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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 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
0-16019
INTERNATIONAL PRECIOUS METALS CORPORATION
(Exact name of registrant as specified in its charter)
Ontario (Canada) 86 0766060
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4633 South 36th Place 85040
Phoenix, Arizona 85040 (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (602) 414-1830
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, no par value
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 proceeding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of
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registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
The aggregate market value of voting stock held by non-affiliates as
of March 24, 1998, was approximately $13,194,334.
Number of common shares outstanding on March 24, 1998: 22,049,857.
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TABLE OF CONTENTS
Page
GLOSSARY 2
PART I .................................................................... 3
Items 1 and 2. Business and Properties (A-C)....................... 3
Item 3. Legal Proceedings.......................................... 18
Item 4. Submission of Matters to a Vote of Security Holders........ 18
PART II .................................................................... 18
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters........................................ 18
Item 6. Selected Financial Data.................................... 20
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 21
Item 8. Financial Statements and Supplementary Data................ 24
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures.................... 25
PART III .................................................................... 25
Item 10. Directors and Executive Officers of the Registrant........ 25
Item 11. Executive Compensation.................................... 26
Item 12. Security Ownership of Certain Beneficial Owners
and Management............................................ 28
Item 13. Certain Relationships and Related Transactions............ 29
PART IV .................................................................... 30
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K............................................... 30
SIGNATURES...................................................................S-1
EXHIBITS.....................................................................E-1
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FORWARD-LOOKING STATEMENTS
Statements throughout this document that are not historical facts may
be "forward-looking statements" within the meaning of Section 21E of the U.S.
Securities Exchange Act of 1934. The Company intends that such statements will
qualify for the safe harbor from liability established by the Private Securities
Litigation Reform Act of 1995. These forward-looking statements sometimes
include words to the effect that the Company or management believes,
anticipates, or expects a stated condition or result. In addition, all estimates
and all statements that describe the Company's future plans, objectives or goals
are forward-looking statements. Since forward-looking statements address future
events and conditions, by their very nature they involve inherent risks and
uncertainties. Actual results in each case could differ materially from those
currently anticipated in such statements by reason of any number of factors,
including variables such as new information regarding the amount of recoverable
minerals at the Company's properties, changes in general economic conditions and
conditions in the financial markets, changes in demand and prices for the
minerals for which the Company explores, legislative, environmental and other
regulatory, political and competitive developments in areas in which the Company
operates and other factors discussed in this report. See Items 1 and 2 "Business
and Property - Certain Risk Factors (C.2.)."
1
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GLOSSARY
The glossary which follows defines terms used in this Report.
Assay: To test an ore or mineral for composition, purity, weight,
or other properties of commercial interest.
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Auger Drilling: A method of rotary drilling where cuttings travel
up to the surface on the external spiral flights of the drill stem.
Chromite layers: Distinct layers found within a layered intrusion,
generally ultramafic, and occasionally hosting platinum mineralization.
DCRS: Differential charge recovery system, a gravity recovery system
for concentrating gold.
Diamond drilling: A variety of rotary drilling in which diamond bits
are used as the rock cutting tool producing a cylindrical section of rock,
usually 5-10 cm in diameter and up to several meters in length, that is brought
to the surface for examination or analysis.
Gabbro: A group of dark-colored, basic intrusive igneous rocks composed
principally of labradorite or bytownite and augite, with or without olivine and
orthopyroxene; also any member of that group. It is the approximate intrusive
equivalent of BASALT. Apatite and magnetite or ilmenite are common accessory
minerals.
Geophysical surveys: Exploration using instruments which detect the
difference in physical characteristics of the near surface (less than 2000
feet from the surface) rock/sediment units by comparing natural factors.
Examples of types of geophysical surveys include electromagnetic, magnetic,
radiometric and gravity.
Intrusion: The process of emplacement of magma in pre-existing
rock; magmatic activity.
Mafic: Said of an igneous rock composed chiefly of dark,
ferromagnesian minerals; also, said of those minerals.
opt: Ounces per ton.
PGE: Platinum Group Elements. See "PGM".
PGM: "Platinum Group Metals (Elements)", includes platinum,
palladium, osmium, rhodium, iridium, and ruthenium.
Pyroxenite: A medium of coarse-grained rock consisting essentially
of pyroxene.
Recovery: The percentage of valuable material derived from an ore.
Generally speaking, the only differences between an
3
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"assay" and a "recovery" are the sample size used and the fact that an
"assay" is a more simplified process. The more complexed the mineralization,
the more difficulty one will encounter in testing for precious metals with
"standard assays". The more modifications that are done to a "standard assay"
in order to perform testing on complexed mineralization, the closer the
"standard assay" comes to approximating what may be recoverable in the
process.
Reverse Circulation Drilling: A method of pneumatic rotary drilling
where all cuttings travel up to the surface through the drill stem thus
avoiding contamination from the drill hole wall.
Standard Fire Assay: The term "standard fire assay" is essentially a
misnomer. Although certain constituents of a "fire assay" are standard, all
fire assays are not the same. Fire assay focuses on the mineral content in a
given sample by smelting (melting the sample in a furnace). The steps of
sample preparation, the adding of a flux, the adding of an inquart, the
firing of the sample, cupeling, parting, etc., are all basic components of
the fire assay procedure and as such may be termed as "standard". However,
the type and amounts of fluxes used, the inquart employed for the collection
of the precious metals, the temperature and the length of time for firing,
vary widely with the nature of the mineral being assayed. These elements also
vary greatly with the opinion of each individual assayer and his personal
assessment of the "correct" variation required for the particular type of
material.
Staking: The 1872 Mining Law provides the right to companies and
individuals to delineate a tract of land by physically placing markers on the
ground and by marking out an area on standard government maps and submitting
and registering the record of the tract of land with the appropriate
governmental agency. The staker then has the right to explore for mineral
substances on that land as long as he complies with the government
regulations.
Strike: The bearing (direction) of the outcrop of an inclined bed on
level surface.
Ultramafic: Said of an igneous rock composed chiefly of mafic
minerals, e.g. monomineralic rocks composed of hypersthene, augite, or
olivine.
4
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PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
A. GENERAL
International Precious Metals Corporation ("IPM" or the "Company")
is principally engaged in the acquisition and exploration of precious metal
mineral resource properties in North America. The Company was incorporated
under the laws of the Province of Ontario on July 22, 1980. The Company's
principal executive offices are located at 4633 South 36th Place, Phoenix,
Arizona 85040 (telephone (602) 414-1830). The registered head office of the
Company is at 390 Bay Street, Suite 502, Toronto, Ontario, M5H 2Y2,
(telephone (416) 368-1489). The Company's common shares are traded on the
Canadian Dealing Network ("CDN") under the symbol IPMC and on the NASDAQ
SmallCap Market ("NASDAQ") under the symbol IPMCF.
The Company was incorporated as Silver Claim Lake Resources Inc. (on
July 22, 1980) and subsequently changed its name to Silver Lake Resources,
Inc. (on April 27, 1981)and to International Platinum Corporation (on June
25, 1986). On December 31, 1987, the Company was amalgamated with its wholly
owned subsidiary, Platinum Exploration Canada, Inc. Finally, on October 11,
1995, the name of the Company was changed to its current name, International
Precious Metals Corporation. In conjunction with such name change, a 1 for 10
consolidation (reverse split) of the Company's common shares was effected on
October 23, 1995. All share figures in this Report give retroactive effect to
such consolidation (reverse split).
The Company has raised approximately $35.1 million since its
formation in 1980 to December 31, 1997 from the issue of its common shares.
These funds have been primarily used for the exploration of three silver and
six gold prospects, nineteen platinum prospects, one lithium prospect and an
oil joint venture in southern Illinois. As discussed below, the Company has
used standard and non-standard methods to evaluate its properties. It can be
anticipated, because of the nature of the business, that exploration on one
or more of the Company's properties will prove unsuccessful and that the
Company will terminate its interest in such properties.
On March 22, 1998 the Company appointed Mr. John A. Yellich as Chief
Executive Officer (CEO) responsible for the day to day operations of the
Company. In conjunction with this appointment, the Company's Board of
Directors accepted the resignation of V. Lee Furlong as Director, President
and CEO.
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B. PROPERTIES
The following lists in order of importance to the Company the
properties in which the Company holds an interest. This order reflects
Management's best judgment but may well change as new information is
obtained. The primary metal being sought on the properties is listed beside
the name of the property.
1. Black Rock (Gold)(Silver)(Platinum Group Metals)
2. Big Trout Lake (Platinum)
3. Eagle Lake (Base Metals)
The Company is actively exploring only the Black Rock Property.
Exploration costs aggregating $792,000 were written off in 1997 relating to the
Company's properties as management determines whether to pursue joint venture
opportunities. Development costs aggregating $11,369,000 relating to 9
properties which had been explored for gold, silver or platinum were written off
in 1996 or prior years as management determined that these properties were
unlikely to become economically profitable.
B.1 BLACK ROCK
The Company believes that its most important property consists of
unpatented mining claims on federal land administered by the U.S. Bureau of
Land Management located in La Paz County, Arizona (the "Black Rock Property"
or the "Property"). The Black Rock Property is located approximately 92 miles
west of Phoenix, Arizona between the southern Little Harquahala Mountains and
the Eagletail Mountains and is accessible directly from Interstate 10. The
Company has invested more than four years and approximately $37.4 million in
purchasing, exploring and advancing the Black Rock Property. Exploration work
on the first 1 sq. kilometer grid has now been completed and the Company is
developing a "resource statement" which will attempt to quantify the amount
of minerals in this area on the Property. The work on the Property is thus
still at a developmental stage and IPM is not engaged in the extraction of
minerals at the Property or any other location.
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B.1.1 ACQUISITION
Prior to 1997, the Company negotiated two agreements with Phoenix
International Mining, Inc. ("Phoenix") pursuant to which the Company
acquired a portion of the interest of Phoenix in the Black Rock Property.
On April 13, 1995, the Company entered into a heads of agreement
with Phoenix (the "Second Agreement") replacing the Initial Agreement. Under the
terms of the Second Agreement, the parties acknowledged that the Company had
earned a 25% interest in the Black Rock Property by having expended
approximately $1,155,000. Under the terms of the Second Agreement, in order to
earn a further 25% interest in the Black Rock Property (i.e. for a total of
50%), the Company was required to:
a) spend sufficient funds (approximately $1,168,000) in order to complete a
feasibility study which showed a contained resource of 300,000 ounces of
gold anywhere within
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the total 16 square miles and which would be capable of sustaining a mine
operation capacity of 1,000/tons per day, based on a 250 day/year mining
operation; and
b) Commence construction of mining and a processing facility capable of
1,000 tons per day throughput capacity.
The Company also had the option of increasing its interest in the Black
Rock Property up to 80% under the following terms and conditions:
a) at the earlier of 3 1/2 years from the date of the Second Agreement and 3
months after the completion of the feasibility study, to acquire an
additional 10% interest by paying to Phoenix 10,000 ounces of gold (or cash
equivalent).
b) by demonstrating production at up to 10,000 tons per day for 120 days
within 2 1/2 years from the date of initial production, the Company could
earn up to a further 20% interest in the Black Rock Property.
Finally, the Company undertook to issue to Phoenix the greater of
$2,000,000.00 worth of common shares or 4,000,000 common shares, within 60 days
following the approval of the issuance by the Toronto Stock Exchange. Since the
Company was unable to obtain approval for the issuance of the common shares, the
Company issued to Phoenix convertible debentures totaling $2,400,000.00 on which
the Company has made full payment, including a final payment of $400,000.00 in
January 1997. A copy of this Agreement is filed with the Securities and
Exchange Commission as an exhibit to this report and is iincorporated herein
by reference.
On May 9, 1997, the Company entered into an agreement (the "Property
Purchase Agreement") with Omega Investment Corporation ("Omega"), the
assignee of Phoenix's rights to the Black Rock Property, pursuant to which
the Company agreed to pay an aggregate of $27,000,000.00 to Omega to acquire
the balance of the interest in the Black Rock Property. In addition to
acquiring a 100% interest in the Black Rock Property, the Property Purchase
Agreement allowed the Company to remove certain time-limited conditions
previously contained in the Second Agreement, by replacing the Second
Agreement. The $27,000,000.00 purchase price was to have been satisfied by
the issuance of 1,000,000 common shares valued at $10.00 per common share and
a cash payment of $17,000,000.00. As security for the payment of the balance
of the purchase price to Omega, the Company issued 3,000,000 common shares to
Omega, which shares were held in escrow pending payment by the Company of the
balance of the purchase price (the "Escrow Shares"). The Company has paid an
aggregate of $800,000.00 in cash to Omega on account of the purchase price
and pursuant the Property Purchase Agreement. The Company's wholly owned
subsidiary, International Precious Metals Corporation of Arizona ("IPMA") was
also a party to the Property Purchase Agreement, solely for the purpose of
holding title to the Black Rock Property. A copy of this Agreement is filed
with the Securities and Exchange Commission as an exhibit to this report and
is incorporated herein by reference.
The Company and Omega amended the Property Purchase Agreement by
agreement dated July 29, 1997, (the "Amended Agreement"), pursuant to which the
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payment date for the balance of the Black Rock Property was changed from July
15, 1997, to October 15, 1997. As consideration for the amendment, the
company agreed to pay to Omega the sum of $5,000.00 per day, and the issuance
of 500 common shares per day for the period from July 15, 1997, to August 15,
1997, the issuance of 1,000 common shares per day for the period from
August 16, 1997, to September 15, 1997, and 1,500 common shares per day for
the period from September 16, 1997, to October 15, 1997. The Company was
unable to meet its payment obligations to pay the balance of the cash
purchase price owing to Omega. On December 3, 1997, the Company issued to
Omega 91,500 common shares being the number of shares owing to Omega to
October 15, 1997, under the Amended Agreement. A copy of this Agreement is
filed with the Securities and Exchange Commission as an exhibit to this
report and is incorporated herein by reference.
On March 11, 1998, IPM and Omega entered into a letter agreement (the
"Letter Agreement") whereby Omega agreed to accept the following as IPM's full
payment of the purchase price pursuant to the Agreement:
a) the payment to Omega by IPM of $1,000,000.00 upon the exercise of the
1,000,000 warrants which are presently outstanding providing the warrant
holders with the right to purchase 1,000,000 common shares of IPM at any
time prior to December 3, 1998, at $1.25 per common share. If IPM does not
pay Omega the $1,000,000.00 on or prior to December 15, 1998, then such
amount will bear interest at the prime rate charged by IPM's bankers in
Phoenix, Arizona, plus 2%. IPM will issue a promissory note to reflect
such obligation.
b) the release to Omega of all rights of IPM to the Escrow Shares. The
3,000,000 common shares are subject to restrictions on their resale
until June 1999.
c) the grant by IPM to Omega of a 1 1/2% Net Smelter Royalty interest in the
Property.
d) the agreement by IPM that it will diligently pursue the development of the
Black Rock Property, provided that there exists the economic merits of
pursuing same.
e) the agreement by IPM to provide evidence to Omega on or prior to August 1
of each year that IPM has paid, or will be paying, the maintenance
fees owing to the U.S. Department of Interior Bureau of Land Management
in order to maintain the claims which comprise the Black Rock Property
in good standing.
As a result of the March 11, 1998 agreement, IPM now controls 100% of
the Black Rock Property. A copy of the Letter Agreement is filed with the
Securities and Exchange Commission ("SEC") as an exhibit to this report and
the the foregoing description of the terms of the Letter Agreement is
qualified by reference thereto.
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 hard-rock 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 was completed
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to assist in the identification of potential drill targets in the area.
B.1.2 DEVELOPMENT OF THE PROPERTY
Near Black Rock, prior to 1993, more than 40 tunnels, pits and
shafts have been dug on quartz and copper outcroppings in the hard rock areas
of the Little Harquahala Mountains which are north and west of the Property.
Many of the "diggings" are up to 100 years old. Although only shallow pits
remain, past claims staked in the Black Rock Property are evidenced by
weathered claim markers and claim filing papers dating in the 1950's. The
Company believes that all such past claims within the IPM land holdings have
lapsed due to nonperformance of annual work or nonpayment of rental fees.
The Black Rock Property includes two physiographic and geologic
portions which are of particular interest to the Company. The "hard rock
portion" generally is made up of areas of the Black Rock Property which are
part of the Harquahala Mountains and have a higher elevation than the average
elevation of the Property. The "basin portion" generally is made up alluvial
sediments deposited in the adjoining basin having relatively low-lying areas
and is part of the Harquahala Plain.
When IPM began exploring for mineralization on the Property, IPM was
not aware of the fact that the Property respresented a new type of precious
metals deposit. IPM's initial testing showed anamolous prescious metal
values. As a result, IPM management commenced a research and development
program in order to provide confirmation of the values of precious metals
from the Property. It was through this research and development program, that
IPM realized that it was exploring a new type of precious metals deposit.
IPM's initial analyses indicated the presence of quantities of gold,
platinum, palladium and silver were contained in samples taken from the
Property. A variety of analytical assay methods were used including, Atomic
Absorption (AA), Inductively-Coupled Plasma (ICP), X-ray Flourescence (XRF)
and fire assay and wet chemical analysis, all being standard mining practices
for initial determinations of mineral content. Although the different
analytical assay methods indicated the presence of precious metals, IPM was
unable to obtain any precious metal values using what is known in the
industry as a "standard fire assay".
The Company has not established a value for the Black Rock
Property, but as stated above, independent tests have, from the beginning,
indicated interesting values of gold, silver, palladium and platinum on the
Property. To assist in the understanding of the exploration and discovery of
a gold deposit, the following is a general summary of the types of gold
mineralization that may be found.
In its natural state, gold occurs in multiple forms:
1) Free Milling Gold - this is the type of elemental gold that was
found in the California and Alaska gold rushes.
2) Refractory Gold - gold which does not respond to typical extraction
processes and therefore requires special treatment (i.e. roasting).
