SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 for
the fiscal year ended December 31, 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 Identification
organization) No.)
601 Whitney Ranch Drive, Suite 10
Henderson, Nevada 89014
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area
code: (702) 433-8525
Securities registered pursuant to Section 12(g) of
the Act:
Common Stock $0.001 Par Value
(Title of Class)
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
--- ---
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K (229.405 of this chapter) is not
contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by
reference in Part III of this Form 10-K or any
amendment to this Form 10-K. -----
The aggregate market value of the voting
stock held by non-affiliates of the registrant as
of March 26, 1998, based on the closing price as
reported on the Nasdaq Stock Market of $1-27/32,
was approximately $57,060,000.
The number of shares outstanding of the
Registrant's Common Stock as of March 26, 1998 was
31,548,026.
Documents Incorporated by Reference:
The information required by Part III of this
Report is incorporated by reference from Alta Gold
Co.'s Proxy Statement for the 1998 Annual Meeting
of Stockholders to be filed with the Commission
not later than 120 days after the end of the
fiscal year covered by this Report.
TABLE OF CONTENTS
PART I . . . . . . . . . . . . . . . . . . . 1
Items 1 and 2. Business and Properties . . 1
Item 3. Legal Proceedings . . . . . . . . 26
Item 4. Submission of Matters to a Vote
of Security Holders . . . . . . . 26
PART II . . . . . . . . . . . . . . . . . . . 26
Item 5. Market for Registrant's Common
Equity and Related Stockholder
Matters . . . . . . . . . . . . . 26
Item 6. Selected Financial Data . . . . . 27
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . 28
Item 8. Financial Statements and
Supplementary Data . . . . . . . . 32
Item 9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure . . . . . 56
PART III . . . . . . . . . . . . . . . . . . . 56
Item 10. Directors and Executive Officers
of the Registrant . . . . . . . . 56
Item 11. Executive Compensation . . . . . 56
Item 12. Security Ownership of Certain
Beneficial Owners and
Management . . . . . . . . . . . 56
Item 13. Certain Relationships and
Related Transactions . . . . . . 56
PART IV . . . . . . . . . . . . . . . . . . . 56
Item 14. Exhibits, Financial Statement
Schedules, and Reports on
Form 8-K . . . . . . . . . . . . 56
SIGNATURES . . . . . . . . . . . . . . . . . . 62
PART I
Items 1 and 2. Business and Properties
Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934
provide 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 the Company's reserves, timing of receipt of
government permits, planned dates for commencement
of 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
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 issues related to the year 2000.
See "- Risk Factors."
GENERAL
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.
HISTORY
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 (1) produced 49,486
ounces of gold at Easy Junior and Kinsley;
(2) completed gold processing at Easy Junior; (3)
continued mining activities at Kinsley; (4)
continued permitting, development drilling and
mine planning at Olinghouse, as well as preparing
a feasibility study; (5) continued permitting and
mine planning at Griffon; (6) continued permitting
at Copper Flat; (7) acquired control of the
Excalibur property ("Excalibur") located in
Mineral County, Nevada; and (8) 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 (1) produced 38,472
ounces of gold at Kinsley; (2) completed site
development and construction and began mining at
Griffon; (3) continued permitting, development
drilling and mine planning and completed a
feasibility study at Olinghouse; (4) continued
permitting at Copper Flat; and (5) 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 (1) completed
mining operations at Kinsley and (2) completed the
acquisition of Lookout Mountain.
OPERATING PROPERTIES
GRIFFON
Background and History. Griffon is located
approximately 46 miles southwest of Ely, Nevada,
and is accessed principally by paved and unpaved
public roads. The Company acquired the property
in October 1994 from Griffon Resources, Inc.
("GRI").
Property Interests. At Griffon, the Company
controls 108 unpatented mining claims covering
approximately 2,200 acres. Pursuant to the terms
of the acquisition agreement under which Griffon
was acquired, the Company is required to make
certain royalty payments to GRI. See "- Risk
Factors - Uncertainty of Title."
Geology. The Griffon deposits consist of two
Carlin-type disseminated gold ore bodies, the
Discovery Ridge deposit and the Hammer Ridge
deposit, hosted in the upper part of the
Mississippian Joana Limestone. The Discovery
Ridge deposit, approximately 100 feet thick, 400
feet wide, and 700 feet long, has excellent
internal continuity and is exposed at the surface.
The Hammer Ridge deposit, located approximately
1,000 feet southeast of Discovery Ridge, is
smaller, but has similar geologic characteristics
and is also exposed at the surface. There is the
potential to expand the reserves to the northwest
and southeast; however, no assurance can be given
that additional reserves will be located.
Reserves. Based upon the Company's reserve
report prepared by Pincock Allen & Holt ("PAH")
dated March 6, 1998 (the "PAH Report"), Griffon
had proven and probable reserves as of
December 31, 1997 of 3,854,000 tons at an average
grade of 0.026 ounces per ton gold, containing
99,580 ounces of gold. The reserves include: (1)
unmined proven and probable reserves of 3,504,000
tons at an average grade of 0.025 ounces per ton
gold, containing 87,000 ounces of gold with an
estimated stripping ratio of 0.8:1 and (2)
stockpiled ore, either at the crusher or on the
heap leach pad, from which gold had not yet been
recovered, consisting of 350,000 tons at an
average grade of 0.036 ounces per ton gold,
containing 12,580 ounces of gold.
Historic Drilling. Prior to the Company's
acquisition of Griffon, GRI and its predecessors
in interest drilled 74 reverse circulation drill
holes (approximately 28,334 feet) and one core
hole (approximately 523 feet). During the
Company's due diligence program prior to acquiring
Griffon and subsequently thereafter, the Company
drilled (1) 40 reverse circulation drill holes
(approximately 7,430 feet) in 1994; (2) 49 reverse
circulation drill holes (approximately 8,065 feet)
in 1995; (3) ten reverse circulation drill holes
(approximately 3,130 feet) in 1996; and (4) 27
reverse circulation drill holes (approximately
6,090 feet) in 1997.
Future Drilling. Subject to the receipt of
adequate financing, the Company plans to drill
approximately 12 reverse circulation drill holes
(approximately 3,600 feet) in 1998 at an estimated
cost of less than $0.1 million. No assurance can
be given that the Company will be able to obtain
the financing necessary to fund these costs. See
"- Risk Factors - Uncertainty of Funding" and
"Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations -
Liquidity and Capital Resources."
[Map of states of Nevada, Utah, Arizona and New
Mexico showing locations of major mining
properties].
Permitting. In accordance with government
regulations, the final permits necessary to
develop and operate Griffon were received in July
1997, at which time site development commenced.
Water Rights. In April 1997, the State of
Nevada granted to the Company an appropriation to
divert and use water in an amount which management
believes is sufficient for its operations at
Griffon.
Development, Mining and Processing. Site
development at Griffon commenced in July 1997, and
mining began in September 1997. Leaching was
initiated in December 1997. Production of refined
gold began in January 1998. Mining at Griffon is
conducted in two open pits using conventional open
pit methods. Operations are conducted over ten to
twelve hour shifts on a seven-day week, 24-hour
per day schedule. Ore is processed at Griffon
through conventional heap leaching. The current
equipment fleet consists of front-end loaders with
50-ton haul trucks working on 15-foot benches and
supported by a full set of ancillary equipment.
Management believes that the equipment is in
adequate working condition.
In 1997, the Company mined 350,000 tons at an
average grade of 0.036 ounces per ton gold,
containing 12,580 ounces of gold, but because of
delays in the completion of the heap leach pad due
to inclement weather, no gold was recovered from
this ore until 1998. Based on the PAH Report,
mining activities at Griffon are expected to
continue through the first quarter of 2000, with
gold production from heap leaching and pad rinsing
to continue in declining amounts through the
remainder of 2000. See "- Risk Factors - Limited
Life of Mining Projects."
Reclamation. The Company is conducting
reclamation on a continuous basis; however, most
of the reclamation, including recontouring,
revegetation, building removal and pad rinsing,
will not commence until mining and processing are
completed. Based on the present area of
disturbance and the reclamation plan for Griffon,
the Company presently estimates that the cost of
such reclamation will be approximately $0.7
million, none of which had been accrued as of
December 31, 1997.
KINSLEY
Background and History. Kinsley is located
approximately 80 miles northeast of Ely, Nevada,
and is accessed by paved and unpaved public roads.
The property was acquired from Cominco American
Resources Incorporated and USMX, Inc. in April
1994.
Property Interests. At Kinsley, the Company
controls 204 unpatented mining claims covering
approximately 4,200 acres. See "- Risk Factors -
Uncertainty of Title."
Geology. The deposits at Kinsley occur as a
cluster of Carlin-type disseminated gold ore
bodies in Cambrian age sedimentary rocks within
and adjacent to a large northwest trending
structure. Gold mineral deposits occur as
replacement lenses and structurally prepared zones
in multiple ore bodies. Mineralization is fine
grained and readily amenable to heap leaching.
Reserves. Based upon the PAH Report, Kinsley
had proven and probable reserves as of
December 31, 1997 of 132,000 tons at an average
grade of 0.035 ounces per ton gold, containing
4,650 ounces of gold, with an estimated stripping
ratio of 3.5:1. These reserves do not include an
estimated 31,400 ounces of recoverable gold on the
heap leach pad as of December 31, 1997. See " -
Reserves" and " - Risk Factors - Reserves
Estimates."
Historic Drilling. Prior to the Company's
acquisition of Kinsley, Cominco American Resources
Incorporated and USMX, Inc. and their predecessors
in interest drilled 497 reverse circulation drill
holes (approximately 119,150 feet). During the
Company's due diligence program prior to acquiring
Kinsley and subsequently thereafter, the Company
drilled (1) 18 reverse circulation drill holes
(approximately 2,915 feet) and seven core holes
(approximately 944 feet) in 1993; (2) 29 reverse
circulation drill holes (approximately 4,720 feet)
in 1994; (3) 51 reverse circulation drill holes
(approximately 8,540 feet) in 1995; (4) 387
reverse circulation drill holes (approximately
73,655 feet) in 1996; and (5) 167 reverse
circulation drill holes (approximately 35,065
feet) in 1997.
Future Drilling. No drilling is planned at
Kinsley in 1998. Subject to the receipt of
adequate financing and the necessary government
permits, the Company may elect to do additional
drilling in 1999 or thereafter. See "- Risk
Factors - Uncertainty of Funding"and "- Government
Permits and Project Delays" and "Item 7.
Management's Discussion of Analysis of Financial
Condition and Results of Operations - Liquidity
and Capital Resources."
Permitting. In accordance with government
regulations, all permits necessary to develop and
operate Kinsley were received in 1994, prior to
the commencement of site development and mining.
Water Rights. The State of Nevada granted to
the Company an appropriation to divert and use
water in an amount which management believes is
sufficient for its operations at Kinsley.
Development, Mining and Processing. Site
development at Kinsley commenced in July 1994 and
mining began in October 1994. Production of
refined gold began in January 1995. Mining,
utilizing conventional open pit methods, was
completed in the first quarter of 1998.
In 1996 and 1997, the Company mined 1,853,196
and 1,587,701 tons of ore, respectively, with an
average grade of 0.032 and 0.037 ounces per ton
gold, respectively, and produced 44,552 and 38,472
ounces of gold, respectively. Gold production
from heap leaching and pad rinsing is expected to
continue in declining amounts through 2000. See
"- Risk Factors - Limited Life of Mining
Projects."
Reclamation. The Company is conducting
reclamation on a continuous basis; however, most
of the reclamation, including recontouring,
revegetation, building removal and pad rinsing,
will not commence until processing and any future
potential drilling programs and mining operations
are completed. Based on the present area of
disturbance and the reclamation plan for Kinsley,
the Company presently estimates that cost of such
reclamation will be approximately $0.2 million,
nearly all of which has been accrued as of
December 31, 1997.
DEVELOPMENT PROPERTIES
Olinghouse
Background and History. Olinghouse is
located approximately 35 miles east of Reno,
Nevada, and is accessed by paved and unpaved
public roads. The Company acquired the property
in July 1994 from Phelps Dodge Mining Company.
Property Interests. At Olinghouse, the
Company controls 371 unpatented and 11 patented
mining claims covering approximately 6,700 acres.
Over half of the currently identified ore body
lies within one of the patented mining claims.
Thirty-eight of the unpatented mining claims and
all of the patented mining claims are held under
eight mineral leases with various third parties.
Four of the mineral leases contain purchase
options, one of which has been exercised. The
earliest expiration date of the mineral leases
with respect to which annual minimum payments do
not result in automatic exercise of a purchase
option is 2032; provided, however, that each of
the leases, except for the lease as to which the
purchase option has been exercised, may be
terminated at any time upon notice by the Company.
Six of the mineral leases carry net smelter return
royalties. All of the mineral leases require
annual minimum payments. See "- Risk Factors -
Uncertainty of Title."
Geology. Gold occurs in a series of at least
ten sub-parallel mineralized structures cutting
andesitic volcanic rocks. The structures trend
northeasterly and dip northwesterly at 35-90
degrees. Mineralization typically occurs over
widths of 20-150 feet, and over strike lengths of
greater than 1,000 feet.
Reserves. Based upon the PAH Report,
Olinghouse had proven and probable reserves as of
December 31, 1997 of 12,257,000 tons of ore at an
average grade of 0.042 ounces per ton gold,
containing 512,800 ounces of gold with an
estimated stripping ratio of 4.5:1. Based upon
the Company's reserve report prepared by PAH dated
March 14, 1997, Olinghouse had proven and probable
reserves as of December 31, 1996 of 22,751,000
tons of ore with an average grade of 0.029 ounces
per ton gold, containing 662,200 ounces of gold,
with an estimated stripping ratio of 3.2:1. The
decrease in reported reserves from 1996 to 1997 is
a result of the significant decrease in the price
of gold experienced during 1997 and its effect on
the calculation of reserves. Reserves reported as
of December 31, 1996 were calculated on the basis
of a gold price of $390/oz; reserves reported as
of December 31, 1997 were calculated on the basis
of a gold price of $300/oz. Some geologic and
engineering parameters were also changed in
remodeling the ore reserve. See "- Reserves" and
"- Risk Factors - Reserves Estimates."
In order to minimize the influence of high
grade intervals in the calculation of reserves,
drill hole composites were capped at 0.70 ounces
per ton gold and a restricted search was used for
all composites greater than 0.25 ounces per ton
gold. In addition, exceptionally high grade
intervals intersected in the core drilling program
were excluded entirely from the reserve
calculation in order to eliminate the possibility
of imparting a positive bias on the data.
The Company has completed an extensive soil
sampling program within the property position
defining a number of moderate to high-magnitude
anomalies which mimic the known reserves and its
extensions and follow a series of parallel
structures. Drilling in some of these parallel
structures has intersected ore grade gold
mineralization but the size of these mineral
deposits has not been delineated. Many of the
soil anomalies have not yet been tested.
Historic Drilling. Prior to the Company's
acquisition of Olinghouse, Phelps Dodge Mining
Company drilled 57 reverse circulation drill holes
(approximately 34,695 feet) and seven core holes
(approximately 6,507 feet). During the Company's
due diligence program prior to acquiring
Olinghouse and subsequently thereafter, the
Company drilled (1) 30 reverse circulation drill
holes (approximately 10,265 feet) in 1994; (2) 124
reverse circulation drill holes (approximately
52,327 feet) in 1995; (3) 396 reverse circulation
drill holes (approximately 187,420 feet) and six
core holes (approximately 1,181 feet) in 1996; and
(4) 72 reverse circulation drill holes
(approximately 25,495 feet) in 1997.
Future Drilling. Subject to the receipt of
adequate financing, the Company plans to drill
approximately 35 additional shallow reverse
circulation drill holes (approximately 14,000
feet) in 1998 at an estimated cost of
approximately $0.2 million. The 1998 drilling
program will focus on defining mineral deposits
identified in previous drilling programs, as well
as the testing of new targets. No assurance can
be given that the Company will be able to obtain
the financing necessary to fund these costs. See
"- Risk Factors - Uncertainty of Funding" and
"Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations -
Liquidity and Capital Resources."
Permitting. The Company submitted its Plan of
Operation in March 1996, a draft Environmental
Impact Statement ("EIS") was issued in November
1997 and the Final EIS was published in the
Federal Register in February 1998. The Record of
Decision is expected to be received in April
1998. The last remaining required permits,
including the Water Pollution Control and
reclamation permits and a Section 404 permit, are
expected to be received early in the second
quarter of 1998. The Company anticipates spending
approximately $0.3 million in 1998 to complete the
permitting process. No assurance can be given
that the Company will receive the remaining
government permits in a timely manner, or without
conditions which would materially and adversely
impact the project. See "- Risk Factors -
Government Permits and Project Delays."
Water Rights. The State of Nevada granted to
the Company an appropriation to divert and use
water in an amount which management believes is
sufficient for all anticipated operations at
Olinghouse.
Development Plan. Subject to the receipt of
the necessary financing and the necessary
government permits, the Company plans to begin
site development and production at Olinghouse in
the second and third quarters of 1998,
respectively. Mining is scheduled to begin
initially in the Green Hill orebody and thereafter
in the Payback Pit utilizing conventional open pit
methods. Operations are expected to be conducted
on a seven-day per week 24-hour per day schedule.
Higher grade ore will be initially processed
through a gravity separation mill and subsequently
agglomerated and processed through conventional
heap leaching. Lower grade ore will be processed
solely through conventional heap leaching. The
mine plan contemplates using a fleet of front-end
loaders coupled with 85-ton haul trucks working on
15-foot benches. The Company has obtained price
quotations for the required equipment.
The Company completed a Feasibility Study on
the property in August 1997. PAH completed a Due
Diligence Review of the Feasibility Study in
October 1997, concluding, "... that the project is
feasible, that it is based on adequate data and
sound engineering principles, ..." The
Feasibility Study was based on a gold price of
$335 per ounce. Subsequent to this, the Company
asked PAH to examine the impact of a gold price of
$300 per ounce. In a report issued in December
1997, PAH concluded, "From these evaluations, it
is Pincock Allen & Holt's opinion that a gold
price of $300 per ounce should not affect the
feasibility of the Olinghouse Project."
Subject to the receipt of adequate financing
and the necessary government permits, the Company
anticipates spending approximately $14.3 million
at Olinghouse in 1998 for site development and
equipment and an additional $3.7 million for
project working capital. On March 16, 1998, the
Company signed a term sheet for a $24.4 million
production financing and working capital facility
with a consortium of lenders led by Gerald Metals,
Inc. (the "Loan Facility"). The Loan Facility is
to be used for site development, construction,
equipment and working capital for Olinghouse, as
well as for the early repayment of an existing
loan with BHF-Bank Aktiengesellschaft ("BHF Bank")
in the outstanding principal amount of
approximately $3.4 million. $19.4 million of the
Loan Facility is subject to customary due
diligence, definitive loan documentation and the
receipt of the necessary permits at Olinghouse.
No assurance can be given that the Company will be
able to obtain the financing necessary to fund
these costs or receive the necessary government
permits in a timely manner, or without conditions
which would materially and adversely impact the
project. See "- Risk Factors - Uncertainty of
Funding" and "- Government Permits and Project
Delays" and "Item 7. Management's Discussion of
Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
Reclamation. Until the Company begins site
development and mining, the Company's only
reclamation obligation involves the recontouring
of drill roads and drill sites, the cost of which
is minimal.
LOOKOUT MOUNTAIN
Background and History. Lookout Mountain is
located approximately eight miles south of Eureka,
Nevada and is accessed by paved and unpaved public
roads. The property was acquired from Echo Bay
Exploration Inc. ("Echo Bay") in January 1998.
Property Interests. At Lookout Mountain, the
Company controls 227 unpatented mining claims
covering approximately 4,500 acres. All of the
mining claims are held under a mining lease with a
third party, which expires no sooner than 2013;
provided, however that the lease may be terminated
at any time upon notice by the Company. The lease
carries a net smelter return royalty and requires
advance minimum annual royalties. See "- Risk
Factors - Uncertainity of Title."
Geology. Gold mineralization occurs in the
Cambrian Dunderberg Shale, as well as in the
Devonian Nevada Group. The geology of Lookout
Mountain is comparable to Kinsley, although the
mineralizing structure is more extensive. Ore
occurs in jasperoid and silicified zones in the
Cambrian Dunderberg Shale. Ore is generally
steeply dipping to the east. Significant gold
mineralization has been encountered over a strike
length of two miles, from the surface to a depth
of over 700 feet.
Gold occurs in limestone and shale in varying
oxidation states. Well to moderately oxidized
material shows good metallurgical recoveries by
conventional cyanidation. Pyritic material has
not been broadly tested but appears to be
refractory.
Reserves. There are no known reserves on the
property, and no assurance can be given that a
commercially viable ore deposit exists until
further drilling or other underground testing is
done and a comprehensive feasibility study based
upon such work is concluded.
Historic Drilling. Prior to the Company's
acquisition of the property, Echo Bay and its
predecessors in interest drilled 386 holes on the
property, defining several mineral deposits.
Additional fill-in drilling will be required to
classify any of these mineral deposits as minable
reserves.
Future Drilling. Subject to the receipt of
adequate financing and the necessary government
permits, the Company plans to drill approximately
186 reverse circulation drill holes (approximately
42,650 feet) in 1998 at an estimated cost of
approximately $0.4 million. No assurance can be
given that the Company will be able to obtain the
financing necessary to fund these costs or receive
the necessary government permits in a timely
manner or without conditions which would
materially and adversely impact the project. See
"- Risk Factors - Uncertainty of Funding" and "-
Government Permits and Project Delays" and "Item
7. Management's Discussion of Analysis of
Financial Condition and Results of Operations -
Liquidity and Capital Resources."
Permitting. Echo Bay completed an
Environmental Assessment of the property in 1997,
under which the Company can conduct some drilling.
The Company is currently preparing a Plan of
Operation for a 250 hole drilling program, as well
as a mine Plan of Operation.
Water Rights. The Company does not require
water rights for the present stage of development
at Lookout Mountain.
Development Plan. The Company is planning to
conduct baseline environmental studies in 1998
that will form the basis of an Environmental
Impact Statement for the eventual development of
the property.
Reclamation. The Company does not have any
reclamation obligations at Lookout Mountain at
this time.
EXCALIBUR
Background and History. Excalibur is located
approximately 20 miles southwest of the town of
Mina, in Mineral County, Nevada and approximately
120 miles southeast of Reno, Nevada, and is
accessed by paved and unpaved public roads. In
October 1996, the Company entered into a mineral
lease with an independent geologist for six
unpatented claims at Excalibur and has since
staked an additional 61 unpatented mining claims.
Property Interests. At Excalibur, the
Company controls 67 unpatented mining claims
covering approximately 1,340 acres. Six of the
unpatented mining claims are held under a mineral
lease with a third party, which lease expires no
sooner than 2016; provided, however that the lease
may be terminated at any time upon notice by the
Company. The lease carries a net smelter return
royalty and requires modest advance minimum annual
royalties. See "- Risk Factors - Uncertainty of
Title."
Geology. Gold mineralization occurs in a
large 1,000 feet by 2,000 feet jasperiod breccia
within the Triassic-age Excelsior Formation and in
structurally controlled zones. The Excelsior
Formation consists of metamorphosed tuffaceous
sediments, volcanic rocks, limestone and chert.
Based upon rock samples taken by the Company,
low-grade gold concentrations are common within
the jasperiod.
Reserves. There are no known reserves on the
property and no assurance can be given that a
commercially viable ore deposit exists until
further drilling or other underground testing is
done and a comprehensive feasibility study based
upon such work is concluded.
Historic Drilling. The Company has not found
any evidence of previous drilling at Excalibur.
In 1997, the Company drilled six reverse
circulation drill holes (approximately 1,850
feet), of which gold mineralization was
encountered in three holes.
Future Drilling. Subject to the receipt of
adequate financing and the necessary government
permits, the Company plans to drill approximately
10 reverse circulation drill holes (approximately
5,000 feet) on the property in 1998 at a cost of
less than $0.1 million. No assurance can be given
that the Company will be able to obtain the
financing necessary to fund these costs or receive
the necessary government permits in a timely
manner, or without condition which would
materially and adversely impact the project. See
"- Risk Factors - Uncertainty of Funding" and "-
Government Permits and Project Delays" and "Item
7. Management's Discussion of Analysis of
Financial Condition and Results of Operations -
Liquidity and Capital Resources."
Permitting. The only permit which will be
required at Excalibur in 1998 relates to drilling,
which permit the Company expects to apply for and
receive in sufficient time to complete its 1998
drilling program.
Water Rights. The Company does not require
any water rights for the present stage of
development at Excalibur.
Development Plan. Pending the results of the
Company's 1998 drilling program at Excalibur, the
Company does not have any development plans for
Excalibur at this time.
Reclamation. Until the Company begins site
development and mining, the Company's only
reclamation obligation involves the recontouring
of drill roads and drill sites, the cost of which
is minimal.
OSCEOLA
Background and History. Osceola is located
approximately 37 miles southeast of Ely, Nevada,
and is accessed by paved and unpaved public roads.
In November 1996, the Company entered into an
agreement with Osceola Gold Mining Company giving
the Company an option to acquire an interest in
Osceola. Under the terms of the agreement, if the
Company expends at least $0.6 million for drilling
and associated work prior to December 1999, the
Company may elect to have a 50% interest in, and
become the operator of, a joint venture which will
be formed and will control Osceola upon such
election by the Company. As of December 31, 1997,
the Company had expended approximately $0.3
million for drilling and associated work at
Osceola.
Property Interests. Osceola includes 129
unpatented and five patented mining claims
covering approximately 2,600 acres. The five
patented and 79 of the unpatented mining claims
are held under five mineral leases with various
third parties. The earliest expiration date of
the mineral leases is 2001. See "- Risk Factors -
Uncertainty of Title."
Geology. Lode gold mineralization at Osceola
occurs in mesothermal quartz vein swarms and in
replacement lenses in limestone. Several such
high-grade gold bearing quartz veins were mined
underground in the late 1800s. Based upon a
limited analysis of waste dumps at the mouth of
one of these underground workings, the Gilded Age
mine, the Company believes that the rock adjacent
to the veins may be mineralized.
Reserves. There are no defined reserves at
Osceola, and no assurance that a commercially
viable ore deposit exists until further drilling
or other underground testing is done and a
comprehensive feasibility study based upon such
work is concluded.
Historic Drilling. In 1997, the Company
found evidence that at least two holes had
previously been drilled on the property. Osceola
Gold Mining Company has no records of these drill
holes. The drill holes are not located in any of
the targets currently being explored by the
Company. In 1997, the Company drilled 25 holes
totaling approximately 9,385 feet, of which gold
mineralization was encountered in 19 holes.
Future Drilling. The Company does not plan
any additional drilling in 1998. Subject to the
receipt of adequate financing and the necessary
government permits, the Company may elect to do
additional drilling in 1999 or thereafter. See "-
Risk Factors - Uncertainty of Funding" and "-
Government Permits and Project Delays" and "Item
7. Management's Discussion of Analysis of
Financial Condition and Results of Operations -
Liquidity and Capital Resources."
Permitting. At this time, the only required
permit at Osceola relates to the 1997 drilling
program, which permit the Company received in
December 1996.
Water Rights. The Company does not require
any water rights for the present stage of
development at Osceola.
Development Plan. The Company does not have
any development plans for Osceola at this time.
Reclamation. Until the Company begins site
development and mining, the Company's only
reclamation obligation involves the recontouring
of drill roads and drill sites, the cost of which
is minimal.
COPPER FLAT
Background and History. Copper Flat is
located within the Hillsboro Mining District, 27
miles west of Truth or Consequences, New Mexico,
and is accessed by paved and unpaved public roads.
The Company acquired Copper Flat in June 1994 from
Gold Express Corporation ("Gold Express"),
currently known as StarTronix International, Inc.
Based upon Gold Express' Form 10-K for the
year ended June 30, 1993, the property was
initially put into production in early 1982 at a
cost in excess of $112.0 million. After three and
one-half months of production, operations were
halted due to low metal prices. The property was
thereafter put into a care and maintenance mode
until 1986, at which time all buildings and
equipment were sold and removed, although certain
infrastructure still remains in place. During the
three and one half months the mine was in
operation in 1982, approximately 1.2 million tons
of ore were mined, and approximately 7.4 million
pounds of copper, 2,301 ounces of gold and 55,966
ounces of silver were produced.
Property Interests. At Copper Flat, the
Company controls 418 unpatented and 21 patented
mining claims and fee land covering approximately
5,400 acres. Fee land and patented mining claims
covering approximately 464 acres are held under
four leases with various third parties. The
earliest expiration date of the leases is 2010;
provided, however, that each of the leases may be
terminated at any time upon notice by the Company.
Copper Flat is subject to a reserved interest held
by Gold Express' predecessor in interest. This
reserved interest requires net smelter return
royalties and annual advanced royalties. See "-
Risk Factors - Uncertainty of Title."
Geology. The Copper Flat deposit occurs in
and is adjacent to a breccia pipe cutting a small
quartz monzonite porphyry stock. Chalcopyrite is
the dominant copper mineral. Gold and silver
occur as electrum. Molybdenite is the dominant
molybdenum mineral.
Reserves. Based upon the PAH Report, Copper
Flat had proven and probable reserves at
December 31, 1997 of 56,549,000 tons of ore at an
average grade of 0.432% copper, 0.004 ounces per
ton gold, 0.064 ounces per ton silver and 0.014%
molybdenum. Contained metal is approximately
489,000,000 pounds of copper, 244,200 ounces of
gold, 3,601,700 ounces of silver and 15,800,000
pounds of molybdenum. The deposit has internal
continuity and an estimated stripping ratio of
less than 0.9:1. See "- Reserves" and "- Risk
Factors - Reserves Estimates."
Historic Drilling. Prior to the Company's
acquisition of Copper Flat, Gold Express'
predecessors in interest drilled 181 reverse
circulation and core drill holes (approximately
127,325 feet). Based on the prior drilling and
feasibility studies done by PAH in 1989 and by
another mining consulting firm in 1993, as well as
on information generated from actual mining and
production in 1982, the Company determined that no
additional drilling was required for the main ore
body.
Future Drilling. At this time, the Company
does not contemplate any additional drilling at
Copper Flat in the near future.
Permitting. A draft EIS was issued in
February 1996 and a Record of Decision is expected
to be received in the third quarter of 1998. The
Air Quality permit was received in April 1996;
however, the New Mexico Mining and Minerals
Division permit and the New Mexico Ground Water
permit are pending. In December 1996, an owner of
real property known as the Ladder Ranch, near
Copper Flat, threatened to challenge the
permitting and opening of Copper Flat. The owner
of the Ladder Ranch has raised concerns that
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, or that the
Company will otherwise receive the necessary
government permits in a timely manner, or without
conditions which would materially and adversely
impact the project. See "- Risk Factors -
Government Permits and Project Delays."
The Company anticipates spending
approximately $0.4 million at Copper Flat in 1998
for permitting and property holding costs.
Water Rights. The Company has an
appropriation granted by the State of New Mexico
to divert and use water in an amount which
management believes is sufficient for its
operations at Copper Flat.
Development Plan. Copper Flat already has
certain infrastructure in place. The
infrastructure includes a tailings pond, 19 miles
of power lines, a water well field, a 20-inch
diameter water line, building and equipment
foundations, an access road and a system of
diversion dams and channels. The Company does not
anticipate any site development or construction at
Copper Flat in 1998. The Company is presently
evaluating the potential operation, joint venture,
sale or spin-off of Copper Flat and its other base
metals properties so that the Company can focus on
gold development and production.
Reclamation. All required reclamation from
previous mining and production activity at Copper
Flat has been completed. However, groundwater
contamination has been discovered near the
tailings pond at Copper Flat. If the property is
developed, the Company anticipates that
remediation will be accomplished as part of its
operating plan. If the property is not developed,
the Company may be required to clean up the
groundwater contamination. The scope and cost of
cleanup has not been determined at this time.
OTHER PROPERTIES
Easy Junior
The Company completed mining all reserves in
August 1994, and completed gold processing in
December 1996. The Company does not plan any
additional development at Easy Junior. The only
significant reclamation remaining at Easy Junior
includes pad rinsing and recontouring and
revegetation of the leach pad, waste dumps and
ponds. The Company plans to complete this
remaining reclamation in 1999 at an estimated cost
of less than $0.1 million.
Other
The Company also owns or controls other
properties containing precious and/or base metals.
The properties are in various stages, including
holding, exploration, development and reclamation.
In addition, one property is currently being
leased to another mining company.
RESERVES
The Company calculates its reserves by
methods generally applied within the mining
industry by a multidisciplinary team of
geologists, engineers, and geostatisticians. Due
to the nature of the deposits, all reserves are
calculated from drill-hole assay results.
Representative samples are generally collected
from reverse circulation drilling, including core
drilling in deposits where reverse circulation
drill samples could be contaminated or diluted and
each five-foot drill interval is assayed and the
assay results are evaluated to detect potential
bias, and check assays are completed on all ore-
grade intercepts as a quality-control procedure.
Computer-generated ore deposit models are compared
against manual methods and, as mining progresses,
against actual mining results. Pit outlines
generated from the models are based upon mining
and processing costs and processing recoveries and
are validated by mining and processing experience,
yielding estimates of reserves determined by
optimum economic mining limits.
Reserves reported by the Company as of
December 31, 1997 for Griffon, Olinghouse, Kinsley
and Copper Flat have been audited by PAH as
provided in the PAH Report. PAH's audit of these
reserves stated that the Company's models for
these reserves have been prepared according to
accepted engineering practice and that these
reserves satisfy the requirement for proven and
probable reserves.
The following table summarizes proven and
probable ore reserve, ore grade and contained
metal of the properties owned by the Company as of
December 31, 1997. See "- Risk Factors - Reserves
Estimates."
<TABLE>
<CAPTION>
Operat- Tons of
ing Ore
(O) / Proven
Devel- and Average
opment Probable Grade Contained
(D) Reserves (1) Metal (2)
------ -------- ------- ---------
<S> <C> <C> <C> <C>
Gold
Olinghouse D 12,257,000 0.042 512,800 oz.
Griffon O 3,854,000 0.026 99,580 oz.
Kinsley O 132,000 0.035 4,650 oz.(3)
Copper Flat D 56,549,000 0.004 244,200 oz.
-----------
Total 861,230 oz.
===========
Other Metals
Silver (Copper
Flat) D 56,549,000 0.064 3,601,700 oz.
Copper (Copper
Flat) D 56,549,000 0.432% 489,000,000 lbs.
Molybdenum
(Copper
Flat) D 56,549,000 0.014% 15,800,000 lbs.
- ----------------------
(1) The average grade for (1) precious metals is
expressed in ounces of contained metal per ton of
proven and probable reserves; and (2) base metals
is expressed as a percentage of contained metal
per ton of proven and probable reserves.
(2) Estimated processing recovery rates for the
Company's proven and probable reserves, as a
percent of contained metal, are as follows:
(1) gold: Griffon - 88%, Olinghouse - 83%, Kinsley
- - 75%, Copper Flat - 50%; (2) silver: Copper Flat
- - 90%; (3) copper: Copper Flat - 91%; and
(4) molybdenum: Copper Flat - 66%.
(3) Excludes an estimated 31,400 ounces of
recoverable gold on the heap leach pad as of
December 31, 1997.
</TABLE>
GOLD PRODUCTION AND COST DATA
Based upon the operations at the Company's
current and former operating properties, the
following table sets forth the Company's gold
production, the average realized sales price per
ounce, the average cash costs per ounce of gold
produced, and the average total costs per ounce of
gold produced for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Production (ounces
of gold)
Kinsley 38,472 44,552 40,667 - -
Easy Junior (1) - 4,934 12,396 23,589 -
Other - - - - 163
------ ------ ------ ------ ------
Total
production 38,472 49,486 53,063 23,589 163
====== ====== ====== ====== ======
Average realized
sales price per
ounce $ 340 $ 392 $ 392 $ 390 $ 387
Average cash costs
per ounce
Kinsley $ 206 $ 219 $ 184 $ - $ -
Easy Junior (1) - 292 283 230 -
Other - - - - NM(2)
------ ------ ------ ------ ------
Weighted average
cash costs per
ounce $ 206 $ 226 $ 207 $ 230 NM(2)
====== ====== ====== ====== ======
Average total
costs per ounce
Kinsley $ 261 $ 284 $ 259 $ - $ -
Easy Junior(1) - 294 291 245 -
Other - - - - NM(2)
------ ------ ------ ------ ------
Weighted average
total costs
per ounce $ 261 $ 285 $ 266 $ 245 NM(2)
====== ====== ====== ====== ======
- ----------------
(1) The Company completed mining all reserves at
Easy Junior in August 1994, and completed gold
processing in December 1996. See "Business and
Properties - Other Properties - Easy Junior."
(2) Not meaningful because gold production
resulted primarily from pad rinsing conducted
during reclamation activities at the Company's
mining properties in 1993.
</TABLE>
MINING AND PROCESSING METHODS
Mining and processing methods currently used
by the Company include open-pit mining and heap
leaching. The following is a general description
of the mining and processing methods used at the
Company's mines.
Open-Pit Mining
At its current operations, the Company
conducts open-pit mining utilizing conventional,
industry-employed methods and proven equipment.
The Company also anticipates conducting open-pit
mining at Olinghouse and Copper Flat. Mine plans
are designed to remove overburden to expose
sufficient ore to meet processing requirements.
Material is generally drilled and blasted in 15-
to 30-foot benches. The blasted material is then
loaded onto off-road haul trucks using a fleet of
front-end loaders. Overburden is transported
outside the pits and placed on piles. Ore is
transported by haul trucks to a crushing plant.
The Company has comprehensive preventative
maintenance programs at each mine for maintaining
all equipment. As a piece of equipment reaches
the end of its economic life, that unit is retired
and replaced.
Heap Leaching
In conventional heap leaching, the ore is
hauled from the pit and crushed to an optimum size
depending on the nature of the ore. The crushed
ore is then mixed with lime, oil and/or polymer
agglomerates and conveyed to the leach pads where
it is stacked. The stacked ore is then
cross-ripped to increase solution percolation, and
a weak cyanide solution is applied to the top
surface of the heaps using drip and sprinkler
irrigation techniques. This solution percolates
down through the ore, where the cyanide leaches
the gold from the rock, collects on the lined pad
and holds the gold in solution as it flows to a
central collection location. All leaching occurs
in a closed system on lined pads designed to meet
applicable environmental protection standards.
The system is designed to recover all cyanide and
prevent its escape or infiltration into the
ground.
The gold-bearing pregnant solutions are
collected from each heap and pumped to the
processing facilities for recovery. The gold is
recovered through carbon adsorption followed by
conventional pressure stripping of the carbon
using a high-temperature caustic solution, which
is then pumped to electro-winning cells. Gold is
electro-plated onto cathodes. The resultant
electro-plated material is removed from the
cathodes, fluxed, smelted and poured into dore
bars for shipment to a third-party refinery.
MARKETING AND HEDGING
The Company has contractually agreed to sell
100% of its gold production to Gerald Metals,
Inc., located in Stamford, Connecticut, through
April 1999, pursuant to fixed price future sales
contracts and/or at spot prices prevailing at the
time of sale. As of December 31, 1997, the
Company had (1) purchased put options for 84,000
ounces of gold at $335/oz, of which options for
7,000 ounces mature each month from January to
December 1998, and (2) sold call options for
45,000 ounces of gold at $390/oz, of which option
for 3,750 ounces mature each month from January to
December 1998. Due to the fungible nature of
gold, the Company believes that other buyers are
readily available to purchase the Company's gold
and, consequently, that its reliance on a single
customer does not represent a significant risk to
the Company's operations.
During the years ended December 31, 1997 and
1996, the Company sold all of its gold production
to Gerald Metals, Inc. During the year ended
December 31, 1995, the Company sold 86% of its
gold production to Gerald Metals, Inc. and the
remainder to Prudential Securities Incorporated.
In order to mitigate some of the risks
associated with fluctuating gold prices, the
Company currently uses and may in the future use
various price hedging strategies. Based upon an
internal policy, the Company may only sell forward
up to 50% of its estimated annual production.
Historically, hedging activities have been limited
to short-term contracts for future deliveries of
specific quantities of gold at specific prices and
the use of put and call options. The Company
continuously evaluates the short- and long-term
benefits of employing various hedging strategies
based upon current market conditions. In
addition, lenders may require the Company to
engage in hedging activities. See "- Risk Factors
- - Risk of Hedging Strategies."
GOVERNMENT CONTROLS AND REGULATIONS
The Company's business is subject to
extensive governmental controls and regulations
which are amended from time to time. The Company
is unable to predict what additional legislation
or amendments may be proposed that might affect
its business or the time at which any such
proposals, if enacted, might become effective.
Such legislation or amendments, however, could
require increased capital and operating
expenditures and could prevent or delay certain
operations by the Company. See "Risk Factors."
Outlined below are some of the more
significant aspects of governmental controls and
regulations which materially affect the Company's
principal area of business.
Regulation of Mining Activity
General. All of the Company's operations,
including its exploration, development and
production activities, are subject to regulation
under environmental laws, policies and
regulations. These laws, policies and regulations
regulate, among other matters, emissions to the
air, protection of and discharges to surface water
and groundwater, management of waste, management
of hazardous substances, protection of natural
resources, protection of endangered species,
protection of antiquities and reclamation of land.
The Company's operations are also subject to
numerous other federal, state and local laws and
regulations. At the federal level, the mining
operations of the Company are subject to
inspection and regulation by the division of Mine
Safety and Health Administration of the Department
of Labor ("MSHA") under provisions of the Federal
Mine Safety and Health Act of 1977. The
Occupation and Safety Health Administration
("OSHA") also has jurisdiction over certain safety
and health standards not covered by MSHA.
Permitting. The Company's existing mining
operations and all future exploration and
development projects also require a variety of
federal, state and local regulatory reviews,
approvals and permits, such as an Environmental
Impact Statement, an Army Corps of Engineers
Section 404 permit for placement of dredged or
fill material in waters or wetlands, a Water
Pollution Control permit or similar permits to
protect the quality of surface water and
groundwater, a Storm Water Discharge permit, an
Air Quality permit, a Reclamation Plan permit, a
Mining and Mineral Division permit and other
approvals of Plans of Operation and reclamation
plans. Although the Company believes the reviews,
approvals and permits for these projects typically
can be obtained in a timely fashion, permitting
procedures are complex, costly, time-consuming and
subject to potential regulatory delay or denial.
The Company does not believe that existing
permitting requirements or other environmental
protection laws and regulations will have a
material adverse effect on its business, financial
condition or results of operations. However, the
Company cannot be certain that future changes in
laws and regulations would not result in
significant additional expense, capital
expenditures, restrictions or delays associated
with the development and operation of the
Company's properties. The Company cannot predict
whether it will be able to renew its existing
permits without material changes in existing
permit conditions. Modification of existing
permits, such as the imposition of additional
conditions, could have a material adverse effect
on the Company's financial condition or results of
operations.
Reclamation. The State of Nevada (where a
majority of the Company's properties are located)
adopted the Mined Land Reclamation Act (the
"Nevada Act") in 1989 that established design,
operation, monitoring and closure requirements for
all mining facilities. The Nevada Act has
increased the cost of designing, operating,
monitoring and closing new mining facilities and
could affect the cost of operating, monitoring and
closing existing mining facilities. The State of
Nevada has also adopted reclamation regulations
pursuant to which reclamation plans have been
prepared and financial assurances established for
existing facilities. New facilities are also
required to provide a reclamation plan and
financial assurance to ensure that the reclamation
plan is implemented upon completion of operations.
The Nevada Act also requires reclamation plans and
permits for exploration projects that will result
in more than five acres of surface disturbance.
The State of New Mexico (where Copper Flat is
located) recently enacted the 1993 New Mexico
Mining Act (the "New Mexico Act"), a statute
applicable to most existing hard-rock and precious
metals mines, as well as to future exploration and
mining projects in New Mexico. The New Mexico Act
requires, among other things, closure and
reclamation of mines and exploration projects.
The closure and reclamation obligations associated
with mining operations are imposed upon the
operator or owner of the mining operation.
Environmental Regulations
Legislation and implementation regulations
adopted or proposed by the United States
Environmental Protection ("EPA"), the Army Corps
of Engineers, the Bureau of Land Management and by
comparable agencies in various states directly and
indirectly affect the mining industry in the
United States. These laws and regulations address
the environmental impact of mining and mineral
processing, including potential contamination of
soil, surface water and groundwater from mining
activities, such as tailings ponds, heap leach
pads, process ponds, chemical and fuel storage,
acid drainage and the generation and management of
waste. In particular, 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 ("CERCLA"
or "Superfund") and the National Environmental
Policy Act require analyses and/or impose effluent
standards, new source performance standards, air
quality and emission standards, other design or
operational requirements and limits on the
emission, discharge or release of pollutants
regarding various components of mining and mineral
processing, including gold ore mining and
processing. Such statutes also may impose
liability on the Company for remediation of waste
disposed of by the Company.
The Company's gold mining and processing
operations generate large quantities of solid
waste which is subject to regulation under the
RCRA and similar state laws. The majority of the
wastes produced by the Company's operations are
"extraction" and "beneficiation" wastes that EPA
has determined not to regulate under RCRA's
"hazardous waste" program. Instead, the EPA is
developing a solid waste regulatory program
specific to mining operations under the RCRA. Of
particular concern to the mining industry is a
proposal by the EPA titled "Recommendation for a
Regulatory Program for Mining Waste and Materials
Under Subtitle D of the Resource Conservation and
Recovery Act" ("Strawman II") which, if
implemented, would create a system of
comprehensive federal regulation of the entire
mine site. Many of these requirements would be
duplicative of existing state regulations.
Strawman II as currently proposed would regulate
not only mine and mill wastes but also numerous
production facilities and processes which could
limit internal flexibility in operating a mine. To
implement Strawman II the EPA must seek additional
statutory authority, which is expected to be
requested in connection with Congress'
reauthorization of RCRA.
The Company is also subject to regulations
under (1) CERCLA which regulates and establishes
liability for the release of hazardous substances
and (2) the Endangered Species Act ("ESA") which
identifies endangered species of plants and
animals and regulates activities to protect these
species and their habitats. Revisions to CERCLA
and ESA are being considered by Congress; the
impact on the Company of these revisions is not
clear at this time. The Army Corps of Engineers
has announced its intent to limit and restrict the
availability of a nationwide permit which
authorizes the placement of fill material in
isolated waters of up to ten acres in area without
the need to obtain an individual permit. The
impact of this action on the Company cannot be
determined at this time.
Environmental laws and regulations may also
have an indirect impact on the Company, such as
increased cost for electricity due to acid rains
provisions of the Clean Air Act Amendments of
1990. Charges by refiners have substantially
increased over the past several years because of
requirements that refiners meet revised
environmental quality standards. The Company has
no control over the refiners' operations or their
compliance with environmental laws and
regulations.
The Company believes that its operations are
in substantial compliance with federal and state
regulations and that no significant unanticipated
capital expenditures for environmental control
facilities will be required in the near future.
However, compliance with these standards, laws and
regulations may necessitate control measures and
expenditures which, if required, cannot be
estimated at this time. Compliance may require
substantial prophylactic measures regarding
operation of new mines and mills or materially
affect the proposed schedule for construction of
such facilities. Under certain circumstances,
construction of mining facilities may be stayed
pending regulatory approval. See "- Risk Factors
- - Environmental Controls."
SEASONAL FACTORS
The Company does not believe that its
revenues from mining activities and gold
production are significantly seasonal, however,
harsh weather conditions in the winter may
restrict the Company's access to its mining
properties and slow the production of gold through
heap leaching.
COMPETITION
The Company competes with other mining
companies and private individuals in connection
with the acquisition of mining claims and mineral
leases on gold and other precious metals prospects
and in connection with the recruitments and
retention of qualified employees. Many of the
Company's competitors have significantly greater
financial and other resources, including access to
financial markets.
EMPLOYEES
As of December 31, 1997, the Company employed
approximately 126 people. None of the employees
of the Company is covered by a collective
bargaining agreement. Employees conduct most of
the functions of the Company, although consultants
and contractors in the fields of geology,
engineering, hydrology, drilling, law, insurance,
and legislative liaison provide certain services
necessary for the functioning of the Company. To
support its production, exploration and permitting
activities, the Company maintains executive
offices in Henderson, Nevada, operational
headquarters in Ely, Nevada and a field office in
Fernley, Nevada.
RISK FACTORS
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 an 18 year
low of $278 per ounce in January 1998. The
average daily closing spot price for gold in 1998
(through March 26, 1998) on COMEX was $294 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.
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> <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
</TABLE>
On March 26, 1998 the afternoon fixing for
gold on the London P.M. Fix was $299.60. 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, at which mining was 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 Griffon, which commenced
gold production in January 1998. If operations at
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 Griffon to continue for at least two
years, with gold production from heap leaching and
pad rinsing to continue thereafter in declining
amounts through 2000. No assurance can be given
that the estimated time for completion of mining
activities at Griffon or gold production at
Griffon and Kinsley is accurate. The Company has
not yet initiated production at either of its two
primary development stage properties, Olinghouse
or Copper Flat. The Company's ability to generate
future operating revenues and earnings after
Griffon and Kinsley are depleted is dependent on
its ability to bring one or more of these or other
properties into production. The commencement of
production at these properties 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 properties in
operation once the mining and/or processing of ore
from 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 Olinghouse and
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
threatened to challenge 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.
For 1998, the Company has budgeted cash
expenditures of (1) $0.9 million for permitting
and holding costs at Olinghouse and Copper Flat,
(2) $8.5 million for debt repayment and associated
interest, and (3) $0.1 million for reclamation.
These expenditures are expected to be funded from
revenues generated from gold production at Griffon
and Kinsley. An additional $18.0 million in
expenditures for site development, construction,
equipment and working capital for Olinghouse has
been tentatively budgeted for 1998, as well as an
additional $0.7 million for drilling and related
activities at Griffon, Olinghouse, Lookout
Mountain and Excalibur. See "Business and
Properties - Operating Properties -- Griffon," "-
Development Properties - Olinghouse," "- Lookout
Mountain," and "- Excalibur." The Company will
require outside sources of capital to fund such
tentatively planned expenditures. On March 16,
1998, the Company signed a term sheet for a $24.4
million Loan Facility. The Loan Facility is to be
used for site development, construction, equipment
and working capital for Olinghouse, as well as for
the early repayment of an existing loan with BHF
Bank in the outstanding principal amount of
approximately $3.4 million. $19.4 million of the
Loan Facility is subject to customary due
diligence, definitive loan documentation and the
receipt of the necessary permits at Olinghouse.
See "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations -
Liquidity and Capital Resources." No assurance
can be given that the Company will obtain outside
financing on terms that are favorable to the
Company or in the amounts necessary to fund such
tentatively planned expenditures.
The Company's ability to obtain outside
financing will depend upon, among other things,
the receipt of government permits for Olinghouse
and the market price of gold and perceptions of
future gold prices. Therefore, the availability
of financing is dependent largely upon factors
outside of the Company's control, and cannot be
accurately predicted. The failure of the Company
to obtain outside financing could have a material
adverse effect upon its financial condition and
results of operations.
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 RCRA, the CERCLA and
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
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 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 and
evaluation of a number of significant factors,
including, but not limited to, the: (1) receipt
of government permits; (2) costs of bringing the
property into production, including exploration
and development work, preparation of feasibility
studies and construction of production facilities;
(3) availability and costs of financing;
(4) ongoing costs of production; (5) market prices
for the metals to be produced; and (6) 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 assurance 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 the PAH Report 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 production
(such as Olinghouse and Copper Flat) may require
revision if the Company commences 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 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. See
"- Marketing and Hedging." 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, 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 (1) change
the composition of the incumbent Board of
Directors; (2) benefit from certain transactions
which are opposed by the incumbent Board of
Directors; and (3) 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
the Company's 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
Company's 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.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any litigation
or administrative proceedings that the Company
believes would have a material adverse affect on
the Company's results of operations. The Company
is not aware of any threat of such litigation or
proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Market Information. The Company's common
stock ("Common Stock") is traded on the Nasdaq
Stock Market under the symbol "ALTA." The
following table sets forth the high and low
closing prices of the Common Stock, as reported by
the Nasdaq Stock Market, during the periods
indicated.
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, High Low
- ------------------------------ ---- ---
<S> <C> <C>
1996
- ----
First Quarter 5-1/32 1-17/32
Second Quarter 4-7/8 3-1/16
Third Quarter 4 3-1/8
Fourth Quarter 4-9/16 3-11/32
1997
- ----
First Quarter 4-1/4 2-31/32
Second Quarter 3-17/32 2-5/16
Third Quarter 3 1-27/32
Fourth Quarter 2-23/32 1-3/16
</TABLE>
The closing price on the Nasdaq Stock Market
on March 26, 1998 was $1-27/32 per share.
Holders. As of March 26, 1998, there were
approximately 7,378 holders of record of the
Company's common stock, including several holders
who are nominees for an undetermined number of
beneficial owners.
Dividends. The Company has not declared or
paid any dividends on its Common Stock since 1989,
and the Board of Directors intends to retain all
earnings, if any, for use in the Company's
business for the foreseeable future. In addition,
one of the Company's loan agreements restricts the
payment of cash dividends. See "Item 7.
Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity
and Capital Resources - 1998 Outlook." Any future
determination as to declaration and payment of
dividends will be made at the discretion of the
Board of Directors.
On November 11, 1997, the Company entered
into an agreement (the "Master Agreement") with
the holders of the 4% Convertible Debentures
issued on April 14, 1997 (the "1997 Debentures").
Pursuant to the terms of the Master Agreement, the
maturity date of the 1997 Debentures was extended
from April 14, 1999 to April 14, 2000. In
addition, the Company agreed to issue warrants in
three tranches to the holders of the 1997
Debentures based upon the outstanding principal
amount of the 1997 Debentures on November 15,
1997, March 31, 1998 and September 30, 1998. The
exercise price for each tranche is 120% of the
closing price on the respective issuance dates.
The warrants are exercisable at any time after
their issuance date and within a three-year period
for the first tranche and a five-year period for
the second and third tranches. Pursuant to the
terms of the Master Agreement, the Company agreed
to file a registration statement with the
Securities and Exchange Commission prior to April
30, 1998 to register the common stock issuable
upon an exercise of the warrants. On November 18,
1997, the Company issued warrants to purchase
232,000 shares of the Company's common stock at an
exercise price of $2.18 per share. The warrants
were issued pursuant to an exemption from
registration as set forth in Section 4(2) and
Regulation D of the Securities Act of 1993.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain
selected financial data with respect to the
Company and should be read in conjunction with the
Financial Statements and Notes thereto set forth
elsewhere in this report. All amounts are stated
in thousands except per share amounts.
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
INCOME STATE-
MENT DATA
Total
revenues $12,252 $19,581 $20,636 $10,696 $ 210
Income (loss)
from
operations 911 3,288 3,778 649 (5,798)
Income (loss)
before extra-
ordinary
item 1,123 3,247 5,889(1) 622 (5,071)
Extraordinary
item 784(2) - - 2,182(2) (5,071)
Net income
(loss) 1,907 3,247 5,889 2,804 (5,071)
Earnings per
common
share:
Basic -
Income (loss)
before
extra-
ordinary
item 0.04 0.11 0.21 0.02 (0.19)
Extra-
ordinary
item 0.02 - - 0.08 -
Net income
(loss) 0.06 0.11 0.21 0.10 (0.19)
Diluted -
Income (loss)
before
extra-
ordinary
item 0.03 0.11 0.20 0.02 (0.19)
Extra-
ordinary
item 0.02 - - 0.08 -
Net income
(loss) 0.06 0.11 0.20 0.10 (0.19)
</TABLE>
<TABLE>
<CAPTION>
December 31,
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balance Sheet
Data
Total assets $62,986 $46,621 $40,399 $38,455 $38,192
Long-term
obligations 14,086 3,164 4,878 6,722 3,113
Working capital
(deficit) 2,819 (2,634) (312) (2,391) 8,515
Stockholders'
equity 39,799 35,604 30,388 23,938 19,241
- -----------
(1) Includes $2.4 million from a non-recurring
net gain on the sale of an asset.
(2) Gain on extinguishment of debt.
</TABLE>
No dividends were paid during the above five-year
period.
SUPPLEMENTARY FINANCIAL INFORMATION
The following table summarizes certain
selected unaudited financial data with respect to
the Company and should be read in conjunction with
the Financial Statements and Notes thereto set
forth elsewhere in this report. All amounts are
stated in thousands except per share amounts.
<TABLE>
<CAPTION>
Quarters Ended
-------------------------------------
(Unaudited) Years
Ended
March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
--------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
1997 -
Total
revenues $2,858 $2,991 $2,649 $3,754 $12,252
Income from
operations 49 72 597 193 911
Net income
before
extraordinary
item 79 160 664 220 1,123
Extraordinary
item - 784 - - 784
Net income 79 944 664 220 1,907
Earnings per
common share:
Basic -
Income before
extraordinary
item - 0.01 0.02 0.01 0.04
Extraordinary
item - 0.02 - - 0.02
Net income - 0.03 0.02 0.01 0.06
Diluted -
Income before
extraordinary
item - - 0.02 0.01 0.03
Extraordinary
item - 0.02 - - 0.02
Net income - 0.03 0.02 0.01 0.06
1996 -
Total
revenues $5,185 $5,186 $4,629 $4,581 $19,581
Income from
operations 776 1,002 937 573 3,288
Net income 733 975 887 652 3,247
Earnings per
common share:
Basic and
Diluted 0.02 0.03 0.03 0.02 0.11
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934
provide 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 the Company's reserves, timing of receipt of
government permits, planned dates for commencement
of 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
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 issues related to the year 2000.
See "Items 1 and 2. Business and Properties -
Risk Factors."
RESULTS OF OPERATIONS
Comparison of the years ended December 31, 1997
and 1996
In 1997, the Company had $12.3 million in
revenue from the sale of 35,990 ounces of gold at
an average price of $340/oz, as compared to $19.6
million in revenue in 1996 from the sale of 49,900
ounces of gold at an average price of $392/oz. In
1997, the Company produced 38,472 ounces of gold,
all from Kinsley, at an average cash cost of
$206/oz. In 1996, the Company produced 49,486
ounces of gold, 44,552 ounces from Kinsley at an
average cash cost of $219/oz and 4,934 ounces from
Easy Junior at an average cash cost of $292/oz.
The decrease in cash production costs at Kinsley
from $219/oz in 1996 to $206/oz in 1997 is
principally due to an increase in the grade of the
ore mined. In 1997, the Company mined 1,588,000
tons of ore at Kinsley with an average grade of
.037 oz/ton gold. In 1996, the Company mined
1,853,000 tons of ore with an average grade of
.032 oz/ton gold.
The decrease in revenue from $19.6 million in
1996 to $12.3 million in 1997 is due to the
following: (1) an unexpected diminution in the
later half of 1997 of the size and the
metallurgical quality of the last two remaining
ore bodies to be mined at Kinsley; (2) the
completion of gold production at Easy Junior in
1996; and (3) the significant decrease in the
price of gold that was experienced in 1997. The
decrease in direct mining, production and holding
costs from $14.6 million in 1996 to $9.5 million
in 1997 is directly related to the decrease in
production, as well as the higher grade of ore
mined at Kinsley in 1997.
General and administrative expenses were $1.6
million in both 1996 and 1997.
Exploration expenses increased from $0.1
million in 1996 to $0.3 million in 1997 as the
result of exploration activities conducted in 1997
on properties acquired in the latter half of 1996.
Interest income and other increased from $0.1
million in 1996 to $0.2 million in 1997 as the
result of more funds available for investment in
1997. The decrease in interest expense from $0.1
million in 1996 to zero in 1997 was due to
increased capitalization of interest in 1997.
In 1997, the Company realized an
extraordinary gain of $0.8 million from the early
retirement of debt. There were no similar
transactions in 1996.
No provision for income taxes was recognized
during either 1997 or 1996 because of the
generation of a tax loss in both years. As of
December 31, 1997, the Company estimates that it
has approximately $30.9 million in accumulated net
operating loss carryforwards. These net operating
loss carryforwards are scheduled to expire during
the period 2005 to 2012.
Comparison of the Years Ended December 31, 1996
and 1995
In 1996, the Company had $19.6 million in
revenue from the sale of 49,900 ounces of gold at
an average price of $392/oz, as compared to $20.6
million in revenue in 1995 from the sale of 52,580
ounces of gold at an average price of $392/oz. In
1996, the Company produced 49,486 ounces of gold,
44,552 ounces from Kinsley at an average cash cost
of $219/oz and 4,934 ounces from Easy Junior at an
average cash cost of $292/oz. In 1995, the
Company produced 53,063 ounces of gold, 40,667
ounces from Kinsley at an average cash cost of
$184/oz and 12,396 ounces from Easy Junior at an
average cash cost of $283/oz. The increase in
cash production costs at Kinsley from $184/oz to
$219/oz between 1995 and 1996 is principally due
to a decrease in the grade of ore mined and longer
hauls. In 1996, the Company mined 1,853,000 tons
of ore at Kinsley with an average grade of .032
oz/ton gold, principally from the Ridge deposit.
In 1995, the Company mined 1,268,000 tons of ore
at Kinsley with an average grade of .052 oz/ton
gold, principally from the Main deposit, which was
depleted by the end of 1995.
Gold production at Kinsley began in late
January 1995. Mining at Easy Junior was completed
in the third quarter of 1994; however, gold
production from pad rinsing continued in ever
decreasing amounts until it ended in December
1996. The decrease in revenue from $20.6 million
in 1995 to $19.6 million in 1996 is principally
due to the winding down of gold production at Easy
Junior, as partially offset by Kinsley being in
production for a full year in 1996. The decrease
in direct mining, production and holding costs
from $15.4 million in 1995 to $14.6 million in
1996 is directly related to the decrease in
production, as partially offset by the lower grade
of ore mined at Kinsley in 1996.
General and administrative expenses increased
from $1.4 million in 1995 to $1.6 million in 1996
due to costs incurred in 1996 associated with the
Company's efforts to raise additional equity and
debt capital.
Exploration expenses increased from $30,000
in 1995 to nearly $0.1 million in 1996 as the
result of exploration conducted in 1996 on
properties acquired late in 1996.
In 1995, the Company sold its remaining
interest in the Robinson copper property for a net
gain of $2.4 million; there were no similar
transactions in 1996. Interest income and other
decreased from nearly $0.2 million in 1995 to
nearly $0.1 million in 1996 primarily as the
result of lower average balances available for
investment in 1996. Interest expense and other
decreased from $0.6 million in 1995 to $0.1
million in 1996 principally due to increased
capitalization of interest in 1996.
No provision for income taxes was recognized
in 1996 because of the generation of a tax loss
and in 1995 because of the utilization of net
operating loss carryforwards. As of December 31,
1996, the Company estimates that it has
approximately $25.0 million in accumulated net
operating loss carryforwards. These net operating
loss carryforwards are scheduled to expire during
the period 2005 to 2011.
LIQUIDITY AND CAPITAL RESOURCES
General
As of December 31, 1997, the Company had $2.8
million in working capital, as compared to a $2.6
million working capital deficit as of December 31,
1996. The $5.4 million increase in working
capital is primarily due to proceeds received from
the issuance of $10.0 million in convertible
debentures and funds generated from gold
production at Kinsley, as partially offset by
funds required (1) to put Griffon into production,
(2) to continue the permitting and development of
Olinghouse, and (3) to continue the permitting of
Copper Flat. The Company believes that production
from Griffon and Kinsley will provide adequate
liquidity for the Company's operational needs
during 1998. Outside financing, whether from debt
or through joint ventures or similar arrangements,
will be required to begin site development and
construction at Olinghouse and Copper Flat.
The following table summarizes the Company's
working capital (deficit) as of the dates shown
(with dollars in thousands):
<TABLE>
<CAPTION>
December 31,
----------------
1997 1996
------ ------
<S> <C> <C>
Working Capital (Deficit) $2,819 $(2,634)
Working Capital Ratio 1.31:1 0.66:1
</TABLE>
OPERATIONS AND CAPITAL EXPENDITURES
In 1997, 1996 and 1995, the Company spent
$9.9 million, $8.8 million and $4.5 million,
respectively, for the acquisition of mining
claims, permitting and mine planning and the
acquisition of plant and equipment, for a total of
$23.2 million during the three-year period. In
1997, the Company used $1.1 million in operations
and in 1996 and 1995, the Company generated from
operations $5.6 million and $4.9 million,
respectively, for a net total of $9.4 million
during the three-year period. The resultant $13.8
million cash shortfall for the three-year period
was funded with $.5 million in cash on hand at the
beginning of the three-year period, the receipt of
$2.6 million in proceeds from asset sales, the
receipt of $0.2 million from the exercise of stock
options and $13.8 million in net borrowings. The
decrease in cash flow from operations from a
positive $5.6 million in 1996 and a positive $4.9
million in 1995 to a negative $1.1 million in 1997
is principally due to the decrease in operating
income in 1997 and the normal up-front build-up of
work-in-process gold inventory at Griffon at the
end of 1997. Mining began at Griffon in September
1997. Production of refined gold began in January
1998.
Financing Activities
The Company obtained $13.8 million and $3.4
million from net financing activities in 1997 and
1996, respectively, and used $3.2 million in net
financing activities in 1995, for a net total of
$14.0 million provided by financing activities
during the three-year period. In 1997 and 1996,
the Company realized $13.6 and $3.4 million,
respectively, from net borrowings. In 1995, the
Company reduced outstanding debt by $3.2 million.
Other
The approach of the year 2000 has become a
potential problem for businesses utilizing
computers in their operations since many computer
programs are date sensitive and will only
recognize the last two digits of the year, thereby
recognizing the year 2000 as the year 1900 or not
at all (the "Year 2000 Issue"). Management has
made a comprehensive assessment of the Company's
exposure to the Year 2000 Issue and what will be
required to ensure that the Company is Year 2000
compliant. The primary computer programs utilized
in the Company's operations and financial
reporting systems have been acquired from
independent software vendors. All of these
vendors have been formally contacted to determine
whether their systems are Year 2000 compliant,
and, if not, timelines have been or will be
established as to when the Company will receive
the required upgrades that assure that these
systems will be Year 2000 compliant. Maintenance
or modification costs associated with the Year
2000 Issue will be expensed as incurred, while the
costs of any new software will be capitalized and
amortized over the software's useful life. The
Company does not expect to incur costs in
connection with the Year 2000 Issue that would
have a material impact on operations. Although
the Company presently believes that all of its
software programs will be Year 2000 compliant,
there can be no assurances that the Company will
not be adversely affected by the Year 2000 Issue.
1998 Outlook
For 1998, the Company has budgeted cash
expenditures of (1) $0.9 million for permitting
and holding costs at Olinghouse and Copper Flat,
(2) $8.5 million for debt repayment and associated
interest, and (3) $0.1 million for reclamation.
These expenditures are expected to be funded from
revenues generated from gold production at Griffon
and Kinsley, all of which has been hedged at a
minimum price of $335/oz. An additional $18.0
million in expenditures for site development,
construction, equipment and working capital for
Olinghouse has been tentatively budgeted for 1998,
as well as $0.7 million for drilling and related
activities at Griffon, Olinghouse, Lookout
Mountain and Excalibur. The timing of these
additional expenditures is dependent upon the
receipt of the remaining outstanding permits and
the availability of outside financing. The
Company is currently in the final stage of
permitting Olinghouse. On March 16, 1998, the
Company signed a term sheet for a $24.4 million
Loan Facility. The Loan Facility is to be used
for site development, construction, equipment and
working capital for Olinghouse, as well as for the
early repayment of an existing loan with BHF Bank
in the outstanding principal amount of
approximately $3.4 million. $19.4 million of the
Loan Facility is subject to customary due
diligence, definitive loan documentation and the
receipt of the necessary permits at Olinghouse.
The Company expects to obtain all of the necessary
permits and financing; however, there is no
assurance that the Company will be able to do so.
See "- Risk Factors - Uncertainty of Funding" and
"- Government Permits and Project Delays."
Under the terms of the 1997 Debentures, the
Company must not issue more than a total of
5,779,695 shares of its common stock (the "Maximum
Share Amount"), unless the Company has obtained
stockholder approval or a waiver by the Nasdaq
Stock Market. In lieu of any conversion of shares
in excess of the Maximum Share Amount, the Company
must pay the holders of the 1997 Debentures 111%
of the outstanding principal amount plus accrued
and unpaid interest. Based on a conversion price
of $1.49 (90% of the average closing bid price of
the Company's common stock for the five trading
days preceding February 13, 1998 or $1.66), the
Company would be obligated to pay holders of the
1997 Debentures a total of $1,532,000 if the
holders were to convert all of the outstanding
1997 Debentures ($7,065,000 in the aggregate
principal amount as of February 13, 1998). The
amount payable to holders of the 1997 Debentures,
if any, will increase or decrease depending on the
average closing bid price of the Company's common
stock. If the average closing bid price of the
Company's common stock were $2.06 or above, a
conversion of all the outstanding 1997 Debentures
would not exceed the Maximum Share Amount and no
payment to holders in lieu of a conversion of
shares would be required. If all or any of the
1997 Debentures are converted within the next 12
months that would result in the issuance of shares
in excess of the Maximum Share Amount, management
believes that the Company will have sufficient
funds to pay the holders in lieu of a conversion
of such shares or it will request stockholder
approval for the issuance of such shares.
As of December 31, 1997, the Company had (1)
purchased put options for 84,000 ounces of gold at
$335/oz, of which options for 7,000 ounces mature
each month from January 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 to December 1998.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
Page
----
Report of Independent Public Accountants 33
Financial Statements:
- Balance Sheets as of December 31, 1997
and 1996 34
- Statements of Operations for the
Years Ended December 31, 1997, 1996
and 1995 36
- Statements of Stockholders' Equity
for Years Ended December 31, 1997,
1996 and 1995 37
- Statements of Cash Flows for the
Years Ended December 31, 1997, 1996
and 1995 38
- Notes to Financial Statements 40
Supplementary Financial Information is included on
page 28.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Stockholders and Board of Directors of Alta
Gold Co.:
We have audited the accompanying balance sheets of
Alta Gold Co. (a Nevada corporation) as of
December 31, 1997 and 1996, and the related
statements of operations, stockholders' equity and
cash flows for each of the three years in the
period ended December 31, 1997. These financial
statements are the responsibility of the Company's
management. Our responsibility is to express an
opinion on these financial statements based on our
audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about whether
the financial statements are free of material
misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit
also includes assessing the accounting principles
used and significant estimates made by management,
as well as evaluating the overall financial
statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects,
the financial position of Alta Gold Co. as of
December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the
three years in the period ended December 31, 1997
in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
February 13, 1998
ALTA GOLD CO.
BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
(In thousands)
ASSETS
------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents $ 3,330 $ 518
Inventories 8,152 4,568
Accounts receivable,
prepaid expenses and
other 157 133
------- -------
Total current assets 11,639 5,219
PROPERTY AND EQUIPMENT,
net:
Mining properties and
claims 20,936 20,500
Buildings and equipment 17,697 13,851
------- -------
38,633 34,351
Less - accumulated
depreciation (11,705) (10,237)
------- -------
Total property and
equipment, net 26,928 24,114
DEFERRED MINE DEVELOPMENT
COSTS, net 22,896 16,037
OTHER ASSETS 1,523 1,251
------- -------
Total assets $62,986 $46,621
======= =======
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
ALTA GOLD CO.
BALANCE SHEETS (CONTINUED)
AS OF DECEMBER 31, 1997 AND 1996
(In thousands, except share and per share amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 829 $ 1,378
Accrued liabilities 661 609
Current portion of long-term
reclamation liabilities 129 449
Current portion of long-term
debt 7,482 5,417
------- -------
Total current liabilities 9,101 7,853
LONG-TERM DEBT, net of
current portion 11,910 1,993
DEFERRED INCOME TAXES 662 662
LONG-TERM LIABILITIES:
Imputed interest payable 917 -
Reclamation (net of current
portion) 597 509
------- -------
Total liabilities 23,187 11,017
------- -------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY:
Common stock, $.001 par
value; authorized
60,000,000 shares, issued
30,191,639 and 29,022,371
shares, respectively 30 29
Additional paid-in capital 46,615 44,328
Accumulated deficit (6,846) (8,753)
------- -------
Total stockholders' equity 39,799 35,604
------- -------
Total liabilities
and stockholders'
equity $62,986 $46,621
======= =======
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
ALTA GOLD CO.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REVENUE:
Sales of gold and
other metals $12,252 $19,581 $20,636
OPERATING COSTS AND
EXPENSES:
Direct mining,
production,
reclamation and
maintenance costs 9,507 14,590 15,396
General and
administrative 1,568 1,611 1,432
Exploration 266 92 30
------- ------- -------
11,341 16,293 16,858
INCOME FROM OPERATIONS 911 3,288 3,778
OTHER INCOME (EXPENSE):
Gain on sale of assets - - 2,589
Interest and other
income 212 92 167
Interest expense - (133) (645)
------- ------- -------
212 (41) 2,111
------- ------- -------
INCOME BEFORE PROVISION
FOR INCOME TAXES AND
EXTRAORDINARY ITEM 1,123 3,247 5,889
PROVISION FOR INCOME
TAXES - - -
------ ------ ------
INCOME BEFORE
EXTRAORDINARY ITEM 1,123 3,247 5,889
EXTRAORDINARY ITEM:
Gain on extinguishment
of debt 784 - -
------ ------ ------
NET INCOME $1,907 $3,247 $5,889
====== ====== ======
EARNINGS PER COMMON
SHARE
INCOME BEFORE
EXTRAORDINARY ITEM
Basic $ .04 $ .11 $ .21
Diluted .03 .11 .20
NET INCOME
Basic $ .06 $ .11 $ .21
Diluted .06 .11 .20
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
ALTA GOLD CO.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(In thousands)
<TABLE>
<CAPTION>
Additional Accumu-
Common Stock Paid-in lated
Shares Amount Capital Deficit Total
------ ------ -------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, December
31, 1994 27,951 28 41,799 (17,889) 23,938
Common stock
issued for
compensation 41 - 47 - 47
Contribution from
shareholder - - 14 - 14
Common stock issued
for repayment of
debt 461 - 500 - 500
Net income - - - 5,889 5,889
------ --- ----- ------ ------
Balance, December
31, 1995 28,453 28 42,360 (12,000) 30,388
Common stock
issued for
compensation 51 - 79 - 79
Common stock
issued for
exercise of
stock options 78 - 39 - 39
Common stock
issued in
conjunction with
acquisition of
mining properties
and claims 40 - 160 - 160
Common stock issued
upon conversion of
debt 400 1 1,599 - 1,600
Compensation
expense for
stock options - - 128 - 128
Other - - (37) - (37)
Net income - - - 3,247 3,247
------ --- ------ ------ ------
Balance, December
31, 1996 29,022 29 44,328 (8,753) 35,604
Compensation
expense for
stock options - - 80 - 80
Warrants issued in
conjunction with
debt financing - - 72 - 72
Common stock
issued for
exercise of
stock options 181 - 185 - 185
Common stock
issued upon
conversion of
debt 992 1 1,950 - 1,951
Other (4) - - - -
Net income - - - 1,907 1,907
------ --- ------- ------- ------
Balance, December
31, 1997 30,191 $30 $46,615 $(6,846) $39,799
====== === ======= ======== =======
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
ALTA GOLD CO.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(In thousands)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $1,907 $3,247 $5,889
Adjustments to reconcile
net income to net cash
provided by operating
activities-
Depreciation, depletion
and amortization 2,377 3,087 3,350
Net gain on sale of
assets - - (2,589)
Gain on extinguishment
of debt (784) - -
Stock issued for
compensation and other
services - 79 47
Compensation expense for
stock options 80 128 -
Decrease (increase) in -
Inventories (3,584) (317) (445)
Accounts receivable,
prepaid expenses and
other (296) (347) 519
Increase (decrease) in -
Accounts payable (549) 314 (1,141)
Accrued and other
liabilities (237) (523) (690)
Deferred income taxes - (93) -
------- ------ ------
Net cash provided by
operating activities (1,086) 5,575 4,940
------- ------ ------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to property and
equipment (3,645) (1,644) (1,474)
Additions to deferred
mine development costs (6,242) (7,147) (3,084)
Proceeds from sale of
property and equipment - - 240
Proceeds from sale of
royalty interest - - 2,425
------- ------ ------
Net cash used in investing
activities (9,887) (8,791) (1,893)
------- ------ ------
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
ALTA GOLD CO.
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(In thousands)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance
of debt 21,300 5,500 5,853
Payments on debt (7,700) (2,137) (9,016)
Proceeds from exercise
of stock options 185 39 -
Other - (37) 14
------- ------ ------
Net cash provided by (used
in) financing activities 13,785 3,365 (3,149)
------- ------ ------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 2,812 149 (102)
CASH AND CASH EQUIVALENTS:
Beginning of year 518 369 471
------- ------ ------
End of year $ 3,330 $ 518 $ 369
======= ====== ======
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the
year for-
Interest, net of amount
capitalized $ - $ 262 $ 357
====== ====== ======
Income taxes $ - $ 36 $ 67
====== ====== ======
SUPPLEMENTAL SCHEDULE
OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Equipment purchased
with debt $ 874 $ 707 $ 761
====== ====== ======
Mining properties and
claims acquired with
common stock $ - $ 160 $ -
====== ====== ======
Debt retired with
common stock $1,950 $1,600 $ 500
====== ====== ======
Mining properties and
claims purchase price
adjustment $ - $1,400 $ -
====== ====== ======
Interest capitalized on
zero coupon debentures $ 42 $ 123 $ 113
====== ====== ======
Debt acquisition costs
for common stock $ 72 $ - $ -
====== ====== ======
Imputed interest on
convertible debentures $1,111 $ - $ -
====== ====== ======
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
ALTA GOLD CO.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) BASIS OF PRESENTATION AND NATURE OF
OPERATIONS
Basis of Financial Statement Presentation
-----------------------------------------
The accompanying financial statements include the
accounts of Alta Gold Co. (the "Company"), which
was incorporated in Nevada in 1962. The Company
is engaged in the exploration, development, mining
and production of gold on properties located in
Nevada. The Company also owns three base metal
properties, located in the western United States.
Kinsley
-------
In 1993, the Company entered into an option
agreement with Cominco American Resources
Incorporated ("Cominco") and USMX, INC. ("USMX")
to purchase a 100% interest in the Kinsley gold
property, located near Wendover, Nevada, for a
total purchase price of $3,000,000 consisting of
$2,000,000 cash and shares of common stock of the
Company with a market value of $1,000,000. During
1994, the Company exercised its option and
acquired the Kinsley gold property. The Company
made an initial cash payment of $1,000,000 (which
included option payments of $50,000 made in 1993)
and issued 420,683 shares of common stock which
had a market value of $500,000. The Company paid
the remaining $1,000,000 in cash and issued
461,095 shares of common stock of the Company with
a market value of $500,000 in 1995.
Cominco and USMX have a right of first refusal
with respect to future sales or transfers of
Kinsley interests to third parties as well as
rights to acquire a 25% working interest in the
Kinsley gold property if gold production exceeds a
total of 300,000 ounces and an additional 24%
working interest if gold production exceeds a
total of 500,000 ounces.
Copper Flat
-----------
During 1994, the Company acquired a 100% interest
in the Copper Flat project which is located in the
Hillsboro Mining District, east of Silver City,
New Mexico, from Gold Express Corporation ("Gold
Express"). The purchase price for the Copper Flat
property consisted of: (i) $1,400,000 in cash,
(ii) a 6% convertible subordinated debenture in
the principal amount of $1,500,000 due two years
after the date of acquisition, (iii) a 6%
convertible subordinated debenture in the
principal amount of $1,500,000 due four years
after the date of acquisition, and (iv) a
$4,000,000 subordinated zero coupon debenture due
fourteen years after the date of acquisition.
The debentures were subject to a right of offset
in the event that the Company suffered any loss,
cost, damage, injury or expense as a result of a
breach by Gold Express of any provision of the
asset purchase agreement under which the
debentures were issued. The Company identified
several breaches made by Gold Express and
exercised its right of offset. In June 1996, the
Company entered into a settlement with Gold
Express' successor in interest, StarTronix
International, Inc. ("StarTronix"), to convert
$1,600,000 of the $3,000,000 convertible
debentures into 400,000 shares of the Company's
common stock and warrants to buy an additional
400,000 shares of the Company's common stock at a
price of $4.00 per share. The warrants were
determined to have a de minimis value. The
difference was credited against the original cost
of certain mining properties and claims for which
the original debentures were issued.
Concurrent with the acquisition of the interest in
the Copper Flat project, the Company issued
375,000 restricted common shares of the Company to
the owner of a reserved interest in exchange for
capping the net smelter return royalty at 2-1/2%
during the life of the project. Under the terms
of this agreement, the Company was obligated to
pay the owner of this reserved interest the
difference between $4.00 per share and the closing
price, if less than $4.00 per share, of the
Company's common stock as of the second
anniversary date of the common stock issuance as
multiplied by a maximum of 250,000 shares. In
1996, a payment of $109,000 was made to the owner
of the reserved interest to satisfy this
obligation.
Pursuant to the terms of the purchase agreement,
the Company granted Gold Express a provisional
copper production royalty, which provided for a
royalty based on 50% of the quantity of copper
produced from the Copper Flat property during a
calendar quarter. The maximum amount of the
royalty over the life of the mine was $4,000,000
and any royalty payments made by the Company was
to be credited, on a dollar for dollar basis,
against the principal amount owed under the
$4,000,000 zero coupon debenture.
On May 12, 1997, the Company paid $750,000 in cash
to the holder of the $4,000,000 zero coupon
debenture in exchange for the full and complete
satisfaction of the debenture and the termination
of the associated agreement to receive up to
$4,000,000 in royalties. As the result of the
transaction, the Company retired the $4,000,000
zero coupon Debenture, which had a net book value
of $1,534,000, and recorded a one-time
extraordinary gain of $784,000.
The Copper Flat project is subject to a reserved
interest held by Gold Express' predecessor in
interest. The reserved interest required payments
of a 2-1/2% net smelter return royalty. Until
production commences, the Company must pay the
predecessor in interest $150,000 in annual
advanced royalties which will be credited against
the net smelter royalty when production commences.
Olinghouse
----------
During 1994, the Company acquired a 100% interest
in the Olinghouse gold property, located 30 miles
east of Reno, Nevada, from the Phelps Dodge Mining
Company for a total purchase price of $6,875,000
consisting of $4,625,000 in cash and a promissory
note in the amount of $2,250,000 which was paid in
July 1995.
Griffon
-------
During 1994, the Company acquired from Griffon
Resources, Inc. the Griffon gold property
located near Ely, Nevada. Under the terms of the
purchase agreement, the Company is required to
make annual holding payments of $40,830 through
1996 and pay production royalties of $13.60 per
ounce of gold for the first 50,000 ounces of
production and a maximum of $10.00 per ounce of
gold on any subsequent production.
The Company began construction and site
development at Griffon in July 1997, commenced
mining in September 1997, and began gold
production in January 1998.
Easy Junior
-----------
The Company owns a 100% interest in the Easy
Junior mine which is located near Ely, Nevada.
Mining operations were completed in the third
quarter of 1994 with the exception of crushing and
leaching activities. Crushing activities were
completed in the first quarter of 1995 and
leaching activities were completed in the fourth
quarter of 1996. Reclamation activity continued
during 1997.
Ward and Taylor Operations
--------------------------
The Company's main base metal property in Nevada
is the Ward zinc mine ("Ward"). Production mining
at Ward commenced in 1989 and the Company began
milling the Ward ore at the Taylor mill in 1990.
The Company suspended mining operations in March
1991 as a result of declining zinc prices and
higher than anticipated operating costs. The
Taylor mill continued operating in 1991 until the
mined ore stockpiles were processed. The net book
value of property, equipment, claims and deferred
mine development costs at Ward and the Taylor mill
is approximately $8,369,000 at December 31, 1997.
Robinson Copper Project
-----------------------
In January 1995, the Company sold its royalty
interest in the Robinson project for $2,425,000 in
cash. The Company had previously owned a working
interest in the Robinson project through 1991. At
the time of the sale, the royalty interest had no
book value, and accordingly, the Company
recognized a gain of $2,425,000 on the sale of
assets which is included in the accompanying 1995
statement of operations.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management's Use of Estimates
-----------------------------
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates
and assumptions that affect the reported amounts
of assets and liabilities and disclosures of
contingent assets and liabilities at the date of
the financial statements and the reported amounts
of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
--------------------------
For purposes of the balance sheets and statements
of cash flows, the Company considers all highly
liquid investments with an original maturity of
three months or less to be cash equivalents. Such
investments are carried at cost which approximates
fair value.
Inventories
-----------
Inventories of in-process mineral products and
consumable supplies are stated at the lower of
cost (using the first-in, first-out method) or
market value. Inventories of refined products are
stated at market value.
Inventories consist of the following as of
December 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Precious metals:
Refined products $ 865 $ 132
In process 7,129 4,293
Consumable supplies 158 143
------ ------
$8,152 $4,568
====== ======
</TABLE>
Property and Equipment
----------------------
Property and equipment are recorded at cost.
Costs incurred for additions, improvements and
betterments are capitalized as incurred.
Depreciation is calculated using the straight-line
method over the estimated useful lives (ranging
from 3 to 15 years) of the related assets.
Certain processing buildings and equipment are
depreciated using the units-of-production method.
Costs for maintenance and repairs are charged to
expense or, if the equipment is associated with a
property under development, to deferred
development costs, as incurred.
Exploration/Deferred Mine Development Costs
-------------------------------------------
The Company expenses exploration costs incurred in
finding areas of mineralization. When an area of
mineralization has been approved for development,
any further exploration costs are capitalized.
Deferred mine development costs are recorded at
cost and amortized to operations over the expected
productive lives of the properties using the
units-of-production method based on estimated
reserves. The recoverability of deferred mine
development costs is dependent upon future metals
prices. Whenever events or circumstances indicate
that the carrying amount of the deferred
development costs may not be recoverable, the
Company analyzes the impact of these changes and
their effect on the future cash flows of a
property. If the sum of the undiscounted future
cash flows is less than the carrying amount of a
property, the Company's policy is to write the
assets down to their fair value.
Capitalized Interest
--------------------
The Company capitalizes interest costs associated
with significant projects which have been approved
for development and for which development
activities are in process. Interest capitalized
during the years ended December 31, 1997, 1996 and
1995 totaled $1,035,000, $384,000 and $286,000,
respectively.
Reclamation Costs
-----------------
Minimum standards for mine reclamation have been
established by various governmental agencies which
affect certain operations of the Company. The
Company accrues estimated reclamation costs during
the property's productive life based on estimated
reserves using the units-of-production method.
Revenue Recognition
-------------------
The Company recognizes revenue for all sales of
mineral products at the point of transfer to the
buyer. Sales of certain metal by-products are
accounted for as a reduction to direct mining and
production costs.
Hedging Activities
------------------
The Company has contractually agreed to sell 100%
of its gold production to Gerald Metals, Inc.,
located in Stamford, Connecticut, through April
1999, pursuant to fixed price future sales
contracts and/or at spot prices prevailing at the
time of sale. As of December 31, 1997, the
Company had (1) purchased put options for 84,000
ounces of gold at $335/oz., of which 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. Due to the
fungible nature of gold, the Company believes that
other buyers are readily available to purchase the
Company's gold and, consequently, that its
reliance on a single customer does not represent a
significant risk to the Company's operations.
During the years ended December 31, 1997 and 1996,
the Company sold all of its gold production to
Gerald Metals, Inc. During the year ended
December 31, 1995, the Company sold 86% of its
gold production to Gerald Metals, Inc. and the
remainder to Prudential Securities Incorporated.
Income Taxes
------------
The Company follows the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109,
Accounting for Income Taxes, which requires
recognition of deferred income tax assets and
liabilities for the consequences of temporary
differences between amounts reported for financial
and income tax purposes. SFAS No. 109 also
requires the recognition of future tax benefits of
deferred tax assets related to net operating loss
carryforwards and certain other temporary
differences to the extent that realization of such
deferred tax assets is more likely than not;
otherwise a valuation allowance is applied.
Earnings Per Share
------------------
The Company follows the provisions of SFAS No.
128, Earnings Per Share, which is required for
financial statements issued for periods ending
after December 15, 1997, and requires restatement
of all prior-period earnings per share date
presented. SFAS No. 128 replaces previously
reported earnings per share with "basic" earnings
per share and "diluted" earnings per share. Basic
earnings per share is based on the weighted
average number of shares actually outstanding
during the year. Diluted earnings per share
includes the potential dilution for the exercise
of stock options, warrants, and debt conversions.
Reclassifications
-----------------
Certain reclassifications have been made to the
prior periods' financial statements to conform
with the current year presentation. These
reclassifications had no effect on net income.
(3) DEFERRED MINE DEVELOPMENT COSTS
Deferred mine development costs as of December 31,
1997 and 1996, are summarized as follows by mining
area (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Olinghouse $11,873 $ 6,687
Ward and Taylor 4,389 4,389
Copper Flat 5,339 4,025
Kinsley 2,352 1,907
Griffon 1,468 946
------- -------
25,421 17,954
Less-accumulated
amortization (2,525) (1,917)
------- -------
$22,896 $16,037
======= =======
</TABLE>
(4) LONG-TERM DEBT
Long-term debt as of December 31, 1997 and 1996
consists of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Credit facility with Gerald
Metals and BHF Bank; interest
at LIBOR plus 2% (7.8% at
December 31, 1997) due March
31, 1999. Principal payments
payable in 15 equal installments,
commencing on January 31, 1998;
secured by a first priority
mortgage lien on the Kinsley
and Griffon gold properties $8,500 $ -
Credit facility with The First
National Bank of Ely due in
one principal payment of $1.4
million on January 2, 1999.
Interest payable quarterly at
an annual rate of 12.0%
beginning March 31, 1998;
secured by property 1,400 -
Convertible debentures maturing
April 14, 2000. Interest
payable quarterly at an annual
rate of 4.0% 8,250 -
Note payable to Gerald Metals;
interest at LIBOR
plus 2% (7.6% at December 31,
1996); due November 30, 1997;
secured by a first priority
mortgage on the Kinsley gold
property; paid in April, 1997 - 4,900
Zero coupon $4,000,000
subordinated debenture;
discounted at an imputed interest
rate of 9.0%; due June 14, 2008;
settled in May, 1997 - 1,492
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 1,242 1,018
------- ------
19,392 7,410
Less-current portion (7,482) (5,417)
------- ------
Total long-term debt $11,910 $1,993
======= ======
</TABLE>
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 credit facility
to repay certain indebtedness due to Gerald
Metals. The remaining funds were 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 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 April
1, 1999.
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, 2000. 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. As a result of the
conversion feature, the Company recorded
$1,111,000 imputed interest payable and the
related expense was capitalized as deferred
development. Due to conversions, the imputed
interest decreased to 917,000 at December 31,
1997. 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
December 31, 1997, $1,750,000 of the convertible
debentures have been converted into 991,630 shares
of the Company's common stock. Subsequent to year-
end, an additional $1,185,000 of convertible
debentures converted into 976,443 shares of the
Company's common stock.
Under the terms of the Debentures, the Company
must not issue more than 5,779,695 shares of its
common stock (the "Maximum Share Amount"), unless
the Company has obtained stockholder approval or a
waiver by the Nasdaq Stock Market. In lieu of any
conversion of shares in excess of the Maximum
Share Amount, the Company must pay the holders of
the Debentures 111% of the outstanding principal
amount plus accrued and unpaid interest. Based on
a conversion price of $1.49 (90% of the average
closing bid price of the Company's common stock
for the five trading days preceding February 13,
1998 or $1.66), the Company would be obligated to
pay holders of the debentures a total of
$1,532,000 if the holders were to convert all of
the outstanding Debentures ($7,065,000 in the
aggregate principal amount as of February 13,
1998). The amount payable to holders of the
Debentures, if any, will increase or decrease
depending on the average closing bid price of the
Company's common stock. If the average closing bid
price of the Company's common stock were $2.06 or
above, a conversion of all the outstanding
Debentures would not exceed the Maximum Share
Amount and no payment to holders in lieu of a
conversion of shares would be required. To date,
the Company had not requested stockholder approval
for the issuance of shares in excess of the
Maximum Share Amount.
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.
In management's opinion, the fair market value of
long-term debt approximated book value at December
31, 1997 and 1996. The fair value of long-term
debt is based on the present value of expected
future cash flows discounted by the Company's
estimated incremental borrowing rate.
At December 31, 1997, maturities of the Company's
long-term debt are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31,
1998 $ 7,482
1999 3,503
2000 8,407
2001 -
2002 -
Thereafter -
-------
$19,392
=======
</TABLE>
(5) INCOME TAXES
The components of the net deferred tax asset
(liability) as of December 31, 1997 and 1996, are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss
carryforwards $10,825 $ 8,750
Reclamation and other
reserves 309 381
Other 69 85
------- -------
11,203 9,216
Less - valuation allowance 5,103 (5,667)
------- -------
Total deferred tax assets 6,100 3,549
------- -------
Deferred tax liabilities:
Depreciation, depletion
and amortization (6,100) (3,549)
Alternative minimum
taxes (662) (662)
------- -------
Total deferred tax
liabilities (6,762) (4,211)
------- -------
Net deferred income
taxes $ (662) $ (662)
======= =======
</TABLE>
SFAS No. 109 requires the recognition of future
tax benefits of deferred tax assets related to net
operating loss carryforwards and certain temporary
differences to the extent that realization of such
benefit is more likely than not; otherwise, a
valuation allowance is applied. At December 31,
1997 and 1996, the Company determined that
$5,103,000 and $5,667,000, respectively, of
previously unrecognized tax benefits did not
satisfy the recognition criteria set forth in SFAS
No. 109 because of the Company's history of prior
operating results; therefore, a valuation
allowance was recorded to reserve the applicable
deferred tax assets. During the years ended
December 31, 1997, 1996 and 1995, no income tax
provision was recognized due to utilization of net
operating loss carryforwards.
The following is a reconciliation between the
"expected" provision for income taxes using the
statutory Federal income tax rate (35%) and the
provision for income taxes for each of the three
years ended December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Computed "expected"
provision for income
taxes at the Federal
statutory rate $ 668 $ 1,136 $ 2,061
Utilization of net
operating loss
carryforwards (564) (1,140) (2,053)
Exercise of non-
qualified stock
options (107) - -
Other 3 4 (8)
----- ------ ------
Provision for income
taxes $ - $ - $ -
===== ====== ======
</TABLE>
As of December 31, 1997, the Company had the
following income tax carryforwards available for
income tax purposes (in thousands):
<TABLE>
<CAPTION>
Expiration
Dates Amounts
---------- -------
<S> <C> <C>
Federal regular tax
operating loss
carryforwards 2005 to 2012 $30,930
Federal AMT operating
loss carryforwards 2007 to 2012 $ 5,041
</TABLE>
(6) RECLAMATION AND ENVIRONMENTAL COSTS
General
-------
The Company has recorded its best estimate of
future reclamation and closure costs based on
currently available facts and technology and
enacted laws and regulations, and has taken into
consideration the Company's estimate of the likely
effects of inflation and other societal and
economic factors. In determining its best
estimate of future reclamation and closure costs,
the Company has given consideration to its prior
experience and the experience of other companies
in reclaiming and closing properties. The Company
believes it has accrued all necessary reclamation
costs and there are no additional contingent
losses on unasserted claims to be disclosed or
recorded in the reclamation liability. The
Company has not disposed of any properties for
which it has a commitment or is liable for any
known environmental liabilities.
The Company's mining exploration, development and
operational activities are subject to Federal,
state and local laws as well as various
governmental agency regulations that require the
Company to protect the environment. The laws and
regulations governing mining operations are
continually changing and generally are becoming
more restrictive. Consequently, the Company's
current estimates of its reclamation obligations
and its current level of expenditures to perform
ongoing reclamation may change in the future. At
the present time, however, the Company cannot
predict the outcome of future regulation or its
impact on costs. Failure to comply with
applicable laws and regulations can result in
delays in operations, injunctive actions and
damages as well as civil and criminal penalties.
To the extent that planned production on its
properties is delayed, interrupted or discontinued
because of regulation, future earnings of the
Company would be adversely affected. The Company
believes its operations are presently in
substantial compliance with applicable air and
water quality laws and regulations.
A portion of the Company's reclamation obligation
relates to former mining properties acquired by
the Company. For the obligations recorded on
these properties, actual expenditures for
reclamation may occur over a number of years.
For properties currently in production, the
Company has taken extra precautions to minimize
the possibility of chemical spills, especially in
its heap leaching operations. Leak detection
systems, double liner pads and soil neutralization
to help prevent spills and to minimize any adverse
consequences resulting from a possible spill have
been installed pursuant to regulatory requirements
and permits.
Restricted Reclamation Deposits
-------------------------------
Certain regulatory agencies, such as the Bureau of
Land Management and the Environmental Protection
Agency, review the Company's reclamation and
environmental obligations and require the Company
to hold restricted deposits at financial
institutions or with the appropriate agency to
ensure that adequate funds will be available to
meet estimated future reclamation costs. Such
deposits, totaling $382,000 and $870,000 as of
December 31, 1997 and 1996, respectively, are
classified as other assets in the accompanying
balance sheets. During 1997, the Company enlisted
the services of a bonding company to collateralize
a portion of reclamation bonds previously held in
financial institutions as restrictive deposits.
Shasta Property
---------------
In January 1996, the Company entered into a
settlement agreement with the California
Sportfishing Protection Alliance ("CSPA") related
to certain property owned by the Company in Shasta
County, California. The CSPA had previously filed
an action against the Company under the Clean
Water Act. The Company agreed to pay the CSPA
$450,000 and make certain expenditures related to
reclamation and clean-up. Under the terms of the
settlement, the Company paid the CSPA $200,000 in
1996, $150,000 on January 31, 1997, and must pay
$100,000 before January 31, 1998. These 1997 and
1998 payment obligations have been included in
reclamation liabilities in the accompanying
balance sheets.
In April 1996, the Company entered into a
settlement agreement with various companies which
also owned property in Shasta County and which the
Company alleged to have contributed to any
environmental damage in the area. The Company
received $380,000 from the various companies and
was indemnified against present and future claims,
except for costs incurred as a result of the CSPA
settlement.
(7) COMMITMENTS AND CONTINGENCIES
Litigation
----------
The Company is the subject of legal proceedings in
various stages, which it considers routine to its
business activities. It is management's opinion
that these matters will not have a material
adverse effect on the Company's financial position
or results of operations.
Purchase Commitment
-------------------
The Company formerly rented office facilities in
Ely, Nevada. In 1994, it exercised an option to
purchase these facilities. The option provides
for payments of $200,000 in cash, 100,000 shares
of restricted common stock of the Company, and a
$1,000,000 note payable, payable in six annual
installments with interest at prime plus 1%
(9.5% at December 31, 1997). The Company has
made the initial $200,000 non-refundable payment
under terms of the option. However, before the
Company acquires the property, the seller is
responsible for addressing certain title issues.
The Company is awaiting the resolution of the
title issues before completing the purchase. The
$200,000 is included in other assets in the
accompanying balance sheets.
Royalty Agreements, Mineral Leases and Work
Commitments
-------------------------------------------
Some of the Company's properties are subject to
minimum royalties and production royalties ranging
from 1/2% to 6% of net smelter returns or gross
sales price, as defined. In addition, certain
development properties are subject to work
commitments. These minimum royalty payments,
mineral leases and work commitments are terminable
upon notice by the Company and, therefore, are not
reflected as liabilities in the accompanying
balance sheets.
In conjunction with the acquisition of the
Olinghouse gold property, the Company assumed
mineral leases for land on which most of the
resource occurs. Payments of mineral leases in
1997 and 1996 totaled $478,000 and $460,000,
respectively. At December 31, 1997, minimum lease
payments under these leases are as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31,
1998 $ 489
1999 241
2000 257
2001 263
2002 265
Thereafter 2,344
------
$3,859
======
</TABLE>
Operating Leases
----------------
The Company leases its corporate headquarters in
Henderson, Nevada. Under the terms of the lease,
the Company is required to make monthly rent
payments which increase annually based on the
increase in the consumer price index, with each
annual increase to be no less than 4% and no more
than 8%. Rental expense which is included in
general and administrative expenses was $109,000
and $105,000 for the years ended December 31, 1997
and 1996, respectively. Minimum rental payments
under the lease are approximately $114,000 and
$19,000 for the years ending December 31, 1998,
and 1999, respectively.
Insurance Coverage
------------------
The Company carries insurance against property
damage, including boiler and machinery insurance,
and also comprehensive general liability,
including liability policies applicable to motor
vehicles. The Company is also insured against
dishonesty and gold and silver bullion losses, as
well as losses of products in transit. The
Company has elected not to insure against business
interruption. The Company cannot economically
insure for environmental pollution and has elected
not to insure for mine cave-ins and other possible
natural hazards consistent with industry practice.
(8) EMPLOYEE BENEFIT PLANS
401(k) Plan
-----------
The Company has a deferred compensation plan
pursuant to Section 401(k) of the Internal Revenue
Code for all regular full-time employees who have
reached the age of 21 and completed one year of
service. The Company's contributions to the plan
are at the discretion of the Company's Board of
Directors. It has been the Company's policy to
match the participant's voluntary salary deferrals
at the rate of 100% to a maximum of 5% of pay.
Amounts expensed under the plan for the years
ended December 31, 1997, 1996 and 1995 totaled
$154,000, $130,000, and $119,000, respectively.
Stock-Based Compensation Plans
------------------------------
The Company has adopted the 1994 Employee Stock
Option Plan and the 1997 Employee Stock Option
Plan. In addition, the Company has granted
options pursuant to various employment agreements.
1994 Plan In June 1994, the Company's
stockholders approved the 1994 Plan, under which
all employees of the Company, as well as persons
who perform substantial services for or on behalf
of the Company, are eligible to receive options to
purchase shares of the Company's common stock.
The Company reserved 1,000,000 shares of common
stock for issuance under the 1994 Plan and the
Company's Board of Directors were authorized to
establish a committee to administer all aspects of
the 1994 Plan, including selection of people to
receive options, the number of options to be
granted (up to a maximum of 1,000,000) and the
establishment of the general terms of each option
grant. The options granted in 1994 and 1995 vest
over periods ranging from two to four years and
are exercisable over a period of ten years. No
options were granted in 1996.
1997 Plan - In June 1997, the Company's
stockholders approved the 1997 Plan, under which
all employees of the Company, as well as persons
who perform substantial services for or on behalf
of the Company, are eligible to receive options to
purchase shares of the Company's common stock.
The Company reserved 1,000,000 shares of common
stock for issuance under the 1997 Plan and the
Company's Board of Directors were authorized to
establish a committee to administer all aspects of
the 1997 Plan, including selection of people to
receive options, the number of options to be
granted (up to a maximum of 1,000,000) and the
establishment of the general terms of each option
grant. The options granted in 1997 vest over
periods ranging from one to four years and are
exercisable over a period of ten years.
In 1991 and 1992, the Company entered into a four-
year and a three-year employment agreement with
its Chairman and Chief Executive Officer ("CEO")
and its Chief Financial Officer ("CFO"),
respectively. As an employment signing bonus, the
Company granted the CEO and CFO options to
purchase 500,000 and 80,000 shares of common
stock, respectively, at a price of $.75 per share.
The options became exercisable ratably over a
four-year period and are exercisable for a period
of ten years.
In 1995, the Company entered into three-year
employment agreements with the CEO, CFO, and the
Vice President of Engineering and Construction.
Under the terms of the employment agreements, the
three officers were granted options to purchase
375,000, 120,000, and 90,000 shares of common
stock, respectively, at a price of $.75 per share.
The options become exercisable ratably over a
three-year period and are exercisable over a
period of ten years.
The Company accounts for these stock options under
Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, under
which compensation cost is determined as the
difference in the fair market value of the shares
on the date the options are granted and the
exercise price of the options. For the years
ended December 31, 1997, 1996 and 1995, had the
compensation cost for these plans been determined
consistent with SFAS No. 123, Accounting for
Stock-Based Compensation, the Company's net
income and earnings per share would have been
reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net Income
As reported $1,907,000 $3,247,000 $5,889,000
========== ========== ==========
Pro forma $1,598,000 $3,024,000 $5,666,000
========== ========== ==========
Basic EPS
As reported $.06 $.11 $.21
==== ==== ====
Pro forma $.05 $.11 $.20
==== ==== ====
Diluted EPS
As reported $.06 $.11 $.20
==== ==== ====
Pro forma $.05 $.10 $.20
==== ==== ====
</TABLE>
Because the SFAS No. 123 method of accounting has
not been applied to options granted prior to
January 1, 1995, the resulting pro forma
compensation cost may not be representative of
that to be expected in future years.
A summary of the status of the Company's 1994 and
1997 Plans and options related to employment
agreements for each of the three years in the
period ended December 31, 1997, is presented in
the table and narrative below (shares in
thousands):
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------ ------------
Wtd. Wtd. Wtd.
Avg. Avg. Avg.
Ex. Ex. Ex.
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning
of year 1,302 $1.08 2,165 $1.08 2,067 $1.07
Granted 918 $1.10 - - 405 $1.25
Exercised - - (98) $1.34 (35) $1.29
Canceled (55) $1.34 - - - $ -
---- -----
Outstanding,
end of year 2,165 $1.08 2,067 $1.07 2,437 $1.10
===== ===== =====
Exercisable
at end of year 764 $ .91 1,232 $1.00 1,603 $1.03
===== ===== =====
Weighted average
fair value of
options granted $ .78 $ - $ .85
===== ===== =====
</TABLE>
At December 31, 1997, 1,160,000 of the 2,437,000
options outstanding have a weighted average
exercise price of $.75 and a weighted average
remaining contractual life of 6.1 years. Of these
options, 965,000 are exercisable. The remaining
1,277,000 options outstanding have exercise prices
between $1.25 and $1.72, with a weighted average
exercise price of $1.41 and a weighted average
remaining contractual life of 8.2 years. 638,000
of these options are exercisable and their
weighted average exercise price is $1.46. At
December 31, 1997, 595,000 options were
available for grant under the 1997 Plan.
At December 31, 1996, 1,165,000 of the 2,067,000
options outstanding have a weighted average
exercise price of $.75 and a weighted average
remaining contractual life of 9.1 years. 775,000
of these options are exercisable. The remaining
902,000 options outstanding have exercise prices
between $1.34 and $1.72, with a weighted average
exercise price of $1.48 and a weighted average
remaining contractual life of 8.4 years. 457,000
of these options are exercisable and their
weighted average exercise price is $1.42.
The fair value of each option grant is estimated
on the date of the grant using the Black-Scholes
option pricing model with the following
assumptions: risk-free interest rate of 6.35%
percent; expected dividend yield of 0.0 percent;
expected life of 3.0 to 4.0 years; expected
volatility of 64 to 90 percent.
(9) STOCKHOLDERS' EQUITY
Non-Employee Director Stock Option and
Stock Compensation Agreements
--------------------------------------
In December 1996, the Company granted options to
purchase 35,000 shares of the Company's common
stock at a price of $3.53 per share to directors
as directors' compensation under the 1996 Director
Stock Option Plan. The options became exercisable
immediately and remain exercisable for a period of
ten years from the grant date and expire 90 days
after a director leaves the Company's board.
Compensation cost of $38,000 was recognized based
on the fair value of the options. During the
years ended December 31, 1997, 1996 and 1995, the
Company issued 0, 50,833, and 40,834 shares,
respectively, of its restricted common stock to
directors as directors' compensation. During 1997
10,000 options expired.
Other Non-Employee Stock Options
--------------------------------
In March 1995, the Company granted Gerald Metals
an option to purchase 150,000 shares of the
Company's common stock at a price of $1.03 per
share in consideration for, and as part of, an
agreement between the two companies for precious
metal sales and hedging activities. The option
became exercisable immediately and remains
exercisable for a period of five years from the
grant date. During 1997, Gerald Metals exercised
its option for 150,000 shares.
In May 1996, the Company granted Gerald Metals an
option to purchase 75,000 shares of the Company's
common stock at a price of $3.75 per share in
connection with a loan from Gerald Metals (see
Note 4). The option became exercisable
immediately and remains exercisable for a period
of five years from the grant date. The Company
capitalized the fair value of these options
totaling $72,000 as deferred financing fees which
are being amortized to interest expense over the
life of the loan.
Non-Employee Stock Warrants
---------------------------
In November 1995, the Company issued 50,000
warrants to purchase shares of its common stock at
an exercise price of $2.00 per share to an
investment company in connection with a loan made
to the Company (see Note 4). These warrants
became exercisable immediately and remain
exercisable for a period of three years from the
grant date.
In June 1996, the Company issued 400,000 warrants
with an exercise price of $4.00 per share as part
of a settlement to retire subordinated debentures
issued in conjunction with the acquisition of
Copper Flat (see Notes 1 and 4). These warrants
became exercisable immediately and remain
exercisable for a period of five years from the
grant date.
In November 1997, the Company issued 232,000
warrants with an exercise price of $2.18 per share
as an incentive for the holders of the Debentures
not to convert (see Note 4). These warrants
became exercisable immediately and remain
exercisable for a period of three years from the
grant date. The Company capitalized the fair
value of these options totaling $72,000 as
deferred development for the Olinghouse mine and
will amortize the costs based on the units of
production method consistent with all deferred
development.
(10) EARNINGS PER SHARE
<TABLE>
<CAPTION>
Per
Share
Income Shares Amount
------ ------ ------
For the Year Ended 1997
-----------------------
<S> <C> <C> <C>
Net Income $1,907,000
Basic Earnings
per Share $1,907,000 29,477,000 $.06
====
Options issued to
executives,
employees and
others - 1,602,000
Convertible debt - 2,154,000
---------- ----------
Diluted Earnings
per Share
Income available to
stockholders
plus assumed
conversions $1,907,000 33,233,000 $.06
========== ========== ====
For the Year Ended 1996
-----------------------
Net Income $3,247,000
----------
Basic Earnings
per Share $3,247,000 28,765,000 $.11
====
Options issued to
executives,
employees and
others - 1,646,000
--------- ----------
Diluted Earnings
per Share
Income available
to stockholders
plus assumed
conversions $3,247,000 30,411,000 $.11
========== ========== ====
For the Year Ended 1995
-----------------------
Net Income $5,889,000
----------
Basic Earnings
per Share $5,889,000 28,338,000 $.21
====
Options issued to
executives,
employees and
others - 390,000
---------- ----------
Diluted Earnings
per Share
Income available
to stockholders
plus assumed
conversions $5,889,000 28,728,000 $.20
========== ========== ====
</TABLE>
Basic earnings per share were computed by dividing
net income by the weighted average number of
shares of common stock outstanding during the
year. Diluted earnings per share includes the
dilution for stock options and the conversion of
the Debentures upon issuance on April 10, 1997.
In 1997, the Company adopted SFAS No. 128,
"Earnings per Share," effective December 15, 1997.
As a result, the Company's reported earnings per
share for 1996 and 1995 were restated. The effect
of this accounting change on previously reported
earnings per share (EPS) data was as follows:
<TABLE>
<CAPTION>
Per share amounts 1996 1995
---- ----
<S> <C> <C>
Primary EPS as reported $.11 $.21
Effect of SFAS No. 128 - -
---- ----
Basic EPS as restated $.11 $.21
==== ====
Fully diluted EPS as
reported $.11 $.21
Effect of SFAS No. 128 - (.01)
---- ----
Diluted EPS as restated $.11 $.20
==== ====
</TABLE>
(11) RELATED PARTY TRANSACTIONS
Directors' Compensation
-----------------------
At December 31, 1997 and 1996, the Company had
accrued compensation totaling approximately
$50,000 and $70,000, respectively, for non-
mployee directors of the Company.
Employment Agreements
---------------------
The three-year employment agreements with the CEO,
CFO, and Vice President of Engineering and
Construction provide for an annual salary
(including increases), incentive compensation,
benefits and stock options (see Note 8). The
agreements also include termination and anti-
akeover provisions which provide for a payment to
the three officers based on prior compensation, in
the event of a change in control of the Company.
Contribution from Shareholder
-----------------------------
During 1995, a director of the Company purchased
shares of the Company's common stock on the open
market and sold those shares at a profit within
six months of the purchase, in violation of SEC
regulations. In accordance with Section 16(b) of
the Securities and Exchange Act of 1934, the
profits of $14,000 were turned over to the Company
and credited to additional paid-in-capital.
(12) SUBSEQUENT EVENT
On January 14, 1998, the Company acquired the
Lookout Mountain gold property from Echo Bay
Exporation, Inc. Lookout Mountain consists of
approximately 4,500 acres of unpatented mining
claims and is located eight miles south of Eureka,
Nevada. The Company paid the sum of $163,000 to
Echo Bay for right, title, and interest as lessee
and optionee. Royalty payments will be made
annually in the sum of $150,000.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
This information is incorporated by reference
from the Company's Proxy Statement to be filed
with the Securities and Exchange Commission (the
"Commission") in connection with the Company's
Annual Meeting of Stockholders to be held on June
12, 1998.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference
from the Company's Proxy Statement to be filed
with the Commission in connection with the
Company's Annual Meeting of Stockholders to be
held on June 12, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
This information is incorporated by reference
from the Company's Proxy Statement to be filed
with the Commission in connection with the
Company's Annual Meeting of Stockholders to be
held on June 12, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
This information is incorporated by reference
from the Company's Proxy Statement to be filed
with the Commission in connection with the
Company's Annual Meeting of Stockholders to be
held on June 12, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
Page
----
(a) 1. Financial Statements:
See Index to Financial Statement 32
2. Financial Statement Schedules
None required.
(b) Reports on Form 8-K:
None.
(c) Exhibits:
The following listed documents are included
herein or have been incorporated by reference from
previous reports filed with the Securities and
Exchange Commission:
3.01 Restated Articles of Incorporation of Alta
Gold Co.(15)
3.02 Restated Bylaws of Alta Gold Co.(15)
4.01 See Exhibit 3.01
4.02 See Exhibit 3.02
4.03 See Exhibit 10.14
4.04 See Exhibit 10.15
4.05 See Exhibit 10.24
4.06 See Exhibit 10.27
4.07 See Exhibit 10.29
4.08 See Exhibit 10.30
4.09 See Exhibit 10.40
4.10 See Exhibit 10.41
4.11 See Exhibit 10.42
4.12 See Exhibit 10.44
10.01 Exchange Agreement dated June 30, 1988, by
and among Silver King Mines, Inc., Pacific
Silver Corporation, Alta Gold Co. ("Alta"),
NERCO Minerals Company, and Resource
Associates of Alaska ("RAA") relating to
the exchange of Alta's interest in the
Taylor Property with RAA for an undivided
one-half interest in the Shoshone
Property.(1)
10.02 Master Agreement between the Company, Magma
Copper Company and Magma Nevada Mining
Company dated as of December 14, 1990.(2)
10.03 Consent, Lease Termination and Asset
Transfer Agreement among the Echo Bay
Group, Magma Copper Company, Magma Nevada
Mining Company and the Company dated as of
December 14, 1990.(2)
10.04 Limited Partnership Agreement among the
Company, Magma Nevada Mining Company and
Magma Limited Partner Co. dated as of March
13, 1991.(2)
10.05 Option Agreement between the Company and
Magma Nevada Mining Company dated March 13,
1991 relating to Put and Call options on
interest in the Robinson Property.(2)
10.06 Irrevocable Trust Agreement and Assignment
of Partnership Units to Trustee dated March
13, 1991 between the Company and West One
Trust Company.(2)
10.07 Provisional Copper Production Payment
Agreement between the Company and Magma
Mining Company dated December 14, 1990.(2)
10.08 Provisional Gold Production Payment
Agreement between the Company and Magma
Mining Company dated December 14, 1990.(2)
10.09 Letter Agreement among the Company,
Kennecott, Magma and the Echo Bay Group
concerning environmental liability and
expenditures on the Robinson Property.(2)
10.10 Employment Agreement between Alta Gold Co.
and Robert N. Pratt dated October 15,
1991.(4)
10.11 Employment Agreement between Alta Gold Co.
and John A. Bielun dated October 18,
1992.(4)
10.12 Asset Purchase Agreement between Alta Gold
Co. and Gold Express Corporation dated June
14, 1994.(7)
10.13 Two year 6% Subordinated Convertible
Debenture due June 14, 1996 issued by Alta
Gold Co. to Gold Express Corporation dated
June 14, 1994.(7)
10.14 Four year 6% Subordinated Convertible
Debenture due June 14, 1998 issued by Alta
Gold Co. to Gold Express Corporation dated
June 14, 1994.(7)
10.15 Fourteen year Subordinated Zero Coupon
Debenture due June 14, 2008 issued by Alta
Gold Co. to Gold Express Corporation dated
June 14, 1994.(7)
10.16 Provisional Copper Production Royalty
Agreement between Alta Gold Co. and Gold
Express Corporation dated June 14, 1994.(7)
10.17 Agreement by and among Alta Gold Co., Cobb
Resources Corporation and Hydro Resources
Corporation in regard to the royalty on the
Copper Flat Property effective June 14,
1994.(7)
10.18 Agreement for Purchase and Sale of Mining
Claims between Alta Gold Co. and Phelps
Dodge Mining Company effective July 8,
1994.(8)
10.19 Agreement for Purchase and Sale of Mining
Claims between Alta Gold Co. and Cominco
American Resources Incorporated and USMX,
Inc., dated April 14, 1994.(11)
10.20 Agreement for Purchase and Sale of Mining
Claims between Alta Gold Co. and Griffon
Resources, Inc. effective October 14,
1994.(11)
10.21 Facility Agreement between Gerald Metals,
Inc. and Alta Gold Co. dated March 28,
1995.(9)
10.22 Margin Agreement between Gerald Metals,
Inc. and Alta Gold Co. dated March 28,
1995.(9)
10.23 Purchase/Refining Agreement between Gerald
Metals, Inc. and Alta Gold Co. dated March
28, 1995.(9)
10.24 Stock Option Agreement between Gerald
Metals, Inc. and Alta Gold Co. dated March
28, 1995.(9)
10.25 Employment Agreement between Alta Gold Co.
and Robert N. Pratt dated June 9, 1995.(10)
10.26 Employment Agreement between Alta Gold Co.
and John A. Bielun dated June 9, 1995.(10)
10.27 Promissory Note with U.S. Bank of Nevada
dated September 18, 1995.(10)
10.28 Employment Agreement between Alta Gold Co.
and James S. Goff dated June 9, 1995.(12)
10.29 Loan Agreement dated May 31, 1996 between
Alta Gold Co. and Gerald Metals, Inc.(13)
10.30 Stock Option Agreement dated May 31, 1996
between Gerald Metals, Inc. and Alta Gold
Co.(13)
10.31 Settlement Agreement dated June 28, 1996 by
and between Alta Gold Co. and StarTronix
International, Inc., the successor in
interest to Gold Express Corporation.(14)
10.32 Warrant to purchase 400,000 shares of Alta
Gold Co. common stock granted on June 28,
1996 to StarTronix International, Inc.(14)
10.33 Loan Agreement dated April 10, 1997, by and
among Alta Gold Co., Gerald Metals, Inc.
and BHF - Bank Aktiengesellschaft, New York
Branch.(16)
10.34 Deed of Trust With Assignment of Rents and
Royalties, Security Agreement and Financing
Statement (Nevada) dated April 10, 1997,
made by Alta Gold Co. as Trustor, to First
American Title Company of Nevada as Trustee
for the benefit of Gerald Metals, Inc. and
BHF - Bank Aktiengesellschaft, New York
Branch as beneficiaries.(16)
10.35 Security Agreement dated April 10, 1997, by
and among Alta Gold Co., Gerald Metals,
Inc. and BHF - Bank Aktiengesellschaft, New
York Branch.(16)
10.36 Secured Promissory Note dated April 10,
1997, made by Alta Gold Co. in favor of
Gerald Metals, Inc. in the principal amount
of $4,250,000.(16)
10.37 Secured Promissory Note dated April 10,
1997, made by Alta Gold Co. in favor of BHF
- Bank Aktiengesellschaft, New York Branch
in the principal amount of $4,250,000.(16)
10.38 Agreement dated April 10, 1997, by and
between Alta Gold Co. and Gerald Metals,
Inc. regarding future contracts for the
sale and purchase of gold and gold
options.(16)
10.39 Purchase/Refining Agreement dated April 10,
1997, by and between Alta Gold Co. and
Gerald Metals, Inc. regarding the sale of
gold to Gerald Metals, Inc.; and Addendum 1
to Purchase/Refining Agreement dated April
10, 1997.(16)
10.40 Securities Purchase Agreement dated April
14, 1997, by and among Alta Gold Co. and
RGC International Investors, LDC, The
Tailwind Fund, Ltd., European American
Securities Account Client, Keyway
Investments Ltd., Olympus Securities, Ltd.,
Nelson Partners and Halifax, L.P.(17)
10.41 Form of Convertible Debentures dated April
14, 1997, issued by Alta Gold Co.,
contained in Exhibit 10.40.(17)
10.42 Registration Rights Agreement dated April
14, 1997, by and among Alta Gold Co. and
RGC International Investors, LDC, The
Tailwind Fund, Ltd., European American
Securities Account Client, Keyway
Investments Ltd., Olympus Securities, Ltd.,
Nelson Partners and Halifax, L.P.,
contained in Exhibit 10.40.(17)
10.43 Debenture Payoff and Royalty Termination
Agreement dated May 12, 1997 between Alta
Gold Co. and StarTronix International,
Inc.(18)
10.44 Form of Master Agreement dated November 11,
1998, by and among Alta Gold Co. and RGC
International Investors, LDC, The Tailwind
Fund, Ltd., Keyway Investments Ltd.,
Olympus Securities, Ltd., Nelson Partners
and Halifax, L.P., including form of
Warrant to Purchase Shares of Common Stock
and form of First Amendment to Convertible
Debenture.
21.01 Subsidiaries of the Company.(5)
23.01 Consent of Arthur Andersen LLP.
23.02 Consent of Pincock, Allen & Holt.
27.01 Financial Data Schedule.
99.01 Court stipulated Escrow Agreement re: Mase
Westpac litigation.(3)
99.02 Settlement Agreement and Mutual Release
dated May 23, 1994 by Republic Mase Bank
Limited, Republic Mase Inc. and Alta Gold
Co.(6)
- ---------------
(1) Incorporated by reference to Form 10-K (file
no. 2-2274) for the fiscal year ended March
31, 1988.
(2) Incorporated by reference to Form 10-K (file
no. 2-2274) for the year ended December 31,
1990.
(3) Incorporated by reference to Form 10-K (file
no. 2-2274) for the year ended December 31,
1991.
(4) Incorporated by reference to Form 10-K (file
no. 2-2274) for the year ended December 31,
1992.
(5) Incorporated by reference to Form 10-K (file
no. 2-2274) for the year ended December 31,
1993.
(6) Incorporated by reference to Form 8-K (file
no. 2-2274) dated May 23, 1994.
(7) Incorporated by reference to Form 8-K (file
no. 2-2274) dated June 14, 1994.
(8) Incorporated by reference to Form 8-K (file
no. 2-2274) dated July 8, 1994.
(9) Incorporated by reference to Form 10-Q (file
no. 2-2274) for the quarter ended June 30,
1995.
(10) Incorporated by reference to Form 10-Q (file
no. 2-2274) for the quarter ended September
30, 1995.
(11) Incorporated by reference to Form 10-K (file
no. 2-2274) for the year ended December 31,
1994.
(12) Incorporated by reference to Form 10-K (file
no. 2-2274) for the year ended December 31,
1995.
(13) Incorporated by reference to Form 8-K (file
no. 2-2274) dated May 31, 1996.
(14) Incorporated by reference to Form 10-Q (file
no. 2-2274) for the quarter ended June 30,
1996.
(15) Incorporated by reference to Form 8-K (file
no. 2-2274) dated January 20, 1997.
(16) Incorporated by reference to Form 8-K (file
no. 2-2274) dated April 10, 1997.
(17) Incorporated by reference to Form 8-K (file
no. 2-2274) dated April 14, 1997.
(18) Incorporated by reference to Form 10-Q (file
no. 2-2274) for the quarter ended June 30,
1997.
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) 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.
By: /s/ Robert N. Pratt
--------------------
Robert N. Pratt,
Chief Executive
Officer
Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has
been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Robert N. Pratt Chairman, March 27, 1998
- ------------------- President,
Robert N. Pratt Chief
Executive
Officer and
Director
/s/ John A. Bielun Principal March 27, 1998
- ------------------ Financial
John A. Bielun Officer and
Principal
Accounting
Officer
/s/ Ralph N. Gilges Director March 27, 1998
- -------------------
Ralph N. Gilges
/s/ Thomas A. Henrie Director March 27, 1998
- --------------------
Thomas A. Henrie
/s/ John A. Keily Director March 27, 1998
- ------------------
John A. Keily
/s/ Jack W. Kendrick Director March 27, 1998
- --------------------
Jack W. Kendrick
/s/ Thomas D. Mueller Director March 27, 1998
- ---------------------
Thomas D. Mueller
EXHIBIT INDEX
Exhibit Page
No. Description No.
- ------- ----------- ----
3.01 Restated Articles of Incorporation
of Alta Gold Co.(15)
3.02 Restated Bylaws of Alta Gold Co.(15)
4.01 See Exhibit 3.01
4.02 See Exhibit 3.02
4.03 See Exhibit 10.14
4.04 See Exhibit 10.15
4.05 See Exhibit 10.24
4.06 See Exhibit 10.27
4.07 See Exhibit 10.29
4.08 See Exhibit 10.30
4.09 See Exhibit 10.40
4.10 See Exhibit 10.41
4.11 See Exhibit 10.42
4.12 See Exhibit 10.44
10.01 Exchange Agreement dated June 30,
1988,by and among Silver King
Mines, Inc., Pacific Silver
Corporation, Alta Gold Co.
("Alta"), NERCO Minerals Company,
and Resource Associates of Alaska
("RAA") relating to the exchange
of Alta's interest in the Taylor
Property with RAA for an undivided
one-half interest in the Shoshone
Property.(1)
10.02 Master Agreement between the Company,
Magma Copper Company and Magma Nevada
Mining Company dated as of December 14,
1990.(2)
10.03 Consent, Lease Termination and Asset
Transfer Agreement among the Echo Bay
Group, Magma Copper Company, Magma Nevada
Mining Company and the Company dated as
of December 14, 1990.(2)
10.04 Limited Partnership Agreement among the
Company, Magma Nevada Mining Company and
Magma Limited Partner Co. dated as of
March 13, 1991.(2)
10.05 Option Agreement between the Company
and Magma Nevada Mining Company
dated March 13, 1991 relating to
Put and Call options on interest
in the Robinson Property.(2)
10.06 Irrevocable Trust Agreement and
Assignment of Partnership Units
to Trustee dated March 13, 1991
between the Company and West
One Trust Company.(2)
10.07 Provisional Copper Production
Payment Agreement between the
Company and Magma Mining Company
dated December 14, 1990.(2)
10.08 Provisional Gold Production Payment
Agreement between the Company
and Magma Mining Company dated
December 14, 1990.(2)
10.09 Letter Agreement among the Company,
Kennecott, Magma and the Echo Bay
Group concerning environmental
liability and expenditures on
the Robinson Property.(2)
10.10 Employment Agreement between Alta
Gold Co. and Robert N. Pratt dated
October 15, 1991.(4)
10.11 Employment Agreement between Alta
Gold Co. and John A. Bielun dated
October 18, 1992.(4)
10.12 Asset Purchase Agreement between
Alta Gold Co. and Gold Express
Corporation dated June 14, 1994.(7)
10.13 Two year 6% Subordinated Convertible
Debenture due June 14, 1996 issued by
Alta Gold Co. to Gold Express Corporation
dated June 14, 1994.(7)
10.14 Four year 6% Subordinated Convertible
Debenture due June 14, 1998 issued by
Alta Gold Co. to Gold Express
Corporation dated June 14, 1994.(7)
10.15 Fourteen year Subordinated Zero Coupon
Debenture due June 14, 2008 issued by
Alta Gold Co. to Gold Express
Corporation dated June 14, 1994.(7)
10.16 Provisional Copper Production Royalty
Agreement between Alta Gold Co. and
Gold Express Corporation dated June 14,
1994.(7)
10.17 Agreement by and among Alta Gold Co.,
Cobb Resources Corporation and Hydro
Resources Corporation in regard to the
royalty on the Copper Flat Property
effective June 14, 1994.(7)
10.18 Agreement for Purchase and Sale of
Mining Claims between Alta Gold Co.
and Phelps Dodge Mining Company
effective July 8, 1994.(8)
10.19 Agreement for Purchase and Sale of
Mining Claims between Alta Gold Co.
and Cominco American Resources
Incorporated and USMX, INC, dated
April 14, 1994.(11)
10.20 Agreement for Purchase and Sale of
Mining Claims between Alta Gold Co.
and Griffon Resources, Inc. effective
October 14, 1994.(11)
10.21 Facility Agreement between Gerald
Metals, Inc. and Alta Gold Co. dated
March 28, 1995.(9)
10.22 Margin Agreement between Gerald Metals,
Inc. and Alta Gold Co. dated March 28,
1995.(9)
10.23 Purchase/Refining Agreement between
Gerald Metals, Inc. and Alta Gold Co.
dated March 28, 1995.(9)
10.24 Stock Option Agreement between Gerald
Metals, Inc. and Alta Gold Co. dated
March 28, 1995.(9)
10.25 Employment Agreement between Alta Gold
Co. and Robert N. Pratt dated June 9,
1995.(10)
10.26 Employment Agreement between Alta Gold
Co. and John A. Bielun dated June 9,
1995.(10)
10.27 Promissory Note with U.S. Bank of Nevada
dated September 18, 1995.(10)
10.28 Employment Agreement between Alta Gold
Co. and James S. Goff dated June 9,
1995.(12)
10.29 Loan Agreement dated May 31, 1996 between
Alta Gold Co. and Gerald Metals, Inc.(13)
10.30 Stock Option Agreement dated May 31, 1996
between Gerald Metals, Inc. and Alta Gold
Co.(13)
10.31 Settlement Agreement dated June 28, 1996
by and between Alta Gold Co. and
StarTronix International, Inc., the
successor in interest to Gold Express
Corporation.(14)
10.32 Warrant to purchase 400,000 shares
of Alta Gold Co. common stock
granted on June 28, 1996 to
StarTronix International, Inc.(14)
10.33 Loan Agreement dated April 10, 1997,
by and among Alta Gold Co., Gerald
Metals, Inc. and BHF - Bank
Aktiengesellschaft, New York Branch.(16)
10.34 Deed of Trust With Assignment of Rents
and Royalties, Security Agreement and
Financing Statement (Nevada) dated
April 10, 1997, made by Alta Gold Co.
as Trustor, to First American Title
Company of Nevada as Trustee for the
benefit of Gerald Metals, Inc. and BHF -
Bank Aktiengesellschaft, New York Branch
as beneficiaries.(16)
10.35 Security Agreement dated April 10, 1997,
by and among Alta Gold Co., Gerald
Metals, Inc. and BHF - Bank
Aktiengesellschaft, New York Branch.(16)
10.36 Secured Promissory Note dated April 10,
1997, made by Alta Gold Co. in favor of
Gerald Metals, Inc. in the principal
amount of $4,250,000.(16)
10.37 Secured Promissory Note dated April 10,
1997, made by Alta Gold Co. in favor of
BHF - Bank Aktiengesellschaft, New York
Branch in the principal amount of
$4,250,000.(16)
10.38 Agreement dated April 10, 1997, by and
between Alta Gold Co. and Gerald Metals,
Inc. regarding future contracts for the
sale and purchase of gold and gold
options.(16)
10.39 Purchase/Refining Agreement dated April
10, 1997, by and between Alta Gold Co.
and Gerald Metals, Inc. regarding the
sale of gold to Gerald Metals, Inc.;
and Addendum 1 to Purchase/Refining
Agreement dated April 10, 1997.(16)
10.40 Securities Purchase Agreement dated
April 14, 1997, by and among Alta Gold
Co. and RGC International Investors,
LDC, The Tailwind Fund, Ltd.,
European American Securities Account
Client, Keyway Investments Ltd.,
Olympus Securities, Ltd., Nelson
Partners and Halifax, L.P.(17)
10.41 Form of Convertible Debentures dated
April 14, 1997, issued by Alta Gold Co.,
contained in Exhibit 10.40.(17)
10.42 Registration Rights Agreement dated
April 14, 1997, by and among Alta
Gold Co. and RGC International
Investors, LDC, The Tailwind Fund,
Ltd., European American Securities
Account Client, Keyway Investments
Ltd.,Olympus Securities, Ltd.,
Nelson Partners and Halifax, L.P.,
contained in Exhibit 10.40.(17)
10.43 Debenture Payoff and Royalty
Termination Agreement dated
May 12, 1997 between Alta Gold Co.
and StarTronix International, Inc.(18)
10.44 Form of Master Agreement dated November
11, 1998, by and among Alta Gold Co.
and RGC International Investors, LDC,
The Tailwind Fund, Ltd., Keyway
Investments Ltd., Olympus Securities,
Ltd., Nelson Partners and Halifax,
L.P., including form of Warrant to
Purchase Shares of Common Stock and
form of First Amendment to
Convertible Debenture. 69
21.01 Subsidiaries of the Company.(5)
23.01 Consent of Arthur Andersen LLP. 91
23.02 Consent of Pincock, Allen & Holt. 93
27.01 Financial Data Schedule. 95
99.01 Court stipulated Escrow Agreement re:
Mase Westpac litigation.(3)
99.02 Settlement Agreement and Mutual
Release dated May 23, 1994 by Republic
Mase Bank Limited, Republic Mase Inc.
and Alta Gold Co.(6)
- ---------------
(1) Incorporated by reference to Form 10-K (file
no. 2-2274) for the fiscal year ended March
31, 1988.
(2) Incorporated by reference to Form 10-K (file
no. 2-2274) for the year ended December 31,
1990.
(3) Incorporated by reference to Form 10-K (file
no. 2-2274) for the year ended December 31,
1991.
(4) Incorporated by reference to Form 10-K (file
no. 2-2274) for the year ended December 31,
1992.
(5) Incorporated by reference to Form 10-K (file
no. 2-2274) for the year ended December 31,
1993.
(6) Incorporated by reference to Form 8-K (file
no. 2-2274) dated May 23, 1994.
(7) Incorporated by reference to Form 8-K (file
no. 2-2274) dated June 14, 1994.
(8) Incorporated by reference to Form 8-K (file
no. 2-2274) dated July 8, 1994.
(9) Incorporated by reference to Form 10-Q (file
no. 2-2274) for the quarter ended June 30,
1995.
(10) Incorporated by reference to Form 10-Q (file
no. 2-2274) for the quarter ended September
30, 1995.
(11) Incorporated by reference to Form 10-K (file
no. 2-2274) for the year ended December 31,
1994.
(12) Incorporated by reference to Form 10-K (file
no. 2-2274) for the year ended December 31,
1995.
(13) Incorporated by reference to Form 8-K (file
no. 2-2274) dated May 31, 1996.
(14) Incorporated by reference to Form 10-Q (file
no. 2-2274) for the quarter ended June 30,
1996.
(15) Incorporated by reference to Form 8-K (file
no. 2-2274) dated January 20, 1997.
(16) Incorporated by reference to Form 8-K (file
no. 2-2274) dated April 10, 1997.
(17) Incorporated by reference to Form 8-K (file
no. 2-2274) dated April 14, 1997.
(18) Incorporated by reference to Form 10-Q (file
no. 2-2274) for the quarter ended June 30,
1997.
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,330
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 8,152
<CURRENT-ASSETS> 11,639
<PP&E> 38,633
<DEPRECIATION> 11,705
<TOTAL-ASSETS> 62,986
<CURRENT-LIABILITIES> 9,101
<BONDS> 11,910
0
0
<COMMON> 30
<OTHER-SE> 39,769
<TOTAL-LIABILITY-AND-EQUITY> 62,986
<SALES> 12,252
<TOTAL-REVENUES> 12,252
<CGS> 9,507
<TOTAL-COSTS> 9,507
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,123
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,123
<DISCONTINUED> 0
<EXTRAORDINARY> 784
<CHANGES> 0
<NET-INCOME> 1,907
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
EXHIBIT 10.44
FORM OF MASTER AGREEMENT DATED
NOVEMBER 11, 1998
MASTER AGREEMENT
This Master Agreement (this "Agreement") is
made and entered as of this 11th day of November,
1997 (the "Effective Date"), by and between Alta
Gold Co., a Nevada corporation (the "Company"),
and ------------------- ("Holder") (collectively
the Company and Holder are hereinafter referred to
as the "Parties").
R E C I T A L S
Whereas, on April 14, 1997, the Company
issued and sold to Holder a convertible debenture
of the Company (the "Convertible Debenture") in
the original principal amount of ------------
- ---------------------- (U.S.)), convertible into
shares of the Company's common stock, par value
$.001 per share ("Common Stock");
Whereas, the Parties desire to enter into
this Agreement for the purpose of establishing
their respective rights and obligations in
connection with the issuance by the Company of
three (3) tranches of warrants (the "Warrants") to
purchase Common Stock to Holder, and the amendment
of the maturity date of the Convertible Debenture
from April 14, 1999 to April 14, 2000; and
Whereas, concurrently herewith, the Parties
will enter into a First Amendment to Convertible
Debenture (the "First Amendment") (collectively
the First Amendment and this Agreement are
hereinafter referred to as the "Transaction
Documents"), to memorialize the mutual intent of
the Parties;
Now, Therefore, in consideration of the
foregoing recitals and of the mutual covenants,
conditions, undertakings, representations and
warranties hereinafter set forth, and for other
good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the
Parties do hereby covenant and agree that the
Recitals are true and correct and by this
reference incorporated herein as if fully set
forth, and the Parties further agree as follows:
I. TERMS AND CONDITIONS
A. Issuance of Warrants
1. Terms. Subject to the conditions
set forth in this Agreement, on the Issuance Dates
(defined below), the Company shall issue to Holder
the Warrants at varying exercise prices per share
(the "Exercise Prices"). The Warrants shall be
issued in three tranches (collectively, the
"Tranches," and individually referred to as
"Tranche One," "Tranche Two," and "Tranche Three")
on: (a) November 15, 1997 (the "Tranche One
Issuance Date"); (b) March 31, 1998 (the "Tranche
Two Issuance Date"); and (c) September 30, 1998
(the "Tranche Three Issuance Date") (collectively
the Tranche One Issuance Date, the Tranche Two
Issuance Date and the Tranche Three Issuance Date
are hereinafter referred to as the "Issuance
Dates"). The Warrants shall be issued in
substantially the form attached hereto as Exhibit
A.
2. Calculation of Warrants. The number
of Warrants issued for Tranche One, Tranche Two
and Tranche Three shall be determined on the
Tranche One Issuance Date, the Tranche Two
Issuance Date, and the Tranche Three Issuance
Date, respectively. The number of shares of
Common Stock issuable under the Warrants issued on
the respective Issuance Dates shall be a specified
percentage of the quotient resulting from the
division of the Convertible Debenture principal
outstanding on the respective Issuance Date by the
closing price of the Common Stock on the same
Issuance Date (the "Conversion Quotient," or more
specifically, the "Tranche One Conversion
Quotient," "Tranche Two Conversion Quotient," and
"Tranche Three Conversion Quotient" for each of
the Tranches respectively). The number of shares
of Common Stock issuable under the Warrants to be
issued under each of the Tranches is as follows:
(i) five percent (5%) of the Tranche One
Conversion Quotient (the "Tranche One Warrants");
(ii) ten percent (10%) of the Tranche Two
Conversion Quotient (the "Tranche Two Warrants");
and (iii) fifteen percent (15%) of the Tranche
Three Conversion Quotient (the "Tranche Three
Warrants").
3. Exercise Price. The respective
Exercise Price for each of the Tranches shall be
one hundred twenty percent (120%) of the closing
price of the Common Stock on the Nasdaq National
Market, as reported by The Wall Street Journal, on
the corresponding Issuance Date.
4. Exercise Period. The Warrants may be
exercised any time after the respective Issuance
Date, and (a) for Tranche One, within three (3)
years of the Tranche One Issuance Date; (b) for
Tranche Two, within five (5) years of the Tranche
Two Issuance Date; and (c) for Tranche Three,
within five (5) years of the Tranche Three
Issuance Date.
B. First Amendment to the Convertible
Debenture
1. Terms. The maturity date of the
Convertible Debenture shall be extended for a
period of one (1) year from April 14, 1999 to
April 14, 2000, and, contemporaneous with the
execution of this Agreement, the Parties shall
enter into the First Amendment in substantially
the form attached hereto as Exhibit B.
II. UNDERTAKINGS DURING TERM OF AGREEMENT
A. Good Faith and Cooperation
The Parties severally warrant, represent and
undertake in favor of the other the following:
1. Performance. The Parties will duly
and timely perform all of their respective
obligations under the Transaction Documents; and
2. Good Faith. The Parties will deal at
all times with the other honestly and with the
utmost good faith with respect to the Transaction
Documents.
B. Authority and Due Execution
The Parties hereto severally warrant,
represent and undertake in favor of the other the
following:
1. Enforceability. Each Transaction
Document to which it is a party constitutes a
valid and legally binding obligation to the Party
enforceable in accordance with their respective
rights subject to: (a) any statute of
limitations; (b) any laws of bankruptcy,
insolvency, liquidation, reorganization or other
laws affecting creditor's rights generally; and
(c) any defenses of set-off or counterclaim.
2. Authorizations. Each Party has
obtained or effected all material authorizations,
approvals, consents, licenses, permits,
exemptions, filings, registrations, or
notifications which must be obtained before the
entry into, or performance of its obligations
under, each Transaction Document to which it is a
party and all such permissions are in full force
and effect and any conditions upon which the
permissions were given have been, and will
continue to be, complied with.
III. NOTICES
All notices, requests, and other
communications required or permitted to be given
or delivered hereunder shall be in writing, and
shall be either: (a) personally delivered; (b)
sent by certified or registered mail; or (c) sent
by a nationally recognized overnight mail courier,
postage prepaid and addressed, to:
The Company: Alta Gold Co.
601 Whitney Ranch Drive
Henderson, Nevada 89014
Attention: Chief Executive
Officer
Facsimile: 702-433-1547
Copy to: Michael J. Bonner, Esq.
Kummer Kaempfer Bonner & Renshaw
3800 Howard Hughes Parkway
7th Floor
Las Vegas, Nevada 89109
Facsimile: 702-796-7181
Holder: To the address set forth on the
signature page hereto.
Any such notice, request, or other communication
may be sent by facsimile, but shall in such case
be subsequently confirmed by a writing personally
delivered or sent by registered or certified mail
or by recognized overnight mail courier as
provided above. All notices, requests, and other
communications shall be deemed to have been given
either at the time of the receipt thereof by the
person entitled to receive such notice at the
address of such person for purposes of this
Article III, or, if mailed or with a recognized
overnight mail courier upon deposit with the
United States post office or such overnight mail
courier, if postage is prepaid and the mailing is
properly addressed, as the case may be.
IV. ADDITIONAL PROVISIONS
A. Amendment
No amendment or other modification of this
Agreement shall be deemed effective unless and
until such amendment or modification is in an
express writing and signed by the Parties.
B. Attorneys' Fees
Each Party is responsible for its own legal
fees and costs with respect to the preparation,
delivery and execution of this Agreement. In the
event that any action is filed in relation to this
Agreement, the unsuccessful Party to such action
shall pay to the successful Party, in addition to
all other sums that either Party may be called
upon to pay, the successful Party's reasonable
attorneys' fees and costs incurred in connection
with such action.
C. Binding Effect
This Agreement shall be binding upon and
shall inure to the benefit of the Parties and
their respective successors, predecessors,
parents, affiliates, subsidiaries, divisions,
officers, directors, stockholders, employees,
advisors, consultants, insurers, attorneys, heirs,
executors, administrators and any persons claiming
rights by, through or under them.
D. Counterparts
This Agreement may be executed in two or more
counterparts and shall be deemed to have become
effective when and only when all Parties hereto
have executed this Agreement, although it shall
not be necessary that any single counterpart be
signed by or on behalf of each of the Parties
hereto, and all such counterparts shall be deemed
to constitute but one and the same instrument.
This Agreement, once executed by a Party, may be
delivered to the other Party hereto by facsimile
transmission of a copy of this Agreement bearing
the signature of the Party so delivering this
Agreement.
E. Forum Selection and Choice of Law
This Agreement shall be governed by and
construed and enforced in accordance with the
internal laws of the State of Nevada without
regard to the body of law controlling conflicts of
law. The Parties hereby submit to the exclusive
jurisdiction of the courts located in Las Vegas,
Nevada, with respect to any dispute arising under
this Agreement, any other agreements entered into
in connection herewith and the transactions
contemplated hereby or thereby.
F. Headings
The subject headings of the Articles,
Sections and Subsections of this Agreement are
included only for purposes of convenience of
reference, and shall not affect the construction
or interpretation of any of the provisions hereof.
G. Neutral Interpretation
The provisions contained herein shall not be
construed in favor of or against any Party because
that Party or its counsel drafted this Agreement,
but shall be construed as if all Parties prepared
this Agreement, and any rules of construction to
the contrary are hereby specifically waived. The
terms of this Agreement were negotiated at arm's
length by the Parties and their respective
attorneys.
H. Nonwaiver
No provision of this Agreement or the right
to receive reasonable performance of any act
called for by the terms hereof shall be deemed
waived by a waiver of the breach thereof as to any
particular transaction or occurrence. Any
purported waiver shall not be valid unless it is
in writing and signed by the Party to be charged
thereby, and then, only to the extent set forth in
such writing.
I. Partial Invalidity
If any term, condition, covenant, or
provision of this Agreement, or any application
thereof, shall be held by a court of competent
jurisdiction to be invalid, void or unenforceable,
all provisions, covenants, and conditions of this
Agreement and applications thereof not held
invalid, void or unenforceable shall continue in
full force and effect, unless the essence of the
Agreement is thereby destroyed, and shall in no
way be affected, impaired or invalidated thereby,
unless the essence of the Agreement is thereby
destroyed.
J. Waiver of Restrictions on Releases
Imposed by Law
All rights under any law of any state or
territory of the United States or any foreign
country limiting or exempting any type of claim
from being completely, totally, and fully released
by this Agreement are expressly waived.
In Witness Whereof, the Parties have executed
this Agreement as of the Effective Date.
Alta Gold Co.,
a Nevada corporation
- ----------------------------------
By: Robert N. Pratt
Its: Chief Executive Officer and
Chairman of the Board
Holder
By: ----------------------------
Its: ----------------------------
EXHIBIT A
WARRANT
THIS WARRANT AND THE SHARES ISSUABLE UPON THE
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAW. THIS WARRANT
OR SUCH SHARES MAY NOT BE SOLD, DISTRIBUTED,
PLEDGED, OFFERED FOR SALE, ASSIGNED, TRANSFERRED,
OR OTHERWISE DISPOSED OF UNLESS: (A) THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
AND APPLICABLE STATE SECURITIES LAW COVERING ANY
SUCH TRANSACTION INVOLVING SAID SECURITIES; (B)
THE COMPANY (DEFINED BELOW) RECEIVES AN OPINION OF
LEGAL COUNSEL FOR THE HOLDER OF THIS WARRANT
STATING THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION AND SUCH OPINION IS IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY
AND FROM COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY; OR (C) PURSUANT TO RULE 144 UNDER SUCH
ACT.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
ALTA GOLD CO.
This is to certify that, for value received,
- ----------------------------, or its registered
transferees or assigns (the "Holder"), is
entitled, during a specified period of time as set
forth in Section 3 herein (the "Exercise Period"),
to purchase from Alta Gold Co., a Nevada
corporation (the "Company"), ---------- fully paid
and nonassessable shares of the Company's common
stock, par value $0.001 per share (the "Common
Stock"), at an exercise price per share as set
forth in Section 1 herein (the "Exercise Price")
(such number of shares and the Exercise Price
being subject to adjustment as provided herein).
The term "Warrant," as used herein, refers to this
Warrant to Purchase Shares of Common Stock, the
term "Warrant Shares," as used herein, refers to
the shares of Common Stock purchasable hereunder,
and the term "Parties," as used herein, refers
collectively to the Holder and the Company.
TERMS AND CONDITIONS
This Warrant is subject to the following
terms, provisions, and conditions:
1. Exercise Price. The Exercise Price
shall be $------------- per share.
2. Manner of Exercise; Issuance of
Certificates; Payment for Shares. Subject to the
provisions hereof, this Warrant may be exercised
by the Holder, in whole or in part, by the
surrender of this Warrant, together with an
exercise agreement in the form attached hereto
(the "Exercise Agreement"), duly completed and
executed by the Holder, to the Company during
normal business hours on any business day at the
Company's principal executive offices (or such
other location as the Company may designate by
notice to the Holder); and upon (a) the payment to
the Company in cash, by certified or official bank
check or by wire transfer for the account of the
Company in the amount of the Exercise Price
multiplied by the number of Warrant Shares for
which the Warrant is being exercised; or (b) after
May 31, 1998, if the resale of the Warrant Shares
by the Holder is not then registered pursuant to
an effective registration statement under the
Securities Act of 1933, as amended (the
"Securities Act") pursuant to the terms of Section
12 of this Agreement, delivery to the Company of a
written notice of an election to effect a Cashless
Exercise (as defined below) pursuant to the terms
of Section 11 of this Agreement.
The Warrant Shares so purchased shall be
deemed to be issued to the Holder as the record
owner of such Warrant Shares, as of the close of
business on the date on which this Warrant shall
have been surrendered, the completed Exercise
Agreement shall have been delivered, and payment
shall have been made for such Warrant Shares as
set forth above. Certificates for the Warrant
Shares so purchased, representing the aggregate
number of shares specified in the Exercise
Agreement, shall be delivered to the Holder within
a reasonable time, not exceeding three (3)
business days, after this Warrant shall have been
so exercised. The certificates so delivered shall
be in such denominations as may be reasonably
requested by the Holder and shall be registered in
the name of the Holder or such other name as shall
be designated by the Holder. If this Warrant
shall have been exercised only in part, then,
unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of
such certificates, deliver to the Holder a new
warrant representing the number of Warrant Shares
with respect to which this Warrant shall not then
have been exercised.
Notwithstanding anything in this Warrant
to the contrary, in no event shall the Holder be
entitled to exercise a number of Warrants (or
portions thereof) in excess of the number of
Warrants (or portions thereof) upon exercise of
which the sum of (a) the number of shares of
Common Stock beneficially owned by the Holder and
its affiliates (other than shares of Common Stock
which may be deemed beneficially owned through the
ownership of the unexercised Warrants and
unconverted portions of the Debentures (as defined
in the Securities Purchase Agreement dated April
14, 1997 (the "Securities Purchase Agreement"), by
and among the Company, the Holder and certain
other investors named therein)) and (b) the number
of shares of Common Stock issuable upon exercise
of the Warrants (or portions thereof) with respect
to which the determination described herein is
being made, would result in beneficial ownership
by the Holder and its affiliates of more than 4.9%
of the outstanding shares of Common Stock. For
purposes of the immediately preceding sentence,
beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation
13D-G thereunder, except as otherwise provided in
clause (a) of this paragraph.
3. Exercise Period. This Warrant may be
exercised any time after the Issuance Date and
before 2:00 p.m., Las Vegas time, on
- ------------------- (the "Exercise Period").
4. Certain Agreements of the Company.
The Company hereby covenants and agrees as
follows:
(a) Shares to be Fully Paid. All
Warrant Shares shall, upon issuance in
accordance with the terms of this Warrant, be
validly issued,fully paid, and non-
assessable.
(b) Reservation of Shares. During
the Exercise Period, the Company shall at all
times have authorized, and reserved for the
purpose of issuance upon exercise of this
Warrant,a sufficient number of shares of
Common Stock to provide for the exercise of
this Warrant.
(c) Listing. Subject to (i) the
registration for resale of the Warrant Shares
pursuant to Section 12 of this Agreement and
(ii)receipt by the Company of the Exercise
Agreement,the Company shall secure the
listing of the Warrant Shares upon each
national securities exchange or automated
quotation system, if any,upon which shares
of Common Stock are then listed and shall
maintain, so long as any other shares of
Common Stock shall be so listed, such
listing of the Warrant Shares; and the
Company shall so list on each national
securities exchange or automated quotation
system, as the case may be, and shall
maintain such listing of, any other shares
of capital stock of the Company issuable
upon the exercise of this Warrant if and so
long as any shares of the same class shall
be listed on such national securities
exchange or automated quotation system.
(d) Certain Actions Prohibited.
The Company will not, by amendment of its
charter or through any reorganization,
consolidation, merger, dissolution, or any
other voluntary action, avoid or seek to
avoid the observance or performance of any of
the terms to be observed or performed by it
hereunder, but will at all times in good
faith assist in the carrying out of all
the provisions of this Warrant and in the
taking of all such action as may reasonably
be requested by the Holder in order to
protect the exercise privilege of the Holder
against any impairment, consistent with the
terms and purpose of this Warrant. Without
limiting the generality of the foregoing, the
Company will not increase the par value of
any shares of Common Stock above the Exercise
Price and will take all such actions as may
be necessary or appropriate in order that the
Company may validly and legally issue fully
paid and non-assessable shares of Common
Stock upon the exercise of this Warrant.
(e) Successors and Assigns. This
Warrant shall be binding upon any entity
succeeding to the Company by merger,
consolidation, or acquisition of all or
substantially all the Company's assets.
5. Adjustment Provisions. During
the Exercise Period, the Exercise Price and
the number of Warrant Shares shall be subject
to adjustment from time to time as provided
in this Section 5. In the event that any
adjustment of the Exercise Price as required
herein results in a fraction of a cent, such
Exercise Price shall be rounded up to the
nearest cent.
(a) Subdivision or
Combination of Common Stock. If the Company
at any time subdivides (by any stock split,
stock dividend, recapitalization,
reorganization, reclassification or
otherwise) the Common Stock into a greater
number of shares, then, after the date of
record for effecting such subdivision, the
Exercise Price in effect immediately prior to
such subdivision will be proportionately
reduced. If the Company at any time combines
(by reverse stock split, recapitalization,
reorganization,reclassification or otherwise)
into a smaller number of shares, then, after
the date of record for effecting such
combination, the Exercise Price in effect
immediately prior to such combination will be
proportionately increased.
(b) Adjustment in Number of Shares.
Upon each adjustment of the Exercise Price
pursuant to the provisions of this Section 5,
the number of shares of Common Stock issuable
upon exercise of this Warrant shall be
adjusted by multiplying a number equal to the
Exercise Price by the number of shares of
Common Stock issuable upon exercise of this
Warrant immediately prior to such adjustments
and dividing the product so obtained by the
adjusted Exercise Price.
(c) Consolidation, Merger or Sale.
In case of any consolidation of the Company
with, or merger of the Company into any other
corporation, or in case of any sale or
conveyance of all or substantially all of the
assets of the Company other than in
connection with a plan of complete
liquidation of the Company, then as a
condition of such consolidation, merger or
sale or conveyance, adequate provision will
be made whereby the Holder will have the
right to acquire and receive upon exercise of
this Warrant in lieu of the shares of Common
Stock immediately theretofore acquirable upon
the exercise of this Warrant, such shares of
stock, securities or assets as may be issued
or payable with respect to or in exchange for
the number of shares of Common Stock
immediately theretofore acquirable and
receivable upon exercise of this Warrant had
such consolidation, merger or sale or
conveyance not taken place. In any such
case, the Company will make appropriate
provision to insure that the provisions of
this Section 5 hereof will thereafter be
applicable as nearly as may be in relation to
any shares of stock or securities thereafter
deliverable upon the exercise of this
Warrant. The Company will not effect any
consolidation, merger or sale or conveyance
unless prior to the consummation thereof, the
successor corporation (if other than the
Company) assumes by written instrument the
obligations under this Section 5 and the
obligations to deliver to the Holder such
shares of stock, securities or assets as, in
accordance with the foregoing provisions, the
Holder may be entitled to acquire.
(d) Distribution of Assets. In case
the Company shall declare or make any
distribution of its assets (including cash)
to holders of Common Stock as a partial
liquidating dividend, by way of return of
capital or otherwise, then, after the date of
record for determining stockholders entitled
to such distribution, but prior to the date
of distribution, the Holder shall be entitled
upon exercise of this Warrant for the
purchase of any or all of the shares of
Common Stock subject hereto, to receive the
amount of such assets which would have been
payable to the Holder had such Holder been
the holder of such shares of Common Stock on
the record date for the determination of
stockholders entitled to such distribution.
(e) Notice of Adjustment. Upon the
occurrence of any event which requires any
adjustment of the Exercise Price, then, and
in each such case, the Company shall give
notice thereof to the Holder, which notice
shall state the Exercise Price resulting from
such adjustment and the increase or decrease
in the number of Warrant Shares purchasable
at such price upon exercise, setting forth in
reasonable detail the method of calculation
and the facts upon which such calculation is
based. Such calculation shall be certified
by the chief financial officer of the
Company.
(f) Minimum Adjustment of Exercise
Price. No adjustment of the Exercise Price
shall be made in an amount of less than one
percent (1%) of the Exercise Price in effect
at the time such adjustment is otherwise
required to be made, but any such lesser
adjustment shall be carried forward and shall
be made at the time and together with the
next subsequent adjustment which, together
with any adjustments so carried forward,
shall amount to not less than one percent
(1%) of such Exercise Price.
(g) No Fractional Shares. No
fractional shares of Common Stock are to be
issued upon the exercise of this Warrant, but
the Company shall pay a cash adjustment in
respect of any fractional shares which would
otherwise be issuable in an amount equal to
the same fraction of the Market Price of a
share of Common Stock on the date of such
exercise. The term "Market Price" as of any
date means (i) the last reported sale price
for the Common Stock on the Nasdaq National
Market ("Nasdaq") on that date as reported by
The Wall Street Journal (the "WSJ") or (ii)
if Nasdaq is not the principal trading market
for the Common Stock, the last reported sale
price on the principal trading market for the
Common Stock on that date as reported by the
WSJ, or (iii) if the market value cannot be
calculated as of such date on any of the
foregoing bases, the fair market value as
reasonably determined in good faith by the
board of directors of the Company.
(h) Other Notices. In case at any
time:
(i) the Company shall declare
any dividend upon the Common Stock
payable in shares of stock of any class
or make any other distribution
(including dividends or distributions
payable in cash out of retained
earnings) to the holders of Common
Stock;
(ii) the Company shall offer
for subscription pro rata to the
holders of Common Stock any additional
shares of stock of any class or other
rights;
(iii) there shall be any
capital reorganization of the Company,
or reclassification of the Common
Stock, or consolidation or merger of
the Company with or into, or sale of
all or substantially all its assets to,
another corporation or entity; or
(iv) there shall be a voluntary
or involuntary dissolution, liquidation
or winding up of the Company; then, in
each such case, the Company shall give
to the Holder (a) notice of the date on
which the books of the Company shall
close or a record shall be taken for
determining the holders of Common Stock
entitled to receive any such dividend,
distribution, or subscription rights or
for determining the holders of Common
Stock entitled to vote in respect of
any such reorganization,
reclassification, consolidation,
merger, sale, dissolution, liquidation
or winding-up and, (b) in the case of
any such reorganization,
reclassification, consolidation,
merger, sale, dissolution, liquidation
or winding-up, notice of the date (or,
if not then known, a reasonable
approximation thereof by the Company)
when the same shall take place. Such
notice shall also specify the
approximate date on which the holders
of Common Stock shall be entitled to
receive such dividend, distribution, or
subscription rights or to exchange
their Common Stock for stock or other
securities or property deliverable upon
such reorganization, reclassification,
consolidation, merger, sale,
dissolution, liquidation, or winding-
up, as the case may be. Such notice
shall be given at least ten (10) days
prior to the record date or the date on
which the Company's books are closed in
respect thereto. Failure to give any
such notice or any defect therein shall
not affect the validity of the
proceedings referred to in classes (i),
(ii), (iii) and (iv) above.
6. Payment of Expenses. The Company and
the Holder shall each be responsible for their own
costs and expenses payable in connection with (a)
the negotiation, preparation, execution and
delivery of this Agreement and the other
agreements to be executed in connection herewith;
and (b) the issuance of certificates for Warrant
Shares upon the exercise of this Warrant. The
Company shall pay any issuance tax in connection
with the issuance of certificates for Warrant
Shares; provided, however, that the Holder shall
be responsible for any income or other taxes in
connection with such issuance.
7. No Rights or Liabilities as a
Stockholder. This Warrant shall not entitle the
Holder to any voting rights or other rights as a
stockholder of the Company. No provision of this
Warrant, in the absence of affirmative action by
the Holder to purchase Warrant Shares, and no mere
enumeration herein of the rights or privileges of
the Holder, shall give rise to any liability of
such Holder for the Exercise Price or as a
stockholder of the Company, whether such liability
is asserted by the Company or by creditors of the
Company.
8. Transfer, Exchange, and Replacement of
Warrant.
(a) Restriction on Transfer. This
Warrant and the rights granted to the Holder
are transferable, in whole or in part, upon
surrender of this Warrant, together with a
properly executed assignment in the form
attached hereto, at the principle executive
offices of the Company (or such other office
agency of the Company as it may designate by
notice to the Holder), provided, however,
that any transfer or assignment shall be
subject to the conditions set forth in
Section 8(e). Until presentation for
registration of transfer on the books of the
Company, the Company may treat the registered
Holder as the owner and Holder for all
purposes, and the Company shall not be
affected by any notice to the contrary.
(b) Exchange of Warrants;
Replacement of Warrants. This Warrant is
exchangeable upon the surrender hereof by the
Holder to the Company at its office for new
warrants of like tenor and date representing
in the aggregate the right to purchase the
number of shares of Common Stock purchasable
hereunder, each of such new Warrants to
represent the right to purchase such number
of shares of Common Stock (not to exceed the
aggregate total number purchasable hereunder)
as shall be reasonably designated by the
Holder at the time of such surrender. Upon
receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft,
destruction, or mutilation of this Warrant,
and, in case of loss, theft or destruction,
of indemnity, or security reasonably
satisfactory to it, and upon, surrender and
cancellation of this Warrant, if mutilated,
the Company will make and deliver a new
warrant of like tenor, in lieu of this
Warrant.
(c) Cancellation; Payment of
Expenses. Upon the surrender of this Warrant
in connection with any transfer, exchange, or
replacement as provided in this Section 8,
this Warrant shall be promptly canceled by
the Company. The Company and the Holder
shall each be responsible for their own costs
and expenses payable in connection with the
preparation, execution, and delivery of new
warrants pursuant to this Section 8. The
Holder shall be responsible for any tax which
may be payable in connection with any
transfer of a certificate for Warrant Shares.
(d) Registrar. The Company shall
maintain, at its principal executive offices
(or such other location as the Company may
designate by notice to the Holder), a
registrar for this Warrant, in which the
Company shall record the name and address of
the person in whose name this Warrant has
been issued, as well as the name and address
of each transferee and each prior owner of
this Warrant.
(e) Exercise or Transfer Without
Registration. No interest in this Warrant and
the Warrant Shares may be sold, distributed,
assigned, offered, pledged or otherwise
transferred, unless (a) there is an effective
registration statement under the Securities
Act and applicable state securities laws
covering any such transaction covering such
securities, or (b) the Company receives an
opinion of legal counsel for the Holder
stating that such transaction is exempt from
registration and such opinion is in form and
substance reasonably satisfactory to the
Company and from counsel reasonably
satisfactory to the Company. A legend
setting forth or referring to the above
restrictions shall be placed on any warrant
and certificates for Warrant Shares subject
to these restrictions and a stop transfer
order shall be placed on the books of the
Company and with any transfer agents against
this Warrant and the Warrant Shares until
they may be legally sold or otherwise
transferred without restriction. The first
Holder of this Warrant, by taking and holding
the same represents to the Company that such
Holder is acquiring this Warrant for
investment and not with a view to the
distribution thereof.
9. Amendments. No amendment or
modification of this Warrant shall be deemed
effective unless and until such amendment or
modification is an express writing executed by
both of the Parties.
10. Governing Law. This Warrant shall be
governed by and construed and enforced in
accordance with the internal laws of the State of
Nevada without regard to the body of law
controlling conflicts of law. The parties hereto
hereby submit to the exclusive jurisdiction of the
courts located in Las Vegas, Nevada, with respect
to any dispute arising under this Warrant and the
transactions contemplated hereby.
11. Cashless Exercise. Notwithstanding
anything to the contrary contained in this
Warrant, if the resale of the Warrant Shares by
the Holder is not registered on or before May 31,
1998 pursuant to an effective registration
statement under the Securities Act, this Warrant
may be exercised after May 31, 1998 by
presentation and surrender of this Warrant to the
Company at its principal executive offices with a
written notice of the Holder's intention to effect
a cashless exercise, including a calculation of
the number of shares of Common Stock to be issued
upon such exercise in accordance with the terms
hereof (a "Cashless Exercise'). In the event of a
Cashless Exercise, in lieu of paying the Exercise
Price in cash, the holder shall surrender this
Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant
Shares to which it would otherwise be entitled by
a fraction, the numerator of which shall be the
difference between the then current Market Price
per share of Common Stock and the Exercise Price,
and the denominator of which shall be the then
current Market Price per share of Common Stock.
12. Registration Rights.
(a) Mandatory Registration. The
Company shall prepare, and on or prior to
April 30, 1998, file with United States
Securities and Exchange Commission (the
"SEC"), a registration statement on Form S-3
(or, if Form S-3 is not then available, on
such form of registration statement as is
then available to effect a registration of
the Registrable Securities (as defined
below)) covering the resale of the
Registrable Securities underlying this
Warrant, which registration statement, to the
extent allowable under the Securities Act and
the rules promulgated thereunder (including
Rule 416), shall state that such registration
statement also covers such indeterminate
numbers of additional shares of Common Stock
as may become issuable upon conversion of the
Warrants (i) to prevent dilution resulting
from stock splits, stock dividends or similar
transactions or (ii) by reason of changes in
the Exercise Price in accordance with the
terms of this Warrant. The Company shall use
its best efforts to obtain effectiveness of
the registration statement as soon as
practicable. For purposes of this Agreement,
the term "Registrable Securities" means the
Warrant Shares issued or issuable and any
shares of capital stock issued or issuable as
a dividend on or in exchange for or otherwise
with respect to any of the foregoing.
(b) Obligations of the Holder. It shall
be a condition precedent to the obligations
of the Company to complete the registration
pursuant to this Warrant with respect to the
Registrable Securities of the Holder that
such Holder shall furnish to the Company such
information regarding itself, the Registrable
Securities held by it and the intended method
of disposition of the Registrable Securities
held by it as shall be reasonably required to
effect the registration of such Registrable
Securities and shall execute such documents
and otherwise cooperate with the Company as
reasonably requested by the Company in
connection with the preparation and filing of
the registration statement. At least three
(3) business days prior to the first
anticipated filing date of the Registration
Statement, the Company shall notify the
Holder of the information the Company
requires from each such Holder.
(c) Expense of the Registration. All
reasonable expenses, other than underwriting
discounts and commissions, incurred by the
Company in connection with registrations,
filings or qualifications pursuant to this
Section 12, including without limitation, all
registration, listing and qualification fees,
printers and accounting fees, and the fees
and disbursements of counsel for the Company,
shall be borne by the Company.
(d) Indemnification. The Holder shall be
entitled to the same indemnification rights
and obligations as provided to Investors (as
that term is defined in the Registration
Agreement (defined herein)) in Section 6 of
that certain Registration Rights Agreement
(the "Registration Agreement") dated April
14, 1997, by and among the Company, the
initial Holder and certain other investors
parties thereto.
In Witness Whereof, the Company has caused
this Warrant to be signed by its duly authorized
officer.
ALTA GOLD CO.,
a Nevada corporation
By: ------------------------
Name: -----------------
Title: -----------------
Date: ------------------------
EXERCISE AGREEMENT
To: Alta Gold Co. (the "Company")
The undersigned, pursuant to the provisions
set forth in the attached Warrant to Purchase
Shares of Common Stock (the "Warrant"), hereby
irrevocably elects and agrees to purchase
- ----------------- shares (the "Exercised Shares")
of the Company's common stock ("Common Stock")
covered by the Warrant, and makes payment herewith
in full therefor at the price per share provided
by the Warrant in cash or by certified or official
bank check in the amount of, or by surrender of
securities issued by the Company (including a
portion of the Warrant) having a market value (in
the case of a portion of this Warrant, determined
in accordance with Section 11 of the Warrant)
equal to, $-------------. If said number of
shares of Common Stock shall not be all the shares
purchasable under the Warrant, a new warrant is to
be issued in the name of said undersigned covering
the balance of the shares purchasable thereunder
less any fraction of a share paid in cash. Please
issue a certificate or certificates for the
Exercised Shares in the name of and pay any cash
for any fractional share to:
Name: ---------------------------
Signature: -----------------------
Dated: ---------------------------
Address: -------------------------
-------------------------
-------------------------
-------------------------
Note: The above signature should correspond
exactly with the name on the face of the Warrant.
ASSIGNMENT
For Value Received, the undersigned hereby
sells, assigns, and transfers all the rights of
the undersigned under the attached Warrant to
Purchase Shares of Common Stock (the "Warrant"),
with respect to the number of shares of common
stock of Alta Gold Co. (the "Company") covered
thereby set forth hereinbelow, to:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and hereby irrevocably constitutes and appoints
- ------------------------ as agent and
attorney-in-fact to transfer the Warrant on the
books of the Company, with full power of
substitution in the premises, subject to Section 8
of the Warrant.
Dated: -------------------------
Signature: ---------------------
Name: --------------------------
Title: -------------------------
Address: -----------------------
-----------------------
-----------------------
Note: The above signature should correspond
exactly with the name on the face of the Warrant.
EXHIBIT B
FIRST AMENDMENT TO CONVERTIBLE DEBENTURE
This First Amendment to Convertible Debenture
(this "First Amendment") is made and entered as of
this 11th day of November, 1997 (the "Effective
Date"), by and between Alta Gold Co., a Nevada
corporation (the "Company"), and ----------------,
("Holder") (collectively the "Parties").
R E C I T A L S
Whereas, on April 14, 1997, the Company
issued and sold to Holder a convertible debenture
of the Company (the "Convertible Debenture") in
the original principal amount of Four Million
Dollars ($4,000,000.00 (U.S.)), convertible into
shares of the Company's common stock, par value
$.001 per share.
Whereas, the Parties desire to enter into
this First Amendment for the purposes of
extending the maturity date of the Convertible
Debenture from April 14, 1999 to April 14, 2000;
and
Whereas, concurrently herewith, the Parties
will enter into a Master Agreement, to memorialize
the mutual intent of the Parties;
Now, Therefore, in consideration of the
foregoing recitals and of the mutual covenants,
conditions, undertakings, representations and
warranties hereinafter set forth, and for other
good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the
Parties do hereby covenant and agree that the
Recitals are true and correct and by this
reference incorporated herein as if fully set
forth, and the Parties further agree as follows:
1. Amendment. The first sentence of the
first paragraph of the Convertible Debenture which
currently reads as follows:
FOR VALUE RECEIVED, ALTA GOLD CO., a Nevada
corporation (hereinafter called the
"Borrower") hereby promises to pay to the
order of -------------------- or registered
assigns (the "Holder") the sum of
------------------------------, on April 14,
1999, and to pay interest on the unpaid
principal balance hereof at the rate of four
percent (4%) per annum from April 14, 1997
(the "Issue Date") until the same becomes due
and payable, whether at maturity or upon
acceleration or by prepayment or otherwise.
is hereby amended and replaced in its entirety
with the following:
FOR VALUE RECEIVED, ALTA GOLD CO., a Nevada
corporation (hereinafter called the
"Borrower") hereby promises to pay to the
order of -------------------- or registered
assigns (the "Holder") the sum of
-----------------, on April 14, 2000, and to
pay interest on the unpaid principal balance
hereof at the rate of four percent (4%) per
annum from April 14, 1997 (the "Issue Date")
until the same becomes due and payable,
whether at maturity or upon acceleration or
by prepayment or otherwise.
2. Interpretation. In the event that
there is a conflict between any of the provisions
of this First Amendment and any of the provisions
of the Convertible Debenture, the provisions of
this First Amendment shall control.
3. Remaining Terms and Conditions.
Except as expressly amended or modified by this
First Amendment, all of the terms and conditions
of the Convertible Debenture shall remain
unchanged and in full force and effect.
4. Counterparts. This Amendment may be
executed in two or more counterparts and shall be
deemed to have become effective when and only when
both Parties have executed this Amendment,
although it shall not be necessary that any single
counterpart be signed by or on behalf of each of
the Parties, and all such counterparts shall be
deemed to constitute but one and the same
instrument. This Amendment, once executed by a
Party, may be delivered to the other Party hereto
by facsimile transmission of a copy of this
Amendment bearing the signature of the Party so
delivering this Amendment.
In Witness Whereof, the Parties have executed
this First Amendment as of the Effective Date.
ALTA GOLD CO.,
a Nevada corporation
----------------------
By: Robert N. Pratt
Its: Chief Executive Officer and
Chairman of the Board
HOLDER
By: -----------------------
Its: -----------------------
EXHIBIT 23.01
CONSENT OF ARTHUR ANDERSEN LLP
[Arthur Andersen LLP Letterhead]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby
consent to the incorporation of our report
included in this Form 10-K, into the Company's
previously filed Registration Statements File Nos.
33-84046, 333-05695, 333-05697, 333-05699 and 333-
26547.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
March 27, 1998
EXHIBIT 23.02
CONSENT OF PINCOCK, ALLEN & HOLT
[Pincock, Allen & Holt Letterhead]
March 25, 1998
Mr. John A. Bielun
Chief Financial Officer
Alta Gold Co.
601 Whitney Ranch Drive
Suite 10
Henderson, Nevada 89014
Dear Sirs:
Pincock, Allen & Holt, a mining consulting
firm based in Lakewood, Colorado, hereby consents
to the incorporation by reference in the
registration statements on Form S-8 (nos. 333-
5695, 333-05697 and 333-05699) and on Form S-3
(nos. 33-84046 and 333-26547) of Alta Gold Co. of
our report entitled "1997 Reserve Audit, Kinsley
Mountain Mine, Griffon Mine, Olinghouse Project,
Copper Flat Project and Lookout Mountain Project,"
dated March 6, 1998 and all references to our firm
included in or made part of Alta Gold Co.'s Annual
Report or Form 10-K for the fiscal year ending
December 31, 1997.
Sincerely,
PINCOCK, ALLEN & HOLT
/s/ John W. Rozelle
John W. Rozelle, C.P.G.
Principal Geologist
