<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number 0-23042
MK GOLD COMPANY
---------------
(Exact name of registrant as specified in its charter)
Delaware 82-0487047
-------------------- ------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 East South Temple, Suite 2100, Salt Lake City, Utah 84111
- ------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(801) 297-6900
- ------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- ------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. On November 1, 1999, there
were 37,320,000 outstanding shares of the Registrant's Common Stock, par value
$.01 per share.
<PAGE>
PART I. FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
- -----------------------------
As more fully described in the accompanying notes, the unaudited interim
consolidated financial statements contained in this report should be read in
conjunction with the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 (the "1998 10-K"). The 1998 10-K contains information relevant
to an analysis of the financial information contained in this report and for
purposes of comparing the Company's results of operations for the three and nine
month periods ended September 30, 1999 with the same periods in the prior year.
2
<PAGE>
MK GOLD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of dollars except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
(Unaudited) (Unaudited)
1999 1998 1999 1998
------------------------ ----------------------------
<S> <C> <C> <C> <C>
REVENUE
Product sales $ 4,776 $ 321 $ 6,007 $ 5,816
Mining services 2,763 2,708 8,324 7,752
----------- ----------- ----------- ------------
Total revenue 7,539 3,029 14,331 13,568
OPERATING EXPENSES
Product sales 4,759 217 7,024 5,529
Mining services 2,084 2,366 6,564 6,692
----------- ----------- ----------- ------------
Total costs and operating expenses 6,843 2,583 13,588 12,221
GROSS PROFIT 696 446 743 1,347
EXPLORATION AND PROJECT
INVESTIGATION COSTS (705) (922) (1,717) (2,202)
GENERAL AND ADMINISTRATIVE
EXPENSES (498) (361) (1,269) (1,234)
----------- ----------- ----------- ------------
LOSS FROM OPERATIONS (507) (837) (2,243) (2,089)
Investment income 129 278 513 839
Interest expense (118) (20) (156) (62)
Gain on sale of assets 13 198 92 259
----------- ----------- ----------- ------------
LOSS BEFORE INCOME TAXES (483) (381) (1,794) (1,053)
Income tax expense - - - (5)
----------- ----------- ----------- ------------
NET LOSS $ (483) $ (381) $ (1,794) $ (1,058)
=========== =========== =========== ============
Basic and diluted loss per share $ (0.03) $ (0.02) $ (0.09) $ (0.05)
Basic and diluted weighted
average shares
used to compute loss per share 19,261,365 19,464,466 19,261,365 19,464,466
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
MK GOLD COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1999 1998
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 9,119 $15,687
Gold bullion held for sale 1,210 2,101
Receivables 2,515 2,428
Inventories
Ore and in process 986 658
Materials and supplies 644 649
Deferred income taxes 123 123
Other 237 283
------- -------
Total current assets 14,834 21,929
------- -------
Mining rights, property, plant and mine development, net 46,547 1,189
Deferred income taxes 304 304
Restricted cash 1,053 1,426
------- -------
TOTAL ASSETS $62,738 $24,848
======= =======
</TABLE>
(continued)
4
<PAGE>
MK GOLD COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
(Unaudited) (Audited)
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 2,353 $ 1,749
Current portion of mine closure liabilities 454 1,105
Short-term note payable - Leucadia National Corporation 15,807 -
Other accrued liabilities 380 293
-------- --------
Total current liabilities 18,994 3,147
-------- --------
Mine closure and reclamation liabilities 743 666
Deferred revenue 1,970 2,864
Deferred income tax liability 4,323 -
Line of Credit - Leucadia National Corporation 20,000 -
-------- --------
Total liabilities 46,030 6,677
-------- --------
STOCKHOLDERS' EQUITY
Common stock, par value $.01, 19,261,365 issued and outstanding
at September 30, 1999 and 19,464,466 issued and 19,261,929
outstanding at December 31, 1998 193 195
Capital in excess of par value 67,146 67,146
Accumulated deficit (50,962) (49,168)
Treasury stock - (2)
Accumulated other comprehensive gain 331 -
-------- --------
Total stockholders' equity 16,708 18,171
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 62,738 $ 24,848
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
(concluded)
5
<PAGE>
MK GOLD COMPANY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
>
Nine Months Ended
September 30
1999 1998
(Unaudited) (Unaudited)
