<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________to ___________
Commission file number 1-9620
AMAX GOLD INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1199974
- ------------------------------------------------ ----------------------
(State or other jurisdiction of incorporation or (IRS Employers
organization) Identification No.)
9100 East Mineral Circle, Englewood, Colorado 80155
- ------------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 643-5500
----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ----
Common Stock Outstanding, $0.01 par value, as of May 14, 1997 - 99,364,999
shares
Total Pages - 15
Exhibit Index Located on Page 13
1
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMAX GOLD INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- -----------------------------------------------------------------
1997 1996/(1)/
- -----------------------------------------------------------------
<S> <C> <C>
Revenues $38.4 $25.6
Costs and operating expenses:
Cost of sales 25.2 20.7
Depreciation and depletion 11.4 6.1
General and administrative 1.9 2.7
Exploration 0.8 0.6
- -----------------------------------------------------------------
Total costs and operating expenses 39.3 30.1
- -----------------------------------------------------------------
Loss from operations (0.9) (4.5)
Interest expense (9.4) (5.6)
Capitalized interest 4.2 4.6
Interest income 0.3 0.5
Other (0.3) (0.5)
- -----------------------------------------------------------------
Loss before income taxes and cumulative
effect of accounting change (6.1) (5.5)
Income tax benefit - -
- -----------------------------------------------------------------
Loss before cumulative effect of
accounting change (6.1) (5.5)
Cumulative effect of accounting change 4.5 -
- -----------------------------------------------------------------
Net loss (1.6) (5.5)
Preferred stock dividends (1.7) (1.7)
- -----------------------------------------------------------------
Loss attributable to common shares $(3.3) $ (7.2)
=================================================================
Per common share:
Loss before cumulative effect of
accounting change $(.08) $ (.07)
Cumulative effect of accounting change .05 -
- -----------------------------------------------------------------
Net loss $(.03) $ (.07)
=================================================================
Weighted average common shares outstanding 99.3 96.4
=================================================================
</TABLE>
/(1)/ The 1996 amounts have been restated to reflect the change from the LIFO
inventory method to a three-month rolling average cost method.
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in millions except par value of stock)
<TABLE>
<CAPTION>
March 31,
1997 December 31,
(Unaudited) 1996/(1)/
- -------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and equivalents $ 21.8 $ 11.1
Inventories 33.3 28.5
Receivables 8.2 3.2
Other 16.3 17.9
- -------------------------------------------------------------------------------------
Current assets 79.6 60.7
Property, plant and equipment, net 661.0 667.1
Other 31.5 34.4
- -------------------------------------------------------------------------------------
Total assets $772.1 $ 762.2
=====================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Cyprus Amax demand loan $142.3 $ 130.0
Current maturities of long-term debt 53.2 39.3
Accounts payable, trade 11.0 14.7
Accrued and other current liabilities 29.0 23.8
Reclamation reserve, current portion 3.9 4.5
- -------------------------------------------------------------------------------------
Current liabilities 239.4 212.3
Long-term debt 258.0 272.6
Reclamation reserve, non-current portion 11.4 11.2
Other 6.5 6.7
- -------------------------------------------------------------------------------------
Total liabilities 515.3 502.8
Commitments and contingencies - -
Shareholders' equity:
Preferred stock, par value $1.00 per share, authorized
10,000,000 shares, 2,000,000 shares designated as
$2.25 Series A Convertible Preferred Stock,
no shares issued and outstanding; and 1,840,000 shares
designated as $3.75 Series B Convertible Preferred
Stock, issued and outstanding 1,840,000 shares 1.8 1.8
Common Stock, par value $.01 per share, authorized
200,000,000 shares, issued and outstanding 99,344,878
shares in 1997 and 99,308,979 shares in 1996 1.0 1.0
Paid-in capital 355.9 355.7
Accumulated deficit (93.8) (90.5)
Unearned equity - financing costs (8.1) (8.6)
- -------------------------------------------------------------------------------------
Total shareholders' equity 256.8 259.4
- -------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $772.1 $ 762.2
=====================================================================================
</TABLE>
/(1)/ The 1996 amounts have been restated to reflect the change from the LIFO
inventory method to a three-month rolling average cost method.
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- ---------------------------------------------------------------------------
1997 1996/(1)/
- ---------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (1.6) $ (5.5)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and depletion 11.4 6.1
Cumulative effect of accounting change (4.5) -
Increase (decrease) in reclamation reserve (0.4) 0.3
Increase (decrease) in working capital items 6.8 (1.4)
- ---------------------------------------------------------------------------
Net cash provided by (used in) operating activities 11.7 (0.5)
- ---------------------------------------------------------------------------
Cash Flows from Investing Activities:
Capital expenditures (5.9) (41.0)
Loan to joint venture partner - (2.0)
Capitalized interest (4.2) (4.6)
- ---------------------------------------------------------------------------
Net cash used in investing activities (10.1) (47.6)
- ---------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from financings 12.3 50.0
Repayments of financings (0.7) (1.5)
Deferred financing costs (0.8) (0.3)
Preferred dividends paid (1.7) (1.7)
- ---------------------------------------------------------------------------
Net cash provided by financing activities 9.1 46.5
- ---------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents 10.7 (1.6)
Cash and equivalents at January 1 11.1 25.6
- ---------------------------------------------------------------------------
Cash and equivalents at March 31 $ 21.8 $ 24.0
- ---------------------------------------------------------------------------
</TABLE>
/(1)/ The 1996 amounts have been restated to reflect the change from the LIFO
inventory method to a three-month rolling average cost method.