Refractory Gold can be associated with sulphide materials (i.e. copper,
iron, zinc, lead etc.), contained in carbonaceous material (i.e.
carbons, graphites) or finely disseminated in quartz, or encapsulated
by sulphides and/or silicates.
3) Complexed Mineralization - gold which occurs together with other
mineral compounds. This type of gold can be associated (i.e. complexed)
with clays, black/heavy mineral sands, iron oxides, and with complex
matrix chemistry, such as salts (calcium and sodium chlorides),
organics (i.e. humates) and sodium and calcium carbonates. Like
refractory gold, complexed gold does not respond to typical extraction
processes. Gold located on the Black Rock Property falls within this
category.
At the present time, commercial mining is limited to free milling gold
and certain forms of refractory gold. Exploration companies such as IPM are
seeking the means to exploit other forms of gold deposits that have Complexed
Mineralization. The following table, SUMMARY OF GOLD DEPOSITS AND
RECOVERY METHODS, presents the types of deposits; their
ability to be fire assayed; the recovery method; grade range of deposits; the
amount of research time required to capitalize on a new technology for each type
of discovery; where these types of deposits occur and which mining companies
are applying these technologies.
SUMMARY OF GOLD DEPOSITS AND RECOVERY METHODS
PREPARED FOR INTERNATIONAL PRECIOUS METALS
<TABLE>
<CAPTION>
GRADE YEARS TO
TYPE DEPOSITS FIRE ASSAY RECOVERY RANGE (OPT) NEW TECH DEVELOP MINING COMPANIES
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<S> <C> <C> <C> <C> <C> <C> <C>
1) FREE MILLING
ORES
Free Gold Course Placer Yes Simple Gravity 0.01-0.03 No In Antiquity Placer Dome
Lode Yes Simple Gravity 0.03-0.75 No In Antiquity AMAK
Free Gold, Fine Oxide Ores Yes Cyanidation & 0.03+ 90 yrs old AMAK, Echo Bay
Flotation/ New Crest
Cyanidation (Australia)
Free Gold, Lower Oxide Ores Yes Heap & Vat Cyanide 0.02+ 20 yrs old 5-10 Years Echo Bay
Grade Reacting Nevada Producers
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2) REFRACTORY ORES
Carbonaceous Oxide Ores Yes Pretreatment with 0.07+ 50 yrs old 20 Years Newmont Barrick
With Carbon Oxidants &
Cyanidation
Gold In Sulphides Sulphide Ores Yes Roasting 0.07+ 80 yrs old 20 Years Homestate, Barrick
Tellurides (Cu,Pb,In,As) Pressure Oxida- 0.07+ 20 yrs old 10 Years NCO
tion, Cyanidation
a Bio-Leach 0.07+ 10 yrs old 10 Years S. Africa (Mintek)
Gold in Sulphides Sulfides of Fe Yes Bio-Oxidation 0.02+ 2 yrs old 10 Years Tonkin Springs
(Lower Grade) As. etc. Leach Newmont Gold Quarry
Encapsulated Gold Quartz Veins Some Not Recoverable 0.03+ In R&D 5-10 Years Newmont-still in
in Quartz & Sands Difficulty by Present Methods R&D
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3) COMPLEXED
MINERALIZATION
Gold in Ganque Yes, by To be Determined 0.02+ In R&D 2-5 Years IPM & Others
In Process of Minerals, Si, Modified and (Some Success)
Documentation Clays, Alkali Chemical
In Process of Gold in Micro Yes, by To be Determined 0.02+ In R&D 2-10 Years IPM & Others
Documentation Clusters & Modified and (Some Success)
Organics Chemical
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</TABLE>
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B.1.3 Material Events Associated with Black Rock Development
B.1.3.1 1995 Drilling Program and 1996 Wet Chemical Assay
In October 1995, the Company began implementing a systematic strategy
for advancing the basin portion of the Black Rock Property. The Company's plan
was to begin a drill program and to continue developing and improving the
efficiency and effectiveness of its testing process. The program design over the
first one square kilometer Black Rock Property grid consisted of one hundred
twenty-one drill holes to a depth of thirty meters (100 feet). Samples were
collected every 1.32m (5 feet) until 100 foot depth or auger drill refusal.
The total of 2,251 samples collected were then leached for precious
metals analysis. Check assays were performed on 20% of the samples at a
separate independent laboratory. Independent laboratories confirmed the
measurement of attractive values of gold. Acceptable correlation was
exhibited between the laboratories. The Company reported in April 1996 that
the average amount of gold and platinum measured via the leach procedure from
the entire drill grid was 0.046 opt and 0.09 opt, respectively.
B.1.3.2 Expansion of Chloride Leach Tests, December, 1996, to June
1997: Fire Assay Test, June 1997
In December, 1996, an independent process mineralogist retained by
IPM, developed a more complex chloride leach procedure which measured
mineralization on samples taken from the Property. The cholride leach
procedure allowed the precious metals to be measured by instrumentation or
extracted as physical metal. The initial tests consisted of results using
small bench scale samples of material (approximately 1 oz. To 3 oz.) taken
from the Property.
The chloride leach procedure, which showed both significant results
and correlation between laboratories, required expanded testing. A benefit of
the procedure was that, not only could it be used in laboratory scale testing
but IPM believed that the procedure could also be applied to larger scale
bench tests as well as demonstration bulk testing. Hence, a pilot plant
program was commenced to measure mineralization up to an aggregate of 2,152
lb. samples. All of the testing was conducted at a private independent
laboratory and verified by instrument at a second independent recognized
industry recognized laboratory.
In June, 1997, IPM received a report from AuRIC Metallurgical
Laboratories, Inc. ("AuRIC"), an independent refiner, that AuRIC had
extracted mineralization from three samples taken from the Black Rock
Propertry aggregating 1,752 lbs. and processed by the independent laboratory
using the chloride leach procedure. Also in June 1997, AuRIC advised IPM that
it had successfully repeated a fire assay on samples taken from the Property.
AuRIC stated they had developed a quick, accurate and inexpensive fire assay
methodology for gold, platinum and palladium for samples taken from the Black
Rock Property.
B.1.3.3 Independent Verification Program
In April, 1997, IPM commenced the verification of the chloride leach
procedure using outside third party consultants. The objective of the
"independent verification
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program" was the confirmation of the presence of precious metals at the
Property, and not the determination of the grade of precious metals. The role
of the third party consultants was equivalent to that of an auditor, in that
their roles were to observe and ensure the scientific integrity of the
extraction process i.e. to ensure that no contamination occurred during the
processing of the samples, maintenance of security, the testing of all
chemicals and compounds etc.
Since the mineralization contained at Black Rock is quite complex and
is controlled by extraneous mineralogical compounds i.e. clays, calcium
carbonate, organics, heavy minerals, silicates etc., the extraction process
developed by IPM's consultant became quite complicated, involving a number of
stages. During several attempts at verifying the extraction of metal, changes to
the procedure and equipment originally used were effected, rendering the tests
invalid. Since the independent third parties involved in the verification
program wanted to ensure strict control over the extraction process testing,
neither IPM nor its independent consultant were allowed into the lab at any time
during the testing period. As such, neither were able to ascertain whether or
not the extraction process was being exactly followed.
Notwithstanding the fact that the tests were invalid due to changes
in the procedure and equipment, there was sufficient mineralization found in
the samples to enable Behre Dolbear & Company, Inc. (Behre-Dolbear), a
recognized mining consulting group to confirm the presence of gold and
Bateman Engineering Inc., a recognized engineering and metallurgical
consulting organization ("Bateman") to confirm the presence of both gold and
platinum. After the completion of the independent verification program,
Bateman stated that it was their view the chloride leach recovery process
would not be economically suitable as a recovery process to be used as part
of a mining operation. Although IPM initially believed that the chloride
leach recovery process had the potential to be economic, Bateman's view was
the process was not economic.
In conjunction with the independent verification of the chloride
leach procedure the Company also commenced the verification of the fire assay
test developed by AuRIC for gold, platinum and palladium. The representative
from AuRIC met at a third party lab to further evaluate the proscribed gold
assay method, overseeing all stages of the process as performed by the
technicians at that laboratory. Although the procedure was performed multiple
times, the independent laboratory was unable to confirm the values which
AuRIC had originally reported to IPM.
AuRIC requested time to re-evaluate its method, and determine if any
changes in the method had inadvertently occurred when it was transferred to
the third-party laboratory. IPM agreed to await AuRIC's pleasure at
replicating its fire assay methodology for gold, platinum and palladium, but
at this time no date has been set when this will occur.
B.1.3.4 INTERNAL FIRE ASSAY TESTING -MODIFIED FIRE ASSAY, NOVEMBER, 1997
As previously discussed, standard fire assay procedures do not
provide repeatable measurements of content in the Black Rock material. To
that end, the Company has developed a modified fire assay procedure on raw
Black Rock Property (head grade) samples. The modified fire assay developed
by IPM and confirmed by an Arizona registered State laboratory yielded
positive results for gold. Non-destructive elemental determination (Scanning
Electron Microscope/Emission Dispersion Spectroscopy) has been used to verify
the elemental composition of the metal prills recovered by the modified fire
assay. During the last quarter of 1997, IPM conducted well over 700 tests
utilizing various methods.
The result was a method that is of longer duration to complete but
is successful in the determination of metal, with silver being a recent metal
to be identified. Some of the prills were
12
<PAGE>
weighed, while others were dissolved and determined by Atomic Absorption
(AA). The most recent testing has shown values from both secured chain of
custody samples collected by both of IPM's consultants Behre-Dolbear and
Company and Bateman, as set forth in the following chart:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
LOCATION/ HEAD GRADE HEAD GRADE TYPE INTERVAL IN FEET TYPE OF SAMPLE
HOLE # GOLD OZ/T SILVER OZ/T OF
COLLECTION
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
168 0.017 2.770 AUGER 30 - 35 -
- -----------------------------------------------------------------------------------------------------------------
181A 0.023 1.800 AUGER 3 - 25 CHAIN OF CUSTODY
- -----------------------------------------------------------------------------------------------------------------
143A 0.033 1.490 AUGER 3 - 25 CHAIN OF CUSTODY
- -----------------------------------------------------------------------------------------------------------------
181T 0.042 0.020 TRENCH 5 - 25 CHAIN OF CUSTODY
- -----------------------------------------------------------------------------------------------------------------
181T 0.080 NOT DETERMINED TRENCH 5 - 25 CHAIN OF CUSTODY
- -----------------------------------------------------------------------------------------------------------------
130A 0.052 1.500 AUGER 40 - 45 -
- -----------------------------------------------------------------------------------------------------------------
127 0.035 1.300 AUGER 15 -20 -
- -----------------------------------------------------------------------------------------------------------------
181B 0.023 NOT DETERMINED AUGER 25 -50 CHAIN OF CUSTODY
- -----------------------------------------------------------------------------------------------------------------
181B 0.020 NOT DETERMINED AUGER 25 - 50 CHAIN OF CUSTODY
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: ALL OF THE VALUES FALL WITHIN THE PREVIOUSLY ANNOUNCED RANGES OF GRADE
FOR THE BLACK ROCK AREA, HOWEVER, THE ABOVE SAMPLES REPRESENT ONLY TWO
LIMITED AREAS.
The Company engaged Bateman who has accepted this technical procedure
as a method to proceed to the second stage of the mine development process,
being the calculation of a resource statement on the first one square km
drilled grid. Reference is made to the headings "Summary Status Statement for
the Black Rock Property" and "Stages of the Mine Development Process" for a
further description of the work to be completed in the second and later
stages of the mine development process.
13
<PAGE>
B.1.4 SUMMARY STATUS STATEMENT FOR THE BLACK ROCK PROPERTY
Over the past 4 years, IPM has been engaged in the exploration for
precious metals on the Property. When IPM began exploring for mineralization
on the Property, IPM was not aware of the fact that the Property represented
a new type of precious metals deposit, currently identified as "Complexed
Mineralization", being mineralization associated with clays, black/heavy
mineral sands, iron oxides, and with complex matrix chemistry, such as salts
(calcium and sodium chlorides), organics (i.e. humates) and sodium and
calcium carbonates.
IPM's initial exploration program involved the testing and assaying
of samples taken from the Property for mineral content. The testing included
outcrop, bedrock, soil sampling, etc., with analyses consisting of
geochemical testing and/or assaying; geologic assessments to determine the
potential geologic environment; geophysical studies to expand the knowledge
of the Property and to identify the potential for new or hidden geologic
targets; and the quantification and placement of the Property into a geologic
model.
IPM's initial exploration program utilized a multitude of standard
mining methodologies for initial determinations of mineral content, and these
results convinced IPM of the presence of anamolous precious metal values.
Although these different methodologies indicated the presence of precious
metals, IPM was unable to obtain precious metal values using the industry
recognized standard fire assay. As such, the scientific challenge for IPM
became how to quantify mineral content from samples taken from the Property
using an industry recognized assay method.
As stated in IPM's press release of November 14, 1997, IPM is now
able to measure the amount of mineralization in a given sample taken from the
Property using an industry recognized assay method. This step is significant
since the ability to measure the amount of mineralization in a given sample,
through what has been termed as a Modified Fire Assay Procedure, will now
allow IPM to progress the Property to the next stage of development, being
the preparation of a Resource Statement. In conjunction with the preparation
of a Resource Statement for the drilled one square kilometre grid, IPM will
continue exploration work on the
14
<PAGE>
Property outside of this area.
A Resource Statement requires an area be drilled to depth and width
according to a certain spacing formula (i.e. holes so far apart, samples
taken every "x" number of feet) in an effort to determine the aggregate
amount of mineralization that is likely contained on the drilled one square
kilometre grid and define those areas where the mineralization is
concentrated or depleted. Mining geologists and engineers examine the geology
and assay data from the drilling program and integrate that information in a
statistical model to estimate average grade and tonnage which "defines" that
specific portion of the property tested. Generally speaking, the Resource
Statement stage can take up to 2 years and practically, some of the
feasibility studies can be done concurrently. IPM has now commenced this
stage for the drilled one square kilometre grid.
Upon completion of the Resource Statement, and conditional upon
there being sufficient mineralization contained therein, IPM would progress
to the next stage of development, being the preparation of a Feasibility
Study. A Feasibility Study evaluates, for a specific property, all of the
tasks and costs associated with the extraction and sale of the mineralization
to determine if there is an economic basis for actually building a mine on
the property. The study is applied to the resource that has been defined in
the second stage of this process and can take up to 2 years. The distribution
and variations of grades seen from the Resource Statement become the
benchmark for the grade control and ultimate planning in a mining operation
to ensure the greatest percentage of precious metals will be recovered in the
mill, at least to the quantity determined by the head grade analysis.
The final stage of a mining project if the economics are favorable,
staking the property to operating status. Generally speaking the permitting,
construction and development stage can take approximately 1 to 3 years after
the completion of the feasibility analysis.
B.2 BIG TROUT LAKE, ONTARIO
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. The closest all-weather public
road extends north from Pickle Lake (the nearest sizable community) to within
approximately 100 miles of the property. From there, a private road, usable
only in winter, extends to the property. The property is accessible in summer
only by helicopter.
Some 46 claims which were set to lapse on Feb. 20, 1998 are being
extended for a minimum of six months to enable the company to option the
property to another party
15
<PAGE>
able to carry out immediate exploration. A field expenditure of $65,000 per
year is required to hold the property intact. The entire property or portions
may be currently taken to lease by application and conducting a boundary
survey of the subject claims. The claims cover a four-mile strike length of
the Big Trout Lake mafic to ultramafic intrusion, and expire in 1999. The
Company holds a 66.7% interest in the claims, subject to the Overseas
Platinum Corporation holding a 10% net profit interest in the Company's
interest.
Previous drilling by Canadian Occidental Petroleum in 1981 intersected
0.28 ounces of PGM per ton over 6.7 feet within layered chromite seams. A 6,595
foot, 9 hole surface drill program in late 1985 successfully outlined 8 foot and
160 foot wide PGM bearing zones.
In 1986 a 550 line mile airborne magnetometer survey was completed
to help locate the platinum bearing chromite units. A 12 hole drill program
in 1987 tested this zone in four holes and other targeted areas in eight
holes. Continuity of the chromite bands was established with values reaching
0.07 ounces per ton platinum/palladium. A drilling program of 13 holes was
conducted during 1988. This program returned grades of 0. 15 ounces per ton
of platinum group metals over 2.0 feet, and 0.07 ounces per ton over 1.6
feet. During 1989, 20 holes were drilled. Six of twenty holes intersected PGM
in excess of 0.13 ounces per ton over thickness' of 1.0 foot to 7.6 feet. Two
of these intersections graded 0.37 ounces and 0.38 ounces of PGM per ton over
3.3 feet and 5.0 feet.
16
<PAGE>
The Company has expended approximately $1.2 million on this property.
Despite the amount of exploration already undertaken on Big Trout Lake, this
property is still in a relatively early stage of its exploration. Since 1990,
the company has limited its work on the property because of financial
constraints. The Company in 1996 refreshed prior survey grids and camp sites and
conducted a geophysical survey using electromagnetic techniques. The work
delineated further electromagnetic conductors for the express purpose of
locating new drill targets along strike from the prior platinum/palladium drill
intersections. A total of $24,000 was expended by IPM during 1997 on clean up of
the old camp locations.
During 1997, management has written off a portion of the deferred
mineral exploration expenditures in response to the current survey report and
budgets for the property. Joint venture partners are being sought to assist with
the exploration funding for this prospect.
B.3 EAGLE LAKE, ONTARIO
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. No public roads provide access to the property and
the property is accessible in summer only by helicopter. No costs are associated
with holding the claims.
