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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, 1998, OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO .
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Commission file number 2-2274.
ALTA GOLD CO.
(Exact name of Registrant as specified in its charter)
NEVADA 87-0259249
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification 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. X
-----
The aggregate market value of the voting stock held by non-
affiliates of the registrant as of March 26, 1999, based on the
closing price as reported on the Nasdaq Stock Market of $1.0625
was approximately $34,961,000.
The number of shares outstanding of the Registrant's Common
Stock as of March 26, 1999 was 33,477,990.
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 1999 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.
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TABLE OF CONTENTS
PART I .........................................................2
Items 1 and 2. Business and Properties........................2
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..................29
Item 7A. Quantitative and Qualitative Disclosures About
Market Risks........................................33
Item 8. Financial Statements and Supplementary Data..........34
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...............57
PART III.......................................................57
Item 10. Directors and Executive Officers of the
Registrant..........................................57
Item 11. Executive Compensation..............................57
Item 12. Security Ownership of Certain Beneficial
Owners and Management...............................57
Item 13. Certain Relationships and Related Transactions......57
PART IV........................................................57
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.................................57
SIGNATURES.....................................................63
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PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
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, LIQUIDITY SOURCES AND ABILITY TO MEET OBLIGATIONS,
CAPITAL SPENDING, FINANCING SOURCES AND THE EFFECTS OF
REGULATION. SUCH FORWARD-LOOKING INFORMATION INVOLVES IMPORTANT
ASSUMPTIONS, RISKS AND UNCERTAINTIES THAT COULD SIGNIFICANTLY
AFFECT ANTICIPATED RESULTS IN THE FUTURE AND, ACCORDINGLY, SUCH
RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-
LOOKING STATEMENTS MADE HEREIN. THESE RISKS AND UNCERTAINTIES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE RELATING TO THE SOURCES OF
CASH NECESSARY TO MEET OBLIGATIONS, 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. 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.
Recent History
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.
Following the acquisition of these properties, the Company
(1) put Kinsley into operation in the fourth quarter of 1994 and
completed mining at Kinsley in the first quarter of 1998; (2) put
Griffon into operation in the third quarter of 1997; and (3) put
Olinghouse into operation in the third quarter of 1998.
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
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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.
In 1998, the Company (1) completed site development and
construction and began mining at Olinghouse; (2) completed mining
at Kinsley; (3) continued permitting at Copper Flat;
(4) completed the acquisition of Lookout Mountain; (5) initiated
the acquisition of the Goodsprings property ("Goodsprings")
located in Clark County, Nevada; and (6) produced 50,377 ounces
of gold, including 37,921 ounces from Griffon, 9,543 ounces from
Kinsley and 2,913 ounces from Olinghouse.
OPERATING 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 402
unpatented and 11 patented mining claims covering approximately
7,200 acres. Nineteen of the unpatented mining claims and nine
of the patented mining claims are held under six mineral leases
with various third parties. Two of the mineral leases contain
purchase options. The earliest expiration date of the mineral
leases is 2032; provided, however, that each of the leases may be
terminated at any time upon notice by the Company. All of the
mineral leases carry net smelter return royalties and 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 Company's reserve report prepared
by Pincock Allen & Holt ("PAH") dated March 30, 1999 (the "PAH
Report"), Olinghouse had proven and probable reserves as of
December 31, 1998 of 9,165,000 tons of ore at an average grade of
0.051 ounces per ton gold, containing 466,800 ounces of gold.
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.
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[MAP OF MAJOR MINING PROPERTIES]
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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; (4) 72
reverse circulation drill holes (approximately 25,495 feet) in
1997; and (5) five reverse circulation drill holes (approximately
3,000 feet) in 1998.
FUTURE DRILLING. No drilling is planned at Olinghouse in
1999.
PERMITTING. All environmental permits necessary to develop
and operate the first phase at Olinghouse were received in 1998.
Certain building permits for support facilities are expected to
be obtained in 1999.
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, MINING AND PROCESSING. Site development at
Olinghouse commenced in May 1998, mining began in July 1998,
initial gold production from the mill began in September 1998 and
from the leach pad in December 1998. Mining at Olinghouse is
conducted in two open pits using conventional open pit methods.
Mining is conducted on two ten-hour shifts per day, six days per
week; milling on one twelve-hour shift per day, seven days per
week; and, heap leaching around-the-clock, seven days per week.
Higher grade ore is initially processed through a gravity
separation mill and subsequently agglomerated and processed
through conventional heap leaching. Lower grade ore is processed
through conventional heap leaching. The current equipment fleet
includes front-end loaders with 85-ton haul trucks working on 15-
foot benches and is supported by a full complement of ancillary
equipment. Management believes that the equipment is in adequate
working condition.
In 1998, the Company mined 704,000 tons of ore at
Olinghouse, with an average grade of 0.028 ounces per ton gold,
and produced 2,913 ounces of gold. Based on the presently
permitted mine plan, mining activities at Olinghouse are expected
to continue through December 2002, with gold production from heap
leaching and pad rinsing to continue in declining amounts through
the third quarter of 2004. See "- Risk Factors - Limited Life of
Mining Projects."
RECLAMATION. The Company estimates that it will cost
approximately $1.1 million to reclaim the first phase of
operations at Olinghouse. Beginning in 1999, the Company began
to accrue for this cost as based on the unit-of-production
method.
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."
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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 are additional exploration targets on the property;
however, no assurance can be given that additional reserves will
be located.
RESERVES. Based upon the PAH Report, Griffon had proven and
probable reserves as of December 31, 1998 of 1,525,000 tons of
ore at an average grade of 0.022 ounces per ton gold, containing
34,000 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; (4) 27 reverse circulation drill holes (approximately 6,090
feet) in 1997; and (5) six reverse circulation drill holes
(approximately 1,685 feet) in 1998.
FUTURE DRILLING. No drilling is planned at Griffon in 1999.
PERMITTING. The final permits necessary to initially
develop and operate Griffon were received in 1997. The Company
is currently awaiting additional permits required for an
expansion program at the Hammer Ridge deposit.
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 includes front-end loaders with 50-ton haul
trucks working on 15-foot benches and is supported by a full
complement of ancillary equipment. Management believes that the
equipment is in adequate working condition.
In 1997 and 1998, the Company mined a total of 350,000 and
2,130,000 tons of ore, respectively, at Griffon with an average
grade of 0.036 and 0.031 ounces per ton gold, respectively.
Commencing with its first gold pour in January 1998, the Company
produced 37,921 ounces of gold in 1998. Based on the presently
permitted mine plan, mining activities at Griffon are expected to
be completed in April 1999, with gold production from heap
leaching and pad rinsing to continue in declining amounts through
the remainder of 1999. 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
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plan for Griffon, the Company presently estimates that the cost
of such reclamation will be approximately $0.4 million, $0.2
million of which had been accrued as of December 31, 1998.
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 112
unpatented mining claims covering approximately 2,300 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. There are no longer any known reserves at
Kinsley, and no assurance can be given that another 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
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. No drilling was conducted
in 1998.
FUTURE DRILLING. No drilling is planned at Kinsley in 1999.
PERMITTING. All permits necessary to develop and operate
Kinsley were received in 1994.
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 1997 and 1998, the Company mined 1,588,000 and 94,000
tons of ore, respectively, at Kinsley with an average grade of
0.037 and 0.033 ounces per ton gold, respectively, and produced
38,472 and 9,543 ounces of gold, respectively. Although gold
production from heap leaching ceased in 1998, minimal gold
production from pad rinsing is expected to continue in declining
amounts through 1999. See "- Risk Factors - Limited Life of
Mining Projects."
RECLAMATION. The Company is conducting reclamation on a
continuous basis; however, a portion of the reclamation,
including recontouring, revegetation, and building removal will
not commence until processing and any future potential drilling
programs and mining operations are completed. Based on the
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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, all of which has been accrued
as of December 31, 1998.
DEVELOPMENT PROPERTIES
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 232 unpatented mining claims covering approximately
3,900 acres. All of the mining claims are held under a mining
lease with a third party, which expires no sooner than 2013;
however, 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 -
Uncertainty 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 similar 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, the Company plans to drill approximately 95 reverse
circulation drill holes (approximately 38,000 feet) on the
property in 1999 at an estimated cost of $0.4 million. No
assurance can be given that the Company will be able to obtain
the financing necessary to fund these costs. See "- Risk Factors
- - Liquidity" and "- Uncertainty of Funding" and "Item 7.
Management's Discussion and 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.
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DEVELOPMENT PLAN. The Company began 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.
GOODSPRINGS
BACKGROUND AND HISTORY. Goodsprings is located in Clark
County, Nevada, approximately 30 miles southwest of Las Vegas.
The Company acquired the property from two individual landowners
on January 31, 1999.
PROPERTY INTERESTS. At Goodsprings, the Company controls 86
unpatented mining claims covering approximately 1,700 acres.
Pursuant to the terms of the acquisition agreement under which
Goodsprings was acquired, the Company is required to make certain
annual advance royalty payments to the landowners. See "- Risk
Factors - Uncertainty of Title."
GEOLOGY. The Goodsprings district is a large, zoned
polymetallic district. The district is primarily known for its
zinc-lead-copper replacement deposits hosted by Paleozoic
carbonate rocks; however, many of the deposits contained
significant precious metals and the district has recorded
production of 90,500 ounces of gold and 2,100,000 ounces of
silver. Although much of the silver came from bi-product base
metal production, the majority of the gold was primary and was
derived from high grade (+0.5 oz/ton) gold zones within and
adjacent to a granitic intrusion.
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. There are approximately twelve old drill
sites on the property, but the parties responsible for the
drilling is not known and the data has not been found.
FUTURE DRILLING. The Company does not plan to conduct any
drilling at Goodsprings in 1999; however, subject to the receipt
of adequate financing, the Company plans to conduct geophysical
surveys and additional geologic studies to further define the
exploration targets.
PERMITTING. At this time, there are no permits required for
the work being conducted on the property.
WATER RIGHTS. The Company does not require any water rights
for the present stage of exploration at Goodsprings.
DEVELOPMENT PLAN. The Company does not have any development
plans for Goodsprings at this time.
RECLAMATION. The Company has no reclamation obligations at
Goodsprings at this time.
