FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ----- to -----.
Commission File Number 2-2274
ALTA GOLD CO.
-------------
(Exact Name of Registrant as specified in its charter)
Nevada 87-0259249
------ ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification
Number)
601 Whitney Ranch Drive, Suite 10
Henderson, Nevada 89014
- --------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including
area code: (702) 433-8525
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
---- ----
The number of shares outstanding of the Registrant's
Common Stock as of October 21, 1997 was 30,064,359.
<PAGE>
ALTA GOLD CO.
INDEX
Page
Number
------
PART I Financial Information
Item 1 Financial Statements
Condensed Balance Sheets as of
September 30, 1997 and
December 31, 1996 3
Condensed Statements of Operations
for the Three Months Ended
September 30, 1997 and 1996 5
Nine Months Ended
September 30, 1997 and 1996 6
Condensed Statements of Cash Flows
for the Six Months Ended
September 30, 1997 and 1996 7
Notes to Condensed Financial
Statements 9
Item 2 Management's Discussion and Analysis
of Financial Condition and Results
of Operations 13
PART II Other Information
Item 6 Exhibits and Reports on Form 8-K 18
SIGNATURE 19
<PAGE>
ALTA GOLD CO.
-------------
CONDENSED BALANCE SHEETS
------------------------
(Unaudited)
-----------
ASSETS
------
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,685,000 $ 518,000
Inventories 7,562,000 4,568,000
Prepaid expenses and other 614,000 133,000
------------ -------------
Total current assets 10,861,000 5,219,000
PROPERTY AND EQUIPMENT, net
Mining properties and claims 20,567,000 20,500,000
Buildings and equipment 17,054,000 13,851,000
----------- ------------
37,621,000 34,351,000
Less - accumulated
depreciation (11,257,000) (10,237,000)
----------- ------------
Total property and
equipment, net 26,364,000 24,114,000
DEFERRED MINE DEVELOPMENT
COSTS, net 21,838,000 16,037,000
OTHER ASSETS 1,094,000 1,251,000
----------- -----------
Total Assets $60,157,000 $46,621,000
=========== ===========
</TABLE>
The accompanying notes to condensed financial
statements are an integral part of these
statements.
3
<PAGE>
ALTA GOLD CO.
-------------
CONDENSED BALANCE SHEETS (continued)
------------------------------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 602,000 $ 1,378,000
Accrued liabilities 887,000 1,058,000
Current portion of
long-term debt 5,744,000 5,417,000
----------- ------------
Total current liabilities 7,233,000 7,853,000
LONG-TERM DEBT, net of
current portion 11,565,000 1,993,000
DEFERRED INCOME TAXES 662,000 662,000
OTHER LONG-TERM LIABILITIES 1,494,000 509,000
---------- -----------
Total liabilities 20,954,000 11,017,000
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value;
authorized 60,000,000 shares,
issued 30,039,660 and
29,022,371 shares,
respectively 30,000 29,000
Additional capital 46,239,000 44,328,000
Accumulated deficit (7,066,000) (8,753,000)
----------- -----------
Total stockholders'
equity 39,203,000 35,604,000
----------- -----------
Total liabilities and
stockholders' equity $60,157,000 $46,621,000
=========== ==========
</TABLE>
The accompanying notes to condensed
financial statements are an integral
part of these statements.
4
<PAGE>
ALTA GOLD CO.
------------
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1997 1996
---- ----
<S> <C> <C>
REVENUE $2,649,000 $4,629,000
---------- ----------
OPERATING COSTS AND EXPENSES:
Direct mining, production,
reclamation and maintenance
costs 1,636,000 3,309,000
General and administrative 323,000 344,000
Exploration 93,000 39,000
---------- ----------
2,052,000 3,692,000
---------- ----------
Income from operations 597,000 937,000
---------- ----------
OTHER INCOME (EXPENSE), net:
Interest income and other 67,000 8,000
Interest expense and other - (58,000)
---------- ----------
67,000 (50,000)
---------- ----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 664,000 887,000
---------- ----------
PROVISION FOR INCOME TAXES - -
---------- ----------
NET INCOME $ 664,000 $ 887,000
========== ==========
NET INCOME PER SHARE
(Primary and fully
diluted) $ 0.02 $ 0.03
========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (Primary and
fully diluted): 34,858,826 30,513,469
========== ==========
</TABLE>
The accompanying notes to condensed
financial statements are
an integral part of these statements.
5
<PAGE>
ALTA GOLD CO.
-------------
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------
1997 1996
---- ----
<S> <C> <C>
REVENUE $8,498,000 $15,000,000
---------- -----------
OPERATING COSTS AND EXPENSES:
Direct mining, production
and holding costs 6,492,000 11,136,000
General and administrative 1,108,000 1,094,000
Exploration 180,000 55,000
---------- -----------
7,780,000 12,285,000
---------- -----------
Income from operations 718,000 2,715,000
---------- -----------
OTHER INCOME (EXPENSE), net:
Interest income and other 187,000 66,000
Interest expense and other (2,000) (186,000)
---------- -----------
185,000 (120,000)
---------- -----------
INCOME BEFORE PROVISION FOR
INCOME TAXES AND
EXTRAORDINARY ITEM 903,000 2,595,000
---------- -----------
PROVISION FOR INCOME TAXES - -
---------- -----------
INCOME BEFORE EXTRAORDINARY
ITEM 903,000 2,595,000
---------- -----------
EXTRAORDINARY ITEM:
Gain on extinguishment
of debt 784,000 -
---------- -----------
NET INCOME $1,687,000 $ 2,595,000
========== ===========
NET INCOME PER SHARE
(Primary and fully
diluted):
Income before extraordinary
item $ 0.03 $ 0.09
Extraordinary item 0.02 -
---------- ----------
Net income per share $ 0.05 $ 0.09
========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (Primary and
fully diluted): 34,095,718 30,306,777
========== ==========
</TABLE>
The accompanying notes to condensed
financial statements are an integral
part of these statements.
6
<PAGE>
ALTA GOLD CO.
-------------
CONDENSED STATEMENTS OF CASH FLOWS
----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $1,687,000 $2,595,000
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation, depletion
and amortization 1,624,000 2,326,000
Gain on extinguishment
of debt (784,000) -
Stock compensation - 80,000
Decrease (increase) in:
Inventories (2,994,000) 70,000
Prepaid expenses and
other (319,000) (358,000)
Increase (decrease) in:
Accounts payable (776,000) (313,000)
Accrued and other
liabilities (171,000) (542,000)
---------- ---------
Net cash provided by (used in)
operating activities (1,733,000) 3,858,000
---------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to property and
equipment (3,388,000) (2,271,000)
Additions to deferred
mine development costs (5,088,000) (4,223,000)
---------- ----------
Net cash used in investing
activities (8,476,000) (6,494,000)
---------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance
of debt 18,274,000 4,207,000
Payment on debt (6,083,000) (1,430,000)
Proceeds from exercise
of stock options 185,000 29,000
Other - (110,000)
---------- ----------
Net cash provided by financing
activities 12,376,000 2,696,000
---------- ----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 2,167,000 60,000
CASH AND CASH EQUIVALENTS,
beginning of period 518,000 369,000
---------- ----------
CASH AND CASH EQUIVALENTS,
end of period $2,685,000 $ 429,000
========== ==========
</TABLE>
The accompanying notes to condensed
financial statements are an integral
part of these statements.
7
<PAGE>
ALTA GOLD CO.
-------------
CONDENSED STATEMENTS OF CASH FLOWS (Continued)
---------------------------------------------
(Unaudited)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1997 1996
---- ----
<S> <C> <C>
Cash paid during the period
for interest, net of amount
capitalized $ - $ 184,000
Cash paid during the period
for income taxes $ - $ 28,000
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
During the nine months ended September 30,
1997, $1,550,000 in convertible debentures were
converted into 832,934 shares of common stock.
During the nine months ended September 30,
1996, the Company retired $3,000,000 in
convertible debentures - $1,600,000 through the
issuance of 400,000 shares of common stock and
400,000 warrants and $1,400,000 through the
exercise of offset provisions as provided in the
asset purchase agreement underlying the
convertible debentures. Concurrently with the
exercise of the offset provisions, the cost and
book value of the assets acquired under the asset
purchase agreement was also reduced by
$1,400,000.
