SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): September 22, 1997
Dakota Mining Corporation
(Exact Name of Registrant as Specified in its Charter)
Canada 0-17583 84-1094683
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
410 Seventeenth Street, Suite 2450
Denver, Colorado 80202
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (303) 573-0221
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 5. Other Events
On September 25, 1997, Dakota Mining Corporation issued a press release
which is included as an exhibit to this report.
Item 7.
(c) Exhibits
a. Press release dated September 25, 1997.
b. Third Amendment To Credit Agreement.
c. Ratification and Confirmation
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 hereunto duly authorized.
DAKOTA MINING CORPORATION
Date: September 29, 1997 By: \s\ Alan R. Bell
----------------------------------
Alan R. Bell, President and Chief
Executive officer
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Exhibit a.
DAKOTA MINING CORPORATION ENTERS INTO AMENDED CREDIT ARRANGEMENT
RELATING TO ITS ILLINOIS CREEK PROJECT
DENVER, CO - September 25, 1997. Dakota Mining Corporation
("Dakota") announced today an amended credit arrangement with N M
Rothschild & Sons Limited ("Rothschild"). Rothschild is the
lender for the Illinois Creek Project in Alaska operated by
Dakota's subsidiary, USMX of Alaska, Inc. ("USMX-AK").
Pursuant to the revised agreement, USMX-AK has liquidated certain
hedging contracts securing the loan in the amount of $2 million,
which proceeds have been paid to D. H. Blattner & Son, the
principal contractor at the Project, for services at the Project.
USMX-AK has agreed to continue to make regular payments to
Blattner and Blattner has agreed to continue its services to
complete all planned mining and related activities scheduled for
the remainder of 1997, with the end of season now estimated to be
near October 31, 1997. Such planned activities include the
placement on the leach pad of sufficient mine material to provide
an insulating barrier that will allow USMX-AK to continue the
leaching and gold recovery processing throughout the upcoming
winter months.
USMX-AK has agreed with Rothschild that it will make a
prepayment of the principal amount of the loan in an amount of
not less than the $2 million paid to Blattner not later than
December 31, 1997. The Company forecasts that this payment can
be made if its Project production schedule is met; however, USMX-
AK will be subject to all of the risks inherent in a relatively
new mining operation. The total balance of the Rothschild loan
is currently $20.5 million. USMX-AK will also be required to
continue to make regular interest payments. Additional principal
payments are to be made in accordance with a revised amortization
schedule, with an aggregate of 65% of the principal amount to be
paid in periodic installments by December 31, 1998.
All revenues from the Project will be placed in a Proceeds
Account. Dakota will be permitted to withdraw $55,000 per month
for its overhead costs which are not directly related to the
Project. Other than these monthly payments and payment of direct
Project costs, USMX-AK may not pay any dividends or other
distributions to Dakota until all principal and interest payments
on the loan have been made to Rothschild. Accordingly, Dakota
will not be able to use any of the Project revenues for its
working capital or for other mining activities until Rothschild
has been repaid fully.
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In the agreement, USMX-AK and Rothschild have confirmed that
certain events of default are currently outstanding and that the
agreement does not constitute a waiver of any of Rothschild's
rights. The events of default include USMX-AK's inability to
timely pay its contractors, principally Blattner, and the delay
in mechanical completion of the Project. Exceptionally dry
weather conditions in the Spring delayed flooding of the heap and
caused the process plant to operate at less than 10% of its
nominal capacity of 1,000 gallons per minute ("gpm"). The Plant
is now operating at approximately 900 gpm.
As previously announced in August 1997, Dakota suspended ore
mining activities at its Gilt Edge Mine located near Deadwood,
South Dakota pending completion of an environmental impact study.
This delay, together with current low gold prices and the slower
than expected start-up of the Illinois Creek Project, have had an
adverse effect upon Dakota's liquidity and financial condition.
