Item 1. Business (a) General Development Annual Report to Stockholders, of Business Exhibit 13 pages 1-11, 17, 20- 21, 23-29
(b) Financial Information (Not Applicable) About Industry Segments
(c) Narrative Description Annual Report to Stockholders, of Business Exhibit 13, pages 1-15, 20- 21, 25-29
(d) Financial Information Annual Report to Stockholders, About Foreign and Exhibit 13, pages 25-26 Domestic Operations and Export Sales
Item 2.
Item 2. Properties Annual Report to Stockholders, Exhibit 13, pages 7-11
Item 3.
Item 3. Legal Proceedings Annual Report to Stockholders, Exhibit 13, page 27
Item 4.
Item 4. Submission of Matters (Not Applicable) to a Vote of Security Holders
Executive Officers of the Registrant
The executive officers of FMC Gold Company, together with the offices in FMC Gold Company presently held by them, their business experience since January 1, 1989, and their ages, are as follows:
Age Office; year of election; Name 3/1/94 and other information for past 5 years
Larry D. Brady 51 Chairman of the Board and Chief Executive Officer of the Company since November, 1991; President of FMC (93); Executive Vice President of FMC (89-93); Vice President-Corporate Development of FMC (88); Vice President and General Manager - Agricultural Chemical Group (83-88)
Brian J. Kennedy 50 President and Chief Operating Officer of FMC Gold Company (87); Manager, Minerals Division of FMC (84); Director of FMC's Natural Resources Operations (80-84)
Donald L. Beckwith 47 Vice President-Operations (92); Vice President-Development (87- 92); Manager of Planning and Development for FMC's Natural Resources Operations (79-87)
Nha D. Hoang 51 Vice President-International (93); Director, International for FMC (87-93)
Robert A. Horn 51 Vice President-Exploration (94); previously with AMCL International Mining Consultants (92-94); Vice President, BP Canada (88- 92)
Steven E. Baginski 35 Vice President-Finance, Treasurer and Chief Financial Officer (93); Manager of Business Planning, Pepsi Co. Foods International (92- 93); Chief Financial Officer, Frito-Lay of Hawaii (89-92)
Robert L. Day 59 Secretary and General Counsel (87); Secretary and Assistant General Counsel of FMC (87); Associate General Counsel of FMC (78)
Each of the Company's executive officers has been employed by the Company and/or by FMC Corporation in a managerial capacity for the past five years except for Messrs. Baginski and Horn. No family relationship exists between any of the above-listed officers and there are no arrangements or understandings between any of them and any other persons pursuant to which they were selected as an officer. All officers are elected to hold office for one year and until their successors are elected and qualify.
10-K Item No. Incorporated by Reference From
PART II Item 5.
Item 5. Market for Registrant's Annual Report to Stockholders, Common Equity and Related Exhibit 13, pages 12- 15, 31 Stockholder Matters
Item 6.
Item 6. Selected Financial Data Annual Report to Stockholders, Exhibit 13, pages 2-5, 11-15, 21, 25-26, 31
Item 7.
Item 7. Management's Discussion Annual Report to Stockholders, and Analysis of Financial Exhibit 13, pages 2- 15, 17-18, Condition and Results of 20-21, 26-29, 31 Operations
Item 8.
Item 8. Financial Statements and Annual Report to Stockholders, Supplementary Data Exhibit 13, pages 15-30 (including all Schedules required under Item 14 of Part IV)
Item 9.
Item 9. Changes in and disagreements (Not Applicable) with Accountants on Accounting and Financial Disclosure
PART III Item 10.
Item 10. Directors and Executive Part I; Proxy Statement for Officers of the Registrant 1994 Annual Meeting of Stockholders, pages 2-3, 11; Annual Report to Stockholders, Exhibit 13, pages 32-33
Item 11.
Item 11. Executive Compensation Proxy Statement for 1994 Annual Meeting of Stockholders, pages 6-10
Item 12.
Item 12. Security Ownership of Proxy Statement for Certain Beneficial Annual Meeting of Stockholders, Owners and Management pages 3-4
Item 13.
Item 13. Certain Relationships Proxy Statement for and Related Transactions Annual Meeting of Stockholders, pages 2-5
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed with this Report
1. Consolidated financial statements of FMC Gold Company and its subsidiaries are incorporated under Item 8 of this Form 10-K.
2. All required financial statement schedules are included in the consolidated financial statements or notes thereto as incorporated under item 8 of this Form 10-K.
3. Exhibits: See attached exhibit index, page 7.
(b) Reports on Form 8-K
1. Report filed on December 10, 1993, regarding charges resulting primarily from writedown of carrying value of investment in Beartrack project.
(c) Exhibits
See Index of Exhibits. 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.
FMC GOLD COMPANY (Registrant)
Brian J. Kennedy President
By Robert L. Day______ Date: March 28, 1994 Robert L. Day (Attorney-in-Fact)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
LARRY D. BRADY* Chairman of the Board, Chief Executive Larry D. Brady Officer and Director
STEVEN E. BAGINSKI* Vice President- Finance, Principal Steven E. Baginski Financial Officer and Principal Accounting Officer
ROBERT N. BURT* Director Robert N. Burt
PAUL L. DAVIES, JR.* Director Paul L. Davies, Jr.
NHA D. HOANG.* Director Nha D. Hoang
BRIAN J. KENNEDY* Director Brian J. Kennedy
EDMUND W. LITTLEFIELD* Director Edmund W. Littlefield
ARTHUR D. LYONS* Director Arthur D. Lyons
*By Robert L. Day_____________ March 28, 1994 Robert L. Day Attorney-in-FactDOCUMENT HEADER DOCUMENT DESCRIPTION EXHIBIT INDEX DOCUMENT TYPE 2 COUNT 3 INDEX TO EXHIBITS FILED WITH OR INCORPORATED BY REFERENCE INTO FORM 10-K OF FMC GOLD COMPANY FOR YEAR ENDED DECEMBER 31, 1993
Exhibit No. Sequential This 10-K Exhibit Description Page No.
