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Filed pursuant to Rule 424(b)(3)
File No. 33-98876
SUNSHINE MERGER COMPANY
SUPPLEMENT DATED MARCH 5, 1996
TO
PROXY STATEMENT/PROSPECTUS DATED FEBRUARY 9, 1996
The following supplements certain information presented in the Proxy
Statement/Prospectus referenced above and describes a proposed transaction
being undertaken by Sunshine and its principal subsidiary, SPMI, to ensure
adequate funding is available for opportunities being developed in South
America.
RECENT DEVELOPMENTS
PROPOSED OFFERING
Sunshine, through SPMI, proposes to make an offering conducted in
Europe (the "Notes Offering") pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended. It is currently anticipated that the Notes
Offering will be consummated on or about March 21, 1996. SPMI currently
estimates it will issue up to approximately $30 million aggregate principal
amount of Senior Exchangeable Notes due 2000 (the "Notes") pursuant to the
Notes Offering. The net proceeds from the Notes Offering (currently estimated
to be approximately $27.25 million) will be used to fund development and
exploration opportunities of the Company, and for working capital requirements
of the Company.
Set forth below are certain proposed terms that SPMI currently
estimates will be the terms and provisions of the Notes and the Notes Offering.
The Notes will bear interest at approximately 7 to 8% per annum and will mature
four years after their issuance. The Notes may be exchanged at the option of
the holder at any time after 40 days following the date of issuance and prior
to maturity, unless previously redeemed. At any time after one year from the
date of issuance and prior to maturity, SPMI may force the exchange of the
Notes, in whole or in part, subject to certain restrictions. The Notes will
initially be exchangeable into a specified number of shares of Common Stock of
the Company at a specified exchange price per share ranging from the then
current market price to a 5% premium over the then current market price per
share, subject to reset and adjustment in certain events. SPMI may redeem the
Notes at any time at their principal amount if United States withholding taxes
are imposed on payments in respect of the Notes. The Notes will be guaranteed
by Sunshine (and any successors thereof) and the guarantee will rank senior to
all of its unsecured and subordinated obligations, including the currently
outstanding Convertible Subordinated Reset Debentures due July 15, 2008. There
can be no assurance that the Notes offering will be consummated, or if
consummated, that the terms and provisions of the actual Notes and the Notes
Offering will be the same as described herein.
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The Notes (and the underlying Common Stock) will not be registered
under the Securities Act and may not be offered or sold in the United States
without registration under the Securities Act or absent an applicable exemption
from the registration requirements.
PIRQUITAS
Initial results of the drilling and sampling program at the newly
acquired Pirquitas property in northwest Argentina is confirming evidence of a
large disseminated silver and tin ore body, that could be developed by standard
low-cost open pit techniques.
A 1992 report on the property, supported by extensive underground
sampling data, estimated a resource of some 39 million short tons containing
3.50 to 5.25 ounces of silver per ton and between 0.2 and 0.4% tin, for a total
contained metal content of 134 to 202 million ounces of silver and between 154
and 308 million pounds of tin (equivalent to 2.9 to 4.9 million ounces of gold
at current prices). The same report also suggested the potential for the area
to host significantly greater tonnages of similar mineralization.
Work is currently underway to verify previously reported grades and
establish ore reserves. The first part of this program is expected to be
completed by mid-year. Selected assay results for the first three reverse
circulation drill holes from surface, shown on the attached cross-section, are
as follows:
<TABLE>
<CAPTION>
Drill Hole Interval Length Silver Assay Tin Assay
---------- -------- ------ ------------ ---------
<S> <C> <C> <C> <C>
AR-1 P 305-440 135 ft. 9.3 oz/ton 0.69%
AR-2 P 105-463 358 ft. 18.1 oz/ton 0.55%
AR-3 P 230-358 128 ft. 9.3 oz/ton 0.24%
</TABLE>
In addition to the above drill results, the Company has received
assays from the re-sampling of certain workings located above the water level
in the mine, also shown on the attached cross-section. While initially not
expected to be heavily mineralized, areas of considerable length contain
significantly higher values than anticipated, as described below:
<TABLE>
<CAPTION>
Adit Length Silver Assay Tin Assay
---- ------ ------------ ---------
<S> <C> <C> <C>
Oploca-2 62 ft. 42.9 oz/ton 0.85%
Oploca-2 98 ft. 5.1 oz/ton 0.07%
Potosi-2 125 ft. 6.0 oz/ton 0.12%
</TABLE>
Because of the better than expected results of this initial drilling
and sampling work, the Company is very encouraged about the property's
potential to host an ore deposit of more than 130 million ounces of silver.