To date, exploration of the property has identified several
east-northeasterly trending zones which carry anomalous gold, silver and/or base
metal values over a significant stratigraphic column. Results from the 1988
drill program which targeted geophysical conductors included a 2.5 foot wide
zone of stringer type mineralization assaying 0.174 ounces gold per ton, 0.32
ounces silver per ton and 0.35% copper from the North Twin Island - Poplar
Island area. The mineralization occurs stratigraphically below a massive
sulphide horizon containing anomalous base and precious metal values. Geological
mapping in the summer of 1988 along the northern portion of the property traced
out an anomalous zone over a 5 mile strike length in which gold and zinc
mineralization were associated with a quartz eye tuff. Subsequently, geophysical
surveys identified several targets along this favorable geological horizon on
which drilling occurred in early 1989. Values of 0.06 ounces of silver and 0.93%
zinc over .23 feet and 0.10% zinc over 4.6 feet were intersected within
widespread broader anomalous sulphide and graphitic zones. Exploration confirmed
a widespread presence of precious and base metal mineralization on the Eagle
Lake Property.
In early 1990 an option agreement was concluded with Teck Corporation
("Teck") which entitled Teck to earn a 50% joint venture interest in the
property by expending $1,650,000 on exploration over four and a half years. Teck
spent a total of approximately $370,000 on the property up to March 1991,
principally on geophysical surveys and drilling. On June 12, 1991 Teck advised
the Company that it was terminating the agreement and returning the claims to
the Company.
17
<PAGE>
The Company in 1996 refreshed prior survey grids and camp sites and
conducted geophysical survey using electromagnetic techniques. The work
delineated further electromagnetic conductors for the express purpose of
locating new drill targets along strike from the prior massive sulfide/gold
intersections. 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.
In 1997, management has written-off a portion of the deferred mineral
exploration expenditures in response to current survey reports and budgets for
the property. No further work is anticipated on this project this year.
B.4 GEORGIA LAKE, ONTARIO
In 1997, management has decided not to pursue further development of
this property and accordingly is has been written off in the year.
B.5 GOLD HILL, ARIZONA
In 1997, management decided not to pursue further development of the
Gold Hill property and accordingly it has been written off in the year.
B.6 Stages of the Mine Development Process, an overview
There are four basic stages to the mine development process. These stages are
common throughout the industry, and every mining project must pass through them
regardless of the mineral being sought and the form in which that mineral is
presented. The first stage involves conducting exploration work on a property to
determine the potential for finding minerals; the second stage involves the
development of a resource statement on the property; the third stage involves
conducting feasibility studies to evaluate extraction methods and engineering
design to determine the potential economics of a property; and the final stage
involves the ultimate engineering design and construction of the mining and
milling production facility.
Stage 1, Initial Exploration, involves evaluations, studies and tests of the
property for mineral content. The objective of this work is to determine the
potential geologic environment of the property, to expand the knowledge of the
geologic target or to identify potential new or hidden geologic targets, and to
quantify and place the property into a geologic model. In the case of the
Property, a major factor in achieving the Stage 1 objectives is having an
accurate test to determine the amount of mineralization in a given sample.
Generally speaking the initial exploration stage can take approximately 2 to 10
years.
Stage 2, the development of a Resource Statement, requires an area be drilled
to depth and width according to a certain spacing formula (i.e. holes so far
apart, samples taken every 'x' number of feet) in an effort to determine the
aggregate amount of mineralization that is likely contained on the property
and the area(s) in which the mineralization is concentrated. Mining
geologists and engineers examine the data from the drilling program and
integrate that information into a statistical model to estimate average grade
and tonnage which "defines" the specific portion of the property tested. The
completion of a Resource Statement allows a company to quantify the economic
value of the precious metals on the property and then make a pre-feasibility
determination as to whether there are sufficient quantities of mineralization
to commence the feasibility study stage. Generally speaking the Resource
Statement stage can take approximately 1 to 2 years.
Stage 3, Feasibility Study, evaluates the extraction methods, engineering design
and the environmental and permitting factors and costs for a specific property,
as well as estimates of all of the costs associated with the extraction and sale
of the recovered metals/product to determine if there is an economic basis for
actually building a mine on the property. The study is applied to the resource
that has been defined in the second stage of this process, however additional
drilling may be required. The concentrations determined by the Resource
Statement become the benchmark for planning the mining and milling operation to
ensure the highest percentage of precious metals will be recovered. Generally
speaking the feasibility study stage can take approximately 2 to 4 years.
Stage 4, Construction and Operation, is the final stage of mine development.
Reaching this stage is wholly dependent upon the results of the Feasibility
Study. The engineering design, construction, development and operation of a
producing mine can require the outlay of hundreds of millions of dollars and
therefore is a step considered most seriously before commitment of that
magnitude is made. Generally speaking the design, construction and development
stage can take approximately 1 to 3 years.
C.1 SEGMENTED INFORMATION
Certain financial data of the Company, segmented by geographic region,
are set forth in Note 14 to the Consolidated Financial Statement appearing
elsewhere herein.
18
<PAGE>
C.2 CERTAIN RISK FACTORS
C.2.1 MARKET FOR METALS
The prices paid for gold, silver and platinum group metals are based
upon demand in the trading market. Factors which influence these markets
include currency values, political considerations both in the producing
regions themselves and worldwide, governmental sales and purchases, including
sales originating in the former USSR, commercial demand, particularly for
silver and platinum, and demand for jewelry purchases. Production of metals
generally changes more slowly than demand. The March 24, 1998 spot prices for
gold and silver as quoted by Handy & Harman were $299.25 an ounce and $6.24
an ounce, respectively. The March 24, 1998 spot price for platinum on the New
York Mercantile Exchange was $406.70 an ounce.
C.2.2 GOVERNMENT REGULATION
The Company's exploration and projected development activities are
subject to extensive federal, state and local laws and regulations governing
exploration, development, production, labor standards, occupational health,
waste disposal, protection and remediation of the environment, reclamation,
toxic substances and other matters. Compliance with such laws and regulations
has increased the costs of exploring the Company's properties. It is possible
that the costs and delays associated with compliance with such regulations
could prevent the Company from proceeding with the exploration and
development of one or more of its properties.
C.2.3 COMPETITION
There is aggressive competition within the minerals industry to
discover and acquire properties considered to have commercial potential. The
Company competes for the opportunity to participate in promising exploration
projects with other entities, many of which have greater resources than the
Company. In addition, the Company competes with others in efforts to obtain
financing to explore and develop mineral properties.
C.2.3 RISKS INHERENT IN THE MINING INDUSTRY
Mineral exploration and development is highly speculative and capital
intensive. Most exploration efforts are not successful, in that they do not
result in the discovery of mineralization of sufficient quantity or quality to
be profitably mined. The operations of the Company are also indirectly subject
to all of the hazards and risks normally incident to exploring and developing
mining properties. These risks include insufficient ore reserves, fluctuations
in production costs that may make mining of reserves uneconomic; significant
environmental and other regulatory restrictions; geological problems; force
majeure events; and the risk of injury to persons, property or the environment.
C.2.4 UNCERTAINTY OF RESERVES AND MINERALIZATION ESTIMATES
There are numerous uncertainties inherent in evaluating possible
reserves and mineralization, including many factors beyond the control of the
Company. The evaluation of possible reserves and mineralization is a subjective
process and the accuracy of any such evaluation is a function of the quality of
available data and of engineering and geological interpretation and judgment.
Results of drilling, metallurgical testing and production subsequent to the date
of any evaluation may justify revision of such evaluation. No assurances can be
given that the volume and grade of reserves recovered and rates of production
will not be less than anticipated. Declines in the market price of gold or other
precious metals also may render reserves or mineralization containing relatively
lower grades of ore uneconomic to exploit.
C.2.5. 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 such validity is always subject to contest. Unpatented
mining claims are unique property interests and are generally considered subject
to greater title risk than patented mining claims, or real property interests
that are owned in fee simple. The Company has not yet filed a patent application
for any of its properties that are located on federal public lands
19
<PAGE>
in the United States and, under proposed legislation to change the General
Mining Law, patents may be hard to obtain. Although the Company has attempted
to acquire satisfactory title to its properties, the Company does not intend
to obtain title opinions until financing is sought to develop a property,
with the attendant risk that title to some properties may be defective.
C.2.6. SOURCES OF CAPITAL; LIQUIDITY OF COMMON SHARES
Since all of the Company properties are presently in the exploration
stage, the continuation of the Company is dependent on its ability to obtain
equity financing to permit the further exploration and development of its
properties.
On February 11, 1998, the Company received a Notice from the NASDAQ
staff stating that the Company no longer qualified for continued listing on
the NASDAQ SmallCap Market. The Company requested and was granted a hearing
before an independent panel to review the determination of the NASDAQ staff.
The hearing was held on March 19, 1998, and as of March 30, 1998 the Company
had not received the independent panel's decision. Delisting of the common
shares from the NASDAQ SmallCap Market would impair the Company's ability to
obtain equity financing. The Company's common shares were previously listed
and traded on the Toronto Stock Exchange but were delisted on June 5, 1995,
following a twelve month suspension.
ITEM 3. LEGAL PROCEEDINGS
On April 28, 1997, the Company filed a Notice of Claim for damages
against the Arizona Department of Mines and Mineral Resources ("ADMMR"), its
director Mason Coggin, and employee Nyal Niemuth. The Notice of Claim alleges
damages in excess of $25 million dollars from untrue and misleading
statements and information provided by Messrs. Coggin and Niemuth in response
to inquiries from existing shareholders of the company, potential investors
and members of the media in connection with the Company's development of the
Black Rock Property. The Company also has claimed that Messrs. Coggin and
Niemuth acted beyond their statutory authority by making statements which
disparaged and maligned the Company. It is the Company's understanding that
the mandate of ADMMR is to operate the Arizona Mineral Museum and to maintain
archives about mining. The Company understands that neither ADMMR nor any of
its employees have any legal authority to regulate, review and/or comment on
companies mining in the State of Arizona. In connection with the filing of
the Notice of Claim, on September 2, 1997, the Company obtained a permanent
injunction against ADMMR and Messrs. Coggin and Neimuth in their official
capacities as representatives of ADMMR, enjoining ADMMR and Messrs. Coggin
and Niemuth from commenting on or giving financial advice relative to any
mining venture or company in Arizona.
On a related matter, the Company is in receipt of a demand letter
seeking payment of the sum of $2,500,000.00 for the purchase of certain gold
assay methodology and damages for the unauthorized appropriation of a
proprietary gold technology. It is the Company's position that the demand is
without merit, since the methodologies presently being used by the Company
are based on entirely different technology. At this time it is unknown if
additional amounts, if any, are payable pursuant to this demand.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the solicitation
of proxies or otherwise.
20
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common shares were listed and posted for trading on The NASDAQ
Stock Market, Inc. ("NASDAQ") on May 26, 1989 and the Canadian Dealing
Network (CDN) November 5, 1994.
During 1997, the Company was the subject of several inquiries by
NASDAQ, the United States Securities and Exchange Commission and the Arizona
Corporations Commission. The Company was asked to voluntarily provide certain
information and documentation to questions raised by each regulatory authority.
The Company voluntarily provided each regulatory authority with the information
and documentation requested, and to date, no further inquiry has been made.
On February 11, 1998, the Company received a Notice from the NASDAQ
staff stating that the Company no longer qualified for continued listing on the
NASDAQ SmallCap Market. The Company requested and was granted a hearing
before an independent panel to review the determination of the NASDAQ staff.
The hearing was held on March 19, 1998, and as of March 30, 1998 the Company
had not received the independent panel's decision. Pending the decision of
the independent panel, the Company's common shares will continue to trade on
the NASDAQ. If the independent panel's decision supports the
21
<PAGE>
NASDAQ staff's determination, then the Company's common shares will be
delisted from the NASDAQ SmallCap Market, in which case they will continue to
trade on the Canadian Dealing Network. The Company expects that its common
shares will also trade on NASDAQ's Bulletin Board in the United States. If
the independent panel's decision supports the Company's position, then the
Company's common shares will continue to trade on the NASDAQ SmallCap Market
and CDN.
The following table sets forth the high and low closing sales prices
reported by the Canadian Dealing Network and NASDAQ for the common shares for
the periods indicated. The quotations are presented after giving retroactive
effect to a reverse 1 for 10 split on October 23, 1995.
<TABLE>
<CAPTION>
- --------------------------- -------------------- ------------------------ --------------------- --------------------
Canadian Dealing Canadian Dealing NASDAQ SmallCap NASDAQ SmallCap
Network (CDN) Network (CDN) Market Market
(Canadian $) (Canadian $) (US$) (US$)
- --------------------------- -------------------- ------------------------ --------------------- --------------------
Date High Low High Low
- --------------------------- -------------------- ------------------------ --------------------- --------------------
<S> <C> <C> <C> <C>
1995- 1st Quarter 2.50 1.25 1.875 1.25
- --------------------------- -------------------- ------------------------ --------------------- --------------------
1995- 2nd Quarter 2.50 1.50 1.875 0.625
- --------------------------- -------------------- ------------------------ --------------------- --------------------
1995- 3rd Quarter 1.75 1.00 1.875 0.625
- --------------------------- -------------------- ------------------------ --------------------- --------------------
1995- 4th Quarter 4.10 0.75 3.50 1.16
- --------------------------- -------------------- ------------------------ --------------------- --------------------
1996- 1st Quarter 6.625 3.00 5.75 2.25
- --------------------------- -------------------- ------------------------ --------------------- --------------------
1996- 2nd Quarter 7.00 5.375 6.375 3.375
- --------------------------- -------------------- ------------------------ --------------------- --------------------
1996- 3rd Quarter 6.25 3.00 5.063 1.875
- --------------------------- -------------------- ------------------------ --------------------- --------------------
1996- 4th Quarter 6.375 2.75 4.938 1.938
- --------------------------- -------------------- ------------------------ --------------------- --------------------
1997 - 1st Quarter 20.00 2.50 14.50 3.50
- --------------------------- -------------------- ------------------------ --------------------- --------------------
1997 - 2ND Quarter 15.00 8.00 11.07 5.32
- --------------------------- -------------------- ------------------------ --------------------- --------------------
1997 - 3rd Quarter 10.50 5.25 8.04 3.66
- --------------------------- -------------------- ------------------------ --------------------- --------------------
1997 - 4th Quarter 8.50 1.50 6.63 1.00
- --------------------------- -------------------- ------------------------ --------------------- --------------------
1998 - 1st Quarter 2.50 .50 2.00 .54
- --------------------------- -------------------- ------------------------ --------------------- --------------------
</TABLE>
As of March 24, 1998 there were 1,531 registered holders of common
shares and 22,049,857 common shares issued and outstanding.
During 1997, the Company issued an aggregate of 6,190,450 common
shares, of which 1,865,000 were issued outside the United States in reliance on
Regulation S (pursuant to the exercise of warrants at $1.20 and $4.40 per
common shares). 233,950 common shares were issued primarily for cash upon
exercise of options granted under the Company's Stock Option Plan at prices
ranging from $1.05 to $4.50 per common share, for which the private offering
exemption under Section 4(2) of the
22
<PAGE>
Securities Act of 1933, as amended, is claimed. The remaining 4,091,500
shares were issued in exchange for real property, in Section 4(2) private
transactions, on the following dates: 1,000,000 common shares at US$10.00 per
share on May 9, 1997; 3,091,500 common shares at prices ranging from US $4.80
to US$6.40 per share on May 9, 1997 and December 3, 1997.
The Company has no intention of declaring or paying dividends on its
common shares and, in any event, its current financial position precludes it
from doing so.
Currently, there are no governmental laws, decrees or regulations in
Canada, the country in which the Company is amalgamated, which restrict the
export or import of capital (including foreign exchange controls), or, except
for withholding taxes, which affect the remittance of dividends or other
payments to nonresident holders of the securities of Canadian corporations. Any
cash dividends paid by the Company to shareholders resident in the United States
will be subject to a withholding tax of 15% (for which a shareholder may be able
to claim a credit). There no limitations currently imposed by Canadian law or by
the Company's Articles of Amalgamation or By-Laws on the right of nonresident or
foreign owners to hold or vote the Company's common shares.
ITEM 6. SELECTED FINANCIAL DATA
DECEMBER 31, 1997, 1996, 1995, 1994, 1993 (IN U.S. DOLLARS)
The following table shows selected financial data in accordance with
accounting principles generally accepted in the U.S.. In the opinion of the
Company's auditors, these principles, in all material respects, conform with
accounting principles generally accepted in the United States.
23
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------- ------------------ ------------------ ---------------- ----------------- -----------------
1997 1996 1995 1994 1993
- -------------------------------- ------------------ ------------------ ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 0 $ 0 $ 0 $ 0 $ 0
- -------------------------------- ------------------ ------------------ ---------------- ----------------- -----------------
Loss for the Year 4,840,000 1,399,000 2,444,000 1,354,000 963,000
- -------------------------------- ------------------ ------------------ ---------------- ----------------- -----------------
Loss Per Share 0.27 0.11 0.27 0.22 0.30
- -------------------------------- ------------------ ------------------ ---------------- ----------------- -----------------
Total Assets 40,371,000 11,958,000 7,802,000 5,268,000 4,022,000
- -------------------------------- ------------------ ------------------ ---------------- ----------------- -----------------
Deferred Mineral Exploration 37,891,000 8,298,000 7,050,000 4,339,000 3,387,000
Expenditures
- -------------------------------- ------------------ ------------------ ---------------- ----------------- -----------------
Long Term Liabilities 111,000 169,000 339,000 0 0
- -------------------------------- ------------------ ------------------ ---------------- ----------------- -----------------
Working Capital (2,202,000) 1,872,000 (2,787,000) (927,000) (991,000)
- -------------------------------- ------------------ ------------------ ---------------- ----------------- -----------------
Share Capital 62,894,000 32,085,000 23,105,000 20,255,000 17,490,000
- -------------------------------- ------------------ ------------------ ---------------- ----------------- -----------------
Deficit Accum. during 26,172,000 21,332,000 20,576,000 18,958,000 17,436,000
Development Stage
- -------------------------------- ------------------ ------------------ ---------------- ----------------- -----------------
Shareholders Equity 36,722,000 10,753,000 4,058,000 3,442,000 2,057,000
- -------------------------------- ------------------ ------------------ ---------------- ----------------- -----------------
Cash dividends 0 0 0 0 0
- -------------------------------- ------------------ ------------------ ---------------- ----------------- -----------------
Number of Common Shares 21,049,857 14,859,407 9,496,098 7,219,000 4,648,526
Outstanding at Year End
- ---------------------------------------------------------------------------------------------------------------------------
Note: Share and per share figures are adjusted to give retroactive effect to a 1 for 10 reverse split on October 23, 1995.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto included elsewhere
herein as well as the data set forth in "Selected Financial Data."
