SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended
December 31, 1999
or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from
to
Commission file number 0-17480
CROWN RESOURCES CORPORATION
(Exact name of registrant as specified in charter)
Washington 84-1097086
(State or other jurisdiction of (IRS Employer Identification
No.)
incorporation or organization)
1675 Broadway, Suite 2400, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303)534-1030
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained to the best of registrant's knowledge in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of
the registrant was approximately $ 15,082,000 based upon the
closing price on March 1, 2000.
There were 14,539,697 shares of common stock, $0.01 par value,
outstanding on March 1, 2000.
This Form 10-K consists of pages
Exhibit Index Begins on Page
TABLE OF CONTENTS
Page
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . .
. . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . .
. . 11
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . .
. . 24
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . .
. . 25
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters . . . . . . . . . .
. . 27
Item 6. Selected Financial Data . . . . . . . . . . . . . . .
. . 27
Item 7. Management's Discussion and Analysis of
Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . . .
28
Item 8. Financial Statements and Supplementary Data . . . . .
. . 34
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . .
35
PART III
Item 10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . . . . . .
. . 35
Item 11. Executive Compensation . . . . . . . . . . . . . . . .
. . 35
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . .
. . 35
Item 13. Certain Relationships and Related. . . . . . . . . . .
. . 35
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . . .
. . 35
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 40
PART I
The information set forth in Business, Properties and
Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources includes
"forward looking statements" within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, and is subject to the safe harbor created by
those sections. Factors that realistically could cause results to
differ materially from those projected in the forward looking
statements are set forth in Business, Management's Discussion and
Analysis of Financial Condition and Results of Operations-Liquidity
and Capital Resources and Considerations Related to Crown's
Business below.
Item 1. Business
(a) Overview
Crown Resources Corporation ("Crown" or the "Company") is a
precious metals exploration company operating in the western United
States, Peru, and Mexico. Its properties and investments in Peru
are held through Solitario Resources Corporation ("Solitario"), a
57.2%-owned subsidiary as of December 31, 1999. Crown's principal
expertise is in identifying properties with promising mineral
potential, acquiring these properties and exploring them to an
advanced stage. Crown's goal is to advance its properties, either
on its own or through joint venture, to the feasibility study
stage. Furthermore, Crown intends to pursue development of the
properties, typically through a joint venture with a partner that
has expertise in mining operations. Crown has in the past
recognized, and expects in the future to recognize, revenues from
the option and sale of property interests to joint venture partners
and from the sale of its share of gold produced on its properties.
Crown was incorporated under the laws of the State of
Washington in August 1988. Unless otherwise indicated by the
context, all references to Crown or the Company in this report
shall be read to refer to Crown Resources Corporation and its
subsidiaries taken together.
(b) Recent Developments
On the January 19, 2000, the State of Washington Pollution
Control Hearings Board ("PCHB") issued a ruling vacating the
previously granted 401 Water Quality Permit for the Crown Jewel
Project issued by the Washington Department of Ecology ("WDOE").
The ruling also reversed certain water rights issued by the WDOE
for the Crown Jewel Project. On March 14, 2000, Battle Mountain
Gold Company("Battle Mountain" or "BMG"), Crown's joint venture
partner that is earning a 54% interest in the project, filed an
appeal in Superior Court for the State of Washington for Okanogan
County, challenging the PCHB ruling. A hearing date has not yet
been set in the appeal. Nonetheless, the PCHB ruling creates
further delay and uncertainty regarding a timetable for the
construction of the project. See Properties - Crown Jewel Project
and Legal Proceedings.
As a result of the PCHB ruling, on February 4, 2000, Battle
Mountain announced it was writing off its entire investment in the
Crown Jewel Project as of December 31, 1999, and reclassifying the
proven and probable reserves to mineralized materials. Because
Crown is the holder of 100% of the Crown Jewel project, subject to
Battle Mountain's potential earn-in, and because the basis and
economics of Crown's interest is materially different than Battle
Mountain's interest, Crown engaged Mine Reserves Associates ("MRA")
to conduct an independent analysis of its Crown Jewel project
reserves in February and March 2000. Per the MRA report, Crown is
reporting proven and probable reserves of 2,556,000 tons at a grade
of 0.354 for a total of 905,000 contained ounces. The MRA design
would use the bulk of the waste rock material from mine design for
tailings dam construction and to backfill the underground mining
areas, in order to increase the recoverable underground ounces.
As part of the review of reserves by MRA, Crown also engaged
Gochnour and Associates to evaluate the ability to obtain permits
for the MRA design. Per Gochnour and Associates, the MRA mine
design is legally permittable. See Properties - Crown Jewel
Project
On February 3, 2000 Solitario announced an agreement with a
affiliate of Newmont Mining Corporation sell its interest in its
Yanacocha property for $6 million in cash and a sliding scale Net
Smelter Return ("NSR") royalty that varies depending on the price
of gold. Closing of the transaction is expected during the second
quarter of 2000, pending the completion of due diligence and
regulatory approval. See Properties - Yanacocha Gold Property.
(c) Considerations Related to Crown's Business
Exploration and Development.
Crown's domestic mineral properties, which consist of an
variety of interests including unpatented and patented claims held
under lease or in fee, consist of exploration concessions or mining
claims held under application or option or purchase agreements.
The properties are located in Nevada, Washington, Montana, and
Utah. Crown's Latin American properties are located in Peru, and
Mexico. Crown acts as operator on all of its properties that are
not held in joint ventures. The success of projects held under
joint ventures that are not operated by Crown is substantially
dependent on the joint venture partner. In particular, the
operating success of the Crown Jewel Project and the Bongara zinc
project are largely dependent on Battle Mountain and Cominco,
respectively, its joint venture partners. Any future revenues from
Solitario's interest in the Yanacocha NSR royalty will be dependent
on Newmont. See Properties - Crown Jewel Project, Bongara Zinc
Project, Yanacocha Gold Property.
After selecting a possible exploration area through its own
efforts or with others, Crown compiles reports, reviews past
production records, and geologic surveys concerning the area.
Crown then undertakes a field exploration program to determine
whether the area merits work. Initial field exploration on a
property normally consists of geologic mapping and geochemical
and/or geophysical surveys, together with selected sampling to
identify host environments that may contain specific mineral
occurrences. If an area shows promise, Crown will generally either
conduct geologic drilling programs in an effort to locate the
existence of economic mineralization or seek a joint venture
partner to undertake such work. If mineralization is delineated,
further work will be undertaken to estimate ore reserves; evaluate
the feasibility for the development of a mining project, obtain
permits for commercial development and, if the project appears to
be economically viable, proceed to place the ore deposit into
commercial production.
Foreign Operations.
Crown has property interests in Mexico and through Solitario,
has interests in properties located in Peru. These countries have,
from time to time, experienced periods of political and economic
instability. Foreign properties, operations and investments may be
adversely affected by local political and economic developments,
including nationalization, exchange controls, currency
fluctuations, taxation and laws or policies as well as, bylaws and
policies of the United States affecting foreign trade, investment
and taxation. Furthermore, it is particularly important that Crown
maintain good relationships with the governments in the countries
in which it operates. Crown may not be able to maintain such
relationships if the governments or policies related to mining in
these countries change. Certain other regions in which Crown may
conduct operations have also been subject to political and economic
instability, creating uncertainty and the potential for a loss of
resources dedicated to these regions.
Management and technical services are provided to Solitario by
Crown pursuant to a management agreement for which Crown receives
management fees. Certain directors and officers of Crown are also
directors and officers of Solitario. As such, certain of these
officers devote a portion of their time to Solitario matters from
which Crown, as a majority shareholder, may not receive the full
benefit. Additionally, the fact that these officers receive cash
compensation from Crown and not from Solitario may give rise to
certain conflicts of interest between these officers' duties to
Crown and to Solitario.
Sources of Financing.
The capital required for exploration and development of
properties is substantial. Crown has financed operations through
the issuance of convertible debentures, utilization of joint
venture arrangements with third parties (generally providing that
the third party will obtain a specified percentage of Crown's
interest in a certain property in exchange for the expenditure of
a specified amount), the sale by Crown of interests in properties
or other assets, and by the issuance of common stock. See
Properties - Crown Jewel Project-Financing, Properties - Bongara
Zinc Project, Properties - Yanacocha, and Management's Discussion
and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources.
Competition and Markets.
A large number of companies are engaged in the exploration and
development of mineral properties, many of which have substantially
greater technical and financial resources than Crown. Therefore,
Crown may be at a disadvantage with respect to many of its
competitors in the acquisition, exploration and development of
mining properties.
The marketing of minerals is affected by numerous factors,
many of which are beyond the control of Crown. Among factors
beyond the control of Crown are the price of the raw or refined
minerals in the marketplace, imports of minerals from other
countries, the availability of adequate milling and smelting
facilities, the price of fuel, the availability and the cost of
labor, and the market price of competitive minerals.
Title. U.S. Properties.
Crown's domestic properties consist, to a large extent, of
unpatented mining claims on unappropriated federal land pursuant to
procedures established by the Mining Law of 1872 and other federal
and state laws. These acts generally provide that a citizen of the
United States (including corporations) may acquire a possessory
right to develop and mine valuable mineral deposits discovered upon
unappropriated federal lands, provided that such lands have not
been withdrawn from mineral location, e.g., national parks,
military reservations and lands designated as part of the National
Wilderness Preservation System. These laws also provide for the
location of unpatented millsite claims for the purpose of mining
and milling minerals from valid mining claims. The validity of all
unpatented mining claims is dependent upon inherent uncertainties
and conditions. These uncertainties relate to such non-record
facts as the sufficiency of the discovery of minerals, proper
posting and marking of boundaries, and possible conflicts with
other claims not determinable from descriptions of record.
Furthermore, the acquisition of unpatented millsite claims may be
limited by several factors which include the number of valid
unpatented mining claims.
Crown's Crown Jewel project, as proposed by Battle Mountain, has
located necessary millsite claims in excess of the number of
unpatented mining claims to be developed. In November 1997 the
Solicitor of the Department of the Interior issued an opinion which
stated among other things, that the Bureau of Land Management
should not approve plans of operation that rely on a greater number
of millsite claims than the number of mining claims being
developed. Federal Public Law 106-31 mandated reinstatement of the
Record of Decision for the Crown Jewel Project and approval of the
Plan of Operations, which had respectively been revoked and denied
based upon the Solicitor's opinion. The approval of the Plan of
Operations has been appealed by project opponents.
Prior to discovery of a locatable mineral thereon, a mining claim
may be open to location by others unless the owner is in possession
of the claim. In the event that the discovery of a valuable
mineral deposit is made on unpatented mining claims in the
exploratory stage, Crown may not be able to assure clear title.
The Budget Reconciliation Act of 1993 (the "1993 Act"),
requires the holder of each unpatented mining claim to pay a "claim
maintenance fee" of $100 per claim on or before August 31 of each
year. To locate new unpatented claims, Crown must pay the $100 per
claim maintenance fee for the initial assessment year and a $25 per
claim location fee. If Crown fails to pay a claim maintenance fee
or a location fee as required by the 1993 Act, it conclusively
forfeits the related unpatented claim.
In connection with the acquisition of Crown's properties,
Crown conducts limited reviews of title and related matters, and
obtains certain representations regarding ownership. Although
Crown believes it has conducted reasonable investigations (in
accordance with standard mining practice) of the validity of
ownership, there can be no assurance that it holds good and
marketable title to all of its properties.
Title. Latin American Properties.
Peru
Under Peruvian law, private parties may obtain authorization
to exploit precious and base metals and certain other minerals by
applying for concessions granted by the Peru Public Mining
Registry.
Applications for concessions may cover a variety of activities
including the exploration and exploitation of metallic or non-
metallic minerals, concentration or refining of minerals,
transportation through non-conventional methods and auxiliary
services to be provided to two or more mineral concessions.
The filing of an application for concession grants the holder
the exclusive right to obtain the concession conditioned on the
outcome of the approval process. The approval process is an
administrative procedure under the authority of the Peru Public
Mining Registry. The process includes a public notice procedure
allowing third parties to give notice of opposition or prior claim,
if any, before the title to the concession is granted. The
approval process may take six months to several years, depending
upon the volume of applications being filed and whether conflicting
claims or objections are noted. Although Solitario believes that
it has taken all necessary steps with respect to the application
and approval process for its Peru property concessions, there is no
assurance that all applications will result in issued concessions.
As of February 15, 2000, Solitario has obtained titles or leased
mining concessions covering approximately 286,000 acres
(approximately 2.47 acres per hectare).
To apply for a concession, an applicant must register with and
pay to the Peru Public Mining Registry, a fee equivalent to $2 per
hectare ($0.80 per acre) for a metallic mineral concession at the
time of application. The applicant must also pay a one-time fee of
approximately $80 for each application. Concession holders must
conduct their exploration efforts in compliance with all applicable
mining laws and regulations. The concession holder must file
annual reports with the Ministry of Energy and Mines and pay a fee
(the "Peruvian Annual Rental Fee") of $2 per year per hectare until
the property is in production.
Mining concessions in Peru are granted for an indefinite
period and require only that the holder pay the applicable Peruvian
Annual Rental Fee and operate and manage the properties as
described in order to keep the concessions in good standing. If
after eight years the concession holder has not produced minerals
from the property having a value of at least $100 per year per
hectare, the applicable Peruvian Annual Rental Fee is increased by
$2 per year per hectare. No royalty payments to the Peruvian
government are due from the sale of minerals produced.
Concessions and applications for concessions are
transferrable. A governmental consent is required for a transfer
only if the concession covers properties located within 50
kilometers of the border. A transfer is effective from the date of
the contract of transfer, although to be enforceable against the
government and third parties, the contract of transfer must be
registered in the Peru Public Mining Registry.
Mexico
Since 1997, Crown, through contractors and its own employees,
has conducted exploration activities in Mexico focusing in the
state of Durango. Under Mexican law enacted in 1993, the
exploration and exploitation of minerals require the granting of
separate assignations made by the government of Mexico of lands
available for exploration or exploitation. Authorities in the
Secretariat of Commerce grant exploration concessions with a fixed
life of six years which must then be changed to an exploitation
concession or lost. Exploitation concessions have a term of 50
years which may be extended for up to an additional 50 years.
The concessions are granted to Mexican individuals or Mexican
companies domiciled in Mexico. Crown holds its Mexican concessions
through Group Crown Exploration S.A. de C.V., ("GCE"), a wholly-
owned Mexican subsidiary.
To maintain exploration concessions in good standing, the
holder is required to pay fees in New Pesos ("NP$") of NP$1.59 per
hectare(or approximately $0.07 per acre at the current exchange
rate) during the first year after the concession is granted,
NP$4.75 per hectare ($0.20 per acre) in the second to fourth years
and NP$9.78 per hectare ($0.42 per acre) in the fifth and sixth
years. This increases to NP$19.68 per hectare ($0.85 per acre) in
the first year after an exploitation concession is granted, rising
to NP$39.48 per hectare ($1.70 per acre) in the second to fourth
years and settling at NP$69.23 per hectare ($2.98 per acre)
thereafter.
In addition to the above fees, the holder must also make an
investment in works and tasks on the exploration concessions
consisting of a flat fee and a per hectare amount, both of which
vary with the age and size of the concession based upon a sliding-
scale from 100 hectare concessions to 5,000 hectare concessions.