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
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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, 1998, the
Company had expended approximately $0.3 million for drilling and
associated work at Osceola.
PROPERTY INTERESTS. Osceola includes 119 unpatented and
five patented mining claims covering approximately 3,000 acres.
The five patented and 98 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. No drilling was
conducted in 1998.
FUTURE DRILLING. The Company does not plan any additional
drilling in 1999.
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").
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
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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; however, 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, 1998 of 50,210,000 tons of
ore at an average grade of 0.450% copper, 0.004 ounces per ton
gold, 0.066 ounces per ton silver and 0.015% molybdenum.
Contained metal is approximately 447,872,000 pounds of copper,
223,900 ounces of gold, 3,299,500 ounces of silver and 14,762,000
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 final EIS was issued in March 1999 and
a Record of Decision is expected to be received in August 1999.
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. Ted Turner ("Turner"), an owner
of a ranch near Copper Flat, has challenged the permitting and
opening of Copper Flat. Turner continues to raise 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 Turner are without merit, and it intends to vigorously
defend any such challenge to Copper Flat. However, no assurance
can be given that 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 $0.6 million
at Copper Flat in 1999 for permitting and property holding costs.
11
<PAGE>
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 1999. 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
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 to
confirm the reliability of the reverse circulation drill samples.
Each five-foot drill interval is assayed and the assay results
are evaluated to detect potential bias. Check analyses are
completed on most 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, 1998 for
Olinghouse, Griffon 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.
12
<PAGE>
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, 1998. See "- Risk Factors -
Reserves Estimates."
<TABLE>
<CAPTION>
TONS OF ORE
PROVEN AND
OPERATING (O)/ PROBABLE AVERAGE CONTAINED
DEVELOPMENT (D) RESERVES<F1> GRADE<F2> METAL<F3>
--------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
GOLD
Olinghouse O 9,165,000 0.051 466,800 oz.
Griffon O 1,525,000 0.022 34,000 oz.
Copper Flat D 50,210,000 0.004 223,900 oz.
-----------
Total 724,700 oz.
===========
OTHER METALS
Silver (Copper Flat) D 50,210,000 0.066 3,299,500 oz.
Copper (Copper Flat) D 50,210,000 0.450% 447,872,000 lbs.
Molybdenum (Copper Flat) D 50,210,000 0.015% 14,762,000 lbs.
- ------------------
<FN>
<F1> Proven and probable reserves have been calculated on
the basis of the following metals prices:
gold $300/oz. copper $0.85/lb.
silver $5.50/lb. molybdenum $3.60/lb.
<F2> The average grade for precious metals is expressed in
ounces of contained metal per ton of proven and
probable reserves; and for base metals is expressed as
a percentage of proven and probable reserves.
<F3> 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%, Copper Flat - 50%; (2) silver: Copper
Flat - 90%; (3) copper: Copper Flat - 91%; and (4)
molybdenum: Copper Flat - 66%.
</FN>
</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 END DECEMBER 31,
-------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PRODUCTION (OUNCES OF GOLD):
Griffon <F1> 37,921 - - - -
Kinsley <F2> 9,543 38,472 44,552 40,667 -
Olinghouse <F3> 2,913 - - - -
Easy Junior <F4> - - 4,934 12,396 23,589
--------- --------- --------- --------- ---------
Total production 50,377 38,472 49,486 53,063 23,589
========= ========= ========= ========= =========
13
<PAGE>
AVERAGE REALIZED SALES PRICE PER OUNCE $336 $340 $392 $392 $390
========= ========= ========= ========= =========
AVERAGE CASH COSTS PER OUNCE:
Griffon <F1> $148 $ - $ - $ - $ -
Kinsley <F2> 312 206 219 184 -
Olinghouse <F3> 432 - - - -
Easy Junior <F4> - - 292 283 230
--------- --------- --------- --------- ---------
Weighted average cash costs per ounce $195 $206 $226 $207 $230
========= ========= ========= ========= =========
AVERAGE TOTAL COSTS PER OUNCE:
Griffon <F1> $220 $ - $ - $ - $ -
Kinsley <F2> 394 261 284 259 -
Olinghouse <F3> 586 - - - -
Easy Junior <F4> - - 294 291 245
--------- --------- --------- --------- ---------
Weighted average total costs per ounce $274 $261 $285 $266 $245
========= ========= ========= ========= =========
___________________
<FN>
<F1> Mining began at Griffon in September 1997; gold production
began in January 1998. See "Business and Properties -
Operating Properties - Griffon."
<F2> Mining was completed at Kinsley in March 1998. Although
gold production from heap leaching ceased in 1998, minimal
gold production from pad rinsing is expected to continue
in declining amounts through 1999. See "Business and
Properties - Operating Properties - Kinsley."
<F3> Mining began at Olinghouse in July 1998; gold production
from the initial shakedown runs at the mill began in
September 1998 and from the leach pad in December 1998.
The initially high cash cost of production at Olinghouse
is due to start-up problems, as well as cost overruns
caused by delays in obtaining all of the necessary permits.
See "Business and Properties - Operating Properties -
Olinghouse."
<F4> Mining was completed at Easy Junior in August 1994, and
gold production was completed in December 1996. See
"Business and Properties - Other Properties - Easy
Junior."
</FN>
</TABLE>
MINING AND PROCESSING METHODS
Mining and processing methods currently used by the Company
include open-pit mining and heap leaching and milling. 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 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
14
<PAGE>
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.
MILLING
At Olinghouse, the Company uses a gravity mill to recover
gold from high grade in-place ore bodies. The mined ore is first
conventionally crushed and thereafter conveyed to a grinding
plant where water is introduced and the crushed ore is ground-
down to a finer size. Following this process, the ore is then
passed through a series of concentrators and a gold concentrate
is produced. The concentrate is then 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 2003, pursuant to fixed price future
contracts, put options and/or at spot prices prevailing at the
time of sale. As of December 31, 1998, the Company had (1) sold
forward 25,800 ounces of gold at a weighted average price of
$339/oz., maturing in various amounts during the first four
months of 1999, (2) purchased put options for 6,200 ounces of
gold with a floor price of $335/oz., expiring in January 1999,
and (3) purchased put options for 335,800 ounces of gold with a
floor price of $280/oz., expiring in various amounts during the
period February 1999 through September 2001. 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, 1998, 1997 and 1996, the
Company sold all of its gold production to Gerald Metals, Inc.
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
15
<PAGE>
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.
16
<PAGE>
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.
17
<PAGE>
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, 1998, the Company employed approximately
200 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
IN ADDITION TO FACTORS DISCUSSED ELSEWHERE IN THIS ANNUAL
REPORT ON FORM 10-K, THE FOLLOWING ARE IMPORTANT FACTORS THAT
COULD CAUSE RESULTS OR EVENTS TO DIFFER MATERIALLY FROM THOSE
CONTAINED IN ANY FORWARD-LOOKING STATEMENT MADE BY OR ON BEHALF
OF THE COMPANY. SEE "SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS"
ABOVE.
LIQUIDITY
The Company is solely dependent upon cash flow from
operations at Olinghouse and Griffon to fund operations and to
repay its obligations. During 1998, the Company's operating
results were negatively impacted by start-up problems at
Olinghouse, as well as cost overruns caused by delays in
obtaining all of the necessary permits. As a result of the start-
up problems and permitting delays, gold
18
<PAGE>
production at Olinghouse in 1998 was less than expected and the
cash cost of gold production exceeded $430 per ounce, resulting
in negative cash flow from operations at Olinghouse. At
December 31, 1998, the Company's line of credit had been drawn to
its maximum amount, the majority of its accounts payable were
past due, production at Olinghouse was below expectations and
available cash was limited, all of which has contributed to
substantial doubt about the Company's ability to continue as a
going concern.
Production from Griffon continues to generate positive cash
flow, and management has, since the first of the year, identified
and corrected many of the start-up problems which caused
Olinghouse's production shortfall in 1998. Correction of these
problems has reduced Olinghouse's cash cost of gold production
from $432 per ounce in 1998 to $218 per ounce in February 1999
and is expected to improve the Company's cash flow.
Management of the Company is currently pursuing outside
sources of capital, including equipment refinancing, sale or
lease of assets, other debt or equity financing, and the sale of
royalty interests. However, there is no assurance that the
Company will be successful in its efforts to obtain additional
capital.
RECENT LOSSES
In 1998, the Company incurred an operating loss, and expects
that it will continue to do so in the near future and that its
return to profitability will depend on, among other things, the
ability to bring Olinghouse's production up to full capacity and
a significant increase in the price of gold over current prices.
See "- Volatility of the Price of Gold," "- Reserves Estimates"
and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation."
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. See "- Liquidity" and
"Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital
Resources."
The continued existence of the Company is dependent upon
obtaining additional outside capital until the Company begins to
generate positive cash flow from operations at Olinghouse. No
assurance can be given that the Company will be successful in its
efforts to obtain additional capital.
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 $294 per ounce in 1998,
falling to a 19 year low of $275 per ounce in August 1998. The
average daily closing spot price for gold in 1999 (through
March 26, 1999) on COMEX was $288 per ounce. Gold prices can
fluctuate widely and are affected by numerous factors beyond the
Company's control, including industrial
19
<PAGE>
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>
1985 $341 $284
1986 438 326
1987 500 436
1988 484 395
1989 416 356
1990 424 346
1991 403 344
1992 360 330
1993 406 326
1994 396 370
1995 396 372
1996 415 367
1997 367 283
1998 313 273
</TABLE>
On March 26, 1999, the afternoon fixing for gold on the
London P.M. Fix was $279.80. Gold prices on the London P.M. Fix
are regularly published in most major financial publications and
many nationally recognized newspapers.
20
<PAGE>
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 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.
CURRENT DEPENDENCE ON TWO PRODUCING PROPERTIES
All of the Company's gold production in 1998 came from its
mining operations at Griffon, Olinghouse and, in declining
amounts from Kinsley, at which mining was completed in the first
quarter of 1998. Future operating revenues are dependent upon
gold production at Olinghouse (which commenced gold production in
September 1998) and Griffon (which commenced gold production in
January 1998). If operations at Olinghouse and/or Griffon 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 properties which have a limited life. Mining at Kinsley
was completed in the first quarter of 1998, with minimal gold
production from pad rinsing expected to continue in declining
amounts through 1999. The Company expects to complete mining at
Griffon in April 1999 with gold production from heap leaching and
pad rinsing to continue thereafter in declining amounts through
1999. Based on the reserve estimate as of December 31, 1998, the
Company anticipates that Olinghouse will have a mine life of at
least four years. No assurance can be given that the estimated
time for completion of mining at Griffon and Olinghouse or gold
production from Olinghouse, Griffon and Kinsley is accurate. The
Company has not yet initiated production at either of its two
primary development stage properties, Lookout Mountain or Copper
Flat. The Company's ability to generate future operating
revenues and earnings after Olinghouse, Griffon and Kinsley are
depleted is dependent on its ability to bring one or more of
these or other properties into production. The commencement of
production at Lookout Mountain and Copper Flat is subject to,
among other things, obtaining necessary governmental permits and
obtaining outside sources of funding. No assurance can be given
that the Company will have any mining properties in operation
once the mining and/or processing of ore from Olinghouse, Griffon
and Kinsley or other future operating properties, if any, are
completed.
GOVERNMENT PERMITS AND PROJECT DELAYS
The Company is seeking government permits and approvals for
the development of Lookout Mountain 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
21
<PAGE>
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.
Ted Turner ("Turner"), an owner of a ranch near Copper Flat,
has challenged the permitting and opening of Copper Flat. Turner
continues to raise 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 Turner are without
merit, and it intends to vigorously defend any such challenge to
Copper Flat. However, no assurance can be given that such
challenge will not prevent or delay the permitting or opening of
Copper Flat.
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,
22
<PAGE>
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 Copper Flat as having
minable reserves. No assurance can be given, however, that this
property 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.
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
23
<PAGE>
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
24
<PAGE>
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 owned
currently or previously by the Company. 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, Vice President of Exploration and Vice
President of Production 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.
25
<PAGE>
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.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the services of certain key
executives, including Robert N. Pratt, Chief Executive Officer,
President and Chairman of the Board of Directors, and John A.
Bielun, Senior Vice President and Chief Financial Officer. The
loss of either of these individuals could have a material adverse
effect on the Company's business and operations. The Company
currently does not have key person insurance on these
individuals. The Company has entered into employment agreements
with certain of its key executives, including Messrs. Pratt and
Bielun, both of which expire in October 2001.
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>
1997
First Quarter 4-1/4 2-31/32
Second Quarter 4-17/32 2-5/16
Third Quarter 3 1-27/32
Fourth Quarter 2-23/32 1-3/16
1998
First Quarter 2-1/8 1-1/4
Second Quarter 2-13/16 1-21/32
Third Quarter 2-9/16 1-1/4
Fourth Quarter 2-1/2 1-5/16
</TABLE>
The closing price on the Nasdaq Stock Market on March 26,
1999 was $1 1/16 per share.
26
<PAGE>
HOLDERS. As of March 26, 1999, there were approximately
7,200 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 - 1999 Outlook." Any future determination as
to declaration and payment of dividends will be made at the
discretion of the Board of Directors.
OTHER. 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
"Debentures"). Pursuant to the terms of the Master Agreement,
the maturity date of the 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 Debentures based
upon the outstanding principal amount of the 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 filed a registration statement with the Securities
and Exchange Commission in April 1998 to register the common
stock issuable upon an exercise of the warrants. On March 31,
1998, the Company issued warrants to purchase 318,000 shares of
the Company's common stock at an exercise price of $2.36 per
share. On September 30, 1998, the Company issued warrants to
purchase an additional 263,000 shares of the Company's common
stock at an exercise price of $2.33 per share.
Effective April 30, 1998, the Company entered into a
$17,000,000 revolving credit and term loan agreement (the
"Revolving Credit and Term Loan") with Standard Chartered Bank,
Credit Agricole Indosuez and Gerald Metals, Inc. As partial
compensation for assisting the Company in obtaining the Revolving
Credit and Term Loan, the Company issued to Gerald Metals, Inc.
options to acquire 450,000 shares of the Company's common stock.
The options have an exercise price of $1.78 per share (based on
the closing price of the Company's common stock on the date which
the term sheet underlying the Revolving Credit and Term Loan was
executed) and are exercisable through May 15, 2003. Under the
terms of the underlying stock option agreement, the Company
subsequently registered the underlying shares under the
Securities Act of 1933.
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>
YEAR END DECEMBER 31,
---------------------------------------------------------------
1998 1997 1996 1995 1994
----------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Total revenues $16,869 $12,252 $19,581 $20,636 $10,696
Income (loss) from operations (8,908)<F1> 911 3,288 3,778 649
Income (loss) before extraordinary item (8,415)<F2> 1,123 3,247 5,889<F3> 622
Extraordinary item - 784<F4> - - 2,182<F4>
Net income (loss) (8,415) 1,907 3,247 5,889 2,804
27
<PAGE>
Earnings (loss) per common share:
Basic -
Income (loss) before extraordinary item (0.26) 0.04 0.11 0.21 0.02
Extraordinary item - 0.02 - - 0.08
Net income (loss) (0.26) 0.06 0.11 0.21 0.10
Diluted -
Income (loss) before extraordinary item (0.26) 0.03 0.11 0.20 0.02
Extraordinary item - 0.02 - - 0.08
Net income (loss) (0.26) 0.06 0.11 0.20 0.10
YEAR END DECEMBER 31,
---------------------------------------------------------------
1998 1997 1996 1995 1994
----------- --------- ---------- --------- ---------
BALANCE SHEET DATA
Total assets $74,492 $62,986 $46,621 $40,399 $38,455
Long-term obligations 26,038 14,086 3,164 4,878 6,722
Working capital (deficit) (1,573) 2,538 (2,634) (312) (2,391)
Stockholders' equity 37,957 39,799 35,604 30,388 23,938
___________________
<FN>
<F1> Includes a charge of $9.3 million from the writedown of
various assets.
<F2> Includes $0.8 million from a non-recurring gain from an
insurance settlement.
<F3> Includes $2.4 million from a non-recurring net gain on the
sale of an asset.
<F4> Gain on extinguishment of debt.
</FN>
</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>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)<F1> YEAR
----------- ------------ ------------ -------------- ----------
<S> <C> <C> <C> <C> <C>
1998 - Total revenues $3,624 $3,221 $5,237 $4,787 $16,869
Income (loss) from operations 324 135 805 (10,172) (8,908)
Net income (loss) 366 114 696 (9,591) (8,415)
Earnings (loss) per common share:
Basic 0.01 - 0.02 (0.29) (0.26)
Diluted 0.01 - 0.02 (0.29) (0.26)
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
- ----------------
<FN>
<F1> Includes a charge of $9.3 million from the writedown of
various assets.
</FN>
</TABLE>
28
<PAGE>
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, LIQUIDITY SOURCES AND ABILITY TO MEET OBLIGATIONS,
CAPITAL SPENDING, FINANCING SOURCES AND THE EFFECTS OF
REGULATION. SUCH FORWARD-LOOKING INFORMATION INVOLVES IMPORTANT
ASSUMPTIONS, RISKS AND UNCERTAINTIES THAT COULD SIGNIFICANTLY
AFFECT ANTICIPATED RESULTS IN THE FUTURE AND, ACCORDINGLY, SUCH
RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-
LOOKING STATEMENTS MADE HEREIN. THESE RISKS AND UNCERTAINTIES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE RELATING TO THE SOURCES OF
CASH NECESSARY TO MEET OBLIGATIONS, 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, 1998 AND 1997
In 1998, the Company had $16.9 million in revenue from the
sale of 50,200 ounces of gold at an average price of $336/oz, as
compared to $12.3 million in revenue from the sale of 35,990
ounces of gold at an average price of $340/oz in 1997. In 1998,
the Company (1) mined 2,130,000 tons of ore at Griffon with an
average grade of 0.031 oz/ton gold containing 65,794 ounces of
gold, (2) mined 704,000 tons of ore at Olinghouse with an average
grade of 0.028 oz/ton gold containing 19,420 ounces of gold, (3)
mined 94,000 tons of ore at Kinsley with an average grade of
0.033 oz/ton gold containing 3,135 ounces of gold, and
(4) produced 50,377 ounces of gold, including 37,921 ounces from
Griffon at an average cash cost of $148/oz, 9,543 ounces from
Kinsley at an average cash cost of $312/oz and 2,913 ounces from
start-up production from Olinghouse at an average cash cost of
$432/oz. In 1997, the Company (1) mined 1,588,000 tons of ore at
Kinsley with an average grade of 0.037 oz/ton gold containing
58,270 ounces of gold, (2) mined 350,000 tons of ore at Griffon
with an average grade of 0.036 oz/ton gold containing 12,581
ounces of gold, and (3) produced 38,472 ounces of gold, all from
Kinsley, at an average cost of $206/oz. Mining at Griffon began
in September 1997 and production of refined gold began in January
1998. Mining at Olinghouse began in July 1998 and production of
refined gold from the initial shakedown run of mill began in
September 1998 and from the leach pad in December 1998. Mining
at Kinsley was completed in early March 1998, with gold
production from pad rinsing expected to continue in declining
amounts through 1999. The decrease in gold production at Kinsley
from 38,472 ounces of gold in 1997 to 9,543 ounces of gold in
1998 is due to the completion of mining at Kinsley in March 1998
and to the diminution of the size and the metallurgical quality
of the last two ore bodies mined at Kinsley. The increase in the
average cash cost of production at Kinsley from $206/oz in 1997
to $312/oz in 1998 is due to the diminution of the size and the
metallurgical quality of the last two ore bodies mined at
Kinsley. The
29
<PAGE>
decidedly high cash cost of production at Olinghouse of $432/oz
is due to start-up problems and delays in obtaining all of the
necessary permits.
In 1998, the Company reported a loss of $8.4 million as
compared to a net profit of $1.9 million in 1997. The loss in
1998 is the result of a non-cash charge of $9.3 million for an
asset impairment loss. The net profit in 1997 also included a
non-recurring $0.8 million extraordinary gain on extinguishment
of debt.
The increase in revenue from $12.2 million in 1997 to $16.9
million in 1998 is due to the initiation of gold production at
Griffon and Olinghouse in 1998, as partially offset by the
decrease in production at Kinsley.
