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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 Year Ended December 31, 1997.
COMMISSION FILE NO. 1-2714
ATLAS CORPORATION
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(Exact name of Registrant as specified in its charter)
DELAWARE 13-5503312
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
370 Seventeenth Street, 303-629-2440
Suite 3140, Denver, CO ----------------------
80202 (Registrant's
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(Address of principal (including area code)
executive offices) (Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
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TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value $1 NASDAQ Bulletin
per share Board
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Option Warrants to
Purchase Common Stock
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Securities registered pursuant to Section 12(g) of the Act: None
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 the Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of 24,077,539 shares of Common Stock held by non-
affiliates of the Registrant as of March 26, 1998 was $6,741,711.
As of March 26, 1998 Registrant had outstanding 27,360,253 shares of Common
Stock, $1.00 Par Value, its only class of voting stock.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
This report includes forward looking statements concerning the Company's
operations, performance and financial condition. Such forward looking statements
involves risks and uncertainties and are subject to change based on various
factors. Actual results could differ materially. Readers are cautioned not to
place undo reliance on forward looking statements.
Item 1. BUSINESS
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GENERAL
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Atlas Corporation ("Atlas" or the "Company") is principally engaged in the
exploration, development and exploitation of mineral resource properties. Atlas
was incorporated under the laws of the State of Delaware on October 31, 1936.
The principal office of Atlas is located at Republic Plaza, 370 Seventeenth
Street, Suite 3140, Denver, Colorado, 80202 U.S.A. Atlas has five-
subsidiaries: (i) 100% ownership in Atlas Precious Metals Inc. ("APMI"),
incorporated under the laws of the State of Nevada, which holds the Grassy
Mountain property and the exploration portion of the Gold Bar claim block, (ii)
100% ownership of Atlas Gold Mining Inc. ("AGMI"), incorporated under the laws
of the State of Nevada, which holds the mineral reserves and other assets and
infrastructure at the Gold Bar mine, (iii) 100% ownership in Arisur Inc.
("Arisur"), a Grand Cayman corporation, which owns and operates mines in
Bolivia, South America through a Bolivian branch, (iv) 100% ownership of Suramco
Metals, Inc. ("Suramco"), and (v) approximately 61% ownership of Cornerstone
Industrial Minerals Corporation ("Cornerstone") (formerly known as Phoenix
Financial Holdings Inc.). Atlas intends to wind up the businesses of APMI, AGMI,
and Suramco, as soon as practical, as a means to cut its general and
administrative costs. In December 1996 Atlas completed the sale of its wholly
owned subsidiary, Atlas Perlite, Inc., to Cornerstone. See "Item 1 Business -
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Tucker Hill".
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ARISUR INC.
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In 1996 the Company acquired a 50% interest in Arisur from Arimetco
International Inc., a Canadian corporation, for $3 million in cash and purchased
100% of Suramco, which owned the remaining 50% interest in Arisur, for four
million shares of the Company's common stock. Arisur owns and operates the
Andacaba Mine and the Don Francisco and Koyamayu exploration and development
properties. All three properties are underground lead, zinc and silver
operations located in southern Bolivia. Arisur processes ore through its
Andacaba Mill and in 1997 purchased the Koyamayu property and the Comali Mill
for expansion opportunities. During 1997 Suramco's interest in Arisur was
transferred to Atlas, resulting in 100% direct ownership by Atlas.
EMPLOYEES AND OFFICES
Arisur's corporate office is located in La Paz, Bolivia and staffed by seven
persons. Operations are conducted out of Arisur's office in Potosi, which is
staffed by nine persons. Additionally, there are 259 miners, mill workers and
maintenance persons directly involved in operations.
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ANDACABA MINE
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LOCATION
The property is located in the south central altiplano region of Bolivia near
the city of Potosi, a historic mining community, at an elevation of
approximately 4,500 meters (14,800 feet). The Andacaba property is accessible by
traveling south/southeast 37 kilometers (23 miles) via an all weather gravel
road from the city of Potosi.
PROPERTY
The Andacaba facilities and mine are situated on 15 concessions controlled 100%
by Arisur comprising 1,505 hectares (3,712 acres).
OPERATIONS
The Andacaba lead, zinc and silver mine has been in operation since the early
1900s. The mining operations take place year round with an average of 28 days
per month for a total of 330 workdays per year. The Andacaba Mill processes ore
from all three of Arisur's mining properties and presently has excess capacity
to perform custom milling. The concentrates are shipped by truck to Potosi and
then by rail to warehouses at the Chilean seaport of Antofagasta prior to
shipment to smelters in various markets. In February 1998 Chilean authorities
reached agreement with Bolivian authorities to relocate the area set aside for
lead concentrate storage to a location approximately 30 kilometers north of
Antofagasta at Portezuelo Station.
CONDITION
Service facilities at the mine site are basic and require upgrading as part of
the mine expansion for which planning is underway. The Andacaba Mill capacity
was expanded in 1997 to 550 tonnes per day. A direct power line from the Velarde
II substation near Potosi was completed in August 1997. Water for the mill is
supplied from underground sources at the mine. The city of Potosi provides a
source of supplies and labor.
GEOLOGY/MINERALOGY
The mineralized veins at Andacaba are enclosed in tertiary porphyritic quartz
latite or rhyodacite volcanic rocks. The volcanics are part of an igneous
complex that includes an elliptical-shaped pluton of biotite granodiorite that
crops out south of the mine area. The pluton is believed to be 40 kilometers
(25 miles) long and 14 kilometers (9 miles) wide. Volcanic breccias can be
observed in the mine area. Clasts in the breccias consist of sediments and
volcanics that range from one to 15 centimeters (0.4 to 6 inches) across. The
matrix is fine, pulverized material cemented by quartz. Paleozoic sediments
outcrop west of the mine and lead, zinc and silver veins are known to occur in
the sediments beyond the property boundary. The thickness of the volcanic
package is not known and at deeper levels in the mine the host volcanics may
change to either Paleozoic sediments or possibly granodiorite. On the surface
the veins are oxidized to a depth of about 20 meters (66 feet). Minerals in the
oxidized zone include limonite, hematite, goethite, quartz and clay. In the
sulfide zone the primary minerals are marmatite, galena, jamesonite,
boulangerite, sphalerite, tetrahedrite, stephanite,
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quartz, pyrite, pyrrhotite, chalcopyrite, arsenopyrite, siderite, and others.
Wall rocks show very little alteration. There is possibly some silicification of
the rhyodacite.
RESERVES/RESOURCES
Reserves as determined by MINTEC, Mineria Tecnica Consultores Asociados in
October 1996 stood at 547,000 tonnes proven and probable containing 2.68% Lead
("Pb"), 8.26% Zinc ("Zn") and 9.13 troy ounces Silver ("Ag") per tonne (284
grams). Reserves determined by Arisur as of February 1997 stood at 561,000
tonnes proven and probable containing 2.68% Pb, 7.19% Zn, and 6.01 troy ounces
Ag per tonne (187 grams). Prospective resources of 7 million tonnes (7.7 million
short tons) are inferred based on geological projections.
DON FRANCISCO PROJECT
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LOCATION
The property is accessible via an all weather road 77 kilometers (48 miles) in a
southerly direction from Potosi or 64 kilometers (40 miles) from the Andacaba
mine. The Don Francisco project is at an elevation of 3,000 meters (9,800 feet).
PROPERTY
Arisur owns five concessions covering 227 hectares (approximately 560 acres).
OPERATIONS
The Don Francisco project is currently producing approximately 250 tonnes per
month. In 1997 head grades averaged 0.73% Pb, 12.43% Zn and 1.60 troy ounces Ag
per tonne (50 grams). Ore is trucked to Andacaba for processing. Additionally,
costs and requirements are being estimated and prepared for start-up of a second
mill at Andacaba using much of the equipment removed from the Andacaba Mill
during the expansion completed last year. This second mill would be utilized to
more efficiently process the Don Francisco ore since it contains a much higher
zinc content.
CONDITIONS
Sufficient water is available to conduct the mining operations. Electrical
power is presently supplied by generator but a recently completed power line
supplies electrical power to within 2 kilometers of the project. Facilities are
situated on the property for the mineworkers and a radio communication system is
in place between Don Francisco and Andacaba.
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GEOLOGY
The structural setting is similar to Andacaba in that there is one main
structure - the Veta Principal south of the river, which flows across the
property, and the Veta Cumbre north of the river with secondary splits off the
footwall of the main vein. Host rocks are Ordovician calcareous shales,
siltstones and sandstones. The sequence has been folded into a series of
synclines and anticlines. The Veta Principal occupies both flanks and the axial
portion (for a short distance) of a major anticline. Igneous dikes are also
present in the stratigraphic section.
RESERVES/RESOURCES
An audit of reserves prepared by MINTEC in October 1997 indicates 56,000 tonnes
proven and probable containing 17% Zn and 7.52 troy ounces Ag per tonne (234
grams). Geologic projection along the principal vein structure infers a
prospective resource of 240,000 tonnes (265,000 short tons).
KOYAMAYU PROJECT
In August 1997 the Company completed the acquisition of the Koyamayu lead, zinc
and silver property, located in southern Bolivia, for $100,000. The Company
mined and processed approximately 2,000 tonnes of ore during 1997. Presently,
1998 plans include production of approximately 5,000 tonnes with further designs
to develop the mine for increased production. An audit of reserves completed by
MINTEC in October 1997 indicated proven and probable reserves of approximately
13,000 tonnes containing 3.5% Pb, 15% Zn, and 0.96 troy ounce Ag per tonne (30
grams). The ore mined at Koyamayu is to be processed at Andacaba or,
alternatively, it may be processed at the Comali Mill.
COMALI MILL
Arisur executed agreements to acquire the Comali Mill in late 1996 for $250,000
and the acquisition was completed in January 1998. The facility requires
capital expenditures of an estimated $150,000 to achieve operations of 120
tonnes (130 short tons) per day. Its circuits are to be designed to recover
lead, zinc and silver in separate lead and zinc concentrates. The Company
intends to make use of Comali as a regional mill for Koyamayu ore and for toll
milling ore from third parties. The Comali Mill is situated near the community
of Toropalca, 30 kilometers (19 miles) south of Don Francisco.
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In Bolivia, the Company's near-term focus will be on expansion of existing
operations, the evaluation of additional lead, zinc and silver mining
opportunities as well as evaluation of precious metal opportunities.
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CORNERSTONE INDUSTRIAL MINERALS CORPORATION
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On November 30, 1995 the Company purchased from a group of individual investors
12.2 million shares of Phoenix Financial Holdings Inc., representing
approximately 51% of the total shares then outstanding for an aggregate purchase
price of C$1,781,200. On September 3, 1996 the shareholders approved a name
change from Phoenix Financial Holdings Inc. to Cornerstone Industrial Minerals
Corporation ("Cornerstone"). On December 13, 1996 Cornerstone executed a Stock
Purchase Agreement providing for the purchase by Cornerstone of all of the
issued and outstanding shares of Atlas Perlite, Inc., owner of the Tucker Hill
perlite Project ("Tucker Hill") from Atlas. Subsequently, Cornerstone changed
the name of Atlas Perlite, Inc. to Cornerstone Industrial Minerals Corporation,
U.S.A. The Stock Purchase Agreement calls for payment to Atlas of $1 million in
cash, the issuance of 9,647,986 shares of common stock of Cornerstone, valued at
$1 million, the reimbursement of Atlas' Tucker Hill development costs of
$2,945,282, and the retention by Atlas of a 2% gross proceeds royalty on the
sale of perlite from Tucker Hill. The purchase price is payable in three stages
as follows: $125,000 and 1,205,998 shares due at closing, $500,000 and 4,823,993
shares of common stock upon obtaining all operating permits and $375,000 and
3,077,994 shares of common stock related to Atlas assisting the Company in
meeting three other milestones which include obtaining base load perlite
contracts for a specified amount of revenues per year, obtaining definitive
project financing and achieving commercial production. Payments for the first
two stages were issued in 1997. The additional shares to be issued upon meeting
the additional milestones will result in Atlas' equity position in Cornerstone
increasing from approximately 61% to 65%. The transaction was approved by a
committee of independent board members of Cornerstone and also was approved by a
majority of the minority shareholders of Cornerstone at its annual general
meeting held on September 3, 1996. As discussed in more detail below under
"Project Status," the Company has decided to sell its interest in Cornerstone.
TUCKER HILL OPERATIONS
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Cornerstone produces and processes perlite for sale to end-users. Operations are
directed through Cornerstone's Lakeview, Oregon location, which is staffed by 11
persons. Cornerstone's corporate offices are located in Denver, Colorado.
Perlite is a naturally occurring volcanic glass, which is environmentally
friendly and chemically inert. When subjected to heat, perlite physically
expands to up to twenty times its original volume. This expansion is due to the
change in the state of water (2% to 5%) entrapped within the glass structure.
As this interstitial water turns to vapor, the internal pressures increase and
the perlite expands into larger, less dense particles. Expanded, perlite's heat
resistance, extraordinary insulating characteristics and low bulk density suit
it ideally for applications in construction and horticulture. Other uses for
expanded perlite include filter media, cryogenics, food products and chemicals.
Cornerstone mines, crushes, sizes, and delivers finished perlite meeting various
size specifications to end users (primarily expansion plants).
In 1997 demand for finished perlite in the United States was approximately
700,000 tons. Demand growth averaged 6% per year from 1985 to 1994, was 9% in
1995 and 3% in 1996. Cornerstone expects to take advantage of its regional
location for sales, including sales to customers in Canada and Pacific Rim
countries.
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LOCATION
The Tucker Hill project is comprised of a quarry, a processing facility and a
transloading facility, all located in south central Oregon. The quarry is
accessed by traveling 35 miles northwest of the community of Lakeview, in Lake
County, Oregon on US Highway 395 and state highway 31, and then three and a half
miles south on an improved haulroad. The processing facility is located in an
industrial park in Lakeview. A transloading facility, comprised of silos for
product storage and load-out access to a rail spur, is located 90 miles west of
Lakeview in Henley, Oregon.
PROPERTY
The Tucker Hill property encompasses approximately 900 acres and is comprised of
45 unpatented lode mining claims. The millsite property, comprised of 26.53
acres of fee land, was purchased by Cornerstone from Lake County. The
transloading facility located in Henley is situated upon property held under a
long-term lease from the Burlington Northern Santa Fe Railway, owner and
operator of the rail line adjacent to this facility.
GEOLOGY
Tucker Hill is a low hill with about 500 feet of relief within the Chewaucan
Valley. The perlite deposit occurs in the northeastern portion of the Devils
Garden lava field. The lava field is five to ten million years old and is thus
classified as late Miocene to early Pliocene and is composed largely of olivine
basalt flows, minor andesite flows, and related rhyolitic domes and pyroclastic
rocks. Tucker Hill is one of the late Miocene composite rhyolitic lava domes
within the field. The Tucker Hill rhyolitic dome complex is a package of
cooling units that originated from a single eruptive center along a linear vent
system. Two major cooling units are recognized: the outer chill margin and
inner rhyolitic core. The chill margin consists of an outer glass envelope and
contains various sub-units of perlite. Erosion of the Tucker Hill lava dome has
removed a portion of the outer glass envelope, exposing the rhyolitic core,
leaving extensive areas of perlite.
HISTORY
Local Oregon prospectors discovered a small portion of the Tucker Hill perlite
deposit in 1949. Bulk samples taken by these prospectors were collected and
expanded by the U.S. Bureau of Mines in Tucson, Arizona. Expansion results were
favorable and the property underwent a brief period of surface mining.
In 1980 Houston International Minerals Corporation, later acquired by Tenneco
Inc. acquired the property through location of mining claims and confirmed the
presence of a significant resource of commercial grade perlite. In July 1987
Atlas acquired an option to purchase this property from Tenneco, which was
exercised in 1988.
Extensive evaluation work was carried out by Tenneco consisting of geological
mapping, rock chip sampling and analysis, diamond core drilling and bulk
sampling. Atlas continued this effort and, to date, 42 holes have been drilled
and numerous surface bulk samples collected. Testing of the perlite included
expansion tests, measurements of expanded and compacted density, sinkers
(percentage of non-expandables) and brightness. Full scale testing of bulk
samples was performed at the facilities of two end users. The results of this
test work indicated that Tucker Hill perlite exceeded established standards for
expansion and yield.
In 1995 Atlas made the decision to develop Tucker Hill and has subsequently
acquired the necessary operating permits. Mining of perlite commenced in late
1996 with processing started
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in early 1997. A significant contract for over 40,000 tons per year has been
executed with Armstrong World Industries, Inc. ("Armstrong") and Cornerstone
continues its efforts to contract with other purchasers for finished perlite.
RESERVES
Proven and probable reserves at Tucker Hill of 4.9 million tons of perlite were
reported by Micon International Limited in its "Review of The Tucker Hill
Perlite Deposit" completed on April 26, 1996. The report was prepared at the
direction of a special independent committee of the Cornerstone Board of
Directors, in support of Cornerstone's purchase of Atlas Perlite, Inc.
The 4.9 million tons is based on 42 core and reverse circulation drill holes and
13 bulk samples. Samples were analyzed for chemical, physical, and optical
characteristics as well as expandability performance. Test results, as well as
reports from end users, demonstrate that the perlite is a universal variety
suitable for a wide array of expanded products.
The reserves are restricted to an area delimited by the ten-year mining plan as
permitted with the Bureau of Land Management. Geologic resources have been
estimated in excess of 50 million tons.
OPERATIONS
Mining
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Cornerstone conducts mining utilizing conventional quarrying methods. Topsoil
and organic matter are stripped from the surface with a dozer to expose the
perlite. This material is stockpiled for later use as growth media during
reclamation. The perlite is then either drilled and blasted or ripped and
cross-ripped with a dozer.
The perlite is then gathered into a pile with the dozer and loaded into trucks
with a loader. A contract trucking company then hauls the perlite to the
processing facility in Lakeview where it is dumped onto the run-of-mine
stockpile. Internal waste, which is minimal (approximately five percent), is
hauled to a gravel pit at the base of Tucker Hill for disposal.
Processing
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Finished perlite is produced from the processing facility, a crushing, drying
and sizing operation, in four product streams. Run of mine perlite is reclaimed
from the mill stockpile with a loader and is then dumped into a pocket feeding a
primary jaw crusher (alternatively primary crushing has been performed at the
mine with positive results). This jaw crusher reduces the size of the perlite
to about two inches. This crushed perlite reports to a crushed ore stockpile
for delivery to a secondary impact crusher where it is further reduced in size
to 1/2 inch and is then dried in a rotary dryer. The purpose of drying is to
deliver a product to end users which has less than 0.5% free moisture, a
requirement for most end users.
After drying, the product reports to the primary screen where horticultural
grade perlite is separated. Undersize perlite which passes the primary screen
reports to the secondary screens, with oversize being crushed by a tertiary
impact crusher in a closed circuit with the secondary screens. Filler/insulation
grade perlite is obtained from the secondary screen undersize. A
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dust collection system recovers fines from all transfer points downstream from
the dryer.
Finally, the sized perlite is stored at this facility in silos with the finished
product being delivered to customers via rail or by truck. The Lakeview plant
site is situated on a rail line serviced by the Union Pacific Railroad.
Transloading Facility
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In order to ensure rail access and to gain a competitive advantage for rail
transportation rates, Cornerstone constructed a transloading facility at Henley
that is serviced by the Burlington Northern Santa Fe Railway. Finished perlite
from the Lakeview plant is hauled by a trucking contractor to Henley and off-
loaded into silos for transloading into rail cars.
ENVIRONMENTAL PERMITTING
Cornerstone acquired regulatory permits for its quarry operations through the
Bureau of Land Management and Oregon Department of Geology and Mineral
Industries. Operation of the Lakeview plant is permitted under a conditional
use permit granted by Lake County and additional permits were obtained from the
Oregon Department of Environmental Quality.
PROJECT STATUS
Mining operations commenced at the quarry in December 1996. Testing of the
processing facility began in February 1997 at the Lakeview plant. Initial
shipments of finished perlite were made to Armstrong, which reported that the
perlite was satisfactory for its operations. From February 1997 to August 1997,
the facility underwent modifications identified in the testing phase. Since
August 1997 the processing facility has performed at a rate less than expected
and requires additional improvements to achieve the design rate.
Cornerstone has a contract with Armstrong to supply their St. Helens, Oregon
facility with all of its perlite requirements, currently estimated to be
approximately 52,000 tons per year. The term of the contract is through
November 1999 and provides for a two-year extension if prices are agreed upon.
Though Cornerstone has made numerous modifications to the processing facility,
it has concluded that, as currently configured, the facility will not reach the
capacity as originally anticipated without further capital improvements. The
Company does not have the necessary resources to provide the funds for such an
improvement and therefore, in December 1997, the Atlas Board of Directors made
the decision to sell its interest in Cornerstone.
GRASSY MOUNTAIN PROPERTY
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LOCATION
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The Grassy Mountain project is located in northern Malheur County, Oregon,
approximately 22 miles southwest of Vale, Oregon. The property is accessed by
traveling four miles west from Vale on U.S. Highway 20, then south on the Twin
Springs County Road for 23 miles, or by driving south from Nyssa on U.S. Highway
95 to Owyhee and then west to Rock Springs Canyon and by gravel road for 14
miles. The project elevation ranges from 3,300 to 4,300 feet.
PROPERTY
The Grassy Mountain property encompasses approximately 15 square miles. Atlas
owns 429 unpatented lode claims. An additional 86 unpatented lode and placer
claims are controlled under four separate mineral lease or lease/option to
purchase agreements. Approximately 1,000 acres of fee surface, 240 acres of fee
surface and minerals, and 80 acres of fee minerals are held under two
lease/option agreements. Atlas holds one state prospecting permit covering 1,280
acres.
GEOLOGY
The rocks exposed at Grassy Mountain are part of a late to middle-Miocene Grassy
Mountain Formation, a sequence of volcanic and volcanisclastic rocks made up of
primarily olivine-rich basalt and intercalated tufaceous siltstones, sandstones,
and conglomerates. The rocks have been dated through mammalian fossils and
Potassium-Argon chronology to be approximately 10 million years old. The
sediments are primarily flat lying with a slight regional dip to the east. The
structural trend of the area is N10W to N30E. Later post mineralization east
west faulting probably cut these features.
Mineralization is associated with a low-grade gold siliceous hot springs system
with enrichment along multi-stage quartz-adularia veins and favorable
lithologies. Explosive brecciation and overpressuring of the rock, common in
these systems, was minimized due to the un-lithified nature of the sediments.
The mineralized rock is highly silicified and locally brecciated in the vicinity
of the feeder structures. As silicification decreases so does grade. Away from
the feeder zones lithology also plays an important role in gold deposition. The
finer grained siltstones contain the bulk of the lower grade material. The
higher grades are found in the coarser arkosic sandstones. The feeder or vein
zones contain grades as high as 20 ounces of gold/ton ("oz. Au/t").
HISTORY
There was no significant mining or major mineral occurrence known in the area
prior to the Company's acquisition of the Grassy Mountain deposit in 1986.
Detailed mapping and sampling were completed in 1986 and several drill targets
were defined. Hole 26-9 is considered the discovery hole with 145 feet of
mineralization averaging 0.075 oz. Au/t. The claim block was expanded at this
time and exploration work continued through 1991. The Company completed 388
drill holes for a total of approximately 221,500 feet on the property.
Newmont Grassy Mountain Corporation, a wholly owned subsidiary of Newmont
Exploration Company ("Newmont"), acquired the property from the Company in
September, 1992 and continued property evaluation through August, 1994
completing an additional 13 core and reverse circulation holes.
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In September 1996 the Company executed an agreement with Newmont, (the
"Agreement"), which provided for the reconveyance of the Grassy Mountain
property to the Company. Pursuant to the Agreement, Atlas paid an amount of
$206,000 to Newmont, issued a $500,000 unsecured, non-interest-bearing
promissory note (originally due September 18, 1997, but subsequently extended)
and assumed bonding requirements for exploration reclamation of $146,000.
RESERVES
As part of a detailed feasibility study conducted by Kilborn SNC-Lavin, Inc.
("Kilborn") in 1990, Pincock, Allen & Holt, Inc. ("PA&H") developed an open pit
mine model. The feasibility study resulted in the definition of a mineable
reserve of 996,000 ounces at a $350 gold price from 16 million tons at grades
0.062 oz. Au/t of mill and heap leach ores. Neither the recovered silver nor
low-grade leach ores were considered. The contained silver is approximately
2,467,000 ounces.
PA&H completed a feasibility study in 1990. The database utilized for this study
consisted of 180 drill holes in the main deposit area. The drilling is
predominantly vertical and angle reverse circulation rotary drill holes with
some core holes. Using a 0.02 oz. Au/t cutoff, PA&H calculated a geologic
resource of 17,217,000 tons at a grade of 0.061 oz. Au/t for a total of
1,051,500 ounces and 2,610,000 ounces of contained silver.
UNDERGROUND STUDY
Two underground feasibility studies were commissioned to evaluate 200 tons per
day ("tpd") and 1,000 tpd production options by Kilborn and Dynatec Mining
Corporation, respectively. The 200 tpd study indicated diluted mineable
reserves of 131,000 tons at a grade of 1.132 oz. Au/t for 149,000 contained
ounces. The second, larger scale underground study at 1,000 tpd used an 0.08
oz. Au/t cutoff and identifies diluted mineable reserves as 1.9 million tons at
a grade of 0.262 oz. Au/t for 497,000 contained ounces.
EXPLORATION
An additional resource was drilled out approximately 1 mile west of the main
deposit. The Crabgrass target contains a near surface geologic resource at a
0.02 oz. Au/t cutoff of 24,000 ounces contained in 600,000 tons grading 0.038
oz. Au/t. Several drilled and undrilled areas within the Grassy Mountain claim
block have potential for additional resources.
PROJECT STATUS
On January 9, 1998 the Company signed an option agreement with Tombstone
Explorations Company Ltd. ("Tombstone"), granting to Tombstone an exclusive
option to purchase 100% of the Grassy Mountain property for $4 million. The
payments are to be made over four years approximating $1 million each year.
Under the terms of the agreement, Tombstone may accelerate the purchase by
paying a total of $3.5 million to Atlas by February 2000. Tombstone has designed
a two-phase drill program comprised of 15 drillholes (approximately 10,000 feet)
currently underway.
GOLD BAR MINE
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LOCATION
The Gold Bar Resource Area is located in and adjacent to the Roberts Mountains
in Eureka County, Nevada, at elevations ranging from 6,400 to 8,800 feet above
sea level. The area is reached by traveling 22 miles west of Eureka, Nevada, on
U.S. Highway No. 50 and 17 miles northeast along the Three Bars Road.
PROPERTY
The Gold Bar Project area encompasses approximately 100 square miles. There are
3,204 unpatented lode-mining claims of which Atlas owns 3,025 and 179 are held
through lease and option to purchase agreements. Atlas also owns 182 unpatented
millsite claims, 6 patented lode claims and 8 patented millsite claims.
Additionally, Atlas holds under lease another 2,000 fee acres of surface with
varying percentages of the underlying minerals.
GEOLOGY
All of the mineralization found occurs as sediment-hosted, "Carlin-type"
deposits. These deposits are hosted by carbonate-rich sedimentary rocks and are
characterized by micron size gold and a distinct hydrothermal alteration suite.
Gold mineralization and alteration are characteristically enriched in the trace
elements silver, antimony, arsenic, mercury, and thallium.
HISTORY
Regional reconnaissance exploration led the Company to the Battle Mountain Trend
area in the summer of 1983. Focused reconnaissance along the southern Roberts
Mountains identified widespread hydrothermal alteration with anomalous gold
geochemistry along the western range front. Detailed exploration in the area
subsequently led to acquisition of land, target development, and drilling.
Since then, the Company has discovered five gold deposits: Gold Bar, Goldstone,
Gold Ridge, Gold Pick, and Gold Canyon. From inception through cessation of
operations in 1994, 485,200 ounces of gold were recovered from 7,514,600 tons of
ore grading .074 oz. Au/t milled.
Mill construction occurred during 1986 with the first gold poured in January
1987. The mill was originally designed and constructed for 1,500 throughput.
An expansion in 1989 increased throughput to the current 3,200 tpd rate.
RESERVES
Following suspension of mining operations at Gold Canyon, which occurred in
February of 1994, Atlas delayed plans for further mining of the Gold Pick and
Gold Ridge deposits pending additional drilling and further study of cost
cutting measures. This confirmatory program included the drilling of 303
surface and 55 underground holes.
The mine plan for the Gold Pick and Gold Ridge deposits established proven and
probable mineable reserves which were independently audited by Mine Reserve
Associates of Denver, Colorado in December 1994. PA&H of Denver, Colorado as
part of its independent review of the Gold Bar Resource Area, dated December 13,
1995, confirmed the following at a gold price of $400:
11
<PAGE>
PROVEN AND PROBABLE RESERVES
DECEMBER 1996
- --------------------------------------------------------------------------------
CONTAINED
ORE TONS GRADE (OZ AU/T) OUNCES/(1)/
Gold Pick East 1,278,000 0.073 93,939
- --------------------------------------------------------------------------------
Gold Pick West 1,009,000 0.069 69,909
- --------------------------------------------------------------------------------
Gold Ridge 391,000 0.059 23,077
- --------------------------------------------------------------------------------
Total 2,678,000 0.070 186,925
- --------------------------------------------------------------------------------
/(1)/ Estimated recoverable ounces of 157,000 based upon an overall 84% recovery
rate.
MEASURED & INDICATED
MINERALIZED MATERIAL *
- --------------------------------------------------------------------------------
TONS CONTAINED
(000) GRADE (OZ AU/T) OUNCES
- --------------------------------------------------------------------------------
Advanced Prospects** 3,369 0.031 104,000
* "Mineralized Material" is precious metal bearing rock that has been
physically delineated by one or more of a number of methods including drilling,
underground sampling and surface trenching and sampling. This material has been
found to contain a sufficient amount of mineralization of an average grade of
metals to have economic potential that warrants further exploration and
evaluation. Estimates of tonnage and grade are made on the continuity, size and
shape of the mineralization and have taken into account effects of waste mining
and dilution.
** Advanced prospects include Cabin Creek, Hunter, Gold Canyon and Pot
Canyon.
At December 31, 1997 the market price of gold was $291 per ounce. The above
noted reserves and mineralized material would not be economic at this price.
PROJECT STATUS
On June 6, 1997 Barrick Gold Exploration Inc. ("Barrick"), a subsidiary of
Barrick Gold Corporation, completed the purchase from the Company of more than
90% of the Gold Bar claim block with an option to acquire the balance within two
years. The Company received $1,000,000 in cash from Barrick and Barrick
purchased one million Atlas Common Shares at $1 per share. Under the terms of
the purchase, Barrick has agreed to spend $3,000,000 on the property prior to
June of 1999. At Barrick's election, on or before June 3, 1999, the balance of
the Gold Bar property will be conveyed to Barrick and Atlas may elect either to
receive an additional $15,000,000 in cash and retain a 2% net smelter royalty,
or to participate with Barrick in the further exploration and development of
Gold Bar as a 25% carried joint venture participant. If Atlas elects to
participate as a joint venture partner, Barrick will spend a minimum of
$15,000,000 on the project. If Barrick chooses not to acquire the balance of
the properties within the two-year period, all of Barrick's interest in the Gold
Bar properties will be reconveyed to Atlas.
DOBY GEORGE PROPERTY
- --------------------
On October 25, 1995 Atlas purchased the Doby George property from Independence
Mining Company, Inc. ("Independence") for $400,000 in cash plus 1.4 million
common shares of Atlas.
LOCATION
12
<PAGE>
Doby George is situated in northern Elko County, Nevada, and approximately 60
air miles north of the community of Elko. The property is accessed by traveling
north of Elko on U.S. Highway 225 for approximately 70 miles, then southwest on
Maggie Creek Summit Road another 12 miles.
PROPERTY
The Doby George Project area encompasses approximately nine square miles in Elko
County, Nevada. Atlas owns 601 acres of fee land plus 240 unpatented lode-mining
claims. An additional 104 lode claims are held under three separate lease
agreements.
GEOLOGY
Rock types at Doby George are dominated by Mississipian Schoonover Formation
siliceous and limy siltstones, sandstones, cherts and quartzites, which host all
significant mineralization on the property. Structure and stratigraphy
generally control mineralization. High angle structures appear to be related to
the more significant mineralization with mineralization increasing in both grade
and thickness toward major structures. Gold is fine grained and commonly occurs
within quartz veins and silicified zones.
HISTORY
Felmont Oil Company, an affiliate of Homestake Mining Company first identified
the property in 1983. Homestake conducted exploration drilling on the property
through 1991 when the property was sold to Independence. A total of 727 holes
have been drilled at Doby George on 5 separate deposits, and metallurgical
testwork has confirmed that the mineralization is generally not refractory and
is amenable to heap leach processing. The drilling and mapping to date have
confirmed that a significant portion of the mineralization is shallow, varying
in thickness from 15 feet to 225 feet, and may be mined by open pit methods. The
identified mineralized zones have been estimated by Behre Dolbear & Company of
Denver, Colorado, in an independent evaluation concluded in July 1994, to
contain 3.6 million tons of mineralized material at a grade of 0.06 oz. Au/t.
PROJECT STATUS
On September 1997 the Company executed a purchase agreement for the sale of the
Doby George property to Western Exploration and Development Ltd. ("Western")
which calls for installment payments of $1,600,000 to be paid as follows:
$200,000 on October 13, 1997; $400,000 on December 15, 1997; $300,000 on March
15, 1998; $300,000 on June 15, 1998; and $400,000 on September 15, 1998. In the
event that Western elects not to complete the purchase of the property, it is
entitled to receive Atlas common shares, valued at $1 per share, equal to the
option payments paid to Atlas. Western acquired certain rights to the 84,000
acre IL Ranch, a part of which is prospective and surrounds Doby George. As of
March 31, 1998 Western has made all scheduled payments.
DISCONTINUED OPERATIONS
- -----------------------
Uranium Mill Site, Moab, Utah
- -----------------------------
13
<PAGE>
HISTORY
Atlas' Moab mill site (the "Site") is located in Grand County, Utah, 3 miles
northwest of Moab and is accessed from U.S. Highway 191. The Site occupies
approximately 200 acres within 437 acres that Atlas owns in fee simple on the
outside bend of the Colorado River, at the southern end of the Moab Canyon,
approximately 4,000 feet above mean sea level.
The Uranium Reduction Company ("URC") built and began operations at the Site in
October 1956. Atlas acquired URC in 1962 and operated the uranium mill until
1984 when it was placed on stand-by status. Atlas holds U.S. Nuclear Regulatory
Commission ("NRC") Source Material License SUA-917 for the Site, which was
changed to a "possession only" status on December 18, 1992. The NRC's most
recent inspection (February 1998) report concluded that there were no violations
or deviations of the license.
Atlas was authorized to extract uranium oxide by both the acid and alkaline
leach processes and the mill was licensed for production at 850 metric tons
(1,870,000 pounds) of yellowcake annually.
The majority of the ore processed at the mill came from the Big Indian Uranium
District approximately 30 miles to the southeast. The ore, primarily sandstone
with minor amounts of carbonate, was ground to a sufficiently fine consistency
to allow maximum efficient chemical reactions to occur. It was then processed
through either the acid-leach circuit or the alkaline-leach circuit. The solids
remaining after uranium extraction were pumped to the tailings impoundment.
The approximate wet weight of the tailings contained within the tailings pile is
10.5 million tons, with a volume of 7.5 million cubic yards. The tailings pile
is composed of fine tailings (slimes) and coarse tailings (sand). An interim
cover comprised of low-grade ore, native soils and a synthetic geo-grid, was
placed over the tailings pile beginning in 1989 and ending in 1995.
A decommissioning plan for the mill facilities was approved by NRC on November
28, 1988. The dismantling and disposal of the mill facilities was completed in
1996. All that remains at the Site is an office/warehouse and the 130 acre
tailings pile.
The NRC approved a reclamation plan for the Site in 1982. The plan was based on
the projected life of facility tailings capacity requirements. The disposal pile
was designed for an ultimate crest elevation of 4,076 feet, which was not
achieved, thus resulting in the necessity to revise the reclamation plan. Atlas,
in August 1988, submitted a revised reclamation plan for NRC review and
approval. In 1990, the NRC changed its technical criteria, which resulted in
requests for additional information, reevaluation, and redesign. As a result,
Atlas submitted a revised reclamation plan (the "Plan") in 1992. On July 20,
1993 NRC gave notice in the Federal Register of its decision to approve the Plan
and made available for public comment an environmental assessment of the effects
of the proposed action. Comments received prompted NRC to withdraw, in October
1993, its previous decision to approve the Plan. On March 30, 1994, NRC
announced its intent to prepare an Environmental Impact Statement ("EIS") to
evaluate potential impact to the environment of the proposed plan and certain
alternative proposals.
14
<PAGE>
The Plan would allow the Company to reclaim the tailings pile in place for
permanent disposal and long-term custodial care by a government agency and to
relinquish responsibility of the Site after having its NRC license terminated.
Reclamation activities planned for the Site include recontouring the tailings
pile to allow for the natural drainage of precipitation and covering it with
earthen material and rock to control radon emanations and prevent erosion.
The Company, after many years and at great expense, is near completion of the
regulatory process for approval of the Plan. On March 7, 1997 the NRC issued
its Technical Evaluation Report ("TER") which acknowledges that the Plan is in
compliance with the technical requirements for capping the tailings pile onsite.
The TER is used to evaluate compliance with regulatory and safety criteria.
However, the regulatory approval process is not complete until the NRC issues
its final EIS, which is anticipated in late 1998. In the draft EIS issued in
January 1996, the NRC staff' concluded that Atlas' proposal to reclaim the pile
in place is acceptable. The TER concludes that the proposed reclamation plan
satisfies the regulatory requirements.
While the NRC was prepared to publish the final EIS in mid-1997, it has been
delayed due to concerns raised by the U.S. Fish and Wildlife Services ("FWS")
about four endangered species of fish in the Colorado River. The FWS must
prepare a biological opinion ("BO") under the Endangered Species Act to complete
the EIS process. The BO has been delayed due to the FWS request for additional
information. Atlas and the NRC continue to believe the Plan satisfies the
regulatory requirements and protects public health and the environment. For
example the NRC's recent comment (Feb. 13, 1998) to the FWS states, "Based on
our review of all the information available, we continue to conclude that
reclamation of the tailings pile, as proposed by Atlas, is unlikely to
jeopardize the few endangered species of fish, as stated in our Supplemental
Biological Assessment".
On March 11, 1998 the FWS acknowledged to the NRC that since the NRC lacked the
authority to require Atlas to relocate the tailings pile to an alternate site,
the FWS could not recommend relocating the tailings pile as a reasonable and
prudent alternative.
When reclaimed, approximately 250 acres, which encompass the capped tailings and
reconfigured Moab Wash, will be deeded to the federal or state government.
Approximately 187 acres are available to Atlas for sale. A substantial portion
of the remaining land could be developed for commercial use after reclamation
and has an estimated value at current market prices in excess of $2.0 million.