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (1,794) $(1,058)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation, depletion and amortization 688 772
Receivable from sale of assets - (140)
Gain on sale of assets (92) (259)
Changes in assets and liabilities net of effects of Riomin Acquisition:
Gold bullion held for sale 891 (948)
Receivables 1,354 (34)
Refundable income taxes - 594
Inventories (323) 61
Other assets 49 55
Restricted cash 373 (149)
Deferred revenue (894) (430)
Mine closure and reclamation liabilities (574) (893)
Accounts payable and other accrued liabilities (31) (413)
---------- -------
Total adjustments 1,441 (1,784)
---------- -------
Net cash provided (used) by operating activities (353) (2,842)
---------- -------
INVESTING ACTIVITIES:
Additions to property, plant and mine development (822) (218)
Acquisition of Riomin (net of cash acquired) (41,314) -
Proceeds from disposition of property and plant 111 1,146
---------- -------
Net cash provided (used) by investing activities (42,025) 928
---------- -------
FINANCING ACTIVITIES:
Short-term note payable - Leucadia National Corporation 15,807 -
Net borrowings under line-of-credit agreement - Leucadia National Corporation 20,000 -
---------- -------
Net cash provided by financing activities 35,807 -
---------- -------
EFFECT OF EXCHANGE RATES ON CASH 3 -
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,568) (1,914)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 15,687 18,189
---------- -------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 9,119 $16,275
========== =======
Supplemental disclosures of cash flow information:
Interest paid $ 188 $ 38
Income taxes paid (refund), net - (594)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:
Fair value of assets acquired (net of cash acquired) $ 46,359 -
Fair value of liabilities assumed (5,045)
----------
NET CASH PAID $ 41,314
==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE>
MK GOLD COMPANY
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands)
1. Unaudited Interim Consolidated Financial Statements
The financial information included herein is unaudited; however, the
information reflects all adjustments (consisting of normal recurring
adjustments) that are, in the opinion of management, necessary to the fair
presentation of the consolidated financial position, results of operations,
and cash flows for the interim periods. The consolidated financial
statements should be read in conjunction with the Notes to Consolidated
Financial Statements for the year ended December 31, 1998, which are
included in the Company's Annual Report on Form 10-K for such year (the
"1998 10-K"). The results of operations for the nine months ended September
30, 1999, are not necessarily indicative of the results to be expected for
the full year. The consolidated balance sheet at December 31, 1998, was
extracted from the audited consolidated financial statements contained in
the 1998 10-K and does not include all disclosures required by generally
accepted accounting principles for annual consolidated financial
statements.
2. Reclassification
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
3. Mining Joint Ventures
The Company owns a 25% undivided interest in the Castle Mountain Venture
(the "CMV"), which operates a gold mine in San Bernardino County,
California. The results for the CMV have been proportionally reflected in
the accompanying consolidated financial statements. Any differences
between the Company's share of reported sales and income and the amounts
shown on these schedules are due to differences in the timing of revenue
and expense recognition. The amounts below reflect the balances on the
joint venture books and do not reflect the impairment previously recorded
by the Company.
<TABLE>
<CAPTION>
Castle Mountain Venture
Total Venture MK Gold's Share
------------------ -----------------
Results of Operations
Nine Months Ended September 30 1999 1998 1999 1998
-------------------------------- ------- -------- ------- -------
<S> <C> <C> <C> <C>
Product sales $17,009 $ 20,284 $ 4,252 $ 5,071
Loss before taxes $(6,180) $(12,264) $(1,546) $(3,066)
</TABLE>
The Company owns a 53% interest in the American Girl Mining Joint Venture
(the "AGMJV") which, prior to September 1996, operated a gold mine in
Imperial County, California. After an extensive review of the operations
at the AGMJV, the Company determined that continued operation at the AGMJV
could not be economically justified. On September 5, 1996, the Company
announced the suspension of operations at the AGMJV and subsequently began
mine closure and reclamation operations. Mine closure and reclamation
activities continued during the nine months ended September 30, 1999.
