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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1995 COMMISSION FILE NUMBER 0-16484
FIRSTMISS GOLD INC.
(Exact name of registrant as specified in its charter)
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NEVADA 64-0748908
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6025 SOUTH QUEBEC STREET 80111
SUITE 310 (Zip Code)
ENGLEWOOD, COLORADO
(Address of principal executive offices)
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Registrant's telephone number, including area code: (303) 771-9000
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01
COMMON STOCK PURCHASE RIGHTS
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES /X/ NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
Aggregate market value of the voting stock held by non-affiliates of the
Registrant on August 22, 1995: $71,826,211
COMMON STOCK OUTSTANDING ON AUGUST 22, 1995: 18,182,600
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TABLE OF CONTENTS
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PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES............................................... 1
ITEM 3. LEGAL PROCEEDINGS........................................................... 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................... 11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS....................................................... 11
ITEM 6. SELECTED FINANCIAL DATA..................................................... 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................................... 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................................. 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE....................................... 22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS............................................ 23
ITEM 11. EXECUTIVE COMPENSATION...................................................... 26
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................................ 30
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................. 32
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
ON FORM 8-K............................................................... 36
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PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
INTRODUCTION
FirstMiss Gold Inc., a Nevada corporation (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 (the "Getchell Fault") and the Turquoise Ridge fault zone
(the "Turquoise Ridge Fault"). As of June 30, 1995, the Company had proven and
probable reserves of approximately 6,963,600 million tons of ore at an average
grade of 0.206 ounces/ton gold, with approximately 1,434,900 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 ("fiscal
1995"), approximately 184,298 ounces of gold were produced and sold, excluding
14,939 development ounces.
The Getchell Property is located in the Potosi Mining District on the
eastern side of the Osgood Mountain Range, 35 miles northeast of Winnemucca,
Nevada. Access to the property is via Nevada State Highway 18 and an all-weather
gravel road maintained jointly by the Company and various competitors who use
the same access. Operations on the Getchell Property include a pressure
oxidation ("autoclave") mill facility and heap leach facility. Currently,
sulfide ores for the mill are produced from an underground mine known as the
"Getchell Main Underground Mine." Oxide ores for the heap leach facility were
produced during fiscal 1995 from an open pit known as the "Turquoise Ridge Oxide
Pit," which is no longer in operation, and from existing stockpiles. The Company
is actively pursuing an exploration program on the Getchell Property.
In January 1995, the Company announced a geologic resource along the
Turquoise Ridge Fault. The Company has hired Mineral Resources Development, Inc.
("MRDI") to prepare a pre-feasibility 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. MRDI, directly or through sub-contractors, is also
providing information on hydrological, metallurgical and geotechnical
characterization to support mine plans and economic analyses, the purpose of
which is to define a mineable reserve. The Company anticipates that a full
report by MRDI that describes the results of their analysis will be available by
mid-September 1995. There can be no assurances that the MRDI pre-feasibility
study will be the basis for an addition to the Company's proven and probable
reserves.
The Company was incorporated in Nevada in August 1987 by First Mississippi
Corporation, a Mississippi corporation ("First Mississippi"), for the purpose of
financing, developing and operating the Getchell gold mining project and for
conducting minerals exploration. First Mississippi is a diversified corporation
engaged in the production of chemicals for industry and agriculture and related
products and services. In May 1988, the Company sold 3,250,000 shares of its
common stock in an initial public offering. Currently, approximately 81% of the
Company's stock is held by First Mississippi.
In February 1990, First Mississippi announced plans to distribute its stock
in the Company to First Mississippi's shareholders. According to First
Mississippi, this spin-off was subject to a favorable tax ruling from the
Internal Revenue Service and a favorable operational and financial outlook for
the Company. Although the required ruling was received in December 1990, gold
prices had fallen in the interim, and the spin-off was put on hold. First
Mississippi has informed the Company that it received a subsequent ruling from
the Internal Revenue Service in April 1995 that a spin-off would be treated as a
tax-free distribution for federal income tax purposes, subject to certain
conditions. The Company understands that First Mississippi has not made a final
determination with respect to a spin-off and that any such determination will be
based in part on the results of the MRDI pre-feasibility study described above.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
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The Company's principal executive offices are located at 6025 South Quebec
Street, Suite 310, Englewood, Colorado 80111. The Company's telephone number is
(303) 771-9000. At June 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
June 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 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
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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 second half of
fiscal 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 now
stands at 3,650,200 tons of ore at an average grade of 0.335 ounces per ton, or
1,223,000 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.
Turquoise Ridge. In January 1995, the Company announced a geologic resource
along the Turquoise Ridge Fault. To facilitate timely delineation of any
mineable reserve, an intensive core drilling program addressing primarily the
southwestern portion of the Turquoise Ridge trend was conducted from February to
July 1995. As part of this program, thirteen core drill rigs generated in excess
of 70 drill holes spaced on intervals of 50 to 150 feet and produced in excess
of 130,000 vertical feet of core samples. This program was concentrated on a
limited area of Turquoise Ridge, approximately 800 feet by 1,100 feet.
The Company has hired MRDI to prepare a pre-feasibility study with respect
to Turquoise Ridge. MRDI, directly or through sub-contractors, is also providing
information on hydrological, metallurgical and geotechnical characterization to
support mine plans and economic analyses, the purpose of which is to define a
mineable reserve. The Company anticipates that a full report by MRDI that
describes the results of their analysis will be available by mid-September 1995.
There can be no assurances that the MRDI pre-feasibility study will be the basis
for an addition to the Company's proven and probable reserves.
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.
For a map of the Getchell Property, see page 10 herein.
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RESERVES
The following table sets forth the proven and probable mineable gold ore
reserves located on the Getchell Property as of June 30, 1995. Sulfide reserves
assume a 0.200 ounce per ton cutoff for underground reserves. Oxide reserves are
based on a 0.010 cyanide soluble cutoff grade. Included in sulfide reserves are
low-grade stockpiles containing 1,605,800 tons of ore at an average grade of
0.099 ounces per ton, or 159,300 contained ounces of gold. Also included in
sulfide reserves are 3,668,200 tons of underground ore at an average grade of
0.335 ounces per ton, or 1,229,000 contained ounces of gold.
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 and projected future mining and milling costs. These
reserves have been prepared by the Company and confirmed by Mine Development
Associates, an independent mining consulting firm.
PROVEN AND PROBABLE MINEABLE RESERVES(1)
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CONTAINED
ORE TONS GRADE GOLD OUNCES
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(WEIGHTED AVERAGE)
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Sulfide.............................................. 5,274,000 0.263 1,388,300
Oxide................................................ 1,689,600 0.028 46,600
--------- ----- -----------
Total................................................ 6,963,600 0.206 1,434,900
</TABLE>
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(1) These reserves do not include any potential reserves at the Turquoise Ridge
site.
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. During fiscal 1995, oxide ore for heap leaching was mined from
the Turquoise Ridge Oxide Pit, old dumps and stockpiles. In fiscal
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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.
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SULFIDE ORE
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GETCHELL MAIN TOTAL
STOCKPILE MAIN PIT UNDERGROUND MINE SULFIDE ORE
----------- -------- ---------------- -----------
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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>
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OXIDE ORE
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DUMPS AND TURQUOISE TOTAL
STOCKPILES RIDGE PIT OXIDE ORE
--------- --------- ---------
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Tons Processed.............................. 415,406 539,764 955,170
Grade....................................... 0.190 0.030 0.025
Contained Ounces............................ 7,743 16,136 23,879
</TABLE>
Ancillary Facilities and Raw Materials. Oxygen, which is used in the
autoclaves, is supplied under a long-term agreement by an independent contractor
who owns and operates a plant at the mill site. The agreement has a remaining
term of approximately 8.5 years. Payments were $3.5 million in fiscal 1995 and
are estimated to be approximately $2.8 million in fiscal 1996. Supplemental
liquid oxygen is delivered by truck by the same independent contractor when mill
needs exceed the oxygen plant output; such liquid oxygen deliveries constituted
approximately 12.8% of the Company's oxygen use in fiscal 1995.
Electricity is provided by an independent utility company under an electric
services agreement. The mill uses reclaimed water pumped from the tailings pond
and from the dewatering of the pits. Makeup water for the milling process comes
from two wells located on the Getchell Property approximately four miles from
the plant. A limestone deposit located on the Getchell Property is mined and
stockpiled by an independent contractor for use in the milling process.
Other materials necessary in the milling process, such as sodium hydroxide,
sulfuric acid, lime, carbon, propane and sodium cyanide, are available for
purchase from more than one supplier and are hauled by truck to the Getchell
Property. These materials may be subject to shortages from time to time,
resulting in higher costs.
The Company has constructed a tailings dam and pond on 172 acres of land on
the property. In June 1995, the Company substantially completed an additional
lift increasing the capacity at the tailings pond. Additional lifts to increase
capacity will be constructed as needed. The pond is lined with a synthetic liner
and is designed to accommodate run-off from a 100-year flood event and
reasonably expected seismic activity for the site.
SALES AND MARKETING
During fiscal 1995, the Company's dore was refined and sold under contract
to Metalor USA Refining Corporation ("Metalor") of North Attleborough,
Massachusetts, an indirect wholly-owned subsidiary of Swiss Bank Corporation.
The Company believes that there are a number of potential purchasers in addition
to Metalor. Total ounces of gold sold were 199,237 (which includes 14,939
development phase ounces from the Getchell Main Underground Mine), 243,826, and
210,644 for fiscal 1995, 1994 and 1993, respectively. Of these sales, none were
exported in fiscal 1995, and 7% and 28% were exported (to France) in fiscal 1994
and 1993, respectively.
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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
dollar deposits 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 June 30, 1995, the Company had spot deferred contracts on 147,100 gold
ounces which are scheduled to be delivered throughout fiscal 1996 at prices
ranging from $387 to $420 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 June 30,
1995, the unrealized gain on the contracts is $416,000.
Risk of loss with these forward sales and purchases agreements 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.
In fiscal 1994 and 1993, the Company had a 150,000 ounce gold loan with a
predetermined price of $475 per ounce, and a related fixed forward sales
arrangement covering 202,600 gold ounces. Under the gold loan, in fiscal 1994
and 1993 the Company delivered 20,625 and 28,125 gold ounces. Under the forward
sales arrangement, the Company delivered 47,000 and 40,000 gold ounces in fiscal
1994 and 1993, respectively, at $400 per gold ounce. All commitments under these
agreements were fulfilled at June 30, 1994.
See Notes 1 and 6 to the Consolidated Financial Statements. See "Risk
Factors -- Hedging Activities."
GOVERNMENT REGULATION
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. It is the
Company's policy to comply with the directives and regulations of MSHA and OSHA.
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
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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.
See "Risk Factors -- Regulation of Mining Activity."
ENVIRONMENTAL MATTERS AND SAFETY
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. Should the Company be unable to fully fund the cost of remedying an
environmental problem, the Company might be required to suspend operations or
enter into interim compliance measures pending completion of the required
remedy. The potential exposure may be significant and could have a material
adverse effect on the Company.
In the context of environmental permitting, including the approval of
reclamation plans, the Company must comply with standards, laws and regulations
which may entail greater or lesser costs and delays depending on the nature of
the activity to be permitted and how stringently the regulations are implemented
by the permitting authority. It is possible that the costs and delays associated
with compliance with such laws, regulations and permits could become such that
the Company would not proceed with the development of a project or the operation
or further development of a mine. Laws and regulations involving the protection
and remediation of the environment are constantly changing and are generally
becoming more restrictive. The Company has made, and expects to make in the
future, significant expenditures to comply with such laws and regulations.
Pending bills which affect environmental laws applicable to mining include
versions which may substantially alter the Clean Water Act, Safe Drinking Water
Act, Endangered Species Act and a bill which will introduce additional
protection of wetlands (Wetlands Protection and Management Act). Adverse
developments and operating requirements in these acts could impair the ability
of the Company as well as others to develop mineral resources. Revisions to
current versions of these bills could occur prior to passage.
The Environmental Protection Agency ("EPA") continues the development of a
solid waste regulatory program specific to mining operations under the Resource
Conservation and Recovery Act ("RCRA"). Of particular concern to the mining
industry is a proposal by 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.
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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.
Environmental Compliance and Capital Costs. The Company incurred compliance
costs of $530,000, $292,000 and $216,000 in fiscal 1995, 1994 and 1993,
respectively, in connection with permitting, monitoring for compliance with
pollution control requirements and waste management.
Capital expenditures for environmental protection were $1.8 million in
fiscal 1995 related principally to the increase in capacity at the tailings
pond. Such capital expenditures are expected to be approximately $100,000 in
fiscal 1996. These projected expenditures are based on laws and regulations
currently in effect and should not have a material adverse effect on the
Company's earnings or competitive position.
Reclamation. The Company accrues for environmental liabilities associated
with reclamation and closure costs over the productive lives of its mines.
Activities which result in reclamation costs are the permanent closure of the
mining and mineral processing operations and reclamation of the disturbed land
to a productive use. Permanent closure and reclamation activities take place
concurrent with and after the productive life of the operations. Activities
which result in closure costs after permanent closure and reclamation relate to
monitoring. The Company conducts concurrent reclamation activities. The Company
anticipates making additional accruals during the remaining productive life of
the operations. Current insurance coverage does not cover reclamation and
closure costs.
The uncertainties related to reclamation and closure costs result from
unknown future additional regulatory requirements, significant new surface
disturbances or additional mineral processing facilities and the potential for
recognition in the future of additional activities needed for reclamation. The
technologies for reclamation are evolving during the life of the operations.
Periodic review of the activities and costs for reclamation, and consequent
adjustments to the ongoing accrual, are conducted.
In accordance with the State of Nevada Division of Environmental Protection
("NDEP"), the Company has submitted a plan to the NDEP for the eventual closure
and reclamation of the Getchell Property and is awaiting approval and
permitting. As of June 30, 1995, the total estimated cost for reclamation and
eventual closure was $4.8 million, of which the Company had accrued $3.0
million. The Company has begun reclamation of surface mining disturbances and
anticipates an ongoing program of reclamation over the next several years.
Activities have included regrading, revegetation and soil stabilization.
Safety Compliance Costs. The Company incurred compliance costs of $470,000
in fiscal 1995 related to safety and industrial hygiene.
See "Risk Factors -- Environmental Regulations."
COMPETITION
The Company faces competition from other mining companies in connection
with the acquisition of mineral interests and the recruitment and retention of
qualified employees. Many of the competitors have substantially larger financial
resources and produce substantially larger amounts of gold. As such, it may be
difficult for the Company to obtain potential development properties in the
future on acceptable terms.
8
<PAGE> 11
WORKING CAPITAL REQUIREMENTS AND SEASONALITY OF BUSINESS
Changes in ore inventory will typically have the most effect on working
capital requirements. Ore inventory tonnages fluctuate in response to various
factors including scheduled milling rates, projected ore availability, weather
conditions and efficient scheduling of mine production. Winter weather extremes
may affect levels of gold production.
9
<PAGE> 12
[MAP]
The graphic represents a map of the Getchell Property and its general location
within the State of Nevada. The map sets forth the boundaries of the property
and the location on the property of certain of the Company's past and present
mining sites and certain areas identified for exploration. The map is dated
June 30, 1995.
10
<PAGE> 13
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party or
to which any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the Nasdaq National Market. Its
symbol is "FRMG." The high and low recorded prices of the Company's common stock
during each quarter of fiscal 1994 and 1995 are presented in the table below. 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 advances from First Mississippi. There were
approximately 2,000 stockholders, including individual participants in security
position listings, as of September 1, 1995.
<TABLE>
<CAPTION>
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>
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>
11
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
--------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (FOR
PERIOD):
Net sales................................ $ 71,485 $ 95,150 78,773 83,048 73,464
Cost of sales............................ 69,775 82,131 75,254 71,664 67,504
-------- -------- -------- -------- --------
Gross profit................... 1,170 13,019 3,519 11,384 5,960
Exploration expenses..................... 3,776 4,049 2,803 1,142 1,347
Abandonment and impairment of mineral
properties............................. 11,531 0 256 0 0
Selling, general and administrative
expenses............................... 2,659 1,745 2,021 2,368 2,073
-------- -------- -------- -------- --------
Earnings (loss) from operations.......... (16,256) 7,225 (1,561) 7,874 2,540
Other income............................. 132 150 180 356 392
Interest expense......................... (1,805) (1,776) (1,705) (2,302) (2,906)
-------- -------- -------- -------- --------
Earnings (loss) before income
taxes........................ (17,929) 5,599 (3,086) 5,928 26
Income tax expense (benefit)............. 428 1,300 (617) 1,671 (63)
-------- -------- -------- -------- --------
Earnings (loss) before cumulative effect
of change in accounting principle...... (18,357) 4,299 (2,469) 4,257 89
Cumulative effect of change in accounting
principle.............................. 0 1,350 0 0 0
-------- -------- -------- -------- --------
Net earnings (loss)............ $(18,357) $ 5,649 $ (2,469) $ 4,257 $ 89
======== ======== ======== ======== ========
Earnings (loss) per common share before
cumulative effect of accounting
change................................. $ (1.01) $ 0.24 (0.14) 0.24 0.00
Cumulative effect of accounting change... $ 0 $ 0.07 0.00 0.00 0.00
-------- -------- -------- -------- --------
Total earnings (loss) per
common share................. $ (1.01) $ 0.31 $ (0.14) $ 0.24 $ 0.00
======== ======== ======== ======== ========
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit)................ $ 5,722 $ 12,981 (6,931) (843) (4,629)
Net property, plant and equipment........ 67,689 66,798 75,360 72,380 84,029
Total assets............................. 85,120 88,747 92,238 93,348 104,344
Gold loan................................ 0 0 9,800 23,163 40,980
Notes payable to First Mississippi....... 40,900 29,339 23,635 14,237 13,140
Stockholders' equity..................... 31,744 49,719 44,068 46,102 41,844
OPERATING DATA (FOR PERIOD):
Ounces of Gold Produced:
Mill..................................... 166,937* 215,363 186,799 196,877 164,213
Heap Leach............................... 17,361 28,463 23,666 21,871 21,580
-------- -------- -------- -------- --------
Total.......................... 184,298* 243,826 210,465 218,748 185,793
Ounces of gold sold...................... 184,298* 243,826 210,644 218,821 185,540
Average Realized Price per Ounce......... $ 388 $ 390 $ 374 $ 380 $ 396
Average Market Price per Ounce........... $ 385 $ 379 $ 346 $ 352 $ 373
Cash Costs per Ounce:
Mill..................................... $ 327 $ 290 $ 290 $ 262 $ 299
Heap Leach............................... $ 318 $ 183 $ 202 $ 166 $ 227
</TABLE>
---------------
* Excludes 14,939 development ounces from the Getchell Main Underground Mine.
The above selected historical financial data should be read in conjunction
with the Consolidated Financial Statements and the Notes thereto on pages F-1
through F-16 and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained herein.
12
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
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 is traded on numerous commodity exchanges and over-the-counter markets
around the world with regular adjustments to establish a market clearing price.
Prices typically fluctuate over a wide range in response to numerous factors,
all of which are beyond the Company's control, including expectations of
inflation, interest rates, political and monetary policies of various national
governments, the needs of industrial and jewelry manufacturers, trends in
worldwide mine output and currency exchange rates. The aggregate effect of the
above factors on gold prices is impossible to predict. The Company's revenues,
cash flow and operating results are all materially impacted by gold prices. A
prolonged downturn in gold prices could also adversely affect the carrying value
of various assets and the Company's reserve position.
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. As
of June 30, 1995, the Company had produced over 1.2 million ounces of gold from
the Getchell Property.
While the Company's past production has come principally from open pit
mines, the Company's current production comes from underground mining.
Development work was largely completed on the Getchell Main Underground Mine
during fiscal 1995. Operation of the underground mine was taken over by the
Company in January 1995 following initial development by a contractor. The mine,
which began commercial production in May 1995, reached a production rate of
approximately 700 tons of ore per day by the end of fiscal 1995 and in August
reached 1,000 tons of ore per day. The Company's mining rate goal is to achieve
output of 1,200 tons of ore per day in fiscal 1996, although there can be no
assurances that this goal will be met.
In fiscal 1996, the Company expects gold production to be less than
production levels in fiscal 1995, during which the Company produced
approximately 184,298 ounces of gold, excluding 14,939 development ounces. The
estimated decrease in production in fiscal 1996 will be caused by the increased
use of lower grade stockpiled ore following the closure of the Main Pit and the
Turquoise Ridge Oxide Pit. There is sufficient stockpile material to feed the
mill for approximately two years at current milling rates, assuming the Getchell
Main Underground Mine produces at 1,000 tons of ore per day. Leaching of
existing loaded pads will also 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.
In January 1995, the Company announced a geologic resource along the
Turquoise Ridge Fault. To facilitate rapid delineation of any mineable reserve,
an intensive core drilling program addressing primarily the southwestern portion
of the Turquoise Ridge trend was conducted from February to July 1995. As part
of this program, thirteen core drill rigs generated in excess of 70 drill holes
spaced on intervals of 50 to 150 feet and produced in excess of 130,000 vertical
feet of core samples. This program was concentrated on a limited area of
Turquoise Ridge, approximately 800 feet by 1,100 feet. The Company has hired
MRDI to prepare a pre-feasibility study with respect to Turquoise Ridge. The
Company anticipates that a full report by MRDI that describes the results of
their analysis will be available by mid-September 1995. There can be no
assurances that the MRDI pre-feasibility study will be the basis for an addition
to the Company's proven and probable reserves.
RESULTS OF OPERATIONS
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
13
<PAGE> 16
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. At June 30, 1995,
147,100 ounces were hedged, using spot deferred contracts, for delivery over the
next 11 months at an average price of $401 per ounce.
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.
Exploration expenditures are expected to decline in the near term. Surface
drilling will be scaled back at Turquoise Ridge pending results of the MRDI
pre-feasibility study. If the study results are positive, additional drilling
will likely be delayed until a shaft is down and drilling can proceed from
underground access. Ongoing exploration drilling is planned at Section 13 and on
other targets at the Getchell Property during fiscal 1996.
14
<PAGE> 17
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.
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. See
"Liquidity and Capital Resources" below.
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.
15
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its operations from cash generated
from operations, an initial public offering of securities in 1988, a gold loan
project financing in 1988 and loans from its 81% owner, First Mississippi.
Cash provided by operating activities during fiscal years 1995, 1994 and
1993 were $16.0 million, $21.9 million and $18.3 million, respectively. The
decrease in cash provided by operating activities in fiscal 1995 is primarily
attributable to lower production, only slightly offset by reduced cost of sales
as compared to fiscal 1994 in which the Company experienced higher grade ore
with only slightly increased costs.
Capital expenditures were $26.9 million, $10.5 million and $5.6 million in
fiscal years 1995, 1994 and 1993, respectively. Capital expenditures in fiscal
1995 included $3.6 million for general mill improvements, $14.9 million for
equipment and capitalized development costs at the Getchell Main Underground
Mine and $8.4 million for development drilling and engineering at Turquoise
Ridge.
Net cash flows provided by operations have been insufficient to cover
investing activities and debt service to parties other than First Mississippi.
As a result, $9.3 million in cash was borrowed from First Mississippi in fiscal
1995, $1.2 million in fiscal 1994 and $8.5 million in fiscal 1993. In addition
to the cash borrowings, $2.3 million in fiscal 1995 was added to the First
Mississippi notes for payment of interest, bringing the total obligations due
First Mississippi to $43.2 million at June 30, 1995, including $2.3 million of
current payables. In February 1995, a single new promissory note (the "Note")
was executed with First Mississippi, replacing several smaller notes in place at
that date. The Note carries an interest rate of prime plus 0.75 percent and
accrues interest once a year in February. The Note is due no later than August
1, 1997. See Note 7 to the Consolidated Financial Statements.
Capital expenditures for fiscal 1996 are estimated to be $22.7 million
primarily due to the anticipated development of Turquoise Ridge. Operating cash
flow is not anticipated to be sufficient to meet these capital requirements. In
August 1995, the board of directors of First Mississippi approved additional
funding to the Company of up to $10 million. In order to undertake planned mine
development activities, the Company will need additional financing. The Company
is engaged in discussions with third parties concerning such financing, but no
definitive financing agreements have been executed. Accordingly, if the Company
is unable to arrange additional financing it may not be able to carry out its
planned mine development activities and other future operations.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("Statement 121"). Statement 121 establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used and for long-lived assets and for certain identifiable intangibles to be
disposed of. The Company adopted Statement 121 in fiscal 1995.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the Consolidated
Financial Statements of the Company and the Notes thereto on pages F-1 through
F-16.
RISK FACTORS
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
16
<PAGE> 19
prices, but not necessarily in the same manner as current demand and supply
affect the prices of the 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> <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 August 31, 1995)........................... 396 372 384
</TABLE>
The London P.M. Fix on August 31, 1995, was $382 per ounce.
Reserves
The ore reserves presented in this Annual Report on Form 10-K are, in large
part, estimates made by the Company and confirmed by Mine Development
Associates, an independent mining consultant. 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.
Project Development Risks; Turquoise Ridge
The Company has retained MRDI to complete a pre-feasibility study with
respect to Turquoise Ridge. There can be no assurances that the MRDI
pre-feasibility study will be the basis for an addition to the Company's proven
and probable reserves. Moreover, the Company estimates that the capital
expenditures required for the development of Turquoise Ridge in fiscal 1996 will
total at least $22.7 million. The Company
17
<PAGE> 20
does not presently have financing for complete development of Turquoise Ridge,
and there can be no assurance that such capital will be obtained on acceptable
terms, if at all.
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 currently estimated.
Dependence on a Single Mine
All of the Company's revenues are 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.
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.
Losses
The Company reported a net loss of $18.4 million for the fiscal year ended
June 30, 1995, based on decreased production volume and increased cost of sales
due to lower grade ore and an $11.5 million abandonment and impairment charge.
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.
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
dollar deposits less the gold lease
18
<PAGE> 21
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 June 30, 1995, the Company had spot deferred contracts on 147,100 gold
ounces which are scheduled to be delivered throughout fiscal 1996 at prices
ranging from $387 to $420 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 June 30,
1995, the unrealized gain on the contracts is $416,000. The Company's accounting
treatment for spot deferred contracts is outlined in Notes 1 and 6 to the
Consolidated Financial Statements.
Risk of loss with these forward sales and purchases agreements 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
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.
Control of the Company by First Mississippi
First Mississippi is a diversified corporation engaged in the production of
chemicals for industry and agriculture and related products and services. First
Mississippi currently owns approximately 81% of the common stock of the Company.
Unless and until a spin-off or other disposition of the shares held by First
Mississippi, First Mississippi will have the ability to control all fundamental
matters affecting the Company, including the election of directors of the
Company and decisions regarding the acquisition or disposition of assets, and,
as the controlling shareholder of the Company, First Mississippi is able to
influence all other decisions of the Company. The ongoing relationship between
the Company and First Mississippi may result in conflicts of interest between
the Company and First Mississippi that may result in actions taken by the
Company that do not fully reflect the interests of all stockholders of the
Company. Pursuant to an Administrative Services Agreement, the Company has the
right to obtain various administrative services from First Mississippi. The
Company believes that the terms of this agreement are no less favorable to the
Company than those that could have been obtained from unaffiliated third
parties. In addition, pursuant to a Tax Sharing Agreement, the Company
recomputes its income tax provision each year on a separate return basis and is
required to pay First Mississippi amounts approximating the federal income tax
liability it would have paid if it had filed an independent consolidated return.
First Mississippi is required to reimburse the Company for any deduction, credit
or allowance which has been utilized by First Mississippi and its subsidiaries
in the consolidated tax returns at such time as the Company could have utilized
the underlying tax assets if it had filed on a separate return basis. As of June
30, 1995, the Company had approximately $18,829 of tax assets which First
Mississippi is required to reimburse under the terms of the Tax Sharing
Agreement. See "Related Party Transactions."
19
<PAGE> 22
Potential Adverse Effects of a Spin-Off by First Mississippi
First Mississippi has informed the Company that it received a ruling from
the Internal Revenue Service in April 1995 that a spin-off of the Company would
be treated as a tax-free distribution for federal income tax purposes, subject
to certain conditions. Currently, approximately 81% of the Company's common
stock is held by First Mississippi. The Company understands that First
Mississippi has not made a final determination with respect to a spin-off.
Although the Company is unable to predict the effect, if any, that a spin-off
would have on the market price of the Company's common stock at the time, the
distribution of a substantial number of shares of the Company's common stock by
First Mississippi pursuant to a spin-off, or the perception that a spin-off is
likely to occur, could have a material adverse effect on the price of the common
stock.
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). See "Executive
Compensation -- Compensation Plans and Arrangements."
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
20
<PAGE> 23
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.
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,
21
<PAGE> 24
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 (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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this item are set forth on pages F-1
through F-16.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
22
<PAGE> 25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The names, ages and positions of the executive officers and directors of
the Company as of August 31, 1995 are set forth below.(1)
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------------- --- ----------------------------------------
<S> <C> <C>
J. Kelley Williams................... 61 Chairman of the Board
G.W. Thompson........................ 53 President, Chief Executive Officer and
Director
Donald O. Miller..................... 49 Vice President, Human Resources
Richard Nanna........................ 46 Vice President, Exploration
Donald S. Robson..................... 43 Vice President and Chief Financial
Officer
R. David Russell..................... 39 Vice President and Chief Operating
Officer
Roger D. Palmer...................... 45 Controller
J. Steve Chustz...................... 46 General Counsel
James L. McArthur.................... 52 Secretary
Cecil Alvarez........................ 60 Director
Walter A. Drexel..................... 65 Director
Robert C. Horton..................... 69 Director
Pete Ingersoll....................... 65 Director
Charles P. Moreton................... 67 Director
Paul W. Murrill...................... 61 Director
R. Michael Summerford................ 46 Director
Robert L. Zerga...................... 54 Director
</TABLE>
---------------
(1) Mr. Charles M. McAuley, the former President and Chief Executive Officer of
the Company, retired effective September 1, 1994.
G.W. Thompson. Mr. Thompson, 53, is President and Chief Executive Officer
of the Company and has been since September 1994. He was a private investor and
consultant in the mining business from May 1992 until September 1994. He was
President and Chief Executive Officer of Meridian Minerals Company, a
diversified minerals company and a subsidiary of Burlington Resources Inc.
("Meridian Minerals"), from 1983 to May 1992.
Donald S. Robson. Mr. Robson, 43, is Vice President and Chief Financial
Officer of the Company and has been since March 1995. From May 1990 to September
1994, he was Vice President, Finance of Lac Minerals Ltd. ("Lac Minerals"), a
gold mining company.
R. David Russell. Mr. Russell, 39, is Vice President and Chief Operating
Officer of the Company and has been since February 1995. From April 1994 to
February 1995, he was General Manager of Lac Minerals U.S.A. Ltd., a gold mining
company and a wholly owned subsidiary of Lac Minerals. From June 1993 to April
1994, he was a Manager at Independence Mining Company ("Independence Mining"), a
gold mining company and a subsidiary of Minorco Inc. From September 1992 to June
1993, he was a Manager at Hecla Mining Company, a diversified mining company.
From August 1988 to April 1992, he was General Manager at the Lincoln Mine,
owned by Meridian Minerals.
Donald O. Miller. Mr. Miller, 49, is the Vice President, Human Resources
and has been since April 1995. From January 1993 to April 1995, Mr. Miller had
his own consulting firm, GEM 2000, at which he consulted on human resources
issues, primarily in the mining industry. From May 1991 to January 1993, he was
the Vice President, Human Resources at Newmont Mining Company, an international
gold mining company. From November 1988 to May 1991, he was the Manager,
Compensation and Benefits at Cyprus Minerals Company, a major producer of
copper, coal and molybdenum.
23
<PAGE> 26
Roger D. Palmer. Mr. Palmer, 45, is the Controller of the Company and has
been since April 1995. From June 1992 to December 1993, Mr. Palmer held the
positions of Assistant Controller and Manager, Financial Planning and Analysis
with the Company. From June 1989 to June 1992 he was the Division Controller at
OESI Power Corporation, a geothermal energy company.
Richard F. Nanna. Mr. Nanna, 46, is the Vice President, Exploration of the
Company and has been since August 1991. From 1981 to August 1991, Mr. Nanna was
an exploration geologist with the Company.
J. Steve Chustz. Mr. Chustz, 46, is General Counsel of the Company and has
been since November 1994. He is also General Counsel of First Mississippi and
has been since November 1993. From 1987 to November 1993, he was Associate
General Counsel of First Mississippi.
James L. McArthur. James L. McArthur, 52, is Secretary of the Company and
has been since May 1993. He is also Secretary and Manager, Investor Relations of
First Mississippi and has been since 1993 and 1988, respectively.
J. Kelley Williams. Mr. Williams, 61, is Chairman of the Board of the
Company and has been since October 1987. He is the Chairman of the Board and
Chief Executive Officer of First Mississippi and has been since November 1988.
He was a Director, President and Chief Executive Officer of First Mississippi
from 1971 until November 1988. He is Director of Deposit Guaranty Corporation
and Deposit Guaranty National Bank, Jackson, Mississippi. He is a member of the
Nominating Committee.
Cecil Alvarez. Mr. Alvarez, 60, is retired and has been a director of the
Company since 1987. He was President and Chief Executive Officer of the Company
from August 1990 until his retirement in March 1992. From October 1987 until
August 1990, Mr. Alvarez was President of the Company. He was employed by First
Mississippi in 1968 and joined the Company as General Manager in 1980. He is a
member of the Audit Committee.
Walter A. Drexel. Mr. Drexel, 65, is retired and has been since 1987. He
has been a director since May 1995. From January 1981 to March 1987, Mr. Drexel
was employed in various capacities with Burlington Northern Inc. ("Burlington")
and its wholly-owned subsidiary, Burlington Northern Railroad ("Burlington
Railroad"), including serving as Vice Chairman of Burlington and Chairman, CEO
and President of Burlington Railroad. Prior to 1981, Mr. Drexel served for 23
years in various capacities as an officer at Atlantic Richfield Company. He is a
member of the Audit Committee.
Robert C. Horton. Mr. Horton, 69, is a self-employed mining consultant and
has been a director of the Company since March 1, 1994. He is the Associate Dean
Emeritus of the Mackay School of Mines at the University of Nevada, Reno, and
was Associate Dean from July 1989 until July 1990. He was also Director of that
University's Center for Strategic Materials Research and Policy Study from
September 1987 until July 1990. From September 1981 until July 1987, Mr. Horton
was the Director of the U.S. Bureau of Mines, Department of the Interior,
Washington, D.C. He is a member of the Compensation Committee and the Long-Term
Incentive Committee.
Pete Ingersoll. Mr. Ingersoll, 65, is the principal partner of Ingersoll,
Parker & Longabaugh, a consulting firm. From July 1987 to December 1992, he was
a Senior Vice President, Metals and Mining, in the Equity Research Department of
Lehman Brothers. He is Chairman of the Audit Committee and a member of the
Long-Term Incentive Committee.
Charles P. Moreton. Mr. Moreton, 67, has been a private investor, primarily
in the oil and gas business, since July 1991, and has been a Company director
since 1988. Mr. Moreton was the Chairman of the Board of Commet Resources, Inc.,
a natural gas transmission and marketing company in Houston, Texas, from 1986
until its dissolution in July 1991. He is also a Director of Tanglewood
Bancshares, Inc., Houston, Texas. He is a Director of First Mississippi and
Plasma Processing Corporation, a subsidiary of First Mississippi. He is a member
of the Audit Committee and the Long-Term Incentive Committee.
Paul W. Murrill. Dr. Murrill, 61, is a professional engineer. Dr. Murrill
has been a director of Entergy Corporation since 1994, when it purchased Gulf
States Utilities Company, an electric and gas utility company in Beaumont,
Texas, of which Dr. Murrill was a director. Until March 1990, Dr. Murrill was
also a Special
24
<PAGE> 27
Advisor to the Chairman of the Board of Gulf States. Dr. Murrill had also
previously served as Chairman of the Board and Chief Executive Officer of that
company. He is a Director of Picadilly Cafeterias, Inc., a restaurant chain,
Baton Rouge, Louisiana; ZYGO, a high precision instrument company, Middlefield,
Connecticut; Howell Corporation, a diversified energy company, Houston, Texas;
and Tidewater, Inc., an oil service company, New Orleans, Louisiana. He is also
a Director of First Mississippi. He is Chairman of both the Compensation
Committee and the Long-Term Incentive Committee and is a member of the
Nominating Committee.
R. Michael Summerford. Mr. Summerford, 46, is Vice President and Chief
Financial Officer of First Mississippi and has been since 1988, and has been a
director of the Company since 1988. From 1983 to 1988, he was a Vice President
of First Mississippi. Mr. Summerford is also the Director of Melamine Chemicals,
Inc., a publicly held corporation originally formed by First Mississippi and an
unrelated party, and is a member of the Management Committee of Triad Chemical,
a joint venture fifty percent (50%) owned by First Mississippi.
Robert L. Zerga. Mr. Zerga, 54, has been semi-retired and self-employed
since January 1995. From July 1990 to November 1994, he served as Chief
Executive Officer and Chairman of the Board of Independence Mining. During the
same time period, he served as Vice President and director of Minorco (U.S.A.)
Inc., a gold mining company and a subsidiary of Minorco Inc. He is a member of
the Compensation Committee.
BOARD COMMITTEES
The Audit Committee consists of four directors who are not employees of
First Mississippi or the Company with broad latitude for inquiry into all
operations of the Company. Its primary responsibilities include recommendation
to the board on the selection of independent auditors; review of audit reports
prepared by independent auditors, internal auditors, independent engineers,
insurance auditors and other consultants engaged by the Company to examine
specific areas of corporate operations; and examination of the adequacy of
compliance with various governmental regulations and corporate policies and
procedures. The current members of the Audit Committee are Cecil Alvarez, Walter
Drexel, Charles Moreton and Pete Ingersoll.
The Compensation Committee consists of three non-employee directors and is
responsible for determining compensation for the Company's executive officers.
The current members of the Compensation Committee are Robert Horton, Paul
Murrill and Robert Zerga.
The Nominating Committee consists of one non-employee director and the
Chief Executive Officer and is responsible for director nominations. The
Nominating Committee considers suggestions from all sources. The current members
of the Nominating Committee are Paul Murrill and Kelley Williams.
The Long-Term Incentive Committee consists of four directors who are not
employees of First Mississippi or the Company. The committee is the
administrator of the Company's Amended and Restated Long-Term Incentive Plan
(the "LTI Plan") and makes all determinations as to who shall receive awards
under the plan, including the timing, pricing and amount of such awards. The
current members of this committee are Robert Horton, Pete Ingersoll, Charles
Moreton and Paul Murrill.
25
<PAGE> 28
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- ------------------------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK AWARDS UNDERLYING COMPENSATION
POSITION(1) YEAR ($) ($) (2)($) ($) OPTIONS(3) (4)($)
---------------------------- ---- ------- ------ ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
G.W. Thompson............... 1995 167,000 0(5) --(6) 65,000(7) 90,000 3,008(8)(9)
President & CEO
Charles M. McAuley(10)...... 1995 191,500 0 88,643(11) 0 0 0
Former President & CEO 1994 191,500 42,900 46,920(11) 0 0 32,459(8)(9)(12)
1993 190,000 0 --(6) 0 26,000 46,181(8)(9)(12)(13)
Richard F. Nanna............ 1995 90,228 27,200 --(6) 0 8,127 4,804(8)(9)
Vice President, Exploration 1994 88,920 55,300 --(6) 0 7,300 4,765(8)(9)
1993 84,972 0 14,550(11) 0 5,000 4,429(8)(9)
</TABLE>
---------------
(1) The table does not include R. David Russell, Vice President and Chief
Operating Officer, Donald S. Robson, Vice President and Chief Financial
Officer and Donald O. Miller, Vice President, Human Resources, because such
individuals were employed by the Company during fiscal 1995 and did not
earn sufficient compensation during such period to require disclosure in
the table. Messrs. Russell, Robson and Miller will receive annual
compensation from the Company in the amounts of $150,000, $125,000 and
$100,000, respectively. In addition, on their hire dates, Messrs. Russell,
Robson and Miller received Nonqualified Stock Options ("NQSOs") under the
LTI Plan to purchase 34,000, 22,059 and 13,954 shares, respectively, of
common stock of the Company. Such options vest 100% one year from the date
of grant.
(2) Other Annual Compensation includes direct cash payments related to tax
reimbursement payments, tax planning and tax return preparation services
provided to the named Executive Officer at the Company's expense, and tax
reimbursements paid on imputed income resulting from the personal use of
Company automobiles and memberships. Tax reimbursement payments are
pursuant to a plan providing for payment to eligible employees of
thirty-seven percent (37%) of the Company's federal income tax deduction
resulting from the exercise of Debenture Options and NQSOs.
(3) Represents NQSOs granted under the LTI Plan.
(4) All Other Compensation is comprised of Company contributions related to the
401(k) Plan, relocation expenses, executive life insurance paid by the
Company on the Executive Officer's behalf, and the above market portion of
interest earned under the Deferred Income Plan. See "Compensation Plans and
Arrangements."
(5) Mr. Thompson's bonus will be calculated for a 16-month period (September
1994 through December 1995), incorporating performance for fiscal year
1995, and thus is not presently determinable.
(6) Aggregate prerequisites and other personal benefits were less than $50,000
or ten percent (10%) of the total annual salary and bonus reported for the
named Executive Officer and thus are excluded from the table.
(7) Represents 10,000 shares of restricted stock issued to Mr. Thompson upon
being named President and CEO, of which he has sole voting but no
investment power. All of the shares vest no later than August 22, 1997
provided Mr. Thompson continues to be employed by the Company at such date.
(8) Company contributions related to the 401(k) Plan in fiscal year 1995 were
$2,000 for Mr. Thompson and $3,655 for Mr. Nanna, in fiscal year 1994 were
$7,600 for Mr. McAuley and $3,557 for Mr. Nanna, and in fiscal 1993 were
$7,600 for Mr. McAuley and $3,398 for Mr. Nanna.
(9) Executive life insurance paid by the Company in fiscal year 1995 on behalf
of Mr. Thompson was $1,008 and on behalf of Mr. Nanna was $1,149, in fiscal
year 1994 was $2,337 on behalf of Mr. McAuley and
26
<PAGE> 29
$1,208 on behalf of Mr. Nanna, and in fiscal 1993 was $1,778 on behalf of
Mr. McAuley and $1,031 on behalf of Mr. Nanna.
(10) Mr. McAuley retired as President, Chief Executive Officer, and Director of
the Company, effective September 1, 1994. Mr. McAuley will be compensated
by First Mississippi for a period of eighteen (18) months at his fiscal
1994 salary rate. Included in the table is compensation paid to Mr. McAuley
by First Mississippi for services to First Mississippi and its other
subsidiaries, but does not include $239,575 received from First Mississippi
for the purchase of 111,000 of NQSOs previously held by Mr. McAuley.
(11) Includes tax reimbursement payments to Mr. McAuley of $88,643 in fiscal
year 1995 and $42,615 in fiscal year 1994 and $12,963 to Mr. Nanna in
fiscal year 1993.
(12) Above market interest earned under the Deferred Income Plan by Mr. McAuley
in fiscal years 1994 and 1993 were $22,522 and $11,182, respectively.
(13) Mr. McAuley was reimbursed for relocation expenses in the amount of $25,621
in fiscal 1993 by the Company.
OPTION GRANTS IN FISCAL YEAR 1995*
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED RATES OF
STOCK PRICE
APPRECIATION FOR
NUMBER OF SECURITIES % OF TOTAL EXERCISE OPTION TERM(2)
UNDERLYING OPTIONS OPTIONS GRANTED PRICE EXPIRATION -------------------
NAME GRANTED(1) TO ALL EMPLOYEES ($/SHARE) DATE 5% 10%
----------------------------------- -------------------- ---------------- -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
G.W. Thompson...................... 90,000 42% $6.810 8/22/04 385,200 976,500
Charles M. McAuley................. -- -- -- -- -- --
Richard F. Nanna................... 8,127 4% $11.44 5/10/05 58,433 148,155
</TABLE>
---------------
* Options shown in this table represent NQSOs granted to employees under the
LTI Plan.
(1) The Company has in effect a plan providing for payment of thirty-seven
percent (37%) of the Company's federal income tax deduction resulting from
the exercise of Debenture Options and NQSOs. Amounts received are included
as Other Annual Compensation in the Company's Summary Compensation Table.
(2) The amounts shown are for illustrative purposes only. Actual stock prices
will vary from time to time based upon market factors and the Company's
financial performance. There can be no assurance that the assumed rates of
appreciation will be achieved. Figures shown for Mr. Thompson are the
pre-tax gains which would be recognized on August 22, 2004 if Mr. Thompson
exercised all of his options on that date and the Company's stock price had
grown between August 22, 1994 and August 22, 2004, at the 5% and 10%
assumed growth rates set by the Securities and Exchange Commission to
$11.09 and to $17.66 per share, respectively. Figures shown for Mr. Nanna
are the pre-tax gains which would be recognized on May 10, 2005 if Mr.
Nanna exercised all of his options on that date and the Company's stock
price had grown between May 10, 1995 and May 10, 2005, at the 5% and 10%
growth rates set by the Securities and Exchange Commission to $18.63 and to
$29.67 per share, respectively.
27
<PAGE> 30
FIRSTMISS GOLD INC. OPTION EXERCISES
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES AGGREGATE VALUE OF
UNDERLYING UNEXERCISED, IN-THE-
UNEXERCISED OPTIONS AT MONEY OPTIONS AT
6/30/95 6/30/95 ($)
SHARES ACQUIRED VALUE --------------------------- ------------------------------
NAME ON EXERCISE RECOGNIZED EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE
--------------------------------- --------------- ---------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
G.W. Thompson.................... -- -- 90,000 0 1,187,100 0
Charles M. McAuley*.............. -- -- -- -- -- --
Richard F. Nanna................. -- -- 32,300 8,127 472,025 69,567
</TABLE>
---------------
* See footnote 10 to Summary Compensation Table.
(1) Value was computed as the difference between the individual option price and
the per share price of the Company's Common Stock on June 30, 1995. Only
options with fair market values in excess of the exercise price are
reflected in this column.
DIRECTOR COMPENSATION
The Chairman of the Board is compensated for his services with a retainer
of $18,500 per year. Other Directors who are not employees of the Company are
compensated for their services with a retainer of $7,500 per year. In addition,
all non-employee Directors receive $500 per day for attendance at Board
meetings, and an additional $350 per day for attendance at Committee meetings.
No compensation in addition to his regular salary and benefits is paid to the
Chief Executive Officer for his services as a Director. Travel expenses to and
from meetings are also reimbursed to Directors. No fees are paid for informal
meetings and meetings held by telephone conference call. The Company has
purchased, on behalf of each of its Directors, $100,000 of accidental death and
dismemberment insurance protection and $250,000 of business travel accident
protection.
COMPENSATION PLANS AND ARRANGEMENTS
Termination Agreements
In fiscal 1995, the Company entered into Termination Agreements with G.W.
Thompson, Donald S. Robson, R. David Russell and Donald O. Miller. The
agreements are contingent upon a Change of Control, as defined in the
agreements, and provide for a three-year term. Each individual would be paid
upon termination without cause within three years of a Change of Control or upon
resignation within twelve months of a Change of Control, one and one-half times
the sum of the three-year average of his annual base salary (excluding bonuses)
plus fringe benefit costs equal to thirty-six percent of his annual base salary.
Upon termination, the individual would have the option, unless he notifies the
Company otherwise, to receive a cash payment equal to the cash value of all his
NQSOs, Debenture Options and Debentures, whether then exercisable or not. No
individual would receive payments in the event of death, disability or
termination for cause. The agreements also provide for, among other things, an
additional payment to be made by the Company to the individual if any of the
severance payments provided for by the agreements or any other payments made
pursuant to a Change of Control of the Company (the "Total Payments") become
subject to an additional tax ("Excise Tax") imposed by Section 4999 of the
Internal Revenue Code, such that the net of all of the payments received by the
individual after the imposition of the Excise Tax on the Total Payments and the
federal income tax on the additional payment shall be equal to the Total
Payments.
The Amended and Restated Long-Term Incentive Plan
In 1988, as amended in 1989 and 1991, the Board of the Company authorized
the Amended and Restated Long-Term Incentive Plan (the "LTI Plan") for
Directors, Officers and certain key employees of the
28
<PAGE> 31
Company. Under the Plan, up to 900,000 shares of Common Stock of the Company
were authorized for the grant of awards.
Under the Plan, the annual awards to Directors, who are not employees of
the Company or First Mississippi Corporation ("Outside Directors") shall be made
on each annual date (the day after the Annual Meeting) for the first five years
of service on the Board during the term of the LTI Plan. The awards are in the
form of Debenture Options which are options to purchase the Company's
Convertible Subordinated Debentures at par value equal to the principle amount.
Each time Debenture Options are granted, a new series of Convertible
Subordinated Debentures is created for issuance with terms fixed by the Board.
These options are exercisable at any time within ten years of grant. However, as
amended in 1991, the LTI Plan provides that the Convertible Subordinated
Debentures cannot be converted into preferred stock and then into Common Stock
until at least six months has elapsed between the date the Debenture Option is
granted and the date the Debenture Option is converted. On each annual award
date, each outside Director then entitled to an award will receive an option to
purchase Convertible Subordinated Debentures in the principle amount equal to
the fair market value of 1,000 shares of the Company's Common Stock on the date
of grant. On any annual grant date when the Company is not able to grant
Debenture Options, each Outside Director then serving will receive a NQSO to
purchase 1,000 shares of the Company's Common Stock at its fair market value on
the date of grant. No other types of awards may be granted to outside Directors
under the Plan.
The Deferred Income Plan
In fiscal year 1986, First Mississippi established a Deferred Income Plan
for Directors, Officers and Key Employees which superseded the previous deferred
income arrangement and pursuant to which deferral opportunities in any given
year are determined at the discretion of the Board of First Mississippi for up
to a maximum of three years. These deferrals are held by First Mississippi until
retirement, resignation or other termination of services. Effective January 1,
1994, amounts deferred under the Deferred Income Plan earn interest at a rate of
one hundred twenty percent of the applicable annual federal long-term rate as
specified in the Internal Revenue Code. First Mississippi is owner and
beneficiary of life insurance policies covering most of the participants in this
plan. The benefits under these policies are expected to cover the interest cost
in excess of market rates, resulting in no net cost to First Mississippi over
the life of the plan. The maximum interest rate and other plan provisions may be
amended prospectively and, if necessary, may be adjusted retroactively due to
severe economic changes including but not limited to changes in tax law.
However, no retroactive changes in the rate of return may occur unless such
economic changes are material, adverse and retroactive in nature. Mr. Alvarez
deferred a portion of his compensation for the maximum three years when he was
an Officer of the Company, but currently does not defer any compensation. As
long as Mr. Alvarez remains on the Board, his account balance will earn
interest, but at the ten year Treasury Note Rate. Mr. McAuley, while an Officer
of First Mississippi, deferred a portion of his compensation for a maximum three
years and his account balance continued to accrue interest at the higher rate.
29
<PAGE> 32
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of August 22, 1995, First Mississippi owned 14,750,000 shares or
approximately 81% of the Company's issued and outstanding shares of Common
Stock. The Directors and Officers of the Company beneficially own Debenture
Options, Convertible Subordinated Debentures, Nonqualified Stock Options
("NQSO") and Common Stock of the Company as follows:
<TABLE>
<CAPTION>
DEBENTURE TOTAL COMMON
OPTIONS OR PERCENT COMMON STOCK BENEFICIALLY PERCENT
DIRECTOR/OFFICER NQSOS(1) OF CLASS STOCK OWNED(2) OF CLASS
-------------------------------------- ---------- -------- ------ ------------------ --------
<S> <C> <C> <C> <C> <C>
Cecil Alvarez......................... 100 (3)
1988-A Series Debenture Options..... 26,000 88%
1989-A Series Debenture Options..... 9,000 90%
1990-A Series Debenture Options..... 12,000 86%
1991-A Series Debentures(1)......... 4,000 100%
-------
51,000 51,100 *
Walter A. Drexel...................... 0 N/A 1,000 1,000 *
Robert C. Horton...................... 1,500 (4)
1989-B Series Debenture Options..... 1,000 33%
1990-C Series Debenture Options..... 1,000 33%
1991-B Series Debenture Options..... 1,000 33%
1992-A Series Debenture Options..... 1,000 33%
1993-A Series Debenture Options..... 1,000 33%
-------
5,000 6,500 *
Pete Ingersoll........................
1994-A Series Debenture Options..... 1,000 100% 0 1,000 *
Charles P. Moreton.................... 10,700(3)
1989-B Series Debenture Options..... 1,000 33%
1990-C Series Debenture Options..... 1,000 33%
1991-B Series Debenture Options..... 1,000 33%
1992-A Series Debenture Options..... 1,000 33%
1993-A Series Debenture Options..... 1,000 33%
-------
5,000 15,700 *
Paul W. Murrill....................... 1,000
1989-B Series Debenture Options..... 1,000 33%
1990-C Series Debenture Options..... 1,000 33%
1991-B Series Debenture Options..... 1,000 33%
1992-A Series Debenture Options..... 1,000 33%
1993-A Series Debenture Options..... 1,000 33%
-------
5,000 6,000 *
Richard F. Nanna...................... 0
1988-A Series Debenture Options..... 3,500 12%
1989-A Series Debenture Options..... 1,000 10%
1990-A Series Debenture Options..... 2,000 14%
NQSOs............................... 32,300 13%
-------
38,800 38,800 *
Roger D. Palmer....................... 606
NQSOs............................... 2,000 1% 2,606 *
R. Michael Summerford................. 0 N/A 1,400 1,400 *
G.W. Thompson......................... 10,000(5)
NQSOs............................... 90,000 36% 100,000 *
J. Kelley Williams.................... 0 N/A 26,237 26,237 *
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
DEBENTURE TOTAL COMMON
OPTIONS OR PERCENT COMMON STOCK BENEFICIALLY PERCENT
DIRECTOR/OFFICER NQSOS(1) OF CLASS STOCK OWNED(2) OF CLASS
------- --- ------ ------- ----
<S> <C> <C> <C> <C> <C>
All Directors and Executive Officers
as a Group (17 Persons)(6).......... 52,543
1988-A Series Debenture Options..... 29,500 100%
1989-A Series Debenture Options..... 10,000 100%
1989-B Series Debenture Options..... 3,000 100%
1990-A Series Debenture Options..... 14,000 100%
1990-C Series Debenture Options..... 3,000 100%
1991-A Series Debentures(1)......... 4,000 100%
1991-B Series Debenture Options..... 3,000 100%
1992-A Series Debenture Options..... 3,000 100%
1993-A Series Debenture Options..... 3,000 100%
1994-A Series Debenture Options..... 1,000 100%
NQSOs............................... 124,300 49%
------- ------- -----
197,800 250,343 1.36%
</TABLE>
---------------
* Represents less than one percent (1%) of class.
(1) Numbers represent shares of Common Stock of the Company underlying Debenture
Options and NQSOs beneficially owned by the Directors and Officers which are
exercisable within sixty days of August 22, 1995, except for 4,000 shares of
the 1991-A Series Debentures held by Mr. Alvarez which represent shares of
Common Stock underlying Convertible Subordinated Debentures (with a value of
$11,750) that have already been purchased through the exercise of Debenture
Options. Since more than the six (6) months has elapsed from date of grant,
the Debenture Options are exercisable and immediately convertible into the
specified number of Convertible Subordinate Debentures and then immediately
convertible into shares of Convertible Preferred Stock of the same series
and then immediately convertible into the specified number of shares of
Common Stock of the Company. NQSOs are exercisable no earlier than six (6)
months after the date of the grant into shares of Common Stock of the
Company and presently all are exercisable.
(2) In connection with the Stockholder Rights Plan adopted by the Board on June
13, 1990, Stock Purchase Rights were dividended to stockholders of record on
June 25, 1990, and are deemed to attach to the outstanding shares of Common
Stock of the Company, including outstanding shares of Common Stock reported
above as being owned by Directors and Officers. Rights expire ten (10) years
after the date of initial issuance subject to earlier redemption or
exchange. The rights are redeemable at the option of the Company for $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 the Board). An acquiring person exists when any person
(except for First Mississippi) together with its affiliates and associates,
without the approval of the Board, becomes the beneficial owner of 15% or
more of the Common Stock of the Company. From and after the close of
business on the tenth day after a public announcement that the acquiring
person exists, each right not beneficially owned by the acquiring person
"flips in" to entitle the holder to buy for $40, the initial excise price
(subject to adjustment), Common Stock of the Company having a market value
of $80. In the event that the Company is acquired by means of a merger or
other business combination or 50% or more of the Company's assets or
earnings power are sold or transferred, in each case without approval of the
Board, then each right not beneficially owned by the acquiring person "flips
over" to entitle the holder to buy for $40, Common Stock of the acquiring or
transfer party having a market value of $80. The rights have no voting
rights.
(3) Shared voting and investment power with wife.
(4) Included are 500 shares owned by Mrs. Horton, of which Mr. Horton has no
voting and investment power and disclaims beneficial ownership.
31
<PAGE> 34
(5) Represents 10,000 shares of restricted stock issued to Mr. Thompson upon
being named President and CEO, of which he has sole voting but no
investment power. All of the shares vest no later than August 22, 1997
provided Mr. Thompson continues to be employed by the Company at such date.
(6) Except as otherwise indicated in these notes, the shares beneficially owned
by the persons indicated in the table above represent sole voting and
investment power.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As discussed below, the Company and its Directors and Officers engage in
various transactions with First Mississippi. As disclosed above, certain
Directors and Officers of the Company are also Directors or Officers of First
Mississippi. As of August 22, 1995, the Company's Directors and Executive
Officers beneficially own shares of Common Stock of First Mississippi as
follows, except that those Directors and Executive Officers of the Company that
do not beneficially own any shares of First Mississippi Common Stock are not
listed below.
BENEFICIAL OWNERSHIP OF
FIRST MISSISSIPPI COMMON STOCK
<TABLE>
<CAPTION>
TOTAL COMMON
DEBENTURE STOCK
OPTIONS OR PERCENT OF COMMON BENEFICIALLY PERCENT OF
DIRECTOR/OFFICER NQSOS(1) CLASS STOCK OWNED (2) CLASS
----------------------------------------- ---------- ---------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Cecil Alvarez............................ 0 N/A 500 500 *
J. Steve Chustz.......................... 1,269
NQSOs.................................. 10,000 11% 11,269 *
James L. McArthur........................ 2,364
NQSOs.................................. 650 1% 3,014 *
Charles M. McAuley....................... 0 N/A 15,154 15,154 *
Charles P. Moreton....................... 10,250(3)
1988-1 Series Debenture Options........ 1,000 9%
1989-2 Series Debenture Options........ 1,000 9%
1990-2 Series Debenture Options........ 1,000 9%
1991-2 Series Debenture Options........ 1,000 9%
1992-1 Series Debenture Options........ 1,000 9%
-------
5,000 15,250 *
Paul W. Murrill.......................... 7,125(4)
1988-1 Series Debenture Options........ 1,000 9%
1989-2 Series Debenture Options........ 1,000 9%
1990-2 Series Debenture Options........ 1,000 9%
1991-2 Series Debenture Options........ 1,000 9%
1992-1 Series Debenture Options........ 1,000 9%
-------
5,000 12,125 *
Richard F. Nanna......................... 0 N/A 753 753 *
R. Michael Summerford.................... 36,544
1987-A Series Debenture Options........ 8,000 20%
1988-A Series Debenture Options........ 13,000 15%
1989-A Series Debenture Options........ 14,000 42%
1990-1 Series Debenture Options........ 14,000 18%
1991-1 Series Debenture Options........ 18,000 23%
-------
67,000 103,544 *
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
TOTAL COMMON
DEBENTURE STOCK
OPTIONS OR PERCENT OF COMMON BENEFICIALLY PERCENT OF
DIRECTOR/OFFICER NQSOS(1) CLASS STOCK OWNED (2) CLASS
----------------------------------------- ------- ---- ------- --------- -----
<S> <C> <C> <C> <C> <C>
J. Kelley Williams....................... 726,811(5)
1986-A Series Debenture Options........ 40,000 100%
1987-A Series Debenture Options........ 25,000 63%
1988-A Series Debenture Options........ 45,000 52%
1989-1 Series Debenture Options........ 45,000 100%
1990-1 Series Debenture Options........ 45,000 59%
1991-1 Series Debenture Options........ 45,000 57%
NQSOs.................................. 65,000 68%
-------
310,000 1,036,811 4.97%
All Directors and Officers as a Group
(17 Persons)(6)........................ 800,770
1986-A Series Debenture Options........ 40,000 100%
1987-A Series Debenture Options........ 33,000 83%
1988-A Series Debenture Options........ 58,000 67%
1988-1 Series Debenture Options........ 2,000 18%
1989-A Series Debenture Options........ 14,000 42%
1989-1 Series Debenture Options........ 45,000 100%
1989-2 Series Debenture Options........ 2,000 18%
1990-1 Series Debenture Options........ 59,000 77%
1990-2 Series Debenture Options........ 2,000 18%
1991-1 Series Debenture Options........ 63,000 79%
1991-2 Series Debenture Options........ 2,000 18%
1992-1 Series Debenture Options........ 2,000 18%
NQSOs.................................. 75,650 80%
------- --------- -----
397,650 1,198,420 5.72%
</TABLE>
---------------
* Represents less than one percent (1%) of the class.
(1) Numbers represent shares of Common Stock of First Mississippi underlying the
Debenture Options and NQSOs beneficially owned by the Directors and
Officers which are exercisable within sixty days of August 22, 1995. Since
more than six (6) months has elapsed from date of grant, the Debenture
Options are exercisable and immediately convertible into the specified
number of Convertible Subordinated Debentures and then immediately
convertible into shares of Convertible Preferred Stock of the same series
and then immediately convertible into the specified number of shares of
Common Stock of First Mississippi. NQSOs are exercisable no earlier than
six (6) months after the date of the grant into shares of Common Stock of
First Mississippi and presently all are exercisable.
(2) In connection with the Shareholder Rights Plan adopted by First Mississippi
on May 12, 1986, and amended on February 14, 1989, Preferred Stock Purchase
Rights were distributed to stockholders and are deemed to be attached to
the outstanding shares of Common Stock of First Mississippi, including the
outstanding shares of Common Stock reported above as being owned by
Directors and Officers. Under certain conditions, each right may be
exercised to purchase one one-hundredth (1/100) of a share of a new series
of preferred stock, at an exercise price of $30 (subject to adjustment).
The rights, which do not have voting rights, expire in 1996 and may be
redeemed by First Mississippi at a price of $.05 per right prior to a
specified period of time after the occurrence of certain events. In certain
events, each right (except certain rights beneficially owned by 20% or more
owners, which rights are voided) will entitle its holder to purchase shares
of First Mississippi Common Stock with a value of twice the then current
exercise price.
(3) Shared voting and investment power with wife.
33
<PAGE> 36
(4) Excluded are 775 shares owned by Mrs. Murrill of which Dr. Murrill has no
voting or investment powers and disclaims beneficial ownership.
(5) Included are 177,000 shares of which Mr. Williams has shared voting and
investment power, 3,500 of which he disclaims beneficial ownership. Not
included are 61,750 shares held in the Jean P. Williams, Revocable Trust,
of which Mr. Williams has no voting and investment power and disclaims
beneficial ownership.
(6) Except for James L. McArthur who has sole voting power but shares investment
power as to 8 shares, and except as otherwise indicated in these notes, the
persons included in the table have sole voting and investment power with
respect to the shares, and except for Mr. Williams, own less than one
percent (1%) of the total shares of First Mississippi Common Stock.
Excluded are 12 shares owned by Mrs. McArthur, of which Mr. McArthur has no
voting and investment power and disclaims beneficial ownership.
See "Related Party Transactions" for a discussion of further information
regarding transactions between First Mississippi and the Company, generally.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Murrill is Chairman of the Company's Compensation Committee and is also
a Director of First Mississippi. He has not served as an officer or employee of
the Company or First Mississippi.
RELATED PARTY TRANSACTIONS
First Mississippi Corporation Distribution. In February 1990, First
Mississippi announced plans to distribute its stock in the Company to First
Mississippi's shareholders. According to First Mississippi, this spin-off was
subject to a favorable tax ruling from the Internal Revenue Service and a
favorable operational and financial outlook for the Company. Although the
required ruling was received in December 1990, gold prices had fallen in the
interim, and the spin-off was put on hold. First Mississippi has informed the
Company that it received a subsequent ruling from the Internal Revenue Service
in April 1995 that a spin-off would be treated as a tax-free distribution for
federal income tax purposes, subject to certain conditions. The Company
understands that First Mississippi has not made a final determination with
respect to a spin-off and that any such determination will be based in part on
the results of the pre-feasibility study.
First Mississippi Corporation Advances. During fiscal years 1995, 1994 and
1993, the Company received proceeds from notes payable to First Mississippi of
$10,428,000, $1,200,000 and $8,500,000, respectively. Interest has accrued on
these notes in the amount of $1,801,000 in fiscal 1995, $1,730,000 in fiscal
1994 and $1,063,000 in fiscal 1993. In February 1995, a Note evidencing all
advances as of such date and replacing the notes in place as of such date was
issued to First Mississippi. The Note carries an interest rate of prime plus
0.75 percent and accrues interest once a year in February. The Note is due no
later than August 1, 1997. The Note is unsecured and is due upon call by First
Mississippi with 367 days notice. The Note would be immediately due upon certain
events, including a change of control other than a distribution from First
Mississippi to its stockholders of the Company's stock owned by First
Mississippi.
First Mississippi Corporation Indemnity. First Mississippi indemnifies its
Officers and Directors and those of its subsidiaries when such Officers and
Directors are serving in such capacities at the request of the Board of First
Mississippi. On February 2, 1991, the Board of First Mississippi extended its
Corporate Indemnity to the Directors of the Company who are not otherwise
employees of the Company or First Mississippi. First Mississippi's Corporate
Indemnity requires that the person to be indemnified either: (a) be wholly
successful, on the merits or otherwise, in any action or proceeding against such
person; or (b) otherwise establish that such person acted in good faith and in a
manner such person reasonably believed to be in, or not opposed to, the best
interests of the Company, and in the case of any criminal action or proceeding,
had no reasonable cause to believe that the conduct was unlawful. Whether these
standards are met will be determined by those stockholders or Directors of First
Mississippi not involved in the matter at issue or by special legal counsel
34
<PAGE> 37
selected by the Directors of First Mississippi. In the case of any action or
suit by or in the right of the Company, any person finally adjudged liable for
gross negligence or willful misconduct in performing duties for the Company will
not be entitled to indemnification unless a Court determines that
indemnification is proper under the circumstances. Advancement of expenses is
allowed upon receipt of an undertaking to repay should it ultimately be
determined that an individual is not entitled to indemnity.
Administrative Service Agreement. Pursuant to the terms of an
Administrative Services Agreement, as amended, with First Mississippi, the
Company obtains from First Mississippi services including communications,
financial services (accounting, management information, internal audit and tax),
human resources, legal, risk management and shareholder services. Prior to the
last day of each fiscal year, the Company and First Mississippi agree on hourly
rates for such services for the following fiscal year or until the date of a
spin-off. The hourly rates determined primarily on a cost reimbursement basis
and approved by a majority of the Company's non-employee Directors who are also
not affiliated with First Mississippi. The Company reimbursed First Mississippi
approximately $224,000, $139,000 and $148,000 in fiscal years 1995, 1994 and
1993, respectively, for such services. The Company has the right to obtain such
services from unaffiliated third parties if it believes that such services can
be obtained at a lower cost than the fee paid to First Mississippi. The
Administrative Services Agreement is terminable by the Company as of the end of
any month on ninety (90) days written notice and by First Mississippi as of the
end of any month or at such time as First Mississippi's ownership of the Company
declines to less than forty percent (40%) of the then outstanding Common Stock
of the Company, but in either case, on one hundred eighty (180) days written
notice.
Tax Sharing Agreement. In October 1987, the Company and First Mississippi
entered into a Tax Sharing Agreement pursuant to which the Company recomputes
its income tax provision each year on a separate return basis and is required to
pay First Mississippi amounts approximating the federal income tax liability it
would have paid if it had filed an independent consolidated return. First
Mississippi is required to reimburse the Company for any deduction, credit or
allowance which has been utilized by First Mississippi and its subsidiaries in
the consolidated tax returns at such time as the Company could have utilized the
underlying tax assets if it had filed on a separate return basis. As of June 30,
1995, the Company had approximately $18,829 of tax assets which First
Mississippi is required to reimburse under the terms of the Tax Sharing
Agreement.
First Mississippi Benefit Plans. The Company's employees participate in the
First Mississippi qualified noncontributory defined benefit pension plan and its
401(k) thrift plan. The Company reimburses First Mississippi for the pension
plan on a proportionate share basis and for the Company matching portion of the
employees' contribution to the 401(k) plan. During fiscal 1995, 1994 and 1993,
the Company paid $451,000, $412,000 and $374,000 respectively, in connection
with such plans.
35
<PAGE> 38
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND SCHEDULES
The Financial Statements which are filed with this Form 10-K are set forth
in the Index to Financial Statements at page F-1, which immediately precedes
such Financial Statements. No schedules are required under the applicable
instructions or are inapplicable and have therefore been omitted.
EXHIBITS
The following exhibits are, as indicated below, either filed herewith or
have previously been filed with the Commission and are referred to and
incorporated herein by reference to such filings.
<TABLE>
<S> <C>
3(a) -- Articles of Incorporation, as amended, which were filed as Exhibit
3(a) to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1991, are incorporated herein by reference.
3(b) -- Bylaws of the Company, which were filed as Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1990, are incorporated herein by reference.
4(a) -- Article IV, Article XIII and Article XIV of the Company's Articles of
Incorporation, which are included in Exhibit 3(a) filed with the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1991, are incorporated herein by reference.
4(b) -- Article II and Article V, Section 6 of the Company's Bylaws, which
are included in Exhibit 3(b) filed with the Company's Annual Report
on Form 10-K for fiscal year ended June 30, 1990, are incorporated
herein by reference.
4(c) -- Company Resolutions authorizing the 1988-A Series Convertible
Preferred Stock, effective July 13, 1988, which were filed as Exhibit
4(c) to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1988, are incorporated by reference.
4(d) -- Company Resolutions authorizing the 1989-A Series Convertible
Preferred Stock, effective August 9, 1989, which were filed as
Exhibit 4(f) to the Company's Annual Report on Form 10-K for the year
ended June 30, 1989, are incorporated herein by reference.
4(e) -- Company Resolutions authorizing the 1989-B Series Convertible
Preferred Stock, effective November 2, 1989, which were filed as
Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1989, are incorporated herein by
reference.
4(f) -- Company Resolutions authorizing the 1990-A Series Convertible
Preferred Stock, effective August 8, 1990, which were filed as
Exhibit 4(f) to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1990, are incorporated herein by
reference.
4(g) -- Company Resolutions authorizing the Company's 1990-B and 1990-C
Series Convertible Preferred Stock, effective November 1, 1990 and
November 2, 1990, respectively, which were filed as Exhibit 4.1 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1990, are incorporated herein by reference.
</TABLE>
36
<PAGE> 39
<TABLE>
<S> <C>
4(h) -- Company Resolutions authorizing the 1991-A Series Convertible
Preferred Stock, effective August 14, 1991, which were filed as
Exhibit 4(h) to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1991, are incorporated herein by
reference.
4(i) -- Company Resolutions authorizing the 1991-B Series Convertible
Preferred Stock, effective November 7, 1991, which were filed as
Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991, are incorporated herein by
reference.
4(j) -- Company Resolutions authorizing the 1992-A Series Convertible
Preferred Stock, effective November 5, 1992, which were filed as
Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1992, are incorporated herein by
reference.
4(k) -- Company Resolutions authorizing the 1993-A Series Convertible
Preferred Stock, effective November 4, 1993, which were filed as
Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993, are incorporated herein by
reference.
4(l) -- Credit Agreement, dated as of December 30, 1987, which was filed as
Exhibit 10.17 to Amendment No. 1 to the Company's Registration
Statement on Form S-1 filed with the Securities and Exchange
Commission on November 2, 1987 (the "Form S-1"), is incorporated by
reference.
4(m) -- First Amendment to Credit Agreement, dated as of January 26, 1988,
which was filed as Exhibit 10.23 to Amendment No. 2 to the Company's
Form S-1, is incorporated by reference.
4(n) -- Second Amendment to Credit Agreement, dated as of April 14, 1988,
which was filed as Exhibit 10.24 to Amendment No. 4 to the Company's
Form S-1, is incorporated by reference.
4(o) -- Third Amendment to Credit Agreement, dated as of March 30, 1989,
which was filed as Exhibit 4(h) to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1989, is incorporated by
reference.
4(p) -- Fourth Amendment to the Credit Agreement, dated as of July 2, 1990,
which was filed as Exhibit 4(m) to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1991, is incorporated
herein by reference.
4(q) -- Amended and Restated Gold Loan Agreement, dated January 26, 1988,
which was filed as Exhibit 10.15 to Amendment No. 2 to the Company's
Form S-1, is incorporated by reference.
4(r) -- Rights Agreement dated June 13, 1990, which was filed as Exhibit 1 to
the Company's Form 8-K dated June 13, 1990, is incorporated by
reference.
4(s) -- Loan Agreement between the Company and First Mississippi, dated March
29, 1990, which was filed as Exhibit 4(p) to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1991, is
incorporated herein by reference.
4(t) -- Amendment to Loan Agreement between The Company and First
Mississippi, dated August 27, 1991, which was filed as Exhibit 4(q)
to the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1991, is incorporated herein by reference.
4(u) -- Second Amendment to Loan Agreement between the Company and First
Mississippi dated August 25, 1993, which was filed as Exhibit 4(t) to
the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, is incorporated herein by reference.
</TABLE>
37
<PAGE> 40
<TABLE>
<S> <C>
10(a) -- Gold Production Purchase Agreement, dated November 11, 1987, together
with Form of Amendment No. 1 thereto, which was filed as Exhibit
10.16 to Amendment No. 1 to the Company's Form S-1, is incorporated
by reference.
10(b) -- Administrative Services Agreement, dated October 28, 1987, which was
filed as Exhibit 10.2 to the Company's Form S-1, is incorporated by
reference.
10(c) -- Tax Sharing Agreement effective as of October 1, 1987, which was
filed as Exhibit 10.3 to the Company's Form S-1, is incorporated by
reference.
10(d) -- Non-Competition Agreement, dated October 28, 1987, which was filed as
Exhibit 10.4 to the Company's Form S-1, is incorporated by reference.
10(e) -- Registration Rights Agreement, dated October 28, 1987, which was
filed as Exhibit 10.5, to the Company's Form S-1, is incorporated by
reference.
10(f) -- Totem Talc Joint Venture Agreement, dated May 20, 1986, which was
filed as Exhibit 10.9 to the Company's Form S-1, is incorporated by
reference.
10(g) -- Final Purchase Agreement, dated February 5, 1981, and related
agreements, which were filed as Exhibit 10.10 to the Company's Form
S-1, are incorporated by reference.
10(h) -- Exploration and Option Agreement, dated May 25, 1979, which was filed
as Exhibit 10.11 to the Company's Form S-1, is incorporated by
reference.
10(i) -- FirstMiss Gold Inc. Amended and Restated Long-Term Incentive Plan, as
amended November 14, 1992, which was filed as Exhibit 10(i) Annual
Report on Form 10-K for the fiscal year ended June 30, 1993 is
incorporated herein by reference.
10(j) -- Assignment Agreement, dated October 28, 1987, which was filed as
Exhibit 10.14 to the Company's Form S-1, is incorporated by
reference.
10(k) -- Form of Indemnification Agreement between the Company and the
following Directors of the Company: Cecil Alvarez, Sellers Stough,
Robert C. Horton, Robert Laxalt, Charles M. McAuley, John Phelps
"Pete" Ingersoll, Jr., and G. W. Thompson (Company's Indemnification
Agreements with each such individual contains identical provisions to
those contained in the form), which was filed as Exhibit 10(q) to the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1988, is incorporated by reference.
10(l) -- Reserved.
10(m) -- Gold Loan Agreement, dated November 11, 1987, which was filed as
Exhibit 10.15 to Amendment No. 1 to the Company's Form S-1, is
incorporated by reference.
10(n) -- Indemnity Agreement, dated as of October 30, 1987, which was filed as
Exhibit 10.18 to Amendment No. 1 to the Company's Form S-1, is
incorporated by reference.
10(o) -- Credit Support Agreement, dated as of December 30, 1987, which was
filed as Exhibit 10.19 to Amendment No. 1 to the Company's Form S-1,
is incorporated by reference.
10(p) -- Construction Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing, dated as of December 30, 1987, which was filed as
Exhibit 10.20 to Amendment No. 2 to the Company's Form S-1, is
incorporated by reference.
10(q) -- Developer Indemnity Agreement, dated as of January 26, 1988, which
was filed as Exhibit 10.21 to Amendment No. 2 to the Company's Form
S-1, is incorporated by reference.
</TABLE>
38
<PAGE> 41
<TABLE>
<S> <C>
10(r) -- Amendment No. 1 to the Gold Production Purchase Agreement, dated as
of January 26, 1988, which was filed as Exhibit 10.22 to Amendment
No. 2 to the Company's Form S-1, is incorporated by reference.
10(s) -- Form of Termination Agreement between First Mississippi Corporation
and Charles M. McAuley (Company's Termination Agreement with such
individual contains identical provisions to those contained in the
form), which was filed as Exhibit 10(v) to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1991, is
incorporated herein by reference.
10(t) -- Form of Termination Agreement between the Company and Richard F.
Nanna, Q. Allen Neal and Charles M. McAuley (Company's Termination
Agreement with each such individual contains identical provisions to
those contained in the form), which was filed as Exhibit 10(w) to the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1991, is incorporated herein by reference.
10(u) -- Form of Addendum to Termination Agreement between the Company and
Richard F. Nanna, Q. Allen Neal and Charles M. McAuley (Company's
Addendum to Termination Agreement with each such individual contains
identical provisions to those contained in the form), which was filed
as Exhibit 10(x) to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1991, is incorporated herein by reference.
10(v) -- Refining Agreement between FMG Inc. and Metalor USA Refining
Corporation dated June 1, 1992, which was filed as Exhibit 10(w) to
the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1992, is incorporated herein by reference.
10(w) -- Amendment to Refining Agreement between FMG Inc. and Metalor USA
Refining Corporation dated May 27, 1993, which was filed as Exhibit
10(x) to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1993, is incorporated herein by reference.
10(x) -- Sales Agreement between FMG Inc. and Nesmont Precious Metals
Corporation, dated as of June 1, 1991, which was filed as Exhibit
10(z) to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1991, is incorporated herein by reference.
10(y) -- Mine Operating Contract between FMG Inc. and N.A. Degerstrom, Inc.,
dated July 1, 1991, which was filed as Exhibit 10(aa) to the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1991, is incorporated herein by reference.
10(z) -- Electric Services Agreement, dated August 14, 1987, which was filed
as Exhibit 10.7 to the Company's Form S-1, is incorporated herein by
reference.
10(aa) -- Oxygen Supply Agreement, dated August 27, 1987, and Air Rights Lease
Agreement, dated as of August 27, 1987, which were filed as Exhibit
10(j) to the Company's Annual Report on Form 10-K for the year ended
June 30, 1989, are incorporated herein by reference.
10(bb) -- Mine Contract between FMG Inc. and J.S. Redpath Corporation dated
August 30, 1993, which was filed as Exhibit 10(bb) to the Company's
Form 10-K for the fiscal year ended June 30, 1994, is incorporated
herein by reference.
10(cc) -- Amendment to Administrative Services Agreement between First
Mississippi and the Company dated August 29, 1995.
10(dd) -- Form of Termination Agreement between the Company and G.W. Thompson,
Donald S. Robson, R. David Russell and Donald O. Miller (Company's
Termination Agreement with each such individual contains identical
provisions to those contained in the form).
</TABLE>
39
<PAGE> 42
<TABLE>
<S> <C>
10(ee) -- Promissory Note by the Company in favor of First Mississippi dated
February 1, 1995.
10(ff) -- Restricted Stock Award Agreement between the Company and G.W.
Thompson dated August 22, 1994.
21 -- List of subsidiaries of the Company.
23 -- Auditors' Consent regarding incorporation of reports into
Registration Statement Nos. 33-24401, 2-93585, 33-24414, 33-31226,
33-32572, 33-37085, 33-39067, 33-43602, 33-45342, 33-56046, 33-57761
and 33-74020.
27 -- Financial Data Schedule.
</TABLE>
Certain debt instruments have not been filed. The Company agrees to furnish
a copy of such agreement(s) to the Commission upon request.
REPORTS ON FORM 8-K
On June 5, 1995, the Company filed a Form 8-K voluntarily reporting under
Item 5 of Form 8-K the election of Walter A. Drexel to the Board.
40
<PAGE> 43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRSTMISS GOLD INC.
Date: September 5, 1995 By: /s/ G. W. THOMPSON
------------------------------
G. W. Thompson, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------------------------------------------- ---------------------------- -------------------
<C> <S> <C>
/s/ G. W. THOMPSON President and Chief September 5, 1995
---------------------------------- Executive Officer
G. W. Thompson (Principal Executive
Officer) and Director
/s/ DONALD S. ROBSON Vice President and Chief September 5, 1995
---------------------------------- Financial Officer
Donald S. Robson (Principal Financial
Officer)
/s/ ROGER D. PALMER Controller (Principal September 5, 1995
---------------------------------- Accounting Officer)
Roger D. Palmer
/s/ J. KELLEY WILLIAMS Director and Chairman of the September 5, 1995
---------------------------------- Board of Directors
J. Kelley Williams
/s/ CECIL ALVAREZ Director September 5, 1995
----------------------------------
Cecil Alvarez
/s/ WALTER A. DREXEL Director September 5, 1995
----------------------------------
Walter A. Drexel
/s/ ROBERT C. HORTON Director September 5, 1995
----------------------------------
Robert C. Horton
/s/ PETE INGERSOLL Director September 5, 1995
----------------------------------
Pete Ingersoll
/s/ CHARLES P. MORETON Director September 5, 1995
----------------------------------
Charles P. Moreton
/s/ PAUL W. MURRILL Director September 5, 1995
----------------------------------
Paul W. Murrill
/s/ R. MICHAEL SUMMERFORD Director September 5, 1995
----------------------------------
R. Michael Summerford
/s/ ROBERT L. ZERGA Director September 5, 1995
----------------------------------
Robert L. Zerga
</TABLE>
41
<PAGE> 44
FIRSTMISS GOLD INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AT JUNE 30, 1995 AND JUNE 30, 1994 AND
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
PAGE
----------------
<S> <C>
Independent Auditors Report................................................ F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statements of Stockholders' Equity............................ F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7 through F-16
</TABLE>
F-1
<PAGE> 45
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
FirstMiss Gold Inc.:
We have audited the accompanying consolidated balance sheets of FirstMiss
Gold Inc. and subsidiary as of June 30, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended June 30, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of FirstMiss
Gold Inc. and subsidiary as of June 30, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1995, in conformity with generally accepted accounting
principles.
As discussed in Notes 1 and 8 to the consolidated financial statements, the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes, as of July 1, 1993.
KPMG Peat Marwick LLP
Denver, Colorado
July 28, 1995, except as to the second
paragraph of Note 1(a), which is
as of August 31, 1995
F-2
<PAGE> 46
FIRSTMISS GOLD INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1994
(IN THOUSANDS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................................. $ 595 $ 1,979
Trade accounts receivable.............................................. 1,709 2,190
Inventories:
Ore and in process.................................................. 2,459 7,488
Materials and supplies.............................................. 7,095 5,266
------- -------
Total inventories.............................................. 9,554 12,754
------- -------
Prepaid expenses and other current assets................................ 728 181
Deferred income taxes due from First Mississippi (note 8)................ 2,581 2,581
------- -------
Total current assets........................................... 15,167 19,685
Property, plant and equipment, net (note 3).............................. 67,689 66,798
Deferred income taxes due from First Mississippi (note 8)................ 2,264 2,264
------- -------
Total assets................................................... $85,120 $88,747
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................... $ 6,595 $ 5,165
Payable to First Mississippi (note 7).................................. 1,943 910
Income taxes payable to First Mississippi (note 8)..................... 402 74
Other accrued expenses................................................. 505 555
------- -------
Total current liabilities...................................... 9,445 6,704
------- -------
Notes payable to First Mississippi (note 7).............................. 40,900 29,339
Accrued reclamation costs................................................ 3,031 2,985
Stockholders' equity (notes 5 and 11):
Preferred stock, par value $.01 per share; 10,000,000 shares
authorized; none issued............................................. -- --
Common stock, par value $.01 per share; 50,000,000 shares authorized;
issued and outstanding 18,182,600 shares in 1995 and 18,111,500
shares in 1994...................................................... 182 181
Contributed and paid-in capital........................................ 34,285 33,862
Retained earnings (accumulated deficit)................................ (2,681) 15,676
Unearned compensation.................................................. (42) --
------- -------
Total stockholders' equity..................................... 31,744 49,719
------- -------
Commitments (notes 5, 6, 7, 9 and 10)
Total liabilities and stockholders' equity..................... $85,120 $88,747
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 47
FIRSTMISS GOLD INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Net sales (note 4)............................................. $ 71,485 $95,150 $78,773
Cost of sales.................................................. 69,775 82,131 75,254
-------- ------- -------
Gross profit......................................... 1,710 13,019 3,519
Exploration expenses........................................... 3,776 4,049 2,803
Abandonment and impairment of mineral properties (note 2)...... 11,531 -- 256
Selling, general and administrative expenses (note 7).......... 2,659 1,745 2,021
-------- ------- -------
Earnings (loss) from operations...................... (16,256) 7,225 (1,561)
Interest expense, net (notes 3 and 7).......................... (1,805) (1,776) (1,705)
Other income................................................... 132 150 180
-------- ------- -------
Earnings (loss) before income taxes and cumulative
effect of change in accounting principle........... (17,929) 5,599 (3,086)
Income tax expense (benefit) payable to (due from) First
Mississippi (note 8)......................................... 428 1,300 (617)
-------- ------- -------
Earnings (loss) before cumulative effect of change in
accounting principle............................... (18,357) 4,299 (2,469)
Cumulative effect of change in accounting for income taxes
(note 8)..................................................... -- 1,350 --
-------- ------- -------
Net earnings (loss).................................. $(18,357) $ 5,649 $(2,469)
======== ======= =======
Earnings (loss) per common share:
Before cumulative effect of accounting change................ $ (1.01) $ 0.24 $ (0.14)
Cumulative effect of accounting change....................... -- 0.07 --
-------- ------- -------
$ (1.01) $ 0.31 $ (0.14)
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 48
FIRSTMISS GOLD INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Common stock:
Balance at beginning of year................................. $ 181 $ 181 $ 180
Issuance of 71,100 and 109,500 shares in 1995 and 1993,
respectively (note 5)..................................... 1 -- 1
-------- ------- -------
Balance at end of year....................................... $ 182 $ 181 $ 181
======== ======= =======
Contributed and paid-in capital:
Balance at beginning of year................................. $ 33,862 $33,862 $33,430
Issuance of 71,100 and 109,500 shares in 1995 and 1993,
respectively (note 5)..................................... 363 -- 432
Issuance of restricted stock awards (note 5)................. 60 -- --
-------- ------- -------
Balance at end of year....................................... $ 34,285 $33,862 $33,862
======== ======= =======
Retained earnings (accumulated deficit):
Balance at beginning of year................................. $ 15,676 $10,027 $12,496
Net earnings (loss) for the year............................. (18,357) 5,649 (2,469)
-------- ------- -------
Balance at end of year....................................... $ (2,681) $15,676 $10,027
======== ======= =======
Unearned compensation:
Balance at beginning of year................................. $ -- $ (2) $ (4)
Issuance of restricted stock awards.......................... (60) -- --
Amortization of unearned compensation........................ 18 2 2
-------- ------- -------
Balance at end of year....................................... $ (42) $ -- $ (2)
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 49
FIRSTMISS GOLD INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)............................................................... $(18,357) $ 5,649 $ (2,469)
Adjustments to reconcile net earnings (loss) to net cash provided by operating
activities:
Depreciation and depletion...................................................... 9,514 13,459 13,525
Amortization.................................................................... 5,031 9,920 203
Abandonment and impairment of mineral properties................................ 11,531 -- 256
Deferred income taxes, including cumulative effect of change in accounting
principle
in 1994....................................................................... -- (3,204) (1,627)
Loss (gain) on disposal or write-down of assets................................. 31 13 (12)
Deferred compensation........................................................... 19 2 2
Write-down of inventory......................................................... -- -- 1,500
Net change in operating assets and liabilities, net of noncash activity:
Trade accounts receivable..................................................... 481 (228) (308)
Inventories................................................................... 3,200 (3,188) 1,556
Prepaid expenses and other current assets..................................... (547) 55 (65)
Accounts payable.............................................................. 1,430 (3,818) 4,080
Payable to First Mississippi.................................................. 3,313 4,723 1,020
Income taxes payable to First Mississippi..................................... 328 (1,846) 510
Other accrued expenses........................................................ (50) (149) (782)
Accrued reclamation costs..................................................... 46 549 947
-------- -------- --------
Cash provided by operating activities....................................... 15,970 21,937 18,336
-------- -------- --------
Cash flows from investing activities:
Capital expenditures.............................................................. (26,883) 10,451) (5,555)
Proceeds from sale of property.................................................... 203 15 51
Deferred stripping costs.......................................................... (318) (4,612) (11,244)
-------- -------- --------
Cash used by investing activities........................................... (26,998) (15,048) (16,748)
-------- -------- --------
Cash flows from financing activities:
Purchase of gold for repayment of gold loan....................................... -- (9,800) (13,363)
Proceeds from issuance of common stock............................................ 363 -- 433
Proceeds from notes payable to First Mississippi.................................. 10,428 1,200 8,500
Repayments on notes payable to First Mississippi.................................. (1,147) -- --
Proceeds from issuance of convertible debentures.................................. -- -- 12
-------- -------- --------
Cash provided (used) by financing activities................................ 9,644 (8,600) (4,418)
-------- -------- --------
Net decrease in cash and cash equivalents................................... (1,384) (1,711) (2,830)
Cash and cash equivalents at beginning of year...................................... 1,979 3,690 6,520
-------- -------- --------
Cash and cash equivalents at end of year............................................ $ 595 $ 1,979 $ 3,690
======== ======== ========
Supplemental disclosures:
Interest paid during the year, net of amounts capitalized......................... $ 48 $ 292 $ 554
======== ======== ========
Income taxes paid to First Mississippi............................................ $ -- $ 2,000 $ 500
======== ======== ========
</TABLE>
Supplemental noncash financing activities:
In 1995, 1994 and 1993, $2,280,000, $1,505,000 and $898,000, respectively, of
interest expense payable to First Mississippi was transferred to the principal
balance of notes payable to First Mississippi.
In 1994, $3,000,000 of income taxes payable was transferred to notes payable
to First Mississippi.
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 50
FIRSTMISS GOLD INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995, 1994 AND 1993
(1) OWNERSHIP AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) OWNERSHIP AND OPERATIONS
FirstMiss Gold Inc. (the "Company") was incorporated in August 1987 as a
subsidiary of First Mississippi Corporation ("First Mississippi") for purposes
of financing, developing and operating mining projects and conducting
exploration for precious metals. First Mississippi's interest in the Company is
approximately 81% or 14,750,000 shares as of June 30, 1995.
In August 1995, the Board of Directors of First Mississippi Corporation
approved additional funding to the Company of up to $10 million. In order to
undertake planned mine development activities, the Company will need additional
financing. The Company is engaged in discussions with third parties concerning
such financing, but no definitive financing agreements have been executed.
Accordingly, if the Company is unable to arrange additional financing it may not
be able to carry out its planned mine development activities and other future
operations.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, FMG Inc., ("FMG"). All significant intercompany
balances and transactions have been eliminated in consolidation.
(C) CASH AND CASH EQUIVALENTS
The Company considers all short-term investments with original maturities
of three months or less to be cash equivalents.
(D) INVENTORIES
Inventories of ore and in process and finished goods are stated at the
lower of average cost or net realizable value. Materials and supplies are stated
at the lower of average cost or replacement cost.
The Company provides an allowance for obsolescence for certain materials
and supplies inventory items. The allowance is based on estimates of inventory
salvage value and anticipated usage over the estimated life of the mine. At June
30, 1995 and 1994, the allowance for obsolescence was $1,229,000 and $1,169,000,
respectively.
(E) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Maintenance and repairs
are charged to expense as incurred.
Capitalization of Interest
Interest is capitalized on expenditures related to construction or
development projects actively being prepared for their intended use.
Capitalization is discontinued when the asset enters commercial operation or
development ceases.
Mineral Exploration and Mine Development
Exploration costs are charged to expense as incurred, as are development
costs for projects not yet determined by management to be commercially feasible.
Mine development expenditures for mining
F-7
<PAGE> 51
FIRSTMISS GOLD INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
properties are capitalized when the properties are determined to have
development potential but not yet producing.
Mineral Properties
Mining projects and properties are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of these assets
may not be recoverable. If estimated future cash flows expected to result from
the use of the mining project or property and its eventual disposition are less
than the carrying amount of the mining project or property, an impairment is
recognized based upon the estimated fair value of the mining project or
property. Fair value generally is based on the present value of estimated future
net cash flows for each mining project or property calculated using estimates of
proven and probable reserves, estimated future prices, operating costs, capital
requirements and reclamation costs.
Deferred Stripping Costs
To properly match waste removal costs with revenue from gold sales, mining
costs associated with waste rock removal are deferred and charged to operations
on the basis of the estimated average stripping ratio for the life of each
individual ore body. The average stripping ratio is calculated as a ratio of the
tons of waste rock material estimated to be removed to the tons of ore estimated
to contain recoverable gold.
(F) DEPRECIATION, DEPLETION AND AMORTIZATION
Property, plant and equipment with useful lives as long or longer than
existing ore reserves are depreciated or depleted using the units-of-production
method. Plant and equipment with useful lives shorter than existing ore reserves
are depreciated over their useful lives using the straight-line method.
Depreciation and depletion rates are subject to periodic review to ensure that
asset costs are written off over their useful lives.
Depletion is computed on a units-of-production method based on the ratio of
tons mined or ounces of gold produced during the period, to the estimated total
proven and probable reserves of the related property.
(G) RECLAMATION OF MINING AREAS
A liability has been established for estimated costs for restoring certain
disturbed mining and milling areas to comply with existing reclamation
standards. Such costs are charged to operations on a units-of-production basis
over the life of the mine.
(H) REVENUE RECOGNITION
Revenue from spot sales are recorded when title passes to the buyer.
Revenue from shipments under forward sales agreements are recorded at the
settlement date of the agreements. Proceeds from the gold loan were accounted
for as deferred revenue and recognized in income at the rate of $475 per ounce
of gold. Total ounces of gold sold were 184,298, 243,826, and 210,644 for 1995,
1994 and 1993, respectively. Total ounces of gold sold in 1995 does not include
14,939 ounces from properties in development.
(I) HEDGING TRANSACTIONS
In order to protect against the impact of falling gold prices, the Company
enters into hedging transactions which not only provide a minimum price for
future production but also allow the Company to take advantage of increases in
the gold price. Hedging transactions have included the purchase of spot deferred
contracts and obtaining gold loans. Gains and losses from hedging activities are
recognized in sales on a basis consistent with the hedged item. Gains and losses
on early termination of hedging contracts are deferred until the hedged items
are recognized in sales.
F-8
<PAGE> 52
FIRSTMISS GOLD INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(J) AMORTIZATION OF DEFERRED LOAN COSTS
Deferred loan costs are amortized over the term of the related loan using
the interest method. Amortization charged to expense in 1994 and 1993, was
$75,000 and $203,000, respectively. Deferred loan costs were fully amortized at
June 30, 1994.
(K) INCOME TAXES
The Company has a tax sharing and allocation agreement with First
Mississippi under which the Company makes payments to First Mississippi in
respect to federal, state and local income taxes and state franchise taxes as if
it were a separate corporation, not affiliated with First Mississippi, filing
separate income tax returns.
Under the provisions of the tax sharing agreement, First Mississippi is
required to reimburse the Company for any deduction, credit or allowance which
has been utilized by First Mississippi and subsidiaries in the consolidated tax
returns at such time as the Company could have utilized the underlying tax
assets if it had filed federal and state income tax returns computed on a
separate return basis. In addition, the Company is required to pay First
Mississippi for the estimated income tax liability of the Company for the
taxable year, to be computed as though the Company were reporting its taxable
income or loss on a separate return basis.
The Company adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (Statement 109) as of July 1, 1993. Under the asset
and liability method of Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amount of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date. The cumulative effect of this change in method of accounting for income
taxes is included in the consolidated statement of operations for the year ended
June 30, 1994.
(L) EARNINGS PER SHARE
Earnings per share is calculated based on the weighted average number of
common shares and dilutive common share equivalents outstanding during each year
of 18,139,000 in 1995, 18,150,000 in 1994 and 18,024,000 in 1993.
(M) RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the 1995
financial statement presentation.
(2) ABANDONMENTS AND IMPAIRMENT OF MINING ASSETS
As discussed in note 1, the Company performs property evaluations to assess
the recoverability of its mining properties and investments. Mining in the Main
Pit was discontinued in July 1995 after a geotechnical monitoring program,
initiated in June 1995, indicated that continued mining in the Main Pit would
likely destabilize the pit wall. This event combined with lower grades and
higher than anticipated costs, makes it unlikely that the Company will recover
the remaining proven and probable reserves in the Main Pit. Accordingly, the
remaining pit development costs of $5,475,000 and deferred stripping costs of
$3,613,000 have been written off in fiscal 1995.
During fiscal 1995, management made the decision that they no longer
intended to develop the Silver Bar prospect. The decision was based on the
continued low market price of silver and commitment of exploration
F-9
<PAGE> 53
FIRSTMISS GOLD INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and development resources to the Company's Turquoise Ridge project. After
attempts at selling the Silver Bar prospect in the fourth quarter were
unsuccessful, the investment in Silver Bar was written off, resulting in a
charge to operations of $2,324,000.
Additional exploration prospects with a recorded value of $119,000 were
abandoned during fiscal 1995.
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30, 1995 and 1994 consisted of:
<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Undeveloped properties......................................... $ -- $ 2,471
Properties under development................................... 8,979 6,449
Producing mining properties.................................... 36,238 32,169
Plant, machinery and equipment................................. 91,183 85,980
Furniture and fixtures......................................... 451 426
-------- --------
136,851 127,495
Less accumulated depreciation and depletion.................... 69,162 69,022
-------- --------
Net depreciable property, plant and equipment........ 67,689 58,473
Deferred stripping costs, net of amortization.................. -- 8,325
-------- --------
Net property, plant and equipment.................... $ 67,689 $ 66,798
======== ========
</TABLE>
Properties under development consists of construction and other costs
related to facilities and development not yet completed and placed in service.
Interest capitalized during 1995, 1994 and 1993 amounted to $1,159,000, $221,000
and $43,000, respectively. Depreciation and depletion expense was $9,514,000,
$13,459,000 and $13,525,000 in 1995, 1994 and 1993, respectively. Amortization
of deferred stripping costs was $5,031,000, $9,920,000 and $203,000 in 1995,
1994 and 1993, respectively.
The cost of undeveloped properties is reclassified to developed properties
when management determines that the project is commercially productive.
(4) GOLD LOAN AND CREDIT AGREEMENT
FMG had a gold loan which matured and was repaid in full on June 30, 1994.
Under the gold loan, FMG borrowed a total of 150,000 ounces of gold which
provided $71,270,000 at an average predetermined price of $475 per ounce. In the
years ended June 30, 1994 and 1993, FMG repaid 20,625 and 28,125 ounces of the
gold loan and, as a result of the repayments, approximately $9,800,000 and
$13,363,000, respectively, of deferred revenue was recognized in gold sales.
Pursuant to the gold loan agreements, FMG was required to enter into a
forward sales arrangement, covering 202,600 ounces of gold. Under this
agreement, during 1994 and 1993, FMG sold 47,000 and 40,000 ounces,
respectively, at $400 per ounce. All commitments under the agreement were
fulfilled as of June 30, 1994.
(5) PENSION, 401(K) AND LONG-TERM INCENTIVE PLANS
The Company's employees participate in the First Mississippi qualified
noncontributory defined benefit pension plan. Under the plan, an employee
becomes a participant following six months of service, provided that the
employee is regularly employed for at least 1,000 hours per year. First
Mississippi bills the Company for its proportionate share of the annual cost
based on the number of employees participating. Pension expense for 1995, 1994
and 1993 amounted to $451,000, $412,000 and $374,000, respectively.
F-10
<PAGE> 54
FIRSTMISS GOLD INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Substantially all employees who have completed six months of service are
eligible to participate in the First Mississippi 401(k) thrift plan. Under the
plan, employees may elect to contribute from 1% to 16.8% of monthly base pay,
with the Company providing matching contributions up to 4% of monthly base pay.
Total expense under the plan amounted to $217,000 in 1995, $195,000 in 1994 and
$181,000 in 1993.
Directors, officers and certain key employees of the Company participate in
a long-term incentive plan under which the Company has reserved 900,000 shares
of common stock for issuance. Awards may be in the form of stock options,
options to purchase debentures convertible into common stock or convertible
preferred stock, stock appreciation rights, performance units, restricted stock,
supplemental cash and such other forms as the Board of Directors may direct.
Stock options may be incentive stock options or nonqualified stock options. The
Board of Directors in its discretion will determine the recipients and the
amounts of all awards. Options outstanding will expire in 1998 through 2004
unless exercised. The debenture options outstanding give the holder the right to
purchase a debenture from the Company, which is convertible into preferred stock
which is then convertible into common stock of the Company at the original
option price. As of June 30, 1995, 319,251 common shares remained available for
granting until the plan terminates in 1997.
Changes in stock options and debenture options for the years ended June 30,
1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
STOCK OPTIONS DEBENTURE OPTIONS
------------------------------ ------------------------------
NUMBER OPTION PRICE NUMBER OPTION PRICE
OF SHARES PER SHARE OF SHARES PER SHARE
--------- ----------------- --------- -----------------
<S> <C> <C> <C> <C>
Outstanding at June 30, 1992........ -- $ - 176,800 $2.9375 - 10.1875
Granted........................... 157,000 4.375 5,000 5.8125
Exercised......................... (32,000) 4.375 (81,500) 2.9375 - 5.50
--------- ---------
Outstanding at June 30, 1993........ 125,000 4.375 100,300 3.25 - 10.1875
Granted........................... 60,200 6.6875 5,000 6.375
Expired or canceled............... (2,300) 6.6875 (3,000) 7.625 - 9.75
--------- ---------
Outstanding at June 30, 1994........ 182,900 4.375 - 6.6875 102,300 3.25 - 10.1875
Granted........................... 246,349 7.25 - 11.4375 1,000 9.53125
Exercised......................... (47,600) 6.6875 - 7.25 (13,500) 3.25 - 10.1875
Expired or canceled............... (129,700) 4.375 - 6.6875 (20,300) 7.625 - 9.750
--------- ---------
Outstanding at June 30, 1995........ 251,949 4.375 - 11.4375 69,500 3.25 - 10.1875
========= =========
</TABLE>
During 1995, a restricted stock award of 10,000 common shares was granted.
This award vests on the earlier of August 22, 1997 or three months after
completion of a secondary offering following a spin off of the Company by First
Mississippi. No restricted stock awards were granted in 1994 or 1993.
(6) HEDGING ACTIVITIES AND COMMITMENTS
At June 30, 1995, the Company had commitments under spot deferred sales
contracts for the delivery of gold as follows:
<TABLE>
<CAPTION>
DELIVERY AVERAGE
DATE PRICE OUNCES
------------ ------- -------
<S> <C> <C>
Fiscal 1996 $400.96 147,100
</TABLE>
Based on the market price of gold on June 30, 1995, the unrealized gain on
these contracts is $417,000. Risks of loss arise from the possible inability of
the counterparty to fulfill its obligations under the contracts.
F-11
<PAGE> 55
FIRSTMISS GOLD INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) RELATED PARTY TRANSACTIONS
The Company has an administrative services agreement with First
Mississippi. Generally, the Company reimburses First Mississippi on a fee basis
determined annually, which fee approximates the cost of obtaining services from
an unaffiliated third party. The Company also has the right to obtain such
services from unaffiliated parties. The Company reimbursed First Mississippi
approximately $224,000, $139,000 and $148,000 in 1995, 1994 and 1993,
respectively, under this agreement. Direct expenses incurred by First
Mississippi on behalf of the Company are allocated to the Company based on the
actual costs incurred.
The Company reimbursed First Mississippi approximately $327,000, $214,000
and $141,000 in 1995, 1994 and 1993, respectively, for insurance premiums paid
on its behalf by First Mississippi.
As of June 30, 1995 and 1994, the Company has $40,900,000 and $29,339,000,
respectively, outstanding pursuant to notes payable to First Mississippi. The
promissory notes evidencing the advances are unsecured and are due 367 days
after notice of demand but no later than August 1, 1997. Interest accrues at the
prime rate of the Chase Manhattan Bank, N.A. plus 0.75% and, if unpaid, is added
to the notes on the anniversary dates. The notes would be immediately due upon
certain events including a change of control other than a distribution from
First Mississippi to its stockholders, of the FirstMiss Gold Inc. stock owned by
First Mississippi. Interest expense on these notes was $1,801,000 in 1995,
$1,730,000 in 1994 and $1,063,000 in 1993. In 1995, 1994 and 1993, $2,280,000,
$1,505,000 and $898,000, respectively, of interest expense payable to First
Mississippi was transferred to long-term notes payable as an addition to the
notes. In addition, in 1994, $3,000,000 of income taxes payable to First
Mississippi was transferred to notes payable.
(8) INCOME TAXES
The Company adopted Statement 109 as of July 1, 1993. The cumulative
effect, totaling $1,350,000, of this change in accounting for income taxes is
reported separately in the consolidated statement of operations for the year
ended June 30, 1994. Financial statements of prior years have not been restated
to apply the provisions of Statement 109.
Income tax expense (benefit) attributable to earnings (loss) before income
tax expense consists of (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
----------------------------
1995 1994 1993
---- ------- -------
<S> <C> <C> <C>
Federal:
Current................................................ $428 $ 3,783 $ 867
Deferred............................................... -- (2,483) (1,484)
---- ------- -------
$428 $ 1,300 $ (617)
==== ======= =======
</TABLE>
F-12
<PAGE> 56
FIRSTMISS GOLD INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense (benefit) for the years ended June 30, 1995, 1994 and
1993, respectively, differed from the amounts computed by applying the U.S.
federal income tax rate of 35% for 1995 and 34% for 1994 and 1993, to pretax
income as a result of the following:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
----------------------------
1995 1994 1993
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)................ $(6,275) $1,904 $(1,049)
Benefit not recorded for net operating loss carryforwards
and minimum tax credit................................. 6,684 -- --
Percentage depletion..................................... (1,177) 1,043) --
Non deductible expenses and other........................ 16 (91) 5
Tax provision adjustment for pending IRS matters......... 1,180 427 --
Benefit not recorded for net operating loss.............. -- -- 427
Adjustment to deferred tax assets and liabilities for
enacted change in tax rates............................ -- 103 --
------- ------- -------
Actual tax expense (benefit)............................. $ 428 $1,300 $ (617)
======= ======= =======
</TABLE>
For the year ended June 30, 1993, deferred income tax expense of $1,484,000
results from timing differences in the recognition of income and expense for
income tax and financial reporting purposes. The sources and tax effects of
those timing differences for the year ended June 30, 1993 are presented below
(in thousands):
<TABLE>
<S> <C>
Capitalized mineral exploration and development costs and related
amortization............................................................. $ 3,470
Depreciation and depletion................................................. (1,718)
Alternative minimum tax credit carryforward................................ (867)
Tax effect of net operating loss carryforward.............................. (1,754)
Benefit not recorded for loss carryback.................................... 427
Deferred loan costs........................................................ (69)
Accrued reclamation costs.................................................. (322)
Inventory valuation adjustment............................................. (510)
Other, net................................................................. (141)
-------
$(1,484)
=======
</TABLE>
F-13
<PAGE> 57
FIRSTMISS GOLD INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to the deferred tax
assets and deferred tax liabilities at June 30, 1995 and 1994 are presented
below:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accrued pension costs........................................ $ 656 $ 519
Accrued reclamation costs.................................... 1,085 1,052
Deferred stripping costs..................................... 4,017 2,256
Inventory valuation adjustment............................... 374 356
Federal net operating loss carryforward...................... 10,318 2,643
Alternative minimum tax credit carryforward.................. 9,157 9,695
Other, net................................................... 883 846
-------- --------
Total gross deferred tax assets...................... 26,490 17,367
Less valuation allowance....................................... (6,684) --
-------- --------
Total deferred tax assets............................ 19,806 17,367
-------- --------
Deferred tax liabilities:
Plant and equipment, principally due to difference in
depreciation.............................................. (1,551) (1,770)
Interest capitalized for financial reporting purposes........ (279) (303)
Depletion.................................................... (1,114) (1,114)
Capitalized mineral exploration and development costs and
related amortization...................................... (11,792) (9,020)
Other, net................................................... (225) (315)
-------- --------
Total gross deferred tax liabilities................. (14,961) (12,522)
-------- --------
Net deferred tax assets.............................. $ 4,845 $ 4,845
======== ========
</TABLE>
As of June 30, 1995, the Company has a claim against First Mississippi,
under a tax sharing agreement, related to unused cumulative net operating loss
carryforwards for federal income tax purposes of approximately $29,480,000 which
have not been used by the Company to offset future federal taxable income, if
any. The expiration of these loss carryforwards are as follows (in thousands):
<TABLE>
<S> <C>
2006............................................... $ 2,766
2008............................................... 7,485
2010............................................... 19,229
</TABLE>
The Company also has a claim against First Mississippi related to unused
alternative minimum tax credit carryforwards of $9,157,000 available to reduce
future regular income taxes, if any, in excess of alternative minimum taxes over
an indefinite period. Under the tax sharing agreement, First Mississippi is
required to reimburse the Company for these gross deferred tax assets at such
time as the Company could have utilized the underlying assets assuming it filed
its federal and state income tax returns computed on a separate return basis.
There was no valuation allowance for deferred tax assets as of July 1,
1994. The net change in the total valuation allowance for the year ended June
30, 1995 was an increase of $6,684,000.
F-14
<PAGE> 58
FIRSTMISS GOLD INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) LEASES
Future minimum rental payments for office space and mining equipment under
noncancelable operating leases in excess of one year as of June 30, 1995, are as
follows (in thousands):
<TABLE>
<S> <C>
Years ending June 30:
1996.............................................. $ 1,233
1997.............................................. 1,220
1998.............................................. 1,213
1999.............................................. 1,210
2000.............................................. 941
------
$ 5,817
======
</TABLE>
Total rent expense was approximately $1,258,000 in 1995, $417,000 in 1994
and $442,000 in 1993.
(10) OTHER COMMITMENTS
The Company has an agreement with an independent contractor which owns and
operates an oxygen plant which provides oxygen for the autoclave process in the
mill. The agreement requires, among other things, that the Company must
generally pay the independent contractor at a rate of approximately $236,000 a
month in fiscal 1996 (subject to future adjustment for inflation) and that the
Company pay a termination fee if the contract was to be terminated prior to
January 2004, of approximately $3,200,000 in fiscal 1996, decreasing each year
thereafter to approximately $400,000 in the last year of the contract.
The Company is obligated to pay a 2% royalty on net smelter returns of the
current mineral production from certain of its mining properties. Royalties
accrued on sales are recorded as operating costs and amounted to $1,535,000,
$1,852,000 and $1,449,000 in 1995, 1994 and 1993, respectively.
(11) STOCKHOLDERS' RIGHTS PLAN
On June 13, 1990, the Company 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.
F-15
<PAGE> 59
FIRSTMISS GOLD INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(12) QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data follow (in thousands except for per share
data):
<TABLE>
<CAPTION>
QUARTERLY
----------------------------------------------
1995 SEPT. 30* DEC. 31* MAR. 31* JUNE 30**
------------------------------------------------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net sales........................................ As previously reported $21,940 $17,832 $18,456 $ 17,673
======= ======= ======= =======
As adjusted $21,509 $16,517 $15,786 $ 17,673
======= ======= ======= =======
Gross profit..................................... As previously reported $ 3,805 $(1,274) $ 2,862 $ (2,194)
======= ======= ======= =======
As adjusted $ 3,616 $(1,349) $ 1,637 $ (2,194)
======= ======= ======= =======
Earnings (loss) before income taxes.............. As previously reported $ 1,071 $(2,692) $ 1,186 $(16,005)
======= ======= ======= =======
As adjusted $ 882 $(2,767) $ (39) $(16,005)
======= ======= ======= =======
Net earnings..................................... As previously reported $ 696 $(1,752) $ 771 $(16,583)
======= ======= ======= =======
As adjusted $ 507 $(1,827) $ (454) $(16,583)
======= ======= ======= =======
Earnings per share............................... As previously reported $ 0.04 $ (0.10) $ 0.04 $ (0.91)
======= ======= ======= =======
As adjusted $ 0.03 $ (0.10) $ (0.03) $ (0.91)
======= ======= ======= =======
1994
Net sales................................................................. $20,836 $24,495 $24,658 $ 25,161
======= ======= ======= =======
Gross profit.............................................................. $ 1,607 $ 4,532 $ 4,020 $ 2,860
======= ======= ======= =======
Earnings (loss) before cumulative effect of change in accounting
principle............................................................... $ (185) $ 1,826 $ 2,123 $ 535
======= ======= ======= =======
Net earnings.............................................................. $ 1,165 $ 1,826 $ 2,123 $ 535
======= ======= ======= =======
Earnings (loss) per share before cumulative effect of accounting change... $ (0.01) $ 0.10 $ 0.12 $ 0.03
======= ======= ======= =======
Earnings per share........................................................ $ 0.06 $ 0.10 $ 0.12 $ 0.03
======= ======= ======= =======
</TABLE>
---------------
* The Company adjusted the previously reported quarterly financial information
for the first three quarters of fiscal 1995 to capitalize certain revenue and
expenses as mining development costs.
** As described in note 2, the Company recorded a provision to impair certain
mining assets in the fourth quarter. Additionally, the Company recorded a
valuation allowance on deferred tax assets in the fourth quarter principally
as a result of these impairments.
The above quarterly earnings (loss) per share are based on the weighted
average common shares outstanding during each quarter whereas the annual
earnings (loss) per share are based on the weighted average common shares
outstanding during the year.
F-16
<PAGE> 60
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
----------------------------------------------------------------------------------
<S> <C>
3(a) -- Articles of Incorporation, as amended, which were filed as Exhibit
3(a) to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1991, are incorporated herein by reference.
3(b) -- Bylaws of the Company, which were filed as Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1990, are incorporated herein by reference.
4(a) -- Article IV, Article XIII and Article XIV of the Company's Articles of
Incorporation, which are included in Exhibit 3(a) filed with the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1991, are incorporated herein by reference.
4(b) -- Article II and Article V, Section 6 of the Company's Bylaws, which
are included in Exhibit 3(b) filed with the Company's Annual Report
on Form 10-K for fiscal year ended June 30, 1990, are incorporated
herein by reference.
4(c) -- Company Resolutions authorizing the 1988-A Series Convertible
Preferred Stock, effective July 13, 1988, which were filed as Exhibit
4(c) to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1988, are incorporated by reference.
4(d) -- Company Resolutions authorizing the 1989-A Series Convertible
Preferred Stock, effective August 9, 1989, which were filed as
Exhibit 4(f) to the Company's Annual Report on Form 10-K for the year
ended June 30, 1989, are incorporated herein by reference.
4(e) -- Company Resolutions authorizing the 1989-B Series Convertible
Preferred Stock, effective November 2, 1989, which were filed as
Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1989, are incorporated herein by
reference.
4(f) -- Company Resolutions authorizing the 1990-A Series Convertible
Preferred Stock, effective August 8, 1990, which were filed as
Exhibit 4(f) to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1990, are incorporated herein by
reference.
4(g) -- Company Resolutions authorizing the Company's 1990-B and 1990-C
Series Convertible Preferred Stock, effective November 1, 1990 and
November 2, 1990, respectively, which were filed as Exhibit 4.1 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1990, are incorporated herein by reference.
4(h) -- Company Resolutions authorizing the 1991-A Series Convertible
Preferred Stock, effective August 14, 1991, which were filed as
Exhibit 4(h) to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1991, are incorporated herein by
reference.
4(i) -- Company Resolutions authorizing the 1991-B Series Convertible
Preferred Stock, effective November 7, 1991, which were filed as
Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991, are incorporated herein by
reference.
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
----------------------------------------------------------------------------------
<S> <C>
4(j) -- Company Resolutions authorizing the 1992-A Series Convertible
Preferred Stock, effective November 5, 1992, which were filed as
Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1992, are incorporated herein by
reference.
4(k) -- Company Resolutions authorizing the 1993-A Series Convertible
Preferred Stock, effective November 4, 1993, which were filed as
Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993, are incorporated herein by
reference.
4(l) -- Credit Agreement, dated as of December 30, 1987, which was filed as
Exhibit 10.17 to Amendment No. 1 to the Company's Registration
Statement on Form S-1 filed with the Securities and Exchange
Commission on November 2, 1987 (the "Form S-1"), is incorporated by
reference.
4(m) -- First Amendment to Credit Agreement, dated as of January 26, 1988,
which was filed as Exhibit 10.23 to Amendment No. 2 to the Company's
Form S-1, is incorporated by reference.
4(n) -- Second Amendment to Credit Agreement, dated as of April 14, 1988,
which was filed as Exhibit 10.24 to Amendment No. 4 to the Company's
Form S-1, is incorporated by reference.
4(o) -- Third Amendment to Credit Agreement, dated as of March 30, 1989,
which was filed as Exhibit 4(h) to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1989, is incorporated by
reference.
4(p) -- Fourth Amendment to the Credit Agreement, dated as of July 2, 1990,
which was filed as Exhibit 4(m) to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1991, is incorporated
herein by reference.
4(q) -- Amended and Restated Gold Loan Agreement, dated January 26, 1988,
which was filed as Exhibit 10.15 to Amendment No. 2 to the Company's
Form S-1, is incorporated by reference.
4(r) -- Rights Agreement dated June 13, 1990, which was filed as Exhibit 1 to
the Company's Form 8-K dated June 13, 1990, is incorporated by
reference.
4(s) -- Loan Agreement between the Company and First Mississippi, dated March
29, 1990, which was filed as Exhibit 4(p) to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1991, is
incorporated herein by reference.
4(t) -- Amendment to Loan Agreement between The Company and First
Mississippi, dated August 27, 1991, which was filed as Exhibit 4(q)
to the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1991, is incorporated herein by reference.
4(u) -- Second Amendment to Loan Agreement between the Company and First
Mississippi dated August 25, 1993, which was filed as Exhibit 4(t) to
the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, is incorporated herein by reference.
10(a) -- Gold Production Purchase Agreement, dated November 11, 1987, together
with Form of Amendment No. 1 thereto, which was filed as Exhibit
10.16 to Amendment No. 1 to the Company's Form S-1, is incorporated
by reference.
10(b) -- Administrative Services Agreement, dated October 28, 1987, which was
filed as Exhibit 10.2 to the Company's Form S-1, is incorporated by
reference.
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
-----------------------------------------------------------------------------------
<S> <C>
10(c) -- Tax Sharing Agreement effective as of October 1, 1987, which was
filed as Exhibit 10.3 to the Company's Form S-1, is incorporated by
reference.
10(d) -- Non-Competition Agreement, dated October 28, 1987, which was filed as
Exhibit 10.4 to the Company's Form S-1, is incorporated by reference.
10(e) -- Registration Rights Agreement, dated October 28, 1987, which was
filed as Exhibit 10.5, to the Company's Form S-1, is incorporated by
reference.
10(f) -- Totem Talc Joint Venture Agreement, dated May 20, 1986, which was
filed as Exhibit 10.9 to the Company's Form S-1, is incorporated by
reference.
10(g) -- Final Purchase Agreement, dated February 5, 1981, and related
agreements, which were filed as Exhibit 10.10 to the Company's Form
S-1, are incorporated by reference.
10(h) -- Exploration and Option Agreement, dated May 25, 1979, which was filed
as Exhibit 10.11 to the Company's Form S-1, is incorporated by
reference.
10(i) -- FirstMiss Gold Inc. Amended and Restated Long-Term Incentive Plan, as
amended November 14, 1992, which was filed as Exhibit 10(i) Annual
Report on Form 10-K for the fiscal year ended June 30, 1993 is
incorporated herein by reference.
10(j) -- Assignment Agreement, dated October 28, 1987, which was filed as
Exhibit 10.14 to the Company's Form S-1, is incorporated by
reference.
10(k) -- Form of Indemnification Agreement between the Company and the
following Directors of the Company: Cecil Alvarez, Sellers Stough,
Robert C. Horton, Robert Laxalt, Charles M. McAuley, John Phelps
"Pete" Ingersoll, Jr., and G. W. Thompson (Company's Indemnification
Agreements with each such individual contains identical provisions to
those contained in the form), which was filed as Exhibit 10(q) to the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1988, is incorporated by reference.
10(l) -- Reserved.
10(m) -- Gold Loan Agreement, dated November 11, 1987, which was filed as
Exhibit 10.15 to Amendment No. 1 to the Company's Form S-1, is
incorporated by reference.
10(n) -- Indemnity Agreement, dated as of October 30, 1987, which was filed as
Exhibit 10.18 to Amendment No. 1 to the Company's Form S-1, is
incorporated by reference.
10(o) -- Credit Support Agreement, dated as of December 30, 1987, which was
filed as Exhibit 10.19 to Amendment No. 1 to the Company's Form S-1,
is incorporated by reference.
10(p) -- Construction Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing, dated as of December 30, 1987, which was filed as
Exhibit 10.20 to Amendment No. 2 to the Company's Form S-1, is
incorporated by reference.
10(q) -- Developer Indemnity Agreement, dated as of January 26, 1988, which
was filed as Exhibit 10.21 to Amendment No. 2 to the Company's Form
S-1, is incorporated by reference.
10(r) -- Amendment No. 1 to the Gold Production Purchase Agreement, dated as
of January 26, 1988, which was filed as Exhibit 10.22 to Amendment
No. 2 to the Company's Form S-1, is incorporated by reference.
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
----------------------------------------------------------------------------------
<S> <C>
10(s) -- Form of Termination Agreement between First Mississippi Corporation
and Charles M. McAuley (Company's Termination Agreement with such
individual contains identical provisions to those contained in the
form), which was filed as Exhibit 10(v) to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1991, is
incorporated herein by reference.
10(t) -- Form of Termination Agreement between the Company and Richard F.
Nanna, Q. Allen Neal and Charles M. McAuley (Company's Termination
Agreement with each such individual contains identical provisions to
those contained in the form), which was filed as Exhibit 10(w) to the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1991, is incorporated herein by reference.
10(u) -- Form of Addendum to Termination Agreement between the Company and
Richard F. Nanna, Q. Allen Neal and Charles M. McAuley (Company's
Addendum to Termination Agreement with each such individual contains
identical provisions to those contained in the form), which was filed
as Exhibit 10(x) to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1991, is incorporated herein by reference.
10(v) -- Refining Agreement between FMG Inc. and Metalor USA Refining
Corporation dated June 1, 1992, which was filed as Exhibit 10(w) to
the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1992, is incorporated herein by reference.
10(w) -- Amendment to Refining Agreement between FMG Inc. and Metalor USA
Refining Corporation dated May 27, 1993, which was filed as Exhibit
10(x) to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1993, is incorporated herein by reference.
10(x) -- Sales Agreement between FMG Inc. and Nesmont Precious Metals
Corporation, dated as of June 1, 1991, which was filed as Exhibit
10(z) to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1991, is incorporated herein by reference.
10(y) -- Mine Operating Contract between FMG Inc. and N.A. Degerstrom, Inc.,
dated July 1, 1991, which was filed as Exhibit 10(aa) to the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1991, is incorporated herein by reference.
10(z) -- Electric Services Agreement, dated August 14, 1987, which was filed
as Exhibit 10.7 to the Company's Form S-1, is incorporated herein by
reference.
10(aa) -- Oxygen Supply Agreement, dated August 27, 1987, and Air Rights Lease
Agreement, dated as of August 27, 1987, which were filed as Exhibit
10(j) to the Company's Annual Report on Form 10-K for the year ended
June 30, 1989, are incorporated herein by reference.
10(bb) -- Mine Contract between FMG Inc. and J.S. Redpath Corporation dated
August 30, 1993, which was filed as Exhibit 10(bb) to the Company's
Form 10-K for the fiscal year ended June 30, 1994, is incorporated
herein by reference.
10(cc) -- Amendment to Administrative Services Agreement between First
Mississippi and the Company dated August 29, 1995.
10(dd) -- Form of Termination Agreement between the Company and G.W. Thompson,
Donald S. Robson, R. David Russell and Donald O. Miller (Company's
Termination Agreement with each such individual contains identical
provisions to those contained in the form).
</TABLE>
<PAGE> 64
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
-----------------------------------------------------------------------------------
<S> <C>
10(ee) -- Promissory Note by the Company in favor of First Mississippi dated
February 1, 1995.
10(ff) -- Restricted Stock Award Agreement between the Company and G.W.
Thompson dated August 22, 1994.
21 -- List of subsidiaries of the Company.
23 -- Auditors' Consent regarding incorporation of reports into
Registration Statement Nos. 33-24401, 2-93585, 33-24414, 33-31226,
33-32572, 33-37085, 33-39067, 33-43602, 33-45342, 33-56046, 33-57761
and 33-74020.
27 -- Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10(cc)
AMENDMENT TO
ADMINISTRATIVE SERVICES AGREEMENT
This amendment to the Administrative Services Agreement by and
between First Mississippi Corporation ("FMC"), a Mississippi corporation, and
FirstMiss Gold Inc. ("FMGI"), a Nevada corporation, is entered this 29th day of
August, 1995.
WHEREAS, the parties entered into an Administrative Services
Agreement (the "Agreement") on October 28, 1987 for the provision of various
administrative services by FMC to FMGI; and
WHEREAS, the parties desire to amend Section 2 of the
Agreement.
NOW THEREFORE, the parties hereby agree as follows:
The Agreement is hereby amended by deleting Section 2 in its
entirety and replacing it with the following:
2. Compensation
(a) Preparation of Budgets. Prior to the last day of each
fiscal year, FMGI and FMC shall agree on proposed hourly rates
for administrative and legal services to be rendered pursuant
to this Agreement for the following fiscal year or until the
date of the proposed spin-off. The budget shall contain line
items for each service set forth in paragraph 1 above and
shall contain a detailed description of the line item service
contemplated in the budget and hourly rate for providing such
services. Executive and director time shall be excluded from
the budget figures, and shall not be charged to FMGI. Such
budget shall be approved by a majority vote of the Board of
Directors of FMGI who are not officers or employees of FMGI or
FMC, and are not Directors of FMC. Except for the actual cost
of employee benefits provided to FMGI participants which will
be reimbursed to FMC, FMC agrees to provide and FMGI agrees to
pay for all administrative and legal services contemplated
hereunder at the hourly rates set forth in the Board approved
budget.
(b) Payments. FMGI shall pay FMC for administrative and
legal services on or before the thirtieth day
following the end of each month based upon billing by
FMC.
<PAGE> 2
This Amendment to the Agreement is effective as of the date
first above written.
FMC: FMGI:
First Mississippi Corporation FirstMiss Gold Inc.
By: /s/ R. M. Summerford By: /s/ G. W. Thompson
----------------------------- ---------------------------------
Name: R. M. Summerford Name: G. W. Thompson
--------------------------- -------------------------------
Title: Vice President Title: President and CEO
-------------------------- ------------------------------
2
<PAGE> 1
EXHIBIT 10(dd)
Date
PRIVILEGED AND CONFIDENTIAL
Name
Title
FirstMiss Gold Inc.
Meadow Wood Corporate Centre
5190 Neil Road, Suite 310
Reno, Nevada 89502-6503
RE: Termination Agreements
Dear _____:
FirstMiss Gold Inc. (the "Company") considers it essential to the best
interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the
Company (the "Board") recognizes that, as is the case with many publicly held
corporations and their subsidiaries, the possibility of a Change in Control may
exist and that such possibility, and the uncertainty and questions which it may
raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of
the Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from
the possibility of a Change in Control of the Company.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereto, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "Change in Control of the Company" (as defined in
Section 2 hereof) under the circumstances described below. This letter,
however, does not otherwise change your employment arrangements and except for
the conditions contained therein pertaining to a Change in Control, your
continued employment continues to be subject to the will of the Board of the
Company.
<PAGE> 2
Name
Date
Page 2
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through ________; provided, however, if a
Change in Control of the Company shall have occurred during the term of this
Agreement, this Agreement shall continue in effect for a period of three (3)
years beyond the month in which such Change in Control occurred; provided
further, that in no event shall this Agreement extend beyond your normal
retirement age unless specifically endorsed to so provide.
2. Change in Control.
(i) No benefits shall be payable hereunder unless there
shall have been a Change in Control of the Company, as set forth
below. For purposes of this Agreement, a "Change in Control of the
Company" shall be deemed to have occurred if:
(A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other than a trustee or
other fiduciary holding securities under an employee benefit
plan of the Company or a corporation owned, directly or
indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the
Company, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty (20%) percent or
more of the combined voting power of the Company's then
outstanding securities; or
(B) during any period of two consecutive years
(not including any period) prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a
director designated by a person who has entered into an
agreement with the Company to effect a transaction described
in clause (A) or (C) of this Subsection) whose election by the
Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at
the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason
to constitute a majority thereof; or
(C) the shareholders of the Company approve a
merger or
<PAGE> 3
Name
Date
Page 3
consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) at least eighty (80%) percent of the
combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such
merger or consolidation, or the shareholders of the Company
approve an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
(ii) For purposes of this Agreement, a Change of Control
will not be deemed to occur and no severance benefits will be paid to
you pursuant to Subsection 4(iii) hereof, merely because First
Mississippi Corporation ("First Mississippi") effects a spin-off
("Spin-off") as that term is defined by Section 355 of the Internal
Revenue Code of 1986, as amended (the "Code"), dividends or otherwise
distributes the shares of stock in the Company to First Mississippi
shareholders, the effect of which is that First Mississippi owns less
than 80% of the stock of the Company;
(iii) For purposes of this Agreement, a "potential Change
in Control of the Company" shall be deemed to have occurred if:
(A) the Company enters into an agreement, the
consummation of which would result in the occurrence of a
Change in Control of the Company;
(B) any person (including the Company) publicly
announces an intention to take or to consider taking actions
which if consummated would constitute a Change in Control of
the Company;
(C) any person, other than a trustee or other
fiduciary holding securities under an employee benefit plan of
the Company or a corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, who is
or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing nine and a half (9.5%)
percent or more of the combined voting power of the Company's
then outstanding securities, increases his beneficial
ownership of such securities by five (5%)
<PAGE> 4
Name
Date
Page 4
or more over the percentage so owned by such person on the
date hereof; or
(D) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a potential Change in
Control of the Company has occurred. You agree that, subject
to the terms and conditions of this Agreement, in the event of
a potential Change in Control of the Company, you will remain
in the employ of the Company until the earliest of (i) a date
which is six (6) months from the occurrence of such potential
Change in Control of the Company, (ii) the termination by you
of your employment by reason of Disability, as defined in
Subsection 3(i), or (iii) the occurrence of a change in
control of the Company.
3. Termination Following Change in Control. If any of the events
described in Subsection 2(i) hereof constituting a Change in Control of the
Company shall have occurred, you shall be entitled to the benefits provided in
Subsection 4(iii) hereof upon the subsequent termination of your employment
during the term of this Agreement or upon your resignation within twelve (12)
months of the occurrence of such events as specified in Section 2 unless such
termination is (A) because of your death or Disability as defined in Section
3(i), (B) by the Company for Cause.
(i) Disability. If, as a result of your incapacity due
to physical or mental illness, you shall have been absent from the
full-time performance of your duties with the Company for six (6)
consecutive months, and within thirty (30) days after written notice
of termination is given you shall not have returned to the full-time
performance of your duties, your employment may be terminated for
"Disability".
(ii) Cause. Termination by the Company of your employment
for "Cause" shall mean termination upon (A) the willful and continued
failure by you to substantially perform your duties with the Company
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination) after a written demand
for substantial performance is delivered to you by the Board, which
demand specifically identifies the manner in which the Board believes
that you have not substantially performed your duties, or (B) the
willful engaging by you in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise. For
purposes of this Subsection, no act, or failure to act, on your part
shall be deemed "willful" unless done, or omitted to be done, by you
not in good faith and without reasonable belief that your action or
omission was in the best
<PAGE> 5
Name
Date
Page 5
interest of the Company. Notwithstanding the foregoing, you shall not
be deemed to have been terminated for Cause unless and until there
shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three quarters (3/4) of the
entire membership of the Board at a meeting of the Board called and
held for such purpose (after reasonable notice to you and opportunity
for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty of
conduct set forth above in clauses (A) or (B) of the first sentence of
this Subsection and specifying the particulars thereof in detail.
(iii) Notice of Termination. Any purported termination of
your employment by the Company or by you shall be communicated by
written Notice of Termination to the other party hereto in accordance
with Section 6 hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision
so indicated.
(iv) Date of Termination, Etc. "Date of Termination"
shall mean (A) if your employment is terminated for Disability, thirty
(30) days after Notice of Termination is given provided that you shall
not have returned to the full-time performance of your duties during
such thirty (30) day period), and (B) if your employment is terminated
pursuant to Subsection (ii) above or for any other reason (other than
Disability), the date specified in the Notice of Termination (which,
in the case of a termination pursuant to Subsection (ii) above shall
not be less than thirty (30) days, and in the case of a termination
pursuant to Subsection (ii) more than sixty (60) days, respectively,
from the date such Notice of Termination is given); provided that if
within fifteen (15) days after any Notice of Termination is given, or
if later, prior to the Date of Termination (as determinate without
regard to this provision), the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning
the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement
of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal
therefrom has expired and no appeal has been perfected); provided
further that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party
giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding
<PAGE> 6
Name
Date
Page 6
the pendency of any such dispute, the Company will continue to pay you
your full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, base salary) and
continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved
in accordance with this Subsection. Amounts paid under this
Subsection are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts
due under this Agreement.
4. Compensation Upon Termination or During Disability. Following
a Change in Control of the Company, as defined by Subsection 2(i), upon
termination of your employment or during a period of disability, you shall be
entitled to the following benefits:
(i) During any period that you fail to perform your
full-time duties with the Company as a result of incapacity due to
physical or mental illness, you shall continue to receive your base
salary at the rate in effect at the commencement of any such period,
together with all compensation payable to you under the FirstMiss
Gold, Inc. 1988 Long-Term Incentive Plan or other plan during such
period, until this Agreement is terminated pursuant to Section 3(i)
hereof. Thereafter, or in the event your employment shall be
terminated, or by reason of your death, your benefits shall be
determined under the Company's retirement, insurance and other
compensation programs then in effect in accordance with the terms of
such programs.
(ii) If your employment shall be terminated by the Company
for Cause or Disability, or death, the Company shall pay you your full
base salary through the Date of Termination at the rate in effect at
the time Notice of Termination is given, plus all other amounts to
which you are entitled under any compensation plan of the Company at
the time such payments are due, and the Company shall have no further
obligations to you under his Agreement.
(iii) If your employment by the Company shall be terminated
(a) by the Company other than for Cause or Disability or (b) upon your
resignation as specified in Section 3 hereof then you shall be
entitled to the benefits provided below:
(A) The Company shall pay you your full base
salary through the Date of Termination at the rate in effect
at the time Notice of Termination is
<PAGE> 7
Name
Date
Page 7
given, plus all other amounts to which you are entitled under
any compensation plan of the Company, at the time such
payments are due, except as otherwise provided below.
(B) In lieu of any further salary payments to you
for periods subsequent to the Date of Termination, the Company
shall pay as severance pay to you, a lump sum severance
payment (together with the payments provided in Paragraphs C
and E below and any payment you may receive pursuant to
Paragraph D below, the "Severance Payments") equal to 1.5
times the sum of (i) your annual base salary not including
bonuses), averaged over the three (3) years (or such portion
of the three (3) years during which you actually were employed
by the Company) prior to he occurrence of the circumstances
giving rise to the Notice of Termination given in respect
thereof, and (ii) the average cost for the Company of fringe
benefits in effect at the time immediately prior to such
Notice of Termination in effect which for purpose of this
Agreement is defined to be thirty-six (36%) percent of your
annual base salary in effect immediately prior to the
occurrence of the circumstance giving rise to the Notice of
Termination.
(C) Notwithstanding any provision of the
Company's Long-Term Incentive Plan as amended from time to
time, or any other compensation arrangements then in effect,
the Company shall pay to you a lump sum amount equal to the
sum of any incentive compensation which has been allocated or
awarded to you for a year or other measuring period preceding
the Date of Termination, but has not yet been paid.
(D) (x) except for Incentive Stock Options
("ISO's") which are hereby specifically excluded, in lieu of
shares of common stock of the Company ("Company Shares")
issuable upon exercise of outstanding options ("Options"),
granted to you under the Company's Long-Term Incentive Plans
as amended from time to time, or any other plan then in effect
(which Options shall be canceled upon the making of the
payment referred to below), unless you notify the Company by
giving notice in accordance with Section 6 hereof within
fifteen (15) days after receipt of Notice of Termination that
you do not wish such payment, the Company shall pay to you not
later than the fifth day following the Date of Termination, an
amount in cash equal to the product of (i) the difference (to
the extent that such difference is a positive number) obtained
by subtracting the per share exercise
<PAGE> 8
Name
Date
Page 8
price of each Option held by you whether or not then fully
exercisable from the higher of (A) the closing price of
Company Shares as reported on the New York Stock Exchange on
the Date of Termination, or (B) the highest per share price
for Company Shares actually paid in connection with any Change
in Control of the Company, and (ii) the number of Company
Shares covered by each such Option; (y) in lieu of convertible
debentures of the Company ("the "Debentures") issuable upon
exercise of outstanding options ("Debenture Options") granted
to you under the Company's Long-Term Incentive Plans, as
amended from time to time, or any other plan then in effect
(which Debenture Options shall be canceled upon the making of
the payment referred to below), unless you notify the Company
by giving notice in accordance with Section 6 hereof within
fifteen (15) days after receipt of Notice of Termination that
you do not wish to receive such payment, the Company will pay
to you, not later than the fifth (5th) day following the Date
of Termination, an amount in cash equal to the product of (i)
the difference (to the extent that such difference is a
positive number) obtained by subtracting the per share price
at which the Debentures would be convertible into Company
Shares whether or not then fully exercisable from the higher
of (A) the closing price of Company Shares as reported on the
New York Stock Exchange on the Date of Termination, or (B) the
highest per share price for Company Shares actually paid in
connection with any Change in Control of the Company, and (ii)
the number of Company Shares issuable upon conversion of the
Debentures covered by the Debenture Options; and (z) in lieu
of any conversion rights under any outstanding Debentures
issued upon the exercise of Debenture Options (which
Debentures shall be canceled upon the making of the payment
referred to below), unless you notify the Company by giving
notice in accordance with Section 6 hereof within fifteen (15)
days after receipt of Notice of Termination that you do not
wish such payment, the Company will pay to you an amount in
cash equal to the product of the higher of (A) the closing
price of Company Shares as reported on the New York Stock
Exchange on the Date of Termination or (B) the highest per
share price for Company Shares actually paid in connection
with any Change in Control of the Company, and (ii) the number
of Company Shares into which such Debentures are then
convertible.
(E) The Company shall also pay to you all legal
fees and expenses incurred by you as a result of such
termination (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or
<PAGE> 9
Name
Date
Page 9
in seeking to obtain or enforce any right or benefit provided
by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of
Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") to any payment or benefit provided hereunder).
(F) In the event that you become entitled to the
payments (the "Severance Payments") provided under paragraphs
(B), (C), (D) and (E) above, or to any other payments or
benefits received or to be received by you in connection with
a Change in Control of the Company or your termination of
employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Company, any
person whose actions result in a Change in Control or any
person affiliated with the Company or such person)
(collectively with the Severance Payments, the "Total
Payments") if any of the Total Payments will be subject to the
tax (the "Excise Tax") imposed by Section 4999 of the Code,
the Company shall pay to you at the time specified in
paragraph (G), below, an additional amount (the "Gross-Up
Payment") such that the net amount retained by you, after
deduction of any Excise Tax on the Total Payments and any
federal income tax and Excise Tax upon the payment provided
for by this paragraph, shall be equal to the Total Payments.
For purposes of determining whether any of the Total Payments
will be subject to the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2)
of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1)
shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel selected by the Company's independent
auditors and acceptable to you such other payments or benefits
(in whole or in part) do not constitute parachute payments, or
such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within
the meaning of Section 280(b)(4) of the Code in excess of the
base amount within the meaning of Section 280G(b)(3) of the
Code, or are otherwise not subject to the Excise Tax, (ii) the
amount of the Total Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of (A) the
total amount of the Total Payments or (B) the amount of excess
parachute payments within the meaning of Section 280G(b)(1)
(after applying clause (i), above), and (iii) the value of any
non-cash benefits or any
<PAGE> 10
Name
Date
Page 10
deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up Payment,
you shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year
in which the Gross-Up Payment is to be made. In the event
that the Excise Tax is subsequently determined to be less than
the amount taken into account hereunder at the time of
termination of your employment, you shall repay to the Company
at the time that the amount of such reduction in Excise Tax is
finally determined the portion of the Gross-Up Payment
attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and federal
income tax imposed on the Gross-Up Payment being repaid by you
if such repayment results in a reduction in Excise Tax and/or
a federal income tax reduction) plus interest on the amount of
such repayment at the rate provided in Section 1274(b)(2)(B)
of the Code. In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder at the time
of the termination of your employment (including by reason of
any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company
shall make an additional gross- up payment in respect of such
excess (plus any interest payable with respect to such excess)
at the time that the amount of such excess is finally
determined.
(G) The payments provided for in paragraphs (B),
(C), (D) and (F) above, shall be made not later than the fifth
(5th) day following the Date of Termination, provided,
however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall
pay to you on such day an estimate, as determined in good
faith by the Company, of the minimum amount of such payments
and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined, but in
no event later than the thirtieth (30th) day after the Date of
Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the Company
to you payable on the fifth (5th) day after demand by the
Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
<PAGE> 11
Name
Date
Page 11
(vi) You shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided
for in this Section 4 be reduced by any compensation earned by you as
the result of employment by another employer, by retirement benefits,
by offset against any amount claimed to be owed by you to the Company,
or otherwise.
(vii) In addition to all other amounts payable to you under
this Section 4, you shall be entitled to receive all benefits payable
to you under the 401(k) Thrift Plan, and any other plan or agreement
relating to retirement benefits.
5. Successors, Binding Agreement.
(i) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required
to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Company in
the same amount and on the same terms as you would be entitled to
hereunder if you terminate your employment for Good Reason following a
Change in Control of the Company, except that for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be payable
to you hereunder if you had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.
<PAGE> 12
Name
Date
Page 12
6. Notices. For the purpose of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth on the first page of this Agreement,
provided that all notice to the Company shall be directed to the attention of
the Board with a copy to the Secretary of the Company, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Mississippi. All references to
Sections of the Exchange Act or the Code shall be deemed also to refer to any
successor provisions to such Sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under federal, state
or local law. The obligations of the Company under Section 4 shall survive the
expiration of the term of this Agreement.
8. Validity. The invalidity or unenforceable ability or any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
<PAGE> 13
Name
Date
Page 13
If this letter sets forth our agreement on the subject matter hereof, kindly
sign and return to the Company the enclosed copy of this letter which will then
constitute our agreement on this subject.
Sincerely yours,
FIRSTMISS GOLD INC.
J. Kelley Williams
Chairman of the Board
ACCEPTED AND AGREED TO on this, the _______, day of _________________________,
1995.
___________________________________________
NAME
<PAGE> 1
EXHIBIT 10(ee)
PROMISSORY NOTE
$41,000,000.00 Date of Note: February 1, 1995
--------------
On demand, for value received, FirstMiss Gold Inc. ("FRMG") by this
promissory note (hereinafter called "this Note"), promises to pay to First
Mississippi Corporation ("FRM"), forty one million dollars ($41,000,000,00) or
the aggregate unpaid principal amount of all advances to or for the benefit of
FRMG on or after the date hereof in accordance with the terms hereof, together
with interest on the aggregate unpaid principal amount of all advances, as
evidenced by Schedule A attached.
This Note evidences a revolving line of credit by FRM in favor of
FRMG, and accordingly, FRMG shall have the right during the term of this Note
to borrow, repay and reborrow principal at any time and in any amount up to the
amount set forth in this Note prior to demand.
This Note shall bear interest from its effective date, based on the
daily aggregate principal balance, until the entire principal and interest are
paid, at a rate equal to the Prime Rate plus 3/4% per annum at the Chase
Manhattan Bank, N.A. as such Prime Rate shall change from time to time.
Interest on this Note is due one year from the date of this Note and each
anniversary thereafter, or upon payment of all remaining outstanding principal,
whichever occurs first. Any interest unpaid when due shall be added to, and
bear the same interest as, principal.
FRM is hereby authorized by FRMG to place appropriate notation on
Schedule A hereto evidencing the date, advances or repayments related to this
Note, provided, however, the failure of FRM to make any such notation shall not
limit or otherwise affect the
<PAGE> 2
obligations of FRMG to repay any advances hereunder. The first notation of
Schedule A, will be the effective date of this Note, on which such date all
then existing loan agreements and promissory notes between FRM and FRMG will be
canceled and the balance of principal and interest outstanding under such loan
agreements and promissory notes will become a part of this Note.
This Note and any accrued interest are to be paid 367 days after
demand of First Mississippi Corporation, but in no event paid later than August
1, 1997, regardless of whether demand is made by First Mississippi Corporation
by that date.
This Note will automatically, without demand, become immediately due
and payable upon the insolvency, general assignment, receivership, bankruptcy
or dissolution of FirstMiss Gold Inc., or upon any change in control of FRMG
other than a distribution from FRM to its shareholders of the shares of Common
Stock of FRMG owned by FRM.
FRM waives presentation, protest, notice of protest, notice of
dishonor and notice of nonpayment.
By: /s/ G.W. Thompson
---------------------------------
G.W. Thompson
President & CEO
FirstMiss Gold Inc.
2
<PAGE> 1
EXHIBIT 10(ff)
FirstMiss Gold Inc.
5190 NEIL ROAD, SUITE 310
(702) 827-0211/FAX #827-0541/RENO, NEVADA 89502
FIRSTMISS GOLD INC.
RESTRICTED STOCK AWARD AGREEMENT
AUGUST 22, 1994
Mr. G.W. Thompson
President and Chief Executive Officer
FirstMiss Gold, Inc.
5190 Neil Road, Suite 310
Reno, NV 89502-6503
Re: Restricted Stock Award providing for 10,000 shares of the Common Stock
of FirstMiss Gold Inc. granted August 22, 1994.
Dear Bill:
FIRSTMISS GOLD, INC. (the "Company") by resolution of its Board of Directors on
October 27, 1987 and by shareholder consent dated November 2, 1987 adopted the
Amended and Restated FirstMiss Gold Long-Term Incentive Plan (the "Plan").
Pursuant to the Plan and in consideration for the retention of your services as
an officer and/or key employee of the Company, the Long-Term Incentive
Committee (the "Committee") hereby grants to you, on August 22, 1994, a
Restricted Stock Award of 10,000 shares of the Common Stock of the Company (the
"Shares"), subject, however, to all of the terms and conditions set forth in
the Plan, as amended, a copy of which is annexed hereto as Appendix A, and made
a part hereof, and expressly subject to the following parameters:
(1) For so long as such Shares are subject to restrictions,
neither the Shares nor the right to vote such Shares nor to
receive dividends thereon may be sold, assigned, transferred,
exchanged, pledged, apothecated, or otherwise encumbered, with
the exception of the executed stock power held by the Company
Secretary as required in Paragraphs 3 and 6 of this Agreement;
provided, however, that you may give proxies to vote said
Shares at any meeting of the shareholders of the Company.
(2) For so long as the Shares are issued in your name, you shall
be entitled to all dividends and shall have the right to vote
such Shares.
<PAGE> 2
Restricted Stock Award Agreement
August 22, 1994
(3) Certificates representing Shares subject to restriction shall
be held by the Company Secretary with executed power attached.
The Secretary is authorized to cause said Shares to be
re-issued without restrictions at such time as are provided in
this Agreement, provided all other terms and conditions are
carried out, and is further authorized to cancel said
certificates if any of the Shares shall be forfeited.
(4) Each certificate representing Shares subject to restriction
shall be endorsed with the following legend: "This
certificate and the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture and
restrictions against transfer) contained in the Plan and an
Agreement entered into between the registered owner and
FirstMiss Gold Inc. Release from such terms and conditions
shall be obtained only in accordance with the provisions of
the Plan and the Agreement, each of which is on file in the
office of the Secretary of FirstMiss Gold Inc., Jackson,
Mississippi."
(5) On the earlier date of August 22, 1997 or three (3) months
after completion of a secondary offering following the
spin-off of the Company by First Mississippi Corporation,
provided you are at said date employed by Company as
hereinbefore defined, and achieving satisfactory performance
(except as provided in Paragraph 8 of this Agreement),
restrictions shall be removed from the Shares, provided the
other terms and conditions of this Agreement have been
performed. At such time the Secretary is authorized to cause
such Shares to be re-issued without restrictions and deliver
the certificate representing same to you.
(6) As a condition of the receipt of the Shares, you shall agree
not to elect under Section 83(b) of the Internal Revenue Code
of 1986 to be taxed on the fair market value of the stock at
the time of grant. In addition, you shall deliver an executed
stock power covering any of the Shares held by the Company
Secretary.
<PAGE> 3
Restricted Stock Award Agreement
August 22, 1994
(7) In the event of the termination of your employment by the
Company for Cause or in the event you terminate your
employment for any reason whatsoever, not including death or
disability, then any Shares held by the Secretary shall be
forfeited and the Secretary is authorized to cancel said
certificates. For purposes of this Agreement, your employment
for "Cause" shall mean termination upon (a) the willful and
continued failure by you to substantially perform your duties
with the Company (provided such failure is not a result of a
disability) after a written demand for substantial performance
is delivered to you by the Board, which demand specifically
identifies the manner in which the Board believes that you
have not substantially performed your duties, or (b) the
willful engaging by you in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise.
For purposes of this Subsection, no act or failure to act on
your part shall be deemed "willful" unless done, or omitted to
be done, by you not in good faith and without reasonable
belief that your action or omission was in the best interest
of the Company.
(8) In the event your employment is terminated by the Company for
any reason other than Cause, including death or disability,
then you or your legal successor shall be entitled to receive,
and the Secretary at such time is authorized to re-issue
without restrictions, the Shares and the certificate
representing same that you would have received on the date the
restriction period lapses, as hereinabove provided for in
Paragraph 5.
(9) Anything in this Agreement to the contrary notwithstanding,
the Committee may determine in its sole discretion to
accelerate the restriction period provided for in Paragraph 5
with respect to all or part of the Shares covered by this
Agreement.
<PAGE> 4
Restricted Stock Award Agreement
August 22, 1994
The term used in this Letter Agreement shall have the same meaning as set forth
in the Plan. If there is any omission or conflict between this Letter
Agreement and the Plan, the Plan shall control. The provisions of the Plan are
incorporated herein by reference.
Please indicate your acceptance of this Award and your agreement to comply with
the provisions of the Plan annexed hereto by signing and returning the enclosed
copy of the letter to Teresa Holland in the FMC Human Resources department.
Sincerely,
FIRSTMISS GOLD INC.
By: /s/ J. Kelley Williams
-------------------------------
J. Kelley Williams
Chairman of the Board
ACCEPTED this 29th day of September, 1994
/s/ G.W. Thompson
-----------------------------------
G.W. Thompson
Attachment: Appendix A
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE REGISTRANT
FMG Inc.
State of Incorporation: Nevada
<PAGE> 1
EXHIBIT 23
AUDITORS' CONSENT
The Board of Directors
FirstMiss Gold Inc.:
We consent to incorporation by reference in the registration statements (No.
33-24401, 2-93585, 33-24414, 33-31226, 33-32572, 33-37085, 33-39067, 33-43602,
33-45342, 33-56046, 33-57761 and 33-74020) on Form S-8 of FirstMiss Gold Inc.
of our report dated July 28, 1995, except as to the second paragraph of Note
1(a), which is as of August 31, 1995, relating to the consolidated balance
sheets of FirstMiss Gold Inc. and subsidiary as of June 30, 1995 and 1994, and
the related consolidated statements of operations, stockholders' equity and
cash flows for each of the years in the three-year period ended June 30, 1995,
which report appears in the June 30, 1995, annual report on Form 10-K of
FirstMiss Gold Inc.
KPMG Peat Marwick LLP
Denver, Colorado
September 7, 1995
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 595
<SECURITIES> 0
<RECEIVABLES> 1,709
<ALLOWANCES> 0
<INVENTORY> 9,554
<CURRENT-ASSETS> 15,167
<PP&E> 136,851
<DEPRECIATION> 69,162
<TOTAL-ASSETS> 85,120
<CURRENT-LIABILITIES> 9,445
<BONDS> 40,900
<COMMON> 182
0
0
<OTHER-SE> 31,562
<TOTAL-LIABILITY-AND-EQUITY> 85,120
<SALES> 71,485
<TOTAL-REVENUES> 71,485
<CGS> 69,775
<TOTAL-COSTS> 69,775
<OTHER-EXPENSES> 17,834
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,805
<INCOME-PRETAX> (17,929)
<INCOME-TAX> 428
<INCOME-CONTINUING> (18,357)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,357)
<EPS-PRIMARY> (1.01)
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