<PAGE> 1
Filed pursuant to Rule 424b(3)
Registration Statement No. 33-62449
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* *
* THIS PRELIMINARY PROSPECTUS SUPPLEMENT AND THE INFORMATION CONTAINED *
* HEREIN ARE SUBJECT TO COMPLETION OR AMENDMENT AND PROSPECTIVE *
* PURCHASERS ARE REFERRED TO THE RELATED FINAL PROSPECTUS SUPPLEMENT *
* FOR DEFINITIVE INFORMATION ON ANY MATTER CONTAINED HEREIN. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. NEITHER THIS PRELIMINARY *
* PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS SHALL *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION *
* IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* JURISDICTION. *
* *
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SUBJECT TO COMPLETION, DATED NOVEMBER 7, 1995
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus Dated November 1, 1995)
5,000,000 SHARES
FIRSTMISS GOLD INC.
COMMON STOCK
All of the shares of the common stock of the Company, par value $.01 per share
(the "Common Stock"), being offered hereby (the "Offering") are being sold by
the Company. The Common Stock is traded on The Nasdaq National Market ("Nasdaq")
under the symbol "FRMG." On November 7, 1995, the last reported sale price of
the Common Stock as reported by Nasdaq was $18.625 per share. See "Price Range
of Common Stock and Dividends."
---------------------
SEE "RISK FACTORS" COMMENCING ON PAGE S-6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A FEDERAL OFFENSE.
<TABLE>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........................ $ $ $
- ----------------------------------------------------------------------------------------------
Total(3)......................... $ $ $
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under applicable securities laws. See
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $343,750.
(3) The Company has granted the several Underwriters an option, exercisable
within 30 days after the date of this Prospectus Supplement, to purchase up
to an additional 750,000 shares of Common Stock to cover over-allotments, if
any. If all of such additional shares are purchased, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ ,
$ , and $ , respectively. See "Underwriting."
---------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, and subject to
the approval of certain legal matters by counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that the delivery of shares of Common Stock will be made in , on or
about , 1995.
---------------------
NESBITT BURNS SECURITIES INC.
SALOMON BROTHERS INC
SCOTIAMCLEOD (USA) INC.
S.G.WARBURG & CO. INC.
TORONTO DOMINION SECURITIES INC.
---------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS NOVEMBER , 1995
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE> 3
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto appearing
elsewhere or incorporated by reference in this Prospectus Supplement and the
accompanying Prospectus. Except as otherwise specified, all information in this
Prospectus Supplement assumes no exercise of the Underwriters' over-allotment
option. References to the "Company" in this Prospectus Supplement and
accompanying Prospectus include FirstMiss Gold Inc. and its subsidiary.
THE COMPANY
FirstMiss Gold Inc. (the "Company"), is engaged in the exploration,
development, mining and processing of gold ore from the 33,000-acre "Getchell
Property" located in northern Nevada. Gold mineralization on the Getchell
Property is found in a series of discrete zones along the Getchell fault zone
and the Turquoise Ridge fault zone. During fiscal 1995, approximately 184,298
ounces of gold were produced and sold, excluding 14,939 development ounces. As
of June 30, 1995, the Company had proven and probable reserves of approximately
6.964 million tons of ore with an average grade of 0.206 ounces per ton of gold,
or approximately 1.435 million contained ounces of gold.
RECENT DEVELOPMENTS
In February 1995, the Company hired Mineral Resources Development, Inc.
("MRDI") to prepare a pre-feasibility study with respect to a geologic resource
along the Turquoise Ridge fault. Based on the MRDI pre-feasibility study, the
Company announced on September 25, 1995, an additional probable reserve
consisting of 3.712 million tons of ore with an average grade of 0.338 ounces
per ton or 1.254 million contained ounces of gold.
On October 20, 1995, the Company's former parent, First Mississippi
Corporation ("First Mississippi"), distributed its 81% interest in the Company's
Common Stock to First Mississippi shareholders.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered................. 5,000,000 shares
Common Stock outstanding(1):
Before the Offering(2)............. 18,182,600 shares
After the Offering................. 23,182,600 shares
Use of Proceeds...................... To repay $15 million of the $52.5 million in
principal amount of debt owed to First Mississippi,
to repay amounts borrowed under the Company's
existing credit facility (approximately $5.5
million), for development activities at Turquoise
Ridge and for general corporate purposes. The Company
may choose to use proceeds to pay down additional
amounts under the First Mississippi loan.
Nasdaq Trading Symbol................ FRMG
</TABLE>
- ---------------
(1) Excludes options to purchase shares of Common Stock, which as of June 30,
1995 consisted of 251,949 shares of Common Stock underlying stock options
and 69,500 shares of Common Stock underlying debenture options.
(2) As of October 31, 1995.
RISK FACTORS
For information concerning certain factors that should be considered by
prospective investors, see "Risk Factors," commencing on page S-6.
S-3
<PAGE> 4
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SEPTEMBER
30 YEARS ENDED JUNE 30
----------------- --------------------------------
1995 1994 1995 1994 1993
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................. $17,605 $21,509 $ 71,485 $ 95,150 $ 78,773
Gross profit............................... 666 3,616 1,710 13,019 3,519
Exploration expenses....................... 366 1,712 3,776 4,049 2,803
Abandonment and impairment of mineral
properties............................... -- -- 11,531 -- 256
Earnings (loss) from operations............ (778) 1,246 (16,256) 7,225 (1,561)
Net earnings (loss)................... (1,234) 507 (18,357) 5,649 (2,469)
Net earnings (loss) per common share....... $ (0.07) $ 0.03 $ (1.01) $ 0.31 $ (0.14)
OPERATING DATA:
Ounces of gold sold........................ 43,845 55,724(1) 184,298(2) 243,826 210,644
Average Realized Price per Ounce........... $ 402 $ 386 $ 388 $ 390 $ 374
Average Market Price per Ounce............. $ 383 $ 386 $ 385 $ 379 $ 346
Ounces of Gold Produced:
Mill..................................... 42,262 50,402(1) 166,937(2) 215,363 186,799
Heap Leach............................... 1,583 5,322 17,361 28,463 23,666
Cash Costs per Ounce:
Mill..................................... $ 348 $ 275 $ 327 $ 290 $ 290
Heap Leach............................... $ 137 $ 241 $ 318 $ 183 $ 202
Combined................................. $ 341 $ 272 $ 326 $ 278 $ 280
Total Cost per Ounce:
Mill..................................... $ 395 $ 328 $ 384 $ 356 $ 374
Heap Leach............................... $ 149 $ 254 $ 330 $ 194 $ 228
Combined................................. $ 386 $ 321 $ 378 $ 337 $ 358
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
----------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital................................................... $ 8,877 $ 76,366
Property, plant and equipment, net................................ 69,179 69,179
Total assets...................................................... 87,704 149,984
Notes payable to First Mississippi................................ 46,750 23,500
Stockholders' equity.............................................. 30,509 119,634
</TABLE>
- ---------------
(1) Excludes 1,120 development ounces from the Getchell Main Underground Mine.
(2) Excludes 14,939 development ounces from the Getchell Main Underground Mine.
(3) After giving effect to the spin-off by First Mississippi, the Offering
(assuming an offering price of $18.625 per share) and the application of
the estimated net proceeds therefrom. See "Use of Proceeds."
S-4
<PAGE> 5
PROVEN AND PROBABLE MINEABLE RESERVES
The following table sets forth the proven and probable mineable gold ore
reserves located on the Getchell Property as of June 30, 1995 as supplemented by
the reserves announced by the Company on September 25, 1995 with respect to
Turquoise Ridge. Sulfide reserves assume a 0.200 ounce per ton cutoff for
underground reserves (0.250 ounce per ton cutoff for the reserves announced with
respect to Turquoise Ridge). Oxide reserves are based on a 0.010 cyanide soluble
cutoff grade.
Proven and probable mineable ore reserves are estimates of quantities and
grades of ore which can be economically recovered based on assumptions of a $400
per ounce future gold price. These reserves have been prepared by the Company
and have been confirmed with respect to the Company's reserves as of June 30,
1995 by Mine Development Associates and with respect to the Company's reserves
at Turquoise Ridge announced on September 25, 1995, by MRDI, each of which is an
independent mining consulting firm.
<TABLE>
<CAPTION>
CONTAINED
ORE TONS GRADE GOLD OUNCES
--------- ----- -----------
(WEIGHTED AVERAGE)
<S> <C> <C> <C>
Sulfide..................................................... 5,274,000 0.263 1,388,300
Oxide....................................................... 1,689,600 0.028 46,600
--------- ----- -----------
Total Reserves(1)................................. 6,963,600 0.206 1,434,900
======== ===== =========
Turquoise Ridge(2).......................................... 3,712,000 0.338 1,254,000
======== ===== =========
</TABLE>
- ---------------
(1) As of June 30, 1995. Total reserves do not include reserves at Turquoise
Ridge.
(2) As of September 25, 1995. All Turquoise Ridge reserves are sulfide.
S-5
<PAGE> 6
RISK FACTORS
Purchasers of the Common Stock being offered hereby should carefully read
this entire Prospectus Supplement, the accompanying Prospectus and the documents
incorporated by reference therein. Ownership of shares of the Common Stock
involves certain risks. In determining whether to purchase shares of Common
Stock, prospective investors should consider carefully the following factors in
addition to the other information contained in this Prospectus Supplement, the
accompanying Prospectus and the documents incorporated by reference therein.
GOLD PRICE VOLATILITY
The Company's profitability is significantly affected by changes in the
market price of gold. Gold prices fluctuate widely and are affected by numerous
industry factors, such as demand for precious metals, forward selling by
producers, central bank sales and purchases of gold, and production and cost
levels in major gold-producing regions such as South Africa and the former
Soviet Union. Moreover, gold prices are also affected by macro-economic factors
such as expectations for inflation, interest rates, currency exchange rates, and
global or regional political and economic situations. The current demand for,
and supply of, gold affect gold prices, but not necessarily in the same manner
as current demand and supply affect the prices of other commodities. The
potential supply of gold consists of new mine production plus existing stocks of
bullion and fabricated gold held by governments, financial institutions,
industrial organizations and individuals. Since mine production in any single
year constitutes a very small portion of the total potential supply of gold,
normal variations in current production do not necessarily have a significant
effect on the supply of gold or on its price. If gold prices should decline
below the Company's cash costs of production and remain at such levels for any
sustained period, the Company could determine that it is not economically
feasible to continue commercial production.
The volatility of gold prices is illustrated in the following table of the
annual high, low and average London P.M. Fix:
<TABLE>
<CAPTION>
PRICE PER OUNCE
---------------------------
CALENDAR YEAR HIGH LOW AVERAGE
------------- ----- ----- -------
<S> <C> <C> <C>
1984................................................... $406 $308 $ 360
1985................................................... 341 294 317
1986................................................... 438 326 368
1987................................................... 500 390 446
1988................................................... 495 395 437
1989................................................... 416 356 381
1990................................................... 474 346 383
1991................................................... 403 344 362
1992................................................... 374 330 344
1993................................................... 406 326 360
1994................................................... 396 370 384
1995 (through November 7, 1995)........................ 396 372 384
</TABLE>
The London P.M. Fix on November 7, 1995, was $384.80 per ounce.
LOSSES
The Company reported a net loss of $1.2 million for the quarter ended
September 30, 1995. The Company also reported a net loss of $18.4 million for
the fiscal year ended June 30, 1995. The Company expects to continue to
experience losses until its low grade stockpiled ore is replaced by higher grade
ore from new sources, which new sources could include sources presently being
explored or developed by the Company. There can be no assurance that any such
replacement higher grade ore will be obtained by the Company.
S-6
<PAGE> 7
RESERVES
The ore reserves presented in this Prospectus Supplement are, in large
part, estimates made by the Company and confirmed by independent mining
consultants. No assurance can be given that the indicated level of recovery of
gold will be realized or that the assumed gold price of $400 per ounce will be
obtained. Reserve estimates may require revision based on actual production
experience. Market price fluctuations of gold, as well as increased production
costs or reduced recovery rates, may render ore reserves containing relatively
lower grades of mineralization uneconomic and may ultimately result in a
restatement of reserves. Moreover, short-term operating factors relating to the
ore reserves, such as the need for sequential development of ore bodies and the
processing of new or different ore grades, may adversely affect the Company's
profitability in any particular accounting period.
Declines in the market price of gold may also render ore reserves
containing relatively lower grades of gold mineralization uneconomic to exploit
unless the utilization of forward sales contracts or other hedging techniques is
sufficient to offset the effects of a drop in the market price of the gold
expected to be mined from such reserves. If the Company's realized price per
ounce of gold, including hedging benefits, were to decline substantially below
the levels set for calculation of reserves for an extended period, there could
be material delays in the development of new projects, increased net losses,
reduced cash flow, reductions in reserves and asset impairments.
CERTAIN TURQUOISE RIDGE PROJECT RISKS
The Turquoise Ridge Project involves numerous risks. These include the
following:
There can be no assurances that the probable reserves set forth in the MRDI
pre-feasibility study will actually be able to be mined and milled on an
economical basis, if at all. The MRDI study is based upon many assumptions, any,
some or all of which may not prove to be accurate. The failure of any such
assumptions to prove accurate may alter the conclusions of the MRDI study and
may have a material adverse effect on the Company.
The Turquoise Ridge project is at the pre-feasibility study level of
project development. The expenditure required to advance the project to the
point of a production test is large, particularly since the Company has decided
to proceed with shaft systems capable of being used in full-scale production to
save time and money, should trial mining be confirmed as viable. Thus to a large
extent expenditures which would usually be supported by a feasibility study will
depend on the data in-hand and assumptions made in this pre-feasibility study
with attendant higher level of uncertainty.
RESERVES
The resource and reserve estimates were prepared using geological and
engineering judgment based on available data. In the absence of underground
development, such estimates must be regarded as imprecise and some of the
assumptions made may later prove to be incorrect or unreliable.
The grade distribution at Turquoise Ridge is fairly narrow, with most
stopping blocks having grades between 0.2 to 0.4 ounces per ton. This means that
small changes in cutoff grade can cause large shifts in the reserves. If
dilution and/or mining costs related to bad ground are higher than expected, the
reserves could be substantially reduced, resulting in a shortening of mine life
and a reduced or negative cash flow.
MINING
Dilution. The tonnage and grade of the mill feed material was estimated by
applying dilution factors to certain resource data. The dilution agents are
backfill, waste from the back of overcut crosscuts and drifts, and from the
walls. In the case of the latter two, MRDI assumed that there would be an
average of one foot of back and wall dilution. If this dilution increases, there
will be corresponding negative effects on the tonnage and grade to mill. This
risk is related to the irregular configuration of the ore body which, even with
the tight cut-and-fill stopping method used, could make achievement of a
dilution thickness of one foot impossible to achieve in practice.
S-7
<PAGE> 8
No. 1 Shaft Completion. MRDI believes a two-year assumed construction
period for No. 1 Shaft, which will become the main production shaft, is an
aggressive schedule. Delay in construction would necessitate removing ore
through the No. 2 Shaft, which is basically designed for waste and the limited
ore from early production. Additionally, the availability of the final
ventilation circuit required for mining depends upon the completion of No. 1
Shaft.
Mining Cost. As part of the project risk assessment, sensitivities were run
on various mining costs. Due to uncertainties about actual ground conditions and
productivities, these costs are only predictable within a broad range and the
predictions may not be valid. Therefore, actual mining costs may have a material
adverse effect on the viability of the Turquoise Ridge project and on the
Company.
HYDROLOGY
Drainage of the ore body and country rocks will be critical to the
achievement of the mining efficiencies and costs estimated for the study. If the
deposit is not drained and water remains in this clay-rich environment, mining
conditions could worsen, and support costs will increase. If, due to the
presence of fine clays, the deposit drains slowly, the start of production may
be delayed, and the build-up to full production may be of longer duration.
Additionally, depending upon the quantity and quality of water encountered, the
water treatment/disposal options presently available to the Company may be
insufficient to meet estimated amounts needed to treat water pumped from
Turquoise Ridge during de-watering.
GEOTECHNICAL CONSIDERATIONS
The Turquoise Ridge ore zones contain areas of poor ground conditions due
to a high percentage of the ground being comprised of low rock mass rating rock
and clay. As a result, additional ground support may be required.
PROJECT DEVELOPMENT RISKS
The Company from time to time engages in the development of new ore bodies.
The Company's ability to sustain or increase its present level of gold
production is dependent in part on the successful development of such new ore
bodies and/or expansion of existing mining operations. The economic feasibility
of any such development project, and all such projects collectively, is based
upon, among other things, estimates of reserves, metallurgic recoveries, capital
and operating costs of such projects and future gold prices. Development
projects are also subject to the successful completion of feasibility studies,
issuance of necessary permits and receipt of adequate financing.
Development projects have no operating history upon which to base estimates
of future cash operating costs and capital requirements. In particular,
estimates of reserves, metal recoveries and cash operating costs are to a large
extent based upon the interpretation of geologic data obtained from drill holes
and other sampling techniques and feasibility studies which derive estimates of
cash operating costs based upon anticipated tonnage and grades of ore to be
mined and processed, the configuration of the ore body, expected recovery rates
of metals from the ore, comparable facility and equipment costs, anticipated
climate conditions and other factors. As a result, it is possible that actual
cash operating costs and economic returns of any and all development projects
may materially differ from the costs and returns initially estimated.
DEPENDENCE ON A SINGLE MINE
All of the Company's revenues are currently derived from its mining and
milling operations at the Getchell Property. If the operations at the Getchell
Main Underground Mine or at any of the Company's processing facilities were to
be reduced, interrupted or curtailed, the Company's ability to generate revenues
and profits in the future would be materially adversely affected.
S-8
<PAGE> 9
EXPLORATION
Mineral exploration, particularly for gold, is highly speculative in
nature, involves many risks and frequently is unsuccessful. The Company is
seeking to expand its reserves only through exploration and development at the
Getchell Property. There can be no assurance that the Company's exploration
efforts will result in the discovery of gold mineralization or that any
mineralization discovered will result in an increase of the Company's reserves.
If reserves are developed, it may take a number of years and substantial
expenditures from the initial phases of drilling until production is possible,
during which time the economic feasibility of production may change. No
assurance can be given that the Company's exploration programs will result in
the replacement of current production with new reserves or that the Company's
development program will be able to extend the life of the Company's existing
mines.
UNCERTAINTY OF FUTURE FINANCING
The Company has historically been largely dependent upon First Mississippi
for the continued financing of its operations. The Company's operating cash flow
is not anticipated to be sufficient to meet the Company's capital requirements.