Crown expects to meet or exceed the required investments over the
terms of its lease option agreements.
Mexican law provides for escalation of fees and investment in
accordance with the change in the Mexican price index (inflation).
There are no designated royalties to be paid on concessions.
Regulation.
The development, production and sale of minerals is subject to
federal, state, provincial and local regulation in a variety of
ways, including environmental regulation and taxation. Federal,
state, and local environmental regulations generally have a
significant effect on all companies, including Crown, engaged in
mining or other extractive activities, particularly with respect to
the permitting requirements imposed on such companies, the
possibilities of project delays, and the increased expense required
to comply with such regulations. Crown believes it is in
substantial compliance with all such regulations in all the
jurisdictions in which it operates.
Crown is subject to income taxes, state and local franchise
taxes, personal property taxes, and state severance taxes levied by
various governmental units in the countries in which Crown
operates. State severance taxes vary between the states and,
within a single state, the amount of tax, based on a percentage of
the value of the mineral being extracted, varies from mineral to
mineral. Crown's operations are also subject to taxation by each
locality in which it owns mineral properties or does business.
The domestic exploration programs conducted by Crown are
subject to federal, state and local environmental regulations. A
substantial portion of Crown's mining claims are on U.S. public
lands. The United States Forest Service ("USFS") and Bureau of
Land Management ("BLM") extensively regulate mining operations
conducted on public lands. Most operations involving the
exploration for minerals are subject to existing laws and
regulations relating to exploration procedures, safety precautions,
employee health and safety, air quality standards, pollution of
stream and fresh water sources, odor, noise, dust, and other
environmental protection controls adopted by federal, state, and
local governmental authorities as well as the rights of adjoining
property owners. Crown may be required to prepare and present to
federal, state, or local authorities data pertaining to the effect
or impact that any proposed exploration or production of minerals
may have upon the environment. All requirements imposed by any
such authorities may be costly and time-consuming and may delay
commencement or continuation of exploration or production
operations.
Future legislation and regulations are expected to continue to
emphasize the protection of the environment and, as a consequence,
the activities of Crown may be more closely regulated to further
the cause of environmental protection. Such legislation and
regulations, as well as future interpretation of existing laws, may
require substantial increases in capital and operating costs to
Crown and delays, interruptions, or a termination of operations,
the extent of which cannot be predicted.
Bills proposing major changes to the mining laws of the United
States have been considered by Congress. If these bills, which may
include royalty fees or net profits interests, are enacted in the
future, they could have a significant effect on the ownership and
operation of patented and unpatented mining claims in the United
States including claims owned or held by Crown. Although it is not
possible to predict whether or in what form Congress might enact
changes to the mining laws, amendments to current laws and
regulations governing operations and activities of mining companies
or more stringent implementation thereof could have a material
adverse impact on Crown.
Applicable laws and regulations require Crown to make certain
capital and operating expenditures to maintain current operations
and initiate new operations. Crown's estimate of expenditures
required to comply with applicable regulations are included in all
of its budgets for its projects. Although these costs are
difficult to determine, Crown is not currently aware of any
expenditures that are required in excess of budgeted amounts.
Crown incurs expenditures for land reclamation undertaken in the
normal course of operations in compliance with federal and state
land restoration laws and regulations. Under certain
circumstances, it may be required to close an operation until a
particular problem is remedied or to undertake other remedial
actions. However, Crown is not aware of the existence of any such
circumstances at this time.
Gold Price.
The future profitability of Crown's operations is
significantly dependent on the price of gold. The gold price has
fluctuated widely over time due to factors beyond Crown's control
and, in the third quarter of 1999, reached an twenty-year low of
$251 per ounce before rebounding to over $300 per ounce in the
fourth quarter. Many factors influence the price of gold including
interest rates, rate of inflation, the strength of the U.S. dollar
in relation to other currencies, supply and demand, economic
conditions, and political turmoil. Crown cannot predict whether
gold prices will remain at a level at which its reserves can be
mined profitably.
Insurance.
The gold mining industry is subject to risks of human injury,
environmental liability and loss of assets. Crown maintains
insurance coverage consistent with industry practice, but can give
no assurance that this level of insurance can cover all risks of
harm to Crown associated with being involved in the mining
business.
Employees.
As of March 1, 2000, Crown employed 22 persons on a full-time
basis, including 10 U.S.-based employees and 12 employees in Peru.
Crown considers its relations with employees to be excellent. All
employees are eligible to participate in Crown's stock option
plans. None of Crown's employees are covered by a collective
bargaining agreement.
Item 2. Properties
Reserves and Mineral Deposits
The following table shows gold reserves net to Crown at
December 31, 1999:
Mineable Proven and Probable Reserves
Ore Gold Grade Contained Gold
(Millions of tons) (oz/ton) (000 ozs)
Crown Jewel Project 2.56 0.354 905
Crown's proven and probable reserves are reported as mineable
(extractable) ore reserves. Reserves do not reflect recovery
losses in the milling process, but do include allowance for
dilution of ore in the mining process. Reserves have been
calculated based on a gold price of $325 per ounce. Metallurgical
recovery of 85% was estimated. The reserves were based upon an
independent analysis performed by MRA in March 2000 assuming 100%
ownership by Crown. See Crown Jewel Project.
While Crown has 100% ownership of the Crown Jewel project, the
project is currently subject to Battle Mountain's right to acquire
a 54% interest under the terms of the Crown Jewel Venture Agreement
("Venture Agreement"). Battle Mountain had previously reported
total proven and probable reserves of 1.5 million ounces for the
project, 707,000 ounces net to the Crown's 46% interest, as part of
a mining plan under the Venture Agreement. However, in February
2000, in light of the January 2000 PCHB ruling, Battle Mountain
reclassified its interest in the Crown Jewel project from proven
and probable reserves to mineralized materials and wrote off its
investment in the Crown Jewel Project as of December 31, 1999.
See Crown Jewel Project.
In addition to the proven and probable reserves shown above,
are mineral resource deposits reported by MRA of 1,295,000 tons at
a grade of 0.383 ounces of gold per ton for a total of 496,000
contained ounces of gold. These tons are included to be mined and
processed in the mine plan developed by MRA.
In addition to the above, Crown has identified mineral
deposits on the Cord Ranch, Kings Canyon and Bongara properties.
The following discussion summarizes the primary mining
properties in which Crown has interests. Company management
believes the properties described below are favorable for mineral
development, although there is no assurance that any of the
properties in which Crown has or may acquire an interest will be
economically viable.
Crown Jewel Project
General. The Crown Jewel project is located on an approximate
8,000-acre property 24 miles east of Oroville, Washington. Crown
discovered the Crown Jewel gold deposit in 1988, and has a carrying
value of approximately $13.7 million in land, acquisition and
exploration costs as of December 31, 1999. The project is
currently under joint venture with Battle Mountain.
The property is held by a combination of fee ownership,
private mining leases with options to purchase, state mining
leases, with the balance being unpatented mining claims. Royalties
vary from 4%-5% net smelter return ("NSR") royalties on certain
private parcels, however, the ore body as currently defined is not
subject to royalties payable to any third party.
Geology and Land. The Crown Jewel deposit occurs within a
large skarn system formed at the southern contact of the Buckhorn
Mountain Cretaceous-aged diorite-granodiorite pluton with Triassic-
aged limestones and andesites. Both the skarn system and ore body
are relatively tabular and flat-lying in geometry. The skarn
system is compositionally zoned in relation to the intrusive pluton
with gold mineralization both concordant and crosscutting to the
various skarn assemblages.
Battle Mountain Joint Venture. In March 1990, Crown entered
into an agreement with Battle Mountain, which was subsequently
modified in May 1994. Under the agreement as modified, Battle
Mountain has paid to Crown $18,500,000, and since March 14, 1990,
has funded all exploration and permitting on Crown Jewel. Crown
does not anticipate receiving additional payments from Battle
Mountain under the joint venture agreement. In order to acquire a
51% interest in the project, and an additional 3% interest (to 54%)
in the first 1,600,000 ounces of gold from the project, Battle
Mountain is required to construct a facility to treat a minimum of
3,000 tons of ore per day and to fully fund exploration and
development costs through the commencement of commercial production
to acquire its interest. No monies are repayable by Crown to
Battle Mountain for the costs Battle Mountain incurs prior to
commercial production.
Reserves. In February 2000, in light of the January 2000
PCHB ruling, Battle Mountain reclassified its interest in the Crown
Jewel project from proven and probable reserves to mineralized
materials and wrote off its investment in the Crown Jewel Project
as of December 31, 1999. Battle Mountain based its decision on the
uncertainty about the ability to obtain permits for the Battle
Mountain mine plan which contemplates an open-pit mine capable of
supporting a 3,000 ton per day mining facility. In February 2000
Crown engaged MRA to conduct an independent analysis of an
alternative mine plan that would have reduced environmental
impacts. Crown also engaged Gochnour and Associates ("Gochnour")
to evaluate the ability to obtain permits for the alternate mine
plan. Based upon the reports of MRA and Gochnour, Crown has
determined that the Crown Jewel Project contains sufficient
reserves to recover Crown's investment whether developed under the
current joint venture agreement or independently by Crown.
The following table summarizes the Crown Jewel reserves as of
December 31, 2000, as provided by MRA:
Proven and Probable Reserves (100% basis)
Grade Contained
Tons (oz/ton) Ounces
Crown Jewel 2,556,000 0.354 905,000
Reserve Study. The MRA study indicates the deposit could be
mined in a combination of underground operations with a small open-
cut, with ore processed on site in a mill processing 1850 tons per
day.
The reserve analysis was based on results from 765 drill holes
totaling 307,038 feet. MRA's mine design utilizes a 0.155 ounces
of gold per ton ("opt") cutoff grade with a 85% metallurgical
recovery factor for gold. The assumed economic parameters applied
to the design included a $325 gold price, mining costs of $26.20
per ton for underground and $2.20 per ton for the open cut. The
open cut is assumed to produce 354,000 tons of ore at an average
grade of 0.263 opt with a strip ratio of 9.2:1. The MRA design
utilizes the waste rock from the open cut for tailings dam
construction and to backfill the underground mining areas to reduce
subsidence and increase the recoverable underground ounces. The
underground mine is assumed to produce 2,203,000 tons of ore at an
average grade of 0.368 opt. The design calls for a processing
facility rated at 1850 tons per day utilizing the parameters
developed in the 1992 feasibility study, updated for subsequent
engineering studies, for a carbon in leach mill with an 85%
recovery factor. The estimated milling costs are $13.60 per ton
with project administration estimated at $2.00 per ton.
Based upon the same cutoff grade, MRA has estimated other
mineral deposits of 1,295,000 tons grading 0.383 opt for a total of
496,000 contained ounces are present within the currently designed
underground workings at Crown Jewel.
The cash operating costs to mine proven and probable reserves
and deposits within the underground workings have been estimated by
MRA to be approximately $134 per ounce, with capital costs of
approximately $91 million (including $21 million of contingency) to
bring the project into production.
Exploration. Crown began an exploration program at Crown
Jewel in mid-1988 and by the end of 1989 had drilled approximately
200 holes on the property. Between March 1990 and December 1992,
Battle Mountain drilled over 550 holes designed to both confirm and
expand the known reserve. To date, only 500 acres of the
approximate 2,000 acres of prospective skarn geology have been
drill-tested.
Feasibility Study. Prior to the MRA study and Battle
Mountain's decision to write off its investment in the Crown Jewel
project, Crown relied upon the results of an independent
feasibility study commissioned by Battle Mountain in March of 1992.
Based on this study, Battle Mountain began development of the Crown
Jewel gold deposit based on a mine design utilizing an open pit and
a 3,000 ton per day mining facility. Further engineering and
reserve studies by Battle Mountain estimated direct cash production
costs at approximately $165 per ounce of gold produced. Battle
Mountain's mine design estimated capital costs at approximately
$80 million to achieve commercial production. Should the joint
venture proceed, Battle Mountain will be responsible for funding
capital costs. The studies indicated an approximate eight-year
mine life with production averaging 175,000 ounces (100% basis) of
gold per year.
Permitting and Development. Battle Mountain submitted its
original Plan of Operations ("POO") to the Washington Department of
Ecology ("WDOE") and the United Stated Forest Service ("USFS") in
January 1992. In February 1997, the Final Environmental Impact
Statement ("FEIS") was filed by the USFS and the WDOE. The FEIS
describes the environmental effects of the plan to construct and
operate the Crown Jewel mine, and alternatives to that plan. Also,
in February 1997, the USFS and the Bureau of Land Management issued
a favorable Record of Decision ("ROD") selecting Battle Mountain's
open pit mining alternative.
Several appeals by certain persons and special interest groups
contesting the FEIS were filed with the USFS in 1997. In May of
1997, the USFS Deputy Regional Forester upheld the ROD to approve
the Crown Jewel mine project, denying four appeals which had been
filed in March 1997. In May 1997, an action was filed in U.S.
District Court against the USFS appealing certain issues. In
January 1999, the Court ruled in favor of the USFS and denied all
claims of the plaintiffs.
In September 1997, an action was filed before PCHB challenging
the FEIS and certain permit decisions. On the January 19, 2000
PCHB issued a ruling vacating the previously granted 401 Water
Quality Permit for the Crown Jewel Project issued by the WDOE. The
ruling also reversed certain water rights issued by the WDOE for
the Crown Jewel Project. On March 14, 2000, Battle Mountain
appealed the PCHB ruling in Superior Court for the State of
Washington for Okanogan County. No hearing date has been set in
the appeal.
Only one major permit necessary to begin construction remained
outstanding prior to the negative PCHB ruling. It is not known if
other permits previously granted to the project may be subject to
review as a result of the PCHB ruling.
As part of the analysis of the Crown Jewel reserves subsequent
to the January 2000 PCHB ruling, Crown retained Gochnour, an
independent mining environmental consultant, to review the required
permits for the mine design as proposed in the MRA report.
Gochnour indicates the MRA design would require conducting
additional baseline studies and collecting data for modeling to
amend previously approved permits as well as to obtain permits for
activities that were not previously contemplated, for example the
underground mining effects on ground water. Gochnour indicated the
underground alternative will also require mitigation of
environmental impacts. The Gochnour report concludes the MRA mine
design is legally permittable. Although Crown and Gochnour are not
aware of any laws or regulations which would be violated by the
mine design proposed by MRA, there will continue to be uncertainty
regarding the ability of Crown obtaining the necessary permits from
the regulatory authorities in a timely manner, if ever.
In late March 1999, Battle Mountain received notification (the
"Notification") that the Department of Interior and the Department
of Agriculture could not presently approve the POO for the Crown
Jewel Project and vacated the previously approved ROD. On May 21,
1999, President Clinton signed legislation mandating the
reinstatement of the ROD and approval of the POO. The Departments
of Interior and Agriculture reinstated the ROD and approved the POO
in June 1999.
Construction of the Crown Jewel project will not begin prior
to the successful completion of the remaining permit applications
and resolution of the legal and administrative challenges.
Potential delays due to the appeals process, permit process or
litigation are difficult to quantify. See Legal Proceedings.