For further information on the Moab site reclamation, see "Management's
Discussion and Analysis of Financial Position and Operating Results -
Environmental Matters."
15
<PAGE>
ASBESTOS MINE SITE, COALINGA, CALIFORNIA
- ----------------------------------------
Atlas, which operated the mine for a five year period in the 1960s, was notified
by the Environmental Protection Agency in fiscal 1988 that the Bureau of Land
Management, and several other subsequent owners were potentially responsible
parties under the Comprehensive Environmental Response, Compensation and
Liability Act for cleanup costs at the mine site. Remedial construction
activities at the Company's former asbestos mine and mill site located near
Coalinga, California, which began in October 1994, are complete. The
Environmental Protection Agency issued its "Approval of Construction Completion"
on November 14, 1996 two years after the remedial action plan was approved. For
further information on the Coalinga reclamation, see "Management's Discussion
and Analysis of Financial Position and Operating Results - Environmental
Matters."
RISK FACTORS
- ------------
PRICES
- ------
The Company's profitability has and continues to be significantly affected by
metal prices. These prices may fluctuate widely and are affected by numerous
factors beyond the Company's control, including global and regional demand,
production costs, transportation and smelting charges, political and economic
conditions, strength of the United States dollar and exchange rates.
Gold, lead, zinc and silver are products that can be easily sold on numerous
markets throughout the world. It is not difficult to ascertain the market price
for these metals at any particular time, and these metals can be sold to a large
number of refiners or metals dealers on a competitive basis. The Company
normally sells its metal production through major dealers, in some cases may use
hedging programs. Sales of finished perlite are individually negotiated with end
users. There are no guarantees that the Company will be able to obtain sales
commitments in quantities or at prices sufficient to make a profit.
ENVIRONMENTAL ISSUES
- --------------------
The Company is required to comply with various federal, state and local
regulations relating to environmental matters at its properties. The Company is
required to obtain permits from various governmental agencies in order to mine
and mill. The Company has obtained all of the necessary permits relating to its
on-going operations. The Company cannot anticipate whether increasing costs of
environmental compliance for its properties will have a material adverse impact
on planned operations or competitive position.
COMPETITION
- -----------
The Company competes with substantially larger companies in the acquisition of
properties and the production and sale of metals and industrial minerals. With
the exception of the perlite market, the Company does not believe that it or any
other competitor is a material factor in these markets, and the price it
receives for its production depends almost entirely upon market conditions over
which it has no control. The Company believes that it can promptly sell at
current market prices all of the metals and minerals that it can produce.
LIQUIDITY
- ---------
The Company incurred net losses of $15,619,000 and $10,385,000 for the years
ended December 31, 1997 and 1996, $4,266,000 for the six months ended December
31, 1995 and $19,776,000 for the year ended June 30, 1995. The Company expects
that it will continue to incur losses in the near future, and that its return to
profitability will depend on, among other things its ability to dispose of its
interest in its investment in Cornerstone and the profitability of production
at existing mines. While the Company continues to generate limited cash flow at
its Bolivian mines, the amount of cash flow available for acquisitions,
investments, exploration and development is very limited. As a result the
Company is carefully monitoring its discretionary spending while it seeks
financing alternatives. There is no guarantee that the Company will be able to
obtain the necessary financing to enable it to return to profitability.
MINING AND PROCESSING
- ---------------------
The Company's business operations are subject to risks and hazards inherent in
the mining industry, including but not limited to unanticipated variations in
grade and other geological problems, water conditions, surface or underground
conditions, metallurgical and other processing problems, mechanical equipment
performance problems, the unavailability of materials and equipment, accidents,
labor force and transportation disruptions, unanticipated transportation costs
and weather conditions, any of which can materially and adversely affect, among
other things, the development of properties, production quantities and rates,
costs and expenditures and production commencement dates.
RISK OF INTERNATIONAL OPERATIONS
- --------------------------------
Many of the mineral rights and interests of the Company are subject to
governmental approvals, licenses and permits. Such approvals, licenses and
permits are, as a practical matter, subject to the discretion of the applicable
governments or governmental officials. No assurance can be given that the
Company will be successful in obtaining any or all of the various approvals,
licenses and permits it seeks, that it will obtain them in a timely fashion, or
that it will be able to maintain them in full force and effect without
modification or revocation.
In certain countries in which the Company has assets and operations, such assets
and operations are subject to various political, economic and other
uncertainties, including, among other things, the risks of war or civil unrest,
expropriation, nationalization, renegotiation or nullification of existing
concessions, licenses, permits, approvals and contracts, taxation policies,
foreign exchange and repatriation restrictions, changing political conditions,
international monetary fluctuations and currency controls. In addition, in the
event of a dispute arising from foreign operations, the Company may be subject
to the exclusive jurisdiction of foreign courts or may not be successful in
subjecting foreign persons to the jurisdiction of courts in the United States.
The Company also may be hindered or prevented from enforcing its rights with
respect to a governmental instrumentality because of the doctrine of sovereign
immunity. It is not possible for the Company to accurately predict such
developments or changes in law or policy or to what extent any such developments
or changes may have a material adverse effect on the Company's operations.
16
<PAGE>
Item 2. PROPERTIES
----------
The Company's materially important properties consist of the Andacaba mine and
the Don Francisco and Koyamayu projects which produce lead, zinc and silver in
Bolivia, Tucker Hill which produces perlite, Gold Bar which contains gold
resources, and to the Doby George and Grassy Mountain gold properties, described
under "Item 1 Business".
--------
Item 3. LEGAL PROCEEDINGS
-----------------
The information called for by this Item is set forth in Note 14 to the Financial
Statements and is incorporated herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of the security holders during the quarter
ended December 31, 1997.
EXECUTIVE OFFICERS OF THE COMPANY
- ---------------------------------
Set forth below is the age and certain other information regarding each person
currently serving as an executive officer of the Company.
Gregg B. Shafter, age 42, has served as President since October 7, 1997. Since
joining the Company in August 1991, Mr. Shafter has also served in the
capacities of Vice President of Project Development, Manager Business
Development and Land Manager. Prior thereto Mr. Shafter performed acquisition
and administrative functions for Western Gold Exploration and Mining Company,
Limited Partnership and Atlantic Richfield Company.
Richard E. Blubaugh, age 50, has served as Vice President of Environmental and
Governmental Affairs since October 1, 1990, and has been with Atlas for 16
years. He has been involved in the environmental, health and safety field for
over 23 years, has managed environmental and regulatory functions for mining
firms in seven western states, and also has experience as a regulator and a
consultant.
James R. Jensen, age 38, has served as Treasurer and Secretary since February
1997. Mr. Jensen joined the Company in August of 1989, as Accounting Manager
and was promoted to Controller in September 1993. Prior to his employment with
the Company, Mr. Jensen was a manager with the accounting firm of KPMG Peat
Marwick.
17
<PAGE>
PART II
Item 5. MARKET FOR THE COMPANY'S COMMON STOCK
--------------------------------------
AND RELATED STOCKHOLDER MATTERS
-------------------------------
ATLAS' COMMON STOCK IS LISTED ON THE NASDAQ BULLETIN BOARD UNDER THE SYMBOL
- ---------------------------------------------------------------------------
ATSP. The High and Low sales prices for the Common Stock for each quarterly
period are as follows:
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1997 1996 1995
- ---------------------------------------------------------------
Quarter Ended High Low High Low High Low
- ---------------------------------------------------------------
March 31 $13/16 $ 9/16 $1 7/8 $1 3/8 N/A N/A
June 30 3/4 11/32 1 1/2 1 N/A N/A
September 30 1/2 1/8 1 1/8 11/16 $ 2 $1 5/8
December 31 3/8 1/16 1 1/8 5/8 1 3/4 1 1/8
No dividends were declared in the years ended December 31, 1997 and 1996, or in
the six months ended December 31, 1995. At March 26, 1998, there were
approximately 16,041 holders of record of the Company's Common Stock.
Item 6. SELECTED FINANCIAL DATA
-----------------------
The following table is derived in part from the audited consolidated financial
statements of the Company. The consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States. In all material respects, they conform with principles generally
accepted in Canada (except as described in Note 20 to the Company's consolidated
financial statements). This information should be read in conjunction with the
audited consolidated financial statements and the notes thereto.
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
Year Ended Dec. 31, Dec. 31, Year Ended June 30,
-------------------- -------------------------------
1997 1996 1995 1995 1994 1993
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Mining revenue $ 3,935 $ 578 $ - $ 2,328 $ 19,478 $ 19,280
Loss from continuing
operations (13,921) (10,385) (4,266) (20,397) (12,040) (28,066)
Income (loss) from
discontinued operations (2,868) - - 621 2,175 (875)
Net loss (15,619) (10,385) (4,266) (19,776) (9,865) (29,909)
PER SHARE OF COMMON STOCK:
Loss from continuing
operations (0.54) (0.49) (0.22) (1.23) (1.45) (4.43)
Income (loss) from
discontinued operations (0.11) - - 0.04 0.26 (0.14)
Net loss (0.61) (0.49) (0.22) (1.19) (1.19) (4.72)
Cash dividends per share - - - - - -
BALANCE SHEET DATA:
Cash and cash
equivalents 583 1,022 220 4,452 3,767 1,734
Total assets 42,316 56,021 68,080 59,222 38,227 37,349
Long-term
obligations 29,820 36,808 37,899 34,841 33,247 32,607
Working capital
(deficit) (8,197) (2,437) 7,212 5,664 (239) (2,816)
Total stockholders'
equity (deficit) 531 12,372 22,143 24,833 (2,475) (4,407)
Book value per
share 0.02 0.51 1.16 1.34 (0.26) (0.70)
</TABLE>
18
<PAGE>
Item 7. CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and accompanying notes.
During 1995, the Board of Directors authorized a change in Atlas' fiscal year-
end to December 31. This change was implemented during 1995, and resulted in
financial information being reported for the six month period ended December
31, 1995.
WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES
- ------------------------------------------------
Between the summer of 1994 (briefly before the suspension of milling operations
at the Company's Gold Bar mine in September 1994) and early 1996, the Company
completed several financings, the proceeds of which were used to complete
acquisitions and to raise working capital. During the summer of 1994, the
Company raised $50 million through private placement of 9,090,909 Units for a
purchase price of $5.50 per Unit, each Unit consisting of one share of Atlas
Common Stock and one-half of one warrant (exercisable for five years) to
purchase one share of Atlas Common Stock at an exercise price of $7.00 per
share. The financing closed in escrow in August 1994. Of $50 million raised,
$35.5 million was released from escrow on August 15, 1994, allowing Atlas to
complete the acquisition of 12,694,200 common shares (37.2% of the outstanding
shares) of Vista Gold Corp. ("Vista"). The remaining $14.5 million was released
on December 15, 1994, following shareholder approval of a proposal to increase
the number of Atlas Common Shares authorized for issuance. Of this amount, $3.2
million was ultimately used in March 1995 to acquire 2.4 million shares (or 9%
of the outstanding shares) of Dakota Mining Corporation ("Dakota"). In November
1995, the Company completed a private placement of $10 million 7% Exchangeable
Debentures ("Debentures") due October 25, 2000. The Debentures were secured by
the pledge of 8,474,576 of the Vista shares. See Item 8. "Financial Statements
and Supplementary Data."
In March 1996, the Company sold its 2,419,000 common shares of Dakota for $4.5
million and in October 1996, it sold the 4,240,324 shares of Vista not pledged
for net proceeds of $5.5 million.
In February 1997, Arisur signed a financing agreement with the Corporacion
Andina de Fomento ("CAF") for US $3 million dollars. CAF is a multilateral
financial institution that supports sustainable development and integration
efforts within the Andean region of South America. The proceeds of the first
tranche of the loan of $2.3 million, received in May 1997, paid for certain
equipment and expansion programs of the Bolivian operations and reimbursed Atlas
in excess of $500,000 of funds previously advanced for said purposes. The
remaining $700,000 has not yet been funded pending final approvals from CAF.
During 1997, the Company also completed transactions on three of its non-
operating properties. In June, the Company sold 90% of its Gold Bar property to
Barrick for $1 million in cash and the purchase of one million shares of the
Company's stock at $1 per share. In September the Company executed an agreement
for the sale of its Doby George property for a total purchase price of $1.6
million, to be paid in installments through September 1998. The Company also
completed an option agreement for the sale of its Grassy Mountain property for
19
<PAGE>
$4 million to be paid in installments over 4 years. See Item 1. "BUSINESS" for a
more complete discussion of these transactions.
In June 1997 the Company repurchased the Debentures from the Debenture holders.
The agreement with the Debenture holders provided for the then remaining
outstanding principal amount of $9,810,000 together with accrued interest to be
repurchased for a combination of 1,500,928 new issue Atlas common shares and the
remaining Vista shares.
The above transactions, in addition to financing the acquisitions noted above,
have allowed the Company to acquire its interest in Arisur (see Item 1. "ARISUR
INC.") and to develop its Tucker Hill perlite project (see Item 1. "TUCKER
HILL OPERATIONS"). These expenditures, combined with minimal operating revenues
during most of this time period, have resulted in large swings in the Company's
working capital position.
Working capital decreased by $5.8 million during 1997. This was a result of
construction and development expenditures at Tucker Hill and Andacaba of $3.7
million, ongoing exploration, standby and administrative costs totaling $3.1
million and uranium reclamation costs of $1.2 million. Cash inflows included
$2 million from Barrick (see above), $1.6 million in Title X receipts (see Item
7. "Environmental Matters") and long-term debt proceeds of $1.9 million. In
addition to the above, the Company's $3.5 million convertible debenture, due
September 30, 1998, has been classified as a current liability at December 31,
1997. See Note 1. to the Consolidated Financial Statements.
Working capital decreased by $9.6 million during 1996. This was a result of
acquisition costs of Arisur of approximately $3.7 million, construction and
development costs at Tucker Hill and Andacaba of $4.1 million and ongoing
exploration, standby and administrative costs totaling $6.6 million, offset by
the sale of Vista shares noted above.
During 1998, the Company will focus its efforts on the continuing development of
its Bolivian operations, both through the continuing expansion of its current
mine and mill operations as well as through the identification and acquisition
of other promising properties in the area.
Pending the commencement of significant cash flows from the Company's Bolivian
properties, the Company is pursuing several alternatives for near term
financing. In addition to the property transactions described above, the
Company announced its intention to sell its controlling interest in Cornerstone
in 1998. The Company also continues to pursue other sources of funding,
including potential mergers with companies holding sufficient cash reserves.
20
<PAGE>
The Company is also evaluating the leveraging of its unencumbered property in
Moab and its restricted cash and Title X receivable (See Item 7. "ENVIRONMENTAL
MATTERS") in order to secure short or long term funding as appropriate.
Management believes that the above actions, along with the continued cooperation
of the Company's creditors and stringent management of cash resources, will
enable the Company to meet its short term cash requirements.
The Company believes that its mining operations will generate positive cash
flows beginning in 1998 or 1999, and will allow the Company to be less dependent
on the debt and equity markets for its working capital needs in the future.
In order to meet its estimated long term reclamation obligations the Company
will utilize its restricted cash and securities, which supports the bonding of
such obligations, reimbursements due under the Title X program and, as
necessary, cash flow from operations. See Item 7. "ENVIRONMENTAL MATTERS."
For the year ended December 31, 1997, the Company's capital expenditures were
$1.8 million, compared with $1.3 million during 1996. Expenditures for 1997
consisted of $1.6 million at Andacaba for the mine and mill expansion and $0.2
million at Grassy Mountain. In 1996, development and construction costs
incurred at Andacaba were $1.1 million, and acquisition costs of Grassy Mountain
were $0.2 million.
RESULTS OF OPERATIONS
- ---------------------
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996
- -------------------------------------------------------------------------
REVENUES
Mining revenues in 1997 were $3,935,000 compared to $578,000 in 1996. Revenues
in 1997 represent the first full year of operations at the Company's Bolivian
mining properties compared to only one quarter in 1996, subsequent to the
purchase of Arisur by the Company on October 8, 1996. Revenues in 1997 also
were higher as a result of the expansion of its mining and milling operations in
1997, resulting in greater production than in prior years.
21
<PAGE>
OPERATING/PRODUCTION COSTS
Total operating costs in 1997 were $4,336,000, including depreciation of
$665,000, compared to $765,000 during 1996. The large increase in operating
costs can also be attributed to the first full year of production and the
greater capacity as described above.
EXPLORATION
Exploration costs were $731,000 for the year ended December 31, 1997 as compared
to $1,264,000 for the year ended December 31, 1996. The primary expenditure in
1997 was a $450,000 charge pursuant to a joint venture termination agreement
with Vista. Costs incurred in 1996 primarily reflect approximately $900,000 of
work performed on the Commonwealth property during the year.
GENERAL AND ADMINISTRATIVE
General and administrative expenses in 1997 were $1,925,000, a decrease of
$2,181,000 from 1996 costs of $4,106,000. The 1996 costs includes severance
payments of $830,000 related to the resignations of David J. Birkenshaw as
Chairman and CEO of the Company and Gerald E. Davis as President of the Company,
approximately $300,000 reflecting costs associated with unsuccessful merger
discussions with MSV Resources Inc., Company bonuses paid during the first
quarter of 1996 and costs associated with the relocation of the corporate
office. The Company underwent an intensive cost reduction program in 1997,
resulting in decreased salary, consulting and other general and administrative
costs during the year.
OTHER
In June 1997, the Company repurchased the Debentures as described above. The
transaction resulted in a loss of $5,419,000, which has been recorded in the
income statement as a loss from repuchase of Debentures of $6,589,000 and an
extraordinary gain of $1,170,000.
Effective December 15, 1997 the Company terminated life insurance coverage for
all current and future retirees, and also discontinued the retiree medical
benefit for all current employees, with the exception of three employees who
have been grandfathered. This change resulted in a curtailment gain of $655,000
in the year ended December 31, 1997.
Also during 1997, the Company recorded a loss from assets held for sale of
$2,938,000 as a result of its decision to sell its controlling interest in
Cornerstone.
22
<PAGE>
SIX MONTHS ENDED DECEMBER 31, 1995 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
- ----------------------------------------------------------------------------
1994
- ----
REVENUES
Due to the suspension of milling operations at the Gold Bar Project in September
1994, the Company had no mining revenues for the six months ended December 31,
1995. This compares to mining revenue of $2,328,000 and gold production of
6,021 ounces generated from Gold Bar during the six months ended December 31,
1994.
OPERATING/PRODUCTION COSTS
The Company had no operating costs in the six months ended December 31, 1995.
Operating costs for the six month period ended December 31, 1994, which was
marked by the suspension of milling activities at Gold Bar on September 19,
1994, included production costs of $2,683,000, depreciation, depletion and
amortization of $348,000 and the accrual of shutdown and standby costs of
$1,275,000. Production costs at the Gold Bar property increased to $446 per
ounce, or 115% of revenue, due to the processing of low grade ore from depleting
stockpiles. The $1,275,000 accrual for shutdown and standby costs recorded in
September 1994 reflected the projected shutdown and standby costs to be incurred
through the remainder of fiscal 1995.
EXPLORATION
The Company incurred exploration costs of $307,000 during the six months ended
December 31, 1995 for continued exploration efforts on the Gold Bar property, as
compared to $1,105,000 for the six months ended December 31, 1994. This
decrease reflects the cost savings associated with entering into the joint
venture agreements covering approximately 80% of the Gold Bar claim block as
compared to the underground exploration conducted at Gold Bar during the six
months ended December 31, 1994.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the six months ended December 31, 1995
were $1,745,000 compared to $1,372,000 for the six months ended December 31,
1994. This increase was primarily a result of an intensified property
acquisition program and relocation expenses.
YEAR ENDED JUNE 30, 1995 COMPARED TO YEAR ENDED JUNE 30, 1994
- -------------------------------------------------------------
In January 1994, production from the Gold Bar property was halted after a
confirmatory drill program indicated that mining to the originally designed Gold
Canyon pit bottom would have been uneconomical due to the occurrence of more
refractory material than had been previously forecast. Management initiated the
processing of low grade stockpiled ores in an effort to avoid the suspension of
milling operations. Engineering and metallurgical studies focusing on the
development of short term reserves were accelerated. On September 16, 1994,
stockpiled ores were depleted and the Company was forced to suspend milling
operations and to temporarily place the Gold Bar property on standby. As a
result, the fiscal year ended June 30, 1995 reflects only three months of
operations.
23
<PAGE>
REVENUES
Revenues for the years ended June 30, 1995 and 1994 were $2,328,000 and
$19,478,000, respectively. Gold production decreased to 6,021 ounces in fiscal
1995 from 51,700 ounces in fiscal 1994. The decreases in revenue and gold
production in fiscal 1995 reflect the suspension of operations at the Gold Bar
property after only three months of production. The average price per ounce of
gold realized in fiscal 1995 was $387 versus $377 in fiscal 1994.
OPERATING/PRODUCTION COSTS
Production costs for fiscal 1995 and 1994 were $2,683,000 and $16,526,000,
respectively. Production costs per ounce in fiscal 1995 and 1994 were $446 and
$319, respectively. The decreases in production costs are a result of the
suspension of operations at the Gold Bar property after three months of
production in fiscal 1995. The higher production costs per ounce reflect the
lower grades of ore run subsequent to the suspension of operations.
The Company incurred $1,485,000 in shutdown and standby costs during the last
three quarters of fiscal 1995. Such costs included severance payments,
continuing onsite security and maintenance as well as general and administrative
expenditures.
During the fourth quarter of fiscal 1994, the Company and an independent
consultant began evaluating the Gold Bar mine plan and remaining known ore
reserves. As a result, the Company determined that its remaining unamortized
costs could not be recovered from undiscounted cash flows over the remaining
mine life and the Company recognized an impairment to adjust the carrying value
of its assets with the property being written down to estimated salvage value.
This adjustment resulted in a charge to operations of $5,355,000 in the fourth
quarter of fiscal 1994.
Depreciation, depletion and amortization charges of $395,000 in fiscal 1995
represent the flow through of non-cash costs contained in stockpiled ore
inventory at the end of fiscal 1994 and the write-off of capital expenditures
incurred during the three months of operations in fiscal 1995.
EXPLORATION COSTS
Exploration costs of $1,911,000 were incurred in fiscal 1995, a decrease of
approximately $400,000 from fiscal 1994. The decrease is attributable to the
reduction of land holding costs, as joint venture partners (see below) were
responsible for and leasehold payments, and to a reduction of personnel.
Exploration costs in fiscal 1994 increased $430,000 from fiscal 1993 as a result
of an underground drilling program commenced in the fourth quarter of fiscal
1994 and ended during the first quarter of fiscal 1995.
GENERAL AND ADMINISTRATIVE
General and administrative expenses decreased by $326,000 from $3,068,000 in
fiscal 1994 to $2,742,000 in fiscal 1995, or 11%. The primary reason for the
decrease was a $400,000 reduction in salaries and severance costs.
24
<PAGE>
OTHER
During the first quarter of the fiscal year ended June 30, 1995 the Company
acquired a 37.2% interest in Vista, and recorded an equity loss of $1,361,000
during the remainder of the year. Following the merger of Vista with its 50.5%
subsidiary, Hycroft Resources and Development Corporation, Atlas re-evaluated
its investment in Vista relative to the fair values implied in the amalgamation
and to the known reserves at the Crofoot/Lewis mine. As a result, the Company
recorded an $11,419,000 impairment of its investment in Vista as of June 30,
1995.
During October 1994, Atlas recorded a $1,144,000 loss related to the forfeiture
of a non-refundable deposit on the purchase of securities in Dakota. Atlas'
decision to forfeit the deposit was based on its review of the relative market
and purchase prices. In March 1995, Atlas entered into an agreement to purchase
approximately 2.4 million common shares of Dakota for $3,000,000, whereby each
company released the other from any liability arising out of a previous
agreement.
Notes 13 and 14 to the Financial Statements provide details and a discussion of
discontinued operations for the past three fiscal years.
ENVIRONMENTAL MATTERS
- ---------------------
The Company is subject to extensive federal, state and local environmental laws
and regulations. These laws, which are constantly changing, regulate the
discharge of materials into the environment and may require the Company to
mitigate any environmental effects caused by its operations. The Company
believes that it is currently in substantial compliance with all federal, state
and local environmental regulations applicable to its current and discontinued
operations.
The Company is obligated to decommission and reclaim its uranium mill site
located near Moab, Utah. The Company discontinued its uranium operations in
1987, and estimated shut-down and reclamation expenses were accrued.
Reclamation and decommissioning costs (net of reimbursements, see below) of
$1,215,000, $1,808,000, $1,189,000, and $1,497,000 have been charged against
this accrual for the years ended December 31, 1997 and 1996, six months ended
December 31, 1995, and the fiscal year ended June 30, 1995. The approval
process for the Company's plan of reclamation was again delayed during 1997.
The continued delays in this process increase the ultimate cost of the
reclamation plan due to additional technical information requirements,
continuing overhead costs, legal and consulting fees, as well as inflation and
other ongoing carrying costs of the property. Due to these added costs, along
with possible changes in the scope of the Company's reclamation plan, the
Company has reevaluated its uranium reclamation accrual and concluded that an
additional charge of $3,000,000 was required in the year ended December 31,
1997. The balance of this accrual at December 31, 1997, after the additional
charge, was $21,935,000. The reclamation plan as proposed by the Company
extends over the next three to six years. Title X of "The Comprehensive
National Energy Policy Act" ("Title X"), which was enacted in October 1992,
provides for reimbursement by the federal government of past and future
reclamation expenses in proportion to the extent that the Site's tailings were
generated by Atomic Energy Commission ("AEC") contracts. With respect to the
Company's discontinued uranium operations, 56% of the tailings were generated by
AEC contracts. Requests for reimbursement
25
<PAGE>
under Title X must be submitted annually to the Department of Energy ("DOE") and
are subject to review and audit. At December 31, 1997, the Company had recorded
a Title X receivable of $15,865,000 which includes claims already made (see
below) as well as an estimate of future claims based upon the recorded
reclamation liability. The timing on the repayment of costs approved for
reimbursement is a function of Congressional appropriation.
In July 1994, the Company submitted the first of four claims under Title X of
the 1992 Energy Act for reimbursement of compliance and reclamation costs. The
four claims cover costs incurred from fiscal 1980 through March 1997. The total
amount reimbursable under the four claims is $6,812,000. As of March 15, 1998,
the Company had received $4,276,000 in reimbursements under Title X leaving a
remaining balance due of $2,536,000 at December 31, 1997.
On January 30, 1996, the Nuclear Regulatory Commission ("NRC") released a draft
Environmental Impact Statement ("EIS") and a draft Technical Evaluation Report
("TER") regarding the Company's reclamation proposal. Atlas' proposed
reclamation plan consists of contouring the tailings pile to allow for the
natural drainage of precipitation and the addition of an earth and rock cover to
prevent erosion and minimize radon emanation. The current EIS process is being
used by the NRC to evaluate the environmental impact of the Company's proposed
plan and an alternative proposal. In the draft EIS, the NRC staff preliminarily
concluded that Atlas' proposal to reclaim the pile in place was acceptable and
less costly than the proposed alternative. The final TER, dated March 7, 1997,
concluded that the Atlas reclamation plan was in compliance with the technical
requirements for capping the tailings facility on-site.
The Company is confident that the ultimate result of the EIS review process, in
conjunction with the supportive conclusion of the TER will be the approval of
its reclamation plan, and that its accrual is sufficient to cover future
reclamation costs.
Estimated reclamation costs relating to the Gold Bar Resource Area are recorded
based on the units of production method. There were no reclamation costs
expensed in the twelve month periods ended December 31, 1997 and 1996, the six
month period ended December 31, 1995 and the fiscal year ended June 30, 1995
since analysis indicated that the $3,118,000 accrued for reclamation costs at
the Gold Bar Resource Area is adequate.
The Company anticipates, funding over the next three to six years, the estimated
closing and reclamation costs of its uranium and gold mining operations from the
$6,208,000 in restricted cash which serves as collateral for letters of credit
and reclamation bonds relating to these costs and from reimbursements under
Title X. The above sources of funds will not satisfy the entire obligation, nor
can the availability of these funds be assured when required. The Company
expects to fund any such deficiencies through the sale of assets, financings
secured by the above noted assets and/or from cash flows from operations as
needed.
During fiscal 1988, the United States Environmental Protection Agency ("EPA")
notified the Company that it was one of several potentially responsible parties
("PRPs") under the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") for cleanup costs at the Company's former asbestos mine
and mill site near Coalinga, California and in the City of Coalinga. In fiscal
1993 and 1991, the Company established a reserve of,
26
<PAGE>
and recorded as an expense $600,000 and $3,000,000, respectively, to cover the
Company's share of costs to be incurred in connection with this matter. The
accruals reflect participation by the Bureau of Land Management ("BLM"), which
was also named as a PRP. The Company instituted legal action against 13
insurance carriers which had issued insurance policies over a period of more
than 25 years with respect to these sites. During fiscal 1994, the Company
reached settlement with a number of these carriers and recorded a gain from
discontinued operations of $2,175,000.
In October 1994, the EPA approved a remedial action plan for the sites. Due to
unusually heavy rains experienced at the site during the spring and early summer
of 1995, the Company experienced delays and cost overruns. As a result, the
Company recorded an additional loss from discontinued operations of $225,000 in
the fourth quarter of fiscal 1995. The EPA issued its "Approval of Construction
Completion" on November 14, 1996.
In 1997, the Company recorded an additional accrual of $217,000 primarily due to
past administrative and oversight costs of the EPA for the years 1994 through
1997, and also for costs charged by the State of California for its
administrative costs incurred at Coalinga.
IMPACT OF YEAR 2000
- -------------------
The Company's computer programs consist of canned software which will be
upgraded by the manufacturer at minimal cost to the Company in order to achieve
year 2000 compliance. The Company believes that following these modifications or
upgrades, which are anticipated to be completed by the end of 1998, the issue
will not result in any significant impact on the operations of the Company or
its computer systems.
27
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
INDEX TO FINANCIAL STATEMENTS Page
Consolidated Statements of Operations 31
for the Years Ended December 31, 1997
and 1996, the Six Months Ended
December 31, 1995 and for the Year
Ended June 30, 1995
Consolidated Balance Sheets as of 32
December 31, 1997 and 1996
Consolidated Statements of Stockholders' 33
Equity (Deficit) for the Years Ended
December 31, 1997 and 1996, the Six
Months Ended December 31, 1995 and for
the Year Ended June 30, 1995
Consolidated Statements of Cash Flow 34
for the Year Ended December 31, 1997
and 1996, the Six Months Ended
December 31, 1995, and for the Year
Ended June 30, 1995
Notes to Consolidated Financial 35 - 61
Statements
Report of Independent Auditors 62
28
<PAGE>
ATLAS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except earnings per share)
<TABLE>
<CAPTION>
Year Ended Six Months
December 31, Ended Year Ended
---------------------- December 31, June 30,
1997 1996 1995 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
Mining revenue $ 3,935 $ 578 $ - $ 2,328
- ------------------------------------------------------------------------------------------
Costs and expenses:
Production costs 3,671 441 - 2,683
Depreciation, depletion and
amortization 665 324 - 348
Impairment of mineral property
(Note 6) 1,256 - - -
Shutdown and standby costs
(Note 5) 446 1,232 671 1,485
General and administrative
expenses 1,925 4,106 1,745 2,742
Exploration and prospecting
costs 731 1,264 307 1,911
- ------------------------------------------------------------------------------------------
Gross operating loss (4,759) (6,789) (2,723) (6,841)
- ------------------------------------------------------------------------------------------
Other (income) and expense:
Equity in loss of Vista Gold
Corp. (Note 9) - 2,721 1,703 1,361
Loss on asset held for sale
(Note 9) 2,938 272 25 -
Loss on repurchase of
debentures (Note 10) 6,589 - - -
Gain on curtailment of
retirement plan (Note 16) (655) - - -
Impairment of investment in
Vista Gold Corp. (Note 9) - - - 11,419
Forfeiture of deposit on stock
purchase agreement (Note 4) - - - 1,144
Interest (income) expense, net 559 728 73 (327)
Other (income) expense, net
(Notes 4 and 9) (269) (125) (258) (41)
- ------------------------------------------------------------------------------------------
Loss from continuing
operations before income
taxes and extraordinary
gain (13,921) (10,385) (4,266) (20,397)
Provision for income taxes (Note 18) - - - -
- ------------------------------------------------------------------------------------------
Loss from continuing
operations (13,921) (10,385) (4,266) (20,397)
Income (loss) from discontinued
operations (Note 13) (2,868) - - 621
- ------------------------------------------------------------------------------------------
Loss before extraordinary
gain (16,789) (10,385) (4,266) (19,776)
Extraordinary gain (Note 10) 1,170 - - -
- ------------------------------------------------------------------------------------------
Net loss $(15,619) $(10,385) $(4,266) $(19,776)
==========================================================================================
Basic and diluted earnings per share of
common stock (Note 17)
Loss from continuing
operations $ (0.54) $(0.49) $(0.22) $(1.23)
Income (loss) from discontinued
operations (0.11) - - 0.04
Extraordinary gain 0.04 - - -
- ------------------------------------------------------------------------------------------
Net loss $ (0.61) $(0.49) $(0.22) $(1.19)
==========================================================================================
Weighted average of common shares
outstanding 25,811 21,015 19,148 16,549
==========================================================================================
</TABLE>
See accompanying notes
29
<PAGE>
ATLAS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31,
------------------------
1997 1996
- ---------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 583 $ 1,022
Accounts receivable - Trade 542 270
Title X receivable (Note 14) 1,100 1,600
Accounts receivable - other 541 469
Inventories (Note 3) 965 848
Prepaid expenses and other
current assets 37 195
- ---------------------------------------------------------------------------
Total current assets 3,768 4,404
Property, plant and equipment (Note 6) 60,427 59,909
Less: Accumulated depreciation,
depletion and amortization
and impairment (46,027) (44,778)
- ---------------------------------------------------------------------------
14,400 15,131
Investment in Vista Gold Corp. (Notes
4, 9 and 10) - 11,542
Restricted cash and securities (Note
11) 6,208 6,254
Asset held for sale (Note 9) 3,000 3,984
Title X receivable (Note 14) 14,765 13,593
Other assets (Note 11) 175 1,113
- ---------------------------------------------------------------------------
$ 42,316 $ 56,021
===========================================================================
LIABILITIES
Current liabilities:
Trade accounts payable $ 2,209 $ 1,443
Other accrued
liabilities (Note 11) 2,189 2,069
Short-term debt (Note 10) 6,017 2,129
Deferred gain on joint
venture agreement 750 -
Current portion of
estimated uranium
reclamation costs (Note 14) 800 1,200
- ---------------------------------------------------------------------------
Total current liabilities 11,965 6,841
Long-term debt (Note 10) 1,917 13,310
Other liabilities, long-term (Note 11) 27,903 23,498
Commitments and contingencies (Note 14)
STOCKHOLDERS' EQUITY (Notes 7, 8, 10 and 21)
Common stock, par value $1 per share;
authorized 50,000,000; issued and
outstanding, 27,281,503 and
24,180,264, at December 31, 1997 and 1996,
respectively 27,282 24,180
Capital in excess of par value 66,735 68,514
Deficit (93,486) (77,867)
Unrealized loss on investment in
equity securities (Note 4) - (2,322)
Currency translation adjustment - (133)
- ---------------------------------------------------------------------------
Total stockholders' equity 531 12,372
- ---------------------------------------------------------------------------
$ 42,316 $ 56,021
============================================================================
See accompanying notes
30
<PAGE>
ATLAS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands)
<TABLE>
<CAPTION>
Capital in
Common Common Excess of
Shares Stock Par Value Deficit Other Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1994 9,410 $ 9,410 $31,555 $(43,440) $ - $ (2,475)
Issuance of Common Stock (Note 21) 9,091 9,091 36,965 - - 46,056
Exercise of Warrants 15 15 39 - - 54
Interest on Debenture 40 40 50 - - 90
Shares issued to 401(k) plan 22 22 69 - - 91
Unrealized gain on investment (Note 4) - - - - 896 896
Currency translation adjustment - - - - (103) (103)
Current year loss - - - (19,776) - (19,776)
- --------------------------------------------------------------------------------------------------------
Balance at June 30, 1995 18,578 18,578 68,678 (63,216) 793 24,833
Issuance of Common Stock for purchase of
property (Note 6) 1,400 1,400 525 - - 1,925
Shares issued to 401(k) plan 18 18 16 - - 34
Interest on Debenture 39 39 29 - - 68
Unrealized loss on investment (Note 4) - - - - (454) (454)
Currency translation adjustment - - - - 3 3
Current year loss - - - (4,266) - (4,266)
- --------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 20,035 20,035 69,248 (67,482) 342 22,143
Issuance of Common Stock for purchase of
Arisur Inc. (Note 9) 4,000 4,000 (750) - - 3,250
Shares issued to 401(k) plan 66 66 3 - - 69
Interest on Debenture (Note 10) 79 79 13 - - 92
Unrealized loss on investment (Note 4) - - - - (2,764) (2,764)
Currency translation adjustment - - - - (33) (33)
Current year loss - - - (10,385) - (10,385)
- --------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 24,180 24,180 68,514 (77,867) (2,455) 12,372
Shares issued to 401(k) plan 74 74 (39) - - 35
Interest on Debenture 40 40 (10) - - 30
Shares issued to Barrick (Note 6) 1,000 1,000 (500) - - 500
Shares issued to retire Exchangeable
Debentures (Note 10) 1,501 1,501 (938) - - 563
Shares issued for payment of fees 294 294 (184) - - 110
Sale of Vista shares (Note 10) - - - - 2,455 2,455
Shares issued in settlement of pension
obligation 193 193 (108) - - 85
Current year loss - - - (15,619) - (15,619)
- -------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 27,282 $27,282 $66,735 $(93,486) $ - $ 531
=======================================================================================================
</TABLE>
See accompanying notes
31
<PAGE>
ATLAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
<TABLE>
<CAPTION>
Year Ended Six Months
December 31, Ended Year End
---------------------- Dec. 31, June 30,
1997 1996 1995 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating activities:
Net loss $(15,619) $(10,385) $ (4,266) $(19,776)
(Income) loss from discontinued
operations 2,868 - - (621)
From continuing operations:
Adjustments to reconcile loss to
net cash used in operations
(Note 12) 9,386 3,630 1,844 14,198
Changes in operating assets and
liabilities (Note 12) 1,808 (2,010) 1,113 (116)
- ---------------------------------------------------------------------------------------------
(1,557) (8,765) (1,309) (6,315)
- ---------------------------------------------------------------------------------------------
Discontinued operations:
Operating income (loss) (net of tax) (2,868) - - 621
Adjustments to reconcile income (loss)
to net cash provided by (used in)
operations:
Decrease (increase) in accounts
receivable - - - 875
Increase in accrued liabilities 217 - - 123
Increase (decrease) in other
liabilities, long-term (349) - - 102
Net increase (decrease) in
estimated reclamation costs 3,365 (1,808) (1,190) (1,497)
- ---------------------------------------------------------------------------------------------
365 (1,808) (1,190) 224
- ---------------------------------------------------------------------------------------------
Net cash used in operations (1,192) (10,573) (2,499) (6,091)
- ---------------------------------------------------------------------------------------------
Investing activities:
Net cash expended in purchase of
subsidiary - (3,676) - -
Purchase of stock in Vista Gold Corp. - - - (36,492)
Investment in equity securities - - (180) (3,007)
Cash released from (placed in) escrow - 10,000 (10,000) -
Additions to property, plant and
equipment (1,847) (1,286) (1,015) (265)
Investment in asset held for sale (2,057) (1,948) (1,636) (307)
Proceeds from joint venture agreement 1,500 - - -
Proceeds from sale of Vista Gold
Corp. 76 5,527 - -
Proceeds from sale of Dakota Mining
Corporation - 4,520 - -
Proceeds from sale of equipment and
reduction in other assets 563 - - 491
- ---------------------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities (1,765) 13,137 (12,831) (39,580)
- ---------------------------------------------------------------------------------------------
Financing activities:
Proceeds from borrowings on short
term debt and line of credit 505 238 - 3,550
Repayment of short-term debt (500) (2,000) - (3,550)
Proceeds from the issuance of Common
Stock 500 - - 50,054
Proceeds from the issuance of
long-term debt 2,300 - 10,000 -
Proceeds from the issuance of
short-term notes - - 2,000 -
Costs to repurchase Exchangeable
Debenture (287) - - -
Cost of issuance of long-term debt
and Common Stock - - (902) (3,698)
- ---------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 2,518 (1,762) 11,098 46,356
- ---------------------------------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents (439) 802 (4,232) 685
- ---------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning
of period 1,022 220 4,452 3,767
- ---------------------------------------------------------------------------------------------
Cash and cash equivalents at end
of period $ 583 $ 1,022 $ 220 $ 4,452
=============================================================================================
Supplemental disclosures of noncash
activities:
</TABLE>
See accompanying notes
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. The
Company has incurred operating losses of $13,921,000, $10,385,000, $4,266,000
and $20,397,000 for the years ended December 31, 1997 and 1996, the six months
ended December 31, 1995 and the fiscal year ended June 30, 1995, respectively
and has a working capital deficit of $8,197,000 at December 31, 1997. These
considerations raise substantial doubt about the Company's ability to continue
as a going concern. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.