3.1 Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 of the Company's Registration Statement on Form S-1 (No. 33-14429)) ..................N/A
3.2 By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1 (No. 33-14429)) ..........................N/A
4.1 Form of certificate representing Shares of Common Stock of the Company (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-1 (No. 33-14429)) ........N/A
10.1 Management Services Agreement between the Company and FMC (incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1 (No. 33-14429)) .....................N/A
10.2 Amendment No. 1 to Management Services Agreement between the Company and FMC (incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1987) ..........................N/A
10.3 Amendment No. 2 to Management Services Agreement between the Company and FMC (incorporated by reference to Exhibit 10.3 to the Company's Form 10-K for 1990) ...... N/A
10.4 Tax Sharing Agreement between the Company and FMC (incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on Form S-1 (No. 33-14429)) ...................................N/A
10.5 Bill of Sale, Purchase and Assumption Agreement between the Company and FMC (incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-1 (No. 33-14429)) .... N/A
10.6 Joint Venture Agreement between Freeport Exploration Company and FMC Corporation (incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on Form S-1 (No. 33-14429)) ...................... N/A
10.7 FMC 1981 Incentive Share Plan, as amended effective April 24, 1987 (incorporated by reference to Exhibit 10.5 to the Company's Registration Statement on Form S-1 (No. 33-14429)) ..............................N/A
10.8 FMC Corporation Salaried Employees' Retirement Plan, as revised on January 1, 1985 (incorporated by reference from Exhibit 10.2 to the Form SE filed by FMC on March 27, 1992) ....... N/A
10.9 FMC Corporation Employees' Thrift and Stock Purchase Plan, as revised and restated as of April 1, 1991 (incor- porated by reference from Exhibit 10.3 to the Form SE filed by FMC on March 27, 1992) . N/A
10.10 FMC Salaried Employees' Equivalent Retirement Plan (incorporated by reference from Exhibit 10.4 to the Form SE filed by FMC on March 27, 1992) N/A
10.11 FMC Deferred Compensation Equivalent Retirement and Thrift Plan (incorporated by reference from Exhibit 10.5 to the Form SE filed by FMC on March 27, 1992) ..N/A
10.12 FMC Management Bonus Plan (incorporated by reference from Exhibit 10.6 to the Form SE filed by FMC on March 27, 1992) N/A
10.13 FMC Employees' Thrift and Stock Purchase Trust dated April 1, 1982 (incorporated by reference from Exhibit 10.7 to the Form SE filed by FMC on March 27, 1992) N/A
10.14 Amendment to FMC Employees' Thrift and Stock Purchase Trust dated April 1, 1988 (incorporated by reference from Exhibit 10.8 to the Form SE filed by FMC on March 27, 1992) . N/A
10.15 FMC Master Trust Agreement between FMC and Bankers Trust Company (incorporated by reference from Exhibit 10.9 to the Form SE filed by FMC on March 27, 1992) N/A
10.16 FMC Gold Company 1988 Long-Term Incentive Compensation Plan (incorporated by reference from Exhibit 10.19 to the Company's Form 10-K for 1989) N/A
10.17 Agreement and Plan of Merger among Meridian Minerals Company, Meridian Gold Company, FMC Gold Company, FMC Corporation and Burlington Resources, Inc. dated April 19, 1990 (Incorporated by reference from Exhibit 1 to the Company's Current Report on Form 8 dated April 19, 1990) N/A
13 Annual Report of FMC Gold Company for the year ended December 31, 1993 1
22 List of Significant Subsidiaries of the Registrant . 34
24 Consent of Auditors . 35
25 Powers of Attorney 36-37 DOCUMENT HEADER DOCUMENT DESCRIPTION EXHIBITS DOCUMENT TYPE 2 COUNT 37 FMC GOLD COMPANY Annual Report on Form 10-K for 1993
Exhibit 13 Annual Report of FMC Gold Company
CONTENTS Message to Stockholders 2 Exploration 4 Development 7 Operations 8 Financial Review 11 Financial Results 14 Directors and Officers 28
STOCKHOLDER DATA
ANNUAL MEETING OF STOCKHOLDERS
FMC Gold's annual meeting of stockholders will be held at 11 a.m. on Wednesday, May 4, 1994, in the Gold Room of the Stanford Court Hotel at 905 California Street, San Francisco, California.
Notice of the meeting, together with proxy material, will be mailed approximately 40 days prior to the meeting to stockholders of record as of March 16, 1994.
TRANSFER AGENT AND REGISTRAR OF STOCK
Harris Trust and Savings Bank P.O. Box 755 Chicago, Illinois 60690
Questions concerning FMC Gold common stock should be sent to the above address.
EXCHANGE LISTINGS
Common stock: New York Stock Exchange
FMC Corporation subordinated debentures exchangeable into FMC Gold common stock:
Luxembourg Exchange
COMMON STOCK SYMBOL
FGL
FORM 10-K
A copy of the company's annual report to the Securities and Exchange Commission on Form 10-K for 1993 is available upon written request to:
FMC Gold Company Communications Department 200 East Randolph Drive Chicago, Illinois 60601
However, most information required under Parts I, II and III of Form 10-K has been incorporated by reference to the annual report to stockholders or the proxy statement.
FMC Gold was incorporated in 1987 under Delaware law.
CORPORATE PROFILE
FMC Gold is a precious metals producer, with 1993 production of 321,000 ounces of gold and 863,000 ounces of silver. FMC Gold has reserves of 1.8 million ounces of gold.
FMC Gold was formed in 1987 through a combination of FMC Corporation's North American Precious Metals interests. In June 1987, FMC Gold sold 11.4 percent of its shares to the public. In May 1990, FMC Gold issued eight million new shares of stock to acquire Meridian Gold Company. FMC Corporation holds the remaining 79 percent of shares. FMC Gold today has two producing properties: Jerritt Canyon (30 percent ownership), located in Nevada, and Royal Mountain King (100 percent ownership) in California. FMC Gold also holds the majority interest in the Beartrack project (86 percent ownership) in Idaho. In addition, FMC Gold carries an active exploration property inventory within the western United States and Latin America.
HIGHLIGHTS
Gold production of 321,000 ounces.
Cash costs of $194 per ounce.
FMC Gold generated $12.5 million of cash flow, raising year-end cash and cash equivalents to $167 million.