In order to undertake planned development activities, the Company will need
additional financing. There can be no assurance that the Company's cash flow and
available financings will be sufficient to cover the Company's capital
requirements, including the estimated $85 million needed to bring the initial
phase of the Turquoise Ridge underground mine into commercial production of
2,000 tons of ore per day.
HEDGING ACTIVITIES
The Company currently uses spot deferred contracts in its hedging program
to protect earnings and cash flows from the impact of gold price fluctuations.
These transactions have been designated as hedges of the price of future
production and are accounted for as such. Spot deferred contracts are agreements
between a seller and a counterparty whereby the seller commits to deliver a set
quantity of gold, at an established date in the future and at agreed to prices.
The established price is equal to the spot price for gold plus "contango."
Contango is equal to the difference between the prevailing market rate for cash
borrowings less the gold lease rate, for comparable periods, and represents
compensation to the seller for holding gold until a future date. Contango rates
ranged from approximately 4 1/2% to 6 1/2% during fiscal 1995.
At the scheduled future delivery date, the seller may, at the option of the
counterparty, deliver into the contract or defer the delivery to a future date.
This option allows the seller to maximize the price realized by selling at the
spot market price if such price at that time were to be higher than the forward
contract price. Each time a seller defers delivery, the forward sales price is
increased by the then prevailing contango for the next period. Generally, the
counterparty will allow the seller to continue to defer contract deliveries
providing that there is sufficient scheduled production from proven and probable
reserves to fulfill the commitment. During fiscal 1995 and 1994, the Company
deferred delivery on contracts representing 70,100 and 244,000 ounces,
respectively.
At September 30, 1995, the Company had spot deferred contracts on 127,100
gold ounces which are scheduled to be delivered through May 1996 at prices
ranging from $391 to $421 per gold ounce. The Company intends to continue to
defer delivery into future periods when the spot market price is higher than the
spot deferred contract price. Based on the market price of gold at September 30,
1995, the unrealized gain on the contracts was approximately $1.7 million. The
Company's accounting treatment for spot deferred contracts is outlined in Notes
1 and 6 to the Consolidated Financial Statements to the Company's Form 10-K for
the fiscal year ended June 30, 1995.
Risk of loss with these spot deferred contracts arises from the possible
inability of a counterparty to honor contracts and from changes in the Company's
anticipated production of gold. However, nonperformance by any party to the
financial instruments in not anticipated.
The Company is required by the counterparty to maintain a $12 million
margin account which is guaranteed by First Mississippi. Should the cumulative
liquidation cost of the Company's spot deferred positions exceed the cumulative
value of such positions by an amount in excess of the margin account, the
S-9
<PAGE> 10
Company could be subject to a margin call. The liquidation cost is what the
Company would have to pay on the liquidation date to purchase fixed forward
delivery contracts to meet its spot deferred deliveries. The cost of fixed
forward delivery contracts is based upon the spot price on the liquidation date
plus contango through the deliver date.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the services of certain key officers and
employees, including its Chief Executive Officer, its Chief Financial Officer
and its Chief Operating Officer. Competition in the mining industry for
qualified individuals is intense, and the loss of any of these key officers or
employees if not replaced could have a material adverse effect on the Company's
business and its operations. The Company currently does not have key person
insurance. The Company has entered into Termination Agreements with its Chief
Executive Officer, Chief Financial Officer and Chief Operating Officer which
provide for certain payments upon termination or resignation resulting from a
change of control (as defined in such agreements).
REGULATION OF MINING ACTIVITY
The mining operations of the Company are subject to inspection and
regulation by the Mine Safety and Health Administration of the Department of
Labor ("MSHA") under provisions of the Federal Mine Safety and Health Act of
1977. The Occupation and Safety Health Administration ("OSHA") also has
jurisdiction over safety and health standards not covered by MSHA.
All of the Company's exploration, development and production activities are
subject to regulation under one or more of the various environmental laws. These
laws address emissions to the air, discharges to water, management of wastes,
management of hazardous substances, protection of natural resources, protection
of antiquities and reclamation of lands which are disturbed. Many of the
regulations also require permits to be obtained for the Company's activities;
these permits normally are subject to public review processes resulting in
public approval of the activity. It is possible that future changes in these
laws or regulations could have a significant impact on some portion of the
Company's business, causing those activities to be economically reevaluated at
that time.
During the past three years, the United States Congress considered a number
of proposed amendments to the General Mining Law of 1872, as amended (the
"General Mining Law"), which governs mining claims and related activities on
federal lands. In 1992, a holding fee of $100 per claim was imposed upon
unpatented mining claims located on federal lands. In October 1994, a one-year
moratorium on processing of new patent applications was approved. In addition, a
variety of legislation is now pending before the United States Congress to amend
further the General Mining Law. The proposed legislation would, among other
things, change the current patenting procedures, impose royalties, and enact new
reclamation, environmental controls and restoration requirements. The royalty
proposals range from a 2% royalty on "net profits" from mining claims to an 8%
royalty on modified gross income/net smelter returns. The extent of any such
changes is not presently known and the potential impact on the Company as a
result of future congressional action is difficult to predict. Although a
majority of the Company's existing mining operations occur on private or
patented property, the proposed changes to the General Mining Law could
adversely affect the Company's ability to economically develop mineral resources
on federal lands.
ENVIRONMENTAL REGULATIONS
Mining is subject to potential risks and liabilities associated with
pollution of the environment and the disposal of waste products occurring as a
result of mineral exploration and production. Environmental liability may result
from mining activities conducted by others prior to the Company's ownership of a
property. Insurance for environmental risks (including potential liability for
pollution or other hazards as a result of the disposal of waste products
occurring from exploration and production) is not generally available at a
reasonable price to the Company or to other companies within the industry. To
the extent the Company is subject to environmental liabilities, the payment of
such liabilities would reduce funds otherwise available to the Company and could
have a material adverse effect on the Company.
S-10
<PAGE> 11
In the context of environmental permitting, including the approval of
reclamation plans, the Company must comply with standards, laws and regulations
which may entail greater or lesser costs and delays depending on the nature of
the activity to be permitted and how stringently the regulations are
implementing by the permitting authority. It is possible that the costs and
delays associated with compliance with such laws, regulations and permits could
become such that the Company would not proceed with the development of a project
or the operation or further development of a mine. Laws and regulations
involving the protection and remediation of the environment are constantly
changing and are generally becoming more restrictive. The Company has made, and
expects to make in the future, significant expenditures to comply with such laws
and regulations.
Pending bills which affect environmental laws applicable to mining include
versions which may substantially alter the Clean Water Act, Safe Drinking Water
Act, Endangered Species Act and a bill which will introduce additional
protection of wetlands (Wetlands Protection and Management Act). Adverse
developments and operating requirements in these acts could impair the ability
of the Company as well as others to develop mineral resources. Revisions to
current versions of these bills could occur prior to passage.
The Environmental Protection Agency ("EPA") continues the development of a
solid waste regulatory program specific to mining operations under the Resource
Conservation and Recovery Act ("RCRA"). Of particular concern to the mining
industry is a proposal by the EPA titled "Recommendation for a Regulatory
Program for Mining Waste and Materials Under Subtitle D of the Resource
Conservation and Recovery Act" ("Strawman II") which, if implemented, would
create a system of comprehensive federal regulation of the entire mine site.
Many of these requirements would be duplicative of existing state regulations.
Strawman II as currently proposed would regulate not only mine and mill wastes
but also numerous production facilities and processes which could limit internal
flexibility in operating a mine. To implement Strawman II as proposed, the EPA
must seek additional statutory authority, which is expected to be requested in
connection with Congress' reauthorization of RCRA.
The Company is also subject to regulations under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA" or
"Superfund") which regulates and establishes liability for the release of
hazardous substances and (ii) the Endangered Species Act ("ESA") which
identifies endangered species of plants and animals and regulates activities to
protect these species and their habitats. Revisions to CERCLA and ESA are being
considered by Congress; the impact on the Company of these revisions is not
clear at this time.
Environmental laws and regulations may also have an indirect impact on the
Company, such as increased cost for electricity due to acid rain provisions of
the Clean Air Act Amendments of 1990. Charges by refiners to which the Company
sells its metallic concentrates and products have substantially increased over
the past several years because of requirements that refiners meet revised
environmental quality standards. The Company has no control over the refiners'
operations or their compliance with environmental laws and regulations. If the
refining capacity of the United States is significantly further reduced because
of environmental requirements, it is possible that the Company's operations
could be adversely affected.
MINING RISKS AND INSURANCE
The gold ore located on the Getchell Property and the existing tailings
ponds and waste dumps located on the Getchell Property contain relatively high
levels of arsenic, and the milling of such ore involves the use of other toxic
substances, including sodium cyanide, sodium hydroxide, sulfuric acid and nitric
acid. In addition, the business of gold mining is generally subject to a number
of risks and hazards, including environmental hazards, industrial accidents,
labor disputes, the encounter of unusual or unexpected geological conditions,
slope failures, changes in the regulatory environment and natural phenomena such
as inclement weather conditions, floods, blizzards and earthquakes. Such
occurrences could result in damage to, or destruction of, mineral properties or
production facilities, personal injury or death, environmental damage, delays in
mining, monetary losses and possible legal liability. The Company maintains
insurance against risks that are typical in the gold mining industry and in
amounts that the Company believes to be reasonable, but which may not provide
adequate coverage in certain unforeseen circumstances. However, insurance
against certain risks
S-11
<PAGE> 12
(including certain liabilities for environmental pollution or other hazards as a
result of exploration and production) is not generally available to the Company
or to other companies within the industry.
TITLE TO PROPERTIES
Certain of the Company's mineral rights consist of unpatented mining
claims. Unpatented mining claims are unique property interests that are
generally considered to be subject to greater title risk than other real
property interests. The greater title risk results from unpatented mining claims
being dependent on strict compliance with a complex body of federal and state
statutory and decisional law, much of which compliance involves physical
activities on the land, and from the lack of public records which definitively
control the issues of validity and ownership.
S-12
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby are estimated to be approximately $88.1 million (or approximately $101.4
million if the Underwriters' over-allotment option is exercised in full).
The Company intends to use the net proceeds to repay $15 million of the
$52.5 million in principal amount of debt owed to First Mississippi, to repay
amounts borrowed under the Company's existing credit facility with The
Toronto-Dominion Bank of approximately $5.5 million, for development activities
at Turquoise Ridge and for general corporate purposes. The Company may use
$500,000 to pay fees related to The Toronto-Dominion Bank loan and may choose to
use proceeds to pay down additional amounts under the First Mississippi loan.
The interest rate on the First Mississippi loan is based on the LIBOR rate plus
a variable rate and was 6.875% at November 7, 1995. The interest rate on The
Toronto-Dominion Bank loan is based on the LIBOR rate plus 3% and was 8.875% at
November 7, 1995. The maturity dates for the First Mississippi loan and The
Toronto-Dominion Bank loan are September 22, 2000 and October 31, 1996,
respectively. Pending the application of the net proceeds, the Company expects
to invest such proceeds in short-term, interest-bearing instruments or other
investment-grade securities.
CAPITALIZATION
The following table sets forth the actual capitalization of the Company and
its subsidiary at September 30, 1995, and as adjusted to give effect to the
issuance of the shares of the Common Stock being offered hereby at a price of
$18.625 (assuming no exercise of the Underwriters' over-allotment option) and
the application of the estimated net proceeds therefrom, and the spin-off by
First Mississippi. See "Use of Proceeds." The information in the table below
should be read in conjunction with the Company's Consolidated Financial
Statements and the Notes thereto included elsewhere herein or incorporated by
reference herein or in the accompanying Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
----------------------------
ACTUAL AS ADJUSTED(1)
------- --------------
<S> <C> <C>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
Cash and cash equivalents..................................... $ -- $ 67,125(2)
Debt:
Current portion............................................. -- --
Notes payable to First Mississippi.......................... 46,750 23,500
------- --------
Total debt.......................................... 46,750 23,500(3)
------- --------
Stockholders' equity
Common stock, $.01 par value................................ 182 232
Contributed and paid-in capital............................. 34,285 123,360
Accumulated deficit......................................... (3,916) (3,916)
Unearned compensation....................................... (42) (42)
------- --------
Total stockholders' equity.......................... 30,509 119,634
------- --------
Total capitalization................................ $77,259 $143,134
======= ========
</TABLE>
- ---------------
(1) Assumes 5,000,000 shares issued at $18.625, less underwriting discount.
(2) The increase in cash and cash equivalents resulting from the offering is
attributable to estimated net proceeds of $88.1 million less $15 million
required to repay outstanding indebtedness to First Mississippi and $6
million (including $500,000 in fees) to repay amounts due under The
Toronto-Dominion Bank loan agreement.
(3) Assumes repayment of $15 million of the note payable to First Mississippi, a
$14 million credit against the First Mississippi loan as a result of the
settlement of the Tax Sharing Agreement with First Mississippi, the
reclassification of $2.9 million of accounts payable to First Mississippi
from current
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<PAGE> 14
liabilities to long-term debt and the increase of $2.8 million of long-term
debt payable to First Mississippi incurred subsequent to September 30,
1995.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is listed on The Nasdaq National Market and is
traded under the symbol "FRMG." The following table sets forth for the periods
indicated, the high and low recorded prices of the Company's Common Stock. On
November 7, 1995, the last reported sale price of the Common Stock on Nasdaq was
$18.625 per share.
<TABLE>
<CAPTION>
FISCAL 1994 HIGH LOW
- ------------ ------ ------
<S> <C> <C>
First Quarter.................................................... $ 8.00 $ 5.13
Second Quarter................................................... $ 8.00 $ 5.13
Third Quarter.................................................... $ 8.63 $ 5.94
Fourth Quarter................................................... $ 7.88 $ 6.25
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1995
- ------------
<S> <C> <C>
First Quarter.................................................... $ 8.75 $ 6.25
Second Quarter................................................... $10.50 $ 8.00
Third Quarter.................................................... $10.13 $ 7.75
Fourth Quarter................................................... $21.00 $ 9.75
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1996
- ------------
<S> <C> <C>
First Quarter.................................................... $25.00 $19.50
Second Quarter................................................... $22.50 $17.63
(through November 7, 1995)
</TABLE>
No dividends have been declared since the Company's initial public offering
in May 1988, and dividends are not anticipated for the near future. The Company
intends to retain earnings to support current operations, to fund exploration
and development projects and to repay debt. The First Mississippi loan and The
Toronto-Dominion Bank loan prohibit the payment of dividends.
S-14
<PAGE> 15
SELECTED FINANCIAL AND OPERATING DATA
The Selected Consolidated Financial Data as of June 30, 1995 and 1994 and
for the three years ended June 30, 1995 have been derived from the Company's
Consolidated Financial Statements, which statements have been audited by KPMG
Peat Marwick LLP, independent public accountants. The Selected Financial Data
for the three months ended September 30, 1995 and 1994, have been derived from
the Company's unaudited financial statements which, in the opinion of
management, include all adjustments necessary to make such financial statements
not misleading. The Selected Financial and Operating Data below should be read
in conjunction with the Company's Consolidated Financial Statements and the
Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained herein or in the accompanying Prospectus or
incorporated by reference herein or therein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30 YEARS ENDED JUNE 30
------------------- ------------------------------
1995 1994 1995 1994 1993
------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
AND OPERATING DATA)
STATEMENT OF OPERATIONS DATA:
Net sales................................... $17,605 $ 21,509 $ 71,485 $95,150 $78,773
Cost of sales............................... 16,939 17,893 69,775 82,131 75,254
------- -------- -------- ------- -------
Gross profit...................... 666 3,616 1,710 13,019 3,519
Exploration expenses........................ 366 1,712 3,776 4,049 2,803
Abandonment and impairment of mineral
properties................................ -- -- 11,531 -- 256
Selling, general and administrative
expenses.................................. 1,078 658 2,659 1,745 2,021
------- -------- -------- ------- -------
Earnings (loss) from operations............. (778) 1,246 (16,256) 7,225 (1,561)
Interest expense, net....................... (961) (416) (1,805) (1,776) (1,705)
Other income................................ 80 52 132 150 180
------- -------- -------- ------- -------
Earnings (loss) before income
taxes........................... (1,659) 882 (17,929) 5,599 (3,086)
Income tax expense (benefit)................ (425) 375 428 1,300 (617)
------- -------- -------- ------- -------
Earnings (loss) before cumulative effect of
change in accounting principle............ (1,234) 507 (18,357) 4,299 (2,469)
Cumulative effect of change in accounting
principle................................. -- -- -- 1,350 --
------- -------- -------- ------- -------
Net earnings (loss)......................... $(1,234) $ 507 $(18,357) $ 5,649 $(2,469)
======= ======== ======== ======= =======
Earnings (loss) per common share before
cumulative effect of accounting change.... $ (0.07) $ 0.03 $ (1.01) $ 0.24 $ (0.14)
Cumulative effect of accounting change...... $ 0.00 $ 0.00 $ -- $ 0.07 $ 0.00
------- -------- -------- ------- -------
Net earnings (loss) per common
share........................... $ (0.07) $ 0.03 $ (1.01) $ 0.31 $ (0.14)
======= ======== ======== ======= =======
OPERATING DATA (FOR PERIOD):
Ounces of gold sold......................... 43,845 55,724** 184,298* 243,826 210,644
Average Realized Price per Ounce............ $ 402 $ 386 $ 388 $ 390 $ 374
Average Market Price per Ounce.............. $ 383 $ 386 $ 385 $ 379 $ 346
Ounces of Gold Produced:
Mill...................................... 42,262 50,402** 166,937* 215,363 186,799
Heap Leach................................ 1,583 5,322 17,361 28,463 23,666
Cash Costs per Ounce:
Mill...................................... $ 348 $ 275 $ 327 $ 290 $ 290
Heap Leach................................ $ 137 $ 241 $ 318 $ 183 $ 202
Combined.................................. $ 341 $ 272 $ 326 $ 278 $ 280
Total Cost per Ounce:
Mill...................................... $ 395 $ 328 $ 384 $ 356 $ 374
Heap Leach................................ $ 149 $ 254 $ 330 $ 194 $ 228
Combined.................................. $ 386 $ 321 $ 378 $ 337 $ 358
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................. $ 8,877 $ 11,782 $ 5,722 $12,981
Net property, plant and equipment........... 69,179 66,465 67,689 66,798
Total assets................................ 87,704 89,250 85,120 88,747
Gold loan................................... -- -- -- --
Notes payable to First Mississippi.......... 46,750 28,192 40,900 29,339
Stockholders' equity........................ 30,509 50,227 31,744 49,719
</TABLE>
- ---------------
* Excludes 14,939 development ounces from the Getchell Main Underground Mine.
** Excludes 1,120 development ounces from the Getchell Main Underground Mine.
S-15
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
In February 1995 the Company hired Mineral Resources Development, Inc.
("MRDI") to prepare a pre-feasibility study (the "MRDI Study") with respect to a
geological resource along the Turquoise Ridge Fault. In September 1995, MRDI
issued an executive summary of its pre-feasibility study. The pre-feasibility
study concludes that the Turquoise Ridge area contains probable reserves of
1.254 million contained ounces of gold.
On October 20, 1995, the Company's former parent, First Mississippi
Corporation ("First Mississippi"), distributed its 81% interest in the Company
to First Mississippi shareholders. In connection with this spin-off, the Company
entered into several agreements with First Mississippi including a loan
agreement covering the Company's $52.5 million of outstanding borrowings from
First Mississippi at October 20, 1995, an agreement to undertake a public
offering of the Company's common stock with gross proceeds of at least $50
million prior to April 28, 1996, and an agreement to settle certain tax sharing
arrangements. The Company also entered into a $20 million credit facility with
The Toronto-Dominion Bank. See "Liquidity and Capital Resources."
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1994
Overview
The Company incurred a loss of $1.2 million ($0.07 per share) for the three
months ended September 30, 1995 compared to earnings of $0.5 million ($0.03 per
share) for the three months ended September 30, 1994. Lower sales revenues,
which resulted from reduced grades at the mill and lower output from the heap
leach operation, were primarily responsible for the lower earnings.
The following table highlights certain sales and production information:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------
9/30/95 9/30/94
------- -------
<S> <C> <C>
Ounces sold....................................................... 43,845 55,724 *
Average Realized Price per Ounce.................................. $ 402 $ 386
Average Market Price per Ounce.................................... $ 383 $ 386
Ounces Produced:
Mill......................................................... 42,262 50,402 *
Heap Leach................................................... 1,583 5,322
Cash Cost per Ounce:
Mill......................................................... $ 348 $ 275
Heap Leach................................................... $ 137 $ 241
Combined..................................................... $ 341 $ 272
Total Cost per Ounce:
Mill......................................................... $ 395 $ 328
Heap Leach................................................... $ 149 $ 254
Combined..................................................... $ 386 $ 321
</TABLE>
- ---------------
* Excludes 1,120 development ounces from the Getchell Main Underground Mine.
Net Sales
Net sales of $17.6 million for the three months ended September 30, 1995
(which includes $0.8 million of hedging gains), decreased from $21.5 million for
the three months ended September 30, 1994 as sales volume fell to 43,845 ounces
from 55,724 ounces. Mill feed grades for the three months ended September 30,
S-16
<PAGE> 17
1995 dropped to 0.165 ounces per ton from 0.214 ounces per ton in the same
period in the prior year, primarily due to increased milling of lower grade
stockpile ores to replace Main Pit ores. Underground ore grades were lower than
expected due to mining in lower grade stope areas while the higher grade stopes
await backfill to continue mining. The production backfill shortfalls are due
primarily to a backfill plant which does not provide the needed flexibility to
mine sequentially and efficiently in higher grade stope production areas. A new
2,000 ton per day backfill plant is under construction and is expected to be
operational in the first quarter of calendar year 1996. Realized gold prices
which averaged $402 per ounce (which included $18 per ounce of hedging gains)
were significantly higher than the $386 per ounce realized in the same period in
the prior year. There were no material hedging gains or losses in the three
months ended September 30, 1994.
Heap leach gold output was significantly lower during the three months
ended September 30, 1995 at 1,583 ounces compared to 5,322 ounces in the three
months ended September 30, 1994. No ore has been added to the leach pads since
June 1995 when the Turquoise Ridge Oxide Pit came to the end of its scheduled
productive life. Leaching of existing pads will continue as long as residual
gold can be economically extracted. Leach pad gold output will be substantially
lower than in the past and will likely decrease over time.
As of September 30, 1995, 127,100 ounces of gold had been sold for delivery
over the next eight months using spot deferred contracts at prices ranging
between $391 and $421 per ounce.
Cost of Sales
Total cost of sales for the three months ended September 30, 1995 were
$16.9 million, down $1 million from the same period in the prior year, primarily
due to lower costs at the heap leach operation following cessation of oxide
mining. Depreciation expense for the mill decreased in the three months ended
September 30, 1995 by $0.7 million due to an increase in millable reserves at
Turquoise Ridge based on the MRDI Study. This decrease was off-set by higher
operating costs. As a result, cost of sales at the mill was unchanged from the
same period in the prior year. Significantly lower gold output due to lower
grade ore during the three months ended September 30, 1995 yielded a cash cost
of $341 per ounce, versus $272 per ounce for the same period last year, but cash
cost per ton milled was essentially unchanged. Mill output averaged 3,194 tons
per day for the quarter, up from 3,076 tons per day in the three months ended
September 30, 1994.
Exploration Expenses
Exploration expenses in the three months ended September 30, 1995 of $0.4
million were down from $1.7 million in the three months ended September 30,
1994. Commencing October 1, 1994, the Company determined that Turquoise Ridge
was a development project rather than an exploration site and capitalized
subsequent expenditures at Turquoise Ridge, including $0.5 million of drilling
costs in the quarter ended September 30, 1995. The remainder of the decrease in
exploration expenses was due to the Company's decision temporarily to scale back
drilling activity pending review of exploration targets.
Selling, General and Administrative Expenses
Selling, General & Administrative expenses during the three months ended
September 30, 1995 were up $0.4 million from the same period in the prior year
due to corporate office relocation costs, increased personnel, and legal and
accounting costs related to the spin-off and financing activities.
Interest Expense, Net
Interest expense was up $0.5 million in the three months ended September
30, 1995 from the same period of the prior year due to increases in the
principal balances on the First Mississippi note needed to cover shortfalls in
operating cash flow and capital spending. See "Liquidity and Capital Resources."
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
Overview
Results for the fiscal year ended June 30, 1995, were a net loss of $18.4
million ($1.01 per share) compared to earnings of $5.6 million ($0.31 cents per
share) and a loss of $2.5 million ($0.14 per share) in fiscal 1994 and 1993,
respectively. Included in the results in fiscal 1995 are non-cash impairment and
S-17
<PAGE> 18
abandonment charges of $11.5 million. Lower mill throughput and reduced grades
at both the heap leach facility and the mill also contributed to the fiscal 1995
loss. In fiscal 1994, earnings were up sharply from fiscal 1993 due to higher
revenues and lower unit costs, which resulted from the high grade North Pit ore
milled during the year. A one-time $1.4 million benefit from a required change
in income tax accounting also contributed to fiscal 1994 earnings.
Sales
Sales in fiscal 1995 fell to $71.5 million from $95.2 million in the prior
fiscal year due to lower volume and lower ore grades in both the oxide and
sulfide operations. Oxide ore grades dropped as the Turquoise Ridge Oxide Pit
came to the end of its scheduled productive life in the fourth quarter. Mill
feed grades were lower due to increased milling of lower grade stockpile ores.
Realized gold prices of $388 per ounce in fiscal 1995 were basically
unchanged from $390 in fiscal 1994 and compared to $374 per ounce in fiscal
1993. The Company's hedging program contributed $3 per ounce to the realized
price in fiscal 1995, $11 per ounce in fiscal 1994 and $28 per ounce in fiscal
1993. Fiscal 1994 sales of $95.1 million were up substantially from $78.8
million in fiscal 1993 due primarily to high grade North Pit ore body mined and
milled in fiscal 1994. Mill feed grades averaged 0.175, 0.203 and 0.169 ounces
per ton in fiscal 1995, fiscal 1994 and fiscal 1993, respectively.
During fiscal 1995, hedges for 169,900 ounces were closed against spot
deferred contracts at an average price of $392 per ounce, contributing $0.6
million to revenues as compared to 3,000 ounces delivered against spot deferred
contracts at $375 per ounce in fiscal 1994. Sales in fiscal 1994 and fiscal 1993
reflected gold loan payments of 20,625 and 28,125 ounces, respectively, at $475
per ounce. In addition, in fiscal 1994 and fiscal 1993, the Company exercised
hedges for the sale of 47,000 and 40,000 ounces of gold, respectively, at $400
per ounce under terms of a gold loan related hedging program.
Costs of Sales
Total cost of sales in fiscal 1995 was down $12.4 million (15%) from fiscal
1994, largely due to lower depreciation and mining costs associated with the
lower grade stockpile ores milled during the year. Although total cost of sales
was down, total cost per ounce increased from $337 per ounce in fiscal 1994 to
$379 per ounce in fiscal 1995 due to lower mill throughput and reduced grades at
both the heap leach facility and the mill. Cash costs per ounce were $326 in
fiscal 1995 compared to $278 in fiscal 1994 due to lower production levels in
fiscal 1995. Total costs of sales in fiscal 1994 were up $6.9 million (9%) from
fiscal 1993, principally due to the costs associated with a 16% increase in
annual production. Total cost per ounce was lower in fiscal 1994 than in fiscal
1993 due to the sharp increase in unit production in fiscal 1994.
Exploration
Exploration expenses in fiscal 1995 of $3.8 million were down from $4.0
million in fiscal 1994 and compared to $2.8 million in fiscal 1993. However,
total exploration and development expenditures, including drill costs
capitalized at Turquoise Ridge after September 1994, were up sharply to $10.7
million in fiscal 1995 from $5.7 million in fiscal 1994 and $3.7 million in
fiscal 1993. The significant increase is largely a reflection of the increased
scope of activity at Turquoise Ridge as well as drilling on various other
exploration targets on the Getchell Property.
Abandonments and Impairments
Abandonments and impairments in fiscal 1995, which totalled $11.5 million,
included a $2.4 million non-cash write-off of an inactive silver exploration
property in New Mexico and a $9.1 million non-cash write-down of assets
associated with the Main Pit. The silver property write-off was in response to
the continued low price of silver, unsuccessful attempts in the fourth quarter
to find a buyer for the property and commitment of exploration and development
to Turquoise Ridge. Capitalized pit development costs and deferred stripping
costs were written off as a result of the early shut-down of the Main Pit due to
a geotechnical monitoring program indicating that continued mining would likely
destabilize the pit wall, lower grade ore and higher costs than anticipated.
S-18
<PAGE> 19
Selling, General and Administrative
SG&A costs were $2.7 million in fiscal 1995, up from $1.7 million in fiscal
1994 and $2.0 in fiscal 1993. The increase in fiscal 1995 was primarily due to
increases in personnel and activities relating to a potential spin-off of the
Company's common stock held by First Mississippi. Legal and professional
services also were higher in response to the anticipated spin-off and certain
financing activities. Fiscal 1995 salaries, benefits and moving charges
increased from the prior fiscal year, reflecting the hiring of additional
corporate officers. SG&A costs were lower in fiscal 1994 than in fiscal 1993 due
to reductions in staff personnel and lower moving, recruiting and professional
services costs.
Other
Interest and other income totaled $0.1 million in fiscal 1995, essentially
unchanged from the two prior fiscal years. Other income includes gains on sale
of excess equipment, minor royalties and other miscellaneous income.
Interest Expense
Total obligations payable to First Mississippi increased to $43.2 million,
including $2.3 million of current payables, at June 30, 1995 from $30.2 million
at the end of fiscal 1994 and $24.3 million at the end of fiscal 1993. Net
interest expense of $1.8 million in fiscal 1995 was essentially unchanged from
the prior two fiscal years, but gross interest expense before capitalization of
interest was $3.0 million in fiscal 1995 or $1.0 million greater than fiscal
1994 and $1.2 million greater than fiscal 1993. The increase was a result of
higher balances on the First Mississippi notes. Interest capitalized during
fiscal years 1995, 1994 and 1993 amounted to $1,159,000, $221,000 and $43,000,
respectively. The increase from fiscal 1994 to fiscal 1995 was due primarily to
development at the Getchell Main Underground Mine. Interest costs of $1.2
million and $.2 million on advances from First Mississippi to fund mine
development projects were capitalized in fiscal 1995 and 1994, respectively.
Income Taxes; Cumulative Effect of Change in Accounting Principles
In July 1993, the Company adopted the Financial Accounting Standards
Board's Statement No. 109 "Accounting for Income Taxes" ("Statement 109").
Adoption of Statement No. 109 changed the Company's method of accounting for
income taxes from the deferred method required under APB Opinion 11 to the asset
and liability method. The Company opted to report the impact of this accounting
change as a cumulative effect of change in accounting principle rather than to
restate prior years' income tax provisions. The cumulative effect on 1994's
income from adopting Statement 109 was a $1.4 million tax benefit. See Note 8 to
the Consolidated Financial Statements.
Fiscal 1995 income tax expense was down from the prior fiscal year as a
result of lower earnings, partially offset by $6.7 million in tax benefits which
were not recorded for operating losses incurred because their realization is
currently uncertain and therefore is included as a component of income taxes in
fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash used by operating activities was $3.0 million during the three months
ended September 30, 1995 compared to cash flows provided by operations of $6.8
million in the same period of the prior year. This shift was primarily due to
lower sales revenues, reduction of amounts owed vendors and use of cash to
increase supplies and materials inventories required to support the increase in
underground mining operations.
Capital investing activities required $3.4 million of cash during the three
months ended September 30, 1995. These investment activities were primarily
related to the costs of the MRDI Study and associated drilling at Turquoise
Ridge.
During the three months ended September 30, 1995, $5.9 million of cash was
borrowed from First Mississippi to fund operations and investment activities,
bringing the total note due to First Mississippi to $46.8 million.
S-19
<PAGE> 20
In connection with the spin-off by First Mississippi of its shares of the
Company on October 20, 1995, all loan amounts due First Mississippi were
consolidated into a new loan agreement covering the Company's $52.5 million of
borrowings from First Mississippi at that date. Amounts borrowed under the new
loan agreement are payable in September 2000. Interest accrues at a LIBOR-based
rate and is payable based on the LIBOR period selected by the Company (one
month, three month, six month or one year). The loan agreement permits
prepayments at any time at the Company's option and requires $15.0 million in
principal of the loan to be repaid following the consummation of any public
offering of the Company's securities after the date of the loan agreement as
well as full prepayment upon a change in control of the Company.
The Company also signed a loan agreement with The Toronto-Dominion Bank for
an interim credit facility of up to $20 million to provide financing for the
development of the Company's mining properties and for general working capital
purposes. Borrowings under the credit facility bear interest at 3% over the
LIBOR rate for each one month period during which advances are outstanding. In
addition, the Company will pay Toronto Dominion a drawdown fee of 1% of the
amount of each advance of funds to the Company under the credit facility . All
advances of funds under the credit facility must be repaid by the Company on
October 31, 1996. The Company is obligated to prepay amounts advanced under the
credit facility from the net proceeds of any financing or issuance of securities
of the Company. The Company has also granted Toronto Dominion an equity
participation right which provides that the Company will pay Toronto Dominion,
either in cash or shares of common stock, an amount not to exceed (i) $1,000,000
if all advances under the credit facility are paid in full within six months of
the date of the facility and (ii) $1,500,000 if such advances are paid in full
after such six month period but before the Due Date (as defined therein). At any
time prior to November 30, 1995, the Company may satisfy the participation right
in full by paying $500,000 (in cash or securities of equivalent value). On
October 23, 1995 the Company drew $5.5 million against this credit facility.
First Mississippi has agreed to pay the Company approximately $14 million
in settlement of amounts owed under terms of a Tax Sharing Agreement in force
while the Company was a subsidiary of First Mississippi. The amounts owed by
First Mississippi represent the tax benefit received by the affiliated group of
which First Mississippi is the common parent corporation from its use of the
Company's losses, deductions, credits and allowances in pre-spin off periods.
The settlement provides that these funds will first be provided to the Company
as a standby line of credit available to the Company in the event the Toronto
Dominion credit facility is fully drawn. At such time as the Company secures
permanent capital, the settlement amount will be credited against the debt owed
by the Company to First Mississippi. The Company has accounted for this
settlement by reclassifying certain deferred tax assets, totaling approximately
$14 million, to a receivable from First Mississippi, and reflecting
approximately $9 million as deferred tax liabilities.
Capital expenditures for the 12 months ending June 30, 1996 are estimated
to be $22.7 million, primarily due to the anticipated development of Turquoise
Ridge. The MRDI Study estimates that the capital required to bring the initial
phase of the Turquoise Ridge Underground mine into commercial production will be
approximately $85 million. Operating cash flow is not anticipated to be
sufficient to meet these capital requirements. In order to undertake planned
development activities, the Company will need additional financing. Under terms
of the Tax Ruling Agreement entered into with First Mississippi in connection
with the spin-off, the Company has agreed to undertake a public offering of
common stock with gross proceeds of at least $50 million prior to April 28,
1996. There can be no assurance that the Company will be able to obtain
financing on satisfactory terms, if at all.
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<PAGE> 21
THE COMPANY
INTRODUCTION
The Company is engaged in the exploration, development, mining and
processing of gold ore from the 33,000-acre "Getchell Property" located in the
Potosi Mining District on the eastern side of the Osgood Mountain Range, 35
miles northeast of Winnemucca, Nevada. Gold mineralization on the Getchell
Property is found in a series of discrete zones along the Getchell fault zone
and the Turquoise Ridge fault zone.
The Company was incorporated in Nevada in August 1987 by First Mississippi,
for the purpose of financing, developing and operating the Getchell gold mining
project and for conducting minerals exploration. In May 1988, the Company sold
3,250,000 shares of its Common Stock in an initial public offering. Prior to
spinning off its Company stock to its shareholders on October 20, 1995, First
Mississippi held approximately 81% of the Company's Common Stock.
As of June 30, 1995, the Company had proven and probable reserves of
approximately 6.964 million tons of ore at an average grade of 0.206 ounces/ton
gold, with approximately 1.435 million contained ounces of gold. This reserve
figure does not include any reserves in the underground mineralized area of
Turquoise Ridge. The proven and probable mineable ore reserve ounces are
"contained" ounces. Actual ounces expected to be recovered during milling and
heap leach processing will be less due to recovery process inefficiencies.
During the fiscal year ended June 30, 1995, approximately 184,298 ounces of gold
were produced and sold, excluding 14,939 development ounces.
In January 1995, the Company announced a geologic resource along the
Turquoise Ridge fault on the Company's Getchell Property in Nevada. The Company
hired MRDI to prepare a pre-feasibility study (the "MRDI Study") with respect to
Turquoise Ridge. A pre-feasibility study is an economic-based analysis of an ore
body that serves as the basis for a mine plan for the extraction of gold from
that ore body on an economically viable basis. In September 1995, MRDI issued an
executive summary (the "MRDI Study Summary") of its pre-feasibility study. The
MRDI Study concludes that the Turquoise Ridge area contains probable reserves
consisting of 3.712 million tons of ore with an average grade of 0.338 ounces
per ton or 1.254 million contained ounces of gold.
The Company's principal executive offices are located at 5460 South Quebec
Street, Suite 240, Englewood, Colorado 80111. The Company's telephone number is
(303) 771-9000. At September 30, 1995, the Company had approximately 300
employees.
THE GETCHELL PROPERTY
History. Gold mining commenced at the Getchell Property in the late 1930's
and has continued intermittently since that time under several different owners.
First Mississippi purchased the property (inactive at the time) from Conoco,
Inc. in 1983. First Mississippi began a program to develop the property in July
1983. Operations at the autoclave mill facility and the oxide heap leach
facility were commenced in February 1989 and June 1985, respectively, and as of
September 30, 1995, the Company had produced over 1.2 million ounces of gold.
Property Interests. Certain of the Company's mineral rights consist of
unpatented mining claims. Unpatented mining claims are unique property interests
that are generally considered to be subject to greater title risk than other
real property interests. The Getchell Property consists of approximately 18,900
acres of unpatented lode and mill site mining claims and 14,100 acres of fee
land owned by the Company. Greater than 90% of the Company's current reserves
are on fee land. Approximately 65% of the Getchell Property, including all
current proven and probable reserves, is subject to a 2% net smelter royalty
owned by a third party.
Geology. Gold mineralization on the Getchell Property occurs in a series of
discrete zones associated with the north-trending Getchell fault and with the
northeast-trending Turquoise Ridge fault. Both systems cut through a thick
sequence of interbedded early Paleozoic sedimentary, igneous and volcanic units.
The
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<PAGE> 22
northwest-dipping Turquoise Ridge fault and the eastward-dipping Getchell fault
intersect in an open pit known as the "Main Pit," an area where mining has
ceased.
Gold sulfide mineral deposits are found at depth along the Getchell fault
and in sedimentary units in contact with the Getchell fault. Drilling has
identified similar gold sulfide mineralization deposits in folded Paleozoic
sedimentary units in contact with the Turquoise Ridge fault 2,000 feet northeast
of the Getchell fault. Oxidized gold deposits are also associated with the
Getchell and Turquoise Ridge fault zones, typically occurring as discrete zones
at depths shallower than the sulfide mineralization.
A mineral deposit is a naturally occurring concentration of minerals that
may or may not be economically mineable. A mineable reserve is that part of a
mineral deposit that has been drilled sufficiently to define the tonnage and
grade and that may be extracted at a profit. Mineral deposits do not qualify as
commercially mineable ore bodies ("proven and probable" mineable reserves) under
Securities and Exchange Commission rules until a final and comprehensive
economic, technical and legal feasibility study based upon adequate test results
is concluded.
Mining. While the Company's past production has come principally from open
pit mines, the Company's current production comes from underground mining. The
Main Pit was closed in July 1995 after a geotechnical monitoring program
indicated that continued pit mining would likely destabilize the pit wall. As a
result, approximately 239,000 tons of ore averaging 0.153 ounces per ton, or
approximately 36,600 contained ounces of gold, were abandoned in the pit bottom.
The Company wrote off the unamortized cost of various assets that were expected
to be recovered from the remaining ore reserves. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Results of
Operations."
The Turquoise Ridge Oxide Pit, a primary source of oxide ore, was closed on
schedule in June 1995 after a determination that it had been mined out. Leaching
of existing loaded pads will continue as long as residual gold can be
economically extracted. However, in fiscal 1996, assuming no additional oxide
ore is mined, the Company will not stack additional ore on the leach pads, and
as a result, leach pad gold output will be substantially lower than in the past
and will likely decrease over time.
The Getchell Main Underground Mine began commercial production of sulfide
mill feed on May 1, 1995, and the Company anticipates that the majority of
mining activities will be underground for the foreseeable future. Stockpiled
ores and the Getchell Main Underground Mine will furnish mill feed until
additional sulfide ore sources can be put into production. There is sufficient
stockpile material to feed the mill for approximately two years at current
milling rates, assuming the Getchell Main Underground Mine produces 1,000 tons
of ore per day. Stockpile ore grades are lower than what was typically produced
from the Main Pit in recent years.
Getchell Main Underground Mine. Operations at the Getchell Main Underground
Mine were the main focus of the Company's attention during the six months ended
June 30, 1995. In January 1995, the Company assumed full mining duties from an
independent underground mining contractor and implemented a program to enhance
the mine's operations. Staff enhancements were made with particular attention to
mine planning, engineering and an underground operations staff. To facilitate
achievement of near and long-term production goals, the Company has leased
additional equipment and has made additions to the mine work force.
By the end of fiscal 1995, production from the Getchell Main Underground
Mine was approximately 700 tons of ore per day with an average gold grade of
0.317 ounces per ton, and in August 1995, production reached the 1,000 ton-per
day target. The Company's mining rate goal is to achieve output of 1,200 tons of
ore per day in fiscal 1996. However, there can be no assurances that such goals
will be reached. In fiscal 1995, the Getchell Main Underground Mine produced
116,850 tons of ore at an average grade of 0.333 ounces per ton, or 38,911
contained ounces of gold. The total Getchell Main Underground reserve as of June
30, 1995 was 3.650 million tons of ore at an average grade of 0.335 ounces per
ton, or 1.223 million contained ounces of gold.
The Company has employed the "Drift and Fill" mining method in the Getchell
Main Underground Mine, which the Company has determined is appropriate for the
ground conditions currently being encountered. This mining method involves
mining a section of ore, which is then backfilled with a mixture of sand and
concrete prior to the mining of the next contiguous section of the ore body.
Higher productivity stoping methods are currently under review for future
applications.
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<PAGE> 23
Turquoise Ridge. Based on the MRDI Study Summary, the Company has announced
a new probable reserve at Turquoise Ridge consisting of 3.712 million tons of
ore with an average grade of .338 ounces per ton or 1.254 million contained
ounces of gold. This reserve addition represents an increase of 87% from the end
of fiscal 1995 reserve figure. Expected mill recoveries are approximately 91%.
Reserves are defined as that part of a mineral deposit which could be
economically and legally extracted or produced at the time of reserve
determination. Probable reserves are reserves for which quantity and grade are
computed from information similar to that used for proven reserves, but the
sites for inspection, sampling and measurement are farther apart or are
otherwise less adequately spaced. The degree of assurance, although lower than
that for proven reserves, is high enough to assume continuity between points of
observation.
The MRDI Study focused on one area of encouraging drill intersections from
a portion of the Turquoise Ridge structural trend of the Getchell property. The
MRDI Study is based upon the piercements of 51 drill holes, which were targeted
to be positioned at a nominal spacing of 100 feet. Eight of the drill hole
piercements provide close-spaced, 50-feet offsets. There are overall a total of
81 drill holes within the vicinity of the Turquoise Ridge resource area.
However, a number of mineralized intercepts exist in the periphery of the study
area which were not incorporated into the MRDI Study. In order to ensure the
integrity of the database used to support resource estimation and mine planning,
more than 10,000 drill samples were passed through a MRDI designated quality
control-quality assurance protocol, designed to monitor the precision of gold
assays on a batch-by-batch basis.
VULCAN software was used to prepare a three dimensional computer model of
the formations, structure and mineralized envelopes. Within the mineralized
envelopes, gold grades were estimated for 10 x 10 x 12 feet blocks using a
kriged interpolation process. Models were also prepared for sulfide sulfur,
carbonate content and rock mass rating.
The MRDI Study involved hydrologic characterization. A prototype dewatering
well, three observation wells and four piezometers were installed in the
Turquoise Ridge area to acquire three-dimensional aquifer parameter data. Based
on the hydraulic conductivity values, simulations were made of mine dewatering
rates for pumping of surface wells from the mineralized zone and from one or two
(or both) shaft sites over the projected 18-month development period.
The MRDI Study also involved geotechnical rock mass characterization.
Oriented core was obtained from three of the holes drilled. This was used to
establish the orientation of five major fault sets. A rock mass rating
assessment was conducted on cores. These were reconciled with cores and
underground observations obtained from the Getchell underground mine.
The MRDI Study found that the ore at Turquoise Ridge occurs in three types
of ore bodies comprising shallow dipping bedded ores located in the hanging wall
and footwall of the Turquoise Ridge shear zone and steeply dipping faulted ores.
Given the configuration of the ore bodies and the weak nature of the ground, the
underhand cut-and-fill mining method has been selected. Drifts and crosscuts
will be 12 feet by 10 feet in size. Depending on the horizontal width, both
longitudinal and transverse stoping will be employed.
It is currently expected that two shafts will access the ore bodies. One
shaft would serve as a production/service shaft and the other would serve as a
ventilation shaft and an emergency exit. A development drilling and trial
stoping program would be conducted from the ventilation shaft until the sinking
of the production shaft is complete.
Ore body access is expected to be via two main crosscuts on the 3500 and
4000 L's, a main access decline which connects the levels and sublevel
development off this access spaced at a vertical interval of 72 feet.
The MRDI Study Summary estimates that the capital required to bring the
initial phase of the Turquoise Ridge underground mine into commercial production
of 2,000 tons of ore per day will be approximately $85 million, to be spent from
approximately October 1995 to the first calendar quarter of 1998. Major capital
expenditures are the production shaft, estimated to cost $33 million and the
mine development costs of approximately $26 million. Under the timetable
presently contemplated by the Company, initial production would not commence
prior to mid-calendar 1998.
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<PAGE> 24
The MRDI Study Summary notes that projected cash flow of $25.7 million is
small compared to the size of the capital investment contemplated by the Company
of $85.5 million and that such projections would ordinarily not be enough to
justify a project and to declare a reserve. However, MRDI noted that certain
unusual characteristics warranted the declaration of a reserve. Such
characteristics include: (i) that the Company is an operating company with
in-place underground mining and processing capability within the Getchell
district, now being operated by an experienced management group and workforce
and (ii) that a fairly stringent cutoff grade of 0.25 ounces of gold per ton was
applied for purposes of the MRDI Study. However, there can be no assurance that
any of these assumptions will prove to be accurate. Turquoise Ridge involves
numerous risks, certain of which are summarized in "Risk Factors -- Certain
Turquoise Ridge Project Risks."
EXPLORATION AND DEVELOPMENT
The Company's exploration activities are concentrated exclusively on the
Getchell Property and include drilling, geological mapping, and geophysical and
geochemical surveys. Prior to fiscal 1994, exploration was oriented toward
development of known ore zones and evaluation of the numerous exploration
targets on the property. In fiscal 1994, exploration concentrated along the
Turquoise Ridge fault, where high grade gold sulfide mineralization was
discovered. Fiscal 1995 exploration efforts continued to concentrate on the
Turquoise Ridge area.
Limited exploration of the rest of the Getchell Property has indicated deep
sulfide mineralization at Hansen Creek, located along the Getchell fault to the
south of the Main Pit, and mixed oxide/sulfide mineralization at Section 13,
located in the northeast corner of the Getchell Property. Several other
exploration targets have been identified at the Getchell Property and await
exploration drilling.
At the Getchell Main Underground Mine, the ore body remains open at depth
and along strike. Fiscal 1996 development drilling will concentrate on deeper
parts of the Getchell Main Underground ore body and areas along strike from the
current reserves.
RESERVES
The following table sets forth the proven and probable mineable gold ore
reserves located on the Getchell Property as of June 30, 1995 as supplemented by
the reserves announced by the Company on September 25, 1995 with respect to
Turquoise Ridge. Sulfide reserves assume a 0.200 ounce per ton cutoff for
underground reserves (0.250 ounce per ton cutoff for the reserves announced with
respect to Turquoise Ridge). Oxide reserves are based on a 0.010 cyanide soluble
cutoff grade.
Proven and probable mineable ore reserves are estimates of quantities and
grades of ore which can be economically recovered based on assumptions of a $400
per ounce future gold price. These reserves have been prepared by the Company
and have been confirmed with respect to the Company's reserves as of June 30,
1995 by Mine Development Associates and with respect to the Company's reserves
at Turquoise Ridge announced on September 25, 1995, by MRDI, each of which is an
independent mining consulting firm.
PROVEN AND PROBABLE MINEABLE RESERVES
<TABLE>
<CAPTION>
CONTAINED
ORE TONS GRADE GOLD OUNCES
--------- ----- -----------
(WEIGHTED AVERAGE)
<S> <C> <C> <C>
Sulfide..................................................... 5,274,000 0.263 1,388,300
Oxide....................................................... 1,689,600 0.028 46,600
--------- ----- ---------
Total Reserves(1)................................. 6,963,600 0.206 1,434,900
========= ===== =========
Turquoise Ridge(2).......................................... 3,712,000 0.338 1,254,000
========= ===== =========
</TABLE>
- ---------------
(1) As of June 30, 1995. Total reserves do not include reserves at Turquoise
Ridge.
(2) As of September 25, 1995. All Turquoise Ridge reserves are sulfide.
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<PAGE> 25
OPERATIONS
Milling Process. Economic gold recoveries from the sulfide ores on the
Getchell Property are attained by oxidizing the ore prior to treatment by
conventional carbon in leach ("CIL") processes. The Company's mill was designed
and constructed to use high temperature pressure oxidation autoclaves to oxidize
sulfides in the ore. Prior to pressure oxidation, ore is ground in a
conventional grinding circuit, thickened to form an ore slurry, treated with
sulfuric acid to remove carbonate minerals and preheated. The preheated ore
slurry then enters the autoclaves where the temperature and pressure are
increased and high purity oxygen is added to oxidize the sulfide minerals. As
the ore slurry leaves the autoclaves, limestone and lime are added to adjust the
pH. The ore slurry is then transferred to a conventional CIL circuit where gold
is adsorbed onto carbon granules. Loaded carbon is periodically removed from the
cyanide circuit and processed to strip the gold. The stripping process
culminates in a gold precipitate which is collected in filter presses and
smelted into dore bars for shipment. The Company was one of the first U.S. gold
companies to use autoclaves for processing ore. The Company believes that
autoclaves are presently the most effective available method for milling high
sulfide ore.
The mill was designed to process an average daily nominal throughput of
3,000 tons at an average recovery rate of 89%. Since September 1991, liquid
oxygen has been purchased to supplement oxygen produced by an on-site plant.
This additional oxygen has helped to increase average daily throughput above
nominal capacity. In fiscal 1995, the average daily mill throughput was 3,219
tons and gold recovery averaged 88%. Autoclave availability averaged 90.1% in
fiscal 1995 versus 89.5% in fiscal 1994.
Heap Leaching Process. Heap leaching is a process used to recover gold from
naturally oxidized, permeable ore. The process involves the percolation of a
cyanide solution through crushed ore heaped on an impervious pad to dissolve
gold out of the ore. Since recovery rates from heap leaching are lower than from
conventional CIL milling, this process is not usually applied to high-grade ore.
Heap leach recovery has averaged approximately 70% of the cyanide soluble gold
for the last fiscal year.
Heap leach operations consist of two active pads, five ponds and a
processing plant. In fiscal 1996, assuming no additional oxide ore is mined, the
Company will not stack additional ore on the leach pads, and as a result, leach
pad gold output will be substantially lower than in the past and will likely
decrease over time.
Production. The following table sets forth selected information about the
Company's production of gold in fiscal 1995.
<TABLE>
<CAPTION>
SULFIDE ORE
-----------------------------------------------------
GETCHELL MAIN TOTAL
STOCKPILE MAIN PIT UNDERGROUND MINE SULFIDE ORE
--------- -------- ---------------- -----------
<S> <C> <C> <C> <C>
Tons Processed.................................... 750,821 307,263 116,850 1,174,934
Grade............................................. 0.132 0.220 0.333 0.175
Contained Ounces.................................. 99,108 67,594 38,911 205,613
</TABLE>
<TABLE>
<CAPTION>
OXIDE ORE
--------------------------------------------------------
TURQUOISE RIDGE
DUMPS AND STOCKPILES OXIDE PIT(1) TOTAL OXIDE ORE
-------------------- --------------- ---------------
<S> <C> <C> <C>
Tons Processed................................. 415,406 539,764 955,170
Grade.......................................... 0.190 0.030 0.025
Contained Ounces............................... 7,743 16,136 23,879
</TABLE>
- ---------------
(1) Closed in June 1995.
SPIN-OFF BY FIRST MISSISSIPPI
On September 24, 1995, the Company and First Mississippi entered into
certain agreements related to the spin-off of First Mississippi's stock of the
Company to First Mississippi's shareholders (the "Distribution"). These
agreements are attached as exhibits to the Company's report on Form 8-K/A-2
dated September 24, 1995 and are summarized, along with certain related
documents including a $20 million credit
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<PAGE> 26
facility with Toronto-Dominion Bank, below. Such summaries are qualified in
their entirety by reference to the agreements and documents for the full terms
thereof.
Post Spin-Off Agreement. The Company and First Mississippi have entered
into the Post Spin-Off Agreement, which provides generally for the transition of
the Company from a subsidiary of First Mississippi to a stand-alone corporation.
In particular, the Post Spin-Off Agreement provides for, among other things: (i)
the grant by First Mississippi to the Company for a period of at least five
years from the date of the Distribution to use the name "FirstMiss" as part of
its corporate name and (ii) the cooperation of the Company and First Mississippi
to effectuate the purposes of the Distribution and the documents related to such
Distribution.
Tax Ruling Agreement. The Tax Ruling Agreement sets forth covenants and
agreements of the Company relevant to maintaining the tax-free nature of the
Distribution after consummation of the Distribution. Under the Tax Ruling
Agreement, the Company represents that it has not taken and will not take any
action which is inconsistent with the facts and representations stated in the
private letter ruling (the "Ruling") and related submissions related to the
Distribution from the Internal Revenue Service (the "I.R.S.").
The Tax Ruling Agreement provides that the Company will consummate an
underwritten public equity offering of common stock generating aggregate
proceeds of at least $50,000,000 (the "Required Offering") as soon as
practicable in the reasonable business judgment of the Company's board of
directors and that such offering will be consummated prior to April 28, 1996
unless the Company has obtained a supplemental ruling from the I.R.S. that
failure to consummate such offering will not affect the Ruling. The Tax Ruling
Agreement provides that the Company will use at least $15 million of the
proceeds from the equity offering to repay a portion of its outstanding debt to
First Mississippi, will use at least $35 million of the proceeds for the
development and exploration of its Turquoise Ridge and Getchell properties for
the mining and exploration of gold and will use any balance of the proceeds for
purposes related to the business of the Company, including for working capital.
The Tax Ruling Agreement provides that the Company will not prior to one
year from the date of the Distribution enter into any agreement to merge or
consolidate with or into any other corporation, to liquidate or partially
liquidate, to sell or transfer all or substantially all of its assets, to redeem
or repurchase any of its capital stock (except for the redemption of the stock
of one or more Company employees upon his or her termination) or to issue
additional shares of its capital stock (except in connection with the Required
Offering or issuances pursuant to the Company's employee benefit or compensation
plans) (each a "Prohibited Action"), unless it first obtains an opinion of
counsel or a supplemental ruling from the I.R.S. that such action does not
interfere with the Tax Ruling.
In the event the Company (i) takes any such Prohibited Action without an
opinion or a supplemental I.R.S. ruling, (ii) ceases to actively conduct its
trade or business, (iii) fails to consummate the Required Offering prior to
April 27, 1996 or (iv) solicits or assists any person or group to commence a
tender offer if such person or group would acquire beneficial ownership of 20
percent or more of the Company's outstanding common stock, the Company agreed
under the Tax Ruling Agreement to indemnify and hold First Mississippi and
certain affiliated corporations harmless against any and all federal, state and
local taxes, interest, penalties and additions thereto imposed upon or incurred
by such corporations as a result of such action's effect on the tax-free nature
of the Distribution.
Loan Agreement. The Loan Agreement and related promissory note establish a
specific repayment plan for the intercompany debt owed by the Company to First
Mississippi. As of the date of the Distribution, this debt was $52.5 million.
Under the Loan Agreement, the Company agreed to repay the entire remaining
principal balance on September 22, 2000, or earlier if the loan is accelerated
under the circumstances provided for in the Loan Agreement. Interest accrues at
a LIBOR-based rate and is payable based on the LIBOR period selected by the
Company (one month, three month, six month or one year). The Loan Agreement
permits prepayments at any time at the Company's option and requires $15 million
in principal of the loan to be repaid following the consummation of any public
offering of the Company's securities after the date of the Loan Agreement as
well as full prepayment upon a change in control of the Company. In the Loan
Agreement, the Company makes certain representations and warranties about its
corporate status and
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<PAGE> 27
financial and business condition and affirmative and negative covenants
customary in lending transactions as to the conduct of its business going
forward. Certain circumstances, including failure to pay principal or interest
when due and the Company's insolvency, will constitute an event of default under
the Loan Agreement entitling First Mississippi to accelerate the remaining
principal balance of the loan, plus accrued interest. First Mississippi has
agreed to subordinate certain of its rights to those of The Toronto-Dominion
Bank (see "Toronto-Dominion Bank Loan Facility" below).
Amended Tax Sharing Agreement. First Mississippi and the Company have
entered into an Amended Tax Sharing Agreement. The Amended Tax Sharing Agreement
provides for the termination of the Tax Sharing Agreement dated as of October 1,
1987 to which First Mississippi and the Company are parties, and sets forth the
parties' obligations with respect to taxes relating to pre-Distribution taxable
periods ("Pre-Spin-Off Periods").
The Amended Tax Sharing Agreement obligates First Mississippi to pay the
Company (by either an actual payment or a reduction in the Company's outstanding
indebtedness to First Mississippi) an agreed upon amount (approximately $14
million) representing the tax benefit received by the affiliated group of which
First Mississippi is the common parent corporation (the "First Mississippi
Affiliated Group") from its use of the Company's losses, deductions, credits and
allowances in Pre-Spin-Off Periods.
The Company has agreed in the Tax Sharing Agreement to indemnify First
Mississippi for any taxes attributable to the Company and assessed with respect
to consolidated or combined tax returns which include the Company and relate to
Pre-Spin-Off Periods, to the extent any liability for such taxes exceeds
$250,000. Conversely, First Mississippi has agreed to indemnify the Company
against any liability for taxes attributable to members of the First Mississippi
Affiliated Group other than the Company, but imposed on the Company as a result
of its inclusion in First Mississippi's consolidated or combined tax returns for
Pre-Spin-Off Periods.
The Toronto-Dominion Bank Loan Facility. The Loan Facility is provided by
The Toronto-Dominion Bank acting through its Toronto-Dominion Merchant Bank
Division ("Agent") and one or more financial institutions which may become
parties to the Loan Facility. The Loan Facility provides for $20,000,000 of term
loans to the Company. Amounts drawn under the Loan Facility are available for
financing the development of the Company's mining properties and for the general
working capital purposes of the Company.
Borrowings under the Loan Facility bear interest at 3% over the LIBOR rate
for each one month period during which advances are outstanding. In addition,
the Company will pay the Agent a drawdown fee of 1% of the amount of each
advance of funds to the Company under the Loan Facility and has granted to the
Agent a participation right as described in the following paragraph. The Company
has paid to the Agent a commitment fee in the amount of $100,000 and an
additional fee of $400,000, and is required to pay a commitment fee in the
amount of $100,000 per month commencing on April 1, 1996 during the remaining
term of the Loan Facility. All advances of funds under the Loan Facility must be
repaid by the Company on October 31, 1996. The Company is obligated to prepay
amounts advanced under the Loan Facility from the net proceeds of any financing
or issuance of securities by the Company. Amounts repaid under the Loan Facility
cannot be reborrowed. On October 23, 1995, the Company drew $5.5 million against
this credit facility and intends to repay such amount upon completion of this
Offering.
The Company has granted to the Agent an equity participation right which
may be exercised by written notice (i) after the earlier of termination of the
Loan Facility and the Due Date (as defined therein) and (ii) on or before 30
months following repayment of all funds advanced under the Loan Facility. Upon
exercise of such participation right, the Company shall pay to the Agent, either
in cash or by way of issuance to the Agent of shares of the Common Stock of the
Company (valued at the weighted average closing price of such shares during the
ten-day period prior to the date of exercise of the participation right), an
amount not exceeding (x) $1,000,000 if all advances under the Loan Facility are
paid in full within six months of the date of the Loan Facility, and (y)
$1,500,000 if such funds advanced are paid in full after such six month period,
but prior to the Due Date. At any time prior to November 30, 1995, the Borrower
may satisfy the participation right in full by paying $500,000 (in cash or
through the issuance of securities of equivalent value) to the Agent. In the
event any obligations of the Company described in this paragraph are satisfied
by issuance of
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<PAGE> 28
Common Stock of the Company, the Agent will have piggy-back registration rights
in connection with any registration of the Common Stock of the Company.
The loans under the Loan Facility are guaranteed by the Company's
wholly-owned subsidiary FMG Inc. The obligations of FMG Inc. and the Company
under the Loan Facility are secured by a pledge by the Company of all the
capital stock of FMG Inc. In connection with the Loan Facility, the Company is
required to deliver to the Agent a satisfactory agreement from First Mississippi
as to subordination of certain of the Company's obligations to First Mississippi
to the obligations of the Company to the Agent.
The Loan Facility contains covenants and provisions that restrict, among
other things, the Company's ability to: (i) change its business; (ii)
consolidate, merge or sell all of its assets; (iii) incur certain indebtedness;
(iv) incur liens on its property; and (v) declare dividends.
DESCRIPTION OF COMMON STOCK
The Company has authority to issue up to 50,000,000 shares of Common Stock,
par value $.01 per share. As of October 31, 1995, there were 18,182,600 shares
of Common Stock issued and outstanding. The holders of Common Stock are entitled
to one vote per share on all matters to be voted on by shareholders, including
the election of directors. Shareholders are not entitled to cumulative voting
rights, and, accordingly, the holders of a majority of the shares voting for the
election of directors can elect the entire Board if they choose to do so and, in
that event, the holders of the remaining shares will not be able to elect any
person to the Board of Directors.
The holders of Common Stock are entitled to receive such dividends, if any,
as may be declared from time to time by the Board of Directors, in its
discretion, from funds legally available thereof and subject to prior dividend
rights of holders of any shares of preferred stock of the Company which may be
outstanding. The First Mississippi loan and The Toronto-Dominion Bank loan
prohibit the payment of dividends. Upon liquidation or dissolution of the
Company subject to prior liquidation rights of the holders of preferred stock of
the Company, the holders of Common Stock are entitled to receive on a pro rata
basis the remaining assets of the Company available for distribution. Holders of
Common Stock have no preemptive or other subscription rights, and there are no
conversion rights or redemption or sinking fund provisions with respect to such
shares. KeyCorp Shareholder Services, Inc. acts as transfer agent and registrar
for the Common Stock.
On June 13, 1990, the Company adopted a Stockholders' Rights Plan and
declared a distribution of one common stock purchase right for each outstanding
share of common stock. The rights, which do not have voting rights, expire in
June 2000 and are subject to redemption or exchange by the Company at $0.01 per
right at any time before the close of business on the tenth day after a public
announcement that an acquiring person exists (unless such 10-day period is
extended by action of the Company's Board of Directors). The rights have an
initial exercise price of $40 which is subject to adjustment. In the event of an
entity other than First Mississippi acquiring more than a 15% beneficial
ownership of the Company, the rights entitle the holder to acquire common stock
of the Company with a value of twice the established exercise price. In the
event of a merger or other business combination, the rights entitle the holder
to acquire stock of the acquiring entity with a value of twice the established
exercise price.
S-28
<PAGE> 29
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
dated , 1995 (the "Underwriting Agreement") among the Company,
Nesbitt Burns Securities Inc., Salomon Brothers Inc, ScotiaMcLeod (USA) Inc.,
S.G.Warburg & Co. Inc., Toronto Dominion Securities Inc. (collectively, the
"U.S. Underwriters"), and Nesbitt Burns Inc., Salomon Brothers Canada Inc,
ScotiaMcLeod Inc. and Toronto Dominion Securities Inc. (collectively, the
"Canadian Underwriters"), as underwriters (collectively, the "Underwriters"),
the Company has agreed to sell and the Underwriters have, subject to the
conditions specified therein, agreed to purchase from the Company the number of
shares of Common Stock set forth in the table below. The obligation of each
Underwriter to purchase the shares of Common Stock set forth against its name in
the table is joint with the obligation of its affiliate set forth beside its
name in the table but several and not joint with respect to each other
Underwriter in the table.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
Nesbitt Burns Securities Inc./Nesbitt Burns Inc............................
Salomon Brothers Inc/Salomon Brothers Canada Inc...........................
ScotiaMcLeod (USA) Inc./ScotiaMcLeod Inc...................................
S.G.Warburg & Co. Inc......................................................
Toronto Dominion Securities Inc............................................
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that they may be
terminated upon the occurrence of certain stated events. The Underwriters are,
however, obligated to take up and pay for all of the shares of Common Stock
offered hereby if any are purchased under the Underwriting Agreement.
Under the Underwriting Agreement, the U.S. Underwriters and any dealer to
whom they sell shares of Common Stock will not offer to sell or sell such shares
in Canada or to persons who are Canadian persons, and the Canadian Underwriters
and any dealer to whom they sell shares of Common Stock will not offer to sell
or sell such shares in the United States or to persons who are U.S. persons. The
foregoing limitations do not apply to stabilization transactions or to
transaction between the U.S. Underwriters and the Canadian Underwriters. Subject
to applicable law, the Underwriters may offer the Common Stock outside Canada
and the United States.
With respect to the offering in the United States, the U.S. Underwriters
propose to offer the Common Stock directly to the public at the public offering
price set forth on the cover page of this Prospectus Supplement and to certain
dealers at such public offering price less a concession not to exceed
US$ per share. Such dealers may reallow a concession not to exceed
US$ per share to other dealers. After the public offering, the public
offering price and concessions and reallowances to dealers may be changed by the
Underwriters.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus Supplement, to purchase up
to 750,000 additional shares of Common Stock at the initial public offering
price less the underwriting discount. The Underwriters may exercise such option
solely to cover over-allotments, if any, on the sale of the Common Stock offered
hereby.
The Company has agreed to indemnify the Underwriters and their directors,
officers, employees and agents against certain liabilities, including civil
liabilities under the Canadian provincial securities legislation or the
Securities Act of 1933 (United States), as amended, or will contribute to
payments the Underwriters may be required to make in respect thereof.
The Company has agreed with the Underwriters that it will not, for the
period ending 90 days after the closing of the Offering, issue or sell any
shares of Common Stock or any right to acquire shares of Common Stock, without
the prior consent of Nesbitt Burns Inc., except that the Company may grant
options to purchase shares of Common Stock pursuant to the Company's stock
option plan and may issue shares of Common Stock pursuant to the exercise of
options granted under the Company's stock option plan.
S-29
<PAGE> 30
Pursuant to a policy statement of the Ontario Securities Commission, if the
Common Stock is listed on The Toronto Stock Exchange prior to the completion of
the distribution of the shares, the Underwriters may not, throughout the period
of distribution, bid for or purchase shares of Common Stock. The policy
statement allows certain exceptions to the foregoing prohibitions. The
Underwriters may only avail themselves of such exceptions on the condition that
the bid or purchase not be engaged in for the purpose of creating actual or
apparent active trading in, or raising the price of, the shares of Common Stock.
These exceptions include a bid or purchase permitted under the by-laws and rules
of the Toronto Stock Exchange relating to market stabilization and passive
market-making activities and a bid or purchase made for on behalf of a customer
where the order was not solicited during the period of distribution. Subject to
the foregoing, in connection with this offering, the Underwriters may over-allot
or effect transactions which stabilize or maintain the market prices of the
Common Stock at levels other than those which might otherwise prevail on the
open market. Such transactions, if commenced, may be discontinued at any time.
In connection with this offering, the Underwriters may engage in passive
market making transactions in the Common Stock on Nasdaq immediately prior to
the commencement of sales in this offering, in accordance with Rule 10b-6A under
the Securities Exchange Act of 1934, as amended. Passive market making consists
of displaying bids on Nasdaq limited to the bid prices of independent market
makers and purchases limited by such prices and effected in response to order
flow. Net purchases by a passive market maker on each day are limited to a
specified percentage of the passive market maker's average daily trading volume
in the Common Stock during a specified prior period and must be discontinued
when such limit is reached. Passive market making may stabilize the market price
of the Common Stock at a level above that which might otherwise prevail and, if
commenced, may be discontinued at any time.
Toronto Dominion Securities Inc. is indirectly a subsidiary of a Canadian
Bank (the "Bank"), which is a commercial banker of the Company. The decision to
offer the shares of Common Stock, the determination of the terms of the
distribution and the use of proceeds from this offering were made without the
involvement of the Bank. The Company is a party to a revolving credit facility
(the "Facility") with the Bank. As of the date of this Prospectus Supplement,
the aggregate amount of indebtedness of the Company owing to the Bank under the
Facility was approximately $5.5 million, which the Company intends to repay with
the proceeds of this Offering. The Facility is secured by a pledge of all of the
shares of capital stock of the Company's subsidiary, FMG Inc. Toronto Dominion
Securities Inc. will not receive any benefit in connection with this offering
other than its portion of the Underwriters' fee payable by the Company.
Each of the Underwriters, from time to time, performs investment banking
and other financial services for the Company.
LEGAL MATTERS
Certain U.S. legal matters with respect to the Common Stock offered hereby
will be passed upon for the Company by Latham & Watkins, San Francisco,
California and certain Canadian legal matters will be passed upon for the
Company by McCarthy Tetrault, Toronto, Ontario. Certain U.S. legal matters will
passed upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom,
Toronto, Ontario and certain Canadian legal matters will be passed upon for the
Underwriters by Davies, Ward & Beck, Toronto, Ontario.
EXPERTS
The financial statements of FirstMiss Gold Inc. as of June 30, 1995 and
1994, and for each of the years in the three-year period ended June 30, 1995
have been incorporated by reference herein and in the registration statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
S-30
<PAGE> 31
PROSPECTUS
FIRSTMISS GOLD INC.
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
EQUITY WARRANTS
DEBT WARRANTS
FirstMiss Gold Inc. (the "Company"), directly or through agents, dealers,
or underwriters designated from time to time, may offer, issue and sell,
together or separately, up to $200,000,000 in the aggregate of (a) secured or
unsecured debt securities (the "Debt Securities") of the Company, in one or more
series, which may be either senior debt securities (the "Senior Debt
Securities"), senior subordinated debt securities (the "Senior Subordinated Debt
Securities") or subordinated debt securities (the "Subordinated Debt
Securities"), (b) shares of preferred stock of the Company, par value $.01 per
share (the "Preferred Stock"), in one or more series, (c) fractional interests
in shares of Preferred Stock represented by depositary shares (the "Depositary
Shares"), (d) shares of common stock of the Company, par value $.01 per share
(the "Common Stock"), (e) warrants to purchase Common Stock or Preferred Stock
(the "Equity Warrants") or (f) warrants to purchase Debt Securities (the "Debt
Warrants" and together with the Equity Warrants, the "Warrants"), or any
combination of the foregoing, either individually or as units consisting of one
or more of the foregoing, each on terms to be determined at the time of sale.
The Debt Securities may be issued as exchangeable and/or convertible Debt
Securities exchangeable for or convertible into shares of Common Stock or
Preferred Stock. The Preferred Stock may also be exchangeable for and/or
convertible into shares of Common Stock or another series of Preferred Stock.
The Debt Securities, the Preferred Stock, the Common Stock and the Warrants are
collectively referred to herein as the "Securities." When a particular series of
Securities is offered, a supplement to this Prospectus (each a "Prospectus
Supplement") will be delivered with this Prospectus. The Prospectus Supplement
will set forth the terms of the offering and sale of the offered Securities.
THE PURCHASE OF THE SECURITIES INVOLVES CERTAIN MATERIAL RISKS.
SEE "RISK FACTORS" COMMENCING ON PAGE 3.
Except as described more fully herein or as set forth in the Prospectus
Supplement relating to any offered Debt Securities, the Indenture will not
provide holders of Debt Securities protection in the event of a highly-leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company which could adversely affect holders of Debt Securities.
See "Description of Debt Securities -- Consolidation, Merger and Sale of
Assets."
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol FRMG. On October 30, 1995, the last reported sale price of the Common
Stock as reported by Nasdaq was $17.875 per share. The Company has not yet
determined whether any of the Debt Securities, Preferred Stock or Warrants
offered hereby will be listed on any exchange or over-the-counter market. If the
Company decides to seek listing of any such Securities, the Prospectus
Supplement relating thereto will disclose such exchange or market.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A FEDERAL OFFENSE.
-----------------------------------------
The Securities may be sold directly by the Company, through agents
designated from time to time or to or through underwriters or dealers. The
Company reserves the sole right to accept, and together with its agents, from
time to time, to reject in whole or in part any proposed purchase of Securities
to be made directly or through agents. See "Plan of Distribution." If any such
agents or underwriters are involved in the sale of any Securities, the names of
such agents or underwriters and any applicable fees, commissions or discounts
will be set forth in the applicable Prospectus Supplement.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by the applicable Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 1, 1995.
<PAGE> 32
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES
ACT OF 1934. SEE "PLAN OF DISTRIBUTION."
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with all amendments
and exhibits thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, part of which has been omitted in accordance with the
rules and regulations of the Commission. For further information about the
Company and the Securities offered hereby, reference is made to the Registration
Statement, including the exhibits filed as a part thereof and otherwise
incorporated therein. Statements made in this Prospectus as to the contents of
any document referred to herein are not necessarily complete, and in each
instance reference is made to such document for a more complete description, and
each such statement is qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files periodic reports, proxy statements and other information with
the Commission. The Registration Statement, including the exhibits thereto, as
well as such reports and other information filed by the Company with the
Commission, can be inspected, without charge, and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington D.C., 20549; 7 World Trade Center, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Reports and
other information concerning the Company can also be inspected at the offices of
the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated by reference in this Prospectus: (1) the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995,
(2) the Company's report on Form 8-K filed with the Commission on September 25,
1995, (3) the Company's report on Form 8-K/A filed with the Commission on
September 27, 1995, (4) the Company's report on Form 8-K/A-2 filed with the
Commission on November 1, 1995, and (5) all other documents subsequently filed
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and before the termination of the offering, which shall
be deemed to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon request, a copy of
any documents incorporated into this Prospectus by reference (other than
exhibits incorporated by reference into such document). Requests for documents
should be
2
<PAGE> 33
submitted to FirstMiss Gold Inc., 5460 South Quebec Street, Suite 240,
Englewood, Colorado 80111, Attention: Secretary (telephone (303) 771-9000). The
information relating to the Company contained in this Prospectus does not
purport to be comprehensive and should be read together with the information
contained in the documents incorporated or deemed to be incorporated by
reference herein.
THE COMPANY
FirstMiss Gold Inc. (the "Company") is engaged in the business of mining
and processing gold ores and exploration for such ores. The Company owns and
operates a property (the "Getchell Property") located in the Potosi Mining
District on the eastern side of the Osgood Mountain Range 35 miles northeast of
the town of Winnemucca, Nevada. Operations on the Getchell Property include a
pressure oxidation (autoclave) mill facility and an oxide heap leach facility.
Currently, sulfides ores for the mill are produced from an underground mine
known as the Getchell Main Underground Mine. Oxide ores for the heap leach
facility are produced from existing stockpiles. The Company is actively
conducting exploration on the 33,000-acre Getchell Property.
The Company was incorporated in Nevada in August 1987 by First Mississippi
Corporation ("First Mississippi"), a Mississippi corporation, for the purpose of
financing, developing and operating the Getchell gold mining project and for
conducting minerals exploration. Operations at the autoclave mill facility and
the oxide heap leach facility were commenced in February 1989 and June 1985,
respectively, and as of June 30, 1995, the Company had produced over 1.2 million
ounces of gold. Approximately 81% of the Company's stock is currently held by
First Mississippi. First Mississippi has announced that it intends to distribute
all of its stock in the Company to First Mississippi shareholders, which
distribution will result in a change of ownership of approximately 81% of the
Company's common stock. This distribution will also result in the ownership of
approximately 567,300 additional shares, or 3.1%, of the Company's outstanding
common stock as of August 22, 1995, by the Company's executive officers and
directors.
The Company's principal executive offices are located at 5460 South Quebec
Street, Suite 240, Englewood, Colorado 80111, and its telephone number is (303)
771-9000.
RISK FACTORS
In addition to the other information in this Prospectus, prospective
purchasers of the Securities offered hereby should carefully consider the risk
factors set forth under the heading "Risk Factors" in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included in the
Company's most recently incorporated Annual Report on Form 10-K or Quarterly
Report on Form 10-Q. See "Information Incorporated by Reference."
USE OF PROCEEDS
The Company currently has no specific plans for the use of the net proceeds
from the sale of Securities offered hereby. However, the Company currently
anticipates that any such net proceeds would be used for general corporate
purposes, which may include but are not limited to working capital, capital
expenditures, repayment of indebtedness (including indebtedness to First
Mississippi) and acquisitions. When a particular series of Securities is
offered, the Prospectus Supplement relating thereto will set forth the Company's
intended use for the net proceeds received from the sale of such Securities.
Pending the application of the net proceeds, the Company expects to invest such
proceeds in short-term, interest-bearing instruments or other investment-grade
securities.
3
<PAGE> 34
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the unaudited consolidated ratios of
earnings to fixed charges and earnings to fixed charges and preferred stock
dividends for the Company for the periods indicated.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
-------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.......................... * 3.60 * 3.19 *
Ratio of earnings to fixed charges and preferred stock
dividends................................................. * 3.60 * 3.19 *
</TABLE>
- ---------------
* For the fiscal years ended June 30, 1991, 1993 and 1995, earnings were
insufficient to cover fixed charges by $74,000, $3,129,000 and $19,088,000,
respectively. Therefore, no ratios are provided for these fiscal years.
For the purpose of calculating the ratio of earnings to fixed charges and
the ratio of earnings to fixed charges and preferred stock dividends, earnings
consist of income before income taxes and fixed charges (exclusive of preferred
stock dividends). For the purpose of calculating both ratios, fixed charges
include interest expense, capitalized interest and that portion of rentals
representative of an interest factor. Because the Company did not distribute any
preferred stock dividends during fiscal years 1991-1995, the two above ratios
are identical.
4
<PAGE> 35
GENERAL DESCRIPTION OF SECURITIES
The Company directly or through agents, dealers, or underwriters designated
from time to time, may offer, issue and sell, together or separately, up to
$200,000,000 in the aggregate of (a) secured or unsecured debt securities (the
"Debt Securities") of the Company, in one or more series, which may be either
senior debt securities (the "Senior Debt Securities"), senior subordinated debt
securities (the "Senior Subordinated Debt Securities") or subordinated debt
securities (the "Subordinated Debt Securities"), (b) shares of preferred stock
of the Company, par value $.01 per share (the "Preferred Stock"), in one or more
series, (c) fractional interests in shares of Preferred Stock represented by
depositary shares (the "Depositary Shares"), (d) shares of common stock of the
Company, par value $.01 per share (the "Common Stock"), (e) warrants to purchase
Common Stock or Preferred Stock (the "Equity Warrants") or (f) warrants to
purchase Debt Securities (the "Debt Warrants" and together with the Equity
Warrants, the "Warrants"), or any combination of the foregoing, either
individually or as units consisting of one or more of the foregoing, each on
terms to be determined at the time of sale. The Debt Securities may be issued as
exchangeable and/or convertible Debt Securities exchangeable for or convertible
into shares of Common Stock or Preferred Stock. The Preferred Stock may also be
exchangeable for and/or convertible into shares of Common Stock or another
series of Preferred Stock. The Debt Securities, the Preferred Stock, the Common
Stock and the Warrants are collectively referred to herein as the "Securities."
When a particular series of Securities is offered, a supplement to this
Prospectus (each a "Prospectus Supplement") will be delivered with this
Prospectus. The Prospectus Supplement will set forth the terms of the offering
and sale of the offered Securities.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement and
the extent, if any, to which such general provisions do not apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating to
such Debt Securities.
Debt Securities may be issued from time to time in series under an
indenture, and one or more indentures supplemental thereto (collectively, the
"Indenture"), between the Company and a trustee to be identified in the
applicable Prospectus Supplement (the "Trustee"). The terms of the Debt
Securities will include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (the "TIA") as in
effect on the date of the Indenture. The Debt Securities will be subject to all
such terms, and potential investors of the Debt Securities are referred to the
Indenture and the TIA for a statement thereof. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below. As used under this caption, unless the context
otherwise requires, "Offered Debt Securities" shall mean the Debt Securities
offered by this Prospectus and the accompanying Prospectus Supplement.
GENERAL
The Indenture will provide for the issuance of Debt Securities in series
and will not limit the principal amount of Debt Securities which may be issued
thereunder. In addition, except as may be provided in the Prospectus Supplement
relating to such Debt Securities, the Indenture will not limit the amount of
additional indebtedness the Company may incur.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the series of Offered Debt Securities in respect
of which this Prospectus is being delivered: (1) the title of the Offered Debt
Securities; (2) whether the Offered Debt Securities are Senior Debt Securities,
Senior Subordinated Debt Securities or Subordinated Debt Securities or any
combination thereof; (3) any limit upon the aggregate principal amount of the
Offered Debt Securities; (4) the date or dates on which the principal of the
Offered Debt Securities is payable; (5) the rate or rates at which the Offered
Debt Securities will bear interest, if any, or the manner in which such rate or
rates are determined; (6) the date or dates from which any
5
<PAGE> 36
such interest will accrue, the interest payment dates on which any such interest
on the Offered Debt Securities will be payable and the record dates for the
determination of holders to whom interest is payable; (7) the place or places
where the principal of and any interest on the Offered Debt Securities will be
payable; (8) the obligation of the Company, if any, to redeem, purchase or repay
the Offered Debt Securities in whole or in part pursuant to any sinking fund or
analogous provisions or at the option of the holders and the price or prices at
which and the period and periods within which and the terms and conditions upon
which the Offered Debt Securities shall be redeemed, purchased or repaid
pursuant to such obligation; (9) the denominations in which any Offered Debt
Securities will be issuable, if other than denominations of U.S. $1,000 and any
integral multiple thereof; (10) if other than the principal amount thereof, the
portion of the principal amount of the Offered Debt Securities of the series
which will be payable upon declaration of the acceleration of the maturity
thereof; (11) any addition to or change in the covenants which apply to the
Offered Debt Securities; (12) any Events of Default with respect to the Offered
Debt Securities, if not otherwise set forth under "Events of Default"; (13)
whether the Offered Debt Securities will be issued in whole or in part in global
form; the terms and conditions, if any, upon which such global Offered Debt
Securities may be exchanged in whole or in part for other individual securities,
and the depositary for the Offered Debt Securities; (14) the terms and
conditions, if any, upon which the Offered Debt Securities shall be exchanged
for or converted into other securities or property; (15) the nature and terms of
the security for any secured Offered Debt Securities; and (16) any other terms
of the Offered Debt Securities which terms shall not be inconsistent with the
provisions of the Indenture.
Debt Securities may be issued at a discount from their principal amount
("Original Issue Discount Securities"). Federal income tax considerations and
other special considerations applicable to any such Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
Debt Securities may be issued in bearer form, with or without coupons.
Federal income tax considerations and other special considerations applicable to
bearer securities will be described in the applicable Prospectus Supplement.
Unless otherwise indicated in this Prospectus or a Prospectus Supplement,
the Debt Securities will not have the benefit of any covenants that limit or
restrict the Company's business or operations, the pledging of the Company's
assets or the incurrence of indebtedness by the Company.
STATUS OF DEBT SECURITIES
The Senior Debt Securities will be unsubordinated obligations of the
Company and will rank on a parity with all other unsecured and unsubordinated
indebtedness of the Company.
The obligations of the Company pursuant to Senior Subordinated Debt
Securities will be subordinate in right of payment, to the extent and in the
manner set forth in the Indenture, to all Senior Indebtedness of the Company.
Except to the extent set forth in the Prospectus Supplement, "Senior
Indebtedness" of the Company is defined to mean the principal of, and premium,
if any, and any interest (including interest accruing subsequent to the
commencement of any proceeding for the bankruptcy or reorganization of the
Company under any applicable bankruptcy, insolvency or similar law now or
hereafter in effect) on (a) all indebtedness of the Company whether heretofore
or hereafter incurred (i) for borrowed money or (ii) in connection with the
acquisition by the Company or a subsidiary of assets other than in the ordinary
course of business, for the payment of which the Company is liable directly or
indirectly by guarantee, letter of credit, obligation to purchase or acquire or
otherwise, or the payment of which is secured by a lien, charge or encumbrance
on assets acquired by the Company, (b) amendments, modifications, renewals,
extensions and deferrals of any such indebtedness, and (c) any indebtedness
issued in exchange for any such indebtedness (clauses (a) through (c) hereof
being collectively referred to herein as "Debt"); provided, however, that the
following will not constitute Senior Indebtedness with respect to Senior
Subordinated Debt Securities: (1) any Debt as to which, in the instrument
evidencing such Debt or pursuant to which such Debt was issued, it is expressly
provided that such Debt is subordinate in right of payment to all Debt of the
Company not expressly subordinated to such Debt; (2) any Debt which by its terms
refers explicitly to the Senior Subordinated Debt Securities and states that
such Debt shall not be senior in right of payment; and (3) any Debt of the
Company
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in respect of the Senior Subordinated Debt Securities or any Subordinated Debt
Securities. The Company will not issue Debt which is subordinated in right of
payment to any other Debt of the Company and which is not expressly made pari
passu with, or subordinate and junior in right of payment to, the Senior
Subordinated Debt Securities.
The obligations of the Company pursuant to Subordinated Debt Securities
will be subordinate in right of payment to all Senior Indebtedness of the
Company and to any Senior Subordinated Debt Securities; provided, however, that
the following will not constitute Senior Indebtedness with respect to
Subordinated Debt Securities: (1) any Debt as to which, in the instrument
evidencing such Debt or pursuant to which such Debt was issued, it is expressly
provided that such Debt is subordinate in right of payment to all Debt of the
Company not expressly subordinated to such Debt; and (2) any Debt of the Company
in respect of Subordinated Debt Securities and any Debt which by its terms
refers explicitly to the Subordinated Debt Securities and states that such Debt
shall not be senior in right of payment.
No payment pursuant to the Senior Subordinated Debt Securities or the
Subordinated Debt Securities, as the case may be, may be made unless all amounts
of principal, premium, if any, and interest then due on all applicable Senior
Indebtedness of the Company shall have been paid in full or if there shall have
occurred and be continuing beyond any applicable grace period a default in any
payment with respect to any such Senior Indebtedness, or if there shall have
occurred any event of default with respect to any such Senior Indebtedness
permitting the holders thereof to accelerate the maturity thereof, or if any
judicial proceeding shall be pending with respect to any such default. However,
the Company may make payments pursuant to the Senior Subordinated Debt
Securities or the Subordinated Debt Securities, as the case may be, if a default
in payment or an event of default with respect to the Senior Indebtedness
permitting the holder thereof to accelerate the maturity thereof has occurred
and is continuing and judicial proceedings with respect thereto have not been
commenced within a certain number of days of such default in payment or event of
default. Upon any distribution of the assets of the Company upon dissolution,
winding-up, liquidation or reorganization, the holders of Senior Indebtedness of
the Company will be entitled to receive payment in full of principal, premium,
if any, and interest (including interest accruing subsequent to the commencement
of any proceeding for the bankruptcy or reorganization of the Company under any
applicable bankruptcy, insolvency or similar law now or hereafter in effect)
before any payment is made on the Senior Subordinated Debt Securities or
Subordinated Debt Securities, as applicable. By reason of such subordination, in
the event of insolvency of the Company, holders of Senior Indebtedness of the
Company may receive more, ratably, and holders of the Senior Subordinated Debt
Securities or Subordinated Debt Securities, as applicable, having a claim
pursuant to the Senior Subordinated Debt Securities or Subordinated Debt
Securities, as applicable, may receive less, ratably, than the other creditors
of the Company. Such subordination will not prevent the occurrence of any event
of default (an "Event of Default") in respect of the Senior Subordinated Debt
Securities or the Subordinated Debt Securities.
If the Company offers Debt Securities, the applicable Prospectus Supplement
will set forth the aggregate amount of outstanding indebtedness, if any, as of
the most recent practicable date that by the terms of such Debt Securities would
be senior to such Debt Securities. The applicable Prospectus Supplement will
also set forth any limitation on the issuance by the Company of any additional
senior indebtedness.
CONVERSION RIGHTS
The terms, if any, on which Debt Securities of a series may be exchanged
for or converted into shares of Common Stock or Preferred Stock will be set
forth in the Prospectus Supplement relating thereto.
EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise specified in the applicable Prospectus Supplement, payment
of principal, premium, if any, and any interest on the Debt Securities will be
payable, and the exchange of and the transfer of Debt Securities will be
registerable, at the office of the Trustee or at any other office or agency
maintained by the Company for such purpose subject to the limitations of the
Indenture. Unless otherwise indicated in the applicable Prospectus Supplement,
the Debt Securities will be issued in denominations of U.S. $1,000 or
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integral multiples thereof. No service charge will be made for any registration
of transfer or exchange of the Debt Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in the form of one or more
Global Securities (the "Global Securities") that will be deposited with a
Depositary or its nominee identified in the applicable Prospectus Supplement. In
such a case, one or more Global Securities will be issued in a denomination or
aggregate denominations equal to the portion of the aggregate principal amount
of outstanding Debt Securities of the series to be represented by such Global
Security or Securities. Each Global Security will be deposited with such
Depositary or nominee or a custodian therefor and will bear a legend regarding
the restrictions on exchanges and registration of transfer thereof referred to
below and any such other matters as may be provided for pursuant to the
applicable Indenture.
Notwithstanding any provision of the Indenture or any Debt Security
described herein, no Global Security may be transferred to, or registered or
exchanged for Debt Securities registered in the name of, any person other than
the Depositary for such Global Security or any nominee of such Depositary, and
no such transfer may be registered, unless (i) the Depositary has notified the
Company that it is unwilling or unable to continue as Depositary for such Global
Security or has ceased to be qualified to act as such as required by the
applicable Indenture, (ii) the Company executes and delivers to the Trustee an
order that such Global Security shall be so transferable, registrable and
exchangeable, and such transfers shall be registrable, or (iii) there shall
exist such circumstances, if any, as may be described in the applicable
Prospectus Supplement. All Debt Securities issued in exchange for a Global
Security or any portion thereof will be registered in such names as the
Depositary may direct.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Company expects
that the following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Depositary will be represented by a Global Security registered
in the name of such Depositary or its nominee. Upon the issuance of such Global
Security and the deposit of such Global Security with or on behalf of the
Depositary for such Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters or agents of such Debt Securities or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of beneficial
interests in such Global Security will be limited to participants or persons
that may hold interests through participants. Ownership of beneficial interests
by participants in such Global Security will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
Depositary or its nominee for such Global Security. Ownership of beneficial
interests in such Global Security by Persons that hold through participants will
be shown on, and the transfer of that ownership interest within such participant
will be effected only through, records maintained by such participant. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in certificated form. The foregoing
limitations and such laws may impair the ability to transfer beneficial
interests in such Global Securities.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture. Unless otherwise specified in the applicable Prospectus Supplement,
owners of beneficial interests in such Global Security will not be entitled to
have Debt Securities of the series represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities of such series in certified form and will not be
considered the holders thereof for any purposes under the Indenture.
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Accordingly, each person owning a beneficial interest in such Global Security
must rely on the procedures of the Depositary and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a holder under the Indenture. If the
Company requests any action of holders or an owner of a beneficial interest in
such Global Security desires to give any notice or take any action a holder is
entitled to give or take under the Indenture, the Depositary will authorize the
participants to give such notice or take such action, and participants would
authorize beneficial owners owning through such participants to give such notice
or take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Notwithstanding any other provisions to the contrary in the Indenture, the
rights of the beneficial owners of the Debt Securities to receive payment of the
principal and premium, if any, of and interest on such Debt Securities, on or
after the respective due dates expressed in such Debt Securities, or to
institute suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
beneficial owners.
Principal of and any interest on a Global Security will be payable in the
manner described in the applicable Prospectus Supplement.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of any holders of outstanding Debt
Securities, may not consolidate with or merge into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its property
or assets to any person unless (a) the Company is the surviving corporation or
the entity or the person formed by or surviving any such consolidation or merger
(if other than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation organized
and existing under the laws of the United States, any state thereof or the
District of Columbia; (b) the entity or person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Debt
Securities and the Indenture; and (c) immediately prior to and after the
transaction no Default or Event of Default exists.
Except as may be described in a Prospectus Supplement applicable to a
particular series of Debt Securities, there are no covenants or other provisions
in the Indenture providing for a put or increased interest or otherwise that
would afford holders of Debt Securities additional protection in the event of a
recapitalization transaction, a change of control of the Company or a highly
leveraged transaction.
COVENANTS OF THE COMPANY
The applicable Prospectus Supplement will describe any material covenants
in respect of a series of Offered Debt Securities. Other than the covenants of
the Company included in the Indenture as described above or as described in the
applicable Prospectus Supplement, the Indenture will not provide holders of Debt
Securities protection in the event of a highly-leveraged transaction,
reorganization, restructuring, merger or similar transaction involving the
Company which could adversely affect holders of Debt Securities.
EVENTS OF DEFAULT
Unless otherwise specified in the applicable Prospectus Supplement, the
following will constitute Events of Default under the Indenture with respect to
Debt Securities of any series: (a) failure to pay principal of any Debt Security
of that series when due and payable at maturity, upon redemption or otherwise;
(b) failure to pay any interest on any Debt Security of that series when due,
and the Default continues for 30 days; (c) an Event of Default, as defined in
the Debt Securities of that series, occurs and is continuing, or the Company
fails to comply with any of its other agreements in the Debt Securities of that
series or in the Indenture with respect to that series and the Default continues
for the period and after the notice provided therein (and described below); and
(d) certain events of bankruptcy, insolvency or reorganization. A Default under
clause (c) above is not an Event of Default with respect to a particular series
of Securities until the Trustee or the holders of at least 25% in principal
amount of the then outstanding Securities of that series notify the
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Company of the Default and the Company does not cure the Default within 30 days
after receipt of the notice. The notice must specify the Default, demand that it
be remedied and state that the notice is a "Notice of Default."
If an Event of Default with respect to outstanding Debt Securities of any
series (other than an Event or Default relating to certain events of bankruptcy,
insolvency or reorganization) shall occur and be continuing, either the Trustee
or the holders of at least 25% in principal amount of the outstanding Debt
Securities of that series by notice, as provided in the Indenture, may declare
the unpaid principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities, such lesser amount as may be specified in
the terms of that series) of, and any accrued and unpaid interest on, all Debt
Securities of that series to be due and payable immediately. However, at any
time after a declaration of acceleration with respect to Debt Securities of any
series has been made, but before a judgment or decree based on such acceleration
has been obtained, the holders of a majority in principal amount of the
outstanding Debt Securities of that series may, under certain circumstances,
rescind and annul such acceleration. For information as to waiver of defaults,
see "Modification and Waiver" below.
The Indenture will provide that, subject to the duty of the Trustee during
an Event of Default to act with the required standard of care, the Trustee will
be under no obligation to exercise any of its rights or powers under the
applicable Indenture at the request or direction of any of the holders, unless
such holders shall have offered to the Trustee reasonable security or indemnity.
Subject to certain provisions, including those requiring security or
indemnification of the Trustee, the holders of a majority in principal amount of
the outstanding Debt Securities of any series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of that series.
The Company will be required to furnish to the Trustee under the Indenture
annually a statement as to the performance by the Company of its obligations
under that Indenture and as to any default in such performance.
MODIFICATION AND WAIVER
Subject to certain exceptions, the Company and the Trustee may amend the
Indenture or the Debt Securities with the written consent of the holders of a
majority in principal amount of the then outstanding Debt Securities of each
series affected by the amendment with each series voting as a separate class.
The holders of a majority in principal amount of the then outstanding Debt
Securities of any series may also waive compliance in a particular instance by
the Company with any provision of the Indenture with respect to the Debt
Securities of that series; provided, however, that without the consent of each
holder of Debt Securities affected, an amendment or waiver may not (i) reduce
the percentage of the principal amount of Debt Securities whose holders must
consent to an amendment or waiver; (ii) reduce the rate or change the time for
payment of interest on any Debt Security; (iii) reduce the principal of or
change the fixed maturity of any Debt Security, or alter the redemption
provisions which respect thereto; (iv) make any Debt Security payable in money
other than that stated in the Debt Security; (v) make any change in the
provisions concerning waivers of Default or Events of Default by holders or the
rights of holders to recover the principal of or interest on any Debt Security;
or (vi) waive a default in the payment of the principal of, or interest on, any
Debt Security, except as otherwise provided in the Indenture. The Company and
the Trustee may amend the Indenture or the Debt Securities without notice to or
the consent of any holder of a Debt Security: (i) to cure any ambiguity, defect
or inconsistency; (ii) to comply with the Indenture's provisions with respect to
successor corporations; (iii) to comply with any requirements of the Commission
in connection with the qualification of the Indenture under the TIA; (iv) to
provide for Debt Securities in addition to or in place of certificated Debt
Securities; (v) to add to, change or eliminate any of the provisions of the
Indenture in respect of one of more series of Debt Securities, provided,
however, that any such addition, change or elimination (A) shall neither (1)
apply to any Debt Security of any series created prior to the execution of such
amendment and entitled to the benefit of such provision, nor (2) modify the
rights of a holder of any such Debt Security with respect to such provision, or
(B) shall become effective only when there is no outstanding Debt Security of
any series created prior to such amendment and entitled to the benefit of such
provision; (vi) to make any change that
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does not adversely affect in any material respect the interest on any holder; or
(vii) to establish additional series of Debt Securities as permitted by the
Indenture.
Subject to certain exceptions, the holders of a majority in principal
amount of the then outstanding Debt Securities of any series, by notice to the
Trustee, may waive an existing Default or Event of Default and its consequences
except a Default or Event of Default in the payment of the principal of or
interest on any Debt Security with respect to the Debt Securities of that
series.
TERMINATION OF THE COMPANY'S OBLIGATIONS UNDER THE DEBT SECURITIES AND THE
INDENTURE
Except as otherwise described below, the Company may terminate its
obligations under the Debt Securities and the Indenture with respect to the Debt
Securities if:
(a) all previously authenticated and delivered (other than destroyed,
lost or stolen Debt Securities which have been replaced or Debt Securities
which are paid or Debt Securities for whose payment money or securities has
theretofore been held in trust and thereafter repaid to the Company) have
been delivered to the Trustee for cancellation and the Company has paid all
sums payable by it under the Indenture; or
(b) (1) the Debt Securities mature within one year; and
(2) the Company irrevocably deposits in trust with the Trustee during
such one-year period, under the terms of an irrevocable trust agreement in
form and substance satisfactory to the Trustee, as trust funds solely for
the benefit of the holders of Debt Securities for that purpose, money or
U.S. Government Obligations, or a combination thereof, with the U.S.
Government Obligations maturing as to principal and interest in such
amounts and at such times as are sufficient, without consideration of any
reinvestment of such interest, to pay principal of and interest on the Debt
Securities to maturity and to pay all other sums payable by it under the
Indenture; or
(c) (1) the Company irrevocably deposits in trust with the Trustee
under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds solely for the benefit of the
holders of Debt Securities for that purpose, money or U.S. Government
Obligations, or a combination thereof, with the U.S. Government Obligations
maturing as to principal and interest in such amounts and at such times as
are sufficient, without consideration of any reinvestment of such interest,
to pay principal of and interest on the Debt Securities to maturity;
(2) The Company shall have delivered to the Trustee (A) a ruling
directed to the Trustee received from the Internal Revenue Service to the
effect that the holders of the Debt Securities will not recognize income,
gain or loss for federal income tax purposes as a result of the Company's
exercise of its option under this clause (c) and will be subject to federal
income tax on the same amount and in the same manner and at the same times
as would have been the case if such option had not been exercised, or (B)
an opinion of counsel to the same effect as the ruling described in
subclause (A) above accompanied by a ruling to that effect published by the
Internal Revenue Service, unless there has been a change in the applicable
federal income tax law since the date of the Indenture such that a ruling
from the Internal Revenue Service is no longer required;
(3) The Company has paid or caused to be paid all sums then payable by
the Company under the Indenture; and
(4) the Company has delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that all conditions precedent
provided for in this clause (c) relating to termination of obligations of
the Company have been complied with.
The Company's obligations under sections of the Indenture relating to the
registrar and the paying agent, their obligations, the maintenance of a list of
holders, transfers of Debt Securities, replacement of securities, payment
(together with payment obligations under the Debt Securities), compensation and
indemnity of the Trustee, replacement of the Trustee and repayment to the
Company of excess money held by the Trustee or
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the paying Agent, shall survive until the Debt Securities are no longer
outstanding. If the ruling from the Internal Revenue Service or opinion of
counsel referred to in clause (c)(2) above is based on or assumes that the
Company's payment obligations under the Indenture or its payment obligations
under the Debt Securities will continue (or is silent with respect thereto),
then such discharge shall constitute only a "covenant defeasance" and,
consequently, the Company shall remain liable for the payment of the Debt
Securities. However, if and when a ruling from the Internal Revenue Service or
opinion of counsel referred to in clause (c)(2) above is able to be provided
specifically without regard to, and not in reliance upon, the continuance of the
Company's payment obligations under the Indenture and its payment obligations
under the Debt Securities, then the Company's payment obligations under the
Indenture and the Debt Securities shall cease upon delivery to the Trustee of
such ruling or opinion of counsel and compliance with the other conditions
precedent provided for in clause (c) above relating to the satisfaction and
discharge of the Indenture. In such a case (a "legal defeasance") holders would
be able to look only to the trust fund for payment of principal or interest on
the Debt Securities.
REGARDING THE TRUSTEES
The Trustee with respect to the first series of Debt Securities, if any,
will be identified in the Prospectus Supplement relating to such Debt
Securities. Other Trustees may be designated for any subsequent series of Debt
Securities. The Indenture and provisions of the TIA incorporated by reference
therein, contain certain limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases,
or to realize on certain property received in respect of any such claim, as
security or otherwise. The Trustee and its affiliates engage in, and will be
permitted to continue to engage in, other transactions with the Company and its
affiliates; provided, however, that if it acquires any conflicting interest (as
defined), it must eliminate such conflict or resign.
The holders of a majority in principal amount of the then outstanding Debt
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee. The TIA and the Indenture provide that in case an Event of Default
shall occur (and be continuing), the Trustee will be required, in the exercise
of its rights and powers, to use the degree of care and skill of a prudent man
in the conduct of his own affairs. Subject to such provision, the Trustee will
be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any of the holders of the Debt Securities issued
thereunder, unless they have offered to the Trustee indemnity satisfactory to
it.
DESCRIPTION OF PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. Certain other terms of any series of the
Preferred Stock offered by any Prospectus Supplement will be described in such
Prospectus Supplement. The description of certain provisions of the Preferred
Stock set forth below and in any Prospectus Supplement does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Company's Articles of Incorporation, as amended (the "Articles of
Incorporation"), and the certificate of designation (a "Certificate of
Designation") relating to each series of the Preferred Stock which will be filed
with the Commission and incorporated by reference in the Registration Statement
of which this Prospectus is a part at or prior to the time of the issuance of
such series of the Preferred Stock. As of August 22, 1995, the Company had no
shares of Preferred Stock outstanding.
GENERAL
The Company has the authority to issue up to 10,000,000 shares of preferred
stock, $.01 par value per share ("preferred stock of the Company," which term,
as used herein, includes the Preferred Stock offered hereby). Under the Articles
of Incorporation, the Board of Directors of the Company is authorized without
further stockholder action to designate and provide for the issuance of such
shares of preferred stock of the Company, in one or more series, with such
voting powers, full or limited, and with such designations,
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preferences and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be stated in the
resolution or resolutions providing for the issue of a series of such stock
adopted, at any time or from time to time, by the Board of Directors of the
Company (as used herein the term "Board of Directors of the Company" includes
any duly authorized committee thereof).
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in a Prospectus
Supplement relating to a particular series of the Preferred Stock. Reference is
made to the Prospectus Supplement relating to the particular series of the
Preferred Stock offered thereby for specific terms, including: (i) the
designation and stated value per share of such Preferred Stock and the number of
shares offered; (ii) the amount of liquidation preference per share; (iii) the
initial public offering price at which such Preferred Stock will be issued; (iv)
the dividend rate (or method of calculation), the dates on which dividends shall
be payable and the dates from which dividends shall commence to cumulate, if
any; (v) any redemption or sinking fund provisions; (vi) any conversion or
exchange rights; (vii) whether depositary shares representing shares of such
Preferred Stock will be offered and, if so, the fraction of a share of such
Preferred Stock represented by each depositary share; and (viii) any additional
voting, dividend, liquidation, redemption, sinking fund and other rights,
preferences, privileges, limitations and restrictions.
The Preferred Stock will, when issued, be fully paid and nonassessable and
will have no preemptive rights. The rights of the holders of each series of the
Preferred Stock will be subordinate to those of the Company's general creditors.
DIVIDEND RIGHTS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of funds
of the Company legally available therefor, cash dividends on such dates and at
such rates as are set forth in, or as are determined by the method described in,
the Prospectus Supplement relating to such series of the Preferred Stock. Such
rate may be fixed or variable or both. Each such dividend will be payable to the
holders of record as they appear on the stock books of the Company on such
record dates, fixed by the Board of Directors of the Company, as specified in
the Prospectus Supplement relating to such series of Preferred Stock.
Such dividends may be cumulative or noncumulative, as provided in the
Prospectus Supplement relating to such series of Preferred Stock. If the Board
of Directors of the Company fails to declare a dividend payable on a dividend
payment date on any series of Preferred Stock for which dividends are
noncumulative, then the right to receive a dividend in respect of the dividend
period ending on such dividend payment date will be lost, and the Company will
have no obligation to pay any dividend for such period, whether or not dividends
on such series are declared payable on any future dividend payment dates.
Dividends on the shares of each series of Preferred Stock for which dividends
are cumulative will accrue from the date on which the Company initially issues
shares of such series.
Unless otherwise specified in the applicable Prospectus Supplement, so long
as the shares of any series of the Preferred Stock are outstanding, unless (i)
full dividends (including if such Preferred Stock is cumulative, dividends for
prior dividend periods) have been paid or declared and set apart for payment on
all outstanding shares of the Preferred Stock of such series and all other
classes and series of preferred stock of the Company (other than Junior Stock,
as defined below) and (ii) the Company is not in default or in arrears with
respect to the mandatory or optional redemption or mandatory repurchase or other
mandatory retirement of, or with respect to any sinking or other analogous funds
for, any shares of Preferred Stock of such series or any shares of any other
preferred stock of the Company of any class or series (other than Junior Stock),
the Company may not declare any dividends on any shares of Common Stock of the
Company or any other stock of the Company ranking as to dividends or
distributions of assets junior to such series of Preferred Stock (the Common
Stock and any such other stock being herein referred to as "Junior Stock"), or
make any payment on account of, or set apart money for, the purchase, redemption
or other retirement of, or for a sinking or other analogous fund for, any shares
of Junior Stock or make any distribution in respect thereof, whether in cash or
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property or in obligations of stock of the Company, other than in Junior Stock
which is neither convertible into, nor exchangeable or exercisable for, any
securities of the Company other than Junior Stock.
LIQUIDATION PREFERENCES
Unless otherwise specified in the applicable Prospectus Supplement, in the
event of any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, the holders of each series of the Preferred Stock will
be entitled to receive out of the assets of the Company available for
distribution to stockholders, before any distribution of assets is made to the
holders of Common Stock or any other shares of stock of the Company ranking
junior as to such distribution to such series of the Preferred Stock, the amount
set forth in the Prospectus Supplement relating to such series of the Preferred
Stock. If, upon any voluntary or involuntary liquidation, dissolution or winding
up of the Company, the amounts payable with respect to the Preferred Stock of
any series and any other shares of preferred stock of the Company (including any
other series of the Preferred Stock) ranking as to any such distribution on a
parity with such series of the Preferred Stock are not paid in full, the holders
of the Preferred Stock of such series and of such other shares of preferred
stock of the Company will share ratably in any such distribution of assets of
the Company in proportion to the full respective preferential amounts to which
they are entitled. After payment to the holders of the Preferred Stock of each
series of the full preferential amounts of the liquidating distribution to which
they are entitled, unless otherwise provided in the applicable Prospectus
Supplement, the holders of each such series of the Preferred Stock will be
entitled to no further participation in any distribution of assets by the
Company.
REDEMPTION
A series of the Preferred Stock may be redeemable, in whole or from time to
time in part, at the option of the Company, and may be subject to mandatory
redemption pursuant to a sinking fund or otherwise, in each case upon terms, at
the times and at the redemption prices set forth in the Prospectus Supplement
relating to such series. Shares of the Preferred Stock redeemed by the Company
will be restored to the status of authorized but unissued shares of preferred
stock of the Company.
In the event that fewer than all of the outstanding shares of a series of
the Preferred Stock are to be redeemed, whether by mandatory or optional
redemption, the number of shares to be redeemed will be determined by lot or pro
rata (subject to rounding to avoid fractional shares) as may be determined by
the Company or by any other method as may be determined by the Company in its
sole discretion to be equitable. From and after the redemption date (unless
default is made by the Company in providing for the payment of the redemption
price plus cumulated and unpaid dividends, if any) dividends will cease to
accumulate on the shares of the Preferred Stock called for redemption and all
rights of the holders thereof (except the right to receive the redemption price
plus accumulated and unpaid dividends, if any) will cease.
Unless otherwise specified in the applicable Prospectus Supplement, so long
as any dividends on shares of any series of the Preferred Stock or any other
series of preferred stock of the Company ranking on a parity as to dividends and
distribution of assets with such series of the Preferred Stock are in arrears,
no shares of any such series of the Preferred Stock or such other series of
preferred stock of the Company will be redeemed (whether by mandatory or
optional redemption) unless all such shares are simultaneously redeemed, and the
Company will not purchase or otherwise acquire any such shares; provided,
however, that the foregoing will not prevent the purchase or acquisition of
share shares pursuant to a purchase or exchange offer made on the same terms to
holders of all such shares outstanding.
CONVERSION AND EXCHANGE RIGHTS
The terms, if any, on which shares of Preferred Stock of any series may be
exchanged for or converted into shares of Common Stock or another series of
Preferred Stock will be set forth in the Prospectus Supplement relating thereto.
Such terms may include provisions for conversion, either mandatory, at the
option of the holder, or at the option of the Company, in which case the number
of shares of Common Stock
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<PAGE> 45
or the number of shares of another series of Preferred Stock to be received by
the holders of Preferred Stock would be calculated as of a time and in the
manner stated in the Prospectus Supplement.
VOTING RIGHTS
Except as indicated in a Prospectus Supplement relating to a particular
series of the Preferred Stock, or except as required by applicable law, the
holders of the Preferred Stock will not be entitled to vote for any purpose.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement (as defined below) and of the Depositary
Shares (as defined below) and Depositary Receipts (as defined below) does not
purport to be complete and is subject to and qualified in its entirety by
reference to the forms of Deposit Agreement and Depositary Receipts relating to
each series of Preferred Stock which will be filed with the Commission in
connection with the offering of any such series of Preferred Stock.
GENERAL
The Company may, at its option, elect to offer fractional interest in
shares of Preferred Stock, rather than shares of Preferred Stock. In the event
such option is exercised, the Company will provide for the issuance by a
Depositary to the public of receipts for depositary shares ("Depositary
Shares"), each of which will represent fractional interests of a particular
series of Preferred Stock (which will be set forth in the Prospectus Supplement
relating to a particular series of Preferred Stock).
The shares of any series of Preferred Stock underlying the Depositary
Shares will be deposited under a separate Deposit Agreement (the "Deposit
Agreement") between the Company and a bank or trust company selected by the
Company having its principal office in the United States and having a combined
capital and surplus of at least $50,000,000 (the "Depositary"). The Prospectus
Supplement relating to a series of Depositary Shares will set forth the name and
address of the Depositary. Subject to the terms of the Deposit Agreement, each
owner of Depositary Shares will be entitled, in proportion to the applicable
fractional interests in shares of Preferred Stock underlying such Depositary
Shares, to all the rights and preferences of the Preferred Stock underlying such
Depositary Shares (including dividend, voting, redemption, conversion and
liquidation rights). Additionally, each owner of Depositary Shares is entitled
to receive the shares of Preferred Stock underlying such Depositary Shares.
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement (the "Depositary Receipts"). Depositary
Receipts will be distributed to those persons purchasing the fractional
interests in shares of the related series of Preferred Stock in accordance with
the terms of the offering for Preferred Stock described in the related
Prospectus Supplement.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of Preferred Stock to the record holders of
Depositary Shares relating to such Preferred Stock in proportion, as nearly as
practicable, to the numbers of such Depositary Shares owned by such holders on
the relevant record date, subject to any applicable tax withholding. The
Depositary shall distribute only such amount, however, as can be distributed
without attributing to any holder of Depositary Shares a fraction of one cent,
and any balance not so distributed shall be added to and treated as part of the
next sum received by the Depositary for distribution to record holders of
Depositary Shares.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, adopt such method as it deems equitable and practicable for the
purpose of effecting such distribution,
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<PAGE> 46
including the sale of such property and distribution of the net proceeds from
such sale to such holders, subject to any applicable tax withholding.
Any subscription or similar rights offered by the Company to holders of
Preferred Stock will be made available to the holders of Depositary Shares in
such manner as the Depositary may determine, with the approval of the Company.
REDEMPTION OF DEPOSITARY SHARES
If a series of the Preferred Stock underlying the Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Depositary resulting from the redemption, in whole or in part,
of such series of the Preferred Stock held by the Depositary. The Depositary
shall mail notice of redemption not less than 30 and not more than 60 days prior
to the date fixed for redemption to the record holders of the Depositary Shares
to be so redeemed at their respective addresses appearing in the Depositary's
books. The redemption price per Depositary Share will be equal to the applicable
fraction of the redemption price per share payable with respect to such series
of the Preferred Stock. Whenever the Company redeems shares of Preferred Stock
held by the Depositary, the Depositary will redeem as of the same redemption
date the number of Depositary Shares relating to shares of Preferred Stock so
redeemed. If less than all of the Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed will be selected by lot or pro rata as may be
determined by the Depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
moneys, securities or other property payable upon such redemption and any money,
securities or other property to which the holders of such Depositary Shares were
entitled, including any accrued and unpaid dividends payable in connection with
such redemption, upon such redemption upon surrender to the Depositary of the
Depositary Receipts evidencing such Depositary Shares.
VOTING OF PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the
applicable Preferred Stock are entitled to vote, the Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Shares relating to such Preferred Stock. Each record holder of such
Depositary Shares on the record date (which will be the same date as the record
date for the Preferred Stock) will be entitled, subject to any applicable
restrictions, to instruct the Depositary as to the exercise of the voting rights
pertaining to the number of shares of Preferred Stock underlying such holder's
Depositary Shares. The Depositary will endeavor, insofar as practicable, to vote
the number of shares of Preferred Stock underlying such Depositary Shares in
accordance with such instructions, and the Company will agree to take all action
which may be deemed necessary by the Depositary in order to enable the
Depositary to do so.
AMENDMENT AND TERMINATION OF DEPOSITARY AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary. However, any amendment which materially
and adversely alters the rights of the existing holders of Depositary Shares
will not be effective unless such amendment has been approved by the record
holders of at least a majority of the Depositary Shares than outstanding. A
Deposit Agreement may be terminated by the Company or the Depositary only if (i)
all outstanding Depositary Shares relating thereto have been redeemed or (ii)
there has been a final distribution in respect of the Preferred Stock of the
relevant series in connection with any liquidation, dissolution or winding up of
the Company and such distribution has been distributed to the holders of the
related Depositary Shares.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Depositary in connection with
16
<PAGE> 47
the initial deposit of any Preferred Stock and any redemption of such Preferred
Stock. Holders of Depositary Shares will pay transfer and other taxes and
governmental charges and such other charges as are expressly provided in the
Deposit Agreement to be for their accounts.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company notice
of its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50,000,000.
MISCELLANEOUS
The Depositary will forward to the holders of Depositary Shares all reports
and communications from the Company which are delivered to the Depositary and
which the Company is required to furnish to the holders of the applicable
Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and the
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder and they will not be obligated to prosecute or
defend any legal proceeding in respect of any Depositary Shares or Preferred
Stock unless satisfactory indemnity is furnished. They may rely upon written
advice of counsel or accountants, or information provided by persons presenting
Preferred Stock for deposit, holders of Depositary Shares or other persons
believed to be competent and on documents believed to be genuine.
DESCRIPTION OF COMMON STOCK
The Company has authority to issue up to 50,000,000 shares of Common Stock,
par value $.01 per share. As of August 22, 1995, there were 18,182,600 shares of
Common Stock issued and outstanding. The holders of Common Stock are entitled to
one vote per share on all matters to be voted on by shareholders, including the
election of directors. Shareholders are not entitled to cumulative voting
rights, and, accordingly, the holders of a majority of the shares voting for the
election of directors can elect the entire Board if they choose to do so and, in
that event, the holders of the remaining shares will not be able to elect any
person to the Board of Directors.
The holders of Common Stock are entitled to receive such dividends, if any,
as may be declared from time to time by the Board of Directors, in its
discretion, from funds legally available thereof and subject to prior dividend
rights of holders of any shares of preferred stock of the Company which may be
outstanding. Upon liquidation or dissolution of the Company subject to prior
liquidation rights of the holders of preferred stock of the Company, the holders
of Common Stock are entitled to receive on a pro rata basis the remaining assets
of the Company available for distribution. Holders of Common Stock have no
preemptive or other subscription rights, and there are no conversion rights or
redemption or sinking fund provisions with respect to such shares. KeyCorp
Shareholder Services, Inc. acts as transfer agent and registrar for the Common
Stock.
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<PAGE> 48
DESCRIPTION OF WARRANTS
The Company may issue Warrants to purchase Debt Securities ("Debt
Warrants"), as well as Warrants to purchase Preferred Stock or Common Stock
("Equity Warrants") (together, the "Warrants"). Warrants may be issued
independently or together with any Securities and may be attached to or separate
from such Securities. The Warrants are to be issued under warrant agreements
(each a "Warrant Agreement") to be entered into between the Company and a bank
or trust company, as warrant agent (the "Warrant Agent"), all as shall be set
forth in the Prospectus Supplement relating to Warrants being offered pursuant
thereto. As of August 22, 1995, the Company has no Warrants outstanding.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the terms of Debt
Warrants offered thereby, the Warrant Agreement relating to such Debt Warrants
and the debt warrant certificates representing such Debt Warrants ("Debt Warrant
Certificates"), including the following: (1) the title of such Debt Warrants;
(2) the aggregate number of such Debt Warrants; (3) the price or prices at which
such Debt Warrants will be issued; (4) the designation, aggregate principal
amount and terms of the Debt Securities purchasable upon exercise of such Debt
Warrants, and the procedures and conditions relating to the exercise of such
Debt Warrants; (5) the designation and terms of any related Debt Securities with
which such Debt Warrants are issued, and the number of such Debt Warrants issued
with each such Debt Security; (6) the date, if any, on and after which such Debt
Warrants and the related Debt Securities will be separately transferable; (7)
the principal amount of Debt Securities purchasable upon exercise of each Debt
Warrant; (8) the date on which the right to exercise such Debt Warrants will
commence, and the date on which such right will expire; (9) the maximum or
minimum number of such Debt Warrants which may be exercised at any time; (10) a
discussion of any material federal income tax considerations; and (11) any other
terms of such Debt Warrants and terms, procedures and limitations relating to
the exercise of such Debt Warrants.
Debt Warrant Certificates will be exchangeable for new Debt Warrant
Certificates of different denominations, and Debt Warrants may be exercised at
the corporate trust office of the Warrant Agent or any other office indicated in
the Prospectus Supplement. Prior to the exercise of their Debt Warrants, holders
of Debt Warrants will not have any of the rights of holders of the Debt
Securities purchasable upon such exercise and will not be entitled to payment of
principal of or any premium or interest on the Debt Securities purchasable upon
such exercise.
EQUITY WARRANTS
The applicable Prospectus Supplement will describe the following terms of
Equity Warrants offered thereby: (1) the title of such Equity Warrants; (2) the
Securities (i.e. Preferred Stock or Common Stock) for which such Equity Warrants
are exercisable; (3) the price or prices at which such Equity Warrants will be
issued; (4) if applicable, the designation and terms of the Preferred Stock or
Common Stock with which such Equity Warrants are issued, and the number of such
Equity Warrants issued with each such share of Preferred Stock or Common Stock;
(5) if applicable, the date on and after which such Equity Warrants and the
related Preferred Stock or Common Stock will be separately transferable; (6) if
applicable, a discussion of any material federal income tax considerations; and
(7) any other terms of such Equity Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Equity Warrants.
Holders of Equity Warrants will not be entitled, by virtue of being such
holders, to vote, to consent, to receive dividends, to receive notice as
stockholders with respect to any meeting of stockholders for the election of
directors of the Company or any other matter, or to exercise any rights
whatsoever as stockholders of the Company.
The exercise price payable and the number of shares of Common Stock of
Preferred Stock purchasable upon the exercise of each Equity Warrant will be
subject to adjustment in certain events, including the issuance of a stock
dividend to holders of Common Stock or Preferred Stock or a stock split, reverse
stock split, combination, subdivision or reclassification of Common Stock or
Preferred Stock. In lieu of adjusting the number of shares of Common Stock or
Preferred Stock purchasable upon exercise of each Equity Warrant,
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<PAGE> 49
the Company may elect to adjust the number of Equity Warrants. No adjustments in
the number of shares purchasable upon exercise of the Equity Warrants will be
required until cumulative adjustments require an adjustment of at least 1%
thereof. The Company may, at its option, reduce the exercise price at any time.
No fractional shares will be issued upon exercise of Equity Warrants, but the
Company will pay the cash value of any fractional shares otherwise issuable.
Notwithstanding the foregoing, in case of any consolidation, merger, or sale or
conveyance of the property of the Company as an entirety or substantially as an
entirety, the holder of each outstanding Equity Warrant shall have the right to
the kind and amount of shares of stock and other securities and property
(including cash) receivable by a holder of the number of shares of Common Stock
of Preferred Stock into which such Equity Warrant was exercisable immediately
prior thereto.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder to purchase for cash such principal
amount of Securities at such exercise price as shall in each case be set forth
in, or be determinable as set forth in, the Prospectus Supplement relating to
the Warrants offered thereby. Warrants may be exercised at any time up to the
close of business on the expiration date set forth in the Prospectus Supplement
relating to the Warrants offered thereby. After the close of business on the
expiration date, unexercised Warrants will become void.
Warrants may be exercised as set forth in the Prospectus Supplement
relating to the Warrants offered thereby. Upon receipt of payment and the
warrant certificate properly completed and duly executed at the corporate trust
office of the Warrant Agent or any other office indicated in the Prospectus
Supplement, the Company will, as soon as practicable, forward the Securities
purchasable upon such exercise. If less than all of the Warrants represented by
such warrant certificate are exercised, a new warrant certificate will be issued
for the remaining Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters, which may
include Salomon Brothers Inc, for public offering and sale in the United States
or Canada by them or may sell the Securities to investors directly or through
agents. Any such underwriter or agent involved in the offer and sale of
Securities will be named in the applicable Prospectus Supplement. The Company
has reserved the right to sell Securities directly to investors on its own
behalf in those jurisdictions where and in such manner as it is authorized to do
so.
Underwriters may offer and sell Securities at a fixed price or prices,
which may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, or at negotiated prices. The Company
also may, from time to time, authorize dealers, acting as the Company's agents,
to offer and sell Securities upon the terms and conditions as are set forth in
the applicable Prospectus Supplement. In connection with the sale of Securities,
underwriters may receive compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of the Securities for whom they may act as agent. Underwriters may
sell Securities to or through dealers, and such dealers may receive compensation
in the form of discounts, concessions or commissions from the underwriters
and/or commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be set forth
in the applicable Prospectus Supplement. Dealers and agents participating in the
distribution of Securities may be deemed to be underwriters, and any discounts
and commissions received by them and any profit realized by them on resale of
the Securities may be deemed to be underwriting discounts and commissions.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act of 1933.
If so indicated in the Prospectus Supplement, the Company will authorize
dealers acting as the Company's agents to solicit offers by certain institutions
to purchase the Securities from the Company at the
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<PAGE> 50
public offering price set forth in the applicable Prospectus Supplement pursuant
to delayed delivery contracts ("Contracts") providing for payment and delivery
on the date or dates stated in such Prospectus Supplement. Each Contract will be
for an amount not less than the amounts stated in the applicable Prospectus
Supplement. Institutions with whom Contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and other
institutions but will in all cases be subject to the approval of the Company.
Contracts will not be subject to any conditions except (i) the purchase by the
institution of the Securities covered by its Contract shall not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such institution is subject, and (ii) if the Securities are being sold
to underwriters, the Company shall have sold to such underwriters the total
amount specified in the applicable Prospectus Supplement. A commission indicated
in the applicable Prospectus Supplement will be paid to underwriters and agents
soliciting purchases of Securities pursuant to Contracts accepted by the
Company.
The rules of the Commission generally prohibit underwriters and other
members of the selling group from making a market in the Company's Common Stock
during the "cooling off" period immediately preceding the commencement of sales
in the offering. The Commission has, however, adopted an exemption from these
rules that permits passive market making under certain conditions. These rules
permit an underwriter or other member of the selling group to continue to make a
market in the Company's Common Stock subject to the conditions, among others,
that its bid not exceed the highest bid by a market maker not connected with the
offering and that its net purchases on any one trading day not exceed prescribed
limits. Pursuant to these exemptions, certain underwriters and other members of
the selling group may engage in passive market making in the Company's Common
Stock during the cooling off period.
LEGAL MATTERS
Certain legal matters with respect to the Securities offered hereby will be
passed upon for the Company by Latham & Watkins, San Francisco, California.
Certain legal matters will be passed upon for any agents or underwriters by
counsel for such agents or underwriters identified in the applicable Prospectus
Supplement.
EXPERTS
The financial statements of FirstMiss Gold Inc. as of June 30, 1995 and
1994, and for each of the years in the three-year period ended June 30, 1995
have been incorporated by reference herein and in the registration statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
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<PAGE> 51
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN SO AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER TO SELL IS NOT AUTHORIZED, OR IN WHICH THE PERSON IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary......... S-3
Risk Factors.......................... S-6
Use of Proceeds....................... S-13
Capitalization........................ S-13
Price Range of Common Stock and
Dividends........................... S-14
Selected Financial and Operating
Data................................ S-15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... S-16
The Company........................... S-21
Description of Common Stock........... S-28
Underwriting.......................... S-29
Legal Matters......................... S-30
Experts............................... S-30
PROSPECTUS
Available Information................. 2
Information Incorporated by
Reference........................... 2
The Company........................... 3
Risk Factors.......................... 3
Use of Proceeds....................... 3
Ratios of Earnings to Fixed Charges
and Earnings to Combined Fixed
Charges and Preferred Stock
Dividends........................... 4
General Description of Securities..... 5
Description of Debt Securities........ 5
Description of Preferred Stock........ 12
Description of Depositary Shares...... 15
Description of Common Stock........... 17
Description of Warrants............... 18
Plan of Distribution.................. 19
Legal Matters......................... 20
Experts............................... 20
</TABLE>
================================================================================
================================================================================
5,000,000 SHARES
FIRSTMISS GOLD INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
NESBITT BURNS SECURITIES INC.
SALOMON BROTHERS INC
SCOTIAMCLEOD (USA) INC.
S.G.WARBURG & CO. INC.
TORONTO DOMINION SECURITIES INC.
NOVEMBER , 1995
================================================================================