Financing. In the event that Battle Mountain is unable to
proceed with the project and must relinquish its right to acquire
a 54% interest, Crown would then make a decision to either proceed
with the project alone or seek a similar joint venture situation
with another major mining company. There is no assurance that
Crown could successfully pursue either strategy.
In order to acquire its 54% interest in the project, Battle
Mountain is currently funding all general property, exploration and
development costs through the start of commercial production,
including the construction of a mill facility capable of processing
a minimum of 3,000 tons of ore per day. No monies are repayable by
Crown to Battle Mountain for the costs incurred through the pre-
commercial production stage. Crown will be required to fund its
46% share of production costs upon the start of commercial
production.
Cord Ranch Project
General. In 1989, Crown entered into an exploration and
mining agreement with the surface and mineral rights owners of the
34,000-acre Cord Ranch located in Elko County, Nevada. The lease
agreement was originally for a term of five years from August 31,
1989 and renewable thereafter.
Following several amendments, the amended agreement provided
for a minimum payment of $25,000, paid in 1999. Additionally, the
agreement calls for non-recoupable payments depending on the price
of gold of between $65,000 and $90,000 in 2000, between $100,000
and $150,000 in 2001, and $150,000 and $200,000 in 2002 and
thereafter. Pursuant to the amended agreement, Crown may terminate
the lease agreement at any time and avoid any future obligation or
commitment, except reclamation.
Two property acquisitions immediately adjacent to the Cord
Ranch were made in 1990. The Dixie Creek project, consisting of
1,240 acres, was acquired under agreements entered into in October
1990. At approximately the same time, the Pinon Range property,
consisting of 640 acres of unpatented claims, was acquired.
In September 1994, Crown signed an agreement which was
assigned to a subsidiary of Royal Standard Minerals Inc. ("Royal
Standard"). Royal Standard has earned a 70% interest in Crown's
Cord Ranch and adjacent gold properties. In addition, Royal
Standard must provide Crown's share of expenditures through the
completion of a favorable feasibility study, with such expenditures
to be repaid from Crown's share of production from the properties.
In April 1997, Royal Standard assigned Cameco (U.S.)Inc.
("Cameco") the right to earn a 51% interest in the Cord Ranch lease
and claims reducing Royal Standard's interest to 19% upon earn-in.
In August 1999, Cameco dropped its option to earn an interest in
the property. Royal Standard is currently seeking a new joint
venture partner on the property.
Geology. The Cord Ranch properties lie on the east side of
the Pinon Range and are situated on the Carlin gold trend, where
nearly four million ounces of gold are produced annually.
Paleozoic strata underlying the western parts of the property are
the same formations hosting major deposits in the southern section
of the trend. The area has sustained multiple periods of
deformation and structural preparation of the rocks is very good.
Gold mineralization is generally associated with jasperoid rocks.
Mineral Deposits. To date, 418 drill holes have been
completed on the Cord Ranch project. In early 1994, Crown
estimated the size of two gold deposits, the Pinon Range and Dark
Star deposits. Based on the results of 150 drill holes, the Pinon
Range mineral deposit is estimated at 7.2 million tons containing
0.025 opt of gold at a cutoff grade of 0.013 opt of gold. At Dark
Star, 61 drill holes completed by Crown during 1991-92 define a
mineral deposit totaling 7.5 million tons grading 0.020 opt of gold
at a cutoff grade of 0.013 opt of gold. Combined, Crown and Royal
Standard hold 50% of the mineral rights and 100% of the surface
rights at Dark Star.
Other Property Interests
Lamefoot Mine Royalty. In 1992, Crown acquired from various
underlying lease holders a 0.75% NSR royalty interest in the
Lamefoot deposit for $306,000. This property lies approximately
three miles from the Kettle River Project ("KRP") mill, operated by
Echo Bay Mines Ltd. ("Echo Bay") in northeastern Washington state.
According to Echo Bay, Lamefoot ores represent one of the two ore
feed sources to the KRP mill through the next year. Crown received
approximately $104,000 in royalties from Lamefoot during 1999.
Crown expects to receive approximately $100,000 in royalties from
Lamefoot during 2000.
Kings Canyon. The Kings Canyon property in Utah consists of
1,525 acres of state leases and unpatented claims. Crown holds a
100% interest in the property, subject to a 1-4% NSR royalty to
third parties.
Crown estimates the Kings Canyon property hosts a mineral
deposit that contains 6.8 million tons of material grading 0.030
opt of gold at a cutoff grade of 0.013 opt gold. The gold occurs
as sediment-hosted disseminated mineralization in Paleozoic
carbonate rocks. Crown intends to find a joint venture partner to
further evaluate and develop this mineral deposit.
Manhattan. A 100% interest in the 540-acre Manhattan property
in central Nevada was acquired in 1989. In December 1999 Crown
dropped the Manhattan property and wrote off the remaining
investment of $79,000. No further work is anticipated on this
property.
Kendall Mine Royalty. In September 1991, Crown acquired
Judith Gold Corporation, whose primary asset is the Kendall
property located near Lewiston, Montana. Canyon Resources
Corporation leases the Kendall property which entitles Crown to
receive a 5% NSR royalty on production at the Kendall gold mine.
Mining of ore at the Kendall mine has ceased and the mine site is
presently in reclamation.
MEXICO
Since 1997, Crown has conducted exploration and reconnaissance
activities in Mexico, focusing its efforts in the state of Durango.
In early 1999, Crown acquired the Magistral del Oro ("Magistral")
and San Juan de Minas ("San Juan") properties covering
approximately 13,000 acres and 700 acres respectively. The owner
of the Magistral claims entered into bankruptcy proceedings in
Mexico during 1999 and due to related complications in securing
adequate title to the property , the interest in the Magistral
property was dropped by Crown in December 1999.
San Juan
The 700-acre San Juan property holds identified targets with
potential to host high-grade silver, lead, zinc and gold vein
mineralization as well as disseminated gold-silver mineralization
in footwall and hanging wall zones of main fissure veins.
Mineralization in veins and alteration are predominantly hosted in
diorite and granite intrusions. Minor historic production, to
depths of 130 feet, took place along the 6,500 foot long west-
northwest trending vein zone. Individual veins range up to 15 feet
thick with adjacent disseminated mineralization ranging up to 300
feet in width.
Crown will earn a 100% interest in the San Juan property,
acquired in 1999, by making cash payments to concession holders
totaling $232,000 over four years, and an additional balloon
payment of $800,000 at the end of the four years. Crown is also
required to pay all taxes and meet required work commitments as
prescribed by Mexican law. The San Juan property was located by a
third party consultant who will earn a commission totaling $45,000
during the first three years and $40,000 per year until the
property is either abandoned or put into production. The third
party consultants will retain a NSR of 2% from any production,
subject to minimum annual payments of $50,000.
Crown has planned a six-hole 3,300 foot drilling program is
scheduled for the San Juan property in the first quarter of 2000.
Peru
The following map shows the location of the primary properties
in which the Company has interests in South America.
PERU
Bongara Zinc Project, Amazonas Department, Peru
General. Since 1993, Solitario has leased exploration
concessions or has filed claims for concessions currently covering
approximately 80,000 acres in the Bongara area of northern Peru
(the "Bongara project).
In December 1996, Solitario signed an agreement regarding the
Bongara project with a subsidiary of Cominco. The agreement was
modified in January 1999, increasing the joint venture's acreage,
which currently approximates 345,000 acres. Cominco has the right
to earn a 65% interest in the Bongara project by spending a minimum
of $17,000,000 over a five year period which commenced in January
1999, on exploration and development (in addition to the
approximately $10 million spent prior to January 1999)and by making
annual cash payments of between $100,000 and $500,000 per year
(depending on the price of zinc) to Solitario as well as fully
funding the project through a positive feasibility study. Cash
payments of $118,000, $118,000, and $354,000 have been paid by
Cominco in January 2000, 1999, and 1998, respectively. In addition
to the cash payments and work commitments, Cominco has agreed to
finance Solitario's share of project development costs, subject to
repayment, after a production decision is made, should Solitario
not secure third-party financing. Through December 31, 1999,
Cominco has spent approximately $13 million on exploration at the
Bongara project.
Location. The Bongara project is situated approximately 225
miles by paved and gravel roads from the port city of Chiclayo to
the southwest, in northern Peru. Most of the property lies within
ten miles of a paved road with access to the coast. Travel within
the project area is accomplished by foot or horseback or
helicopter. The property falls on the east slope of the Andes at
an average elevation of 5,000 feet.
Geology and Exploration. The property is underlain by
northwest-trending Jurassic-Cretaceous-age carbonates, fine to
coarse clastic sediments, and shales. Mapping conducted by Cominco
indicates that zinc mineralization occurs within carbonate rock
units in which limestone has been substantially altered to
dolomite.
The primary focus of exploration has been at the Florida
Canyon area of the Bongara project. Mineralization at Florida
Canyon occurs primarily in the middle member of the Chambara
Formation of the Pucara Group of Jurassic geologic age. The middle
member of the Chambara is approximately 700 feet thick and contains
several very favorable rock horizons that are preferentially
mineralized. Vertical structures, which host zinc mineralization
have acted as feeder structures to the stacked stratigraphic
mineralized horizons.
Since 1997, Cominco has drilled 49 core holes at Florida
Canyon totaling 47,200 feet. At Florida Canyon, the widest
intersection of mineralization encountered to date averaged 12%
zinc over 193 feet and the highest grade intersection averaged 27%
zinc over 17 feet. Twelve other drill holes were located in other
areas of the project.
Regional exploration has consisted of satellite imagery
interpretation, stream sediment geochemistry, geologic mapping and
stratigraphic analysis, detailed rock and soil geochemistry, and
hand digging shallow prospect pits. Eighteen surface anomalies
were evaluated in detail during 1998. Surface rock alteration and
geochemistry of the Florida Canyon and nearby Tesoro Canyon
prospect areas are very similar. These two prospects may merge
into a larger mineralized system measuring approximately three
miles long and two miles wide.
Yanacocha Gold Property, Cajamarca Department, Peru
General. The Yanacocha property, located in northern Peru, is
comprised of one contiguous block of approximately 155,000 acres
located in the Yanacocha gold and gold-copper district.
On February 3, 2000 Solitario announced an agreement with an
affiliate of Newmont Mining Corporation ("Newmont") to sell its
interest in its Yanacocha property for $6 million and a sliding
scale net smelter return ("NSR") royalty that varies depending on
the price of gold. In order to effect the transaction, Solitario
has agreed to transfer all of the operating assets and liabilities,
excluding its interest in Yanacocha, of its Peru operating
subsidiary, Minera Los Tapados ("MLT"), to a new operating
subsidiary, Minera Solitario Peru. Newmont will receive all of the
outstanding shares of MLT for the cash consideration and
subsequently deliver the NSR royalty to Solitario. Closing of the
transaction is expected during the second quarter of 2000, pending
the completion of due diligence and regulatory approval. The
balance of Solitario's investment in the Yanacocha property,
$178,000, has been reclassified to assets held for sale. Upon
closing of the transaction, Solitario expects to record a pre-tax
gain of approximately $5.8 million.
The property had been explored previously under joint venture
with Placer Dome, Ltd; Rio Tinto, Ltd; and Barrick Gold
Corporation.
Location. The Yanacocha gold district lies in northern Peru's
Cajamarca Department, 15 miles north of the historic provincial
capital city of Cajamarca (population: 100,000). The Yanacocha
district is a one hour drive north of Cajamarca on paved and
improved gravel roads. Elevations range from 9,000 feet at
Cajamarca to 13,800 feet at the highest points in and around
Yanacocha.
Geology and Exploration. The property is located contiguous
to the north and west of South America's largest gold mine, Newmont
Mining Company's ("Newmont") 51%-owned and operated Minera
Yanacocha heap leach gold mine (1999 production of 1.7 million
ounces of gold). Total proven and probable reserves at the
Yanacocha mine have been reported by Newmont to be 32.9 million
ounces of gold at the end of 1999. The Corona gold-copper porphyry
deposit (four million ounces of gold and one billion pounds of
copper) lies one mile north of Solitario's property position.
Geologically, the Yanacocha district is situated in Tertiary-
age volcanic terrain which extends from Cajamarca to the Ecuadorian
border, 225 miles to the north-northwest. The volcanic rocks are
underlain by Cretaceous basement consisting of carbonate and
quartzite sedimentary rocks intruded by Cretaceous or Tertiary-age
porphyritic intrusives. The gold mineralization present at
Newmont's Minera Yanacocha mine occurs within zones of silicified
volcanic rocks and porphyritic intrusions.
Work conducted by Solitario and its partners has consisted of
geological mapping, rock and stream sediment geochemical sampling,
helicopter-borne geophysical surveying, ground induced-polarization
surveying and core drilling.
Sapalache Gold Property, Piura region, Peru
General. The 43,000 acre Sapalache gold property (formerly
called Shimbe) is located in the department of Piura in northern
Peru ten miles from the Ecuadorian border. The property was staked
in 1993 and 1997 by a third party on behalf of Solitario. The
claims are currently being transferred to Solitario under the terms
of a contract which requires no payments to the title holder.
Under Peruvian law only citizens of Peru can stake claims within 30
miles of the border with neighboring countries. Transfer of title
to Solitario is subject to approval by Presidential decree. This
process is anticipated within one year. Solitario has the right to
explore and exploit the minerals through contract with the title
holder.
In July 1999, Solitario entered into a letter of intent with
AngloGold which allows them to earn a 51% interest in the property.
To earn their interest, AngloGold is required to spend a total of
$6 million over four years, including the drilling 6,600 feet
within sixteen months of signing.
Geology and Exploration. The Sapalache property consists of
tertiary volcanic rocks which locally have irregular bodies and
veins of quartz. Work to date has included stream sediment, soil
and rock sampling and related geochemistry. Rock samples have
returned assays of up to 0.3 ounces per ton of gold.
Soloco Zinc Property, Amazonas Region, Peru
General. In September 1997, Solitario entered into a lease
and option to purchase agreement on the Soloco Property covering
approximately 9,700 acres. The Soloco Property is located in the
department of Amazonas. In October of 1998, the Solitario signed
a joint venture with Billiton Exploration and Mining Peru B.V.
("Billiton"). Billiton completed seven core holes on the property
totaling 3,300 feet during 1999. Although the drilling intersected
oxide zinc mineralization, they decided not to proceed to the
second year under the option agreement. Solitario wrote down its
investment in the property and is not planning any further work on
the property.
Santa Barbara Gold Property, Cerro de Pasco Region, Peru
General. In April 1997, Solitario entered into an agreement
with RTZ Mining and Exploration ("RTZ") granting Solitario the
right to earn a 60% interest in the Santa Barbara project. The
property contains approximately 12,300 acres located 120 miles
northeast of Lima, Peru in the Cerro de Pasco Region. Solitario
dropped its option on the property and recorded a write-down during
1999 on its remaining costs in the property.
Exploration Expenditure Overview
During 1999, Crown conducted exploration activities on its
properties incurring approximately $1.0 million in expenditures,
including $0.6 million in South America. Several of Crown's
properties are subject to leases and/or options to purchase.
Crown's share of 1999 annual lease and rental obligations and
option payments totaled $42,000 for properties it currently holds.
Certain other mining claims and properties not subject to leases
were acquired by Crown either by deed or were located by Crown.