In April 1993, the company purchased the remaining 50 percent of the Humboldt Gold Venture, which brings the company's ownership of the Rossi exploration property to 100 percent
SILVER PRICES HIGH/LOW
$8
7 6.93
5.42 5.36 5 4.55 4.34 5.05 3.96 3 3.56 3.66 3.53
93 92 91 90 89 Average
GOLD PRICES High/Low
$500
406 420 400 403 344 348 330 356 300 326
250 93 92 91 90 89 Average
PRODUCTION Gold Equivalent Ounces (In thousands)
500 441 402 403
400 383
93 92 91 90 89 Paradise Peak Jerritt Canyon Austin Royal Mountain King
PRODUCTION COSTS (1) $ Per Gold Equivalent Ounce
350 326 300 290
250 240 194 150 161
93 92 91 90 89
Cash Cost Full Cost
EARNINGS PER SHARE
$1.00
0.80 0.75
0.60 0.56
0.40 0.20 0.20 0.12 0.10 0.00
(0.70) 93 92 91 90 89
Before asset write-downs and other charges Net Income
OPERATING SUMMARY 1993 1992 Production (thousands of ounces): Gold 321 418 Silver 863 1,926 2,337 Total (gold equivalent) 331 441 Average realized price (ounce): Gold $357.00 $343.00 $361.00 Silver $ 3.94 $ 4.01 $ 4.05 Cash cost of production per gold equivalent ounce(1) $194.00 $180.00 $220.00 Year-end reserves (thousands of ounces): Gold 1,752 2,279 2,620 Silver - 4,321 7,576
FINANCIAL SUMMARY
(In millions, except per share data) 1993 1992 Sales $118.9 $150.0 $139.4 Income before write-downs and other charges(2) $ 9.3 $ 14.4 $7.0 Write-downs and other charges $(60.6) $ - $- Net income (loss) $(51.3) $ 14.4 $7.0 Earnings (loss) per common share: Income before write-downs and other charges(2) $ 0.12 $ 0.20 $0.10 Net income (loss) $(0.70) $ 0.20 $0.10 Exploration costs $ 14.4 $ 12.2 $12.6 Capital expenditures $ 18.5 $ 19.0 $19.4 Cash flow $ 12.5 $ 28.9 $24.0 Common shares outstanding 73.5 73.5 73.5 Common stock prices High 7-3/8 6-1/4 10-3/8 Low 4 4 4
(1)Cash cost of production includes all mine-site cash operating and administrative expenses, including royalties and net proceeds taxes. Selling expenses and pre-production stripping costs are excluded. Full cost includes all cash costs plus non-cash costs and corporate overhead.
(2)Supplemental financial information. Income before write-downs and other charges, and related earnings per share, should not be considered in isolation nor as alternatives for net income (loss) or as the sole measures of the company's profitability.
MESSAGE TO STOCKHOLDERS
With the shutdown of Paradise Peak in 1993 and the anticipated shutdown of Royal Mountain King in 1994, we are increasingly dependent on our exploration skills as the source of providing shareholder value. The situation is now more difficult as a result of the declining attractiveness of U.S. exploration. We continue efforts in selected high-potential areas in the United States; however, we are increasingly moving our exploration investment offshore.
In 1993, our Paradise Peak operation completed production at mid- year, and we completed heap leaching of the lower-grade ore by year-end. We also drew down reserves at our Royal Mountain King mine, which will cease production by mid-year 1994.
In 1993, as expected, production declined to 331,000 gold equivalent ounces due to the exhaustion of millable reserves at Paradise Peak. With lower production, sales declined to $119 million.
FMC Gold incurred a net loss of $51.3 million as a result of special charges of $60.6 million associated with asset write- downs at the Beartrack property in Salmon, Idaho, and costs associated with the closing of the Paradise Peak and Royal Mountain King mines.
Our revenues were helped somewhat by our unhedged position, which allowed the company to benefit from higher precious metals prices during 1993. Average realized gold prices of $357 per ounce were $14 higher than the prior year.
In 1993, we generated $12.5 million in cash flow, with year-end cash equivalents totaling $166.8 million. Our strong cash position with no debt ensures our ability to respond to successful exploration or business development programs.
Meanwhile, we focused on renewing our business. During the past year, we funded a $14.4 million exploration program. While our recent exploration efforts have not produced minable reserves, we are encouraged by progress at the Rossi property in Nevada, where we became sole owner in April, as well as drilling projects in Chile.
In 1993, we redirected much of our exploration efforts overseas. Last year, approximately one-third of our exploration spending was related to prospects outside the United States, and we see the trend increasing toward offshore investing. While the regulatory environment has become increasingly stringent in the United States, particularly with the proposed changes to federal mining legislation, other countries are inviting production.
FMC Gold staffed an international business development group to pursue acquisition and development of advanced-stage opportunities in selected countries, including the Newly Independent States (the former Soviet Union) and China, where in early 1994, we signed memoranda to participate in investigating known deposits.
OPERATIONS
As anticipated, gold production totaled 321,000 ounces in 1993, down 23 percent from the prior year. The reduced production reflected the
depletion of economic ore at Paradise Peak. In May, the mill was shut down, and reclamation of the minesite began. Heap leaching continued throughout the year and accounted for 61 percent of the 158,000 ounces produced. Cash costs of production improved 13 percent from the prior
year to $117 per ounce, reflecting the lower cost of heap-leach operation and the completion of mining.
At Jerritt Canyon, production was up 13 percent to 108,000 ounces, reflecting higher throughput and improved grades. Cash costs of production increased slightly to $240 per ounce due to increased mining costs.
At Royal Mountain King, production declined 23 percent to 55,000 ounces due to a severe winter and the failure of the hydraulic shovel. Decreased production caused cash costs to increase 18 percent to $336 per ounce.
RESERVES
The company's gold reserves totaled 1.8 million ounces at year- end, down 0.5 million ounces from the prior year.
Exploration efforts at Jerritt Canyon focused on expanding proven reserves and identifying new resources. At the end of 1993, FMC Gold's 30 percent interest in the proven and probable reserves at Jerritt Canyon was 880,000 ounces.
At Beartrack, further delineation of the known reserves was deferred until gold prices improved. As a result, at the end of 1993, FMC Gold's 86 percent interest in the proven and probable reserves at Beartrack remains at 839,000 ounces.
Increased international exploration activity will continue in 1994 as we pursue interests in Mexico and Chile. International exploration spending is expected to be approximately half of total exploration spending in 1994. In the western United States, we will continue to assess the overall claim block at Jerritt Canyon and continue our deep drilling program at the Rossi property on the Carlin Trend.
DEVELOPMENT
Permits remain in place for our Beartrack property. However, the National Marine Fisheries Service has placed a restraining order on all development activity within the Salmon National Forest until a biological opinion is completed. The agency's report will determine whether construction activity would threaten the Chinook salmon, an endangered species. Beartrack construction will continue to be deferred until this issue is resolved, and gold prices improve.
MANAGEMENT CHANGES
In 1993 we welcomed several people to our management team. Nha D. Hoang was appointed vice president-international and was elected a director of FMC Gold. Nha's knowledge of the global marketplace and expertise in international development projects and operations will boost our chances for success as we increase offshore exploration investments. Steven E. Baginski was elected vice president- finance. Steve brings us highly desirable skills in strategic planning and acquisitions, as well as experience in global startups. Robert A. Horn was elected vice president- exploration. Bob has 25 years of experience in exploration and mining in South America, Africa, Australia, Europe, Canada and the
United States and will play an important role in charting our future course.
OUTLOOK
As Jerritt Canyon becomes our primary source of production in 1994, gold production is expected to decline to 174,000 ounces, and silver production will decline to 77,000 ounces. Production costs are expected to increase in the range of the North American industry average.
Our future depends on the success of our exploration efforts as we expand our focus outside the United States and as our new international development group pursues advanced-stage opportunities within selected countries. Our strong balance sheet, technical expertise and solid organization have us well- positioned to bring new projects into development and to expand reserves.
Larry D. Brady Chairman of the Board and Chief Executive Officer
Brian J. Kennedy President and Chief Operating Officer
February 12, 1994
EXPLORATION
In 1993, exploration spending totaled $14.4 million, including $2.4 million for targets in the vicinity of the Paradise Peak and Jerritt Canyon deposits. We spent $4.5 million to evaluate prospects, primarily in Mexico and Chile, and the remaining $7.5 million funded grassroots exploration, submittal evaluations and project work throughout the western United States. At year-end we retain 15 active exploration projects.
We continue to be optimistic about our Rossi property in Nevada. In April, we purchased the remaining 50 percent of the Humboldt Gold Venture from TRE Management Company for $5.5 million, and brought our ownership of Rossi to 100 percent. Our deep-drilling program at Rossi, located on the Carlin Trend in Elko County, Nevada, has shown progressively encouraging results over the past four years. In 1993, exploration spending on Rossi totaled $3.4 million, and spending is expected to be near this level in 1994.
Meanwhile, small geologic resources have been developed at the Miller Mountain and Ramshorn projects in Montana. These projects might be farmed out during 1994 due to the size of the discovered resources.
Our international programs in Mexico and Chile expanded in 1993 to include seven projects that currently are being evaluated. Results of our drilling projects in Chile were especially encouraging, and we're planning a larger-scale program there in 1994.
In the fall, we formed an international business development group to identify advanced opportunities within the Newly Independent States (the former Soviet Union), China and several other countries. We expect spending on international targets and reconnaissance to be about half of the approximately $15 million targeted for our 1994 exploration program.
FMC GOLD ORE RESERVES (PROVEN AND PROBABLE)(1) December 31, 1993 December 31, 1992 (In thousands, except Tons(2) Grade Ounces(3) Tons(2) Grade Ounces(3) grades) (OPT) (Cont) (OPT) (Cont) Gold Paradise Peak Millable - - - 570 0.075 43 Heap leach - - - 5,775 0.027 154 Jerritt Canyon (30%) Millable(4) 5,530 0.158 876 6,400 0.166 1,063 Heap leach 150 0.026 4 906 0.039 35 Royal Mountain King Millable 628 0.053 33 2,740 0.053 145 Beartrack (86%) Heap leach(5) 23,712 0.035 839 23,712 0.035 839 Total 30,020 N/A 1,752 40,103 N/A 2,279
Silver (Paradise Peak only) Millable - - - 570 1.415 808 Heap leach - - - 5,775 0.608 3,513 Total - - - 6,345 N/A 4,321
(1)Reserve estimates for 1993 and 1992 are based on assumed prices of $350 per ounce for gold and $4.00 per ounce for silver. (2)Based on optimized mine plans, which incorporate as necessary the impacts of dilution and access for FMC Gold operations. (3)Contained ounces exceed recoverable ounces due to metal losses experienced during the extraction process. Precious metal recoveries are dependent on process used, grade of ore and metallurgy. Estimated recoveries are as follows: Paradise Peak mill ore 90% gold; 60% silver. Paradise Peak heap-leach ore 65-85% gold; 5-20% silver. Jerritt Canyon mill ore 90%. Jerritt Canyon heap-leach ore 60%. Royal Mountain King mill ore 75-80%. Beartrack heap-leach ore 66%. (4)Jerritt Canyon millable reserves reflect a change in the anticipated method of mining the New Deep orebody. 1993 millable reserves are based on underground mining of New Deep, while the 1992 millable reserves were based on open pit mining of New Deep. 1993 millable reserves would be 5,948 tons at a 0.160 grade yielding 951 contained ounces if New Deep were to be mined using the open pit method. 1992 millable reserves would have been 5,105 tons at a 0.176 grade yielding 896 contained ounces if New Deep were mined underground. (5)Beartrack's proven and probable reserves were determined based upon a $350 per ounce gold price. Although our proven and probable reserves can be economically mined, the development of the Beartrack property in the current gold price environment does not meet the company's return criteria and has therefore been put on standby. The property, however, has potential to add shareholder value assuming certain gold prices and other positive conditions. The company continues to assess the possibility for the future development of the property.
DEVELOPMENT
Development at Beartrack continues to be deferred until gold prices improve. Seventy-one percent of this property, located 11 miles northwest of Salmon,Idaho, was acquired as part of the 1990 Meridian Gold acquisition. In December 1991, Canyon Resources Corporation transferred its 15 percent interest in this property to
FMC Gold. As a result, FMC Gold ownsan 86 percent interest in this property, with the remaining 14 percent held by Minex.
The Beartrack property covers 53 square miles and contains approximately one million ounces of proven and probable gold reserves. Eighty-five percent of the mineable ore reserves are on patented land. Current studies indicate that the project could be developed at a cost of approximately $50 million, with annual heap-leach production averaging 100,000 ounces of gold per year, at a cash production cost of $205 per ounce.
Beartrack's permits remain in effect. However, late last year, the Salmon National Forest received orders from the National Marine Fisheries Service in Portland, Oregon, to "avoid further developments or impacts to riparian reserves" until NMFS had completed its biological opinion, as required by the U.S. Endangered Species Act. This opinion is not expected until sometime in the first quarter of 1994. Construction of Beartrack cannot begin until this process is completed.
Deferral of the project is the most prudent course given current gold prices and the regulatory environment.
OPERATIONS
PARADISE PEAK
The wholly owned Paradise Peak mine, located 140 miles southeast of Reno, Nevada, had a good year in 1993, despite mill-grade ore being exhausted in May.
We operated three mines at the Paradise Peak property: the original Paradise Peak mine, Ketchup Flat mine and County Line mine. Ore from the original Paradise Peak discovery was processed primarily through the mill, while ores from Ketchup Flat and County Line deposits were heap leached.
As anticipated, due to the depletion of the orebody, 1993 gold production decreased 37 percent to 158,000 ounces; similarly, silver production decreased 58 percent to 800,000 ounces. Production from low-grade, heap-leach operations contributed to 61 percent of total gold production. The mill was shut down in May, and mining activity ended in August.
In 1993, cash costs of production improved 13 percent to $117 per ounce due to lower process costs of heap leaching. We began reclamation of the mine site, and this work will continue well in to 1995. As we detoxify heap-leach pads in 1994, FMC Gold will recover approximately 30,000 ounces of gold.
JERRITT CANYON
The Jerritt Canyon mine, located 57 miles northwest of Elko, Nevada, is 30 percent owned by FMC Gold. Our joint-venture partner, Independence Mining Company, Inc., a wholly owned subsidiary of Minorco (U.S.A.) Inc., operates the mine.
Development and mining activities take place at Jerritt Canyon on various orebodies scattered over a 120-mile claim block. Ore is processed through one of two milling circuits-a wet mill circuit for less refractory ores, and a dry milling and ore-roasting
circuit for more refractory ores that contain higher carbon content.
In 1993, FMC Gold's 30 percent share of gold production was 108,000 ounces, up 13 percent from the previous year, reflecting higher mill throughput and improved ore grades. The mine moved a record 41 million tons of material due to an expanded and upgraded mine fleet, and the use of an outside mining contractor.
Mill throughput increased during 1993, rising to 8,552 tons per day 5 percent above 1992. The average grade of ore milled improved 10 percent to 0.129 ounces per ton; average recovery remained at 89 percent.
The average cash costs of gold production increased 4 percent to $240 per ounce, reflecting higher mining costs associated with increased haul distances.
At year-end 1993, the company's share of reserves declined 20 percent to 0.9 million ounces. Approximately half of current reserves are contained within the New Deep orebody that was discovered in 1990. New Deep contains approximately 1.3 million ounces of gold with an average grade of 0.2 ounces per ton.
Significant efforts focused on identifying new resources at Jerritt Canyon. FMC Gold's share of exploration costs on the claim block totaled $2.2 million. Results are encouraging as several prospective areas demonstrated significant mineralization.
ROYAL MOUNTAIN KING
During 1993, the wholly owned Royal Mountain King mine located in Calaveras County, 40 miles east of Stockton, California, struggled to offset adverse climatic conditions and the failure of the hydraulic shovel.
In 1993, gold production at Royal Mountain King declined 23 percent to 55,000 ounces. The lower production was a result of three factors: a 5 percent decline in mill throughput to 3,645 tons per day associated with the extraordinarily wet winter, a 12 percent reduction in the average grade of gold ore to 0.053 ounces per ton, and a 6 percent decline in recoveries to 77 percent.
1993 cash costs of production increased 18 percent to $336 per ounce primarily due to lower gold production. Efforts to reduce costs and increase efficiency have been considerable. However, it has been difficult to offset unfavorable physical conditions. These conditions have forced us to accelerate the shut down of the mine to mid-year 1994.
STATISTICAL SUMMARY
1993 1992 1991 1990 1989 Tons of ore processed (thousands) Paradise Peak Mill 587 1,727 1,558 1,409 1,339 Heap leach 3,918 4,715 3,217 803 465 Total 4,505 6,442 4,775 2,212 1,804
Jerritt Canyon (FMC Gold share) Mill 936 897 865 754 545 Heap leach - - - - 107 Total 936 897 865 754 652 Austin (FMC Gold share) N/A N/A N/A N/A 80 Royal Mountain King 1,334 1,405 1,368 659 N/A Ore grade (ounces per ton) Paradise Peak (Mill) Gold 0.115 0.097 0.079 0.136 0.168 Silver 1.900 1.511 2.166 5.599 5.385 Paradise Peak (Heap leach) Gold 0.026 0.028 0.029 0.028 0.036 Silver 0.331 0.278 0.316 0.540 0.574 Jerritt Canyon (Mill) 0.129 0.117 0.145 0.147 0.179 Austin (Mill) N/A N/A N/A N/A 0.201 Royal Mountain King (Mill) 0.053 0.060 0.057 0.068 N/A Recoveries Paradise Peak (Mill) Gold 89% 93% 92% 94% 95% Silver 57% 63% 63% 68% 71% Paradise Peak (Heap leach) Gold 82% 74% 72% 74% 73% Silver 8% 17% 16% 20% 28% Jerritt Canyon (Mill) 89% 89% 88% 88% 90% Austin (Mill) N/A N/A N/A N/A 84% Royal Mountain King (Mill) 77% 82% 78% 81% N/A
Production (thousands of ounces) Gold Paradise Peak Mill 61 157 114 183 216 Heap leach 97 94 68 16 12 Jerritt Canyon (FMC Gold share) 108 96 113 98 87 Austin (FMC Gold share) N/A N/A N/A N/A 14 Royal Mountain King 55 71 62 35 N/A Total 321 418 357 332 329
Silver Mill 698 1,709 2,176 5,395 5,084 Heap Heach 165 217 161 86 76 Total 863 1,926 2,337 5,481 5,160 Total gold equivalent(1) 331 441 383 402 403
(1)Silver/gold conversion ratio: 90.6:1 in 1993, 85.5:1 in 1992,89.1:1 in 1991, 77.8:1 in 1990, 70.0:1 in 1989
Cash cost of production ($ per gold equivalent ounce) Paradise Peak $117 $134 $180 $106 $95 Jerritt Canyon $240 $230 $219 $237 $247 Austin N/A N/A N/A N/A $142 Royal Mountain King $336 $285 $353 $365 N/A Average $194 $180 $220 $161 $129 Full cost of production $310 $290 $326 $240 $201
FINANCIAL REVIEW
SALES AND EARNINGS
Sales decreased to $118.9 million from $150.0 million in 1992 primarily due to a 23 percent decrease in gold production and 55 percent lower silver production, offset by slightly higher precious metals prices. At Paradise Peak, gold production decreased to 158,000 ounces in 1993, due to the shutdown of the mill in May 1993. Heap-leach operations will continue to generate residual gold during detoxification through 1994. At Jerritt Canyon, the company's 30 percent share of gold production rose to 108,000 ounces due to 10 percent higher ore grades in both the ore-roasting process and the wet mill. The Royal Mountain King mine produced 55,000 ounces in 1993, a 23 percent decrease from 1992, due to 12 percent lower ore grades as well as lower recoveries. As expected, silver production declined to 863,000 ounces from 1,926,000 ounces in 1992 due to the exhaustion of mill ore reserves at Paradise Peak.
The average realized price of gold increased to $357 per ounce from $343 per ounce in 1992. Average realized silver prices declined slightly to $3.94 per ounce from $4.01 per ounce in 1992. The company's average precious metal prices were essentially equal to commodity market averages.
Cost of sales decreased to $96.8 million in 1993 due to the mill shutdown at Paradise Peak, partially offset by higher operating costs at Jerritt Canyon as a result of increased production. Average cash costs of production increased to $194 per gold equivalent ounce from $180 in 1992 reflecting the exhaustion of low-cost mill ore grades at Paradise Peak mine as well as higher costs at Jerritt Canyon and Royal Mountain King. Cash costs at Paradise Peak decreased to $117 per gold equivalent ounce in 1993, reflecting lower costs associated with heap-leach production and the absence of mining costs beginning in July 1993. Royal Mountain King cash costs per ounce increased 18 percent due to lower production volumes as a result of lower ore grades. Jerritt Canyon cash costs increased to $240 per ounce from $230 in 1992 due to higher mining costs.
Exploration spending increased to $14.4 million in 1993, reflecting increased spending related to Jerritt Canyon as well as an increased focus on international exploration. Selling, general and administrative expenses decreased slightly to $7.0 million in 1993, due to lower allocated costs from FMC Corporation (FMC), as well as continued cost reduction efforts. Interest income increased to $8.3 million in 1993 due to an increase in cash and cash equivalents of $12.5 million as well as achieving higher interest rates on loans to FMC.
In mid-December, the company recorded a $60.6 million charge primarily for write-down of assets. The charge included an asset write-down of $51.0 million for the Beartrack development property and related investments. Recent gold prices have not increased as projected, resulting in a write-down of the book value of the assets. The company is continuing to assess the future development of the Beartrack property. At Royal Mountain King, a charge of $4.6 million was recorded to fully depreciate the fixed assets due to the planned closure of the mine in mid- 1994. A charge of $5.0 million was taken at Paradise Peak for additional mine closure costs in 1994 and beyond.
Net income was $9.3 million before the impact of write-downs and other charges. After the $60.6 million in write-downs and other charges, the company reported a net loss of $51.3 million. Net income was $14.4 million in 1992. Earnings per share decreased to $(0.70) per share from $0.20 in 1992.
TAXES
The company recorded a 1 percent tax benefit on losses in 1993 compared with an 11 percent tax on earnings in 1992. The decrease in rate is due to lower earnings partially offset by the Beartrack property write-down which was not tax effected.
LIQUIDITY AND CAPITAL RESOURCES
Cash to meet the company's operating needs, finance capital expenditures and fund exploration activities was generated from operations. At December 31, 1993, cash and cash equivalents totaled $166.8 million, primarily in the form of loans to FMC which have varying maturities and are payable on demand. As of December 31, 1993, FMC's cash on hand and available credit lines were more than adequate to allow repayment of these loans.
Capital expenditures of $18.5 million were slightly less in 1993 than in 1992. Major capital outlays for the year included mine development and equipment additions at Jerritt Canyon, and the purchase of the remaining 50 percent interest in the Humboldt Gold Venture.
On December 31, 1993, the company paid a dividend on common stock of $0.05 per share to stockholders of record on December 9, 1993.
Expected cash requirements for 1994 include approximately $15 to $20 million for planned capital expenditures, primarily associated with Jerritt Canyon orebody development and equipment additions, approximately $15 million for exploration activities and $3.7 million for dividends, based on the current dividend rate. The company expects to fund these requirements from existing cash and cash equivalents and cash flow from operations.
As a matter of course, the company periodically evaluates the possible acquisition of other mining assets or companies. Should such an acquisition occur, or should mine development at any of the company's existing properties prove beneficial, significant cash requirements may be necessary. The company believes that any unexpected cash requirements could be funded by current cash balances or through borrowing from third parties.
1993 FOURTH QUARTER COMPARED WITH 1992
Sales in the fourth quarter fell 25 percent to $26.3 million from $35.1 million in the fourth quarter of 1992, as a result of the shutdown of the mill at Paradise Peak.
In the fourth quarter, the average realized price of gold increased 11 percent to $373 per ounce. The average realized price of silver increased 25 percent to $4.72 per ounce. Gold production decreased to 64,000 ounces from 101,000 ounces in the fourth quarter of 1992. At Paradise Peak, gold production declined to 22,000 ounces from 62,000 ounces in the fourth quarter of 1992. The decrease in gold production reflected the exhaustion of mill-grade ore in May of
1993, with fourth quarter production coming entirely from the heap-leach operation. At Jerritt Canyon, gold production increased 41 percent to 31,000 ounces in the fourth quarter due to significantly higher mill ore grades and improved recoveries.
Silver production for the fourth quarter declined to 47,000 ounces from 386,000 ounces in 1992 as a result of the expected decline in grades associated with the mill shutdown at Paradise Peak.
Cost of sales decreased $11.0 million to $19.8 million due mainly to the cessation of mill operations at Paradise Peak. Average cash production costs for the quarter increased to $209 per gold equivalent ounce compared with $193 per gold equivalent ounce in 1992, reflecting the declines in production at Paradise Peak and Royal Mountain King.
Exploration spending rose $1.2 million to $4.9 million due mainly to increased spending for the Jerritt Canyon property and the foreign program. Selling, general and administrative expenses increased $0.5 million, reflecting timing of expenses. Interest income increased $0.6 million to $2.2 million as the loan balances increased and better interest rates were achieved.
Net income for the quarter increased $2.0 million to $3.1 million (before $60.6 million in write-downs and special charges) from $1.1 million due to higher gold prices and lower overall costs resulting from the shutdown of Paradise Peak. In December of 1993 the company recorded an after-tax special charge of $60.6 million, or $0.82 per share, primarily to cover the write-down of the Beartrack development property. After special charges, losses per share were $0.78 for the quarter compared with earnings of $0.01 last year.
1992 COMPARED WITH 1991
Sales increased to $150.0 million from $139.4 million in 1991, primarily due to a 17 percent increase in gold production, offset by lower precious metals prices and reduced silver production. At Paradise Peak, gold production increased to 251,000 ounces from 182,000 ounces in 1991, due to higher mill throughput, mill grades and increased heap-leach activity. At Jerritt Canyon, the company's 30 percent share of gold production declined to 96,000 ounces from 113,000 ounces in 1991 due to reduced ore grades for both the ore-roasting process and the wet mill. Production at the Royal Mountain King mine increased to 71,000 ounces from 62,000 ounces in 1991 as a result of higher ore grades. Silver production declined to 1.9 million ounces from 2.3 million ounces in 1991, reflecting the continued expected decline in silver grades at Paradise Peak.
The average realized price of gold declined to $343 per ounce from $361 per ounce in 1991. The average realized price of silver declined slightly to $4.01 per ounce from $4.05 per ounce in 1991.
Average cash costs of production decreased to $180 per gold equivalent ounce from $220 in 1991, reflecting increased gold production at Paradise Peak and Royal Mountain King, in addition to lower operating costs.
Exploration spending decreased slightly to $12.2 million in 1992, primarily due to the reduced exploration of developed properties, with a shift to international exploration. Selling, general and administrative expenses increased slightly to $7.7 million in 1992. Interest income declined to $6.0 million in 1992, as the effect of a $29 million
increase in cash and cash equivalents was more than offset by lower interest rates. Net income increased to $14.4 million compared with net income of $7.0 million in 1991, due to higher sales, offset in part by higher costs as noted above. Earnings per share increased to $0.20 per share from $0.10 per share in 1991.
QUARTERLY FINANCIAL INFORMATION (unaudited)
(In millions, except per share data) 1993 1992 1st 2nd 3rd 4th 1st 2nd 3rd 4th Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Sales $35.5 $31.2 $25.9 $ 26.3 $39.5 $36.9 $38.5 $35.1 Gross profit $ 5.4 $ 5.4 $ 4.8 $ 6.5 $ 9.7 $ 5.4 $10.6 $ 4.3 Earnings (loss) before interest and taxes $ 1.4 $(0.4) $0.2 $(61.1) $ 5.8 $ 0.5 $4.8 $(1.0) Net income (loss) $ 2.8 $ 1.0 $2.4 $(57.5) $ 6.9 $ 1.1 $5.3 $ 1.1 Earnings (loss) per common share(1) $0.04 $0.01 $0.03 $(0.78) $0.09 $0.02 $0.07 $0.01 Dividends per common share $ 0.05 $0.05 Common stock prices: High $5-1/8 $6-7/8 $7-3/8 $5-3/4 $5-1/4 $5-5/8 $6-1/4 5-5/8 Low $4 $4-3/8 $4-7/8 $4-7/8 $4 $4 $4-5/8 $4-1/8
(1) Quarterly earnings per common share may differ from the full- year amounts due to rounding.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data) Year ended December 1993 1992 1991 Sales $118,927 $150,030 $139,389 Costs and expenses Cost of sales 96,822 119,987 117,875 Exploration costs 14,414 12,174 12,575 Selling, general and administrative expenses 7,003 7,664 7,511 Write-downs and other charges (Note 3) 60,600 - - Total costs and expenses 178,839 139,825 137,961 Earnings (loss) before interest and taxes (59,912) 10,205 1,428 Interest income 8,336 5,965 7,758 Income (loss) before income taxes (51,576) 16,170 9,186 Provision (benefit) for income taxes (Note 8) (313) 1,725 2,200 Net income (loss) $(51,263) $14,445 $6,986 Earnings (loss) per common share (Note 1) $(0.70) $ 0.20 $0.10
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data) December 31 1993 1992 CURRENT ASSETS Loans due from FMC Corporation (Notes 1 and 12) $167,326 $154,826 Trade receivables 2,527 3,773 Inventories (Note 4) 3,776 6,292 Other current assets 1,236 420 Total current assets 174,865 165,311 Property, plant and equipment, net (Note 5) 60,605 120,957 Deferred income taxes (Note 8) 2,527 1,192 Other assets 638 4,443 TOTAL ASSETS $238,635 $291,903
CURRENT LIABILITIES Outstanding checks in excess of bank balances (Note 1) $ 542 $ 510 Accounts payable, trade and other 8,206 7,816 Accrued and other liabilities (Note 6) 11,935 10,312 Amounts due to FMC Corporation (Note 12) 1,069 1,382 Income taxes payable (Notes 1 and 8) 4,922 7,100
Total current liabilities 26,674 27,120 Other long-term liabilities (Note 7) 12,316 10,201 Commitments and contingent liabilities (Note 11)
STOCKHOLDERS' EQUITY Preferred stock, $1.00 par value, authorized 100,000 shares; none issued or outstanding - - Common stock, $0.01 par value, authorized 150,000,000 shares; issued and outstanding 73,484,395 shares 735 735 Capital in excess of par value 68,609 68,609 Retained earnings 130,301 185,238 Total stockholders' equity 199,645 254,582 Total liabilities and stockholders' equity $238,635 $291,903
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS Reconciliation of Net Income (Loss) to Net Cash Provided by Operating Activities
(In thousands) Year ended December31 1993 1992 1991 Net income (loss) $(51,263) $14,445 $6,986 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Provision for depreciation and amortization 25,804 30,653 31,507 Deferred tax provision (benefit) (1,335) (3,022) 285 Write-downs and other charges (Note 3) 60,600 - -
(Increase) decrease in assets: Trade receivables 1,246 34 3,522 Inventories 2,516 85 1,286 Other current assets (816) 169 2,319
(Decrease) increase in liabilities: Accounts payable, trade and other 390 (3,775) 1,998 Accrued and other liabilities 1,623 5,518 (62) Amounts due to FMC Corporation (313) (110) 1,475 Income taxes payable (2,178) 4,047 (2,337) Other long-term liabilities (2,885) 3,153 1,929 Net cash provided by operating activities $33,389 $51,197 $48,908
Supplemental disclosure of non-cash investing and financing activities:
In December 1991, Canyon Resources Corporation (Canyon), a joint- venture partner in the Beartrack development project, elected to transfer its 15 percent interest in the project to the company to satisfy certain obligations. As part of this transaction, the company reclassified $4.7 million of amounts due from Canyon to property, plant and equipment (Note 2).
Supplemental disclosure of cash flow information:
Cash paid for income taxes during 1993, 1992 and 1991 was $3,180, $700 and $4,260, respectively.
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(In thousands) Year ended December 31 1993 1992 1991 NET CASH PROVIDED BY OPERATING ACTIVITIES $33,389 $51,197 $48,908 Cash flows from investing activities: Capital spending (18,455) (19,037) (19,357) Disposal of property, plant and equipment, net 1,431 465 200 Increase in other assets (223) (20) (2,028) Net cash used in investing activities (17,247) (18,592) (21,185) Cash flows from financing activities: Dividends paid (3,674) (3,674) (3,674) Increase in cash and cash equivalents 12,468 28,931 24,049 Cash and cash equivalents, beginning of year 154,316 125,385 101,336 Cash and cash equivalents, end of year $166,784 $154,316 $125,385 See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Number Capital of Common in excess Retained (In thousands) shares stock of par value earnings Balance December 31, 1990 73,484 $735 $68,609 $171,155 Net income 6,986 Cash dividend ($0.05 per share) (3,674) Balance December 31, 1991 73,484 735 68,609 174,467 Net income 14,445 Cash dividend ($0.05 per share) (3,674) Balance December 31, 1992 73,484 735 68,609 185,238 Net loss (51,263) Cash dividend ($0.05 per share) (3,674) Balance December 31, 1993 73,484 $735 $68,609 $130,301
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 PRINCIPAL ACCOUNTING POLICIES
CONSOLIDATION. The consolidated financial statements include the accounts of the company and all majority-owned subsidiaries. The accounts of joint ventures in which the company holds an interest are consolidated on a pro rata basis. All significant intercompany accounts are eliminated in consolidation.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents consists of: Year ended December 31 (In thousands) 1993 1992 1991 Loans due from FMC Corporation $167,326 $154,826 $127,000 Outstanding checks in excess of bank balances (542) (510) (1,615) Total cash and cash equivalents $166,784 $154,316 $125,385
Loans due from FMC consist of five notes, with varying maturities, due upon demand. Terms and conditions of these loans are covered by the management services agreement between the company and FMC (Note 12).
As a result of the company's participation in FMC's centralized cash management system, the company reported a liability for outstanding checks in excess of bank balances due to the timing of cash transfers from FMC.
INVENTORIES. Finished goods inventories are stated at the lower of the average cost or market, and include labor, materials, other production costs and depreciation. No inventory value is assigned to stockpiled ore or in-process material, except for certain stockpiled leach-pad ore where cost includes labor, materials and other production costs.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment, including development costs and capitalized interest associated with the construction of certain capital assets, is recorded at cost. Depreciation and amortization for financial reporting purposes is provided principally on the straight- line basis over the shorter of the estimated lives of the assets or the estimated proven and probable recoverable reserves. Royal Mountain King assets are depreciated over units of production. Gains and losses are reflected in income upon sale or retirement of assets.
Maintenance and repairs are charged to expense in the year incurred ($12.6 million, $13.5 million and $14.9 million in 1993, 1992 and 1991, respectively). Expenditures that extend the useful life of property, plant and equipment or increase its productivity are capitalized.
MINERAL EXPLORATION AND DEVELOPMENT COSTS. Mineral exploration and preliminary development costs are expensed as incurred. Development costs applicable to mineralized properties deemed capable of commercial production are capitalized and then amortized over units of production.
RECLAMATION. Reclamation and shutdown costs to be incurred when mining operations are closed are estimated and accrued over the life of the mine.
INCOME TAXES. Income tax provisions are based on income reported for financial statement purposes, adjusted for transactions (permanent differences) that do not enter into the computation of income taxes payable. Prior to January 1, 1993, the company deferred the tax effects of timing differences between financial reporting and tax income. Effective
January 1, 1993, the company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109 requires an asset and liability approach, whereby deferred tax liabilities and assets are recognized for expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities.
OTHER TAXES. Sales and property taxes were $2.6 million, $3.0 million and $3.2 million, and net proceeds taxes paid (refunded) were $(0.3) million, $2.1 million and $1.2 million in 1993, 1992 and 1991, respectively.
EARNINGS PER COMMON SHARE. Earnings per common share are computed by dividing net income (loss) by the weighted average number of shares of common stock and common stock equivalents (incentive plan shares and founders' Award shares) outstanding during the year (73,484,395 in 1993 and 1992, and 73,489,720 in 1991).
FINANCIAL INSTRUMENTS. The fair value of financial instruments approximated their carrying values at December 31, 1993, 1992 and 1991. Fair values have been determined through information obtained from both market sources and management estimates.
ACCOUNTING STANDARDS NOT ADOPTED. In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, "Employers" Accounting for Postemployment Benefits." Statement No. 112, effective for fiscal year 1994, establishes accounting standards for benefits provided to former or inactive employees after employment but before retirement. The company is continuing to evaluate the new statement's provisions, although it does not expect that implementation will have a material impact on the company's results of operations and financial position.
RECLASSIFICATIONS. Certain prior-year amounts have been reclassified to conform with the current year's presentation.
NOTE 2 ACQUISITIONS AND DIVESTITURES In April 1993, the company purchased the remaining 50 percent interest in the Humboldt Gold Venture from TRE Management Company for $5.5 million, bringing the company's ownership interest in all gold and precious metal-bearing ores in the related property to 100 percent. The former Humboldt Gold Venture is targeting deep gold mineralization at the "Rossi Property" on the Carlin Gold Trend in Nevada.
In December 1991, Canyon Resources Corporation (Canyon), a joint- venture partner in the Beartrack project, elected to transfer its 15 percent interest in the project to the company to satisfy certain obligations. As part of this transaction, completed in 1992, the company cancelled a $1.75 million loan due from Canyon and $4.7
million of other amounts relating to Canyon's share of development expenditures incurred by the joint venture.
NOTE 3 WRITE-DOWNS AND OTHER CHARGES In December 1993, the company recorded a special charge of $60.6 million or $0.82 per share. This charge included a write-down of $51.0 million for the Beartrack development property and related investments. The Beartrack property was acquired for stock in 1990. Gold prices have not increased as projected; and therefore, the book value of the property was written down to reflect these lower prices. The property, however, has potential to add shareholder value assuming certain gold prices and other positive conditions. The company continues to assess the possibilities for the future development of the property.
Also included was a charge of $4.6 million associated with the write-down of fixed assets at the Royal Mountain King mine, which is projected to complete production in mid-1994. Because the mine is forecasted to operate near breakeven before depreciation during 1994, an earlier shutdown could result from either lower than anticipated gold prices or higher than anticipated cash costs or both. The fixed asset write-down is consistent with the uncertainty surrounding 1994 results. A charge of $5.0 million was also recorded at Paradise Peak for additional mine closure costs in 1994 and beyond.
NOTE 4 INVENTORIES
Inventories included at cost in current assets at December 31 were: (In thousands) 1993 1992 Gold and silver $482 $1,544 Leach-pad ore - 769 Materials and supplies 3,294 3,979 Total $3,776 $6,292
Gold and silver inventories are in the form of dore', which is suitable for delivery to precious metal treatment facilities. These inventories are generally sold to and further processed by these facilities into forms suitable for end uses.
NOTE 5 PROPERTY, PLANT AND EQUIPMENT A summary of changes in property, plant and equipment and related accumulated depreciation accounts is as follows: