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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
.
Commission file number 0-11226
GOLDEN CYCLE GOLD CORPORATION
(Exact name of registrant as specified in its charter)
Colorado
84-0630963
(State of incorporation)
(I.R.S. Employer
Identification No.)
Suite 209, 2340 Robinson Street,
Colorado Springs, CO
80904
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (719) 471-9013
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
Common Stock, No Par Value .
(Title of Class)
Certain information required by Item 8 and 14 (d) has been omitted and will be
filed by amendment.
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
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $7,983,607. This calculation is based on the
average of the bid and asked prices of the common stock on the Pacific Stock
Exchange on March 25, 1996.
The number of shares of the Registrant's Common Stock, outstanding as of March
25, 1996 was 1,573,050.
DOCUMENTS INCORPORATED BY REFERENCE:
Document Part of the Form 10K into
Definitive Proxy Statement which the Document is incorporated
to Shareholders Part III, Items 10, 11, 12 &
13
PART I
ITEM 1. BUSINESS
Golden Cycle Gold Corporation was incorporated under the laws of the
State of Colorado on May 19, 1972 for the purpose of acquiring and developing
the mining properties (the "Mining Properties") of the Golden Cycle
Corporation, located in the Cripple Creek Mining District of Colorado. Unless
the context otherwise requires, the terms "Registrant" and "Company" mean
Golden Cycle Gold Corporation.
The primary business of the Company consists of its participation in
the Cripple Creek & Victor Gold Mining Company, a joint venture (the "Joint
Venture") with Pikes Peak Mining Company ("Pikes Peak"), a wholly-owned
subsidiary of Independence Mining Company Inc.. Independence Mining Company
Inc. is a wholly owned subsidiary of Minoroco (U.S.A.) Inc. The Joint Venture
engages in gold mining activity in the Cripple Creek area of Colorado.
As of December 31, 1995, the Company had a total of 3 employees.
Description of Mining Joint Venture
The Company's interest in the Joint Venture was received in exchange
for the Company's rights to gold mining properties in the Cripple Creek Mining
District of Colorado. The rights and obligations of the parties are covered by
an Amended and Restated Joint Venture Agreement (the "Joint Venture Agreement")
dated and effective January 1, 1991, between Pikes Peak and the Company. The
Joint Venture engages in gold mining activity in the Cripple Creek area of
Colorado and the Company's participation in the Joint Venture constitutes the
primary business activity of the Registrant. Pikes Peak serves as the manager
(the "Manager") of the Joint Venture.
The Joint Venture Agreement defines an Initial Phase that will end
when (i) Net Proceeds (defined in the Joint Venture Agreement generally as
gross revenues less costs) in the amount of $58 million have been distributed
to the joint venturers in the proportion of 80% to Pikes Peak and 20% to the
Company, and (ii) the Initial Loans (defined below) have been repaid. After
the Initial Phase, the Joint Venture will distribute metal in kind in the
proportion of 67% to Pikes Peak and 33% to the Company. Notwithstanding the
foregoing, the Company will generally be entitled to receive, in each year
during the Initial Phase or until the mining of ore by the Joint Venture ceases
due to the exhaustion of economically recoverable reserves (if that occurs
prior to the end of the Initial Phase), a minimum annual distribution of
$250,000 (each, a "Minimum Annual Distribution"). The first three Minimum
Annual Distributions were not deemed to be a distribution of Net Proceeds to
the Company and will not be applied against the Company's share of any Net
Proceeds. The Minimum Annual Distributions received on January 15, 1994 and
after constitute an advance on Net Proceeds and will be recouped against future
distributions allocable to the Company.
The Joint Venture Agreement provides that, during the period from
January 1, 1991 until the end of the Initial Phase, all funds required for
operations and mine development by the Joint Venture will be loaned (the
"Initial Loans") to the Joint Venture by either Pikes Peak or, if such loans
are available at a lower cost than from Pikes Peak, financial institutions.
Except for the Minimum Annual Distributions, the Initial Loans and interest
thereon must be repaid prior to distributions of Net Proceeds to the Joint
Venturers. The audited Joint Venture financial statements reported that as of
December 31, 1995, the Joint Venture had $142,586,000 in Initial Loans payable
to Pikes Peak. After the Initial Phase, the Joint Venturers will contribute
funds in proportion to their respective distributive shares.
The Joint Venture's Cresson mine moved into commercial production in
the first half of 1995. However, the ultimate profitability of the Cresson
operation is dependent upon a number of factors, including without limitation,
the market price of gold, which is volatile and subject to speculative
movement, and the efficiency of the mining operation. To date, the Joint
Venture has not generated net income.
The 1996 expenses in the Joint Venture's budget include approximately
$15.4 million in non cash items such as depreciation and amortization of assets
and reclamation accrual. The Joint Venture's budget indicates that Joint
Venture cash flows from the projected net income and non cash items, less the
Minimum Annual Distribution to the Company, will not completely finance the
proposed 1996 capital program for the Joint Venture, which includes the
completion of the phase 2 leach pad and $2.7 million in reserve development
drilling. The total cost of the capital program is estimated by the Joint
Venture to be $18.2 million.
Whether future gold prices and the results of the Joint Venture's
operations will reach and maintain a level necessary to repay the Initial
Loans, complete the Initial Phase, and thereafter generate net income cannot be
assured. Furthermore, until a broader historical record of commercial
production at the Joint Venture's Cresson project operations has been
established, the minimum price of gold necessary to sustain profitable
operations over the long term cannot be readily determined. Based on the
amount of Initial Loans payable to the Manager and the recurring operating
losses incurred by the Joint Venture, management of the Company believes that,
absent a significant and sustained increase in the prevailing market prices for
gold, it is unlikely that the Company will receive more than the Minimum Annual
Distribution from the Joint Venture in the foreseeable future.
The Company voted against approval of the proposed 1996 Joint Venture
Program and Budget. This budget was approved by the Joint Venture Management
Committee. Votes in the Joint Venture's governing Management Committee for
most operating decisions are commensurate with percentage of equity ownership,
giving Pikes Peak control over most decisions. Only certain actions defined in
Section 4.5(b) of the Amended and Restated Joint Venture Agreement require
unanimous approval of Pikes Peak and the Company.
Description of Joint Venture Mining Operations
(The Manager provides the Company with detailed information on the activities
and operations of the Joint Venture. The following description of the Joint
Venture's operations is derived from information made available by the Manager,
upon whom reliance is placed, together with information independently developed
by the Company.)
In 1995 the Joint Venture completed construction of the required
infrastructure for the Cresson open pit mine and began mining operations with
the first Cresson gold pour occurring on February 14, 1995. During 1995 Phase
1 of the Cresson leach pad was completed, and the earth work construction
necessary to prepare the ground for construction of the Phase 2 expansion of
the Cresson leach pad during 1996 was finished. Throughout 1995 the Victor
leach pad continued to yield moderate economic quantities of gold from Globe
Hill and Ironclad ore stacked there in previous years.
The Joint Venture's strategy for 1996 is:
Mine the Cresson open pit throughout the year.
Complete construction of Phase 2 of the Cresson leach pad.
Reinitiate leaching operations on the Victor pad during second quarter.
Conduct limited development and exploration drilling within the area of
interest.
Continue to compile and digitize geologic information from historic underground
works.
Cresson Project
Gold production from the Cresson project, which commenced on February
14, 1995, was delayed several months by numerous factors, including the United
States Bureau of Land Management's classification of the project as an
undertaking, under the National Historic Preservation Act and applicable
regulations, thereby necessitating a time consuming and costly archeological
study and clearance procedure for the entire area of disturbance. Also,
difficulties were experienced during start up of the Cresson operation,
resulting in a loss of anticipated production during 1995.
The Joint Venture produced 67,916 troy ounces of gold from the
Cresson Project during 1995, and mined 7,155,395 tons of ore. The ore mined
was calculated by the Joint Venture to: average .022 troy ounces of gold per
ton (calculated by shake leach); contain 201,552 troy ounces of gold; and
ultimately recover approximately 141,145 troy ounces of gold (approximately 70%
of contained ounces).
As of December 31, 1995, the Joint Venture estimates that Cresson ore
containing approximately 142,550 recoverable troy ounces of gold had been
placed on the leach pad (including approximately 3,365 troy ounces from ore
stockpiled during 1994). At year end 1995, the leach pad was calculated to
contain nearly 77,000 troy ounces of recoverable gold.
Plans: The Joint Venture's goal for 1996 is to produce in excess of
160,000 troy ounces of gold. Gold production is projected to stabilize at
approximately 160,000 troy ounces per year through the estimated 7 year life of
the mine, according to the Joint Venture's mine plan. Additional exploration
of the Cresson deposit may extend the mine life, see "Gold Reserves" below.
During 1996 the Joint Venture plans to mine approximately 8,500,000
tons of ore from the Cresson open pit at a stripping ratio of about 1.6:1, and
an average grade of .027 troy ounce of gold per ton.
Although speculative, the Company believes that based upon its own
analysis, future Cresson exploration may indicate sizable additional gold ore
reserves at depth, to the south and to the east of the existent Cresson ore
reserve. Prior to the formation of the Joint Venture, a continuous, drill
indicated, bulk minable gold resource was found by the Company on and below the
Cresson 2,300 level and in the Cresson lateral approximately 1,700 and 2,000
feet respectively vertically below the identified Cresson ore reserve. The
Joint Venture continues to expand the Cresson ore reserve (see "Gold Reserves"
below).
Victor Leach Pad
The Joint Venture anticipates approximately 2,400 troy ounces of gold
to be produced from a renewal of leaching operations during the second quarter
1996. Leaching of this pad will continue so long as economic. This pad
contains ore from two previous open pits, the Ironclad and Globe Hill pits.
Mining in the Ironclad open pit was completed May 20, 1994, and mining in the
Globe Hill open pit was completed September 20, 1993. No additions of ore to
this leach pad are contemplated during 1996.
Employment
Employment for the Joint Venture increased to 253 during 1995, up
from 230 at the end of 1994. Pikes Peak provides the work force required by
the Joint Venture, which has no employees. The additional staff was required
by preparations for and construction of the Cresson mine and facilities as well
as bringing the mine into full production. The Manager's full production
staffing level is presently 255.
Environment
The Joint Venture's balance sheet at December 31, 1995 reflects a
total of $5.226 million in accrued reclamation liabilities. The Joint Venture
has 1,044.4 acres under financial warranty as of March 1996 within its mining
permit of 2,027 acres. The Joint Venture has posted a $17.997 million bond
with the Colorado Mined Land Reclamation Board to ensure the reclamation of
mining disturbances. Current plans will result in the Joint Venture posting an
increased bond as phase 2 of the leach pad is completed.
Current reclamation projects include: reclamation of selected
exploration drill sites; reclamation of Phase IV leach pad side walls;
reclamation of the Ironclad and Globe Hill waste rock side walls; stockpiling
of topsoil for future reclamation; detoxification of completed leach pads; and
removal of a detoxified leach pad.
Governmental Regulation
Like all mining operations in the U.S., the Joint Venture is subject
to a multitude of environmental laws and regulations promulgated by federal,
state and local governments including, but not limited to the National
Environmental Policy Act ("NEPA"); the Comprehensive Environmental, Response,
Compensation and Liability Act ("CERCLA"); the Clean Air Act, ("CAA"); the
Clean Water Act, ("CWA"); the Hazardous Materials Transportation Act, ("HMTA");
and the Toxic Substances Control Act, ("TSCA"). The Joint Venture's operations
are subject to comprehensive regulation by the U.S. Department of the Interior
(Bureau of Land Management), the U.S. Environmental Protection Agency ("EPA"),
the U.S. Mine Safety and Health Administration ("MSHA") and similar state and
local agencies. Failure to comply with applicable laws, regulations and
permits can result in injunctive action, damages and civil and criminal
penalties. If the Joint Venture expands or changes its existing operations or
proposes any new operations, it may be required to obtain additional or amended
permits or authorizations. In particular, CERCLA, commonly called the
"Superfund Act", contains stringent reporting requirements for the release or
disposal of hazardous substances, with substantial fines for noncompliance. In
addition, under CERCLA, any party responsible for the release or threatened
release of a hazardous substance into the environment is liable for all
clean-up costs. These regulations apply throughout the U.S. mining industry
and generally should not have a material adverse effect on the Joint Venture's
competitive position.
Hazardous wastes from certain mining and mineral processing
operations are temporarily exempt from regulation under the federal Resource
Conservation and Recovery Act ("RCRA"). EPA is currently considering the
promulgation of a special set of rules to regulate mining wastes under RCRA,
but those may be delayed pending anticipated Congressional re-authorization and
revision of RCRA. The effect of any future regulation on the Joint Venture's
operations cannot be determined until the legislative process is completed and
new rules are issued; but it is assumed that they will have a significant
impact on operations of all mining companies and increase the costs of those
operations.
Although the Manager expects that compliance with federal, state and
local environmental regulations will continue to require significant future
outlays, it is not possible to say with any certainty what impact such
compliance may have on the Joint Venture's future capital expenditures or
earnings.
Gold Reserves
During 1995, as part of its determination of the Joint Venture
reserves, the Joint Venture recomputed the Cresson ore deposit reserves and
reaffirmed the 1993 computed reserves for all other Joint Venture ore deposits
shown in the table below. The Joint Venture estimated the total gold reserves
identified by the exploration program through year-end 1995 at 2.607 million
troy ounces of gold contained in 97,156,000 short tons of ore. The Joint
Venture's estimates follow:
Cripple Creek & Victor Gold Mining Company
Gold Ore Reserve Estimate as of December 31, 1995 *
ORE ORE
CONTAINED WASTE
TONS TENOR OUNCES
TONS
(000's) (TROY)
(000's)
________ _________ ____________
________
CRESSON 89,745 0.0252 2,258,792
126,380
ALTMAN 5,188 0.0483 250,571
28,789
WILD HORSE 1,209 0.0565 68,309
6,090
GRASSY 1,014 0.0291 29,507
1,055
________ _________ ____________
________
TOTAL: 97,156 0.0268 2,607,179
162,314
________ _________ ____________
________
* These gold reserve figures were estimated based on a $400 per troy ounce
gold price for the Cresson deposit and a $350 per ounce gold price for all
others, and are subject to various royalties. There can be no assurance,
however, that the Joint Venture can earn a profit when the market price of gold
equals or exceeds the gold price used in estimating those reserves. For
instance, during 1995, when the Joint Venture incurred a loss of $3.654
million, the average price of gold sold by the Joint Venture was approximately
$385 per troy ounce.
The above estimates are based upon drill inferred data and are a
combination of "proven" and "probable" reserves. The classifications of proven
and probable are taken from the Securities and Exchange Commission's Guide 7.
Proven (Measured) Reserves. Reserves for which (a) quantity is
computed from dimensions revealed in outcrops, trenches, workings or drill
holes; grade and/or quality are computed from the results of detailed sampling
and (b) the sites for inspection, sampling and measurement are spaced so
closely and the geologic character is so well defined that the size, shape,
depth and mineral content of reserves are well established.
Probable (Indicated) Reserves. Reserves for which quantity and grade
and/or quality are computed from information similar to that used for proven
(measured) reserves, but the sites for inspection, sampling, and measurement
are farther apart or are other wise less adequately spaced. The degree of
assurance, although lower than that for proven (measured) reserves, is high
enough to assume continuity between points of observation.
Exploration
70,779 feet were drilled during 1995, of which 3,324 feet were core
samples and the remainder was reverse circulation drilling. The drilling
effort primarily focused on development drilling in the Cresson project area.
The Joint Venture spent approximately $151,300 on exploration and $934,700 on
development drilling.
The Cresson development drilling program fully replaced 1995
production, adding 20,515,000 tons of ore and 412,095 contained troy ounces of
gold to the reserves estimate.
During 1996 the Joint Venture plans to spend approximately $1.3
million in exploration activities and $2.7 million on development work.
Gold Production and Sales
Total production from the Cresson and Victor projects for the year
ended December 31, 1995 was 76,589 troy ounces of gold and 26,429 troy ounces
of silver. 76,581 troy ounces of gold were sold at an average price of
approximately $385 per ounce for $29,493,581. Silver sales for the year of
20,364 troy ounces of silver at an average price of $4.98 per ounce yielded
$101,326. Total revenue from metal sales was $29,594,907.
Distribution of Proceeds and Other Financial Aspects
The Joint Venture made payments of the Minimum Annual Distribution of
$250,000 to the Company on each of June 13, 1991, January 15, 1992, January 15,
1993, January 15, 1994, January 15, 1995 and January 15, 1996. Subsequent
payments of the same amount will be made on January 15th of each year until the
conclusion of the Initial Phase, as defined in the Joint Venture Agreement, or
until the mining. The payments made on January 15, 1994, 1995 and 1996 and
subsequent annual payments constitute an advance on Net Proceeds and will be
recouped against future distributions of net proceeds. After recovery of these
advances, if the Company's share (20% in the Initial Phase) of Net Proceeds
exceeds the Minimum Annual Distribution, the larger amount will be distributed
to the Company. The Joint Venture incurred a net loss of $3.654 million for
the year ended December 31, 1995. Included in the net loss are non cash costs
of more than $6.175 million, including depreciation, depletion and amortization
(DD&A) costs of $4.811 million, accrued reclamation costs (net of cash
expenditures) of $1.364 million, and non cash interest expense of $9.507
million financed through the Pikes Peak loan.
The Company accounts for its investment in the Joint Venture on the
equity method. Joint Venture distributions in excess of the investment
carrying value are recorded as income. During 1992, the Company's share of
Joint Venture losses exceeded the remaining carrying value of the investment
and, accordingly, the investment was reduced to zero. The Company does not
record its share of Joint Venture losses incurred subsequent to the reduction
of its investment balance to zero. To the extent the Joint Venture is
subsequently profitable, the Company will not record its share of equity income
until the cumulative amount of previously unrecorded Joint Venture losses has
been recouped.
As a result of the reduction of the Joint Venture investment carrying
value to zero during 1992, the Company did not record its share of the Joint
Venture's losses in 1995, 1994 and 1993. The Company's share of Joint Venture
losses which have not been recorded in its financial statements is $730,800,
$1,870,000, and $1,707,600 in 1995, 1994, and 1993, respectively. As of
December 31, 1995, the Company's accumulated unrecorded losses from the Joint
Venture are $4,413,858.
ITEM 2. PROPERTIES: MINING, OIL AND GAS, AND WATER RIGHTS
Mining Properties The Joint Venture mining properties consist of
owned, leased and optioned mining claims and other land covering approximately
6,500 acres in and around the Cripple Creek Mining District of Teller County,
Colorado and include most of the principal formerly-producing mines of the
Cripple Creek district. The majority of the above acreage was contributed by
the Company to the Joint Venture. Subsequently, the Joint Venture has
purchased, leased and optioned additional acreage.
The Joint Venture mining properties are situated on the west flank of
Pikes Peak, about 20 air miles west of Colorado Springs and 65 air miles south
of Denver. The area is accessible by paved highway and supplied by requisite
utilities. The elevation of the properties averages slightly over 10,000 feet
above sea level. Snow accumulations are generally light and do not materially
interfere with access to the property. However, cold weather conditions in the
winter months hamper surface leaching operations.
To a great extent, the Joint Venture mining properties lie within the
boundary of a geological entity known as a caldera or "volcanic subsidence
basin" (the "Basin"). The Basin is of rudimentary elliptical outline, with its
long axis trending in a northwesterly direction. It has a length of about
4-1/2 miles and a width of about 2-1/2 miles, covering some 5,000 acres at the
ground surface. The area of the Basin gradually narrows with depth. The bulk
of the historical Cripple Creek gold production was from the underground mines
within the Basin, with the major mines located in the southern portion of the
Basin.
From the inception of production in 1891 until the suspension of
operations in 1960, the Cripple Creek Mining District was the major gold mining
district in the United States. It is estimated that approximately 21 million
ounces of gold were produced in this period, principally from mines later
contributed to the Joint Venture by Golden Cycle Gold Corporation. The Joint
Venture has added about 332,000 troy ounces of gold to this total during the
period 1985 through 1994. The Joint Venture mining properties include most of
the principal formerly producing mines in the Cripple Creek district, including
the Ajax, Cresson, Portland, Independence, Vindicator and Golden Cycle.
Because of the age of many of the mines and the fact that mining operations
throughout the Basin declined and were suspended more than thirty years ago,
the existing mine shafts are unsuitable for current operation without
substantial rehabilitation. The Joint Venture is not currently operating
underground.
Oil and Gas Properties
The oil and gas properties of the Company are comprised of
approximately 7,300 acres of mineral rights in the Penrose Area of Fremont
County, Colorado. There is no evidence of successful oil and gas development
nearby, with the exception of the Florence, Colorado area. Florence was the
site of the first producing wells in Colorado in the 1860's and the area is
still producing on a limited scale today. Several years ago, interest was
shown in leasing very large acreages of state land about 50 to70 miles east of
the Company's land. No development of that area is visible at this time. The
oil and gas properties have no carrying value.
Water Rights
The Company is a party to a water purchase agreement signed in
February 1992 with the City of Cripple Creek, Colorado. The agreement calls
for the sale by the Company of up to 1.097 Cubic Feet Per Second (about 794
acre feet) of a water right owned by the Company. The agreement calls for a
minimum price of $312,500, based upon a price for the first 125 acre feet
transferred at $2,500 per acre foot, and includes a commitment by the City to
buy all additional acre feet transferred at $1,500 per acre foot. In
accordance with the agreement, the City initiated the request for transfer in
the Water Court on October 29, 1992. The contract contains substantial
contingencies and may or may not finally close. Water Rights transfers
typically require a substantial period of time for final adjudication.
Objections to the transfer were filed by the cities of Victor and
Colorado Springs, the Mountain Mutual Water Company, Landau/Lichtenberg and the
Joint Venture. The City of Cripple Creek has submitted the required well
permits, published a First Amendment to Application for Change of Point of
Diversion, laid the water lines, and has contracted for the drilling of the
required wells. The City of Cripple Creek recently filed a draft Water Decree
for agreement and comment from all interested parties. The reception of the
draft by all parties, particularly the objectors, will largely determine the
speed of closure of the contract. The City of Cripple Creek's attorney has
advised the Company that the City anticipates concluding the adjudication of
the water right, including review by the Water Court, in the second half of
1996.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings to which the Company is a party are
pending. The Joint Venture is involved in certain litigation in the United
States District Court, District of Colorado: Paul N. Temple v. Cripple Creek &
Victor Gold Mining Company, case no. 95-WY-1588. Mr. Temple claims a royalty
interest on a group of mining claims known as the Stratton Block. The Joint
Venture believes that the royalty interest was purchased when the mining claims
were acquired by a broker on the Joint Venture's behalf. The estimated life of
mine value of the royalty interest based on the current Cresson mine plan
exceeds $1,000,000. If the royalty interest is determined to be valid,
payments for royalty due on past production that would become subject to the
royalty would exceed $200,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders
during the fourth quarter of 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY MATTERS
Market Information
The Company's common stock has been listed and traded on the Pacific
Stock Exchange since 1987 (except during the period from July 6, 1994 to August
30, 1994, as discussed below), and from July 1, 1983 until June 30, 1992 was
quoted on NASDAQ. The Company's trading symbol is GCC on the Pacific Exchange.
