<PAGE>
THIS PROSPECTUS IS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 424 (b) (1)
Registration No. 333-64847
450,000 SHARES
[ALTA GOLD CO. LOGO]
COMMON STOCK
The shares offered hereby (the "Shares") consist of up to
450,000 shares of common stock, $.001 par value per share
("Common Stock"), of Alta Gold Co., a Nevada corporation (the
"Company"), which may be issuable by the Company to Gerald
Metals, Inc. (the "Selling Stockholder") upon the exercise of the
Options (as defined below). On May 15, 1998, the Company entered
into an agreement with the Selling Stockholder, whereby the
Company granted to the Selling Stockholder an option to purchase
up to 450,000 shares of Common Stock (the "Option") for certain
consulting and financial services provided to the Company by the
Selling Stockholder. The exercise price (the "Exercise Price")
for the Option is $1.78125 per share and is exercisable at any
time within a five-year period from the date of grant. The
Option supercedes and replaces an option to purchase up to 75,000
shares of Common Stock previously granted by the Company to the
Selling Stockholder on March 31, 1996, which shares were
registered under a registration statement on Form S-8 (no.
333-05695) filed with the Securities and Exchange Commission (the
"Commission") on June 12, 1996. This Prospectus covers the sale
of the Shares from time to time by the Selling Stockholder. The
issuance of the Shares upon the exercise of the Option is not
covered by this Prospectus, rather only the resale of such Shares
by the Selling Stockholder or its respective pledgees, donees,
transferees or other successors in interest.
The Shares may be offered from time to time by the Selling
Stockholder or its respective pledgees, donees, transferees,
assignees or other successors in interest. The Company has
agreed to pay certain expenses of the registration of the Shares.
Any brokers' or underwriters' fees or commissions incurred by the
Selling Stockholder in connection with the sale of the Shares
will be borne by the Selling Stockholder. The Company will not
receive any proceeds directly from the sale of the Shares by the
Selling Stockholder. See "Use of Proceeds." The aggregate
proceeds to the Selling Stockholder from the sale of the Shares
will be the sale price of the Shares sold, less the aggregate
underwriters' commissions and discounts, if any, and the expenses
of distribution not borne by the Company.
The Selling Stockholder has not advised the Company of any
specific plans for the distribution of the Shares covered by this
Prospectus, but it is anticipated that the Shares will be sold
from time to time by the Selling Stockholder or their respective
pledgees, donees, transferees or other successors in interest,
primarily in transactions (which may include block transactions)
on the Nasdaq National Market, or such other market on which the
Company's securities may from time to time be trading at the
market price then prevailing, although sales may also be made in
negotiated transactions or otherwise. The Selling Stockholder
and the brokers and dealers through whom sales of the Shares may
be made may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"),
and their commissions or discount and other compensation may be
regarded as underwriters' compensation. See "Plan of
Distribution."
The Common Stock is currently listed on the Nasdaq National
Market under the symbol "ALTA." On September 24, 1998, the last
reported sale price of the Common Stock on the Nasdaq National
Market was $2.1875 per share.
1
<PAGE>
THERE ARE CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED
BEFORE PURCHASING THE SHARES. SEE "RISK FACTORS" BEGINNING ON
PAGE 5.
__________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is October 7, 1998.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
INCORPORATION OF DOCUMENTS BY REFERENCE...................... 3
THE COMPANY.................................................. 4
RISK FACTORS................................................. 5
USE OF PROCEEDS.............................................. 12
SELLING STOCKHOLDER.......................................... 12
PLAN OF DISTRIBUTION......................................... 13
LEGAL MATTERS................................................ 14
EXPERTS...................................................... 14
AVAILABLE INFORMATION........................................ 14
</TABLE>
2
<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents, which have been filed by the
Company with the Commission, are hereby incorporated by reference
into this Prospectus:
(i) The Company's annual report on Form 10-K for the
fiscal year ended December 31, 1997;
(ii) The Company's quarterly reports on Form 10-Q for the
quarters ended March 31, 1998 and June 30, 1998;
(iii) The Company's proxy statement on Schedule 14A for the
Company's annual meeting of stockholders held on
June 12, 1998; and
(iv) The description of the Common Stock contained in the
Company's registration statement on Form S-3,
Amendment No. 4 (no. 33-84046), as filed with the
Commission under the Securities Act.
All documents filed by the Company after the date of this
Prospectus pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and prior to the termination of the offering hereunder shall be
deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute
a part of this Prospectus.
The Company will provide without charge to each person to
whom a copy of this Prospectus is delivered, upon the written or
oral request of any such person, a copy of any or all of the
documents incorporated herein by reference, other than exhibits
to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests
for such copies should be directed to Margo R. Bergeson,
Secretary, Alta Gold Co., at the Company's principal executive
offices located at 601 Whitney Ranch Drive, Suite 10, Henderson,
Nevada 89014. Telephone requests may be directed to Ms. Bergeson
at (702) 433-8525.
3
<PAGE>
THE COMPANY
Alta Gold Co. (the "Company") is engaged in the exploration,
development, mining and production of gold on properties located
in Nevada. The Company also has three base metals properties in
the western United States which are in various stages of
development. The Company operates solely in the metals mining
industry segment. The Company was incorporated in Nevada on May
7, 1962, under the name of Silver King Mines, Inc. On November
24, 1989, the Company merged with Pacific Silver Corporation, and
the Company's name was changed to Alta Gold Co. The Company's
principal executive offices are located at 601 Whitney Ranch
Drive, Suite 10, Henderson, Nevada 89014, and its telephone
number is (702) 433-8525.
In 1991, the Company ceased mining activities because of
higher than expected mining costs, and lower than anticipated ore
grades and recoveries, as well as declining gold prices.
Following a change in management and the implementation of a new
mining plan, the Company resumed mining in 1993 at the Easy
Junior mine ("Easy Junior") located near Ely, Nevada. In 1994,
the Company acquired three gold properties, the Kinsley mine
("Kinsley") located in Elko County, Nevada, the Olinghouse
property ("Olinghouse") located in Washoe County, Nevada, and the
Griffon property ("Griffon") located in White Pine County,
Nevada, and one copper property, the Copper Flat property
("Copper Flat") located in Sierra County, New Mexico. Kinsley
was permitted, developed and put into operation in October 1994,
and the Company completed mining all reserves at Easy Junior in
August 1994.
In 1996, the Company (i) produced 49,486 ounces of gold at
Easy Junior and Kinsley; (ii) completed gold processing at Easy
Junior; (iii) continued mining activities at Kinsley;
(iv) continued permitting, development drilling and mine planning
at Olinghouse, as well as preparing a feasibility study;
(v) continued permitting and mine planning at Griffon;
(vi) continued permitting at Cooper Flat; (vii) acquired control
of the Excalibur property ("Excalibur") located in Mineral
County, Nevada; and (viii) entered into an agreement giving the
Company an option to acquire a 50% interest in, and right to
manage, the Osceola property ("Osceola") located in White Pine
County, Nevada.
In 1997, the Company (i) produced 38,472 ounces of gold at
Kinsley; (ii) completed site development and construction and
began mining at Griffon; (iii) continued permitting, development
drilling and mine planning and completed a feasibility study at
Olinghouse; (iv) continued permitting at Copper Flat; and
(v) initiated the acquisition of the Lookout Mountain gold
property ("Lookout Mountain") located in Eureka County, Nevada
from Echo Bay Exploration, Inc. In the first quarter of 1998,
the Company (i) completed mining operations at Kinsley; and
(ii) completed the acquisition of Lookout Mountain.
In 1998 (through September 24, 1998), the Company
(i) completed site development and construction and began mining
at Olinghouse; (ii) continued to conduct mining activities at
Griffon; (iii) continued to permit Copper Flat; and
(iv) conducted exploration at Excalibur, Lookout Mountain and
Osceola.
RECENT DEVELOPMENTS
Immediately following the Company's receipt on May 8, 1998
of the final permit for Olinghouse, the Company began site
development and mine construction. In July 1998, the Company
began mining activities and in September 1998, the Company began
producing gold at Olinghouse. The Company expects to be in full
operation at Olinghouse by the end of 1998, with an anticipated
annualized production rate of 100,000 oz/year, assuming normal
operating conditions. No assurance can be given that the Company
will be able to produce gold at Olinghouse at the expected rate.
4
<PAGE>
RISK FACTORS
EXCEPT FOR HISTORICAL INFORMATION CONTAINED IN THIS
PROSPECTUS, THE MATTERS DISCUSSED HEREIN CONTAIN FORWARD-LOOKING
STATEMENTS MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF SECTION
27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT,
INCLUDING MANAGEMENT'S EXPECTATIONS REGARDING THE COMPANY'S
RESERVES, TIMING OF RECEIPT OF GOVERNMENT PERMITS, PLANNED DATES
FOR COMMENCEMENT OF PRODUCTION AT THE COMPANY'S MINING OPERATIONS
AND GOLD PRODUCTION AT THE COMPANY'S MINING PROPERTIES,
ANTICIPATED DRILLING AND RECLAMATION EXPENDITURES AS WELL AS
OTHER CAPITAL SPENDING, FINANCING SOURCES AND THE EFFECTS OF
REGULATION. SUCH FORWARD-LOOKING STATEMENTS ARE INHERENTLY
UNCERTAIN, AND INVESTORS MUST RECOGNIZE THAT ACTUAL RESULTS MAY
DIFFER FROM MANAGEMENT'S EXPECTATIONS. KEY FACTORS IMPACTING
CURRENT AND FUTURE OPERATIONS OF THE COMPANY INCLUDE THE FACTORS
DISCUSSED BELOW.
PROSPECTIVE PURCHASERS OF THE SHARES SHOULD CONSIDER
CAREFULLY THE FOLLOWING FACTORS IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE MAKING AN
INVESTMENT IN THE SHARES.
VOLATILITY OF THE PRICE OF GOLD
The profitability of the Company's current operations is
affected by the market price of gold, which is currently at
depressed levels. The average daily closing spot price for gold
on the Commodity Exchange ("COMEX") dropped from approximately
$388 per ounce in 1996 to approximately $332 per ounce in 1997.
Gold continued to drop in 1998, falling to a 19-year low of
$274.60 per ounce in August 1998. The average daily closing spot
price for gold in 1998 (through September 24, 1998) on COMEX was
$293.80 per ounce. Gold prices can fluctuate widely and are
affected by numerous factors beyond the Company's control,
including industrial and jewelry demand, expectations with
respect to the rate of inflation, the strength of the U.S. dollar
(the currency in which the price of gold is generally quoted) and
of other currencies, interest rates, central bank sales, forward
sales by producers, global or regional political or economic
events and production costs in major gold-producing regions such
as South Africa and the former Soviet Union. In addition, the
price of gold sometimes is subject to rapid short-term changes
because of speculative activities.
The demand for and supply of gold affect gold prices, but
not necessarily in the same manner as supply and demand may
affect the prices of other commodities. The supply of gold
consists of a combination of new mine production and existing
stocks of bullion and fabricated gold held by governments, public
and private financial institutions, industrial organizations and
private individuals. As the amounts produced in any single year
constitute a very small portion of the total potential supply of
gold, normal variations in current production do not necessarily
have a significant impact on the supply of gold or on its price.
If the price of gold should decrease, the value of the
Company's gold properties which are being explored or developed
would also decrease and the Company might not be able to recover
its investment in those properties. The decision to place a mine
in production, and the commitment of funds necessary for that
purpose, must be made well in advance of the time when a mining
company will receive the first revenues from that production.
Price fluctuations between the time that such a decision is made
and the commencement of production can dramatically change the
economics of a mine. If the Company's revenue from gold sales
falls for a substantial period below its costs of production at
any or all of its operations, the Company could determine that it
is not economically feasible to continue commercial production at
any or all of its operations. One of the reasons the Company
ceased gold production activities from 1991 to 1993 was because
of depressed gold prices during that period.
5
<PAGE>
The volatility of gold prices is illustrated in the
following table of annual high and low gold fixing prices per
ounce on the London P.M. Fix:
<TABLE>
<CAPTION>
Year High Low
----------------------------------------------------------
<S> <C> <C>
1985.................................. $341 $284
1986.................................. 438 326
1987.................................. 500 436
1988.................................. 484 395
1989.................................. 416 356
1990.................................. 424 346
1991.................................. 403 344
1992.................................. 360 330
1993.................................. 406 326
1994.................................. 396 370
1995.................................. 396 372
1996.................................. 415 367
1997.................................. 367 283
1998 (through September 24, 1998)..... 313 273
</TABLE>
On September 24, 1998, the afternoon fixing for gold on the
London P.M. Fix was $292.70. Gold prices on the London P.M. Fix
are regularly published in most major financial publications and
many nationally recognized newspapers.
CURRENT DEPENDENCE ON TWO PRODUCING PROPERTIES
All of the Company's operating revenues in 1997 were derived
from its mining operations at Kinsley, which mining operations
were completed in the first quarter of 1998. Future operating
revenues are dependent upon processing the remaining recoverable
gold on the leach pad at Kinsley and on gold production at
Olinghouse (which commenced gold production in September 1998)
and at Griffon (which commenced gold production in January 1998).
If operations at Olinghouse and Griffon and, to a lesser extent,
Kinsley, were interrupted or curtailed, the Company's ability to
generate operating revenues and earnings would be materially and
adversely affected unless and until other properties were put
into production.
LIMITED LIFE OF MINING PROJECTS
The Company derives all of its operating revenues from
mining projects which have a limited life. Mining at Kinsley was
completed in the first quarter of 1998, with remaining gold
production from heap leaching and pad rinsing expected to
continue in declining amounts through 2000. Based on the reserve
estimate as of December 31, 1997, the Company expects mining
activities at (i) Olinghouse to continue for at least five years,
with gold production from heap leaching and pad rinsing to
continue thereafter in declining amounts through 2005; and (ii)
Griffon to continue for at least two years, with gold production
from heap leaching and pad rinsing to continue thereafter in
declining amounts through 2001. No assurance can be given that
the estimated time for completion of mining activities at
Olinghouse and Griffon or gold production at Olinghouse, Griffon
and Kinsley is accurate. The Company's ability to generate
future operating revenues and earnings after Olinghouse, Griffon
and Kinsley are depleted is dependent on its ability to bring one
or more of its other properties into production. The
commencement of production at Copper Flat is subject to, among
other things, obtaining necessary governmental permits and
obtaining outside sources of funding. No assurance can
be given that the Company will have any mining
6
<PAGE>
properties in operation once the mining and/or processing of ore
from Olinghouse, Griffon and Kinsley or other future operating
properties, if any, are completed.
GOVERNMENT PERMITS AND PROJECT DELAYS
The Company is seeking government permits and approvals for
the development of Copper Flat. Obtaining the necessary
government permits is a complex and time-consuming process
involving numerous federal, state and local agencies. The
duration and success of each permitting effort are contingent
upon many variables not within the Company's control.
Notwithstanding the Company's good faith expectations, no
assurance can be given that any government permit or approval
will be issued when anticipated or without conditions that may
have a material adverse effect on the project. In the context of
environmental permitting, including the approval of reclamation
plans, the Company must comply with existing standards, laws and
regulations which may entail unexpected costs and delays
depending on the nature of the activity to be permitted and the
interpretation of the regulations implemented by the permitting
authority. Substantial delays in obtaining, or a failure to
obtain, certain government permits or approvals without
burdensome conditions could have a material adverse effect on the
Company's business and operations.
An owner of real property known as the Ladder Ranch, near
Copper Flat in New Mexico, has challenged the permitting and
opening of Copper Flat. The owner of the Ladder Ranch has raised
concerns that operations at Copper Flat would affect his quality
of life and is allegedly concerned about the impact of Copper
Flat's operations on the environment. The Company believes that
the allegations made by the owner of the Ladder Ranch are without
merit, and it intends to vigorously defend any such challenge to
Copper Flat. However, no assurance can be given that any such
challenge will not prevent or delay the permitting or opening of
Copper Flat.
UNCERTAINTY OF FUNDING
Mining operations require a substantial amount of capital
prior to the commencement of, and in connection with, the actual
production of gold. Such capital requirements relate to the
costs of, among other things, acquiring mining claims and
properties, obtaining government permits, exploration and
delineation drilling to determine the underground configuration
of the ore body, designing and constructing the mine and process
facilities, purchasing and maintaining mining equipment, and
complying with bonding requirements established by various
regulatory agencies regarding the future restoration and
reclamation activities for each property.
ENVIRONMENTAL CONTROLS
The Company is required to comply with numerous
environmental laws and regulations imposed by federal and state
authorities. At the federal level, legislation such as the Clean
Water Act, the Clean Air Act, the Federal Resource Conservation
and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the National
Environmental Policy Act impose effluent and waste standards,
performance standards, air quality and emissions standards and
other design or operational requirements for various components
of mining and mineral processing, including gold ore mining and
processing. Although the majority of the waste produced by the
Company's operations are "extraction" and "beneficiation"
wastes, which the United States Environmental Protection
Agency ("EPA") does not regulate under its current
"hazardous waste" program, the EPA is currently developing
a separate program under the RCRA to regulate such
waste. Until the new regulatory program is formally
7
<PAGE>
proposed by the EPA, there is not a sufficient basis on which to
predict the potential impacts of such regulations on the Company.
Many states, including the State of Nevada (where a majority
of the Company's properties are located), have also adopted
regulations that establish design, operation, monitoring, and
closing requirements for mining operations. Under these
regulations, mining companies are required to provide a
reclamation plan and financial assurance to insure that the
reclamation plan is implemented upon completion of mining
operations. Additionally, Nevada and other states require mining
operations to obtain and comply with environmental permits,
including permits regarding air emissions and the protection of
surface water and groundwater.
The Company's compliance with federal and state
environmental laws may necessitate significant capital outlays or
delays, may materially and adversely affect the economics of a
given property, or may cause material changes or delays in the
Company's intended exploration, development and production
activities. Further, new or different environmental standards
imposed by governmental authorities in the future could adversely
affect the Company's business activities.
PROPOSED LEGISLATION AFFECTING THE MINING INDUSTRY
During the past several years, the United States Congress
considered a number of proposed amendments to the General Mining
Law of 1872, as amended (the "General Mining Law") which governs
mining claims and related activities on federal lands. In 1992,
a holding fee of $100 per claim was imposed upon unpatented
mining claims located on federal lands. Beginning in October
1994, a moratorium on processing of new patent applications was
approved. In addition, a variety of legislation is now pending
before the United States Congress to amend further the General
Mining Law. The proposed legislation would, among other things,
change the current patenting procedures, limit the rights
obtained in a patent, impose royalties on unpatented claims, and
enact new reclamation, environmental controls and restoration
requirements. The royalty proposals range from a 2% royalty on
"net profits" from mining claims to an 8% royalty on modified
gross income/net smelter returns. The extent of any such changes
that may be enacted is not presently known and the potential
impact on the Company as a result of future congressional action
is difficult to predict. If enacted, the proposed legislation
could adversely affect the economics of development of operating
mines on the federal unpatented mining claims held by the
Company. Many of the Company's properties, including Griffon and
portions of Olinghouse and Copper Flat, consist of unpatented
mining claims on federal lands. The Company's financial
performance could therefore be materially and adversely affected
by passage of all or pertinent parts of the proposed legislation.
UNCERTAINTY OF DEVELOPMENT PROPERTY ECONOMICS
Exploration for and production of minerals is highly
speculative and involves greater risks than are inherent in many
other industries. Many exploration programs do not result in the
discovery of mineralization, and any mineralization discovered
may not be of sufficient quantity or quality to be profitably
mined. Also, because of the uncertainties in determining
metallurgical amenability of any minerals discovered, the mere
discovery of mineralization may not warrant the mining of the
minerals on the basis of available technology.
The Company's decision as to whether any of the mineral
development properties it now holds or which it may acquire in
the future contain commercially minable deposits, and whether
such properties should be brought into production, depends upon
the results of its exploration programs and/or feasibility
analyses and the recommendations of engineers and
geologists. The decision will involve the consideration
8
<PAGE>
and evaluation of a number of significant factors, including, but
not limited to, the: (i) receipt of government permits;
(ii) costs of bringing the property into production, including
exploration and development work, preparation of feasibility
studies and construction of production facilities;
(iii) availability and costs of financing; (iv) ongoing costs of
production; (v) market prices for the metals to be produced; and
(vi) estimates of reserves or mineralization. No assurance can
be given that any of the development properties the Company owns,
leases or acquires contain (or will contain) commercially minable
mineral deposits, and no assurances can be given that the Company
will ever generate a positive cash flow from production
operations on such properties. The Company has identified
Olinghouse and Copper Flat as having minable reserves. No
assurance can be given, however, that either of these development
properties can attain profitable operations.
COMPETITION AND SCARCITY OF MINERAL LANDS
Although many companies and individuals are engaged in the
mining business, including large, established mining companies,
there is a limited supply of desirable mineral lands available
for claim staking, lease or other acquisition in the United
States and other areas where the Company contemplates conducting
exploration and/or production activities. The Company may be at
a competitive disadvantage in acquiring suitable mining
properties since it must compete with these other individuals and
companies, many of which have greater financial resources and
larger technical staffs than the Company. As a result, there can
be no assurance the Company will be able to acquire new reserves
or replace its current reserves once they are depleted.
RESERVES ESTIMATES
The reserves reported in that certain Pincock Allen & Holt
report dated March 6, 1998 are based upon estimates and no
assurance can be given that the Company will recover the
indicated amount of metals. Further, estimated reserves for
properties that have not yet commenced or have recently commenced
production (such as Copper Flat and Olinghouse) may require
revision following actual production. Fluctuations in the market
price of the metals produced by the Company as well as increased
production costs or reduced recovery rates, could make the mining
of ore reserves containing relatively lower grades of
mineralization uneconomic, and could ultimately cause the Company
to restate its reserves. Moreover, short-term operating factors
relating to the ore reserves, such as the need for sequential
development of ore bodies and the processing of new or different
ore grades, could adversely affect the Company's profitability in
any particular accounting period.
UNCERTAINTY OF TITLE
A majority of the Company's properties consist of unpatented
mining claims or mill site claims which the Company owns or
leases. These claims are located on federal land or involve
mineral rights which are subject to the claims procedures
established by the General Mining Law. Under this law, if a
claimant complies with the statute and the regulations for the
location of a mining claim or mill site claim, the claimant
obtains a valid possessory right to the land or the minerals
contained therein. To preserve an otherwise valid claim, the
claimant must also make certain additional filings with the
county in which the land or mineral is situated and the Bureau of
Land Management, and pay an annual holding fee of $100 per claim.
If a claimant fails to make the annual holding payment or make
the required filings, the mining claim or mill site claim is void
or voidable.
Because mining claims and mill site claims are self-
initiated and self-maintained rights, they are subject
to unique vulnerabilities not associated with other
types of property interests. It is difficult to
9
<PAGE>
ascertain the validity of unpatented mining claims or mill site
claims from public property records and, therefore, it is
difficult to confirm that a claimant has followed all of the
requisite steps for the initiation and maintenance of a claim.
The General Mining Law requires the discovery of a valuable
mineral on each mining claim in order for such claim to be valid,
and mining claims may be challenged by rival mining claimants and
the United States. Under judicial interpretations of the rule of
discovery, the mining claimant has the burden of proving that the
mineral found is of such quality and quantity as to justify
further development, and that the deposit is of such value that
it can be mined, removed and disposed of at a profit. The burden
of showing that there is a present profitable market applies not
only to the time when the claim was located, but also to the time
when such claim's validity is challenged. It is therefore
conceivable that, during times of falling metal prices, claims
which were valid when they were located could become invalid if
challenged.
Title to unpatented claims and other mining properties in
the western United States typically involves certain other
inherent risks due to the frequently ambiguous conveyance history
of those properties, as well as the frequently ambiguous or
imprecise language of mining leases, agreements and royalty
obligations. No generally applicable title insurance is
available for mining or mill site claims. As a result, some of
the titles to the Company's properties may be subject to
challenge.
MINING RISKS AND INSURANCE
The Company's operations are subject to all of the operating
hazards and risks normally incident to exploring for and
developing mineral properties, such as unusual or unexpected
geological formations, environmental pollution, personal
injuries, flooding, cave-ins, changes in technology or mining
techniques, periodic interruptions because of inclement weather
and industrial accidents. Although the Company currently
maintains insurance within ranges of coverage consistent with
industry practice to ameliorate some of these risks, no assurance
can be given that such insurance will continue to be available at
economically feasible rates, or that the Company's insurance is
adequate to cover the risks and potential liabilities associated
with exploring, owning and operating its properties. Insurance
against environmental risks is not generally available to the
Company or to other companies in the mining industry.
RISK OF HEDGING STRATEGIES
In order to mitigate some of the risks associated with
fluctuating gold prices, the Company has in the past and may in
the future use various price hedging strategies, such as selling
future contracts for gold, or using call and put options, to lock
in delivery prices for its gold production. The Company
continually evaluates the potential short- and long-term benefits
of engaging in such price hedging strategies based upon the then
current market conditions. In addition, lenders may from time to
time require the Company to use such hedging strategies. No
assurance can be given, however, that the use of price hedging
strategies will always benefit the Company. There is a
possibility that the Company could lock in forward deliveries at
prices lower than the market price at the time of delivery. The
Company could also be subject to margin calls if the market price
of gold were to significantly rise above the contracted forward
delivery prices, which could materially and adversely affect the
Company's cash flows and financial condition. In addition, the
Company could fail to produce enough gold to satisfy its forward
delivery obligations, causing the Company to purchase gold in the
spot market at higher prices to fulfill its delivery obligations.
UNKNOWN ENVIRONMENTAL LIABILITIES FOR PAST ACTIVITIES
Mining operations involve a potential risk of releases to
soil, surface water and groundwater of metals, chemicals, fuels,
liquids having acidic properties and other contaminants. In
recent years,
10
<PAGE>
regulatory requirements and improved technology have
significantly reduced those risks. However, those risks have not
been eliminated, and the risk of environmental contamination from
present and past mining activities exists for mining companies.
Companies may be liable for environmental contamination and
natural resource damages relating to properties which they
currently own or operate or at which environmental contamination
occurred while or before they owned or operated the properties.
The Company has conducted limited reviews of potential
environmental cleanup liability at its operating and primary
development properties, as well as other properties acquired by
the Company subsequent to 1992. The Company has conducted
limited or no reviews of potential environmental cleanup
liability at other properties owned currently or previously by
the Company. On a few occasions at operating sites, the Company
has detected leaks in excess of allowable rates in the primary
liners at heap leach pads or ponds. In each such case, the pad
or pond was equipped with a second liner and either the location
of the leak in the primary liner was taken out of service or the
leak was repaired. Other than known conditions which will be
remediated pursuant to approved or proposed reclamation plans,
the Company is not aware of any significant environmental
contamination which could give rise to cleanup obligations or
natural resource damages on the part of the Company as a result
of past activities (by the Company or others) on these
properties. However, no assurance can be given that potential
liabilities for such contamination or damages caused by past
activities at these properties do not exist.
EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's Bylaws contain certain measures designed to
make it more difficult and time consuming to change majority
control of the Company's Board of Directors and to reduce the
vulnerability of the Company to an unsolicited offer to take
control of the Company. The Company has also entered into
employment agreements with its Chief Executive Officer, Chief
Financial Officer and Vice President of Engineering and
Construction which provide for certain payments upon termination
or resignation resulting from a change in control of the Company.
Furthermore, Nevada's "Combination with Interested Stockholders
Statute" and "Control Share Acquisition Statute" may have the
effect of delaying or making it more difficult to effect a change
in control of the Company.
These corporate and statutory anti-takeover measures may
have certain negative consequences, including an effect on the
ability of stockholders of the Company or other individuals to
(i) change the composition of the incumbent Board of Directors;
(ii) benefit from certain transactions which are opposed by the
incumbent Board of Directors; and (iii) make a tender offer or
otherwise attempt to gain control of the Company, even if such
attempt was beneficial to the Company and its stockholders.
Since such measures may also discourage accumulations of large
blocks of Common Stock by purchasers whose objective is to seek
control of the Company or have such Common Stock repurchased by
the Company (or other persons) at a premium, these measures could
also depress the market price of the Common Stock. Accordingly,
stockholders may be deprived of certain opportunities to realize
the "control premium" associated with takeover attempts.
RISKS ASSOCIATED WITH POSSIBLE ACQUISITIONS
The Company periodically considers the acquisition of mining
claims, properties and businesses. In connection with any such
future acquisitions, the Company may incur indebtedness or issue
equity securities, resulting in dilution of the percentage
ownership of existing stockholders. The Company intends to seek
stockholder approval for any such acquisitions only to the extent
required by applicable law, regulations or stock market listing
rules.
11
<PAGE>
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the services of certain key
executives, including Robert N. Pratt, Chief Executive Officer,
President and Chairman of the Board of Directors, and John A.
Bielun, Senior Vice President and Chief Financial Officer. The
loss of either of these individuals could have a material adverse
effect on the Company's business and operations. The Company
currently does not have key person insurance on these
individuals. The Company has entered into employment agreements
with certain of its key executives, including Messrs. Pratt and
Bielun. Each of these employment agreements expires in October
1998.
USE OF PROCEEDS
The Company will not receive any proceeds directly from the
sale of the Shares by the Selling Stockholder. The aggregate
proceeds to the Selling Stockholder from the sale of the Shares
will be the sale price of the Shares sold, less the aggregate
underwriters= commissions and discounts, if any, and the expenses
of distribution not borne by the Company. The Company has agreed
to pay certain expenses of the registration of the Shares.
SELLING STOCKHOLDER
The table below sets forth the name of the Selling
Stockholder, the number of Shares which may be sold by the
Selling Stockholder as of the date of this Prospectus, regardless
of whether such Selling Stockholder has a present intent to sell,
and the number of Shares which may be offered for resale pursuant
to this Prospectus. The number of Shares included in the
registration statement on file with the Commission of which this
Prospectus is a part is based upon the number of Shares
underlying the Option.
Within the past three years, the Selling Stockholder has
loaned certain funds to the Company and has provided financial
and consulting services to the Company, including consultation
services in connection with hedging and precious metals sales.
The Selling Stockholder is a lender under that certain $17.0
million revolving credit and term loan agreement dated as of
April 30, 1998, among the Company, Standard Chartered Bank,
Credit Agricole Indosuez and the Selling Stockholder. The
Company used $6.8 million of the loan proceeds under the
revolving credit and term loan agreement to repay certain
indebtedness to the Selling Stockholder and BHF-Bank
Aktiengesellschaft. In consideration of its services, the
Company, from time to time, has granted to the Selling
Stockholder options to purchase shares of Common Stock, including
the Option. The Option supercedes and replaces a certain option
to purchase up to 75,000 shares of Common Stock previously
granted by the Company to the Selling Stockholder on March 31,
1996. In addition to the foregoing, the Company is required to
sell 100% of its gold production to the Selling Stockholder
through April 30, 2003. All such sales of gold to the Selling
Stockholder are made at the market price prevailing at the time
of sale.
The information below is based upon information provided by
the Selling Stockholder. Because the Selling Stockholder may
offer all, some or none of the Shares, no definitive estimate as
to the number of Shares thereof that will be held by the Selling
Stockholder after this offering of the Shares can be provided and
the table below has been prepared on the assumption that all of
the Shares offered under this Prospectus will be sold to
unaffiliated parties. The Shares are being registered to permit
public secondary trading of the Shares, and the Selling
Stockholder may offer the Shares for resale from time to time.
See "Plan of Distribution."
12
<PAGE>
The Shares being offered by the Selling Stockholder are
issuable by the Company to the Selling Stockholder upon the
exercise of the Option granted by the Company to the Selling
Stockholder. The Exercise Price for the Option is $1.78125 per
share.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
NUMBER OF NUMBER OF BENEFICIALLY BENEFICIALLY
SHARES SHARES THAT OWNED AFTER OWNED AFTER THE
BENEFICIALLY MAY BE THE SALE OF SALE OF THE
SELLING STOCKHOLDER OWNED<F1>,<F2> SOLD<F2> THE SHARES<F3> SHARES<F3>
- --------------------- --------------- ------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Gerald Metals, Inc. 600,000 450,000 150,000 *
____________________
<FN>
* Beneficial ownership does not exceed 1% of the outstanding
Common Stock.
<F1> The Selling Stockholder has and will have sole voting and
sole investment power with respect to all Shares owned.
<F2> Includes 450,000 Shares of the Common Stock issuable upon
the exercise of the Option. In addition, the total amount
of the Common Stock offered under this Prospectus and
included in the registration statement of which this
Prospectus is a part includes a presently indeterminate
number of shares of the Common Stock issuable upon the
exercise of the Option, as such number may be adjusted as a
result of stock splits, stock dividends and antidilution
provisions in accordance with Rule 416 of the Securities
Act.
<F3> Assumes the sale of all of the Shares issuable upon the
exercise of the Option to persons who are not affiliates of
the Selling Stockholder.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
The Shares being offered by the Selling Stockholder or its
respective pledgees, donees, transferees, assignees or other
successors in interest, may be sold in one or more transactions
(which may involve block transactions) on the Nasdaq National
Market or on such other market on which the Common Stock may from
time to time be trading, in privately-negotiated transactions,
though the writing of options on the Shares, short sales or any
combination thereof. The sale price to the public may be the
market price prevailing at the time of sale, a price related to
such prevailing market price or such other price as the Selling
Stockholder determines from time to time. The Shares may also be
sold pursuant to Rule 144. The Selling Stockholder shall have
the sole and absolute discretion not to accept any purchase offer
or make any sale of Shares if they deem the purchase price to be
unsatisfactory at any particular time.
The Selling Stockholder or its respective pledgees, donees,
transferees, assignees or other successors in interest, may also
sell the Shares directly to market makers acting as principals
and/or broker-dealers acting as agents for themselves or their
customers. Brokers acting as agents for the Selling Stockholder
will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing
the Shares will do so for their own account and at their own
risk. It is possible that the Selling Stockholder will attempt
to sell shares of Common Stock in block transactions to market
makers or other purchasers at a price per share which may be
below the then market price. There can be no assurance that all
or any of the Shares offered hereby will be issued to, or sold
by, the Selling Stockholder. The Selling Stockholder and any
brokers, dealers or agents, upon effecting the sale of any of the
Shares offered hereby, may be deemed "underwriters" as that term
is defined under the Securities Act or the Exchange Act, or the
rules and regulations thereunder.
The Selling Stockholder, alternatively, may sell all or any
part of the Shares offered hereby through an underwriter. The
Selling Stockholder has not entered into any agreement with a
prospective underwriter and there is no assurance that any such
agreement will be entered into. If the Selling Stockholder
enters into such an agreement or agreements, the relevant details
will be set forth in a supplement or revisions to this
Prospectus.
13
<PAGE>
The Selling Stockholder and any other person participating
in the sale or distribution of the Shares will be subject to
applicable provisions of the Exchange Act and the rules and
regulations thereunder, which provisions may limit the timing of
purchases and sales of any of the Shares by the Selling
Stockholder or any other such person. The foregoing may affect
the marketability of the Shares.
LEGAL MATTERS
The validity of the Shares being offered hereby will be
passed upon for the Company by Kummer Kaempfer Bonner & Renshaw,
Las Vegas, Nevada.
EXPERTS
The financial statements of the Company incorporated by
reference in this Prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority
of said firm as experts in accounting and auditing in giving said
reports.
The Company's ore reserves incorporated by reference into
this Prospectus have been audited by the independent engineering
firm of Pincock, Allen & Holt, and are included herein in
reliance upon the authority of said firm as an expert in such
matters.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Exchange Act and in accordance therewith files reports, proxy
and information statements and other information with the
Commission. Such reports, proxy and information statements and
other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following Regional Offices of
the Commission: Northwest Atrium Center, 400 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such
material may be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
The Company has filed with the Commission a registration
statement (the "Registration Statement") on Form S-3 under the
Securities Act, of which this Prospectus constitutes a part, with
respect to the Shares. The Registration Statement, including
exhibits and schedules thereto, may be obtained from the
Commission's principal office at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of the fees
prescribed by the Commission. Statements contained in this
Prospectus as to the contents of any document referred to are not
necessarily complete and in each instance reference is made to
the copy of the appropriate document filed as an exhibit to, or
incorporated by reference into, the Registration Statement, each
statement being qualified in all respects by such reference. In
addition, the Commission maintains a web site that contains
reports, proxy and information statements, and other information
regarding registrants that file electronically with the
Commission. The Company is such a filer. The Commission web
site address is (http://www.sec.gov).
14