Direct mining, production, reclamation and maintenance costs
increased from $9.5 million in 1997 to $14.7 million in 1998 as
the result of the initiation of gold production at Griffon and
Olinghouse in 1998, the initially high cash cost of production at
Olinghouse and the higher cash cost of production at Kinsley in
1998, as partially offset by the completion of mining at Kinsley
in March 1998.
The changes in general and administrative expenses, from
$1.6 million in 1997 to $1.5 million in 1998, and in exploration
expense, essentially the same for each year, are considered de
minimus.
In 1998, the Company recorded a non-cash charge of $9.3
million for an asset impairment loss. The charge included a $6.3
million writedown of Kinsley and a $3.0 million writedown of the
Ward mine, a zinc property owned by the Company. The writedown
of Kinsley was necessitated by an unanticipated and precipitous
deterioration in the recovery rate of the ore on the leach pad.
The writedown of Ward resulted from the continued decline in zinc
prices and management's determination that mining Ward was no
longer economically feasible.
In 1998, the Company also incurred a $0.2 million loss from
the sale of certain assets and received a one-time insurance
settlement for $0.8 million. There were no similar transactions
in 1997.
Interest and other income decreased from $0.2 million in
1997 to $0.1 million in 1998 as the result of less funds being
available for investment in 1998. The $0.3 million charge for
interest expense and other represents the expensing of Olinghouse
debt-related costs pertaining to post-initiation of gold
production. Similar costs incurred prior to the initiation of
gold production were capitalized.
In 1997, the Company realized an extraordinary gain of $0.8
million from the early retirement of debt. There were no similar
transactions in 1998.
No provision for income taxes was recognized in either 1998
or 1997 because of the utilization of net operating loss
carryforwards. As of December 31, 1998, the Company estimates
that it has approximately $37.5 million in net operating loss
carryforwards. These net operating loss carryforwards are
scheduled to expire during the period 2005 to 2018.
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
30
<PAGE>
$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 and other income 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 and other 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.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
As of December 31, 1998, the Company had a working capital
deficit of $1.6 million, as compared to $2.5 million in working
capital as of December 31, 1997. This $4.1 million decrease in
working capital is primarily due to the funds required to put
Olinghouse into production, including funds needed for
permitting, development, construction, equipment and working
capital, as partially offset by $5.3 million in proceeds received
from net borrowings and from funds generated from gold production
at Griffon.
The following table summarizes the Company's working capital
(deficit) as of the dates shown (with dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
----------- ----------
<S> <C> <C>
Working Capital (Deficit) ($1,573) $2,538
Working Capital Ratio 0.85:1 1.29:1
</TABLE>
31
<PAGE>
OPERATIONS AND CAPITAL EXPENDITURES
In 1998, 1997 and 1996, the Company spent $19.7 million,
$10.4 million and $9.5 million, respectively, for the acquisition
of plant and equipment, mine development, permitting and the
acquisition of mining claims, for a total of $39.6 million during
the three-year period. In 1998 and 1996, the Company generated
$4.7 million and $5.6 million from operations, respectively, and
in 1997, the Company used $0.5 million in operations, for a net
total of $9.7 million during the three-year period. The
resultant $29.9 million shortfall for the three-year period was
funded with $0.4 million in cash on hand at the beginning of the
three-year period, the receipt of $0.2 million from the exercise
of stock options and $30.3 million in net borrowings.
FINANCING ACTIVITIES
In 1998, 1997 and 1996, the Company generated $12.7 million,
$13.5 million and $4.1 million, respectively, from net
borrowings, for a total of $30.3 million generated during the
three-year period.
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.
1999 OUTLOOK
The Company is solely dependent upon cash flow from
operations at Olinghouse and Griffon to fund operations and to
repay its obligations. During 1998, the Company's operating
results were negatively impacted by start-up problems at
Olinghouse, as well as cost overruns caused by delays in
obtaining all of the necessary permits. As a result of the start-
up problems and permitting delays, gold production at Olinghouse
in 1998 was less than expected and the cash cost of gold
production exceeded $430 per ounce, resulting in negative cash
flow from operations at Olinghouse. At December 31, 1998, the
Company's line of credit had been drawn to its maximum amount,
the majority of its accounts payable were past due, production at
Olinghouse was below expectations and available cash was limited,
all of which has contributed to substantial doubt about the
Company's ability to continue as a going concern.
Production from Griffon continues to generate positive cash
flow, and management has, since the first of the year, identified
and corrected many of the start-up problems which caused
Olinghouse's production shortfall in 1998. Correction of these
problems has reduced Olinghouse's cash cost of gold
32
<PAGE>
production from $432 per ounce in 1998 to $218 per ounce in
February 1999 and is expected to improve the Company's cash flow.
Management of the Company is currently pursuing outside
sources of capital, including equipment refinancing, sale or
lease of assets, other debt or equity financing, and the sale of
royalty interests. However, there is no assurance that the
Company will be successful in its efforts to obtain additional
capital.
Under the terms of the 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 Debentures 111%
of the outstanding principal amount plus accrued and unpaid
interest. Based on a conversion price of $0.96 (90% of the
average closing bid price of the Company's common stock for the
five trading days preceding March 26, 1999 or $1.06), the Company
would be obligated to pay holders of the Debentures a total of
$2,120,000 if the holders were to convert all of the outstanding
Debentures ($3,350,000 in the aggregate principal amount as of
March 26, 1999). 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
$2.47 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. If
all or any of the Debentures are converted within the next 12
months that would result in the issuance of shares in excess of
the Maximum Share Amount, the Company would not have sufficient
funds to pay the holders in lieu of a conversion of such shares
and it would be required to obtain outside sources of capital.
There is no assurance that the Company will be successful in its
efforts to obtain additional capital.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISKS
GOLD PRICE
The Company's profitability is significantly impacted by
changes in the market price of gold. Gold prices may fluctuate
widely. In August 1998, the market price of gold declined to
levels that were the lowest in nearly 20 years and has remained
below $300/oz. for most of 1998. For factors that affect gold
prices, see "Items 1 and 2. Business and Properties - Risk
Factors - Volatility of the Price Gold."
In order to mitigate the detrimental effects of significant
decreases in the price of gold, the Company has historically
hedged all or a portion of its anticipated gold production. As
of December 31, 1998, the Company had in place the following
hedges which cover in full the Company's projected future gold
production through September 2001:
<TABLE>
<CAPTION>
EXPECTED MATURITY OR TRANSACTION YEAR
------------------------------------------------
1999 2000 2001
------------- ------------- -------------
<S> <C> <C> <C>
FORWARD SALES CONTRACTS:
Ounces 25,800 - -
Average Price ($/oz.) $339 - -
PUT OPTIONS OWNED:
Ounces 133,400 132,000 82,800
Average Price ($/oz.) $283 $280 $280
</TABLE>
33
<PAGE>
Based on the Company's estimated production for 1999 (and
excluding the deep, in-the-money forward sales contracts and put
options owned), every $10 increase in the price of gold above
$280/oz. would result in an increase of approximately $0.7
million in both net income and net cash flow. Conversely, if the
price of gold is above the protected floor price of $280/oz.,
every $10 decrease in the price of gold would result in the same
corresponding decreases in both net income and net cash flow.
INTEREST RATES
At December 31, 1998, the Company's outstanding debt
included $17.0 million in variable rate debt with a weighted
average interest rate of 7.1% and $12.2 million in fixed rate
debt with a weighted average interest rate of 7.4%. Every
hypothetical one percentage increase or decrease in the variable
interest rate in 1999 would result in a corresponding $0.2
million increase or decrease in both net income and net cash
flow.
FOREIGN CURRENCY
The price of gold is denominated in United States dollars
and all of the Company's operations and expenses are incurred in
United States dollars. Accordingly, the Company has no direct
foreign currency exposure.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE
----
Report of Independent Public Accountants 35
Financial Statements:
Balance Sheets as of December 31, 1998 and 1997 36
Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996 38
Statements of Stockholders' Equity for Years Ended
December 31, 1998, 1997 and 1996 39
Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 40
Notes to Financial Statements 42
Supplementary Financial Information is included on page 28.
34
<PAGE>
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, 1998 and 1997, and the
related statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December
31, 1998. 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, 1998 and 1997, and the
results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note 3 to the financial statements, the Company's operating
results were negatively impacted by start-up problems at the
Company's Olinghouse gold property as well as cost overruns
caused by delays in obtaining all of the necessary permits.
Consequently, initial gold production at Olinghouse resulted in
negative cash flows from the Olinghouse operations and raises
substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters
are also described in Note 3. The financial statements do not
include any adjustments that might result from the outcome of
this uncertainty.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
March 13, 1999
35
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
(In thousands)
ASSETS
1998 1997
----------- ----------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 953 $ 3,330
Inventories 7,020 8,152
Accounts receivable, prepaid expenses and other 951 157
--------- ----------
Total current assets 8,924 11,639
PROPERTY AND EQUIPMENT, net:
Mining properties and claims 17,185 20,936
Buildings and equipment 29,491 17,697
---------- ----------
46,676 38,633
Less - accumulated depreciation (9,033) (11,705)
---------- ----------
Total property and equipment, net 37,643 26,928
DEFERRED MINE DEVELOPMENT COSTS, net 24,185 22,896
OTHER ASSETS 3,740 1,523
---------- ----------
Total assets $ 74,492 $ 62,986
========== ==========
The accompanying notes to financial statements
are an integral part of these statements.
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
BALANCE SHEETS (CONTINUED)
AS OF DECEMBER 31, 1998 AND 1997
(In thousands, except share and per share amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY
1998 1997
--------- ---------
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 4,403 $ 829
Accrued liabilities 1,023 661
Current portion of long-term reclamation liabilities 250 129
Current portion of long-term debt 4,821 7,482
-------- --------
Total current liabilities 10,497 9,101
LONG-TERM DEBT, net of current portion 24,381 11,910
DEFERRED INCOME TAXES 662 662
LONG-TERM LIABILITIES:
Imputed interest payable 372 917
Reclamation (net of current portion) 623 597
-------- --------
Total liabilities 36,535 23,187
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; authorized
60,000,000 shares, issued 33,477,990 and
30,191,639 shares, respectively 34 30
Additional paid-in capital 53,184 46,615
Accumulated deficit (15,261) (6,846)
-------- --------
Total stockholders' equity 37,957 39,799
-------- --------
Total liabilities and stockholders' equity $ 74,492 $ 62,986
======== ========
The accompanying notes to financial statements
are an integral part of these statements.
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands, except share and per share amounts)
1998 1997 1996
-------- -------- --------
REVENUE:
<S> <C> <C> <C>
Sales of gold and other metals $16,869 $12,252 $19,581
OPERATING COSTS AND EXPENSES:
Direct mining, production, reclamation
and maintenance costs 14,730 9,507 14,590
General and administrative 1,468 1,568 1,611
Exploration 287 266 92
Impairment of assets 9,292 - -
-------- -------- --------
25,777 11,341 16,293
-------- -------- --------
INCOME (LOSS) FROM OPERATIONS (8,908) 911 3,288
OTHER INCOME (EXPENSE):
Loss on sale of assets (168) - -
Interest and other income 99 212 92
Insurance settlement 836 - -
Interest expense and other (274) - -
-------- -------- --------
493 212 (41)
-------- -------- --------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES AND
EXTRAORDINARY ITEM (8,415) 1,123 3,247
PROVISION FOR INCOME TAXES - - -
-------- -------- --------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (8,415) 1,123 3,247
EXTRAORDINARY ITEM:
Gain on extinguishment of debt - 784 -
-------- -------- --------
NET INCOME (LOSS) $(8,415) $ 1,907 $ 3,247
======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM
Basic $ (.26) $ .04 $ .11
Diluted (.26) .03 .11
NET (LOSS) INCOME
Basic $ (.26) $ .06 $ .11
Diluted (.26) .06 .11
The accompanying notes to financial statements
are an integral part of these statements.
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands)
COMMON STOCK ADDITIONAL
---------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
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
Compensation expense
for stock options - - 70 - 70
Common stock issued for
exercise of stock options 4 - 5 - 5
Common stock issued upon
conversion of debt 3,283 3 5,459 - 5,462
Stock options and warrants
issued in conjunction with
debt financing 1,035 1,035
Other 1 - - 1
Net income (loss) - - - (8,415) (8,415)
------ ------ --------- --------- --------
Balance, December 31, 1998 33,478 $ 34 $ 53,184 $ (15,261) $ 37,957
====== ====== ========= ========= ========
The accompanying notes to financial statements
are an integral part of these statements.
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands)
1998 1997 1996
--------- -------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (8,415) $ 1,907 $ 3,247
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities-
Depreciation, depletion and amortization 4,182 2,377 3,087
Impairment of assets 9,292 - -
Loss on sale of assets 168 - -
Gain on extinguishment of debt - (784) -
Stock issued for compensation
and other services - - 79
Compensation expense for stock options 70 80 128
Decrease (increase) in -
Inventories (3,665) (3,584) (317)
Accounts receivable, prepaid expenses and other (846) 292 (347)
Increase (decrease) in -
Accounts payable 3,574 (549) 314
Accrued and other liabilities 308 (244) (523)
Deferred income taxes - - (93)
--------- ------- --------
Net cash provided by (used in) operating activities 4,668 (505) 5,575
--------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (7,423) (3,645) (1,644)
Additions to deferred mine development costs (4,972) (5,869) (7,147)
Proceeds from sale of property and equipment 46 - -
--------- ------- --------
Net cash used in investing activities (12,349) (9,514) (8,791)
--------- ------- --------
The accompanying notes to financial statements
are an integral part of these statements.
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands)
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt $ 17,000 $ 21,300 $ 5,500
Payments on debt (9,643) (7,700) (2,137)
Payment of finance fees (2,058) (954) -
Proceeds from exercise of stock options 5 185 39
Other - - (37)
---------- ---------- ---------
Net cash provided by (used in) financing
activities 5,304 12,831 3,365
---------- ---------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (2,377) 2,812 149
CASH AND CASH EQUIVALENTS:
Beginning of year 3,330 518 369
---------- ---------- ---------
End of year $ 953 $ 3,330 $ 518
========== ========== =========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for-
Interest, net of amount capitalized $ 182 $ - $ 262
========== ========== =========
Income taxes $ - $ - $ 36
========== ========== =========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Equipment purchased with debt $ 7,353 $ 874 $ 707
========== ========== =========
Mining properties and claims acquired
with common stock $ - $ - $ 160
========== ========== =========
Debt retired with common stock $ 4,900 $ 1,950 $ 1,600
========== ========== =========
Mining properties and claims
purchase price adjustment $ - $ - $ 1,400
========== ========== =========
Interest capitalized on zero coupon debentures $ - $ 42 $ 123
========== ========== =========
Stock options and warrants issued in
conjunction with debt financing $ 1,035 $ 72 $ -
========== ========== =========
Imputed interest on convertible debentures $ - $ 1,111 $ -
========== ========== =========
The accompanying notes to financial statements
are an integral part of these statements.
</TABLE>
41
<PAGE>
ALTA GOLD CO.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(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.
OLINGHOUSE
In 1994, the Company acquired a 100% interest in the
Olinghouse gold property, located 30 miles east of Reno, Nevada.
Site development and construction began in May 1998 and mining
followed shortly thereafter in July 1998. Production of refined
gold from the initial shakedown run of the mill began in
September 1998 and the initial gold production from the leach pad
commenced in December 1998.
GRIFFON
During 1994, the Company acquired a 100% interest in the
Griffin gold property located near Ely, Nevada. The Company began
construction and site development at Griffin in July 1997,
commenced mining in September 1997, and began gold production in
January 1998.
KINSLEY
In 1993, the Company acquired a 100% interest in the Kinsley
gold property, located near Wendover, Nevada. Mining began in
October 1994 and production of refined gold followed shortly
thereafter in January 1995. In March 1998, the Company completed
mining at Kinsley and leaching activities continued through the
end of the year. During the fourth quarter of 1998, certain
assets at Kinsley were written off (See Note 4) due to an
unanticipated and precipitous deterioration in the recovery rate
of the ore on the leach pad.
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 1998.
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. The Company is in the
process of obtaining all of the permits necessary to be able to
put Copper Flat into production.
42
<PAGE>
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. During the fourth
quarter of 1998, certain assets at Ward were written off (See
Note 4) due to the continued decline in zinc prices and
management's determination that mining was no longer economically
feasible. The net book value of property, equipment, claims and
deferred mine development costs at Ward and Taylor is
approximately $ 5,312,000 at December 31, 1998.
(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, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Precious metals:
Refined products $ 946 $ 865
In process 5,945 7,129
Consumable supplies 129 158
----------- -----------
$ 7,020 $ 8,152
=========== ===========
</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.
43
<PAGE>
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 property and equipment or 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 the assets, the Company's policy
is to write the assets down to their fair value. (See Note 4.)
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, 1998, 1997 and
1996 totaled $1,488,000, $1,035,000 and $384,000, respectively.
DEFERRED FINANCING FEES
Deferred financing fees incurred with the placement of
long-term debt are capitalized and amortized to interest expense
over the life of the related debt.
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 2003, pursuant to fixed price future
sales contracts, put options and/or at spot prices prevailing at
the time of sale. As of December 31, 1998, the Company had (1)
put options maturing in January 1999 for 6,200 ounces of gold
with an exercise price of $335/oz., (2) forward contracts
maturing at various times during the first four months of 1999
for 25,800 ounces of gold with a weighted average exercise price
of $339/oz, and (3) and put options maturing at various times and
various amounts during the period February 1999 through September
2001 for 335,800 ounces of gold with an exercise price of
$280/oz. Due to the fungible nature of gold, the Company
believes that other
44
<PAGE>
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, 1998 and 1997, the
Company sold all of its gold production to Gerald Metals, Inc.
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 data 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 include the potential dilution for the exercise of
stock options, warrants, and debt conversions.
START-UP COSTS
The American Institute of Certified Public Accountants has
issued Statement of Position 98-5 ("SOP 98-5") which provides
guidance on the financial reporting of start-up and organization
costs. SOP 98-5 broadly defines start-up activities and requires
that costs of such start-up activities and organization costs be
expenses as incurred. SOP 98-5 is effective for fiscal years
beginning after December 31, 1998, with earlier application
encouraged. For the year ended December 31, 1998, the Company
has elected to adopt SOP 98-5. The impact of the early
adoption was that approximately $875,000 in start-up costs,
previously capitalized during the current year, were expensed in
the accompanying financial statements. There was no cummulative
effect from prior years of adopting SOP 98-5.
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) LIQUIDITY
The Company is solely dependent upon cash flow from
operations at Olinghouse and Griffon to fund operations and to
repay its obligations. During 1998, the Company's operating
results were negatively impacted by start-up problems at
Olinghouse, as well as cost overruns caused by delays in
obtaining all of the necessary permits. As a result of the start-
up problems and permitting delays, gold production at Olinghouse
in 1998 was less than expected and the cash cost of gold
production exceeded $430 per ounce, resulting in negative cash
flows from operations at Olinghouse. At December 31, 1998, the
Company's line of credit had been drawn to its maximum amount,
the majority of its accounts payable were past due,
45
<PAGE>
production at Olinghouse was below expectations and available
cash was limited, all of which has contributed to substantial
doubt about the Company's ability to continue as a going concern.
Production from Griffon continues to generate positive cash
flow and management has, since the first of the year, identified
and corrected many of the start-up problems which caused
Olinghouse's production shortfall in 1998. Management believes
that the correction of these problems should improve the
Company's cash flow.
Management of the Company is currently pursuing outside
sources of capital, including equipment refinancing, sale or
lease of assets, other debt or equity financing, and the sale of
royalty interest. However, there is no assurance that the
Company will be successful in its efforts to obtain additional
capital. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
(4) WRITE-DOWN OF ASSETS
In 1998, the Company recorded a $9,292,000 write-down related
to an asset impairment loss. The write-down included a $6,330,000
write-down of the Kinsley property and a $2,962,000 write-down of
the Ward property. The Kinsley write-down was necessitated by an
unanticipated and precipitous deterioration in the recovery rate
of the ore on the leach pad. The Ward write-down resulted from
the continued decline in zinc prices and management's
determination that mining Ward was no longer economically
feasible. The write-down related to inventory of $4,797,000,
deferred development of $3,400,000 and property and equipment of
$1,095,000.
(5) DEFERRED MINE DEVELOPMENT COSTS
Deferred mine development costs as of December 31, 1998 and
1997, are summarized as follows by mining area (in thousands):
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Olinghouse $ 16,779 $ 11,873
Ward and Taylor 677 4,389
Copper Flat 6,190 5,339
Kinsley - 2,352
Griffon 1,520 1,468
---------- ----------
25,166 25,421
Less-accumulated amortization (981) (2,525)
----------- ----------
$ 24,185 $ 22,896
=========== ==========
</TABLE>
(6) LONG-TERM DEBT
Long-term debt as of December 31, 1998 and 1997 consists of
the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Term loan with Standard Charter Bank, Credit
Agricole Indosuez and Gerald Metals, Inc.;
interest is stated at LIBOR plus 2% (7.1% at
December 31, 1998) due on December 31, 2001.
Principal payments payable in 11 equal
installments commencing on June 30, 1999;
secured by a first priority mortgage lien on
Olinghouse, Griffon, Copper Flat and Kinsley $ 11,000 $ -
Revolving credit loan with Standard Charter
Bank, Credit Agricole Indosuez and Gerald
Metals, Inc.; interest is stated at LIBOR plus
2% (7.1% at December 31, 1998) due April 30,
2000; secured by a first priority mortgage
lien on Olinghouse, Griffon, Copper Flat and
Kinsley 6,000 -
Credit facility with Gerald Metals, Inc. and BHF
Bank; interest at LIBOR plus 2% (7.8% at
December 31, 1997) due March 31, 1999. Paid
in May 1998 - 8,500
Credit facility with The First National Bank of
Ely due in one principal payment of $1.4
million on January 2, 2000. Interest payable
quarterly at an annual rate of 12.0%; secured
by property 1,400 1,400
Convertible debentures maturing April 14, 2000.
Interest payable quarterly at an annual rate
of 4.0%; unsecured 3,350 8,250
Notes payable; interest at various rates of 7.6%
to 11.8%; due at various dates between April
1999 and October 2003; secured by equipment
7,452 1,242
------------ -----------
29,202 19,392
Less- current portion (4,821) (7,482)
------------ -----------
Total long-term debt $ 24,381 $ 11,910
============ ===========
</TABLE>
On April 30, 1998, the Company entered into a revolving
credit and term loan agreement with Standard Chartered Bank,
Credit Agricole Indosuez, and Gerald Metals, Inc. to borrow up
to $17,000,000. The Company used approximately $8,500,000 of the
credit facility to repay certain indebtedness due to Gerald
Metals and BHF Bank. The remaining funds were used for the
construction and pre production at Olinghouse, working capital
and the payment of certain expenses. Borrowings from the credit
facility accrues interest at LIBOR plus two percent. Interest is
payable monthly and principal is payable in eleven equal
installments commencing on June 30, 1999. The credit facility is
secured by a first priority on tangible and intangible property
of the Company. The credit facility contains certain financial
covenants including a requirement for Minimum Net Worth, Minimum
Current Ratio, Maximum Leverage Ratio, Minimum EBITDA to Interest
Expense, Minimum EBITDA to Interest Expense and Principal and
Maximum Allowable Capital Expenditures, as defined. As of
December 31, 1998, the Company was not in compliance with the
Minimum Current Ratio and Maximum Leverage Ratio. On March 12,
1999, the Company obtained a waiver with respect to the Company's
noncompliance as of December 31, 1998 from Standard Chartered
Bank, Credit Agricole Indosuez, and Gerald Metals, Inc.
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
47
<PAGE>
payable and the related expense was capitalized as deferred
development. Due to conversions, the imputed interest decreased
to 372,000 at December 31, 1998. 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, 1998, $6,650,000 of
the convertible debentures have been converted into 4,274,253
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 $.99 (90% of the average closing
bid price of the Company's common stock for the five trading days
preceding March 13, 1999 or $1.10), the Company would be
obligated to pay holders of the debentures a total of $2,060,000
if the holders were to convert all of the outstanding Debentures
($3,350,000 in the aggregate principal amount as of March 13,
1999). 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 $2.47 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, 1998 and 1997. 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, 1998 maturities of the Company's long-term
debt are as follows (in thousands):
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1999 $ 4,821
2000 16,444
2001 5,667
2002 1,357
2003 913
------------
$ 29,202
============
</TABLE>
48
<PAGE>
(7) INCOME TAXES
The components of the net deferred tax asset (liability) as
of December 31, 1998 and 1997, are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 13,138 $ 10,825
Impaired assets 3,252 -
Reclamation and other reserves 361 309
Other 131 69
------------ -----------
16,882 11,203
Less - valuation allowance (7,938) (5,103)
------------ -----------
Total deferred tax assets 8,944 6,100
------------ -----------
Deferred tax liabilities:
Depreciation, depletion and amortization (8,944) (6,100)
Alternative minimum taxes (662) (662)
------------ -----------
Total deferred tax liabilities (9,606) (6,762)
------------ -----------
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, 1998 and 1997, the Company
determined that $7,938,000 and $5,103,000, 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 year ended December 31, 1998, no
income tax benefit was recognized as realization of such benefits
were not considered more likely than not under the criteria
established by SFAS No. 109. During the years ended December 31,
1997 and 1996, 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, 1998 (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ----------
<S> <C> <C> <C>
Computed "expected" provision for income
taxes at the Federal statutory rate $ (2,945) $ 668 $ 1,136
Net operating loss B no benefit recorded 2,938 - -
Utilization of net operating loss carryforwards - (564) (1,140)
Exercise of non-qualified stock options - (107) -
Other 7 3 4
---------- ---------- ----------
Provision for income taxes $ - $ - $ -
========== ========== ==========
</TABLE>
49
<PAGE>
As of December 31, 1998 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 2018 $ 37,536
Federal AMT operating loss
carryforwards 2007 to 2018 $ 6,168
</TABLE>
(8) 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
50
<PAGE>
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 $400,000 and $382,000 as of December 31, 1998
and 1997, 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.
(9) 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, 1998). 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 1998,
1997 and 1996 totaled $240,000, $478,000 and $460,000,
respectively. At December 31, 1998, minimum lease payments under
these leases are as follows (in thousands):
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1999 $ 201
2000 212
2001 219
2002 220
2003 901
Thereafter 1,386
---------
$ 3,139
=========
</TABLE>
51
<PAGE>
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 $114,000,
$109,000 and $105,000 for the years ended December 31, 1998, 1997
and 1996, 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.
(10) 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, 1998,
1997 and 1996 totaled $155,000, $154,000, and $130,000,
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 were
granted in 1994 and 1995 and vest over periods ranging from two
to four years and are exercisable over a period of ten years. No
options were granted in 1998.
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
52
<PAGE>
granted in 1997 vest over periods ranging from one to four years
and are exercisable over a period of ten years. No options were
granted in 1998.
In 1995, the Company entered into three-year employment
agreements with the CEO, CFO, and the former 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, 1998, 1997 and 1996, 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>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Net Income
As reported $ (8,415,000) $ 1,907,000 $ 3,247,000
============= ============= =============
Pro forma $ (8,588,000) $ 1,598,000 $ 3,024,000
============= ============= =============
Basic EPS
As reported $ (.26) $ .06 $ .11
============= ============= =============
Pro forma $ (.26) $ .05 $ .11
============= ============= =============
Diluted EPS
As reported $ (.26) $ .06 $ .11
============= ============= =============
Pro forma $ (.26) $ .05 $ .10
============= ============= =============
</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, 1998 is presented in
the table and narrative below (shares in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
------------------- ------------------- -------------------
WTD. AVG. WTD. AVG. WTD. AVG.
SHARES EX. PRICE SHARES EX. PRICE SHARES EX. PRICE
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of year 2,165 $1.08 2,067 $1.07 2,437 $1.10
Granted - - 405 $1.25 - -
Exercised (98) $1.34 (35) $1.29 (4) $1.34
Canceled - - - - - -
-------- -------- --------
Outstanding, end of year 2,067 $1.07 2,437 $1.10 2,433 $1.07
======== ======== ========
Exercisable at end of year 1,232 $1.00 1,603 $1.03 2,079 $1.05
======== ======== ========
Weighted average fair value
of options granted $ - $ .85 $ -
======== ======== ========
</TABLE>
At December 31, 1998, 1,160,000 of the 2,433,000 options
outstanding have a weighted average exercise price of $.75 and a
weighted average remaining contractual life of 5.1 years. All of
these options
53
<PAGE>
are exercisable. The remaining 1,273,000 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 6.1 years. 919,000 of these options are
exercisable and their weighted average exercise price is $1.44.
At December 31, 1998, 595,000 options were available for grant
under the 1997 Plan.
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.
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 5.8% to
6.5%; expected dividend yield of 0.0 percent; expected life of
3.0 to 4.0 years; expected volatility of 49 to 90 percent for
each of the years ended December 31, 1998, 1997, and 1996.
(11) STOCKHOLDERS' EQUITY
NON-EMPLOYEE DIRECTOR STOCK OPTION AND STOCK COMPENSATION
AGREEMENTS
In 1998, the Company granted options to purchase 50,000 shares
of the Company's common stock at a price of $1.50 per share, to
directors as directors' compensation under the 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 $41,000 was recognized based on the fair
value of the options.
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
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 1997, 10,000
options expired.
During the years ended December 31, 1998, 1997 and 1996, the
Company issued 0, 0, and 50,833 shares, respectively, of its
restricted common stock to directors as directors' compensation.
OTHER NON-EMPLOYEE STOCK OPTIONS
In May 1998, the Company granted Gerald Metals an option to
purchase 450,000 shares of the Company's common stock at a price
of $1.78 per share in connection with services rendered in
obtaining the $17,000,000 revolving credit and term loan (see
Note 6). 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
$441,000, as deferred financing fees and is amortizing this cost
over the life of the loan.
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
54
<PAGE>
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.
NON-EMPLOYEE STOCK WARRANTS
The Company issued 318,222 warrants with an exercise price of
2.36 per share in March 1998 and 283,225 warrants with an
exercise price of $2.33 per share in September 1998 in exchange
for extending the maturity date of the Debentures by one year.
Extending the maturity date was an underlying requirement for
obtaining the $17,000,000 revolving credit and term loan
agreement (See Note 6). The warrants became exercisable
immediately and remain exercisable for a period of five years
from the grant date. The Company capitalized the fair value of
these warrants, totaling $594,000, as deferred financing fees and
is amortizing this cost over the life of the loan.