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 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.
Pursuant to a letter agreement dated March 11, 1998 between Omega
and the Company, the Company is required to make a payment to Omega of
$1,000,000.00 upon the exercise of the 1,000,000 warrants, providing the
warrant holders with the right to purchase 1,000,000 common shares of IPM at
any time prior to December 3, 1998, at $1.25 per common share. If IPM does
not pay Omega the $1,000,000.00 on or prior to December 15, 1998, then such
amount will bear interest at the prime rate charged by IPM's bankers in
Phoenix, Arizona, plus 2%. IPM will issue a promissory note to reflect this
obligation.
From inception, July 22, 1980, to December 31, 1997, the Company raised
gross proceeds of $35,180,000 through the issue of its common shares. In
addition, $750,000 was raised by the sale of convertible debentures in 1990. Of
these amounts, approximately $23,305,000 has been expended on exploration and
development activities.
In 1997, proceeds from shares issued totaled $5,609,000 and
exploration activities resulted in cash expenditures of $4,185,000. At
December 31, 1997, the Company had cash resources of approximately $668,000.
25
<PAGE>
Of the 22,049,857 common shares of the Company outstanding on March 24,
1998, 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.
The Company in 1997 made non-interest bearing loans to Namibian
Copper Mines, Inc. ("Namibian") to cover the operating office expenses of
Namibian, including the partial salaries of IPM employees. Two of the
executive officers of Namibian were executive officers of the Company. All
monies accrued under this arrangement have been converted to equity in
Namibian and the shares have been subsequently sold. The Company invested in
Namibian commencing in 1996 with a view to expanding its exploration
interest. Namibian utilized employees of the Company to carry out normal
technical and financial duties, with allocation of expenses associated with
such functions accrued over time. Employees of the Company were utilized when
time was available from their responsibilities with the Company.
The Company in 1997 made non-interest bearing loans to MG Gold
Corporation ("MG Gold") to cover the overhead and some operating expenses of
MG Gold. Several of the executive officers of MG Gold were also executive
officers of the Company. The Company has agreed to accept a combination of
shares and cash as repayment for the loan. The Company invested in MG Gold
commencing in 1996 with a view to expanding its exploration interests. MG
Gold utilized employees of the Company to carry out normal technical and
financial duties, with allocation of expenses associated with such functions
accrued over time. Employees of the Company were utilized when time was
available from their responsibilities with the Company.
Since 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. Specifically, additional
financing is needed to provide the company with additional working
capital to cover the $2,202,000 deficiency in working capital for
1997. The Company intends to raise an additional $3,000,000 to $4,500,000 in
equity financing but its ability to do so may be affected by a determination
of the Nasdaq staff that the Company no longer qualifies for continued
listing on the Nasdaq SmallCap Market. The Company requested and was granted
a hearing before an independent committee to review the Nasdaq's staff's
determination. See "CERTAIN RISK FACTORS--Sources of Capital; Liquidity
of Common Shares".
On January 13, 1998 the company completed a private placement of
1,000,000 units, with each unit consisting of one common share and one warrant
to purchase a common share at $1.25 prior to the close of business on December
3, 1998, for aggregate proceeds of $1,250,000. Amounts received by December
31, 1997 relating to future common share issuances have been recorded to
deposits payable.
On dates between January 1, 1998 and February 16, 1998, the company
issued $200,000 of 9% senior convertible debentures due on January 31, 2001
with a conversion price equal to the lower of : 110% of the company's share
price at the date of debenture issuance; and 80% of the company's share price
for the 5 trading days prior to date of conversion.
The Company has an outstanding debenture in the amount of $175,000.
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
The loss for 1997 of $4,840,000 was larger than the loss for 1996 of
$1,399,000 due primarily to the writing off of mineral exploration
expenditures on the Company properties amounting to $792,000, and the write
down on investments of $436,000. The administrative expenses were larger due
in part to an expansion of the assay recovery process, moving to a new
location, increased legal and consulting costs.
26
<PAGE>
During 1997, the Company: (i) issued 1,865,000 common shares for
cash on exercise of warrants at prices ranging from $1.20 to $4.40 per share,
resulting in proceeds of $4,978,000; (ii) issued 233,950 common shares
pursuant to the exercise of options at prices ranging from $1.05 to $4.50 per
share for cash consideration of $631,000; (iii) issued 1,000,000 common
shares under private placements with respect to the purchase price of the
Black Rock Property at $10.00 per share; (iv) and issued 3,091,500 under
private placement originally as security with respect to the purchase of the
Black Rock Property and to be released as satisfaction of the payment
of the balance of the property price at prices ranging from $4.80 to $6.40
per share.
Working capital decreased to a deficit of $2,202,000 in 1997 from a
surplus of $1,872,000 in 1996 principally because of an increase in accounts
payable at December 31, 1997.
During 1997, the Company repaid the balance of $400,000 of debentures
issued to Phoenix in 1995.
1996 COMPARED TO 1995
The loss for 1996 of $1,916,000 was smaller than the loss for 1995 of
$3,059,000 due primarily to the write off in 1995 of exploration costs of
$1,788,000, offset in part by an increase in administrative expenses in 1996.
During 1996, the Company: (i) issued 2,484,000 common shares under
private placements ranging from $3.00 to $3.45 per share, resulting in proceeds
of $8,244,000; (ii) issued 2,103,000 common shares pursuant to the exercise of
warrants at prices ranging from $1.00 to $3.80 per share for cash consideration
of $3,004,000; (iii) issued 336,000 common shares under private placements and
pursuant to the exercise of warrants at prices ranging from $1.20 to $3.00 per
share for consideration of $792,000 to retire debentures and interest; (iv)
issued 424,475 common shares pursuant to the exercise of options at prices
ranging from $1.45 to $3.28 per share for cash consideration of $773,000, and
15,834 common shares at prices ranging from $1.45 to $2.50 per share pursuant to
the exercise of options for services valued at $27,000; and issued warrants
providing the right to purchase 2,700,000 common shares at prices ranging from
$2.82 to $4.40 per share in connection with the private placements.
Working capital increased to $2,564,000 in 1996 from a deficit of
$3,818,000 in 1995 principally because of the issuance of securities.
27
<PAGE>
During 1996, the Company repaid $2,000,000 of debentures of a total
of $2,400,000 of debentures issued to Phoenix in 1995.
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.
28
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company for periods ended December 31,
1997 are listed in Item 14 and attached to this Report. The Company's
Consolidated Financial Statements are prepared in U.S. dollars and in accordance
with accounting principles generally accepted in the U.S..
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no disagreements with accountants on accounting and
financial disclosure in 1997.
The financial statements listed in Item 14 and attached to this
report are expressed in United States currency. The prior year's financial
statements were expressed in Canadian currency and have been restated to U.S.
currency at the 1996 year end rate. Additionally, the prior years' financial
statements were prepared in accordance with the accounting principles
generally accepted in Canada and have been restated to be in accordance with
the accounting principles generally accepted in the United States.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company at March 24, 1998
were as follows:
NAME AGE PROFESSION POSITION
Alan D. Doyle 44 Investment Banker Chairman, Director
John Yellich 53 Geologist V.P. Chief Executive Officer
David Kornhauser 39 Attorney Secretary, Director
John Blaikie 60 Stockbroker Director
Paul Mentzer 35 Earth Scientist Manager Technical Services
Each director is elected at the annual general meeting of shareholders
of the Company and holds office until his successor is elected or until his or
her earlier death, resignation or removal. Each executive officer of the Company
is appointed by the board of directors and serves at the pleasure of the board
of directors.
29
<PAGE>
Alan Doyle joined the Company on March 13, 1995 as Chairman and
Director. Prior to that time, he was a partner at Turnbull Doyle Resources, a
merchant bank in Sydney. He is a graduate of Macquarie University with a degree
in Economic Geology. For the past 16 years he has been involved in mining
research and analysis, corporate advisory management and financing international
resource projects.
John Yellich, a certified professional geologist, has worked with
the IPM technical and management team as a consultant since July of 1997 and
was operating as the Vice President and General Manager until he officially
joined the Company as Chief Executive Officer. Before joining the company he
was a managing officer of a consulting group within the largest hazardous
waste company in North America. He has more than 27 years of professional
experience with 17 in the mining and milling industry. He has a geology
degree from Western Michigan University where he has also completed graduate
studies.
David Kornhauser is a corporate, commercial and securities lawyer. He
began working for the Company on August 30, 1993 as Secretary and Director.
Before that, he was a sole practitioner affiliated with Conway Kleinman
Kornhauser & Gotlieb, a law firm in which he became a partner on December 1,
1996. He graduated with a MBA in 1982 and received his Law Degree from Dalhousie
University in 1985. Mr. Kornhauser was called to the Bar in the Province of
Ontario in 1987.
John Blaikie is a graduate of Queens University and became a
Director on May 22, 1996. He has served as branch manager of the
Correspondence Bank of Montreal and he has been the Vice President and
Director of Cassels Blaikie and Company (stock brokers) now Scotia McLeod,
for 36 years.
Paul Mentzer is an Earth Scientist and a graduate of Purdue University.
Prior to joining the Company as Vice President of Operations on September 24,
1995, he spent eight years as a Research Scientist at Purdue University.
V. Le Furlong resigned as Director, President and CEO on March
22, 1998.
Russell French resigned as Director on February 12, 1998.
There are no family relationships among the officers and directors of
the Company.
ITEM 11. EXECUTIVE COMPENSATION
In 1997, the Company paid consulting and other fees to executive
officers and directors aggregating $738,000. See "Item 13 - Certain
Relationships and Related Transactions."
30
<PAGE>
The following table summarizes, for the years indicated, the
compensation paid by the Company to the Chief Executive Officer and each
other executive officer of the Company who received in 1997 salary and bonus
exceeding $100,000.
SUMMARY COMPENSATION TABLE (IN U.S. DOLLARS)
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
AWARDS PAYOUT
- ---------- -------------- ------- ------------ --------- ---------------- ----------- --------------- --------- ----------------
OTHER ANNUAL RESTRICTED SECURITIES
COMPENSATION STOCK UNDERLYING LTIP ALL OTHER
NAME POSITION YEAR SALARY BONUS (US$) AWARDS OPTIONS/SARS PAYOUT COMPENSATION
(US$) (US$) (US$) (#) (US$) (US$)
- ---------- -------------- ------- ------------ --------- ---------------- ----------- --------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alan Chairman 1995 12,500 0 0 0 100,000 0 0
Doyle 1996 105,000 0 0 0 150,000 0 0
1997(1) 153,000 0 7,172 0 300,000 0 0
- ---------- -------------- ------- ------------ --------- ---------------- ----------- --------------- --------- ----------------
John A. CEO 1997 95,000 0 0 0 50,000 0 0
Yellich
- ---------- -------------- ------- ------------ --------- ---------------- ----------- --------------- --------- ----------------
David Corporate 1995 96,000 0 140,000
Kornhauser Secretary 1996 60,000 0 0 0 60,000 0 0
1997(1) 109,000 0 0 0 125,000 0 0
- ---------- -------------- ------- ------------ --------- ---------------- ----------- --------------- --------- ----------------
Paul Manager 1995 68,085 0 90,000
Mentzer Technical 1996 86,025 14,587 100,000
Services 1997(1) 119,000 0 37,130 0 120,000 0 0
- ---------- -------------- ------- ------------ --------- ---------------- ----------- --------------- --------- ----------------
V.L. Former CEO & 1995 24,570 0 0 0 100,000 0 0
Furlong President 1996 117,420 0 17,018 0 150,000 0 0
1997(1) 217,000 0 44,075 0 300,000 0 0
- ---------- -------------- ------- ------------ --------- ---------------- ----------- --------------- --------- ----------------
</TABLE>
The following table lists each grant of options during 1997 by the
Company to the executive officers named in the Summary Compensation Table.
(1) Certain of the grants in 1997 are subject to shareholder
approval.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (IN U.S. DOLLARS)
31
<PAGE>
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR OPTION TERM
- ----------------- ---------------- -------------------- ----------- ------------------- ----------- -------------
NUMBER OF
COMMON SHARES % OF TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO OR
NAME OPTIONS GRANTED EMPLOYEES IN YEAR BASE PRICE EXPIRATION DATE 5% (US$) 10% (US$)
(US$/SH)
- ----------------- ---------------- -------------------- ----------- ------------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan Doyle 250,000 28.1% 4.53 Feb. 13, 2002 312,500 692,500
50,000(1) 29.4% 5.78 Oct. 20, 2002 80,000 176,500
- ----------------- ---------------- -------------------- ----------- ------------------- ----------- -------------
John A. Yellich 50,000 41.2% 6.09 Jun. 4, 2002 84,000 86,000
- ----------------- ---------------- -------------------- ----------- ------------------- ----------- -------------
David Kornhauser 95,000 10.7% 4.53 Feb. 13, 2002 118,750 263,150
30,000(1) 17.7% 5.78 Oct. 20, 2002 48,000 105,900
- ----------------- ---------------- -------------------- ----------- ------------------- ----------- -------------
Paul Mentzer 100,000 11.3% 4.53 Feb. 13, 2002 125,000 277,000
20,000(1) 11.8% 5.78 Oct. 20, 2002 32,000 70,600
- ----------------- ---------------- -------------------- ----------- ------------------- ----------- -------------
V.L. Furlong 250,000 28.1% 4.53 Feb. 13, 2002 312,500 692,500
50,000(1) 29.4% 5.78 Oct. 20, 2002 80,000 176,500
- ----------------- ---------------- -------------------- ----------- ------------------- ----------- -------------
</TABLE>
(1) Subject to shareholder approval.
AGGREGATE OPTION EXERCISE AND FISCAL YEAR END OPTION VALUE TABLE
(IN U.S. DOLLARS)
The following table indicates the number and value of options
exercised by executive officers named in the Summary Compensation Table
during 1997 and the number of exercisable and unexercisable options held by
such executive officers as of December 31, 1997.
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------- ------------------------- -----------------------------
Value of Unexercised
# of Shares Underlying in-the-money options at
Unexercised Options at 12/31/97
Shares Acquired Value 12/31/97 (Exercisable/ Exercisable/Unexercisable
Name on Exercise # Realized (US$) Unexercisable) (US$)
- --------------------- --------------------- --------------- ------------------------- -----------------------------
<S> <C> <C> <C> <C>
Alan Doyle 0 0 700,000/162,500 0/0
- --------------------- --------------------- --------------- ------------------------- -----------------------------
John A Yellich 0 0 25,000/25,000 0/0
- --------------------- --------------------- --------------- ------------------------- -----------------------------
David Kornhauser 30,000 209,180 253,500/70,000 0/0
- --------------------- --------------------- --------------- ------------------------- -----------------------------
Paul Mentzer 0 0 215,000/65,000 0/0
- --------------------- --------------------- --------------- ------------------------- -----------------------------
V.L. Furlong 0 0 562,886/162,500 0/0
- --------------------- --------------------- --------------- ------------------------- -----------------------------
</TABLE>
From time to time the Board of Directors of the Company has granted
options to certain directors, officers and employees, including options granted
under its Employee Stock Option Plan. As of March 24, 1998, directors, officers
and employees held in the aggregate options to acquire 2,466,153 common shares.
32
<PAGE>
LONG-TERM INCENTIVE, DEFINED BENEFIT AND ACTUARIAL PLAN DISCLOSURE
The Company in 1997 did not make any awards to any executive officer
named in the Summary Compensation Table under any long-term incentive plan. The
Company does not have in effect any defined benefit or actuarial plan.
COMPENSATION OF DIRECTORS
Non-executive directors of the Company are entitled to receive $10,000
per year for services provided as directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Alan Doyle, Lee Furlong and David Kornhauser participated in
deliberations of the Board of Directors regarding officer compensation but
declared their conflict of interest with respect to their individual
compensation and refrained from voting when their respective compensation was
voted upon.
During the year ended December 31, 1997, the Company incurred
consulting and other fees in the aggregate amount of $738,000 for services
provided by directors and executive officers of the Company. Of this amount,
$45,000 was paid to Bill Allred. The portion of that amount paid to the
executive officers named in the Summary Compensation Table is shown as their
respective salaries for 1997 in the Table.
The Company in 1997 made non-interest bearing loans to Namibian
Copper Mines, Inc. ("Namibian") to cover the operating office expenses of
Namibian, including the partial salaries of IPM employees. Two of the
executive officers of Namibian were executive officers of the Company. All
monies accrued under this arrangement have subsequently been converted to
equity in Namibian and the shares have been subsequently sold. The Company
invested in Namibian commencing in 1996 with a view to expanding its
exploration interest. Namibian utilized employees of the company to carry out
normal technical and financial duties, the bulk of such functions were
accrued over time. Officers and managers of the Company were utilized when
time was available from their responsibilities with the Company.
The Company in 1997 made non-interest bearing loans to MG Gold to
cover the overhead and some operating expenses of MG Gold. Several of the
executive officers of MG Gold were also executive officers of the Company.
The Company has agreed to accept a combination of shares and cash as
repayment for the loan. The Company invested in MG Gold commencing in 1996
with a view to expanding its exploration interests. MG Gold utilized
employees of the Company to carry out normal technical and financial duties,
the bulk of such functions were accrued over time. Employees of the Company
were utilized when time was available from their responsibilities with the
Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
33
<PAGE>
AND MANAGEMENT
The following table sets forth certain information at March 24, 1998,
regarding the beneficial ownership, including common shares which may be
acquired upon the exercise of stock options or warrants that are presently
exercisable or will become exercisable within 60 days of that date, of the
Company's common shares by (i) persons known to the Company to own more than 5%
of the Company's common shares, (ii) each director of the Company and (iii) the
executive officers and directors as a group.
NAME AND ADDRESS AMOUNT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) % OF CLASS
------------------- -------------------------- ----------
Alan D. Doyle, Sydney, NSW Aust. 898,000(2) 4.08
David Kornhauser, Toronto, Ont. 253,500(2) 1.15
John Blaikie, Toronto, Ont. 44,000(2) 0.20
Executive Officers and Directors 1,549,300(2) 7.03
as a group (5 persons)(3)
Cede & Co.(4) 16,500,562 74.8
(The Depository Trust Company),
New York, New York
Omega Investment Corporation, 3,691,500 16.7
Cayman Islands, Bristish West
Indies
KeyCorp Investment Services 1,454,800 6.6
Group, Cleveland, Ohio
- ----------------
(1) Each person directly owns, and has sole voting and investment power with
respect to, the indicated shares.
(2) Includes the following number of shares subject to options that were
exercisable at or within 60 days after March 24, 1998: Alan Doyle -
700,000; David Kornhauser - 253,500; John Blaikie - 22,000;
Executive Officers and Directors as a group - 1,215,500.
(3) V. Le Furlong, Syndey, NSW, Australia, resigned as Director,
President and CEO on March 22, 1998 and has beneficial ownership of
765,886(2) shares at 3.48% of class, of which 562,886 were shares subject
to options.
Russell French, Vancouver, BC. resigned as Director on February 12, 1998
and has 35,000(2) shares at 0.16% of class, of which 35,000 were shares
subject to options.
(4) As at February 27, 1998. The above noted registered shareholder is
the nominee of the beneficial owners of the common shares of the Company.
The Company is unaware of any person beneficially owning more than 5%
of the issued and outstanding common shares of the Company, except for
The Capital Group of Companies, a Los Angeles based mutual fund who
indicated in a press release issued in March, 1997, that it owned 10%
of the issued and outstanding capital of the Corporation as at such
date. This amount may be reflected in the shares registered in the name
of Cede & Co. indicated above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No officer or director, nor any spouse or relative of such persons, has
had any interest in any material transaction with the Company as either a party
or as a holder of a direct or indirect material interest in 1997 except as set
forth below.
During the year ended December 31, 1997, the Company incurred
consulting and other fees in the aggregate amount of $738,000 for services
provided by directors and senior officers of the Company. The portion of that
amount paid to the executive officers named in the Summary Compensation Table
is shown as their respective salaries for 1997 in the Executive Table.
34
<PAGE>
The Company in 1997 made non-interest bearing loans to Namibian to
cover the operating office expenses of Namibian, including the partial
salaries of IPM employees. Two of the executive officers of Namibian were
executive officers of the Company. All monies accrued under this arrangement
have subsequently been converted to equity in Namibian and the shares have
been subsequently sold. The Company invested in Namibian commencing in 1996
with a view to expanding its exploration interest. Namibian utilized
employees of the company to carry out normal technical and financial duties,
with allocation of expenses associated with such functions accrued over time.
Employees of the Company were utilized when time was available from their
responsibilities with the Company.
The Company in 1997 made non-interest bearing loans to MG Gold to
cover the overhead and some operating expenses of MG Gold. Several of the
executive officers of MG Gold were also executive officers of the Company.
The Company has agreed to accept a combination of shares and cash as
repayment for the loan. The Company invested in MG Gold commencing in 1996
with a view to expanding its exploration interests. MG Gold utilized
employees of the Company to carry out normal technical and financial duties,
with allocation of expenses associated with such functions accrued over time.
Employees of the Company were utilized when time was available from their
responsibilities with the Company.
35
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
1. Financial Statements
The following financial statements of the Company are attached hereto:
Auditors' Report
Consolidated Balance Sheets as at December 31, 1997
and 1996
Consolidated Statements of Loss and Deficit for the
years ended December 31, 1997, 1996 and 1995 and cumulative
from inception, July 22, 1980 to December 31, 1997.
Consolidated Statements of Changes in Financial
Position for the years ended December 31, 1997, 1996, and 1995
and cumulative from inception, July 22, 1980 to December 31,
1997.
Consolidated Statements of Deferred Mineral
Exploration Expenditures for the years ended December 31,
1997, 1996 and 1995 and cumulative from inception, July 22,
1980 to December 31, 1997.
Notes to Consolidated Financial Statements
2. Exhibits
See Index to Exhibits on page E-1 of this Report for
statement of Exhibits filed herewith.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL PRECIOUS METALS CORPORATION
By: /s/ John A. Yellich
---------------------
John A. Yellich
Chief Executive Officer
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities and
on the dates indicated.
POSITION DATE
/s/ John A. Yellich Chief Executive Officer March 31, 1998
- -------------------
John A. Yellich
/s/ Tanya M. Nelson Controller (Principal Accounting March 31, 1998
- ------------------- Officer)
Tanya M. Nelson
/s/ Alan D. Doyle Chairman of the Board and Director March 31, 1998
- -----------------
Alan D. Doyle
/s/ David Kornhauser Secretary and Director March 31, 1998
- --------------------
David Kornhauser
John Blaikie Director March 31, 1998
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PRECIOUS METALS CORPORATION
Annual Report on Form 10-K For
The Year Ended December 31, 1997
EXHIBIT INDEX
- -------------- --------------------------------------------------------------------------------------- ----------
EXHIBIT DESCRIPTION PAGE
- -------------- --------------------------------------------------------------------------------------- ----------
<S> <C> <C>
3 Articles of Incorporation and By-Laws (incorporated by reference
from the Registrant's Annual Report on Form 20-F for the fiscal
year ended December 31, 1992).
- -------------- --------------------------------------------------------------------------------------- ----------
4 Specimen Stock Certificates (incorporated by reference from the
Registrant's Annual Report on Form 20-F for the fiscal year ended
December 31, 1992).
- -------------- --------------------------------------------------------------------------------------- ----------
10(a) Joint Venture Agreement between BP Resources Canada Limited and Platinum Exploration
Canada, Inc. dated January 9, 1986 (incorporated by reference from the Registrant's
Annual Report on Form 20-F for the fiscal year ended December 31, 1992).
- -------------- --------------------------------------------------------------------------------------- ----------
10(b) Joint Venture Agreement dated June 12, 1987 between Fuellstoff GmbH, International
Platinum Corporation and Platinum Exploration Canada, Inc. (incorporated by reference
from the Registrant's Annual Report on Form 20-F for the fiscal
year ended December 31, 1992).
- -------------- --------------------------------------------------------------------------------------- ----------
10(c) Joint Venture Agreement dated December 31, 1987 between
Fuellstoff GmbH, International Platinum Corporation, Platinum
Exploration Canada, Inc. and Jenkim Investments Ltd (incorporated
by reference from the Registrant's Annual Report on Form 20-F for
the fiscal year ended December 31, 1992).
- -------------- --------------------------------------------------------------------------------------- ----------
10(d) Operating Agreement dated January 12, 1987 between Quatro Energies Corporation and
International Platinum (incorporated by reference from the Registrant's Annual Report
on Form 20-F for the fiscal year ended December 31, 1992).
- -------------- --------------------------------------------------------------------------------------- ----------
10(e) Letter Agreement dated January 12, 1987 between Quatro Energies Corporation and
International Platinum Corporation (incorporated by reference from the Registrant's
Annual Report on Form 20-F for the fiscal year ended December 31, 1992).
- -------------- --------------------------------------------------------------------------------------- ----------
10(f) Letter Agreement dated March 16, 1987 between Quatro Energies Corporation and
International Platinum Corporation (incorporated by reference from the Registrant's
Annual Report on Form 20-F for the fiscal year ended December 31, 1992).
- -------------- --------------------------------------------------------------------------------------- ----------
10(g) Letter Agreement dated June 14, 1990 between Quatro Energies
Corporation and International Platinum Corporation (incorporated
by reference from the Registrant's Annual Report on Form 20-F for
the fiscal year ended December 31, 1992).
- -------------- --------------------------------------------------------------------------------------- ----------
<PAGE>
- -------------- --------------------------------------------------------------------------------------- ----------
10(h) Debenture Agreements between Defever Minet, Nobels & Co dated March 26, 1990 Allen &
Co Incorporated and Bruce Allen dated April 27, 1990 (incorporated by reference from
the Registrant's Annual Report on Form 20-F for the fiscal year
ended December 31, 1992).
- -------------- --------------------------------------------------------------------------------------- ----------
10(i) Letter Agreement dated April 16, 1992 between Jamestone Platinum
and International Platinum Corporation (incorporated by reference
from the Registrant's Annual Report on Form 20-F for the fiscal
year ended December 31, 1992).
- -------------- --------------------------------------------------------------------------------------- ----------
10(j) Letter Agreement dated April 1, 1993 between 1020632 Ontario Inc. and International
Platinum Corporation (incorporated by reference from the Registrant's Annual Report
on Form 20-F for the fiscal year ended December 31, 1993).
- -------------- --------------------------------------------------------------------------------------- ----------
10(k) Heads of Agreement (Business Terms) For Black Rock Property between International
Platinum Corporation and Phoenix International Mining Corporation executed in March
1994 (incorporated by reference from the Registrant's Annual
Report on Form 20-F for the fiscal year ended December 31, 1993).
- -------------- --------------------------------------------------------------------------------------- ----------
10(l) Heads of Agreement (Business Terms) For Extended Black Rock
Property between International Platinum Corporation and Phoenix
International Mining Corporation executed in March 1994
(incorporated by reference from the Registrant's Annual Report on
Form 20-F for the fiscal year ended December 31, 1993).
- -------------- --------------------------------------------------------------------------------------- ----------
10(m) Agreement in Principal between Phoenix International Mining Inc.
and Tacatura Investments Pty Ltd dated October 1, 1993,
(incorporated by reference from the Registrant's Annual Report on
Form 20-F for the fiscal year ended December 31, 1993).
- -------------- --------------------------------------------------------------------------------------- ----------
10(n) Assignment Agreement And Acknowledgment among Tacatura Investment
(Pty) Limited and New Ventures Development Corporation and
Phoenix International Mining Inc. dated October 18, 1993,
(incorporated by reference from the Registrant's Annual Report on
Form 20-F for the fiscal year ended December 31, 1993).
- -------------- --------------------------------------------------------------------------------------- ----------
10(o) Letter Agreement between New Ventures Development Corporation and International
Platinum Corporation dated October 18, 1993. (incorporated by reference from the
Registrant's Annual Report on Form 20-F for the fiscal year ended December 31, 1993).
- -------------- --------------------------------------------------------------------------------------- ----------
10(p) Assignment Agreement And Acknowledgment among International Platinum Corporation and
New Ventures Development Corporation and Phoenix International Mining Inc. dated
October 18, 1993. (incorporated by reference from the Registrant's Annual Report on
Form 20-F for the fiscal year ended December 31, 1993).
- -------------- --------------------------------------------------------------------------------------- ----------
10(q) Agreement dated September 7, 1993 between Falconbridge Limited and Starmin Mining
Inc. and Hellens Eplett Mining Inc. and International Platinum Corporation.
(incorporated by reference from the Registrant's Annual Report on Form 20-F for the
fiscal year ended December 31, 1993).
- -------------- --------------------------------------------------------------------------------------- ----------
<PAGE>
- -------------- --------------------------------------------------------------------------------------- ----------
10(r) Notorial Prospecting Contract dated December 17, 1990 between Jamestone Platinum
(Pty) Limited and Susan Bekker. (incorporated by reference from the Registrant's
Annual Report on Form 20-F for the fiscal year ended December 31, 1993).
- -------------- --------------------------------------------------------------------------------------- ----------
10(s) Notorial Prospecting Contract dated December 6, 1990 between
Jamestone Platinum (Pty) Limited and Alan John Wilson,
(incorporated by reference from the Registrant's Annual Report on
Form 20-F for the fiscal year ended December 31, 1993).
- -------------- --------------------------------------------------------------------------------------- ----------
10(t) Letter Agreement between Behre Dolbear and Company dated May 20, 1994. (Incorporated
by reference from the Registrant's Annual Report on Form 20-F for
the fiscal year ended December 31, 1995).
- -------------- --------------------------------------------------------------------------------------- ----------
10(u) Amendment to Letter Agreement between Behre Dolbear and Company dated May 23, 1994.
(Incorporated by reference from the Registrant's Annual Report on
Form 20-F for the fiscal year ended December 31, 1995).
- -------------- --------------------------------------------------------------------------------------- ----------
10(v) Letter Agreement with Behre Dolbear and Company relating to
modification of the drilling program dated July 19, 1994.
(Incorporated by reference from the Registrant's Annual Report on
Form 20-F for the fiscal year ended December 31, 1995).
- -------------- --------------------------------------------------------------------------------------- ----------
10(w) Joint Venture Revised Heads of Agreement Black Rock and Extended
Black Rock Property dated April 13, 1995. (Incorporated by
reference from the Registrant's Annual Report on Form 20-F for
the fiscal year ended December 31, 1995).
- -------------- --------------------------------------------------------------------------------------- ----------
10(x) Mining Lease - Purchase Agreement between Gold Hill Mining Joint Venture Partnership
and International Precious Metals Corporation dated August 18, 1995. (Incorporated
by reference from the Registrant's Annual Report on Form 20-F for
the fiscal year ended December 31, 1995).
- -------------- --------------------------------------------------------------------------------------- ----------
10(y) Convertible Debenture Agreement between Phoenix International Mining, Inc. and
International Precious Metals Corporation dated November 22, 1995. (Incorporated by
reference from the Registrant's Annual Report on Form 20-F for the fiscal year ended
December 31, 1995).
- -------------- --------------------------------------------------------------------------------------- ----------
10(z) Letter Agreement between Behre Dolbear and Company relating
assaying procedures dated March 25, 1996. (Incorporated by
reference from the Registrant's Annual Report on Form 20-F for
the fiscal year ended December 31, 1995).
- -------------- --------------------------------------------------------------------------------------- ----------
10(aa) Stock Option Plan (Incorporated by reference from the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996).
- -------------- --------------------------------------------------------------------------------------- ----------
10(bb) Property Purchase Agreement among the Company, International Precious Metals
Corporation of Arizona, and Omega Investment Corporation dated May 9, 1997.
(Incorporated by reference from the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996).
- -------------- --------------------------------------------------------------------------------------- ----------
<PAGE>
- -------------- --------------------------------------------------------------------------------------- ----------
10(cc) Preliminary Agreement between Auric and the Company relating to a
fire assay procedure dated June 9, 1997.
- -------------- --------------------------------------------------------------------------------------- ----------
10(dd) Supplemental to Preliminary Agreement between Auric and the
Company relating to a fire assay procedure dated June 25, 1997.
- -------------- --------------------------------------------------------------------------------------- ----------
10(ee) Letter Agreement between Omega Investment Corporation and the
Company relating to the acquisition of 100% interest in Black
Rock Property dated March 11, 1998.
- -------------- --------------------------------------------------------------------------------------- ----------
10(ff) Agreement between Omega Investment Corporation and the Company
relating to the acquisition of 100% interest in Black Rock
Property dated March 26, 1998.
- -------------- --------------------------------------------------------------------------------------- ----------
21 Subsidiaries. (Incorporated by reference from the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1996).
- -------------- --------------------------------------------------------------------------------------- ----------
99(a) Report of Kilborn Inc. to the Toronto Stock Exchange dated April 22, 1994.
(incorporated by reference from the Registrant's Annual Report on Form 20-F for the
fiscal year ended December 31, 194).
- -------------- --------------------------------------------------------------------------------------- ----------
99(b) Interim Report of Behre Dolbear & Company, Inc. dated October 1994. (Incorporated by
reference from the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996).
- -------------- --------------------------------------------------------------------------------------- ----------
99(c) Letter dated December 15, 1995 of Behre Dolbear & Company, Inc. (Incorporated by
reference from the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996).
- -------------- --------------------------------------------------------------------------------------- ----------
99(d) Report of Roland Mountford dated February 1, 1996. (Incorporated by reference from
the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996).
- -------------- --------------------------------------------------------------------------------------- ----------
99(e) Report of Drs. Julian and Susan Vearncombe dated May, 1996. (Incorporated by
reference from the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996).
- -------------- --------------------------------------------------------------------------------------- ----------
</TABLE>
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A Development Stage Company)
YEARS ENDED DECEMBER 31, 1997 AND 1996
CONTENTS
Page
Auditors' Report 1
Consolidated financial statements:
Consolidated balance sheets 2
Consolidated statements of loss and deficit 3
Consolidated statements of shareholders' equity 4
Consolidated statements of cash flows 5
Consolidated statements of deferred mineral 6
exploration expenditures
Notes to consolidated financial statements 7-25
<PAGE>
AUDITORS' REPORT
To the shareholders of
International Precious Metals Corporation
We have audited the consolidated balance sheets of International Precious
Metals Corporation (a development stage company) as at December 31, 1997 and
1996 and the consolidated statements of loss and deficit, shareholders'
equity, cash flows and deferred mineral exploration expenditures for each of
the three years in the period ended December 31, 1997. These consolidated
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the company as at December
31, 1997 and 1996 and the results of its operations, cash flows and deferred
mineral exploration expenditures for each of the three years in the period
ended December 31, 1997 in conformity with accounting principles generally
accepted in the United States (which differ in certain material respects from
the accounting principles generally accepted in Canada -- See Note 17).
The financial statements have been prepared assuming that the company will
continue as a going concern. As discussed in Note 1 to the financial
statements, the company is a development stage company with no significant
operating results to date which raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters
are also disclosed in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Toronto, Canada.