Dakota has ongoing needs for cash to fund administrative expenses
and permitting, construction and environmental compliance
activities at its Gilt Edge and Stibnite Mines. Management is
presently investigating various potential sources of new
financing, including the sale of certain assets, sale of equity
and borrowing arrangements. Dakota has no firm arrangements or
understandings for additional funding and no assurance can be
given that Dakota will be successful in obtaining such additional
funding, or that if arrangements are made, they will be on terms
favorable to the Company.
This news release contains forward-looking information, which
involves a degree of risk and uncertainty due to various factors
affecting Dakota's business, including, but not limited to, gold
price volatility, ore grade and recovery rates, exploration
results, mining and processing conditions and costs, and
compliance with regulatory and permitting requirements. For a
more detailed discussion of such risks and other factors, see
Dakota's filings with The Securities and Exchange Commission,
particularly those on Forms 10-K, 10-Q, 8-K and S-4.
For further information, please contact Alan R. Bell, President
and Chief Executive Officer, John R. Haigh, Vice President,
Investor Relations (303) 573-0221, FAX (303) 573-1012.
<PAGE>
Exhibit b.
AGREEMENT
Each reference to September 19,1997 contained in the THIRD AMENDMENT
TO CREDIT AGREEMENT by and between USMX OF ALASKA, INC. and N M
ROTHSCHILD & SONS LIMITED shall be changed to September 22, 1997.
BORROWER
USMX OF ALASKA, INC.
By:
Name:
Title:
LENDER
N M ROTHSCHILD & SONS LIMITED
<PAGE>
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Third Amendment")
is made and entered into as of September 19, 1997, by and between N M
ROTHSCHILD & SONS LIMITED, a company organized and existing under the laws
of England with an address at New Court, St. Swithin's Lane, London EC4P
4DU ("Lender"), and USMX OF ALASKA, INC., a company organized and existing
under the laws of Alaska with an address at 1560 Broadway, Suite 880,
Denver, Colorado 80202 ("Borrower") pursuant to Section 11.1 of that
certain Credit Agreement dated as of July 11, 1996, between Lender and
Borrower (as amended by the First Amendment to Credit Agreement, the "AK
Credit Agreement").
R E C I T A L S
I. Pursuant to the AK Credit Agreement, Lender agreed, under
certain terms and conditions, to loan to Borrower up to $19,500,000 to be
used to finance the construction and initial operation of the Illinois
Creek, Alaska gold mining facility. Pursuant to a Second Amendment to
Credit Agreement dated as of July 28, 1997 (the "Second Amendment") the
amounts loaned to Borrower were increased to $20,500,000 and certain other
modifications were made to the AK Credit Agreement. The AK Credit
Agreement, as amended by the Second Amendment, is referred to as the
"Existing Credit Agreement."
II. Since the date of the Second Amendment, certain developments
at and with respect to the Project have occurred and Lender and Borrower
desire to further modify the Existing Credit Agreement to respond thereto
as provided in this Third Amendment.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual provisions set
forth below, the parties agree as follows:
A. Definitions. Capitalized terms used herein but not
otherwise defined shall have the meanings given thereto in the Existing
Credit Agreement.
B. Status of Loan Documents. Borrower reaffirms its liability
for all of the obligations evidenced or secured by the Loan Documents, and
acknowledges that Borrower has no defenses to enforcement of the Loan
Documents in accordance with their respective terms and no basis for
asserting any offset or other claim against Lender.
C. Amendment of Existing Credit Agreement. The Existing Credit
Agreement is hereby amended as follows:
1. Schedule 3.6(b) "Amortization Schedule" to
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the Existing Credit Agreement is hereby deleted in its
entirety and the form of Schedule 3.6(b) "Amortization
Schedule appended hereto, is substituted therefore and
shall constitute the Amortization Schedule under the
Existing Credit Agreement, as amended hereby, for all
purposes.
2. Section 1.1 of the Existing Credit
Agreement is hereby amended as follows:
a. The following defined terms are
hereby added to Section 1.1:
"Blattner Payment" means the amount of
$2,000,000, representing the Hedging Liquidation
Proceeds, to be paid by Borrower to D. H. Blattner
& Sons, a contractor at the Project, for amounts
due for services rendered at the Project.
"Dakota" means Dakota Mining Corporation, a
corporation continued under the Canada Business
Corporation Act, of which USMX is a wholly owned
subsidiary, and of which Borrower is an indirect
wholly-owned subsidiary.
"Dakota Project Costs" means Dakota Project
Overhead Costs and Dakota Project Direct Costs.
"Dakota Project Overhead Costs" means the
amount of $55,000 per calendar month commencing
September 1, 1997, or such lesser amount as
Borrower may establish from time to time by notice
to Lender, which amount is agreed by Borrower and
Lender to be the amount which may be included in
Project Operating Costs and paid by Borrower to
Dakota as Project Operating Costs pursuant to
Section 3.14 hereof. Such amount represents the
agreed level of reimbursement of Dakota by
Borrower for all costs associated with or
attributable to services provided by Dakota to or
for the benefit of the Project, including salaries
and benefits of officers, directors and employees
of Dakota, travel expenses, telephone and other
communication expenses and other out-of-pocket
expenses of Dakota which are not Dakota Project
Direct Costs.
"Dakota Project Direct Costs" means out of
pocket expenditures by Dakota on or after
September 1, 1997, to Persons other than
shareholders, officers, directors or employees of
Dakota, of which reasonable evidence is provided
to Lender, for insurance payments, real or
personal property tax payments, bonding or other
surety expenses due after September 1, 1997, and
other expenses approved by Lender in its sole
discretion, directly relating to the Project,
<PAGE>
which have been paid by Dakota rather than
Borrower for administrative convenience."
"Hedging Liquidation Proceeds" means a
maximum of amount of $2,000,000, to be realized by
Borrower upon liquidation of certain Price Fixing
Commitments in effect with Lender.
"Payable Aging Report" means a report, in
form reasonably acceptable to Lender, which
identifies all accounts payable or other pending
payment obligations of Borrower with respect to
the Project or otherwise, with the aging of such
accounts payable or other payment obligations
specified in such report.
"Working Capital Balance" shall refer to an
amount to be retained as a credit balance in the
Proceeds Account, which amount shall be $500,000.
b. The defined term "Project Operating Costs" is
hereby amended by deleting "and" from the end of clause (b)
thereof, by deleting the period at the end of clause (c) thereof
and substituting ": and" therefore, and by adding the following
thereto:
"(d) Dakota Project Costs."
c. The defined terms "CapEx Retention Amount,"
"Start-up Retention Amount," "Interest Retention Amount" and
"Retention Amount" are hereby deleted from Section 1.1.
3. Section 3.14 of the Existing Credit Agreement is
hereby amended as follows:
a. The phrase "the proceeds derived from the
exercise of any Hedging Agreement," is deleted from the second
sentence in Paragraph (a) thereof and the following phrase is
substituted therefor:
"the proceeds derived from the exercise of any
Hedging Agreement, or from the liquidation of any
Price Fixing Commitment, including the Hedging
Liquidation Proceeds,"
b. The second and third paragraphs in Paragraph
(a) thereof are deleted and the following are substituted
therefor:
"Disbursements or withdrawals from the
Proceeds Account will be made during the first ten
days following the end of each calendar month (or
at other times as may be approved by Lender in its
sole discretion) and only pursuant to a Request
for Disbursement in the form of Exhibit B hereto
<PAGE>
and which otherwise indicates the manner in which
such disbursement will be applied in accordance
with the following provisions of this Section
3.14.
Credit balances in the Proceeds Account in
excess of the Working Capital Balance, or such
lesser credit balance as may be approved by Lender
in its sole discretion, shall be applied as
follows:
First, to payment of Project Capital Costs
and Project Operating Costs incurred by
Borrower in accordance with the Development
Plan;
Second, to payment of fees or other amounts
due Lender hereunder or under any of the Loan
Documents which are due and payable and which
remain unpaid;
Third, to payment of interest due with
respect to the Loans;
Fourth, to prepayment of the Principal Amount
of the Loans until a prepayment in an amount
equal to the Blattner Payment has been made,
with all such prepayments to be allocated to
the installment payments of the Principal
Amount of the Loans set forth in the
Amortization Schedule in order of maturity;
and
Fifth, to payment of the Principal Amount of
the Loans, with all such payments to be
allocated to the installment payments of the
Principal Amount of the Loans set forth in
the Amortization Schedule in order of
maturity.
4. Section 5.7 and 5.8 are hereby added to the
Existing Credit Agreement, as follows:
"5.7 Positive Hedging Agreement Values as
Collateral. Borrower and Lender agree that if
Hedging Agreements, including Price Fixing
Commitments, are marked to market from time to
time and have positive liquidation values, such
positive values constitute a portion of the
Collateral, are subject to the Security Documents,
and may not be realized by Borrower (without the
express prior written consent of Lender) except by
physical delivery of Gold produced from the
Project in accordance with the terms thereof.
5.8 Blattner Payment. Lender hereby
consents to the liquidation of Price Fixing
Commitments of Borrower in the manner agreed by
Borrower and Lender in an amount sufficient to
generate proceeds sufficient to make the Blattner
<PAGE>
Payment. Borrower agrees to utilize the proceeds
of such liquidation of Price Fixing Commitments
solely for purposes of making the Blattner Payment
not later than September 19, 1997. Borrower
agrees to make prepayments of the Principal
Amounts of the Loans, as provided in Section
3.14(a) or otherwise, in an amount not less than
the $2,000,000 Blattner Payment, not later than
December 31, 1997."
5. Section 8.2(h) is hereby amended by adding the
following sentence thereto:
"In addition, not later than the fifth day of each
month, or at any other time as reasonably
requested by Lender, Borrower shall submit to
Lender a Payable Aging Report."
6. Section 9.9 of the Existing Credit Agreement is
hereby deleted in its entirety and the following is substituted
therefor:
9.9 Restriction on Dividends, Redemptions
and Other Distributions and Payments to Certain
Persons. Other than as provided in Section
3.14(a), Borrower shall not declare, order, pay or
make any dividend or other distribution or
payment, directly or indirectly, in respect of any
shares of any class of stock of Borrower, now or
hereafter outstanding, or with respect to any
Indebtedness or other obligation of Borrower to
USMX or Dakota, now existing or hereafter arising.
7. Section 10.1(a) of the Existing Credit Agreement
is hereby deleted in its entirety and the following is
substituted therefor:
(a) Nonpayment. Borrower shall fail to
pay any Principal Amount when due hereunder
(whether at stated maturity or by acceleration or
otherwise), or shall fail to make prepayments of
the Principal Amount due hereunder between October
1, 1997 and December 31, 1997 in an aggregate
amount at least equal to the Blattner Payment, or
shall fail to pay interest hereunder or on the
Notes when due."
8. Each and every reference to "Note" in the Existing
Credit Agreement is hereby changed to "Notes."
D. Ratification of Existing Credit Agreement and
Other Loan Documents. As modified by this Third Amendment, the
Existing Credit Agreement and all other Loan Documents are in all
respects ratified, approved and confirmed, and as so amended,
shall remain in full force and effect. From and after the date
hereof, all references to the "Credit Agreement" or to any Loan
Document in any Loan Document or in any Related Document shall be
references to the Existing Agreement or to the Loan Documents,
respectively, as amended by this Third Amendment.
<PAGE>
E. Reaffirmation. Borrower hereby reaffirms each
representation, warranty, and covenant contained in the Existing
Credit Agreement with the same force and effect as if each were
separately stated herein and made as of the date hereof, except
(i) for such made as of a certain date, which are hereby
reaffirmed as of such date, (ii) to the extent of any variance
therefrom disclosed on Exhibit A to the Certificate of Borrower
delivered to Lender pursuant to Paragraph H. hereof, and
(iii) and as amended in this Third Amendment..
F. Title Matters. Borrower represents and warrants
to Lender that, except as previously disclosed to Lender, it is
the sole owner of the Mining Properties, and that the Mining
Properties are free and clear of all material defects of title or
Liens.
G. Defaults under the Loan Documents. Borrower
acknowledges and agrees that any Default by Borrower under this
Third Amendment shall constitute a Default under each of the Loan
documents, entitling Lender to exercise any or all rights and
remedies provided for in the Loan Documents. Borrower and Lender
confirm that certain Events of Default are currently outstanding
under the Existing Credit Agreement and other Loan Documents. It
is expressly agreed that nothing contained in this Third
Amendment, and no other action by the Lender through the date
hereof, constitutes the waiver or other relinquishment of any
rights by Lender with respect to any such Events of Default,
whether or not any such Events of Default are known to Lender.
H. Conditions Precedent. The obligations of the
Lender under this Third Amendment are subject to the conditions
precedent that the Lender shall have received each of the
following Instruments not later than 11:00 a.m. (Denver time) on
September 19, 1997:
1. An Instrument, executed by each of USMX and
Dakota, inform satisfactory to the Lender in its sole
discretion, ratifying and confirming the Guaranty of
each such Person of all Obligations of the Borrower;
AND
2. A certificate from an officer of the Borrower
evidencing the adoption by the Board of Directors of
the Borrower of resolutions, in form and substance
reasonably satisfactory to the Lender, authorizing the
execution, delivery and performance of this Third
Amendment by the Borrower.
I. Additional Agreements of Borrower. Not later than
September 24, 1997 the Borrower shall have provided to the Lender
an opinion of Bearman, Talesnick and Clowdus, substantially in
the form of the opinion provided by such firm in connection with
the Second Amendment, and otherwise in form reasonably acceptable
to the Lender, addressing the corporate status, corporate
authority, corporate action and enforceable nature of this Third
Amendment with respect to the Borrower, and of the ratification
of guarantees by USMX and Dakota.
J. Successors and Assigns. Nothing in this Third
Amendment shall be construed as waiving or modifying any
provision of the Existing Credit Agreement prohibiting transfer
of the Mining Properties without the prior written consent of
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Lender, or making any such transfer a Default under the Existing
Credit Agreement. Subject to the preceding sentence, this Third
Amendment shall bind and benefit the parties and their respective
heirs, personal representatives, successors and assigns.
K. Governing Law; Severability; Merger. This Third
Amendment shall be governed by and construed in accordance with
the laws of the State of Colorado. Wherever possible, each
provision of the Loan Documents is to be interpreted so as to be
effective and valid under applicable law. If any provision of
any Loan Document is for any reason and to any extent, invalid or
unenforceable, then neither the remainder of the Loan Document in
which such provision appears, nor any other Loan Document, nor
the application of the provisions to other persons or entities or
in other circumstances, shall be affected by such invalidity or
unenforceability. The Existing Credit Agreement, together with
the other Loan Documents, all as amended and modified by the
Related Documents, represent the final agreement between the
parties pertaining to the subject matter thereof.
L. Execution in Counterparts. This Third Amendment
may be executed in two or more counterparts, all of which shall,
upon execution of identical counterparts by all parties,
constitute a single agreement. Each party agrees to accept the
facsimile signature (with original to follow) of the other party,
and to be bound by its facsimile signature.
Signed and delivered as of the date first mentioned above.
BORROWER
USMX OF ALASKA, INC.
By:
Name:
Title:
LENDER
PER PRO
N M ROTHSCHILD & SONS LIMITED
<PAGE>
Exhibit c.
Ratification and Confirmation
RATIFICATION AND CONFIRMATION
THIS RATIFICATION AND CONFIRMATION (the "Ratification") is made this
19th day of September, 1997 by DAKOTA MINING CORPORATION, a corporation
continued under the Canada Business Corporation Act ("Dakota") and USMX,
INC., a Delaware corporation ("USMX") for the benefit of N M ROTHSCHILD &
SONS LIMITED, a company organized and existing under English law ("NMR").
RECITALS
A. USMX of Alaska, Inc., an Alaska corporation ("USMXAK") which is a
wholly owned subsidiary of USMX, is a party to and borrower under a Credit
Agreement dated as of July 11, 1996, as amended by a First Amendment to
Credit Agreement, as further amended by a Second Amendment to Credit
Agreement dated as of July 28, 1997, and as further amended by a Third
Amendment to Credit Agreement dated as of September 19, 1997 (the "Third
Amendment to Credit Agreement," with such Credit Agreement and all
amendments thereto referred to as the "Credit Agreement").
B. The obligations of USMXAK under the Credit Agreement are
guaranteed by Dakota pursuant to a Guaranty dated as of July 28, 1997, and
the obligations of Dakota under such Guaranty are secured by a Pledge and
Security Agreement executed by Dakota, dated as of July 28, 1997, with such
Guaranty and Pledge and Security Agreement, and any modifications thereof,
referred to as the "Dakota Credit Support Documents."
C. The obligations of USMXAK under the Credit Agreement are
guaranteed by USMX pursuant to a Guaranty dated July 11, 1996, as amended
by an Agreement dated as of July 28, 1997, and the obligations of USMX
under such Guaranty are secured by a Pledge and Security Agreement dated as
of July 11, 1996 and by certain Collateral Assignments of Deeds of Trust
dated as of July 11, 1996, as such Pledge and Security Agreement and
Collateral Assignments of Deeds of Trust were modified by the Agreement
dated as of July 28, 1997, with such Guaranty, Pledge and Security
Agreement, Collateral Assignments of Deeds of Trust and all other documents
and instruments executed by USMX in connection with or as contemplated by
the Credit Agreement, and any modifications thereof, referred to
collectively as the "USMX Credit Support Documents."
D. Dakota and USMX desire hereby to evidence their
agreement that the Dakota Credit Support Documents and USMX
Credit Support Documents remain in full force and effect in
accordance with their terms and apply to all obligations of
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USMXAK under the Credit Agreement, including the Third Amendment
to Credit Agreement, and Loan Documents associated therewith.
AGREEMENT
NOW, THEREFORE, in consideration of NMR agreeing to the
Third Amendment to Credit Agreement, Dakota and USMX agree as
follows:
1. Dakota Ratification and Confirmation. Dakota hereby
(a) ratifies and confirms the Dakota Credit Support Documents,
(b) agrees that the Dakota Credit Support Documents apply to all
obligations of USMXAK under the Credit Agreement, including the
Third Amendment to Credit Agreement, and under all Loan Documents
contemplated thereby, and (c) agrees and confirms that the Dakota
Credit Support Documents remain in full force and effect in
accordance with their terms.
2. USMX Ratification and Confirmation. USMX hereby (a)
ratifies and confirms the USMX Credit Support Documents, (b)
agrees that the USMX Credit Support Documents apply to all
obligations of USMXAK under the Credit Agreement, including the
Third Amendment to Credit Agreement, and under all Loan Documents
contemplated thereby, and (c) agrees and confirms that the USMX
Credit Support Documents remain in full force and effect in
accordance with their terms.
3. Authority; Binding Effect. Each of Dakota and USMX
represents to NMR that it has the authority to execute and
deliver this Ratification, that it has duly executed and
delivered this Ratification, and that this Ratification is
binding on and enforceable against it in accordance with its
terms.
4. Inurement. This Ratification is binding upon and will
inure to the benefit of the successors and assigns of Dakota,
USMX and NMR, respectively.
IN WITNESS WHEREOF, the undersigned have executed this
Ratification on September 19, 1997.
DAKOTA MINING CORPORATION
By:
Name:
Title:
USMX, INC.
By:
Name:
Title:
