SECURITIES AND EXCHANGE COMMISSION
Washington, DC
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: JULY 7, 1998
GOLDEN EAGLE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Colorado 0-23726 84-1116515
(State of other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
4949 South Syracuse Street, Suite 300, Denver, Colorado 80237
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 694-6101
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Item 1. Changes in Control of Registrant
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None
Item 2. Acquisition or Disposition of Assets
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None
Item 3. Bankruptcy or Receivership
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None
Item 4. Changes in Registrant's Certifying Accountant
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None
Item 5. Other Events
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a) Change in Corporate Counsel
Registrant has again retained the services of Michael A. Littman, Esq. as
its counsel, whose address is 10200 W. 44th Avenue, Suite 400, Wheat Ridge,
Colorado 80033; phone (303) 422-8127; fax (303) 422-7796. Registrant has
terminated the services of Russell C. Burk as its counsel.
b) SEC Civil Action
On May 7, 1998, the SEC filed a civil action (SEC vs. Golden Eagle
International, Inc., No. 98-Z-1020 [D. Colo.]) against Registrant;
Registrant's former president, Ron Knittle (resigned in May of 1996);
Registrant's current secretary/treasurer and a director, Mary Erickson;
Registrant's former public relations firm (had not performed work for
Registrant for over 2 years); and two individuals, regarding acts which had
occurred between 1994 and mid-1996. Among the allegations made in the SEC's
complaint were that Registrant and the individuals involved had issued
press releases which were false and misleading in an attempt to hype the
value of the Registrant's stock.
c) Consultant and Report
Mr. Guido Paravicini, M.A., Eng., an independent consulting mining engineer
and geophysicist, was retained by Registrant in late 1996 to carry out a
literature search regarding the Cangalli concessions under the control of
Registrant's subsidiary at the time, Golden Eagle Bolivia Mining, S.A., as
well as the surrounding Tipuani Mining District. Registrant also retained
Mr. Paravicini to carry out a field sampling program; to perform geological
mapping and interpretation; to report resources and reserves, if any, found
on the Cangalli concessions; and to investigate Registrant's subsidiary's
legal right to mine the property under study. Mr. Paravicini produced a
report entitled, "Summary Geological Report on the Gold Deposits at
Cangalli, Bolivia" (January 1997), and the final report entitled,
"Technical Geological Report on the Gold Deposits at Cangalli, Bolivia"
(April 1997). At the time Mr. Paravicini was retained, in late 1996,
Registrant performed substantial due diligence on Mr. Paravicini's
credentials, including receiving photocopies of all of his diplomas and
certificates, as well as independently verifying that Mr. Paravicini had
studied at the indicated universities. Professional references were
provided and investigated, and Mr. Paravicini's general reputation for
competence and expertise in the community among his peers was also
confirmed.
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At Registrant's request, Mr. Paravicini continued his field sampling work
and geological mapping and interpretation from mid-1997 through April 1998.
On May 21, 1998, Mr. Paravicini delivered to Registrant's offices in La
Paz, Bolivia a copy of his geological report on his findings entitled,
"Technical Geological and Sampling Report: Resources and Reserves on the
Gold Deposits at Cangalli, Bolivia." In addition, Mr. Paravicini
communicated the results of his report to Mr. Terry C. Turner, Registrant's
president. Mr. Turner interviewed Mr. Paravicini in detail regarding the
substance of the report, as well as the nature of the sampling; chain of
custody of those samples; assay procedures; ore block modeling; minimum
physical and chemical criteria which had been applied to estimate reserves
related to specified mining and production practices, including those for
grade, quality, thickness, and depth; and Mr. Paravicini's reasonable
assumptions regarding economically and legally mining the deposit. A
written report with appendices totaling approximately 2,500 pages was
subsequently delivered and has been translated into English.
d) SEC Testimony Regarding Report
On June 4, 1998, Registrant's counsel, Mr. John Henry Schlie, received a
request from the Regional Office of the U.S. Securities and Exchange
Commission in Denver, Colorado, that the Registrant produce a copy of the
report on which the Press Release of May 22, 1998, was based, by Monday,
June 8, 1998. In addition, the same request from the SEC Regional Office
included a request that the Registrant produce Mr. Guido Paravicini to
provide voluntary testimony regarding his report on Friday, June 12, 1998.
Registrant informed the SEC Regional Office that Mr. Paravicini was an
independent consultant, and could not be compelled by the Registrant to
appear. However, the Registrant immediately invited Mr. Paravicini to
appear in Denver, Colorado, on the date indicated by the SEC to offer
voluntary testimony regarding his report. Registrant had expressed to the
SEC Regional Office its desire to cooperate fully, provide any and all
pertinent information. Registrant did not request reimbursement of Mr.