February 17, 1998, except as to Note 4
which is as of March 11, 1998 and Note 15
which is as of March 19, 1998. Chartered Accountants.
1.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------- -------------
(Note 2(a))
<S> <C> <C>
ASSETS
Current assets
Cash $ 668,000 $ 1,930,000
Other (Note 3) 668,000 978,000
------------- -------------
Total current assets 1,336,000 2,908,000
Deferred mineral exploration
expenditures (Note 4) 37,891,000 8,298,000
Capital assets (Note 5) 1,144,000 752,000
------------- -------------
Total assets $ 40,371,000 $ 11,958,000
------------- -------------
------------- -------------
LIABILITIES
Current liabilities
Bank loan (Note 6) $ 500,000 $ -
Accounts payable 2,324,000 404,000
Debentures (Note 7) 175,000 582,000
Deposits (Note 15) 500,000 -
Vehicle and equipment loans,
current portion Note 8 39,000 50,000
------------- -------------
Total current liabilities 3,538,000 1,036,000
Vehicle and equipment loans,
long term portion Note 8 111,000 169,000
------------- -------------
Total liabilities 3,649,000 1,205,000
------------- -------------
SHAREHOLDERS' EQUITY
Share capital (Notes 9 and 10) 62,894,000 32,085,000
Deficit (26,172,000) (21,332,000)
------------- -------------
36,722,000 10,753,000
------------- -------------
Total liabilities and shareholders' equity $ 40,371,000 $ 11,958,000
------------- -------------
------------- -------------
</TABLE>
Contingencies, commitments and other
information (Notes 1, 13 and 16)
See accompanying notes.
Approved on behalf of the Board:
--------------------- ---------------------
Director Director
2.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
<TABLE>
<CAPTION>
Cumulative
from inception,
Year ended December 31, July 22, 1980
---------------------------------------------- to December 31,
1997 1996 1995 1997
------------- ------------- ------------ -------------
(Note 2 (a)) (Note 2 (a)) (Note 2 (a))
<S> <C> <C> <C> <C>
Expenses
Administrative $ 3,337,000 $ 1,223,000 $ 1,086,000 $ 12,681,000
Mineral exploration expenditures
written-off (Note 4) 792,000 - 1,305,000 12,161,000
Debenture and demand note interest 40,000 74,000 31,000 355,000
Write-down on investments (Note 3) 436,000 - - 436,000
Bad debt - - - 180,000
Amortization 235,000 102,000 22,000 359,000
------------- ------------- ------------ -------------
Loss for the period 4,840,000 1,399,000 2,444,000 26,172,000
Deficit, beginning of period 21,332,000 19,933,000 17,489,000 -
------------- ------------- ------------ -------------
Deficit, end of period $ 26,172,000 $ 21,332,000 $ 19,933,000 $ 26,172,000
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
Loss per share $0.27 $0.11 $0.29
------------- ------------- ------------
------------- ------------- ------------
</TABLE>
See accompanying notes.
3.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Share Capital Total
(Notes 9 and 10) Accumulated Shareholders'
Shares Amount deficit equity
(Note 2 (a)) (Note 2 (a)) (Note 2 (a))
<S> <C> <C> <C> <C>
Balance, December 31, 1993 46,392,404 $ 17,490,000 $(16,135,000) $ 1,355,000
Issuance of common shares 13,600,000 1,402,000 1,402,000
Exercise of options and warrants 10,997,000 925,000 925,000
Issued to convert debenture and interest 1,200,000 438,000 438,000
Net loss - - (1,354,000) (1,354,000)
------------ ------------ ------------ ------------
Balance, December 31, 1994 72,189,404 20,255,000 (17,489,000) 2,766,000
------------ ------------
10 shares exchanged for 1 (Note 9) 7,219,000 20,255,000 -- --
Issuance of common shares 1,700,000 1,980,000 -- 1,980,000
Exercise of options and warrants 577,098 870,000 -- 870,000
Net loss -- -- (2,444,000) (2,444,000)
------------ ------------ ------------ ------------
Balance, December 31, 1995 9,496,098 23,105,000 (19,933,000) 3,172,000
Issuance of common shares 2,820,000 6,205,000 -- 6,205,000
Exercise of options and warrants 2,543,309 2,775,000 -- 2,775,000
Net loss -- -- (1,399,000) (1,399,000)
------------ ------------ ------------ ------------
Balance, December 31, 1996 14,859,407 32,085,000 (21,332,000) 10,753,000
Exercise of options and warrants 2,098,950 5,609,000 -- 5,609,000
Issued to acquire property 4,091,500 25,200,000 -- 25,200,000
Net loss -- -- (4,840,000) (4,840,000)
------------ ------------ ------------ ------------
Balance, December 31, 1997 21,049,857 $ 62,894,000 $(26,172,000) $ 36,722,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
from inception,
Year ended December 31, July 22, 1980
---------------------------------------------- to December 31,
1997 1996 1995 1997
------------- ------------- ------------ -------------
(Note 2 (a)) (Note 2 (a)) (Note 2 (a))
<S> <C> <C> <C> <C>
Cash from (required by):
Operating activities
Net loss for the period ($4,840,000) ($1,399,000) ($2,444,000) ($26,172,000)
Items not involving cash
Administrative services
provided in exchange for
common shares -- 20,000 791,000 1,155,000
Mineral exploration
expenditures written-off 792,000 -- 1,305,000 12,161,000
Write-down on investment 436,000 -- -- 436,000
Amortization - expensed 235,000 102,000 22,000 359,000
- deferred 96,000 43,000 -- 139,000
------------ ------------ ------------ -------------
Working capital required by
operations (3,281,000) (1,234,000) (326,000) (11,922,000)
------------ ------------ ------------ -------------
Changes in non-cash working capital
balances related to operations
Prepaids, deposits and sundry
receivables 72,000 (191,000) (30,000) (95,000)
Accounts payable 1,920,000 (429,000) (472,000) 2,204,000
------------ ------------ ------------ -------------
1,992,000 (620,000) (502,000) 2,109,000
------------ ------------ ------------ -------------
Cash used for mineral
exploration expenditures (5,185,000) (2,476,000) (3,479,000) (23,305,000)
------------ ------------ ------------ -------------
Cash required by operations (6,474,000) (4,330,000) (4,307,000) (33,118,000)
------------ ------------ ------------ -------------
Investing activities
Related parties - advances 12,000 (221,000) (99,000) (397,000)
- shares (210,000) (299,000) -- (527,000)
Purchase of capital assets, net (723,000) (751,000) (112,000) (1,785,000)
------------ ------------ ------------ -------------
(921,000) (1,271,000) (211,000) (2,709,000)
------------ ------------ ------------ -------------
Financing activities
Shares issued for cash 5,609,000 8,962,000 2,058,000 35,180,000
Debentures (407,000) (2,000,000) 2,390,000 165,000
Deposits on share issuance 500,000 -- -- 500,000
Vehicle and equipment loans (69,000) 219,000 -- 150,000
------------ ------------ ------------ -------------
5,633,000 7,181,000 4,448,000 35,995,000
------------ ------------ ------------ -------------
Change in cash during the period (1,762,000) 1,580,000 (70,000) 168,000
Cash, beginning of period 1,930,000 350,000 420,000
------------ ------------ ------------ -------------
Cash, end of period 168,000 $1,930,000 $350,000 $168,000
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Cash (indebtedness) consists of:
Cash $668,000 $1,930,000 $350,000
Bank loan (500,000) -- --
------------ ------------ ------------
$168,000 $1,930,000 $350,000
------------ ------------ ------------
------------ ------------ ------------
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for interest $40,000 $7,000 $18,000
------------ ------------ ------------
</TABLE>
See accompanying notes.
4.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF DEFERRED MINERAL EXPLORATION EXPENDITURES
<TABLE>
<CAPTION>
Cumulative
from inception,
Year ended December 31, July 22, 1980,
------------------------------------- to December 31,
1997 1996 1995 1997
------ ------ ------ ---------------
(Note 2 (a)) (Note 2 (a)) (Note 2 (a))
<S> <C> <C> <C> <C>
Balance, beginning of period $ 8,298,000 $5,822,000 $3,323,000
Property acquisition costs
and option payments 27,000,000 -- 2,732,000 32,531,000
Exploration expenditures 3,385,000 2,476,000 1,072,000 17,521,000
----------- ----------- ----------- -----------
38,683,000 8,298,000 7,127,000 50,052,000
Expenditures written off 792,000 -- 1,305,000 12,161,000
----------- ----------- ----------- -----------
Balance, end of period $37,891,000 $8,298,000 $5,822,000 $37,891,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
The company is amalgamated under the laws of the Province of Ontario Canada.
1. 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 interntion 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 some of the properties and engaged
independent consultants to market such 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.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF FINANCIAL STATEMENT PRESENTATION
These financial statements are expressed in United States currency. The prior
years' financial statements were expressed in Canadian currency and have been
restated into United States currency at the 1996 year end rate. Additionally,
the prior years' financial statements were prepared in accordance with the
accounting principles generally accepted in Canada and have been restated to be
in accordance with the accounting principles generally accepted in the United
States as explained more fully in Note 17. These consolidated financial
statements include the accounts of its subsidiaries, 1020632 Ontario Inc.
(Georgia Lake) and International Precious Metals Corporation of Arizona
("IPMA"). IPMA was incorporated for the sole purpose of holding title to the
Black Rock Properties.
(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) AMORTIZATION
Capital assets are stated at cost. Amortization of administrative assets is
recorded on a straight-line basis over five years calculated to charge the costs
of the assets to operations over their estimated useful lives. 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.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) FOREIGN CURRENCY TRANSLATION
Monetary assets and liabilities in foreign currencies have been translated into
U.S. 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.
3. OTHER ASSETS
1997 1996
---- ----
Related parties (Note 12)
- Advances $ 266,000 $ 436,000
- Investment in common shares 231,000 299,000
Prepaids, deposits and sundry receivables 171,000 243,000
---------- ----------
$ 668,000 $ 978,000
---------- ----------
---------- ----------
The advances to related parties are unsecured and non-interest bearing. A
majority of these advances result from an allocation of overhead expenses and
the use of company personnel. It is management's intention to sell the
investments in common shares in related parties in the subsequent fiscal year.
Accordingly, advances and investment in common shares have been written-down
to their respective market values.
4. DEFERRED MINERAL EXPLORATION EXPENDITURES
BAL. EXPEND. EXPEND. BALANCE
BEG OF FOR THE WRITE OFF END OF
PROPERTIES YEAR YEAR IN THE YEAR YEAR
---------- ------------ ----------- ------------
North America
-Big Trout Lake $ 651,000 $ 39,000 $ 414,000 $ 276,000
-Eagle Lake 305,000 107,000 248,000 164,000
-Georgia Lake 84,000 3,000 87,000 --
-Black Rock 7,230,000 30,221,000 -- 37,451,000
-Gold Hill 28,000 15,000 43,000 --
---------- ------------ ----------- ------------
1997 $8,298,000 $ 30,385,000 $ 792,000 $ 37,891,000
---------- ------------ ----------- ------------
---------- ------------ ----------- ------------
1996 $5,822,000 $ 2,476,000 $ -- $ 8,298,000
---------- ------------ ----------- ------------
---------- ------------ ----------- ------------
From the company's inception on July 22, 1980, approximately $12,000,000 of
mineral exploration expenditures have been written-off.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
4. DEFERRED MINERAL EXPLORATION EXPENDITURES (CONTINUED)
(a) BIG TROUT LAKE
The property is located in northwestern Ontario, Canada. The company is
party to a platinum joint venture agreement with respect to certain of its
own claims whereunder the company's joint venture partners, Degussa A.G.
("Degussa") and Jenkim Holdings (Canada) Ltd. ("Jenkim"), earned a 60%
interest in the claims by making contributions to the joint venture to
December 31, 1989. In 1991, Degussa withdrew from the joint venture, thereby
forfeiting its 27% interest in the joint venture properties. As at December
31, 1997, the company exercises joint control of the property. No joint
venture company is in place owning the property and as such all joint venture
partners own their respective shares in the properties directly. In 1997,
management has written-off a portion of the deferred mineral exploration
expenditures in response to current survey reports and budgets for the
property.
(b) EAGLE LAKE
The property is located in northwestern Ontario, Canada and the claims are held
directly by the company. In 1997, management have written-off a portion of the
deferred mineral exploration expenditures in response to current survey reports
and budgets for the property.
(c) GEORGIA LAKE
The property is located in northwestern Ontario, Canada and the claims are held
by 1020632 Ontario Limited, a wholly-owned subsidiary. In 1997, management has
decided not to pursue further development of this property and accordingly it
has been written-off in the year.
(d) BLACK ROCK AND BLACK ROCK EXTENDED (THE "BLACK ROCK PROPERTY")
The Black Rock property is located 92 miles west of Phoenix, Arizona.
During the year, the company renegotiated its agreement with Phoenix
International Mining Corporation ("Phoenix") pertaining to the acquisition of
the rights to the Black Rock property.
On May 9, 1997, the company entered into an agreement (the "Property Purchase
Agreement") with Omega Investment Corporation ("Omega"), the assignee of
Phoenix's rights to the Black Rock Property, pursuant to which the company
agreed to pay an aggregate of $27,000,000 to Omega to acquire the balance of
the interest in the Black Rock Property. The $27,000,000 purchase price was
to have been satisfied by the issuance of 1,000,000 common shares valued at
$10.00 per share and cash payment of $17,000,000. As security for the
payment of the balance of the purchase price to Omega, the company issued
3,000,000 common shares to Omega, which shares were held in escrow pending
payment by the company of the balance of the purchase price (the "Escrow
Shares"). The company has paid an aggregate of $800,000 in cash to Omega on
account of the purchase price and pursuant to the Property Purchase
Agreement. The company's wholly owned subsidiary, International Precious
Metals Corporation of Arizona ("IPMA") was also a party to the Property
Purchase Agreement solely for the purpose of holding title to the Black Rock
Property.
The company and Omega amended the Property Purchase Agreement by agreement dated
July 29, 1997 (the "Amended Agreement"), pursuant to which the payment date for
the balance of the Black Rock property was extended from July 15, 1997 to
October 15, 1997. As consideration for the amendment, the company agreed to pay
to Omega the sum of $5,000 per day for the period subsequent to July 15, 1997
and the issuance of 500 common
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
4. DEFERRED MINERAL EXPLORATION EXPENDITURES (CONTINUED)
shares per day for the period from July 15, 1997 to August 15, 1997, the
issuance of 1,000 common shares per day for the period from August 16, 1997 to
September 15, 1997, and 1,500 common shares per day for the period from
September 16, 1997 to October 15, 1997 (an aggregate of 91,500 common shares and
$845,000 cash for the period ended December 31, 1997).
The company was unable to meet its payment obligations to pay the balance of
the cash purchase price owing to Omega. On December 3, 1997, the company
issued to Omega 91,500 common shares being the number of shares owing to
Omega to October 15, 1997, under the Amended Agreement. These shares were
recorded to share capital for the year and are part of the satisfaction of
the purchase price.
Finally, on March 11, 1998, the company and Omega entered in a new letter
agreement (the "Letter Agreement") pursuant to which the company completed
the acquisition of a 100% interest in the Black Rock Property.
Pursuant to the Letter Agreement the company will:
a) Pay to Omega $1,000,000 upon the exercise of the 1,000,000 warrants which
are presently outstanding providing the warrant holders with the right to
purchase 1,000,000 common shares of the company at any time prior to
December 3, 1998 at $1.25 per common share. If the company does not pay
Omega the $1,000,000 on or prior to December 15, 1998, then such amount
will bear interest at the prime rate charged by the company's bankers in
Phoenix, Arizona plus 2%. The company will issue a promissory note to
Omega to reflect such terms. As at December 31, 1997 the $1,000,000 has
been recorded in accounts payable and is included as part of the purchase
price.
b) Release to Omega of all rights of the company to the "Escrow Shares".
The "Escrow shares" are subject to restrictions on their resale until
June, 1999. These shares are recorded in share capital for the year and
are part of the satisfaction of the purchase price.
c) Grant to Omega a 1 1/2% net smelter royalty interest in the Black Rock
Property.
d) Diligently pursue the development of the Black Rock Property, provided
that there exists the economic merits of pursuing same. Further, in the
event that Omega has reasonable grounds to believe that the company is not
diligently pursuing development of the properties and can successfully
establish this to an arbitrator, then the company will be deemed to have
abandoned the Black Rock Property and ownership will revert back to
Omega.
e) Provide evidence to Omega on or prior to August 1 of each year that the
company has paid or will be paying the maintenance fees owing to the U.S.
Department of Interior, Bureau of Land Management in order to maintain the
claims which comprise the Black Rock Property in good standing.
(c) 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. In 1997,
management has decided not to pursue further development of this property and
accordingly it has been written off in the year.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
5. CAPITAL ASSETS
Net
Accumulated ------------------------
Cost amortization 1997 1996
----------- ----------- ----------- -----------
Machinery and equipment $ 530,000 $ 146,000 $ 384,000 $ 246,000
Field Vehicles 413,000 86,000 327,000 227,000
Office equipment and fixtures 565,000 132,000 433,000 279,000
----------- ----------- ----------- -----------
$ 1,508,000 $ 364,000 $ 1,144,000 $ 752,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
6. BANK LOAN
The bank loan bears interest at 7.5% per annum and is secured by certain cash
balances.
7. DEBENTURES
The debentures are repayable for CDN $250,000 on demand and bear interest at
Canadian prime rate less 2%.
Relating to the Black Rock property, the company issued in 1995 to "Phoenix",
debentures totaling $2,400,000, comprised of four amounts of US$500,000 with due
dates in 1996 of January 1, April 1, July 1 and October 1, and one US$400,000
with a due date of January 1, 1997. Each debenture was convertible into common
shares and bore interest beginning on its due date at the prime rate of the
company's bank in Phoenix, Arizona, plus 2%. During 1996 and 1997, the company
fully repaid these debentures using cash of $2,400,000.
