UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended June 30, 1997
or
[ ] Transition Report Pursuant to Section 13 and 15(d) of The Securities
Exchange Act of 1934
Dakota Mining Corporation
----------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Canada 0-17583 84-1094683
-------------------------------- ------------------- -----------------------
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation/organization) Number) Identification No.)
1560 Broadway
Suite 880
Denver, Colorado 80202
(Address of principal executive offices)
Telephone: (303) 573-0221
Fax: (303) 573-1012
(Registrant's telephone number, including area code)
410 Seventeenth Street
Suite 2450
Denver, Colorado 80202
(Former address of principal executive offices)
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
Number of common shares outstanding on August 12, 1997: 51,101,726
<PAGE>
DAKOTA MINING CORPORATION
INDEX
PART I FINANCIAL INFORMATION PAGE
ITEM 1 CONDENSED CONSOLIDATED BALANCE SHEETS.................. 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS....... 4
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS........ 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS............................................ 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................. 11
PART II OTHER INFORMATION..................................... 19
ITEM 1 - LEGAL PROCEEDINGS............................ 19
ITEM 2 - CHANGES IN SECURITIES......................... 19
ITEM 3 - DEFAULT UPON SENIOR SECURITIES................. 19
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.19
ITEM 5 - OTHER INFORMATION............................. 19
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K............. 19
Signatures......................................................... 20
<PAGE>
<TABLE>
DAKOTA MINING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(expressed in United States dollars)
(unaudited)
<CAPTION>
June 30, 1997 December 31, 1996
--------------- ------------------------
ASSETS
<S> <C> <C>
Current assets
Cash $ 6,396,300 $ 5,092,150
Inventories 8,589,903 2,643,701
Deferred stripping costs 1,147,426 886,086
Deferred hedging costs 4,073,503 -
Other current assets 796,853 739,064
------------- ------------------------
21,003,985 9,361,001
Property, plant and equipment, net 53,719,122 15,150,399
Other assets
Reclamation bonds 10,228,918 5,111,844
Advance minimum royalties 1,455,769 1,871,965
Deferred hedging costs 2,149,433 -
Other 497,065 74,141
============== ========================
$89,054,292 $31,569,350
============== ========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 7,983,695 $ 4,915,525
Accrued liabilities and other 2,424,499 2,003,625
Reclamation Costs 1,102,003 428,983
Short-term borrowings 176,607 623,623
Current portion of long-term debt 10,366,989 383,265
-------------- ------------------------
22,053,793 8,355,021
Long-term liabilities
Long-term debt 24,708,032 3,240,053
Other long-term liabilities 1,212,931 952,000
Reclamation costs 5,925,411 5,562,881
-------------- ------------------------
Total liabilities 53,900,167 18,109,955
-------------- ------------------------
Shareholders' equity
Purchase warrants 63,134 63,134
Paid in Capital 10,540,053 -
Preference shares, without par value; 20,000,000
shares authorized, none issued or outstanding - -
Common shares, without par value; unlimited
shares authorized; 51,101,726 issued and
outstanding in 1997; 35,479,742 in 1996 69,197,299 51,101,726
Accumulated deficit (44,034,312) (39,133,909)
Cumulative translation adjustment (612,049) (279,810)
-------------- ------------------------
35,154,125 13,459,395
============== ========================
Total shareholders' equity $89,054,292 $31,569,350
============== ========================
<FN>
(See accompanying notes to condensed consolidated financial statements)
</FN>
</TABLE>
<PAGE>
<TABLE>
DAKOTA MINING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(expressed in United States dollars)
(unaudited)
<CAPTION>
Three months ended Six months ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
----------------- ----------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Operating revenues $3,396,204 $3,604,052 $7,889,310 $6,800,767
----------------- ----------------- ----------------- -------------------
Operating costs
Mine, mill and administration 3,303,858 3,023,581 6,488,343 5,669,559
Depreciation and depletion 1,342,813 1,134,291 1,873,440 1,954,136
Holding and standby costs - 1,330,026 - 1,330,026
Royalties and severance taxes 215,257 130,184 544,434 259,340
Exploration 14,265 35,190 15,589 64,394
Reclamation 164,079 848,231 369,293 956,379
Other - 14,891 - 24,444
General corporate costs 517,239 466,852 916,863 838,823
Property Impairment 2,635,767 - 2,635,767 -
----------------- ----------------- ----------------- -------------------
8,193,278 6,983,246 12,843,729 11,097,101
----------------- ----------------- ----------------- -------------------
Operating loss (4,797,074) (3,379,194) (4,954,419) (4,296,334)
----------------- ----------------- ----------------- -------------------
Other income (expense):
Investment income 254,673 254,306 341,800 308,424
Interest expense (407,536) (103,778) (533,485) (162,714)
Other (38,659) 21,453 (20,072) (2,022)
----------------- ----------------- ----------------- -------------------
(191,522) 171,981 (211,757) 143,688
----------------- ----------------- ----------------- -------------------
Net loss $(4,988,596) $(3,207,213) $(5,116,176) $(4,152,646)
================= ================= ================= ===================
Net loss per common share $ (0.12) $ (0.11) $ (0.13) $ (0.15)
================= ================= ================= ===================
Weighted average number of
shares outstanding 40,687,069 27,992,313 38,083,406 27,278,893
================= ================= ================= ===================
<FN>
(See accompanying notes to condensed consolidated financial statements)
</FN>
</TABLE>
<PAGE>
<TABLE>
DAKOTA MINING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in United States dollars)
(unaudited)
Six months ended
June 30, 1997 June 30, 1996
------------------- -------------------
Cash provided by (used in):
<S> <C> <C>
Operating activities
Net loss $(5,116,176) $(4,152,646)
Add (deduct) non-cash items:
Depreciation, depletion and amortization 1,873,440 1,954,136
Property impairment 2,635,767 -
Reclamation, holding and standby accrued, net 1,035,550 1,630,352
Other - (39,502)
------------------- -------------------
428,581 (607,660)
Net change in non-cash working
capital items related to operations (2,764,988) (4,142,188)
------------------- -------------------
(2,336,407) (4,749,848)
------------------- -------------------
Investment activities
Additions to property, plant and equipment (2,478,983) (2,701,246)
Payment of capital related liabilities assumed at merger (3,723,897) -
Merger costs paid (812,084) -
Advances to USMX prior to merger (6,480,178) -
Additions to reclamation bonds and other assets (1,771,678) (1,063,712)
------------------- -------------------
(15,266,820) (3,764,958)
-------------------
-------------------
Financing activities
Proceeds from exercise of common share
purchase warrants - 336,059
Proceeds from the sale of special warrants 18,216,195 14,507,250
Special warrant offering costs paid (1,412,595) (964,793)
New borrowings 2,970,000 3,236,837
Repayment of indebtedness (533,985) (394,711)
-------------------
-------------------
19,239,615 16,720,642
-------------------
-------------------
Effect of exchange rate on cash (332,238) 12,712
------------------- -------------------
Net change in cash 1,304,150 8,218,548
Cash, beginning of period 5,092,150 2,260,025
------------------- -------------------
Cash, end of period $ 6,396,300 $10,478,573
=================== ===================
<FN>
(See accompanying notes to condensed consolidated financial statement)
</FN>
</TABLE>
<PAGE>
DAKOTA MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. General
Dakota Mining Corporation and its subsidiaries (the "Company") are
engaged in the business of investing in and operating precious metals
mining projects, producing gold and silver and exploring for, acquiring and
developing precious metals properties.
The consolidated financial statements of the Company are reported in
United States dollars in accordance with generally accepted accounting
principles in Canada. As described in Note 4, these principles may differ
in certain respects from those that the Company would have followed had its
consolidated financial statements been prepared in accordance with
generally accepted accounting principles and practices in the United
States.
The interim financial data is unaudited. However, in the opinion of
management, all adjustments that are normal and recurring in nature have
been made for a fair presentation of the financial position of the Company
at June 30, 1997 and the results of operations for the interim periods
presented. Results of operations for this period are not necessarily
indicative of results to be expected for the full year. For a more thorough
understanding of the Company's operations and financial position, these
statements should be read with the audited financial statements and notes
included with the Company's December 31, 1996 audited financial statements
as filed in its Annual Report on Form 10-K.
2. Merger
In February 1997, a definitive agreement ("Merger Agreement") with
USMX, Inc. ("USMX") was signed. The merger was completed May 29, 1997,
following a vote in favor of the transaction by shareholders of both
companies. Under the terms of the Merger Agreement, shareholders of USMX
received one Dakota common share for every 1.1 common shares of USMX held
and USMX became a wholly owned subsidiary of Dakota. In connection with the
transaction, the Company issued approximately 15.6 million common shares.
The Company's Common Shares had an approximate market value of $16.4
million or $1.05 per share, based upon an average US Dollar trading price
for the Common Shares on the day the merger was completed. Prior to the
merger the Company made loans and advances to USMX for approximately $6.5
million. These loans and advances were recorded as as part of the purchase
price of USMX. The Company accounted for the merger as a purchase.
Under the terms of the Merger Agreement, the Company provided USMX with
a $5 million loan facility from the proceeds of the Special Warrant
offering. The loan was needed by USMX to reduce its outstanding accounts
payable and to commence start-up of the Illinois Creek Mine. In addition to
the $5 million loan the Company advanced USMX approximately $1.5 prior to
the compilation of the merger. The additional funds were primarily used by
USMX to fund working capital requirements at the Illinois Creek Mine. The
Company accounted for the loan and advances as an adjustment to the
purchase price of USMX.
The following table summarizes the effect on the Company's balance
sheet at the May 29, 1997, merger date:
Assets acquired
Cash and other current assets $ 177,939
Inventories 2,864,413
Property plant and equipment 39,656,697
Reclamation bonds 3,855,445
Advance minimum royalties 450,000
Hedging contracts 6,222,936
------------------
Total assets acquired 53,227,430
Liabilities and debt assumed
Liabilities assumed 7,461,695
Debt assumed 22,086,156
------------------
Total liabilities and debt assumed 29,547,851
==================
Amounts paid and value of shares issued $ 23,679,579
==================
3. Convertible Debenture Offering
In order to provide financing for the merger with USMX, on February 5,
1997, the Company entered into an agency agreement with certain Canadian
investment dealers (collectively, the "Agents") to sell by way of private
placement 25,000 Special Warrants at a price of Cdn$1,000 per Special
Warrant for aggregate gross proceeds to the Company of Cdn$25 million (US
$18.22 million). The Special Warrants offering was completed on February 6,
1997 with all proceeds, net of a 6% commission paid to the Agents, placed
into an escrow account. Proceeds from the Special Warrant offering, after
deducting the 6% commission paid to Agents and other costs, were
approximately US$16.8 million. On the date the merger was completed, all of
the remaining escrow funds were released to the Company. The offering
proceeds are principally being used to complete construction and commence
start-up of the Illinois Creek Mine, acquired in the merger with USMX,
Inc., for developmental drilling and for general working capital purposes.
Effective May 29, 1997, upon receipt of shareholder's approval of the
Merger Agreement, each Special Warrant was excised without payment of any
additional consideration, into one 7.5% unsecured subordinated convertible
debenture (the "Debentures") of the Company in the principal amount of
Cdn$1,000. Each Debenture will be convertible into common shares of the
Company at a conversion price of Cdn$2.00 (US $1.56) per common share up to
and including the last business day immediately preceding February 5, 2004.
The Debentures are not redeemable prior to January 29, 2001 but thereafter
are redeemable by the Company if the weighted average trading price of the
Company's common shares is 125% of the conversion price for a defined
period prior to such redemption. On maturity or redemption, the Company has
the option to repay the principal amount of the Debentures in cash or
common shares of the Company at a price equal to 95% of the weighted
average trading price for a defined period prior to such maturity or
redemption.
The issue amount for the Debentures has been allocated between equity
and debt. The debt component has been calculated, effective the date of the
issue, by discounting the mandatory cash payments of principal and interest
under the terms of the Debentures.
4. Inventories and Deferred Stripping Costs
On the dates indicated, inventories were comprised of the following:
June 30, 1997 December 31, 1996
-------------------- ------------------
Bullion $1,079,273 $ 854,444
Heap leach 6,291,104 1,524,072
Materials and supplies 1,219,526 265,185
==================== ==================
$8,589,903 $2,643,701
==================== ==================
In 1997 and as of December 31, 1996, the mining activity at Gilt Edge
Mine included the removal of waste overburden. All deferred stripping costs
reported on the consolidated balance sheets pertain to this activity.
Mining costs associated with the waste removal are deferred and recognized
in operations based on the average stripping costs for the related ore
body. The average stripping costs is calculated as the total tons of
material to be mined compared to the tons of ore estimated to contain
economically recoverable minerals.
<PAGE>
5. Long-term Debt
<TABLE>
Long-term debt is comprised of the following
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
Note Payable to Gerald $ 6,200,000 $3,230,000
Note Payable to Rothschild 22,086,156 -
Convertible Debentures 6,592,467 -
Note Payable to Harley Hall 179,200 358,400
Equipment Notes 17,198 34,918
---------------------- ------------------------
35,075,021 3,623,318
Less current portion (10,366,989) (383,265)
====================== ========================
$24,708,032 $3,240,053
====================== ========================
</TABLE>
For a description of Convertible Debentures, refer to Note 3. Of Notes to
Consolidated Financial Statements.
(a) Note Payable to Gerald
On February 28, 1997, the Company entered into a letter agreement with
Gerald Metals Inc. to amend and restate the terms of a Revolving Loan
Agreement dated April 19, 1996. Under the amended terms, the revolving
loan was converted into a term loan of up to $7.5 million, the excess
over the $5.0 million must be repaid by August 1997 and the balance
repaid at the rate of $1.0 million per month commencing in June 1998.
The loan bears interest at LIBOR plus 2.25% and is collateralized by
the Company's underlying assets at its Gilt Edge and Stibnite mines.
Accordingly, the amounts outstanding at June 30, 1997 under the
Revolving Loan Agreement have been classified as long-term.
(b) Note Payable to Rothschild
At the merger date, USMX was obligated to NM Rothschild and Sons
("Rothschild") under a $22 million financing facility ("Rothschild
Credit Agreements"). Upon completion of the Merger, Dakota assumed the
obligations of this facility. Dakota agreed to use $1.5 million of the
proceeds from the Special Warrant offering to repay a portion of the
Rothschild Credit Agreement. The $1.5 million payment was made to
Rothschild during August, 1997. The remaining loan balance of $20.5
million is collateralized by the stock of the operating subsidiary of
USMX and its principal asset the Illinois Creek Mine, as well as the
stock of USMX and guarantees of USMX and Dakota. The loan bears
interest, payable quarterly, at 2.25% above LIBOR until "commercial
completion" of the project has occurred. The requirements for
commercial completion include the construction of the Illinois Creek
Mine facilities, which facilities and the equipment thereon must be
mechanically complete and electrically operable ("Mechanical
Completion"), the achievement of production amounts and grades, costs
and reserves similar to the development plan, and the absence of any
default in the Rothschild Credit Agreement. Following commercial
completion, this note bears interest at 1.879% above LIBOR. Also, upon
completion, the guarantee of Dakota becomes non-recourse to the stock
and assets of USMX and the operating subsidiary. Principal payments are
to be made in installments of $3 million each on November 30 and
February 28, of each year, commencing November 30, 1997.
(c) Note Payable to Harley Hall
At June 30, 1997 the remaining balance due to Harley Hall, doing
business as Hall Construction, ("Hall") is repayable by the Golden
Reward Mine in 6 equal monthly principal payments. The amount owed to
Hall bears interest at United States prime plus 1%. The amount owed to
Hall is collateralized by a mechanics' lien on the Golden Reward Mine.
The Company's 40% share of the note is reflected in the table above.
(d) Equipment Notes Payable
The equipment notes payable are for equipment purchased from a supplier
who agreed to a repayment term over three years on a graduated payment
basis. Interest ranging from 6% to 16.5% per annum is payable monthly.
The notes are secured by the equipment which is located at the Gilt
Edge Mine.
Management believes the fair value of long-term debt approximates the
carrying value.
6. Generally Accepted Accounting Principles (GAAP) in Canada and the
United States
The Company follows Canadian accounting principles which are different
in some respects from accounting principles applicable in the United
States. There are no significant differences in 1997 and 1996 between
Canadian accounting principles and U.S. GAAP pertaining to the Company.
(a) Under US GAAP, the Debentures would be accounted for as debt, all of which
would be classified as long-term in the amount of $18.2 million. Interest
would be calculated on the balance of the Debentures and accordingly would
be higher by $260,000 in the three months and $409,000 in the six months
ended June 30, 1997, respectively.
(b) Under Canadian accounting principles, the Arrangement completed on
September 15, 1993 (Note 6) was accounted for as a financial reorganization
resulting in a "fresh start." Consequently, results of operations and cash
flows for periods before the financial reorganization are not reported.
However, under U.S. GAAP, the Arrangement would be accounted for as a
quasi-reorganization and the pre-Arrangement results of operations and cash
flow activities would have been combined with the post-Arrangement
financial reorganization activities. U.S. GAAP requires that the deficit
accumulated after the financial reorganization be dated as of September 15,
1993 to notify financial statement readers of the reorganization.
(c) Under U.S. GAAP, the Company would calculate deferred income taxes using an
asset and liability method. Deferred income taxes reflect the net tax
effect of temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts used for
income tax purposes.
(d) At June 30, 1997 and 1996, the Company had one stock-based compensation
plan. The Company applies the intrinsic value method in accounting for its
plan. Accordingly, no compensation cost has been recognized for its fixed
stock option plan. No material compensation cost would be recognizable
under the method of Financial Accounting Standards Board Statement 123 -
Accounting for Stock-Based Compensation.
7. Ownership Interest in Golden Reward Mine
The Company owns a 40% interest in Golden Reward Mine, with the
remaining 60% interest being owned by two subsidiaries of Wharf Resources
Ltd. ("Wharf"). The Company's proportionate share of the partnership's
balance sheets as of June 30, 1997 and December 31, 1996 and statements of
operations for each of the years indicated are as follows:
June 30, 1997 December 31, 1996
------------------ ------------------
Net Assets:
Current assets $ - $ 569,273
Plant property and equipment 1,263,971 1,264,336
Other assets 575,830 575,849
--------------- -------------------
Total assets 1,839,801 2,409,458
--------------- -------------------
Accounts payable and other
current liabilities 441,464 486,829
Current portion of long-term debt 179,200 358,400
Other long-term liabilities 1,753,013 1,843,911
--------------- -------------------
Total liabilities 2,373,677 2,689,140
--------------- -------------------
$ (533,876) $ (279,682)
=============== ===================
<PAGE>
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
---------------- ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Statement of operations:
Revenues $ - $ 1,541,172 $ - $ 2,960,563
---------------- ------------------ ------------------ -----------------
Mine cash production costs 102,019 1,417,963 166,548 2,668,708
Royalties - 432,389 - 483,667
Holding and standby costs - 432,389 - 943,226
Exploration 1,374 27,586 1,374 53,516
Reclamation - 531,348 - 639,496
Depreciation and depletion - 659,360 - 1,271,740
------------------ ------------------ -----------------
----------------
Total production costs 103,393 4,011,872 167,922 6,060,353
---------------- ------------------ ------------------ -----------------
Operating income (loss) (103,393) (2,470,700) (167,922) (3,099,790)
Other income (expense) 7,081 48,455 20,547 39,848
------------------ ------------------ -----------------
================
$( 96,312) $( 2,422,245) $(147,375) $(3,059,942)
================ ================== ================== =================
</TABLE>
The owners have disagreed regarding certain operational and financial
matters for the Golden Reward Mine, including planned future operations and
related funding requirements. The resolution of this matter is not
presently determinable.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Sources and Uses of Cash
Special Warrant Financing and Issue of Debentures. To provide financing for
Dakota and USMX in connection with the merger with USMX, on February 5, 1997,
Dakota entered into an agency agreement with certain Canadian investment dealers
(the "Agents") to sell by way of private placement 25,000 Special Warrants at a
price of Cdn.$1,000 per Special Warrant for aggregate gross proceeds to Dakota
of Cdn.$25 million (U.S. $18.22 million). Proceeds from the Special Warrant
offering, after deducting the 6% commission paid to Agents and other costs, was
approximately $16.8 million. The offering proceeds are principally being used to
complete construction and commence start-up of the Illinois Creek Project,
developmental drilling, repayment of $1.5 million of the Rothschild Credit
Agreements (defined below) and for general working capital purposes.
Under the terms of the Merger Agreement, the Company provided USMX with a
$5 million loan facility from the proceeds of the Special Warrant offering. On
March 11, 1997, $5.0 million of the Special Warrant offering proceeds was
released to Dakota in connection with $5 million loan facility. As part of the
Merger transactions, Dakota and USMX agreed that Dakota would provide a $5
million line of credit to USMX, the proceeds of which were used to sustain
USMX's operations until the Merger was consummated. The loan was needed by USMX
to reduce its outstanding accounts payable and to commence start-up of the
Illinois Creek Mine. In addition to the $5 million loan the Company advanced
USMX approximately $1.5 prior to the completion of the merger. The additional
funds were primarily used by USMX to fund working capital requirements at the
Illinois Creek Mine. The Company accounted for the loan and advances as an
adjustment to the purchase price of USMX.
Effective May 29, 1997, upon receipt of shareholder's approval of the
Merger Agreement, each Special Warrant was exercised without payment of any
additional consideration, into one 7.5% unsecured subordinated convertible
debenture (the "Debentures") of the Company in the principal amount of
Cdn$1,000. Each Debenture will be convertible into common shares of the Company
at a conversion price of Cdn$2.00 (US $1.56) per common share up to and
including the last business day immediately preceding February 5, 2004. The
Debentures are not redeemable prior to January 29, 2001 but thereafter are
redeemable by the Company if the weighted average trading price of the Company's
common shares is 125% of the conversion price for a defined period prior to such
redemption. On maturity or redemption, the Company has the option to repay the
principal amount of the Debentures in cash or common shares of the Company at a
price equal to 95% of the weighted average trading price for a defined period
prior to such maturity or redemption.
Rothschild Credit Agreements. At the merger date, USMX was obligated to
Rothschild under a $22 million financing facility. Upon completion of the
Merger, the Company assumed the obligations of this facility. In August 1997,
the Company repaid $1.5 million of the Rothschild loan from the proceeds of the
Debenture offering discussed above, leaving an outstanding balance of $20.5
million.
The Company has agreed to guarantee the project loan until it has been
demonstrated that the Illinois Creek Mine is operating in a manner satisfactory
to Rothschild and that no defaults are outstanding. In addition, the Company is
a continuing guarantor of the covenant to comply with environmental laws. The
Company's obligations under its guarantee are secured by subordinated security
interests in the Illinois Creek Mine assets and the outstanding shares of the
operating subsidiary formed to own and develop the mine.
The Company expects to repay the remaining outstanding amounts under the
Rothschild Credit Agreements and all related interest accrued thereon from the
operating cash flows from the Illinois Creek Project. No assurances can be given
that the Illinois Creek Project will provide sufficient cash flows to meet these
repayment obligations.
On February 28, 1997, the Company entered into a letter agreement with
Gerald Metals Inc. to amend and restate the terms of a Revolving Loan Agreement
dated April 19, 1996. Under the amended terms, the revolving loan was converted
into a term loan of which $6.2 million was outstanding at June 30, 1997. Of the
total outstanding, $1.2 million must be repaid by August 1997 and the balance
repaid at the rate of $1.0 million per month commencing in June 1998. The loan
bears interest at LIBOR plus 2.25% and is collateralized by the Company's
underlying assets at its Gilt Edge and Stibnite mines. No assurances can be
given that the Gilt Edge and Stibnite Mines will generate sufficient cash flows
to meet these repayment obligations.
For the balance of 1997, capital expenditures at Gilt Edge Mine are
expected to approximate $1.5 million, $900,000 for heap leach pad expansion,
$350,000 for exploration and the remainder for mine development and equipment
replacement. Capital expenditures at Stibnite Mine are expected to approximate
$660,000 for the remainder of 1997 primarily for reclamation and exploration.
For the remainder of 1997 capital expenditures at Illinois Creek are estimated
to be $1.8 million to complete construction of heap leach facilities. The
Company expects to spent $1.0 million on exploration related activities at
Thunder Mountain Project during the remainder of the year.
In 1998, capital expenditures relate primarily to heap leach pad expansion
at Gilt Edge Mine - $2.5 million and at Illinois Creek Mine - $2.2 million. An
additional $1.0 million of capital expenditures will be allocated for
exploration at Gilt Edge, Illinois Creek and Stibnite Mines depending upon the
results of 1997 drilling activities. In 1999, estimated capital expenditures of
$3.1 will pertain primarily to heap leach pad expansion and exploration
activities.
Dakota has ongoing needs for cash to fund permitting, construction and
environmental compliance activities at its Gilt Edge, Stibnite and Illinois
Creek Mines. Management is presently investigating several alternative sources
of new financing, including sale of certain assets and new borrowing
arrangements. No aasurances can be given that management will be successful in
obtaining such additional funding.
As of June 30, 1997, the investment in property, plant and equipment at
Gilt Edge Mine approximated $10.1 million of which $1.7 million is attributed to
the sulfide development potential of the property which is not currently subject
to amortization. Dakota believes that mining and processing the Anchor Hill
oxide deposit and the substantial sulfide deposit will generate sufficient
operating margins to ensure the recovery of Dakota's remaining investment in
Gilt Edge Mine.
Dakota estimates that the salvage value of the Golden Reward Mine assets is
equal to or exceeds all remaining obligations of the partnership. Accordingly,
future holding costs are not expected to be material to Dakota.
As of June 30, 1997, management determined that based upon current spot
prices for gold, that Stibnite Mine would exhaust its oxide reserves during the
third quarter of 1997. Accordingly, management determined that the carrying vale
of the assets at Stibnite Mine were in excess of there realizable value and that
operations would be suspended after the third quarter. Accordingly, an
impairment was recorded in the amount of $1.6 million. Management continues to
believe that the Stibnite District represents a significant exploration project
and intends to continue to conduct ongoing evaluations, exploration and related
activities. It is also management's intention to focus the Company's near term
efforts on the Thunder Mountain project in order to place that project into
production as early as 1999.
Dakota's investment in mining assets at Illinois Creek Mine as of June 30,
1997, is approximately $33.5 million. Dakota believes that Illinois Creek Mine's
future operating margins will be sufficient to recover its investment in mining
assets.
At June 30, 1997, the deficit in working capital was approximately $1.0
million, compared to working capital of approximately $1.0 million at December
31, 1996. The decrease is due principally to a $10.0 million increase in the
current portion of long term debt, of which $7.6 million was assumed in the
merger with USMX, and a $3.1 million increase in accounts payable associated
with increased activity at the Company's three mines. The decreases to working
capital are partially offset by a $5.9 million increase in inventories, a $4.1
million increase in deferred hedging costs and a $1.3 million increase in cash
resulting from proceeds from sale of the special warrants.
Cash used in operations was $2.3 million during the first six months of
1997 compared to cash used in operations of $4.7 million during the same period
of 1996. Cash used in the first six months of 1997 is primarily the result of
the increase in inventories discussed above, principally at Illinois Creek Mine
which is in the start-up phase. If such inventories were valued at market, the
deficit in working capital would have been eliminated. At June 30, 1997, heap
leach inventories at Illinois Creek were approximately 19,400 ounces of
recoverable gold at a total cost of $3,175,000. No gold was recovered from
Illinois Creek until July, 1997. The Company expects inventory levels to
increase during the third quarter as seasonal mining of ore tons continues.
During the fourth quarter and throughout the first half of 1998, the Company
expects to recover a significant portion of the ounces of gold mined to date and
during the third quarter. Cash used in the first six months of 1996 is primarily
due to the decrease in accounts payable and accrued liabilities at June 30, 1996
as a result of selling down year-end gold bullion inventories and utilizing a
portion of proceeds from the sale of special warrants completed in February
1996.
Cash used in investment activities of $15.3 million during the first six
months of 1997 pertains primarily to advances to USMX prior to the merger
becoming effective as well as the costs related to the merger and to the
expansion of facilities and exploration in the amount of approximately $4.2
million at Gilt Edge Mine, Illinois Creek Mine and the Thunder Mountain Project.
Cash used in investment activities of $3.8 million during the first six months
of 1996 pertains primarily to expansion of heap leach pads located at Gilt Edge
Mine in order to accommodate ores mined from the Anchor Hill oxide deposit
Cash provided by financing activities during the first six months of 1997
included approximately $16.8 million of proceeds, net of offering costs, from
the sale of Special Warrants in February 1996, and new borrowings of $1.2
million under the credit facility with Gerald.
Other. In the course of its normal business, Dakota uses forward sales and
commodity put and call option contracts to manage its exposure to fluctuations
in the price of gold which it produces. Contract positions are designed to
ensure that Dakota will receive a defined minimum price for a portion of its
gold production. Potential gains on gold price increases are also eliminated
under forward sales commitments if such commitments are not bought back.
Dakota is exposed to credit risk to the extent of an inability of a
counterparty to honor contracts; however, management believes the risk of
incurring losses due to credit risk is remote. Market risk on financial
instruments results from fluctuations in the gold price during the periods in
which the contracts are outstanding. Dakota manages its exposure to market risk
by matching future physical gold delivery with contract maturities. Risk of loss
arises from the possible inability of Dakota to deliver gold.
As of August 12, 1997, Dakota had forward sale contracts to deliver
approximately 165,700 ounces of gold over the next three years at an average
price of $402 per ounce, put options to deliver 24,000 ounces of gold in 1998 at
a minimum price $350 per ounce and has sold call options covering 35,750 ounces
of gold in 1997 and 1998 at an average price of $390 per ounce. Of the total
forward sales contracts, contracts covering 140,900 ounces of gold at an average
price of $411 per ounce pertain to the Illinois Creek Mine, and were acquired in
connection with the USMX merger at a cost of $6.2 million.
At June 30, 1997, the market value of the Company's gold hedging position
approximated $7.8 million. Fluctuations in future gold prices could
significantly impact Dakota's future revenues as only a portion of Dakota's
expected gold production in 1997 has been hedged by these contracts.
Environmental Matters and Government Regulation. All of Dakota's
exploration, development and production activities are subject to regulation
under one or more of the various state, local and federal environmental laws and
regulations. These laws address emissions to the air, discharges to water,
management of wastes, management of hazardous substances, protection of
endangered species, protection of natural resources and others. Such laws and
regulations are generally becoming more restrictive. Dakota has made and expects
to continue to make in the future, significant expenditures to comply with such
laws and regulations.
Existing and possible future environmental legislation, regulations and
actions, could cause additional expense, capital expenditures, restrictions and
delays in the activities of Dakota, the extent of which cannot be predicted.
Regulatory requirements and environmental standards are subject to constant
evaluation and may be significantly increased, which significantly adversely
affect Dakota's business. The cost of compliance with changes in governmental
regulations has the potential to reduce the profitability of operations.
Several recent legislative developments have affected or may in the future
affect the cost of and the ability of mining claimants to use the Mining Law of
1872, as amended, to acquire and use federal lands for mining operations. Since
October 1994, a moratorium has been imposed on processing new patent
applications for mining claims. Also, since 1993, a rental or maintenance annual
fee of $100 per claim has been imposed by the Federal government on unpatented
mining claims in lieu of the prior requirement for annual assessment work.
During the last several Congressional sessions, bills have been repeatedly
introduced in the U.S. Congress which would supplant or radically alter the
General Mining Law. As of June 30, 1997, no such bills had been passed. Such
bills have proposed, among other things, to permanently eliminate or greatly
limit the right to a mineral patent, impose royalties, and impose new federal
reclamation, environmental control and other restoration requirements. If
enacted, such legislation could impair the ability of Company to economically
develop mineral resources on federal lands. The extent of the changes, if any,
which may be made by Congress to the General Mining Law is not presently known
and the potential impact on Dakota as a result of future Congressional action is
not presently determinable.
The South Dakota Department of Environment and Natural Resources ("DENR")
has conducted a Preliminary Assessment on behalf of the United States
Environmental Protection Agency ("EPA") of Gilt Edge Mine activities including
the approximately 406 acres permitted under Dakota's South Dakota state mining
permit. At this time, EPA has not made a determination as to whether any further
study needs to be made of the site. Accordingly, Dakota is not able to determine
what impact, if any, further action by the DENR or EPA in connection with the
Preliminary Assessment may have on the site. Dakota does not know when the EPA
may reach a decision on the Preliminary Assessment.
In April 1993, the DENR issued the DENR Order regarding remediation efforts
related to acid rock drainage at Gilt Edge Mine. The DENR Order remains in
effect and Dakota is in full compliance. The DENR Order principally requires
that, unless discharge water meets certain permitted terms and conditions, there
shall be no discharge of acid mine drainage. On January 19, 1996, Dakota
received final approval of an updated and amended reclamation plan from the
State of South Dakota. Under the conditions of the revised reclamation plan,
Dakota plans to reclaim waste depositories and other areas by capping these
areas with impervious materials available from the overburden associated with
the Anchor Hill oxide deposit. Such capping will prevent any continued migration
of acid mine drainage.
The ultimate Anchor Hill open pit design at Dakota's Gilt Edge Mine
contemplates that approximately 37 acres of public lands will be disturbed,
principally for pit wall layback and waste removal. Accordingly, Dakota is
required to complete an Environmental Impact Statement (the "Gilt Edge EIS").
Dakota now expects to finalize the Gilt Edge EIS by September of 1997. If,
however, the Gilt Edge EIS is not completed in a timely manner, Gilt Edge Mine
operations scheduled to commence in 1998 will be delayed.
Dakota has provided the State of South Dakota with a form of financial
assurance in the amount of $7.9 million in connection with the reclamation and
remediation plan in the form of cash deposits of $2.4 million and a demand note
as proof of financial assurance in the amount of $5.5 million. Dakota has
estimated that its actual capping costs will approximate $3.2 million, which
costs have been fully accrued at June 30, 1997. Funding of this obligation will
be made from operating cash flow derived from processing the Anchor Hill oxide
deposit.
At a future date when Dakota provides notice to the State of South Dakota
that the Gilt Edge Mine will close and that post closure care is to begin,
Dakota will be obligated to convert a portion of its financial assurance into a
post-closure fund in a form acceptable to the State to ensure long term
treatment and maintenance of the site. The amount of the post-closure financial
assurance is not expected to be less than $3.0 million although no final
determination will be made until the mine actually closes.
The State of South Dakota requires mines to provide the State with
financial assurance to cover mitigation costs in the event of an environmental
accident. In order to fulfill its obligation, Dakota has provided the State with
a form of demand note in the amount of $359,000.
Golden Reward L.P. is required by the State of South Dakota to provide
financial security to cover the estimated cost of reclamation. Reclamation
bonds totaling $1,175,759 have been posted as a guarantee that the land
which is disturbed by mining will be reclaimed. Golden Reward L.P. anticipates
that total costs of reclamation will not exceed the amount of these bonds.
In November 1993, Dakota filed an application for a U.S. Federal Clean
Water Act National Pollution Discharge Elimination System permit in respect of
Stibnite Mine. This permit is not necessary for Dakota's current mining
operations at Stibnite Mine. However, Dakota believes that obtaining this permit
would be of benefit as it would allow Stibnite Mine to discharge clean water
from the minesite in accordance with such permit standards in the future. Dakota
cannot anticipate when a draft permit will be issued.
On July 10, 1995, Dakota entered into a voluntary Administrative Order on
Consent with the EPA regarding the Stibnite Mine tailings area (the "Meadow
Creek Plan"). Approximately 50% of the work under the Meadow Creek Plan was
completed in 1995. Through June 30, 1997, approximately $225,000 has been
incurred in connection with the Meadow Creek Plan. Management estimates that it
will cost approximately $667,000 in 1997 in order to complete the Meadow Creek
Plan. Such costs will be funded from operating cash flows although there is no
assurance that sufficient cash flow from operations will be generated to
complete the Meadow Creek Plan. Dakota has apprised previous owners and
operators of the property of the Meadow Creek Plan and believes that a portion
of such costs may be recoverable from these parties. However, there is no
assurance that Dakota will be successful in obtaining a recovery of any of the
costs of the Meadow Creek Plan.
On September 11, 1996, Dakota received a Notice of Potential Liability and
Conduct of Removal Action from the United States Environmental Protection Agency
("EPA") pertaining to certain remediation activities at an historic mine sight,
located on certain lands once leased by Dakota. Dakota never conducted
operations at this sight and no longer owns any interest in the leases
pertaining to this property. The EPA estimates a total cost of $940,000 for its
action. However, Dakota cannot presently determine the extent of its liability,
or whether any liability actually exists.
Reclamation bonds totaling $859,500 have been posted by Dakota in
accordance with State of Idaho and USFS requirements to ensure that land which
is disturbed by mining at Stibnite Mine will be reclaimed. Dakota estimates that
the total costs of reclamation of other land which is disturbed by mining will
not exceed the amount of these reclamation bonds.
Reclamation bonds totaling $1,525,000 have been posted by Dakota in
accordance with State of Alaska requirements to ensure that land which is
disturbed by mining at Illinois Creek Mine will be reclaimed. Dakota estimates
that the total costs of reclamation of land which is disturbed by mining will
not exceed the amount of these reclamation bonds.
Reclamation bonds totaling $1,736,600 have been posted by Dakota in
accordance with State of Utah and USFS requirements to ensure that land which
was disturbed by mining at the Goldstrike Mine, acquired in the merger with
USMX, will be reclaimed. Approximately half of the reclamation at the Goldstrike
Mine has been completed and Dakota expects release of a portion of the bonding
requirements by the end of the year.
Results Of Operations - For the Periods Ended June 30, 1997 and 1996
Revenues and Direct Operating Costs
The Company recorded a consolidated net loss of $5.0 million, or $0.12 per
share, for the second quarter of 1997, compared to a consolidated net loss of
$3.2 million or $0.11 per share, during the second quarter of 1996.
Year-to-date, the Company recorded a consolidated net loss of $5.1 million or
$0.13 per share in 1997, compared to a loss of $4.2 million, or $0.15 per share
in 1996.
Shown below is the Company's share of metals sales (in ounces) for each
respective quarter:
<TABLE>
<CAPTION>
Metal Sales Metal Sales
Three months ended Six months ended(1)
June 30, June 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Ounces of gold sold:
Cactus Mine (25%) 123 271 173 355
Gilt Edge Mine 7,279 3,091 16,380 5,211
Golden Reward Mine (40%) - 3,886 - 7,455
Stibnite Mine 1,925 1,950 4,402 4,184
------------- ------------- -------------
=============
9,327 9,198 20,955 17,205
============= ============= ============= =============
</TABLE>
(1) Precious metals production for each of the joint venture operations
includes the Company's pro rata share.
<PAGE>
Operating results for the comparative periods ended June 30 are summarized
in the following table:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
============== =============== ============== ===============
<S> <C> <C> <C> <C>
Operating revenue $3,396,204 $3,604,052 $7,889,310 $6,800,767
============== =============== ============== ===============
Average net price per ounce of
gold realized $ 364 $ 392 $ 376 $ 395
============== =============== ============== ===============
Average London PM fix per ounce
of gold $ 340 $ 382 $ 343 $ 382
============== =============== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
Three months ended Six months ended
Mine, Mill and Administration(1) June 30, June 30,
1997 1996 1997 1996
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Gilt Edge Mine $2,689,429 $ 901,253 $5,141,685 $1,499,290
Golden Reward Mine 102,118 1,405,005 165,642 2,646,197
Stibnite Mine 453,639 594,021 1,065,913 1,376,807
Cactus Mine 58,672 123,302 115,103 147,265
---------------- --------------- --------------- ---------------
Total mine, mill and administration $3,303,858 $3,023,581 $6,488,343 $5,669,559
================ =============== =============== ===============
Average cash cost per ounce
of gold sold $ 330 $ 329 $ 299 $ 330
================ =============== =============== ===============
</TABLE>
(1) Cash costs include mining, milling, project administration, on-property
exploration, and all holding and standby costs.
Metal sales at Gilt Edge Mine were higher during the first six months of
1997 when compared to the same period of 1996, due to an increase in ore tons
processed and the composition of the ore processed. During 1997, Gilt Edge Mine
processed approximately 869,300 ore tons at an average grade of 0.028 ounces of
gold per ton from its Anchor Hill oxide deposit compared to 528,400 ore tons at
an average grade of 0.026 ounces of gold per ton in 1996. In addition, while the
majority of the 1997 gold production came from the Anchor Hill oxide deposit,
1996 mining of ore from the Anchor Hill oxide deposit did not commence until the
second quarter of 1996 with earlier gold recovery coming from less productive
stockpiled sulfide gold ores.
The above increase in production was partially offset by the absence of
metal sales from Dakota's 40% interest in the Golden Reward Mine during the
first six months of 1997 compared to the same period of 1996. Golden Reward Mine
ceased mining activities at the end of the second quarter of 1996.
Mine, mill and administrative costs decreased to $299 per ounce of gold
sold during the first six months of 1997 compared to $330 per ounce of gold sold
during the same period of 1996. The decrease in costs relates primarily to the
increased ounces of gold sold and the source of the ounces sold during 1997
compared to 1996. During the first six months of 1997 the majority of the gold
production came from the Gilt Edge Mine at a cost per ounce sold of $314
compared to the same period of 1996 when the majority of the gold came from the
Golden Reward Mine at a cost per ounce sold of $354.
Depreciation and depletion is slightly lower for the first six months of 1997 as
compared to the same period of 1996. The change is the result of a reduction in
depletion of approximately $1.2 million as a result of the cessation of mining
activities in June 1996 at Golden Reward Mine. The decrease was partially offset
by $394,000 of higher depletion at Gilt Edge Mine due to the increase in ounces
of gold sold and an increase of $712,000 in depletion at Stibnite Mine as the
result of a higher depletion rate being applied in 1997 as compared to 1996. In
addition, during the first six months of 1996, the Company recorded an accrual
of approximately $1.3 million to record its share of holding and standby costs
related to the cessation of mining activities at Golden Reward Mine. No charges
were made for holding and standby costs during the first six months of 1997.
Depletion is calculated using the units of production method.
Royalties vary from mine-to-mine and within the specific area being mined
in accordance with various agreements with landowners. Royalties and severance
taxes increase during the first six months of 1997 primarily as the result of
primary production coming from Gilt Edge Mine with a higher royalty rate when
compared to the lower royalty rate Golden Reward Mine, which provided the
primary production during the first six months of 1996. In addition, royalties
and severance taxes are related to gold sales which increased in the first six
months of 1997 as compared to the same period for 1996.
The entire property impairment cost is related to Stibnite Mine as
discussed above under Sources and Uses of Cash..
Reclamation costs during the first six months of 1997 consist principally
of accruals at Gilt Edge Mine and Illinois Creek Mine. Reclamation costs for the
first six months of 1996 relate principally to Golden Reward Mine which ceased
mining operations in June, 1996. According to estimates provided by the
Company's partner in Golden Reward Mine, all future reclamation costs are
currently accrued as of June 30, 1997.
General corporate costs increased slightly for the first six months of 1997
when compared to the same period for 1996, due to additions in staff, legal
expenses, travel activities, and in the use of outside professional services.
These increases are due, in part, to overall increases in corporate activity and
additional staff resulting from the merger.
Interest expense during the first six months of 1997 increased compared to
the same period of 1996 as the result of (i) increased loan balances related to
the Gerald Metals, Inc. loan agreement, (ii) interest related to the convertible
debentures discussed above and (iii) the assumption of the Rothschild loan in
the merger with USMX.
Dakota does not anticipate that its U.S. operations will be subject to
alternative minimum tax during 1997.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULT UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The annual meeting of stockholders was held on May 29, 1997 in Toronto,
Onterio. Six proposals were submitted by management as described in the
Company's Proxy Statement dated April 30, 1997, and were voted upon and
adopted by stockholders at the meeting. The table below briefly describes
the proposals:
1) To approve and adopt the Merger Agreement and , including the issue
of additional common shares by Dakota.
2) To ratify an amendment to the Share Incentive Plan of the Company.
3) To approve the issuance of up to 4,884,550 common shares of Dakota
issuable upon exercise of Series B. Special Warrants.
4) Election of Directors
5) To appoint KPMG Peat Marwick Thorne as the Auditors 6) To authorize the
Directors to fix the Auditors remuneration
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
1) The Company filed a Form 8-K reporting under Item 2. the May 29, 1997
merger of the company with USMX, Inc.
2) Exhibit 11 Computation of Earnings Per Share
3) Exhibit 27 Financial Data Schedule
4) Exhibit 10.23 Second Amendment to Credit Agreement between USMX of
Alaska, Inc. and N M Rothschild and Sons Limited,
dated July 28, 1997.
5) Exhibit 10.24 Guaranty of the Company to N M Rothschild and Sons
Limited, dated July 28, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements 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
Dakota Mining Corporation
c/s Alan R. Bell Date August 19, 1997
- ------------------------------------ ---------------
Alan R. Bell
President and Chief Executive Officer
c/s Robert R. Gilmore Date August 19,1997
- ------------------------------------ --------------
Robert R. Gilmore
Vice President Finance
and Chief Financial Officer
<PAGE>
<TABLE>
DAKOTA MINING CORPORATION
Exhibit 11 - COMPUTATION OF EARNINGS PER SHARE
Six months ended June 30, 1997 and 1996
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
-------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Beginning shares outstanding 35,479,742 26,534,742 35,479,742 26,534,742
Exercise of common share purchase
warrants - - - -
Exercise of special warrants - 1,242,857 - 621,429
Average shares issued to USMX
stockholders related to merger 5,207,327 - 2,603,664 -
Average shares issued for options exercised - 214,714 - 122,722
-------------- --------------- ----------------- -----------------
Weighted average shares outstanding 40,687,069 27,992,313 38,083,406 27,278,893
============= ============== ================= =================
Net loss $(4,988,596) $(3,207,213) $(5,116,176) $(4,152,646)
============= ============== ================= =================
Loss per common share $ (0.12) $ (0.11) $ (0.13) $ (0.15)
============== ================= ================= =================
<FN>
NOTE: All other issued and outstanding Debentures, options and warrants are antidilutive. Fully diluted calculation is not
different and therefore is not applicable.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000848448
<NAME> Dakota Mining Corp.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> Jun-30-1997
<CASH> 6,396
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 8,590
<CURRENT-ASSETS> 21,004
<PP&E> 53,719
<DEPRECIATION> 0
<TOTAL-ASSETS> 89,054
<CURRENT-LIABILITIES> 22,054
<BONDS> 0
0
0
<COMMON> 69,197
<OTHER-SE> (34,043)
<TOTAL-LIABILITY-AND-EQUITY> 89,054
<SALES> 7,889
<TOTAL-REVENUES> 7,889
<CGS> 6,488
<TOTAL-COSTS> 12,844
<OTHER-EXPENSES> (322)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 533
<INCOME-PRETAX> (5,116)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,116)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,116)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into
as of July 28, 1997 by and between USMX, INC., a Delaware
corporation ("USMX") and N M ROTHSCHILD & SONS LIMITED, a company
organized and existing under the laws of England ("NMR").
Recitals
A. Pursuant to a Credit Agreement dated as of July 11,
1996, NMR, as lender, has advanced loans in the principal amount
of $2,500,000 to USMX, as borrower. Such Credit Agreement, as it
has been amended by NMR and USMX is referred to herein as the
"USMX Credit Agreement."
B. Pursuant to an Agreement and Plan of Merger dated
February 5, 1997, as amended April 21, 1997 (the "Merger
Agreement") among USMX, Dakota Mining Corporation, a corporation
continued under the Canadian Business Corporation Act ("Dakota")
and Dakota Merger Corporation, a Delaware corporation which is a
wholly-owned subsidiary of Dakota, Dakota Merger Corporation
merged with USMX, with USMX continuing as the surviving
corporation and a wholly-owned subsidiary of Dakota.
C. NMR has consented to the merger contemplated by the
Merger Agreement and has also agreed to modify the terms and
conditions of the Credit Agreement dated as of July 11, 1996
between NMR, as lender, and USMX of Alaska, Inc., an Alaska
corporation ("USMXAK"), as borrower (the "USMXAK Credit
Agreement"), subject, among other things, to USMX entering into
this Agreement and performing its obligations hereunder.
Agreement
NOW, THEREFORE, in consideration of the following covenants
NMR and USMX hereby agree as follows:
1. Defined Terms. Capitalized terms which are not
expressly defined in this Agreement will have the meanings given
thereto in the USMX Credit Agreement.
2. USMX Credit Agreement. Not later than July 28, 1997,
or such later date as may be mutually agreed in writing by USMX
and NMR, USMX will pay in full all principal, interest, fees and
other amounts due and payable to Lender under the USMX Credit
Agreement. USMX and NMR agree that upon such payment, the USMX
Credit Agreement will terminate, and NMR will have no further
rights thereunder to convert the Loan into shares of Common Stock
of USMX. Such payment by USMX is a condition precedent to the
agreements set forth in Paragraphs 3, 4 and 5 hereof.
3. Pledge and Security Agreement. Notwithstanding such
termination of the USMX Credit Agreement, the Pledge and Security
Agreement dated as of July 11, 1996, made by USMX in favor of
NMR, will remain in effect to secure the payment and performance
by USMX of its obligations under the USMX Guaranty (identified in
Paragraph 5 below) and under such Pledge and Security Agreement.
USMX and NMR hereby agree that the definition of "Secured
Obligations" in such Pledge and Security Agreement is modified to
delete the references to the USMX Credit Agreement, and to the
Convertible Note executed by USMX in connection therewith.
Subject to such modification, USMX hereby ratifies and confirms
such Pledge and Security Agreement and agrees that it remains in
full force and effect to secure the performance by USMX of its
obligations under the USMX Guaranty and under such Pledge and
Security Agreement.
4. Collateral Assignment of Deeds of Trust. USMX and NMR
agree that the Collateral Assignment of Deeds of Trust dated as
of July 11, 1996, made by USMX for the benefit of NMR in
connection with the USMX Credit Agreement and the USMX Guaranty,
is modified to delete the references to the USMX Credit Agreement
therein, but that such Collateral Assignment of Deeds of Trust
will otherwise remain in full force and effect and will continue
to secure the performance by USMX of its obligations under the
USMX Guaranty and as otherwise provided therein. Subject to such
modification, USMX hereby ratifies and confirms such Collateral
Assignment of Deeds of Trust.
5. USMX Guaranty. USMX guaranteed the payment and
performance of the obligations of USMXAK under the USMXAK Credit
Agreement pursuant to a Guaranty dated July 11, 1996 (the "USMX
Guaranty"). USMX and NMR hereby agree that the Guaranty is
modified to delete the provision thereof limiting NMR's recourse
thereunder against USMX after the occurrence of "Completion" as
defined in the USMXAK Credit Agreement, and USMX and NMR agree
that such Guaranty by USMX will remain the general, unlimited
obligation of USMX until all Obligations (as defined therein) are
satisfied. The USMX Guaranty is further modified to delete
Sections 10(a), 10(c), 11 and 16 thereof. Also, the first
sentence of Section 10 (requiring Guarantor's contribution of
$1,500,000 to Borrower) is deleted in its entirety, and the word
"also" is deleted from the following sentence. USMX hereby
acknowledges notice of the Second Amendment to the USMXAK Credit
Agreement dated as of July 28, 1997 which, among other things,
increases the credit available to USMXAK thereunder to
$20,500,000. USMX hereby confirms that the Guaranty covers and
extends to all obligations of USMXAK under the USMXAK Credit
Agreement, as so modified by such Second Amendment, and as the
USMXAK Credit Agreement may be further modified or amended in
accordance with its terms. Subject to the modifications of the
USMX Guaranty set forth herein, USMX hereby ratifies and confirms
the USMX Guaranty in accordance with its terms.
6. Registration Rights Agreement. The Registration Rights
Agreement dated as of July 11, 1996 between USMX and NMR is
hereby terminated.
7. General Provisions.
a. Inurement. This Agreement is binding upon and
will inure to the benefit of the successors and assigns of USMX
and NMR.
b. Counterpart Execution. This Agreement may be
executed in two or more counterparts, all of which shall, upon
execution of identical counterparts by all parties, constitute a
single agreement.
Executed by the parties hereto as of the date first above
written.
USMX, INC.
By:
Name:
Title:
N M ROTHSCHILD & SONS LIMITED
By:
Name: Brian T. Dolan
Title: Attorney-in-Fact
GUARANTY
This GUARANTY (the "Guaranty"), dated as of July 28,
1997, is made by DAKOTA MINING CORPORATION, a corporation
continued under the Canada Business Corporation Act
("Guarantor"), in favor of and for the benefit of N M ROTHSCHILD
& SONS LIMITED, a company organized and existing under the laws
of England ("Lender").
RECITALS
A. Pursuant to an Agreement and Plan of Merger dated
February 5, 1997, as amended April 21, 1997 (the "Merger
Agreement") among Dakota, Dakota Merger Corporation and USMX,
Inc., a Delaware corporation ("USMX"), Dakota Merger Corporation
merged with USMX (the "Merger"), the surviving corporation, which
is now a wholly-owned subsidiary of Dakota. Guarantor has agreed
to extend up to $5,000,000 in loans to USMX pursuant to a Loan
Agreement dated as of March 11, 1997 (as such agreement may be
amended in accordance with its terms, the "Dakota Loan
Agreement"). Obligations of USMX to Guarantor under the Dakota
Loan Agreement (the "USMX/Dakota Obligations") to the extent of
$3,000,000 thereof are secured by a mortgage and assignment of
contract rights relating to the Thunder Mountain project located
in Valley County, Idaho and a pledge of 10,000 shares of stock in
MXUS, S.A. de C.V., a corporation organized under the laws of
Mexico. The real and personal property rights comprising the
Thunder Mountain project and the pledged MXUS shares are referred
to as the "Dakota Collateral".
B. Rothschild has previously extended a loan in the
principal amount of $2,500,000 to USMX pursuant to a Credit
Agreement between Rothschild and USMX dated as of July 11, 1996
(as amended in accordance with its terms, the "USMX Credit
Agreement"). Pursuant to an Agreement dated as of July 28, 1997
USMX has agreed to pay all amounts due under the USMX Credit
Agreement, and the parties have agreed to terminate the right of
Rothschild to convert all principal amounts thereunder into
common shares in USMX. Rothschild has also previously extended
or agreed to extend to USMX of Alaska, Inc., an Alaska
corporation which is a wholly-owned subsidiary of USMX
("USMXAK"), pursuant to a Credit Agreement dated as of July 11,
1996 loans in the maximum principal amount of $19,500,000.
Pursuant to a Second Amendment to Credit Agreement as of July 28,
1997, Rothschild has agreed to increase the credit available to
USMXAK thereunder to $20,500,000, and the parties have amended
such Credit Agreement in other respects (with such Credit
Agreement, as so amended, referred to as the "USMXAK Credit
Agreement"). Amounts due under the USMXAK Credit Agreement are
guaranteed by USMX pursuant to a Guaranty dated as of July 11,
1996 (the "USMX Guaranty"). All amounts due under (i) the USMXAK
Credit Agreement and under the collateral and other documents
executed by USMX and USMXAK (together, the "Borrowers") in
connection therewith, and (ii) the USMX Guaranty and the
collateral and other documents executed by USMX in connection
therewith are referred to collectively as the "USMX/Rothschild
Obligations."
C. Rothschild has consented to the Merger provided
that upon the effectiveness of the Merger, Dakota will provide
its unlimited guaranty of payment and performance of the
USMX/Rothschild Obligations until achievement of Completion, as
such term is defined in the USMXAK Credit Agreement, whereupon
such guaranty by Dakota will be limited in recourse to the shares
of USMX pledged by Dakota to secure such guaranty.
AGREEMENT
NOW, THEREFORE, Guarantor hereby covenants and agrees
to and with Lender as follows:
1. Condition Precedent. This Guaranty is subject to
satisfaction of the condition precedent that the Merger shall
have occurred. Until satisfaction of the foregoing condition
precedent, Guarantor shall have no obligations of any kind
hereunder to Lender or any other Person.
2. Defined Terms. Unless otherwise defined herein,
capitalized terms used in this Guaranty have the meanings
assigned to such terms in the Credit Agreements.
3. Guaranty.
(a) Guarantor hereby guarantees, absolutely and
unconditionally, the prompt and complete payment and performance
of the USMX/Rothschild Obligations when due (whether at the
stated maturity, by acceleration or otherwise) and at all times
thereafter, provided that, on or after Completion of the Project,
if no Default or Event of Default is outstanding, Lender's sole
recourse under this Guaranty shall be to the Pledged Collateral
(defined in the Pledge and Security Agreement of even date
herewith between Guarantor and Lender (the "Pledge Agreement").
Guarantor also agrees to pay any and all expenses (including
attorneys' fees and disbursements) related to or arising from
Lender's enforcement of this Guaranty. The guarantees and
obligations of this Section 3(a) are referred to collectively as
the "Guaranteed Obligations".
(b) Guarantor agrees that this Guaranty
constitutes a guaranty of payment and not of collection, and
Lender shall not be obligated to initiate, pursue or exhaust any
form of recourse or obtain any judgment against either of
Borrowers or others (including other guarantors) or to realize
upon or exhaust any collateral security held by or available to
Lender before being entitled to payment from the undersigned
hereunder. The liability of Guarantor shall not be limited,
diminished or affected by (i) any condition of either of
Borrowers or Guarantor (including bankruptcy, liquidation or
dissolution) or failure by Lender to file or enforce any claim
against the estate (in administration, bankruptcy, dissolution or
otherwise) of either of Borrowers, Guarantor or others, (ii) the
fact that recovery from either of Borrowers or any other person
is barred by any statute of limitations, invalidity, illegality,
unenforceability or for any other reason or that either of
Borrowers or Guarantor has valid defenses, claims or offsets
(whether at law, in equity or by agreement), (iii) any amendment,
modification or change of any kind or nature to the Credit
Agreements, the Loan Documents, or this Guaranty, or any
Instrument or understanding executed or entered into pursuant to
the Credit Agreements, (iv) any adjustment, indulgence,
forbearance or compromise granted by Lender to either of
Borrowers or Guarantor, or (v) any other circumstance which might
otherwise constitute a legal or equitable discharge of a
guarantor. Guarantor renounces all benefits of discussion and
division and waives diligence, presentment, protest, notice of
dishonor, protest or default, demand for payment upon Borrowers
or the undersigned, notice of acceptance of this Guaranty, notice
of any addition to or increase or decrease in the Obligations,
and all other notices and demands whatsoever.
(c) This Guaranty is a continuing guaranty, and
it will not be discharged until payment in full of all of the
Guaranteed Obligations and cancellation of this Guaranty by
Lender ("Termination") and will remain in full force and effect
notwithstanding any interruption in the business relations
between Borrowers and Lender or any increase or decrease from
time to time in the amount of the Obligations.
4. Guaranty Secured. Payment and performance under
this Guaranty is secured by pledges, encumbrances and security
interests in certain collateral pursuant to the Pledge Agreement.
Reference is hereby made to the Pledge Agreement for a definition
and description of such collateral so encumbered to secure all
the obligations of Guarantor hereunder.
5. Lender's Rights. Guarantor authorizes Lender,
without notice or demand and without affecting Guarantor's
liability hereunder, to take and hold security for the payment of
this Guaranty and/or any of the Guaranteed Obligations, and
exchange, enforce, waive and release any such security; and to
apply such security and direct the order or manner of sale
thereof as Lender, in its discretion, may determine; and to
obtain a guaranty of the Guaranteed Obligations from any one or
more Persons and at any time or times to enforce, waive,
rearrange, modify, limit or release any of such other Persons
from their obligations under such guaranties. Guarantor hereby
acknowledges and agrees that the obligations of all Persons to
pay and satisfy the Guaranteed Obligations pursuant to their
respective agreements or guaranties (including Guarantor's
obligations hereunder) shall be joint and several.
6. Effectiveness; Reinstatement. This Guaranty shall
continue to be effective, or be reinstated, as the case may be,
if at any time payment, or any part thereof, of any of the
Guaranteed Obligations is rescinded or must otherwise be restored
or returned by Lender upon the insolvency, bankruptcy, dissolu
tion, liquidation or reorganization of either of Borrowers, or
upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, Borrowers
or any substantial part of their respective property, or
otherwise, all as though such payments had not been made.
Borrowers and Lender may modify, rearrange, extend for any period
and/or renew from time to time the Guaranteed Obligations without
notice to Guarantor, and in such event the obligations of
Guarantor with respect to the Guaranteed Obligations shall not be
released, discharged or reduced and Guarantor will remain fully
bound hereunder on such Guaranteed Obligations. This Guaranty
may be enforced by Lender and any subsequent holder of the
Guaranteed Obligations and shall not be discharged by the
assignment or negotiation of all or a part of the Guaranteed
Obligations.
7. Default. If either of Borrowers has failed to pay
or perform when due the Guaranteed Obligations or there is an
event with respect to Guarantor that would require or permit the
acceleration pursuant to either of the Credit Agreements of any
outstanding loan, then all of the Guaranteed Obligations shall be
immediately due and payable by Guarantor, regardless of whether
the payment of the Guaranteed Obligations has been accelerated or
either of Borrowers is in default with respect to the Guaranteed
Obligations.
8. Merger. This Guaranty shall not be affected by
any change in the name of either of Borrowers, or by the
acquisition of either of Borrowers' business by any person, firm
or corporation, or by any change whatsoever in the objects,
capital structure or constitution of Borrowers, or by any merger,
amalgamation or consolidation of either of Borrowers with any
corporation, or by any dissolution or liquidation of either of
Borrowers, but shall, notwithstanding the happening of any such
event, continue to apply to all the Obligations whether
theretofore or thereafter incurred, and in this instrument the
word "Borrowers" shall include every such person, firm, partner
and corporation and all successors of the customer. Guarantor
shall promptly notify Lender of any change or event described in
this Section 8.
9. No Waiver. Lender shall not be obligated to
exercise any right, power or privilege hereunder, and no failure
to exercise and no delay in exercising, on the part of Lender,
any such right, power or privilege shall operate as a waiver
thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. No notice to or demand on
Guarantor shall be deemed to be a waiver of the right of Lender
to take further action without notice or demand as provided
herein. No waiver shall be applicable except in the specific
instance for which given, nor in any event shall any modification
or waiver of any provision of this Guaranty be effective unless
in writing and signed on behalf of Lender.
10. Representations and Warranties.
(a) Guarantor hereby represents and warrants to
Lender that:
(i) Benefit to Guarantor: Guarantor's
guaranty pursuant to this Guaranty reasonably may be
expected to benefit, directly or indirectly, Guarantor;
(ii) Familiarity and Reliance: Guarantor is
familiar with, and has independently reviewed the books
and records regarding, the financial condition of
Borrowers and is familiar with the value of any and all
collateral intended to be created as security for the
Guaranteed Obligations. Notwithstanding the foregoing,
Guarantor is not relying on such financial condition or
the collateral as an inducement to enter into this
Guaranty;
(iii) No Representation: Neither Lender nor
any other person, corporation or entity has made any
representation, warranty or statement to Guarantor with
regard to Borrowers or their respective financial
condition in order to induce Guarantor to execute this
Guaranty; and
(iv) Guarantor's Financial Condition: As of
the date hereof and after giving effect to this
Guaranty and the contingent liability evidenced hereby,
Guarantor is and will be solvent, and has assets which,
fairly valued, exceed its obligations, liabilities and
debts.
11. Guarantor's Covenants.
(a) Guarantor hereby covenants and agrees with
Lender to deliver to Lender in a timely and
complete manner all financial and other
information concerning Guarantor which is
required to be provided by Borrower to Lender
pursuant to the USMXAK Credit Agreement.
(b) Guarantor hereby covenants and agrees with
Lender to cause USMX and Borrower to perform
all of the Guaranteed Obligations under the
USMX Guaranty and the USMXAK Credit
Agreement, respectively, or under the other
documents and instruments included in the
Guaranteed Obligations to which USMX or
Borrower, respectively, are parties.
(c) Guarantor hereby covenants and agrees not to
accelerate the due date of the USMX/Dakota
Obligations or to exercise any rights it may
have with respect to the Dakota Collateral
based upon any failure to perform or other
default by USMX prior to the full
satisfaction and discharge of the
USMX/Rothschild Obligations.
12. Notices. All notices, demands, instructions or
other communications required or permitted to be given or made to
Guarantor or Lender shall be given in accordance with the
provisions of the USMXAK Credit Agreement at the addresses set
forth on the signature pages hereof.
13. Amendments. No amendment or waiver of any
provision of this Guaranty, nor consent to any departure by
Guarantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by Lender, and, in the case
of any amendment, by Guarantor, and then such waiver or consent
shall be effective only in the specific instance and for the
specific purpose for which given.
14. Successor and Assigns. This Guaranty shall extend
to and inure to the benefit of Lender and its successors and
assigns, and every reference herein to Guarantor is a reference
to, and shall be construed as including, Guarantor and the
successors and assigns of Guarantor, to and upon all of whom this
Guaranty and agreement shall extend and be binding.
15. Further Assurances. Guarantor agrees to execute
and deliver to Lender all such documents and to take all such
other action as may be reasonably requested by Lender to more
fully vest in and assure Lender of all of the rights, powers,
privileges and remedies herein intended to be granted to or
conferred upon Lender.
16. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
COLORADO, INCLUDING THE CONFLICTS OF LAW PROVISIONS THEREOF.
17. VENUE; SUBMISSION TO JURISDICTION. FOR THE
PURPOSE OF ASSURING THAT LENDER MAY ENFORCE ITS RIGHTS UNDER THIS
GUARANTY, GUARANTOR, FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS,
HEREBY IRREVOCABLY (A) AGREES THAT ANY LEGAL OR EQUITABLE ACTION,
SUIT OR PROCEEDING AGAINST GUARANTOR, OR BY GUARANTOR AGAINST
LENDER, ARISING OUT OF OR RELATING TO THIS GUARANTY, OR ANY
TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE SUBJECT MATTER
OF ANY OF THE FOREGOING SHALL BE INSTITUTED ONLY IN STATE AND
FEDERAL COURTS LOCATED IN THE CITY AND COUNTY OF DENVER,
COLORADO; (B) WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO SUCH VENUE OF ANY SUCH ACTION, SUIT OR PROCEEDING OR ANY
CLAIM OF FORUM NON CONVENIENS; (C) SUBMITS ITSELF TO THE
NONEXCLUSIVE JURISDICTION OF ANY SUCH STATE OR FEDERAL COURT FOR
PURPOSES OF ANY SUCH ACTION, SUIT OR PROCEEDING; AND (D) WAIVES
ANY IMMUNITY FROM JURISDICTION TO WHICH IT MIGHT OTHERWISE BE
ENTITLED IN ANY SUCH ACTION, SUIT OR PROCEEDING WHICH MAY BE
INSTITUTED IN ANY SUCH STATE OR FEDERAL COURT, AND WAIVES ANY
IMMUNITY FROM THE MAINTAINING OF AN ACTION AGAINST IT TO ENFORCE
IN ANY SUCH STATE OR FEDERAL COURT OR ELSEWHERE, ANY JUDGMENT FOR
MONEY OBTAINED IN ANY SUCH ACTION, SUIT OR PROCEEDING AND, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, ANY IMMUNITY FROM EXECUTION.
GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY OF THE AFORESAID
COURTS BY THE MAILING OF COPIES OF SUCH PROCESS TO THE BORROWERS,
BY CERTIFIED OR REGISTERED MAIL, AT THE ADDRESS REFERENCED IN
SECTION 12 HEREOF.
18. WAIVER OF JURY TRIAL. GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LEGAL OR
EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED HEREBY OR THE
SUBJECT MATTER OF ANY OF THE FOREGOING.
19. ENTIRE AGREEMENT. THIS WRITTEN GUARANTY
REPRESENTS THE FINAL AGREEMENT BETWEEN LENDER AND GUARANTOR WITH
RESPECT TO THE MATTERS SET FORTH HEREIN AND MAY NOT BE CONTRA
DICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENT OF LENDER AND GUARANTOR. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN LENDER AND GUARANTOR RELATING TO THIS GUARANTY
OR THE MATTERS SET FORTH HEREIN.
[Signatures on following page]
IN WITNESS WHEREOF, the undersigned has caused this
Guaranty to be duly executed and delivered as of the 28th day of
July, 1997.
DAKOTA MINING CORPORATION
By:
Alan R. Bell
President
410 Seventeenth Street, #2450
Denver, CO 80202
Attn: Robert R. Gilmore
FAX: (303) 573-1012
N M ROTHSCHILD & SONS LIMITED
By:
Name: Brian T. Dolan
Title: Attorney-in-Fact
Address:
c/o Rothschild Denver Inc.
370 Seventeenth Street, #3020
Denver, CO 80202
Attn: Mark Williamson
FAX: (303) 607-0998