With respect to the claims and other properties acquired by deed or
located by Crown, the obligation required to hold the claims is to
pay ad valorem property taxes in the case of the patented mining
claims and fee land, and annual rental fees in the case of the
unpatented mining claims. See Considerations Related to Crown's
Business.
<TABLE>
2000 WORK COMMITMENTS
Crown's work commitments remaining to be fulfilled in 2000
are $1,000 pertaining to its Mexican property.
ANNUAL RENTALS
<CAPTION>
Annual Rentals
Rental on and Option Payments
Unpatented for Property Crown's Share
Claims and Subject to of Costs
Property Concessions Lease in 2000 in 2000(1)
U.S.
<S> <C> <C> <C>
Crown Jewel $ 65,000 $ 35,000 $ -
Cord Ranch 12,000 65,000 -
Other 1,000 1,000
PERU
Yanacocha (2) 128,000 - -
Bongara 278,000 - -
Other 4,000 35,000 4,000
MEXICO 2,000 48,000 50,000
TOTAL: $489,000 $184,000 $ 55,000
</TABLE>
(1) Represents Crown's estimated share of rentals and option
payments in 2000 based upon existing joint venture or leasing
arrangements. (This estimate does not include costs to be borne by
other joint venturers.)
(2) Crown will pay this amount if the Newmont transaction is not
completed prior to June 30, 2000.
Item 3. Legal Proceedings
Item 1. Legal Proceedings
In March 1997, administrative appeals of the ROD for the Final
Environmental Impact Statement ("FEIS") for the Crown Jewel Project
were filed against the United States Forest Service, ("USFS") by
members of the following parties: (i) a joint appeal by the
Okanogan Highlands Alliance, Washington Environmental Council,
Colville Indian Environmental Protection Alliance, Washington
Wilderness Coalition, Rivers Council of Washington, and Sierra
Club, Cascade Chapter; (ii) Confederated Tribes of the Colville
Reservation; (iii) Columbia River Bioregional Education Project;
and (iv) Kettle Range Conservation Group; (all groups collectively
the "Plaintiffs"). The appeals were denied in May 1997.
Pollution Control Hearings Board
Since the fourth quarter of 1997, members of the Plaintiffs,
and others filed a total of seven actions (PCHB Nos. 97-146, 97-
182, 97-183, 97-185, 97-186, 98-019 and 99-019) against the
Washington Department of Ecology ("WDOE") before the Pollution
Control Hearings Board ("PCHB"), a state administrative tribunal,
challenging the FEIS and certain permit decisions. Although the
PCHB dismissed or ruled in favor of the WDOE on three of the
actions (PCHB 97-146, 97-185 and 98-019), after a consolidated
hearing on the remaining actions, in January of 2000, the PCHB
issued a ruling vacating the previously granted 401 Water Quality
Permit for the Crown Jewel Project issued by WDOE. The ruling also
reversed certain water rights issued by the WDOE for the Crown
Jewel Project. On March 14, 2000, Battle Mountain filed an appeal
in Superior Court of the State of Washington for Okanogan County
challenging the PCHB ruling. A hearing date has not been set in
the appeal.
United States District Court
In late May 1997, members of the Plaintiffs filed an action in
United States District Court for the District of Oregon against the
USFS appealing the Forest Service's issuance of the FEIS, its
decision to uphold the ROD and the denial of administrative
appeals. On December 31, 1998 the Court affirmed the decisions of
the USFS on the adequacy of the FEIS by granting all motions for
summary judgement on behalf of the USFS and BMG, while denying all
motions of the Plaintiffs. Members of the Plaintiffs appealed the
decision to the Ninth Circuit Court of Appeals in April of 1999.
Briefs have been filed in the appeal, however no hearing date has
been set.
Thurston County Superior Court
In December of 1997, the members of the Plaintiffs filed three
separate actions against the WDOE in Superior Court of the State of
Washington for Thurston County. The actions challenge the WDOE's
approval of permits issued to BMG for water resource mitigation and
solid waste permit rulings. In April 1998, members of the
Plaintiffs dismissed one of the three actions related to the
tailings and solid waste permits without prejudice. In November
1998, the remaining two actions were consolidated. The case is
currently pending and no trial date has been set.
United States Congress
In late March 1999, BMG received the Notification from the
Departments of the Interior and Agriculture (the "Departments")
vacating the ROD and indicating the POO for the Project could not
then be approved. In June 1999, the Departments reinstated the ROD
and approved the POO, as mandated by legislation passed by Congress
and signed into law by President Clinton. Members of the
Plaintiffs filed an action in United States District Court for the
District of Oregon, challenging the reinstatement of the ROD and
the grant of the POO. The case is currently pending and no trial
date has been set.
The Interior Board of Land Appeals
In July 1999, members of the Plaintiffs filed two petitions
requesting a stay of the BLM's decision to approve the Project's
POO with the Department of Interior's Interior Board of Land
Appeals (the "IBLA"). The appeals alleged the approval of the POO
was improper because of a lack of compliance with the Mining Law of
1872 as it relates to the surface use of unpatented mining claims.
In September of 1999, the IBLA found that the Plaintiff's have no
chance for success on the merits of their appeals. The IBLA denied
their petitions for stay and affirmed the BLM's approval of the
POO.
The impact and timing of resolutions of these and any other
appeals related to the permitting process cannot be determined with
any accuracy at this time. See Properties - Crown Jewel Project -
Permitting and Development.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders
during the fourth quarter of 1999
EXECUTIVE OFFICERS
The executive officers of Crown are as follows:
Name and municipality Position with Crown and business
of residence Age experience within the last five years
MARK E. JONES, III 60 Chairman of Crown since 1987,
Houston, Texas Chief Executive Officer from 1987 to
1993 and President from September 1989
to November 1990; Chairman of Solitario
since August 1993.
CHRISTOPHER E. HERALD 46 Chief Executive Officer of Crown
Golden, Colorado since June of 1999, the President of
Crown since November 1990.
Chief Executive Officer of Solitario
since June of 1999, President of
Solitario since August 1993.
JAMES R. MARONICK 44 Chief Financial Officer of Crown
Lakewood, Colorado since June 1999, Vice President -
Finance and Secretary/Treasurer of the
Company and Solitario since September
1997; Vice President - Finance and
Secretary/Treasurer of Consolidated
Nevada Goldfields Corporation from
November 1994 to September 1997.
DEBBIE W. MINO 47 Vice President - Investor Relations
Sugar Land, Texas of Crown since 1989.
WALTER H. HUNT 48 Vice President - South American
Lima, Peru Operations of Crown since July
1994; President - South American
Operations, Solitario since June
1999; Vice President - Peru Operations
of Solitario since July 1994.
Officers of Crown are appointed by the Board of Directors.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The common stock of Crown was approved for quotation on the
NASDAQ system and trading commenced on February 17, 1989 under the
symbol CRRS. Since August 1, 1989 Crown's common stock has been
traded on the NASDAQ National Market System. Crown's stock has
been listed and traded in Canada on The Toronto Stock Exchange
since December 10, 1991, under the symbol CRO.
<TABLE>
The following table sets forth the high and low sales prices
on the NASDAQ National Market System for Crown's common stock for
the quarterly periods from January 1, 1997 to December 31, 1999.
<CAPTION"
Prices (US$)
High Low
1998:
<S> <C> <C>
First Quarter $4.75 $3.50
Second Quarter 4.88 3.69
Third Quarter 4.50 2.50
Fourth Quarter 3.88 1.63
1999:
First Quarter 3.00 1.50
Second Quarter 2.25 0.81
Third Quarter 3.06 1.25
Fourth Quarter 4.75 1.66
</TABLE>
Holders of common stock are entitled to receive such dividends
as may be declared by the Board of Directors. Crown has not paid
any dividends on its common stock and does not anticipate paying
any dividends in the foreseeable future.
At March 1, 2000, there were 1,214 record holders of Crown's
common stock.
Item 6. Selected Financial Data
The selected consolidated financial data set forth below for
each of the five years in the period ended December 31, 1999 and as
of the years then ended has been derived from the audited
consolidated financial statements of Crown (not all of which
financial statements are presented herein). The selected
consolidated financial data should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and
Results of Operations and the audited consolidated financial
statements and related notes thereto included elsewhere in this
report.
<TABLE>
<CAPTION>
Balance sheet data: As of December 31,
(in thousands) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Total Assets $22,709 $36,500 $34,338 $37,113 $36,664
Long Term Debt 15,000 15,000 15,000 15,000 15,000
Working Capital 4,881 7,839 5,521 5,384 7,632
Stockholders' Equity 5,980 17,182 13,979 17,197 18,430
</TABLE>
<TABLE>
<CAPTION>
Income statement Years ended December 31,
data: (in thousands, 1999 1998 1997 1996 1995
except per share
amounts)
<S> <C> <C> <C> <C> <C>
Revenues $ 541 $ 610 $ 685 $ 803 $1,030
Net loss before change
in accounting
principle 2,666 1,928 4,979 1,571 1,717
Change in accounting
principle 8,451 - - - -
Net loss $11,117(1) $1,928 $4,979 $1,571 $1,717
Basic loss per share
before change in
accounting principle $0.18 $0.13 $0.38 $0.12 $0.13
Change in accounting
principle 0.58 - - - -
Basic loss per share $0.76 $0.13 $0.38 $0.12 $0.13
</TABLE>
(1) Crown changed its method of accounting for exploration costs
and recorded a $8.5 million charge related to the cumulative
effect of the change in accounting principle to operations in
1999.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion should be read in conjunction with
Crown's consolidated financial statements for the years ended
December 31, 1999, 1998 and 1997, included elsewhere in this
report. Crown's financial condition and results of operations are
not necessarily indicative of what may be expected in future years.
Crown's assets in Peru are held through Solitario Resources
Corporation ("Solitario"), a 57.2%-owned subsidiary as of December
31, 1999.
Results of Operations
Crown has historically derived its revenues from the option
and sale of property interests, from royalty interests, interest
income and from the sale of its share of gold produced on its
properties. Revenues from the option and sale of property
interests have consisted of a small number of relatively large
transactions. Such transactions have occurred, and in the future
are likely to occur, if at all, at irregular intervals and have a
significant impact on operating results in the periods in which
they occur. Crown recorded $100,000 in mineral option proceeds
during in 1999 from payments related to its Bongara joint venture
in Peru.
Crown had a net loss before cumulative effect of a change in
accounting principle of $2.7 million or $0.18 per share in 1999
compared with a net loss of $1.9 million or $0.13 per share in 1998
and a net loss of $5.0 million or $0.38 per share in 1997.
During the fourth quarter of 1999, Crown changed its method of
accounting for exploration costs on properties without proven and
probable reserves from capitalizing all expenditures to expensing
all costs, other than acquisition costs, prior to the establishment
of proven and probable reserves. This will bring Crown's
accounting method in accordance with the predominant practice in
the U.S. mining industry. The $8.5 million cumulative effect of
the change on prior years is included in the loss for 1999. The
effect of the change on 1999 was to increase the loss before
cumulative effect of change in accounting principle by $0.1 million
or $0.01 per share.
Total revenues were $0.5 million in 1999 compared with $0.6
million in 1998 and $0.7 million in 1997. Crown's recurring
revenues have been primarily derived from its royalty interests and
from interest income. Crown recorded $0.1 million in mineral
option proceeds during 1999 as a result of the change in accounting
principle during the year.
Royalty income was $0.1 million in 1999, $0.1 million in 1998
and $0.3 million in 1997. Royalty income has decreased due to the
completion of mining at the Kendall mine in Montana, in which Crown
has a 5% royalty interest. The mine is now in reclamation.
Crown's remaining royalty interest relates to the Lamefoot deposit
at the Kettle River mine in Washington. The Lamefoot deposit
represents the primary ore source at Kettle River for the next
year. Approximately $0.1 million is expected to be received from
this royalty interest in 2000.
Interest income was $0.3 million in 1999 compared with $0.5
million in 1998 and $0.4 million in 1997. Fluctuations are due a
changes in Crown's average invested cash balances. The primary
factors resulting in increases in cash balances have been from
proceeds received from sales of Crown's common stock during 1998
and from the sales of common stock of Crown's subsidiary, Solitario
in 1997. Additionally, the level of exploration activity carried
on by Crown has affected the amount of cash available for
investment. See Liquidity and Capital Resources.
General and administrative expenses in 1999 were $1.4 million
compared with $1.5 million in 1998 and $2.0 million in 1997. The
lower costs in 1999 and 1998 are the result of decreased
exploration activity, the decision to eliminate active exploration
in Argentina, as well as reduced administrative staff and travel.
Interest expense was $1.0 million in each of 1999, 1998 and
1997 and related primarily to Crown's convertible debentures.
Included in interest expense is amortization of deferred offering
costs of $0.1 million in each of 1999, 1998 and 1997.
Crown regularly performs evaluations of its assets to assess
the recoverability of its investments in these assets. All long-
lived assets are reviewed for impairment whenever events or
circumstances change which indicate the carrying amount of an asset
may not be recoverable utilizing established guidelines based upon
estimated future net cash flows from the asset. Write-downs
relating to exploration properties amounted to $0.2 million in
1999, $0.9 million in 1998 and $5.7 million in 1997. Included in
the write-down for 1997 was Crown's decision to sell its operations
in Argentina resulting in a $3.8 million charge to operations.
Minority interest in loss of subsidiary was $0.4 million in
1999 compared to $0.2 million in 1998 and $2.2 million in 1997.
The variance in 1997 occurred as the result of higher losses in
Solitario due primarily to the Argentina asset write-down.
Liquidity and Capital Resources
Due to the nature of the mining business, the acquisition,
exploration and development of mineral properties requires
significant expenditures prior to the commencement of production.
Crown has in the past financed its activities through the sale of
gold, the sale of securities, joint venture arrangements (including
project financing) and the sale of interests in its properties. To
the extent necessary, Crown expects to continue to use similar
financing techniques.
Crown's exploration and development activities and funding
opportunities, as well as those of its joint venture partners, may
be materially affected by gold price levels and changes in those
levels. The market price of gold is determined in world markets
and is affected by numerous factors which are beyond Crown's
control.
Net cash used in operating activities was $2.7 million in 1999
compared with uses of $1.7 million in 1998 and $2.1 million in
1997. The major difference related to the inclusion of exploration
expenses as an operating cost after the adoption of the change in
accounting principle in 1999, rather than as additions to mineral
properties in 1998 and 1997.
Net cash used in investing activities in 1999 was $0.3
million, compared with $1.1 million in 1998 and $2.6 million in
1997. Cash uses included mineral property additions of $0.2
million in 1999, $1.5 million in 1998 and $3.3 million in 1997.
These amounts included no South American property additions through
Solitario in 1999, $1.0 million in 1998 and $2.4 million in 1997.
Net cash provided by financing activities was $5.1 million during
1998 primarily from the sale of Crown's common stock.
Crown has budgeted $ 1.4 million for exploration in 2000, $0.9
million of which is planned for Peru. Crown's exploration
expenditures have constituted the bulk of its activities.
Accordingly, the reduction in Crown's assets related to the change
in accounting principle, has affected the comparability of its
assets, income and cash flows for the three years ended December
31, 1999. Crown's acquisition and exploration programs in 1999,
1998 and 1997 have primarily been devoted to properties in South
America. Crown is exposed to risks normally associated with
foreign investments, including political, economic and social
instabilities, as well as foreign exchange controls and currency
fluctuations. Foreign investments may also be subject to laws and
policies of the United States affecting foreign trade, investment
and taxation which could affect the conduct or profitability of
future operations.
In February 1998, Crown received $4.6 million, after
commissions and offering expenses, from a European equity financing
through the private placement of 1.04 million shares of Crown's
common stock. Included in the placement was an agency fee of
40,000 shares paid to David Williamson Associates, Ltd., of which
David R. Williamson, a director of Crown, is a principal.
On February 3, 2000 Solitario announced an agreement with an
affiliate of Newmont Mining Corporation ("Newmont") to sell its
interest in its Yanacocha property for $6 million and a sliding
scale (depending on the price of gold) net smelter return ("NSR")
royalty. In order to effect the transaction, Solitario has agreed
to transfer all of the operating assets and liabilities, excluding
its interest in Yanacocha, of its Peru operating subsidiary, Minera
Los Tapados ("MLT"), to a new operating subsidiary, Minera
Solitario Peru. Newmont will receive all of the outstanding shares
of MLT for the cash consideration and subsequently deliver the NSR
royalty to Solitario. Closing of the transaction is expected
during the second quarter of 2000, pending the completion of due
diligence and regulatory approval. The balance of Solitario's
investment in the Yanacocha property, $178,000, has been
reclassified to assets held for sale. Upon closing of the
transaction, Solitario expects to record a pre-tax gain of
approximately $5.8 million.
During 1998, Solitario completed the sale of its Argentina
subsidiary to TNR Resources, Ltd. of Vancouver, B.C. Canada
("TNR"). The purchase price of $350,000 was received in the form
of 1,250,000 common shares of TNR and warrants to purchase an
additional 625,000 common shares. TNR reimbursed Solitario $29,000
for costs incurred through a cash payment of $8,000 and delivery of
184,709 additional common shares of TNR.
During 1999, less than $0.1 million was received from the
exercise of stock options. Crown does not anticipate significant
exercises of stock options in the foreseeable future.
Cash and cash equivalents amounted to $5.2 million at December
31, 1999. These funds are generally invested in short-term
interest-bearing deposits and securities, pending investment in
current and future projects. Included in cash and cash
equivalents at December 31, 1999 was $2.4 million which was held in
Solitario. Working capital at December 31, 1999 was $4.9 million.
Crown believes that its existing funds and projected sources
of funds will be sufficient to finance its currently-planned
exploration and other operating activities. Crown will need to
raise additional capital to meet its required debt repayments,
including the payment of its $15 million convertible debentures,
due August 2001. Crown's long-term funding opportunities and
operating results are highly dependent on the gold price as well as
successful permitting, development and commencement of commercial
production at the Crown Jewel Project. Moreover, there can be no
assurance Crown will be able to raise necessary capital in the
future.
Exploration Activities
A significant part of Crown's business involves the review of
potential property acquisitions and continuing review and analysis
of properties in which it has an interest, to determine the
exploration and development potential of the properties. In
analyzing expected levels of expenditures for work commitments and
lease obligations, Crown considers the fact that its obligations to
make such payments fluctuate greatly depending on whether, among
other things, Crown makes a decision to sell a property interest,
convey a property interest to a joint venture, or allow its
interest in a property to lapse by not making the work commitment
or payment required.
Crown estimates its 2000 work commitments remaining to be
fulfilled on its existing properties will be less than $0.1
million which are to be fulfilled by Crown. Crown's share of
rental obligations and other property payments for 2000 are
expected to be less than $0.1 million.
New Accounting Pronouncements
In June of 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The standard,
which is effective for fiscal years beginning after June 15, 2000,
sets forth guidelines for recording derivative instruments as
assets and liabilities to be reported in the financial statements
at fair value and that changes in the fair value of the instruments
shall be recognized in the results of operations. This standard,
when adopted by the Company, is not expected to have a material
effect on the Company's reported financial position, results of
operations and cash flows.
Environmental and Permitting and Legal
The Final Environmental Impact Statement ("FEIS") on the Crown
Jewel project was issued to the public in February 1997. In May of
1997, the United States Forest Service ("USFS") upheld the Record
of Decision ("ROD") to approve the Crown Jewel project. In May
1997, an action was filed in U.S. District Court against the USFS
appealing its decision to uphold the ROD. This action was
dismissed on December 31, 1998. As of December 31, 1999, all
substantive permit applications necessary to begin construction
have been filed with the various local, state and federal agencies
and are undergoing review. As of December 31, 1999, the Crown
Jewel project had received favorable decisions on 57 of 70, or 81%,
of the total permits necessary on the project. In January of 2000,
the Pollution Control Hearings Board ("PCHB"), a state
administrative tribunal, issued a ruling in response to an appeal
vacating the previously granted 401 Water Quality Permit for the
Crown Jewel Project issued by WDOE. The ruling also reversed
certain water rights issued by the WDOE for the Crown Jewel
Project. On March 14, 2000, Battle Mountain filed an appeal in
Superior Court of the State of Washington for Okanogan County
challenging the PCHB ruling. A hearing date has not been set in
the appeal. It has not been determined what effect, if any, this
ruling will have on other previously issued permits.
As a result of the PCHB ruling, on February 4, 2000, Battle
Mountain announced it was writing off its entire investment in the
Crown Jewel Project as of December 31, 1999, and reclassifying the
proven and probable reserves to mineralized materials. Because
Crown is the holder of 100% of the Crown Jewel project, subject to
Battle Mountain's potential earn-in, and that the basis and
economics of Crown's interest is materially different than Battle
Mountain's interest, Crown engaged Mine Reserves Associates ("MRA")
to conduct an independent analysis of its Crown Jewel project
reserves in February and March 2000. Per the MRA report, Crown is
reporting proven and probable reserves of 2,556,000 tons at a grade
of 0.354 for a total of 905,000 contained ounces. The MRA design
would use the bulk of the waste rock material from mine design for
tailings dam construction and to backfill the underground mining
areas, in order to increase the recoverable underground ounces.
As part of the analysis of the Crown Jewel reserves subsequent
to the January 2000 PCHB ruling, Crown retained Gochnour, an
independent mining environmental consultant, to review the required
permits for the mine design as proposed in the MRA report.
Gochnour indicates the MRA design would require conducting
additional baseline studies and collecting data for modeling to
amend previously approved permits as well as to obtain permits for
activities that were not previously contemplated, for example the
underground mining effects on ground water. Gochnour indicated the
underground alternative will also require mitigation of
environmental impacts. The Gochnour report concludes the MRA mine
design is legally permittable. Although Crown and Gochnour are not
aware of any laws or regulations which would be violated by the
mine design proposed by MRA, there will continue to be uncertainty
regarding the ability of Crown obtaining the necessary permits from
the regulatory authorities in a timely manner, if ever.
There are no assurances that required permits will be issued in a
timely fashion, that Crown or Battle Mountain will prevail in
current or future legal actions or that conditions contained in
permits issued by the agencies will not be so onerous as to
preclude construction or operation of the project.
Uncertainties which exist with respect to timing of commercial
production at Crown Jewel, and the potential fluctuation in gold
prices, could have a material effect upon Crown's ability to fund
its operating activities in the long term. There is no assurance
that such funding will or can be secured on terms favorable to
Crown.
Item 7a. Quantitative and Qualitative Disclosure About Market Risk
Crown is exposed to market risks associated with changes in
interest rates as it relates to its cash and short term
investments, and commodity price risks for changes in the price of
precious and base metals insofar as such changes may affect the
economic viability of its exploration and development projects.
The $15,000,000, 5.75% convertible debentures due in 2001 are not
subject to market risk because they have a fixed interest rate and
a repayment amount payable either in cash or common stock of Crown.
Crown does not use financial or other derivative instruments to
manage market risk.
A hypothetical change of one percent in the interest rate earned on
short term investments during 1999 would have resulted in an
increase or decrease of approximately $0.1 million in net income.
A change of 10% in the price of gold, silver or zinc would not have
had a material change in the assets, liabilities or net income.
Item 8. Financial Statements and Supplementary Data
CROWN RESOURCES CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report . . . . . . . . . . . . . . . . F-1
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31,
1999 and 1998 . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Operations for the years
ended December 31, 1999, 1998 and 1997 . . . . . . . . . F-3
Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1999, 1998 and 1997 . . . . F-4
Consolidated Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997 . . . . . . . . . F-5
Notes to Consolidated Financial Statements . . . . . . . . . F-6
All schedules are omitted as the required information is
included in the financial statements or notes thereto or is not
applicable. Financial information on 50% or less owned entities is
omitted, as the entities do not meet the tests for inclusion.
Crown is not required to provide the selected quarterly
financial data specified in Item 302 of Regulation S-K because it
does not meet the tests outlined in Item 302(a)(5).
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Crown Resources Corporation
Denver, Colorado
We have audited the consolidated balance sheets of Crown Resources
Corporation and subsidiaries (Crown) as of December 31, 1999 and
1998, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are
the responsibility of Crown's management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Crown
Resources Corporation and subsidiaries as of December 31, 1999 and
1998, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1999 in
conformity with accounting principles generally accepted in the
United States of America.
As discussed in Note 2 to the financial statements, Crown changed
its method of accounting for exploration costs on properties
without proven and probable reserves in 1999.
DELOITTE & TOUCHE LLP
Denver, Colorado
March 28, 2000
F-1
<TABLE>
CROWN RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31,
1999 1998
(in thousands)
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 5,174 $ 8,136
Short-term investments 87 87
Prepaid expenses and other 114 128
Total current assets 5,375 8,351
Mineral properties, net 16,772 27,532
Other assets:
Debt issuance costs, net 170 272
Marketable equity securities, at fair value 103 233
Assets held for disposition 178 -
Other 111 112
Total other assets 562 617
$22,709 $36,500
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 205 $ 222
Other 289 290
Total current liabilities 494 512
Long term liabilities:
Convertible debentures 15,000 15,000
Minority interest in consolidated
subsidiary 1,235 3,806
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value;
authorized 20,000,000 shares;
none outstanding - -
Common stock, $0.01 par value;
authorized 50,000,000 shares;
issued and outstanding 14,539,697
and 14,520,725 shares 145 145
Additional paid-in capital 34,803 34,768
Accumulated deficit (28,837) (17,720)
Accumulated other comprehensive loss (131) (11)
Total stockholders equity 5,980 17,182
$22,709 $36,500
</TABLE>
See notes to consolidated financial statements.
F-2
CROWN RESOURCES CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
(in thousands, except per Years Ended December 31,
share amounts) 1999 1998 1997
<S> <C> <C> <C>
Revenues:
Royalty income $ 104 $ 139 $ 300
Interest income 337 471 385
Mineral property option
proceeds 100 - -
541 610 685
Costs and expenses:
Exploration 1,025 - -
Depreciation, depletion and
amortization 65 101 180
General and administrative 1,367 1,526 1,985
Interest 971 971 1,020
Asset write-downs 166 867 5,743
Other, net 2 (22) 12
3,596 3,443 8,940
Loss before income
taxes and minority interest
and cumulative effect of change
in accounting principle (3,055) (2,833) (8,255)
Income tax benefit ( - ) (731) (1,055)
Loss before minority interest (3,055) (2,102) (7,200)
Minority interest in loss of subsidiary (389) (174) (2,221)
Net loss before cumulative effect of
change in accounting principle ( 2,666) (1,928) (4,979)
Cumulative effect of change in
accounting principle ( 8,451) - -
Net loss $ (11,117) $ (1,928) $ (4,979)
Per common share:
Basic and diluted loss
before cumulative effect of
change in accounting principle $ (0.18) $ (0.13) $ (0.38)
Change in accounting principle (0.58) - -
Basic and diluted loss $ (0.76) $ (0.13) $ (0.38)
Weighted average number of
common and common equivalent
shares outstanding 14,534 14,345 13,268
Pro forma amounts assuming the method
of expensing exploration costs as
incurred is applied retroactively:
Net loss $ (2,666) $ (2,878) $ (4,367)
Basic and diluted loss per common
share $ (0.18) $ (0.20) $ (0.33)
</TABLE>
See notes to consolidated financial statements.
F-3
CROWN RESOURCES CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION> Accumulated
Additional Other
(in thousands, except share Common Stock Paid-in Accumulated Comprehensive
amounts) Shares Amount Capital Deficit Loss Total
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 13,211,484 $132 $27,886 $(10,813) $ (8) $17,197
Issuance of shares:
Exercise of stock options 76,950 1 342 - - 343
For services 24,395 - 140 - - 140
Sale of shares of subsidiary,
net of tax of $724 - - 1,285 - - 1,285
Comprehensive income (loss):
Net loss - - - (4,979) - (4,979)
Net unrealized loss on
marketable equity securities - - - - (7) (7)
Comprehensive loss - - - - - (4,986)
Balance, December 31, 1997 13,312,829 133 29,653 (15,792) (15) 13,979
Issuance of shares:
Exercise of stock options 159,166 2 493 - - 495
For services 8,730 - 32 - - 32
In private placement 1,040,000 10 4,590 - - 4,600
Comprehensive income (loss):
Net loss - - - (1,928) - (1,928)
Net unrealized gain on
marketable equity securities - - - - 4 4
Comprehensive loss - - - - - (1,924)
Balance, December 31, 1998 14,520,725 145 34,768 (17,720) (11) 17,182
Issuance of shares:
Exercise of stock options 6,275 - 11 - - 11
For services 12,697 - 24 - - 24
Comprehensive income (loss):
Net loss - - - (11,117) - (11,117)
Net unrealized loss on
marketable equity securities - - - - (120) (120)
Comprehensive loss - - - - - (11,237)
Balance, December 31, 1999 14,539,697 $ 145 $ 34,803 $(28,837) $(131) $ 5,980
</TABLE>
See notes to consolidated financial statements.
F-4
<TABLE>
CROWN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended December 31,
(in thousands) 1999 1998 1997
<S> <C> <C> <C>
Operating Activities:
Net loss $(11,117) $(1,928) $(4,979)
Adjustments:
Depreciation, depletion
and amortization 167 204 282
Deferred income taxes - (731) (1,055)
Asset write-downs 166 867 5,743
Common stock issued for services 24 32 140
Minority interest (389) (174) (2,221)
Cumulative effect of change in
accounting principle 8,451 - -
Loss on sale of assets 3 - -
Changes in operating assets and liabilities:
Bullion inventories - 96 10
Prepaid expenses and other (1) 32 (3)
Accounts payable and
other current liabilities (18) (136) 13
Net cash used in operating activities(2,714) (1,738) (2,070)
Investing Activities:
Additions to mineral properties (217) (1,511) (3,313)
Receipts on mineral property
transactions - 464 655
Proceeds from asset sales 22 (1) 3
Decrease (increase) in other assets (64) (30) 5
Net cash used in investing activities (259) (1,078) (2,650)
Financing Activities:
Sale of common stock - 4,600 -
Sale of common stock of subsidiary, net - - 4,862
Common stock issued under options
and warrants 11 495 268
Net cash provided by financing
activities 11 5,095 5,130
Net increase (decrease) in cash and
cash equivalents (2,962) 2,279 410
Cash and cash equivalents,
beginning of year 8,136 5,857 5,447
Cash and cash equivalents, end of year $ 5,174 $ 8,136 $ 5,857
Supplemental disclosure of cash flow
information:
Non-cash transactions:
Securities received for mineral
property transactions $ 21 $ 212 $ 9
Deferred tax benefit of non-qualified
stock option exercises - - 75
Acquisition of additional interest in
subsidiary - - 205
Cash paid for interest 868 868 868
Increase in accounts receivable from sale of
subsidiary - 29 -
</TABLE>
See notes to consolidated financial statements.