8. VEHICLE AND EQUIPMENT LOANS
1997 1996
--------- ---------
Surveying and field equipment loans, repayable
monthly at $975 principal and interest at 21.5%
per annum, due January 2001 $ 26,000 $ 31,000
Field vehicle and equipment loans, repayable
monthly at $2,706 principal plus interest at 7%
per annum, due October 2001 124,000 154,000
Field vehicle loans, other 0 34,000
--------- ---------
$ 150,000 $ 219,000
Current portion 39,000 50,000
--------- ---------
$ 111,000 $ 169,000
--------- ---------
--------- ---------
The loans are secured by the related vehicles and equipment.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
9. SHARE CAPITAL
The Company's authorized share capital comprises an unlimited number of common
shares. A summary of the share transactions from July 22, 1980 to
December 31, 1997 follows:
Number of
Shares Amount
--------- ----------
Issued on incorporation, July 22, 1980 10,000 $ 2,000
--------- ----------
Balance, December 31, 1980 and 1981 10,000 $ 2,000
Issued for cash on sale of units 830,000 454,000
Issued for cash on exercise of warrants 918,250 603,000
Issued for settlement of share issue commission 83,000 --
Issued to acquire mining property 500,000 91,000
Issued to acquire interest in partnership 1,200,000 219,000
--------- ----------
Balance, December 31, 1982 3,541,250 $1,369,000
Shares issued for cash on sale of units 300,000 401,000
Issued for cash on exercise of warrants 230,000 151,000
Issued for cash under stock options 105,000 108,000
--------- ----------
Balance, December 31, 1983 4,176,250 $2,029,000
Issued for cash on rights offering 700,000 766,000
Issued for cash under stock options 200,000 365,000
--------- ----------
Balance, December 31, 1984 5,076,250 $3,160,000
Issued for cash under private placements 400,000 410,000
Issued for settlement of share issue commission 120,000 123,000
Issued for cash for flow-through shares 880,163 1,055,000
--------- ----------
Balance, December 31, 1985 6,476,413 $4,748,000
Issued for cash for flow-through shares 250,000 270,000
Issued to acquire investment 595,000 782,000
Issued for cash under private placements 800,000 1,231,000
Issued for cash under stock options 60,000 37,000
Issued for cash on exercise of warrants 250,000 364,000
Issued to acquire mining property options 50,000 73,000
Issued for cash for flow-through shares 710,000 1,277,000
--------- ----------
Balance, December 31, 1986 9,191,413 $8,782,000
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
9. SHARE CAPITAL (CONTINUED)
Balance, December 31, 1986 9,191,413 $8,782,000
Issued for cash under private placements 975,000 1,634,000
Issued for cash under stock options 139,250 161,000
Issued for cash for flow-through shares 685,973 1,132,000
Issued to acquire mining property interest 25,000 44,000
--------- ----------
Balance, December 31, 1987 11,016,636 $11,753,000
Issued for cash for flow-through shares 1,007,084 1,400,000
Issued for cash under private placements 557,000 659,000
--------- ----------
Balance, December 31, 1988 12,580,720 $13,812,000
Issued for cash for flow-through shares 738,346 558,000
Issued for cash under private placements 1,155,600 793,000
Issued for cash under stock options 26,000 19,000
Issued to acquire mining property interest 11,000 8,000
--------- ----------
Balance, December 31, 1989 14,511,666 $15,190,000
Issued for cash for flow-through shares 323,165 145,000
Issued for cash under private placements 24,000 7,000
Issued to acquire mining property interest 38,421 21,000
--------- ----------
Balance, December 31, 1990 14,897,252 $15,363,000
Issued for services under stock options 300,000 11,000
Issued for cash under stock options 557,500 30,000
--------- ----------
Balance, December 31, 1991 15,754,752 $15,404,000
Issued for cash under private placements 3,699,394 199,000
Issued to acquire investment 4,000,000 218,000
Issued for services under stock options 1,894,833 95,000
Issued for cash under stock options 1,009,417 56,000
Issued for cash on exercise of warrants 1,000,000 80,000
--------- ----------
Balance, December 31, 1992 27,358,396 $16,052,000
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
9. SHARE CAPITAL (CONTINUED)
Balance, December 31, 1992 27,358,396 $16,052,000
Issued for cash under private placements 8,500,000 533,000
Issued for cash under stock options 275,000 28,000
Issued for cash on exercise of warrants 1,500,000 107,000
Issued for services under stock options 6,024,029 554,000
Issued to acquire investments 2,734,979 216,000
---------- -----------
Balance, December 31, 1993 46,392,404 $17,490,000
Issued for cash under private placements 13,600,000 1,402,000
Issued to convert debenture and interest 1,200,000 438,000
Issued for cash on exercise of warrants 8,500,000 755,000
Issued for cash under stock options 597,600 45,000
Issued for services under stock options 1,900,000 125,000
---------- -----------
Balance, December 31, 1994 72,190,004 20,255,000
---------- -----------
10 shares exchanged for 1
(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) 7,219,000 20,255,000
Issued for cash under private placements
(at prices ranging from $1.00 to $1.46 per share) 1,700,000 1,980,000
Issued for cash on exercise of warrants
(at prices ranging from $0.90 to $1.00 per share) 77,000 72,000
Issued for cash under stock options
(at a price of $1.46 per share) 5,000 7,000
Issued for services under stock options
(at prices ranging from $.61 to $2.40 per share) 495,098 791,000
---------- -----------
Balance, December 31, 1995 9,496,098 $23,105,000
---------- -----------
Issued for cash under private placements
(at prices ranging from $2.20 to $2.55 per share) 2,820,000 6,205,000
Issued for cash on exercise of warrants
(at prices ranging from $0.90 to $2.82 per share) 2,103,000 2,193,000
Issued for cash under stock options
(at prices ranging from $1.05 to $2.40 per share) 424,475 562,000
Issued for services under stock options
(at prices ranging from $1.05 to $1.80 per share) 15,834 20,000
---------- -----------
5,363,309 8,980,000
---------- -----------
Balance, December 31, 1996 14,859,407 32,085,000
---------- -----------
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
9. SHARE CAPITAL (CONTINUED)
Balance, December 31, 1996 14,859,407 32,085,000
Issued for cash on exercise of warrants
(at prices ranging from $1.20 to $4.40 per share) 1,865,000 4,978,000
Issued for cash under stock options (at prices
ranging from $1.05 to $4.50 per share) 233,950 631,000
Issued under private placement with respect
to the purchase of the "Black Rock Property"
as described in Note 4 (at $10.00 per share) 1,000,000 10,000,000
Issued under private placement, originally as
security with respect to the purchase of the
"Black Rock Property" and amended to be released
as satisfaction of the payment of the balance of
the property price as described in Note 4 (at
prices ranging from $4.80 to $6.40 per share) 3,091,500 15,200,000
---------- -----------
6,190,450 30,809,000
---------- -----------
Balance, December 31, 1997 21,049,857 62,894,000
---------- -----------
---------- -----------
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
10. SHARE OPTIONS AND WARRANTS
(a) STOCK OPTIONS
Under the terms of the Employee Stock Option Plan (the "Plan"), the Company
may issue options to eligible employees to purchase an aggregate of
2,400,000 common shares of the Company at prices not lower than the market
price of the shares at the date prior to the grant. Changes to options
during 1996 and 1997 are as follows:
Plan Price Range
--------- -----------
Options outstanding
December 31, 1995 1,094,993 $0.62-$2.40
--------- -----------
-----------
Options granted in 1996
July 10 760,000 $4.40
August 16 160,000 $2.125
Options exercised (440,219) $0.95-$2.40
Options expired or canceled (56,171) $2.40
---------
423,610
---------
Options outstanding
December 31, 1996 1,518,603 $1.00-$4.40
--------- -----------
-----------
Options granted in 1997
February 14 890,000 $4.50
June 4 121,500 $6.09
October 20 (conditional upon
shareholder approval) 170,000 $5.78
Options exercised (233,950) $1.00-$4.40
--------- -----------
-----------
947,550
---------
Options outstanding
December 31, 1997 2,466,153 $1.00-$6.09
--------- -----------
--------- -----------
Options outstanding at December 31, 1997 expire at various dates from March 3,
1999 to October 22, 2002
(b) SFAS 123 required disclosure
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS
123"). This statement requires that companies with stock-based compensation
plans either recognize compensation expense based on new fair value accounting
methods or continue to apply the provisions of Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employee" ("APB25") and disclose
pro forma net loss and loss per share assuming the fair value method had been
applied. The company has elected to follow APB 25 and related interpretations
in accounting for its employee stock options.
Pro forma information regarding net loss and loss per share is required by
"SFAS 123", and has been determined as if the company had accounted for its
employee stock options under the fair value method of that statement. The
fair value for these options was estimated at the date of the grant using a
Black-Scholes option pricing model with the following weighted average
assumptions: volatility factors of the
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
10. SHARE OPTIONS AND WARRANTS (CONTINUED)
expected market price of the company's common stock of 157% and dividend yields
of 0%, weighted average expected life of the options ranging from 2 to 4 years,
and risk-free interest rate of 5.25%.
"SFAS 123" requires that, for the pro forma disclosure, the compensation cost
based on the fair values of the options at the grant dates be amortized over the
vesting period. If compensation cost for stock options had been determined
based on the fair value at the grant dates for 1997 and 1996 consistent with the
method prescribed by "SFAS 123", the company's net loss and loss per share would
have been adjusted to the pro forma amounts indicated below:
1997 1996
Pro forma net loss ($8,940,000) ($3,699,000)
----------- -----------
----------- -----------
Pro forma net loss per common share ($0.50) ($0.30)
----------- -----------
----------- -----------
(c) Warrants
Warrants issued in 1996 providing the right to purchase 930,000 common shares at
a price of $6.00 per common share remain outstanding with an expiry date of May
1, 1998. During the year an additional 25,000 warrants were exercised at $4.40
per share however, these exercised shares were returned to the company
subsequent to the year end.
11. INCOME TAXES
As at December 31, 1997, the company has income tax loss carry-forwards of
approximately $1,500,000 which may be available to reduce income taxes otherwise
payable in future years. These carry-forwards, if available and unused, will
expire from 1998 to 2004.
In addition, exploration expenditures of approximately $12,000,000 have been
written-off as at December 31, 1997 in the financial statements, and may be
available for deduction from taxable income of future years.
The potential future benefit of these loss carry-forwards and exploration
expenditures has not been recognized in these financial statements.
To December 31, 1997, expenditures made under flow-through share agreements
aggregating $1,900,000, which are included in deferred mineral exploration
expenditures, are deductible by investors, and accordingly, are not available
for deduction from taxable income of the company.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
12. RELATED PARTY TRANSACTIONS
Other assets from related parties relate to amounts from corporations which have
senior management in common with the company (see Note 3).
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) In 1997, the company incurred legal and secretarial fees provided by
directors and senior officers of the company amounting to $109,000 (1996 -
$45,000). These fees have been charged to administrative expenses.
(b) In 1997, consulting fees were charged by directors and senior officers of
the company amounting to $628,000 (1996 - $365,000). Of the total fees,
$261,000 (1996 - $165,000) has been charged to administrative expenses and
$367,000 (1996 - $200,000) pertaining to time spent overseeing the Black Rock
exploration has been included in the company's deferred mineral exploration
expenditures.
13. CONTINGENCIES AND COMMITMENTS
(a) 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 financings.
(b) MINIMUM PROPERTY COMMITMENTS
In order to keep its property leases in good order, the company is committed to
the following amounts:
2001 and
1998 1999 2000 subsequent years
-------- -------- -------- ----------------
Black Rock $150,000 $150,000 $150,000 $150,000
Eagle Lake 75,000 75,000 75,000 75,000
Big Trout Lake 65,000 65,000 65,000 65,000
-------- -------- -------- --------
$290,000 $290,000 $290,000 $290,000
-------- -------- -------- --------
-------- -------- -------- --------
Additionally, the company leases office and warehouse premises under leases
expiring up to the year 2005 at an annual base rental of approximately $150,000.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
14. SEGMENTED INFORMATION
The company's major activity relates to the exploration for precious metal
(gold, silver and platinum) in the United States of America and Canada. Below
are details of the company's mineral expenditures and identifiable assets
segregated according to the country where the expenditure was incurred or the
asset is situate, as the case may be:
United States Canada
------------- ------
Year ended 1997:
Mineral expenditures $30,236,000 $ 149,000
Identifiable assets $39,931,000 $ 440,000
Year ended 1996:
Mineral expenditures $ 2,412,000 $ 64,000
Identifiable assets $10,918,000 $ 1,040,000
15. LEGAL PROCEEDINGS
(a) On April 28, 1997, the company filed a Notice of Claim for damages against
the Arizona Department of Mines and Mineral Resources ("ADMMR"), its director
Mason Coggin and employee Nyal Niemuth. The Notice of Claim alleges damages
in excess of $25 million dollars from untrue and misleading statements and
information provided by Messrs. Coggin and Niemuth in response to inquiries
from existing shareholders of the company, potential investors and members of
the media in connection with the company's development of the Black Rock
property. The company also claimed that Messrs. Coggin and Niemuth acted
beyond their statutory authority. It is the company's understanding that the
mandate of ADMMR is to operate the Arizona Mineral Museum and to maintain
archives about mining. The company understands that neither the ADMMR nor
any of its employees have any legal authority to regulate, review and/or
comment on companies mining in the State of Arizona.
In connection with the filing of the Notice of Claim on September 2, 1997,
the company obtained a permanent injunction against ADMMR and Messrs. Coggin
and Niemuth in their official capacities as representatives of ADMMR,
enjoining ADMMR and Messrs. Coggin and Niemuth from commenting on or giving
financial advice relative to any mining venture or company in Arizona.
(b) During 1997, the company was the subject of several inquiries by The Nasdaq
Stock Market, Inc. ("Nasdaq"), the United States Securities and Exchange
Commission and the Arizona Corporation Commission. The company was asked to
voluntarily provide certain information and documentation to questions raised
by each regulatory authority. The company voluntarily provided each
regulatory authority with the information and documentation requested, and to
date, no further inquiry has been made.
On February 11, 1998, the company received a Notice stating that Nasdaq
staff had determined that the company no longer qualified for continued
listing on the Nasdaq SmallCap Market. The company requested and was granted
a hearing before an independent panel to review the determination of the
Nasdaq staff. The hearing was held on March 19, 1998, and to March 24, 1998
the company had not received the independent panel's decision. Pending the
decision of the independent panel, the company's common shares will continue
to trade on the Nasdaq SmallCap Market. If the independent panel's decision
supports the Nasdaq staff's determination, then the company's common shares
will be delisted from the Nasdaq SmallCap Market, in which case they will
continue to trade on the Canadian Dealing Network. The company expects that
its common shares will also trade on the Bulletin Board in the United States.
If the independent panel's decision supports the company's position, then
the company's common shares will continue to trade on the Nasdaq SmallCap
Market.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
15. LEGAL PROCEEDINGS (CONTINUED)
(c) The company is in receipt of a demand letter seeking payment of the sum
of $2,500,000 pursuant to an agreement the company signed to purchase a
certain assay methodology and a claim for unauthorized appropriation of
proprietary technology. The company believes the methodology has not been
proven by third party verification and that it has developed its own
methodology which is independent and is based on a different technology. At
this time it is unknown if additional amounts, if any, are payable pursuant
to this demand letter.
16. OTHER INFORMATION
(a) Subsequent events
On January 13, 1998 the company completed a private placement of 1,000,000
units, with each unit consisting of one common share and one warrant to purchase
a common share at $1.25 prior to the close of business on December 3, 1998, for
aggregate proceeds of $1,250,000. Amounts received by December 31, 1997
relating to future common share issuances have been recorded to deposits
payable.
On dates between January 1, 1998 and February 16, 1998, the company issued
$200,000 of 9% senior convertible debentures due on January 31, 2001 with a
conversion price equal to the lower of : 110% of the company's share price at
the date of debenture issuance; and 80% of the company's share price for the 5
trading days prior to date of conversion.
(b) Fair Value
The fair value of the company's financial instruments such as sundry
receivables, bank loan, accounts payable, vehicle and equipment loans, deposits
payable and debentures is approximated by its carrying value.
17. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
STATES AND THOSE IN CANADA
The financial statements are prepared in accordance with accounting principles
generally accepted in the United States. In these financial statements, the
major differences between accounting principles generally accepted in the United
States ("U.S. GAAP") and those in Canada ("Canadian GAAP") are as follows:
a) The company follows the practice of charging share issue costs to the share
capital account. Under Canadian GAAP, such costs can be charged to the deficit
account. Although this difference does not affect net shareholders' equity,
under Canadian GAAP the company's share capital and deficit account would be
increased as indicated below.
b) The Company follows the practice of accounting for the premium on
flow-through shares as a reduction of deferred mineral exploration
expenditures. Canadian GAAP would allow the premium to be recorded as a
deferred credit which is written-off or amortized as the related project
expenditures, on which the flow through funds were expended, are written-off
or amortized. Although this difference does not affect net loss, the
deferred premium on flow-through shares would be recorded and deferred
mineral exploration expenditures would be increased as indicated below.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
17. DIFFERENCES BETWEEN ACCOUNTING PRICIPLES GENERALLY ACCEPTED IN UNITED
STATES AND THOSE IN CANADA (CONTINUED)
c) A business combination in 1986 was accounted for using the pooling of
interests method of accounting. Under Canadian GAAP, this business combination
would have been accounted for using the purchase method. This difference does
not affect net loss for the years ended 1997, 1996 and 1995. The deferred
exploration expenditures would have been increased by $442,000 as at December
31, 1997 and 1996, the Company's share capital account would have been
increased by $493,000 as at December 31, 1997 and 1996.
d) Canadian GAAP allows the practice of deferral of period costs such as
certain administrative expenses. This difference would have decreased the net
loss by $212,000 for the year ended December 31, 1995 and decreased deficit and
increased deferred exploration expenditures by $447,000 as at December 31, 1996
and 1997. This difference does not affect net loss for the years ended December
31, 1997 and 1996.
The effect of these differences on the financial statements is as follows:
(a) Balance sheet:
1997 1996
------------ ------------
Deferred mineral exploration expenditures
Under U.S. GAAP $ 37,891,000 $ 8,298,000
Premium on flow-through shares - b) above 339,000 339,000
Pooling - c) above 442,000 442,000
Period costs - d) above 447,000 447,000
------------ ------------
Under Canadian GAAP $ 39,119,000 $ 9,526,000
------------ ------------
------------ ------------
Deferred premium on flow-through shares
Under U.S. GAAP $ 0 $ 0
Applied to deferred mineral
exploration expenditures - b) above 339,000 339,000
------------ ------------
Under Canadian GAAP $ 339,000 $ 339,000
------------ ------------
------------ ------------
Share capital
Under U.S. GAAP $ 62,894,000 $ 32,085,000
Share issue costs - a) above 2,159,000 2,159,000
Pooling - c) above 493,000 493,000
------------ ------------
Under Canadian GAAP $ 65,546,000 $ 34,737,000
------------ ------------
------------ ------------
Deficit
Under U.S. GAAP $ 26,172,000 $ 21,332,000
Share issue costs - a) above 2,159,000 2,159,000
Pooling - c) above 51,000 51,000
Period costs - d) above (447,000) (447,000)
------------ ------------
Under Canadian GAAP $ 27,935,000 $ 23,095,000
------------ ------------
------------ ------------
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
17. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
STATES AND THOSE IN CANADA (CONTINUED)
(b) Statement of loss and deficit
<TABLE>
<CAPTION>
Cumulative from
Year ended December 31, inception July 22, 1980
1997 1996 1995 to December 31, 1997
------------ ------------ ------------ -----------------------
<S> <C> <C> <C> <C>
Net loss for the period
under U.S. GAAP $ 4,840,000 $ 1,399,000 $ 2,444,000 $ 26,172,000
Pooling adjustment
c) above 0 0 0 51,000
Period cost adjustment
(d) above 0 0 (212,000) (447,000)
------------ ------------ ------------ -------------
Net loss for the period
under Canadian GAAP $ 4,840,000 $ 1,399,000 $ 2,232,000 $ 25,776,000
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Loss per share
under Canadian GAAP $ 0.27 $ 0.11 $ 0.29
------- ------- -------
------- ------- -------
</TABLE>
<PAGE>
EXHIBIT 10(cc)
Mr. Lee Furlong
President
International Precious Metals, Inc.
4625 South Ash Avenue, Suite J-1
Tempe, AZ 85282
RE: Preliminary Agreement -- International Precious Metals, Inc.
("International") with Auric Metallurgical Laboratories, LLC ("Auric")
Dear Mr. Furlong:
This preliminary letter of understanding will follow up and supersede the
preliminary letter of understanding sent to your office via fax on June 6, 1997.
This replacement letter of understanding is based upon and required by
your explanatory letter of additional terms sent to my office on June 6, 1997
and my client's representation of your follow-up discussions of this date.
By way of recitals, my client understands and acknowledges your firm's
concern to preliminary test the "Fire Assay Procedure" ("the Technology")
upon actual ore samples mined or processed by your firm, before making an
irrevocable commitment to purchase the Technology as earlier outlined. My
client, Auric, is primarily concerned that in showing and demonstrating the
Technology to your firm that they do not in any manner surrender their
exclusive rights and interest in what Auric considers to be its unique
proprietary process. As a result, Auric wants you to be fully satisfied
before proceeding with the purchase obligation; concomitantly, your firm
needs to fully appreciate the concern of Auric in protecting the
confidentiality of its proprietary technology. This revised preliminary
letter of understanding is prepared to address both these concerns while
outlining the purchase terms.
As earlier outlined in the preliminary intent letter of June 6, 1997 from our
office, International is willing to purchase the rights to use the Technology
for its own refining and processing activities in perpetuity for the
consideration of Seven Hundred Fifty Thousand Dollars U.S. ($750,000.00),
subject to initial testing and review as described below.
<PAGE>
Preliminary Letter of Intent
Auric/International
June 9, 1997
Page 2
Auric acknowledges receipt and sufficiency of a wire transfer of the initial
payment of the foregoing purchase price in the sum of $75,000.00 as
transferred by International to Auric on June 6, 1997. Auric agrees that if
the purchase of the Technology is rejected by International after the initial
testing described below and in accordance with the other terms and provisions
of this Letter of Understanding, then Auric will remit to International the
full amount of the initial tender ($75,000.00) without deduction or interest.
This Agreement would then be of no further force or effect. If the Technology
is accepted by International at the completion of the initial testing, then
International agrees to immediately execute and deliver to the representative
of Auric the purchase money note evidencing the balance of the purchase
obligation of $675,000.00 payable in nine (9) consecutive equal monthly
installments of $75,000.00 each for nine months commencing July 9, 1997,
without interest. A copy of the actual note to be entered is attached hereto
and incorporated by this reference.
It is agreed and understood between Auric and International that one
or more representatives of Auric will present themselves at the principal
place of business for International on June 12 to 13, 1997 for the purposes
of demonstrating and testing the Technology with ore supplied by
International. International represents it will make a decision not later
than the end of business on June 13, 1997 whether to purchase the Technology
and enter the above referenced Note for the balance of the purchase
obligation, if it elects to acquire the Technology. International further
represents that it will not reject the Technology, unless it is manifestly
apparent that it could not be used to fire assay ores of substantially the
same nature and mineral content as the samples previously supplied to Auric
by International for testing.
If the purchase of the Technology is rejected by International in
accordance with the terms outlined in the preceding paragraph, then
International agrees that it will not in any manner use, employ, simulate,
reverse engineer or attempt to duplicate the Technology as demonstrated and
tested; or, create any similar technology derived from or inspired by the
Technology. Specifically, and not in limitation of the foregoing
undertaking, International agrees that it will return any schematic, drawing,
or description of the Technology as made or recorded on any medium (e.g.
paper, computer entry, tape, video tape). No employee, agent or any person
acting under the direction of Authority or control of International will
discuss the concept or details of the Technology or the testing with any
third party.
International further agrees and understands that if it elects to
purchase the Technology, as described above, it is acquiring for the purchase
price a limited license right in perpetuity to use the Technology , without
further consideration, for its own metallurgical processing, including any
wholly owned subsidiary or division, but it is not granted any right to become
a reseller or distributor of the Technology to third parties.
<PAGE>
Preliminary Letter of Intent
Auric/International
June 9, 1997
Page 3
International further agrees that it will use all practical means available
to it to protect and safeguard the Technology, if acquired, from any third
party knowledge or use. It is further understood that Auric may and will
continue to utilize and license the Technology as it sees fit.
The foregoing constitutes a binding agreement between the
undersigned parties, until or unless superseded by a more definitive final
agreement as executed by both parties hereto. Should any action become
necessary to enforce any term or provision of this Agreement either party may
be entitled to seek both injunctive relief and damages. The prevailing party
would also be entitled to reasonable attorney fees and costs of court. Each
person signing below represents that he is fully authorized to enter into
this Agreement pursuant to the governing board for either Auric or
International, respectively.
Accepted and Approved: Accepted and Approved:
Auric Metallurgical Laboratories International Precious Metals, Inc.
A Utah Limited Liability Co. An Arizona Corporation
- -------------------------------- --------------------------------
By Alan Cottle By Lee Furlong
Its Manager Its President
<PAGE>
<TABLE>
<CAPTION>
<S><C>
FOR VALUE RECEIVED, the undersigned promise(s) to pay to Auric Metallurgical Laboratories, LLC
------------------------------------------
or order Six Hundred Seventy-Five Thousand &00/100 ------------ DOLLARS, ($575,000.00).
-------------------------------------------------------------------------------------------
together with interest from date at the rate of ZERO per cent (0%) per annum on the unpaid balance payable
as follows, viz:
Entire Note Balance payable in nine consecutive equal monthly payments
of Seventy-Five Thousand Dollars ($75,000.00/month) commencing July 9,
1997 and payable on such monthly date thereafter until paid in full.
in lawful money of the United States of America, negotiable and payable at the office of Auric Metallurgical
--------------------
Laboratories, a Utah Limited Liability co. at 3260 W. Directors Row, SLC, Ut 84104
- ----------------------------------------------------------------------------------
without defalcation or discount. All payments hereinabove provided for shall be applied first on accrued
interest and balance to reduction of principal. Any installments of principal and interest not paid when
due shall, at the option of the legal holder hereof, bear interest thereafter at the rate of 12% per
annum until paid. --------
In case of default in the payment of any installment of principal or interest as herein
stipulated, then it shall be optional with the legal holder of this note to declare the entire principal
sum hereof due and payable; and proceedings may at once be instituted for the recovery of the same by law,
with accrued interest and costs, including reasonable attorney's fees.
The makers and endorsers severally waive presentment, protest and demand; and waive notice of
protest, demand and of dishonor and non-payment of this note, and expressly agree that this note, or any
payment thereunder, may be extended from time to time without in any way effecting the liability of the
makers and endorsers thereof.
This note and the interest thereon is secured by a first mortgage on PAYEES
interest in the "FIRE ASSAY PROCEDURE"
THIS IS A PURCHASE MONEY NOTE EVIDENCING MAKERS PURCHASE OF THE ABOVE TECHNOLOGY
BY SEPARATE WRITING. NO PENALTY FOR EARLY PAYMENT. THE UNDERSIGNED HAS BEEN
DULY AUTHORIZED TO ENTER THIS NOTE BY RESOLUTION OF THE MAKER'S BOARD OF
DIRECTORS.
International Precious Metals, Inc.
-----------------------------------
/s/ VLR "Lee" Furlong
-----------------------------------
By VLR "Lee" Furlong its President
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10(dd)
Mr. Lee Furlong, President
INTERNATIONAL PRECIOUS METALS, INC.
4625 South Ash Avenue, Suite J-1
Tempe, AZ 85282
RE: Supplement to Preliminary Agreement between International
Precious Metals, Inc. ("International") and Auric Metallurgical
Laboratories, LLC ("Auric") Dated June 9, 1997 ("the Agreement")
Dear Mr. Furlong:
It is the understanding of Auric that both International and Auric
(hereafter collectively ("the parties") mutually acknowledge by the signature
of their respective officers below the following agreed upon changes or
additions to the June 9 Agreement between the parties. Each represents that
the following changes have been reviewed and ratified by the Board of
Directors of International and a majority of the members of Auric, each of
which have fully authorized the undersigned officers of each entity to sign
this Supplemental Agreement.
The terms of the Agreement are accordingly changed, modified or
extended as follows, provided that, no term or provision of the Agreement not
specifically modified below shall be deemed changed, waived or released in
any manner and shall continue to be of full force and effect between the
parties:
1. International will be granted an exclusive right in perpetuity to
the "Fire Assay Procedures" ("the Technology") of Auric. It is agreed that
Auric, or any direct successor entity, shall continue to own and use the
Technology for its own purposes, but will not further assign or convey such
technology to any third party. International may use the Technology for its
own purposes and may further resale or assign such technology without further
consideration to Auric.
2. The Technology is defined between the parties to be a
scientifically verifiable assay process for the detection and measurement of
potentially recoverable commercial quantities of Gold, Platinum and Palladium
from standard ore samples.
3. Notwithstanding any prior agreements as to time for International
to review and accept the Technology, whether written or oral, both parties
now agree and stipulate that the execution of this Supplemental Agreement
evidences the acceptance of the Technology for purchase by International,
subject only to independent laboratory verification by a competent
<PAGE>
Mr. Lee Furlong, President
RE: Supplemental Agreement
June 25, 1997
Page 2
metallurgical or assay laboratory, as designated by Auric, that the
Technology is a reliable and scientifically verifiable assay process for
detection of potentially commercial quantities of Gold, Platinum and
Palladium based upon standard ore samples.
4. It is agreed by and between the parties that International will
complete the independent review of the Technology as described by the prior
paragraph within Ten days (10) of this Supplemental Agreement at its own
cost and expense, and will make the findings available to Auric. Auric
agrees to fully cooperate in the testing process and to supply expertise,
equipment and personnel as reasonably required. In the event, but only in
the event, the test results do not evidence that the Technology is a reliable
and scientifically verifiable assay process for identifying Gold, Platinum
and Palladium from standard ore samples, International may give notice of its
election to fully rescind the purchase obligation for the Technology to Auric
and Auric will promptly refund the initial consideration of $75,000.00 less
any laboratory expenses incurred by Auric to date. International will then
have no further purchase obligation or rights in the Technology, except the
non-disclosure provisions of the Agreement shall survive any such recission.
5. In addition to the cash and note consideration recited in the
Agreement (total $750,000), which shall continue to be paid in accordance
with the Agreement, International shall additionally pay to Auric, upon
testing of the Technology and in consideration for this Supplemental
Agreement, One Hundred Thousand (100,000) of its unrestricted free trading
common shares, either directly or through a third party without recourse to
Auric, and Three Hundred Thousand Shares (300,000) registered free trading
shares within sixty (60) days of this Supplemental Agreement. International
may elect to tender the second installment of 300,000 shares by delivering to
Auric 400,000 shares with a requirement of Auric to reconvey or assign the
initial 100,000 shares to a third party designated by International.
International agrees to fully indemnify Auric from any and all adverse claims
related to the foregoing proposed share transactions.
Accepted and Approved: Accepted and Approved:
AURIC METALLURGICAL INTERNATIONAL PRECIOUS METALS,
LABORATORIES, INC. An Arizona Corporation
A Utah Limited Liability Company
/s/ Alan Cottle /s/ Le Furlong
- ----------------------------------- -----------------------------------
By: Alan Cottle By: Lee Furlong
Its: Manager Its: President
<PAGE>
Exhibit 10(ee)
March 11, 1998
Omega Investment Corporation
Elizathethan Square, Box 1959G
Georgetown, Grand Cayman, BWI
Attention: Mr. Roderick A. McLean, President
- --------------------------------------------
Dear Sirs/Madams:
Re: International Precious Metals Corporation purchase of Black
Rock Property Interest
------------------------------------------------------------
Below please find the terms and conditions upon which International
Precious Metals Corporation ("IPM") will acquire 100% ownership interest in
the Black Rock Property, pursuant to an agreement made as of the 9th day of
May, 1997, between IPM, International Precious Metals Corporation of Arizona
("IPMA") and Omega Investment Corporation ("Omega"), as amended on July 29,
1997. The terms outlined below will be incorporated into an amended property
purchase agreement.
1. IPM will pay to Omega $1,000,000.00 (US) upon the exercise of the
1,000,000 warrants which are presently outstanding providing the
warrant holders with the right to purchase 1,000,000 common shares of
IPM at any time prior to December 3, 1998, at $1.25 (US) per common
share. If IPM does not pay Omega the $1,000,000.00 on or prior to
December 15, 1998, then such amount will become a debt obligation for
IPM bearing interest at the prime rate charged by IPM's bankers in
Phoenix, Arizona, plus 2%.
2. IPM will release from escrow the 3,000,000 common shares issued to
Omega on May 30, 1997. If desired, IPM would arrange for the placement
of the 3,691,500 common shares (being the 3,000,000 common shares to be
issued and the 691,500 common shares already issued to Omega) or such
portion thereof as Omega wished to place so as to allow Omega to obtain
proceeds at current market prices at the time of sale. Alternatively,
at Omega's request, IPM agrees to endeavour to obtain a registration for
such shares so as to allow Omega to sell the shares on the open market,
subject to Omega agreeing to a limited release of same to take into
consideration trading volumes etc. Omega acknowledges that there are
presently restrictions on the transfer of the 3,691,500 common shares
issued to Omega in accordance with the securities laws of the United
States, which such restrictions prevent Omega from selling such shares
in the United States until after the second anniversary of their
issuance.
3. IPM will grant to Omega a 1 1/2% Net Smelter Royalty interest in the
Black Rock property.
<PAGE>
4. IPM agrees that it will diligently pursue the development of the Black
Rock property, provided that there exists the economic merits of
pursuing same. In the event that Omega has reasonable grounds to
believe that IPM (or any successor company who may own IPM's interest
in the Black Rock property) is not diligently pursuing the development
of the Black Rock property, despite the fact that there is economic
merit to pursuing same, then Omega shall have the right to seek a
determination of this fact before an arbitrator. The arbitrator shall
determine firstly whether there is economic merit to developing the
Black Rock property, and in the event of an affirmative answer, the
secondly determine whether IPM is diligently pursuing the development
of the Black Rock property, then IPM will be deemed to have abandoned
the Black Rock property, and ownership of same will revert back to
Omega.
<PAGE>
5. IPM agrees to provide evidence to Omega on or prior to August 1 of each
year that IPM has paid, or will be paying, the maintenance fees owing
to the State of Arizona in order to maintain the claims which comprise
the Black Rock property in good standing.
If the foregoing is in accordance with your understanding and is acceptable to
you, please indicate by signing the enclosed copy of this letter and returning
one copy to us.
Yours very truly,
INTERNATIONAL PRECIOUS METALS CORPORATION
David N. Kornhauser
Corporate Secretary (Toronto)
DNK/sr
The foregoing is confirmed and accepted this day of March, 1998
OMEGA INVESTMENT CORPORATION
Per: /s/ Roderick A. McLean
---------------------------
Name:
Title: President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
INTERNATIONAL PRECIOUS METALS CORPORATION ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 668,000
<SECURITIES> 0
<RECEIVABLES> 668,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,336,000
<PP&E> 1,508,000
<DEPRECIATION> 235,000
<TOTAL-ASSETS> 40,371,000
<CURRENT-LIABILITIES> 3,538,000
<BONDS> 0
0
0
<COMMON> (36,722,000)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 40,371,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,297,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,000
<INCOME-PRETAX> (4,840,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,840,000)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