In November 1997, the Company issued 232,000 warrants with
an exercise price of $2.18 per share in exchange for extending
the maturity date of the Debentures by one year (see Note 6).
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 is
amortizing the costs based on the units of production method
consistent with all deferred development.
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 6). These warrants
became exercisable immediately and remain exercisable for a
period of five years from the grant date.
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. These warrants expired 1998.
(12) EARNINGS PER SHARE
The Company's stock options, warrants and Debentures
outstanding as of December 31, 1998 are antidilutive and have
been excluded from the diluted loss per share calculation for the
year ended December 31, 1998. The diluted earnings per share
calculation for the years ended December 31, 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
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
============== =========== ===========
55
<PAGE>
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
============== =========== ===========
</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, warrants, and the conversion of the
Debentures upon issuance on April 10, 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 was restated. The effect of this
accounting change on previously reported earnings per share (EPS)
data was as follows:
<TABLE>
<CAPTION>
Per share amounts 1996
--------
<S> <C>
Primary EPS as reported $ .11
Effect of SFAS No. 128 -
Basic EPS as restated $ .11
========
Fully diluted EPS as reported $ .11
Effect of SFAS No. 128 -
Diluted EPS as restated $ .11
========
</TABLE>
Had the Company shown the effects of stock options, warrants
and Debentures that were antidilutive, 3,187,000, 909,000 and
227,000 in additional shares would have been included in the
weighted average shares outstanding for the years ended December
31, 1998, 1997 and 1996, respectively.
For the year ending December 31, 1998, the Company had
weighted average common shares outstanding of 32,566,307.
(13) RELATED PARTY TRANSACTIONS
DIRECTORS' COMPENSATION
At December 31, 1998 and 1997, the Company had accrued
compensation totaling approximately $50,000 and $50,000,
respectively, for non-employee directors of the Company.
EMPLOYMENT AGREEMENTS
The three-year employment agreements with the CEO and CFO,
provide for an annual salary (including increases), incentive
compensation, benefits and stock options (see Note 10). The
agreements also include termination and anti-takeover provisions
which provide for a payment to both officers based on prior
compensation, in the event of a change in control of the Company.
56
<PAGE>
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 11,
1999.
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 11, 1999.
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 11, 1999.
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 11, 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON
FORM 8-K
PAGE
----
(a) 1. Financial Statements:
See Index to Financial Statement 34
2. Financial Statement Schedules:
None required.
(b) Reports on Form 8-K:
None.
57
<PAGE>
<TABLE>
<CAPTION>
(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:
<S> <C>
3.01 Restated Articles of Incorporation of Alta Gold Co. <F1>
3.02 Restated Bylaws of Alta Gold Co. <F2>
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. <F1>
10.02 Master Agreement between the Company, Magma Copper
Company and Magma Nevada Mining Company dated as of
December 14, 1990. <F2>
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. <F2>
10.04 Limited Partnership Agreement among the Company, Magma
Nevada Mining Company and Magma Limited Partner Co.
dated as of March 13, 1991. <F2>
58
<PAGE>
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. <F2>
10.06 Irrevocable Trust Agreement and Assignment of
Partnership Units to Trustee dated March 13, 1991
between the Company and West One Trust Company.<F2>
10.07 Provisional Copper Production Payment Agreement
between the Company and Magma Mining Company dated
December 14, 1990. <F2>
10.08 Provisional Gold Production Payment Agreement between
the Company and Magma Mining Company dated
December 14, 1990. <F2>
10.09 Letter Agreement among the Company, Kennecott, Magma
and the Echo Bay Group concerning environmental
liability and expenditures on the Robinson
Property. <F2>
10.10 Employment Agreement between Alta Gold Co. and
Robert N. Pratt dated October 15, 1991. <F4>
10.11 Employment Agreement between Alta Gold Co. and
John A. Bielun dated October 18, 1992. <F4>
10.12 Asset Purchase Agreement between Alta Gold Co. and
Gold Express Corporation dated June 14, 1994 <F7>
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. <F7>
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. <F7>
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.<F7>
10.16 Provisional Copper Production Royalty Agreement
between Alta Gold Co. and Gold Express Corporation
dated June 14, 1994. <F7>
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, 994. <F7>
10.18 Agreement for Purchase and Sale of Mining Claims
between Alta Gold Co. and Phelps Dodge Mining Company
effective July 8, 1994. <F8>
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. <F11>
59
<PAGE>
10.20 Agreement for Purchase and Sale of Mining Claims
between Alta Gold Co. and Griffon Resources, Inc.
effective October 14, 1994. <F11>
10.21 Facility Agreement between Gerald Metals, Inc. and
Alta Gold Co. dated March 28, 1995. <F9>
10.22 Margin Agreement between Gerald Metals, Inc. and Alta
Gold Co. dated March 28, 1995. <F9>
10.23 Purchase/Refining Agreement between Gerald Metals,
Inc. and Alta Gold Co. dated March 28, 1995. <F9>
10.24 Stock Option Agreement between Gerald Metals, Inc. and
Alta Gold Co. dated March 28, 1995. <F9>
10.25 Employment Agreement between Alta Gold Co. and
Robert N. Pratt dated June 9, 1995. <F10>
10.26 Employment Agreement between Alta Gold Co. and John A.
Bielun dated June 9, 1995. <F10>
10.27 Promissory Note with U.S. Bank of Nevada dated
September 18, 1995. <F10>
10.28 Employment Agreement between Alta Gold Co. and
James S. Goff dated June 9, 1995. <F12>
10.29 Loan Agreement dated May 31, 1996 between Alta
Gold Co. and Gerald Metals, Inc. <F13>
10.30 Stock Option Agreement dated May 31, 1996 between
Gerald Metals, Inc. and Alta Gold Co. <F13>
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. <F14>
10.32 Warrant to purchase 400,000 shares of Alta Gold Co.
common stock granted on June 28, 1996 to StarTronix
International, Inc. <F14>
10.33 Loan Agreement dated April 10, 1997, by and among Alta
Gold Co., Gerald Metals, Inc. and BHF - Bank
Aktiengesellschaft, New York Branch. <F16>
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. <F16>
60
<PAGE>
10.35 Security Agreement dated April 10, 1997, by and among
Alta Gold Co., Gerald Metals, Inc. and BHF - Bank
Aktiengesellschaft, New York Branch.<F16>
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. <F16>
10.37 Secured Promissory Note dated April 10, 1997, made by
Alta Gold Co. in favor of BHF 0 Bank
Aktiengesellschaft, New York Branch in the principal
amount of $4,250,000. <F16>
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. <F16>
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 <F16>
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. <F17>
10.41 Form of Convertible Debentures dated April 14, 1997,
issued by Alta Gold Co., contained in Exhibit
10.40. <F17>
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. <F17>
10.43 Debenture Payoff and Royalty Termination Agreement
dated May 12, 1997 between Alta Gold Co. and Star
Tronix International, Inc. <F18>
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. <F19>
10.45 Interim Loan and Security Agreement dated April 16,
1998, between U. S. Bancorp Leasing & Financial and
Alta Gold Co. <F20>
10.46 Revolving Credit and Term Loan Agreement among
Standard Chartered Bank, Credit Agricole Indosuez,
Gerald Metals, Inc. and Alta Gold Co. dated
April 30, 1998. <F20>
10.47 Employment Agreement between Alta Gold Co. and
Joseph A. Pescio dated February 17, 1998. <F21>
61
<PAGE>
10.48 Employment Agreement between Alta Gold Co. and
Robert N. Pratt dated September 11, 1998. <F21>
10.49 Employment Agreement between Alta Gold Co. and John A.
Bielun dated September 11, 1998. <F21>
21.01 Subsidiaries of the Company. <F5>
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. <F3>
99.02 Settlement Agreement and Mutual Release dated May 23,
1994 by Republic Mase Bank Limited, Republic Mase Inc.
and Alta Gold Co. <F6>
<FN>
_______________
<F1> Incorporated by reference to Form 10-K (file no. 2-2274) for
the fiscal year ended March 31, 1988.
<F2> Incorporated by reference to Form 10-K (file no. 2-2274) for
the year ended December 31, 1990.
<F3> Incorporated by reference to Form 10-K (file no. 2-2274) for
the year ended December 31, 1991.
<F4> Incorporated by reference to Form 10-K (file no. 2-2274) for
the year ended December 31, 1992.
<F5> Incorporated by reference to Form 10-K (file no. 2-2274) for
the year ended December 31, 1993.
<F6> Incorporated by reference to Form 8-K (file no. 2-2274)
dated May 23, 1994.
<F7> Incorporated by reference to Form 8-K (file no. 2-2274)
dated June 14, 1994.
<F8> Incorporated by reference to Form 8-K (file no. 2-2274)
dated July 8, 1994.
<F9> Incorporated by reference to Form 10-Q (file no. 2-2274) for
the quarter ended June 30, 1995.
<F10>Incorporated by reference to Form 10-Q (file no. 2-2274) for
the quarter ended September 30, 1995.
<F11>Incorporated by reference to Form 10-K (file no. 2-2274) for
the year ended December 31, 1994.
<F12>Incorporated by reference to Form 10-K (file no. 2-2274) for
the year ended December 31, 1995.
<F13>Incorporated by reference to Form 8-K (file no. 2-2274)
dated May 31, 1996.
<F14>Incorporated by reference to Form 10-Q (file no. 2-2274) for
the quarter ended June 30, 1996.
<F15>Incorporated by reference to Form 8-K (file no. 2-2274)
dated January 20, 1997.
<F16>Incorporated by reference to Form 8-K (file no. 2-2274)
dated April 10, 1997.
<F17>Incorporated by reference to Form 8-K (file no. 2-2274)
dated April 14, 1997.
<F18>Incorporated by reference to Form 10-Q (file no. 2-2274) for
the quarter ended June 30, 1997.
<F19>Incorporated by reference to Form 10-K (file no. 2-2274) for
the year ended December 31, 1997.
<F20>Incorporated by reference to Form 10-Q (file no. 2-2274) for
the quarter ended March 31, 1998.
<F21>Incorporated by reference to Form 10-Q (file no. 2-2274) for
the quarter ended September 30, 1998.