During the nine months ended September 30, 1997
and 1996, the Company capitalized interest of
$42,000 and $91,000, respectively, on zero coupon
debentures to deferred mine development costs.
The accompanying notes to condensed financial
statements are an integral part of these
statements.
8
<PAGE>
ALTA GOLD CO.
-------------
NOTES TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
(Unaudited)
Note 1. Interim Financial Statement Policies and
- -------------------------------------------------
Disclosures
-----------
The interim, unaudited, condensed financial
statements of Alta Gold Co. (the "Company")
included herein have been prepared pursuant to
the rules and regulations of the Securities and
Exchange Commission. Certain information and
footnote disclosures normally required in
financial statements prepared in accordance with
generally accepted accounting principles have
been condensed or omitted pursuant to such rules
and regulations, although the Company believes
that the disclosures are adequate to make the
information presented not misleading.
These interim, unaudited, condensed financial
statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the year
ended December 31, 1996, as filed with the
Securities and Exchange Commission. In the
opinion of management, all adjustments
(consisting of normal recurring accruals)
considered necessary for a fair presentation have
been included. Operating results for the nine
months ended September 30, 1997 are not
necessarily indicative of the results that may be
expected for the year ending December 31, 1997.
Cash and Cash Equivalents
- -------------------------
For purposes of the balance sheets and
statements of cash flows, the Company considers
all investments with an original maturity of
three months or less to be cash equivalents.
Reclamation Costs
- -----------------
Minimum standards for mine reclamation have
been established by various governmental agencies
which affect certain operations of the Company.
The Company's general policy is to accrue
estimated reclamation costs during each
property's productive life based on estimated
reserves using the units of production method.
As of September 30, 1997 and December 31, 1996,
the Company had reserved approximately $666,000
and $958,000, respectively, for reclamation
activities of which approximately $111,000 is
expected to be expended during the last three
months of 1997.
Income Taxes
- ------------
No provision for income taxes was required in
either 1997 or 1996 because of the utilization of
net operating loss carryforwards. As of
September 30, 1997, the Company estimates that it
has approximately $23,428,000 in remaining net
operating loss carryforwards. These net
operating loss carryforwards are scheduled to
expire during the period from 2005 to 2011.
9
<PAGE>
Net Income per Share
- --------------------
Net income per share is computed based on the
weighted-average number of shares of common stock
and common stock equivalents, if dilutive,
actually outstanding during the period.
On a primary basis, net income per share is
based on common stock equivalents adjusted to
reflect additional shares that would be
outstanding (1) using the treasury stock method
assuming exercise of dilutive stock warrants and
stock options having exercise prices less than
the average market price, and (2) using the as-
converted method for convertible debentures.
On a fully diluted basis, net income per share
is based on common stock equivalents adjusted to
reflect additional shares that would be
outstanding (1) using the treasury stock method
assuming exercise of dilutive stock warrants and
stock options having exercise prices less than
the period end market price (when greater than
the average market price), and (2) using the as-
converted method for convertible debentures.
In February 1997, the Financial Accounting
Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings Per
Share" ("SFAS No. 128") which establishes a new
accounting standard for the computation and
reporting on net income per share. SFAS No. 128
is effective for financial statements issued for
periods ending after December 15, 1997, and early
adoption is prohibited. The Company expects that
there will be no material effect upon
implementing SFAS No. 128 on its net income per
share computations.
Note 2. Inventories
- --------------------
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Precious metals:
Refined products $1,080,000 $ 132,000
In process 6,416,000 4,293,000
Consumable supplies 66,000 143,000
---------- ----------
$7,562,000 $4,568,000
========== ==========
</TABLE>
Inventories of in-process metals and consumable
supplies are valued at the lower of cost (using
the first-in, first-out method) or market.
Inventories of refined products are valued at
market.
10
<PAGE>
Note 3 - Long-Term Debt
- -------------------------
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Credit facility with
Gerald Metals and
BHF-Bank; interest at
LIBOR plus 2%; due
March 31, 1999: secured
by a first priority
mortgage on Kinsley
and Griffon $ 6,000,000 $4,900,000
Zero coupon $4,000,000
subordinated debenture;
discounted at an
imputed rate of 9%;
due June 2008 - 1,492,000
Note payable; interest
at 12%; due January 1998;
secured by property and
equipment 1,400,000 -
Notes payable; interest
at various rates of
8.2% to 16.1%; due at
various dates between
April 1998 and July
2000; secured by
equipment 1,459,000 1,018,000
Convertible debentures;
interest at 4%; due
April 14, 1999;
unsecured 8,450,000 -
---------- ---------
17,309,000 7,410,000
Less - current
portion (5,744,000) (5,417,000)
---------- ---------
Total long-term debt $11,565,000 $1,993,000
=========== ==========
</TABLE>
On April 10, 1997, the Company entered into a
credit facility with Gerald Metals, Inc. ("Gerald
Metals") and BHF-Bank Aktiengesellschaft ("BHF
Bank") to borrow up to $8,500,000. The Company
used approximately $4,700,000 of the credit
facility to repay certain indebtedness to Gerald
Metals. The remaining funds are to be used for
the construction of Griffon, working capital and
the payment of certain expenses. Borrowings from
the credit facility accrue interest at LIBOR plus
two percent. Interest is payable monthly and
principal is payable in fifteen equal monthly
installments commencing on January 31, 1998. The
credit facility is secured by a first priority
mortgage on Kinsley and Griffon and a first
priority security interest in all of the
Company's tangible and intangible personal
property. The credit facility contains certain
covenants that impose restrictions on the ability
of the Company to, among other things, change the
Company's corporate structure, pay dividends on
or repurchase the Company's common stock, and
create or suffer to exist any liens (other than
permitted liens) on the Company's assets or
properties. In addition, the Company is required
to sell 100% of its gold production to Gerald
Metals through March 31, 1999.
11
<PAGE>
All sales to Gerald Metals are made at the market
price prevailing at the time of sale. As of
October 20, 1997, the Company had borrowed
$6,000,000 under this credit facility.
On April 14, 1997, the Company completed a
private placement of $10,000,000 in convertible
debentures (the "Debentures") to a small group of
accredited investors. The Debentures accrue
interest at an annual rate of four percent and
mature on April 14, 1999. The Debentures may be
converted into the Company's common stock at a
conversion price equal to the lesser of (1) 90%
of the average of the closing bid prices of the
Company's common stock for the five trading days
preceding a notice of conversion, or (2) $4.00.
The Debentures contain certain covenants that
impose restrictions on the ability of the Company
to, among other things, pay dividends on or
repurchase the Company's common stock. As of
September 30, 1997, $1,550,000 of the convertible
debentures have been converted into 832,934
shares of the Company's common stock.
On May 12, 1997, the Company paid $750,000 in
cash to the holder of a $4,000,000 zero coupon
debenture due in 2008 (the "Debenture") in
exchange for the full and complete satisfaction
of the Debenture and the termination of an
associated agreement under which the holder of
the Debenture had the right to receive up to
$4,000,000 in royalties from future production
from Copper Flat. As the result of the
transaction, the Company retired the Debenture,
which had a net book value of $1,534,000, and
recorded a one-time extraordinary gain of
$784,000.
12
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Section 21E of the Securities Exchange Act of
1934 provides a "safe harbor" for forward-looking
statements. Certain information included herein
contains statements that are forward-looking,
such as statements regarding management's
expectations about future production and
development activities as well as other capital
spending, financing sources and the effects of
regulation. Such forward-looking information
involves important risks and uncertainties that
could significantly affect anticipated results in
the future and, accordingly, such results may
differ from those expressed in any forward-
looking statements made herein. These risks and
uncertainties include, but are not limited to,
those relating to the market price of metals,
production rates, production costs, the
availability of financing, the ability to obtain
and maintain all of the permits necessary to put
and keep properties in production, development
and construction activities and dependence on
existing management. The Company cautions
readers not to place undue reliance on any such
forward-looking statements, and such statements
speak only as of the date made.
RESULTS OF OPERATIONS
- ---------------------
COMPARISON OF THE THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
In the third quarter of 1997, the Company had
$2,649,000 in revenue from the sale of 7,900
ounces of gold at an average price of $335/oz, as
compared to $4,629,000 in revenue from the sale
of 12,000 ounces of gold at an average price of
$386/oz in the third quarter of 1996. In the
third quarter of 1997, the Company mined 510,151
tons of ore at Kinsley with an average grade of
0.0398 oz/ton gold containing 20,329 ounces of
gold and produced 11,001 ounces of gold from
Kinsley at an average cash cost of $163/oz. In
the third quarter of 1996, the Company mined
598,130 tons of ore at Kinsley with an average
grade of 0.0298 oz/ton gold containing 17,835
ounces of gold and produced 11,902 ounces of
gold, 10,697 ounces from Kinsley at an average
cash cost of $199/oz and 1,205 ounces from pad-
rinsing at Easy Junior.
Direct mining, production, reclamation and
maintenance costs decreased from $3,309,000 in
the third quarter of 1996 to $1,636,000 in the
third quarter of 1997 principally due to (1)
lower cash production costs at Kinsley, (2) the
result of mark-to-market adjustments on higher
than second quarter 1997 ending precious metals
inventory and (3) the completion of gold
production from Easy Junior at the end of 1996.
The decrease in cash production costs at Kinsley
between comparable periods is attributed to the
increase in the average grade, from 0.0298 oz/ton
in the third quarter of 1996 to 0.0398 oz/ton in
the third quarter of 1997.
The change in general and administrative
expenses between comparable periods, from
$344,000 in the third quarter of 1996 to $323,000
in the third quarter of 1997, was de minimis.
Exploration expense increased from $39,000 in
the third quarter of 1996 to $93,000 in the third
quarter of 1997 principally as the result of
exploration activities conducted in the third
quarter of 1997 on properties acquired in the
latter half of 1996.
13
<PAGE>
Interest income and other increased from $8,000
to $67,000 between comparable periods as the
result of more funds being available for
investment in the third quarter of 1997. The
decrease in interest expense and other from
$58,000 in the third quarter of 1996 to $0 in the
third quarter of 1997 was due to capitalization
of interest in the third quarter of 1997.
No provision for income taxes was recognized in
either the third quarter of 1997 or the third
quarter of 1996 because of the utilization of net
operating loss carryforwards. As of September
30, 1997, the Company estimates that it has
approximately $23,428,000 in remaining net
operating loss carryforwards. These net
operating loss carryforwards are scheduled to
expire during the period 2005 to 2011.
COMPARISON OF THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996.
During the first nine months of 1997, the
Company had $8,498,000 in revenue from the sale
of 24,790 ounces of gold at an average price of
$343/oz, as compared to $15,000,000 in revenue
from the sale of 37,900 ounces of gold at an
average price of $396/oz during the first nine
months of 1996. During the first nine months of
1997, the Company mined 1,380,462 tons of ore at
Kinsley with an average grade of 0.0353 oz/ton
gold containing 48,663 ounces of gold and
produced 27,844 ounces of gold from Kinsley at an
average cash cost of $194/oz. During the first
nine months of 1996, the Company mined 1,241,685
tons of ore at Kinsley with an average grade of
0.0344 oz/ton gold containing 42,765 ounces of
gold and produced 37,693 ounces of gold, 33,364
ounces from Kinsley at an average cash cost of
$223/oz and 4,329 ounces from pad-rinsing at Easy
Junior.
Direct mining, production, reclamation and
maintenance costs decreased from $11,136,000
during the first nine months of 1996 to
$6,492,000 during the first nine months of 1997
principally due to (1) lower cash production
costs at Kinsley, (2) the result of mark-to-
market adjustments on higher than year-end 1996
ending precious metal inventory and (3) the
completion of gold production from Easy Junior at
the end of 1996. The decrease in cash production
costs at Kinsley between comparable periods is
attributed to an improvement in the stripping
ratio. During the first nine months of 1997, the
stripping ratio at Kinsley was 2.17:1.00 as
compared to a much higher stripping ratio of
3.34:1.00 during the first nine months of 1996.
The change in general and administrative
expenses between comparable periods, from
$1,094,000 during the first nine months of 1996
to $1,108,000 during the first nine months of
1997, was de minimis.
Exploration expense increased from $55,000
during the first nine months of 1996 to $180,000
during the first nine months of 1997 principally
as the result of exploration activities conducted
during the first nine months of 1997 on
properties acquired in the latter half of 1996.
Interest income and other increased from
$66,000 to $187,000 between comparable periods as
the result of more funds being available for
investment during the first nine months of 1997.
The decrease in interest expense and other from
$186,000 during the first nine months of 1996 to
$2,000 during the first nine months of 1997 was
due to increased capitalization of interest
during the first nine months of 1997.
14
<PAGE>
During the first nine months of 1997, the
Company recorded $784,000 from an extraordinary
gain from the retirement of debt. The gain
resulted from the retirement of a $4,000,000 zero
coupon debenture due in 2008. The Company paid
$750,000 in cash to retire the debenture which
had a net carrying value of $1,534,000 at the
time of retirement.
No provision for income taxes was recognized
during either the first nine months of 1997 or
the first nine months of 1996 because of the
utilization of net operating loss carryforwards.
As of September 30, 1997, the Company estimates
that it has approximately $23,428,000 in
remaining net operating loss carryforwards.
These net operating loss carryforwards are
scheduled to expire during the period 2005 to
2011.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of September 30, 1997, the Company had
$3,628,000 in working capital, a $6,262,000
improvement from the December 31, 1996 working
capital deficit of $2,634,000. The increase in
working capital was due to: (1) the issuance of
$10,000,000 in convertible debt, (2) the receipt
of $6,000,000 from an $8,500,000 credit facility
and (3) funds generated from gold production at
Kinsley. The Company believes that gold
production from Kinsley and the $2,500,000 that
is remaining under the $8,500,000 credit facility
will provide adequate liquidity for the Company's
operational needs during the remainder of 1997.
The Company also believes that gold production
from Kinsley and Griffon will provide adequate
liquidity for the Company's operational needs
throughout 1998. The ability of the Company to
satisfy the cash requirements of its operations,
however, will be dependent upon the future
performance of Kinsley and Griffon which will
continue to be influenced by factors which are
beyond the control of the Company. Additional
financing will be required to begin site
development and construction at Olinghouse. The
Company anticipates that these additional funds
will be obtained through equipment and project
financing, although no assurance can be made that
such funds will be available or on terms
acceptable to the Company. See "Outlook" below.
INVESTING AND FINANCING ACTIVITIES
- ----------------------------------
During the first nine months of 1997, the
Company expended $5,088,000 for deferred mine
development costs, principally for the permitting
and development of Olinghouse and Griffon and the
permitting of Copper Flat, and $3,388,000 for
site facilities and equipment, principally for
Griffon. During the same period, the Company (1)
received $18,274,000 in debt financing, including
$10,000,000 from the issuance of convertible
debt, $6,000,000 from an $8,500,000 credit
facility, $1,400,000 from a short-term bank loan
and $874,000 from equipment financing; (2)
received $185,000 from exercised stock options;
and (3) retired $6,083,000 of debt.
On April 10, 1997, the Company entered into a
credit facility with Gerald Metals and BHF Bank
to borrow up to $8,500,000. The Company used
approximately $4,700,000 of the loan to repay
certain indebtedness due to Gerald Metals. The
remaining funds are to be used for the
construction of Griffon, working capital and the
payment of certain expenses. Borrowings from the
credit facility accrue interest at LIBOR plus two
percent. Interest is payable monthly and
principal is payable in fifteen equal monthly
installments commencing on January 31, 1998. The
credit facility is secured
15
<PAGE>
by a first priority mortgage on Kinsley and
Griffon, and a first priority security interest
in all of the Company's tangible and intangible
personal property. The credit facility contains
certain covenants that impose restrictions on the
ability of the Company to, among other things,
change the Company's corporate structure, pay
dividends on or repurchase the Company's common
stock, and create or suffer to exist any liens
(other than permitted liens) on the Company's
assets or properties. In addition, the Company
is required to sell 100% of its gold production
to Gerald Metals through March 31, 1999. All
sales to Gerald Metals are made at the market
price prevailing at the time of sale. As of
October 20, 1997, the Company had borrowed
$6,000,000 under this credit facility.
On April 14, 1997, the Company completed a
private placement of $10,000,000 in convertible
debentures (the "Debentures") to a small group of
accredited investors. The Debentures accrue
interest at an annual rate of four percent and
mature on April 14, 1999. The Debentures may be
converted into the Company's common stock at a
conversion price equal to the lesser of (1) 90%
of the average of the closing bid prices of the
Company's common stock for the five trading days
preceding a notice of conversion, or (2) $4.00.
The Debentures contain certain covenants that
impose restrictions on the ability of the Company
to, among other things, pay dividends on or
repurchase the Company's common stock. As of
September 30, 1997, $1,550,000 of the convertible
debentures have been converted into 832,934
shares of the Company's common stock.
OUTLOOK
- -------
On July 16, 1997, after having received all of
the necessary permits, the Company began
construction and site development at Griffon.
The property is expected to begin producing gold
in late December 1997/early January 1998 at an
annualized rate of 35,000 oz/year. The Company
estimates that $4,267,000 will be required to put
Griffon into production - $2,102,000 for site
development and facilities, $1,820,000 for
working capital and $345,000 for additional
equipment. No assurance can be given that the
actual capital expenditures required to put
Griffon into production will not exceed the
Company's estimate. As of September 30, 1997,
the Company has expended $2,937,000 of the
$4,267,000 required to put Griffon into
production.
In addition to the funds necessary to put
Griffon into production, the Company has budgeted
the following expenditures for the remainder of
1997: (1) $462,000 for permitting and holding
costs at Olinghouse, (2) $143,000 for permitting
and holding costs at Copper Flat, (3) $492,000
for debt servicing, (4) $100,000 for drilling and
associated activities, and (5) $111,000 for
reclamation. Based on (1) the funds on hand as
of September 30, 1997, (2) the remaining
$2,500,000 available under the Company's
$8,500,000 credit facility, and (3) funds
expected to be generated from gold production at
Kinsley, the Company anticipates to be able to
meet all of these funding requirements. The
Company also believes that gold production from
Kinsley and Griffon will provide adequate
liquidity for the Company's operational needs
throughout 1998.
Based on the most recent information available,
the Company presently anticipates that it will
receive all of the permits necessary to put
Olinghouse into production in the first quarter
of 1998. Based on the most recently completed
mine plan, the Company estimates that $24,700,000
will be required to put Olinghouse into
production - $8,200,000 for site development and
facilities, $11,500,000 for equipment and
$5,000,000 for working capital - all of which
will require additional
16
<PAGE>
financing. No assurance can be given that the
actual capital expenditures required to put
Olinghouse into production will not exceed the
Company's estimate. Site development will begin
only after all of the necessary permits are in
place and financing has been arranged. The
Company is investigating potential financing
vehicles for Olinghouse, but has not yet
finalized commitments for such financing. No
assurance can be given that the Company will
obtain either all of the necessary permits or
financing to put Olinghouse into production.
As of September 30, 1997, the Company had (1)
purchased put options for 94,500 ounces of gold
at $335/oz, of which options for 3,500 ounces
mature each month from October 1997 to December
1997 and options for 7,000 ounces mature each
month from January 1998 to December 1998, and (2)
sold call options for 45,000 ounces of gold at
$390/oz, of which options for 3,750 ounces mature
each month from January 1998 to December 1998.
No assurance can be given that any of the
Company's announced mining projects will be
permitted, financed, constructed or result in any
significant contribution to the Company's
reserves, cash flow or earnings.
The Company's business is subject to various
risk factors, some of which are discussed in the
Company's report on Form 10-K for the year ended
December 31, 1996, "Items 1. and 2. Business and
Properties - Risk Factors."
17
<PAGE>
PART II OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.01 Financial Date Schedule
(b) No reports were filed on Form 8-K during
the three-month period ended September
30, 1997.
18
<PAGE>
SIGNATURE
---------
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.
ALTA GOLD CO.
(Registrant)
October 21, 1997 BY: /s/ John A. Bielun
- ---------------- -----------------------
(Date) John A. Bielun
Chief Financial Officer
and Principal
Accounting Officer
19
<PAGE>
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