F-5
1. Business and Summary of Significant Accounting Policies:
Business
Crown Resources Corporation (the "Company" or "Crown") engages
principally in the acquisition, exploration and development of
mineral properties, which presently exist in the western
United States, Mexico and Peru. Its properties in Peru are
held through Solitario Resources Corporation ("Solitario"), a
57.2%-owned subsidiary as of December 31, 1999. Crown's
operations constitute a single business segment.
Crown has historically derived its revenues principally from
royalty interests and interest income and to a lesser extent
from the option and sale of property interests and from the
sale of its share of gold produced from its properties.
Financial reporting
The consolidated financial statements include the accounts of
Crown and its wholly- and majority-owned subsidiaries. All
material intercompany accounts and transactions have been
eliminated in consolidation. Undivided interests in mineral
properties are accounted for by the proportionate
consolidation method in accordance with standard practice in
the mining industry.
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts 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.
Cash equivalents
Cash equivalents include investments in highly-liquid debt
securities with maturities of three months or less when
purchased. Investments with longer maturities at the date of
purchase are classified as short-term investments.
F-6
1. Business and Summary of Significant Accounting Policies
(Continued):
Mineral properties
Land and leasehold acquisition costs are capitalized in cost
centers and are depleted on the basis of the cost centers'
economic reserves (estimated recoverable, proven and probable
reserves) using the units-of-production method. If there are
insufficient economic reserves to use as a basis for depleting
such costs, they are expensed as a mineral property write-off
in the period in which the determination is made.
During 1999, Crown changed its method of accounting for
exploration costs on properties without proven and probable
reserves from capitalizing all expenditures to expensing all
costs incurred, other than acquisition costs, prior to the
establishment of proven and probable reserves (See Note 2).
Crown records the proceeds from the sale of property interests
to joint ventures as a reduction of the related property's
capitalized cost. Proceeds which exceed the capital cost of
the property are recorded as revenue.
Asset write-downs
Crown regularly performs evaluations of its assets to assess
the recoverability of its investments in these assets. All
long-lived assets are reviewed for impairment whenever events
or circumstances change which indicate the carrying amount of
an asset may not be recoverable utilizing established
guidelines based upon future net cash flows from the asset.
Write-downs relating to exploration properties amounted to
$166,000 in 1999. $867,000 in 1998, and $5,743,000 in 1997.
Included in the write-down for 1997 was Crown's decision to
sell its operations in Argentina resulting in a $3,822,000
charge to operations.
Marketable equity securities
Crown's equity securities are classified as available-for-sale
and are carried at fair value. The cost of marketable equity
securities sold is determined by the specific identification
method.
Foreign exchange
The United States dollar is the functional currency for all
Crown's foreign subsidiaries. Foreign currency gains and
losses are included in the results of operations in the
periods in which they occur.
F-7
1. Business and Summary of Significant Accounting Policies
(Continued):
Revenue recognition
Royalty revenue is recognized when product is delivered in-
kind or cash payments are received.
Comprehensive Income
The components of comprehensive income include unrealized
gains and losses on marketable equity securities and are
included in the statement of stockholders' equity and
comprehensive income.
Income taxes
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes
currently due plus deferred taxes related to certain income
and expenses recognized in different periods for financial and
income tax reporting purposes. Deferred tax assets and
liabilities represent the future tax return consequences of
those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled.
Deferred taxes also are recognized for operating losses and
tax credits that are available to offset future taxable income
and income taxes, respectively. A valuation allowance is
provided if it is more likely than not that some or all of the
deferred tax assets will not be realized.
Loss per share
The calculation of basic and diluted loss per share is based
on the weighted average number of common shares outstanding
during the years ended December 31, 1999, 1998 and 1997. The
effect of common stock equivalents which include stock
options, warrants and convertible debt securities is not
included in the computation of diluted per share amounts in
1999, 1998 and 1997 because its inclusion would be anti-
dilutive.
Employee stock compensation plans
Crown follows Accounting Principles Board Opinion ("APBO") No.
25, "Accounting for Stock Issued to Employees." Under the
terms of Crowns's stock option plans, the exercise price of
stock options issued to employees and directors equals the
market price of the stock on the date of grant and, therefore,
Crown does not record compensation expense on stock options
granted to employees and directors.
F-8
1. Business and Summary of Significant Accounting Policies
(Continued):
Minority interest
Minority interest represents the minority stockholders'
proportionate interest in the equity of Solitario. Crown
owned 57.2% of Solitario at December 31, 1999 and 1998.
New accounting pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The standard,
which is effective for years beginning after June 15, 2000,
sets forth guidelines and requirements for reporting
derivative instruments at fair value as assets and
liabilities in the financial statements and requires that
changes in the fair value of the instruments shall be
recognized in the results of operations. The standard, when
adopted by Crown, is not expected to have a material effect on
Crown's reported financial position, results of operations and
cash flows.
2. Mineral Properties:
Change in accounting principle
During the fourth quarter of 1999, Crown changed its method of
accounting for exploration costs on properties without proven
and probable reserves from capitalizing all expenditures to
expensing all costs, other than acquisition costs, prior to
the establishment of proven and probable reserves. This
conforms Crown's accounting method to the predominant practice
in the U.S. mining industry. The $8,451,0000 cumulative
effect of the change on prior years is included in the loss
for 1999. The effect of the change on 1999 was to increase
the loss before cumulative effect of change in accounting
principle by $83,000 or $0.01 per share.
F-9
2. Mineral Properties (Continued):
United States
Crown Jewel Project
In March 1990, Crown entered into an agreement with Battle
Mountain Gold Company ("Battle Mountain"), which was
subsequently modified in May 1994. Under the agreement as
modified, Battle Mountain has paid Crown $18,500,000, and
since March 1990 has funded all exploration and development on
Crown Jewel. In order to acquire a 51% interest in the
project, and an additional 3% interest in the first 1,600,000
ounces of gold from the project, Battle Mountain is required
to fund all development and capital costs to commencement of
commercial production. Crown is not required to fund or repay
costs related to the development and capital costs of the
project prior to commercial production.
On the January 19, 2000, the State of Washington Pollution
Control Hearings Board ("PCHB") issued a ruling vacating the
previously granted 401 Water Quality Permit for the Crown
Jewel Project issued by the Washington Department of Ecology
("WDOE"). The ruling also reversed certain water rights
issued by the WDOE for the Crown Jewel Project.
In light of the ruling by the PCHB, Battle Mountain
reclassified its interest in the Crown Jewel project from
proven and probable reserves to mineralized materials and
wrote off its investment in the Crown Jewel Project as of
December 31, 1999. Crown engaged an independent mining
engineering firm Mine Reserves Associates ("MRA") to evaluate
an alternative mine plan that would have reduced environmental
impacts. Crown also engaged Gochnour and Associates,
("Gochnour") an independent permitting consultant to evaluate
the ability to obtain permits for the alternative mine plan.
Based upon reports from MRA and Gochnour, Crown has determined
the Crown Jewel Project contains sufficient reserves to
recover Crown's investment whether developed under the current
joint venture agreement or independently by Crown.
Cord Ranch
Crown holds a lease for the right to explore and develop the
Cord Ranch prospect, a 34,000 acre ranch in the southern
portion of the Carlin Gold Trend of Nevada. In December 1999,
the lease was amended to provide for a minimum payment of
$25,000, paid in 1999. Additionally, the agreement calls for
a non-recoupable payments depending on the price of gold of
between $65,000 and $90,000 in 2000, between $100,000 and
$150,000 in 2001, and $150,000 and $200,000 in 2002 and
thereafter.
F-10
2. Mineral Properties (Continued):
In September 1994, Crown signed an agreement which has been
assigned to a subsidiary of Royal Standard Minerals Inc.
("Royal Standard"). As of December 31, 1998, Royal Standard
had earned a 70% interest in Crown's Cord Ranch and adjacent
gold properties. Under the terms of the agreement, Royal
Standard must provide Crown's share of expenditures through
the completion of a favorable feasibility study, with such
expenditures to be repaid from Crown's share of production
from the properties.
Peru
Crown, through Solitario, holds exploration concessions or has
filed applications for concessions covering approximately
286,000 acres in Peru. These applications are subject to
normal administrative approvals and the properties are subject
to an annual rental of $2.00 per hectare (approximately 2.47
acres per hectare) in June of each year.
Yanacocha
On February 3, 2000 Solitario announced an agreement with an
affiliate of Newmont Mining Corporation ("Newmont") to sell
its interest in its Yanacocha property for $6 million and a
sliding scale (depending on the price of gold) net smelter
return ("NSR") royalty. In order to effect the transaction,
Solitario has agreed to transfer all of the operating assets
and liabilities, excluding its interest in Yanacocha, of its
Peru operating subsidiary, Minera Los Tapados ("MLT"), to a
new operating subsidiary, Minera Solitario Peru. Newmont will
receive all of the outstanding shares of MLT for the cash
consideration and subsequently deliver the NSR royalty to
Solitario. Closing of the transaction is expected during the
second quarter of 2000, pending the completion of due
diligence and regulatory approval. The balance of Solitario's
investment in the Yanacocha property, $178,000 has been
reclassified to assets held for sale. Upon closing of the
transaction, Solitario expects to record a pre-tax gain of
approximately $5.8 million.
BongarA
Since 1993, Solitario acquired exploration concessions or has
filed claims for concessions currently covering approximately
80,000 acres in northern Peru (the "Bongara project").
F-11
2. Mineral Properties (Continued):
In December 1996, Solitario signed an agreement regarding the
Bongara project with a subsidiary of Cominco Ltd. ("Cominco")
of Vancouver, B.C., Canada. The agreement was modified in
January 1999, increasing the joint venture's acreage, which
currently approximates 345,000 acres. Cominco has the right
to earn a 65% interest in the Bongara project by spending a
minimum of $17,000,000 on exploration and development (in
addition to the approximately $10 million spent prior to
January 1999) over a five-year period beginning January 1999
and by making annual cash payments to the Solitario of between
$100,000 and $500,000 (depending on the price of zinc), as
well as fully funding the project through a bankable
feasibility study. Cash payments of $118,000, $118,000, and
$354,000, including value added taxes of 18%, have been paid
to the Company by Cominco in January 2000, 1999 and 1998,
respectively. In addition to the cash payments and work
commitments, Cominco has agreed to finance Solitario's share
of project development costs, subject to repayment, after a
production decision is made, should Solitario not secure
third-party financing. Through December 31, 1999, Cominco has
spent approximately $13 million on exploration on the Bongara
project.
Argentina
Through December 31, 1997 Solitario had performed exploration
activities and held exploration rights or had filed
applications for rights in Argentina. In July 1998, Solitario
completed the sale of its Argentinian subsidiary to TNR
Resources, Ltd. ("TNR") of Vancouver, B.C., Canada.
Solitario no longer conducts exploration in Argentina.
Mexico
Since 1997 Crown has conducted exploration and reconnaissance
activities in Mexico, focusing its efforts in the state of
Durango. In early 1999, Crown acquired the Magistral del Oro
and San Juan de Minas properties covering approximately 13,000
acres and 700 acres, respectively. During 1999 Crown dropped
the Magistral del Oro property resulting in a $25,000 write
down. Crown is planning additional exploration and
reconnaissance work on its San Juan de Minas property during
2000.
Land leasehold and exploration and development costs
Mineral property costs for all Crown's properties are
comprised of the following:
F-12
<TABLE>
2. Mineral Properties, (Continued):
<CAPTION>
December 31,
1999 1998
<S> <C> <C>
(in thousands)
Land and leasehold costs $14,205 $14,466
Exploration and development
costs 3,391 13,890
17,596 28,356
Less accumulated depreciation,
depletion and amortization 824 824
$16,772 $27,532
</TABLE>
Land and leasehold costs related to mineral properties for
which exploration activities had not yet identified the
presence of economic reserves totaled $3,035,000 and
$13,900,000 at December 31, 1999 and 1998, respectively.
At December 31, 1999 and 1999, the carrying value of the Crown
Jewel project amounted to $ 13,737,000 and $13,632,000
respectively. The Crown Jewel project represents Crown's
total proven and probable gold reserves and its only property
in development.
The net assets of the Company's foreign operations located in
Peru and Mexico and included in the consolidated balance sheet
are $ 406,000 at December 31, 1999 and $5,802,000 at December
31, 1998. Crown is exposed to risks normally associated with
foreign investments, including political, economic and social
instabilities, as well as foreign exchange controls and
currency fluctuations. Foreign investments may also be
subject to laws and policies of the United States affecting
foreign trade, investment and taxation which could affect the
conduct or profitability of future operations.
3. Convertible Debentures:
On August 27, 1991 Crown completed a European offering for $15
million of 5 % Convertible Subordinated Debentures due 2001
("Debentures"). The Debentures are convertible into
approximately 1,523,000 shares of Crown common stock at $9.85
per share, and are redeemable at the option of Crown on
certain terms and conditions. Interest on the Debentures is
payable semiannually in arrears, each February and August.
Neither the Debentures nor the common stock issuable upon
conversion of the Debentures is registered under the
Securities Act of 1933. Debt offering costs are being
amortized over the life of the Debentures.
F-13
4. Income Taxes:
<TABLE>
Crown's income tax expense (benefit) from continuing
operations consists of the following:
<CAPTION>
(in thousands) 1999 1998 1997
<S> <C> <C> <C>
Deferred:
U.S. $ 23 $ 59 $ 84
Foreign 126 85 32
Operating loss and credit
carryovers:
U.S. (23) (790) (997)
Foreign (126) (85) (174)
Income tax benefit $ 0 $ (731) $(1,055)
</TABLE>
Consolidated loss before income taxes includes losses from
foreign operations of $1,030,000, $542,000, and $5,232,000 in
1999, 1998 and 1997, respectively.
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, and
property abandonments.
During 1999, 1998 and 1997 Crown recognized income tax
deductions of $18,000, $200,000, and $643,000, respectively,
from the exercise of non-qualified stock options.
Stockholders' equity has been credited in the amounts of
$68,000 and $75,000, in 1998 and 1997, respectively, for the
income tax benefits of these income tax deductions net of
valuation allowances. There were no such amounts credited to
stockholders' equity in 1999 as a valuation allowance has been
provided.
F-14
4. Income Taxes (Continued):
The net deferred tax (assets)/liabilities in the accompanying
December 31, 1999 and 1998 balance sheets include the
following components:
(in thousands) 1999 1998
Deferred tax assets:
Net operating loss (NOL)
carryovers $ 9,610 $8,713
Capital loss carryovers 2,127 1,857
Alternative minimum tax (AMT)
credit carryovers 325 325
Investment in Peru
subsidiary 2,772 -
Other 121 111
Valuation allowance (10,285) (2,953)
Deferred tax assets 4,620 8,053
Deferred tax liabilities:
Exploration and development
costs 4,161 7,533
Depreciation, depletion and
amortization 459 494
Other - 26
Deferred tax liabilities 4,620 8,053
Net deferred tax (assets)
liabilities $ - $ -
The change in accounting principle, discussed in Note 2, had
the effect of increasing the 1999 valuation allowance offset
to deferred tax assets and decreasing the exploration and
development costs deferred tax liability by $3,526,000.
During 1999, Crown recognized a deferred tax asset relating to
its investment in its Peru subsidiary as it anticipates
disposing of the investment in 2000. A full valuation
allowance has been provided against this deferred tax asset.
A reconciliation of expected federal income tax benefit from
continuing operations at the U.S. Federal tax rate of 34% with
the expense (benefit) for income taxes is as follows:
F-15
<TABLE>
4. Income Taxes (Continued):
<CAPTION>
(in thousands) 1999 1998 1997
<S> <C> <C> <C>
Expected income tax benefit $(1,039) $ (963) $(2,807)
Nondeductible foreign
expenditures 31 26 85
Disposition and deconsolidation
of investment in Argentina - 2,480 (1,683)
Disposition of investment
in Peru (2,373) - -
Excess percentage depletion - (5) -
Foreign mining incentives - - (201)
State income tax benefit (363) (4) (267)
Change in valuation allowance 3,742 (2,057) 3,747
Other 2 (208) 71
Income tax (benefit) $ - $ (731) $(1,055)
</TABLE>
At December 31, 1998 Crown had unused U.S. NOL and capital
loss carryovers of approximately $22,044,000 and $5,550,000,
respectively, which begin to expire in 2004. In addition,
Crown has approximately $325,000 of U.S. AMT credit carryovers
which can be carried forward indefinitely. Crown also has
Peru NOL carryovers at December 31, 1999 of approximately
$5,737,000 which begin to expire four years after the first
year in which Peruvian taxable income arises. At December 31,
1999, Crown has Mexico NOL carryovers of $828,000 which begin
to expire as early as 2003. The anticipated sale of
Solitario's shares of MLT and conversion of its investment in
Yanacocha to a NSR royalty during 2000 will result in the
elimination of the Peru NOL carryovers and the related
valuation allowance (see Note 2).
5. Fair Value of Financial Instruments:
For certain of Crown's financial instruments, including cash
and cash equivalents, short-term investments, accounts payable
and other accrued liabilities, the carrying amounts
approximate fair value due to their short maturities. Crown's
marketable equity securities are carried at their estimated
fair value, based on quoted market prices. The estimated fair
value of the Company's Debentures was $8,250,000 and
$12,750,000 at December 31 1998 and 1997, respectively, based
on quoted market prices.
F-16
6. Commitments and Contingencies:
In acquiring its interests in minerals claims and leases,
Crown has entered into lease agreements which generally may be
canceled at its option. Crown is required to make work
commitments and minimum rental payments in order to maintain
its interests in certain claims and leases. Crown estimates
its 2000 mineral property rentals and option payments to be
approximately $673,000. Based upon existing joint venture or
leasing arrangements, Crown's share of these costs is
approximately $76,000. Additionally, Crown has work
commitments of approximately $1,000 for 2000.
Crown has a defined-contribution retirement plan covering all
full-time U.S. employees. The plan provides for
Company matching, at the rate of 75%, of employee savings
contributions of up to 9% of compensation, subject to ERISA
limitations. The cost of Company contributions in 1999, 1998
and 1997 was $49,000, $53,000 and $52,000, respectively.
Crown leases office space under non-cancelable operating
leases providing for minimum annual rent payments as follows:
$70,000 in 2000, and $33,000 in 2001. Rent expense for all
leases was $83,000, $82,000 and $66,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
7. Stock Option Plans:
Under Crown's 1988 Stock Benefit Plan ("1988 Plan"), the Board
of Directors may (a) grant incentive stock options, as defined
in Section 422A of the Internal Revenue Code of 1986, as
amended, to any employee of Crown or to any employee of any
parent or subsidiary of Crown; (b) grant options other than
incentive stock options (non-qualified stock options); (c)
grant stock appreciation rights or cash bonus rights; (d)
award stock bonuses; and (e) grant stock purchase rights and
sell stock subject to certain restrictions.
Up to 1,500,000 shares of Crown's common stock may be issued
under the 1988 Plan. As of December 31, 1999 573,476 shares
remained available for future issuance under the 1988 Plan
including those already granted. All stock options that have
been granted under the 1988 Plan have been issued at the
market price of the common stock at the date of the grant.
On June 27, 1991, Crown's shareholders approved the Crown
Resources Corporation 1991 Stock Incentive Plan ("1991 Plan").
The Board of Directors has reserved 1,500,000 shares of Crown
common stock for grants under the 1991 Plan. Options granted
under both plans generally expire five years from the date of
grant.
F-17
7. Stock Option Plans (Continued):
Generally, the terms and conditions of the 1991 Plan are
similar to those of the 1988 Plan described above, except that
members of the Board of Directors are eligible only to receive
formula grants of non-qualified stock options. Each member of
the Board of Directors who is also an employee of Crown or any
parent or subsidiary of Crown will be entitled to receive,
automatically, an award of non-qualified stock options on
grant dates defined in the 1991 Plan. Each option will cover
a number of shares determined by dividing the employee-
director's annual base compensation rate on the grant date by
three. Each director who is not an employee will receive an
award of non-qualified stock options covering 10,000 shares of
Crown common stock.
Options granted under the 1991 Plan are granted at the market
price of the common stock at the date of grant, except for
non-qualified options granted to non-directors, which price
cannot be less than the average price for the five business
days immediately preceding the date of grant. As of December
31, 1999, shares available for issue, including those already
granted, totaled 1,145,828 shares.
The activity in the 1988 Plan for the three years ended
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
Weighted Weighted Weighted
Average Average Average
Amount Price(1) Amount Price(1) Amount Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning
of year 576,250 4.22 576,250 5.74 60,000 5.63
Granted - - 546,395 5.75
Exercised (3,000) 1.75 - (30,145) 5.74
Expired (15,750) 4.06 - -
Outstanding,
end of year 557,500 2.13 576,250 4.22 576,250 5.74
Exercisable,
end of year 493,250 2.07 425,250 4.17 342,250 5.74
</TABLE>
(1) In June 1999 and 1998, the board of directors voted to
reprice existing options for current employees, officers
and directors to $1.75 per share and $4.06 per share,
respectively, which was the market price of Crown's
stock.
The options outstanding under the 1988 Plan have a weighted
average remaining contractual life of 1.9 years.
F-18
<TABLE>
7. Stock Option Plans (Continued):
The activity in the 1991 Plan for the three years ended
December 31, 1999 is as follows:
<CAPTION>
1999 1998 1997
Weighted Weighted Weighted
Average Average Average
Amount Price(1) Amount Price(1) Amount Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning
of year 1,115,616 4.16 1,026,432 4.97 1,347,298 5.32
Granted 326,547 1.76 257,080 4.05 50,000 5.73
Exercised (15,972) 1.85 (167,896) 3.14 (71,200) 3.29
Forfeited - - -
Expired (313,591) 4.50 - (299,666) 7.06
Outstanding,
end of year 1,112,602 1.93 1,115,616 4.16 1,026,432 4.97
Exercisable,
end of year 886,850 1.93 982,991 4.16 935,432 6.46
</TABLE>
(1) In June 1999 and June 1998, the board of directors voted
to reprice all existing options for current employees,
officers and directors to $1.75 per share and $4.06 per
share, respectively, which was the market price of
Crown's stock.
The options outstanding under the 1991 Plan have a weighted average
remaining contractual life of 2.3 years.
Pro forma information has been computed as if Crown had accounted
for its stock options under the fair value method of SFAS No. 123.
The fair values of these options were estimated at the date of
grant using a Black-Scholes option pricing model with the following
assumptions for 1999, 1998 and 1997 grants, respectively: risk-free
interest rates of 5.69%, 5.52% and 6.37%; dividend yields of 0%;
volatility factors of the expected market price of Crown's common
stock of 66%, 43% and 52%; and a weighted average expected life of
the options of 2.4 years in 1999, 2.8 years in 1998 and 4 years in
1997. The weighted average fair values of the options granted are
estimated at $0.76, $1.35 and $2.49 per share in 1999, 1998 and
1997, respectively. Had Crown accounted for its stock options under
the fair value method of SFAS No. 123, the following results would
have been reported:
F-19
<TABLE>
7. Stock Option Plans (Continued):
<CAPTION>
(In thousands, except
per share amounts) 1999 1998 1997
<S> <C> <C> <C>
Net loss
As reported $(11,117) $(1,928) $(4,979)
Pro forma (12,297) (3,179) (6,136)
Basic and diluted
loss per share
As reported $ (0.76) $ (0.13) (0.38)
Pro forma (0.85) (0.22) (0.46)
</TABLE>
8. Stockholders' Equity:
Crown is authorized to issue 20,000,000 shares of $0.01 par
value preferred stock and has issued, to a subsidiary,
1,000,000 shares of nonconvertible preferred stock which is
eliminated in consolidation.
On July 25, 1995, Crown adopted a shareholder rights plan
pursuant to which rights ("Rights") to acquire shares of
Series B Preferred Stock were distributed to shareholders of
Crown, with the right to buy 1/100 share of Series B Preferred
Stock for each common share held, at an initial exercise
price of $25.00. Crown also designated 500,000 shares of
preferred stock as Series B Preferred Stock with each 1/100
share having economic terms substantially equivalent to one
common share.
Generally, the Rights will become exercisable if a shareholder
or group of shareholders becomes the beneficial owner of or
announces the intention to acquire common shares of 15 percent
or more of the outstanding common shares of Crown. If the
Rights become exercisable, each Right (other than Rights held
by the acquiring person or group) will entitle the holder to
purchase, at the exercise price, common stock having a market
value equal to twice the exercise price.
In February 1998, Crown received $4.6 million, after
commissions and offering expenses, from a European equity
financing through the private placement of 1.04 million shares
of Crown's common stock. Included in the placement was an
agency fee of 40,000 shares paid to David Williamson
Associates, Ltd., of which David R. Williamson, a director of
Crown, is a principal.
F-20
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 Registrant
(a) Directors.
The information with respect to directors required under this
item is incorporated herein by reference to the table set forth
under the section captioned Election of Directors in Crown's Proxy
Statement in connection with the annual meeting of shareholders to
be held on June 4, 1999 filed with the Securities and Exchange
Commission pursuant to Section 14(a) of the Securities Exchange Act
of 1934.
(b) Executive Officers.
The information with respect to executive officers required
under this item is incorporated herein by reference to Part I of
this Report.
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
The information required under Item 11, Item 12 and Item 13 is
incorporated herein by reference to the sections entitled Executive
Compensation, Security Ownership of Certain Beneficial Owners and
Management and Executive Compensation, respectively, in Crown's
Proxy Statement in connection with the annual meeting of
shareholders to be held June 15, 1999, filed with the Securities
and Exchange Commission pursuant to Section 14(a) of the Securities
Exchange Act of 1934.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) 1. Consolidated Financial Statements: Index on page 37 of
this Report.
2. Exhibits. The exhibits as indexed on pages 44 through 47
of this Report are included as a part of this Form 10-K.
(b) Reports on Form 8-K: None
Exhibit
Number Description
3.1 The Company's Articles of Incorporation
(incorporated by reference to Exhibit 3.1 to
Registration Statement on Form S-4, Commission
File No. 33-25033 (the "1989 S-4 Registration
Statement")).
3.2 The Company's Bylaws (incorporated by reference to
Exhibit 3.2 to the 1989 S-4 Registration
Statement).
3.3 Statement of Rights and Preferences of Series A
Nonconvertible Preferred Stock (issued to a
subsidiary) as filed with the Secretary of State,
State of Washington, which forms part of the
Company's Articles of Incorporation (incorporated
by reference to Exhibit 3.3 to the Company's Form
10-K for the year ended December 31, 1989).
4.1 Form of Rights Agreement, dated as of July 25,
1995, between the Company and American Stock
Transfer & Trust Company (incorporated by
reference to Exhibit 4.1 to the Company's Form 8-K
dated July 25, 1995).
10.1 1988 Stock Benefit Plan of the Company
(incorporated by reference to Exhibit 10.11 to
Amendment No. 2 to the Registration Statement).
10.2 1991 Stock Incentive Plan of the Company
(incorporated by reference to Exhibit 10.13 to
Crown Resources Corporation's Registration
Statement on Form S-4 dated May 17, 1991,
Commission file no. 33-40642 (the "1991 S-4
Registration Statement")).
10.3 Crown Jewel Venture Agreement, dated effective
January 4, 1991, between Crown Resources
Corporation, Crown Resource Corp. of Colorado,
Gold Texas Resources U.S., Inc., and Battle
Mountain Gold Company (incorporated by reference
to Exhibit 10.10 to the 1991 S-4 Registration
Statement).
10.4 Agreement and Plan of Merger, dated April 16,
1991, between Crown Resources Corporation, Crown
Resources Property Corporation and Judith Gold
Corporation (incorporated by reference to Exhibit
2.1 to Crown Resources Corporation's Form 8-K
dated April 16, 1991).
10.5 Mining Lease, dated September 1, 1987, between
Judith Gold Corporation and Canyon Resources
Corporation (incorporated by reference to Exhibit
10.14 to the 1991 S-4 Registration Statement).
10.6 Settlement Agreement, dated September 29, 1992,
between Battle Mountain Gold Company, Crown
Resource Corp. of Colorado, Keystone Surveys,
Inc., and Spenst M. Hansen (incorporated by
reference to Exhibit 10.18 to Crown Resources
Corporation's Form 10-K for the year ended
December 31, 1992).
10.7 First Amendment to Mining Agreement, dated October
25, 1993, between Crown Resource Corp. of Colorado
and United States National Bank of Oregon, as
Trustee for William Cord Pereira, Virginia Lee
Pereira, Philip Kirk Pereira, Patrick Clay Pereira
and Susan Michele Pereira (incorporated by
reference to Exhibit 10.20 to Crown Resources
Corporation's Form 10-K for the year ended
December 31, 1993).
10.8 Second Amendment to Mining Agreement, dated April
28, 1994, between Crown Resource Corp. of Colorado
and United States National Bank of Oregon, as
Trustee for William Cord Pereira, Virginia Lee
Pereira, Philip Kirk Pereira, Patrick Clay Pereira
and Susan Michele Pereira (incorporated by
reference to Exhibit 10.1 to Crown Resources
Corporation's Form 10-Q for the quarter ended
March 31, 1994).
10.9 Settlement Agreement, dated May 6, 1994, between
Crown Resources Corporation, Crown Resource Corp.
of Colorado, Gold Texas Resources U.S., Inc. and
Battle Mountain Gold Company (incorporated by
reference to Exhibit 10.2 to Crown Resources
Corporation's Form 10-Q for the quarter ended
March 31, 1994).
10.10 Second Amendment to Crown Jewel Venture Agreement,
dated April 27, 1994, between Crown Resources
Corporation, Crown Resource Corp. of Colorado,
Gold Texas Resources U.S., Inc. and Battle
Mountain Gold Company (incorporated by reference
to Exhibit 10.1 to Crown Resources Corporation's
Form 10-Q for the quarter ended June 30, 1994).