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying interim unaudited financial statements include all adjustments
which are, in the opinion of management, necessary for a fair presentation.
Results for any interim period are not necessarily indicative of the results
that may be achieved in future periods. The financial information as of this
interim date should be read in conjunction with the financial statements and
notes thereto contained in Amax Gold Inc.'s ("Amax Gold" or the "Company")
Annual Report on Form 10-K for the year ended December 31, 1996. The Company is
currently approximately 52.5 percent owned by Cyprus Amax Minerals Company
("Cyprus Amax").
2. CHANGE IN ACCOUNTING POLICIES
During the first quarter of 1997 Amax Gold elected to change its method of
accounting for inventory from the last-in-first-out (LIFO) method to a three-
month rolling average method. In accordance with generally accepted accounting
principles when changing from the LIFO method, prior years' results have been
restated to reflect the effect of this change in policy. The effect of this
restatement on the first quarter of 1996 was to increase the previously reported
net loss by $2.0 million, or $.02 per share. Additionally, as of January 1,
1997, the Company changed its accounting policy to include depreciation and
depletion in inventory, which has the effect of recording depreciation and
depletion expense in the statement of operations as gold is sold rather than as
it is produced. The cumulative effect of this accounting change is a $4.5
million reduction of the net loss as of January 1, 1997. On a pro forma basis
this change would have reduced the 1996 first quarter net loss by $0.1 million.
Both accounting changes were made in order to better match current costs with
revenues and to conform with prevailing gold industry practice.
3. INVENTORIES
Inventories consist of the following (in millions):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
- -------------------------------------------------
<S> <C> <C>
Gold:
Finished goods $18.7 $16.7
Work-in-process 3.8 3.1
Materials and supplies 10.8 8.7
- -------------------------------------------------
$33.3 $28.5
=================================================
</TABLE>
4. DEBT
The Company borrowed $12.3 million during the first quarter and an additional
$2.6 million through May 14, 1997, under a demand loan facility provided by
Cyprus Amax, for a total of $144.9 million borrowed under this facility. The
Company pays interest on funds borrowed under this facility at LIBOR plus 2.25
percent. Amounts outstanding are payable to Cyprus Amax on demand in cash or, at
the election of Cyprus Amax, in shares of common stock of the Company, valued at
the average closing price over the five days before such election.
5
<PAGE>
5. HEDGE CONTRACTS
Forward sales contracts, generally on a spot deferred basis, put and call option
contracts and compound options are entered into from time to time to protect the
Company from the effect of price changes on precious metals sales. As of March
31, 1997, the Company's outstanding hedge contracts were as follows:
<TABLE>
<CAPTION>
Average
Gold Realized Price
Ounces Per Ounce Period
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Forward sales contracts/(1)/ 181,700 $482 April 1997 - June 1997
Option contracts:
Purchased put options 688,000 $383 April 1997 - December 2000
Sold put options 133,900 $357 April 1997 - December 1997
Purchased call options 469,500 $408 June 1997 - December 1997
Sold call options 299,900 $398 April 1997 - December 1997
</TABLE>
/(1)/ Represents the net forward sales position made generally on a spot
deferred basis, which allows deferral of the delivery of gold ounces to a
later date at a renegotiated gold price.
The fair market value of the Company's forward contracts and put and call
options at March 31, 1997, was approximately $28.4 million. Future market
valuations for contracts are dependent on gold market prices, option volatility
and interest rates, which can vary significantly. Contracts will be utilized to
hedge against declines in gold market prices for the Company's future gold
production while maintaining benefits in the event of higher gold market prices.
As a requirement of the $250 million Fort Knox loan from a group of banks, the
Company entered into interest rate swap agreements to reduce the impact of
changes in interest rates. At March 31, 1997, the Company had interest rate
swaps and swap option sales contracts that if exercised between April 1997 and
April 1998 would obligate the Company to pay a fixed rate of 5.88 percent over
an average term of 1.4 years on a principal amount of $170 million. The Company
also purchased swap options with the right to pay 6.82 percent over an average
term of 1.9 years on a principal amount of $150 million. The fair market value
of the Company's interest rate swap options at March 31, 1997, was approximately
$0.5 million. Due to the requirements placed on the Company as a condition for
the Fort Knox loan, the Company does not expect to close these contracts.
6. KUBAKA ACQUISITION
In October 1996, the Company finalized an amended agreement to acquire from
Cyprus Amax its indirect 50 percent interest in the Kubaka goldmine, which was
approved by the Company's shareholders in December 1996. Kubaka, located in Far
East Russia, poured its first gold in February 1997, and is expected to be
completed at an estimated total capital cost of $228 million. The purchase price
is payable in shares of the Company's common stock with approximately 11.8
million shares payable at closing and 4.2 million paid upon commencement of
commercial production, valued at $5.9375 per share, the average closing price
for the ten trading days preceding the initial public announcement of the
acquisition in October 1995. The Company expects the transaction to be completed
in mid-1997.
6
<PAGE>
As of March 31, 1997, Kubaka has been funded through $86 million of equity
contributions from the partners, on a pro rata basis to their ownership
interests, project financing of $130 million provided by the European Bank for
Reconstruction and Development and the U.S. Overseas Private Investment
Corporation, and $14 million of subordinated debt from a bank licensed to do
business in Russia.
6. COMMITMENTS AND CONTINGENCIES
Reclamation, site restoration and closure costs are accrued on a units-of-
production basis using estimates based upon current federal, state and Chilean
laws and regulations governing the protection of the environment. These laws
and regulations are continually changing and generally becoming more
restrictive. Any changes in these laws and regulations could impact future
estimated reclamation costs. Total reclamation costs for the Company at the end
of current operating mine lives are estimated to be approximately $31 million.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the Company's ounces of gold production,
production costs, ounces of gold sold and average realized prices for the three
months ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- -----------------------------------------------------------------------------------
1997 1996
===================================================================================
<S> <C> <C>
GOLD PRODUCTION (OUNCES)
Fort Knox 29,224 -
Refugio 25,930 -
Hayden Hill 22,211 21,028
Guanaco 25,869 18,919
Sleeper - 19,220
- -----------------------------------------------------------------------------------
Consolidated gold production 103,234 59,167
- -----------------------------------------------------------------------------------
CASH OPERATING COSTS ($ PER OUNCE OF GOLD PRODUCED)/(1)(2)/
Fort Knox $ 181 $ -
Refugio 248 -
Hayden Hill 236 292
Guanaco 251 352
Sleeper - 226
- -----------------------------------------------------------------------------------
Consolidated average cash operating costs $ 227 $ 290
- -----------------------------------------------------------------------------------
TOTAL CASH COSTS ($ PER OUNCE OF GOLD PRODUCED)/(1)(2)/
Fort Knox $ 181 $ -
Refugio 265 -
Hayden Hill 245 300
Guanaco 263 365
Sleeper - 230
- -----------------------------------------------------------------------------------
Consolidated total cash costs $ 236 $ 298
- -----------------------------------------------------------------------------------
TOTAL PRODUCTION COSTS ($ PER OUNCE OF GOLD PRODUCED)/(1)(2)/
Fort Knox $ 353 $ -
Refugio 360 -
Hayden Hill 340 411
Guanaco 397 524
Sleeper - 336
- -----------------------------------------------------------------------------------
Consolidated total production costs $ 363 $ 423
===================================================================================
Ounces of gold sold 99,078 62,273
Average realized price per ounce sold $ 388 $ 412
===================================================================================
</TABLE>
/(1)/ Cash operating costs at the mine sites including overhead, net of credits
for silver by-products. Total cash costs include cash operating costs plus
royalties and applicable production taxes. Total production costs include
total cash costs plus reclamation and depreciation and depletion.
/(2)/ Commercial production commenced at Fort Knox on March 1, 1997 and at
Refugio on October 1, 1996. Consolidated total cash costs exclude the
impact of the write-down of heap leach inventories at Guanaco in 1996.
Mining at Guanaco is expected to be completed during the second quarter of
1997, with residual leaching continuing through mid-year 1998. Mining at
Sleeper was completed in September 1996.
8
<PAGE>
RESULTS OF OPERATIONS
Amax Gold Inc. reported a first quarter 1997 net loss of $1.6 million, or $.03
per share, on revenue of $38.4 million compared with a restated 1996 net loss of
$5.5 million, or $.07 per share, on revenue of $25.6 million. Excluding the
$4.5 million cumulative effect of a first quarter inventory accounting change,
the Company's first quarter 1997 net loss was $6.1 million, or $.08 per share.
Higher interest expense resulting from higher debt balances incurred to complete
the Company's major capital projects was the main factor in the lower earnings.
See Note 2 for further discussion of the changes in accounting policies during
the 1997 first quarter.
The Company's operating loss was $0.9 million during the first quarter of 1997
compared with an operating loss of $4.5 million in the 1996 first quarter.
Lower cash production costs and higher gold sales were the primary reasons for
the improved operating results. Additionally, Fort Knox commenced commercial
production at March 1, 1997, which also contributed to the improvement.
Amax Gold's average realized price for the first quarter of 1997 was $388 per
ounce, compared with $412 per ounce for the 1996 first quarter. These compare
with the 1997 and 1996 first quarter average gold spot prices of $351 per ounce
and $400 per ounce, respectively. Higher first quarter gold sales of 99,078
ounces, compared with 62,273 ounces for the 1996 first quarter, primarily
resulted from production at Fort Knox and Refugio, partially offset by the
absence of production from the Sleeper mine, which is now in reclamation.
Gold production rose nearly 75 percent to 103,234 ounces. Fort Knox and
Refugio, neither of which were in production in the first quarter of 1996, added
a total of 55,154 ounces of gold production. Production at both Guanaco and
Hayden Hill was higher than in the 1996 first quarter. Guanaco produced 25,869
ounces in the first quarter of 1997, a 37 percent increase over the 1996 first
quarter, primarily due to significantly higher grades. Hayden Hill's first
quarter production of 22,211 ounces was slightly higher than the first quarter
of 1996 primarily due to improved crusher throughput. Both Hayden Hill and
Guanaco are expected to complete mining during 1997 with residual leaching
continuing into 1998.
The Company's cost of sales increased compared with the prior year's quarter,
reflecting the substantial increase in sales, offset by lower average cash
costs. Consolidated total cash costs were reduced to $236 per ounce for the
first quarter of 1997 from $298 per ounce in the first quarter of 1996. Fort
Knox's cash costs of $181 per ounce were lower than anticipated as the mine
start-up was smooth and crusher and mill throughput exceeded expectations.
Refugio's cash costs were $265 per ounce, which is slightly higher than the
fourth quarter of 1996, Refugio's first quarter of production. The increase in
cash costs and lower gold production compared with the fourth quarter of 1996
primarily resulted from operational inefficiencies that are currently being
addressed. Guanaco's cash costs improved by nearly 28 percent to $263 per ounce
compared with the 1996 first quarter, due to the increase in production as well
as lower mining costs. Hayden Hill's first quarter 1997 cash costs were also
lower than the comparable 1996 quarter due to more efficient material handling.
Depreciation and depletion increased to $11.4 million during the first quarter
of 1997 primarily as a result of the addition of Fort Knox and Refugio
production, partially offset by a lower depreciation rate at Guanaco due to the
fourth quarter 1996 write-down.
First quarter 1997 general and administrative expenses of $1.9 million were $0.8
million lower than the 1996 first quarter. The decrease is primarily due to the
absence of severance accruals recorded in the first quarter of 1996 relating to
management changes as well as lower salaries and benefits, both resulting from a
second quarter 1996 corporate reorganization.
9
<PAGE>
Higher debt balances necessary to complete construction of the Fort Knox mine
resulted in interest expense of $9.4 million for the first quarter of 1997, a 68
percent increase over the 1996 first quarter.
LIQUIDITY AND CAPITAL RESOURCES
Amax Gold's cash flow from operations improved to $11.7 million in the first
quarter of 1997 compared with cash used in operations of $0.5 million in the
first quarter of 1996. The increased cash flow was primarily attributed to the
addition of Fort Knox and Refugio gold sales coupled with lower total cash
costs.
Capital expenditures of $5.9 million were significantly reduced from the 1996
first quarter due to the completion of construction of the Fort Knox mine.
Capital spending, excluding capitalized interest, at Fort Knox totaled $5.4
million during the first quarter for a total project cost, excluding capitalized
interest, of about $345 million, approximately $25 million below the revised
capital cost estimates announced in April 1996. Capital spending for the
remainder of the year, excluding Kubaka, is expected to be approximately $15
million. See Note 6 for further discussion of the Kubaka acquisition.
Net financing activities generated $9.1 million during the first quarter of
1997. The Company borrowed $12.3 million under the Cyprus Amax demand loan
facility during the first quarter of 1997, increasing the total borrowed through
March 31, 1997, to $142.3 million. An additional $2.6 million was borrowed
through May 14, 1997. Amax Gold does not expect to borrow significant
additional amounts under the demand loan facility as the Company's major capital
projects are substantially complete. Cash flow from operations is expected to be
sufficient to fund the Company's remaining cash needs, including scheduled
third-party debt service. The Company is currently considering various options
to restructure its debt and capital, which could include accessing public debt
and equity markets.
Amax Gold paid regular dividends of $.9375 on the $3.75 Series B Convertible
Preferred Stock during the first quarter of 1997. At March 31, 1997,
approximately 99.3 million shares of the Company's common stock were
outstanding.
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share,
was issued in February 1997. SFAS No. 128 replaces the presentation of primary
EPS with a presentation of basic EPS. It requires a reconciliation of the
numerator and denominator of the basis EPS computation to the numerator and
denominator of the diluted EPS computation. Basic EPS excludes dilution and is
computed by dividing income available to common stockholders by the weighted-
average number of common shares outstanding for the period. For the three
months ended March 31, 1997, basic earnings per share would be the same as
primary earnings per share presented.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
With the exception of historical matters, the matters discussed in this report
are forward-looking statements that involve risks and uncertainties that could
cause actual results to differ materially from projected results. Such forward-
looking statements include statements regarding expected dates for commencement
of mining,
10
<PAGE>
gold production and commercial production, projected quantities of future gold
production, estimated reserves and recovery rates, anticipated production rates,
costs and expenditures, prices realized by the Company, expected future cash
flows, anticipated financing needs, growth plans and sources of financing and
repayment alternatives. Factors that could cause actual results to differ
materially include, among others: risks and uncertainties relating to general
domestic and international economic and political conditions, the cyclical and
volatile price of gold, the political and economic risks associated with foreign
operations, cost overruns, construction delays, unanticipated ground and water
conditions, unanticipated grade and geological problems, metallurgical and other
processing problems, availability of materials and equipment, the timing of
receipt of necessary governmental permits and approvals, the occurrence of
unusual weather or operating conditions, force majeure events, lower than
expected ore grades, the failure of equipment or processes to operate in
accordance with specifications or expectations, labor relations, accidents,
delays in anticipated start-up dates, environmental risks, the results of
financing efforts and financial market conditions and other risk factors
detailed in the Company's Securities and Exchange Commission filings. Refer to
the Risk Factors on pages 7 to 13 of Amendment No. 1 to the Company's
Registration Statement on Form S-3 (No. 333-22598) as filed with the Securities
and Exchange Commission on March 26, 1997, for a more detailed discussion of
risks. Many of such factors are beyond the Company's ability to control or
predict. Readers are cautioned not to put undue reliance on forward-looking
statements. The Company disclaims any intent or obligation to update publicly
these forward-looking statements, whether as a result of new information, future
events or otherwise.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Piedmont Mining Company and Kershaw Gold Company, Inc. have dismissed
their appeals pending in the United States Court of Appeals for the
Fourth Circuit of the $1.4 million environmental arbitration award in
favor of the Company, issued and paid in 1996 in respect of certain
environmental indemnity claims of the Company. The arbitration award is
now a final judgment.
Litigation filed by Kershaw against the Company alleging that the
Company tertiously interfered with performance by its subsidiaries
under certain agreements is still pending in the United States District
Court for the District of South Carolina, Rock Hill Division. The
motion of Piedmont and Kershaw for reconsideration of an order
dismissing all of their lawsuit against the Company except the claim
described above is still pending in South Carolina Circuit Court.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(A) The annual meeting of stockholders was held on May 6, 1997.
(B) See (c) below.
(C) Two proposals were submitted for approval, which were passed
with voting results as follows:
1) All six of the Company's directors were reelected to serve
until the annual meeting of stockholders in 1998, based on the
following tabulations:
(1) Allen Born: 91,664,313 affirmative votes, 309,245
withheld
(2) Gerald J. Malys: 91,751,155 affirmative votes, 222,403
withheld
(3) Richard H. Block: 91,752,471 affirmative votes, 221,087
withheld
(4) Vernon F. Taylor, Jr.: 91,724,955 affirmative votes,
248,603 withheld
(5) Milton Ward: 91,740,018 affirmative votes, 233,540
withheld; and
(6) Russell L. Wood: 91,751,209 affirmative votes, 222,349
withheld.
2) The selection of Price Waterhouse as independent accountants
for the current fiscal year was approved by a tabulation of
91,741,517 votes in favor, 176,189 votes against and 55,852
abstaining.
ITEM 5. OTHER INFORMATION
Not Applicable.
12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) The following Exhibits are being filed as part of this Quarterly
Report on Form 10-Q:
Exhibit Number Document
-------------- --------
(10)(a) Agreement dated March 24, 1997 between
the Company and Leland O. Erdahl
(b) Second Amendment to the Deferred
Compensation Plan for Members of the Board
of Directors of Amax Gold Inc.
(c) First Amendment to the Amax Gold Inc. 1992
Stock Option Plan
(d) First and Second Amendments to the Amax Gold
Inc. Key Employee Long-Term Incentive Plan
(18) Letter dated May 14, 1997, from the
Company's independent accountants to the
Amax Gold Inc. Board of Directors regarding
the preferability of the Company's newly
adopted accounting principles for
inventories.
(27) Financial Data Schedule
(B) No Current Report on Form 8-K was filed during the quarter
ended March 31, 1997.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMAX GOLD INC.
By /s/ Leland O. Erdahl
----------------------------------
Leland O. Erdahl
Vice President and Chief Financial
Officer
(principal financial officer)
Dated: May 15, 1997
14
<PAGE>
AGREEMENT EXHIBIT 10(a)
THIS AGREEMENT ("Agreement") is made and entered into as of March 24, 1997,
by and between Amax Gold Inc., a Delaware corporation (the "Company"), and
Leland O. Erdahl ("Mr. Erdahl").
THE PARTIES AGREE AS FOLLOWS:
1. Duties
------
1.1 Position. Mr. Erdahl agrees to serve the Company as its Vice
--------
President and Chief Financial Officer, and the Company agrees to retain Mr.
Erdahl in such capacity, subject to the terms of this Agreement. Mr. Erdahl
shall devote all of his business time, energy and skill to the affairs of the
Company; provided however that Mr. Erdahl may continue to perform his duties as
a director, commissioner or trustee of certain other corporations or corporate
entities which have been identified to the Company including, among other
things, attending meetings of such boards of directors from time to time. Mr.
Erdahl shall report to the President and Chief Operating Officer of the Company
and shall have powers and duties as shall be specified to him from time to time,
which are consistent with the position of a Vice President and Chief Financial
Officer of the Company. In performing services pursuant to this Agreement, Mr.
Erdahl shall comply with applicable laws and with the policies of the Company as
announced from time to time. Mr. Erdahl's principal place of business with
respect to his services to the Company shall be at the Company's offices in
Englewood, Colorado.
1.2 Independent Contractor. In performing services under this
----------------------
Agreement, Mr. Erdahl shall operate as and have the status of an independent
contractor and not of an employee of the Company. As an independent contractor,
Mr. Erdahl is not entitled to workers' compensation benefits and is obligated to
pay any federal and state income taxes due in respect of any monies earned
pursuant to this Agreement.
2. Term of Consulting Services.
---------------------------
2.1 Basic Term. Mr. Erdahl shall provide the services contemplated
----------
herein from the date hereof through September 30, 1997, unless the Agreement is
terminated earlier as provided herein. This Agreement shall be subject to
extension by mutual agreement for one or more successive periods of one full
month each, subject to the termination provisions hereof.
2.2 Termination. Notwithstanding the foregoing, this Agreement shall
-----------
terminate upon (I) the death of Mr. Erdahl; (ii) written notice of termination
given by the Company to Mr. Erdahl at any time for Cause as defined in Section
2.3 hereof; or (iii) after September 30, 1997, upon written notice by either
party.
2.3 Cause. For purposes of this Agreement, "Cause" shall mean (a) the
-----
willful and continued failure of Mr. Erdahl to perform substantially his duties
with the Company or one of its affiliates (other than any such failure resulting
from incapacity due to physical or mental illness), after
<PAGE>
a written demand of substantial performance is delivered to Mr. Erdahl by the
Board of Directors or Chief Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer believes
that Mr. Erdahl has not substantially performed his duties, or (b) the willful
engaging by Mr. Erdahl in illegal conduct or in gross misconduct which is
materially and demonstrably injurious to the Company.
3. Compensation.
------------
3.1 Base Compensation. Mr. Erdahl shall be paid a monthly fee of
-----------------
$25,000, payable on the fifteenth and last days of each month in accordance with
the Company's regular payroll practice for senior executives.
3.2 Additional Compensation Relating to Business Combination.
--------------------------------------------------------
3.2.1 Cash Bonus and Additional Cash Bonus Measured by Increase
---------------------------------------------------------
in Company Common Stock Value. If during the term of this Agreement, the
- -----------------------------
Company is actively engaged in negotiations with another party relating to a
Business Combination, and such discussions conclude in the closing of a Business
Combination during the term of this Agreement or within six (6) months after the
conclusion of the term of this Agreement, Mr. Erdahl shall be entitled to (I) a
cash bonus payable of $125,000 upon closing of such Business Combination, and
(ii) an additional cash bonus payable upon closing of the Business Combination,
equal to (A) the difference, if such difference is a positive number, between
(x) the closing price of the Company's Common Stock on the New York Stock
Exchange on the date of the closing of the Business Combination and (y) the
closing price of the Company's Common Stock on the New York Stock Exchange on
March 24, 1997 times (B) 20,000; provided, however, that Mr. Erdahl shall not be
entitled to such cash bonus or additional cash bonus if this Agreement has been
terminated by the Company for Cause.
3.2.2 Business Combination. For purposes of this Section 3.2,
--------------------
"Business Combination" shall mean any merger, consolidation, sale or other
transfer of the Company or a substantial portion of the assets of the Company,
an acquisition involving the issuance of the Company Common stock, or other
transaction as a result of which after such Business Combination, current
stockholders of the Company would own less than 80% of the voting stock of the
surviving or resulting entity.
3.3 Additional Benefits. Mr. Erdahl shall be entitled to the
-------------------
following fringe benefits:
3.3.1 Housing. During the term of this Agreement, the Company
-------
will provide Mr. Erdahl with a furnished apartment in the Englewood area,
including utility costs.
3.3.2 Business Expenses. The Company shall reimburse Mr. Erdahl
-----------------
for all reasonable and necessary expenses incurred in carrying out his duties
under this Agreement, including travel and entertainment expenses, in accordance
with the Company's policies in effect from time to time. Mr. Erdahl shall
present monthly to the Company an itemized account of such expenses in such
2
<PAGE>
form as may be required by the Company.
3.3.3 Automobile. The Company shall provide Mr. Erdahl with a
----------
vehicle to be agreed upon by Mr. Erdahl and the Company for his use during the
term of this Agreement.
3.3.4 Personal Travel. During the term of this Agreement, the
---------------
Company will provide to Mr. Erdahl weekly round trip air travel, coach class,
between Denver, Colorado and Las Vegas, Nevada, such travel to occur during non-
working hours, and will reimburse Mr. Erdahl for the cost of airport parking in
connection with such trips.
3.3.5 Employee Benefits. Except as specifically provided herein,
-----------------
Mr. Erdahl shall not be eligible to participate in any of the Company's benefit
and compensation plans, including without limitation, pension and medical plans
and paid vacation.
4. Effect of Termination. In the event Mr. Erdahl's employment is
---------------------
terminated by Mr. Erdahl or the Company for any reason, the Company shall
promptly pay all accrued compensation and shall reimburse any reasonable and
necessary business expenses incurred by Mr. Erdahl in connection with his duties
hereunder, all to the date of termination.
5. Confidentiality. All knowledge and information acquired or developed
---------------
by or on behalf of Mr. Erdahl hereunder which is not otherwise in the public
domain shall be and remain the confidential and proprietary information of the
Company. Any information acquired or developed by Mr. Erdahl hereunder shall be
returned to the Company upon request, or at the termination of this Agreement.
Mr. Erdahl shall maintain strict security over all knowledge and information
acquired or developed by Mr. Erdahl during the performance of this Agreement and
shall not divulge any such knowledge or information directly or indirectly to
any person, other than the authorized representatives of the Company, without
the Company's prior written consent.
5.1 Equitable Remedies. The service rendered by Mr. Erdahl to the
------------------
Company and the information disclosed to Mr. Erdahl during his employment are of
a unique and special character, and any breach of Section 5 hereof will cause
the Company irreparable injury and damage which will be extremely difficult to
quantify. The parties agree that the Company will be entitled to, in addition to
all other remedies available to it, injunctive relief to prevent a breach and to
secure the enforcement of all provisions of Section 5.
6. Miscellaneous.
-------------
6.1 Waiver. The waiver of the breach of any provision of this
------
Agreement shall not operate or be constituted as a waiver of any subsequent
breach of the same or other provision thereof.
6.2 Entire Agreement; Modifications. This Agreement represents the
-------------------------------
entire understanding between the parties with respect to the subject matter
hereof, and this Agreement supersedes any and all prior understandings,
agreements, plans and negotiations, whether written or
3
<PAGE>
oral, with respect to the subject matter hereof, including, without limitation,
any understandings, agreements or obligations respecting any past or future
compensation, bonuses, reimbursements or other payments to Mr. Erdahl from the
Company. All modifications to this Agreement must be in writing and signed by
the party against whom enforcement of such modification is sought.
6.3 Headings. The Section headings herein are intended for reference
--------
and shall not by themselves determine the construction or interpretation of this
Agreement.
6.4 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the Sate of Colorado without application of its
conflict of laws rules.
6.5 Binding Effect; Assignment. This Agreement shall be binding upon
--------------------------
and inure to the benefit of the parties hereto and their respective executors,
administrators, heirs or successors; provided, however, that neither party may
assign rights or obligations under this Agreement without the written consent of
the other party.
6.6 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which taken together shall constitute one and the same
Agreement.
6.7. Severability. In the event that any of the provisions, or
------------
portions or applications thereof, of this Agreement are held to be unenforceable
or invalid by any court of competent jurisdiction, Mr. Erdahl and the Company
shall negotiate an equitable adjustment in the provision of this Agreement with
a view toward effecting the purpose of this Agreement and the validity and
enforceability of the remaining provisions, or portions or applications thereof,
shall not be affected thereby.
7. Survival. Notwithstanding the termination of this Agreement, any duty
--------
or obligation which has been incurred and which has not fully observed,
performed, or discharged, and right, unconditional or conditional, which has
been created and has not been fully enjoyed, enforced, or observed, performed,
or satisfied (including but not limited to the duties, obligations, and rights
with respect to confidentiality) shall survive such expiration or termination
until such duty or obligation has been fully observed, performed, or discharged
and such right has been enforced, enjoyed, or satisfied.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
AMAX GOLD INC., a Delaware
corporation
By: /s/ S. Scott Shellhaas /s/ Leland O. Erdahl
------------------------ ------------------------
S. Scott Shellhaas Leland O. Erdahl
Title: President and Chief Operating Officer
4
<PAGE>
EXHIBIT 10(b)
SECOND AMENDMENT TO THE
DEFERRED COMPENSATION PLAN
FOR MEMBERS OF THE BOARD OF DIRECTORS
OF AMAX GOLD INC.
This Second Amendment to the Deferred Compensation Plan for Members of the
Board of Directors of Amax Gold Inc. ("Plan") is effective the 1st day of
December, 1996.
Recitals
A. The Plan has been in effect since the first day of July, 1988, and it has
been amended on one prior occasion.
B. In 1996, the Securities and Exchange Commission amended the provisions of
Rule 16b-3 of Section 16(b) of the Securities Exchange Act of 1934, and Amax
Gold Inc. ("Company") desires to amend the Plan to conform to certain changes
made in Rule 16b-3 and otherwise modify the Plan for administrative convenience.
C. The amendment made herein has been approved by the Company's Board of
Directors on the 12th day of February, 1997.
Amendment
1. Section 2.02 of the Plan is amended by adding the following sentences to
the end of the section:
A Board Member's application shall be approved in advance of the first
deferral period to which it pertains by either the Board of Directors
or by the standing Compensation Committee of the Board of Directors.
Notwithstanding the foregoing, each election by a Board Member to
participate in the Plan or to change his or her level of participation
in the Plan must be approved in advance by the entire Board of
Directors of the Company or by a committee of the Board of Directors
satisfying the requirements of Rule 16b-3 of Section 16(b) of the
Exchange Act. For purposes hereof, the Compensation Committee shall be
the Compensation Committee which exists from time to time under the
terms of the Amax Gold Inc. Key Executive Long-Term Incentive Plan.
Executed at Arapahoe County, Colorado this 31st day of March, 1997.
AMAX GOLD INC.
By: /s/ S. SCOTT SHELLHAAS
-----------------------------------
S. Scott Shellhaas
President and Chief
Operating Officer
<PAGE>
EXHIBIT 10(c)
FIRST AMENDMENT TO THE
AMAX GOLD INC.
1992 STOCK OPTION PLAN
This First Amendment to the AMAX GOLD INC. ("Company") 1992 STOCK OPTION
PLAN (the "Plan") is effective the 1st day of December, 1996.
Recitals
A. The Plan has been in effect since June 30, 1992, and permits the grant of
Options through January 1, 2003.
B. In 1996, the Securities and Exchange Commission amended the provisions of
Rule 16b-3 of Section 16(b) of the Securities Exchange Act of 1934, and the
Company desires to amend the Plan to conform to certain changes made in Rule
16b-3.
C. The amendments made herein have been approved by the Company's Board of
Directors on the 12th day of February, 1997.
Amendments
1. The first sentence of Section 4(a) of the Plan is hereby amended to read as
follows:
The Board of Directors shall appoint a standing committee of not fewer than
two Non-Employee Directors (as such term is defined under Rule 16a of the
Exchange Act), to be known as the Compensation Committee (the "Compensation
Committee"), to administer and interpret the Plan with respect to all
corporate officers and certain other senior personnel (collectively, the
"Executive Group") and such other personnel to be determined from time to
time by the Compensation Committee.
2. The second paragraph of Section 8(a) of the Plan is amended and restated in
its entirety to read as follows:
An option shall not be exercisable in whole or in part within six
months after the date it is granted or more than 10 years after the date it
is granted; provided, however, that the issuing Committee, in its
discretion, may specify a period or periods during which an option shall
not be exercisable, and may accelerate the exercisability of any option to
any date in the case of the optionee's death or disability, in the case of
a Change in Control, or in all other cases.
Executed at Arapahoe County, Colorado this 31st day of March, 1997.
AMAX GOLD INC.
By: /s/ S. SCOTT SHELLHAAS
-------------------------------------
S. Scott Shellhaas
President and Chief
Operating Officer
<PAGE>
EXHIBIT 10(d)
FIRST AMENDMENT TO THE
AMAX GOLD INC.
KEY EXECUTIVE LONG-TERM INCENTIVE PLAN
This First Amendment to the AMAX GOLD INC. ("Company") KEY EXECUTIVE LONG-
TERM INCENTIVE PLAN (the "Plan") is effective the 1st day of December, 1996.
Recitals
A. The Plan has been in effect since January 1, 1993 and permits the award of
equity-based incentive compensation.
B. The amendment made herein has been approved by the Company's Board of
Directors on the 11th day of December, 1996.
Amendments
1. Section 1.1(s) is hereby amended and restated in its entirety as follows:
"Plan" shall mean this Amax Gold Inc. Key Executive Long-Term Incentive
Plan.
Executed at Arapahoe County, Colorado this 31st day of March, 1997.
AMAX GOLD INC.
By: /s/ S. SCOTT SHELLHAAS
--------------------------------
S. Scott Shellhaas
President and Chief
Operating Officer
<PAGE>
EXHIBIT 10(d)
SECOND AMENDMENT TO THE
AMAX GOLD INC.
KEY EXECUTIVE LONG-TERM INCENTIVE PLAN
This Second Amendment to the AMAX GOLD INC. ("Company") KEY EXECUTIVE LONG-
TERM INCENTIVE PLAN (the "Plan") is effective the 1st day of December, 1996.
Recitals
A. The Plan has been in effect since January 1, 1993, and permits the award of
equity-based incentive compensation.
B. In 1996, the Securities and Exchange Commission amended the provisions of
Rule 16b-3 of Section 16(b) of the Securities Exchange Act of 1934, and the
Company desires to amend the Plan to conform to certain changes made in Rule
16b-3.
C. On December 11, 1996, the Compensation Committee of the Company's Board of
Directors authorized a change in the name of the Plan.
D. The amendment made herein has been approved by the Company's Board of
Directors on the 12th day of February, 1997.
Amendments
1. Section 1.1(i) of the Plan is hereby amended in its entirety to read as
follows:
(i) "Compensation Committee" shall mean the Compensation Committee of
the Board of Directors, a standing committee of not fewer than two Non-
Employee Directors (as such term is defined under Rule 16a of the Exchange
Act), who shall administer and interpret the Plan.
Executed at Arapahoe County, Colorado this 31st day of March, 1997.
AMAX GOLD INC.
By: /s/ S. SCOTT SHELLHAAS
-------------------------------------
S. Scott Shellhaas
President and Chief
Operating Officer
<PAGE>
EXHIBIT 18
May 14, 1997
To the Board of Directors
of Amax Gold Inc.
Dear Directors:
We have been furnished with a copy of the Company's Form 10-Q for the quarter
ended March 31, 1997. Note 2 therein describes changes in the method of
determining the cost of inventories from the last-in, first-out to the three-
month rolling average method and to include depreciation in the cost of
inventories. It should be understood that the preferability of one acceptable
method of inventory accounting over another has not been addressed in any
authoritative accounting literature and in arriving at our opinion expressed
below, we have relied on management's business planning and judgment. Based
upon our discussions with management and the stated reasons for the changes, we
believe that such changes represent, in your circumstances, the adoption of
preferable alternative accounting principles for inventories in conformity with
Accounting Principles Board Opinion No. 20.
We have not made an audit in accordance with generally accepted auditing
standards of the financial statements of Amax Gold Inc. for the three-month
periods ending March 31, 1997 or March 31, 1996 and, accordingly, we express no
opinion thereon or on the financial information filed as part of the Form 10-Q
of which this letter is to be an exhibit.
Very truly yours,
PRICE WATERHOUSE LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 21,800
<SECURITIES> 0
<RECEIVABLES> 8,200
<ALLOWANCES> 0
<INVENTORY> 33,300
<CURRENT-ASSETS> 79,600
<PP&E> 993,700
<DEPRECIATION> 332,700
<TOTAL-ASSETS> 772,100
<CURRENT-LIABILITIES> 239,400
<BONDS> 258,000
1,800
0
<COMMON> 1,000
<OTHER-SE> 254,000
<TOTAL-LIABILITY-AND-EQUITY> 772,100
<SALES> 38,400
<TOTAL-REVENUES> 38,400
<CGS> 25,200
<TOTAL-COSTS> 39,300
<OTHER-EXPENSES> 3,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,900<F1>
<INCOME-PRETAX> (6,100)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,100)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 4,500
<NET-INCOME> (1,600)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
<FN>
<F1>Net of interest income of $0.3 million and capitalized interest of $4.2 million
</FN>
</TABLE>
