleration. In addition, the Prospectus Supplement with respect to any series
of Subordinated Debt Securities may describe additional Events of Default
applicable to such series which are not currently set forth in the Indenture.
The Indenture provides that the Trustee will, within 90 days after receipt of
notice of the occurrence of a default in respect of any series of Subordinated
Debt Securities, give to the holders of the Subordinated Debt Securities of
such series notice of all uncured and unwaived defaults known to it; provided,
however, that, except in the case of a default in the payment of the principal
of (or premium, if any) or any interest on, or any sinking fund installment
with respect to, any Subordinated Debt Securities of such series, the Trustee
will be protected in withholding such notice if it in good faith determines
that the withholding of such notice is in the interest of the holders of the
Subordinated Debt Securities of such series; and provided, further, that such
notice shall not be given until at least 30 days after the occurrence of a
default in the performance, or breach, of any covenant or warranty of the
Company under the
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Indenture other than for the payment of the principal of (or premium, if any)
or any interest on, or any sinking fund installment with respect to, any
Subordinated Debt Securities of such series. For the purpose of this provision,
"default" with respect to Subordinated Debt Securities of any series means any
event which is, or after notice or lapse of time, or both, would become, an
Event of Default with respect to the Subordinated Debt Securities of such
series.
The holders of a majority in principal amount of the outstanding Subordinated
Debt Securities of any series (or, in certain cases, of all outstanding
Subordinated Debt Securities under the Indenture) have the right, subject to
certain limitations, to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to the Subordinated Debt Securities
of such series (or of all outstanding Subordinated Debt Securities under the
Indenture, as the case may be). Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any of the holders of the Subordinated Debt Securities unless
they shall have offered to the Trustee reasonable security or indemnity against
the costs, expenses and liabilities which might be incurred by it in compliance
with such request.
The holders of a majority in principal amount of the outstanding Subordinated
Debt Securities of any series (or, in certain cases, of all outstanding
Subordinated Debt Securities under the Indenture) may on behalf of the holders
of all Subordinated Debt Securities of such series (or of all outstanding
Subordinated Debt Securities under the Indenture, as the case may be) waive any
past default under the Indenture, except a default in the payment of the
principal of (or premium, if any) or interest on any Subordinated Debt Security
or in respect of a provision which under the Indenture cannot be modified or
amended without the consent of the holder of each outstanding Subordinated Debt
Security affected. The holders of a majority in principal amount of the
outstanding Subordinated Debt Securities affected thereby may, on behalf of the
holders of all such Subordinated Debt Securities, waive compliance by Amax Gold
with certain restrictive provisions of the Indenture.
Amax Gold is required to furnish to the Trustee annually a statement as to
the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MODIFICATION
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the holders of a majority in principal amount
of the outstanding Subordinated Debt Securities; provided, however, that no
such modification or amendment may, without the consent of the holder of each
outstanding Subordinated Debt Security affected thereby, (a) change the stated
maturity date of the principal of, or any installment of interest on, any
Subordinated Debt Security, (b) reduce the principal amount of, or the premium
(if any) or interest on, any Subordinated Debt Security, (c) change the Place
of Payment or currency, currencies, or currency unit or units of payment of
principal of, or premium (if any) or interest on, any Subordinated Debt
Security, (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any Subordinated Debt Security or (e) reduce the
percentage in principal amount of outstanding Subordinated Debt Securities the
consent of whose holders is required for modification or amendment of the
Indenture or for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults.
The Indenture provides that Amax Gold and the Trustee may, without the
consent of any holders of Subordinated Debt Securities, enter into supplemental
indentures for the purposes, among other things, of adding to the Company's
covenants, securing the Subordinated Debt Securities, adding additional Events
of Default or curing ambiguities or inconsistencies in the Indenture, provided
any such action to cure ambiguities or inconsistencies shall not adversely
affect the interests of the holders of the Subordinated Debt Securities in any
material respect.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
Amax Gold, without the consent of any holders of outstanding Subordinated
Debt Securities, may consolidate with or merge into, or convey, transfer or
lease its assets substantially as an entirety to, any person, provided that the
person formed by such consolidation or into which Amax Gold is merged or which
acquires or leases the assets of Amax Gold substantially as an entirety is a
corporation, partnership or trust organized under the laws of any United States
jurisdiction and assumes by supplemental indenture the Company's obligations on
the Securities and under the Indenture, that after giving effect to the
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing, and that certain other conditions are met. Upon compliance with
these provisions by a successor person, Amax Gold will be relieved of its
obligations under the Indenture and the Subordinated Debt Securities.
DISCHARGE AND DEFEASANCE
Unless the Prospectus Supplement in respect of any series of Subordinated
Debt Securities shall state otherwise, Amax Gold may terminate its obligations
under the Indenture with respect to Subordinated Debt Securities of any series,
other than its obligation to pay the principal of (and premium, if any) and
interest on such Subordinated Debt Securities and certain other obligations, if
(i) Amax Gold irrevocably deposits or causes to be irrevocably deposited with
the Trustee as trust funds money or U.S. Government Obligations maturing as to
principal and interest sufficient to pay the principal of, any interest on, and
any mandatory sinking funds in respect of, all outstanding Subordinated Debt
Securities of such series on the stated maturity of such payments or on any
redemption date, (ii) Amax Gold has delivered to the Trustee an opinion of
counsel to the effect that the holders of Subordinated Debt Securities of such
series will not recognize income, gain or loss for United States federal income
tax purposes as a result of such discharge and will be subject to United States
federal income tax on the same amount and in the same manner and at the same
time as would have been the case if such discharge had not occurred, (iii) Amax
Gold complies with any additional conditions specified to be applicable with
respect to the covenant defeasance of Subordinated Debt Securities of such
series, and (iv) no default or Event of Default with respect to the
Subordinated Debt Securities of such issue shall have occurred and be
continuing on the date of such deposit or, in so far as they relate to certain
events of bankruptcy or insolvency, at any time in the period ending on the
91st day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such period).
The terms of any series of Subordinated Debt Securities may also provide for
legal defeasance pursuant to the Indenture. In such case, if Amax Gold (i)
irrevocably deposits or causes to be irrevocably deposited money or U.S.
Government Obligations as described above and complies with the other
provisions described above (except that the opinion referred to in clause (ii)
above must be based on a ruling by the Internal Revenue Service or other change
under applicable federal income tax law), (ii) makes a request to the Trustee
to be discharged from its obligations on the Subordinated Debt Securities of
such series and (iii) complies with any additional conditions specified to be
applicable with respect to legal defeasance of Securities of such series, then
Amax Gold shall be deemed to have paid and discharged the entire indebtedness
on all the outstanding Subordinated Debt Securities of such series and the
obligations of Amax Gold under the Indenture and the Subordinated Debt
Securities of such series to pay the principal of (and premium, if any) and
interest on the Subordinated Debt Securities of such series shall cease,
terminate and be completely discharged, and the holders thereof shall
thereafter be entitled only to payment out of the money or U.S. Government
Obligations deposited with the Trustee as aforesaid, unless Amax Gold's
obligations are revived and reinstated because the Trustee is unable to apply
such trust fund by reason of any legal proceeding, order or judgment.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Subordinated Debt Securities are issuable in definitive form as Registered
Debt Securities, as Bearer Debt Securities or both. Unless otherwise indicated
in an applicable Prospectus Supplement, Bearer Debt Securities will have
interest coupons attached. Subordinated Debt Securities are also issuable in
temporary or permanent global form.
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Registered Debt Securities of any series will be exchangeable for other
Registered Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations. In addition, with
respect to any series of Bearer Debt Securities, at the option of the holder,
subject to the terms of the Indenture, such Bearer Debt Securities (with all
unmatured coupons, except as provided below, and all matured coupons in
default) will be exchangeable into Registered Debt Securities of the same
series of any authorized denominations and of a like aggregate principal amount
and tenor. Bearer Debt Securities surrendered in exchange for Registered Debt
Securities between a Regular Record Date or a Special Record Date and the
relevant date for payment of interest shall be surrendered without the coupon
relating to such date for payment of interest, and interest accrued as of such
date will not be payable in respect of the Registered Debt Security issued in
exchange for such Bearer Debt Security, but will be payable only to the holder
of such coupon when due in accordance with the terms of the Indenture.
In connection with its sale during the restricted period (as defined below),
no Bearer Debt Security (including a Subordinated Debt Security in permanent
global form that is either a Bearer Debt Security or exchangeable for Bearer
Debt Securities) shall be mailed or otherwise delivered to any location in the
United States (as defined under "--Limitations on Issuance of Bearer Debt
Securities") and a Bearer Debt Security may be delivered outside the United
States in definitive form in connection with its original issuance only if
prior to delivery the person entitled to receive such Bearer Debt Security
furnishes written certification, in the form required by the Indenture, to the
effect that such Bearer Debt Security is owned by: (a) a person (purchasing for
its own account) who is not a United States person (as defined under "--
Limitations on Issuance of Bearer Debt Securities"); (b) a United States person
who (i) is a foreign branch of a United States financial institution purchasing
for its own account or for resale or (ii) acquired such Bearer Debt Security
through the foreign branch of a United States financial institution and who for
purposes of the certification holds such Bearer Debt Security through such
financial institution on the date of certification and, in either case, such
United States financial institution certifies to Amax Gold or the distributor
selling the Bearer Debt Security within a reasonable time stating that it
agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"), and
the regulations thereunder, or (c) a United States or foreign financial
institution for purposes of resale within the "restricted period" as defined in
United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7). A financial
institution described in clause (c) of the preceding sentence (whether or not
also described in clauses (a) and (b)) must certify that it has not acquired
the Bearer Debt Security for purpose of resale, directly or indirectly, to a
United States person or to a person within the United States or its
possessions. In the case of a Bearer Debt Security in permanent global form,
such certification must be given in connection with notation of a beneficial
owner's interest therein in connection with the original issuance of such
Subordinated Debt Security or upon exchange of a portion of a temporary global
Subordinated Debt Security.
Subordinated Debt Securities may be presented for exchange as provided above,
and Registered Debt Securities may be presented for registration of transfer
(with the form of transfer endorsed thereon duly executed), at the office of
the Security Registrar or at the office of any transfer agent designated by
Amax Gold for such purpose with respect to any series of Subordinated Debt
Securities and referred to in the applicable Prospectus Supplement, without a
service charge and upon payment of any taxes and other governmental charges as
described in the Indenture. Such transfer or exchange will be effected upon the
Security Registrar or such transfer agent, as the case may be, being satisfied
with the documents of title and identity of the person making the request. Amax
Gold has appointed the Trustee as Security Registrar. If a Prospectus
Supplement refers to any transfer agents (in addition to the Security
Registrar) initially designated by Amax Gold with respect to any series of
Subordinated Debt Securities, Amax Gold may at any time rescind the designation
of any such transfer agent or approve a change in the location through which
any such transfer agent acts, except that, if Subordinated Debt Securities of a
series are issued solely as Registered Debt Securities, Amax Gold will be
required to maintain a transfer
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agent in each Place of Payment for such series and, if Subordinated Debt
Securities of a series are issued as Bearer Debt Securities, Amax Gold will be
required to maintain (in addition to the Security Registrar) a transfer agent
in a Place of Payment located outside the United States for Bearer Securities
of such series. Amax Gold may at any time designate additional transfer agents
with respect to any series of Subordinated Debt Securities.
In the event of any redemption in part, Amax Gold shall not be required to
(i) issue, register the transfer of or exchange Subordinated Debt Securities of
any series during a period beginning at the opening of business 15 days prior
to the selection of Subordinated Debt Securities of that series for redemption
and ending on the close of business on (A) if Subordinated Debt Securities of
the series are issued only as Registered Debt Securities, the day of mailing of
the relevant notice of redemption and (B) if Subordinated Debt Securities of
the series are issued as Bearer Debt Securities, the day of the first
publication of the relevant notice of redemption except that, if Securities of
the series are also issued as Registered Debt Securities and there is no
publication, the day of mailing of the relevant notice of redemption; (ii)
register the transfer of or exchange any Registered Debt Security, or portion
thereof, called for redemption, except the unredeemed portion of any Registered
Debt Security being redeemed in part; or (iii) exchange any Bearer Debt
Security called for redemption, except to exchange such Bearer Debt Security
for a Registered Debt Security of that series and like tenor which is
simultaneously surrendered for redemption.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and any premium) and interest on Bearer Debt Securities will
be payable, subject to any applicable laws and regulations in the designated
currency or currency unit, at the offices of such Paying Agents outside the
United States as Amax Gold may designate from time to time, at the option of
the holder, by check or by transfer to an account maintained by the payee with
a bank located outside the United States; provided, however, that the written
certification described above under "--Form, Exchange, Registration and
Transfer" has been delivered prior to the first actual payment of interest.
Unless otherwise indicated in the applicable Prospectus Supplement, payment of
interest on Bearer Debt Securities on any Interest Payment Date will be made
only against surrender to the Paying Agent of the coupon relating to such
Interest Payment Date. No payment with respect to any Bearer Debt Security will
be made at any office or agency of Amax Gold in the United States or by check
mailed to any address in the United States or by transfer to any account
maintained with a bank located in the United States, nor shall any payments be
made in respect of Bearer Debt Securities upon presentation to Amax Gold or its
designated Paying Agents within the United States. Notwithstanding the
foregoing, payments of principal of (and any premium) and interest on Bearer
Debt Securities denominated and payable in U.S. dollars will be made at the
office of Amax Gold's Paying Agent in the United States, if (but only if)
payment of the full amount thereof in U.S. dollars at all offices or agencies
outside the United States is illegal or effectively precluded by exchange
controls or other similar restrictions.
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and any premium) and interest on Registered Debt Securities
will be made in the designated currency or currency unit at the office of such
Paying Agent or Paying Agents as Amax Gold may designate from time to time,
except that at the option of Amax Gold payment of any interest may be made by
check mailed to the address of the person entitled thereto as such address
shall appear in the Security Register. Unless otherwise indicated in an
applicable Prospectus Supplement, payment of any installment of interest on
Registered Debt Securities will be made to the person in whose name such
Registered Debt Security is registered at the close of business on the Regular
Record Date for such interest.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporate Trust Office of the Trustee will be designated as a Paying Agent for
Amax Gold for payments with respect to
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Subordinated Debt Securities which are issuable solely as Registered Debt
Securities, and Amax Gold will maintain a Paying Agent outside the United
States for payments with respect to Subordinated Debt Securities (subject to
limitations described above in the case of Bearer Debt Securities) which are
issued solely as Bearer Debt Securities, or as both Registered Debt Securities
and Bearer Debt Securities. Any Paying Agents outside the United States and any
other Paying Agents in the United States initially designated by Amax Gold for
the Subordinated Debt Securities will be named in an applicable Prospectus
Supplement. Amax Gold may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent or approve a change in the office
through which any Paying Agent acts, except that, if Subordinated Debt
Securities of a series are issued solely as Registered Debt Securities, Amax
Gold will be required to maintain a Paying Agent in each Place of Payment for
such series and, if Subordinated Debt Securities of a series are issued as
Bearer Securities, Amax Gold will be required to maintain (i) a Paying Agent in
the United States for principal payments with respect to any Registered Debt
Securities of the series (and for payments with respect to Bearer Debt
Securities of the series in the circumstances described above, but not
otherwise), and (ii) a Paying Agent in a Place of Payment located outside the
United States where Securities of such series and any coupons appertaining
thereto may be presented and surrendered for payment.
All moneys paid by Amax Gold to a Paying Agent for the payment of principal
of and any premium or interest on any Subordinated Debt Security which remain
unclaimed at the end of three years after such principal, premium or interest
shall have become due and payable will (subject to applicable escheat laws) be
repaid to Amax Gold and the holder of such Subordinated Debt Security or any
coupon will thereafter look only to Amax Gold for payment thereof.
TEMPORARY GLOBAL SECURITIES
If so specified in the applicable Prospectus Supplement, all or any portion
of the Subordinated Debt Securities of a series which are issuable as Bearer
Debt Securities will initially be represented by one or more temporary global
Subordinated Debt Securities, without interest coupons, to be deposited with a
common depository in London for the Euroclear System ("Euroclear") and CEDEL
S.A. ("CEDEL") for credit to the designated accounts. On and after the date
determined as provided in any such temporary global Subordinated Debt Security
and described in the applicable Prospectus Supplement, each such temporary
global Subordinated Debt Security will be exchangeable for definitive Bearer
Debt Securities, definitive Registered Debt Securities or all or a portion of a
permanent global security, or any combination thereof, as specified in the
applicable Prospectus Supplement, but, unless otherwise specified in the
applicable Prospectus Supplement, only upon written certification in the form
and to the effect described under "--Form, Exchange, Registration and
Transfer." No Bearer Debt Security delivered in exchange for a portion of a
temporary global Subordinated Debt Security will be mailed or otherwise
delivered to any location in the United States in connection with such
exchange.
Unless otherwise specified in the applicable Prospectus Supplement, interest
in respect of any portion of a temporary global Subordinated Debt Security
payable in respect of an Interest Payment Date occurring prior to the issuance
of definitive Subordinated Debt Securities or a permanent global Subordinated
Debt Security will be paid to each of Euroclear and CEDEL with respect to the
portion of the temporary global Subordinated Debt Security held for its
account. Each of Euroclear and CEDEL will undertake in such circumstances to
credit such interest received by it in respect of a temporary global
Subordinated Debt Security to the respective accounts for which it holds such
temporary global Subordinated Debt Security only upon receipt in each case of
written certification in the form and to the effect described above under "--
Form, Exchange, Registration and Transfer" as of the relevant Interest Payment
Date regarding the portion of such temporary global Subordinated Debt Security
on which interest is to be so credited.
PERMANENT GLOBAL SECURITIES
If any Subordinated Debt Securities of a series are issuable in permanent
global form, the applicable Prospectus Supplement will describe the
circumstances, if any, under which beneficial owners of
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interests in any such permanent global Subordinated Debt Securities may
exchange such interests for Subordinated Debt Securities of such series and of
like tenor and principal amount in any authorized form and denomination. No
Bearer Debt Security delivered in exchange for a portion of a permanent global
Subordinated Debt Security shall be mailed or otherwise delivered to any
location in the United States in connection with such exchange. A person having
a beneficial interest in a permanent global Subordinated Debt Security, will,
except with respect to payment of principal of and any premium and interest on
such permanent global Subordinated Debt Security, be treated as a holder of
such principal amount of Outstanding Debt Securities represented by such
permanent global Subordinated Debt Security as shall be specified in a written
statement of the holder of such permanent global Subordinated Debt Security or,
in the case of a permanent global Subordinated Debt Security in bearer form, of
the operator of Euroclear or CEDEL which is provided to the Trustee by such
person. Principal of and any premium and interest on a permanent global
Subordinated Debt Security will be payable in the manner described in the
applicable Prospectus Supplement.
BOOK-ENTRY DEBT SECURITIES
The Subordinated Debt Securities of a series may be issued, in whole or in
part, in the form of one or more global Subordinated Debt Securities that would
be deposited with a depository or its nominee identified in the applicable
Prospectus Supplement. The specific terms of any depository arrangement with
respect to any portion of a series of Subordinated Debt Securities and the
rights of, and limitations on, owners of beneficial interests in any such
global Subordinated Debt Security representing all or a portion of a series of
Subordinated Debt Securities will be described in the applicable Prospectus
Supplement.
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES
In compliance with United States federal tax laws and regulations, Bearer
Debt Securities (including securities in permanent global form that are either
Bearer Debt Securities or exchangeable for Bearer Debt Securities) will not be
offered or sold during the restricted period (as defined in United States
Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)) (generally, the first 40
days after the closing date, and, with respect to unsold allotments, until
sold) within the United States or to United States persons (each as defined
below) other than to an office located outside the United States of a United
States financial institution (as defined in Section 1.165-12(c)(1)(v) of the
United States Treasury Regulations), purchasing for its own account or for
resale or for the account of certain customers, that provides a certificate
stating that it agrees to comply with the requirements of Section 165(j)(3)(A),
(B) or (C) of the Code and the United States Treasury Regulations thereunder,
or to certain other persons described in Section 1.163-5(c)(2)(i)(D)(1)(iii)(B)
of the United States Treasury Regulations. Moreover, such Bearer Debt
Securities will not be delivered in connection with their sale during the
restricted period within the United States. Any underwriters and dealers
participating in the offering of Bearer Debt Securities must covenant that they
will not offer or sell during the restricted period any Bearer Debt Securities
within the United States or to United States persons (other than the persons
described above) or deliver in connection with the sale of Bearer Debt
Securities during the restricted period any Bearer Debt Securities within the
United States and that they have in effect procedures reasonably designed to
ensure that their employees and agents who are directly engaged in selling the
Bearer Debt Securities are aware of the restrictions described above. No Bearer
Debt Security (other than a temporary global Bearer Debt Security) will be
delivered in connection with its original issuance nor will interest be paid on
any Bearer Debt Security until receipt by Amax Gold of the written
certification described above under "--Form, Exchange, Registration and
Transfer." Each Bearer Debt Security, other than a temporary global Bearer Debt
Security, will bear a legend to the following effect: "Any United States person
who holds this obligation will be subject to limitations under the United
States income tax laws, including the limitations provided in Sections 165(j)
and 1287(a) of the Internal Revenue Code."
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As used herein, "United States person" means any citizen or resident of the
United States, any corporation, partnership or other entity created or
organized in or under the laws of the United States and any estate or trust the
income of which is subject to United States federal income taxation regardless
of its source, and "United States" means the United States of America
(including the states and the District of Columbia) and its possessions.
MEETINGS
The Indenture contains provisions for convening meetings of the holders of
Subordinated Debt Securities of a series. A meeting may be called at any time
by the Trustee, and also, upon request, by Amax Gold or the holders of at least
10% in principal amount of the Outstanding Debt Securities of such series, in
any such case upon notice given as described under "-Notices" below. Except for
any consent that must be given by the holder of each Outstanding Debt Security
affected thereby, as described under "-Modification" above, any resolution
presented at a meeting or adjourned meeting at which a quorum is present may be
adopted by the affirmative vote of the holders of a majority in principal
amount of the Outstanding Debt Securities of that series; provided, however,
that, except for any consent that must be given by the holder of each
Outstanding Debt Security affected thereby, as described under "-Modification"
above, any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action that may be made, given or
taken by the holders of a specified percentage, which is less than a majority
in principal amount of the Outstanding Debt Securities of a series, may be
adopted at a meeting or adjourned meeting duly reconvened at which a quorum is
present by the affirmative vote of the holders of such specified percentage in
principal amount of the Outstanding Debt Securities of that series. Subject to
the proviso set forth above, any resolution passed or decision taken at any
meeting of holders of Subordinated Debt Securities of any series duly held in
accordance with the Indenture will be binding on all holders of Subordinated
Debt Securities of that series and any related coupons. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
persons holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series.
NOTICES
Except as otherwise provided in the Indenture, notices to holders of Bearer
Debt Securities will be given by publication at least twice in a daily
newspaper in the City of New York and London or other capital city in Western
Europe and in such other city or cities as may be specified in such Securities.
Notices to holders of Registered Debt Securities will be given by mail to the
addresses of such holders as they appear in the Security Register.
THE TRUSTEE
The Indenture contains certain limitations on the right of the Trustee, to
the extent it is a creditor of Amax Gold, to obtain payment of claims in
certain cases and to realize on certain property received with respect to any
such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions, except that, if it acquires any conflicting interest and
there is a default under the Subordinated Debt Securities, it must eliminate
such conflict or resign.
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DESCRIPTION OF PREFERRED STOCK
The Company's Restated Certificate of Incorporation currently authorizes the
issuance of 10,000,000 shares of preferred stock, par value $1.00 per share,
issuable in series. The Board of Directors of the Company is authorized to
approve the issuance of one or more series of preferred stock without further
authorization of the stockholders of Amax Gold and to fix the number of shares,
the designations, the relative rights and preferences and the limitations of
any such series.
No shares of preferred stock are currently outstanding, but Amax Gold has
reserved for issuance 2,000,000 shares of Series A Preferred Stock, issuable by
Amax Gold in repayment of outstanding indebtedness under the DOCLOC Agreement.
See "Description of Capital Stock--Series A Preferred Stock."
The applicable Prospectus Supplement sets forth the number of shares,
particular designation, relative rights and preferences and the limitations of
any series of Preferred Stock in respect of which this Prospectus is delivered.
The particular terms of any such series will include the following:
(i) The maximum number of shares to constitute the series and the
designation thereof;
(ii) The annual dividend rate, if any, on shares of the series, whether
such rate is fixed or variable or both, the date or dates from which
dividends will begin to accrue or accumulate, whether dividends will be
cumulative and whether such dividends shall be paid in cash, Common Stock
or otherwise;
(iii) Whether the shares of the series will be redeemable and, if so, the
price at and the terms and conditions on which the shares of the series may
be redeemed, including the time during which shares of the series may be
redeemed and any accumulated dividends thereon that the holders of shares
of the series shall be entitled to receive upon the redemption thereof;
(iv) The liquidation preference, if any, applicable to shares of the
series;
(v) Whether the shares of the series will be subject to operation of a
retirement or sinking fund and, if so, the extent and manner in which any
such fund shall be applied to the purchase or redemption of the shares of
the series for retirement or for other corporate purposes, and the terms
and provisions relating to the operation of such fund;
(vi) The terms and conditions, if any, on which the shares of the series
shall be convertible into, or exchangeable for, shares of any other class
or classes of capital stock of Amax Gold or another corporation or any
series of any other class or classes, or of any other series of the same
class, including the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same;
(vii) The voting rights, if any, of the shares of the series;
(viii) The currency or units based on or relating to currencies in which
such series is denominated and/or in which payments will or may be payable;
(ix) The methods by which amounts payable in respect of such series may
be calculated and any commodities, currencies or indices, or price, rate or
value, relevant to such calculation;
(x) Any listing of the shares of the series on a securities exchange; and
(xi) Any other preferences and relative, participating, optional or other
rights or qualifications, limitations or restrictions thereof.
Any material United States federal income tax consequences and other special
considerations to any offered Preferred Stock will be described in the
Prospectus Supplement relating to the offering and sale of such Preferred
Stock.
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<PAGE>
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue Warrants to purchase Common Stock. Each series of
Warrants will be issued under a separate warrant agreement (each a "Warrant
Agreement") to be entered into between the Company and a warrant agent (the
"Warrant Agent"). The Warrant Agent will act solely as an agent of the Company
in connection with the Warrants of such series and will not assume any
obligation or relationship of agency or trust for or with any holders or
beneficial owners of Warrants. The following sets forth certain general terms
and provisions of the Warrants offered hereby. Further terms of the Warrants
and the applicable Warrant Agreement will be set forth in the applicable
Prospectus Supplement.
The applicable Prospectus Supplement will describe the following terms of any
Warrants in respect of which this Prospectus is delivered: (i) the title of
such Warrants; (ii) the price or prices at which such Warrants will be issued;
(iii) the periods during which the Warrants are exercisable; (iv) the number of
shares of Common Stock for which each Warrant is exercisable; (v) the exercise
price for such Warrants, including any changes to or adjustments in the
exercise price; (vi) the currency or currencies, including composite
currencies, in which the exercise price of such Warrants may be payable; (vii)
if applicable, a discussion of certain United States federal income tax
considerations; (viii) any listing of the Warrants on a securities exchange;
and (ix) any other terms of such Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Warrants.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized by its Restated Certificate of Incorporation to
issue 200,000,000 shares of Common Stock and 10,000,000 shares of preferred
stock. As of March 31, 1994, there were approximately 78.2 million shares of
Common Stock issued and outstanding and no shares of preferred stock issued and
outstanding, but 2,000,000 shares of preferred stock had been designated by the
Board of Directors of Amax Gold as "$2.25 Series A Convertible Preferred
Stock." All of the shares of Series A Preferred Stock have been reserved for
issuance under the DOCLOC Agreement. See "--Series A Preferred Stock."
COMMON STOCK
The Company's Restated Certificate of Incorporation authorizes the issuance
of 200,000,000 shares of Common Stock. A summary of the terms and provisions of
the Common Stock is set forth below.
Dividends. The holders of Common Stock are entitled to receive dividends
when, as and if declared by the Board out of funds legally available therefor,
provided that if any shares of the Series A Preferred Stock, the Preferred
Stock issued in connection with this Prospectus and the accompanying Prospectus
Supplement, or any other shares of preferred stock are at the time outstanding,
the payment of dividends on Common Stock or other distributions (including
purchases of Common Stock) will be subject to the declaration and payment of
all cumulative dividends on outstanding shares of the Series A Preferred Stock
and may be subject to the declaration and payment of all cumulative dividends
on outstanding shares of the Preferred Stock issued in connection with this
Prospectus and the accompanying Prospectus Supplement and any other shares of
preferred stock which are then outstanding.
Liquidation. In the event of the dissolution, liquidation or winding up of
Amax Gold, holders of Common Stock are entitled to share ratably in any assets
remaining after the satisfaction in full of the prior rights of creditors,
including holders of Amax Gold's indebtedness, and the aggregate liquidation
24
<PAGE>
preference of the Series A Preferred Stock, any Preferred Stock issued in
connection with this Prospectus and the accompanying Prospectus Supplement and
any other shares of preferred stock then outstanding.
Voting. The Company's stockholders are entitled to one vote for each share on
all matters voted on by stockholders, including election of directors. Shares
of Common Stock held by the Company or any entity controlled by the Company do
not have voting rights and are not counted in determining the presence of a
quorum. Directors are elected annually. Holders of Common Stock have no
cumulative voting rights.
No Other Rights. The holders of Common Stock do not have any conversion,
redemption or preemptive rights.
Transfer Agent. The transfer agent for the Common Stock is Chemical Bank, 450
West 33rd Street, New York, New York 10001.
Listing. Shares of the Company's outstanding Common Stock are listed on the
New York and Toronto Stock Exchanges.
SERIES A PREFERRED STOCK
The $2.25 Series A Convertible Preferred Stock was designated as a series of
preferred stock in connection with the DOCLOC Agreement. The Series A Preferred
Stock consists of 2,000,000 shares. A summary of the terms and provisions of
the Series A Preferred Stock is set forth below.
Dividends. The holders of shares of Series A Preferred Stock are entitled to
receive dividends at the annual rate of $2.25 per share, which is cumulative,
accrues without interest and is payable in cash in equal semi-annual
installments. Amax Gold may elect to pay any dividend due and payable in shares
of Common Stock in lieu of a dividend payment in cash, unless the holder of
Series A Preferred Stock delivers written notice stating that such holder
elects to receive cash.
Liquidation Preference. Upon the liquidation, dissolution or winding up of
the Company, the holders of Series A Preferred Stock are entitled to receive
from the assets of the Company an amount equal to the dividends accrued and
unpaid thereon to the date of final distribution to such holders, whether or
not declared, without interest, and a sum equal to $50.00 per share, and no
more. Payment to the holders of shares of Series A Preferred Stock will be made
before any payment is made or any assets distributed to holders of Common Stock
or any other class or series of Amax Gold's capital stock ranking junior as to
liquidation rights to the Series A Preferred Stock.
Redemption at the Option of Amax Gold. The Company, at its option, may at any
time redeem the Series A Preferred Stock, in whole or from time to time in
part, for that number of shares of Common Stock obtained by dividing $50.00 by
the lesser of (i) the Call Price (defined below) and (ii) the Conversion Price
(defined below), plus accrued and unpaid dividends, whether or not declared or
due, to the date fixed for redemption. The maximum number of shares of Common
Stock that Amax Gold may issue upon redemption and conversion of and the
payment of dividends on the Series A Preferred Stock is 12,099,213 shares,
subject to adjustment due to any adjustment in the Conversion Price. In the
case of the redemption of Series A Preferred Stock that would result in the
issuance of more than 12,099,213 shares of Common Stock, the Company would pay
an amount in cash in lieu of such shares of Common Stock in excess of
12,099,213 shares equal to the lesser of the Call Price or the Conversion Price
multiplied by the number of shares in excess of 12,099,213. Such cash payment
will be made in 12 consecutive substantially equal quarterly payments.
The "Call Price" with respect to a redemption of Series A Preferred Stock is
equal to the greater of (i) $5.854 (subject to adjustment in connection with
any adjustment in the Conversion Price) and (ii) the
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<PAGE>
average closing price per share of Common Stock as calculated for a ten day
trading period ending on the fifth trading day prior to the date the notice of
redemption is mailed.
Conversion. The holder of any shares of Series A Preferred Stock will have
the right, at the holder's option, to convert any or all shares of Preferred
Stock held by such holder into Common Stock at any time. Each share of Series A
Preferred Stock is convertible into that number of shares of Common Stock
obtained by dividing $50.00 by the Conversion Price in effect at the time. The
"Conversion Price" is $8.265 and is subject to adjustment upon payment by the
Company of a dividend or the making by the Company of a distribution on Common
Stock in shares of Common Stock, upon the subdivision, combination or issuance
by reclassification of Common Stock, or upon the issuance of rights, options or
warrants to purchase shares of Common Stock at a price per share less than the
current price per share. The maximum number of shares of Common Stock that Amax
Gold may issue upon redemption and conversion of and the payment of dividends
on the Series A Preferred Stock is 12,099,213 shares, subject to adjustment due
to any adjustment in the Conversion Price. No fractional shares of Common Stock
will be issued upon conversion but, in lieu thereof, an appropriate amount will
be paid in cash. No adjustment will be made to the Conversion Price unless such
adjustment would require an increase or decrease of at least 1% of such price.
Voting Rights. The shares of Series A Preferred Stock are not entitled to
vote except as described below or as required by law. Shares of Series A
Preferred Stock held by the Company or any entity controlled by Amax Gold do
not have voting rights and are not counted in determining the presence of a
quorum. If dividends on the Series A Preferred Stock are in arrears in an
amount equal to at least three semi-annual dividend payments, the number of
members of the Board will be increased by two and the holders of Series A
Preferred Stock, voting separately as a class, will have the right to vote for
and elect two additional directors of Amax Gold during the period that such
dividends remain in arrears.
The affirmative vote or consent of the holders of at least 66-2/3 percent of
all outstanding shares of Series A Preferred Stock is required for the Company
to (i) amend, alter or repeal any provision of the Restated Certificate of
Incorporation, as amended, or the Bylaws of the Company, as amended, so as to
affect adversely the relative rights, preferences, qualifications, limitations
or restrictions of the Series A Preferred Stock, (ii) authorize or issue, or
increase the authorized amount of, any additional class or series of stock, or
any security convertible into stock of such class or series ranking prior to
the Series A Preferred Stock in respect of the payment of dividends or upon
liquidation, dissolution or winding up of Amax Gold or (iii) effect any
reclassification of the Series A Preferred Stock.
No Preemptive Rights. The Series A Preferred Stock does not have any
preemptive or subscription rights in respect of any securities of the Company.
Cyprus Amax, however, does have the right to replace from time to time all or a
portion of the DOCLOC Agreement and any outstanding indebtedness and/or Series
A Preferred Stock with the purchase of up to 12,099,213 shares of Common Stock
at a purchase price of $8.265 per share (or $100 million if all 12,099,213
shares of Common Stock are purchased).
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<PAGE>
$21 WARRANTS
The Company issued warrants to purchase 4,066,649 shares of Common Stock in
connection with the acquisition of the Fort Knox property (the "$21 Warrants").
Each of the $21 Warrants permits the holder to purchase one share of Common
Stock at a price of $21.00 per share, subject to adjustment upon the occurrence
of certain events described below. The $21 Warrants are currently exercisable
and will expire at 5:00 p.m., New York City time, on January 8, 1996. The $21
Warrant holders are not protected against dilution of their interests in Amax
Gold if Amax Gold should issue additional shares of Common Stock (other than by
way of stock dividends, stock splits, reclassifications, mergers and other
similar events described in the $21 Warrant Agreement) or preferred stock in
the future. No preemptive rights exist in respect of the $21 Warrants. No
commissions are to be paid to broker-dealers upon the exercise of the $21
Warrants, although Amax Gold may agree in the future to pay such commissions.
Shares of Common Stock will be issued upon surrender of the $21 Warrants and
payment of the exercise price in accordance with the terms of the $21 Warrant
Agreement.
Transferability. The $21 Warrants are transferable, subject, in the case of
certain stockholders who formerly held securities of the joint venturers which
owned the property, to certain agreements entered into between Amax Gold and
such stockholders. The $21 Warrants are currently listed on the Toronto Stock
Exchange and the American Stock Exchange.
Expiration. Unless exercised within the time provided for exercise, the $21
Warrants will automatically expire.
Purchase of Common Stock. There is no minimum number of shares of Common
Stock which must be purchased upon exercise of the $21 Warrants. The maximum
number of shares of Common Stock which can be purchased upon exercise of the
$21 Warrants is 4,066,649 shares.
Antidilution Provisions. The holders of the $21 Warrants in certain instances
are protected against dilution of their interests represented by the underlying
shares of Common Stock upon the issuance to holders of Common Stock of stock
dividends or other distributions of capital stock of the Company without
payment of consideration, upon the issuance of rights or warrants exercisable
for Common Stock at a price per share which is less than the current fair
market value per share, or upon the occurrence of stock splits,
reclassifications, mergers and other similar events described in the $21
Warrant Agreement. If such events were to occur, the exercise price and number
of shares of Common Stock issuable upon exercise of each $21 Warrant would be
adjusted in accordance with the provisions of the $21 Warrant Agreement.
No Voting Power. The holders of the $21 Warrants have no voting power and are
not entitled to dividends. In the event of a liquidation, dissolution, or
winding up of the Company, the $21 Warrant holders will not be entitled to
participate in the distribution of the Company's assets.
Listing. The $21 Warrants are listed on the American Stock Exchange and the
Toronto Stock Exchange. The shares of Common Stock issuable upon exercise of
the $21 Warrants have been listed on the New York Stock Exchange, subject to
notification of issuance.
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<PAGE>
PLAN OF DISTRIBUTION
The Company may offer Securities to or through underwriters, through agents
or directly to other purchasers. Such underwriters may include Salomon Brothers
Inc.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices (which may be changed from time
to time), at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. Each Prospectus
Supplement will describe the method of distribution of the Securities offered
therein.
The Company may sell Securities directly, through agents designated from time
to time, through underwriting syndicates led by one or more managing
underwriters or through one or more underwriters acting alone. Each Prospectus
Supplement will set forth the terms of the Securities to which such Prospectus
Supplement relates, including the name or names of any underwriters or agents
with whom the Company has entered into arrangements with respect to the sale of
such Securities, the public offering or purchase price of such Securities and
the net proceeds to the Company from such sale, any underwriting discounts and
other items constituting underwriters' compensation, any discounts and
commissions allowed or paid to dealers, if any, any commissions allowed or paid
to agents, and the securities exchange or exchanges, if any, on which such
Securities will be listed. Dealer trading may take place in certain of the
Securities, including Securities not listed on any securities exchange.
Securities may be purchased to be reoffered to the public through
underwriting syndicates led by one or more managing underwriters, or through
one or more underwriters acting alone. The underwriter or underwriters with
respect to each underwritten offering of Securities will be named in the
Prospectus Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth
on the cover page of such Prospectus Supplement. Unless otherwise set forth in
the applicable Prospectus Supplement, the obligations of the underwriters to
purchase the Securities will be subject to certain conditions precedent and
each of the underwriters with respect to a sale of Securities will be obligated
to purchase all of its Securities if any are purchased. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
Securities may be offered and sold by the Company through agents designated
by the Company from time to time. Any agent involved in the offer and sale of
any Securities will be named, and any commissions payable by the Company to
such agent will be set forth, in the Prospectus Supplement relating to such
offering. Unless otherwise indicated in such Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its appointment.
Offers to purchase Securities may be solicited directly by the Company and
sales thereof may be made by the Company directly to institutional investors or
others who may be deemed to be underwriters within the meaning of the
Securities Act with respect to any resale thereof. The terms of any such sales
will be described in the Prospectus Supplement relating thereto.
The Company may also issue contracts under which the counterparty may be
required to purchase Securities. Such contracts would be issued for Securities
in amounts, at prices and on terms to be set forth in a Prospectus Supplement.
The anticipated place and time of delivery of Securities will be set forth in
the applicable Prospectus Supplement.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or agents to solicit offers by certain institutions to
purchase Securities from the Company pursuant to delayed delivery contracts
providing for payment and delivery at a future date. Institutions with which
such
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<PAGE>
contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases such institutions must be approved by
the Company. Unless otherwise set forth in the applicable Prospectus
Supplement, the obligations of any purchaser under any such contract will not
be subject to any conditions except that (i) the purchase of the Securities
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject, and (ii) if the Securities are
also being sold to underwriters acting as principals for their own account, the
underwriters shall have purchased such Securities not sold for delayed
delivery. The underwriters and such other persons will not have any
responsibility in respect of the validity or performance of such contracts.
Any underwriter or agent participating in the distribution of the Securities
may be deemed to be an underwriter, as that term is defined in the Securities
Act, of the Securities so offered and sold and any discounts or commissions
received by them from the Company and any profit realized by them on the sale
or resale of the Securities may be deemed to be underwriting discounts and
commissions under the Securities Act.
Underwriters and agents may be entitled, under agreements entered into with
the Company, to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which such underwriters or agents may be required to
make in respect thereof. Certain of such underwriters and agents, including
their associates, may be customers of, engage in transactions with and perform
services for, the Company and its subsidiaries in the ordinary course of
business.
LEGAL MATTERS
The validity of the Securities offered will be passed upon for the Company by
Davis, Graham & Stubbs, Denver, Colorado. Certain legal matters will be passed
upon for the underwriters or selling agents, if any, by Winston & Strawn,
Chicago, Illinois.
EXPERTS
The consolidated financial statements and the related supplemental schedules
as of December 31, 1993 and December 31, 1992 and for each of the three years
in the period ended December 31, 1993, incorporated by reference in this
Prospectus from the Company's Annual Report on Form 10-K for the year ended
December 31, 1993, have been audited by Coopers & Lybrand, independent
accountants, as stated in their reports which are incorporated by reference
herein, which include an explanatory paragraph regarding a change in the method
of accounting for exploration expenditures and postemployment benefits in 1993,
and a change in the method of accounting for precious metals inventory,
postretirement benefits and income taxes in 1992, and have been so included and
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
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<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR AN ACCOMPANYING PROSPECTUS
SUPPLEMENT, IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND SUCH
ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY UNDERWRITER OR DEALER. NEITHER THE DELIVERY OF THIS PROSPECTUS
OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS OR SUCH ACCOMPANYING PROSPECTUS
SUPPLEMENT, OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATES HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 4
Risk Factors............................................................... 5
Use of Proceeds............................................................ 11
Ratio of Earnings to Fixed Charges......................................... 11
Description of Subordinated Debt Securities................................ 12
Description of Preferred Stock............................................. 23
Description of Warrants.................................................... 24
Description of Capital Stock............................................... 24
Plan of Distribution....................................................... 28
Legal Matters.............................................................. 29
Experts.................................................................... 29
</TABLE>
AMAX GOLD INC.
[LOGO OF AMAX GOLD INC. APPEARS HERE]
PROSPECTUS
DATED JUNE , 1994
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth expenses, other than underwriting fees and
commissions, expected to be borne by the Registrant, in connection with the
distribution of the securities being registered:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.................... $68,966
NASD filing fee........................................................ *
Blue Sky fees and expenses............................................. *
Stock exchange listing fees............................................ *
Rating agency fees..................................................... *
Transfer agent fees.................................................... *
Legal.................................................................. *
Printing............................................................... *
Accounting............................................................. *
Miscellaneous..........................................................
-------
TOTAL................................................................ $ *
=======
</TABLE>
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* To be completed by amendment.
All amounts listed above, except for the registration fee, are estimates.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article SIXTH of the Company's Restated Certificate of Incorporation and
Article VI of the Company's Bylaws (collectively the "Governance Documents")
confers on the Company's officers and directors indemnification rights.
Section 102 of the Delaware General Corporation Law (the "Delaware Law")
allows a corporation to eliminate the personal liability of a director of a
corporation to the corporation or to any of its stockholders for monetary
damage for a breach of his fiduciary duty as a director, except in the case
where the director breached his duty of loyalty, failed to act in good faith,
engaged in intentional misconduct or knowingly violated a law, authorized the
payment of a dividend or approved a stock repurchase in violation of Delaware
corporate law or obtained an improper personal benefit. Article SIXTH of the
Company's Restated Certificate of Incorporation eliminates directors' personal
liability in accordance with such Section 102 of the Delaware Law.
Section 145 of the Delaware Law authorizes corporations to indemnify
directors and officers against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement reasonably incurred in connection with
civil, criminal, administrative, or investigative actions, suits or proceedings
to which such persons are parties or threatened to be made a party by reason of
their corporate position (other than actions by or in the right of the
corporation to procure a judgment in its favor--so called "derivative suits")
if such persons acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe their conduct was unlawful. With respect to derivative suits, Section
145 prescribes a similar standard of care but limits the available
indemnification to expenses (including attorneys' fees) reasonably incurred in
connection with the defense or settlement of such action or suit and further
provides that if the derivative suit results in a judgment that the person
seeking indemnification is liable to the corporation, no such indemnification
is to be made without court approval. Section 145(f) of the Delaware Law also
specifically permits corporations to provide their officers, directors,
employees and agents with indemnification and advancement of expenses in
addition
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<PAGE>
to those specifically required and/or permitted to be provided pursuant to
other provisions of such Section 145.
Under the provisions of the Governance Documents, each person who was or is
made a party to, or is threatened to be made a party to or is involved in, any
action, suit or other legal proceeding (whether civil, criminal, administrative
or investigative) by reason of the fact that such person is or was a director
or officer of the Company, or is or was performing services at the Company's
request for another entity, including service with respect to employee benefit
plans, shall be indemnified to the full extent permitted by Delaware Law as in
effect or as it may be amended against all costs, charges, expenses,
liabilities and losses (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred by such person in connection with such proceeding. The
rights to indemnification conferred pursuant to the Governance Documents are
contract rights and include the right to receive payment for expenses of
defending a proceeding as to which there may be a right to indemnification
prior to its final disposition, provided that if the Delaware Law requires (and
it currently does), such advance payment shall be made only upon receipt by the
Company of an undertaking to the effect that all amounts so advanced will be
repaid if it is ultimately found that the party who received such amounts is
not entitled to be indemnified. The effect of providing that the
indemnification rights are contract rights is to permit indemnified individuals
to enforce such provisions directly against the Company. In addition, the
Governance Documents authorize the Company to provide other permissible
indemnification. Finally, the Governance Documents provide that the Company may
(and it does) maintain insurance to protect itself and any of its officers,
directors, employees or agents, to the limit of such coverage, against any
expense, liability or loss, even if the Company would not have the power itself
to indemnify such person against such expense, liability or loss under the
Delaware Law.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement--Equity*
1.2 Form of Underwriting Agreement--Subordinated Debt*
4.1 Form of Indenture for Subordinated Debt Securities*
4.2 Form of Debt Security (included in Exhibit 4.1)*
5.1 Opinion of Davis, Graham & Stubbs*
10.1 Exploration Joint Venture Agreement between Amax Gold and Cyprus Amax*
10.2 Noncompetition Agreement between Amax Gold and Cyprus Amax*
10.3 Memorandum Agreement dated May 5, 1994 between Amax Gold and Cyprus
Metals Company with respect to the sale of Cyprus Amax's interest in
the Cerro Quema deposit in Panama
12.1 Statement re Computation of Ratios
23.1 Consent of Coopers & Lybrand
23.2 Consent of Davis, Graham & Stubbs--see Exhibit 5.1*
24 Powers of Attorney
99 Form of Prospectus Supplement
</TABLE>
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* To be filed by amendment.
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<PAGE>
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes that, for the purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in this Registration Statement shall
be deemed to be a new Registration Statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement,
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934, that are incorporated by reference in the Registration Statement;
(b) That for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of a Registration Statement in reliance upon Rule 430A and contained
in the form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(c) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new Registration Statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(d) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses is incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
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<PAGE>
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or 14c-3 under the Securities Exchange Act of 1934;
and, where the interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN ENGLEWOOD, COLORADO ON THE 3RD DAY OF JUNE 1994.
AMAX GOLD INC.
By: /s/ Mark A. Lettes
----------------------------------
MARK A. LETTES
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON JUNE 3, 1994.
SIGNATURES TITLE
---------- -----
/s/ Milton H. Ward Chairman of the Board, President and
- ------------------------------------- Chief Executive Officer
MILTON H. WARD
/s/ Mark A. Lettes Vice President and Chief Financial
- ------------------------------------- Officer (Principal Financial Officer)
MARK A. LETTES
/s/ Pamela L. Saxton Vice President and Controller
- ------------------------------------- (Principal Accounting Officer)
PAMELA L. SAXTON
Allen Born* Director
- -------------------------------------
ALLEN BORN
/s/ Gerald J. Malys Director
- -------------------------------------
GERALD J. MALYS
Director
- -------------------------------------
ROCKWELL A. SCHNABEL
Vernon F. Taylor, Jr.* Director
- -------------------------------------
VERNON F. TAYLOR, JR.
Russell L. Wood* Director
- -------------------------------------
RUSSELL L. WOOD
*By: /s/ Paul J. Hemschoot, Jr.
--------------------------------
PAUL J. HEMSCHOOT, JR.
ATTORNEY-IN-FACT FOR EACH
OF THE DIRECTORS INDICATED
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S> <C>
1.1 Form of Underwriting Agreement--Equity*
1.2 Form of Underwriting Agreement--Subordinated Debt*
4.1 Form of Indenture for Subordinated Debt Securities*
4.2 Form of Debt Security (included in Exhibit 4.1)*
5.1 Opinion of Davis, Graham & Stubbs*
10.1 Exploration Joint Venture Agreement between Amax Gold and Cyprus
Amax*
10.2 Noncompete Agreement between Amax Gold and Cyprus Amax*
10.3 Memorandum Agreement dated May 5, 1994 between Amax Gold and Cyprus
Metals Company with respect to the sale of Cyprus Amax's interest
in the Cerro Quema deposit in Panama
12.1 Statement re Computation of Ratios
23.1 Consent of Coopers & Lybrand
23.2 Consent of Davis, Graham & Stubbs--see Exhibit 5.1*
24 Powers of Attorney
99 Form of Prospectus Supplement
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
GRAPHICS APPENDIX LIST
----------------------
PAGE WHERE
GRAPHIC APPEARS DESCRIPTION OF GRAPHIC OR CROSS-REFERENCE
- --------------- -----------------------------------------
P.9 of Exhibit 10.3, Map of the Azuero Peninsula of Panama, with
(immediately inset map of entire country of Panama, both
following p.6 of of which highlight the location of the Cerro
memorandum dated Quema project.
May 3,1994).
p.10 of Exhibit 10.3, Map of the Cerro Quema project showing
(immediately regional geology.
following above
map).
<PAGE>
Exhibit 10.3
[LETTERHEAD OF AMAX GOLD INC. APPEARS HERE]
TO: David Watkins DATE: May 5, 1994
FROM: Neil Muncaster
SUBJECT: Cerro Quema
- --------------------------------------------------------------------------------
Further to our discussion yesterday about the sale of Cyprus Amax's share of
Cerro Quema to AGI, the following are some general terms for your review and
approval:
1) AGI would have an 18 month option period in which it would commit to
undertake further definition drilling and metallurgy, and prepare a
final feasibility study in a form mutually acceptable to both
parties.
2) If AGI exercises the option to purchase upon completion of the
feasibility study, it will pay Cyprus Amax in cash or shares $25 per
ounce for their share of mineable reserve ounces contained in the
feasibility study.
3) Using reserve ounces and the base case recoveries that are defined
in the feasibility study, the amount of AGI's share of recoverable
ounces will be estimated, and AGI will pay Cyprus Amax $25 per ounce
for every ounce produced in excess of this figure, payable on a
quarterly basis.
I believe that the value of the property to Cyprus Amax can only be enhanced
during this option period, should AGI decide not to exercise the option. If we
do exercise, a $25 per ounce sales price is a fair market value for reserve
ounces based on our review of numerous industry transactions during the last
three years for similar deposits. Moreover, AGI assumes any downside risk, but
Cyprus Amax shares in any upside potential due to an increase in reserves,
enhanced metallurgical recoveries, etc.
As you know, there is some urgency in beginning the drill program and
establishing the weather station as soon as possible. I
<PAGE>
David Watkins
May 5, 1994
Cerro Quema
Page 2
suggest, therefore, that we use this memo as a letter of intent that will
allow us to proceed with the work. If you agree with the general terms,
please indicate your acceptance below and return a copy to me.
/s/ Neil K. Muncaster
------------------------------
Neil K. Muncaster
Vice President
Amax Gold Inc.
Accepted this 5th day of May, 1994
---
/s/ David Watkins
- -----------------------------------
David Watkins
Senior Vice President-Exploration
Cyprus Metals Company
<PAGE>
[LETTERHEAD OF AMAX GOLD EXPLORATION, INC. APPEARS HERE]
MEMORANDUM
TO: Roger Kauffman DATE: MAY 3, 1994
FROM: Neil Muncaster
SUBJECT: Cerro Quema
================================================================================
A review of all the technical data and economic assumptions by CYMAX related
to their 80% owned Cerro Quema deposit in Panama did not reveal any
significant issues and conclusions with which to take exception. The oxidized
portion of the deposit currently has a drill indicated mineable resource of
320,000 ounces (256,000 ounces CYMAX share) contained in 8.8 million tonnes at
a grade of 1.13 g/t (9.7 million tons at 0.033 opt). The deposit has
potential of being mined and leached at the rate of 1.5 million tonnes/year
(1.65 million tons/yr), producing 46,300 ounces (37,040 ounces CYMAX share)
annually. Preliminary indications are that the deposit could be in production
by the beginning of 1996 at a capital cost of $13.3 million ($10.6 million
CYMAX share). Cash operating costs are projected at $205/ounce and full costs
(purchase price excluded) at $254/ounce.
It is estimated that $2.0 million ($1.6 million to CYMAX) will be required to
complete a feasibility study, primarily for additional drilling to upgrade
the resource to the proven and probable category and for additional metallurgy
to confirm what appears to be exceptionally good leach recoveries. My
recommendation is that AGI assume this obligation with an option to purchase
the CYMAX interest for $25 per mineable reserve ounce based on the ounces that
result from the feasibility study.
Project Description
- ------------------
The Cerro Quema project is located southwest of Panama City in the Azuero
Peninsula. The nearest town of significance is Chitre, and access from Chitre
is by 34 kilometers of paved road and then 14 kilometers of fairly steep 4
wheel drive dirt road.
The resource is contained in three deposits along a 4 kilometer east-west
trending zone at the top of one of the higher mountains in the area. Relief is
on the order of 500 meters. Although vegetation is sparse on top of Cerro
Quema, rainfall varies from 50 to 110 inches during the May to September rainy
season.
Mineral rights are held by an exploration concession currently owned 80% by
CYMAX and 20% by Compania de Exloracion Mineral, S.A.
<PAGE>
Roger Kauffman
May 3, 1994
Subject: Cerro Quema
Page 2
(CEMSA) whose principle is Julio Benedetti, a well known Panamanian
businessman and Colorado School of Mines graduate. A new operating company,
Minera Cerro Quema, S.A. is currently being incorporated, reflecting each
party's joint venture participating interest. Most of the surface rights have
been purchased by the Joint Venture, although some outlying parcels near some
proposed dump sites are still being negotiated.
Since 1990, as part of the 80% earn-in from CEMSA, CYMAX has completed
extensive surface mapping and sampling, drilled 12,186 meters of rotary and
core holes, conducted several bottle roll column leach tests, contracted for
several environmental baseline studies, generated some hand calculated
reserves, and obtained a preliminary feasibility analysis from Kilborn
International of Denver. Although the results from this work are generally
positive, the deposit is not of sufficient size to impact CYMAX, and the
property is currently on standby awaiting a decision by AGI. Several parties,
including Benedetti, have contacted CYMAX regarding purchase of their
interest.
Geology and Ore Reserves
- ------------------------
The deposits are hosted within strongly altered dacitic and andesitic rocks of
Cretaceous age. Nearly all of the ore grade gold is contained in silicified
and brecciated rocks that in turn are surrounded by rocks that are intensely
argillized. Oxidation occurs down to depths of as much as 150 meters, and
some of the deeper drill holes pass into a supergene enriched copper sulfide
zone with up to 35% pyrite. Because some of the best gold grades occur at or
very near the surface, CYMAX geologists have suggested a supergene-enriched
gold zone due to chemical redistribution of the gold and volume loss during
oxidation and leaching of the rocks. The intense brecciation of rocks in the
core of the larger deposit, La Pava, may be indicative of a diatreme, or
breccia pipe.
Although 161 holes have been drilled in the area, only about 53 of these are
in the mineralized zones. Most of these are rotary holes. Some core holes
were drilled but most had either poor recoveries or were drilled as extensions
of the rotary holes to test the sulfide copper mineralization.
The mineable oxide gold resource, which is a hand calculated polygonal
estimate, is tabulated below. Drilling is currently on approximately 50 meter
centers, and it is estimated a 25-30 meter spacing will be necessary to
upgrade this resource to the proven and probable category. Although CYMAX's
estimates are somewhat optimistic in areas that lack information, I believe
that a
<PAGE>
Roger Kauffman
May 3, 1994
Subject: Cerro Quema
Page 3
320,000 ounce mineable reserve is achievable plus or minus 50,000 ounces. A
few anomalies in the immediate area need further drill tests, but there is not
any significant upside potential on the property.
Cerro Quema Project
Summary of Manually Estimated Mineable Gold Reserves
(0.5 gram cutoff, oxides only)
<TABLE>
<CAPTION>
================================================================================
Diluted Reserves Waste Stripping Total Pit
Ratio Tonnage
-----------------------------------------------------------------
Tonnes Gold Grade Contained Tonnes Tonnes
gm/tonne Ounces
of Gold
================================================================================
<S> <C> <C> <C> <C> <C> <C>
La Pava Area 6,467,260 1.072 222,900 6,437,850 1.00 12,905,110
- --------------------------------------------------------------------------------
Quema/Qemita 2,019,220 1.243 80,690 410,820 0.20 2,430,040
West
- --------------------------------------------------------------------------------
Quema/Quemita 311,050 1.629 16,290 210,120 0.68 521,170
East
- --------------------------------------------------------------------------------
TOTAL 8,797,530 1.131 319,880 7,058,790 0.80 15,856,320
- --------------------------------------------------------------------------------
English Units 9,697,429 0.033 opt 319,880 7,780,834 0.80 17,478,263
================================================================================
</TABLE>
Metallurgy
- ----------
Only a limited amount of metallurgical test work has been done to date, but
the initial results suggest excellent recoveries with high consumption of lime
and moderate consumption of cyanide. Preliminary bottle roll tests of rotary
drill chips indicated 95% recovery in 96 hours. An additional bottle roll test
on 3/4 inch material from a surface trench sample gave the same results, with
consumptions of 2 lb/ton lime and 1.9 lb/ton cyanide. A column test of a
- -1.5 inch composite sample from trenches in the La Pava and Quemita zones
achieved 95% recovery in 35 days with consumptions of 4 lb/ton lime and 1.6
lb/ton cyanide.
CYMAX most recently proposed a heap leach scenario with rock crushed to 4-5
inches, a 40 day load-leach-rinse cycle on reusable pads, and 85% recovery.
Considerably more metallurgical testing is necessary before any flowsheet can
be evaluated and optimized. The
<PAGE>
Roger Kauffman
May 3, 1994
Subject: Cerro Quema
Page 4
steep topography and lack of adequate pad space, for example, may necessitate
a vat leach, which if high recoveries can be achieved over a short period of
time, would make economic sense.
Project Economics
- -----------------
The attached tabulation of project economics and sensitivities by CYMAX is
based on a 1.5 million tonne/year heap leach scenario with 84.8% recovery.
The base case shows a 35% IRR and a NPV at 12% of $9.8 million for the CYMAX
80% share. The case with leach recoveries of 80% (95% of base case) may be
more realistic. This shows an IRR of 31% and NPV at 12% of $8.0 million.
Risk Analysis
- -------------
Reserves: I believe the 320,000 ounce mineable reserve is
achievable + 50,000 ounces, no more or no less.
-
Leach Recoveries: Because of the lack of testing, especially at
depth, there is both upside potential and downside
risk in this area.
ARD: CYMAX testing of 23 core samples throughout the
La Pava deposit indicates potential for acid
generation from both waste rock and ore. This is
a downside risk considering the steep topography
that will inhibit containment.
Costs: There may be some upside potential in reducing
the CYMAX estimate of unit costs. For example,
the estimate for mining costs is $1.46/tonne of
ore and waste. Greenstone Resources recently
signed a contract with Brown and Root for mining
the ore and waste at their Santa Rosa deposit in
Panama for $1.00/tonne. Leaching run of mine ore
may potentially eliminate crushing costs.
Topography: Steep topography represents one of the more
formidable obstacles because of the lack of pad
space and potential mine scheduling problems to
achieve a production rate of 1.5 million
tonnes/year.
Permitting: Discussions with Julio Benedetti and the history
of Greenstone's Santa Rosa deposit indicate that
production permits should be obtained in less
than six months. CYMAX has already submitted two
of the required three environmental reports to
federal agencies.
<PAGE>
Roger Kauffman
May 3, 1994
Subject: Cerro Quema
Page 5
Production Schedule: Some of the highest grade ore on the property
starts at grass roots, and there is potential for
increasing production (CYMAX shares) to 50,000+
ounces in initial years.
Cutoff Grade: Reserves were calculated at a 0.50 gram/tonne
cutoff grade but with lower costs and higher
leach recoveries, a 0.25 to 0.30 gram cutoff may
be realistic, thereby bringing some lower grade
material into the reserve category.
Regional Exploration: CYMAX is currently trenching and drilling two
other prospects in the Azeuro Peninsula with
potential similar to Cerro Quema. They are far
enough away to negate any direct impact on Cerro
Quema, but it indicates the potential for having
several operations in Panama.
Plans and Budget through Feasibility
- ------------------------------------
The following are some preliminary CYMAX cost estimates through feasibility
with some adjustments and additions by AGI. The drill program would take
approximately 4-5 months, and if work could start in May, a feasibility study
by year end is achievable:
<TABLE>
<CAPTION>
<S> <C> <C>
Infill drilling 6,000 meters of RC at $75/m and 2,000/m $ 700,000
of PQ core at $110/m
Camp costs house rentals, food, utilities, etc. 40,000
Communications radios and telephones 18,000
Water new supply to base camp 3,000
Surface facility construction of new sample prep and storage shed 30,000
Vehicle rental and maintenance for 4 vehicles for 36,000
6 months
Road maintenance 20,000
Sample analysis freight, customs, prep and assaying 160,000
Metallurgy contractor costs 150,000
Environmental stage 3 study and report plus weather station 225,000
Land purchase potential waste dump site 30,000
Labor project manager 75,000
geological supervisor for 6 months 68,000
local geologists (2) 25,000
local labor, cooks, drivers 30,000
AGI costs preparation of feasibility report, reserves, etc. 250,000
Contingency 148,000
----------
TOTAL $2,000.000
CYMAX SHARE $1,600,00
</TABLE>
<PAGE>
Roger Kauffman
May 3, 1994
Subject: Cerro Quema
Page 6
Recommendations
- ---------------
Cerro Quema has the potential of providing AGI with 37,000 ounces of annual
production and about $4 million of net income per year beginning in 1996. I
recommend that we approach CYMAX with an offer wherein we assume the
obligation for the additional work to produce a final feasibility study with
an option to purchase their interest for $25 per reserve ounce (their share)
contained in the feasibility study. Assuming base case reserve and economics,
CYMAX would receive $6.4 million, and full cost per recoverable ounce produced
by AGI (including cost of sale) would be $283.48. CYMAX has spent
approximately $5.4 million at Cerro Quema to date.
We have been researching acquisition costs for reserve ounces in non-producing
properties to gain an understanding of what is currently taking place in the
industry. Doppler and Associates analyzed 89 Latin American gold transactions
between January 1990 and November 1993. Although there is a wide range in
costs, the median cost per reserve ounce was $28 and a weighted average was $21.
The typical transaction was an option arrangement such as I propose to offer
CYMAX, which allows the buyer time for definition drilling. If the large Gold
Fields and Newmont buyouts are excluded, North American transactions are in
the same range.
A similar study of acquisition costs for proven and probable U.S. gold
reserves from 1990 through July 1993 was published by Mining Business Digest.
The results show that exploration projects sell from $10 to 20/ounce,
development projects for about $30/ounce and producing projects for about
$50/ounce.
The following is a list of recent transactions for properties that are in
approximately the same stage of exploration/development as Cerro Quema:
Talapoosa, NV Pegasus from Athena Gold (1992) $ 7/oz
Grassy Mountain, OR Newmont from Atlas (1992) 22/oz
Rosebud, NV Equinox from LAC (1993) 19/oz
Cripple Creek, CO Independence from Pike Peak (1993) 17/oz
Grouse Creek, ID Great Lakes from Hecla (1993?) 33/oz
Atlanta, ID Consolidate Ramrod from Atlanta (1994) 18/oz
Alligator Ridge, NV Placer Dome from USMX (1994) 28/oz
Lobo, Chile Teck from Anglo (1993) 9/oz
Refugio, Chile AGI from Chilean private interest 23/oz
Fort Knox, AK AGI from Fairbanks Gold and Gilmore Gold (1992) 28/oz
Haile, SC AGI from Piedmont (1992) 31/oz
From this review, it would appear that $25 per reserve ounce is a fair price
to offer CYMAX, especially in light of the limited upside potential. The
Benedetti offer to CYMAX is for a two year option period, a 1.5 million work
commitment, a feasibility study, and a purchase price of $10 per mineable
ounce.
<PAGE>
[MAP APPEARS HERE]
<PAGE>
[MAP APPEARS HERE]
<PAGE>
CYPRUS GOLD COMPANY
CERRO QUEMA GOLD PROSPECT
ASSUMPTION SUMMARY
(100 PERCENT PROJECT BASIS)
LOCATION PANAMA
MINE LIFE (YEARS) 5.9
MINING METHOD OPEN PIT
RESERVES (MM TONNES) 8.797
GRADE (G/TONNE) 1.131
RECOVERY 84.8%
GOLD PRICE ($/OUNCE) 400
ANNUAL PRODUCTION (M OZ) 46
CYPRUS' SHARE 37
CAPITAL REQUIREMENTS ($MM)
EXPLORATION 0
MINE 0.3
PLANT 6.6
INFRASTRUCTURE 1.5
OTHER 1.7
INDIRECTS, CONTINGENCY 3.2
---
TOTAL 13.3
UNIT COSTS, UNITS AS SHOWN
MINING, $/TONNE ORE 1.46
MINING, $/TONNE WASTE 1.46
MILLING, $/TONNE ORE 2.71
SG&A, $/TONNE ORE 0.66
REFINING, SHIPPING, $/OZ AIJ 2.50
TAXATION BASED ON FOREIGN BRANCH TAX REGULATION
CYPRUS EXPLORATION
CERRO QUEMA PROSPECT: UPDATED VALUATION
SUMMARY OF RESULTS, CYPRUS' 80% SHARE
-------------------------------------
<TABLE>
<CAPTION>
NET C.F. PV12 PV15 IRR CASH COST FULL COST
CASE $MM $MM $MM % $/OZ $/OZ
---- --- --- --- - ---- ----
<S> <C> <C> <C> <C> <C> <C>
BASE CASE $400 GOLD 23.1 9.8 7.6 35 205 254
SENSITIVITIES
- -------------
GOLD PRICE, $/OZ.
350 15.3 5.3 3.7 26 204 253
450 30.8 14.2 11.6 43 206 255
GRADE, GRAMS/TONNE
($400 Gold)
UP 5% 26.7 11.6 9.5 39 194 240
DOWN 5% 19.6 7.8 5.9 31 217 269
CAPITAL COST ($400 Gold)
UP 10% 22.3 9.0 6.9 32 205 253
DOWN 10% 23.8 10.4 8.3 38 205 250
OPERATING COSTS
($400 Gold)
UP 10% 20.0 8.0 6.1 31 224 274
DOWN 10% 25.9 11.4 9.1 38 187 236
HEAP RECOVERY
($400 Gold)
95% of plan 20.0 8.0 6.1 31 215 267
90% of plan 16.9 6.2 4.5 28 227 281
</TABLE>
<PAGE>
EXHIBIT 12.1
AMAX GOLD INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except ratios)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
---------------- ------------------------------------------
1994 1993 1993 1992 1991 1990 1989
------- ------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) before
income taxes and
cumulative effect of
accounting changes..... $(7,100) $(8,500) $(122,800) $18,000 $25,300 $36,900 $44,400
------- ------- --------- ------- ------- ------- -------
Adjustments:
Interest expense....... 2,400 1,700 8,500 2,300 400 700 1,200
Interest factor on
rentals(b)............ 100 200 600 200 100 100 100
Amortization of
capitalized interest.. 100 -- 2,600 -- -- -- --
Minority interest in
the losses of
subsidiary (Compania
Minera Amax Guanaco).. (400) -- (1,100) -- -- -- --
Loss from less than 50%
owned subsidiaries
(Canamax Resources
Inc.)................. -- -- -- -- -- 17,600 3,600
------- ------- --------- ------- ------- ------- -------
As adjusted income
(loss)................. $(4,900) $(6,600) $(112,200) $20,500 $25,800 $55,300 $49,300
======= ======= ========= ======= ======= ======= =======
FIXED CHARGES:
Interest expense........ $ 2,400 $ 1,700 $ 8,500 $ 2,300 $ 400 $ 700 $ 1,200
Interest factor on
rentals(b)............. 100 200 600 200 100 100 100
Interest capitalized.... -- 500 500 4,200 800 -- --
------- ------- --------- ------- ------- ------- -------
Total fixed charges..... $ 2,500 $ 2,400 $ 9,600 $ 6,700 $ 1,300 $ 800 $ 1,300
======= ======= ========= ======= ======= ======= =======
Ratio of earnings to
fixed charges.......... (a) (a) (a) 3.06 19.85 69.13 37.92
======= ======= ========= ======= ======= ======= =======
</TABLE>
- --------
(a) Earnings for the three months ended March 31, 1994 and 1993 and the year
ended December 31, 1993 were inadequate to cover fixed charges by $7,400,
$9,000 and $121,800, respectively.
(b) Represents one-third of rent and lease expense which management believes is
a reasonable approximation of an interest factor.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Amax Gold Inc. on Form S-3 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 statement schedules of Amax Gold Inc., as of December 31, 1993
and 1992, and for the three years ended December 31, 1993, 1992 and 1991.
/s/ Coopers & Lybrand
COOPERS & LYBRAND
Denver, Colorado
June 3, 1994
<PAGE>
Exhibit 24
AMAX GOLD INC.
POWER OF ATTORNEY FOR REGISTRATION STATEMENT
ON FORM S-3 UNDER THE SECURITIES ACT OF 1993
The undersigned Director of Amax Gold Inc. hereby appoints Paul J.
Hamschoot, Jr., Roger A. Kauffman and Mark A. Lettes, and each of them
severally, as the attorney-in-fact of the undersigned, to sign a Registration
Statement on Form S-3, or such other appropriate form, on his behalf and to
file such Registration Statement, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
(the "Commission"), under the Securities Act of 1933, as amended (the "Act"),
with respect to the offer and sale of up to $200,000,000 aggregate initial
offering price of Securities of Amax Gold Inc., a Delaware corporation, as
authorized from time to time by the Amax Gold Inc. Board of Directors for sale
pursuant to such Registration Statement in accordance with Rule 415 (a)(1)(x)
under the Act; granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform each and every act and thing needed or
appropriate to be done to comply with the Act and the rules and regulations of
the Commission with respect to such Registration Statement as fully to all
intents and purposes as the undersigned could do in person, hereby ratifying
and confirming all that said attorney-in-fact or any of them may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand.
Date: June 1, 1994
/s/ Allen Born
----------------------------------
Allen Born
<PAGE>
AMAX GOLD INC.
POWER OF ATTORNEY FOR REGISTRATION STATEMENT
ON FORM S-3 UNDER THE SECURITIES ACT OF 1993
The undersigned Director of Amax Gold Inc. hereby appoints Paul J.
Hemschoot, Jr., Roger A. Kauffman and Mark A. Lettes, and each of them
severally, as the attorney-in-fact of the undersigned, to sign a Registration
Statement on Form S-3, or such other appropriate form, on his behalf and to
file such Registration Statement, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
(the "Commission"), under the Securities Act of 1933, as amended (the "Act"),
with respect to the offer and sale of up to $200,000,000 aggregate initial
offering price of Securities of Amax Gold Inc., a Delaware corporation, as
authorized from time to time by the Amax Gold Inc. Board of Directors for sale
pursuant to such Registration Statement in accordance with Rule 415 (a)(l)(x)
under the Act; granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform each and every act and thing needed or
appropriate to be done to comply with the Act and the rules and regulations of
the Commission with respect to such Registration Statement as fully to all
intents and purposes as the undersigned could do in person, hereby ratifying
and confirming all that said attorney-in-fact or any of them may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand.
Date: June 1, 1994
/s/ Vernon F. Taylor, Jr.
--------------------------
Vernon F. Taylor, Jr.
<PAGE>
AMAX GOLD INC.
POWER OF ATTORNEY FOR REGISTRATION STATEMENT
ON FORM S-3 UNDER THE SECURITIES ACT OF 1993
The undersigned Director of Amax Gold Inc. hereby appoints Paul J.
Hemschoot, Jr., Roger A. Kauffman and Mark A. Lettes, and each of them
severally, as the attorney-in-fact of the undersigned, to sign a Registration
Statement on Form S-3, or such other appropriate form, on his behalf and to
file such Registration Statement, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
(the "Commission"), under the Securities Act of 1933, as amended (the "Act"),
with respect to the offer and sale of up to $200,000,000 aggregate initial
offering price of Securities of Amax Gold Inc., a Delaware corporation, as
authorized from time to time by the Amax Gold Inc. Board of Directors for sale
pursuant to such Registration Statement in accordance with Rule 415 (a)(l)(x)
under the Act; granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform each and every act and thing needed or
appropriate to be done to comply with the Act and the rules and regulations of
the Commission with respect to such Registration Statement as fully to all
intents and purposes as the undersigned could do in person, hereby ratifying
and confirming all that said attorney-in-fact or any of them may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand.
Date: June 1, 1994
/s/ Russell L. Wood
--------------------------
Russell L. Wood
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THIS REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
EXHIBIT 99
FORM OF PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus Dated June , 1994)
SHARES
[LOGO OF AMAX GOLD INC. APPEARS HERE]
$ SERIES B CONVERTIBLE PREFERRED STOCK
(LIQUIDATION PREFERENCE $ PER SHARE)
The $ Series B Convertible Preferred Stock, par value $1.00 per share (the
"Convertible Preferred Stock"), of Amax Gold Inc. (the "Company" or "Amax
Gold") is convertible at the option of the holder at any time, unless
previously redeemed, into shares of common stock, par value $0.01 per share
(the "Common Stock"), of the Company at an initial conversion price of $ per
share of Common Stock (equivalent to a conversion rate of shares of Common
Stock for each share of Convertible Preferred Stock), subject to adjustment in
certain events. The outstanding Common Stock is listed on the New York Stock
Exchange and the Toronto Stock Exchange under the symbols "AU" and "AXG,"
respectively. On the last reported sale price of the Common Stock on the
New York Stock Exchange Composite Transactions Tape was $ per share.
The Convertible Preferred Stock is redeemable at any time on and after , at
the option of the Company, in whole or in part, for cash, initially at a
redemption price of $ per share of Convertible Preferred Stock, and
thereafter at prices declining ratably annually to $ per share on and after
, plus accrued and unpaid dividends. Dividends on the Convertible Preferred
Stock will accrue and are cumulative from the date of issuance and are payable
quarterly in arrears on , , and of each year, commencing . The
Convertible Preferred Stock will not be entitled to the benefit of any sinking
fund. See "Description of Convertible Preferred Stock."
[The Company has applied for listing of the Convertible Preferred Stock on the
New York Stock Exchange.]
SEE "RISK FACTORS" FOR CERTAIN RISK FACTORS RELEVANT TO AN INVESTMENT IN THE
CONVERTIBLE PREFERRED STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Share..................................... $ $ $
Total(3)...................................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $ .
(3) The Company has granted to the Underwriters a 30 day option to purchase up
to additional shares of Convertible Preferred Stock at the Price to
Public, less the Underwriting Discount, solely to cover over-allotments, if
any. If the Underwriters exercise such option in full, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
The shares of Convertible Preferred Stock are offered subject to receipt and
acceptance by the Underwriters, to prior sale and to the Underwriters' right to
reject any order in whole or in part and to withdraw, cancel or modify the
offer without notice. It is expected that the shares of Convertible Preferred
Stock will be delivered at the office of Salomon Brothers Inc, Seven World
Trade Center, New York, New York 10048, or through the facilities of The
Depository Trust Company, on or about .
SALOMON BROTHERS INC
The date of this Prospectus Supplement is
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CONVERTIBLE
PREFERRED STOCK OR THE COMPANY'S OUTSTANDING COMMON STOCK AT LEVELS ABOVE
THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY
BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto appearing
elsewhere or incorporated by reference in this Prospectus Supplement and the
accompanying Prospectus. Unless the context otherwise requires, all references
in this Prospectus Supplement to the "Company" and "Amax Gold" refer to Amax
Gold Inc. and its consolidated subsidiaries. Except as otherwise specified, all
information in this Prospectus Supplement assumes no exercise of the
Underwriters' over-allotment option.
THE COMPANY
The Company is engaged in the mining and processing of gold and silver ore in
the United States and Chile, the sale of refined gold and silver bullion and
the exploration for, and acquisition and development of, gold-bearing
properties in North and South America. At December 31, 1993, the Company had
proven/probable gold reserves of approximately 268 million tons of ore
containing approximately 7.4 million ounces of gold. In 1993 the Company's
share of production from its operating properties was approximately 210,900
ounces of gold and approximately 673,500 ounces of silver.
The Company's operating properties consist of a 100% interest in the Sleeper
Mine, an open pit gold mine in Humboldt County, Nevada; a 100% interest in the
Hayden Hill mine, an open pit gold mine in Lassen County, California; an
indirect 90% interest in the Guanaco mine, an open pit gold mine in the Guanaco
Mining District approximately 145 miles southeast of Antofagasta, Chile; and a
100% interest in the Wind Mountain mine, an open pit gold mine in Washoe
County, Nevada, at which mining ceased on January 30, 1992, although residual
heap leach production has continued. The Company, having realized all future
economic benefit from its 33.53% interest in the Waihi gold mine in New Zealand
effective April 30, 1993, retains a nominal interest in such mine. The Company
has two significant gold projects in development: the Refugio project located
in central Chile, in which the Company has an indirect 50% interest, and the
Fort Knox project located approximately 15 miles northeast of Fairbanks,
Alaska, in which the Company has a 100% interest. In addition, the Company has
a third development project under evaluation, a 62.5% joint venture interest in
the Haile gold project, located in South Carolina. Since these development
projects are not on federal lands, none of them would be subject to currently
proposed legislation in Congress to alter the General Mining Law. Reserves
associated with the Refugio project (50% share) and the Fort Knox project
accounted for approximately 77% of the Company's contained ounces from
proven/probable gold ore reserves at December 31, 1993.
The Company was incorporated as a wholly-owned subsidiary of AMAX Inc., a New
York corporation ("Amax"), in April 1987 to acquire the gold interests of Amax
in the United States, Canada and the North Island of New Zealand. Amax sold
approximately 13% of the then outstanding shares of Common Stock of the Company
in the Company's initial public offering in July 1987. On November 15, 1993,
Amax was merged with and into Cyprus Minerals Company (the "Cyprus Amax
Merger"), which was renamed Cyprus Amax Minerals Company ("Cyprus Amax").
Immediately prior to the Cyprus Amax Merger, Amax, which at that time held
approximately 68% of the outstanding shares of the Company's Common Stock,
distributed approximately 21.8 million shares (approximately 28%) of the
Company's Common Stock (together with all of the outstanding shares of common
stock of Alumax Inc., a Delaware corporation that controlled Amax's aluminum
business) in a distribution to its shareholders. Immediately following the
stock distribution and the Cyprus Amax Merger, Cyprus Amax held approximately
31.3 million shares of Amax Gold Common Stock, which constituted approximately
40% of the then outstanding shares of Common Stock of the Company. Subsequent
to the Cyprus Amax Merger, the Company and Cyprus Amax entered into a $100
million double convertible revolving line of credit (the "DOCLOC Agreement"),
under which the Company could issue up to 12,099,213 shares of Common Stock to
Cyprus Amax, and
S-3
<PAGE>
a stock purchase agreement providing for the purchase of 3,000,000 shares of
the Company's Common Stock by Cyprus Amax (the "Stock Purchase Agreement"),
both of which agreements are subject to stockholder approval. The issuance of
Common Stock under these two agreements with Cyprus Amax could potentially
increase Cyprus Amax's share of the Company's outstanding shares of Common
Stock to approximately 46.4 million shares (or approximately 49.7% prior to
giving effect to this offering). See "Recent Developments."
Recognizing the need to expand and diversify its resource base, in 1991 the
Company undertook a strategy to more actively seek advanced-stage exploration
projects both in the United States and in other countries where the geology and
investment climate were favorable to gold mining. In 1992, the Company acquired
a 100% interest in the Fort Knox project and a 90% interest in the Guanaco
project (which has since been developed into the Guanaco mine). In 1992, the
Company also acquired a 62.5% interest in the Haile project. In 1993, the
Company acquired an indirect 50% interest in the Refugio project. The
acquisition of these properties added approximately 6.1 million contained
ounces of gold to the Company's reserves. The Company is now focusing its
efforts on developing the Refugio and Fort Knox projects and optimizing the
operation of its four currently producing mines, while advancing the evaluation
of the Haile project.
The Refugio project is a large scale, low grade ore deposit located in
central Chile. The property is held by Compania Minera Maricunga, a Chilean
mining company ("CMM"), which is indirectly owned 50% by the Company and 50% by
Bema Gold Corporation, a publicly traded company based in Vancouver, British
Columbia ("Bema"). The Company is responsible for day-to-day operating
decisions with respect to the project. The Refugio project encompasses the
Verde, Pancho and Guanaco deposits, which are disseminated gold porphyry
deposits containing trace amounts of copper. All of the current reserves for
the Refugio project are contained in the Verde deposit which has
proven/probable gold reserves of 104.4 million tons of ore, with an average
grade of 0.030 gold ounces per ton or 3.1 million contained ounces of gold (of
which the Company's share is 50%). Feasibility studies have been completed on
the Verde deposit which contemplate construction of an open pit mine and heap
leach operation. The feasibility studies show potential production from the
Verde deposit of 200,000 to 250,000 ounces of gold per year (of which the
Company's share is 50%) at cash operating costs averaging approximately $200 to
$230 per ounce of gold over the mine life, with the higher production rate and
lower unit operating cost expected in the early years of production. CMM is
currently seeking project financing for a significant portion of its capital
requirements. The Company estimates the additional cost of developing the mine
and related facilities at approximately $120 million to $140 million (of which
the Company's share would be 50%) and expects project development to take
approximately two years. Development is dependent, in part, upon obtaining the
necessary financing on acceptable terms.
The Fort Knox project is a large scale, low grade ore deposit located on
state and private lands approximately 15 miles northeast of Fairbanks, Alaska.
The Fort Knox project has proven/probable gold reserves of 174.5 million tons,
with an average grade of 0.024 gold ounces per ton or 4.1 million contained
ounces of gold. The Company has completed detailed feasibility studies which
contemplate the construction of a mine and process plant capable of producing
between 300,000 and 350,000 ounces of gold per year at cash operating costs
ranging from $220 to $240 per ounce of gold over the mine life, with the higher
production rate and lower unit operating costs expected in the early years of
production. In May 1994, the U.S. Army Corps of Engineers issued the required
dredge and fill permit under Section 404 of the Clean Water Act for
construction and operation of the Fort Knox project. With the issuance of that
permit, the Company has all permits needed to proceed with the next phase of
the project development during 1994. This phase of development will involve
completion of detailed engineering, upgrading access roads to the project site
and initial site preparation. Those state permits and
S-4
<PAGE>
authorizations which have not yet been received (e.g., Plan of Operations
approval and air permits) are expected to be applied for and received in due
course, but no assurance can be given that such permits will be issued in the
time period and with the terms and conditions contemplated by the Company. The
Company estimates the additional cost of developing the mine and related
facilities at approximately $250 million to $270 million, in addition to
capitalized acquisition and development costs of approximately [$ million at
.] The Company intends to secure institutional financing to fund a
significant portion of its future capital requirements. Development is
dependent on obtaining such financing on acceptable terms, obtaining final
permits, market conditions and the approval of the Company's Board of
Directors.
In addition to the Refugio and Fort Knox projects, the Company has a 62.5%
joint venture interest in the Haile gold deposit in Lancaster County, South
Carolina, which is in the evaluation stage.
The Company's primary exploration objective continues to be acquisition and
evaluation of near surface gold deposits that can be mined by open pit methods.
Effective as of January 1, 1994, the Company has entered into an exploration
joint venture agreement with Cyprus Amax (the "Exploration JV") under which the
Company and Cyprus Amax will pool their efforts for the principal purpose of
discovering and developing future gold prospects. Cyprus Amax will provide 75%
and the Company will provide 25% of the initial exploration funding for any
newly identified gold targets. The Exploration JV is expected to broaden the
geographic reach of the Company's gold exploration program and reduce its costs
by sharing key personnel and spreading the high risks associated with
exploration. Cyprus Amax's 75% interest in gold prospects developed through the
Exploration JV will be available for Amax Gold to purchase prior to a decision
to place such prospects in production, but only at the then fair market value
of such interest (which may be determined by mutual agreement). Exploration
projects that the Company held prior to the Cyprus Amax Merger will continue to
be evaluated entirely by the Company utilizing the services of Cyprus Amax
geologists under a services agreement. During 1994, the Company's exploration
efforts outside the Exploration JV will be focused on the Robertson property,
an advanced-stage prospect located in Crescent Valley, Nevada, in which the
Company has a right to acquire a 60% interest from a third party by completing
a bankable feasibility study by November 1994. The Company is also evaluating a
Cyprus Amax advanced-stage prospect in Panama under an option to acquire Cyprus
Amax's interest in such prospect upon completion of a feasibility study.
The Company employs a hedging strategy with the objective of mitigating the
impact of downturns in the gold market while maintaining significant upside
potential in market upswings. The Company has historically been able to
maintain an average realized gold price above the average Commodity Exchange,
Inc. ("COMEX") gold market price without engaging in the type of forward
selling that would eliminate much of the upside potential in the event of a
price increase. The Company's hedging efforts resulted in average realized
prices of $392 per ounce and $402 per ounce for 1993 and 1992, respectively.
This contrasts with average COMEX prices of approximately $360 per ounce and
$344 per ounce for 1993 and 1992, respectively.
RISK FACTORS
SEE "RISK FACTORS" FOR CERTAIN RISK FACTORS RELEVANT TO AN INVESTMENT IN THE
CONVERTIBLE PREFERRED STOCK.
S-5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Convertible Preferred
Stock Offered........... shares of $ Series B Convertible Preferred Stock. See
"Description of Convertible Preferred Stock."
Dividends............... Annual cumulative dividends of $ per share of Convertible
Preferred Stock will accrue from the date of original issuance
and are payable quarterly out of funds legally available
therefor on each , , and , commencing when,
as and if declared by the Board of Directors. See "Description
of Convertible Preferred Stock--Dividends."
Liquidation Preference.. $ per share, plus accrued and unpaid dividends. See "De-
scription of Convertible Preferred Stock--Liquidation Rights."
Conversion Rights....... Convertible at any time at the option of the holder, unless
previously redeemed, into Common Stock at an initial conver-
sion price of $ per share of Common Stock (equivalent to a
conversion rate of shares of Common Stock for each share
of Convertible Preferred Stock), subject to adjustment in cer-
tain events. See "Description of Convertible Preferred Stock--
Conversion Rights."
Redemption at the Option
of Amax Gold............ Redeemable at any time on and after at the option of
Amax Gold, in whole or from time to time in part, initially at
a redemption price of $ per share for the 12-month period
commencing , and thereafter at prices declining ratably
on an annual basis to $ per share on and after , plus
in each case accrued and unpaid dividends to, but excluding,
the redemption date. See "Description of Convertible Preferred
Stock--Redemption at Option of the Company."
Voting Rights........... Except as required by law, holders of shares of the Convert-
ible Preferred Stock will not be entitled to vote in the elec-
tion of directors unless dividends on the Convertible Pre-
ferred Stock are in arrears for the equivalent of at least six
full quarterly dividends, in which case holders of the Con-
vertible Preferred Stock will be entitled, voting as a class
together with holders of shares of any other series of pre-
ferred stock ranking on a parity as to the payment of divi-
dends (other than the holder of the Company's $2.25 Series A
Convertible Preferred Stock, par value $1.00 per share (the
"Series A Preferred Stock"), which has its own voting rights
in the event that dividends thereon are in arrears for at
least three semi-annual dividend payments), to elect two addi-
tional directors until such dividend arrearage is eliminated.
In addition, the affirmative consent of the holders of at
least two-thirds of the outstanding Convertible Preferred
Stock, voting separately as a class, will be required for the
issuance of any class or series of stock of the Company rank-
ing senior to the Convertible Preferred Stock as to dividends
or liquidation rights, for amendments to the Company's Re-
stated Certificate of Incorporation or By-laws affecting ad-
versely the rights of holders of the Convertible Preferred
Stock and to effect any reclassification of the Convertible
Preferred Stock. See "Description of Convertible Preferred
Stock--Voting Rights."
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
Ranking................. The Convertible Preferred Stock will be senior to the Common
Stock with respect to dividends and upon liquidation, dissolu-
tion or winding up. The Convertible Preferred Stock will be on
parity with the Series A Preferred Stock. See "Description of
Convertible Preferred Stock-- Dividends" and "--Liquidation
Rights."
Use of Proceeds......... [TO COME]. See "Use of Proceeds."
Listing................. [The Company has applied for listing of the Convertible Pre-
ferred Stock on the New York Stock Exchange.] The Company's
Common Stock is listed on the New York Stock Exchange ("AU")
and the Toronto Stock Exchange ("AXG"). Certain warrants to
purchase shares of the Company's Common Stock are listed on
the American Stock Exchange and the Toronto Stock Exchange.
Proposed NYSE Symbol.... [TO COME]
</TABLE>
S-7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION*
(In thousands, except per share amounts and ratios)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
------ -------------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales.................. $ $ 41,500 $ 81,900 $ 99,700 $128,200 $149,800 $121,600
Gross operating margin
(loss)................ (15,500) (31,900) 16,600 38,000 63,100 59,400
Asset write-downs(1)... (64,100) (87,700) -- -- (12,600) --
Gain on Waihi transac-
tion(2)............... 8,800 8,800 -- -- -- --
Exploration expenses,
net(3)................ (1,600) (5,200) 2,200 (14,000) (9,400) (12,100)
Earnings (loss) from
operations(1)(2)(3)... (72,400) (116,000) 18,800 24,000 36,100 43,700
Net earnings
(loss)(1)(2)(3)(4).... (70,300) (104,200) 11,500 21,200 28,300 33,300
PER SHARE DATA:
Net earnings (loss) per
common
share(1)(2)(3)(4)..... $ $ (.90) $ (1.34) $ .16 $ .35 $ .47 $ .55
Dividends declared per
common share.......... .04 .08 .08 .08 .08 .08
Weighted average common
shares outstanding.... 77,502 77,758 73,695 59,995 59,995 59,995
OTHER FINANCIAL DATA:
Depreciation and deple-
tion.................. $ $ 13,500 $ 25,700 $ 21,800 $ 24,700 $ 26,000 $ 18,100
Capital and cash
acquisition
expenditures(5)....... 13,500 23,400 113,700 60,000 39,900 31,700
Refugio cash
acquisition and
investment costs(6)... 1,000 1,200 -- -- -- --
Ratio of earnings to
fixed charges and
preferred stock
dividends(7).......... -- -- 3.06x 19.85x 69.13x 37.92x
<CAPTION>
JUNE 30, 1994 DECEMBER 31,
--------------------- ------------------------------------------------
ACTUAL AS ADJUSTED(8) 1993 1992 1991 1990 1989
------ -------------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets......... $ $ $ 37,900 $ 47,100 $ 41,700 $ 42,400 $ 23,600
Total assets........... 381,000 477,600 198,300 157,200 150,500
Current liabilities.... 37,600 46,900 28,200 21,200 16,500
Long-term debt and
unearned revenue...... 136,500 103,100 24,100 8,400 31,300
Shareholders' equity... 173,300 257,200 136,300 120,700 98,300
Working capital........ 300 200 13,500 21,200 7,100
</TABLE>
- --------
* TO BE UPDATED FOR THE MOST RECENTLY AVAILABLE INFORMATION AT THE TIME, IF
ANY, OF AN OFFERING OF CONVERTIBLE PREFERRED STOCK.
(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. ("Canamax") recorded in the first half of 1990,
which reduced 1990 net earnings per common share by $.21. The remaining
Canamax investment was sold to Amax during the second half of 1990 for $6.4
million in cash.
(2) During the second quarter of 1993, the Company completed a transaction
which resulted in the realization of all future economic benefit from its
33.53% interest in the Waihi mine, effective April 30, 1993. The Company
recognized an $8.8 million pre-tax ($2.4 million after-tax) gain on such
transaction.
(3) In September 1993, Amax Gold changed its exploration accounting policy,
effective January 1, 1993, such that prior period exploration expenses
would no longer be capitalized and restored to earnings when a property
became exploitable. The 1993 net loss includes a $13.4 million, or $.17 per
common share, after-tax charge relating to the cumulative effect of this
accounting change. The 1992 net earnings include $8.9 million, or $.12 per
common share, of after-tax income related to prior year exploration
expenditures on the Haile and Guanaco projects that were capitalized and
restored to earnings. The pro forma unaudited net earnings and net earnings
per common share, assuming this 1993 exploration accounting change had been
applied retroactively for the fiscal years prior to 1993, were $4.9 million
in 1992 (or $.07 per common share), $21.9 million in 1991 (or $.36 per
common share), $30.5 million in 1990 (or $.50 per common share) and $29.6
million in 1989 (or $.49 per common share).
S-8
<PAGE>
(4) Net loss for 1993 includes a $13.4 million, or $.17 per common share,
after-tax charge relating to the cumulative effect of the January 1, 1993
change in the Company's exploration accounting policy discussed in footnote
(3) above. The 1993 net loss also includes a $1.8 million, or $.03 per
common share, after-tax cumulative effect of the January 1, 1993 adoption
of Statement of Financial Accounting Standards (SFAS) No. 112, "Employers'
Accounting for Postemployment Benefits." Net earnings for 1992 include a
$1.5 million, or $.02 per common share, after-tax cumulative effect of the
January 1, 1992 adoption of Statement of Financial Accounting Standard No.
106, "Postretirement Benefits Other Than Pensions."
(5) Capital and cash acquisition expenditures for the six month period ended
June 30, 1994 and the year ended December 31, 1993 consist of $ million
and $7.7 million, respectively, of Guanaco capital construction and
development costs; $ million and $6.7 million, respectively, of Fort Knox
development costs; an aggregate of $ million and $6.5 million,
respectively, of sustaining capital at Sleeper, Hayden Hill and Waihi, and
$ million and $2.5 million, respectively, of Haile development costs.
(6) Refugio cash acquisition and investment costs for 1993 exclude $21.1
million of capital acquisition costs that were funded through the issuance
of Common Stock.
(7) For purposes of computing the ratio of earnings to fixed charges and
preferred stock dividends, earnings consist of pre-tax earnings before
cumulative effect of accounting changes and the 10% minority interest in
the losses of Compania Minera Amax Guanaco, excluding the Canamax equity
losses and Canamax write-down (described in footnote (1) above),
amortization of capitalized interest and fixed charges. Fixed charges
consist of total interest and bank fees, whether expensed or capitalized,
and one-third of rents, which management believes is a reasonable
approximation of an interest factor. For the six month period ended June
30, 1994, earnings were inadequate to cover fixed charges by $ million
due to continuing operating losses. For the six month period ended June 30,
1993 and the year ended December 31, 1993, earnings were inadequate to
cover fixed charges by $74.7 million and $121.8 million, respectively, due
to the asset write-downs described in footnote (1) above and operating
losses. See "Risk Factors--Recent Losses" and "--Absence of Earnings to
Satisfy Fixed Charges and Dividends on Preferred Stock." Prior to the
offering of the Convertible Preferred Stock made hereby, there has been no
preferred stock outstanding, but 2,000,000 shares of Series A Preferred
Stock have been reserved for issuance to Cyprus Amax in connection with the
DOCLOC Agreement.
(8) As adjusted to give effect to the offering of the Convertible Preferred
Stock made hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds."
S-9
<PAGE>
GOLD PRODUCTION AND PRODUCTION COSTS*
The following table sets forth the Company's overall ounces of gold produced
and sold; weighted average realized prices and weighted average costs per ounce
produced; and ounces of gold production and production costs for the Company's
Sleeper mine, Wind Mountain mine, Hayden Hill mine, Guanaco mine and Waihi mine
for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
--------------- --------------------------------------------
1994 1993 1993 1992 1991 1990 1989
--------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Sleeper Mine
Ounces of gold produced. 48,901 100,018 144,573 183,346 250,131 256,219
Average cost per ounce
produced
Cash production
cost(1)............... $ 320 $ 317 $ 223 $ 188 $ 125 $ 109
Depreciation and
depletion(4).......... 134 132 99 71 60 52
--------- -------- -------- -------- -------- --------
Total production cost.. $ 454 $ 449 $ 322 $ 259 $ 185 $ 161
========= ======== ======== ======== ======== ========
Wind Mountain Mine(2)
Ounces of gold produced. 11,601 19,296 54,690 91,063 81,733 30,903
Average cost per ounce
produced
Cash production
cost(1)............... $ 152 $ 167 $ 114 $ 210 $ 197 $ 265
Depreciation and
depletion............. -- -- 27 109 113 107
--------- -------- -------- -------- -------- --------
Total production cost.. $ 152 $ 167 $ 141 $ 319 $ 310 $ 372
========= ======== ======== ======== ======== ========
Hayden Hill Mine(3)
Ounces of gold produced. 27,152 53,038 28,815 -- -- --
Average cost per ounce
produced
Cash production
cost(1)............... $ 556 $ 470 $ 432 $ -- $ -- $ --
Depreciation and
depletion(4).......... 187 149 152 -- -- --
--------- -------- -------- -------- -------- --------
Total production cost.. $ 743 $ 619 $ 584 $ -- $ -- $ --
========= ======== ======== ======== ======== ========
Guanaco Mine(5)
Ounces of gold produced. 9,564 29,862 -- -- -- --
Average cost per ounce
produced
Cash production
cost(1)............... $ 598 $ 664 $ -- $ -- $ -- $ --
Depreciation and
depletion(4).......... 143 142 -- -- -- --
--------- -------- -------- -------- -------- --------
Total production cost.. $ 741 $ 806 $ -- $ -- $ -- $ --
========= ======== ======== ======== ======== ========
Waihi Mine(6)
Ounces of gold produced. 8,666 8,666 25,525 25,824 22,995 20,265
Average cost per ounce
produced
Cash production
cost(1)............... $ 233 $ 233 $ 225 $ 184 $ 203 $ 223
Depreciation and
depletion(4).......... 49 49 79 67 73 71
--------- -------- -------- -------- -------- --------
Total production cost.. $ 282 $ 282 $ 304 $ 251 $ 276 $ 294
========= ======== ======== ======== ======== ========
Total ounces of gold
produced............... 105,884 210,880 253,603 300,233 354,859 307,387
Total ounces of gold
sold................... 106,045 209,290 248,024 300,418 359,146 296,075
Weighted average price
per ounce sold......... $ 391 $ 392 $ 402 $ 427 $ 417 $ 411
Weighted average cost
per ounce produced(7)
Cash production
cost(1)............... $ 380 $ 388 $ 223 $ 195 $ 147 $ 132
Depreciation and
depletion(4).......... 127 122 87 82 73 59
--------- -------- -------- -------- -------- --------
Total production cost.. $ 507 $ 510 $ 310 $ 277 $ 220 $ 191
========= ======== ======== ======== ======== ========
</TABLE>
- --------
* TO BE UPDATED FOR THE MOST RECENTLY AVAILABLE INFORMATION AT THE TIME, IF
ANY, OF AN OFFERING OF CONVERTIBLE PREFERRED STOCK.
(1) Cash production costs include all direct and indirect operating costs
incurred at the mine sites, including overhead and, where applicable,
Nevada net proceeds tax, royalties and credits for silver by-products.
(2) All mining at the Wind Mountain mine ceased at the end of January 1992,
although the Company continues recovery of gold from residual heap
leaching.
S-10
<PAGE>
(3) Production commenced at the Hayden Hill mine in June 1992 as a mill and
heap leach operation. Beginning July 1993, the mine was reconfigured as a
heap leach operation and mill operations were suspended indefinitely.
(4) In September 1993, the Company changed its accounting policy for
exploration expenditures, effective January 1, 1993. Accordingly, the first
six months of 1993 were restated to reflect the adoption of this policy.
(5) Production commenced at the Guanaco mine in April 1993.
(6) Represents the Company's 33.53% share. During the second quarter of 1993,
the Company completed a transaction which resulted in the realization of
all future economic benefit from its interest in the Waihi mine, effective
April 30, 1993. Therefore, production and related production costs for the
six month period ended June 30, 1993 and the year ended December 31, 1993
only represent amounts through April 30, 1993.
(7) Average costs weighted by ounces of gold produced at each mine.
PROVEN/PROBABLE GOLD ORE RESERVES
The following table sets forth the Company's proven/probable gold ore
reserves at its operating mines and development properties as of December 31,
1993. Reserves are that part of a mineral deposit that can be economically and
legally extracted or produced at the time of reserve determination and are
customarily stated in terms of "ore" when dealing with metals. Reserves
represent in-place grades and do not reflect losses in the recovery process.
Ore reserves at the Sleeper mine, the Hayden Hill mine, the Guanaco mine and
the Haile project have been confirmed by independent consultants, and the ore
reserves at the Fort Knox project and the Refugio project have also been
calculated by independent consultants, all of which independent consultants are
experts in mining, geology and ore reserve determination.
<TABLE>
<CAPTION>
THE COMPANY'S
SHARE OF
AVERAGE GOLD CONTAINED
TONS ORE GRADE OUNCES
(000) (OZ. PER TON) (000 OZ.)
------- ------------- -------------
<S> <C> <C> <C>
OPERATING MINES
Sleeper Mine
Mill ore.................................. 1,331 0.115 153
Heap leach ore............................ 5,358 0.018 97
------- ----- -----
Total.................................... 6,689 0.037 250
Hayden Hill Mine
Heap leach ore............................ 18,800 0.024 451
Guanaco Mine
Heap leach ore............................ 12,874 0.049 570(1)
------- -----
Total of operating mines.................. 38,363 1,271
======= -----
DEVELOPMENT PROPERTIES
Fort Knox Project
Mill ore.................................. 174,483 0.024 4,117
Refugio Project
Heap leach ore............................ 104,383 0.030 1,537(2)
Haile Project
Mill ore.................................. 6,849 0.101 431(3)
------- -----
Total of development properties........... 285,715 6,085
======= -----
Total contained ounces.................... 7,356
=====
</TABLE>
- --------
(1) Represents the Company's 90% share.
(2) Represents the Company's 50% share.
(3) Represents the Company's 62.5% share.
S-11
<PAGE>
RISK FACTORS
Prospective purchasers of shares of the Convertible Preferred Stock offered
hereby should carefully read this Prospectus Supplement, the accompanying
Prospectus and the documents incorporated by reference herein and therein.
Ownership of shares of the Convertible Preferred Stock and of shares of Common
Stock issuable upon conversion thereof involves certain risks. In determining
whether to purchase shares of Convertible Preferred Stock, prospective
investors should consider carefully the following factors in addition to the
risk factors set forth in the accompanying Prospectus and the other information
contained in this Prospectus Supplement and the accompanying Prospectus.
RECENT LOSSES
The Company reported a net loss of $ million [UPDATE FOR MOST RECENT
PERIOD] and a net loss of $104.2 million for the year ended December 31, 1993.
The net loss for the year ended December 31, 1993 included after-tax charges of
$57.5 million for the write-downs of the Sleeper and Hayden Hill investments
and $15.2 million for the cumulative effects of an exploration accounting
change and the adoption of a new accounting standard for postemployment
benefits. Additionally, the 1993 results included an after-tax gain of $2.4
million from the realization of the future economic benefits from the Company's
33.53% interest in the Waihi mine in New Zealand. Excluding these special
items, the 1993 net loss was $33.9 million. The Company expects to continue to
experience net losses until the Company's existing development projects achieve
commercial production, absent a substantial increase in gold market prices.
[UPDATE FOR MOST RECENT PERIOD.] See "Recent Developments--Recent Operating
Performance."
ABSENCE OF EARNINGS TO SATISFY FIXED CHARGES AND DIVIDENDS ON PREFERRED STOCK
Earnings for [UPDATE FOR MOST RECENT PERIOD] were insufficient to cover fixed
charges by approximately $ million, primarily as a result of the recent
losses discussed under "--Recent Losses" above. Beginning in 1993, the Company
has satisfied fixed charges (e.g., interest, whether expensed or capitalized,
and rent expense) from [UPDATE FOR MOST RECENT PERIOD.] In the future, the
Company expects to satisfy its fixed charges and other expenses from cash flow
from operations, and, to the extent cash flow from operations is insufficient,
from the net proceeds of the sale of the shares of Convertible Preferred Stock
offered hereby, [or from borrowings from Cyprus Amax under the DOCLOC
Agreement]. To the extent cash flow remains insufficient, the Company may
consider entering into joint venture arrangements on existing development
projects or disposing of non-strategic assets.
The availability of future net cash provided by operating activities to fund
the payment of dividends on the Convertible Preferred Stock will depend on
numerous factors that cannot now be predicted, including gold prices, the
amount of the Company's expenditures for new project development and the extent
to which the Convertible Preferred Stock is converted, among others. Dividends
will be payable on the Convertible Preferred Stock only when, as and if
declared by the Company's Board of Directors out of funds legally available
therefor. While the Company intends to pay dividends on the Convertible
Preferred Stock, it is expected that the Company will continue to incur losses
until its existing development projects achieve commercial production, absent a
substantial increase in gold market prices. Dividends on the Convertible
Preferred Stock may be paid only out of capital surplus (within the meaning of
the Delaware General Corporation Law) or net profits of the Company for the
fiscal year in which the dividend is declared and the preceding fiscal year. As
of [UPDATE FOR MOST RECENT PERIOD] the Company had a capital surplus of
$ which could be used to pay dividends. Unpaid dividends do not accrue
interest. Dividends may be paid from a portion of the net proceeds of this
offering.
S-12
<PAGE>
ABSENCE OF AN ESTABLISHED MARKET FOR THE CONVERTIBLE PREFERRED STOCK
Prior to the offering of the shares of Convertible Preferred Stock made
hereby, there has been no market for the Convertible Preferred Stock. The
offering price has been determined by agreement between the Company and the
Underwriters. See "Underwriting." [The Company has made application to list the
Convertible Preferred Stock on the New York Stock Exchange, but there can be no
assurance that the New York Stock Exchange will accept the Convertible
Preferred Stock for listing.]
RECENT DEVELOPMENTS
[RECENT OPERATING PERFORMANCE]
[DEVELOPMENT PROJECTS]
[STOCKHOLDER APPROVAL OF DOCLOC AGREEMENT AND STOCK PURCHASE AGREEMENT]
[TRANSACTIONS WITH CYPRUS AMAX]
[OTHER RECENT DEVELOPMENTS]
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Convertible Preferred
Stock offered hereby are estimated to be approximately $ million (or
approximately $ million if the Underwriters' over-allotment option is
exercised in full).
[The Company intends to use the net proceeds to be received from the sale of
the Convertible Preferred Stock for the continued development of the Refugio
and Fort Knox gold projects, to repay indebtedness (including indebtedness owed
to Cyprus Amax), and for other general corporate purposes. See "The Company--
Refugio Project" and "--Fort Knox Project." Pending the application of the net
proceeds, the Company expects to invest such proceeds in short-term, interest-
bearing instruments or other investment-grade securities.]
S-13
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is listed on the New York Stock Exchange under the
symbol "AU" and on the Toronto Stock Exchange under the symbol "AXG." The
following table sets forth, for the periods indicated, the high and low
reported last sale prices per share for the Common Stock reported on the New
York Stock Exchange Composite Transactions Tape.
<TABLE>
<CAPTION>
PRICE RANGE
---------------
HIGH LOW
------- -------
<S> <C> <C>
1991
First Quarter.............................................. $15 3/4 $11 1/2
Second Quarter............................................. 15 12
Third Quarter.............................................. 15 5/8 10 1/8
Fourth Quarter............................................. 12 5/8 10 1/8
1992
First Quarter.............................................. 12 1/2 8 1/2
Second Quarter............................................. 11 1/2 8 7/8
Third Quarter.............................................. 11 5/8 9 1/8
Fourth Quarter............................................. 9 7/8 7 5/8
1993
First Quarter.............................................. 9 3/8 7 3/4
Second Quarter............................................. 9 1/2 6 7/8
Third Quarter.............................................. 10 1/2 6 3/4
Fourth Quarter............................................. 8 6
1994
First Quarter.............................................. 8 1/4 6 1/2
Second Quarter.............................................
</TABLE>
TO BE UPDATED FOR THE MOST RECENTLY AVAILABLE INFORMATION AT THE TIME, IF
ANY, OF AN OFFERING OF CONVERTIBLE PREFERRED STOCK.
On the last reported sales price of the Common Stock on the New York
Stock Exchange Composite Transactions Tape was $ per share. At there
were approximately holders of record of the Company's Common Stock.
In March 1994 the Company eliminated the quarterly cash dividend of $.02 per
share of Common Stock which the Company had paid each quarter since February
1988. The Board of Directors of the Company decided that, in view of recent
operating losses and negative cash flow, it was in the best interests of the
stockholders of the Company to eliminate the dividend. Any determination to pay
future dividends on the Common Stock and the amount thereof would be made by
the Board of Directors and will depend on the Company's future earnings,
capital requirements, financial condition and other relevant factors. The Board
of Directors has no present intention of paying dividends on the Common Stock.
Although the Company's loan agreements do not directly limit the payment of
dividends, the agreements require the Company to comply with certain financial
covenants that may be affected by dividend payments, so long as the Company's
guarantee of the Hayden Hill borrowing remains in effect. These tests include
the maintenance of a minimum tangible net worth for the Company and its
consolidated subsidiaries and a maximum ratio of total liabilities to tangible
net worth of the Company and its consolidated subsidiaries from time to time.
Under the most restrictive of these tests, and after giving effect to the sale
of the Convertible Preferred Stock offered hereby, the Company would have had
approximately $ million available for the payment of dividends as of .
The Company's existing warrants are listed on the American Stock Exchange and
the Toronto Stock Exchange. There is no established trading market for the
Company's Series A Preferred Stock which may be issued to Cyprus Amax in
connection with the DOCLOC Agreement.
S-14
<PAGE>
CAPITALIZATION
(In thousands, except per share amounts)
The following table sets forth the capitalization of the Company and its
consolidated subsidiaries at , and as adjusted to give effect to the
issuance of the shares of Convertible Preferred Stock being offered hereby and
the application of the estimated net proceeds therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
AT
------------------
ACTUAL AS ADJUSTED
------ -----------
<S> <C> <C>
Short-term debt and current maturities of long-term debt and
unearned revenue(1)........................................ $ $
==== ====
Long-term debt(2)........................................... $ $
---- ----
Notes payable to Cyprus Amax(3)............................. $ $
---- ----
Shareholders' equity:
Preferred Stock, par value $1.00 per share, authorized
10,000,000 shares, no shares issued and outstanding,
2,000,000 shares of Series A Convertible Preferred Stock
authorized, no shares issued and outstanding, and
shares of Series B Convertible
Preferred Stock authorized, no shares issued and
outstanding, and shares issued and outstanding as
adjusted................................................
Common Stock, par value $.01 per share, authorized
200,000,000 shares, issued and outstanding shares(4).
Paid-in capital...........................................
Retained earnings.........................................
Common Stock in treasury, at cost (1,991 shares)..........
---- ----
Total shareholders' equity..................................
---- ----
Total capitalization........................................ $ $
==== ====
</TABLE>
- --------
(1) Includes $ million of currently scheduled amortization payments on the
Hayden Hill loan, $ million of currently scheduled amortization payments
on indebtedness to a Chilean governmental agency, $1 million of currently
scheduled amortization payments on a U.S. term loan for the Guanaco mine
and $1.6 million of currently scheduled amortization payments under the
Sleeper gold loan (representing 4,000 gold ounces).
(2) Long-term debt includes $ million under the Hayden Hill loan, $ million
under a U.S. term loan for the Guanaco mine, $ million of indebtedness to
a Chilean governmental agency and $ million of working capital gold loans
(representing gold ounces).
(3) Includes $ million of outstanding indebtedness to Cyprus Amax under a
demand promissory note payable. [In , Cyprus Amax purchased three
million shares of the Company's Common Stock as repayment of approximately
$20.7 million of the amounts outstanding under the promissory note payable.
The remaining $ million outstanding under the promissory note payable was
classified as long-term debt based on Cyprus Amax's deferral of the
remaining balance until 1995.]
(4) Excludes 3,000,000 shares of Common Stock reserved for issuance under the
Dividend Reinvestment Plan, of which shares remain available for
issuance, 4,067,000 shares of Common Stock reserved for issuance upon
exercise of outstanding warrants which expire on January 8, 1996 and have
an exercise price of $21.00 per share, and a total of 2,050,000 shares of
Common Stock reserved for issuance under the Company's Stock Option Plan,
Performance Share Plan, Deferred Compensation Plan for Directors and Non-
Employee Director Stock Grant Plan. Also excludes shares of Common Stock
issuable upon conversion of the shares of Convertible Preferred Stock
offered hereby.
S-15
<PAGE>
THE COMPANY
GENERAL
The Company is engaged in the mining and processing of gold and silver ore in
the United States and Chile, the sale of refined gold and silver bullion and
the exploration for, and acquisition and development of, gold-bearing
properties in North and South America. At December 31, 1993, the Company had
proven/probable gold reserves of approximately 268 million tons of ore
containing approximately 7.4 million ounces of gold. In 1993 the Company's
share of production from its operating properties was approximately 210,900
ounces of gold and approximately 673,500 ounces of silver.
The Company's operating properties consist of a 100% interest in the Sleeper
Mine, an open pit gold mine in Humboldt County, Nevada; a 100% interest in the
Hayden Hill mine, an open pit gold mine in Lassen County, California; an
indirect 90% interest in the Guanaco mine, an open pit gold mine in the Guanaco
Mining District approximately 145 miles southeast of Antofagasta, Chile; and a
100% interest in the Wind Mountain mine, an open pit gold mine in Washoe
County, Nevada, at which mining ceased on January 30, 1992, although residual
heap leach production has continued. The Company, having realized all future
economic benefit from its 33.53% interest in the Waihi gold mine in New Zealand
effective April 30, 1993, retains a nominal interest in such mine. The Company
has two significant gold projects in development: the Refugio project located
in central Chile, in which the Company has an indirect 50% interest, and the
Fort Knox project located approximately 15 miles northeast of Fairbanks,
Alaska, in which the Company has a 100% interest. In addition, the Company has
a third development project under evaluation, a 62.5% joint venture interest in
the Haile gold project, located in South Carolina. Since these development
projects are not on federal lands, none of them would be subject to currently
proposed legislation in Congress to alter the General Mining Law. Reserves
associated with the Refugio project (50% share) and the Fort Knox project
accounted for approximately 77% of the Company's contained ounces from
proven/probable gold ore reserves at December 31, 1993.
The Company was incorporated as a wholly-owned subsidiary of Amax in April
1987 to acquire the gold interests of Amax in the United States, Canada and the
North Island of New Zealand. Amax sold approximately 13% of the then
outstanding shares of Common Stock of the Company in the Company's initial
public offering in July 1987. On November 15, 1993, Amax was merged with and
into Cyprus Minerals Company, which was renamed Cyprus Amax Minerals Company.
Immediately prior to the Cyprus Amax Merger, Amax, which at that time held
approximately 68% of the outstanding shares of the Company's Common Stock,
distributed approximately 21.8 million shares (approximately 28%) of the
Company's Common Stock (together with all of the outstanding shares of common
stock of Alumax Inc., a Delaware corporation that controlled Amax's aluminum
business) in a distribution to its shareholders. Immediately following the
stock distribution and the Cyprus Amax Merger, Cyprus Amax held approximately
31.3 million shares of Amax Gold Common Stock, which constituted approximately
40% of the then outstanding shares of Common Stock of the Company. Subsequent
to the Cyprus Amax Merger, the Company and Cyprus Amax entered into the DOCLOC
Agreement, under which the Company could issue up to 12,099,213 shares of
Common Stock to Cyprus Amax, and the Stock Purchase Agreement providing for the
purchase of 3,000,000 shares of the Company's Common Stock by Cyprus Amax, both
of which agreements are subject to stockholder approval. The issuance of Common
Stock under these two agreements with Cyprus Amax could potentially increase
Cyprus Amax's share of the Company's outstanding shares of Common Stock to
approximately 46.4 million shares (or approximately 49.7% prior to giving
effect to this offering). See "Recent Developments."
Recognizing the need to expand and diversify its resource base, in 1991 the
Company undertook a strategy to more actively seek advanced-stage exploration
projects both in the United States and in other countries where the geology and
investment climate were favorable to gold mining. In 1992, the Company acquired
a 100% interest in the Fort Knox project and a 90% interest in the Guanaco
project (which has
S-16
<PAGE>
since been developed into the Guanaco mine). In 1992, the Company also acquired
a 62.5% interest in the Haile project. In 1993, the Company acquired an
indirect 50% interest in the Refugio project. The acquisition of these
properties added approximately 6.1 million contained ounces of gold to the
Company's reserves. Reserves represent in-place diluted grades and do not
reflect losses in the recovery process. The Company is now focusing its efforts
on developing the Refugio and Fort Knox projects and optimizing the operation
of its four currently producing mines, while advancing the evaluation of the
Haile project.
OPERATING PROPERTIES
SLEEPER MINE
The Company owns 100% of the Sleeper mine, an open pit mine located in
Humboldt County, Nevada, approximately 28 air miles north of Winnemucca. The
Company's land holdings encompass approximately 30 square miles. Current
facilities occupy approximately 2,000 acres of land. The property was
discovered by an Amax geologist in 1982. Development of the mine started in
July 1985 and was completed in March 1986. From inception through December 31,
1993, the Company produced 1,454,726 ounces of gold from the Sleeper mine.
At December 31, 1993 the Company had proven/probable gold ore reserves of
approximately 6.7 million tons, with an average grade of 0.037 gold ounces per
ton or 250,000 contained ounces of gold. Reserves are based on a gold price of
$400 per ounce, with variable cut-off grades. During 1993, the Company produced
100,018 ounces of gold and 254,692 ounces of silver at the Sleeper mine. Cash
production costs were $317 per ounce of gold produced in 1993. [TO BE UPDATED
FOR THE MOST RECENTLY AVAILABLE INFORMATION AT THE TIME, IF ANY, OF AN OFFERING
OF CONVERTIBLE PREFERRED STOCK.]
A large portion of the remaining Sleeper ore reserve contains high clay
content material which is expected to have estimated adverse impacts on
operating costs and recoveries, the effects of which are included in the
current mine plan.
HAYDEN HILL MINE
The Company owns 100% of the Hayden Hill gold mine, an open pit gold mine in
Lassen County, California. Hayden Hill is approximately 120 air miles north-
northwest of Reno, Nevada, and 58 miles northwest of Susanville, California.
The Company controls approximately 6,300 acres through ownership of federal
unpatented mining claims and fee lands and a lease of federal unpatented mining
claims, which has an indefinite term.
The mine, which began production in mid-June 1992, was designed as a combined
mill and heap leach operation. It experienced unacceptably high unit operating
costs and reduced production as a result of lower than expected ore grade.
Mining experience indicated that mill grade ore occurred in thinner, less
continuous structures than originally interpreted by the statistical reserve
analysis. A major reevaluation of the operation was completed in July 1993.
Given the geologic complexity of the deposit as determined from mining
experience and a revised interpretation of geologic data, the proven/probable
reserves were restated as of June 30, 1993 to exclude a significant portion of
the deposit, eliminating the original differentiation between mill ore and heap
leach ore. During the last half of 1993, the mine was configured to operate as
a heap leach operation only, with the mill being maintained on a standby
status.
The Company's proven/probable gold reserves as of December 31, 1993 consisted
of approximately 18.8 million tons of ore, with an average grade of 0.024 gold
ounces per ton or 451,000 contained ounces of gold. Reserves are based on a
gold price of $400 per ounce, with variable cut-off grades. In 1993 the Company
produced 53,038 ounces of gold and 144,438 ounces of silver at the
S-17
<PAGE>
Hayden Hill mine. The cash production costs of gold produced totalled $470 per
ounce for 1993. [TO BE UPDATED FOR THE MOST RECENTLY AVAILABLE INFORMATION AT
THE TIME, IF ANY, OF AN OFFERING OF CONVERTIBLE PREFERRED STOCK.]
GUANACO MINE
The Company owns an indirect 90% interest in the Guanaco mine located in the
Guanaco Mining District, approximately 145 miles southeast of Antofagasta,
Chile. The property is held by Compania Minera Amax Guanaco (CMAG), an indirect
90% owned Chilean subsidiary of the Company which is also operator of the mine.
The Guanaco property position is comprised of approximately 25,000 acres,
consisting of leased mineral claims owned by ENAMI, an entity of the Chilean
government, and certain other mineral rights. Nearly all of the reserves are
located in the area covered by the ENAMI lease. The surface area is owned by
the Chilean government; however, CMAG has filed applications to purchase
selected areas within the ENAMI lease, including the area covered by the
current pit design and areas where the process plant, crusher facilities and
campsite are located. The ENAMI mineral lease has an initial term expiring in
2006, with provisions for five-year renewals thereafter, at the Company's
option.
First commercial production from the Guanaco mine was achieved in April 1993,
and the mine is gradually building to anticipated heap leach production of
between 60,000 and 90,000 ounces of gold per year. The water supply for mine
operations comes primarily from multiple wells adjacent to the minesite and
from nearby surface springs which also provide potable quality water. The
currently developed water supply is insufficient to achieve the optimum level
of production. The Company has water exploration and exploitation rights on an
extensive property position adjacent to the mine, and programs are currently
underway to develop or acquire additional water supplies. There can be no
assurance that such programs will provide a sufficient quantity of water at
acceptable costs or on a timely basis.
Reserves are based upon an assumed gold price of $375 per ounce and a cut-off
grade of 0.013 gold ounces per ton. The proven/probable gold reserves for the
Guanaco mine as of December 31, 1993 were approximately 12.9 million tons of
ore, with an average grade of 0.049 gold ounces per ton for a total of 633,000
contained ounces of gold, of which the Company's share was 570,000 contained
ounces of gold. Production at the Guanaco mine from April 1993 (inception) to
December 1993 was 29,862 ounces of gold produced and 136,687 ounces of silver
produced. The cash production costs of the gold produced were $664 per ounce in
1993. [TO BE UPDATED FOR THE MOST RECENTLY AVAILABLE INFORMATION AT THE TIME,
IF ANY, OF AN OFFERING OF CONVERTIBLE PREFERRED STOCK.]
In addition to various royalty payments, an additional payment to adjust the
purchase price is required to be paid in July 1995 to the minority owners of
the Guanaco project, based on reserves established as of [April 1, 1995]. Based
on the year-end 1993 reserves, the additional payment due would be
approximately $1.3 million. An advance of the 1995 additional payment has been
made in the form of non-interest bearing promissory notes in the aggregate
amount of approximately $4 million. The Company has taken a pledge of the
remaining 10% interest in CMAG to secure the repayment of amounts that may not
be payable under such notes.
WIND MOUNTAIN MINE
The Company owns 100% of the Wind Mountain mine in Washoe County, Nevada. The
Wind Mountain mine is located approximately 75 air miles northeast of Reno and
100 air miles southwest of the Company's Sleeper mine. The Company's holdings
at Wind Mountain encompass approximately 775 acres of unpatented mining claims,
all of which are leased from third parties under a lease that expires in 1995.
Mining ceased at the end of January 1992 due to the depletion of mineral
reserves. Since cessation of mining, the Company continues residual leaching
from the leach pads.
During 1993, the Company produced 19,296 ounces of gold (with cash production
costs of $167 per ounce) and 86,515 ounces of silver at the Wind Mountain mine.
[TO BE UPDATED FOR THE MOST RECENTLY AVAILABLE INFORMATION AT THE TIME, IF ANY,
OF AN OFFERING OF CONVERTIBLE PREFERRED STOCK.]
S-18
<PAGE>
Contemporaneously with the continued recovery of gold, the Company is
proceeding with reclamation of the mine site, which is substantially complete
in all areas other than the process plant and the heap leach pads and ponds.
Once the recovery of residual gold becomes uneconomical, the heap leach piles
will be thoroughly rinsed, contoured and the remaining reclamation of the site
will be completed in accordance with a reclamation plan approved by the Nevada
Department of Environmental Protection and the U.S. Bureau of Land Management.
WAIHI MINE
In June 1993 the Company completed a transaction with a subsidiary of
Poseidon Gold Limited, a publicly traded Australian company, that is also a
participant in the Waihi mine joint venture. Through this transaction, the
Company realized all future economic benefit from the Company's 33.53% interest
in the Waihi gold mine in New Zealand, effective April 30, 1993. The Company
received cash proceeds of US$15.4 million from the transaction and received a
commitment to deliver a total of 15,500 ounces of gold in equal, semi-annual
installments over a five-year period commencing in December 1993.
The Company's share of ounces of gold and silver produced in 1993 was 8,666
ounces and 51,202 ounces, respectively. The cash production costs for the gold
produced at the Waihi mine were $233 per ounce in 1993.
DEVELOPMENT PROJECTS
REFUGIO PROJECT
In January 1993, the Company acquired an indirect 50% interest in the Refugio
gold project, which is located in the Maricunga Mining District in central
Chile, approximately 75 miles due east of Copiapo, for 3.15 million shares of
unregistered Common Stock and $1.1 million in cash. The project is situated at
between 13,800 feet and 14,800 feet above sea level. The property is held by
CMM, a Chilean contractual mining company, which is indirectly owned 50% by the
Company and 50% by Bema. The Company, through a shareholders agreement, is
responsible for most day-to-day decisions.
Property Position. The Refugio property position comprises approximately
14,500 acres, consisting of mineral rights, surface rights and water rights
sufficient to allow development of the project. The principal ore deposit is
held by mining claims which are owned by CMM. Essentially all of the mineral
rights surrounding the claims are held by a joint venture formed by Bema and
the former owner of the Refugio claims. CMM has agreements in place with this
joint venture that would allow CMM to mine major ore deposits found on CMM
property that extend onto surrounding mineral rights and to use the surrounding
areas for project needs.
Surface rights that cover the known mineralization and the proposed
facilities are owned or controlled by CMM under a lease or applications to
purchase from Chilean governmental entities, or agreements with Bema and the
former owner of the Refugio claims. Water extraction rights sufficient to
supply the project are controlled by CMM. In addition, exploration concessions
for water in more favorable locations closer to the project are controlled by
Bema and are being evaluated.
Geology. The Refugio project encompasses the Verde, Pancho and Guanaco gold
deposits, which are disseminated gold porphyry deposits containing trace
amounts of copper. The Verde deposit contains all of the current
proven/probable reserves. The Refugio property lies at the southern end of the
Maricunga Gold District in central Chile. The Maricunga District is a 90 mile
long belt of late volcanic origin that contains a number of large disseminated
gold-silver deposits.
Reserves. Proven/probable reserves are contained in a planned pit based upon
an assumed gold price of $300 per ounce and variable cut-off grades based on
the economics associated with variable
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mining and processing costs. The Company expects the ultimate recovery rate
from the heap leaching process to be in the range of 50% to 80% depending upon
the type of ore, with overall recovery estimated to be approximately 66%. The
proven/probable gold reserves for the Refugio project as of December 31, 1993
were approximately 104.4 million tons of ore, with an average grade of 0.030
gold ounces per ton or 3.1 million contained ounces of gold (the Company's
share of which is approximately 1.5 million contained ounces).
Feasibility. A definitive feasibility study was completed for Bema in
December 1992 for the Verde deposit. The study was based on a gold price of
$375 per ounce and a mineable resource of 3.3 million ounces. This mineable
resource reported by independent consultants contains 7% "mining possible" ore
within the $300 per ounce proven/probable pit, which the Company has not
included as part of the reportable reserves. Potential production from the
Verde deposit is estimated to range from 200,000 to 250,000 ounces of gold per
year, of which the Company's share would be 50%, but no assurance can be given
that such estimate will be achieved. Cash production costs, including
royalties, are estimated by the Company to average approximately $200 to $230
per ounce over the project life, with costs expected to be lower in the early
years. There can be no assurance, however, that such cost estimates will be
achieved. Project development is expected to take approximately two years from
the start of final engineering. Timing of development is dependent upon
economic conditions and availability of acceptable project financing.
Capital Requirements. In addition to the Company's approximately $ million
of capitalized acquisition and development costs (as of ), construction and
development costs to bring the project into production are estimated to total
approximately $120 million to $140 million, of which one-half would be the
Company's share. There can be no assurance, however, that such cost estimate
will be achieved. CMM is seeking project financing for a significant portion of
the required future capital under which the Company and Bema would each be
responsible for supporting its respective share until such time, if any, as the
financing becomes non-recourse. Capital requirements for 1994 are expected to
be $ .
FORT KNOX PROJECT
In January 1992, Amax Gold acquired a 100% interest in the Fort Knox gold
project, a gold deposit occurring as porphyry-style mineralization, in exchange
for approximately 13.2 million shares of Common Stock and approximately 4
million warrants to purchase the Company's Common Stock. The Fort Knox project
is located in the Fairbanks Mining District, 15 miles northeast of Fairbanks,
Alaska. The location of the project near Fairbanks eliminates many of the
infrastructural problems and costs often associated with arctic or sub-arctic
projects.
Property Position. The Fort Knox project (including an exploration prospect
known as the Teryl Property) covers approximately 28,000 acres and consists of
approximately 1,075 state mining claims and 45 patented federal mining claims.
The Fort Knox property is held by way of deeds, mining leases, option
agreements, a joint venture agreement (affecting only the Teryl Property), and
mining claim locations.
The State of Alaska issued to the Company's operating subsidiary in Alaska a
millsite permit covering approximately 7,541 acres, comprising the 1,148 acres
within the mining lease and 6,393 adjoining acres (which adjoining acres
already are included in the state mining claims at Fort Knox or in certain
patented mining claims the surface of which was conveyed by the Company to the
State of Alaska immediately prior to the issuance of the millsite permit). The
issuance of this millsite permit secures for the project adequate lands on
which to construct all of the facilities necessary to bring a mine into
production on the Fort Knox property.
Geology. The Fort Knox gold deposit occurs on a porphyry-style mineralization
of the type usually associated with copper and molybdenum ore bodies. The ore
is hosted within the upper margins of a
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granite intrusion in a stockwork of small quartz veins and shear zones. The
gold occurs as fine grains of free gold disseminated within and along the
margins of the veins and shears. Grade is usually related to the degree of
fracturing and veining of the rocks. The deposit has a dimension of about 4,000
x 2,000 feet, elongated in an east-west direction and extending to depths of
1,000 feet. Because of the low grade and erratic distribution of gold, mining
is planned to be done on a bulk tonnage basis.
Reserves. Reserves are based on a gold price of $375 per ounce and a cut-off
grade of 0.0112 gold ounces per ton. The proven/probable gold reserves for the
Fort Knox project as of December 31, 1993 were approximately 174.5 million
tons, with an average grade of 0.024 gold ounces per ton or 4.1 million
contained ounces of gold. The Company estimates that mill recovery will be
approximately 90%.
Feasibility. A basic engineering study for the project has been completed.
The study has defined an open-pit mining operation and a conventional crushing,
grinding and cyanidation plant designed to treat 13 million tons of ore per
year (36,000 tons per day). The mine and process plant will be designed to
operate year round, and, at this processing rate, are expected to produce
approximately 300,000 to 350,000 ounces of gold per year, with the higher
production rate expected during the early years. Cash production costs
including royalties, severance taxes, and property taxes are estimated to
average between $220 and $240 per ounce of gold, with the lower unit cost being
incurred during the early years of operation. The engineering studies have
considered the effects that the arctic environment will have on the operation,
but no assurance can be given that such rates of production and cost estimates
will be achieved. The Company is currently reviewing the engineering study with
respect to the optimum mining and processing rate.
Permitting. In February 1994, the Company received most of the Alaska State
permits needed to proceed with development of the Fort Knox project. In May
1994, the U.S. Army Corps of Engineers issued the required dredge and fill
permit under Section 404 of the Clean Water Act for construction and operation
of the Fort Knox project. With the issuance of that permit, the Company has all
permits needed to proceed with the next phase of the project development during
1994. This phase of development will involve completion of detailed
engineering, upgrading access roads to the project site, and initial site
preparation. Those state permits and authorizations which have not yet been
received (e.g., Plan of Operations approval and air permits) are expected to be
applied for and received in due course, but no assurance can be given that such
permits will be issued in the time period and with the terms and conditions
contemplated by the Company.
Capital Requirements. Total capital requirements to construct and develop the
Fort Knox project in accordance with the preliminary design are currently
estimated to be between $250 million and $270 million, in addition to
capitalized acquisition and development costs of approximately $ million at
. The Company needs to secure financing to fund a significant portion of
the future capital requirements. Timing of development is dependent on
obtaining financing on acceptable terms, obtaining final permits, market
conditions and approval of the Company's Board of Directors. Capital
expenditures during 1994 are expected to be approximately $12 million, as
compared to approximately $6.7 million in 1993.
HAILE PROJECT
The Company owns a 62.5% joint venture interest in the Haile project, a gold
project in Lancaster County, South Carolina. The remaining 37.5% interest is
owned by Piedmont Mining Company, Inc. ("Piedmont"). The Haile project is
located approximately 50 miles north of Columbia, and 4 miles north of the town
of Kershaw. The Haile project covers approximately 3,700 acres and consists
entirely of fee property, which is either owned by the venture participants,
leased from third parties or controlled by
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purchase agreements. 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.
Reserves. Proven/probable reserves at the Haile project are based upon an
assumed gold price of $375 per ounce and variable cut-off grades based on the
economics associated with variable mining and processing costs. The Company
estimates ultimate gold recoveries will range from 65% to 85%. The
proven/probable gold reserves for the Haile project as of December 31, 1993
were approximately 6.8 million tons of ore, with an average grade of 0.101 gold
ounces per ton and 689,000 contained ounces of gold (of which the Company's
62.5% share is 431,000 contained ounces).
Feasibility. Prior to the Company's acquisition of its interest in the Haile
project and since becoming manager, the Company has conducted an extensive
evaluation program. This program has included studies relating to reserve
delineation, metallurgical evaluation, environmental, hydrological and other
matters. In 1994 the focus is expected to be on further drilling and evaluation
work, ongoing permitting and property maintenance efforts. A number of
parameters have been identified that could improve project economics, but no
assurance can be given that the contemplated studies will succeed in doing so.
EXPLORATION ACTIVITIES
The Company's exploration activities have ranged from "grass roots"
reconnaissance programs and submittal examinations to drill evaluation of
advanced-stage projects. The Company's primary exploration objective continues
to be the acquisition and evaluation of near-surface gold deposits that can be
mined by open pit methods. During 1994 the Company's exploration efforts will
be focused on prospects in Nevada, Panama and Chile.
Prior to the Cyprus Amax Merger, the Company conducted most of its
exploration programs in the United States, Canada and Chile through wholly-
owned subsidiaries of the Company. Effective January 1, 1994, in order to
reduce costs and realize synergies from its new affiliation with Cyprus Amax,
the Company transferred most of its exploration personnel to Cyprus Amax but
retained its Vice President in charge of exploration. Cyprus Amax geologists
will conduct the Company's exploration for new gold either under the
Exploration JV or under a services agreement. The Company and Cyprus Amax
entered into the Exploration JV, effective January 1, 1994, under which the two
companies will pool their efforts for the principal purpose of discovering and
developing future gold properties. Cyprus Amax will provide 75% and the Company
will provide 25% of the initial exploration funding for any newly identified
gold targets. The Exploration JV is expected to benefit the Company by
broadening the geographic reach of its exploration program, sharing key
personnel, reducing costs and spreading the high risks associated with
exploration. Cyprus Amax's 75% interest in gold prospects developed through the
Exploration JV will be available for Amax Gold to purchase prior to a decision
to place such prospects in production, but only at the then fair market value
of such interest (which may be determined by mutual agreement). Exploration
projects that the Company held prior to the Cyprus Amax Merger, principally the
Robertson property described below, will continue to be evaluated solely by the
Company utilizing the services of Cyprus Amax geologists under a services
agreement.
Exploration expenditures were $5.2 million in 1993 compared to $6.7 million
in 1992 (excluding exploration expenditures on the Haile and Guanaco projects
for 1992). The exploration budget for 1994 is approximately $4.0 million.
The Company's separate exploration activities are currently focused on the
Great Basin in Nevada, particularly in the Crescent Valley area where the
Company has an opportunity to earn a 60% interest in the Robertson property,
which is located just north of Placer Dome Inc.'s Pipeline discovery, by
completing a bankable feasibility study for the project by November 1994. The
Company is also evaluating a Cyprus Amax advanced stage prospect in Panama
under an agreement with Cyprus Amax
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that gives the Company an option (which expires in November 1995) to acquire
Cyprus Amax's interest in the prospect upon completion of a feasibility study
in a scope and form reasonably acceptable to both parties. Upon completion of
the feasibility study, the Company will have the option to purchase this
Panamanian prospect from Cyprus Amax for $25 per minable ounce of gold
contained in the proven/probable reserves identified in that feasibility study
and subsequent payments of $25 per recoverable ounce of gold in addition to
such minable reserves.
HEDGING ACTIVITIES
The Company employs a gold hedging strategy with the objective of mitigating
the impact of downturns in the gold market while maintaining significant upside
potential in market upswings. Hedging techniques used include: buying, selling
and/or delivering against gold "put" options; the purchase and sale of gold
"call" options; selling and/or delivering against fixed date and "spot-
deferred" forward sales contracts; and delivering against the Company's gold
loan facilities.
Since the Company's hedging program was initiated in late 1987, the Company
has historically been able to maintain an average realized gold price above the
average COMEX gold market price without engaging in such forward selling that
would eliminate much of the upside potential in the event of price increases.
The Company's hedging efforts resulted in average realized prices of $392 per
ounce and $402 per ounce for 1993 and 1992, respectively. This contrasts with
average COMEX prices of approximately $360 per ounce and $344 per ounce for
1993 and 1992, respectively.
The market value of the Company's forward contracts and put and call option
contracts at was approximately $ million. Future market valuations for
these contracts are dependent on gold market prices, option volatility and
interest rates, which can vary significantly.
DESCRIPTION OF CONVERTIBLE PREFERRED STOCK
The authorized capital stock of the Company includes 10,000,000 shares of
preferred stock, $1.00 par value per share. No shares of preferred stock are
currently outstanding, but 2,000,000 shares of Series A Preferred Stock have
been authorized for issuance pursuant to the DOCLOC Agreement. See "Description
of Capital Stock--Series A Preferred Stock" in the Prospectus.
Shares of the Company's preferred stock may be issued from time to time in
one or more series. The Company's Board of Directors is authorized, without
shareholder approval, to fix the voting rights, dividend rights and terms, any
conversion rights, rights and terms of redemption (including sinking fund
provisions), liquidation preferences and any other rights, preferences and
restrictions of any series of preferred stock and the number of shares
constituting such series and designation thereof. The terms of such preferred
stock may affect adversely the voting power and other rights of the holders of
the Company's Common Stock and may make it more difficult to gain control of
the Company.
The Convertible Preferred Stock has been authorized as a new series of
preferred stock, designated as the "$ Series B Convertible Preferred
Stock," consisting of up to shares. The following summary description of
the terms and provisions of the Convertible Preferred Stock is qualified in its
entirety by reference to the Certificate of Designations creating the
Convertible Preferred Stock, a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus Supplement is a part. For a
discussion of certain federal income tax considerations relevant to the
Convertible Preferred Stock, see "Certain U.S. Federal Income Tax
Considerations."
Dividends. Holders of shares of the Convertible Preferred Stock are entitled
to receive, when, as and if declared by the Board of Directors of the Company,
out of funds of the Company legally available therefor, an annual cash dividend
of $ per share, payable in equal quarterly installments on
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, , and , commencing , except that if such date is a
Saturday, Sunday or legal holiday, then such dividend will be payable on the
next succeeding day that is not a Saturday, Sunday or legal holiday. Dividends
on the Convertible Preferred Stock will accrue without interest and be
cumulative from the date of initial issuance. The amount of dividend payable
for the initial dividend period and for any period shorter than a full
quarterly dividend period will be computed on the basis of a 360-day year of
twelve 30-day months. Dividends will be payable to holders of record as they
appear on the stock transfer books of the Company on such record dates as are
fixed by the Company's Board of Directors.
If dividends are not paid in full upon the Convertible Preferred Stock, the
Series A Preferred Stock and any other preferred stock ranking on a parity as
to dividends with the Convertible Preferred Stock, or, in each case, declared
in full and sums set apart for the payment thereof, all dividends paid or
declared and set aside for payment upon shares of Convertible Preferred Stock,
Series A Preferred Stock and such other parity preferred stock will be paid or
declared and set aside for payment pro rata so that the amount of dividends
paid or declared and set aside for payment per share on the Convertible
Preferred Stock, Series A Preferred Stock and such other parity preferred stock
will bear to each other the same ratio that accrued and unpaid dividends per
share on the shares of Convertible Preferred Stock, Series A Preferred Stock
and such other parity preferred stock bear to each other. Except as set forth
above, unless all accrued and unpaid dividends (including the full dividend for
the then current dividend period) on the Convertible Preferred Stock have been
paid, or declared and sums set aside for the payment thereof, dividends (other
than in Common Stock) may not be paid, or declared and set aside for payment,
and other distributions may not be made upon the Common Stock or on any other
stock of the Company ranking junior to or on a parity with the Convertible
Preferred Stock (including the Series A Preferred Stock) as to dividends, and
neither Common Stock nor any other stock of the Company ranking junior to the
Convertible Preferred Stock as to dividends may be redeemed, purchased or
otherwise acquired for any consideration by the Company.
Liquidation Rights. In the event of any liquidation, dissolution or winding
up of the Company, the holders of shares of Convertible Preferred Stock are
entitled to receive a liquidation preference of $ per share, plus an amount
equal to any accrued and unpaid dividends to the date of payment before any
payment or distribution of assets is made to holders of Common Stock or any
other stock that ranks junior to the Convertible Preferred Stock as to
liquidation rights. The holders of Convertible Preferred Stock, Series A
Preferred Stock and all series or classes of the Company's preferred stock
hereafter issued that rank on a parity as to liquidation rights with the
Convertible Preferred Stock are entitled to share ratably, in accordance with
the respective preferential amounts payable on such stock, in any distribution
of assets of the Company which is not sufficient to pay in full the aggregate
of the amounts payable thereon. After payment in full of the liquidation
preference of the shares of the Convertible Preferred Stock, the holders of
such shares will not be entitled to any further participation in any
distribution of assets by the Company. Neither a consolidation, merger or other
business combination of the Company with or into another corporation or other
entity nor a sale or transfer of all or part of the Company's assets for cash,
securities or other property will be considered a liquidation, dissolution or
winding up of the Company.
Voting Rights. The holders of the Convertible Preferred Stock will have no
voting rights except as described below or as required by law. In exercising
any such vote, each outstanding share of Convertible Preferred Stock will be
entitled to one vote, excluding shares held by the Company or any entity
controlled by the Company, which shares will have no voting rights.
Whenever dividends on the Convertible Preferred Stock are in arrears in an
aggregate amount equal to at least six quarterly dividends on such shares
(whether or not consecutive), the number of directors of the Company will be
increased by two, and the holders of the Convertible Preferred Stock, voting
separately as a class together with holders of shares of any other series of
preferred stock ranking on a parity as to the payment of dividends (other than
the holder of the Series A Preferred Stock, which has its own voting rights in
the event that dividends thereon are in arrears for at least three semi-annual
dividend
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payments), will have the right to elect two additional directors to the
Company's Board of Directors until all accrued and unpaid dividends on the
Convertible Preferred Stock have been declared and paid in full or set aside
for payment in full. The term of office of all directors so elected will
terminate immediately upon such payment or setting aside for payment.
In addition, so long as any Convertible Preferred Stock is outstanding, the
Company will not, without the affirmative vote or consent of the holders of at
least 66 2/3% of all outstanding shares of Convertible Preferred Stock, voting
separately as a class, (i) amend, alter or repeal any provision of the
Certificate of Incorporation or By-laws of the Company so as to affect
adversely the relative rights, preferences, qualifications, limitations or
restrictions of the Convertible Preferred Stock, (ii) authorize or issue or
increase the authorized amount of any additional class or series of stock, or
any security convertible into stock of such class or series, ranking senior to
the Convertible Preferred Stock as to dividends or as to rights upon
liquidation, dissolution or winding up of the Company or (iii) effect any
reclassification of the Convertible Preferred Stock.
Redemption at Option of the Company. The Convertible Preferred Stock will not
be redeemable prior to . On and after such date, the Convertible Preferred
Stock will be redeemable at the option of the Company, in whole or from time to
time in part, at the following redemption prices per share, if redeemed during
the 12-month period commencing on , of the year indicated:
<TABLE>
<CAPTION>
PRICE PER
YEARS SHARE
----- ---------
<S> <C>
............................................................... $
...............................................................
...............................................................
...............................................................
...............................................................
...............................................................
...............................................................
</TABLE>
and thereafter at $ per share, plus in each case accrued and unpaid
dividends to, but excluding, the date of redemption.
If fewer than all of the outstanding shares of Convertible Preferred Stock
are to be redeemed, the Company will select those shares to be redeemed pro
rata or by lot or in such other equitable manner as the Company's Board of
Directors may determine. There is no mandatory redemption or sinking fund
obligation with respect to the Convertible Preferred Stock. In the event that
the Company has failed to pay accrued and unpaid dividends on the Convertible
Preferred Stock, it may not redeem less than all of the then outstanding shares
of the Convertible Preferred Stock until all such accrued and unpaid dividends
have been paid in full for all past dividend periods.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of shares of
Convertible Preferred Stock to be redeemed at the address shown on the
Company's stock transfer books. No fractional shares of Convertible Preferred
Stock will be issued upon any redemption of the Convertible Preferred Stock,
but in lieu thereof, an appropriate amount will be paid in cash based on the
value of the shares of Convertible Preferred Stock as determined in good faith
by the Company's Board of Directors. On and after the redemption date,
dividends will cease to accrue on the shares of Convertible Preferred Stock
called for redemption and all rights of the holders of such shares will
terminate, except the right to receive the redemption price without interest.
Conversion Rights. Each share of Convertible Preferred Stock will, at the
option of the holder, be convertible into shares of Common Stock at any time,
at the conversion price set forth on the cover page
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of this Prospectus Supplement (the "Conversion Price"), adjusted as described
in the following paragraphs, except that if shares of Convertible Preferred
Stock are earlier called for redemption, the conversion right with respect
thereto will terminate at the close of business on the date fixed for
redemption and will be lost if not exercised prior to that time, unless the
Company defaults in payment of the redemption obligation. Fractional shares of
Common Stock will not be delivered upon conversion, but a cash adjustment will
be paid in respect of such fractional interests based on the then current
market price of the Common Stock.
Convertible Preferred Stock surrendered for conversion after the close of
business on a record date for payment of dividends on such Convertible
Preferred Stock and before the opening of business on the next corresponding
dividend payment date (unless such Convertible Preferred Stock has been called
for redemption on a redemption date in that period) must be accompanied by
payment of an amount equal to the dividend thereon which is to be paid on such
dividend payment date. Subject to the foregoing, no payments or adjustments
will be made upon conversion on account of accrued dividends on the Convertible
Preferred Stock or for any dividends or distributions on any shares of Common
Stock delivered upon such conversion.
The Conversion Price is subject to adjustment upon certain events, including
(i) the issuance of Common Stock as a dividend or distribution on the Common
Stock (other than pursuant to the Company's Dividend Reinvestment Plan); (ii) a
combination, subdivision or reclassification of the Common Stock; (iii) the
issuance to all holders of Common Stock of rights, options or warrants
entitling them to subscribe for or purchase Common Stock at a price per share
less than the then current market price; and (iv) the distribution to all
holders of Common Stock of capital stock (other than Common Stock), evidences
of indebtedness of the Company, assets (excluding regular periodic cash
dividends), or rights, options or warrants to subscribe for or purchase
securities of the Company (excluding the dividends, distributions, rights,
options and warrants described above). No adjustment of the Conversion Price
will be required to be made unless such adjustment would require an increase or
decrease of at least one percent of such price; provided, however, any
adjustment not made will be carried forward and taken into account in any
subsequent adjustment. No adjustment to the Conversion Price will be made with
respect to rights, options or warrants issued pursuant to certain employee
benefit plans. Adjustments to the Conversion Price with respect to rights,
options or warrants hereafter adopted or issued generally will be readjusted
following the termination of such rights, options or warrants to take account
of those rights, options or warrants which were not exercised. The Company from
time to time may decrease the Conversion Price by any amount for any period of
at least 20 days, so long as the decrease is irrevocable during such period, in
which case the Company shall give at least 15 days' notice of such decrease. In
addition to the foregoing adjustments, the Company will be permitted to make
such reductions in the Conversion Price as it determines to be advisable in
order that any stock dividend, subdivision of shares, distribution of rights to
purchase stock or securities or distribution of securities convertible into or
exchangeable for stock made by the Company to its stockholders will not be
taxable to the recipients. See "Certain U.S. Federal Income Tax
Considerations--Adjustment of Conversion Price."
Except as stated above, the Conversion Price will not be adjusted for the
issuance of Common Stock, or any securities convertible into or exchangeable
for Common Stock or carrying the right to purchase any of the foregoing, in
exchange for cash, property or services.
In case of any consolidation or merger to which the Company is a party (other
than a merger or consolidation in which the Company is the continuing
corporation and in which the Common Stock outstanding immediately prior to the
merger or consolidation is not exchanged for cash, securities or other property
of another corporation), or in case of any sale, lease or transfer to another
corporation of the property of the Company as an entirety or substantially as
an entirety, there will be no adjustment of the Conversion Price, but each
holder of then outstanding Convertible Preferred Stock will have the right, at
the holder's option, to convert such holder's Convertible Preferred Stock into
the kind and amount of
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securities, cash or other property receivable upon such consolidation, merger,
sale, lease or transfer by a holder of the number of shares of Common Stock
into which such Convertible Preferred Stock might have been converted
immediately prior to such consolidation, merger, sale, lease or transfer,
assuming such holder of Common Stock failed to exercise such holder's rights of
election, if any, as to the kind or amount of securities, cash or other
property receivable upon such consolidation, merger, sale, lease or transfer
(provided that, if the kind or amount of securities, cash or other property
receivable upon such consolidation, merger, sale, lease or transfer is not the
same for each non-electing share, then the kind and amount of securities, cash
or other property receivable upon such consolidation, merger, sale, lease or
transfer for each non-electing share shall be deemed to be the kind and amount
so receivable per share by a plurality of the non-electing shares). In the case
of a cash merger of the Company into another corporation or any other cash
transaction of the type mentioned above, the effect of these provisions would
be that thereafter each share of Convertible Preferred Stock would be
convertible at the Conversion Price in effect at such time into the same amount
of cash per share into which each share of Convertible Preferred Stock would
have been convertible had such share been converted into Common Stock
immediately prior to the effective date of such cash merger or transaction.
Depending upon the terms of such cash merger or transaction, the aggregate
amount of cash into which such shares of Convertible Preferred Stock would be
converted could be more or less than the liquidation preference with respect to
such Convertible Preferred Stock.
Transfer Agent and Registrar. The transfer agent and registrar for the
Convertible Preferred Stock is [Chemical Bank, 450 West 33rd Street, New York,
New York 10001].
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of certain U.S. federal tax
considerations relevant to the purchase, ownership and disposition of the
Convertible Preferred Stock but does not purport to be a complete analysis of
all the potential tax effects thereof. Except with respect to certain foreign
shareholders, the discussion is limited to U.S. federal income tax or
withholding matters, and does not address the potential state, local and
foreign taxes that may be imposed on a holder. The discussion is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations,
and Internal Revenue Service ("IRS") rulings and judicial decisions now in
effect, all of which are subject to change at any time, possibly with
retroactive effect, by legislative, judicial or administrative action. Except
as otherwise indicated, references to Common Stock are to the Common Stock
issuable upon conversion of Convertible Preferred Stock into Common Stock.
The information provided herein is directed to investors who will hold the
Convertible Preferred Stock as a "capital asset" within the meaning of Section
1221 of the Code and assumes throughout that the Convertible Preferred Stock
and the Company's Common Stock will at all times be regularly traded on an
established securities market, within the meaning of applicable Treasury
regulations. In addition, the tax consequences to a particular holder
(including life insurance companies, tax-exempt organizations, financial
institutions, dealers in securities, foreign corporations and nonresident alien
individuals) may be affected by matters not discussed herein. The discussion
also does not address the tax consequences to subsequent holders of the
Convertible Preferred Stock and Common Stock.
The Company has not sought, nor does it intend to seek, a ruling from the IRS
as to any of the matters covered by the discussion, and there can be no
assurance that the IRS will not successfully challenge certain of the
conclusions reached in the discussion. BECAUSE THE U.S. FEDERAL TAX
CONSEQUENCES DISCUSSED BELOW DEPEND UPON EACH HOLDER'S PARTICULAR TAX STATUS,
AND DEPEND FURTHER UPON U.S. FEDERAL TAX LAWS, REGULATIONS, RULINGS AND
DECISIONS WHICH ARE SUBJECT TO CHANGE (WHICH CHANGES MAY BE RETROACTIVE IN
EFFECT), PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING
THE PARTICULAR TAX CONSEQUENCES OF AN INVESTMENT IN THE CONVERTIBLE PREFERRED
STOCK INCLUDING, BUT NOT LIMITED TO, THE APPLICATION AND EFFECT OF ANY STATE,
LOCAL, FOREIGN
S-27
<PAGE>
AND OTHER TAX LAWS, AS WELL AS THE CONSEQUENCES OF ANY RECENT, PENDING OR
PROPOSED CHANGES IN THE APPLICABLE LAWS.
DIVIDENDS ON CONVERTIBLE PREFERRED STOCK
Distributions by the Company with respect to the Convertible Preferred Stock
will be characterized as dividends taxable as ordinary income to the extent of
the company's current or accumulated earnings and profits, if any, as
determined for U.S. federal income tax purposes. To the extent that a
distribution on the Convertible Preferred Stock to a holder exceeds the
holder's allocable share of the Company's current or accumulated earnings and
profits, such distribution will first be treated as a return of capital that
will reduce the holder's adjusted tax basis in such Convertible Preferred
Stock, and then, to the extent the distribution exceeds the holder's adjusted
tax basis in such Convertible Preferred Stock, the excess will be taxed as a
capital gain and will be long-term capital gain if the holder's holding period
for such Convertible Preferred Stock is more than one year.
Based on current projections, it appears that the Company will not have
current earnings during at least part of the period during which the
Convertible Preferred Stock will be outstanding. However, the Company had
accumulated earnings of $ as of March 31, 1994 that could be used to pay
dividends on the Convertible Preferred Stock. The availability of accumulated
earnings and profits or current earnings and profits, if any, in future years
will, however, depend on future profits and losses which cannot be accurately
predicted. Thus, there can be no assurance that all or any portion of a
distribution of the Convertible Preferred Stock will be characterized as a
dividend for U.S. federal income tax purposes. Corporate shareholders will not
be entitled to claim the dividends received deduction with respect to
distributions that do not qualify as dividends. See the discussion regarding
the dividends received deduction below. For the remainder of this discussion,
the term "dividends" refers to a distribution paid entirely out of the
Company's current or accumulated earnings and profits, unless the context
otherwise requires.
Dividends received by a corporate holder of Convertible Preferred Stock will
generally qualify for the 70% dividends received deduction provided by Section
243(a)(1) of the Code if the holding period and other requirements of such
deduction are met, subject to the limitations in Sections 246 and 246A of the
Code. Under Section 246(b) of the Code, the aggregate dividends received
deduction allowed to such a corporate holder of the Convertible Preferred Stock
may not exceed 70% of the taxable income (with certain adjustments) of the
corporate stockholder. Under Section 246(c) of the Code, the 70% dividends
received deduction will not be available with respect to any dividends with
respect to Convertible Preferred Stock that is held for 45 days or less (90
days or less in the case of dividends which are attributable to a period or
periods aggregating more than 366 days). The length of time that a stockholder
will be deemed to have held the Convertible Preferred Stock for this purpose
will be reduced for periods during which the stockholder's risk of loss with
respect to the stock is diminished by reason of the existence of certain
options, contracts to sell, short sales or similar transactions. Moreover, the
70% dividends received deduction will not be available if the taxpayer's risk
of loss with respect to the Convertible Preferred Stock is considered
diminished by the holding of one or more positions in "substantially similar or
related property." Section 246A of the Code may proportionately reduce the
percentage of the 70% dividends received deduction available to a corporate
holder that incurs indebtedness (including the proceeds from a short sale)
"directly attributable" to a "portfolio stock" investment in another company
(such as the Convertible Preferred Stock). In addition, for purposes of
computing its alternative minimum tax liability, a corporate holder may, in
general, not be allowed the dividends received deduction for purposes of
computing the "adjusted current earnings" adjustment.
Section 1059 of the Code will require a corporate holder to reduce (but not
below zero) its basis in the Convertible Preferred Stock by the "nontaxed
portion" of any "extraordinary dividend" if the holder has not held the
Convertible Preferred Stock subject to a risk of loss for more than two years
before the date the Company declares, announces, or agrees to, the amount or
payment of such dividend,
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<PAGE>
whichever is earliest. In addition, upon disposition of such Convertible
Preferred Stock, a holder will recognize gain to the extent that the nontaxed
portion of all extraordinary dividends has not been applied to reduce basis
because of the limitation on reducing basis below zero. Generally, the nontaxed
portion of an extraordinary dividend is the amount excluded from income under
Section 243 of the Code (relating to the dividends received deduction). An
extraordinary dividend on preferred stock, such as the Convertible Preferred
Stock, is a dividend that (i) equals or exceeds 5% of the holder's adjusted tax
basis in the stock (reduced for this purpose by the nontaxed portion of any
prior extraordinary dividend), treating all dividends having ex-dividend dates
within an 85-day period as one dividend, or (ii) exceeds 20% of the holder's
adjusted tax basis in the stock (determined for this purpose without regard to
any reduction for the nontaxed portion of prior extraordinary dividends),
treating all dividends having ex-dividend dates within a 365-day period as one
dividend. An extraordinary dividend would also include any amount treated as a
dividend in the case of a redemption that is either non-pro rata as to all
stockholders or in partial liquidation of the Company, regardless of the
relative size of the dividend and regardless of the corporate holder's holding
period for the Convertible Preferred Stock. A stockholder may elect to
determine whether a dividend on the Convertible Preferred Stock is
extraordinary by reference to the fair market value of the stock on the day
before the ex-dividend date (rather than by reference to the stockholder's
adjusted tax basis) for purposes of the 5% or 20% tests described above if the
holder is able to establish the fair market value of the Convertible Preferred
Stock as of such date to the satisfaction of the IRS.
Under Section 1059(e)(3) of the Code, the extraordinary dividend rules may
not apply with respect to "qualified preferred dividends." A qualified
preferred dividend is any fixed dividend payable with respect to preferred
stock which (i) provides for fixed preferred dividends payable no less often
than annually and (ii) is not in arrears as to dividends when acquired,
provided the actual rate of return, as determined under Section 1059(e)(3) of
the Code, on such stock does not exceed 15%. Where a qualified preferred
dividend exceeds the 5% (or 20%) threshold for extraordinary dividend status
described above, (i) the extraordinary dividend rules will not apply if the
taxpayer holds the stock for more than five years, and (ii) if the taxpayer
disposes of the stock before it has been held for more than five years, the
aggregate reduction in basis cannot exceed the excess of the qualified
preferred dividends paid on such stock during the period held by the taxpayer
over the qualified preferred dividends which would have been paid during such
period on the basis of the stated rate of return, as determined under Section
1059(e)(3) of the Code. The length of time that a taxpayer is deemed to have
held stock for purposes of Section 1059 of the Code is determined under
principles similar to those contained in Section 246(c) of the Code discussed
above.
REDEMPTION PREMIUM
If the redemption price of preferred stock exceeds its issue price by more
than a reasonable redemption premium, the entire amount of such excess will be
considered to be a constructive distribution to the holders and a dividend to
the extent of the corporation's current and accumulated earnings and profits
which is constructively received by the holders over a period of time. A
redemption premium is considered to be reasonable if it is in the nature of a
penalty for a premature redemption and if such premium does not exceed the
amount that the issuer would be required to pay for such redemption right under
market conditions existing at the time of issuance of the preferred stock.
While the issue is not free from doubt, the Company believes that the
redemption premium on the Convertible Preferred Stock is reasonable under this
standard.
REDEMPTION OF CONVERTIBLE PREFERRED STOCK
A redemption of the Convertible Preferred Stock will be a taxable event and
will be treated as a sale of such Convertible Preferred Stock by the holder if
the redemption (i) results in a "complete termination" of the holder's stock
interest in the Company under Section 302(b)(3) of the Code, (ii) is
"substantially disproportionate" with respect to the holder under Section
302(b)(2) of the Code, or (iii) is "not essentially
S-29
<PAGE>
equivalent to a dividend" with respect to the holder under Section 302(b)(1) of
the Code. In determining whether any of these tests has been met, shares of
stock considered to be owned by the holder by reason of certain constructive
ownership rules set forth in Section 318 of the Code, as well as shares
actually owned, generally must be taken into account. A holder of Convertible
Preferred Stock that is redeemed in a redemption that meets one of the tests
described above generally will recognize taxable gain or loss equal to the
difference between the amount of cash and the fair market value of property
(other than stock of the Company or a successor thereto) received by the holder
and the holder's tax basis in the Convertible Preferred Stock redeemed. If the
Convertible Preferred Stock is held as a capital asset, such gain or loss will
be capital gain or capital loss and will be long-term capital gain or capital
loss if the holder has held the Convertible Preferred Stock for more than one
year. If a redemption does not meet any of the tests described above, the cash
and the fair market value of property received by the holder generally will be
taxed as a dividend to the extent paid out of the Company's current or
accumulated earnings and profits. If a redemption of the Convertible Preferred
Stock is treated as a distribution that is taxable as a dividend, the holder's
basis in the redeemed Convertible Preferred Stock will be transferred to the
holder's remaining shares of the Company's stock (if any).
CONVERSION OF CONVERTIBLE PREFERRED STOCK INTO COMMON STOCK
No gain or loss will be recognized upon conversion of Convertible Preferred
Stock solely into shares of Common Stock. However, gain realized upon the
receipt of cash paid in lieu of fractional shares of Common Stock will be taxed
immediately, as if the holder had received the Common Stock attributable to
such fractional interest and then had the Common Stock redeemed for cash.
Except to the extent of basis attributable to the fractional shares of Common
Stock redeemed, the adjusted tax basis for the shares of Common Stock received
upon the conversion will be equal to the adjusted tax basis of the Convertible
Preferred Stock converted, and, provided the Convertible Preferred Stock is
held as a capital asset, the holding period of the shares of Common Stock will
include the holding period of the Convertible Preferred Stock converted.
ADJUSTMENT OF CONVERSION PRICE
Section 305(c) of the Code and the Treasury regulations thereunder treat as a
dividend certain constructive distributions of stock with respect to preferred
stock. Certain adjustments to the conversion price of the Convertible Preferred
Stock, such as adjustments to reflect taxable distributions of cash or property
on any of the outstanding Common Stock of the company, will be treated as a
constructive distribution of stock valued by the increase in the proportionate
interest in the Company held by the holders of the Convertible Preferred Stock
which results thereby, and will be treated as a dividend to the holders of the
Convertible Preferred Stock to the extent of the current or accumulated
earnings and profits of the Company. Adjustments to reflect nontaxable stock
splits or distributions of stock, stock warrants or stock rights will, however,
generally not be so treated. The failure to adjust fully the conversion price
for the Convertible Preferred Stock to reflect distributions of stock, stock
warrants or stock rights with respect to the Common Stock may result in a
taxable dividend to holders of the Common Stock.
BACKUP WITHHOLDING AND INFORMATION REPORTING
General Rules
Under Section 3406 of the Code and applicable Treasury regulations, a
noncorporate holder of Convertible Preferred Stock or Common Stock who is not
otherwise exempt from backup withholding may be subject to backup withholding
at a rate of 31% with respect to dividends paid on, or the proceeds of a sale
or exchange of, the Convertible Preferred Stock or the Common Stock. Generally,
backup
S-30
<PAGE>
withholding applies only when the taxpayer (i) fails to furnish or certify his
correct taxpayer identification number to the payor in the manner required,
(ii) is notified by the IRS that he has failed to report payments of interest
or dividends properly, or (iii) under certain circumstances, fails to certify
under penalty of perjury that he has furnished a correct taxpayer
identification number and that he has not been notified by the IRS that he is
subject to backup withholding for failure to report interest or dividend
payments. Under Treasury regulations currently in force, backup withholding
generally will not apply to dividends paid with respect to Convertible
Preferred Stock or Common Stock to a holder at an address outside the United
States.
Sales of Convertible Preferred Stock and Common Stock
Under Treasury regulations currently in force, the payment of the proceeds of
a sale of shares of Convertible Preferred Stock or Common Stock to or through
the United States office of a broker is subject to information reporting and
possible backup withholding at a rate of 31% unless the owner establishes an
exemption in the manner required by the IRS. The payment of the proceeds of a
sale of Convertible Preferred Stock or Common Stock to or through the foreign
office of a broker generally will not be subject to backup withholding.
However, information reporting requirements will apply to a payment of proceeds
from the sale of shares of Convertible Preferred Stock or Common Stock through
a foreign office of a broker that is a United States person or a "U.S. related
person," unless the broker has documentary evidence in its files that the owner
is a non-United States holder and the broker has no actual knowledge to the
contrary. For this purpose, a U.S. related person is (i) a "controlled foreign
corporation" for U.S. federal income tax purposes or (ii) a foreign person 50%
or more of whose gross income from all sources for certain periods is
effectively connected with the conduct of a United States trade or business.
Holders should consult their tax advisors regarding their qualification for
exemption from backup withholding and the procedure for establishing any
applicable exemption. Any amounts withheld under the backup withholding rules
from a payment to a holder will be allowed as a refund or a credit against the
holder's U.S. federal income tax liability, provided that the required
information is furnished to the IRS.
SPECIAL TAX RULES APPLICABLE TO FOREIGN HOLDERS
As used herein in the discussion of U.S. federal income tax matters, a
"Foreign Holder" is a person who or which, for U.S. federal income tax
purposes, is a foreign corporation, a nonresident alien individual, a
nonresident alien fiduciary of a foreign estate or trust, or a foreign
partnership to the extent that one or more of its members is, for U.S. federal
income tax purposes, a foreign corporation, a nonresident alien individual or a
nonresident alien fiduciary of a foreign estate or trust. Foreign Holders
seeking benefits under applicable tax treaties or an exemption from United
States withholding tax for "effectively connected income," as described below,
will be required to comply with certain certification and other requirements in
order to establish their entitlement to such benefits or exemption.
Dividends
Dividends on the Convertible Preferred Stock or the Common Stock paid to a
Foreign Holder that are not effectively connected with a trade or business
carried on by such Foreign Holder in the United States will generally be
subject to a 30% United States withholding tax. Such rate of withholding may be
reduced to the extent provided by a tax treaty to which the United States is a
party if the recipient of the dividends is entitled to the benefits of the
treaty. A Foreign Holder that is eligible for a reduced rate of United States
withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts withheld by filing an appropriate claim for refund with the IRS.
If the dividends on the Convertible Preferred Stock or the Common Stock are
effectively connected with a trade or business carried on in the United States
by a Foreign Holder, such dividends will be
S-31
<PAGE>
subject to tax at the rates and in the manner applicable to United States
persons. Effectively connected dividends received by a corporate Foreign Holder
may also, under certain circumstances, be subject to an additional "branch
profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
Gain on Disposition of Convertible Preferred Stock or Common Stock
Subject to the discussion above under "Backup Withholding and Information
Reporting," Foreign Holders generally will not be subject to either U.S.
federal income tax or United States federal withholding tax on gain recognized
on a disposition of the Convertible Preferred Stock or the Common Stock unless
(i) the gain is effectively connected with a trade or business conducted by the
Foreign Holder within the United States or, alternatively, if a tax treaty
applies, the gain is attributable to a United States permanent establishment
maintained by the Foreign Holder (in which cases such gain will be subject to
tax at the rates and in the manner applicable to United States persons and the
branch profits tax described above may also apply if the holder is a foreign
corporation), (ii) in the case of an individual Foreign Holder, such holder is
present in the United States for at least 183 days in the taxable year of the
disposition and meets certain other requirements (and provided that such
individual's presence in the United States does not otherwise cause such
individual to be treated as a resident alien, and, thus, generally be taxed as
a United States person), or (iii) the gain is subject to tax under Section 897
of the Code as from the disposition of a United States real property interest.
In general, among other circumstances, gain recognized by a Foreign Holder on a
disposition of Convertible Preferred Stock or Common Stock will not be subject
to tax under Section 897 of the Code if the Foreign Holder, after taking into
account certain constructive ownership rules, does not own, and has not owned
within the five-year period ending on the date of the disposition, more than 5%
of either the outstanding Convertible Preferred Stock or the outstanding Common
Stock of the Company.
U.S. Federal Estate, Gift and Generation--Skipping Transfer Tax
Unless otherwise provided in an applicable estate tax treaty, shares of
Convertible Preferred Stock and Common Stock will be considered property
situated in the United States for U.S. federal estate tax purposes. The estate
of an individual stockholder who, at the time of death, was a nonresident alien
of the United States for U.S. federal estate tax purposes will be required to
file a United States estate tax return, and may incur liability for U.S.
federal estate tax. Gifts by non-resident alien individuals of Convertible
Preferred Stock and Common Stock will not be subject to U.S. federal gift tax
except in the case of certain stockholders who were previously citizens of the
United States.
Under certain circumstances, United States generation-skipping transfer tax
may apply as a result of certain transfers of Convertible Preferred Stock at
death by a nonresident alien individual stockholder to beneficiaries two or
more generations below (or more than 37 1/2 years younger than) the decedent (a
"skip person"), or to a trust having one or more skip persons as beneficiaries.
This tax, if applicable because of a transfer of Convertible Preferred Stock at
death, would be imposed in addition to the United States federal estate tax.
Moreover, under certain circumstances, United States generation-skipping
transfer tax may apply as a result of transfer by a nonresident alien
individual of Convertible Preferred Stock during his lifetime to a trust having
as its beneficiaries one or more skip persons who are citizens or residents of
the United States.
S-32
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to the Underwriters named below, and each of
the Underwriters has severally agreed to purchase from the Company, the
respective number of shares of Convertible Preferred Stock set forth opposite
its name below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
<S> <C>
Salomon Brothers Inc.....................................
---
Total................................................
===
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the shares of
Convertible Preferred Stock offered hereby (other than those subject to the
over-allotment option described below) if any are purchased. In the event of a
default by any Underwriter, the Underwriting Agreement provides that, in
certain circumstances, the purchase commitments of the non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.
The Underwriters have advised the Company that they propose to offer the
shares of Convertible Preferred Stock to the public initially at the public
offering price set forth on the cover page of this Prospectus Supplement and
to certain dealers at such offering price less a concession not to exceed $
per share. The Underwriters may allow and such dealers may reallow a
concession not to exceed $ per share to certain other dealers. After the
initial public offering, the public offering price and such concessions may be
changed.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus Supplement, to purchase up
to additional shares of Convertible Preferred Stock from the Company at the
same price per share as the initial shares to be purchased by the
Underwriters. The Underwriters may exercise such option only to cover over-
allotments in the sale of the shares of Convertible Preferred Stock that the
Underwriters have agreed to purchase. To the extent that the Underwriters
exercise such option, each Underwriter will have a firm commitment, subject to
certain conditions, to purchase the same percentage of option shares as the
number of shares to be purchased by such Underwriter in the above table bears
to the total number of shares to be purchased by the Underwriters.
The Company and Cyprus Amax have each agreed that it will not, for a period
of 90 days after the date hereof, without prior written consent of the
Underwriters, offer, sell or contract to sell, or otherwise dispose of
directly or indirectly, or announce the offering of (i) shares of Common Stock
or any securities convertible into, or exchangeable for, shares of Common
Stock (other than the Convertible Preferred Stock offered hereby or pursuant
to existing stock option or other employee incentive or benefit plans of the
Company and other than upon conversion of the Convertible Preferred Stock
offered hereby or convertible securities outstanding on the date of this
Prospectus Supplement or issuances of Common Stock by the Company to Cyprus
Amax pursuant to the DOCLOC Agreement) or (ii) shares of any class of capital
stock of the Company (other than the Convertible Preferred Stock offered
hereby or issuances of Series A Preferred Stock by the Company to Cyprus Amax
pursuant to the DOCLOC Agreement) which is preferred as to the payment of
dividends, or as to the distribution of assets upon any liquidation or
dissolution of the Company, over shares of any other class of capital stock of
the Company. This restriction will not apply to agreements involving the
issuance of Common Stock in acquisition transactions to be consummated after
the expiration of such 90-day period pursuant to agreements entered into prior
thereto.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or contribute to payments that the Underwriters may be
required to make in respect thereof.
Salomon Brothers Inc has performed various investment banking services for
the Company in the ordinary course of business for which it has received
customary compensation.
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<PAGE>
LEGAL MATTERS
The validity of the shares of Convertible Preferred Stock offered hereby and
the shares of Common Stock issuable upon conversion thereof will be passed upon
for the Company by Davis, Graham & Stubbs, Denver, Colorado. Certain legal
matters for the Underwriters will be passed upon by Winston & Strawn, Chicago,
Illinois.
EXPERTS
The consolidated financial statements and the financial statement schedules
of the Company and its consolidated subsidiaries as of December 31, 1993 and
1992 and for each year in the three-year period ended December 31, 1993,
incorporated by reference in this Prospectus Supplement, have been incorporated
herein in reliance on the reports of Coopers & Lybrand, independent
accountants, as stated in their reports in the Company's 1993 Form 10-K, which
include an explanatory paragraph regarding a change in the method of accounting
for exploration expenditures and postemployment benefits in 1993, and a change
in the method of accounting for precious metals inventory, postretirement
benefits and income taxes in 1992, and have been so included and incorporated
in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.
S-34
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN OR INCORPO-
RATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN CONNEC-
TION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER OR DEALER. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT AND PRO-
SPECTUS, OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATES HEREOF. THIS PROSPEC-
TUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHO-
RIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED
TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITA-
TION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary.............................................. S-3
Risk Factors............................................................... S-12
Recent Developments........................................................ S-13
Use of Proceeds............................................................ S-13
Price Range of Common Stock and Dividends.................................. S-14
Capitalization............................................................. S-15
The Company................................................................ S-16
Description of Convertible Preferred Stock................................. S-23
Certain U.S. Federal Income Tax Consequences............................... S-27
Underwriting............................................................... S-33
Legal Matters.............................................................. S-34
Experts.................................................................... S-34
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 4
Risk Factors............................................................... 5
Use of Proceeds............................................................ 11
Ratio of Earnings to Fixed Charges......................................... 11
Description of Subordinated Debt Securities................................ 12
Description of Preferred Stock............................................. 23
Description of Warrants.................................................... 24
Description of Capital Stock............................................... 24
Plan of Distribution....................................................... 28
Legal Matters.............................................................. 29
Experts.................................................................... 29
</TABLE>
SHARES
AMAX GOLD INC.
$ SERIES B
CONVERTIBLE
PREFERRED STOCK
(LIQUIDATION PREFERENCE $ PER SHARE)
[LOGO OF AMAX GOLD INC. APPEARS HERE]
SALOMON BROTHERS INC
PROSPECTUS SUPPLEMENT
DATED