10.11 Agreement, dated September 8, 1994, between Crown
Resource Corp. of Colorado and Pinon Exploration
Corporation (incorporated by reference to Exhibit
10.1 to Crown Resources Corporation's Form 10-Q
for the quarter ended September 30, 1994).
10.12 Stock Purchase Agreement, dated September 9, 1994,
between Cyprus Gold Exploration Corporation and
Crown Resource Corp. of Colorado, relating to the
Shares of Capital Stock of Pinon Exploration
Corporation (incorporated by reference to Exhibit
10.2 to Crown Resources Corporation's Form 10-Q
for the quarter ended September 30, 1994).
10.13 First Amendment to Agreement between Crown
Resource Corp. of Colorado and Pinon Exploration
Corporation (incorporated by reference to Exhibit
10.18 to Crown Resources Corporation's Form 10-K
for the year ended December 31, 1995).
10.14 Third Amendment to Mining Agreement between United
States National Bank of Oregon, as Trustee for
William Cord Pereira, Virginia Lee Pereira, Philip
Kirk Pereira, Patrick Clay Pereira and Susan
Michael Pereira, as Beneficiaries of the Pereira
Children's Trust and Crown Resource Corp. of
Colorado (incorporated by reference to Exhibit
10.19 to Crown Resources Corporation's Form 10-K
for the year ended December 31, 1995).
10.15 Letter Agreement, dated December 24, 1996, between
Cominco Peru s.r.l. and Mineral Los Tapados S.A.
(incorporated by reference to Exhibit 10.18 to
Crown Resources Corporation's Form 10K for the
year ended December 31, 1996).
10.16 Subscription Agreement and Warrant, dated February
27, 1997, between Crown Resource Corp. of
Colorado and Solitario Resources Corporation
subscribing for 1,500,000 units (a unit consisting
of one share of common stock and one share
purchase warrant) of Solitario Resources
Corporation common stock.
10.17 Stock Purchase Agreement, dated February 23, 1998,
between Crown Resources Corporation and The
Equitable Life Assurance Society (incorporated by
reference to Exhibit 10.1 to Crown Resources
Corporation's Form 8-K, dated February 27, 1998).
10.18 Restated Agreement, dated December 15, 1998
between Minera Los Tapados and Cominco, to amend
the agreement dated December 24, 1996.
10.19 Letter Agreement, dated October 7, 1998 between
Minera Los Tapados and Billiton Exploration and
Mining Peru, B.V. regarding the exploration and
development of the Company's Soloco property in
Peru.
10.20 Letter Agreement, dated January 22, 1999 between
Minera Los Tapados and Placer Dome del Peru,
S.A.C. regarding exploration and development of
the Company's Yanacocha property in Peru.
18.1 Deloitte and Touche letter regarding change in
accounting principle.
11 Statement regarding computation of per share
earnings.
22 Subsidiaries of the registrant.
23.1 Consent of Deloitte & Touche LLP.
25 Powers of attorney.
27 Financial data schedule.
For the purpose of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities
Act of 1933, as amended ("Act"), the registrant hereby undertakes
as follows, which undertaking shall be incorporated by reference
into the registrant's Registration Statement on Form S-8, Nos. 33-
31754 (filed October 24, 1989) and 33-57306 (filed January 22,
1993).
Insofar as indemnification for liabilities arising under the
Act 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 Act 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 a 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CROWN RESOURCES CORPORATION
By: /s/ James R. Maronick
James R. Maronick
Vice President - Finance
Date: March 29, 2000
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature Title Date
/s/ Christopher E. Herald Principal Executive March 29, 2000
Christopher E. Herald Officer and Director
Chief Executive Officer
/s/ James R. Maronick Principal Financial March 29, 2000
James R. Maronick and Accounting Officer
Vice President - Finance
/s/ Mark E. Jones, III *
Mark E. Jones, III
/s/ J. Michael Kenyon *
J. Michael Kenyon
A majority of
/s/ Rodney D. Knutson * the Board of March 29, 2000
Rodney D. Knutson Directors
/s/ Linder G. Mundy *
Linder G. Mundy
/s/ Steven A. Webster *
Steven A. Webster
/s/ David R. Williamson *
David R. Williamson
* By:/s/ James R. Maronick
James R. Maronick, Attorney-in-fact
INDEX TO EXHIBITS
Exhibit
Number Description Page
3.1 The Company's Articles of Incorporation
(incorporated by reference to Exhibit 3.1 to
Registration Statement on Form S-4, Commission
File No. 33-25033 (the "1989 S-4 Registration
Statement")).
3.2 The Company's Bylaws (incorporated by reference to
Exhibit 3.2 to the 1989 S-4 Registration
Statement).
3.3 Statement of Rights and Preferences of Series A
Nonconvertible Preferred Stock (issued to a
subsidiary) as filed with the Secretary of State,
State of Washington, which forms part of the
Company's Articles of Incorporation (incorporated
by reference to Exhibit 3.3 to the Company's Form
10-K for the year ended December 31, 1989).
4.1 Form of Rights Agreement, dated as of July 25,
1995, between the Company and American Stock
Transfer & Trust Company (incorporated by
reference to Exhibit 4.1 to the Company's Form 8-K
dated July 25, 1995).
10.1 1988 Stock Benefit Plan of the Company
(incorporated by reference to Exhibit 10.11 to
Amendment No. 2 to the Registration Statement).
10.2 1991 Stock Incentive Plan of the Company
(incorporated by reference to Exhibit 10.13 to
Crown Resources Corporation's Registration
Statement on Form S-4 dated May 17, 1991,
Commission file no. 33-40642 (the "1991 S-4
Registration Statement")).
10.3 Crown Jewel Venture Agreement, dated effective
January 4, 1991, between Crown Resources
Corporation, Crown Resource Corp. of Colorado,
Gold Texas Resources U.S., Inc., and Battle
Mountain Gold Company (incorporated by reference
to Exhibit 10.10 to the 1991 S-4 Registration
Statement).
10.4 Agreement and Plan of Merger, dated April 16,
1991, between Crown Resources Corporation, Crown
Resources Property Corporation and Judith Gold
Corporation (incorporated by reference to Exhibit
2.1 to Crown Resources Corporation's Form 8-K
dated April 16, 1991).
10.5 Mining Lease, dated September 1, 1987, between
Judith Gold Corporation and Canyon Resources
Corporation (incorporated by reference to Exhibit
10.14 to the 1991 S-4 Registration Statement).
10.6 Settlement Agreement, dated September 29, 1992,
between Battle Mountain Gold Company, Crown
Resource Corp. of Colorado, Keystone Surveys,
Inc., and Spenst M. Hansen (incorporated by
reference to Exhibit 10.18 to Crown Resources
Corporation's Form 10-K for the year ended
December 31, 1992).
10.7 First Amendment to Mining Agreement, dated October
25, 1993, between Crown Resource Corp. of Colorado
and United States National Bank of Oregon, as
Trustee for William Cord Pereira, Virginia Lee
Pereira, Philip Kirk Pereira, Patrick Clay Pereira
and Susan Michele Pereira (incorporated by
reference to Exhibit 10.20 to Crown Resources
Corporation's Form 10-K for the year ended
December 31, 1993).
10.8 Second Amendment to Mining Agreement, dated April
28, 1994, between Crown Resource Corp. of Colorado
and United States National Bank of Oregon, as
Trustee for William Cord Pereira, Virginia Lee
Pereira, Philip Kirk Pereira, Patrick Clay Pereira
and Susan Michele Pereira (incorporated by
reference to Exhibit 10.1 to Crown Resources
Corporation's Form 10-Q for the quarter ended
March 31, 1994).
10.9 Settlement Agreement, dated May 6, 1994, between
Crown Resources Corporation, Crown Resource Corp.
of Colorado, Gold Texas Resources U.S., Inc. and
Battle Mountain Gold Company (incorporated by
reference to Exhibit 10.2 to Crown Resources
Corporation's Form 10-Q for the quarter ended
March 31, 1994).
10.10 Second Amendment to Crown Jewel Venture Agreement,
dated April 27, 1994, between Crown Resources
Corporation, Crown Resource Corp. of Colorado,
Gold Texas Resources U.S., Inc. and Battle
Mountain Gold Company (incorporated by reference
to Exhibit 10.1 to Crown Resources Corporation's
Form 10-Q for the quarter ended June 30, 1994).
10.11 Agreement, dated September 8, 1994, between Crown
Resource Corp. of Colorado and Pinon Exploration
Corporation (incorporated by reference to Exhibit
10.1 to Crown Resources Corporation's Form 10-Q
for the quarter ended September 30, 1994).
10.12 Stock Purchase Agreement, dated September 9, 1994,
between Cyprus Gold Exploration Corporation and
Crown Resource Corp. of Colorado, relating to the
Shares of Capital Stock of Pinon Exploration
Corporation (incorporated by reference to Exhibit
10.18 to Crown Resources Corporation's Form 10-K
for the year ended December 31, 1995).
10.13 First Amendment to Agreement between Crown
Resource Corp. Of Colorado and Pinon Exploration
Corporation (incorporated by reference to Exhibit
10.18 to Crown Resources Corporation's Form 10-K
for the year ended December 13, 1995).
10.14 Third Amendment to Mining Agreement between United
States National Bank of Oregon, as Trustee for
William Cord Pereira, Virginia Lee Pereira, Philip
Kirk Pereira, Patrick Clay Pereira and Susan
Michael Pereira, as Beneficiaries of the Pereira
Children's Trust and Crown Resource Corp. of
Colorado (incorporated by reference to Exhibit
10.19 to Crown Resources Corporation's Form 10-K
for the year ended December 31, 1995).
10.15 Letter Agreement, dated December 24, 1996, between
Cominco Peru s.r.l. and Minera Los Tapados S.A.
(incorporated by reference to Exhibit 10.18 to
Crown Resources Corporation's Form 10K for the
year ended December 31, 1996).
10.16 Subscription Agreement and Warrant, dated February
27, 1997, between Crown Resource Corp. of
Colorado and Solitario Resources Corporation
subscribing for 1,500,000 units (a unit consisting
of one share of common stock and one share
purchase warrant) of Solitario Resources
Corporation common stock.
10.17 Stock Purchase Agreement, dated February 23, 1998,
between Crown Resources Corporation and The
Equitable Life Assurance Society (incorporated by
reference to Exhibit 10.1 to Crown Resources
Corporation's Form 8-K, dated February 27, 1998).
10.18 Restated Agreement, dated December 15, 1998
between Minera Los Tapados and Cominco, to amend
the agreement dated December 24, 1996.
10.19 Letter Agreement, dated October 7, 1998 between
Minera Los Tapados and Billiton Exploration and
Mining Peru, B.V. regarding the exploration and
development of the Company's Soloco property in
Peru.
10.20 Letter Agreement, dated January 22, 1999 between
Minera Los Tapados and Placer Dome del Peru,
S.A.C. regarding exploration and development of
the Company's Yanacocha property in Peru.
11 Statement regarding computation of per share
earnings.
18.1 Deloitte and Touche letter regarding change
in accounting principle
22 Subsidiaries of the registrant.
23.1 Consent of Deloitte & Touche LLP.
25 Powers of attorney.
27 Financial data schedule.
Exhibit 11
<TABLE>
CROWN RESOURCES CORPORATION
Statement Re: Computation of Per Share Earnings
(in thousands, except per share amounts)
<CAPTION>
December 31, December 31, December 31,
1999 1998 1997
<S> <C> <C> <C>
Outstanding at
beginning of year 14,521 13,313 13,211
Issued during the year 19 1,208 102
Outstanding at end of year 14,540 14,521 13,313
Weighted average number
of shares outstanding
during the year 14,534 14,345 13,268
Net loss for year $(11,117) $(1,928) $(4,979)
Basic and diluted loss
per common share $ (0.76) $ (0.13) $ (0.38)
</TABLE>
Exhibit 18.1
March 28, 2000
Crown Resources Corporation
1675 Broadway, Suite 2400
Denver, CO 80202
Dear Sirs:
We have audited the consolidated financial statements of Crown Resources
Corporation and subsidiaries as of December 31, 1999 and 1998, and for
each of the three years in the period ended December 31, 1999, included
in your Annual Report on Form 10-K to the Securities and Exchange
Commission and have issued our report thereon dated March 28, 2000.
Note 2 to such financial statements contains a description of your
adoption during the year ended December 31, 199 of accounting for exploration
costs on mineral properties without proven and probable resources.
In our judgment, such change is to an alternative accounting principle
that is preferable under the circumstances.
Yours truly,
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
<PAGE>
Exhibit 22
CROWN RESOURCES CORPORATION
Schedule of Subsidiaries
December 31, 1999
Crown Resource Corp. of Colorado (100%, incorporated in
Colorado)
Solitario Resources Corporation (formerly Crown Minerals
Corp.) (57.2%-owned subsidiary of Crown Resource Corp. of
Colorado, incorporated in Colorado)
Minera Los Tapados S.A. (100%-owned subsidiary of
Solitario Resources Corporation, incorporated in
Peru)
Crown Minerals Corporation (100%-owned subsidiary of
Crown Resource Corp. of Colorado, incorporated in
Colorado)
Gold Texas Resources U.S., Inc. (100%, incorporated in Texas)
Crownex Resources (Canada) Ltd. (100%, incorporated in British
Columbia, Canada)
Gold Capital Corporation (100%, incorporated in the state of
Washington)
Gold Texas Resources Ltd. (100%-owned subsidiary of Gold
Capital Corporation, incorporated in British Columbia,
Canada)
Judith Gold Corporation (100%, incorporated in Montana)
Group Crown Exploration (100%, incorporated in Mexico City,
Mexico)
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement Nos. 33-31754 and 33-57306 of Crown Resources Corporation
on Form S-8 of our report dated March 28, 2000, appearing in this
Annual Report on Form 10-K of Crown Resources Corporation for the
year ended December 31, 1999.
DELOITTE & TOUCHE LLP
Denver, Colorado
March 28, 2000
Exhibit 25
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints James R. Maronick,
his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign the Annual Report on Form
10-K for the fiscal year ended December 31, 1999, of Crown
Resources Corporation and any and all amendments thereto, and to
file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, and every act and
thing requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-
fact and agent, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
NAME DATE
Mark E. Jones, III
Christopher E. Herald
J. Michael Kenyon
Rodney D. Knutson
Linder G. Mundy
Steven A. Webster
David R. Williamson
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,174
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,375
<PP&E> 17,596
<DEPRECIATION> 824
<TOTAL-ASSETS> 22,709
<CURRENT-LIABILITIES> 494
<BONDS> 15,000
0
0
<COMMON> 34,948
<OTHER-SE> (28,968)
<TOTAL-LIABILITY-AND-EQUITY> 22,709
<SALES> 104
<TOTAL-REVENUES> 541
<CGS> 0
<TOTAL-COSTS> 2,625
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 971
<INCOME-PRETAX> (3,055)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,666)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (8,451)
<NET-INCOME> (11,117)
<EPS-BASIC> (0.76)
<EPS-DILUTED> (0.76)
</TABLE>