The underground workings of the mine are now being dewatered and are being
re-sampled as they become accessible to verify the data supporting the 1992
report. Underground core drilling to test for mineralization below the limits
of the surface drilling will commence shortly thereafter.
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[MAP]
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CERTAIN RISK FACTORS-DILUTION
The following should be added to the end of the last sentence of the
section "Certain Risk Factors-Dilution":
"Additional dilution would result from the issuance of Common Stock
upon the exchange of the Notes. See "Recent Developments" and
"Capitalization."
CAPITALIZATION
The following supplements the information presented under
"Capitalization":
"The following table sets forth the pro forma capitalization
reflecting the Merger, assuming (i) the conversion of each share of
Existing Common Stock into one share of New Common Stock, (ii) the
conversion of each share of Preferred Stock into six (6) shares of New
Common Stock and two Warrants, each to purchase one share of New Common
Stock, (iii) transaction costs of $500,000 and (iv) the consummation of
the Notes Offering as currently anticipated and set forth above under
"Recent Developments" and the exchange of each of the Notes for New
Common Stock.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
-------------------------------------------
PRO FORMA PRO FORMA
FOR NOTES FOR CONVERSION
AND MERGER (1) OF NOTES AND MERGER (2)
-------------- -----------------------
<S> <C> <C>
Long-term debt - 7 to 8 percent Exchangeable Senior
Notes, issued by SPMI and guaranteed
by SSC . . . . . . . . . . . . . . . . . . . . $ 30,000 $ ---
Long-term debt - 9 percent Convertible Subordinated
Reset Debentures due July 15, 2008 . . . . . . 1,519 1,519
Stockholders' equity:
Preferred Stock -
aggregate redemption value:
Pro forma - $0 . . . . . . . . . . . . . . . --- ---
Common Stock - $.01 par value;
400,000,000 shares authorized . . . . . . . . 2,398 2,598
Paid-in capital . . . . . . . . . . . . . . . . 704,822 731,872
Deficit . . . . . . . . . . . . . . . . . . . . (618,237) (618,237)
------------ ------------
88,983 116,233
Less treasury stock, at cost:
3,664,289 shares . . . . . . . . . . . . . . 37 37
------------ ------------
Total stockholders' equity . . . . . . . . . 88,946 116,196
------------ ------------
Total capitalization . . . . . . . . . . . . $ 120,465 $ 117,715
============ ============
Shares outstanding:
Preferred Stock . . . . . . . . . . . . . . . . --- ---
Common Stock . . . . . . . . . . . . . . . . . 236,059,294 256,059,294
Warrants ($2.12 exercise price) . . . . . . . . 10,092,716 10,092,716
Warrants ($1.92 exercise price) . . . . . . . . 14,332,372 14,332,372
</TABLE>
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<TABLE>
<S> <C> <C>
Pro Forma shares outstanding
under alternative assumptions
Shares outstanding (3):
Preferred Stock . . . . . . . . . . . . . . . . --- ---
Common Stock . . . . . . . . . . . . . . . . . 253,258,140 273,258,140
Warrants ($2.12 exercise price) . . . . . . . . 10,092,716 10,092,716
Warrants ($1.92 exercise price) . . . . . . . . 14,332,372 14,332,372
Shares outstanding (4):
Preferred Stock . . . . . . . . . . . . . . . . --- ---
Common Stock . . . . . . . . . . . . . . . . . 242,508,861 262,508,861
Warrants ($2.12 exercise price) 10,092,716 10,092,716
Shares outstanding (5):
Preferred Stock . . . . . . . . . . . . . . . . --- ---
Common Stock . . . . . . . . . . . . . . . . . 259,707,708 279,707,708
Warrants ($2.12 exercise price) . . . . . . . . 10,092,716 10,092,716
</TABLE>
___________________________
(1) Assumes issuance of the Notes and that all holders of Preferred Stock choose
to convert their shares of Preferred Stock into six (6) shares of Common
Stock and two Warrants to purchase Common Stock pursuant to the Merger,
resulting in the issuance of 42,997,116 shares of Common Stock and
14,332,372 Warrants to purchase Common Stock upon the conversion of all
outstanding shares of Preferred Stock, based on the closing sales price of
SSC's Common Stock on February 5, 1996, of $1.75 per share.
(2) Assumes that the Notes are converted into 20,000,000 shares of Common Stock
at an assumed exchange price of $1.50 per share (the closing price of the
Company's Common Stock on February 29, 1996). The net proceeds from
issuance of the Notes is estimated to be approximately $27.25 million.
(3) Assumes all holders of Preferred Stock choose to convert their shares into
the maximum of 8.4 shares of New Common Stock and two Warrants, resulting in
the issuance of 60,195,962 shares of New Common Stock and 14,332,372
Warrants upon the conversion of all outstanding shares of Preferred Stock
pursuant to the Merger, assuming the average closing price of the Company's
common stock for the 120 NYSE trading days after the Effective Date is $1.25
or less per share.
(4) Assumes all holders of Preferred Stock choose to convert their shares into
6.9 shares of New Common Stock and no Warrants, resulting in the issuance of
49,446,683 of New Common Stock and no Warrants, upon the conversion of all
outstanding shares of Preferred Stock pursuant to the Merger, based on the
closing price of the Company's Common Stock on February 5, 1996 of $1.75 per
share.
(5) Assumes all holders of Preferred Stock choose to convert their shares into
the maximum of 9.3 shares of New Common Stock and no Warrants, resulting in
the issuance of 66,645,530 of New Common Stock and no Warrants upon the
conversion of all outstanding shares of Preferred Stock pursuant to the
Merger, assuming the average closing price of the Company's common stock for
the first 120 NYSE trading days after the Effective Date is $1.25 or less
per share."
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COMPARATIVE PER SHARE DATA
The following supplements the information presented under "Comparative
Per Share Data":
"The following table sets forth per share data of the Company on a pro
forma basis after giving effect to the Merger on a retroactive basis and
assuming that the Notes Offering is consummated and that each of the Notes has
been exchanged for New Common Stock.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(1)(2)
---------- ---------------
<S> <C> <C>
Income (loss) from continuing operations per common
share before extraordinary item and
cumulative effect of change in accounting
principle:
Fiscal year ended:
December 31, 1992 $(0.44) $(0.22)
December 31, 1993 (0.25) (0.13)
December 31, 1994 (0.08) (0.02)
Nine months ended:
September 30, 1994 (0.10) 0.00
September 30, 1995 (0.19) (0.04)
Book value per outstanding common share:
December 31, 1994 (0.10) 0.51
September 30, 1995 (0.19) 0.45
</TABLE>
(1) Assumes the exchange of Notes for 20,000,000 shares of Common
Stock at an assumed exchange price of $1.50 per share (the closing
price of the Company's Common Stock on February 29, 1996) and the
issuance of 42,997,116 shares of New Common Stock and 14,332,372
Warrants upon the conversion of all outstanding shares of Preferred
Stock pursuant to the Merger, resulting in the cancellation of the
dividend and redemption rights of the Preferred Stock. Should all
holders of Preferred Stock choose to convert their shares into 6.9
shares of New Common Stock (aggregating 49,446,683 shares of New
Common Stock and no Warrants), pro forma book value per outstanding
common share would be $0.49 and $0.44 at December 31, 1994, and
September 30, 1995, respectively. The number of shares of New Common
Stock assumed to be issued pursuant to the Merger was based upon the
closing price of the Company's Common Stock on February 5, 1996 of
$1.75 per share. The number of shares of New Common Stock to be
issued is subject to adjustment. See "CAPITALIZATION," "THE MERGER
PROPOSAL - CONVERSION OF SECURITIES IN THE MERGER" and "RECENT
DEVELOPMENTS."
(2) Excludes the positive contribution to income applicable to
common shares of the difference between the carrying value of the
Preferred Stock, plus the amount of cumulative dividends in arrears,
and the aggregate fair value of common stock and warrants issued.
Such difference, which is currently estimated to exceed $30 million,
would increase income applicable to common shares in the period the
Merger is consummated."