Paravicini's travel expenses or daily compensation rate from the SEC in a
further attempt to facilitate the information-gathering process.
Mr. Paravicini's report was provided to the SEC on Thursday, June 11, 1998,
with all appendices, in bound form. Mr. Paravicini did appear as requested
on June 12, 1998, before members of the SEC Regional Office staff in
Denver, Colorado, and offered his voluntary testimony over the course of
June 12th, 16th, and half a day on the 17th.
On June 17, 1998, Mr. Terry C. Turner, Registrant's President, also offered
voluntary testimony to the staff of the Regional Office of the SEC in
Denver, Colorado, relative to the issuance of the Press Release on May 22,
1998; other issues regarding Mr. Paravicini's consulting contract and
report; as well as Registrant and its business in general.
e) SEC Notice
The Securities and Exchange Commission has notified Registrant that it
believes that the news release by the Company about the report on May 22,
1998 may have been released without a sufficient basis as to the
reliability of the report. The Commission staff has raised questions
concerning the methodology, analysis and preparation of the report.
Registrant has determined that, in light of the SEC position, it is not
appropriate to publish the report or further excerpts therefrom or to file
it as an exhibit on Form 8-K. The Staff of the Central Regional Office of
the SEC has notified Registrant that it is considering recommending to the
Commission the amendment of its current action against Registrant to
include violations [including Section 10(b)(5)] which may have resulted
from the May 22, 1998 press release. That notification also permits
Registrant, as well as its president, Mr. Terry C. Turner, to make a Wells
Submission, which is a written statement setting forth their legal position
regarding the May 22, 1998 press release.
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f) Review of Report
Registrant is interviewing other independent mining/mineral/geological
consulting firms to review, audit, amend, and correct, if necessary, the
report of Guido Paravicini, and otherwise advise Registrant. If and when
results are available and if appropriate for release, Registrant may
release information.
g) Critical Analysis and Review of May 1998 Report of Paravicini
Registrant is in the process of significant critical evaluation, review and
analysis of the Report of May 1998 by Guido Paravicini. Shareholders and
potential purchasers of Registrant's shares are advised that the Report,
and any results from such report, are subject to substantial and material
changes including reduction or elimination of "reserves". As analysis,
evaluation, and review are completed, and if changes, corrections,
additions, recalculations or modifications are made in the report, the
results from such report may need to be substantially restated. Registrant
is interviewing well-respected mining/mineral/geological consulting firms
to perform an audit, analysis and review of the report, the methods used,
the calculations made, and the engineering and geology contained therein.
There can be no assurance that a new independent firm will confirm any
"reserves" or "mineralization" on the Cangalli concessions, and such new
report, if adverse, may result in substantially negative findings regarding
the Cangalli Concessions, which are the subject of Registrant's contract
rights.
h) Changes, Omissions and Errors May Result in Material and Substantive
Questions Regarding the Credibility of May 1998 Report by Guido Paravicini
Mr. Paravicini has informed Registrant that Proven Reserves, as contained
in the May 1998 Report, must be reduced by at least 29,254 ozt of gold as a
result of calculation errors. When changes, omissions and errors are found
in a report regarding resources and reserves, the entire report itself,
including its methodology, analysis, and preparation, must also be subject
to a new level of scrutiny. Registrant is interviewing well-respected
mining/mineral/geological consulting firms to engage in three tasks
relative to Mr. Paravicini's May 1998 report and the Cangalli concessions:
1. An overall audit and evaluation of Mr. Paravicini's 1998 report. If
problems are found which are remediable, suggestions to Registrant's
Board regarding how those problems may be corrected;
2. Performance of necessary field work to evaluate the reliability of Mr.
Paravicini's geological interpretation of the Cangalli concessions'
mineralization, and to verify previously-performed sampling work or
resample, as deemed necessary;
3. Recommendations to Registrant's Board regarding future necessary
studies, sampling, metallurgical analysis, tests, measurements, volume
and grade calculations, feasibility work, etc., which may be required
to advance Registrant's subsidiary's project on the Cangalli
concessions.
i) Registrant's Financial Ability.
Registrant is currently substantially indebted for small operating loans
and one large revolving line of credit from a Texas bank. For the
foregoing, Registrant is not in a financial position to develop any
resources or reserves which may exist on the Cangalli concessions in any
significant manner. Registrant's financial ability is very material to
consideration of any investment decision by Registrant's shareholders or
prospective shareholders.
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j) Registrant's Experience and Expertise.
Registrant has no experience or expertise operating a large open-pit, or
high volume underground mining operation, and the metallurgical plant that
would necessarily accompany such operations. In addition, Registrant has a
track record of operating at a loss over the past two-year period on its
small underground operation, and its two attempts at small, pilot open-pit
operations. Registrant would necessarily have to find a joint-venture
partner with the experience and expertise that Registrant lacks, or make
other financial and corporate arrangements, such as a merger with a
stronger, more experienced company or the sale of its subsidiary's contract
mining rights. Registrant believes that these facts regarding Registrant's
experience and expertise are material and should be considered by
Registrant's shareholders and prospective shareholders. Registrant's
management has also made key strategic decisions within the passed year to
focus Registrant's, and Registrant's subsidiary's, financial resources on:
1) the rehabilitation of the Cangalli shaft and the development of
underground operations in the Paleochannel; and 2) the exploration efforts
which have culminated in the May 1998 Paravicini report. These decisions
may or may not have been the most beneficial for Registrant's overall
interests, and shareholders or prospective shareholders, should carefully
analyze the financial decisions made by Registrant's management and their
impact on Registrant's financial well being in the future.
k) Current Activities
1. As of the date of the filing of this Report, only $125,000 of a
$250,000 convertible debenture loan has been received from the
investment group in Europe, which funds were to be used to start up
open pit operations. The shortfall is due, in part, to changes
instituted by the SEC regarding the holding period for securities
pursuant to Regulation "S". This new rule change was promulgated by
the SEC and took effect on April 27, 1998. Registrant cannot assure
that the balance of the convertible debenture loan proceeds will ever
be received by Registrant. Registrant's projected use of the loan
proceeds has been significantly frustrated by the failure of the
European group to complete the loan. However, Registrant is not
threatening to take any legal action for the failure since any change
in Regulation "S" was a condition for modification of the convertible
debenture loan agreement.
2. Without sufficient capital, the start-up of the open-pit program has
been indefinitely postponed due to lack of capital.
3. Registrant has retained an attorney to file a registration statement
for a secondary offering of up to 10 million shares of Registrant's
common stock for capital to begin open pit mining. However, Registrant
cannot assure that such efforts will be successful, particularly in
light of recent actions taken by the SEC regarding the suspension of
trading in Registrant's shares, and the pending civil action between
the SEC and the Registrant. The registration has not yet been filed.
4. The open-pit production schedule set for the end of April 1998 is
postponed indefinitely until Registrant has had an opportunity to
raise capital or find a partner or joint venture. In addition, ISP
Engineering, who was extremely patient with Registrant during
weather-related delays, has informed Registrant (June 1998) that it
must assign its equipment destined for the Cangalli open-pit project
elsewhere to other productive projects. ISP has returned Registrant's
equipment mobilization deposit and exercised its contract right
regarding delays to withdraw.
5. German Zambrana was continuing his study of fine gold issues on the
Cangalli deposit. Mr. Zambrana completed the first phase of his work
the fine gold recovery study, and is awaiting second phase funding to
implement his findings in a working metallurgical flow sheet. Further
activities have been indefinitely postponed by Registrant until its
capital is available.
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6. The "El Nino" weather phenomenon has substantially subsided.
Registrant experienced extraordinary costs for mine maintenance and
pumping. Otherwise, the greatest impact suffered by Registrant was the
delay factor in carrying out its projects, and the inability to
produce significant quantities of gold, even to minimally meet
overhead expenses, because of the need to be, almost exclusively,
dedicated to mine maintenance and pumping.
7. Between the dates of January 26-29, 1998, Mr. Gaylen Hansen, CPA,
Registrant's independent auditor, accompanied Terry C. Turner,
Registrant's President, to La Paz, Bolivia to review accounting and
auditing procedures and U.S. Generally Accepted Accounting Principles
("GAAP") with Registrant's subsidiary's accounting staff and its
independent auditors. As of the date of the filing of this 8-K Current
Report, Registrant still has not filed its audited financial
statements and its 10-K Annual Report. This delay is due exclusively
to a misunderstanding and misinterpretation on the part of
Registrant's subsidiary's independent auditors in Bolivia. The
independent audit produced in Bolivia during March 1998 was found to
have several capitalization and expense issues misinterpreted.
Registrant has diligently sought to correct those misunderstandings,
and Registrant's independent auditor has spent many hours working
through the issues with the independent auditors in Bolivia.
Registrant cannot give assurances, that its consolidated audited
financial statements, together with its 10-K Annual Report, will be
filed within any specific period.
Item 6. Resignation of Directors
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None
Item 7. Financial Statements, Pro Forma Financials and Exhibits
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None
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.
Date: July 7, 1998 Golden Eagle International, Inc.
By: /s/ Terry C. Turner
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Terry C. Turner, President
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