SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
Commission File Number 0-16019
INTERNATIONAL PRECIOUS METALS CORPORATION
------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Province of Ontario, Canada
------------------------------------------------------------------------------
(Jurisdiction of formation)
86-0766060
Employer Identification Number
4633 S. 36th Place, Phoenix, Arizona 85040
------------------------------------------------------------------------------
(Address of principal executive officers)
(602) 414-1830
(Registrant's telephone number)
Number of common shares outstanding on March 31, 1997: 16,586,090
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 No X.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
CONTENTS
Part 1. Financial Information Page
Item 1. Condensed Consolidated Financial Statements
Consolidated Balance Sheets
March 31, 1996 and 1997 4-5
Consolidated Statements of Loss and Deficit
Three Months Ended March 31, 1996 and 1997 6
Consolidated Statements of Cash Flow
Three Months Ended March 31, 1996 and 1997 7
Consolidated Statements of Deferred Mineral Exploration Expenditures
Three Months Ended March 31, 1996 and 1997 8
Notes to Consolidated Financial Statements 9-17
Item 2. Management's Discussion and Analysis of Financial 18-19
Condition and Results of Operations
Part II. Other Information
Item 2. Changes in Securities 20
Item 6. Exhibits and Reports on Form 8-K 20
2
<PAGE>
Currency
All dollar amounts set forth in this report are in Canadian dollars, except
where otherwise indicated. The following table sets forth (i) the rates of
exchange for the Canadian dollar, expressed in United States dollars, in effect
at the end of each of the periods indicated; (ii) the average of exchange rates
in effect on the last day of each month during such periods; and (iii) the high
and low exchange rates during each such periods, in each case based on the noon
buying rate in New York City for cable transfers in Canadian dollars as
certified for customs purposes by the Federal Reserve Bank of New York:
<TABLE>
<CAPTION>
Three months
ended
March 31, Year ended December 31,
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Rate at end of period................. $.7228 $.7301 $.7323 $.7128 $.7544 $.7865
Average rate during period............ .7321 .7334 .7305 .7300 .7729 .8235
High.................................. .7487 .7515 .7527 .7632 .8046 .8757
Low................................... .7228 .7215 .7023 .7103 .7439 .7761
</TABLE>
On May 12, 1997, the noon buying rate for $1.00 Canadian was $.7194 United
States.
3
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PRECIOUS METALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Canadian Dollars)
(Unaudited)
December 31, March 31,
1996 1997
----------------- -----------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 2,644,000 $ 6,309,000
Other assets (Note 5) 1,340,000 1,629,000
----------------- -----------------
Total current assets 3,984,000 7,938,000
----------------- -----------------
OTHER ASSETS
Deferred mineral exploration expenditures (Note 6) 13,050,000 13,809,000
Capital assets (Note 7) 1,030,000 1,312,000
----------------- -----------------
Total other assets 14,080,000 15,121,000
----------------- -----------------
Total assets $ 18,064,000 $ 23,059,000
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PRECIOUS METALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Canadian Dollars)
(Unaudited)
December 31, March 31,
1996 1997
----------------- -----------------
LIABILITIES
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued charges $ 553,000 $ 403,000
Debentures (Note 8) 798,000 251,000
Vehicle and equipment loans 69,000 60,000
----------------- -----------------
Total current liabilities 1,420,000 714,000
----------------- -----------------
LONG TERM LIABILITIES
Vehicle and equipment loans 231,000 224,000
Deferred premium on flow-through shares 464,000 464,000
----------------- -----------------
Total long-term liabilities 695,000 688,000
----------------- -----------------
Total liabilities 2,115,000 1,402,000
----------------- -----------------
CONTINGENCIES AND COMMITMENTS (Note 10)
SHAREHOLDERS' EQUITY
Share capital 47,590,000 53,566,000
Deficit (31,641,000) (31,909,000)
----------------- -----------------
Total stockholders' equity 15,949,000 21,657,000
----------------- -----------------
Total liabilities and stockholders' equity $ 18,064,000 $ 23,059,000
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(In Canadian Dollars)
(Unaudited)
Three months ended
March 31, March 31,
1996 1997
----------------- ----------------
INCOME
Interest Income $ 4,000 $ 36,000
----------------- ----------------
Total Income 4,000 36,000
----------------- ----------------
EXPENSES
Debenture interest - -
Administrative 94,000 769,000
Amortization 16,000 71,000
----------------- ----------------
Total expenses 110,000 840,000
----------------- ----------------
LOSS FOR THE PERIOD 106,000 804,000
DEFICIT, BEGINNING OF PERIOD 29,000,000 31,105,570
COSTS OF ISSUING SHARES - -
----------------- ----------------
DEFICIT, END OF PERIOD 29,000,000 31,909,000
LOSS PER SHARE (Note 11) $ 0.01 $ 0.05
================= ================
Weighted Average Number of
Common Shares Outstanding 10,498,706 15,722,688
================= ================
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PRECIOUS METALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In Canadian Dollars)
(Unaudited)
Three months ended
March 31, March 31,
1996 1997
----------------- -----------------
<S> <C> <C>
NET INFLOW (OUTFLOW) OF CASH RELATED TO
THE FOLLOWING ACTIVITIES
OPERATING:
Loss for the period from continuing operations
(less write-off of mineral exploration expenditures) $ (106,117) $ (804,000)
Items not affecting cash 16,577 69,000
----------------- -----------------
(89,540) (735,000)
----------------- -----------------
Changes in non-cash working capital components affecting operations:
Prepaids, deposits and accounts receivable 15,342 (341,000)
Accounts payable and accrued charges (94,009) (50,000)
----------------- -----------------
(78,667) (391,000)
----------------- -----------------
Mineral exploration expenditures (1,043,128) (759,000)
----------------- -----------------
Cash used in continuing operations (1,211,335) (1,885,000)
Discontinued petroleum operations - -
----------------- -----------------
Cash used in operating activities (1,211,335) (1,885,000)
INVESTING:
Exploration advances - -
Loans and advances - -
Related party advances 66,477 (51,000)
Related party shares - -
Furniture, fixtures, and capital assets (309,330) (375,000)
Cash of acquired entities - -
Investment - -
Acquisition of mineral rights to property - -
----------------- -----------------
Cash (used in) provided by investing activities (242,853) (426,000)
----------------- -----------------
FINANCING:
Issue of convertible debentures for cash - -
Debentures - (547,000)
Repayment of debenture - -
Issue of shares for cash 1,953,866 6,512,000
Premium on flow-through shares - -
Costs of issuing shares - -
Vehicle and equipment loans - 11,000
----------------- -----------------
Cash provided by financing activities 1,953,866 5,976,000
----------------- -----------------
INCREASE (DECREASE) IN CASH DURING PERIOD 499,678 3,665,000
CASH, BEGINNING OF PERIOD 389,856 2,644,000
----------------- -----------------
CASH, END OF PERIOD $ 889,534 $ 6,309,000
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
CONSOLIDATED STATEMENTS OF DEFERRED MINERAL EXPLORATION EXPENDITURES
(In Canadian Dollars)
(Unaudited)
Three months ended
March 31, March 31,
1996 1997
----------- ----------
PROPERTY
United States of America
Engineering & Consulting $ 1,014,000 $ 651,000
Exploration -- --
Option Fees -- --
----------- -----------
Total $ 1,014,000 $ 651,000
----------- -----------
Canada
Engineering & Consulting -- --
Exploration 29,000 108,000
Option Fees -- --
----------- -----------
Total 29,000 108,000
----------- -----------
Grand Total $ 1,043,000 $ 759,000
Cumulative Mineral Property Costs
Deferred, beginning of period 9,658,000 13,050,000
----------- -----------
Cumulative Mineral Property Costs
Deferred, end of period $10,701,000 $13,809,000
=========== ===========
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and 1997
1. Presentation of Interim Information
In the opinion of the management of International Precious Metals
Corporation (the Company), the accompanying unaudited condensed
consolidated financial statements include all normal adjustments considered
necessary to present fairly the financial position as of March 31, 1997,
and cash flows and the results of operations for the three months ended
March 31, 1996 and 1997. Interim results are not necessarily indicative of
results for a full year.
The condensed consolidated financial statements and notes are presented as
permitted by Form 10-Q and do not contain certain information included in
the company's audited financial statements and notes for the year ended
December 31, 1996
2. Business Organization
The company is amalgamated under the laws of the Province of Ontario,
Canada. In 1995 the company changed its name from International Platinum
Corporation to International Precious Metals Corporation. On October 23,
1995, The company consolidated (reverse split) its issued and outstanding
capital by changing each common share into one-tenth of a common share.
Information pertaining to share capital, options, warrants and loss per
share for 1996 and 1997 have been stated on a post consolidated (reverse
split) basis.
3. Continuation of business
These consolidated financial statements have been prepared on a going
concern basis which assumes the realization of assets and the satisfaction
of liabilities and commitments in the normal course of business.
The company is a development stage corporation and as all of the company's
properties are presently in the exploration stage, the continuation of the
company as a going concern is dependent upon its ability to obtain equity
financing to permit the further exploration and development of its
properties.
As well, it is the intention of the company's management to seek joint
venture partners for several of the company's properties. To achieve this
end, management has prepared detailed reports on each of the properties and
engaged independent consultants to market the company's properties.
The consolidated financial statements do not give effect to adjustments, if
any, that may be necessary should the company be unable to continue as a
going concern and be required to realize its assets and liquidate its
liabilities in other than the normal course of business. In this event, the
amounts realized on disposal of its assets may be substantially less than
their recorded amounts.
9
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and 1997
4. Significant accounting policies
(a) Basis of financial statement presentation
The accompanying consolidated financial statements are prepared in
accordance with the accounting principals generally accepted in Canada. The
major difference between these accounting principles and those generally
accepted in the United States is discussed in Note 10 of the Notes to the
Consolidated Financial Statements. These financial statements include the
accounts of its subsidiary,1020632 Ontario Inc. (Georgia Lake).
Additionally, the accounts of Hellens-Eplett Mining Inc., Jamestown
Platinum (Pty) Limited and South Africa Mining (Pty) Limited, corporate
exploration joint ventures, have been included using the proportionate
consolidation method. The exploration operations of these joint ventures
were discontinued in 1995.
(b) Deferred mineral exploration expenditures
All direct expenditures related to the exploration and development of
mineral properties in which the company has a continuing interest are
deferred, pending the determination of the economic viability of the
project. Costs related to projects terminated or abandoned are written-off;
costs related to successful projects will be capitalized and amortized over
the estimated life of the projects using a unit of production method.
(c) Deferred premium on flow through shares
The premium received on flow-through shares, representing the excess of the
price paid by an investor for flow-through shares over the market value
stipulated in the offering memorandum with respect to such shares, has been
deferred and is written-off or amortized as the related projects on which
the flow-through funds were expended are written-off or amortized.
(d) Amortization
Capital assets are stated at cost. Amortization is recorded at rates
calculated to charge the cost of vehicles and office equipment and fixtures
to operations over their estimated useful lives of five years on a straight
line basis. Amortization relating to machinery and equipment used directly
in the exploration of projects has been deferred. Maintenance and repairs
are charged to operations as incurred. Gains and losses on disposals are
calculated on the remaining net book value at the time of disposal and
included in income.
(e) Foreign currency translation
Monetary assets and liabilities in foreign currencies have been translated
into Canadian dollars at the exchange rates prevailing at the balance sheet
date. Other assets and liabilities, revenue and expenses arising from
foreign currency transactions have been translated at the exchange rate
prevailing at the date of the transaction. Gains and losses arising from
these translation policies are included in income.
10
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and 1997
5. Other assets March 31
--------
Related parties 1996 1997
---- ----
- Advances ( Note 8) $ 565,000 $ 1,095,000
- Investment in common shares, at cost
Namibian Copper Mines Inc., 1% interest -0- 409,000
Prepaids, deposits and sundry receivables 132,000 125,000
---------------------------
$ 697,000 $ 1,629,000
===========================
The advances to related parties are unsecured, non-interest bearing and have no
specific terms of repayment.
6. Deferred mineral exploration expenditures
Presented below is a discussion of the status of each of the company's
significant mineral properties.
(a) Black Rock Property
The Company holds rights to unpatented mining claims on federal land
administered by the U.S. Bureau of Land Management located approximately 92
miles west of Phoenix, Arizona (the "Black Rock Property"). On May 9, 1997,
the Company entered into an agreement with an affiliate of Phoenix
International Mining, Inc. ("Phoenix") pursuant to which a wholly-owned
subsidiary of the Company will pay an aggregate of US$27,000,000 to
Phoenix's affiliate, consisting of US$17,000,000 in cash and 1,000,000
common shares valued at US$10.00 per share, to acquire all of the rights to
the unpatented mining claims comprising the Black Rock Property which the
Company does not presently own. As the first of two payments under the
Purchase Agreement, the Company's subsidiary on May 9, 1997 paid to
Phoenix's affiliate US$500,000 plus 4,000,000 common shares (of which
3,000,000 common shares will be held by Phoenix's affiliate to secure the
Company's obligation to make the second payment). The Company's subsidiary
will make a second payment of US$16,500,000 on July 15, 1997 (at which time
Phoenix's affiliate will return 3,000,000 common shares to the Company).
The Company expects to raise cash for the second payment through private
placements of its securities, but its ability to do so will depend on
factors beyond its control, including economic and market conditions.
On May 1997, the Company acquired rights to an additional 40 square miles
north of and contiguous to the Black Rock Property by staking and filing
lode claims (each relating to a 40-acre area) and placer claims (each
relating to a 160-acre area) with respect to that area. Aerial photography,
regional and detailed geological mapping, sampling, a geophysical survey
and compilation of existing and new data is currently under way to generate
potential drill targets in the area.
11
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and 1997
6. Deferred mineral exploration expenditures(continued)
The Company is continuously striving to optimize its gold and PGM recovery
techniques and advancing to large-scale testing. This test work is also
invaluable with regard to establishing a head grade of the Black Rock
Property mineralization. To that end, the Company has under development
fire assay procedures on raw Black Rock Property samples, gravity
concentrates and evaporative residues from leach solutions. The fire assay
development is yielding positive results with gold and PGM produced as
physical metal prills. Non-destructive elemental determination has been
used to verify elemental composition of the metal prills recovered by fire
assay procedures. Examples of successful fire assay procedures for gold,
platinum and rhodium are shown in the electron microphotographs and
elemental spectrographs (plotted via Emission Dispersion Spectroscopy).
Fire assay will eventually be applied toward the Black Rock Property as the
"yard stick" by which all recovery procedures will be measured regarding
amenability and efficiency.
IPM has launched further drilling and exploration work on the Black Rock
Property to more fully and completely define the extent of the precious
metal deposit. The new exploration drilling began March 17, 1997. The
reverse circulation drilling, on one kilometer spacings, drilling to
bedrock, will test material in areas previously unexplored by the Company
on the property. This drilling will also provide important data on the
surrounding eight square kilometers believed to make up the larger portion
of the observed geochemical anomaly.
(b) Big Trout Lake
The Company holds an interest in 223 claims, totaling 8,920 acres, on a
property located near Big Trout Lake in northwestern Ontario, Canada,
approximately 400 miles north of Thunder Bay. An expenditure of
approximately $200,000 is necessary to keep the property in good standing.
Since 1990, the company has limited its work on the property because of
financial constraints. Joint venture partners are being sought to assist
with the exploration funding for this prospect.
(c) Eagle Lake
The Company holds 327 claims, consisting of 10,320 acres, located 20 miles
west-southwest of Dryden, Ontario, Canada. All of these claims are in good
standing at least until 1999. Drilling from lake ice, 600 meters of core
drilling was completed in early 1997. Each of the two drill holes
intersected massive sulfides up to 10 meters in width, with no visible
precious metals. One distinct zone of sphalerite (zinc) with a true width
of 0.9 meters was also intersected. Assays are yet to be received. The
expenditures upon these claims will enable them to be held in good
standing.
The Company has done limited work on the property since 1990, but still
holds an interest in the ground and, subject to the availability of funds,
plans to explore the property when conditions are favorable.
(d) Georgia Lake
The Company holds 14 claims covering 710.7 acres located at the west end of
Georgia Lake, 144 kilometers northeast of Thunder Bay, in northwestern
Ontario, Canada. The claims are held under fourteen 10-year leases which
are in good standing until June 1, 2001 and thirteen 2 1-year leases which
are in default. This property is held by the Company as a strategic reserve
as it expects lithium to become of interest and value with the advent of
electric autos. Subject to the availability of funds the Company intends to
undertake further exploration on the property through additional geological
and other research and analysis, and, to the extent consistent with this
analysis, the design and implementation of a core drilling program.
12
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and 1997
6. Deferred mineral exploration expenditures(continued)
(e) Gold Hill
In 1995, the company entered into a four year agreement for the rights to
explore the Gold Hill property. Additionally, within the terms of the
agreement the company may purchase the rights to the property for
US$1,000,000
7. Capital assets
Accumulated Net
Cost amortization 1996 1997
--------------------------------------
Machinery and equipment ............ $591,000 $ 94,000 $182,000 $497,000
Vehicles ........................... 462,000 65,000 122,000 397,000
Office Equipment and fixtures ...... 507,000 89,000 124,000 418,000
$ 1,560,000 $ 248,000 $ 428,00 $1,312,000
============================================
8. Debentures
The company has not paid the amount outstanding on a debenture of $ 250,000
by its due date and is negotiating the settlement of this amount. This
amount remains outstanding at March 31, 1997.
Relating to the Black Rock properties, the Company issued in 1995 to
Phoenix International Mining (Phoenix") debentures totaling $3,274,000
(US$2,400,000). These debentures were convertable into common shares and
bear interest starting in 1996. During 1996, the company repaid $2,726,000
(US$2,000,000) of debentures using cash of $2,026,000 (US$1,500,000) and
issuing 303,000 common shares for $700,000.
Accounts payable includes $186,000 in unpaid debenture interest, including
interest on a debenture discharged in 1994.
13
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and 1997
9. Related party transactions
Other assets (Note 5) relate to amounts from and investment in corporations
which have senior management in common with the company.
In addition to items disclosed separately in the financial statements, the
following transactions took place in the normal course of business with
related parties. These transactions are measured at the exchange amount,
which is the amount of consideration established and agreed to by the
related parties.
(a) At March 31, 1997, the company incurred legal and secretarial fees
provided by directors and senior officers of the company amounting to
$25,000 ( 1996 $12,700). These fees have been charged to
administrative expense.
(b) At March 31, 1997, consulting fees were charged by directors and
senior officers of the company amounting to $98,000(1996 - $55,000).
Of the total fees, $70,000(1996 $36,000) has been charged to
administrative expenses and $28,000(1996$19,000) pertaining to time
spent overseeing the Black Rock exploration has been included in the
company's deferred mineral exploration expenditures.
10. Contingencies
(a) Interest on debenture
In 1994, the company negotiated a settlement of a $500,000 debenture
plus a portion of interest owing. As of December 31, 1996, the amount
of the interest owing is currently in dispute due to alternate methods
used in interest calculation. The company is negotiating a settlement
of this dispute and an additional amount of $75,000 may become
payable.
(b) Recovery of deferred mineral exploration expenditures
The recoverability of deferred expenditures is dependent upon various
factors, including the existence of economically recoverable reserves,
the ability to obtain the necessary financing to complete development
of future profitable operations or profitable disposal of the
properties. Pending the profitable operation or disposal of a
property, cash requirements must be provided by future debt or equity
financing.
14
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and 1997
11. Differences between accounting principles generally accepted in Canada and
those in the Unite States
The financial statements are prepared in accordance with accounting
principles generally accepted in Canada. In these financial statements, the
major differences between accounting principles generally accepted in
Canada( "Canadian GAAP") and those in the United States ("US GAAP") are as
follows:
(a) The company follows the practice of charging share issue cost to the
deficit account. Under U.S. GAAP, such costs would be charged to the
share capital account. Although this difference does not affect net
shareholders' equity, under U.S. GAAP the company's share capital and
deficit accounts would be reduced as indicated below.
(b) The company follows the practice of accounting for the premium on
flow-through shares as a deferred credit which is written-off or
amortized as the related project expenditures, on which the flow
through funds are expended, are written off or amortized. Under U.S.
GAAP, this premium would be treated as a reduction of deferred mineral
exploration expenditures. Although this difference does not affect net
loss, the deferred premium on follow-through shares would be
eliminated and deferred mineral exploration expenditures would be
reduced as indicated below.
(c) A business combination in 1986 was accounted for using the purchase
method of accounting. Under U.S. GAAP, this business combination would
have been accounted for as a pooling of interests. This difference
does not affect net loss for the three months ended March 31, 1996 and
1997. The deferred exploration expenditures would have been reduced by
$605,000 as at March 31, 1996 and 1997, and the company's share
capital account would have been reduced by $676,000 as at March 31,
1996 and 1997.
(d) U.S. GAAP does not follow the practice of deferral of period costs
such as certain administrative expenses. This difference would have
increased the net loss and decreased the deferred exploration
expenditures by $290,000 for the year ended December 31, 1995. This
difference does not affect net loss for the three months ending March
31, 1996 and 1997.
15
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and 1997
11. Differences between accounting principles generally accepted in Canada and
those in the United States(con't).
The effect of these differences on the financial statements is as follows:
<TABLE>
<CAPTION>
March 31
(a) Balance Sheet 1996 1997
<S> <C> <C>
Deferred mineral exploration expenditures
Under Canadian GAAP $ 7,080,000 $13,809,000
Premium on flow-through shares - (b) above (464,000) (464,000)
Pooling - (c) above (605,000) (605,000)
Period costs - (d) above
--------------------------------
Under U.S. GAAP $ 6,911,000 $12,740,000
===============================
Deferred premium on flow through shares
Under Canadian GAAP $ 464,000 $ 464,000
Applied to deferred mineral exploration
expenditures - (b) above (464,000) $ (464,000)
--------------------------------
Under U.S. GAAP $ - $ -
================================
Share capital
Under Canadian GAAP $35,842,000 $53,566,000
Share issue Costs - (a) above - (536,000)
Pooling - (c) above (676,000) (676,000)
--------------------------------
Under U.S. GAAP $35,166,000 $52,354,000
================================
Deficit
Under Canadian GAAP $29,000,000 $31,909,000
Share issue costs - (a) above - -
Pooling - (c) above (71,000) (71,000)
Period costs - (d) above --------------------------------
Under U.S. GAAP $28,929,000 $31,838,000
================================
</TABLE>
16
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and 1997
11. Differences between accounting principles generally accepted in Canada and
those in the United States(con't).
(b) Statement of loss and deficit:
March 31
--------
1996 1997
---- ----
Net loss for the period under Canadian GAAP $106,000 $804,000
Pooling Adjustments - (c) above - -
Period cost adjustment - (d) above ________ _________
Net loss for the period under U.S. GAAP $106,000 $804,000
=======================
Loss per share (Note 9) - under U.S. GAAP $.01 $.05
==== ====
12. Subsequent events
On May 9, 1997, the Company entered into an agreement with an affiliate of
Phoenix International Mining, Inc.(Phoenix), pursuant to which a wholly
owned subsidiary of the Company will pay an aggregate of US$27,000,000 to
Phoenix's affiliate, consisting of US$17,000,000 in cash and 1,000,000
common shares valued at US$10.00 per share, to acquire all of the rights to
the unpatented mining claims comprising the Black Rock Property which the
Company does not presently own. As the first two payments under the
Purchase Agreement, the Company's subsidiary on May 9, 1997 paid to
Phoenix's affiliate US$500,000 plus 4,000,000 common shares (of which
3,000,000 common shares will be held by Phoenix's affiliate to secure the
Company's obligation to make the second payment). The Company's subsidiary
will make the second payment of US$16,500,000 on July 15, 1997 (at which
time Phoenix will return 3,000,000 common shares to the Company). The
Company expects to raise cash for the second payment through private
placement of its securities, but its ability to do so will depend on
factors beyond its control, including economic and market conditions.
17
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, included elsewhere herein.
Liquidity, Capital Resources and Limited Operations
From inception, July 22, 1980, to the end of 1986, the Company's sole activity
related to the exploration for and investigation of precious metal deposits in
Canada and the United States. In early 1987, the Company entered into an
agreement to participate in an oil exploration program in the State of Illinois;
in June 1987, the resulting oil wells commenced production and the Company
realized its first operating operating revenues. The Company has financed
virtually all of its exploration activities through various equity financings,
which continue to be the Company's major source of capital. Interest income
realized from excess cash balances has been applied to the Company's
administrative costs. Exploration for precious metals continues to be the
Company's major activity. The company acquires its interests in various
properties either by its own grass roots exploration efforts, or by
participation in the exploration of properties owned by others, in which case
the Company may earn an interest in the properties by the expenditure of its
funds on the properties or by making payments or issuing its shares to the
property owner. Conversely, the Company may allow others to earn an interest in
its properties by the expenditure of their funds on the exploration of the
Company's properties..
In 1996, proceeds from shares issued totaled $12,841,000 and exploration
activities resulted in expenditures of $3,290,000. At March 31, 1997, the
Company has cash resources of approximately $3,665,000.
Of the 16,586,090 common shares of the Company outstanding on March 31, 1997,
459,473 were "flow-through" shares. "Flow-through" shares are common shares of
the company issued to investors under the terms of agreements which provide that
the funds received will be expended on Canadian Explorations
Expenditures("CEE"), as defined in the Income Tax Act Canada, and that
unexpended funds will be held in trust. The CEE so incurred are deductible for
income tax purposes only by the shareholder and, accordingly, are not available
to the company.
At March 31, 1997, the Company had a working capital surplus of $7,224,000.
Current assets were $7,938,000, compare to current liabilities of $714,000, for
a current ratio of 12 to 1. This compares to current assets of $3,984,000, and
current liabilities of $1,420,000 at December 31, 1996, resulting in a current
ratio of 3 to 1. The Company's liquidity needs are generally being met from its
available cash resources.
The Company during the quarter ended March 31, 1997 made non-interest bearing
loans to Namibian Copper Mines Inc.("Namibian") to cover the operating expenses
of Namibian, including the salaries of its executive officers. Namibian is
controlled by Alan Doyle and shares office space with the company. Several of
the executive officers of Namibian also are executive officers of the Company.
At March 31, 1997, Namibian owed $419,000 to the Company an account of such
loans. Failure of Namibian to repay such loans would have a negative effect on
the liquidity and capital resources of the Company.
18
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
.
The Company is in default on an outstanding debenture in the amount of $250,000
and is negotiating with the holder of the debenture. A failure of such
negotiations could have a negative effect on the liquidity and capital resources
of the Company.
Results of Operations
1997 Compared to 1996
The loss for the three months ended March 31, 1997 of $804,000 was larger than
the loss for 1996 of $106,000 due primarily to increases in administrative
expenses.
Administration costs of $769,000 for the three months ended March 31, 1997 have
increased from $94,000 for the three months ended March 31, 1996, primarily
because of increased consulting fees and increased compensation and office
expenses relating to a major expansion of exploration activities by the Company.
Impact of Inflation on the Company
The Company has no control over the prices of the products in which it deals,
i.e., precious metals. The prices of these commodities are determined by world
markets and are subject to volatile fluctuation over short periods of time.
To date, the major impact of inflation on the Company has been with respect to
costs which have increased moderately in recent years in North America, where
most of the Company's activities take place.
19
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
PART II - OTHER INFORMATION
Item 2 - Changes in Securities
The Company during the first quarter of 1997 made the following issuances within
the United States in reliance on the private offering exemption provided by
Section 4(2) of the Securities Act of 1933, as amended:
Date Number of Shares Aggregate Price
- ---- ---------------- ---------------
January 24 3,750 $6,750
March 5 18,000 50,400
March 7 5,000 14,000
Item 6 - Exhibits are reports on Form 8-K
(a) No exhibits
(b) No reports were filed on Form 8-K this quarter
20
<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.
International Precious Metals Corporation
June 20, 1997
/s/ Billie J. Allred
----------------------------------
Billie J. Allred
Chief Financial Officer
June 20, 1997
/s/Tanya Nelson
----------------------------------
Tanya Nelson
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000818029
<NAME> International Precious Metals Corporation
<CURRENCY> Canadian dollar
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 0.7222
<CASH> 6,309,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,938,000
<PP&E> 1,312,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,059,000
<CURRENT-LIABILITIES> 714,000
<BONDS> 0
0
0
<COMMON> 16,586,090
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 23,059,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 840,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (804,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (804,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (804,000)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