7
<PAGE>
4. Acquisition
On September 1, 1999, the Company acquired the entire share capital and
subordinated debt of Riomin Exploraciones, S.A. ("Riomin") from Rio Tinto
plc ("Rio Tinto"). The aggregate purchase price for the acquisition of
Riomin was $42,000,000 in cash. Riomin holds the exploration and mineral
rights to the Las Cruces copper deposit in the pyrite belt of Spain (the
"Las Cruces Project"). The method of accounting for the acquisition is the
purchase method. The acquisition was funded through (i) borrowings of $20
million pursuant to the Company's existing credit agreement with Leucadia
National Corporation ("Leucadia"), (ii) the sale of 18,058,635 shares of
the Company's authorized but unissued shares of Common Stock to Leucadia
for $15,806,723 and (iii) $6,193,277 from the Company's working capital.
Pending regulatory approval of the acquisition of the Company's common
stock by Leucadia, Leucadia loaned to the Company $15,806,723 pursuant to a
promissory note. This promissory note was repaid October 8, 1999, at the
time regulatory approval was given and the sale of MK Gold Company shares
to Leucadia was completed. In connection with the acquisition of Las
Cruces, the Company also granted Straits Resources Ltd., Sydney, Australia,
a one-year option to purchase 35% of Las Cruces at the Company's cost, plus
interest.
Of the $42,000,000 purchase price, $36,000,000 represents the purchase of
subordinated debt from Rio Tinto. At the acquisition date, Riomin had
stockholder's equity of a negative $6,400,000. The excess purchase price of
approximately $12,400,000, was allocated to mining rights. As part of the
acquisition the Company has also recorded a deferred tax liability of
approximately $4,300,000, which was also allocated to mining rights. The
operating results of Riomin are included in results of operations from its
date of acquisition, September 1, 1999, to September 30, 1999.
From the date of acquisition to September 30, 1999, all feasibility and
development costs for the period were capitalized. The following table
provides certain consolidated pro forma results of continuing operations
data assuming the acquisition of Riomin had occurred at the beginning of
each period presented.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
(000) (000)
---------------------- ---------------------
1999 1998 1999 1998
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Pro forma (unaudited) results
Revenue $ 7,555 3,137 $ 14,421 13,891
Loss before income taxes $ (824) (3,304) $ (3,437) (7,970)
Net loss $ (824) (3,304) $ (3,437) (7,975)
Basic and diluted loss per share $ (.04) (.17) $ (.18) (.41)
</TABLE>
There are no material pro forma adjustments. No mining rights were amortized
because the Las Cruces Project is still in the feasibility and development
stage.
5. Related Party Transactions
For the quarter ended September 30, 1999, approximately $151,000 in
interest and commitment fees was paid relating to the $20,000,000 line-of-
credit facility with Leucadia. In addition, approximately $105,000 in
interest was accrued relating to the promissory note with Leucadia.
Approximately $138,000 in interest relating to the Las Cruces Project was
capitalized.
6. Accounting Standards
In June 1999, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 137 "Accounting
for Derivative Instruments and Hedging Activities-Deferral of the Effective
Date of FASB Statement No. 133." SFAS No. 137 delays the effective date of
SFAS 133 to fiscal years beginning after June 15, 2000. The Company will
adopt the new statement
8
<PAGE>
beginning on January 1, 2001. The Company does not believe that SFAS
137 will have a significant effect on the earnings and financial
position of the Company.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------ -----------------------------------------------------------------------
OF OPERATIONS
-------------
The purpose of this section is to discuss and analyze the Company's consolidated
financial condition, liquidity and capital resources and results of operations.
This analysis should be read in conjunction with the Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998 (the
"1998 10-K"). This section contains certain forward-looking statements that
involve risks and uncertainties, including statements regarding the Company's
plans, objectives, goals, strategies and financial performance. The Company's
actual results could differ materially from the results anticipated in these
forward-looking statements as a result of factors set forth under "Cautionary
Statement for Forward-Looking Information" below and elsewhere in this report.
General
On September 1, 1999, the Company acquired the entire share capital and
subordinated debt of Riomin Exploraciones S.A. from Rio Tinto plc ("Rio Tinto").
Subsequent to the acquisition, the name of Riomin Exploraciones, S.A. was
changed to Cobre Las Cruces, S.A. ("Las Cruces"). Las Cruces holds the
exploration and mineral rights to the Las Cruces copper deposit in the pyrite
belt of Spain (the "Las Cruces Project"). The Las Cruces Project is in the
feasibility and development phase and no copper is currently being produced from
the Las Cruces Project. Actual mining will be subject to permitting, engineering
and construction.
The aggregate purchase price for the acquisition of Las Cruces was $42,000,000
in cash. In addition, Rio Tinto will be entitled to receive a 1.5% royalty on
any copper sales from the Las Cruces Project at a price exceeding $0.80 per
pound. The Company obtained funding for the acquisition of Las Cruces through
(i) borrowings of $20 million pursuant to its existing credit agreement with
Leucadia National Corporation ("Leucadia"), (ii) the sale of 18,058,635 shares
of its authorized but unissued shares of Common Stock to Leucadia for
$15,806,723 and (iii) $6,193,277 from the Company's working capital. In
connection with the acquisition of Las Cruces, the Company also granted Straits
Resources Ltd., Sydney, Australia, a one-year option to purchase 35% of Las
Cruces at the Company's cost, plus interest.
Results of Operations
Gold Production: The Company's attributable share of gold production for the
three and nine month periods ended September 30, 1999, was 5,304 ounces and
15,728 ounces, respectively, compared to 5,184 ounces and 19,317 ounces for the
three and nine month periods ended September 30, 1998. This represents an
increase in production of 2% for the three month period and a decrease of 19%
for the nine month period, compared to the same periods in 1998. The decrease in
production for the nine month period is attributable to the lower grade ore
experienced in the Oro Belle, Hart Tunnel and Jumbo pits and lower ore crushing
rates resulting from weather related and mechanical problems at the Castle
Mountain Venture (the "CMV") and the cessation of gold production at the
American Girl Mining Joint Venture (the "AGMJV"). The Company is conducting
closure and reclamation operations at the AGMJV and expects the project to be
completed by the fourth quarter of 1999.
Product sales revenue for the three and nine month periods ended September 30,
1999 increased $4.5 million and $.2 million, respectively, compared to the
corresponding periods in 1998. The Company sold 16,000 ounces of gold on the
spot market during the third quarter of 1999. During the first and second
quarters of 1999, the Company sold only 2,000 ounces of gold due to weak gold
market conditions. Subsequent to the end of the third quarter, the Company
continued to sell gold under forward sales contracts. In October 1999, 27,336
ounces were sold under forward sales contracts at an average price of $315 per
ounce. Product sales revenue for the three and nine month periods ended
September 30, 1999 also includes deferred revenue of $.3 million and $.9
million, respectively, associated with the settlement of a dispute in 1995
relating to the Company's mining contract at the CMV.
9
<PAGE>
Revenue from mining services for the three and nine month periods ended
September 30, 1999 totaled $2.8 million and $8.3 million, respectively. Revenues
for the three month period ended September 30, 1999 were comparable to the same
period in 1998. Revenues for the nine months ended September 30, 1999 increased
compared to the same period in 1998. This increase is attributable to the
escalation of the contract price and an increase in tons mined during 1999.
Hedging Activity: For the nine month period ended September 30, 1999, the
average gold price realized was $280 per ounce, compared to $317 per ounce for
the nine months ended September 30, 1998. The average spot price for the nine
month period ended September 30, 1999 was $274 per ounce.
Gross Profit: Product sales resulted in gross profit of approximately $17,000
for the three month period ended September 30, 1999. The Company experienced a
loss from product sales of $1.0 million for the nine month period ended
September 30, 1999. The Company experienced losses from product sales of $.2
million and $.6 million, respectively, for the three and nine month periods
ended September 30, 1998. Gross profit for 1999 has been adversely impacted by
the decline in gold prices compared to the same periods in 1998.
Gross profit from contract mining operations increased $.7 million for the nine
months ended September 30, 1999, compared to the same period in 1998. Reductions
in operating costs resulted in improved profit margins for the nine month
period.
Exploration Costs: Exploration and project investigation costs were $.7 million
and $1.7 million for the three and nine month periods ended September 30, 1999,
respectively, compared to $.9 million and $2.2 million for the three and nine
month periods ended September 30, 1998. Despite the reduction in exploration
expense, the Company was active in its three exploration programs. Exploration
activities in Nevada have been focused on three properties acquired during the
fourth quarter of 1998. Field work on these properties commenced during the
second quarter of 1999. Exploration activities in Mexico resulted in a joint
venture with Cominco Mexico S.A. de C.V. to explore the El Habal property in
Sinaloa State. Brazilian exploration activities have included the signing of an
option agreement to explore a prospective gold property in central Brazil.
Geologic sampling and mapping was done on that property during the second
quarter and continued during the three months ended September 30, 1999.
Las Cruces Project: Since acquisition, the activities of Las Cruces have been
focused on completing the environmental and technical studies necessary to
finalize a feasibility study. During September 1999, the Company expended
$271,000 relating to the Las Cruces Project.
General and Administrative Expenses: General and administrative expenses were
$.5 million and $1.3 million for the three and nine month periods ended
September 30, 1999, respectively. This represents an increase of 38% and 3% for
the three and nine month periods ended September 30, 1999, compared to the same
periods in 1998. The increase in general and administrative expenses for the
three months ended September 30, 1999 is due to costs associated with the Las
Cruces acquisition and the Company's pending lawsuit against Morrison-Knudsen
Corporation.
Liquidity and Capital Resources
The Company's principal sources of funds are its available resources of cash and
cash equivalents and cash generated from mining operations and contract mining
services. In addition, the Company maintains a $20 million credit facility with
Leucadia National Corporation, which was renewed effective March 1, 1998 for a
period of three years. At September 30, 1999, the outstanding balance under the
credit facility was $20 million. Loans outstanding under the credit facility
bear interest equal to the prime rate, and interest is payable quarterly. At
September 30, 1999, the Company had cash and cash equivalents of $9.1 million
and gold bullion of $1.2 million representing a decrease in cash and cash
equivalents and gold bullion of $7.5 million from December 31, 1998. The
decrease in cash resources is primarily due to the acquisition of Las Cruces.
Net cash used by operating activities was $.4 million for the nine months ended
September 30, 1999, compared to net cash used by operating activities of $2.8
million for the same period in 1998. The Company's gold bullion inventories
decreased during the first nine months of 1999.
10
<PAGE>
Net cash used in investing activities was $42 million for the nine months ended
September 30, 1999, an increase of $43 million from the same period in 1998. The
increase was due primarily to the acquisition of Las Cruces during the third
quarter of 1999.
Net cash provided by financing activities was $35.8 million for the nine months
ended September 30, 1999, compared to $0 million for the same period in 1998.
The 1999 net cash provided by financing activities resulted from borrowings
under our credit facility and the short-term promissory note relating to the
sale of authorized but unissued shares of MK Gold stock to Leucadia. The
proceeds from these transactions were used to fund a portion of the purchase
price for the Company's acquisition of Las Cruces.
During the quarter ended March 31, 1998, the Company received $.6 million of
income tax refunds relating to the tax loss reported for the year ended December
31, 1997. The Company also received $1.1 million of proceeds from the disposal
of plant and equipment, during 1998.
Additions to property, plant and mine development totaled $.8 million for the
nine months ended September 30, 1999, compared to $.2 million for the same
period in 1998. For all periods presented, additions to property, plant and mine
development equipment consisted of (i) mine development expenditures; (ii)
construction expenditures for buildings, machinery, plant and equipment; and
(iii) expenditures for mobile mining service equipment. Feasibility and
development costs incurred on the Las Cruces Project are capitalized and are
reflected as investing activities in the statement of cash flows.
Upon completion of production at a mine, the Company must make expenditures for
reclamation and closure of the mine. The Company provides for future
reclamation and mine closure liabilities on a units-of-production basis. At
September 30, 1999, $1.2 million were accrued for such costs. In addition to the
accruals, the Company and its joint venture partner are depositing cash in a
separate fund to cover future reclamation costs at the CMV properties. The
Company reviews the adequacy of its reclamation and mine closure liabilities in
light of current laws and regulations and adjusts it liabilities as necessary.
In October 1998, the Company announced a share repurchase program. The Board of
Directors of the Company has authorized the repurchase of up to 2 million
shares. No shares were purchased by the Company during the three months ended
September 30, 1999.
Year 2000 Compliance
The Company has performed an analysis and has implemented procedures to address
year 2000 issues. The Company has converted its financial systems to year 2000
compliant systems. The Company does not anticipate any significant additional
costs to modify its systems to accommodate the impact of the upcoming change in
the century. Although the Company is working cooperatively with certain third
parties, the Company cannot give any assurances that the systems of other
parties will be year 2000 compliant on a timely basis. In the most reasonably
likely worst-case scenario involving the failure of the Company's systems and
applications or those operated by others, the Company's business, financial
condition and results of operations would be materially adversely affected.
However, an estimate of the dollar amount of such an adverse effect cannot be
practically determined at this time.
Cautionary Statement for Forward-Looking Information
Certain information set forth in this report contains "forward-looking
statements" within the meaning of federal securities laws. Forward-looking
statements include statements concerning plans, objectives, goals, strategies,
future events, future revenues or performance, capital expenditures, exploration
efforts, financing needs, plans or intentions relating to acquisitions by the
Company and other information that is not historical information. When used in
this report, the words "estimates," "expects," "anticipates," "forecasts,"
"plans," "intends," "believes" and variations of such words or similar
expressions are intended to identify forward-looking statements. Additional
forward-looking statements may be made by the Company from time to time. All
such subsequent forward-looking statements, whether written or oral and whether
made by or on behalf of the Company, are also expressly qualified by these
cautionary statements.
11
<PAGE>
The Company's forward-looking statements are based upon the Company's current
expectations and various assumptions. The Company's expectations, beliefs and
projections are expressed in good faith and are believed by the Company to have
a reasonable basis, including without limitation, management's examination of
historical operating trends, data contained in the Company's records and other
data available from third parties, but there can be no assurance that
management's expectations, beliefs and projections will result or be achieved or
accomplished. The Company's forward-looking statements apply only as of the date
made. The Company undertakes no obligation to publicly update or revise
forward-looking statements which may be made to reflect events or circumstances
after the date made or to reflect the occurrence of unanticipated events.
There are a number of risks and uncertainties that could cause actual results to
differ materially from those set forth in, contemplated by or underlying the
forward-looking statements contained in this report. These risks include, but
are not limited to, the volatility of gold prices, imprecision of reserve
estimates, risks of exploration and development stage projects, political risks
of development in foreign countries, risks associated with environmental
regulation, mining risks and competition. Each of these risks and certain other
uncertainties are discussed in more detail in the 1998 10-K. There may also be
other factors, including those discussed elsewhere in this report, that may
cause the Company's actual results to differ materially from the forward-looking
statements. Any forward-looking statements made by or on behalf of the Company
should be considered in light of these factors.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------ ----------------------------------------------------------
Not applicable.
12
<PAGE>
PART II. OTHER INFORMATION
---------------------------
Item 1. LEGAL PROCEEDINGS
- ------ -----------------
As previously reported by the Company, the Company has filed a complaint against
Morrison Knudsen Corporation ("MK") seeking a declaration that MK's agreement
not to compete with the Company is valid, binding and enforceable. A trial was
scheduled for August 16, 1999; however, in July 1999 the court notified the
Company that it would be necessary to reschedule the trial. A new trial date has
not yet been determined.
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) The following exhibits are filed with this report.
27 Financial Data Schedule
(b) A report on Form 8-K was filed with the Securities and Exchange
Commission (the "Commission") on September 15, 1999 relating to the
Company's acquisition of Riomin and the change of control resulting
from the sale by the Company of 18,058,635 shares of Common Stock to
Leucadia.
13
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MK GOLD COMPANY
/s/ John C. Farmer
--------------------------------------------
JOHN C. FARMER
Chief Financial Officer
(Authorized Signatory and
Principal Financial and Accounting Officer)
Date: November 15, 1999
14
<PAGE>
INDEX TO EXHIBITS
Exhibits
27 Financial Data Schedule.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE BODY OF THE ACCOMPANYING FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERNCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 9,119
<SECURITIES> 0
<RECEIVABLES> 2,515
<ALLOWANCES> 0
<INVENTORY> 2,840
<CURRENT-ASSETS> 14,834
<PP&E> 66,355
<DEPRECIATION> 19,808
<TOTAL-ASSETS> 62,738
<CURRENT-LIABILITIES> 18,994
<BONDS> 0
0
0
<COMMON> 193
<OTHER-SE> 16,515
<TOTAL-LIABILITY-AND-EQUITY> 62,738
<SALES> 4,776
<TOTAL-REVENUES> 7,539
<CGS> 4,759
<TOTAL-COSTS> 6,843
<OTHER-EXPENSES> 1,203
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 118
<INCOME-PRETAX> (483)
<INCOME-TAX> 0
<INCOME-CONTINUING> (483)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (483)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
</TABLE>