The following table shows the high and low bid price per share on the Pacific
Stock Exchange for each calendar quarter since January 1, 1994.
Price Range For: HI LOW
_________________________________ __________ __________
First Quarter 1996, as of March 21, 1996 $ !0 $ 8
Quarter ended December 31, 1995 8 -5/8 8
- - -1/8
Quarter ended September 30, 1995 8 -7/8 8
- - -1/4
Quarter ended June 30, 1995 10
8 -1/2
Quarter ended March 31, 1995 10
6 -1/4
Quarter ended December 31, 1994 8 -1/8 7
- - -1/4
Quarter ended September 30, 1994 7 -1/2 6
- - -7/8
Quarter ended June 30, 1994 7
6 -3/8
Quarter ended March 31, 1994 8 -1/2 7
- - -1/2
Bid prices are between dealers and do not include mark-ups,
mark-downs, or commissions, nor do they necessarily represent actual
transactions.
The Pacific Stock Exchange (the "Exchange") suspended trading in the
Company's Common Stock on July 6, 1994 after a decision by the Exchange's
Delisting Committee to delist the Company's equities because the Company's
total assets were below the Exchange's minimum criteria of $1,000,000 to
maintain listing. On July 11, 1994 the Company obtained a loan of $500,000
which brought its total assets to approximately $1.2 million, and submitted an
appeal to the Exchange, which resulted in the Exchange relisting the Company's
Common Stock on August 30, 1994. Subsequently, the Exchange informed the
Company that effective January 1995 the asset requirement for the Company to
maintain an equities listing on the Exchange would change from a total asset
based requirement to a net tangible asset requirement of a minimum of $500,000.
The Company believes that it complies with the Exchange's minimum net tangible
asset maintenance requirement as of December 31, 1995, and expects that it will
continue to comply with that requirement during 1996.
Holders of the Company's Common Stock
The number of holders of record of the Company's Common Stock as of
March 21, 1996 was 1263. The number of holders beneficial owners for whom
shares are held in "street name" as of March 21, 1996 is believed to be more
than 750.
Dividends
The Company has not paid any dividends. The Company does not
anticipate the payment of any dividends in the near future.
ITEM 6. SELECTED FINANCIAL DATA
1995 1994 1993
1992 1991
_________ _________ ________ _________
_________
Revenues (1) $ 275,000 $ 283,000 $ 272,000 $
25,000 $ 60,000
Expenses 273,000 465,000 362,000
434,000 328,000
Share of Mining Joint
Venture losses (2) 0 0
0 (991,000) (161,000)
Net Profit (Loss) 2,000 (182,000) (90,000)
(1,400,000) (429,000)
Net Profit (Loss)
Per Share * (3) (0.12) (0.06)
(0.90) (0.28)
Total Assets 548,000 1,033,000 694,000
702,000 2,099,000
Long term obligations - - - - - - - - - - - -
- - - - - - - -
(1) Revenues in 1995, 1994 and 1993 include the Minimum Annual Distribution.
See Management's Discussion and Analysis below, and Notes 1 and 4 to the
financial statements for a description of the accounting for the Minimum Annual
Distribution.
(2) The Company did not record its share of the Joint Venture's loss in 1995,
1994 and 1993 because its Joint Venture investment balance was reduced to zero
in 1992. See Management's Discussion and Analysis below, and Notes 1 and 4 to
the financial statements.
(3) Less than $.01 per share.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company's principal mining investment and source of cash flows is
its interest in the Joint Venture. The Joint Venture engages in gold mining
activity in the Cripple Creek area of Colorado. The Company's Joint Venture
co-venturer is Pikes Peak, a wholly-owned subsidiary of Independence Mining
Company Inc. Independence Mining Company Inc. is a wholly owned subsidiary of
Minoroco (U.S.A.). Inc.
The Company's rights and obligations relating to its Joint Venture
interest are governed by the Joint Venture Agreement. The Joint Venture is
currently operating in the Initial Phase, as defined. In accordance with the
Joint Venture Agreement, Pikes Peak manages the Joint Venture and is required
to finance all operations and capital expenditures during the Initial Phase.
See "Description of Mining Joint Venture" above.
The Company's working capital was $350,394 at December 31, 1995
compared to $329,957 at December 31, 1994. Cash provided by operations was
$4,962 in 1995 compared to cash used by operations of $151,738 during 1994.
Cash provided by operations during 1995 increased approximately $157,000 from
cash used in 1994 due largely to decreases in general and administrative
expenses and decreased legal expenses.
On July 11, 1994 the Company borrowed $500,000 under a promissory
note bearing interest at 4.3%. The purpose of this loan was to bring the
Company's total assets to approximately $1.2 million, thereby exceeding the
Pacific Stock Exchange's (the "Exchange") minimum total asset criteria of
$1,000,000 to maintain the Exchange's listing of the Company's equities. See
"Item 5. Market for the Registrant's Common Stock and Related Securities
Matters" above. The $500,000 note payable and accrued interest was paid on
January 17, 1995 with proceeds from liquidating the money market account.
At December 31, 1995, the Company is not aware of any significant
future capital commitments by the Company.
Management believes that the Company's working capital, augmented by
the Minimum Annual Distribution and interest income, is adequate to support the
operations of the Company in 1996. The possible inflow of proceeds from the
pending sale of the water rights would further serve to strengthen the
Company's financial condition.
Results of Operations
The Company achieved a net profit of $2,281 during the year ended
December 31, 1995 as compared to net losses of approximately $182,000 and
$90,000 for 1994 and 1993, respectively.
The change to a net profit in 1995 from a loss in 1994 was the result
of the implementation of stringent cost reduction measures in general and
administrative expenses, resulting in reductions of approximately $186,000,
elimination of interest expense with the liquidation of the note payable in
January 1995, and a $5,000 improvement in investment income due to increased
prevailing interest rates. By continuing the cost reduction measures as
initiated during 1995, Management anticipates that the Company will achieve a
small net profit from continuing operations again in 1996, augmented by income
from the sale of the Company's Water Rights.
The increase of approximately $92,000 in the loss from 1993 to 1994
was due primarily to an increase of $95,000 in general and administrative
expenses and $9,000 in interest expense, partially offset by a $13,000 gain on
the sale of mining claims. General and Administrative expenses increased
because the Company (i) engaged third party expert engineering consultants to
render independent opinions on the feasibility and economics of the Cresson
Project, (ii) engaged mining attorneys for opinions on the interpretation of
portions of the Joint Venture Agreement and (iii) incurred approximately
$18,000 of legal expenses in connection with a proposed private placement of
Common Stock which was not consummated.
The Company accounts for its investment in the Joint Venture on the
equity method. Joint Venture distributions in excess of the investment
carrying value are recorded as revenue, as the Company is not required to
finance the Joint Venture's operating losses or capital expenditures.
Correspondingly, the Company does not record its share of Joint Venture losses
incurred subsequent to the reduction of its investment balance to zero. To the
extent the Joint Venture is subsequently profitable, the Company will not
record its share of equity income until the cumulative amount of previously
unrecorded Joint Venture losses have been recouped. As of December 31, 1995,
the Company's accumulated unrecorded losses from the Joint Venture are
$4,413,858.
The Joint Venture incurred net losses of $3,654,000, $9,350,000 and
$8,538,000 in 1995, 1994 and 1993, respectively.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14, Part IV.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT*
ITEM 11. EXECUTIVE COMPENSATION*
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT*
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS*
*Information regarding items 10 through 13 has been omitted from this
report because the Company intends to file, on or before April 30, 1996, a
definitive Proxy Statement pursuant to Regulation 14A, containing the
information required by those items, which information is incorporated herein
by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
Financial Statements
Page
Financial Statements of the Registrant:
Independent Auditors' Report, KPMG Peat Marwick LLP
20
Balance Sheets, December 31, 1995 and 1994
21
Statements of Operations for the Years
Ended December 31, 1995, 1994 and 1993
22
Statements of Shareholders' Equity for the Years
Ended December 31, 1995, 1994 and 1993
23
Statements of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993
24
Notes to Financial Statements
25
Financial Statements of Cripple Creek & Victor Gold
Mining Company (A Joint Venture):
Independent Auditors' Report
31
Balance Sheets December 31, 1995 and 1994 32
Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993
33
Statements of Venturers' Equity for the Years Ended
December 31, 1995, 1994 and 1993
34
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993
35
Notes to Financial Statements
36
Exhibit Index
3.1. Articles of Incorporation and By-laws (incorporated by
reference to Exhibit 2 to the Company's Form 10 dated May 19, 1983).
10.1. Amended and Restated Joint Venture Agreement between Pikes
Peak Mining Company and the Company dated as of January 1, 1991 (incorporated
by reference to Exhibit 1 to the Company's Current Report on Form 8-K dated
June 17, 1991).
10.2. Consulting Agreement dated November 19, 1992 with Birl
Worley, Jr. (incorporated by reference to Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992).*
10.3. Directors' Stock Option Plan (incorporated by reference to
Appendix B of the Company's Definitive Proxy Statement dated April 13, 1992).*
10.4 1992 Stock Option Plan (incorporated by reference to Appendix
D of the Company's Definitive Proxy Statement dated April 13, 1992).*
10.5 Consulting Agreement dated May 31, 1995 with Rex H. Hampton
(incorporated by reference to Exhibit 10.5 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).*
23.1 Consent of KPMG Peat Marwick LLP, page 40.
* Constitutes a "management contract or compensatory plan or arrangement"
required to be filed as an exhibit to this Form 10-K pursuant to Item 14 (c).
Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of 1995.
SIGNATURES
Pursuant to the requirements of Section 12 or 15D of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereto duly authorized.
GOLDEN CYCLE
GOLD CORPORATION
By:
Birl W. Worley Jr.
Birl W. Worley Jr., Director,
President, Chief Executive Officer
By: R.
Herbert Hampton
R.
Herbert Hampton
Chief Acounting and Financial Officer
Date: March 25, 1996
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 in the capacities and on the dates indicated:
Melvin L. Cooper
March 25, 1996
Melvin L. Cooper, Director
Date
Rex H. Hampton
March 25, 1996
Rex H. Hampton, Director
Date
John A. Love
March 25, 1996
John A. Love, Director
Date
Frank M. Orrell
March 25, 1996
Frank M. Orrell, Director
Date
Alan P. Ploesser
March 25, 1996
Alan P. Ploesser, Director
Date
Independent Auditors' Report
The Shareholders and Board of Directors
Golden Cycle Gold Corporation
We have audited the accompanying balance sheets of Golden Cycle Gold
Corporation as of December 31, 1995 and 1994 and the related statements of
operations, shareholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1995. 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 Golden Cycle Gold Corporation
as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1995, in conformity with generally accepted accounting principles.
KPMG Peat
Marwick LLP
Denver, Colorado
January 24, 1996
GOLDEN CYCLE GOLD CORPORATION
Balance Sheets
December 31, 1995 and 1994
Assets
1995 1994
_______________________________________ _________
_________
Current assets:
Cash and cash equivalents
$ 9,840 517,427
Short-term investments (note 2)
354,118 327,444
Interest receivable and other current assets
492 47
_________ _________ Total current
assets
364,450 844,918
Assets held for sale (note 3)
176,907 176,907
Property and equipment, net
7,033 11,064
Investment in mining joint venture (note 4)
- -
_________ _________
$ 548,390 1,032,889
========= ========
Liabilities and Shareholders' Equity
_______________________________________
Current liabilities:
Accounts payable and accrued liabilities $
14,056 14,961
Note payable
- 500,000
_________ _________
Total current liabilities
14,056 514,961
Deferred revenue (note 3)
20,000 20,000
Shareholders' equity (note 6):
Common stock, no par value. Authorized 3,500,000 shares;
1,573,050 and 1,571,050 shares issued and outstanding 4,989,737
4,975,612
Additional paid-in capital
1,927,736 1,927,736
Accumulated deficit
(6,403,139) (6,405,420)
_________ _________
Total shareholders' equity
514,334 497,928
_________ _________
$ 548,390 1,032,889
========= ========
See accompanying notes to financial statements.
GOLDEN CYCLE GOLD CORPORATION
Statements of Operations
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
Revenue - distributions from mining joint
venture in excess of carrying value (note 4) $ 250,000
250,000 250,000
Expenses - general and administrative (270,828)
(456,572) (361,890)
_________ _________ _________
Operating loss
(20,828) (206,572) (111,890)
Other income (expense):
Interest and other income
25,319 19,979 22,144
Interest expense
(2,210) (9,018) -
Gain on sale of mining claims -
13,221 -
_________ _________ _________
23,109 24,182 22,144
_________ _________ _________
Net income (loss) $
2,281 (182,390) (89,746)
======== ======== ========
Income (loss) per share $ *
(.12) (.06)
=== === ===
Weighted average common shares outstanding 1,572,383 1,571,050
1,558,225
======== ======== ========
*Less than $.01 per share.
See accompanying notes to financial statements.
GOLDEN CYCLE GOLD CORPORATION
Statements of Shareholders' Equity
Years Ended December 31, 1995, 1994, and 1993
Additional
Common stock
paid-in Accumulated
_________________
Shares Amount
capital deficit Total
________ ________ ________
________ ________
Balances at
December 31, 1992 1,548,050 $ 4,895,487 1,927,736
(6,133,284) 689,939
Stock options exercised 23,000 80,125 -
- 80,125
Net loss - -
- (89,746) (89,746)
Balances at
December 31, 1993 1,571,050 4,975,612 1,927,736
(6,223,030) 680,318
Net Loss - -
- (182,390) (182,390)
Balances at
December 31, 1994 1,571,050 4,975,612 1,927,736
(6,405,420) 497,928
Stock options exercised 2,000 14,125 -
- 14,125
Net Income - -
- 2,281 2,281
Balances at
December 31, 1993 1,573,050 4,989,737 1,927,736
(6,403,139) 514,334
See accompanying notes to financial statements.
GOLDEN CYCLE GOLD CORPORATION
Statements of Cash Flows
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
_______ _______ _______
Cash flows from operating activities:
Net income (loss) $
2,281 (182,390) (89,746)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation expense
4,031 4,233 5,780
Provision for uncollectible receivable -
15,955 -
Gain on sale of mining claims
- - - (13,221) -
Decrease (increase) in interest receivable
and other current assets
(445) 1,946 (866)
Increase (decrease) in accounts payable
and accrued liabilities
(905) 1,739 1,302
Increase in deferred revenue
- - - 20,000 -
_______ _______ _______
Net cash provided by (used in)
operating activities
4,962 (151,738) (83,550)
_______ _______ _______
Cash flows from investing activities:
Decrease (increase) in short-term
investments, net
(26,674) 140,662 (6,542)
Purchases of property and equipment -
(2,673) (9,823)
Proceeds from sale of mining claims -
25,269 -
_______ _______ _______
Net cash provided by (used in)
investing activities
(26,674) 162,258 (16,365)
_______ _______ _______
Cash flows from financing activities:
Proceeds from issuance of note payable -
500,000 -
Repayment of note payable
(500,000) - -
Proceeds from issuance of common stock 14,125
- 80,125
_______ _______ _______
Net cash provided by (used in)
financing activities
(485,875) 500,000 80,125
_______ _______ _______
Net increase (decrease) in cash and
cash equivalents
(507,587) 511,520 (19,790)
Cash and cash equivalents, beginning of year 517,427
5,907 25,697
_______ _______ _______
Cash and cash equivalents, end of year $ 9,840
517,427 5,907
====== ====== ======
See accompanying notes to financial statements.
GOLDEN CYCLE GOLD CORPORATION
Notes to Financial Statements
December 31, 1995 and 1994
________________________________________________________________________
(1) Summary of Significant Accounting Policies
Organization
Golden Cycle Gold Corporation (the Company) acquires and develops mining
properties. The Company's principal investment consists of its joint venture
participation in the Cripple Creek and Victor Gold Mining Company (the Joint
Venture), a precious metals mining company in the Cripple Creek Mining District
of Teller County, Colorado.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles. Management makes various estimates
and assumptions in determining the reported amounts of assets, liabilities,
revenues and expenses for each period presented, and in the disclosure of
commitments and contingencies. Changes in these estimates and assumptions will
occur based on the passage of time and the occurrence of future events.
Statements of Cash Flows
The Company considers highly liquid investments with maturities of less than
three months to be cash equivalents. There are no cash equivalents at December
31, 1995. Cash equivalents include money market funds of %505,880 at December
31, 1994.
Short-Term Investments
Debt securities that the Company has both the positive intent and ability to
hold to maturity are carried at amortized cost. Short-term investments consist
of U.S. Treasury Bills and certificates of deposit.
Investment in Mining Joint Venture
The Company accounts for its investment in the Joint Venture on the equity
method. The Company's share of Joint Venture losses exceeded the remaining
carrying value of the investment and, accordingly, the investment was reduced
to zero prior to 1993. Joint Venture distributions in excess of the investment
carrying value are recorded as income. The Company does not record it share of
Joint Venture losses incurred subsequent to the reduction of its investment
balance to zero. To the extent the Joint Venture is subsequently profitable,
the Company will not record its share of equity income until the cumulative
amount of previously unrecorded Joint Venture losses have been recouped.
GOLDEN CYCLE GOLD CORPORATION
Notes to Financial Statement, Continued
________________________________________________________________________
Property and Equipment
Office furniture, fixtures and equipment are stated at cost and are depreciated
using the straight-line method over estimated useful lives ranging from three
to ten years.
Income Taxes
The Company utilities the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts and the tax basis
of existing assets and liabilities using enacted tax rates expected to apply in
the years in which such temporary differences are expected to be recovered or
settled. Changes in tax rates are recognized in the period of the enactment
date.
Income (Loss) Per Share
Income (loss) per share is based on the weighted average number of shares
outstanding during each year. The computation in 1994 and 1993 excludes
outstanding options as their effect is antidilutive.
Reclassifications
Certain 1994 and 1993 amounts have been reclassified to conform to the 1995
financial statement presentation.
(2) Short-Term Investments
Debt securities are generally held until maturity based on the Company's
ability and intent. The amortized cost of debt securities, which approximates
fair value, at December 31, 1995 and 1994 was $294,118 and $237,444,
respectively. All debt securities held at December 31, 1995 mature within one
year.
(3) Assets Held for Sale
The Company owns certain water rights in Fremont County, Colorado, which it is
actively attempting to sell. On July 10, 1992, the Company entered into an
agreement to sell these water rights for a minimum price of $312,500 and a
maximum price to be determined based upon the actual amount of water approved
for transfer by the Water Court of Water Division 2, State of Colorado (the
Water Court). The sales price will be paid 20% on the
GOLDEN CYCLE GOLD CORPORATION
Notes to Financial Statement, Continued
________________________________________________________________________
date of final approval by the Water Court with the balance due over a five-year
period. Objections to the sale have been filed with the Water Court. In
addition, the agreement is subject to substantial contingencies and may or may
not close. The Company received $20,000 in 1994 pursuant to this agreement and
recorded this amount as deferred revenue pending consummation of the sale. As
of December 31, 1995, the transaction was pending review by the Water Court.
(4) Investment in Mining Joint Venture
The Company owns an interest in the Joint Venture with Pikes Peak Mining
Company (PPMC). PPMC manages the Joint Venture. The Joint Venture conducts
exploration, development, and mining of certain properties in the Cripple Creek
Mining District, Teller County, Colorado. The Joint Venture owns or controls
approximately 6,500 acres of surface and/or mineral rights in the Cripple Creek
Mining District, certain portions of which are being actively explored and
developed.
The Joint Venture Agreement, as amended, generally requires PPMC to finance
operations and capital expenditures of the Joint Venture. The Joint Venture is
currently operating in an Initial Phase, as defined, that will terminate when
Initial Loans, as defined, have been repaid and when $58 million of Net
Proceeds, as defined, has been distributed 80% to PPMC and 20% to the Company.
As of December 31, 1995 Initial Loans were approximately $143 million and no
Net Proceeds have been earned, Initial Loans must be repaid prior to Net
Proceeds being distributed to the venturers. After the Initial Phase, the
Joint Venture will distribute metal in kind, 67% to PPMC and 33% to the
Company. The Agreement also provides for the Company to receive a minimum
annual distribution of $250,000 during the Initial Phase. Beginning in 1994,
such minimum annual distributions are recoupable against the Company's future
share of Net Proceeds.
As a result of the reduction of the Joint Venture investment carrying value to
zero prior to 1993, the Company did not record its share of the Joint Venture's
losses in 1995, 1994 and 1993. The Company's share of Joint Venture losses
which have not been recorded in its financial statements is $731,000,
$1,870,000 and $1,708,000 in 1995, 1994 and 1993, respectively. As of December
31, 1995, the Company's accumulated unrecorded losses from the Joint Venture
are $4,414,000.
GOLDEN CYCLE GOLD CORPORATION
Notes to Financial Statement, Continued
________________________________________________________________________
(4) Investment in Mining Joint Venture (continued)
The condensed balance sheets of the Joint Venture as of December 31, 1995 and
1994 are summarized as follows:
1995 1994
_______ _______
Assets
_________________________________
Inventory $
27,403 1,535
Other current assets
58 115
_______ _______
Total current assets
27,461 1,650
Fixed assets and mine development costs 136,785
125,435
_______ _______
Total assets $
164,246 127,085
======= =======
Liabilities and Venturers' Equity
_________________________________
Current liabilities $
7,879 3,382
Payable to PPMC
142,586 107,382
Accrued reclamation costs
5,226 3,862
_______ _______
Total liabilities
155,691 114,626
Venturers' equity
8,555 12,459
_______ _______
Total liabilities and venturers' equity $ 164,246
127,085
======= =======
The condensed statements of operations of the Joint Venture for each of the
three years ended December 31, 1995 are summarized as follows:
1995
1994 1993
_______
_______ _______
(in thousands)
Revenue $ 29,595
21,669 17,971
Operating expenses (23,789) (27,774)
(23,774)
Interest expense (9,460)
(3,245) (2,735)
_______
_______ _______
Net Loss $ (3,654)
(9,350) (8,538)
=======
======= =======
GOLDEN CYCLE GOLD CORPORATION
Notes to Financial Statement, Continued
________________________________________________________________________
(5) Income Taxes
The tax effects of temporary differences that give ries to significant portions
of the deferred tax assets at December 31, 1995 and 1994 are presented below:
1995 1994
________ ________
Deferred tax assets:
Net operating loss carryforwards $ 429,000
430,000
Provisions for asset impairments, related
to assets held for sale 186,000
186,000
________ ________
615,000 616,000
Valuation allowance (615,000)
(616,000)
________ ________
Net deferred tax asset $ -
-
======= =======
At December 31, 1995, the Company has net operating loss carryforwards for
income tax purposes of approxiamtely $1,145,000 which expire beginning in 1998
through 2010.
(6) Common Stock Options
Prior to 1992, at the discretion of the Company's Board of Directors, certain
officers, directors and employees were granted options to acquire shares of
common stock. The exercise price of the options was based upon the average
market value of a share of the common stock on the date of the grant. Such
options expire ten years from the date of the grant.
During 1992, the Company's board of Directors adopted a Directors' Stock Option
Plan (the Directors' Plan) and a 1992 Stock Option Plan (the 1992 Plan). The
Directors' Plan provides for an annual option grant of 5,000 shares to each
Director, with certain limitations. The 1992 Plan provides for the grant of
options on a discretionary basis to certain employees and consultants. Under
each plan, the exercise price cannot be less than the fair market value of the
common stock on the date of the grant. The expiration of these options is ten
years from the date of the grant.
GOLDEN CYCLE GOLD CORPORATION
Notes to Financial Statement, Continued
________________________________________________________________________
(6) Common Stock Options (continued)
Changes in stock options for each of the years in the three year period ended
December 31, 1995 are as follows:
Option price
Shares
per share
_______
___________
Outstanding at December 31, 1992 176,300
$ 3.00 - 11.00
Exercised (23,000)
3.00 - 8.50
Granted 30,000
10.25
_______
___________
Outstanding at December 31, 1993 183,300
3.00 - 11.00
Terminated (300)
8.50
Granted 37,000
6.625 - 7.50
_______
___________
Outstanding at December 31, 1994 220,000
3.00 - 11.00
Exercised (2,000)
6.625 - 7.50
_______
___________
Outstanding at December 31, 1995 218,000 $
3.00 - 11.00
======
==========
INDEPENDENT AUDITORS' REPORT
Cripple Creek and Victor Gold Mining Company:
We have audited the accompanying balance sheets of Cripple Creek and Victor
Gold Mining Company (a Joint venture) as of December 31, 1995 and 1994, and the
related statements of operations, venturers' equity, and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Joint Venture's management. Our
responsibility is to express an opinion on the 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, such financial statements present fairly, in all material
respects, the financial position of Cripple Creek and Victor Gold Mining
Company as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1995 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 2, 1996
CRIPPLE CREEK AND VICTOR GOLD MINING COMPANY
(A Joint Venture)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(in Thousands)
_______________________________________________________________________
1995 1994
ASSETS
CURRENT ASSETS:
Cash
$ 1 $ 6
Inventory
27,403 1,535
Prepaid expenses
57 109
_______ _______
Total current assets
27,461 1,650
_______ _______
PROPERTY, PLANT AND EQUIPMENT
Land and mineral properties
17,772 17,978
Structures, equipment and mine development 152,887
79,418
Construction - work in progress
14,668 64,081
_______ _______
185,327 161,477
Accumulated depreciation, depletion and amortization (48,542)
(36,042)
_______ _______
Property, plant and equipment, net
136,785 125,435
_______ _______
TOTAL
$164,246 $127,085
======= =======
LIABILITIES AND VENTURERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade
$ 5,548 $ 2,952
Accrued liabilities
2,331 430
_______ _______
Total current liabilities
7,879 3,382
_______ _______
INITIAL LOANS PAYABLE TO PPMC 142,586
107,382
ACCRUED RECLAMATION COSTS 5,226
3,862
VENTURERS' EQUITY
Venturers' investments
60,062 60,062
Accumulated deficit
(51,507) (47,603)
_______ _______
Total venturers' equity
8,555 12,459
_______ _______
TOTAL
$164,246 $127,085
======= =======
See accompanying notes to financial statements.
CRIPPLE CREEK AND VICTOR GOLD MINING COMPANY
(A Joint Venture)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(in Thousands)
_______________________________________________________________________
1995 1994 1993
REVENUES $ 29,595 $
21,669 $ 17,971
OPERATING EXPENSES 23,789 27,774
23,774
______ ______ ______
INCOME (LOSS) FROM OPERATIONS 5,806 (6,105)
(5,803)
______ ______ ______
Other income (expense) 47
14 20
Interest expense (9,507)
(3,259) (2,755)
______ ______ ______
Total other expense - net (9,460)
(3,245) (2,735)
______ ______ ______
NET LOSS $ (3,654)
$ (9,350) $ (8,538)
====== ====== ======
See accompanying notes to financial statements.
CRIPPLE CREEK AND VICTOR GOLD MINING COMPANY
(A Joint Venture)
STATEMENTS OF VENTURER'S EQUITY
YEARS ENDED DECEMBER 31, 1995 1994 AND 1993
(in Thousands)
_______________________________________________________________________
Venturers' Accumulated
Investments Deficit Total
BALANCES AT DECEMBER 31, 1992 $ 60,062 $ (29,215) $ 30,847
1993 Net Loss
(8,538) (8,538)
1993 Distribution
(250) (250)
_______ _______ _______
BALANCES AT DECEMBER 31, 1993 $ 60,062 $ (38,003) $ 22,059
1994 Net Loss
(9,350) (9,350)
1994 Distribution
(250) (250)
_______ _______ _______
BALANCES AT DECEMBER 31, 1994 $ 60,062 $ (47,603) $ 12,459
1995 Net Loss
(3,654) (3,654)
1995 Distribution
(250) (250)
_______ _______ _______
BALANCES AT DECEMBER 31, 1995 $ 60,062 $ (51,507) $ 8,555
======= ======= =======
See accompanying notes to financial statements.
CRIPPLE CREEK AND VICTOR GOLD MINING COMPANY
(A Joint Venture)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(in Thousands)
_______________________________________________________________________
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$(3,654) $(9,350) $(8,538)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization
4,811 6,851 8,195
Lower of cost or market inventory
write-down
2,163
Reclamation, net of cash expenditures
1,364 186 612
Amortization of debt discount
17
Noncash interest expense financed through PPMC loan 9,507
3,259 2,733
Loss (gain) on the sale of property, plant and equipment (47)
498 (23)
Changes in assets and liabilities:
Inventory
(18,173) 7,345 (5,211)
Prepaid expenses
52 41 (105)
Accounts payable - trade
2,596 1,385 594
Accrued liabilities
1,901 (152) 328
Other
4
______ ______ ______
Net cash provided by (used in)
operating activities
(1,643) 10,063 769
______ ______ ______
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(20,922) (68,465) (7,383)
Proceeds from the sale of property, plant and equipment 50
7,711 178
______ ______ ______
Net cash used in investing activities
(20,872) (60,754) (7,205)
______ ______ ______
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans from PPMC
22,760 50,940 7,744
Repayment of long-term debt
(1,059)
Distributions to venturers
(250) (250) (250)
______ ______ ______
Net cash provided by financing activities
22,510 50,690 6,435
______ ______ ______
NET INCREASE (DECREASE) IN CASH (5)
(1) (1)
CASH BALANCE, BEGINNING OF YEAR 6
7 8
______ ______ ______
CASH BALANCE, END OF YEAR $ 1
$ 6 $ 7
====== ====== =====
See accompanying notes to financial statements.
CRIPPLE CREEK AND VICTOR GOLD MINING COMPANY
(A Joint Venture)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(in Thousands)
_______________________________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Joint Venture and Its Operations - Cripple Creek and Victor Gold Mining
Company (the "Joint Venture") is a joint venture organized for the purpose of
conducting exploration, development and mining of certain properties in the
Cripple Creek Mining District, Teller County, Colorado. The venturers are
Pikes Peak Mining Company ("PPMC") and Golden Cycle Gold Corporation ("GCG").
The Joint venture is managed by PPMC. PPMC is wholly owned subsidiary of
Independence Mining Company, Inc. ("IMC") which, in turn, is an indirect wholly
owned subsidiary of Minorco.
Cash and Cash Equivalents - The Joint Venture considers all highly liquid
investments and investments purchased with maturities of three months of less
to be cash equivalents.
Inventory - Inventories of finished goods and work in process are valued at the
lower of cost (first-in, first-out which approximates average cost) or market.
Inventory costs include labor, materials, depreciation, depletion and
amortization, and other production costs. Finished goods include gold and
silver bullion. Work in process includes unrefined and in-process gold and
silver. Materials and supplies are stated at average cost.
December 31,
1995 1994
Finished goods $ 31
$ -0-
Work in process 25,801
1,107
Materials and supplies 1,571
428
_______ _______
$
27,403 $ 1,535
====== ======
Property, Plant and Equipment - Property, plant and equipment contributed by
the venturers has been recorded at the venturers' carrying values. Assets
acquired and mine development costs capitalized subsequent to organization of
the Joint Venture, including interest on funds borrowed to finance mine
development, are stated at cost. Such capitalized interest amounted to $2,937
in 1995, $2,199 in 1994 and $621 in 1993. Depreciation, depletion and
amortization is provided either on a straight-line basis over the estimated
useful lives of the assets or on a units-of-production method.
The carrying value of the Joint Venture's property, plant and equipment is
evaluated periodically based upon a number of factors, including undiscounted
estimated future net cash flows and management's plans to develop the assets.
If conditions warrant, impairment expense is recorded.
Exploration and Development - Exploration costs incurred in the initial
evaluation of new mineral properties are expensed as incurred. Costs incurred
to acquire mineral rights, rehabilitate or expand the capacity of the mine or
develop areas in advance of production, which are expected to be recovered in
the future, are capitalized.
Relamation - The Joint Venture accrues estimated final reclamation costs of
mined properties over the estimated life of the mine on a units-of-production
basis.
Income Taxes - Income taxes are not recorded by the Joint Venture, since any
taxable income or loss is reported on the respective tax returns of the
venturers.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in these financial statements
and accompanying notes. Actual results could differ from those estimates.
2. JOINT VENTURE CONTRIBUTIONS AND DISTRIBUTIONS
The Amended Joint Venture Agreement defines an Initial Phase that will end when
$58 million of Net Proceeds (as defined) has been distributed to the venturers,
80% to PPMC and 20% to GCG. After the Initial Phase, the Joint Venture will
distribute metal in-kind, 67% to PPMC and 33% to GCG. The Amended Joint
Venture Agreement also provides for a minimum annual distribution of $250 to
GCG during the Initial Phase. Beginning in 1994, these minimum annual
distributions are recoupable against GCG's share of any Net Proceeds. No Net
Proceeds, other than the minimum annual distributions, may be distributed until
repayment of existing loans made by the venturers to the Joint Venture has
occurred.
Pursuant to the terms of the Amended Joint Venture Agreement, PPMC contributed
net assets of the Victor Mine to the Joint Venture effective March 31, 1992.
The Victor Mine, also located in the Cripple Creek District, includes mineral
rights to 139 acres and a processing facility. Operations were suspended at
the Victor Mine in January 1986 due principally to low gold prices, but mining
resumed in 1991 and processing began in January 1992.
3. INITIAL LOANS PAYABLE TO PPMC
During the Initial Phase, PPMC lends the Joint Venture all funds needed for
operations and mine development (the "Initial Loans"). Except for the minimum
annual distributions to GCG, the Initial Loans and interest thereon must be
repaid prior to distribution of Net Proceeds to the venturers. The terms of
the Initial Loans do not require scheduled repayments and there is no maturity
date. The Initial Loans payable to PPMC bear interest at a rate of prime plus
2% (10.75% at December 31, 1995, and 9.5% at December 31, 1994), compounded
annually. In 1995, 1994 and 1993, interest on the Initial Loans was $12,444,
$5,455 and $3,354, respectively. The face value of the loans approximates
fair value.
4. SUPPLEMENTAL CASH FLOW INFORMATION
The Joint Venture had the following non-cash financing and investment
activities:
Year Ended December 31,
1995 1994 1993
Non-cash interest on Initial Loans Payable
to PPMC capitalized to property $ 2,937 $ 2,199
$ 621
Joint Venture cash receipts are received by PPMC and payroll expenditures are
paid by PPMC and are recorded as corresponding increased of decreased to the
Initial Loan account. Such cash receipts and expenditures are reflected in the
related underlying accounts in the statement of cash flows.
5. RELATED-PARTY TRANSACTIONS
In the normal course of business, PPMC charges the Joint Venture for its costs
and expenses incurred on behalf of the Joint Venture, including salaries of its
employees performing work directly for the benefit of the Joint Venture. Total
charges to the Joint Venture from PPMC related to such costs were $12,847,
$6,435 and $5,628 during 1995, 1994 and 1993, respectively. In addition, PPMC
is paid a management fee of the lesser of the actual costs incurred of 3% of
equipment purchases and 7% of allowable cash costs. Allowable cash costs
exclude labor, equipment purchases, management fees, property rentals and
royalties. Total management fees charged to the Joint Venture from PPMC were
$1,124 in 1995, $972 in 1994 and $1,386 in 1993.
The Joint Venture leases certain mine equipment from PPMC. The leases may be
renewed annually, at the option of the Joint Venture. In August 1994, lease
charges were suspended by PPMC until active mining resumed in January 1995.
Total charges to the Joint Venture from PPMC related to such leases were
$1,279, $692 and $1,518 during 1995, 1994 and 1993, respectively.
Sales to a refiner, who is an affiliate of PPMC through common ownership,
amounted to $54 and $2,095 for the years ended December 31, 1995 and 1994,
respectively. Sales to the affiliated refiner were made at prevailing market
terms.
6. COMMITMENTS AND CONTINGENCIES
In 1994, the Joint Venture entered into a sale leaseback transaction with an
unrelated party for certain mobile equipment. The sale price was equal to the
Joint Venture's carrying value. The lease meets the criteria of an operating
lease. Rentals under leases which meet the criteria of operating leases were
approximately $2,882, $1,832 and $1,832 during 1995, 1994 and 1993,
respectively. Future rental payments under noncancelable leases are as follows:
For the Year Ended December 31:
1996
$ 1,535
1997
1,595
1998
1,649
1999
1,927
2000
1,941
Thereafter
1,711
________
$ 10,358
========
The Joint Venture leases various mining claims. As a result, the Joint Venture
is required to pay certain annual amounts and/or royalties in order to maintain
these titles and leases. Future minimum payments under advance royalty
agreements are as follows:
For the Year Ended December 31:
1996
$ 140
1997
50
1998
50
1999
50
2000
50
Thereafter
200
________
$ 540
========
The Company is involved in certain litigation in the normal course of business.
Management believes these matters will be resolved without a material adverse
effect on the Joint Venture.
* * * * *
Consent of Independent Auditors
The Board of Directors
Golden Cycle Gold Corporation
We consent to the incorporation by reference in the Registration Statement (No.
33-62952) on Form s-8 of Golden Cycle Gold Corporation of our report dated
January 24, 1996, relating to the balance sheets of Golden Cycle Gold
Corporation as of December 31, 1995 and 1994, and the related statements of
operations, shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1995, which report appears in the December
31, 1995 annual report on Form 10-K of Golden Cycle Gold Corporation.
KPMG Peat Marwick LLP
Denver, Colorado
March 20, 1996