Management's plans to alleviate the substantial doubt include the following:
As further described in Note 6, the Company has entered into option agreements
with respect to its Grassy Mountain, Doby George and Gold Bar properties which,
if completed, will represent a significant source of funds for the Company. In
addition, the Company has announced its intentions to sell its controlling
interest in Cornerstone Industrial Minerals Corporation. The funds from these
transactions will provide the Company near term working capital as well as
capital for the ongoing expansion of the Company's Bolivian operations.
The Company has undergone an expansion of its Bolivian operations and, as a
result, production has steadily increased throughout 1997 and this trend is
expected to continue through 1998. As a result of this increased capacity, the
Company is seeking additional sources of financing, either as an extension, or a
replacement for its current debt related to these properties. The Company also
continues aggressively to pursue other sources of funding, including potential
mergers with companies holding sufficient cash reserves.
The Company is also evaluating the leveraging of its unencumbered properties and
of its restricted cash and Title X receivable (Note 14) in order to secure short
or long-term funding as appropriate. Management believes that the above actions,
along with the continued cooperation of the Company's creditors and stringent
management of cash resources, will enable the Company to meet its short term
cash requirements.
PRINCIPLES OF CONSOLIDATION -- The accompanying consolidated financial
statements include the accounts of Atlas Corporation and all majority-owned
subsidiaries ("the Company"). All significant intercompany balances and
transactions have been eliminated.
CHANGE IN FISCAL YEAR -- The Company changed its fiscal year from June 30 to
December 31 effective December 31, 1995.
INVENTORIES -- Inventories other than finished gold are recorded at the lower
of average cost or net realizable value. Finished gold inventory is carried at
realizable value.
33
<PAGE>
MINING COSTS -- During production periods, costs attributable to waste are
charged to operations based on the average ratio of waste tonnage to ore
tonnage.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment is stated at the
lower of cost, or estimated net realizable value. Depreciation of milling
facilities and depletion of mining properties is determined by the units of
production method. The Company regularly assesses its ability to recover the
carrying value of its assets and recognizes an impairment when it is determined
that unamortized costs cannot be recovered from undiscounted cash flows over the
remaining project life. Leasehold improvements are amortized on a straight-line
basis over the terms of related leases or, if shorter, estimated useful life.
Expenditures for maintenance and repairs are charged to operations as incurred.
Expenditures for additions and major renewals are added to the property, plant
and equipment accounts. Interest expense allocable to the acquisition or
construction of capital assets and deferred mine development is capitalized
until operations commence.
INVESTMENTS -- The Company uses the equity method to account for investments in
common stock of companies 20% to 50% owned. Marketable equity securities
available for sale are recorded at fair value with unrealized gains and losses
reported as a separate component of stockholders' equity.
FOREIGN CURRENCIES -- All assets and liabilities of foreign subsidiaries are
translated into U.S. dollars using the exchange rate prevailing at the balance
sheet date, while income and expense items are translated at the weighted
average exchange rate prevailing during the period. Unrealized exchange gains
and losses are deferred and shown as a currency translation adjustment in
shareholders' equity.
DEVELOPMENT PROPERTIES - At properties identified as having the potential to add
to the Company's proven and probable reserves, the direct costs of acquisition,
exploration and development are capitalized as they are incurred. Determination
as to reserve potential is based on results of feasibility studies which
indicate whether a property is economically feasible. After drilling has
confirmed the shape and continuity of mineralization, initial feasibility
studies are optimized. If production commences, these costs are transferred to
deferred exploration and development costs and amortized against earnings using
the units of production method. If a project is determined not to be
commercially feasible, unrecovered costs are expensed in the year in which the
determination is made.
EXPLORATION COSTS - The costs of exploration programs not anticipated to result
in additions to the Company's reserves and other mineralization in the current
year are expensed as incurred.
MINING REVENUE -- Gold revenues are recorded when the finished product is
available for shipment. Revenues on base metals are recorded at the time of
shipment.
RECLAMATION -- Estimated reclamation, site restoration and closure costs for
each mine are charged to operations over the expected life of the mine using the
units of production method.
INCOME TAXES -- The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 is an asset and liability
34
<PAGE>
approach that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been recognized in
the Company's financial statements or tax returns. In estimating future tax
consequences, SFAS 109 generally considers all expected future events other than
enactments of changes in the tax law or rates. Income tax accounting information
is disclosed in Note 17 to the consolidated financial statements.
CASH EQUIVALENTS -- The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents.
EARNINGS PER SHARE - In 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share." The new statement replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is similar to the previously reported
fully diluted earnings per share. Adoption of the new standard, which involves
restatement of earnings (loss) per share amounts for prior periods, had no
material effect on the Company's earnings (loss) per share amounts for all
periods presented.
LONG-LIVED ASSETS -- 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", which requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present. The Company adopted Statement No. 121 in the first
quarter of 1996. The effect of adoption was not material.
ENVIRONMENTAL REMEDIATION LIABILITIES - In October 1996, the American Institute
of Certified Public Accountants issued SOP 96-1 "Environmental Remediation
Liabilities", which requires the accrual of environmental remediation
liabilities when the criteria for Financial Accounting Statement Board Statement
No. 5 "Accounting for Contingencies" are met. The Company adopted SOP 96-1 in
the first quarter of 1997. The effect of adoption was not material (Note 14).
COMPREHENSIVE INCOME - In June 1997, the Financial Accounting Standards Board
issued Statement No. 130, "Reporting Comprehensive Income", which requires
companies to classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of a statement of financial position. Statement No. 130 is
effective for financial statements for fiscal years beginning after December 15,
1997, and therefore the Company will adopt the new requirements in the first
quarter of 1998. Management does not anticipate that the effects of adoption of
this statement to be material.
SEGMENT REPORTING - In June 1997, the Financial Accounting Standards Board
issued Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information", which establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. In addition,
it establishes standards for related disclosures about products and services,
geographic areas and major customers. Statement No. 131 is effective for
financial statements for fiscal years beginning after December 15, 1997, and
therefore the Company will adopt the new requirements retroactively in 1998.
Management has not completed its review of Statement No. 131, but does not
anticipate that the adoption of this statement will have a significant effect on
the Company's reported segments.
ACCOUNTING ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS -- The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
RECLASSIFICATIONS -- Certain of the comparative figures have been reclassified
to conform with the current year's presentation.
35
<PAGE>
2. RESULTS FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE SIX MONTHS ENDED
DECEMBER 31, 1994
The following financial information for the six months ended December 31, 1994
is unaudited and is being presented for comparative purposes:
Six Months Ended Dec. 31,
----------------------------------
1994
(In thousands) 1995 (Unaudited)
- ----------------------------------------------------------------------------
Mining revenue $ - $ 2,328
Gross operating loss (2,723) (4,455)
Loss from continuing operations before
income taxes (4,266) (5,804)
Provision for income taxes - -
Loss from continuing operations (4,266) (5,804)
Loss from discontinued operations - 846
Net loss $ (4,266) $(4,958)
========= ========
Net loss per common share $ (0.22) $ (0.34)
========= ========
3. INVENTORIES
December 31,
-------------------
(In thousands) 1997 1996
- -------------------------------------------------
Zinc and lead concentrates $ 91 $ 39
Stockpiled ore 249 278
Materials and supplies 625 531
-------------------
$ 965 $ 848
===================
4. INVESTMENTS IN MARKETABLE EQUITY SECURITIES
On May 31, 1994, the Company, Dakota Mining Corporation ("Dakota") and
VenturesTrident, L.P. and VenturesTrident II, L.P. entered into an agreement in
principle providing for (i) the purchase of 1,500,000 common shares of Dakota
from the VenturesTrident Partnerships, for $4.00 per share, and, subject to the
completion of the purchase of the VenturesTrident Shares, (ii) the subscription
by Atlas to 3,100,000 newly-to-be issued convertible preferred shares of Dakota.
On October 28, 1994, the Company determined that, based upon the prevailing
market conditions, it was in the best interests of its shareholders not to
proceed with the Dakota acquisition and forfeited $1,000,000 in nonrefundable
deposits to the VenturesTrident Partnerships. Costs of $144,000 incurred in
conjunction with the Dakota transaction were also expensed.
On March 9, 1995 Atlas and Dakota entered into a Subscription Agreement, under
which Atlas purchased 2,419,355 Special Warrants of Dakota at a price of $1.24
per Special Warrant which were subsequently converted into 2,419,355 Common
Shares of Dakota. In connection with the purchase by the Company of Special
Warrants, the Company and Dakota executed a mutual limited release, whereby each
party released the other from any liability arising out of the May 31, 1994
agreement.
On March 9, 1996 the Company sold its 2,419,355 common shares of Dakota for U.S.
$1.87 per share, or U.S. $4,519,000. The Company recognized a gain in 1996 on
this sale of $1,332,000.
36
<PAGE>
As further described in Note 9, the Company's investment in Vista Gold Corp.
fell below 20% in the fourth quarter of 1996. Accordingly, the investment was
treated as a marketable equity security at December 31, 1996.
The following is a summary of investments in equity securities:
December 31,
---------------------- June 30,
(In thousands) 1997 1996 1995 1995
- -----------------------------------------------------------------------------
Common shares:
Cost $ - $ - $3,187 $3,187
Gross unrealized gains - - 442 896
------------------------------------
Estimated fair value $ - $ - $3,629 $4,083
====================================
Vista Gold Corp. common shares:
Cost $ - $13,864 $ - $ -
Gross unrealized gains - (2,322) - -
------------------------------------
Estimated fair value $ - $11,542 $ - $ -
====================================
5. FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
Financial instruments consist of the following:
December 31,
-----------------------------------------------------
1997 1996
---------------------- ---------------------
Carrying Fair Carrying Fair
(In thousands) Value Value Value Value
- ----------------------------------------------------------------- ---------------------
<S> <C> <C> <C> <C>
Assets
Short-term assets $ 2,766 $ 2,766 $ 3,361 $ 3,361
Long-term equity securities - - 11,542 11,542
Liabilities
Short-term liabilities 11,965 11,965 6,841 6,841
Long-term debt 1,917 1,858 13,310 11,455
</TABLE>
Short-Term Assets and Liabilities: The fair value of cash and cash equivalents,
marketable equity securities, accounts receivable, accounts payable, other
accrued liabilities and short-term debt approximates their carrying value due to
the short-term nature of these instruments.
Long-Term Equity Securities: Equity securities which are classified as long-
term at December 31, 1996 are recorded as Investment in Vista Gold Corp. in the
consolidated balance sheets. These equity securities, which are classified as
available-for-sale, have a basis of $0 and $13,864,000 at December 31, 1997 and
1996, respectively, and are stated at fair value based upon quoted market
prices. The unrealized gain is included as a separate component of shareholders'
equity.
Long-Term Debt: The fair value of long-term debt is based primarily on the
Company's current established refinancing rates of 12%.
37
<PAGE>
6. PROPERTY, PLANT AND EQUIPMENT.
<TABLE>
<CAPTION>
Accumulated
Depreciation,
Depletion
Acquisition Amortization & Net Book
December 31, 1997 (In thousands) Costs Impairment Value
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property and leaseholds $ 6,417 $ 1,983 $ 4,434
Land improvements 5,741 5,740 1
Deferred exploration and
development costs 6,586 3,814 2,772
Buildings and equipment 41,683 34,490 7,193
----------------------------------------------------
Total $60,427 $ 46,027 $ 14,400
====================================================
Accumulated
Depreciation,
Depletion
Acquisition Amortization & Net Book
December 31, 1996 (In thousands) Costs Impairment Value
- -----------------------------------------------------------------------------------------
Property and leaseholds $ 6,516 $ 1,889 $ 4,627
Land improvements 5,734 5,734 -
Deferred exploration and
development costs 6,889 3,017 3,872
Buildings and equipment 40,770 34,138 6,632
----------------------------------------------------
Total $59,909 $ 44,778 $ 15,131
====================================================
</TABLE>
In September 1996 the Company reacquired the Grassy Mountain property from
Newmont Grassy Mountain Corporation for $206,000, a $500,000 note due September
1997 (Note 10) and assumption of a reclamation liability estimated at $201,000.
In December 1997 the Company signed an option agreement with Tombstone
Explorations Company Ltd. ("Tombstone") granting Tombstone an exclusive option
to purchase the Grassy Mountain property for $4 million. The option payments
are to be made over four years approximating $1 million per year. The Company
had received $400,000 from this agreement at December 31, 1997. In the event
that Tombstone does not exercise its option to purchase the property, all
payments previously made to Atlas will be forfeited.
On October 25, 1995 the Company purchased the Doby George property from
Independence Mining Company Inc. for the sum of $400,000 in cash plus 1.4
million shares of the Company's Common Stock. In September 1997 the Company
executed a purchase agreement for the sale of the Doby George property to
Western Exploration and Development Ltd. ("Western") which calls for installment
payments of $1,600,000 to paid as follows: $200,000 on October 13, 1997;
$400,000 on December 15, 1997; $300,000 on March 15, 1998; $300,000 on June 15,
1998; and $400,000 on September 15, 1998. In the event that Western elects not
to complete the purchase of the property, it is entitled to receive Atlas Common
Shares, valued at $1 per share, equal to the option payments paid to Atlas. As
of March 31, 1998, Western had made all scheduled payments required under the
agreement. As a result of the agreement with Western, the Company recorded an
impairment of mineral property of $1,256,000 in the accompanying consolidated
statements of operations for the year ended December 31, 1997.
38
<PAGE>
During September 1994 the Company placed the Gold Bar mine on standby and
recorded an expense of $1,275,000 for estimated shutdown and standby costs
through the end of the fiscal year. During the fourth quarter of the fiscal year
ended June 30, 1995 the Company recorded $210,000 of additional shutdown and
standby costs. During the years ended December 31, 1997 and 1996 and the six
months ended December 31, 1995 the Company recorded $446,000, $1,232,000 and
$671,000, respectively, of additional shutdown and standby costs. On June 6,
1997, Barrick Gold Exploration Inc. ("Barrick"), completed the purchase from the
Company of more than 90% of the Gold Bar claim block with an option to acquire
the balance within two years. The Company received $1,000,000 in cash from
Barrick and Barrick purchased one million Atlas Common Shares at $1 per share.
Under the terms of the purchase, Barrick has agreed to spend $3,000,000 on the
property prior to June of 1999. At Barrick's election, on or before June 3,
1999, the balance of the Gold Bar property will be conveyed to Barrick and Atlas
may elect either to receive an additional $15,000,000 in cash and retain a 2%
net smelter royalty, or to participate with Barrick in the further exploration
and development of Gold Bar as a 25% carried joint venture participant. If Atlas
elects to participate as a joint venture partner, Barrick will spend a minimum
of $15,000,000 on the project. If Barrick chooses not to acquire the balance of
the properties within the two year period, all of Barrick's interest in the Gold
Bar properties will be reconveyed to Atlas.
7. STOCKHOLDERS' EQUITY
The Company is authorized to issue 1,000,000 shares of preferred stock, par
value $1 per share. The preferred stock is issuable in series, with
designations, rights and preferences to be fixed by the Board of Directors. The
Board of Directors has established a series of 200,000 shares of Series
Preferred Stock designated Series A Junior Participating Preferred Stock
("Series A Preferred Stock"), no shares of which have been issued.
At December 31, 1997 there were 875,000 shares of Common Stock reserved for the
conversion of an outstanding convertible Debenture and 2,032,111 shares of
Common Stock reserved for Option Warrants which are exercisable at a price of
$15.625 per share and have no expiration date ("Perpetual Warrants"). Since June
30, 1994, no Perpetual Warrants have been issued or exercised. Also at December
31, 1997 there were 4,545,455 shares of Common Stock reserved for Option
Warrants issued in connection with the private placements discussed in Note 21,
with the following terms and activity:
Date of issuance Aug. 15, 1994 Dec. 14, 1994
Exercise price $ 7.00 $ 7.00
Expiration date Aug. 15, 1999 Dec. 15, 1999
Warrants issued 3,243,405 1,302,050
Shares exercised:
Year ended June 30, 1995 - -
Six months ended December 31, 1995 - -
Year ended December 31, 1996 - -
Year ended December 31, 1997 - -
-------------- --------------
Outstanding December 31, 1997 3,243,405 1,302,050
============== ==============
39
<PAGE>
8. EMPLOYEE INCENTIVE PLANS
The Company's Long Term Incentive Plan (the "LTIP") provides that key employees
may be granted options to purchase Common Stock at the fair value of the shares
on the date of grant. At a February 17, 1995 Meeting of Stockholders, the
shareholders approved an amendment to the LTIP (i) to increase by 850,000 to
1,745,000 the number of shares authorized for issuance under the LTIP, (ii) to
provide for the automatic grant to non-employee directors of the Company of
awards of stock options under the LTIP and (iii) to reduce the minimum period
prior to which an option may be exercised for all options granted after January
6, 1995 from one year to six months. Options are exercisable for a maximum of
ten years from the date of grant and no options may be granted after July 31,
1999.
Date Granted Exercise Price Shares
- -------------------------------------------------------------------------------
Granted October 1, 1986 $ 6.750 6,000
Granted January 6, 1988 16.125 6,000
Granted August 2, 1989 16.750 10,000
Granted November 13, 1989 17.250 2,000
Granted April 14, 1990 14.625 21,500
Granted July 23, 1990 12.125 8,000
Granted September 12, 1990 13.125 47,000
Granted March 6, 1991 7.375 6,450
Granted January 6, 1993 5.125 43,500
Granted March 11, 1993 2.750 30,000
Granted November 15, 1993 4.250 815,000
Granted December 1, 1993 5.250 10,000
Granted May 2, 1994 8.000 5,000
Exercised (30,000)
Canceled (185,950)
- -------------------------------------------------------------------------------
Balance outstanding as of June 30, 1994 794,500
40
<PAGE>
<TABLE>
<CAPTION>
Date Granted Exercise Price Shares
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Granted August 10, 1994 $4.750 122,500
Granted January 6, 1995 2.125 80,000
Granted January 6, 1995 4.500 450,000
Granted January 6, 1995 3.000 83,000
Granted January 6, 1995 4.000 83,000
Granted January 6, 1995 5.000 84,000
Granted May 19, 1995 2.000 235,000
Canceled (815,000)
- ------------------------------------------------------------------------------------------
Balance outstanding as of June 30, 1995 1,117,000
Granted July 12, 1995 1.875 40,000
Granted August 10, 1995 2.000 225,500
Granted December 13, 1995 1.500 20,000
Granted December 15, 1995 2.00 7,800
Canceled (347,000)
- ------------------------------------------------------------------------------------------
Balance outstanding as of December 31,
1995 1,063,300
Granted June 21, 1996 1.500 200,000
Granted October 8, 1996 1.000 20,000
Granted November 1, 1996 1.000 651,000
Granted November 5, 1996 1.000 100,000
Canceled (692,500)
- ------------------------------------------------------------------------------------------
Balance outstanding as of December 31,
1996 1,341,800
Granted January 15, 1997 1.000 35,000
Granted August 15, 1997 1.000 50,000
Canceled (336,500)
- ------------------------------------------------------------------------------------------
Balance outstanding as of December 31,
1997 1,090,300
=============
Summary of options outstanding as of
December 31, 1997:
- ------------------------------------------------------------------------------------------
Date Exercise Price Shares
- ------------------------------------------------------------------------------------------
January 6, 1995 $2.125 40,000
July 12, 1995 1.875 20,000
August 10, 1995 2.000 136,500
December 15, 1995 2.000 7,800
June 21, 1996 1.500 200,000
October 8, 1996 1.000 20,000
November 1, 1996 1.000 516,000
November 5, 1996 1.000 100,000
August 15, 1997 1.000 50,000
- ------------------------------------------------------------------------------------------
1,090,300
=============
</TABLE>
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options. Under APB 25, because the
exercise price of the Company's employee stock options
41
<PAGE>
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
During 1997 the Company authorized the grant of options to key personnel for
85,000 shares of the Company's stock, of which 35,000 expired in 1997. The
remaining options granted have a 10 year term expiring August 15, 2007 and vest
and become fully exercisable at the end of six months of continued service.
During 1996 the Company authorized the grant of options to key personnel for up
to 971,000 shares of the Company's Common Stock. Of these, 200,000 were granted
with a two year term, expiring June 21, 1998 and fully vested and exercisable at
time of grant. Also, there were 100,000 options granted with a two year term
expiring November 5, 1998 and fully vested and exercisable at time of grant. All
remaining options granted have 10 year terms expiring November 1, 2006 and vest
and become fully exercisable at the end of six months of continued service. In
1995 the Company granted a total of 763,300 options to key personnel.
Pro forma information regarding net income and earnings per share as required by
Statement 123, has been determined as if the Company had accounted for its
employee stock options under fair value method of that Statement. The fair value
for these options was estimated at the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions for 1995,
1996 and 1997: risk-free interest rate of 5.09%, 5.09% and 5.71%, respectively;
dividend yields of 0.0%; volatility factors of the expected market price of the
Company's Common Stock of .462; and a weighted-average expected life of the
option of 4 years.
The Black-Scholes option valuation model was developed for the use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option pricing models require the input of
highly subjective assumptions, including expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the option's vesting period. The Company's pro
forma information for the years ended December 31, is as follows (in thousands
except for earnings per share)
1995
1997 1996 (unaudited)
---------------------------------
Pro forma net loss $(15,761) $(10,589) $(19,629)
Pro forma earnings per share
Basic $ (.61) $ (.50) $ (1.03)
Diluted $ (.61) $ (.50) $ (1.03)
A summary of the Company's stock option activity, and related information for
the years ended December 31 follows:
42
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------------------------------------------------
Weighted-Average Weighted-Average Weighted-Average
(In thousands) Options Exercise Price Options Exercise Price Options Exercise Price
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning of year 1,342 $1.35 1,063 $3.45 300 $4.25
Granted 85 1.00 971 1.10 763 3.14
Exercised - - - - - -
Forfeited 337 1.47 692 4.23 - -
-------------------------------------------------------------------------------
Outstanding-end of year 1,090 1.28 1,342 1.35 1,063 3.45
===============================================================================
Exercisable at end of year 1,027 1.30 521 1.62 400 3.69
Weighted-average fair value of
options granted during year $0.09 $ 0.31 $ 0.55
</TABLE>
Exercise prices for options outstanding as of December 31, 1997 ranged from
$1.00 to $2.125. The weighted-average remaining contractual life of those
options is 6.5 years.
9. INVESTMENTS
INVESTMENT IN VISTA GOLD CORP.
On August 15, 1994 the Company completed the purchase from M.I.M. (Canada) Inc.
of 12,694,200 common shares of Granges Inc. (subsequently changed to Vista Gold
Corp., hereinafter referred to as "Vista" see below) which represented 37.2% of
the issued and outstanding shares of Vista. The purchase price was C $4.00 per
share (U.S. $2.80), or an aggregate purchase price of C $50.8 million (U.S.
$35.8 million).
Vista is a precious metals mining company the shares of which are traded on the
Toronto Stock Exchange and the American Stock Exchange. Effective May 1, 1995
Vista amalgamated with Hycroft Resources and Development Corporation
("Hycroft"), which operates the Crofoot/Lewis mine located in Nevada. Prior to
the amalgamation, Vista had a 50.5% ownership position in Hycroft. The terms of
the amalgamation called for each common share of Hycroft to be exchanged for
0.88 of a common share of Vista and for each common share of Vista outstanding
prior to the amalgamation, to be exchanged for one common share of Vista. After
the amalgamation, the Company continued to hold 12,694,200 shares of Vista,
representing 27.5% of the outstanding common shares. On May 25, 1995 the
Company purchased 20,700 common shares of Vista which increased the Company's
interest to a total of 12,714,900 common shares.
On October 16, 1996 the Company sold 4,240,324 Vista Common shares at $1.32 per
share resulting in a net loss of $1.5 million. As further described in Note 10,
the Company exchanged its remaining shares in Vista as partial consideration for
the redemption of its Exchangeable Debentures on June 25, 1997.
The Company reported the results of Vista's operations on the equity method from
the acquisition date of August 15, 1994 until September 30, 1996. On October 1,
1996 as a consequence of the sale of the Vista common shares, the Company
changed its method of accounting for the Vista investment to the lower of cost
or market basis.
43
<PAGE>
Summarized Statements of Operations and Balance Sheets of Vista are presented
below.
<TABLE>
<CAPTION>
Nine Mo. Ended
September 30, Six Mo. Ended Year Ended
1996 December 31, June 30,
STATEMENT OF OPERATIONS (unaudited) 1995 1995
(U.S. GAAP, U.S. Dollars, in thousands) (unaudited) (unaudited)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $26,062 $19,459 $42,833
Cost of sales 21,851 16,544 34,179
Depreciation, depletion & amortization 8,247 4,446 4,773
--------------------------------------------
Income (loss) from mining operations $(4,036) $(1,531) $ 3,881
============================================
Net loss $(8,482) $(1,303) $(1,405)
============================================
BALANCE SHEET Dec. 31,
(U.S. GAAP, U.S. Dollars, in thousands) 1995
-----------
Current assets $ 27,911
Non-current assets $ 36,305
Current liabilities $ 6,239
Non-current liabilities $ 3,409
Net equity $ 54,568
</TABLE>
Under the equity method, the Company recorded a loss of $2,721,000, $1,703,000
and $1,361,000 for the nine months ended September 30, 1996, the six months
ended December 31, 1995 and for the period from August 15, 1994 (date of
acquisition) to June 30, 1995, respectively.
In connection with the May 1, 1995 amalgamation of Vista and Hycroft, the
Company reevaluated its investment in Vista relative to the fair values implied
in the amalgamation and to known reserves at the Crofoot/Lewis mine. As a
result, the Company recorded an $11,419,000 impairment of its investment in
Vista as of June 30, 1995. The impairment reduced the excess cost of the
investment over the net assets attributable to the Company's interest in Vista
from approximately $20.5 million on August 15, 1994 (date of acquisition) to
approximately $9 million at June 30, 1995. The Company amortized the excess cost
of the investment related to producing properties on a unit of production (gold
ounces) basis which is included in the reported loss discussed above.
In September 1995 the Company entered into an exploration joint venture
agreement (the "Agreement") with Vista with respect to approximately 34 square
miles of the Company's Gold Bar claim block. On January 8, 1997 the Company
entered into an agreement with Vista to terminate the Agreement for a total cost
of $450,000.
INVESTMENT IN CORNERSTONE INDUSTRIAL MINERALS CORPORATION
On November 30, 1995 the Company purchased 12.2 million (51%) of the outstanding
common shares of Phoenix Financial Holdings Inc. ("Phoenix") for an aggregate
purchase price of Cdn. $1,781,200 at which time, Atlas assumed control of the
Phoenix Board of Directors. At a meeting of the shareholders on September 3,
1996 the shareholders of Phoenix approved a name change to Cornerstone
Industrial Minerals Corporation ("Cornerstone").
44
<PAGE>
On December 13, 1996 the Company and Cornerstone executed an agreement (the
"Purchase Agreement") providing for the purchase by Cornerstone of all the
issued and outstanding shares of Atlas Perlite, Inc., the Company's wholly owned
subsidiary, the major asset of which is the Tucker Hill perlite project. The
Purchase Agreement calls for payment to the Company of $1 million in cash,
9,647,986 Cornerstone common shares, the reimbursement of the Company's Tucker
Hill development costs of $2,945,282 and the retention by the Company of a
royalty equivalent of 2% of the gross proceeds generated from the sale of
minerals from Tucker Hill. The purchase price is payable in three stages as
follows: $125,000 and 1,205,998 shares due at closing, $500,000 and 4,823,993
shares of common stock upon obtaining all operating permits and $375,000 and
3,077,994 shares of common stock related to the Company assisting Cornerstone in
meeting three other milestones which include obtaining base load perlite
contracts for a specified amount of revenues per year, obtaining permanent
project financing and achieving commercial production. As of December 31, 1997,
the Company has met the first two of these stages resulting in the Company
increasing its ownership percentage to 61%. Upon completion of the transaction,
the Company will have a 65 % equity position in Cornerstone.
During 1997 the construction of a mill process facility was completed, and
perlite production commenced in August 1997. In December 1997, after concluding
that the mill as currently configured is not able to sustain profitable
operations, the Company made the decision to sell its interest in Cornerstone.
As a result of this decision, the Company's investment in Cornerstone has been
classified as an asset held for sale in the accompanying consolidated balance
sheet at December 31, 1997. The Company's loss for the period related to
Cornerstone of $2,938,000, has been included in loss on assets held for sale in
the accompanying consolidated statements of operations. This amount includes an
impairment of the mill by Cornerstone of $1,331,000 and an additional charge by
Atlas of $1,115,000 to adjust the asset to its estimated net realizable value.
All prior periods have been restated to conform to the current year
presentation.
INVESTMENT IN ARISUR INC.
On October 8, 1996 the Company acquired Arisur Inc., a Grand Cayman corporation
("Arisur") which owns and operates the Andacaba and the Don Francisco lead, zinc
and silver mines located in southern Bolivia, South America. The Company
acquired a 50% interest in Arisur from Arimetco International Inc., a Canadian
corporation for $3 million in cash and purchased 100% of Suramco for 4 million
shares (valued at $3,250,000) of the Company's common stock. Suramco owned the
remaining 50% interest in Arisur. During 1997, Suramco's 50% interest in Arisur
was transferred to the Company resulting in 100% direct ownership by Atlas at
December 31, 1997.
The acquisition was accounted for as a purchase under generally accepted
accounting principles. Costs of acquisition in excess of Arisur's book value
have been allocated to the mine and mill equipment, the known reserves of Arisur
and the future exploration potential. The amortization of these costs will be
over the estimated lives of the respective assets, and on the units of
production method for the known reserves. Exploration potential will be
amortized as reserves are delineated. The functional currency of Arisur is the
U.S. dollar.
45
<PAGE>
The following are pro forma results of operations as though Arisur had been
acquired as of January 1, 1996 and as of January 1, 1995.
1996 1995
(unaudited) (unaudited)
------------------------
Mining revenues $ 3,469 $ 4,030
Production costs (2,919) (2,983)
Depreciation, depletion & amortization (1,259) (1,394)
Other costs (10,198) (19,044)
-----------------------
Net loss $(10,907) $(19,391)
=======================
Earnings per share $ (0.45) $ (0.85)
=======================
The results of operations of Arisur (from the date of acquisition to December
31, 1997) are consolidated into the Company's financial statements using the
principles of consolidation discussed in Note 1.
10. CURRENT AND LONG-TERM DEBT
LONG-TERM DEBT (IN THOUSANDS)
December 31,
----------------------
1997 1996
----------------------
Redeemable Convertible Debenture, due
September 20, 1998, bearing
interest at 9% /(1)/ $ - $ 3,500
Exchangeable Debentures, due
October 25, 2000 bearing - 9,810
interest at 7% /(2)/
Corporacion Andina de Fomenta /(3)/ 1,917 -
----------------------
Total long-term debt $ 1,917 $13,310
======================
/(1)/ The Convertible Debenture is convertible as to principal at the option of
the holder into shares of the Company's Common Stock at the rate of $4.00 per
share. Interest on the Convertible Debenture is also payable either in cash or
in Common Stock at the rate of $4.00 per share.
/(2)/ The Exchangeable Debentures were exchangeable, at the Debenture holder's
option, into common shares of Vista Gold Corp. ("Vista Shares") at the rate of
42.5 Vista Shares for each $100 of principal amount of Exchangeable Debentures
surrendered.
/(3)/ The loan from Corporacion Andina de Fomenta is repayable in six equal
semi-annual principal installments plus outstanding interest beginning in
November 1998. The loan bears interest at the six month LIBOR rate plus 4.5%
(10.4% at December 31, 1997). Outstanding amounts are collateralized by certain
property, plant and equipment of the Company with a carrying value of
approximately $700,000.
On June 25, 1997 the Company completed a repurchase of the Exchangeable
Debentures from the Debenture holders for 8,313,065 Vista shares and 1,500,928
new issue Atlas Common Shares. As a result of the transaction, the Company
recorded in the accompanying consolidated statement of operations a loss on
repurchase of Debentures of $6,589,000 and a related extraordinary gain from the
sale of the Vista shares of $1,170,000 for a combined net loss on the
transaction of $5,419,000.
46
<PAGE>
SHORT-TERM DEBT (IN THOUSANDS)
December 31,
--------------------
1997 1996
--------------------
Redeemable Convertible Debenture, due
September 20, 1998, bearing $3,500 $ -
interest at 9% /(1)/
BHN Multibanca S.A. /(2)/ - 606
BHN Multibanca S.A. /(3)/ 133
Advances on sales of concentrates /(4)/ 968 523
Short term loan /(5)/ 300 500
Corporacion Andina de Fomenta /(1)/ 383 -
Note payable - Newmont /(6)/ 500 500
Other 233 -
--------------------
Total short-term debt $6,017 $2,129
====================
/(1)/ See description under long-term debt above.
/(2)/ The original note, entered into in June 1995 was for $2.3 million, bears
interest at 12% per annum, and is payable in varying monthly installments of
principal and interest of approximately $100,000. The balance was paid on June
30, 1997.
/(3)/ The note bears interest at 13% and is payable in monthly installments of
$16,667 plus interest.
/(4)/ Under the terms of its agreement with Glencore International AG for the
sale of zinc/silver and lead/silver concentrates, the Company may take advances
of up to 80% of the estimated value of the concentrates available for shipment
via rail from the Company's warehouse in Potosi, Bolivia, and an additional 10%
of this amount may be advanced once the concentrate is ready for shipment from
port in Chile. Interest is payable on the advances at the "New York" prime
rate plus 1.5% (10.0% at December 31, 1997).
/(5)/ In June 1996 Arisur entered into an additional agreement with Glencore for
a prepayment to be applied against future production in the amount of $500,000.
Interest is payable on the outstanding balance at the three month LIBOR rate
plus 1% (6.9% at December 31, 1997).
/(6)/ The Note bears interest at 10.5% and is due on September 18, 1998.
11. DETAILS OF CERTAIN BALANCE SHEET CAPTIONS
A summary of restricted cash and securities is as follows:
December 31,
------------------
(In thousands) 1997 1996
- ---------------------------------------------------------------
Collateral for a $5,426,000 letter of
credit (a) (c) $5,431 $5,480
Collateral for a $1,500,000
reclamation bond (b) 777 774
--------------------
$6,208 $6,254
====================
/(a)/ Securing $6,500,000 performance bonds related to the Company's uranium
reclamation obligation.
/(b)/ Securing $1,500,000 performance bonds related to the Company's Gold Bar
reclamation obligation.
/(c)/ Securing $1,901,000 performance bonds related primarily to the Company's
Gold Bar reclamation obligation.
A summary of other assets is as follows:
47
<PAGE>
<TABLE>
<CAPTION>
December 31,
----------------------
(In thousands) 1997 1996
- ----------------------------------------------------------------
<S> <C> <C>
Debt issuance costs $ - $ 1,027
Other 175 86
----------------------
$ 175 $ 1,113
======================
A summary of other accrued liabilities
is as follows:
December 31,
----------------------
(In thousands) 1997 1996
----------------------
Accrued compensation and benefits $ 409 $ 485
Mine reclamation accrual 200 300
Accrued asbestos reclamation costs
(Notes 13 and 14) 300 126
Other 1,280 1,158
----------------------
$ 2,189 $ 2,069
======================
A summary of other liabilities,
long-term is as follows:
December 31,
----------------------
(In thousands) 1997 1996
----------------------
Long-term uranium reclamation costs
(Notes 13 and 14) $ 21,135 $16,698
Pension and deferred compensation
obligations 1,138 1,243
Mine reclamation accrual 3,064 3,018
Accrued post retirement benefit
obligation (Note 16) 534 1,262
Other 2,032 1,277
----------------------
$ 27,903 $23,498
======================
</TABLE>
48
<PAGE>
12. DETAILS OF CERTAIN STATEMENTS OF CASH FLOW CAPTIONS
The components of the adjustment to reconcile loss to net cash used in
operations as reflected in the Consolidated Statements of Cash Flows are as
follows:
<TABLE>
<CAPTION>
Six
Year Ended Months Year
December 31, Ended Ended
------------------ Dec. 31, June 30,
(In thousands) 1997 1996 1995 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation, depletion
and amortization $ 808 $ 370 $ 14 $ 395
Equity loss in Vista Gold
Corp. - 2,721 1,703 1,361
Loss from assets held for
sale 2,938 272 25 -
Forfeiture of deposit on
stock purchase agreement - - - 525
Write-down on investment
in Vista Gold Corp. - - - 11,419
Loss on sale of Vista
shares 57 1,439 - -
Loss on repurchase of
Debentures 6,589 - - -
Extraordinary gain 1,170 - - -
Impairment of mineral
property 1,256 - - -
Gain on curtailment of
retirement plan (655) - - -
Gain on sale of Dakota
shares - (1,333) - -
Gain on joint venture
agreement (437) - - -
Other adjustments - 161 102 498
-----------------------------------------------------------
$ 9,386 $ 3,630 $ 1,844 $ 14,198
===========================================================
The components of net changes in operating assets and liabilities are as follows:
Decrease (increase) in
trade/other accounts $ (344) $ 206 $ (114) $ (36)
receivable
Decrease (increase) in
inventories (117) (263) - 843
Decrease (increase) in
prepaid expense and other
current assets 158 (84) 273 (69)
Decrease (increase) in
other assets and
restricted cash and
securities 178 (1,003) 451 2,419
Increase (decrease) in
trade accounts payable 766 (246) 898 (1,554)
Increase (decrease) in
other accrued liabilities 423 (571) (108) (1,784)
Increase (decrease) in
other liabilities,
long-term 744 (49) (287) 65
-----------------------------------------------------------
$ 1,808 $ (2,010) $ 1,113 $ (116)
===========================================================
Net cash required for
operating activities
reflects cash payments
for interest and income
taxes as follows:
Six
Year Ended Months Year
December 31, Ended Ended
----------------------- Dec. 31, June 30,
(In thousands) 1997 1996 1995 1995
- ----------------------------------------------------------------------------------------
Interest (net of amount
capitalized) $ 939 $ 793 $ 20 $ 99
Income taxes - - - -
</TABLE>
49
<PAGE>
13. DISCONTINUED OPERATIONS
During 1997, as a result of continuing delays in the regulatory approval process
and due to an anticipated increase in the scope of the final reclamation plan
expected to be approved by the NRC in 1998 (Note 14), the Company recorded a
charge of $3,000,000 representing an increase to its uranium reclamation
liability. In addition the Company recorded a charge of $217,000 related to
the clean up at its former asbestos mine located near Coalinga, California (Note
14) and also recorded a gain of $349,000 related to coinsurance experience
primarily related to the operations of the Company's Atlas Building Systems
Division, which was sold in 1989.
During fiscal year 1995 the Company recognized income of $621,000 from
discontinued operations, including a gain of $846,000 recorded upon the
receipt of a payment from the Department of Energy under Title X of the Energy
Policy Act (Note 14) in connection with the reclamation of the Company's uranium
mine and mill site in Moab, Utah. The gain was partially offset by a loss of
$225,000 due to cost overruns at the Company's Coalinga, California asbestos
mine and mill reclamation project (Note 14).
The items above are included in the consolidated statements of operations under
the heading "Income from discontinued operations". The following table
summarizes the operating income (loss) of the discontinued businesses:
Asbestos Uranium
Mining & Reclamation Service
Period ended (In thousands) Milling Costs & Other Total
- -------------------------------------------------------------------------------
December 31, 1997 $ (217) $ (3,000) $ 349 $(2,868)
December 31, 1996 $ - $ - $ - $ -
December 31, 1995 $ - $ - $ - $ -
June 30, 1995 $ (225) $ - $ 846 $ 621
14. COMMITMENTS AND CONTINGENCIES
URANIUM MILL SITE, MOAB UTAH
The Company is obligated to decommission and reclaim its uranium mill site
located near Moab, Utah. The Company discontinued its uranium operations and
permanently shut down its uranium mill and mines in 1987, and estimated shut
down expenses and reclamation costs were accrued. Title X of "The Comprehensive
National Energy Policy Act" ("Title X"), enacted in October 1992, provides for
the reimbursement of past and future reclamation expenses related to uranium
sites operated under Atomic Energy Commission contracts. The Company's uranium
reclamation costs are reduced by this Government cost sharing program since 56%
of its tailings were generated under government contracts. The total estimated
reclamation liability ($21,935,000) and current and future Title X receivables
($15,865,000) are shown separately in the accompanying 1997 consolidated balance
sheets leaving a net liability to the Company of $6,070,000.
50
<PAGE>
The Company has submitted four claims to the Department of Energy ("DOE") under
Title X for reclamation costs incurred from the fiscal year ended June 30, 1980
through March 31, 1997. As of December 31, 1997, the status of the four claims
is as follows:
<TABLE>
<CAPTION>
Anticipated Actual Anticipated
Gross Claim Gross Amount Reimbursement Reimbursement Balance
Claim Date Amount Approved Receivable Payments Due
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
July 7, 1994 $4,999,000 $ 4,510,000 $2,530,000 $2,133,000 $ 397,000
June 16, 1995 3,638,000 2,591,000 1,454,000 1,115,000 339,000
May 1, 1996 3,998,000 2,987,000/1/ 1,676,000 719,000 957,000
May 1, 1997 2,054,000 -- /2/ 1,152,000 309,000 843,000
- ------------------------------------------------------------------------------------------------------------------------------------
Totals $6,812,000 $4,276,000 $2,536,000
====================================================================================================================================
</TABLE>
/1/ Preliminary approval as of 12/31/97.
/2/ Pending.
In addition to the above amounts, the Company includes in the Title X receivable
in the consolidated balance sheet an amount equal to 56% of its future estimated
reclamation costs. Timing of the remaining payments for approved reimbursements
is a function of Congressional appropriation of Title X funding.
ASBESTOS MINE SITE, COALINGA, CALIFORNIA
During fiscal year 1988, the United States Environmental Protection Agency
("EPA") notified the Company that it was one of several potentially responsible
parties for cleanup costs at the Company's former asbestos mine and mill site
near Coalinga, California and in the City of Coalinga. A prolonged period of
inquiry and administrative process concerning this matter followed.
In fiscal years 1997, 1995, 1993 and 1991, the Company established a reserve
and recorded as an expense, $217,000, $225,000, $600,000 and $3,000,000,
respectively, to cover the Company's share of cleanup costs and EPA
administrative costs. In fiscal year 1992 the Company began legal action
against thirteen insurance carriers which had issued insurance policies with
respect to the site. During fiscal year 1994 the Company reached settlement
with a number of the carriers and recorded a gain from discontinued operations
of $2,175,000. All claims with remaining carriers were settled in fiscal year
1995. The remedial action plan commenced October 1994 and was completed in
1996. The Company received EPA's "Approval of Construction Completion" on
November 14, 1996.
LEGAL PROCEEDINGS
On June 20, 1997 the Company was served with a Complaint in the matter of Curt
Goldschmidt and Ana Maria Goldschmidt vs. Atlas Corporation; Suramco Metals,
Inc.; Arisur Inc.; and Harold R. Shipes and Eileen A. Shipes in the Superior
Court of the State of Arizona. In December 1994 Suramco Metals, Inc. and Arisur
Inc. purchased all of the shares and assets of Cia Minera Andacaba S.A., which
held a mining company in La Paz, Bolivia. Subsequent to the purchase, Atlas
acquired both Suramco Metals, Inc. and Arisur Inc. Curt and Ana Maria
Goldschmidt, the former owners of Cia Minera Andacaba S.A., claim that the
compensation for the mining property under the purchase agreement was not paid
in full and they are seeking damages in the amount of $800,000. Subsequent to
the Arizona Complaint, in LaPaz Bolivia, Goldschmidt initiated action to seek
satisfaction of the purported damages. It is possible that Goldschmidt may
succeed to effect a provisional registration (similar to a lien), requiring
satisfaction of the claim prior to a sale or transfer by Arisur Inc. of the
Bolivian assets. The Company has denied the Plaintiff's claims in the U.S. and
Bolivia and is currently investigating the claims set forth in the Complaint, as
well as any claims the Company may have against third parties for
indemnification (see
51
<PAGE>
below). It is premature at this time to fully analyze the Company's potential
liability, if any. However, the Company currently intends to vigorously defend
the case.
On September 19, 1997 the Company filed a Complaint for breach of contract and
for indemnity against H. Roy Shipes, et. al. ("the Defendants"). The Company
claims that the Defendants are duty bound to defend and indemnify the Company as
a result of the Goldschmidt claims against the Company (see above). The duty
arose out of a contract by the Defendants to sell the Andacaba Mine to the
Company. Atlas intends to vigorously pursue this claim.
On October 1, 1997 the Defendants filed a claim against the Company. The
Complaint seeks damages for alleged misrepresentations in connection with the
purchase of 50% of Arisur from the Defendants. The Company has denied the
Defendant's claims and is currently investigating the claims set forth in the
Complaint. Though it is too early in the litigation to fully assess the
Company's liability, it is management's belief that this claim will not have a
material impact on the Company.
Wyant Machinery, Inc. ("Wyant") served Cornerstone with a lawsuit on September
9, 1997. Wyant is claiming $312,835 on a breach of contract claim and is
foreclosing on a construction lien against Cornerstone's Perlite Plant in
Lakeview, Oregon and placer mining claims in the vicinity of Lake County,
Oregon. Though it is too early in the litigation to conduct a complete analysis
as to Cornerstone's liability, the Company currently intends to vigorously
defend the case and does not believe that it will have a material impact on the
Company's financial position. In March 1998, Cornerstone filed a counterclaim
against Wyant for damages well in excess of the claim made by Wyant.
On January 30, 1998 a complaint was served on the Company in the matter of
Zonnie Marie Dandy Richards, the estate of Harold J. Richards, Sr. v. Texas
Zinc, Vanadium Corporation of America, Atlas Corporation, and all affiliates
joint venturers and assignees thereof, in the District Court of the Navajo
Nation, Kayenta District Court. The Plaintiff alleges wrongful death of her
husband as a result of his exposure to uranium and other heavy metals at a
uranium mill site purportedly owned and operated by the Company. The Company has
not filed a response and investigation is ongoing. The Plaintiff has not
provided a specific damages claim, and it is too early in the case to assess the
Company's exposure. The Company intends to vigorously defend the case.
OTHER COMMITMENTS
Minimum future rental commitments under the Company's non-cancelable operating
leases having a remaining term in excess of one year at December 31, 1997 are as
follows:
Year ended December 31, (In thousands)
- -------------------------------------------------
1998 $ 89
1999 89
2000 89
2001 -
Later years -
-------
Total minimum payments required $ 267
=======
Amounts charged to rent expense in the years ended December 31, 1997 and 1996,
the six months ended December 31, 1995 and the fiscal year ended June 30, 1995
were $213,000, $201,000, $81,200, $550,000, respectively.
15. EMPLOYEE RETIREMENT PLANS
The Company has a trusteed and insured retirement plan (the "Plan") covering
substantially all salaried employees. The Plan provides pension benefits that
are based on final average compensation minus certain adjustments for primary
social security benefits. The Company's funding policy for the Plan is to make
at least the minimum annual contributions required by applicable government
regulations. Plan assets are invested primarily in equity securities, corporate
and government bonds and money market funds.
52
<PAGE>
<TABLE>
<CAPTION>
Year Ended Six Months Ended Year Ended
December 31, Dec. 31, June 30,
----------------------
(In thousands) 1997 1996 1995 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service costs-benefits earned during
the year $ 9 $ 71 $ 27 $ 83
Interest cost on projected benefit
obligation 433 451 242 432
Actual return on Plan assets (1,043) (700) (290) (218)
Net amortization and deferral 644 318 80 (223)
-------------------------------------------------------
Net periodic pension cost for
the year $ 43 $ 140 $ 59 $ 74
=======================================================
</TABLE>
53
<PAGE>
The following table sets forth the funded status of the Plan and amounts
recognized in the Company's financial statements at December 31, 1997 and 1996.
December 31,
-----------------------
(In thousands) 1997 1996
- ------------------------------------------------------------------
Accumulated benefit obligation based on
salaries to date including vested
benefit obligation of $5,895,000 and
$6,296,000 for December 31, 1997 and
December 31, 1996, respectively $ (5,917) $ (6,342)
Additional benefit obligation based on
estimated future salary levels - (163)
------------------------
Projected benefit obligation (5,917) (6,505)
Fair value of Plan assets 5,190 5,122
------------------------
Funded status (727) (1,383)
Unrecognized net transition obligation - 38
Unrecognized net loss (gain) 327 945
------------------------
Accrued pension cost $ (400) $ (400)
========================
Assumed discount rate 7.25% 7.25%
Assumed rate of increase in future
compensation 5.0% 5.0%
Effective March 1, 1997, the Company elected to freeze future benefit accruals
under the Plan. Past benefits earned will not be affected by this freeze.
The Company has an Investment and Savings Plan to assist eligible employees in
providing for retirement or other future financial needs. Employee contributions
(up to 10% of their earnings) are matched in Company stock by the Company at a
rate of 100% up to a maximum of 6% of the employee's earnings. In addition, the
Company provides a 4% contribution for all eligible employees compensated on an
hourly scale. The Company's contributions to this Plan in the years ended
December 31, 1997 and 1996, the six months ended December 31, 1995 and the
fiscal year ended June 30, 1995 were $ 35,000, $69,000, $34,000 and $91,000,
respectively.
16. OTHER POST RETIREMENT BENEFIT PLANS
In addition to the Company's defined benefit pension plan the Company has a
defined benefit post retirement plan (the "Retirement Plan") covering most
salaried employees. The Retirement Plan provides medical and life insurance
benefits to retirees of the Company that meet certain qualifying criteria. The
Retirement Plan is contributory, with retiree contributions adjusted annually,
and contain other cost-sharing features such as deductibles and coinsurance. The
accounting for the health care plans anticipates future cost-sharing changes to
the written plan that are consistent with the Company's expressed intent to
increase the retiree contribution rate annually for the expected general
inflation rate for that year. The Company's policy is to fund the cost of the
post retirement health care benefits in amounts determined at the discretion of
management and to make annual contributions to the life insurance plan in level
amounts over the plan participant's expected service period. Effective December
15, 1997 the Company terminated the life insurance plan for all participants and
also terminated the medical plan for all current employees, except for three
individuals who were grandfathered. Retirees currently receiving medical
benefits will continue under the Retirement Plan. The change resulted in a
curtailment gain of $655,500 which has been recognized as income in the
accompanying consolidated statement of operations for the year ended December
31, 1997.
54
<PAGE>
The following table shows the Retirement Plan's combined funded status
reconciled with the amounts recognized in the Company's financial statements:
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------------------
(In thousands) 1997 /(1)/ 1996
- ----------------------------------------------------------------------------------------------
Accumulated post retirement benefit obligations:
<S> <C> <C>
Retirees $ (131) $ (690)
Fully eligible active Plan participants (44) (45)
Other active participants (54) (114)
---------------------------
Accrued post retirement benefit cost (229) (849)
Unrecognized prior service cost (17) (109)
Unrecognized net gain (256) (242)
---------------------------
Accrued post retirement benefit cost $ (502) $(1,200)
===========================
</TABLE>
/(1)/ Reduced for curtailment gain
noted above.
<TABLE>
<CAPTION>
Six
Year Ended Months Year
December 31, Ended Ended
-------------------- Dec. 31, June 30,
(In thousands) 1997 1996 1995 1995
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Components of net periodic post
retirement benefit cost:
Service cost $ 12 $ 22 $ 11 $ 49
Interest cost 55 61 31 75
Net amortization and deferral (34) (32) (16) (22)
Net periodic post retirement
-----------------------------------------------------
benefit cost $ 33 $ 51 $ 26 $ 102
=====================================================
</TABLE>
The weighted-average annual assumed rate of increase in per capita cost of
covered benefits (i.e. health care cost trend rate) for the Retirement Plan is
9% for fiscal year 1998 and is assumed to decrease gradually to 5% in 2002 and
remain at that level thereafter.
The health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated post
retirement benefit obligation for the medical plans as of December 31, 1997,
1996, and 1995 and June 30, 1995 by $24,000, $29,000, $32,000 and $32,000
respectively, and the aggregate of the service cost and interest cost components
of net periodic post retirement benefit cost for December 31, 1997 by $12,000.
The weighted-average discount rate used in determining the accumulated post
retirement benefit obligation was 7.25%, 7.25%, 7.25% and 7.5% at December 31,
1997, December 31, 1996, December 31, 1995 and June 30, 1995, respectively.
17. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
Year Ended Six Months
December 31, Ended Year Ended
-------------------- December 31, June 30,
1997 1996 1995 1995
--------------------------------------------------
Numerator:
Loss from continuing
operations $ (13,921) $ (10,385) $ (4,266) $ (20,397)
--------------------------------------------------
Denominator
Weighted average shares
outstanding 25,811 21,015 19,148 16,549
--------------------------------------------------
Basic and diluted earnings
per share $ (0.54) $ (0.49) $ (0.22) $ (1.23)
===================================================
As described in Note 7, the Company has 875,000 Common shares reserved for its
convertible debenture and 6,577,566 shares reserved for option warrants
exercisable at prices ranging from $7.00 to $15.625 per share. The Company also
has 1,090,300 employee stock options outstanding at December 31, 1997
convertible into the Company's Common Stock (Note 8). These securities have not
been included in the computation of diluted earnings per share because the
exercise prices were greater than the average market price of the common shares
and, therefore, the effect would be antidilutive.
55
<PAGE>
18. INCOME TAXES
The Company's provision for income tax from continuing operations consists of
the following:
<TABLE>
<CAPTION>
Six
Year Ended Months Year
December 31, Ended Ended
------------------ Dec. 31, June 30,
(In thousands) 1997 1996 1995 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deferred $ - $ - $ - $ -
Current - - - -
---------------------------------------------------
Income tax expense (benefit) $ - $ - $ - $ -
===================================================
</TABLE>
Deferred income taxes result from temporary differences in the timing of income
and expenses for financial and income tax reporting purposes. The primary
components of deferred income taxes result from exploration and development
costs; depreciation, depletion and amortization expenses; impairments; and
reclamation accruals.
The net deferred tax balances in the accompanying December 31, 1997 and 1996
balance sheets include the following components:
<TABLE>
<CAPTION>
December 31,
--------------------
(In thousands) 1997 1996
- --------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss ("NOL")
carryovers $ 7,616 $ 5,577
Capital loss ("CL") carryovers 1,738 -
Impairment of mineral properties 12,799 12,359
Reclamation accruals 2,484 1,303
Post retirement benefit accrual 250 477
Impairment of investment in
Vista - 2,638
Equity in unconsolidated
subsidiary 1,700 1,367
--------------------
Total deferred tax assets 26,587 23,721
Deferred tax asset valuation allowance (21,446) (20,745)
--------------------
Net deferred tax assets 5,141 2,976
--------------------
Deferred tax liabilities:
Depreciation, depletion and
amortization 4,848 3,789
Deferred revenue 293 -
Unrealized gain on investment
of equity securities - (813)
-------------------
Total deferred tax liabilities 5,141 2,976
-------------------
Net deferred tax balances $ - $ -
===================
</TABLE>
56
<PAGE>
The change in the Company's valuation allowance is summarized as follows:
<TABLE>
<CAPTION>
Six
Year Ended Months Year
December 31, Ended Ended
------------------- Dec. 31, June 30,
(In thousands) 1997 1996 1995 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Valuation allowance, beginning of period $ 20,745 $ 52,031 $ 51,664 $ 45,020
Continuing operations 4,872 3,730 1,502 7,139
Discontinued operations 1,004 - - (217)
Extraordinary gain (410) - - -
Restriction of carryforwards (5,182) (34,950) - -
Other 417 (66) (1,135) (278)
----------------------------------------------------------
$ 21,446 $ 20,745 $ 52,031 $ 51,664
==========================================================
</TABLE>
A reconciliation of expected federal income taxes on income from continuing
operations at statutory rates with the expense/(benefit) for income taxes is as
follows:
<TABLE>
<CAPTION>
Six
Year Ended Months Year
December 31, Ended Ended
------------------- Dec. 31, June 30,
(In thousands) 1997 1996 1995 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax at statutory rates $ (4,872) $ (3,730) $ (1,502) $ (7,139)
Increase in deferred tax asset
valuation allowance 4,872 3,730 1,502 7,139
-----------------------------------------------------------
Income tax expense $ - $ - $ - $ -
===========================================================
</TABLE>
At December 31, 1997 the Company has unused U.S. NOL carryovers of $115,980,000
which commence expiring in 1998, CL carryovers of $22,233,000 which commence
expiring in 2001 and investment tax credit (ITC) carryovers of $192,000 which
commence expiring in 1998. The Company also has alternative minimum tax credit
(AMT) carryovers of $127,000 which can be carried forward indefinitely and
Bolivian NOL carryovers of $2,644,000 which commence expiring in 1998. These
carryovers are subject to restriction due to a change of ownership, as defined
by U.S. tax laws, occurring on October 8, 1996 when the Company issued stock for
the acquisition of Arisur (Note 9). Due to the change of ownership, utilization
of the Company's NOL, ITC CL and AMT credit carryovers existing as of October 8,
1996 is limited to offset approximately $931,000 of taxable income per year. At
December 31, 1997 the Company has unrestricted U.S. NOL and CL carryovers of
$6,461,000 and $4,967,000, respectively, which are available to offset future
taxable income.
57
<PAGE>
19. GEOGRAPHIC SEGMENTS
Financial information regarding geographic segments is set out below:
<TABLE>
<CAPTION>
Six
Year Ended Months
December 31, Ended Year
----------------------- Dec. 31, June 30,
(In thousands) 1997 1996 1995 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue
United States $ - $ - $ - $ 2,328
Bolivia 3,935 578 - -
Loss before income taxes
United States (13,257) (10,117) (4,266) (20,397)
Bolivia (664) (268) - -
Provision for Income tax - - - -
--------------------------------------------------------
Loss from continuing operations (13,921) (10,385) (4,266) (20,397)
Income (loss) from discontinued
operations (2,868) - - 621
--------------------------------------------------------
Loss before extraordinary gain (16,789) (10,385) (4,266) (19,776)
Extraordinary gain 1,170 - - -
--------------------------------------------------------
Net Loss $(15,619) $(10,385) $(4,266) $(19,776)
========================================================
</TABLE>
Dec. 31, Dec. 31,
Balance Sheet 1997 1996
- --------------------------------------------------------------------------------
Assets:
United States $ 30,342 $ 45,308
Bolivia 11,974 10,713
-------- --------
$ 42,316 $ 56,021
======== ========
20. DIFFERENCES BETWEEN U.S. AND CANADIAN GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP)
The Company prepares its consolidated financial statements in accordance with
accounting principles generally accepted in the United States. These differ in
some respects from those in Canada, as described below.
In accordance with U.S. GAAP, equity securities available for sale are recorded
at fair value with unrealized gains and losses reported as a separate component
of stockholders' equity. Accordingly, unrealized gains and losses in investments
in marketable equitable securities at December 31, 1997 and 1996 have been
recorded as a component of stockholders' equity. Under Canadian GAAP, such
investments would be recorded at the lower of cost or market. Therefore, in
conformity with Canadian GAAP, the investments in marketable equity securities
and total stockholders' equity would approximate $0, $531,000, and $13,864,000
and $14,694,000 at December 31, 1997 and December 31, 1996, respectively.
58
<PAGE>
21. PRIVATE PLACEMENTS
The Company conducted a private placement of 9,090,909 Units of Atlas securities
during the summer of 1994 for a purchase price of $5.50 per Unit, each Unit
consisting of one share of the Company's Common Stock and one-half of a warrant
(exercisable for five years) to purchase a share of the Company's Common Stock
at an exercise price of $7.00 per share in order to finance the acquisition of
12,694,200 common shares of Vista (Note 9) and 1,500,000 Common Shares and
3,100,000 Preferred Shares of Dakota Mining Corporation ("Dakota Shares"). The
first portion of such private placement, consisting of the sale of 6,486,809
Units for an aggregate purchase price of $35,677,450, was completed on August
15, 1994 and the proceeds thereof were applied primarily to the cost of the
Vista shares.
On October 29, 1994 the Company determined not to proceed with acquisition of
the Dakota shares (see Note 4). The second portion of the private placement,
the sale of an additional 2,604,100 Units for an aggregate purchase price of
$14,322,550, was completed on December 15, 1994 following the shareholder
approval of an increase in the authorized share capital of the Company. Upon
closing the second portion of the private placement, the Company used a portion
of the proceeds to repay the balance of $800,000 due on a short-term secured
loan.
Of the Units sold in the private placement, Mackenzie Financial Corporation
("Mackenzie Financial") acquired 1,820,000 Units, consisting of 1,820,000 shares
of Common Stock and 910,000 warrants to purchase shares of Common Stock, and
M.I.M. Holdings Limited ("M.I.M.") acquired 2,000,000 Units, consisting of
2,000,000 shares of Common Stock and 1,000,000 warrants to purchase shares of
Common Stock.
On January 18, 1994 the Company sold for $7,500,000 in gross proceeds, 1,500,000
shares of Common Stock for $5.00 per share in a private placement. The shares
were placed outside the United States with a number of gold funds in Canada and
European institutional investors.
59
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS OF ATLAS CORPORATION
We have audited the accompanying consolidated balance sheets of Atlas
Corporation and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the years ended December 31, 1997 and 1996, the six months ended
December 31, 1995, and the year ended June 30, 1995. Our audits also included
the financial statement schedule listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits. We did not audit the financial
statements of Arisur Inc. a wholly owned subsidiary, which statements reflect
total assets of $11,974,000 and $7,523,000 as of December 31, 1997 and 1996,
respectively and total revenues of $3,935,000 and $578,000, for the years then
ended. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to data included for
Arisur, Inc., is based solely on the report of the other auditors.
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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Atlas Corporation and subsidiaries at
December 31, 1997 and 1996, and the consolidated results of their operations and
their cash flows for the years ended December 31, 1997 and 1996, the six months
ended December 31, 1995, and the year ended June 30, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
The accompanying consolidated financial statements have been prepared assuming
that Atlas Corporation will continue as a going concern. As more fully
described in Note 1, the Company has incurred recurring operating losses and has
a working capital deficiency. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters, which include short-term financing and the sale of
certain assets are also described in Note 1. The financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amount and classification of
liabilities that may result from the outcome of this uncertainty.
/s/ Ernst & Young LLP
- ---------------------
Denver, Colorado
March 20, 1998
60
<PAGE>
INDEPENDENT AUDITOR'S OPINION
To: Legal Representative in Bolivia of
ARUSIR INC. (BOLIVIAN BRANCH)
La Paz
1. We have examined the consolidated balance sheet of Arisur Inc. (Bolivian
Branch) as of December 31, 1997 and the accompanying statements of profit
and loss, accumulated results, and changes in the consolidated financial
situation for the year then ended. These financial statements are the
responsibility of Branch Management. Our responsibility is to express an
opinion on these Financial Statements based on our audit.
We conducted our audit in accordance with international 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 examination provides a
reasonable basis for our opinion.
2. In our opinion, the consolidated financial statements mentioned in the first
paragraph, present fairly, in all material respects, the financial and
equity position of Arisur Inc. (Bolivian Branch) as of December 31, 1997,
the results of its operations, accumulated results and changes in financial
position for the year ended on that date in conformity with international
accounting standards.
3. As stated in note 17 to the consolidated financial statements, Arisur Inc.
(Bolivian Branch) and Compania Minera Andacaba S.A. are involved in a penal
law suit. The prosecutor has asked for preventive measures, such as the
temporary suspension of property rights, and the freezing of funds in the
national financial system, which, until the presentation of these financial
statements had not yet been executed by a local judge. In the judgement of
the legal counselor, this matter exposes Arisur Inc. (Bolivian Branch) to a
potential risk in the normal functioning of its operations, with the
possibility of serious consequences in the future.
BERTHIN AMENGUAL & ASOCIADOS
LIC. HUGO BERTHIN AMENGUAL
MAT. PROF. NO. CAUB-482
RUC 2191407
LA PAZ-BOLIVIA
MARCH 9, 1998
60A
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
Not Applicable
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
-----------------------------------------------
DIRECTORS
The Company's directors are divided into three classes and hold office for a
term of three years ending with the annual meeting of stockholders held in the
year ended December 31, 1998 in the case of Class I, in the year ended December
31, 1999 in the case of Class II and in the year ended December 31, 2000 in the
case of Class III. There are currently five directors.
Information Concerning Directors
The following table sets forth certain information concerning each director.
<TABLE>
<CAPTION>
Principal Occupation, Past Five Year's Business
Director Experience
Name Since and Other Directorships Held Age
- ----------------------------------------------------------------------------------------------------------
CLASS I
(Term of Office expires at the Annual Meeting of Stockholders HELD IN THE YEAR ENDED DECEMBER 31, 1998)
<S> <C> <C> <C>
Mario Caron 1996 President, Chief Executive Officer and director of 44
Eden Roc Mineral Corp. from February 1997 to the
present. Chief Executive Officer of Atlas
Corporation from September 1996 to January 1997. From
1993 to 1996, President and Chief Executive Officer of
MSV Resources Inc. and from 1987 to 1993 President of
Corpomin Management Inc. Mr. Caron is a Director of
Cornerstone Industrial Minerals Corporation,
owned 61% by the Company. Mr. Caron also is director
of three junior Canadian exploration companies. His
current business address is 1 First Canadian Place,
Suite 2610 , Toronto, Ontario M5X 1E3, Canada.
Christopher J.A. Davie 1997 President, Castle Exploration Incorporated, 52
formerly Vice President, Projects of the Castle
Group, Inc., and prior to that was a consultant to
the mining industry. Mr. Davie's business address
is 717 Seventeenth Street, Suite 1440, Denver, CO
80202.
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation, Past Five Year's Business
Director Experience
Name Since and Other Directorships Held Age
- ---------------------------------------------------------------------------------------------------------
CLASS II
(Term of office expires at the Annual Meeting of Stockholders HELD IN THE YEAR ENDED DECEMBER 31, 1999)
<S> <C> <C> <C>
James H. Dunnett 1995 Principal of Endeavour Financial Corp., a private 48
Canadian company specializing in arranging project
financing, mergers and acquisitions for the mining
industry. Mr. Dunnett's business address is 1111
West Georgia St., Suite 404, Vancouver, BC, Canada
V6E 4M3.
C. Thomas Ogryzlo 1993 President and CEO of Triton Mining 58
Corporation; formerly Chairman of Kilborn
SNC-Lavalin and prior to that was a principal of
Wright Engineers Limited, an engineering firm;
Director of Carib Gold Resources Inc., Franco Nevada,
Timomin Corporation, Vista Gold Corp. and Cornerstone
Industrial Minerals Corporation, in which Atlas
holds a 61% interest. Mr. Ogryzlo's business
address is 1140 W. Pender Street, #1620, Vancouver,
BC V6E 4G1, Canada
</TABLE>
CLASS III
(Term of Office expires at the Annual Meeting of Stockholders
HELD IN THE YEAR ENDED DECEMBER 31, 2000)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Douglas R. Cook 1988 President of Cook Ventures, Inc., a geological 72
consulting firm; Director, Pegasus Gold
Corporation, and Archangel Diamond Corp.
Mr. Cook's business address is 2485 Greensboro
Drive, Reno, Nevada 89509.
</TABLE>
62
<PAGE>
BOARD AND COMMITTEE MEETINGS
The Company has an Audit Committee and a Compensation Committee of which the
Board of Directors appoints all members. The Compensation Committee consists of
Messrs. Ogryzlo, Cook and Davie. The Audit Committee currently consists of
Messrs. Dunnett, Caron and Ogryzlo. The principal functions of the Audit
Committee are to recommend the selection of the Company's auditors, review with
the auditors the scope and anticipated cost of their audit and receive and
consider a report from the auditors concerning their conduct of the audit. The
principal functions of the Compensation Committee are to administer the
Company's 1979 Key Employee Stock Incentive Plan, Long Term Incentive Plan,
Annual Incentive Plan and Retirement Plan for Outside Directors, to recommend
changes in compensation plans and the adoption of new compensation plans and to
recommend compensation for senior officers of the Company. During the year ended
December 31, 1997 the Audit Committee held three meetings and the Compensation
Committee held one meeting.
During the year ended December 31, 1997 the Board met twelve times. Each
incumbent director attended 75% or more of the aggregate of the total number of
Board meetings and meetings of Board committees on which that director served
during the year ended December 31, 1997 with the exception of Mr. Caron.
OFFICER CONTRACTS
Gregg B. Shafter has served as President of the Company since October 7, 1997.
Mr. Shafter has an employment agreement providing for his employment as an
officer of the Company, at a minimum annual salary of $120,000, until the
termination of his employment either by Mr. Shafter or the Company or his normal
retirement in accordance with the Company retirement programs in place at the
time. Mr. Shafter is entitled, upon termination of his employment by the
Company without "Cause", by him with "Good Reason" or either within three months
prior to a change of control or within two years after a "Change of Control" (as
such terms are defined in the employment agreement), to a severance payment
equal to one-twelfth of his annual salary multiplied by the number of full years
of employment by the Company, provided that in no event shall such amount be
less than one-half of his annual salary, amounts accrued but unpaid under this
employment contract and amounts payable under existing employee benefit plans.
Richard E. Blubaugh has served as Vice President of Environmental and
Governmental Affairs since October 1, 1990. Mr. Blubaugh has an employment
agreement providing for his employment as an officer of the Company, at a
minimum annual salary of $100,690, until the termination of his employment
either by Mr. Blubaugh or the Company or his normal retirement in accordance
with the Company's retirement programs in place at the time. Mr. Blubaugh is
entitled, upon termination of his employment by the Company without "Cause", by
him with "Good Reason" or either within three months prior to a change of
control or within two years after a "Change of Control" (as such terms are
defined in the employment agreement), to a severance payment equal to one year's
salary, amounts accrued but unpaid under his employment agreement and amounts
payable under existing employee benefits plans.
63
<PAGE>
COMPENSATION OF DIRECTORS
Fees paid to non-employee directors consist of a $1,000 fee for each
Board of Directors meeting attended in person, a $500 fee for each Board of
Directors meeting attended by telephone and a $500 fee for each committee
meeting attended. The Chairman also receives an annual fee of $25,000.
Upon joining the Board, all non-employee directors are awarded a one time
grant of 50,000 options under the Long Term Incentive Plan ("LTIP"), vesting six
months from the grant date, at an exercise price equal to the market price on
the grant date or $1.00 per share, whichever is higher. In addition, the
Chairman is awarded options to purchase 25,000 shares of Atlas Common Stock, as
granted under the LTIP, vesting six months from the grant date at an exercise
price equal to the closing market price on the grant date or $1.00 per share,
whichever is higher.
EXECUTIVE OFFICERS
The information concerning the Company's executive officers required by
this Item is included in Part I, Item 4, under the caption "EXECUTIVE OFFICERS
OF THE COMPANY."
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
Under Section 16 of the Exchange Act, the Company's directors and executive
officers and persons holding more than 10% of the Company's Common Stock are
required to report their initial ownership of Common Stock and subsequent
changes to that ownership to the Securities and Exchange Commission by specified
due dates. To the Company's knowledge all of these filing requirements were
satisfied with respect to transactions during the year ended December 31, 1997.
Item II. EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the Company, for
the years ended December 31, 1997 and 1996, the six months ended December 31,
1995 and for the fiscal year ended June 30, 1995, to Messrs. Gregg B. Shafter
and Richard E. Blubaugh. Except for Mr. Blubaugh, no person who was serving as
an executive officer of the Company during the year ended December 31, 1997 had
total cash and cash-equivalent remuneration, which exceeded $100,000 during the
year.
64
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term
-------------------------------------- Compensation
Other ------------
Annual All Other
Name and Principal Year or Period Compen- Stock Compen-
Position Ended Salary Bonus sation Options sation
- ---------------------------------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gregg B. Dec. 31, 1997 $86,395 $ - $ 7,445 (2) - $ 5,100 (3)
Shafter Dec. 31, 1996 80,024 11,813 8,013 (2) 75,000 5,465 (3)
Dec. 31, 1995(1) 37,688 - 3,386 (2) 26,500 2,261 (3)
June 30, 1995 66,000 3,000 1,744 (2) - 3,792 (3)
Richard E.
Blubaugh, VP Dec. 31, 1997 91,690 - 9,768 (2) - 5,501 (3)
Dec. 31, 1996 91,676 13,754 10,214 (2) 75,000 5,703 (3)
Dec. 31, 1995(1) 46,575 - 5,956 (2) 52,500 2,794 (3)
June 30, 1995 85,500 3,500 6,481 (2) 10,000 5,400 (3)
</TABLE>
/(1)/ Represents the six-month period ended December 31, 1995.
/(2)/ Includes certain perquisites, such as car allowances and life insurance
premiums paid by the Company.
/(3)/ Includes contributions by the Company to the Investment Savings Plan
for Employees of Atlas.
See also, with respect to Messrs. Shafter and Blubaugh the section entitled
"Options" below.
PERFORMANCE GRAPH
The following graph shows changes over the past five years in the value of
$100 invested in: (1) Atlas Corporation Common Stock, (2) the Dow Jones Equity
Market Index and (3) the Dow Jones Precious Metals Index. The year-end values
of each investment are based on the share price appreciation plus the monthly
reinvestment of dividends, if any.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG ATLAS CORPORATION, THE DOW JONES EQUITY MARKET INDEX AND THE DOW JONES
PRECIOUS METALS INDEX*
[PERFORMANCE GRAPH HERE]
<TABLE>
<CAPTION>
DJ
Measurement period Precious DJ
(Fiscal Year Covered) Atlas Index Index
- --------------------- -------- -------- --------
<S> <C> <C> <C>
Measurement PT -
12/31/92 $100.00 $100.00 $100.00
FYE 12/31/93 $ 82.35 $160.87 $109.94
FYE 12/31/94 $ 44.71 $134.51 $110.79
FYE 12/31/95 $ 28.24 $142.22 $153.13
FYE 12/31/96 $ 11.76 $144.87 $189.27
FYE 12/31/97 $ 2.57 $100.05 $236.02
</TABLE>
* $100 INVESTED ON 12/31/91 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
65
<PAGE>
INVESTMENT AND SAVINGS PLAN. The Atlas Company Investment and Savings Plan
(the "Plan") benefits employees of the Company and its subsidiaries who have
completed six months of service. Each participant under the Plan must be at
least 21 years of age. Under the Plan, an employee may elect to contribute,
pursuant to a salary reduction election, not less than 1% and not more
than 10% of the employee's annual compensation. The Company makes a
matching contribution of 100% of the amount contributed by the employee,
but not more than 6% of the employee's annual compensation. In addition,
the Company may make special contributions to the Plan, but these special
contributions may not exceed the maximum amount deductible under Section
404(a)(3)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
Employee contributions may be invested in a number of investment options, but
not Common Stock of the Company. All matching and special contributions to the
Plan are invested in shares of Common Stock of the Company.
1978 RETIREMENT PLAN. Eligible employees, including officers, participate
in the Atlas Company 1978 Retirement Plan (the "1978 Retirement Plan"), a
noncontributory defined benefit pension Plan. Benefits under the 1978
Retirement Plan are based on years of service and the participant's compensation
during the participant's three consecutive highest compensated years out of the
participant's final five years as a participant. Benefits under the 1978
Retirement Plan are payable upon disability, death or retirement at age 55 or
later and may be distributed in the form of a lump sum, a single-life annuity, a
joint and survivor annuity covering the participant and a beneficiary or
installments over a term of years. Participants retiring before the age of 55
are entitled to a lump sum distribution. Effective March 1, 1997, the Company
froze all future accrual of benefits under the 1978 Retirement Plan. The
benefits earned by each participant as of February 28, 1997 shall be preserved
and no benefit of any participant shall be decreased or reduced. At the
Company's option the freeze can be lifted at any time in the future.
The following table shows the estimated annual benefits payable upon
retirement in the form of a single-life annuity under the 1978 Retirement Plan
to persons in the specified compensation and years-of-service classifications:
Pension Plan Table
<TABLE>
<CAPTION>
Average Annual
Compensation on
which Retirement Estimated Annual Retirement Benefits at Age
Benefits are Based 65 for Indicated Years of Credited Services
- -------------------- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(10) (15) (20) (25) (30)
-------------- ------------- ------------- ------------- -------------
$ 50,000 $ 8,535 $12,802 $17,070 $21,337 $25,604
$100,000 $18,535 $27,802 $37,070 $46,337 $55,604
$150,000 $28,535 $42,802 $57,070 $71,337 $85,604
$200,000 $28,535 $42,802 $57,070 $71,337 $85,604
$250,000 $28,535 $42,802 $57,070 $71,337 $85,604
$300,000 $28,535 $42,802 $57,070 $71,337 $85,604
</TABLE>
66
<PAGE>
Retirement benefits under the 1978 Retirement Plan are based on salaries
and additional compensation such as awards under the Annual Incentive Plan.
Directors' fees do not affect these benefits.
Benefits listed in the table are net of an offset for part of the
participant's Social Security benefits. There is no other offset. Years of
service credited through December 31, 1997 under the 1978 Retirement Plan for
the officers listed in the SUMMARY COMPENSATION TABLE is 14 years for Mr.
Blubaugh and 4 years for Mr. Shafter.
The Code sets limits on a participant's annual benefits on retirement under
the 1978 Retirement Plan. To assure that participants' retirement benefits are
not reduced in the future because of the Code limits, the Board of Directors
adopted a supplemental Executive Retirement Plan, which provides retirement
benefits on an unfunded basis to selected participants whose benefits under the
1978 Retirement Plan would be limited by the Code in an amount equal to the
difference between the annual retirement benefit permitted under the 1978
Retirement Plan by the Code and the amount that would have been paid but for the
limitation imposed by the Code.
ANNUAL INCENTIVE PLAN. Under the Company's Annual Incentive Plan,
incentive compensation may be paid to key employees selected by the Compensation
Committee based on the achievement by the Company and the selected employees of
performance goals established for each fiscal year by the Compensation
Committee. In addition to target awards, which recognize achievement of the
predetermined goals, the Compensation Committee may establish threshold and
maximum awards to recognize performance, which has only been minimally
acceptable, and performance, which has been significantly above target. Target,
threshold and maximum awards are expressed as a percentage of selected
employees' base salary for the pertinent fiscal year. The Compensation
Committee may consider the adverse impact of external circumstances on the
Company's performance in evaluating the achievement of individual employee goals
and in determining whether to exercise its authority in such circumstances to
make alternative or supplemental awards. Since July 1, 1993, no awards were
made under the Annual Incentive Plan.
OPTIONS
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION.
The following table provides information relating to the number and value of
stock options exercised in the year ended December 31, 1997 and the number of
exercisable and unexercisable stock options held by executive officers at
December 31, 1997:
<TABLE>
<CAPTION>
Number of Unexercised
Options at December 31, 1997
-----------------------------------
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gregg B. Shafter - - 101,500 -
Richard E. Blubaugh - - 127,500 -
</TABLE>
There were no unexercised, in-the-money options at December 31, 1997.
67
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1997 are identified
above under the heading BOARD AND COMMITTEE MEETINGS. No member of the
Compensation Committee is or has been at any time an officer of the Company or
any of its subsidiaries (except for Mr. Cook who served as a non-executive
Chairman of the Company during 1997). During 1997 no executive officer of the
Company served as a director or as member of the Compensation Committee of
another entity whose executive officers served as a director or as a member of
the Compensation Committee of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 15,
1998 regarding the beneficial ownership, including shares of Atlas Common Stock
which may be acquired upon the exercise of stock options or warrants, or the
conversion of any securities, within 60 days of March 15, 1998, of the Company's
Common Stock by (i) persons known to the Company to own more than 5% of
the Company's Common Stock, (ii) each director of the Company, (iii) each
executive officer named in the Summary Compensation Table set forth above, and
(iv) all directors and executive officers as a group:
SECURITY OWNERSHIP TABLE
<TABLE>
<CAPTION>
NUMBER OF SHARES
AND NATURE OF
NAME BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
M.I.M. Holdings Limited 3,000,000 (2) 10.58% (2)
M.I.M. Plaza, 410 Anne St.
Brisbane, Queensland, 4000
Australia
H. R. Shipes 2,174,313 (3) 7.93% (3)
335 North Wilmot Road, Suite 400
Tucson, AZ 85711
Victor D. Bahary 1,581,200 (4) 5.78% (4)
45 Park Boulevard
Ocean, NJ 07712
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
AND NATURE OF
NAME BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Independence Mining Company Inc. 1,400,000 (5) 5.12% (5)
5251 DTC Parkway, Suite 700
Englewood, CO 80111
Douglas R. Cook 97,000 (6) *
Mario Caron 50,000 (7) *
Christopher J. A. Davie 50,000 (7) *
James H. Dunnett 215,000 (8) *
C. Thomas Ogryzlo 70,000 (9) *
Richard E. Blubaugh 163,276 (10) *
All current executive officers and directors as a group (9 3,282,714 (11) 10.89% (11)
persons)
</TABLE>
(1) Does not include shares issuable on the exercise of options, which have not
vested and will not vest within 60 days of this report.
(2) M.I.M. Holdings Limited, to the best of the Company's knowledge, is the
direct beneficial owner of (i) 2,000,000 shares of Common Stock and (ii)
warrants issued by the Company which are exercisable into 1,000,000 shares
of Common Stock at an exercise price of $7.00 per share.
(3) On October 28, 1996 a Schedule 13D was filed with the Securities and
Exchange Commission by H.R. Shipes reflecting beneficial ownership of
2,117,646 shares of Common Stock of which 156,863 are held by Mr. Shipes
for the benefit of his minor child under the Uniform Gift to Minor's Act.
Also included are 56,667 shares obtainable upon exercise of options granted
to Mr. Shipes under the Long Term Incentive Plan.
(4) On October 2, 1997 a Schedule 13D was filed with the Securities and
Exchange Commission by Victor D. Bahary reflecting beneficial ownership of
1,581,200 shares of Common Stock.
(5) On November 3, 1995 Atlas received a copy of Schedule 13D filed by
Independence Mining Company Inc. reflecting direct ownership of 1,400,000
shares of Common Stock.
(6) Includes 2,000 shares of Common Stock directly owned and 95,000 shares
obtainable upon exercise of options granted to Mr. Cook under the Long Term
Incentive Plan.
(7) Includes 50,000 shares obtainable upon exercise of options under the Long
Term Incentive Plan.
69
<PAGE>
(8) James H. Dunnett is the indirect beneficial owner of (i) 100,000 shares of
Common Stock and (ii) warrants issued by the Company which are exercisable
into 45,000 shares of Common Stock at an exercise price of $7.00 per share.
Mr. Dunnett's holdings also include 70,000 shares obtainable upon exercise
of options granted to him under the Long Term Incentive Plan.
(9) Includes 70,000 shares obtainable upon exercise of options granted under
the Long Term Incentive Plan.
(10) Includes (i) 127,500 shares obtainable upon the exercise of options granted
under the Long Term Incentive Plan and (ii) 35,767 shares held in Mr.
Blubaugh's account under the Company's 401(k) Plan.
(11) Includes (i) 699,167 shares obtainable upon exercise of options granted
under the Long Term Incentive Plan, (ii) warrants issued by the Company
which are exercisable into 45,000 shares of Common Stock at an exercise
price of $7.00 per share, (iii) 90,685 shares of Common Stock held
beneficially under the Company's 401(k) Plan and (iv) direct ownership of
2,220,646 shares of Common Stock.
Item 13. Certain Relationships and Related Transactions
Mr. Dunnett is a principal of the investment banking firm of Endeavour Financial
Corporation ("Endeavour") which acts as a financial advisor to the Company.
During the year ended December 31, 1997, the Company paid Endeavour $133,300 in
advisory fees.
70
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(a) (1) Financial Statements:
See Index to Financial Statements and Schedules on page 30.
(2) Financial Statement Schedules:
See Index to Financial Statements and Schedules on page 83.
(3) Exhibits:
Exhibit
Number Exhibits
- --------------------------------------------------------------------------------
2.1 Agreement and Plan of Reorganization between the Company and the
shareholders of Suramco Metals, Inc. dated October 7, 1996 (filed
as Exhibit 2.1 to the Company's annual report on Form 10-K for the
year ended December 31, 1996 and incorporated herein by reference).
2.2 Stock Purchase Agreement between the Company and Arimetco
International Inc. dated October 7, 1996 (filed as Exhibit 2.2 to
the Company's annual report on Form 10-K for the year ended
December 31, 1996 and incorporated herein by reference).
2.3 Stock Purchase Agreement between the Company and Cornerstone
Industrial Minerals Corporation dated December 13, 1996 (filed as
Exhibit 2.3 to the Company's annual report on Form 10-K for the
year ended December 31, 1996, and incorporated herein by
reference).
2.4 Asset Purchase Agreement between the Company, Atlas Gold Mining
Inc. and Atlas Precious Metals Inc. and Barrick Gold Exploration
Inc. dated June 3, 1997 regarding the Company's Gold Bar property.
2.5 Letter Agreement between the Company and Tombstone Explorations Co. Ltd.
dated December 19, 1997 with respect to the Company's Grassy Mountain
property.
3.1 Restated Certificate of Incorporation of the Company, dated
January 3, 1990 (filed as Exhibit 3.2 to the Company's quarterly
report on Form 10-Q for the quarter ended December 31, 1989, and
incorporated herein by reference).
71
<PAGE>
3.2 By-Laws of the Company as amended on July 12, 1995. (filed as
Exhibit 3.3 to the Company's annual report on Form 10-K for the
year ended June 30, 1995 and incorporated herein by reference).
4.1 Indenture dated as of November 10, 1995 between the Company and
Chemical Bank as Trustee (filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-3 (33-65165) as filed with the
Commission on December 19, 1995 under the Securities Act of 1933
and incorporated herein by reference).
4.2 Escrow and Pledge Agreement dated as of November 10, 1995 between
the Company and Chemical Bank as Trustee and Chemical Bank as
Escrow Agent (filed as Exhibit 4.2 to the Company's Registration
Statement on Form S-3 (33-65165) as filed with the Commission on
December 19, 1995 and incorporated herein by reference).
4.3 Special Warrant Indenture dated November 9, 1995 between the
Company and The Montreal Trust Company of Canada containing terms
and conditions governing the issue and exercise of special
Debenture warrants exercisable for 7% Exchangeable Debentures due
October 25, 2000 of the Company (filed as Exhibit 99.2 to the
Company's Registration Statement on Form S-3 (33-65165) as filed
with the Commission on December 19, 1995 and incorporated herein
by reference).
4.4 Exchange Agreement dated June 1997 between the Company and
the holders of the Company's 7% Exchangeable Debentures due
October 25, 2000.
10.1 Atlas Corporation Management Incentive Compensation Plan (filed as
Exhibit 10.2 to the Company's annual report on Form 10-K (File No.
1-2714) for the fiscal year ended June 30, 1981 and incorporated
herein by reference).
10.2 Form of Indemnity Agreement entered into between the Company and
certain of its directors (filed as Exhibit 10.14 to the Company's
annual report on Form 10-K for the fiscal year ended June 30, 1987
and incorporated herein by reference).
10.3 Amended and Restated Rights Agreement dated as of August 2, 1989
between the Company and Manufacturers Hanover Trust Company (filed
as Exhibit 1 to the Company's report on Form 8-K dated August 2,
1989 and incorporated herein by reference)
10.4 Long Term Incentive Plan of the Company dated November 1, 1989
(filed as Exhibit 10.28 to the Company's annual report on Form
10-K for the fiscal year ended June 30, 1989 and incorporated
herein by reference).
72
<PAGE>
10.5 Atlas Corporation Supplemental Executive Retirement Plan dated as
of January 3, 1990 (filed as Exhibit 10.2 to the Company's
quarterly report on Form 10-Q for the quarter ended March 31, 1990
and incorporated herein by reference).
10.6 Atlas Corporation Retirement Plan for Outside Directors dated
April 4, 1990 (filed as Exhibit 10.3 to the Company's quarterly
report on Form 10-Q for the quarter ended March 31, 1990 and
incorporated herein by reference).
10.7 Atlas Corporation Annual Incentive Plan adopted by the Board of
Directors of the Company on March 6, 1991 (filed as Exhibit 10.20
to the Company's annual report on Form 10-K for the year ended
June 30, 1991 and incorporated herein by reference).
10.8 Securities Purchase Agreement dated September 3, 1993 between the
Company and Phoenix Financial Holdings Inc. (filed as Exhibit 2 to
the Company's Report on Form 8-K filed on September 9, 1993 and
incorporated herein by reference).
10.9 Amendment dated as of September 15, 1993 to the Amended and
Restated Rights Agreement dated as of August 2, 1989 between the
Company and Chemical Bank, as successor by merger with
Manufacturers Hanover Trust Company (filed as Exhibit 10.25 to the
Company's annual report on Form 10-K for the year ended June 30,
1993 and incorporated herein by reference).
10.10 Employment agreement made as of September 22, 1993 between the
Company and David J. Birkenshaw (filed as Exhibit 10.1 to the
Company's quarterly report on Form 10-Q for the quarter ended
March 31, 1994 and incorporated herein by reference).
10.11 Amendment dated as of August 28, 1995 to the employment agreement
made as of September 22, 1993 between the Company and David J.
Birkenshaw (filed as Exhibit 10.15 to the Company's annual report
on Form 10-K for the year ended June 30, 1995 and incorporated
herein by reference).
10.12 Share Purchase Agreement dated April 28, 1994 between the Company
and M.I.M. (Canada) Inc. (filed as Exhibit 10.18 to the Company's
annual report on Form 10-K for the year ended June 30, 1994 and
incorporated herein by reference).
10.13 Agreement dated May 10, 1994 between the Company and Granges Inc.
(filed as Exhibit 10.19 to the Company's annual report on Form
10-K for the year ended June 30, 1994 and incorporated herein by
reference)
73
<PAGE>
10.14 Registration Rights Agreement dated August 15, 1994 between the
Company and First Marathon Securities Limited (filed as Exhibit
10.20 to the Company's annual report on Form 10-K for the year
ended June 30, 1994 and incorporated herein by reference).
10.15 Indemnity Agreement dated August 15, 1995 between the Company and
M.I.M. Holdings Limited (filed as Exhibit 10.21 to the Company's
annual report on Form 10-K for the year ended June 30, 1994 and
incorporated herein by reference).
10.16 Second Amendment dated as of August 15, 1994 to the Amended and
Restated Rights Agreement dated August 2, 1989 between the Company
and Chemical Bank, as successor by merger with Manufacturers
Hanover Trust Company (filed as Exhibit 10.1 to the Company's
quarterly report on Form 10-Q for the quarter ended March 31, 1995
and incorporated herein by reference).
10.17 The Company's Long Term Incentive Plan, as amended, dated February
17, 1995 (filed as Exhibit 10.2 to the Company's quarterly report
on Form 10-Q for the quarter ended March 31, 1995 and incorporated
herein by reference).
10.18 Amendment dated September 15, 1995 to the employment agreement
made as of February 17, 1995 between the Company and Richard E.
Blubaugh (filed as Exhibit 10.27 to the Company's annual report
on Form 10-K for the year ended June 30, 1995 and incorporated
herein by reference).
10.19 Employment Agreement dated June 1, 1995 between the Company and
Gerald E. Davis (filed as Exhibit 10.28 to the Company's annual
report on Form 10-K for the year ended June 30, 1995 and
incorporated herein by reference).
10.20 Amendment dated September 20, 1995 to the employment agreement
dated June 1, 1995 between the Company and Gerald E. Davis (filed
as Exhibit 10.29 to the Company's annual report on Form 10-K for
the year ended June 30, 1995 and incorporated herein by reference).
10.21 Underwriting Agreement dated as of October 25, 1995 by and among
the Company, Yorkton Securities Inc. and First Marathon Securities
Ltd. regarding the distribution of special Debenture warrants
exercisable for 7% Exchangeable Debentures due October 25, 2000 of
the Company (filed as Exhibit 99.1 to the Company's Registration
Statement on Form S-3 (33-65165) as filed with the Commission on
December 19, 1995 and incorporated herein by reference).
10.22 Granges Registration Agreement dated as of November 10, 1995
between the Company and Granges Inc. (filed as Exhibit 99.3 to the
Company's Registration Statement on Form S-3 (33-65165) as filed
74
<PAGE>
with the Commission on December 19, 1995 and incorporated herein
by reference).
10.23 Indemnification Agreement dated as of November 15, 1995 between
the Company and Granges Inc. (filed as Exhibit 99.4 to the
Company's Registration Statement on Form S-3 (33-65165) as filed
with the Commission on December 19, 1995 and incorporated herein
by reference).
10.24 Purchase and Sale Agreement dated October 25, 1995 between the
Company and Independence Mining Company Inc. (filed as Exhibit
99.8 to the Company's Registration Statement on Form S-3
(33-65165) as filed with the Commission on December 19, 1995 and
incorporated herein by reference).
10.25 Registration Rights Agreement dated October 25, 1995 between the
Company and Independence Mining Company Inc. (filed as Exhibit
99.9 to the Company's Registration Statement on Form S-3
(33-65165) as filed with the Commission on December 19, 1995 and
incorporated herein by reference).
10.26 Mining Venture Agreement with Granges (U.S.), Inc. dated September
29, 1995 (filed as Exhibit 10.37 to the Company's annual report on
Form 10-K for the year ended December 31, 1995 and incorporated
herein by reference).
10.27 Resignation Agreement and General Release dated June 21, 1996
between the Company and David J. Birkenshaw (filed as Exhibit
10.36 to the Company's annual report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference).
10.28 Support Letter dated August 16, 1996 to the Company from Granges
Inc. and Da Capo Resources Ltd. (filed as Exhibit 10.37 to the
Company's annual report on Form 10-K for the year ended December
31, 1996 and incorporated herein by reference).
10.29 Amendment to Resignation Agreement and General Release dated October 1996
between the Company and David J. Birkenshaw (filed as Exhibit 10.38 to
the Company's annual report on Form 10-K for the year ended December 31,
1996 and incorporated herein by reference).
10.30 Resignation Agreement and General Release dated November 5, 1996 between
the Company and Gerald E. Davis (filed as Exhibit 10.39 to the Company's
annual report on Form 10-K for the year ended December 31, 1996 and
incorporated herein by reference).
75
<PAGE>
10.31 Amendment to Resignation Agreement and General Release dated January 14,
1997 between the Company and Gerald E. Davis (filed as Exhibit 10.40 to
the Company's annual report on Form 10-K for the year ended December 31,
1996 and incorporated herein by reference).
10.32 Employment Agreement dated December 1, 1996 between the Company
and Gregg B. Shafter (filed as Exhibit 10.41 to the Company's
annual report on Form 10-K for the year ended December 31, 1996
and incorporated herein by reference).
10.33 Letter Agreement dated January 6, 1997 regarding the withdrawal
from the Gold Bar mining venture agreement between the Company and
Granges (U.S.), Inc. (filed as Exhibit 10.42 to the Company's
annual report on Form 10-K for the year ended December 31, 1996
and incorporated herein by reference).
21 Subsidiaries of the Company
23 Consent of Independent Auditors
(b) The Registrant did not file or amend reports on Form 8-K during the
fourth quarter of 1997.
For purposes of complying with the amendments to the rules governing Form S-8
(effective July 13, 1990) under the Securities Act of 1933, the undersigned
hereby undertakes as follows, which undertaking shall be incorporated by
reference into the Company's Registration Statement on Form S-8, No. 33-18316
(filed on November 3, 1987, as amended by Post Effective Amendment No. 1 filed
on December 15, 1987):
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by
the director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
76
<PAGE>
_____________________________
Note concerning Exhibits: The Company will furnish copies of Exhibits to
security holders of the Company upon request. The Company may charge a fee in
connection with such a request, which will be limited to the Company's
reasonable expenses in furnishing any such Exhibit.
77
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ATLAS CORPORATION
By: /s/ Gregg B. Shafter
Name: Gregg B. Shafter
Title: President
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ James R. Jensen Treasurer, Controller & Secretary March 31, 1998
- ----------------------------- (Principal Financial Officer
James R. Jensen & Principal Accounting Officer)
/s/ Mario Caron Director March 31, 1998
- -----------------------------
Mario Caron
/s/ Douglas R. Cook Director March 31, 1998
- -----------------------------
Douglas R. Cook
/s/ Christopher J. A. Davie Director March 31, 1998
- -----------------------------
Christopher J. A. Davie
/s/ James H. Dunnett Director March 31, 1998
- -----------------------------
James H. Dunnett
/s/ C. Thomas Ogryzlo Director March 31, 1998
- -----------------------------
C. Thomas Ogryzlo
</TABLE>
78
<PAGE>
ATLAS CORPORATION AND ITS SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1997, 1996 and 1995 and JUNE 30, 1995
Page
----
FINANCIAL STATEMENTS OF ATLAS CORPORATION
<TABLE>
<CAPTION>
<S> <C>
Consolidated Statements of Operations for the
Years Ended December 31, 1997 and 1996, the Six Months Ended
December 31, 1995 and for the Year Ended June 30, 1995. 31
Consolidated Balance Sheets as of December 31, 1997
and 1996. 32
Consolidated Statements of Stockholder's Equity
(Deficit) for the Years Ended December 31, 1997 and 1996,
the Six Months Ended December 31, 1995, and for the
Year Ended June 30, 1995. 33
Consolidated Statements of Cash Flow for the
Years Ended December 31, 1997 and 1996, the Six Months
Ended December 31, 1995 and for the Year Ended
June 30, 1995 34
Notes to Consolidated Financial Statements 35 - 61
Report of Independent Auditors 62
Consent of Independent Auditors 84
SCHEDULES FOR THE YEAR ENDED DECEMBER 31, 1997 AND 1996,
THE SIX MONTHS ENDED DECEMBER 31, 1995 AND FOR THE YEAR ENDED
JUNE 30, 1995:
VIII Valuation and Qualifying Accounts and Reserves 85
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
For the Years Ended December 31, 1997 and 1996, the Six Months Ended
December 31, 1995 and the Year Ended June 30, 1995
(In thousands)
Column A Column B Column C Column D Column E Column F
Additions
Balance at Charged to
Beginning Costs and Charged to Balance at
Classification Period Expenses Other Accounts Deductions End of Period
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Provisions for loss from disposal of
discontinued operations $ 18,704 $ 3,217 $ 2,252 $ (1,258) $ 22,915
Year ended December 31, 1996
Provisions for loss from disposal of
discontinued operations 21,623 - - (2,919) 18,704
Six Months ended December 31, 1995
Provisions for loss from disposal of
discontinued operations 22,829 - - (1,206) 21,623
Year ended June 30, 1995
Provisions for loss from disposal of
discontinued operations 27,707 225 - (5,103) 22,829
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
81
<PAGE>
SCHEDULE OF EXHIBITS
Exhibit
Number Exhibits
- -------------------------------------------------------------------------------
2.1 Agreement and Plan of Reorganization between the Company and the
shareholders of Suramco Metals, Inc. dated October 7, 1996 (filed
as Exhibit 2.1 to the Company's annual report on Form 10-K for the
year ended December 31, 1996 and incorporated herein by reference).
2.2 Stock Purchase Agreement between the Company and Arimetco
International Inc. dated October 7, 1996 (filed as Exhibit 2.2 to
the Company's annual report on Form 10-K for the year ended
December 31, 1996 and incorporated herein by reference).
2.3 Stock Purchase Agreement between the Company and Cornerstone
Industrial Minerals Corporation dated December 13, 1996 (filed as
Exhibit 2.3 to the Company's annual report on Form 10-K for the
year ended December 31, 1996, and incorporated herein by
reference).
2.4 Asset Purchase Agreement between the Company, Atlas Gold Mining
Inc. and Atlas Precious Metals Inc. and Barrick Gold Exploration
Inc. dated June 3, 1997 regarding the Company's Gold Bar property.
2.5 Letter Agreement between the Company and Tombstone Explorations Co. Ltd.
dated December 19, 1997 with respect to the Company's Grassy Mountain
property.
3.1 Restated Certificate of Incorporation of the Company, dated
January 3, 1990 (filed as Exhibit 3.2 to the Company's quarterly
report on Form 10-Q for the quarter ended December 31, 1989, and
incorporated herein by reference).
3.2 By-Laws of the Company as amended on July 12, 1995. (filed as
Exhibit 3.3 to the Company's annual report on Form 10-K for the
year ended June 30, 1995 and incorporated herein by reference).
4.1 Indenture dated as of November 10, 1995 between the Company and
Chemical Bank as Trustee (filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-3 (33-65165) as filed with the
Commission on December 19, 1995 under the Securities Act of 1933
and incorporated herein by reference).
82
<PAGE>
4.2 Escrow and Pledge Agreement dated as of November 10, 1995 between
the Company and Chemical Bank as Trustee and Chemical Bank as
Escrow Agent (filed as Exhibit 4.2 to the Company's Registration
Statement on Form S-3 (33-65165) as filed with the Commission on
December 19, 1995 and incorporated herein by reference).
4.3 Special Warrant Indenture dated November 9, 1995 between the
Company and The Montreal Trust Company of Canada containing terms
and conditions governing the issue and exercise of special
Debenture warrants exercisable for 7% Exchangeable Debentures due
October 25, 2000 of the Company (filed as Exhibit 99.2 to the
Company's Registration Statement on Form S-3 (33-65165) as filed
with the Commission on December 19, 1995 and incorporated herein
by reference).
4.4 Exchange Agreement dated June 1997 between the Company and the holders of
the Company's 7% Exchangeable Debentures due October 25, 2000.
10.1 Atlas Corporation Management Incentive Compensation Plan (filed as
Exhibit 10.2 to the Company's annual report on Form 10-K (File No.
1-2714) for the fiscal year ended June 30, 1981 and incorporated
herein by reference).
10.2 Form of Indemnity Agreement entered into between the Company and
certain of its directors (filed as Exhibit 10.14 to the Company's
annual report on Form 10-K for the fiscal year ended June 30, 1987
and incorporated herein by reference).
10.3 Amended and Restated Rights Agreement dated as of August 2, 1989
between the Company and Manufacturers Hanover Trust Company (filed
as Exhibit 1 to the Company's report on Form 8-K dated August 2,
1989 and incorporated herein by reference).
10.4 Long Term Incentive Plan of the Company dated November 1, 1989
(filed as Exhibit 10.28 to the Company's annual report on Form
10-K for the fiscal year ended June 30, 1989 and incorporated
herein by reference).
10.5 Atlas Corporation Supplemental Executive Retirement Plan dated as
of January 3, 1990 (filed as Exhibit 10.2 to the Company's
quarterly report on Form 10-Q for the quarter ended March 31, 1990
and incorporated herein by reference).
83
<PAGE>
10.6 Atlas Corporation Retirement Plan for Outside Directors dated
April 4, 1990 (filed as Exhibit 10.3 to the Company's quarterly
report on Form 10-Q for the quarter ended March 31, 1990 and
incorporated herein by reference).
10.7 Atlas Corporation Annual Incentive Plan adopted by the Board of
Directors of the Company on March 6, 1991 (filed as Exhibit 10.20
to the Company's annual report on Form 10-K for the year ended
June 30, 1991 and incorporated herein by reference).
10.8 Securities Purchase Agreement dated September 3, 1993 between the
Company and Phoenix Financial Holdings Inc. (filed as Exhibit 2 to
the Company's Report on Form 8-K filed on September 9, 1993 and
incorporated herein by reference).
10.9 Amendment dated as of September 15, 1993 to the Amended and
Restated Rights Agreement dated as of August 2, 1989 between the
Company and Chemical Bank, as successor by merger with
Manufacturers Hanover Trust Company (filed as Exhibit 10.25 to the
Company's annual report on Form 10-K for the year ended June 30,
1993 and incorporated herein by reference).
10.10 Employment agreement made as of September 22, 1993 between the
Company and David J. Birkenshaw (filed as Exhibit 10.1 to the
Company's quarterly report on Form 10-Q for the quarter ended
March 31, 1994 and incorporated herein by reference).
10.11 Amendment dated as of August 28, 1995 to the employment agreement
made as of September 22, 1993 between the Company and David J.
Birkenshaw (filed as Exhibit 10.15 to the Company's annual report
on Form 10-K for the year ended June 30, 1995 and incorporated
herein by reference).
10.12 Share Purchase Agreement dated April 28, 1994 between the Company
and M.I.M. (Canada) Inc. (filed as Exhibit 10.18 to the Company's
annual report on Form 10-K for the year ended June 30, 1994 and
incorporated herein by reference).
10.13 Agreement dated May 10, 1994 between the Company and Granges Inc.
(filed as Exhibit 10.19 to the Company's annual report on Form
10-K for the year ended June 30, 1994 and incorporated herein by
reference)
10.14 Registration Rights Agreement dated August 15, 1994 between the Company
and First Marathon Securities Limited (filed as Exhibit 10.20 to the
Company's annual report on Form 10-K for the year ended June 30, 1994 and
incorporated herein by reference).
84
<PAGE>
10.15 Indemnity Agreement dated August 15, 1995 between the Company and
M.I.M. Holdings Limited (filed as Exhibit 10.21 to the Company's
annual report on Form 10-K for the year ended June 30, 1994 and
incorporated herein by reference).
10.16 Second Amendment dated as of August 15, 1994 to the Amended and
Restated Rights Agreement dated August 2, 1989 between the Company
and Chemical Bank, as successor by merger with Manufacturers
Hanover Trust Company (filed as Exhibit 10.1 to the Company's
quarterly report on Form 10-Q for the quarter ended March 31, 1995
and incorporated herein by reference).
10.17 The Company's Long Term Incentive Plan, as amended, dated February
17, 1995 (filed as Exhibit 10.2 to the Company's quarterly report
on Form 10-Q for the quarter ended March 31, 1995 and incorporated
herein by reference).
10.18 Amendment dated September 15, 1995 to the employment agreement
made as of February 17, 1995 between the Company and Richard E.
Blubaugh (filed as Exhibit 10.27 to the Company's annual report
on Form 10-K for the year ended June 30, 1995 and incorporated
herein by reference).
10.19 Employment Agreement dated June 1, 1995 between the Company and
Gerald E. Davis (filed as Exhibit 10.28 to the Company's annual
report on Form 10-K for the year ended June 30, 1995 and
incorporated herein by reference).
10.20 Amendment dated September 20, 1995 to the employment agreement
dated June 1, 1995 between the Company and Gerald E. Davis (filed
as Exhibit 10.29 to the Company's annual report on Form 10-K for
the year ended June 30, 1995 and incorporated herein by reference).
10.21 Underwriting Agreement dated as of October 25, 1995 by and among
the Company, Yorkton Securities Inc. and First Marathon Securities
Ltd. regarding the distribution of special Debenture warrants
exercisable for 7% Exchangeable Debentures due October 25, 2000 of
the Company (filed as Exhibit 99.1 to the Company's Registration
Statement on Form S-3 (33-65165) as filed with the Commission on
December 19, 1995 and incorporated herein by reference).
10.22 Granges Registration Agreement dated as of November 10, 1995
between the Company and Granges Inc. (filed as Exhibit 99.3 to the
Company's Registration Statement on Form S-3 (33-65165) as filed
85
<PAGE>
with the Commission on December 19, 1995 and incorporated herein
by reference).
10.23 Indemnification Agreement dated as of November 15, 1995 between
the Company and Granges Inc. (filed as Exhibit 99.4 to the
Company's Registration Statement on Form S-3 (33-65165) as filed
with the Commission on December 19, 1995 and incorporated herein
by reference).
10.24 Purchase and Sale Agreement dated October 25, 1995 between the
Company and Independence Mining Company Inc. (filed as Exhibit
99.8 to the Company's Registration Statement on Form S-3
(33-65165) as filed with the Commission on December 19, 1995 and
incorporated herein by reference).
10.25 Registration Rights Agreement dated October 25, 1995 between the
Company and Independence Mining Company Inc. (filed as Exhibit
99.9 to the Company's Registration Statement on Form S-3
(33-65165) as filed with the Commission on December 19, 1995 and
incorporated herein by reference).
10.26 Mining Venture Agreement with Granges (U.S.), Inc. dated September
29, 1995 (filed as Exhibit 10.37 to the Company's annual report on
Form 10-K for the year ended December 31, 1995 and incorporated
herein by reference).
10.27 Resignation Agreement and General Release dated June 21, 1996
between the Company and David J. Birkenshaw (filed as Exhibit
10.36 to the Company's annual report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference).
10.28 Support Letter dated August 16, 1996 to the Company from Granges
Inc. and Da Capo Resources Ltd. (filed as Exhibit 10.37 to the
Company's annual report on Form 10-K for the year ended December
31, 1996 and incorporated herein by reference).
10.29 Amendment to Resignation Agreement and General Release dated
October 1996 between the Company and David J. Birkenshaw (filed as
Exhibit 10.38 to the Company's annual report on Form 10-K for the
year ended December 31, 1996 and incorporated herein by reference).
10.30 Resignation Agreement and General Release dated November 5, 1996
between the Company and Gerald E. Davis (filed as Exhibit 10.39 to
the Company's annual report on Form 10-K for the year ended
December 31, 1996 and incorporated herein by reference).
86
<PAGE>
10.31 Amendment to Resignation Agreement and General Release dated January 14,
1997 between the Company and Gerald E. Davis (filed as Exhibit
10.40 to the Company's annual report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference).
10.32 Employment Agreement dated December 1, 1996 between the Company
and Gregg B. Shafter (filed as Exhibit 10.41 to the Company's
annual report on Form 10-K for the year ended December 31, 1996
and incorporated herein by reference).
10.33 Letter Agreement dated January 6, 1997 regarding the withdrawal
from the Gold Bar mining venture agreement between the Company and
Granges (U.S.), Inc. (filed as Exhibit 10.42 to the Company's
annual report on Form 10-K for the year ended December 31, 1996
and incorporated herein by reference).
21 Subsidiaries of the Company
23 Consent of Independent Auditors
87
<PAGE>
Exhibit 2.4
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered into as of June
3, 1997 by and between Barrick Gold Exploration Inc., an Ohio corporation
("Buyer"), and Atlas Corporation, a Delaware corporation ("Atlas"), Atlas Gold
Mining Inc., a Nevada corporation ("Atlas Gold"), and Atlas Precious Metals
Inc., a Nevada corporation ("Atlas Metals") (individually, a "Seller", and
collectively, the "Sellers"). Buyer and Sellers are sometimes referred to
individually as a "Party" and collectively as the "Parties."
RECITALS
A. Sellers own or control certain patented and unpatented mining claims and
mill sites and fee lands in Eureka County, Nevada (the "Claims"). The Claims
owned by Sellers are more particularly described in Parts I. A and B and Parts
II. A, B and C of Exhibit A to this Agreement. A portion of the Claims, as well
as certain fee lands, are leased by Atlas pursuant to certain mining leases (the
"Leases") which are more particularly described in Parts I. C and D of Exhibit
A.
B. Sellers have entered into certain contracts and agreements (the
"Contracts") related to the Claims and have constructed or otherwise acquired
certain mines, dumps, roads, buildings, fixtures, facilities and other
improvements on a portion of the Claims (the "Fixtures and Improvements"), have
acquired certain water rights (the "Water Rights") and certain operational
permits, and other ancillary rights (the "Related Rights"), and have developed
certain data, maps, cores, analyses, models, studies and other technical
information (the "Information") in connection with Sellers, exploration and
mining activities on the Claims. The Contracts are identified in Part IV of
Exhibit A to this Agreement, the Water Rights are identified in Part V of
Exhibit A to this Agreement, and the Related Rights are identified in Exhibit B
to this Agreement.
C. Buyer desires to purchase from Sellers that portion of the Claims upon
which no (or only limited) mining activities have occurred in the past (the
"Purchased Claims") and the Buyer desires to obtain the right to acquire the
remainder of the Claims (the "Excluded Claims"), in each case, together with the
related Contracts, Fixtures and Improvements, Related Rights and Information and
to conduct certain exploration and other investigatory activities on the
Purchased Claims and the Excluded Claims. The Purchased Claims and the Excluded
Claims are identified in Parts I and II, respectively, of Exhibit A to this
agreement.
D. This Agreement contemplates a transaction in which: Sellers will
convey to Buyer the Purchased Claims and certain shares of common stock to be
issued by Atlas; Sellers will allow Buyer to use certain of the Contracts,
Fixtures and Improvements and Related Rights on an interim basis; Sellers will
grant to Buyer the right to Purchase the Excluded Claims, Contracts, Fixtures
and Improvements, Related Rights and Information; and Sellers will retain the
right to enter into a joint venture with Buyers for the further development of
the Claims.
-1-
<PAGE>
AGREEMENT
In consideration of the premises and the mutual promises herein made, and
in consideration of the representations, warranties, and covenants herein
contained, the Parties agree as follows.
1. Definitions . In addition to the definitions that appear in the text
-----------
of this Agreement, the following terms will have the meanings set out in this
Section 1:
(a) "Adverse Consequences" means all actions, suits, proceedings,
--------------------
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
(b) "Affiliate" has the meaning set forth in Rule 12b-2 of the
---------
regulations promulgated under the Securities Exchange Act.
(c) "Environmental Laws" means the Comprehensive Environmental
------------------
Response, Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, the Clean Air Act, the Federal Water Pollution Control Act
and the Mine Safety and Health Act of 1977, each as amended, together with all
other laws (including applicable rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state
and local governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or employee health and
safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the existence, manufacture, processing,
distribution, use, treatment, storage, disposal, recycling, transport, or
handling or reporting or notification to any governmental authority in the
collection, storage, use, treatment or disposal of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
(d) "Environmental Liabilities" relating to a property means any
-------------------------
Liability arising out of, based on or resulting from (i) the presence, release,
threatened release, discharge or emission into the environment of any Hazardous
Materials or substances existing or arising on, beneath or above such property
and/or emanating or migrating and/or threatening to emanate or migrate from such
property to other properties; (ii) disposal or treatment of or the arrangement
for the disposal or treatment of Hazardous Materials originating or transported
from such property to an off-site treatment, storage or disposal facility, (iii)
physical disturbance of the environment on or from such property; or (iii) the
violation or alleged violation of any Environmental Laws relating to such
property.
(e) "Hazardous Materials" means any substance: (a) the presence of
-------------------
which requires reporting, investigation, removal or remediation under any
Environmental Law; (b) that is
-2-
<PAGE>
defined as a "hazardous waste," "hazardous substance," "extremely hazardous
substance" or "pollutant" or "contaminant" under any Environmental Law; (c) that
is toxic, explosive, corrosive, flammable, ignitable, infections, radioactive,
reactive, carcinogenic, mutagenic or otherwise hazardous and is regulated under
any Environmental Law; (d) the presence of which on a property causes or
threatens to cause a nuisance upon the property or to adjacent properties or
poses or threatens to pose a hazard to the health or safety of persons on or
about the property; (e) that contains gasoline, diesel fuel or other petroleum
hydrocarbons; or (f) that contains PCBs, asbestos or urea formaldehyde foam
insulation; in each case subject to exceptions provided in the Environmental
Laws.
(f) "Knowledge" means actual knowledge of the Party making a
---------
representation or warranty in this Agreement.
(g) "Liability" means any liability (whether known or unknown, whether
---------
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
(h) "Ordinary Course of Business" means the ordinary course of
---------------------------
business consistent with past custom and practice (including with respect to
quantity and frequency).
(i) "Property" means the Claims. the Contracts, the Fixtures and
--------
Improvements, the Related Rights and the Information which, taken together,
constitute the Atlas Gold Bar Property in Eureka County, Nevada.
(j) "Reclamation Areas" means the areas of the Property outlined in
-----------------
the maps of the Property attached hereto as Parts II.D.1 and 2 of Exhibit A,
together with the road that traverses the Claims between the areas (the "Road").
For purposes of this Agreement, the Road itself, to the extent it traverses the
Purchased Claims, shall be deemed to be part of the Excluded Claims.
(k) "$" means dollars of United States currency, unless otherwise
-
explicitly stated.
(l) "Tax" means any federal, state, local, or foreign income, gross
---
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
2. Basic Transaction .
-----------------
(a) Purchase and Sale of the Purchased Claims. At the Closing, Buyer
-----------------------------------------
agrees to purchase from Sellers, and Sellers agree to sell, transfer, convey,
and deliver to Buyer, all of the right, title and interest of Sellers in and to
the Purchased Claims for the total consideration of $1,000,000
-3-
<PAGE>
(the "Purchase Price"). The Purchase Price will be paid to Atlas at the Closing
by wire transfer or other immediately available funds. For purposes of Code
Section 1060, the Purchase Price shall be allocated among the Purchased Claims
on a pro rata basis. The parties agree to execute appropriate forms or otherwise
take such actions as are necessary to report this allocation to the Internal
Revenue Service.
(b) Purchase and Sale of Shares. At the Closing, Buyer agrees to
---------------------------
purchase from Atlas and Atlas agrees to issue to Buyer 1,000,000 shares of the
common stock of Atlas (the "Purchased Shares") at an issue price of $1.00 per
share, for a total price of $1,000,000 (the "Share Purchase Price"). The Share
Purchase Price shall be paid to Atlas at the Closing by wire transfer or other
immediately available funds.
(c) The Closing. The closing of the transactions contemplated by
-----------
this Agreement (the "Closing") shall take place at the offices of Atlas in
Denver, Colorado, commencing at 10:00 a.m. Mountain Daylight Time on June 3,
1997 or at such other place or at such other time or at such other date as the
Parties mutually agree to in writing.
(d) Deliveries at the Closing. At the Closing: (i) Sellers and Buyer
-------------------------
will execute and deliver this Agreement; (ii) Sellers will execute, acknowledge
(if appropriate), and deliver to Buyer instruments of sale, transfer, assignment
and conveyance in the forms attached hereto as Exhibits C-1 and C-2 and
relinquish complete possession of the Purchased Claims to Buyer; (iii) Atlas
will deliver to Buyer a definitive certificate bearing the legend set out in the
Registration Rights Agreement representing the Purchased Shares duly registered
in the name of Buyer; (iv) Atlas and Buyer will enter into a Registration Rights
Agreement and a Shareholders Agreement in the forms attached as Exhibits D and
E, respectively; (v) Sellers shall deliver to Buyer and Buyer shall deliver to
Sellers their respective opinions of counsel, dated as of the Closing Date, in
form and substance as set forth in Exhibits F and G, respectively; (vi) Sellers
will provide evidence that all third party consents required to permit the
transfer of the Purchased Claims have been received; and (vi) Buyer will deliver
to the Seller the consideration specified in Section 2(b) and Section 2(c)
above.
3. Representations and Warranties of Sellers . Each Seller represents
-----------------------------------------
and warrants to Buyer that the statements contained in this Section 3 are or
will be correct and complete as of the Closing Date.
(a) Organization of Sellers. Each Seller is a corporation duly
-----------------------
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation and is duly authorized to conduct business and
is in good standing in the State of Nevada.
(b) Authorization of Transaction. Each Seller has full power and
----------------------------
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors of each Seller have duly
authorized the execution, delivery, and performance of this Agreement by each
Seller. The Property does not constitute substantially all of the assets of
Atlas, the sale of
-4-
<PAGE>
which would require shareholder approval. This Agreement constitutes the valid
and legally binding obligation of each Seller, enforceable in accordance with
its terms and conditions; provided, however, that no representation is made as
to (i) the remedy of specific performance or other equitable remedies for the
enforcement of this Agreement or any other agreement contemplated hereby or (ii)
rights to indemnity under this Agreement for securities law liability, and
provided further that this representation is limited by applicable bankruptcy,
insolvency, moratorium and other similar laws affecting generally the rights of
creditors and secured parties.
(c) Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments referred to in Section 2 above), will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which any Seller is subject or any provision of the articles or bylaws
of any Seller or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
any Seller is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any security interest upon any of its
assets). Except to the extent required in connection with Buyer=s use of
certain of the Related Rights over which state or local governmental entities
have jurisdiction, no Seller needs to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and assumptions
referred to in Section 2 above).
(d) Brokers' Fees. No Seller has any Liability or obligation to pay
-------------
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Buyer could become liable
or obligated.
(e) Subsidiaries. Atlas Metals and Atlas Gold are wholly owned,
------------
direct subsidiaries of Atlas.
(f) Purchased Shares. Upon delivery at Closing, the Purchased Shares
----------------
will be duly authorized, validly issued, fully paid and non-assessable, and will
be free and clear of any security interest or restriction on transfer (other
than under the Securities Act of 1933, as amended, or comparable state laws).
Upon delivery at Closing, title to the Purchased Shares shall be vested
exclusively, legally and beneficially in Buyer. At Closing, the aggregate
Purchased Shares shall constitute less than 5% of all then outstanding Atlas
shares, determined after giving effect to such share issuance.
(g) Events Subsequent. Since the delivery of the Letter of Intent
-----------------
dated April 10, 1997 between Atlas and Buyer there has not been any material
adverse change in the business, financial condition, operations, results of
operations, or future prospects of Sellers.
-5-
<PAGE>
(h) Title to Claims.
---------------
(i) With respect to those Claims identified in Exhibit A as fee
properties, one or more Seller holds record title to such Claims and is in
exclusive possession of and owns such Claims, free and clear of all defects,
liens and encumbrances (including liens arising under Environmental Laws),
arising by, through, or under Sellers, and free and clear of other defects,
liens and encumbrances of which any Seller has Knowledge.
(ii) With respect to those Claims identified in Exhibit A as being
held under leases or other contracts: (A) one or more Seller holds record title
to the leases and contracts and is in exclusive possession of such Claims; (B)
no Seller has received any notice of default of any of the terms or provisions
of such leases or other contracts; (C) the applicable Seller has the authority
under such leases or other contracts to perform fully its obligations under this
Agreement; (D) such leases or contracts are valid and are in good standing and
are free and clear of all defects, liens and encumbrances (including liens
arising under Environmental Laws) arising by, through, or under Sellers; (E)
Sellers have no Knowledge of any act or omission or any condition on the Claims
that could be construed as a default under any such lease or other contract; (F)
to Sellers' Knowledge, the Claims covered thereby are free and clear of all
defects, liens and encumbrances (including liens arising under Environmental
Laws); and (G) all payments due under such leases or other contracts are current
and Sellers' interest under such leases or other contracts is free and clear of
all defects, liens and encumbrances arising by, through, or under Sellers.
(iii) With respect to unpatented mining claims that were located
by any Seller that are included within the Claims, subject to the paramount
title of the United States: (A) the unpatented mining claims were properly laid
out and monumented; (B) all required location and validation work was properly
performed; (C) location notices and certificates were properly recorded and
filed with appropriate governmental agencies; (D) all assessment work and mining
claim maintenance payments required to hold the unpatented mining claims has
been performed and made through the assessment year ending September 1, 1996;
(E) except for the local government filing of affidavit of payment of claim
maintenance fees for the payment due August 31, 1995, all affidavits of
assessment work and other filings required to maintain the claims in good
standing have been properly and timely recorded or filed with appropriate
governmental agencies; and (F) except for overlapping claims within the exterior
boundaries of the Property controlled by Atlas and the Kim Chee group of
unpatented claims within the exterior boundaries of the property, Seller has no
Knowledge of the existence of conflicting mining claims or the presence of third
party mineral entries. With respect to those unpatented mining claims that were
not located by Sellers or their Affiliates but are included within the Claims,
Sellers make the foregoing representations and warranties to their Knowledge.
Seller holds record title to each unpatented mining claim included within the
Claims and each such Claim is free and clear of all material defects, liens and
encumbrances (including liens arising under Environmental Laws), arising by,
through, or under the Sellers and free and clear of other material defects,
liens and encumbrances of which any Seller has Knowledge. With respect to all
of the Claims, Sellers make no representation with respect to the existence of a
"discovery" as contemplated by the mining laws of the United States on any of
the Claims.
-6-
<PAGE>
(iv) Sellers have made available or delivered to Buyer or its counsel
or consultants all information concerning title to the Claims in Sellers'
possession or control, of which Sellers have Knowledge.
(i) Tangible Assets. Sellers own all buildings, machinery, equipment,
---------------
and other material tangible assets located on the Claims except for certain
pickup trucks that are leased by Sellers.
(j) Contracts, Leases, Water Rights and Related Rights. All of the
--------------------------------------------------
Contracts and Leases to which any Seller is a party which relate to, affect,
touch or concern the Property are identified in Exhibit A to this Agreement.
All of the Related Rights and Water Rights owned or held by Sellers are listed
in Exhibit B. Sellers have delivered or made available to Buyer a correct and
complete copy of each written agreement or document identified in Exhibit A and
Exhibit B. With respect to each such agreement or document (except that no
representation is made as to the remedy of specific performance or other
equitable remedies for the enforcement of any such agreement and this
representation is limited by applicable bankruptcy, insolvency, moratorium and
other similar laws affecting generally the right of creditors and secured
parties): (A) the agreement or document is legal, valid, binding, enforceable,
and in full force and effect; (B) the agreement or document will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above); (C)
no Seller is in breach or default and, to Sellers' Knowledge, no other party is
in breach or default and no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination, modification,
or acceleration, under the agreement or document; and (D) no party has
repudiated any provision of the agreement or document.
(k) Litigation. Sellers are not, and have not been threatened to be
----------
made, a party to any action, suit, proceeding, hearing, or investigation of, in,
or before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator with respect to
the Property and Sellers have no reason to believe that any such action, suit,
proceeding, hearing or investigation might be brought against Sellers with
respect to the Property.
(l) Environment, Health, and Safety.
-------------------------------
(i) Except with respect to those matters specifically identified in
Exhibit H to this Agreement, none of the Sellers or their Affiliates and to
Sellers' Knowledge, none of their respective predecessors has any Environmental
Liability related to the Property. No action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against any of them which is still ongoing or outstanding alleging any
such Liability. Except with respect to those matters specifically identified in
Exhibit H to this Agreement, none of them has received written notification of
alleged, actual or potential responsibility for, or any inquiry or investigation
regarding any releases or threatened releases of any Hazardous Materials on the
Property for which any remediation requirements are outstanding. Without
limiting the generality of the preceding, each of the Sellers and their
Affiliates has obtained and been in material compliance
-7-
<PAGE>
with all of the terms and conditions of all permits, licenses, approvals, plans
and other authorizations relating to the Property which are required under, and
has complied in all material respects with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables relating to the Property which are contained in, all Environmental
Laws.
(ii) Except with respect to those matters specifically identified in
Exhibit H to this Agreement, none of the Sellers has any Liability and to their
Knowledge, no predecessor of Sellers has any Liability (and none of the Sellers
or their Affiliates has handled, released, threatened to release or disposed of
any Hazardous Materials, arranged for the disposal of any Hazardous Materials,
accepted any Hazardous Material for transport to a disposal or treatment
facility, exposed any employee or other individual to any Hazardous Materials or
condition, or owned or operated any property or facility in any manner not in
compliance with applicable Environmental Laws that could form the basis for any
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of the Sellers giving rise to any Liability related to the
Property, other than liability under statutes imposing strict liability for any
such activities taken in connection with any such Hazardous Materials) for
damage to the Property or any other location, body of water (surface or
subsurface), land surface, ambient air or natural resource related to the
Property, or for any reason related to the Property under any Environmental Law.
(iii) Except with respect to those matters specifically identified
in Exhibit H to this Agreement, to Sellers' Knowledge, the Property is free of
Hazardous Materials.
(m) Disclosure. The representations and warranties contained in this
----------
Section 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
4. Representations and Warranties of Buyer . Buyer represents and
---------------------------------------
warrants to Sellers that the statements contained in this Section 4 are or will
be correct and complete as of the Closing Date.
(a) Organization of Buyer. Buyer is a corporation duly organized,
---------------------
validly existing, and in good standing under the laws of the State of Ohio and
is duly authorized to conduct business and is in good standing in the State of
Nevada.
(b) Authorization of Transaction. Buyer has full power and authority
----------------------------
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of Buyer, enforceable in accordance
with its terms and conditions; provided, however, that no representation is made
as to (i) the remedy of specific performance or other equitable remedies for the
enforcement of this Agreement or any other agreement contemplated hereby or (ii)
rights to indemnity under this Agreement for securities law liability, and
provided further that this representation is limited by applicable bankruptcy,
insolvency, moratorium and other similar laws affecting generally the rights of
creditors and secured parties.
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<PAGE>
(c) Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Buyer is subject or any provision of its
charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Buyer is a party or by which it is bound or to which any of its assets is
subject. Buyer does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement (including the assignments and assumptions referred to in Section
2 above).
(d) Brokers' Fees. Buyer has no Liability or obligation to pay any
-------------
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Sellers could become
liable or obligated.
(e) Private Placement Representations.
---------------------------------
(i) Buyer can bear the economic risk of losing its entire
investment in the Purchased Shares and can afford to hold the Purchased Shares
for an indefinite period of time; and
(ii) Buyer is an Accredited Investor as defined in Rule 501(a) of
Regulation D of the Securities Act of 1933.
5. Post-Closing Covenants -. The Parties agree as follows with respect to
---------------------- -
the period between the Closing and the Second Closing (as defined below) or the
date of the earlier termination of this Agreement:
(a) General. Each of the Parties will use its reasonable efforts to
-------
take all action and to do all things and to execute and deliver all such
documents and instruments necessary, proper, or advisable in order to consummate
and make effective the ongoing transactions contemplated by this Agreement.
(b) Notices and Consents. Sellers will give any notices to third
--------------------
parties, and Sellers will use their reasonable efforts to obtain any third party
consents, that Buyer reasonably may request in connection with the matters
referred to in Section 6. Each of the Parties will give any notices to, make
any filings with, and use its reasonable efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in Section 6.
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<PAGE>
(c) Operation of Business.
---------------------
(i) Sellers will not engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of Business that would
adversely affect any of the Excluded Claims or any of the other assets that
constitute the Property that are not transferred to Buyer at the Closing.
Sellers will not enter into any agreements with respect to the Excluded Claims
or such assets that will increase any financial obligation to Buyer if the
Second Closing (as defined below) occurs. Sellers will use reasonable best
efforts to maintain all water rights, permits, contracts and agreements with
respect to the Property that were not transferred to Buyer at the Closing, and
Sellers will not create or allow any third party to maintain any lien on the
Property as a result of Sellers' activities and operations, whether on or off of
the Property. With respect to the Reclamation Areas, Sellers will be solely
responsible for and will use their reasonable best efforts to take all actions
as are required under the existing Plans of Operations or other permits covering
those areas, provided that Sellers shall not be restricted in negotiating with
the appropriate governmental agencies for modifications or scheduling changes in
or pertaining to the implementation of those requirements.
(ii) Atlas will maintain ownership of Atlas Gold and Atlas Metals
as wholly-owned direct subsidiaries until the Second Closing or until such
earlier time as such subsidiaries have transferred all of their interests in the
Excluded Claims, the Property and this Agreement to Atlas.
(iii)Sellers will continue reasonable maintenance of such of the
buildings on the Property, such of the power, water and other utilities
necessary to allow Buyer to have reasonable office space in such buildings in
connection with Buyer's activities during the Initial Exploration Period,
provided that Buyer will promptly reimburse Sellers for the incremental cost of
utilities consumed by Buyer and any out of pocket costs incurred by Sellers at
Buyer's request in connection with such use upon receipt of Seller's invoice for
same.
(iv) Sellers will cooperate with Buyer and assist Buyer in
fulfilling its obligation as set forth in Section 6 to make all lease payments
and mining claim maintenance fee filing payments during the Initial Exploration
Period. In particular, Sellers will make available to Buyer Sellers' land
databases with respect to the Property (in both written and electronic form) and
Sellers' employees who are knowledgeable with respect to Sellers' land data and
land databases in connection with the management, preparation and making of all
such payments so as to assure the timeliness of such payments.
(d) Full Access. Sellers will permit representatives of Buyer to have
-----------
full access at all reasonable times, and in a manner so as not to interfere with
the normal business operations of Sellers, to the Property and all personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to the Property.
(e) Notice of Developments. Each Party will give prompt written
----------------------
notice to the other Party of any material adverse development causing a breach
of any of its own representations and warranties in Section 3 and Section 4
above or the covenants contained elsewhere in this
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Agreement. Each Party will provide to the other Party a copy of any notice or
permit submitted by the Party to any governmental agency and of any notice of
violation or similar notice received from such agencies. No disclosure by any
Party pursuant to this Section 5(e), however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
(f) Exclusivity.
-----------
(i) Sellers will not (and Sellers will not cause or permit any of
its Subsidiaries to) (i) solicit, initiate, or encourage the submission of any
proposal or offer relating to the acquisition of the Claims (other than any
acquisition structured as a merger, consolidation, or share exchange) or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt to do or seek any of the foregoing. Sellers
will notify Buyer immediately if Sellers receive any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
(ii) Upon the request of Buyer, Sellers will execute and Buyer
may record a memorandum of this Agreement which does not disclose any of the
financial terms and conditions contained herein but provides notice of Buyer's
exclusive right to purchase the Excluded Claims and of Atlas' right to enter
into a joint venture or to sell the Excluded Claims to Buyer.
(g) Patented Applications for Certain Excluded Claims. The Parties
-------------------------------------------------
agree that Sellers may continue to take all such actions as they deem reasonably
necessary in pursuing the obtaining of patents on certain of the Excluded Claims
for which First Half Final Certificates have been issued, provided, however,
that Sellers shall deliver or make available to Buyer at Buyer's request any
information pertaining to those claims or the patent applications themselves,
and Sellers shall keep Buyer informed on a reasonable basis as to the status of
the prosecution of those patent applications, and provided further that Sellers
shall promptly convey to Buyer all rights obtained by Sellers if patents are
obtained by Sellers following the Second Closing (as defined below) in the event
the Second Closing occurs.
6. Rights and Obligations of Buyer .
-------------------------------
(a) Buyer's Minimum Obligation. Buyer covenants and agrees that,
--------------------------
except as contemplated in paragraph 6(d) below, during the two year period (the
"Initial Exploration Period") immediately following the Closing Date, Buyer
shall spend or cause to be spent not less than $3,000,000 conducting exploration
work on the Claims and paying all mining claim holding and maintenance costs
with respect to the Claims that comprise the Property and the lease maintenance
costs for those leases and agreements identified in Exhibit A, it being Buyer's
understanding that such holding and maintenance costs are currently
approximately $440,000 per annum. Buyer will have full authority to carry out
the exploration activities contemplated by this Section, by itself, or through
its employees, agents or contractors. Without limiting the generality of the
foregoing:
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<PAGE>
(i) Buyer shall purchase or otherwise acquire all necessary material,
supplies, equipment, water, utility and transportation services necessary to
conduct its exploration program on reasonable commercial terms, taking into
account all of the circumstances;
(ii) Buyer shall: (A) make or arrange for all payments required by the
Leases and the Contracts identified in Exhibit A to this Agreement (B) pay all
taxes, assessments and like charges based on Buyer's activities during the
Initial Exploration Period, provided that Buyer shall have the right to contest
the validity, or seek adjustment in the amount, of any taxes, assessments or
charges, but in no event shall Buyer permit or allow title to any of the
Property to be lost as the result of the nonpayment of any taxes, assessments or
like charges for which Buyer is responsible pursuant to this Agreement; and (C)
keep the Property free and clear of all liens and encumbrances arising by,
through and under Buyer, except for mechanic's or materialmen's liens which
shall be released or discharged in a diligent manner.
(iii) Buyer shall: (A) apply for all necessary permits, licenses
and approvals, (B) comply with applicable federal, state and local laws and
regulations, and (C) prepare and file all reports or notices required in
connection with its activities.
(iv) Buyer shall pay all fees required by law in order to maintain
the unpatented mining claims and mill sites included within the Property but
Buyer shall not be liable on account of any determination by any court or
governmental agency that Buyer has not made a discovery on or is not in actual
occupancy for the purposes of preserving or maintaining ownership of such claims
or mill sites. Buyer shall timely record with the appropriate county and file
with the appropriate United States agency, any required affidavits, notices of
intent to hold and other documents in proper form attesting to the payment of
the required fees applicable to each Claim.
(v) Buyer may: (A) locate, amend or relocate any unpatented mining
claim or mill site or tunnel site, (B) locate any fractions resulting from such
amendment or relocation, (C) apply for patents or mining leases or other forms
of mineral tenure for any such unpatented claims or sites, (C) abandon any
unpatented mining claims for the purpose of locating mill sites or otherwise
acquiring from the United States rights to the ground covered thereby, (D)
abandon any unpatented mill sites for the purpose of locating mining claims or
otherwise acquiring from the United States rights to the ground covered thereby,
(E) exchange with or convey to the United States any portion of the Property for
the purpose of acquiring rights to the ground covered thereby or other adjacent
ground, and (F) convert any unpatented claims or mill sites into one or more
leases or other forms of mineral tenure pursuant to any federal law hereafter
enacted; provided that, in each case, the property so acquired shall be subject
to this Agreement and shall included in the Property for all purposes under this
Agreement.
(vi) Buyer shall conduct all such operations in a good, workmanlike
and efficient manner, in accordance with sound mining and other applicable
industry standards and practices, and in accordance with the terms and
provisions of the Contracts; provided that Buyer shall not be in default of any
duty under this Section 6(j) if its failure to perform results from the failure
of Sellers to perform acts or to do other things required of it by this
Agreement and that in no event
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<PAGE>
shall Buyer be liable to Sellers for consequential damages, which shall, for
purposes of the Agreement, include any claim by Sellers with respect to any
decrease or increase in value of the Property, as a result of Buyer's activities
hereunder. The sole liability of Buyers' for failing to conduct any part of its
exploration program in a good, workmanlike and efficient manner, except to the
extent that Buyer's activities create a Liability for Sellers, will be that the
expenditures incurred by Buyer that are not incurred in such manner will not be
included in the charges allowable under Section 6(f) below.
(b) Cooperation by Sellers. During the Initial Exploration Period,
----------------------
Sellers shall provide Buyer with unrestricted access to all information and
documentation in the possession or control of Sellers and their Affiliates (but
Sellers make no representation or warranty as to the accuracy, reliability or
completeness of any such information or documentation) relating to the Property
and the unrestricted right to explore and evaluate all areas of the Property
including, without limitation, the Excluded Claims, and the right to make
reasonable use of the Water Rights and any other assets that constitute the
Property in connection with Buyer's activities. Sellers shall do all such acts
and things and execute and deliver all such documents and instruments as are
necessary or advisable in the reasonable opinion of Buyer to permit Buyer the
unrestricted right to explore and investigate the area comprising the Excluded
Claims during the Initial Exploration Period, at the sole risk and expense of
Buyer. If requested by Buyer, Seller will engage geologists, drillers,
consultants or other persons or entities selected by Buyer to conduct
exploration, environmental and other investigatory activities and do such other
things as may be necessary to perform such work on the Excluded Claims at
Buyer's sole risk and expense. Any such work will be carried out under Buyer's
direction and will be conducted pursuant to Sellers' existing permits where
possible.
(c) Transfer of Excluded Claims. At any time during the Initial
---------------------------
Exploration Period, Buyer may elect by written notice to Sellers to have all or
any portion of the Excluded Claims added to the Purchased Claims and, upon
receipt of such notice, Sellers will promptly convey and relinquish possession
of such claims to Buyer using an instrument in the form attached as Exhibit C-1.
Thereafter, the Excluded Claims so conveyed shall be deemed to be part of the
Purchased Claims for all purposes of this Agreement.
(d) Access to Data. At all reasonable times during the Initial
--------------
Exploration Period, Buyer shall provide Sellers or their representatives, upon
written request from any Seller, access through and across the Purchased Claims
and access to, and the right to inspect and copy all maps, drill logs, core
tests, reports, surveys, assays, analyses, production reports, operations,
technical, accounting, title and financial records, and other information
pertaining to the Property and acquired by Buyer. In addition, the Buyer shall
allow the Sellers and their representatives, at the latter's sole risk and
expense, and subject to reasonable safety regulations, to inspect its activities
at the Property at all reasonable times, so long as the inspecting Seller does
not unreasonably interfere with such activities.
(e) Payment of Deficit. In the event that on or before the expiration
------------------
of the Initial Exploration Period Buyer has not spent an aggregate amount of
$3,000,000 exploring and maintaining the Property as contemplated above and
Buyer has not elected to continue its exploration
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<PAGE>
activities on the Property pursuant to paragraph 7(a)(ii) below, then and in
such event only, Buyer shall, within 15 business days thereafter, provide
Sellers with written notice to that effect and pay the balance of such
$3,000,000 amount to Atlas by certified check, bank draft or wire transfer or
other immediately available funds.
(f) Allowable Charges. In computing the amount of expenditures that
-----------------
have been made by Buyer in exploring and maintaining the Property for the
purposes of the $3,000,000 threshold referred to above, Buyer may include (i)
the costs of all employees, money, facilities and equipment contributed to or
used in connection with exploration on or the analysis of the Property; (ii) the
salaries, wages, and cost of benefits of all employees and charges of
consultants directly engaged in exploration on the Property, including
reasonable transportation, housing and per diem allowances; (iii) the costs of
drilling, trenching, sampling, testing, assaying and evaluating the Property;
(iv) the costs for road construction, pad construction, mobilization,
demobilization, standby time, field camps and other related expenses; (v) the
costs of title examination, surveying, title curative and title defense
activities reasonably necessary to maintain the Claims; (vi) the costs of
geochemical, geophysical and geotechnical studies, mapping and analyses; (vii)
the lease and mining claim rental, advance royalty and maintenance fee and other
required costs pertaining to the maintenance of the Claims; and (viii) all costs
for which Buyer is obligated to reimburse Sellers under this Agreement. In
addition to direct costs and expenses incurred by Buyer, Buyer shall charge an
amount equal to 5% of any contract for goods or services of over $100,000 and
10% of any other amount expended by it in order to reimburse Buyer for its home
office overhead and general and administrative expenses. If any of the
activities described above are carried out by Affiliates of Buyer, the cost or
value of such activities shall be charged on an arm's-length basis.
(g) Report of Expenditures. Buyer shall keep true and correct books,
----------------------
accounts and records of all allowable charges made pursuant to Section 6.1(g),
in accordance with generally accepted accounting principles consistently applied
in the mining industry, and such books and records shall be available for
inspection by Sellers or their representatives at all reasonable times during
the Initial Exploration Period. At any time and from time to time, but in no
case later than 30 days after December 31 and June 30 of each year (except for
the initial June 30 date following execution of this Agreement), Buyer shall
provide to Sellers a detailed accounting of all allowable charges incurred
during that quarter. Sellers shall have a period of 15 days following the
receipt of each accounting in which to make any written objections. If Sellers
fail to make any such objections within such period, the accounting shall be
deemed conclusive evidence of Buyer having incurred allowable charges in the
amount stated in the accounting, absent error or misrepresentation.
7. Elections Available to Parties .
------------------------------
(a) Buyer's Election. At any time at or prior to the expiration of
----------------
the Initial Exploration Period, Buyer may give written notice to Sellers that:
(i) Buyer has elected to terminate its exploration activities on
the Property; or
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<PAGE>
(ii) Buyer has elected to continue its exploration activities on the
Property beyond the expiration of the Initial Exploration Period.
In the event that no notice is given to Sellers by Buyer pursuant to paragraph
7(a) at or before the expiration of the Initial Exploration Period, Buyer will
be deemed to have given notice to Sellers pursuant to paragraph 7(a)(i) above on
the last day of the Initial Exploration Period.
(b) Termination by Buyer. In the event that Buyer either gives or is
--------------------
deemed to have given notice to Seller's pursuant to paragraph 7(a)(i) above,
then:
(i) if applicable, Buyer shall satisfy its payment obligation to
Sellers under paragraph 6(e) above and, in the event Buyer terminates its
exploration activities between August 1 and August 31 of any year, Buyer shall
pay the required claim maintenance fees and make all filings with respect to the
unpatented mining claims and mill sites included within the Claims, and such
costs will be included in the allowable charges described in Section 6(f) even
if such costs are incurred after termination of Buyer's exploration activities.
(ii) as soon as is reasonably practicable and, in any event, within 30
days thereafter, Buyer shall convey the Purchased Claims to Sellers for no
additional consideration, free and clear of defects, liens and encumbrances
created by, through or under Buyer;
(iii) Buyer shall be responsible for timely rectifying in
accordance with applicable laws and regulations any disturbances on or damage to
the Property resulting from exploration work conducted by or at the request of
Buyer during the Initial Exploration Period; and
(iv) upon the written request of Sellers, Buyer shall make available
to Sellers for inspection and copying all data and technical information
relating to the exploration work conducted by or on behalf of Buyer during the
Initial Exploration Period, exclusive of interpretive materials.
(c) Election to Continue. In the event that Buyer gives notice to
--------------------
Sellers pursuant to paragraph 7(a)(ii) above, at any time within 45 days
following the date on which that notice is given to Sellers, Sellers may give
written notice to Buyer that:
(i) Sellers elect to convey the Excluded Claims (to the extent not
previously conveyed) to Buyer and, except as otherwise contemplated in Section
8(b) below, to relinquish in favor of Buyer all other rights and interests of
Sellers of any nature or kind whatsoever in or to the Property; or
(ii) Sellers elect to enter into a joint venture with Buyer in respect
of the Property on the terms and conditions contemplated in paragraph 8(c)
below.
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<PAGE>
In the event that no notice is given to Buyer by Sellers pursuant to paragraph
7(c) within the 45 day period referred to therein, Sellers will be deemed to
have given notice to Buyer pursuant to paragraph 7(c)(i) above on the last day
of that 45 day period.
8. Transfer by Sellers . On the 30th day following the date on which a
-------------------
notice is given or deemed to be given to Buyer by Sellers pursuant to Section
7(c)(i) or (ii) above, or on such earlier or later date as Buyer and Sellers may
mutually agree:
(a) The Second Closing. A second closing (the "Second Closing") will
------------------
be conducted at the offices of Atlas in Denver, Colorado. At the Second
Closing, Sellers shall sell, transfer and convey to Buyer, using instruments in
the forms attached as Exhibits C-3 through C-5, the Excluded Claims (to the
extent not previously conveyed), together with the Contracts, Fixtures and
Improvements, Related Rights and Data, free and clear of any liens, charges or
other encumbrances arising by, through, or under Sellers and Sellers will
provide such other of the documents and opinions that were delivered to Buyer at
the Closing as Buyer may reasonably request and shall do all such acts and
things and sign all such documents and instruments as counsel to Buyer
reasonably considers necessary or advisable such that Sellers relinquish in
favor of Buyer all other rights and interest of Sellers of any nature or kind
whatsoever in or to the Property, other than as expressly set forth below in
this paragraph 8; and
(b) Purchase of Sellers' Interests. If Sellers have given notice
------------------------------
pursuant to Section 7(c)(i): (i) Buyer shall pay to Sellers the sum of $15
million by certified check, bank draft or wire transfer or other immediately
available funds; (ii) Buyer shall grant to Sellers a 2% net smelter return
royalty in respect of the Property in the form of the Net Smelter Return Royalty
Deed attached hereto as Exhibit I on those Claims that are not burdened by any
other royalty (including any net profits interest) at that time as identified in
Part III of Exhibit A; and (iii) Sellers shall execute an agreement in form and
substance reasonably satisfactory to Buyer in which Sellers agree not to acquire
any interests within the Area of Interest described in the Joint Venture
Agreement attached as Exhibit J for a period of three years.
(c) Joint Venture Operations. If Sellers have given notice to Buyer
------------------------
pursuant to Section 7(c)(ii) above, Barrick and Atlas shall enter into a joint
venture (the "Joint Venture") in respect of the Property by executing a Joint
Venture Agreement substantially in the form attached hereto as Exhibit J and the
parties will contribute their interests in the Property to the Joint Venture.
9. Reclamation and Other Liabilities.
----------------------------------
(a) No Obligations until Second Closing. Until such time as the
-----------------------------------
transactions contemplated in Section 8 above are completed as contemplated
therein, Buyer shall not assume or be in any way responsible for any of the
reclamation or other Liabilities of Sellers with respect to the Property. If
the transactions contemplated in Section 8(b) above are so completed, Buyer
shall assume all liabilities under the Leases and Contracts listed in Exhibit A
and the Related Rights identified in Exhibit B, including all Liabilities for
reclamation of the Property as described in Exhibit
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<PAGE>
H and all other Liabilities associated with the Property that are not
inconsistent with Sellers' representations and warranties under this Agreement
and indemnify, defend and hold Sellers harmless with respect to any such
Liabilities. If the joint venture arrangements contemplated in Section 8(c)
above are so effected, the venturers in the Joint Venture shall assume and be
solely responsible for all such liabilities in proportion to their respective
interests.
(b) Sellers' Obligations. Any Liabilities created by Sellers on or
--------------------
with respect to the Excluded Claims between the Closing and the Second Closing
and any Liabilities of Sellers that breach any representation or covenant given
by Sellers in this Agreement will be for the sole account of Sellers and Sellers
will indemnify, defend and hold harmless Buyer with respect to such Liabilities.
10. Buyer's Right to Reject Excluded Claims. Buyer's obligation to accept
---------------------------------------
conveyance of the Excluded Claims at the Second Closing and its assumption (or
the assumption by the Joint Venture created pursuant to Section 8 above) of the
reclamation and other Liabilities associated with the Excluded Claims shall be
conditioned upon the observance by Sellers of the covenants set out in Section
5(c)(i) and (ii) above. In the event that Sellers are in material breach of any
of such covenants at the Second Closing, in addition to any other rights and
remedies that Buyer may have pursuant to this Agreement, Buyer may reject the
Excluded Claim or Claims with respect to which a covenant has been breached and
Buyer may proceed with the Second Closing with respect to the remainder, if any,
of the Excluded Claims, with no reduction in the consideration provided to
Sellers pursuant to Sections 8(b) or 8(c).
11. Transfer Fees. Buyer covenants and agrees to be responsible for and to
-------------
pay all transfer fees or transfer taxes that are eligible in connection with any
transfer of Claims completed by Sellers to Buyer or by Buyer to Sellers as
contemplated in this Agreement.
12. Reclamation Bonds.
-----------------
(a) Existing Bonds. Buyer understands that as at the date hereof,
--------------
Sellers have posted bonds in the aggregate amount of $3,100,000 with applicable
governmental agencies or authorities in order to secure its reclamation
obligations in respect of the Property. Buyer further understands that, as of
the date hereof, Sellers have also posted with the issuing surety company, as
collateral, cash in the amount of approximately $2,100,000 with such issuing
surety in order to secure its obligations under those bonds.
(b) Assumption of Responsibility. Buyer covenants and agrees that in
----------------------------
the event that the transactions contemplated in Section 8 above are completed as
contemplated therein, Buyer will promptly (and in any case within 45 days)
commence to take and diligently pursue all such steps and execute and deliver
all such documents and instruments as are necessary:
(i) to cause to be returned to Sellers the cash amount which then
remains pledged by Sellers to secure its obligations under such reclamation
bonds, and
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<PAGE>
(ii) in the circumstances contemplated in Section 8(b) above, to
assume all of the reclamation obligations in respect of the Property; and
(iii) in the circumstances contemplated in Section 8(c) above, to cause
the joint venture to assume all of such reclamation obligations.
13. Indemnification.
---------------
(a) Indemnification Provisions for Benefit of Buyer.
-----------------------------------------------
(i) In the event any Seller breaches ( or in the event any third party
alleges facts that, if true, would mean any Seller has breached) any of its
representations, warranties, and covenants contained herein, then Sellers
jointly and severally agree to indemnify Buyer from and against the entirety of
any Adverse Consequences Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged breach).
(ii) Each Seller jointly and severally agrees to indemnify, release,
defend and hold harmless Buyer, its Affiliates, and their respective officers,
directors, employers, agents and contractors from and against the entirety of
any Adverse Consequences any of them may suffer resulting from Environmental
Liabilities relating to the Property, except for Environmental Liabilities
caused by the activities of Buyer or its Affiliates during the Initial
Exploration Period.
(b) Indemnification Provisions for Benefit of Sellers.
-------------------------------------------------
(i) In the event Buyer breaches (or in the event any third party
alleges facts that, if true, would mean Buyer has breached) any of its
representations, warranties, and covenants contained herein then Buyer agrees to
indemnify each of Sellers from and against the entirety of any Adverse
Consequences Sellers may suffer resulting from, arising from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged breach).
(ii) Buyer agrees to indemnify, release, defend and hold harmless
Sellers, each of their Affiliates, and their respective officers, directors,
employees, agents and contractors from and against the entirety of any Adverse
Consequences any of them may suffer resulting from Environmental Liabilities
relating to the Property caused by Buyer or its Affiliates during the Initial
Exploration Period.
(c) Matters Involving Third Parties.
-------------------------------
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 13, then the Indemnified Party shall promptly notify
each Indemnifying Party thereof in writing; provided, however, that no delay
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<PAGE>
on the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (C) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (D) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedent, custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (E) the Indemnified
Party conducts the defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 13(d)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (B) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (C) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in Section 13(d)(ii) above is
or becomes unsatisfied, however, (A) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (B) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (C) the Indemnifying Parties will
remain responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 13.
14. Force Majeure.
-------------
(a) Events Permitting Suspension. Each Party's obligations under this
----------------------------
Agreement, other than Buyer's obligations to maintain the Claims and to make
payments under the Contracts as
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<PAGE>
set forth in Section 6, will be suspended during any period of force majeure,
provided that (i) notice is given to the other Party within a reasonable period
of time after an occurrence of an event of force majeure; (ii) the event extends
for a period of more than 24 hours; (iii) the event has a material adverse
effect upon the Party's ability to perform its obligations under this Agreement
or upon Buyer's ability to complete its minimum exploration expenditure
obligation as provided in Section 6 above; and (iv) reasonable endeavors are
made by the Party declaring force majeure to remove, avoid and/or mitigate the
effect of the force majeure event.
(b) Definition of Force Majeure. "Force Majeure" events will be
---------------------------
defined as any occurrence beyond the reasonable control of a Party, including
without limitation: (i) an "Act of God; (ii) war, insurrection and civil strife;
(iii) flood, earthquake, blockages, riot, accident, lightning, fire, explosion,
epidemic or quarantine restrictions; (iv) breakdown or destruction of or
casualty to any material portion of a Party's plant or equipment, shortage of,
delay in or inability to secure fuel, power, water, labor, other critical
supplies, transportation, equipment or facilities at reasonable costs; (v)
governmental acts or regulations or delays in issuing licenses and permits
outside of normal time frames and not attribute to a lack of diligence by the
Party declaring force majeure; and (vi) labor disputes or industrial action of
any kind (including strikes, interruptions, slow downs or other similar actions
on the part of organized labor or preemptive or reactive actions in connection
with impending or then current labor negotiations) and lockouts.
15. Termination. This Agreement may be terminated:
-----------
(a) By Mutual Agreement. Buyer and Sellers may terminate this
-------------------
Agreement by mutual written consent at any time; or
(b) By Buyer. Buyer may terminate this Agreement by giving written
--------
notice to Sellers at any time in the event Sellers have breached any material
representation, warranty, or covenant contained in this Agreement in any
material respect, Buyer has notified Sellers of the breach, and the breach has
continued without cure , or a commencement of diligent efforts to cure, for a
period of 60 days after the notice of breach, in which case, in addition to
Buyer's other rights and remedies, Buyer will be relieved of its obligation to
spend $3,000,000 as provided in Section 6 above.
16. Miscellaneous.
-------------
(a) Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties of the Parties contained in this Agreement shall
survive the Closing and the Second Closing.
(b) Press Releases and Public Announcements. No Party shall issue any
---------------------------------------
press release or make any public announcement relating to the subject matter of
this Agreement without providing a copy of such release or announcement to the
other Party and providing the other Party with the opportunity to comment on
such release; provided, however, that any Party may make any public disclosure
it believes in good faith is required by applicable law or regulation or any
listing or
-20-
<PAGE>
trading agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable efforts to advise the other Party prior
to making the disclosure).
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
----------------
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
-------------------------
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that Buyer may (i) assign any or
all of its rights and interests hereunder to one or more of its Affiliates and
(ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases Buyer nonetheless shall remain
responsible for the performance of all of its obligations hereunder), and
provided further that this Section 16(e) shall not be deemed applicable to or to
require any consent in the event of any corporate merger, consolidation,
amalgamation or reorganization involving the Sellers by which the surviving
entity shall possess substantially all of the stock or all of the property
rights and interests of the Sellers, and shall be subject to all of the
liabilities and obligations of Sellers under this Agreement.
(f) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
-------
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified
-21-
<PAGE>
<TABLE>
<CAPTION>
mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:
<S> <C>
If to Sellers: Copy to:
-------------- --------
Atlas Corporation Davis, Graham & Stubbs LLP
370 Seventeenth Street, #3050 370 Seventeenth Street, #4700
Denver Colorado 80202 Denver, Colorado 80202
Telecopier: (303) 629-2445 Telecopier: (303) 893-1379
Attention: Mr. Gregg B. Shafter Attention: Mr. Randall E. Hubbard
If to Buyer: Copy to:
------------ --------
Barrick Gold Exploration Inc. Parsons Behle & Latimer
293 Spruce Road One Utah Center
Elko, Nevada 89801 201 South Main Street, #1800
Telecopier: (702) 738-2804 P.O. Box 11898
Attention: Mr. David Mako Salt Lake City, Utah 84145-0898
Telecopier: (801) 536-6111
Attention: Mr. Stephen J. Hull
</TABLE>
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the domestic laws of the State of Nevada without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Nevada or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Nevada, except with respect to
matters of corporate securities laws which matters shall be governed,
interpreted and enforced in accordance with the laws of the State of Delaware.
(j) Amendments and Waivers. No amendment or waiver of any provision
----------------------
of this Agreement shall be valid on any Party unless the same shall be in
writing and signed by such Party. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default,
-22-
<PAGE>
misrepresentation, or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
------------
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties will bear its own costs and
--------
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(m) Construction and Interpretation. The Parties have participated
-------------------------------
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without limitation.
(n) Confidentiality. Information concerning Sellers and/or the
---------------
Property which has not previously been disclosed to the public by Sellers shall
be maintained by Buyer and its personnel on a confidential basis, except and to
the extent otherwise required by applicable law or regulatory policy, and shall
not be used by Buyer and its personnel for any purpose other than the purposes
of the arrangements contemplated herein. Each party shall maintain in
confidence the contents of this Agreement and shall not disclose the same,
publicly or to any third party (other than their professional and financial
advisors) without the prior written consent of the other party, such consent not
to be unreasonably withheld or delayed, except as may otherwise be required by
law or the rules of any applicable stock exchange, provided that each Party
will, to the greatest extent practicable in the circumstances, advise and
consult with the other parties prior to making any such required disclosure,
including providing the other party with an ability to comment on any disclosure
proposed to be made.
(o) Incorporation of Exhibits and Schedules. The Exhibits and
---------------------------------------
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(p) Specific Performance. Each of the Parties acknowledges and agrees
--------------------
that the other Party could be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each
-23-
<PAGE>
of the Parties agrees that the other Party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter in addition to any other remedy to
which it may be entitled, at law or in equity.
(q) Submission to Jurisdiction. Each of the Parties submits to the
--------------------------
jurisdiction of any state or federal court sitting in Nevada, in any action or
proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and determined in any
such court. Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other Party with respect
thereto. Any Party may make service on the other Party by sending or delivering
a copy of the process to the Party to be served at the address and in the manner
provided for the giving of notices in Section 16(h) above. Nothing in this
Section 16(q), however, shall affect the right of any Party to bring any action
or proceeding arising out of or relating to this Agreement in any other court or
to serve legal process in any other manner permitted by law or in equity.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
date first above written.
BARRICK GOLD EXPLORATION INC.
By: /s/ BRAD L. DOORES
--------------------------------
BRAD L. DOORES
Name: BRAD L. DOORES
-------------------------------
Title: ATTORNEY-IN-FACT
------------------------------
ATLAS CORPORATION
By: /s/ GREG B. SHAFTER
--------------------------------
Gregg B. Shafter
Vice President Project Development
-24-
<PAGE>
ATLAS GOLD MINING INC.
By: /s/ Gregg B. Shafter
----------------------------------
Gregg B. Shafter
Vice President Project Development
ATLAS PRECIOUS METALS INC.
By: /s/ Gregg B. Shafter
----------------------------------
Gregg B. Shafter
Vice President Project Development
-25-
<PAGE>
EXHIBIT 2.5
December 19, 1997
Gregg B. Shafter
President
Atlas Corporation
370 17th St., Suite 3050
Denver, Colorado 80202
Re: Grassy Mountain Project, Malheur County, Oregon
-----------------------------------------------
Dear Sirs:
The purpose of this letter (the "Agreement") among Atlas Corporation, its
wholly-owned subsidiary, Atlas Precious Metals Inc. (collectively, "Atlas") and
Tombstone Explorations Co. Ltd., and its wholly-owned subsidiary, Tombstone
Nevada Inc. (collectively, "Tombstone") is to confirm the terms and provisions
we have agreed to in respect of the interests of Atlas in a property referred to
as the Grassy Mountain Project, located in Malheur County, Oregon, U.S.A. (the
"Project"), which property is more specifically described in Schedule A to
this Agreement.
Tombstone and Atlas hereby agree to the following:
1. Atlas hereby grants Tombstone an option to acquire a 100% interest in
the Project (the "Option") and the rights to have access to and make
use of the real property comprising the Project (the "Property") for
the purpose of conducting exploration activities. More particularly,
Atlas hereby grants to Tombstone, subject only to any limitations
contained in the Leases (as defined below), the exclusive right to
enter upon and use all or any part of the surface and subsurface of
the Property during the Option Period (as defined below), for the
purposes of surveying, prospecting, bulk sampling, drilling, exploring
and testing the same for any and all ores, metals, minerals and
materials of every kind and character whatsoever found in, on or under
the Property (hereinafter, the "Valuable Minerals").
2. From and after September 15, 1997, and through the date it exercises
the Option (the "Option Period"), Tombstone shall be solely
responsible for taking all actions necessary for maintaining the
Property, subject to the provisions of Paragraph 24, including,
without limitation, (i) the timely payment of all required claim
maintenance fees, and the timely filing, and recording of appropriate
affidavits or
<PAGE>
notices of intent to hold for the unpatented mining claims which
comprise a portion of the Property, and (ii) compliance with and
assumption of all of the terms and conditions of the leases which
comprise a portion of the Property, as described in Exhibit A
(collectively, the "Leases"). Tombstone shall also maintain worker's
compensation insurance covering all of its employees engaged in
activities at the Property as may be required under Oregon law, and
general liability insurance covering its activities at the Property in
accordance with industry standard. Prior to commencing any activities
on the Property, Tombstone shall provide Atlas with evidence of such
liability insurance, and Atlas shall be named as an additional insured
on all such insurance policies. Tombstone agrees to put in place such
surety as may be required to assume the reclamation obligation at the
Property (approximately $145,000) on or before March 15, 1999, or, if
earlier, not later than forty-five days following payment of the
Purchase Price in full. In the event that Tombstone elects not to
exercise the Option, Tombstone agrees that the reclamation obligations
at the Property which Atlas reassumes shall not exceed the existing
$145,000 level. Tombstone agrees to indemnify Atlas and hold Atlas
harmless from and against any expenses, claims, losses, liabilities or
damages, including all attorneys' fees actually incurred by Atlas,
arising out of or based on Tombstone's activities on the Property
during the Option Period, or Tombstone's failure to comply with the
provisions of this Paragraph 2.
3. During the Option Period, Tombstone shall have exclusive control
(subject to the provisions of the Leases) of all operations on the
Property and of any and all equipment, supplies, machinery and other
assets purchased or otherwise acquired or under its control in
connection with such operations. Tombstone may carry out such
operations on the Property during the Option Period as it may, in its
sole discretion, determine to be warranted; provided, however, that
Tombstone may not mine and remove Valuable Minerals from the Property
for the purpose of sale unless it has exercised the Option. Tombstone
agrees to conduct and perform all of its operations on the Property
during the Option Period in compliance with all applicable federal,
state and local laws, rules and regulations. Tombstone shall obtain
all required permits and post all required bonds or other surety
necessary for the conduct of such operations. Atlas, to the extent it
may legally do so, shall use its reasonable efforts to assign or
transfer to Tombstone the right to conduct activities on the Property
under permits now held in the name of Atlas. Tombstone shall indemnify
and hold Atlas harmless from and against any expenses, claims, losses
liabilities or damages, including all attorneys' fees actually
incurred by Atlas, arising from or relating to Tombstone's (i)
activities conducted under permits issued in the name of Atlas, (ii)
failure to comply with said laws or (iii) failure to obtain the
permits or place the bonds or other surety required in connection with
any of Tombstone's activities at or on the Property during the Option
Period. During the Option Period, Tombstone shall keep the title to
the Property free and clear of all liens and encumbrances resulting
from its operations hereunder; provided, however, that Tombstone may
<PAGE>
refuse to pay any claims asserted against it which it disputes in good
faith or which are in existence as of the date hereof. At its sole
cost and expense, Tombstone shall contest any suit, demand or action
commenced to enforce such a claim and, if the suit, demand or action
is decided by a court or other authority of ultimate and final
jurisdiction against Tombstone or the Property, Tombstone shall
promptly pay the judgment and shall post any bond and take all other
action necessary to prevent any sale or loss of the Property or any
part thereof. If it does not exercise the Option, Tombstone shall
reclaim the Property, to the extent disturbed by it during the Option
Period, in accordance with applicable federal, state and local laws,
rules and regulations.
4. Each of the parties represents and warrants to the other as of the
date hereof as follows, and covenants that if the Option is exercised
these representations and warranties will be true and correct on the
Closing Date (as defined below):
(a) It is a corporation duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation.
(b) Each of Atlas and Tombstone (or its wholly-owned U.S. subsidiary)
are duly qualified to do business in the State of Oregon.
(c) It has the requisite corporate power and authority to: (i) enter
into this Agreement and all other agreements contemplated hereby;
and to (ii) carry out and perform its obligations under the terms
and provisions of this Agreement and all agreements contemplated
hereby.
(d) All requisite corporate action on its part, and its officers and
directors, necessary for the execution, delivery and performance
of this Agreement and all of its other agreements of contemplated
hereby have been taken. This Agreement and all agreements and
instruments contemplated hereby, when executed and delivered by
it, and assuming valid execution and delivery by the other party,
will be the legal, valid, and binding obligations of it
enforceable against it in accordance with their terms. The
execution, delivery and performance of this Agreement will not
violate any provision of law; any order of any court or other
agency of government; or any provision of any indenture,
agreement or other instrument to which it is a party or by which
its properties or assets are bound; or be in conflict with,
result in a breach of or constitute (with due notice and lapse of
time) a default under any such indenture, agreement or other
instrument. There is no law, rule or regulation, nor is there
any judgment, decree or order of any court or governmental
authority binding on it which would be contravened by the
execution, delivery, performance or enforcement of this Agreement
or any instrument or agreement required hereunder.
Notwithstanding the foregoing, no
<PAGE>
representation is made as to the remedy of specific performance
or other equitable remedies for the enforcement of this Agreement
or any other agreement contemplated hereby. Additionally, this
representation is limited by applicable bankruptcy, insolvency,
moratorium, and other similar laws affecting generally the rights
and remedies of creditors and secured parties.
(e) All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on by it in such manner as
not to give rise to any valid claim against the other party or
any third party for a brokerage commission, finder's fee or other
fee or commission arising by reason of the transactions
contemplated by this Agreement.
5. Atlas represents and warrants to Tombstone that, to its knowledge,
after inquiry with its President, its Vice-President for Environmental
and Governmental Affairs, its Controller, and its land department, (i)
Atlas has not violated any environmental laws with respect to its
operations on the Property; (ii) other than as set forth in the
Leases, there are no liens, encumbrances, or other burdens on
production affecting the Property; (iii) there are no material defects
of title to the Property created by Atlas; (iv) the Leases are in full
force and effect and Atlas is aware of no defaults thereunder; and (v)
there are no pending or threatened litigation, claims, actions, suits
or inquiries which would have a material adverse effect on the
Property. Nothing herein shall be deemed to be a representation or
warranty by Atlas as to a discovery of Valuable Minerals within any of
the unpatented mining claims comprising the Property.
6. During the Option Period, Atlas shall make available to Tombstone all
data and information ("Data") pertaining to the Property in its
possession. In the event Tombstone exercises its Option, all Data
shall become the property of Tombstone. During the term of the
Option, Atlas shall have the reasonable right to have access to and
review such Data, including any such Data that is developed by
Tombstone. In the event Tombstone elects not to exercise its Option,
all Data delivered to Tombstone and all Data developed by Tombstone
pertaining to the Property shall be delivered to Atlas.
7. In consideration for Atlas granting the Option, Tombstone agrees to
make certain payments (the "Option Payments"), as follows:
. U.S. $100,000 (paid);
. On execution of this Agreement (but not later than December 19,
1997), $300,000, plus an additional amount of $16,650 as
reimbursement for costs associated with the Property and incurred
by Atlas since September 15, 1997 by wire transfer in accordance
with instructions to be provided by Atlas;
<PAGE>
. U.S. $50,000 on or before March 15, 1998;
. U.S. $50,000 on or before May 15, 1998;
. U.S. $200,000 on or before July 15, 1998;
. U.S. $300,000 on or before December 15, 1998;
. U.S. $500,000 on or before July 15, 1999;
. U.S. $500,000 on or before December 15, 1999;
. U.S. $1,000,000 on or before December 15, 2000; and
. U.S. $1,000,000 on or before December 15, 2001.
The total purchase price is U.S. $4.0 million, comprised of the sum of
the Option Payments (collectively, the "Purchase Price").
The parties hereby agree that if Tombstone fails to timely make any
Option Payment required under Paragraph 7, this Agreement shall
terminate, and Tombstone shall have no right to recover any Option
Payments previously made. No failure to make a payment shall be
deemed to have occurred until three business days after the date such
payment is due.
8. Atlas acknowledges that it has received the initial $100,000 Option
Payment.
9. Tombstone agrees to pay, as additional consideration for the Option
granted hereunder an amount equal to one-half of the landman's and
legal fees actually incurred or accrued by Atlas in connection with
the preparation of an updated title opinion (covering certain Poison
Springs and Frog unpatented mining claims) reasonably satisfactory to
Tombstone, promptly after Tombstone's receipt of the title opinion.
In the event a material title defect is identified in that opinion,
the $300,000 Option Payment made by Tombstone to Atlas on December 19,
1997 shall be returned. With respect to the final two $1,000,000
Option Payments, at Tombstone's sole election, it may satisfy such
payments by delivery to Atlas of the sum of U.S. $1,500,000 on or
before February 15, 2000.
10. Tombstone may exercise the Option at any time during the Option Period
by paying the Purchase Price in full (either as set forth in Paragraph
7 or Paragraph 9) and providing written notice of its election to
exercise the Option to Atlas. Within five business days after receipt
of such notice (the "Closing Date"), Atlas shall deliver to Tombstone:
(i) a fully executed and acknowledged special warranty deed conveying
the Property to Tombstone, free and clear of all liens, claims and
encumbrances arising by, through or under Atlas (other than royalties
payable under the Leases); (ii) a fully executed and acknowledged
assignment conveying to Tombstone an undivided 100% interest in the
Leases, the terms and provisions of each of which Tombstone hereby
agrees to comply with and be bound by; (iii) a fully-executed and
acknowledged quitclaim deed conveying the water right listed on
Exhibit A from
<PAGE>
Atlas to Tombstone; (iv) a fully-executed assignment of the office
lease in Vale, Oregon; and (v) any other documents as are reasonably
deemed necessary by Tombstone to effect the conveyances contemplated
under this Agreement.
11. The parties acknowledge and agree that this Agreement is subject to
any requisite regulatory approvals.
12. Tombstone may assign all of its rights and obligations under this
Agreement without the consent of Atlas, provided however, that until
the Purchase Price is paid in full, Tombstone Explorations Co. Ltd.
will guarantee all obligations hereunder as a condition to the
effectiveness of any such assignment. Atlas may assign its rights and
obligations under this Agreement with the prior written consent of
Tombstone, which shall not be unreasonably withheld.
13. Atlas agrees to defend, indemnify and hold harmless Tombstone, its
successors, affiliates, assigns, officers, directors and employees
from and against any and all claims, actions, suits, losses,
liabilities, damages, assessments, judgments, costs and expenses,
including reasonable attorneys' fees, arising out of or related to (i)
any breach by Atlas of any representation, covenant or warranty set
forth herein, or (ii) any activities conducted by Atlas on or in
connection with the Property prior to the date Tombstone exercises the
Option.
14. In addition to the indemnification obligations set forth in Paragraphs
2 and 3, Tombstone agrees to defend, indemnify and hold harmless
Atlas, its successors, affiliates, assigns, officers, directors and
employees from and against any and all claims, actions, suits, losses,
liabilities, damages, assessments, judgments, costs and expenses,
including reasonable attorneys' fees, arising out of or related to (i)
any breach by Tombstone of any representation, covenant or warranty
set forth herein, or (ii) any activities conducted by Tombstone on or
in connection with the Property after the Option Period.
15. Any party who has a claim giving rise to indemnification liability
pursuant to this Agreement (an "Indemnified Party") which results from
a claim by a third party shall give prompt notice to the other party
(the "Indemnifying Party") of such claim, together with a reasonable
description thereof. Failure to provide such notice shall not relieve
a party of any of its obligations hereunder except to the extent
materially prejudiced thereby. With respect to any claim by a third
party against any party to this Agreement which is subject to
indemnification under this Agreement, the Indemnifying Party shall be
afforded the opportunity, at its expense, to defend or settle the
claim if it utilizes counsel reasonably satisfactory to the
Indemnified Party, and promptly commences the defense of such claim
and pursues such defense with diligence; provided, however, that the
Indemnifying Party shall secure the consent of the Indemnified Party
to any settlement, which consent shall not be unreasonably
<PAGE>
withheld. The Indemnified Party may participate in the defense of any
claim at its expense, and until the Indemnifying Party has agreed to
defend such claim, the Indemnified Party may file any motion, answer
or other pleading or take such other action as it deems appropriate to
protect its interests or those of the Indemnifying Party. If an
Indemnifying Party does not elect to contest any third-party claim,
the Indemnifying Party shall be bound by the results obtained with
respect thereto by the Indemnified Party, including any settlement of
such claim.
16. Tombstone shall have the right to terminate, surrender and relinquish
this Agreement at any time during the Option Period by giving written
notice to Atlas of such election. If Tombstone does not timely make
any Option Payment during the Option Period, this Agreement will
terminate as set forth in Paragraph 7. Upon termination of this
Agreement, Tombstone shall have no further liability or obligations
hereunder or with respect to the Property, except with respect to the
indemnification obligations set forth in Paragraphs 2 and 3, and the
obligations set forth in Paragraphs 6, 14, 17 and 18, and Atlas shall
have no further liability or obligations hereunder.
17. Upon termination of this Agreement, if Tombstone has not exercised the
Option, it will provide Atlas with a written release, in recordable
form, of its rights hereunder with respect to the Property. In
addition, if this Agreement terminates after August 1st of any year
during the Option Period, Tombstone shall be obligated to timely pay
all claim maintenance fees to maintain the unpatented mining claims
compromising the Property through the next subsequent assessment year,
and to timely make all required filings and recordings associated
therewith.
18. Upon termination of this Agreement, if Tombstone has not exercised the
Option, it shall surrender possession of the Property to Atlas,
subject to the condition that Tombstone shall have the right at any
time within six months thereafter to complete any reclamation
obligations required of it pursuant to Paragraph 3, and to remove all
of its tools, equipment, machinery, supplies, fixtures, buildings,
structures and other property erected or placed on such property by
Tombstone, excepting only timber, chutes and ladders in place for
underground support and entry. Title to such property not removed
within six months shall, at the election of Atlas, pass to Atlas.
Alternatively, at the end of six months, Atlas may remove any such
property from the Property and dispose of the same in a commercially
reasonable manner, all at the expense of Tombstone.
19. Tombstone may, at any time during the Option Period, terminate this
Agreement as to less than all of the Property, by providing written
notice of such election to Atlas; provided, however, that Tombstone
may not elect to terminate this Agreement as to some, but not all of
any group of unpatented mining claims or fee lands covered by a
particular Lease. In the event of such a partial termination,
Tombstone shall have no further liability or obligations hereunder or
with respect to the unpatented mining claims to which that partial
termination applies, except to reconvey its interest in such portion
of the Property to Atlas, and with respect to the indemnification
obligations set forth in Paragraphs 2 and 3, and the obligations set
forth in Paragraphs 6, 14, 17 and 18. In addition, if Tombstone
elects to partially terminate this Agreement as to all of the
unpatented mining
<PAGE>
claims or fee lands covered by a particular Lease within 30 days of
the date when any advance or annual minimum royalty payment is due
thereunder, Tombstone shall remain responsible for timely making the
required payment.
20. Any press release or public announcement concerning this Agreement,
its contents, the Property, and data and information pertaining to the
Property will not be made by either party except as required by
applicable laws, regulations or stock exchange rules, or as otherwise
agreed by the parties, without the prior written consent of the other
party, such consent not to be unreasonably withheld and to be given in
a timely manner. Tombstone hereby acknowledges that it is relying at
its sole risk on any Data regarding the Property as delivered to it by
Atlas an that they have conducted their own technical evaluation of
the merits of the Property. Further, although Atlas believes it has
included in the Data information known to it which it believes to be
relevant to an investigation of the acquisition of the Property, Atlas
hereby expressly disclaims any representation as to the accuracy or
completeness of any Data heretofore or hereafter delivered to
Tombstone and those reviewing such Data as allowed hereunder shall be
so advised by Tombstone.
21. Time shall be of the essence of this Agreement.
22. This Agreement shall be governed by and construed in accordance with
the laws of the State of Oregon, except for its rules as to conflicts
of laws.
23. This Agreement shall inure to the benefit of and be binding on
Tombstone and Atlas and their successors and assigns.
24. Atlas and Tombstone hereby agree that upon making Option Payments in
the aggregate amount of $2,000,000 (which would occur when Tombstone
makes the Option Payment due December 15, 1999), Tombstone shall have
earned and will be vested in fifty percent of Atlas' interest in the
Property. Upon receipt of the December 15, 1999 Option Payment, Atlas
shall promptly execute and deliver to Tombstone conveyance documents
of the type set forth in Paragraph 10, conveying to Tombstone fifty
percent of Atlas' interest in the Property. After making the December
15, 1999 Option Payment, and if it is not otherwise in default under
this Agreement, Tombstone may, not later than February 15, 2000,
provide written notice to Atlas of Tombstone's election to enter into
a mining venture agreement with Atlas at the Project, in which case
the parties shall endeavor to negotiate promptly and in good faith a
mining venture agreement (using the Rocky Mountain Mineral Law
<PAGE>
Foundation Forms 5 and 5A as a guide) to govern any future activities
at the Project. If Tombstone fails to timely provide such written
notice, all of the terms and provisions of this Agreement shall
continue in full force and effect.
25. This Agreement constitutes the entire agreement between the parties
and replaces and supersedes all prior agreements, memoranda,
correspondence, communications, negotiations and representations,
whether oral or written, express or implied, statutory or otherwise
between Atlas and Tombstone and/or John E. Watson with respect to the
subject matter herein. This Agreement is intended to be a binding
agreement which will replace the letter agreement between the parties
dated November 13, 1997.
26. All references to monetary amounts in this Agreement shall be to U.S.
dollars.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
If the foregoing accurately summarizes our understanding, would you kindly
indicate the same on the enclosed copy of this Agreement in the space provided
and return the same as soon as possible.
Yours truly,
TOMBSTONE EXPLORATIONS CO. LTD.
SIGNATURE ILLEGIBLE
____________________________________
Authorized Signatory
TOMBSTONE NEVADA INC.
SIGNATURE ILLEGIBLE
____________________________________
Authorized Signatory
ATLAS CORPORATION
SIGNATURE ILLEGIBLE
___________________________________
Authorized Signatory
ATLAS PRECIOUS METALS INC.
SIGNATURE ILLEGIBLE
___________________________________
Authorized Signatory
SIGNATURE ILLEGIBLE
____________________________________
John E. Watson, for purposes evidencing his
agreement to the provisions of Paragraph 25
of this Agreement
<PAGE>
EXHIBIT A
1. The following unpatented lode mining claims located in Sections 7 and 8, T
22 S - R 44 E, WM, in Malheur County, Oregon:
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Don 1 108077 88 22025
Don 2 108078 88 22026
Don 3 108079 88 22027
Don 4 108080 88 22028
Don 5 108081 88 22029
Don 6 108082 88 22030
Don 7 108083 88 22031
Don 8 108084 88 22032
Don 9 108085 88 22033
II. The following lode mining claims located in Sections 1, 12, 13, 24, T 22
S - R 43 E, Sections 31 - 34, T 21 S - R 44 E, Sections 3 - 10, 17 - 19, T 22
S - R 44 E, WM, in Malheur County, Oregon:
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Frog 1 104797 88 18804
Frog 2 104798 88 18805
Frog 3 126210 89 39554
Frog 4 126211 89 39555
Frog 5 104801 88 18808
Frog 6 104802 88 18814
Frog 7 104803 88 18809
Frog 8 104804 88 1881G
Frog 9 104805 88 18811
Frog 10 104806 88 18812
Frog 10A 108086 88 22228
Frog 11 104807 88 18813
Frog 12 104808 88 18815
Frog 13 104809 88 18816
Frog 14 104810 88 18817
A-1
<PAGE>
EXHIBIT A
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Frog 15 104811 88 18818
Frog 16 104812 88 18819
Frog 17 104813 88 18820
Frog 18 104814 88 18821
Frog 19 104815 88 18822
Frog 20 104816 88 18823
Frog 21 104817 88 18824
Frog 22 104818 88 18825
Frog 23 104819 88 18826
Frog 24 104820 88 18827
Frog 25 104821 88 18828
Frog 25A 108087 88 22229
Frog 26 104822 88 18829
Frog 26A 108088 88 22230
Frog 27 104823 88 18830
Frog 28 104824 88 18831
Frog 29 104825 88 18832
Frog 30 104826 88 18833
Frog 31 104827 88 18834
Frog 32 104828 88 18835
Frog 33 104829 88 18836
Frog 34 104830 88 18837
Frog 35, as amended 104831 90 3396
Frog 35A 108089 88 22231.
Frog 36 104832 88 18839
Frog 37 104833 88 18840
Frog 38 104834 88 18841
Frog 39 104835 88 18842
Frog 40 104836 88 18843
Frog 41 104837 88 18844
A-2
<PAGE>
EXHIBIT A
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Frog 42 104838 88 18845
Frog 46 104839 88 18846
Frog 46A 108090 88 22232
Frog 46B 108091 88 22233
Frog 47 104840 88 18847
Frog 48 104841 88 18848
Frog 49 104842 88 18849
Frog 50 104843 88 18850
Frog 51 104844 88 18851
Frog 52 104845 88 18852
Frog 53 104846 88 18853
Frog 54 104847 88 18854
Frog 55 104848 88 18855
Frog 56 104849 88 18856
Frog 57 104850 88 18857
Frog 58 104851 88 18858
Frog 59 104852 88 18859
Frog 60 104853 88 18860
Frog 61 104854 88 18861
Frog 62 104855 88 18862
Frog 63 104856 88 18863
Frog 64 104857 88 18864
Frog 65 104858 88 18865
Frog 66 104859 88 18866
Frog 67 104860 88 18867
Frog 68 104861 88 18868
Frog 69 104862 88 18869
Frog 70 104863 88 18870
Frog 71 104864 88 18871
Frog 72 104865 88 18872
A-3
<PAGE>
EXHIBIT A
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Frog 73 104866 88 18873
Frog 74 104867 88 18874
Frog 75 104868 88 18875
Frog 76 104869 88 18876
Frog 77 104870 88 18877
Frog 78 104871 88 18878
Frog 79 104872 88 18879
Frog 80 104873 88 18880
Frog 81 104874 88 18881
Frog 82 104875 88 18882
Frog 83 104876 88 18883
Frog 84 104877 88 18884
Frog 85, as amended 104878 90 1366
Frog 86, as amended 104879 90 1367
Frog 87, as amended 104880 90 1368
Frog 88, as amended 104881 90 1369
Frog 89, as amended 104882 90 1370
Frog 90, as amended 104883 90 1371
Frog 91, as amended 104884 90 1372
Frog 92, as amended 104885 90 1373
Frog 93 104886 88 18893
Frog 94 104887 88 18894
Frog 95 104888 88 18895
Frog 96 104889 88 18896
Frog 97 104890 88 18897
Frog 98 104891 88 18898
Frog 99 104892 88 18899
Frog 100 104893 88 18900
Frog 101 104894 88 18901
Frog 102 104895 88 18902
A-4
<PAGE>
EXHIBIT A
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Frog 103 104896 88 18903
Frog 104 104897 88 18904
Frog 105 104898 88 18905
Frog 106 104899 88 18906
Frog 107 104900 88 18907
Frog 108 104901 88 18908
Frog 109 104902 88 18909
Frog 110 104903 88 18910
Frog 111 104904 88 18911
Frog 112 104905 88 18912
Frog 113 104906 88 18913
Frog 114 104907 88 18914
Frog 115 104908 88 18915
Frog 116 104909 88 18916
Frog 117 104910 88 18917
Frog 118 104911 88 18918
Frog 119 104912 88 18919
Frog 120 104913 88 18920
Frog 121 104914 88 18921
Frog 122 104915 88 18922
Frog 123 104916 88 18923
Frog 124 104917 88 18924
Frog 125 104918 88 18925
Frog 126 104919 88 18926
Frog 127 104920 88 18927
Frog 128 104921 88 18928
Frog 129 104922 88 18929
Frog 130 104923 88 18930
Frog 131 104924 88 18931
Frog 132 104925 88 18932
A-5
<PAGE>
EXHIBIT A
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Frog 133 104926 88 18933
Frog 134 104927 88 18934
Frog 135 104928 88 18935
Frog 136 104929 88 18936
Frog 137 104930 88 18937
Frog 138 104931 88 18938
Frog 139 104932 88 18939
Frog 140 104933 88 18940
Frog 141 104934 88 18941
Frog 142 104935 88 18942
Frog 143 104936 88 18943
Frog 144 104937 88 18944
Frog 145 104938 88 18945
Frog 146 104939 88 18946
Frog 147 104940 88 18947
Frog 148 104941 88 18948
Frog 149 104942 88 18949
Frog 150 104943 88 18950
Frog 151 125178 89 38517
Frog 152 125179 89 38518
Frog 153 104946 88 18953
Frog 154 104947 88 18954
Frog 155 104948 88 18955
Frog 157 104950 88 18957
Frog 159 104952 88 18959
Frog 161 104954 88 18961
Frog 163 104956 88 18963
Frog 166 104959 88 18966
Frog 167 104960 88 18967
Frog 168 104961 88 18968
A-6
<PAGE>
EXHIBIT A
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Frog 169 104962 88 18969
Frog 170 104963 88 18970
Frog 171 104964 88 18971
Frog 172 104965 88 18972
Frog 173 104966 88 18973
Frog 174 104967 88 18974
Frog 175 104968 88 18975
Frog 176 104969 88 18976
Frog 177 104970 88 18977
Frog 178 104971 88 18978
Frog 179 104972 88 18979
Frog 180 104973 88 18980
Frog 181 104974 88 18981
Frog 182 104975 88 18982
Frog 183 104976 88 18983
Frog 184 104977 88 18984
Frog 195 104988 88 18995
Frog 196 104989 88 18996
Frog 197 104990 88 18997
Frog 198 104991 88 18998
Frog 199 104992 88 18999
Frog 200 104993 88 19000
Frog 202 104995 88 19002
Frog 203 104996 88 19003
Frog 204 104997 88 19004
Frog 205 104998 88 19005
Frog 206 104999 88 19006
Frog 207 105000 88 19007
Frog 208 105001 88 19008
Frog 209 105002 88 19009
A-7
<PAGE>
EXHIBIT A
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Frog 210 105003 88 19010
Frog 211 105004 88 19011.
Frog 212 105005 88 19012
Frog 213 105006 88 19013
Frog 214 105007 88 19014
Frog 215 105008 88 19015
Frog 216 105009 88 19016
Frog 217 105010 88 19017
Frog 218 105011 88 19018
Frog 219 105012 88 19019
Frog 220 105013 88 19020
Frog 221 105014 88 19021
Frog 222 105015 88 19022
Frog 223 105016 88 19023
Frog 224 105017 88 19024
Frog 225 105018 88 19025
Frog 226 105019 88 19026
Frog 227 105020 88 19027
Frog 228 105021 88 19028
Frog 229 105022 88 19029
Frog 230 105023 88 19030
Frog 231 105024 88 19031
Frog 232 105025 88 19032
Frog 233 105026 88 19033
Frog 234 105027 88 19034
Frog 235 105028 88 19035
Frog 236 105029 88 19036
Frog 237 105030 88 19037
Frog 238 105031 88 19038
Frog 239 105032 88 19039
A-8
<PAGE>
EXHIBIT A
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Frog 240 105033 88 19040
Frog 241 105034 88 19041
Frog 242 105035 88 19042
Frog 243 105036 88 19043
Frog 244 105037 88 19044
Frog 245 105038 88 19045
Frog 246 105039 88 19046
Frog 247 105040 88 19047
Frog 248 105041 88 19048
Frog 252 105913 88 19861
Frog 253 105914 88 19862
Frog 254 105915 88 19863
Frog 255 105916 88 19864
Frog 307 107254 88 20957
Frog 308 107255 88 20958
Frog 309 107256 88 20959
Frog 310 107257 88 20960
Frog 311 107258 88 20961
Frog 312 107259 88 20962
Frog 313 107260 88 20963
Frog 314 107261 88 20964
Frog 315 107262 88 20965
Frog 316 107263 88 20966
Frog 318 107265 88 20968
Frog 320 107267 88 20970
Frog 322 107269 88 20972
Frog 324 107271 88 20974
Frog 326 107273 88 20976
Frog 328 107275 88 20978
Frog 330 107277 88 20980
A-9
<PAGE>
EXHIBIT A
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Frog 332 107279 88 20982
Frog 334 107281 88 20984
Frog 336 107283 88 20986
Frog 338 107285 88 20988
Frog 340 107287 88 20990
Frog 469 107416 88 21119
Frog 649 107597 88 21299
Frog 650 107598 88 21300
Frog 651 107599 88 21301
Frog 652 107600 88 21302
Frog 653 107601 88 21303
Frog 654 107602 88 21304
Frog 655 107603 88 21305
Frog 656 107604 88 21306
Frog 657 107605 88 21307
Frog 658 107606 88 21308
Frog 679 107627 88 21329
Frog 680 107628 88 21330
Frog 681 107629 88 21331
Frog 682 107630 88 21332
Frog 683 107631 88 21333
Frog 684 107632 88 21334
Frog 685 107633 88 21335
Frog 686 107634 88 21336
Frog 687 107635 88 21337
Frog 688 107636 88 21338
Frog 689 107637 88 21339
Frog 691 107639 88 21341
Frog 693 107641 88 21343
Frog 707 107655 88 21357
A-10
<PAGE>
EXHIBIT A
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Frog 708 107656 88 21358
Frog 709 107657 88 21359
Frog 710 107658 88 21360
Frog 711 107659 88 21361
Frog 712 107660 88 21362
Frog 713 107661 88 21363
Frog 751 107699 88 21401
Frog 752 107700 88 21402
Frog 753 107701 88 21403
Frog 754 107702 88 21404
Frog 755 107703 88 21405
Frog 756 107704 88 21406
Frog 757 107705 88 21407
Frog 758 107706 88 21408
Frog 759 107707 88 21409
Frog 760 107708 88 21410
Frog 761 107709 88 21411
Frog 762 107710 88 21412
Frog 763 107711 88 21413
Frog 764 107712 88 21414
Frog 765 107713 88 21415
Frog 766 107714 88 21416
Frog 767 107715 88 21417
Frog 768 107716 88 21418.
Frog 769 107717 88 21419
Frog 770 107718 88 21420
Frog 771 107719 88 21421
Frog 772 107720 88 21422
Frog 773 107721 88 21423
Frog 774 107722 88 21424
A-11
<PAGE>
EXHIBIT A
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Frog 775 107723 88 21425
Frog 776 107724 88 21426
Frog 777 107725 88 21427
Frog 778 107726 88 21428
Frog 779 107727 88 21429
Frog 780 107728 88 21430
Frog 781 107729 88 21431
Frog 782 107730 88 21432
Frog 783 107731 88 21433
Frog 784 107732 88 21434
Frog 785 107733 88 21435
Frog 786 107734 88 21436
Frog 787 107735 88 21437
Frog 788 107736 88 21438
Frog 789 107737 88 21439
Frog 790 107738 88 21440
Frog 791 107739 88 21441
Frog 792 107740 88 21442
Frog 793 107741 88 21443
Frog 794 107742 88 21444
Frog 795 107743 88 21445
Frog 796 107744 88 21446
Frog 956 107904 88 21606
Frog 957 107905 88 21607
Frog 958 107906 88 21608
Frog 959 107907 88 21609
Frog 960 107908 88 21610
Frog 961 107909 88 21611
Frog 962 107910 88 21612
Frog 963 107911 88 21613
A-12
<PAGE>
EXHIBIT A
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Frog 964 107912 88 21614
Frog 965 107913 88 21615
Frog 966 107914 88 21616
Frog 967 107915 88 21617
Frog 968 107916 88 21618
Frog 969 107917 88 21619
Frog 970 107918 88 21620
Frog 971 107919 88 21621
Frog 972 107920 88 21622
Frog 973 107921 88 21623
Frog 974 107922 88 21624
Frog 975 107923 88 21625
Frog 976 107924 88 21626
Frog 977 107925 88 21627
Frog 978 107926 88 21628
Frog 979 107927 88 21629
Frog 980 107928 88 21630
Frog 981 107929 88 21631
Frog 1040 121899 89 35729
Frog 1042 121901 89 35731
Frog 1044 121903 89 35733
Frog 1046 121905 89 35735
Frog 1048 121907 89 35737
Frog 1069 121928 89 35758
Frog 1070 121929 89 35759
Frog 1071 121930 89 35760
Frog 1071A 145857 93 2994
Frog 1072 121931 89 35761
Frog 1072A 145858 93 2993
Frog 1091 121950 89 35780
A-13
<PAGE>
EXHIBIT A
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Frog 1092 121951 89 35781
Frog 1093 121952 89 35782
Frog 1094 121953 89 35783
Frog 1095 121954 89 35784
Frog 1096 121955 89 35785
Frog 1097 121956 89 35786
Frog 1098 121957 89 35787
Frog 1099 121958 89 35788
Frog 1100 121959 89 35789
Frog 1101 121960 89 35790
Frog 1102 121961 89 35791
Frog 1103 121962 89 35792
Frog 1104 121963 89 35793
Frog 1106 121965 89 35795
Frog 1108 121967 89 35797
Frog 1110 121969 89 35799
Frog 1112 121971 89 35801
Frog 1158 122017 89 35847
Frog 1159 122018 89 35848
Frog 1160 122019 89 35849
Frog 1161 122020 89 35850
Frog 1162 122021 89 35851
Frog 1163 122022 89 35852
Frog 1164 122023 89 35853
Frog 1241 123658 89 37374
Frog 1242 123659 89 37375
Frog 1243 123660 89 37376
Frog 1274 126212 89 39556
Frog 1275 126213 89 39557
Frog 1276 126214 89 39558
Frog 1277 126215 89 39559
A-14
<PAGE>
EXHIBIT A
III. The following unpatented lode mining claims located in Sections 7, 8, 17,
and 18, T 22 S - R 44 E, WM, in Malheur County, Oregon:
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Poison Spring - 1A 146318 93 6060
Poison Spring - 3A 146319 93 6061
Poison Spring - 5A 146320 93 6062
Poison Spring - 6A 146321 93 6063
Poison Spring - 7A 146322 93 6064
Poison Spring - 8A 146323 93 6065
Poison Spring - 9A 146324 93 6066
Poison Spring - 11A 146325 93 6067
Poison Spring - 14A 146326 93 6068
Poison Spring - 18A 146327 93 6069
Poison Spring - 22A 146328 93 6070
Poison Spring - 26A 146329 93 6071
Poison Spring - 27A 146330 93 6072
Poison Spring - 38A 146331 93 6073
IV. State of Oregon Water Permit Application #G-1 1847 / Permit #G-10994
A-15
<PAGE>
EXHIBIT B
I. The following unpatented lode and placer mining claims and fee lands
subject to that certain Mining Lease and Option to Purchase dated September 11,
1989 between John J. Bishop and Henry F. Bishop, dba Bishop Brothers, Eileen
Bishop, Judy Bishop, John J. Bishop, Jr., Anna Mae Wineburger, aka Anna Mae
Hovis, Suzie Bishop, and Chris Bishop, and Atlas Precious Metals Inc., as
amended July 2, 1991, and July 8, 1997 and located in Sections 11 - 14, T 22 S -
R 43 E, WM, in Malheur County, Oregon:
BLM MALHEUR COUNTY
PLACER CLAIM NAME ORMC # BOOK PAGE
- ----------------- ------ ---- -----
BISHOP 1 116169 89 31685
BISHOP 2 116170 89 31686
BISHOP 3 116171 89 31687
BISHOP 4 116172 89 31688
BISHOP 5 116173 89 31689
BISHOP 5 RELOCATED 125516 89 38758
BLM MALHEUR COUNTY
LODE CLAIM NAME ORMC # BOOK PAGE
- --------------- ------ ---- -----
Frog 1244 125180 89 38519
Frog 1245, as amended 125181 91 930
Frog 1246 125182 89 38521
Frog 1247 125183 89 38522
Frog 1248 125184 89 38523
Frog 1249 125185 89 38524
Frog 1250 125186 89 38525
Frog 1251 125187 89 38526
Frog 1252 125188 89 38527
Frog 1253 125189 89 38528
Frog 1254 125190 89 38529
Frog 1255 125191 89 38530
Frog 1256 125192 89 38531
Frog 1257 125193 89 38532
Frog 1258 125194 89 38533
Frog 1259 125195 89 38534
Frog 1260 125196 89 38535
Frog 1261 125197 89 38536
Frog 1262 125198 89 38537
Frog 1263 125199 89 38538
B-1
<PAGE>
EXHIBIT B
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Frog 1264 125200 89 38539
Frog 1265 125201 89 38540
Frog 1266 125202 89 38541
Frog 1267 125203 89 38542
Frog 1268 125204 89 38543
Frog 1269 125205 89 38544
Frog 1270 125206 89 38545
Frog 1271 125207 89 38546
Frog 1272 125208 89 38547
Frog 1273 125209 89 38548
Those certain fee lands located in T 22 S - R 43 E, WM, in Malheur County,
Oregon:
Section 11: S 1/2 (surface only)
Section 12: W 1/2SW 1/4 (surface only)
Section 13: NW 1/4SW 1/4, W 1/2NW1/4 (surface and minerals)
Section 14: E 1/2 SE 1/4, SW 1/4 SE 1/44(surface and minerals)
N 1/2, NW 1/4SE 1/4 (surface only)
Section 15: S 1/2SE 1/4 (surface only)
Il. The following fee lands subject to that certain Mining Lease and Option to
Purchase dated September 11, 1989 between John J. Bishop and Henry F. Bishop,
dba Bishop Brothers, Ann Schlupe, and Frank B. Bishop, located in T 22 S R 43 E,
WM, in Malheur County, Oregon:
Section 12: SE 1/4 SW 1/4 (minerals only)
Section 13: NE 1/4NW 1/4 (minerals only)
III. The following unpatented lode mining claims subject to that certain Mining
Lease and Option to Purchase dated March 5, 1986, between Sherry & Yates, Inc.
and Atlas Precious Metals Inc., as amended July 25, 1991, and located in
Sections 7, 8, 17, and 18, T 22 S - R 44 E, WM, in Malheur County, Oregon:
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Poison Springs # 1 74965 84 121750
Poison Springs # 2 74966 84 121751
Poison Springs # 3 74967 84 121752
Poison Springs # 4 74968 84 121753
Poison Springs # 5 74969 84 121754
B-2
<PAGE>
EXHIBIT B
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Poison Springs # 6 74970 84 121755
Poison Springs # 7 74971 84 121756
Poison Springs # 8 74972 84 121757
Poison Springs # 9 74973 84 121758
Poison Springs # 10 74974 84 121759
Poison Springs # 11 74975 84 121760
Poison Springs # 12 74976 84 121761
Poison Springs # 13 74977 84 121762
Poison Springs # 14 74978 84 121763
Poison Springs # 15 74979 84 121764
Poison Springs 16, as amended 74980 90 1364
Poison Springs 16A 127904 90 1362
Poison Springs 17, as amended 74981 90 1365
Poison Springs 17A 127905 90 1363
Poison Springs # 18 74982 84 121767
Poison Springs 19, as amended 74983 90 6119
Poison Springs 20, as amended 74984 90 6120
Poison Springs 21, as amended 74985 90 6121
Poison Springs # 22 74986 84 121771
Poison Springs 23, as amended 74987 88 22375
Poison Springs 24, as amended 74988 90 6122
Poison Springs 25, as amended 74989 90 6123
Poison Springs # 26 74990 84 121775
Poison Springs # 27 74991 84 121776
Poison Springs # 28 74992 84 121777
Poison Springs 29, as amended 74993 90 6124
Poison Springs 30, as amended 74994 90 6125
Poison Springs 31, as amended 74995 90 6126
Poison Springs # 32 74996 84 121781
Poison Springs 33, as amended 82452 90 6127
B-3
<PAGE>
EXHIBIT B
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Poison Springs 34, as amended 82453 90 6128
Poison Springs 35, as amended 82454 90 6129
Poison Springs 36, as amended 82455 88 22384
Poison Springs 37, as amended 82456 90 6130
Poison Springs#38, as amended 82457 86 2207
IV. The following unpatented lode mining claims subject to that certain Mining
Lease and Agreement effective November 7, 1988 between Whelan's Mining and
Exploration, Inc. and Atlas Precious Metals Inc. as amended October 18, 1996,
and located in Section 5, T 22 S -R 44 E, WM, in Malheur County, Oregon:
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
GM - 1 81293 85 126168
GM - 2 81294 85 126169
GM - 3 81295 85 126170
GM - 4 81296 85 126171
GM - 5 81297 85 126172
GM - 6 81298 85 126173
GM - 7 81299 85 126174
GM - 8 81300 85 126175
GM - 9 81301 85 126176
GM- 10 81302 85 126177
V. The following unpatented lode mining claims subject to that certain Mining
Lease dated March 3, 1989 between Martha G. Cook, David C. Gross, Murray Morris,
and Robert C. Wolgamott and Atlas Precious Metals Inc. as amended February 11,
1997, and that certain Mining Lease dated June 10, 1989 between Donald L.
Nickich and Atlas Precious Metals Inc., as amended and located in Sections 1 and
12, T 22 S -R 43 E, and in Sections 5 - 8, T 22 S - R 44 E, WM, in Malheur
County, Oregon:
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Quartz #1, as amended 37336 88 20057
Quartz #2, as amended 37337 88 20058
Quartz #3, as amended 37338 88 20059
Quartz #4, as amended 37339 88 20060
Quartz #5, as amended 37340 88 20061
B-4
<PAGE>
EXHIBIT B
BLM MALHEUR COUNTY
CLAIM NAME ORMC # BOOK PAGE
- ---------- ------ ---- -----
Quartz #6, as amended 37341 88 20062
Quartz #7, as amended 37342 88 20063
Quartz #8, as amended 37343 88 20064
Quartz #9, as amended 39495 88 20065
Quartz#10, as amended 37345 88 20066
Quartz#11, as amended 37346 88 20067
Quartz#12, as amended 37347 88 20068
Quartz#13, as amended 37348 88 20069
Quartz#14, as amended 37349 88 20070
Quartz#15, as amended 37350 88 20071
Quartz#16, as amended 37351 88 20072
Quartz#17, as amended 37352 88 20073
Quartz#18, as amended 37353 88 20074
Quartz#19, as amended 39114 88 20075
Quartz#20, as amended 39115 88 20076
Quartz#21, as amended 39116 88 20077
Quartz#22, as amended 39117 88 20078
Quartz#23, as amended 39118 88 20079
Quartz#24, as amended 39119 88 20080
Quartz#25, as amended 43771 88 20081
Quartz#26, as amended 43772 88 20082
Quartz#27, as amended 43773 88 20083
Quartz#28, as amended 43774 88 20085
Quartz#29, as amended 43775 88 20084
Quartz No. 30 76749 84 122581
Quartz#31 76750 84 122584
Quartz#32, as amended 76751 88 20086
Quartz#33 106700 88 20087
VI. State of Oregon Mineral Prospecting Permit # 1175 9:
T 21 S - R 44 E, WM, Section 36
T 22 S - R 44 E, WM, Section 16
B-5
<PAGE>
EXHIBIT 4.4
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT (this "Agreement") made as of the date set forth on the
signature page hereof between Atlas Corporation, a Delaware corporation (the
"Company"), and the undersigned (the "Holder").
W I T N E S S E T H :
-------------------
WHEREAS, on November 10, 1995, the Company issued US$10,000,000 principal
amount of its 7% Exchangeable Debentures due October 25, 2000 (the "7%
Debentures") pursuant to an indenture of even date (the "Indenture") between the
Company and The Chase Manhattan Bank (formerly known as Chemical Bank) as
trustee (the "Trustee"), secured by a pledge of 8,474,576 (since reduced to
approximately 8,313,076) shares (such reduced number of pledged shares, as
further reduced by virtue of any subsequent exchanges of 7% Debentures in
accordance with the terms of the 7% Debentures, hereinafter referred to as the
"Pledged Shares") of common stock, no par value per share ("Vista Shares") of
Vista Gold Corp. (as successor by merger to Granges Inc.) under the Indenture
and an escrow and pledge agreement of even date (the "Escrow and Pledge
Agreement") between the Company and the Trustee, as trustee and as escrow agent;
WHEREAS, the Company and Yorkton Securities, Inc. ("Yorkton"), representing
the holders of all 7% Debentures, have negotiated terms with respect to a
repurchase of the 7% Debentures by the Company;
WHEREAS, the Holder holds the principal amount of the 7% Debentures indicated
on the signature page hereof (the "Debentures"); and
WHEREAS, on the terms and conditions set forth herein, the Holder desires to
sell to the Company and the Company desires to purchase from the Holder the
Debentures.
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the Company and the Holder
do hereby agree as follows:
I. SALE OF DEBENTURES AND REPRESENTATIONS BY HOLDER
------------------------------------------------
I.1 Sale of Debentures. (a) Subject to the terms and conditions hereinafter
------------------
set forth, the Holder hereby irrevocably agrees to sell the Debentures to the
Company and waive payment of any interest accrued and unpaid as of the Closing
(as hereinafter defined) in return for (i) a number of Pledged Shares equal to
the product of (A) the number of Pledged Shares and (B) a fraction, the
numerator of which is the principal amount of the Debentures and the denominator
of which is the principal amount of all outstanding 7% Debentures at the time of
the Closing; and (ii) 153 shares of common stock, US$1.00 par value per share,
of the Company (the "Atlas Shares") for each US$1,000 principal amount of the
Debentures (the securities specified in clauses (i) and (ii) above being
collectively referred to herein as the "Securities"). In lieu of fractional
shares resulting from
<PAGE>
the above computations, the Company will make a cash payment equal to the value
of such fractional shares based upon the closing price of the Atlas Shares on
the New York Stock Exchange and of the Vista Shares on the American Stock
Exchange two business days prior to the Closing (as hereinafter defined).
(b) The Holder has delivered certificates representing the Debentures to
Yorkton herewith. The Holder agrees that the certificates representing the
Securities and cash in respect of fractional shares shall be delivered (with
appropriate instruments of transfer endorsed in blank or, in the case of the
Atlas Shares, registered in the name indicated on the signature page hereto) to
Yorkton, as agent for the Holder, at the Closing (as hereinafter defined). The
Holder agrees that the Company will have no further obligation after making such
delivery to Yorkton, as agent for the Holder, and that Yorkton will thenceforth
be responsible for delivery of the Securities to the Holder.
I.2 Investor Status. The Holder makes the representations and warranties
---------------
indicated by checkmark below:
____ (a) The Holder represents that: (i) the Holder was not offered
the Securities in the United States of America, its territories or
possessions, any state of the United States or the District of
Columbia (the "United States"),
(ii) the Holder is currently, and has been at all times when
the Securities were offered, outside the United States,
(iii) the Holder is not a U.S. Person (as hereinafter defined),
2
<PAGE>
The term "U.S. Person" means:
(1) any natural person resident in the United States;
(2) any partnership or corporation organized or incorporated under
the laws of the United States;
(3) any estate of which any executor or administrator is a U.S. person;
(4) any trust of which any trustee is a U.S. Person;
(5) any agency or branch of a foreign entity located in the United States;
(6) any non-discretionary account or similar account (other than an estate or
trust) held by a dealer or other fiduciary for the benefit or account of a
U.S. person;
(7) any discretionary account or similar account (other than an estate or
trust) held by a dealer or other fiduciary organized, incorporated, or (if
an individual) resident in the United States; and
(8) partnership or corporation if:
(i) organized or incorporated under the laws of any foreign
jurisdiction; and
(ii) formed by a U.S. person principally for the purpose of investing in
securities not registered under the Securities Act of 1933 (the
"Act"), unless it is organized or incorporated, and owned, by
accredited investors (as defined in Rule 501(a) under the Act) who
are not natural persons, estates or trusts.
3
<PAGE>
Notwithstanding the foregoing definition of "U.S. Person":
(1) any discretionary account or similar account (other than an
estate or trust) held for the benefit or account of a non-U.S.
person by a dealer or other professional fiduciary organized,
incorporated, or (if an individual) resident in the United States
shall not be deemed a U.S. person;
(2) any estate of which any professional fiduciary acting as executor
or administrator is a U.S. person shall not be deemed a U.S.
person if:
(i) an executor or administrator of the estate who is not a U.S.
person has sole or shared investment discretion with respect
to the assets of the estate; and
(ii) the estate is governed by foreign law;
(3) any trust of which any professional fiduciary acting as trustee
is a U.S. person shall not be deemed a U.S. person if a trustee
who is not a U.S. person has sole or shared investment discretion
with respect to the trust assets, and no beneficiary of the trust
(and no settlor if the trust is revocable) is a U.S. person;
(4) an employee benefit plan established and administered in
accordance with the law of a country other than the United States
and customary practices and documentation of such country shall
not be deemed a U.S. person;
(5) any agency or branch of a U.S. person located outside the United
States shall not be deemed a U.S. person if:
(i) the agency or branch operates for valid business reasons;
and
(ii) the agency or branch is engaged in the business of insurance
or banking and is subject to substantive insurance or
banking
4
<PAGE>
regulation, respectively, in the jurisdiction where
located;
(6) the International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development
Bank, the Asian Development Bank, the African Development Bank,
the United Nations, and their agencies, affiliates and pension
plans shall not be deemed U.S. Persons.
(iv) If the Holder is a resident of Ontario, the Holder acknowledges that it
has been provided with access to substantially the same information concerning
the Company that a prospectus filed under the Securities Act [Ontario] would
provide and is an investor who, by virtue of net worth and investment experience
or by virtue of consultation with or advice from a person or company who is not
a promoter of the Company and who is a registered adviser or registered dealer,
is able to evaluate this investment on the basis of such information respecting
the investment presented by the Company.
____ (b) (i) The holder represents that it is (A) a U.S. Person
or inside the United States and (B) is an "accredited investor" (as
hereinafter defined).
The term "accredited investor" means any of the following:
(1) any organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purposes of acquiring the
Securities, with total assets in excess of US$5,000,000;
5
<PAGE>
(2) any bank as defined in Section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in Section 3(a)(5)(A)
of the Act whether acting in its individual or fiduciary capacity; any
broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934 (the "1934 Act"); any insurance company as
defined in Section 2(13) of the Act; any investment company registered
under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that act; any Small Business
Investment Company licensed by the U.S. Small Business Administration
under Section 301(c) or (d) of the Small Business Investment Act of
1958; any plan established and maintained by a state of the United
States, such state's political subdivisions, or any agency or
instrumentality of a state of the United States or such state's
political subdivisions for the benefit of its employees, if such plan
has total assets in excess of US$5,000,000; any employee benefit plan
within the meaning of the Employee Retirement Income Security Act of
1974 if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such act, which is either a bank, savings
and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
US$5,000,000 or, if a self-directed plan, with investment decisions
made solely by persons that are accredited investors;
(3) any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
(4) any natural person whose individual net worth, or joint net worth with
that
6
<PAGE>
person's spouse, at the time of his purchase exceeds
US$1,000,000;
(5) any natural person who had an individual income in excess of
US$200,000 in each of the two most recent years or joint income with
that person's spouse in excess of US$300,000 in each of those years
and has a reasonable expectation of reaching the same income level in
the current year;
(6) Any trust, with total assets in excess of US$5,000,000, not formed for
the specific purpose of acquiring the Securities, whose purchase is
directed by a person who, either alone or with his purchaser
representative(s) has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks
of an investment in the Securities; or
(7) any entity in which all of the equity owners are accredited investors.
(ii) The Holder hereby represents that the Holder is acquiring the
Securities for the Holder's own account for investment and not with a view
toward the resale or distribution to others.
(iii) The Holder hereby represents that it is not an affiliate (as
hereinafter defined) of Vista Gold Corp. and has not been such an affiliate
during the preceding three months. For the purposes of the preceding sentence,
the term "affiliate" shall mean a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, Vista Gold Corp.
7
<PAGE>
The Holder is a "Reg S Purchaser" if it checks subsection (a) above and is a
"Reg D Purchaser" if it checks subsection (b) above.
I.3 (a) The Holder acknowledges that the Securities have not been registered
under the Act and may not be offered or sold in the United States unless so
registered or if an exemption from such registration is available. The Holder
further acknowledges that the Company is under no obligation to register any of
the Securities under the Act or any state securities or "blue sky" laws. The
Holder agrees to hold the Company and its directors, officers, employees,
controlling persons and agents (including Yorkton and its officers, directors,
employees, counsel, controlling persons and agents) and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses incurred by them as a result of, (i) any
misrepresentation made by the Holder contained in this Agreement, (ii) any sale
or distribution by the Holder in violation of the Act or any applicable state
securities or "blue sky" laws or (iii) any untrue statement of a material fact
made by the Holder and contained herein.
(b) If the Holder is a "Reg D Purchaser", the Holder consents to the
placement of a legend on any certificate or other document evidencing the Atlas
Shares that such securities have not been registered under the Act or any state
securities or "blue sky" laws and setting forth or referring to the restrictions
on transferability and sale thereof contained in this Agreement.
The Company and the Holder anticipate that Vista Gold Corp. will permit the
removal of all restrictive legends on the Vista Shares upon the acquisition
thereof by a Reg D Purchaser pursuant to the terms hereof, and will allow the
Vista Shares to be resold by a Reg D Purchaser without registration under the
Act pursuant to Rule 144(k) under the Act without any holding period or
8
<PAGE>
volume restrictions provided that any such sales are made in accordance with
Rule 144(f) in "brokers' transactions" (as defined in the Act) or directly with
a "market maker" (as defined in the Securities Exchange Act of 1934, as amended)
and further provided that, at the time of such sales, such Holder is not an
"affiliate" (as defined in Rule 144) of Vista Gold Corp. and has not been an
affiliate in the preceding three months (a "144(k) sale").
The Company notes that Rule 144 under the Act would currently allow resales of
Atlas Shares by Reg D Purchasers without registration under the Act after one
year, subject to volume and certain other restrictions or after two years in a
144(k) sale.
(c) If the Holder is a "Reg S Purchaser", the Holder consents to the
placement of a legend, for so long as required by law, on any certificate or
other document evidencing the Atlas Shares as required by Regulation S under the
Act. The Company will remove any such legends 40 days after issuance unless, in
the opinion of counsel to the Company, such legends must be retained by virtue
of a change of applicable law.
The Company and the Holder intend that the Vista Shares being transferred to
the Holder will be transferred to each Reg S Purchaser pursuant to Rule 904 of
Regulation S under the Act and, accordingly, it is anticipated that Vista Gold
Corp. will permit the removal of all restrictive legends on the Vista Shares
upon the acquisition thereof by a Reg S Purchaser pursuant to the terms hereof,
and will allow the Vista Shares to be resold by a Reg S Purchaser without
registration under the Act pursuant to Rule 904 under the Act.
(d) The Holder is aware that the Company will make a notation in its
appropriate records with respect to the restrictions on the transferability of
the Atlas Shares and will refuse to
9
<PAGE>
register any transfers of Atlas Shares not made in accordance with the Act.
I.4 The Holder represents that (i) the Holder was contacted regarding the
offer of the Securities by Yorkton (or an authorized agent or representative
thereof with whom the Holder had a prior substantial pre-existing relationship)
and (ii) no Securities were offered or sold to it by means of any form of
general solicitation or general advertising, and in connection therewith the
Holder did not: (A) receive or review any advertisement, article, notice or
other communication published in a newspaper or magazine or similar media or
broadcast over television or radio, whether closed circuit or generally
available, in connection with the sale of Securities by the Company or (B)
attend any seminar meeting or industry investor conference whose attendees were
invited by any general solicitation or general advertising.
I.5 (a) The Holder hereby acknowledges and represents that (i) the Holder
has prior investment experience, including investment in unregistered
securities, or the Holder has employed the services of an investment advisor,
attorney and/or accountant experienced in evaluating such investments to read
all of the documents furnished or made available by the Company to the Holder
and to evaluate the merits and risks of such an investment on the Holder's
behalf; and (ii) the Holder is able to bear the economic risk which the Holder
hereby assumes.
(b) To the extent necessary, the Holder has retained, at the expense of the
Holder, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement, its sale of
the Debentures and its purchase of the Securities hereunder.
I.6 The Holder represents that the Holder has full power and authority
(corporate,
10
<PAGE>
statutory and otherwise) to execute and deliver this Agreement, to sell the
Debentures and to purchase the Securities. This Agreement constitutes the legal,
valid and binding obligation of the Holder, enforceable against the Holder in
accordance with its terms.
I.7 No Conflict, Governmental and Other Consents. The execution and delivery
--------------------------------------------
by the Holder of this Agreement and the consummation of the transactions
contemplated hereby will not result in the violation of any law, statute, rule,
regulation, order, writ, injunction, judgment or decree of any court or
governmental authority to or by which the Holder is bound, or of any provision
of the constitutive documents of the Holder.
I.8 The Holder owns the Debentures free and clear of any claim or lien of any
nature whatsoever and has not transferred or assigned any rights in or to the
Debentures including, without limitation, any pledge, option, warrant or puts
and will deliver the Debentures free and clear of any such claims or liens.
I.9 The Holder acknowledges that upon Closing Yorkton will receive a
commission from the Company of 2.5% of the principal amount of the Debentures,
payable in cash and shares of the Company.
II. REPRESENTATIONS BY AND COVENANTS OF THE COMPANY
-----------------------------------------------
The Company hereby represents and warrants to the Holder that:
II.1 Organization and Good Standing and Qualification. The Company is a
------------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware.
11
<PAGE>
II.2 Securities Validly Issued, Fully Paid and Nonassessable. The Atlas
-------------------------------------------------------
Shares have been duly and validly authorized and, when issued and paid for
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable. The Vista Shares are, to the Company's best knowledge, validly
issued, fully paid and nonassessable.
II.3 Authorization, Enforceability. The Company has all corporate right,
-----------------------------
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Securities contemplated hereby
and the performance of the Company's obligations hereunder has been taken. This
Agreement, when countersigned by the Company, will be duly executed and
delivered by the Company and constitute a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms.
II.4 No Conflict, Governmental and Other Consents. The execution and
--------------------------------------------
delivery by the Company of this Agreement and the consummation of the
transactions contemplated hereby will not result in the violation of any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority to or by which the Company is bound, or of any
provision of the Certificate of Incorporation or Bylaws of the Company.
12
<PAGE>
III. TERMS OF SALE
-------------
III.1 Closing. On or about June 15, 1997, or such other date as agreed upon
-------
between the Company and Yorkton but in no event later than July 4, 1997, the
Company will deliver the Securities to Yorkton and Yorkton will deliver the
Debentures to the Company (the "Closing"). The Company shall have no obligation
to deliver the Securities or to proceed to Closing unless the holders 80% in
principal amount of outstanding 7% Debentures enter into identical Agreements
with the Company. Notwithstanding the foregoing two sentences, the Company may,
in its sole discretion, proceed to Closing and deliver the Securities and this
Agreement shall be valid and binding in all respects as between the Company and
the Holder.
If Vista Gold Corp. does not provide its transfer agent an opinion of counsel
with respect to removal of legends on the Vista Shares as contemplated by
Section 0 hereof, the Holder may elect not to close, provided, however, that if
holders of more than 20% in principal amount of outstanding 7% Debentures so
elect, the Company may elect not to close with any other holder, including the
Holder.
III.2 Amendment of Indenture and Escrow and Pledge Agreement. (a) The Holder
------------------------------------------------------
hereby consents to and approves any number of supplemental indentures pursuant
to Section 802 of the Indenture, and any number of supplements or amendments to
the Escrow and Pledge Agreement pursuant to Section 17 thereof, necessary or
convenient to evidence this Agreement (including Section hereof) and accomplish
the transactions contemplated hereby. The Holder acknowledges that the Company
intends to discharge the Debentures and the Indenture as soon as practicable
after the Closing and that such supplements and amendments will be formalized
and reduced to writing only if the Company, the Trustee or
13
<PAGE>
their respective counsels consider it necessary or advisable in order to
discharge the Debentures and the Indenture. Such supplements and amendments
shall be deemed to have been made and entered into and shall be binding upon the
Holder, its successors and assigns, regardless of whether so formalized or
reduced to writing and regardless of whether holders of a majority in principal
amount of outstanding 7% Debenture delivers similar consents and approvals to
the Company.
IV. MISCELLANEOUS
-------------
IV.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, or delivered by hand against written receipt therefor,
addressed to the Company at 370 Seventeenth Street, suite 3050, Denver, Colorado
80202, Attention: Senior Vice President, Legal Affairs, and to the Holder at the
Holder's address indicated on the signature page of this Agreement. Notices
shall be deemed to have been given or delivered on the date of mailing, except
notices of change of address, which shall be deemed to have been given or
delivered when received.
IV.2 This Agreement shall not be changed, modified or amended except by a
writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
IV.3 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and to their respective heirs, legal representatives, successors
and assigns. This Agreement sets forth the entire agreement and understanding
between the parties as to the subject matter hereof and merges and supersedes
all prior discussions, agreements and understandings of any and every nature
among them.
14
<PAGE>
IV.4 Upon the execution and delivery of this Agreement by the Holder, this
Agreement shall become a binding obligation of the Holder with respect to the
purchase of the Securities as herein provided.
IV.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF
THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. IN
THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR RESOLVING
DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE SUPREME COURT OF
THE STATE OF NEW YORK IN AND FOR THE COUNTY OF NEW YORK OR THE FEDERAL COURTS
FOR SUCH STATE AND COUNTY, AND RELATED APPELLATE COURTS. THE PARTIES HEREBY
IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.
IV.6 In order to discourage frivolous claims the parties agree that unless a
claimant in any proceeding arising out of this Agreement succeeds in
establishing his claim and recovering a judgment against another party
(regardless of whether such claimant succeeds against one of the other parties
to the action), then the other party shall be entitled to recover from such
claimant all of its reasonable legal costs and expenses relating to such
proceeding or incurred in preparation therefor.
IV.7 The holding of any provision of this Agreement to be invalid or
unenforceable by a
15
<PAGE>
court of competent jurisdiction shall not affect any other provision of this
Agreement, which shall remain in full force and effect. If any provision of this
Agreement shall be declared by a court of competent jurisdiction to be invalid,
illegal or incapable of being enforced in whole or in part, such provision shall
be interpreted so as to remain enforceable to the maximum extent permissible
consistent with applicable law and the remaining conditions and provisions or
portions thereof shall nevertheless remain in full force and effect and
enforceable to the extent they are valid, legal and enforceable, and no
provisions shall be deemed dependent upon any other covenant or provision unless
so expressed herein.
IV.8 It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall not operate, or be construed, as a waiver of any
subsequent breach by that same party.
IV.9 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
IV.10 This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
IV.11 The Holder represents and warrants that it has not engaged, consented
to nor authorized any broker, finder or intermediary to act on its behalf,
directly or indirectly, as a broker, finder or intermediary in connection with
the transactions contemplated by this Agreement. The Holder hereby agrees to
indemnify and hold harmless the Company from and against all fees, commissions
or other payments owing to any such person or firm acting on behalf of such
Holder
16
<PAGE>
hereunder.
IV.12 Nothing in this Agreement shall create or be deemed to create any
rights in any person or entity not a party to this Agreement.
17
<PAGE>
[Signature Page]
- --------------------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------------
Name Typed or Printed
- --------------------------------------------------------------------------------
Entity Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City, State and Zip Code
Principal amount of 7% Debentures __________.
Name in which Securities should be issued:
___________________________________________________________
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Exchange Agreement is agreed to and accepted as of ____________,
1997.
ATLAS CORPORATION
By:
_______________________________________________________________
Name:
Title:
19
<PAGE>
CONSENT OF BENEFICIAL OWNER
The undersigned
______________________________________________________________________ (the
"Holder"):
1. Certifies that the Holder is the beneficial owner of US$ ___________
principal amount of 7% Exchangeable Debentures due October 25, 2000 (the
"Debentures") of Atlas Corporation (the "Company") registered in the name of
______________________________ ;
2. Acknowledges that the Company has not yet made payment of the
installment of interest on the Debentures that became due on May 1, 1997;
3. Agrees to suspend all interest payments now or heretofore payable
under the Debentures or the related Indenture (the "Indenture") dated as of
November 10, 1995 between the Company and The Chase Manhattan Bank (formerly
known as Chemical Bank) as trustee (the "Trustee") until the closing (the
"Closing") under the Agreement to be entered into between the Company and the
Holder relating to the exchange of the Debentures for common shares of Vista
Gold Corp. and common stock of the Company and during the period of such
suspension no default, Event of Default (as defined in the Indenture) or claim
of the Holder or the Trustee shall arise or exist by reason of non-payment of
any such interest, provided, that such suspension shall not continue beyond 30
days from the date hereof unless the Holder consents to such continuance in
another writing;
4. Further acknowledges that the foregoing suspension shall be valid and
binding as to the Holder, its successors and assigns, regardless of whether
Closing occurs;
5. Agrees to provide any transferee of the Debentures a copy of this
consent;
6. Consents to and approves any number of supplemental indentures and
supplements or amendments to the Escrow and Pledge Agreement, dated as of
November 10, 1995 between the Company and The Chase Manhattan Bank (formerly
known as Chemical Bank) as trustee and as escrow agent, necessary or convenient
to effect or evidence this consent.
IN WITNESS WHEREOF, I have set my hand this____ day of ____________, 1997.
- --------------------------------------------------------------------------------
Name:
Title:
20
<PAGE>
CONSENT OF REGISTERED OWNER
The undersigned
______________________________________________________________________ (the
"Holder"), the registered owner of US$ ___________ principal amount of 7%
Exchangeable Debentures due October 25, 2000 (the "Debentures") of Atlas
Corporation (the "Company"):
1. Acknowledges that the Company has not yet made payment of the
installment of interest on the Debentures that became due on May 1, 1997;
2. Agrees to suspend all interest payments now or heretofore payable
under the Debentures or the related Indenture (the "Indenture") dated as of
November 10, 1995 between the Company and The Chase Manhattan Bank (formerly
known as Chemical Bank) as trustee (the "Trustee") until the closing (the
"Closing") under the Agreement to be entered into between the Company and the
Holder relating to the exchange of the Debentures for common shares of Vista
Gold Corp. and common stock of the Company and during the period of such
suspension no default, Event of Default (as defined in the Indenture) or claim
of the Holder or the Trustee shall arise or exist by reason of non-payment of
any such interest, provided, that such suspension shall not continue beyond 30
days from the date hereof unless the Holder consents to such continuance in
another writing;
3. Further acknowledges that the foregoing suspension shall be valid and
binding as to the Holder, its successors and assigns, regardless of whether
Closing occurs;
4. Agrees to provide any transferee of the Debentures a copy of this
consent;
5. Consents to and approves any number of supplemental indentures and
supplements or amendments to the Escrow and Pledge Agreement, dated as of
November 10, 1995 between the Company and The Chase Manhattan Bank (formerly
known as Chemical Bank) as trustee and as escrow agent, necessary or convenient
to effect or evidence this consent.
IN WITNESS WHEREOF, I have set my hand this____ day of ____________, 1997.
- --------------------------------------------------------------------------------
Name:
Title:
21
<PAGE>
EXHIBIT 21
ATLAS CORPORATION
LIST OF SUBSIDIARIES OF THE REGISTRANT
Atlas Precious Metals, Inc. (incorporated in Nevada)
Atlas Gold Mining Inc. (incorporated in Nevada), a subsidiary of Atlas Precious
Metals, Inc.
Cornerstone Industrial Minerals Corporation (organized under the laws of
Ontario, Canada)
Arisur Inc. (organized under the laws of Grand Cayman).
Suramco Metals, Inc. (organized under the laws of Nevada).
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post Effective Amendment Number
19 to Registration Statement Number 2-8439 on Form S-3 dated November 10, 1983,
Post Effective Amendment Number 1 to Registration Statement Number 33-18316 on
Form S-8 dated December 14, 1987, Registration Statement Number 33-87992 on Form
S-3 dated January 13, 1995 and Post Effective Amendment Number 1 to Registration
Statement Number 33-65165 on Form S-3 dated February 2, 1996 and the Related
Prospectuses of our report on the financial statements and schedule included in
this Annual Report on Form 10-K of Atlas Corporation for the year ended December
31, 1997.
/s/ Ernst & Young LLP
Denver, Colorado
March 31, 1998
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 583 1,022
<SECURITIES> 0 0
<RECEIVABLES> 2,183 2,339
<ALLOWANCES> 0 0
<INVENTORY> 965 848
<CURRENT-ASSETS> 3,768 4,404
<PP&E> 60,427 59,909
<DEPRECIATION> 46,027 44,778
<TOTAL-ASSETS> 42,316 56,021
<CURRENT-LIABILITIES> 11,965 6,841
<BONDS> 0 0
0 0
0 0
<COMMON> 27,282 24,180
<OTHER-SE> (26,751) (11,808)
<TOTAL-LIABILITY-AND-EQUITY> 42,316 56,021
<SALES> 3,935 578
<TOTAL-REVENUES> 3,935 578
<CGS> 4,336 765
<TOTAL-COSTS> 6,992 6,135
<OTHER-EXPENSES> 10,305 4,100
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (559) (728)
<INCOME-PRETAX> (13,921) (10,385)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (13,921) (10,385)
<DISCONTINUED> (2,868) 0
<EXTRAORDINARY> 1,170 0
<CHANGES> 0 0
<NET-INCOME> (15,619) (10,385)
<EPS-PRIMARY> (.61) (.49)
<EPS-DILUTED> (.61) (.49)
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