</FN>
</TABLE>
62
<PAGE>
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
<TABLE>
<CAPTION>
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> <C> <C>
/s/ Robert N. Pratt Chairman, President, Chief Executive March 30, 1999
- ---------------------- Officer & Director
Robert N. Pratt
/s/ John A. Bielun Principal Financial Officer and March 30, 1999
- ---------------------- Principal Accounting Officer
John A. Bielun
/s/ Ralph N. Gilges Director March 30, 1999
- ----------------------
Ralph N. Gilges
/s/ Thomas A. Henrie Director March 30, 1999
- ----------------------
Thomas A. Henrie
/s/ John A. Keily Director March 30, 1999
- ----------------------
John A. Keily
/s/ Jack W. Kendrick Director March 30, 1999
- ----------------------
Jack W. Kendrick
/s/ Thomas D. Mueller Director March 30, 1999
- ----------------------
Thomas D. Mueller
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C>
3.01 Restated Articles of Incorporation of Alta Gold Co. <F1>
3.02 Restated Bylaws of Alta Gold Co. <F2>
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. <F1>
10.02 Master Agreement between the Company, Magma Copper
Company and Magma Nevada Mining Company dated as of
December 14, 1990. <F2>
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. <F2>
10.04 Limited Partnership Agreement among the Company, Magma
Nevada Mining Company and Magma Limited Partner Co.
dated as of March 13, 1991. <F2>
64
<PAGE>
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. <F2>
10.06 Irrevocable Trust Agreement and Assignment of
Partnership Units to Trustee dated March 13, 1991
between the Company and West One Trust Company.<F2>
10.07 Provisional Copper Production Payment Agreement
between the Company and Magma Mining Company dated
December 14, 1990. <F2>
10.08 Provisional Gold Production Payment Agreement between
the Company and Magma Mining Company dated
December 14, 1990. <F2>
10.09 Letter Agreement among the Company, Kennecott, Magma
and the Echo Bay Group concerning environmental
liability and expenditures on the Robinson
Property. <F2>
10.10 Employment Agreement between Alta Gold Co. and
Robert N. Pratt dated October 15, 1991. <F4>
10.11 Employment Agreement between Alta Gold Co. and
John A. Bielun dated October 18, 1992. <F4>
10.12 Asset Purchase Agreement between Alta Gold Co. and
Gold Express Corporation dated June 14, 1994 <F7>
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. <F7>
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. <F7>
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.<F7>
10.16 Provisional Copper Production Royalty Agreement
between Alta Gold Co. and Gold Express Corporation
dated June 14, 1994. <F7>
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, 994. <F7>
10.18 Agreement for Purchase and Sale of Mining Claims
between Alta Gold Co. and Phelps Dodge Mining Company
effective July 8, 1994. <F8>
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. <F11>
65
<PAGE>
10.20 Agreement for Purchase and Sale of Mining Claims
between Alta Gold Co. and Griffon Resources, Inc.
effective October 14, 1994. <F11>
10.21 Facility Agreement between Gerald Metals, Inc. and
Alta Gold Co. dated March 28, 1995. <F9>
10.22 Margin Agreement between Gerald Metals, Inc. and Alta
Gold Co. dated March 28, 1995. <F9>
10.23 Purchase/Refining Agreement between Gerald Metals,
Inc. and Alta Gold Co. dated March 28, 1995. <F9>
10.24 Stock Option Agreement between Gerald Metals, Inc. and
Alta Gold Co. dated March 28, 1995. <F9>
10.25 Employment Agreement between Alta Gold Co. and
Robert N. Pratt dated June 9, 1995. <F10>
10.26 Employment Agreement between Alta Gold Co. and John A.
Bielun dated June 9, 1995. <F10>
10.27 Promissory Note with U.S. Bank of Nevada dated
September 18, 1995. <F10>
10.28 Employment Agreement between Alta Gold Co. and
James S. Goff dated June 9, 1995. <F12>
10.29 Loan Agreement dated May 31, 1996 between Alta
Gold Co. and Gerald Metals, Inc. <F13>
10.30 Stock Option Agreement dated May 31, 1996 between
Gerald Metals, Inc. and Alta Gold Co. <F13>
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. <F14>
10.32 Warrant to purchase 400,000 shares of Alta Gold Co.
common stock granted on June 28, 1996 to StarTronix
International, Inc. <F14>
10.33 Loan Agreement dated April 10, 1997, by and among Alta
Gold Co., Gerald Metals, Inc. and BHF - Bank
Aktiengesellschaft, New York Branch. <F16>
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. <F16>
66
<PAGE>
10.35 Security Agreement dated April 10, 1997, by and among
Alta Gold Co., Gerald Metals, Inc. and BHF - Bank
Aktiengesellschaft, New York Branch.<F16>
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. <F16>
10.37 Secured Promissory Note dated April 10, 1997, made by
Alta Gold Co. in favor of BHF 0 Bank
Aktiengesellschaft, New York Branch in the principal
amount of $4,250,000. <F16>
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. <F16>
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 <F16>
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. <F17>
10.41 Form of Convertible Debentures dated April 14, 1997,
issued by Alta Gold Co., contained in Exhibit
10.40. <F17>
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. <F17>
10.43 Debenture Payoff and Royalty Termination Agreement
dated May 12, 1997 between Alta Gold Co. and Star
Tronix International, Inc. <F18>
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. <F19>
10.45 Interim Loan and Security Agreement dated April 16,
1998, between U. S. Bancorp Leasing & Financial and
Alta Gold Co. <F20>
10.46 Revolving Credit and Term Loan Agreement among
Standard Chartered Bank, Credit Agricole Indosuez,
Gerald Metals, Inc. and Alta Gold Co. dated
April 30, 1998. <F20>
10.47 Employment Agreement between Alta Gold Co. and
Joseph A. Pescio dated February 17, 1998. <F21>
67
<PAGE>
10.48 Employment Agreement between Alta Gold Co. and
Robert N. Pratt dated September 11, 1998. <F21>
10.49 Employment Agreement between Alta Gold Co. and John A.
Bielun dated September 11, 1998. <F21>
21.01 Subsidiaries of the Company. <F5>
23.01 Consent of Arthur Andersen LLP. 70
23.02 Consent of Pincock, Allen & Holt. 72
27.01 Financial Data Schedule. 74
99.01 Court stipulated Escrow Agreement re: Mase Westpac
litigation. <F3>
99.02 Settlement Agreement and Mutual Release dated May 23,
1994 by Republic Mase Bank Limited, Republic Mase Inc.
and Alta Gold Co. <F6>
<FN>
_______________
<F1> Incorporated by reference to Form 10-K (file no. 2-2274) for
the fiscal year ended March 31, 1988.
<F2> Incorporated by reference to Form 10-K (file no. 2-2274) for
the year ended December 31, 1990.
<F3> Incorporated by reference to Form 10-K (file no. 2-2274) for
the year ended December 31, 1991.
<F4> Incorporated by reference to Form 10-K (file no. 2-2274) for
the year ended December 31, 1992.
<F5> Incorporated by reference to Form 10-K (file no. 2-2274) for
the year ended December 31, 1993.
<F6> Incorporated by reference to Form 8-K (file no. 2-2274)
dated May 23, 1994.
<F7> Incorporated by reference to Form 8-K (file no. 2-2274)
dated June 14, 1994.
<F8> Incorporated by reference to Form 8-K (file no. 2-2274)
dated July 8, 1994.
<F9> Incorporated by reference to Form 10-Q (file no. 2-2274) for
the quarter ended June 30, 1995.
<F10> Incorporated by reference to Form 10-Q (file no. 2-2274) for
the quarter ended September 30, 1995.
<F11> Incorporated by reference to Form 10-K (file no. 2-2274) for
the year ended December 31, 1994.
<F12> Incorporated by reference to Form 10-K (file no. 2-2274) for
the year ended December 31, 1995.
<F13> Incorporated by reference to Form 8-K (file no. 2-2274)
dated May 31, 1996.
<F14> Incorporated by reference to Form 10-Q (file no. 2-2274) for
the quarter ended June 30, 1996.
<F15> Incorporated by reference to Form 8-K (file no. 2-2274)
dated January 20, 1997.
<F16> Incorporated by reference to Form 8-K (file no. 2-2274)
dated April 10, 1997.
<F17> Incorporated by reference to Form 8-K (file no. 2-2274)
dated April 14, 1997.
<F18> Incorporated by reference to Form 10-Q (file no. 2-2274) for
the quarter ended June 30, 1997.
<F19> Incorporated by reference to Form 10-K (file no. 2-2274) for
the year ended December 31, 1997.
<F20> Incorporated by reference to Form 10-Q (file no. 2-2274) for
the quarter ended March 31, 1998.
<F21> Incorporated by reference to Form 10-Q (file no. 2-2274) for
the quarter ended September 30, 1998.
</FN>
</TABLE>
68
EXHIBIT 23.01
70
<PAGE>
[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, 333-26547, 333-51275 and
333-64847.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Las Vegas Nevada
March 26, 1999
<PAGE>
EXHIBIT 23.02
72
<PAGE>
[PINCOCK ALLEN & HOLT LETTERHEAD]
March 30, 1999
Mr. John Bielun
Chief Financial Officer
Alta Gold Co.
601 Whitney Ranch Road
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-
05695, 333-05697 and 333-05699) and on Form S-3 (nos. 33-84046,
333-26547, 333-51275 and 333-64847) of Alta Gold Co. of our
report entitled "1998 Reserve Audit, Griffon Mine, Olinghouse
Mine and Copper Flat Project," dated March 30, 1999 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, 1998.
Sincerely,
PINCOCK, ALLEN & HOLT
/s/ John W. Rozelle
John W. Rozelle, C.P.G.
Principal Geologist
JWR/sp
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 953
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 7,020
<CURRENT-ASSETS> 8,924
<PP&E> 46,676
<DEPRECIATION> 9,033
<TOTAL-ASSETS> 74,492
<CURRENT-LIABILITIES> 10,497
<BONDS> 24,381
0
0
<COMMON> 34
<OTHER-SE> 37,923
<TOTAL-LIABILITY-AND-EQUITY> 74,492
<SALES> 16,869
<TOTAL-REVENUES> 16,869
<CGS> 14,730
<TOTAL-COSTS> 14,730
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,415)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,415)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,415)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
