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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 1O-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
Commission file number 0-14329
CANYON RESOURCES CORPORATION
(a Delaware corporation)
84-0800747
(I.R.S. Employer Identification No.)
14142 Denver West Parkway, Suite 250, Golden, Colorado 80401
Registrant's telephone number: (303) 278-8464
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
and Warrants to Purchase Common Stock
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the 19,739,607 shares of the registrant's voting
stock held by non-affiliates on March 1, 1996 was approximately $64,548,515.
At March 1, 1996, there were 25,943,459 shares of the registrant's common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the 1995 Annual Meeting to be filed within 120 days after
the fiscal year end (Item 11 in Part III).
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CANYON RESOURCES CORPORATION
FORM 10-K
YEAR ENDED DECEMBER 31, 1995
TABLE OF CONTENTS
ITEM
NUMBER PAGE
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PART I
1. Business 1
2. Properties 8
3. Legal Proceedings 27
4. Submission of Matters to a Vote of Security Holders 29
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters 30
6. Selected Financial Data 31
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 32
8. Financial Statements 40
9. Disagreements on Accounting and Financial Disclosure 63
PART III
10. Directors and Executive Officers of the Registrant 64
11. Executive Compensation 68
The information required by this item appears in the Company's
Proxy Statement for the 1996 Annual Meeting to be filed within
120 days after the end of the fiscal year and is incorporated
by reference in this Annual Report on Form 10-K.
12. Security Ownership of Certain Beneficial Owners and Management 68
13. Certain Relationships and Related Transactions 71
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 72
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PART I
ITEM 1. BUSINESS
GENERAL
Canyon Resources Corporation, a Delaware corporation (the Company or
Canyon) is a Colorado-based company which was organized in 1979 to explore,
acquire, develop, and mine precious metal and other mineral properties. The
Company or Canyon is used herein to refer to all of the wholly-owned and
majority-owned subsidiaries of Canyon Resources Corporation. Since 1986 the
Company has been a reporting company and its securities have been traded on
NASDAQ.
The Company is involved in all phases of the mining business from early
stage exploration, exploration drilling, development drilling, feasibility
studies and permitting, through construction, operation and final closure of
mining projects.
The Company has gold and industrial mineral production operations in the
western United States. The Company conducts exploration activities in the search
for additional valuable mineral properties in the western United States, and in
a number of areas throughout Latin America and Africa. The Company's exploration
and development efforts emphasize precious metals (gold and silver) and
industrial minerals.
Once acquired, mineral properties are evaluated by means of geologic
mapping, rock sampling, and geochemical analyses. Properties having favorable
geologic conditions and anomalous geochemical results usually warrant further
exploration by the Company. In almost all cases, exploration or development
drilling is required to further test the mineral potential of a property.
Properties which have a demonstrated inventory of mineralized rock of a
potentially economic nature are further evaluated by conducting various studies
including calculation of tonnage and grade, metallurgical testing, development
of a mine plan, environmental baseline studies and economic feasibility studies.
If economics of a project are favorable, a plan of operations is developed and
submitted to the required governmental agencies for review. Depending on the
magnitude of the proposed project and its expected environmental impact, a
vigorous environmental review may be required prior to issuance of permits for
the construction of a mining operation.
The Company conducts a portion of its mineral exploration and development
through joint ventures with other companies. The Company has also independently
financed the acquisition of mineral properties and conducted exploration and
drilling programs and implemented mine development and production from mineral
properties in the western United States and exploration programs in Latin
America and Africa. (See "Item 2 - Properties").
The Company is continually evaluating its properties and other properties
which are available for acquisition, and will acquire, joint venture, market to
other companies, or abandon properties in the ordinary course of business
subsequent to the date hereof.
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OPERATIONS
During 1995, the Company continued production of gold and silver from its
Kendall Mine near Lewistown, Montana. The last new ore at Kendall was placed on
a leach pad in January, 1995. Continued leaching of all ore placed on leach pads
since inception occurred throughout 1995, with the production of 16,624 ounces
of gold and 7,429 ounces of silver during the year. Extensive reclamation
activities, such as recontouring the waste-rock piles and covering them with
topsoil and revegetating abandoned areas, occurred at Kendall during 1995. As of
January 1, 1996, an estimated 7,000 ounces of recoverable gold remained in the
two leach pads. (See "Item 2 - Properties - Production Properties - Kendall
Mining District"). In general at the Kendall Mine, gold production declines
during winter months as the colder temperatures reduce the rate of gold
dissolution by the leach solutions.
In 1995, the Company, through its wholly-owned subsidiary, CR Minerals
Corporation, expanded its diatomaceous earth production and marketing and sales
of diatomite products. Diatomaceous earth or diatomite is an industrial mineral
that has a wide variety of uses. Mining and processing of the diatomite occur in
western Nevada and marketing of the products is carried out in the United States
and abroad (See "Item 2 - Properties - Production Properties - Fernley Diatomite
Property").
During 1995, approximately 71% of the Company's revenue was derived from
the Kendall Mine production of gold and silver. In 1996, as production from the
Kendall Mine further declines and the Briggs Mine begins production, it is
anticipated that approximately 20% of revenues will be derived from the Kendall
Mine and approximately 56% from the Briggs Mine. In subsequent years, the Briggs
Mine will dominate production revenues until the McDonald project is placed into
production.
FINANCING
On March 26, 1996, the Company completed a private placement in the amount
of $12.1 million ($11.3 million net of expenses). The offering was completed at
a price of $3.00 per unit which included one share of common stock (4,034,333
total shares) and one-half warrant (2,017,167 total warrants). Each whole
warrant entitles the holder to purchase one share of common stock at an exercise
price equal to $3.75 per share. The warrants expire on March 25, 1999. The
Company intends to file a Registration Statement under the Securities and
Exchange Act of 1933 in respect of the common shares, the warrants, and the
common shares underlying the warrants and use its best efforts to cause such
Registration Statement to become effective as soon as practical. In the event
that the Registration Statement does not become effective on or before the 90th
day following the completion of the private placement, each purchaser of units
will be issued an additional 1/10 of one common share and 1/20 of one warrant
for each unit purchased. The Company's planned use of proceeds are for
exploring properties within and in proximity to the Briggs claim block,
continuing to fund its share of expenditures on the McDonald Project,
exploration work on select foreign properties, particularly in Brazil, and
for general corporate purposes. This financing is expected to adequately
capitalize the Company for the next two years consistent with its present
objectives.
On December 6, 1995, CR Briggs Corporation, a wholly owned subsidiary of
the Company secured a mine financing for development of the Briggs Mine in
Southern California. The financing was completed by Banque Paribas, Bayerische
Vereinsbank AG, and NM Rothschild & Sons Limited and consists of a $34 million
credit facility. This facility is composed of 3 tranches: tranche A is a $25
million gold loan, tranche B is a $5 million cash loan, and tranche C is a $4
million cost-overrun facility. Tranche A portion of the facility consisted of
borrowing 64,425 ounces of gold and immediately selling those ounces at the then
(December 21, 1995) current market price of $388.05 per ounce to raise $25
million. Interest is paid quarterly with a total rate of 2 1/8% plus the gold
lease rate which floats with
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the market and will adjust quarterly. The 3-month gold lease rate was 3.2% when
the loan was monetized and as of February 7, 1996, this rate had decreased to
1.5%. Tranche B portion of the facility consists of a cash loan which is in the
amount of $5 million. Interest is paid quarterly with a total rate of 4 1/8%
plus LIBOR which will adjust quarterly. The 3-month LIBOR rate was 5 3/4% when
the first draw-down was made and as of February 9, the rate had decreased to 5
3/16%. Draw-downs on Tranche C are only expected if the project experiences cost
overruns. The interest rate for Tranche C will be calculated in the same manner
as that of Tranche B. The loan facility will be paid back over a six-year period
from start of gold production. The gold loan agreement contains, among other
things, the following provisions:
1. Canyon Resources Corporation guarantees the gold loan obligations of
CR Briggs Corporation.
2. The loan facility is collateralized by a first mortgage lien on the
property, non-leased assets of CR Briggs Corporation and a pledge of
Canyon's stock in CR Briggs.
3. Mandatory prepayments of principal in reverse order of maturity, are
required out of 30% of excess cash flow, as defined in the loan
agreement.
4. Within 3 years of project completion an additional 70,000 recoverable
ounces of gold processable at the Briggs Mine processing facility must
be identified, or 100% of excess cash flow will then be used to prepay
principal.
5. Canyon Resources must maintain $2 million in an escrow account which
will be used in the event of project cost overruns before the $4
million Tranche C facility can be drawn. Any funds remaining from this
$2 million will be released back to the Company upon completion of
project construction.
6. A condition of the loan agreement is that certain gold hedging will be
undertaken to assure that a portion of the future gold production
costs are covered by such hedging. In December, 1995, a hedge program
was put in place which consisted of forward sales of 186,600 ounces
over the next three years with prices ranging from $395 to $424 per
ounce. In addition, 21,600 puts with a strike price of $380/oz. were
purchased by selling 10,800 calls with a strike price of $403/oz.
7. The loan agreement places limitations on additional indebtedness
during the term of the loan.
8. The Company is required to maintain a debt service reserve account
which is equal to 3 months of debt service requirement funded out of
project cash flow.
In addition to the gold loan facility described above, Caterpillar
Financial Services granted a $10 million facility for leasing mining and
electrical generation equipment for the Briggs Mine. The Company anticipates
using approximately $8.5 million of the facility. The equipment leases will have
a 5-year term.
On June 2, 1993, the Company sold $22.0 million of Subordinated Convertible
Debentures which are due June 1, 1998. Net proceeds to the Company from the sale
was $20.5 million. Interest is payable
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semi-annually on June 1 and December 1 at a rate of 6% per annum. Interest
payments in 1995 totalled $1,292,250. The debentures are convertible at the
option of the holder any time into common shares at the rate of $3.45 of
outstanding principal per share. During 1995, $725,000 of principal was
converted into 210,145 shares of common stock. After June 1, 1996, the Company,
at its option, may redeem the debentures by issuing common stock at the lower of
$3.45 per share or at a rate equal to 94% of the trading common stock price at
the time of redemption or by payment in cash at par.
On May 26, 1993, the Company secured a $4.0 million gold loan and $1.9
million Letter of Credit (Credit Facility) with N M Rothschild (Rothschild). The
Company defeased the Letter of Credit over the term of the Credit Facility by
depositing equivalent cash with a financial institution. The gold loan portion
was monetized at $374.50 per ounce (10,681 ounces) and was repaid by December
31, 1994 from gold production at the Kendall Mine in varying quarterly
installments beginning in the third quarter 1993. Additionally, as part of the
agreement, the Company issued to Rothschild a warrant to purchase 200,000 shares
of common stock at a price of $2.875 per share. One-half of the warrant was
exercised in 1993 resulting in proceeds to the Company of $287,500. A
replacement warrant was issued for the remaining 100,000 shares which is
currently outstanding and due to expire on April 12, 1996.
As part of equity financings in 1990 and 1992, the Company issued warrants
to purchase 3,943,632 shares of common stock, exercisable at $3.50 per share
until December 31, 1994. The Company extended the expiration date of these
warrants to April 12, 1996. No warrants have been exercised to date in
connection with these financings.
AVAILABILITY OF MINERAL DEPOSITS; COMPETITION AND MARKETS
The Company continually explores for and obtains additional mineral
properties in order to secure gold deposits for future development. Gold
mineralization is found in many countries and in many different geologic
environments, and in most cases is accompanied by the presence of silver
mineralization. Country politics and tax structure are important criteria, as
well as the geologic favorability, in the decision to invest in exploration in a
country. Since many companies are engaged in the exploration and development of
gold properties and often have substantially greater technical and financial
resources than the Company, the Company may be at a disadvantage with respect to
some of its competitors in the acquisition and development of suitable mining
prospects. Mineral properties in an early stage of exploration, or not currently
being explored, are often relatively inexpensive to acquire; and the Company
believes that the expertise of its staff and its ability to rapidly evaluate and
respond to opportunities allow it to compete effectively with many companies
having far greater financial resources. In recent years the political
environments in many countries of the world have become favorable to investment
in the mining industry. The Company believes that, in particular, many of such
countries in Latin America and Africa host favorable geologic conditions for the
occurrence of sizeable gold deposits. For these reasons, the Company has
expanded its exploration for gold, silver and other precious metals from the
Western United States to various countries in Latin America and Africa.
In general, larger and higher grade gold deposits can be produced at a
lower cost per ounce than smaller and lower grade deposits. Also deposits that
can be mined by open pit methods usually can be exploited more economically than
those which must be mined by underground methods. The Company believes that the
Briggs gold deposit and the McDonald gold deposit will have production costs
close to or below the world-wide average for gold mines. There are numerous
large gold mining operations throughout the world owned by other companies that
are able to produce gold for a lower cost than the
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Company. Demand for gold and other factors in the financial marketplace have
more of an impact on the gold price than does the production of larger, lower
cost producers. Therefore, the principal competitive factor for the Company is
in the acquisition of suitable mining prospects and not in the marketing of
gold.
Diatomite is a naturally occurring amorphous silica formed by the
silicification of the skeletal remains of single cell aquatic plants. The
Company's diatomite deposits are located in Nevada. Since these deposits are of
such a high quality and are of a sufficient quantity to supply enough material
to meet production and sales forecasts for several decades, the Company does not
actively explore for additional diatomite deposits at the present time. The
Company's diatomite deposits have a high natural brightness which makes them
suitable in many filler applications without calcination. Although there are
many diatomite deposits throughout the world, few of these have the natural
brightness to allow them to compete with the Company's products without
calcination. In addition to being an added expense, calcination of diatomite
greatly increases the crystalline silica content, which can create health
problems. (See "Item 2 - Properties - Production Properties - Fernley Diatomite
Property").
The marketing of all minerals is affected by numerous factors, many of
which are beyond the control of the Company. Such factors include the price of
the mineral in the marketplace, imports of minerals from other nations, demand
for minerals, the availability of adequate refining and milling facilities, and
the market price of competitive minerals used in the same industrial
applications. The market price of minerals is extremely volatile and beyond the
control of the Company. Gold prices are generally influenced by basic
supply/demand fundamentals. The market dynamics of supply/demand can be heavily
influenced by economic policy, i.e., central banks sales/purchases, political
unrest, conflicts between nations, and general perceptions about inflation.
Fluctuating metal prices may have a significant impact on the Company's results
of operations and operating cash flow. Furthermore, if the price of a mineral
should drop dramatically, the value of the Company's properties which are being
explored or developed for that mineral could also drop dramatically and the
Company might not be able to recover its investment in those properties. The
decision to put a mine into production, and the commitment of the funds
necessary for that purpose, must be made long before the first revenues from
production will be received. During the last five years, the average annual
market price of gold has fluctuated between $344 per ounce and $384 per ounce.
Price fluctuations between the time that such a decision is made and the
commencement of production can change completely the economics of the mine.
Although it is possible to protect against price fluctuations by hedging in
certain circumstances, the volatility of mineral prices represents a substantial
risk in the mining industry generally which no amount of planning or technical
expertise can eliminate. The Company's practice has generally been to sell its
minerals at spot prices, unless price hedging was required in connection with
securing loan facilities.
CUSTOMERS
During 1995, the Company sold its gold and silver production primarily to
one precious metal buyer. Given the nature of the commodities being sold and
because many other potential purchasers of gold and silver exist, it is not
believed that the loss of such buyer would adversely affect the Company. The
Company's diatomite products are sold to numerous customers and in several
markets, and the loss of any one customer would not materially affect the
Company's diatomite operations.
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ENVIRONMENTAL MATTERS
The exploration, development, and production programs conducted by the
Company in the United States are subject to local, state, and federal
regulations regarding environmental protection. Many of the Company's mining and
exploration activities are conducted on public lands. The U.S.D.A. Forest
Service extensively regulates mining operations conducted in National Forests.
Department of Interior regulations cover mining operations carried out on most
other public lands. All operations by the Company involving the exploration for
or the production of minerals are subject to existing laws and regulations
relating to exploration procedures, safety precautions, employee health and
safety, air quality standards, pollution of water sources, waste materials,
odor, noise, dust and other environmental protection requirements adopted by
federal, state, and local governmental authorities. The Company may be required
to prepare and present to such authorities data pertaining to the effect or
impact that any proposed exploration for or production of minerals may have upon
the environment. The requirements imposed by any such authorities may be costly,
time consuming, and may delay operations. Future legislation and regulations
designed to protect the environment, as well as future interpretations of
existing laws and regulations, may require substantial increases in equipment
and operating costs to the Company and delays, interruptions, or a termination
of operations. The Company cannot accurately predict or estimate the impact of
any such future laws or regulations, or future interpretations of existing laws
and regulations, on its operations.
The United States has an extensive framework of environmental legislation
that undergoes constant revision. The Company participates in the legislative
process through independent contact with legislators and through trade
organizations to assist legislative bodies in making informed decisions.
Historic mining activities have occurred on certain properties held by the
Company. In the event that such historic activities have resulted in releases or
threatened releases of hazardous substances to the environment, potential for
liability may exist under federal or state remediation statutes. The Company is
not aware of any pending claims under these statutes at this time, and cannot
predict whether any such claims will be asserted in the future.
The Company has spent approximately $1.5 million on reclamation at the
Kendall Mine through December 31, 1995, and expects to spend approximately $0.7
million during 1996 and a further $2.0 million beyond 1996 through mine closure.
At December 31, 1995, the Company has fully accrued for its remaining
anticipated reclamation expenditures. The Company currently maintains a $1.9
million bond with the Montana Department of Environmental Quality to ensure
appropriate reclamation.
As described in "Item 2 - Properties", the cost of acquiring environmental
permits at the Briggs property exceeded $4 million, and the Company has now
obtained all permits required for the construction of the Briggs Mine. Certain
legal proceedings described in "Item 2 - Properties" have been instituted to
challenge the issue of the Briggs Mine permits. The cost of acquiring permits
for the McDonald project could exceed $12.0 million ($3.3 million to the
Company). The Blackfoot River, which flows within a mile of the McDonald
project, has received extensive publicity in the environmental press. Compliance
with existing federal and state laws will insure that the McDonald project will
not cause undue harm to the river. The Company cannot accurately predict or
estimate the level of publicity or environmental activism that could arise
around the project, nor can it predict what effect, if any, such publicity or
activism will have on the ability to bring this project into operation.
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Environmental regulations add to the cost and time needed to bring new
mines on line and add to operating and closure costs for mines already in
operation. As the Company places more mines into production, the costs
associated with regulatory compliance can be expected to increase. Such costs
are a normal cost of doing business in the mining industry, and may require
significant capital expenditures in the future. Additional information and the
potential effects of environmental regulation on specific Company properties are
described in "Item 2-Properties."
To date, the Company has done very little work on its Latin American and
African properties which involved surface disturbance. A limited amount of
trenching and road building was conducted in the Dominican Republic, but has
been totally reclaimed. Although some of the countries in which the Company
works have not as yet developed environmental laws and regulations, it is the
Company's policy to adhere to North American standards in our foreign
operations. The Company cannot accurately predict or estimate the impact of any
future laws or regulations developed in foreign countries on our operations.
EMPLOYEES
As of March 1, 1996, the Company and its wholly-owned subsidiaries employed
114 persons, which number may adjust seasonally. None of the Company's employees
are covered by collective bargaining agreements.
PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS & GOVERNMENT
CONTRACTS
Other than (i) interests in mining properties granted by governmental
authorities and private landowners; and (ii) the use of the tradename "DiaFil"
for the marketing of its diatomaceous earth products, the Company does not own
any material patents, trademarks, licenses, franchises or concessions.
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ITEM 2. PROPERTIES
PRODUCTION PROPERTIES
KENDALL MINING DISTRICT
General
The Kendall Mine near Lewistown, Montana, was developed as an operating
open-pit, heap-leach gold mine in September 1988 under the management of the
Kendall Venture, a joint venture between the Company and Addwest Gold, Inc.
(Addwest). On January 26, 1990, the Company acquired all of the issued and
outstanding common stock of Addwest and through its wholly-owned subsidiary, CR
Kendall Corporation, became the operator and sole owner of the operating
interest in the Kendall Mine.
Through 1995, the Kendall Mine operation leached gold and silver from
crushed ore on a year-round basis. Mining and crushing of all remaining ore was
completed in January 1995. Leaching of the remaining gold in the heap leach pads
will continue through 1996.
Operations
The Kendall Mining District is located approximately 20 miles north of
Lewistown, Montana, and is accessible by paved U.S. highway and graded dirt
roads. The property rights controlled by the Company include (i) approximately
253.61 acres in patented claims and fee land; (ii) mining leases on
approximately 1,932 acres in 71 patented mining claims and fee land. The
recovery facilities include a 1.6 million ton heap leach pad and a 9 million ton
heap leach pad of crushed ore which are still undergoing leaching; process ponds
for retention of barren and pregnant solutions, a 1,000 gpm carbon adsorption
plant, a complete assay laboratory, and facilities for production of gold-silver
dore bars.
Mining operations were terminated in January, 1995, with the exhaustion of
the known orebodies. In 1995, a total of 21,500 tons of ore containing 1,354
ounces of gold and 24,000 tons of waste were mined. The Kendall Mine produced
16,624 ounces of gold and 7,429 ounces of silver during 1995. As of January 1,
1996, approximately 7,000 ounces of recoverable gold remained in the two leach
pads. Cyanide-bearing solutions are applied to the crushed ore through a drip
irrigation system that, during the winter, is buried within the heap. In
general, gold production declines during the winter at the Kendall Mine, due to
the lower temperatures and resulting slower dissolution rate of gold.
It is anticipated that approximately 7,000 ounces of gold will be produced
in 1996. This lower production is due to cessation of new ore mining and
crushing in January 1995. Gold production is expected to cease in 1997.
From April 1988 through December 1993, a total of 1,090 drill holes
totalling 332,619 feet were drilled in the Kendall Mining District. No drilling
has been done since 1994. Drilling was conducted along a two mile long
mineralized zone and resulted in the discovery or delineation of six separate
deposits. All known targets warranting drilling have been tested and no further
exploration work is planned for the Kendall Mining District.
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During 1995, the Company's capital expenditures at Kendall were
approximately $0.17 million, primarily related to closure construction
activities.
Statistical production and financial data of the Kendall Mine for the
period from 1991 through 1995 are shown on the following table.
KENDALL MINE OPERATIONS
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1995 1994 1993 1992 1991
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PRODUCTION
Tons Mined (waste and ore)(000) 45 7,570 6,183 7,117 3,928
Tons Ore Mined (000) 21 1,588 1,737 1,546 1,501
Gold Grade of Ore (oz/ton) 0.079 0.044 0.049 0.059 0.053
Actual Strip Ratio (tons waste/tons ore) 1.1:1 3.8:1 2.6:1 3.6:1 1.6:1
Gold Production (oz) 16,624 48,391 54,203 59,857 57,070
Silver Production (oz) 7,429 22,503 29,218 18,229 10,700
Recoverable Gold Inventory (oz) 7,000 20,608 13,344 14,420 20,371
(unleached gold in heap and ore stockpile)
FINANCIAL (NET TO CANYON)
Ounces of Gold Sold(1) 16,386 45,877 51,113 56,665 54,639
Average Gold Price Realized ($/oz) 386 374 353 376 385
Revenue From Mine Operations ($000) 6,331 17,154 18,027 21,288 21,019
Operating Cost/Ore Ton Mined ($)(2) --(3) 6.87 6.55 7.67 7.89
Operating Cost/Gold Ounce Sold ($)(2) 362 238 223 209 217
Operating Earnings ($000) 391(4) 6,240 6,650 9,432 9,173
Capital Expenditures ($000) 168 477 1,115 1,551 3,332
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(1) Gold production net to Canyon after payment in kind of 5% royalty.
(2) Includes royalty, severance taxes, overhead, and reclamation reserve.
(3) Not meaningful, as active mining of new ore ceased in January, 1995.
(4) Prior to provision for final site restoration of $1.1 million.
Environmental Regulation & Reclamation
The Kendall Mine operates under permits issued by the Montana Department of
Environmental Quality (DEQ), and other regulatory agencies. A life of mine
permit was granted by these agencies on November 1, 1989. The Company recently
completed a land exchange with the U.S. Bureau of Land Management (BLM). In the
exchange, the Company received about 150 acres of BLM land within the Kendall
Mine permit area in return for about 120 acres of patented mining claims outside
the permit area. Because of this exchange, the BLM no longer manages any land
within the permit area and no longer
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holds regulatory authority over the Kendall Mine. The Company has filed a final
closure plan with the DEQ. This plan provides for enhanced closure measures not
contemplated in the original permit. The DEQ approved the reclamation portion of
the closure plans, and is reviewing the water quality and monitoring plans.
The Kendall Mine uses internal and external technical experts to monitor
and insure environmental compliance. The Company believes the operation is
currently in material compliance with all environmental and safety regulations.
The Montana Department of Environmental Quality requires that the Company
maintain a $1,869,000 reclamation bond to ensure appropriate reclamation of the
Kendall Mine. Reclamation has been ongoing throughout the life of the operation.
Disturbed areas are contoured and topsoil is replaced and reseeded as soon as
possible. During 1995, approximately 11 disturbed acres were reclaimed, an
additional 16 acres were recontoured and prepared for reclamation, and no
additional acres were disturbed.
As of the end of January 1995, all identified mineable ore reserves have
been mined. Final reclamation will require recontouring of waste rock dumps,
roads and other areas and redistribution of topsoil and reseeding of some
disturbed areas. Reclamation of the heap will begin only when gold recovery by
continued leaching becomes no longer profitable. Rinsing of the spent ore may
require two or more years before final closure of the heap can begin. Bond
release on the property will only take place once the regulatory agencies are
satisfied that the mine has met all reclamation requirements. There is no
assurance of agency satisfaction with mine closure.
FERNLEY DIATOMITE PROPERTY
The industrial mineral activities of the Company are conducted through its
wholly-owned subsidiary, CR Minerals Corporation. The Company produces and
markets diatomite under the tradename of DiaFil and sells the product both by a
distributor network as well as directly to customers. Diatomite or diatomaceous
earth consists of siliceous skeletal remains of single cell aquatic plants. The
unique properties of diatomite allow it to be used in a wide variety of
applications. The main characteristics of diatomite that are important to its
use in industrial products are unique structure, large surface area, high
absorption of liquids, mild abrasive qualities, low bulk density, low thermal
conductivity, chemical inertness, high silica content, and low impurities.
Diatomite is used to manufacture a broad variety of industrial materials, such
as paints, plastics, asphalt coatings, insecticides, fertilizers, and polishes.
The Company has developed a wide range of diatomite products. These products are
differentiated based on particle size distribution, which yields different
physical properties.
CR Minerals has established a distributor network in the United States,
Canada, and throughout the world for assisting in the marketing of its
diatomite. These distributors sell into the nonagricultural markets - paint,
plastics, asphalt coatings, and other filler applications. Currently CR Minerals
sells directly to agricultural users and wholesalers. CR Minerals maintains its
administrative offices in Golden, Colorado. Sales orders are placed at this
office and transferred to the Fernley production site in Nevada after scheduling
the shipping date. Accounting, inventory control, transportation, and billing
are handled in Golden.
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CR Minerals conducts mining and hauling with its own equipment and staff.
The diatomaceous earth ore is mined from an open-pit and hauled by truck
approximately 15 miles to the diatomite plant in Fernley, Nevada. Initially the
diatomite is crushed to aggregate size, and then simultaneously milled and dried
in a high volume stream of hot air. The dried diatomite is collected in cyclones
for subsequent size classification by mechanical means or air classification.
The coarser and denser accessory minerals are removed, and the diatomite
particles can then be segregated by size fraction. Generally, the finer the size
fraction, the higher the value. The processing facility has a capacity of 40,000
tons per year of processed diatomite and can load finished product in bulk rail
cars, bulk bags, or standard 50 and 55 pound bags which can be shipped by rail,
truck, and as ocean cargo. The processing facility has been in operation since
the 1950's. Since acquisition in 1987, the Company has made capital improvements
including additional air classification equipment, storage bins, and bulk bag
loading facilities. Ample diatomite reserves exist for over 25 years production
at near capacity rates.
The plant produces a natural diatomite product that is composed mainly of
noncrystalline silica. DiaFil products typically contain less than 1%
crystalline silica. Competitive calcined diatomite products contain up to 65%
crystalline silica. Long-term exposure to crystalline silica is believed to
cause pneumoconiosis or fibrotic lung disease. Recent work by the International
Agency for Research on Cancer (IARC) of the World Health Organization has
highlighted the link between cancer and crystalline silica. The Company believes
that the low amount of crystalline silica in its DiaFil products is aiding in
its marketing activities.
The Company's diatomite operations are subject to local, state and federal
laws and regulations. These laws and regulations primarily apply to air quality
and plant emissions resulting from mining, crushing, drying, size
classification, and packaging operations. Pursuant to recently enacted Nevada
statutes, the Company has submitted mining reclamation plans for three diatomite
deposits. The Company currently mines diatomite from one of these deposits and a
prior operator mined from the other two deposits. All of the deposits have been
mined by previous operators under regulatory policies much different than those
in existence today. The Company anticipates, but cannot guarantee, that the
permits will be issued with full acknowledgement of the pre-law disturbance.
Regulatory agencies have not issued mining permits for any of the three
deposits, but have required the Company to post a reclamation assurance of
$24,785 in connection with one of the applications. The Company anticipates that
reclamation assurances will be required for the other applications at some time,
possibly an additional $60,000.
Mining is currently being conducted on private land owned by the Company.
Patent applications were filed in 1993 for claims that contain additional
diatomite deposits. Patents have not yet been issued. The land on which the
processing facility is located is leased from the Southern Pacific Railroad, but
the facilities are owned by the Company. This lease expires in September 2007
and requires monthly payments of $1,050.
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DEVELOPMENT PROPERTIES
BRIGGS PROJECT
General
The Briggs project, located on the west side of the Panamint Range, near
Death Valley, California was acquired by the Company in 1990. It is 16 miles
northeast of Trona and 35 miles northeast of Ridgecrest, in Inyo County,
California. Access from Trona is by 33 miles of paved and graded gravel roads.
The Company owns 100% of the Briggs project, subject to a 2% net smelter return
royalty and an additional 2% net smelter return royalty on all gold production
in excess of 400,000 ounces.
Briggs' holdings include 809 unpatented mining claims, 67 mill site claims
and 1 tunnel site claim that comprise an area of approximately 16,615 acres. The
passage of the Desert Protection Act in 1994 removed all of the Company's
holdings from Wilderness Study Areas. Most of Canyon's mining claims are now
located on land prescribed for multiple use management by the U.S. Bureau of
Land Management.
Financing
On December 6, 1995, CR Briggs, the Company's wholly owned subsidiary
closed a $34 million credit facility for the construction of the Briggs Mine.
See "Item 1 - Business" and "Item 8 - Notes to Financial Statements" for a
description of the transaction.
Exploration and Development
At the turn of the century numerous small gold mines and prospects were
active along the western slope of the Panamint Range, but all activity stopped
by World War II. Since the resurgence of gold exploration in the western United
States during the last 20 years, gold production in the Panamint Range resumed
intermittently on a small scale from two high-grade deposits. Moreover, in the
past several years, other companies have conducted drilling programs on mining
claims either within the perimeter of the Briggs claim block or on its
periphery.
Significant gold mineralization occurs within the Briggs claim block along
a six-mile long trend that includes the Briggs, Cecil R, Jackson, and Gold Tooth
prospects. In 1991, considerable drilling and exploration was conducted in each
of these areas. Since 1991, drilling has been conducted only on the Briggs
project. The Company plans to conduct further exploration, including drilling,
on several of these targets in 1996.
In 1992 and 1993, diamond drilling within the Briggs orebody obtained core
samples of gold ore for both metallurgical and crushing tests. Metallurgical
testing conducted to date indicates that if the ore is crushed to less than 1/4
inch, approximately 75-85% of the gold in the ore can be extracted by
conventional cyanide heap leaching methods.
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The Company completed a definitive Feasibility Study in February 1994.
Roberts & Schaefer Company of Salt Lake City, Utah was retained to conduct a
"Fatal Flaw Review" of all aspects of the Feasibility Study with the exception
of ore reserves; mine plan; mining capital and operating costs; land status;
permitting and environmental issues. Roberts & Schaefer Company also prepared
the Executive Summary for the Feasibility Study. Mine Reserves Associates, Inc.
of Wheat Ridge, Colorado, was retained to conduct the "Fatal Flaw Review" of the
ore reserves, mine plan, and mining capital and operating costs. Remy and
Thomas, Attorneys at Law, of Sacramento, California reviewed the environmental
and permitting aspects of the Feasibility Study. Chamberlin & Associates of
Littleton, Colorado provided an additional opinion on the gold recovery. The
"Fatal Flaw Reviews" concluded that the Briggs Gold Project is technically and
economically feasible.
Through the end of 1995, a total of 192,634 feet of drilling in 567 holes
has been completed at Briggs for exploration, condemnation, metallurgical, and
environmental purposes. The development drilling, on approximately 100 foot
centers, has defined 805,000 ounces of gold, contained within 32.2 million tons
of mineralized rock with an average grade of 0.025 ounce of gold per ton, using
a cutoff grade of 0.01 ounce of gold per ton.
The Feasibility Study, augmented by an economic update in August of 1995,
indicates that approximately 21.9 million tons of the Briggs deposit can be
mined economically at a $375 gold price. The 21.9 million tons of mineable ore
has an average grade of 0.030 ounce gold per ton, and contains 653,000 ounces of
gold with a strip ratio of 1.7:1 (waste tons to ore tons).
Patent application was made for the claims on the Briggs deposit during
1993, however no assurances can be made that patents will be issued.
With the completion of permitting and financing, construction of mine
facilities began on December 16, 1995. The initial construction period will last
approximately 7 months. Gold production will commence in the second half of
1996, after sufficient ore stacking and leaching to facilitate gold recovery has
occurred.
Environmental Regulation
In 1995 the U.S. Bureau of land Management (BLM) and Inyo County, as
co-lead agencies, completed a joint Environmental Impact Statement/Environmental
Impact Report (EIS/EIR) on the Briggs Project. Subsequently, those agencies, as
well as several other agencies, issued permits to the Briggs project. Excepting
permits issued by the air quality authority which require certain actions
following project construction, the permits issued to date are adequate for all
mine operations involving currently identified mineable reserves. A local
environmental group, allied with the Timbisha Shoshone Indian Tribe, have
initiated various actions in opposition to the Briggs permits. These actions are
more fully described under "Item 3 - Legal Proceedings". At present these legal
actions are having no effect on activities at the mine. No assurances can be
given regarding the outcome of these actions or the effects those outcomes might
have on the Company's ability to complete and operate the mine.
The BLM, Inyo County, the California Department of Conservation, and
the Lahontan Regional Water Quality Control Board (Lahontan) have jointly
required the Company to maintain a $3,030,000 reclamation bond to ensure
appropriate reclamation of the Briggs Mine. Additionally, Lahontan requires
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that the Company maintain a $1,010,000 bond to ensure adequate funds to mitigate
any "foreseeable release" of pollutants to state waters. These bonds are subject
to annual review and adjustment.
In 1994, the United States Congress passed the California Desert Protection
Act (CDPA), resolving surface management classifications for large portions of
BLM managed lands in the desert areas of California. The passage of the CDPA
released lands around the Briggs Project for multiple use management,
significantly reducing constraints on exploration and mine operations.
SEVEN-UP PETE JOINT VENTURE
General
Through its wholly-owned subsidiary, CR Montana Corporation, the Company
owns a 27.75% interest in the Seven-Up Pete Venture (SPV) which includes the
Seven-Up Pete gold deposit, the McDonald gold deposit, and the Keep Cool
exploration property. Phelps Dodge Mining Company is the operator of the SPV.
The Seven-Up Pete and McDonald properties are located six to eight miles
east of Lincoln and 45 miles northwest of Helena, in Lewis and Clark County,
Montana. Access to the properties is by dirt roads from a paved highway that
crosses the property. The SPV consists of approximately 35 square miles of
patented and unpatented mining claims and mineral leases of fee and state land,
in general subject to a 5% net smelter returns royalty. During 1994, the state
lease upon which substantially all of the currently identified McDonald orebody
is located was amended. The amendment extended the primary term for a period of
16 months beyond the time required for review and approval of permit
applications for development of the property, including the time required to
resolve any appeals of permit approvals. In addition, the lease may also be held
thereafter by the production of minerals in paying quantities or the payment of
a delay rental of $150,000 per month. The amendment also, along with similar
amendments to five other adjacent state leases, provides for cross-mining on all
six leases and the consolidation of the six leases under a single agreement.
The Company, during 1995, funded its 27.75% share of the operating budget
of the SPV. The Company will need to continue to contribute 27.75% of funds
required for venture expenditures onward in order to maintain its current
ownership interest in the venture.
Geology and Exploration
McDonald Property
During 1989 and 1990, exploration conducted on the McDonald property
included geophysical and geochemical surveys, preliminary metallurgical testing,
and drilling of 76 holes for a total of 41,331 feet. This early exploration
drilling discovered a gold deposit, estimated to contain at least 18 million
tons of mineralized rock of average grade of 0.03 ounce of gold per ton, and
also indicated the potential for a much larger deposit.
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In 1991, an aggressive exploration program was conducted and included
detailed geologic mapping, geophysical surveys, and a drill program of 196 holes
for a total of 176,216 feet. On November 18, 1991, the SPV announced the
discovery of a deposit containing 185 million tons of mineralized rock with an
average grade of 0.028 ounce of gold per ton. Preliminary metallurgical test
work indicated that the mineralized material is amenable to recovery of
approximately 75% of the contained gold in rock that is crushed and heap
leached.
In 1992, exploration drilling continued on the McDonald property and a Mine
Plan and Preliminary Feasibility Study were completed. A total of 232 holes with
172,790 feet of drilling was completed.
In 1993, exploration drilling continued and a definitive Feasibility Study
was completed. A total of 105 holes with 40,383 feet of drilling was completed,
bringing the total drilling footage for the McDonald property to 389,389 feet in
598 holes. Analysis of the drill data through the end of 1993 indicates that the
McDonald deposit contains 8.2 million ounces of gold within 414.4 million tons
of mineralized rock with an average grade of 0.020 ounce of gold per ton, using
a cutoff grade of 0.008 ounce of gold per ton.
The McDonald property is partially covered by a siliceous sinter deposited
by an ancient hot spring system. The sinter overlies shallow dipping volcanic
units which have been strongly fractured and mineralized. The gold
mineralization occurs primarily in a favorable rhyolitic volcanic unit.
The Feasibility Study, completed by Davy International, indicates that
205.1 million tons of the McDonald deposit, with an average grade of 0.025 ounce
of gold per ton and containing 5.2 million ounces of gold, can be mined
economically in an open-pit, heap-leaching operation. The study indicates that
mining and crushing of 121 million tons of ore above a 0.016 ounce of gold per
ton cutoff grade (with an average grade of 0.034 ounce of gold per ton) and
mining and direct loading onto the leach pad of an additional 84 million tons of
lower grade ore (averaging 0.012 ounce of gold per ton) could, with an expected
72% recovery of the contained gold, produce approximately 300,000 ounces of gold
per year over a 12-year mine life. The expected waste-to-ore ratio would be
2.1:1. Initial capital costs for the project, including pre-production
stripping, are expected to be approximately $188 million. Operating costs,
including royalty, severance and property taxes, and reclamation reserve, are
expected to be approximately $231 per ounce of gold produced.
Since the Feasibility Study was completed, additional drilling,
engineering, and metallurgical work have been conducted which provide a basis
for in-progress modifications of the feasibility analysis. The additional data
indicates the potential for mining and economic recovery of more gold from the
McDonald deposit than indicated in the earlier Feasibility Study.
Environmental baseline studies have been conducted since 1989, providing
the necessary information to design and site facilities for the proposed
McDonald gold mine. Baseline studies include air quality, meteorology, surface
water, groundwater, wildlife, fisheries, aquatics, vegetation, soils,
recreation, transportation, visual resources, wetlands, cultural resources, and
socioeconomics.
In 1994 the SPV completed environmental baseline and engineering studies
that demonstrate that the proposed McDonald gold mine can be operated in an
environmentally sound manner. This information was used to prepare and file an
application for Plan of Operations with the Montana
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Department of State Lands (recently reorganized under the Department of
Environmental Quality (DEQ)) in November 1994. The DEQ is reviewing the
application and has initiated preparation of an Environmental Impact Statement
(EIS) with the Montana Department of Natural Resources and Conservation (DNRC)
and the US Army Corps of Engineers (COE) as co-lead agencies.
The agencies have selected Morrison-Maierle Environmental, an experienced
Montana firm, to act as a third party contractor in preparing the EIS. The
contractor will complete the EIS under supervision of the lead agencies with the
SPV bearing all costs through an arrangement with the lead agencies. Subsequent
to contractor selection, the lead agencies have completed "scoping" and the
contractor is actively preparing the EIS. Scoping included four public meetings
in communities around the project and acceptance of written comments from
interested parties. The SPV expects that permits for the project could be issued
as early as the third quarter of 1997.
Seven-Up Pete Property
Between 1989 and 1993, exploration, bulk sampling, development studies,
metallurgical testing, and environmental baseline studies were conducted on the
Seven-Up Pete property. By 1993, the total drilling on the property was 378
holes for 159,410 feet of drilling. A draft preliminary Feasibility Study was
completed in early January 1993, updating an earlier September 1991 study.
The January 1993 Preliminary Feasibility Study for the Seven-Up Pete
property considered the development of the Seven-Up Pete deposit as a satellite
to the McDonald deposit. In this study, a revised estimate of the Seven-Up Pete
deposit was calculated as a mineable reserve of 10.3 million tons at an average
grade of 0.058 ounce of gold per ton. The SPV has determined that no additional
work on the Seven-Up Pete property should be carried out at present and efforts
should concentrate on the McDonald property.
The Seven-Up Pete property is covered by middle Tertiary andesitic volcanic
rocks. The most important controls on mineralization at Seven-Up Pete are north
to northwest-trending faults that have localized quartz-pyrite-precious metal
mineralization. The structures generally dip to the west and can be up to 150
feet wide. Gold and silver occur in high grade quartz veins that are localized
near the margins of the shear zone, as well as in lower grade shattered zones
between the high grade veins. Gold mineralization occurs as free gold as well as
submicroscopic particles associated with pyrite.
Environmental Regulation
The Seven-Up Pete deposit occurs on patented mining claims within a U.S.
National Forest. The McDonald deposit occurs on private and state lands. As with
all mining projects, careful environmental study and permitting will be required
before a mine can be developed on either property. There are no assurances that
all needed permits will be issued nor that, in the event they are issued, such
issuance will be timely, nor that conditions contained in permits issued by the
agencies will not be so onerous as to preclude construction and operation of the
project.
Mining activity in the United States is subject to the granting of numerous
permits under applicable Federal and State statutes, including, but not limited
to, the National Environmental Policy Act, the Clean Water Act, the Clean Air
Act, and the Montana Environmental Policy Act. It is not legal
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to engage in mining activity without securing the permits required by these and
other statutes. Initiation of gold production at the McDonald project will thus
require the granting of numerous permits, some of which are discretionary.
Major permits include the Operating Permit from the Montana Department of
Environmental Quality (DEQ), the Operating Plan from the Montana Department of
Natural Resources and Conservation (DNRC), the Air Quality Permit (DEQ), the
Montana Pollutant Discharge Elimination System Permit (DEQ), a Non-Degradation
Authorization (DEQ), a Stormwater Discharge Permit (DEQ), a Water Rights Permit
(DNRC), a Section 404 Dredge and Fill Permit from the U.S. Army Corps of
Engineers (COE), and a Fiscal Impact Plan which must be approved by the Montana
Hard Rock Impact Board and numerous local government units.
An Environmental Impact Statement (EIS) is currently being prepared by
three co-lead agencies, DEQ, DNRC, and COE. This EIS will be used to support all
of the major permit decisions. Agency decisions on the permits are anticipated
to be forthcoming by the end of 1997. Certain environmental groups are in the
process of attempting to qualify an initiative petition related to water quality
regulation for placement on the ballot during the general election in Montana in
November of 1996. If placed on the ballot and if passed in the election in
November, such an initiative could have a materially adverse effect on the
permitting process at McDonald. No assurance can be given that such permits will
be issued, or if issued, in what time frame such issuance would occur.
PRINCIPAL EXPLORATION PROPERTIES
The status of exploration activities on the Company's major exploration
properties is described below. The properties described are believed to be the
most significant of the Company's current inventory. However, that inventory is
constantly changing and it is to be expected that some of the properties
discussed will eventually be joint-ventured, marketed or abandoned, and that
other properties owned or acquired by the Company will become the object of more
intensive exploration activities.
BRIGGS/PANAMINT PROPERTIES
Significant gold mineralization occurs within the Briggs claim block along
a six-mile long trend that includes the Briggs, Cecil R, Jackson, and Gold Tooth
prospects. In 1991, considerable drilling and exploration was conducted in each
of these areas. Drilling activity was severely hampered on the Cecil R, Jackson
and Gold Tooth areas by the presence of Wilderness Study Areas. Since 1991,
drilling has been conducted only on and immediately adjacent to the Briggs
project. The Company plans to conduct further exploration, including drilling,
on several of these targets in 1996 now that the Company's entire claim block
has been released from Wilderness Study Area designation.
MOUNTAIN VIEW PROPERTY
The Mountain View project is located in the Deep Hole Mining District,
approximately 15 miles northwest of Gerlach, in northwestern Nevada. In mid
1992, the Company entered into a joint venture with Independence Mining Company
and also acquired additional claims in the area consolidating a major
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land position. The Company conducted an aggressive integrated exploration
program, including geological, geochemical, geophysical, and drilling programs
to evaluate the gold potential near the old Mountain View Mine and elsewhere
across the property block. This program resulted in the discovery of a
significant new gold mineralization zone on the south end of the property in
late 1992.
During 1993 and 1994, the Company continued an aggressive exploration
program on the property, including drilling more than 75,000 feet in 117 reverse
circulation and combined reverse circulation/core drill holes. Of the total
drilling, 60,375 feet in 87 holes were concentrated in the discovery area on the
south end of the property. The discovery area drilling has resulted in the
identification and partial delineation of a deposit which contains an estimated
19.6 million tons of mineralized rock with an average grade of 0.027 ounce of
gold per ton. The mineralized rock occurs beneath 100 to 600 feet of pediment
gravel on the west side of the Granite Mountains range front fault.
At the beginning of 1994, the Company owned a 60% interest and Independence
Mining Company (IMC) owned a 40% interest in the Mountain View Joint Venture.
The joint venture partners funded $0.5 million of exploration expenditures in
early 1994, after which time IMC declined to contribute any additional funds.
The Company obtained and subsequently exercised an option to purchase IMC's
remaining interest in the joint venture in exchange for 61,539 shares of common
stock of the Company, thereby owning 100% interest in the Mountain View project,
effective January, 1995.
On July 17, 1995, the Company entered into an exploration agreement with
Homestake Mining Company (HMC). HMC can earn a 51% interest in the Mountain View
property by expenditures of $4 million prior to December 31, 1999 and completion
of a feasibility study. An additional 9% interest can be acquired by HMC by
funding all development costs through to production.
During 1995 HMC expended $738,412 on the property, primarily in the
drilling of 22 reverse circulation and 4 core holes. Additional work consisted
of geological mapping, sampling, petrography, age dating, geophysics and staking
130 new lode claims. Including the new claims, the Mountain View property
consists of approximately 8,600 acres of mineral rights in leased and located
unpatented lode claims, placer mining claims and 440 acres of leased fee land.
The leased properties have minor advance royalty payments and a maximum of 4%
net smelter return royalty.
HMC's work in 1995 confirmed the high-grade zone of the gold deposit
previously discovered by Canyon and located several other gold-mineralized areas
on the property. HMC has indicated that they intend to continue the exploration
program in 1996 with a planned budget of $1 million.
RATTLESNAKE PROPERTY
The Rattlesnake project is located in the Rattlesnake Hills, Natona County,
Wyoming, about 70 miles west of Casper. The property consists of 144 unpatented
lode mining claims (partly leased) and two state mineral leases, totalling
approximately 3,540 acres. The leased properties have modest annual advance
royalty payments and a maximum 4% net smelter return royalty.
The Company acquired the property in 1992 and conducted mapping and surface
rock sampling. This work, in conjunction with exploration conducted by American
Copper and Nickel Company from
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1983 to 1987 (9,825 feet of drilling in 32 reverse circulation holes),
identified several favorable drill targets. In 1993 the Company entered into a
joint venture agreement with Newmont Exploration Ltd.
From 1993 to 1995, Newmont conducted detailed evaluation of the property
consisting of surface sampling (rock, soil, stream sediment), ground geophysics
(magnetics, VLF-EM, radiometrics, IP), trenching and drilling. A total of 14
holes (2 core, 12 reverse circulation) and 10,705 feet were drilled in the North
Stock target area. The Antelope Basin and South Stock target areas, initially
scheduled for drill testing by Newmont, were not drilled prior to Newmont
dropping out of the joint venture in August, 1995.
Preliminary estimates indicated that Newmont drilling in the North Stock
area identified and partially delineated a mineralized zone from surface to a
depth of 900 feet. Drilling by ACNC in the Antelope Basin area indicates the
presence of mineralized rock in that area also. The South Stock area appears to
be the largest target on the property, but at present, remains untested by
drilling.
The Company is currently seeking a new joint venture partner to continue
the exploration of the Rattlesnake project.
MONTANA PROPERTIES
The Company owns approximately 900,000 acres of fee simple and fee mineral
rights in western Montana. The fee mineral rights underlie surface rights owned
by other parties. In March 1995 the Company entered into an Exploration
Agreement with Option to Acquire Title Agreement with BHP Minerals International
Exploration Inc. (BHP) to explore the Company's 900,000 acre holding in western
Montana. The Agreement allows BHP the option to acquire an undivided 50%
ownership in the property as to gold and an undivided 51% ownership for all
other minerals by expending at least $2.5 million on the property over a
six-year period and making payments of $25,000 per year to the Company. BHP also
has the option to acquire an additional 1% ownership in gold properties by
paying one million dollars to the Company.
During 1995, BHP Minerals expended $200,870 on surface exploration and
drilling on the Company's property. Eight drill holes totalling 2,960 feet were
drilled on one prospect in the Garnet Range, generally with negative results. A
large (1,200 square mile) stream sediment sampling program identified over 20
potential base and/or precious metal targets. Extensive follow-up surface work
and drilling are planned for 1996. BHP Minerals has a minimum expenditure
requirement obligation of $300,000 on the property for 1996.
In October, 1995 the Company entered into a Mining Venture Agreement with
Kennecott Exploration Company (Kennecott) to explore approximately 2,100 acres
in the Lincoln Valley, adjacent to the Seven-Up Pete Joint Venture. Kennecott
has the option to earn a 51% interest in and to the Company's holdings by
expending $2,000,000 over 5 years. Kennecott also has the option to increase its
interest by an additional 9% by funding a Feasibility Study for the Properties.
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During 1995, Kennecott conducted geologic mapping, rock and soil
geochemical sampling and geophysical surveys on the Lincoln Valley properties.
Several structural zones were identified along portions of which anomalous gold
and indicator minerals were identified. Kennecott plans continued exploration,
including drilling in 1996.
LATIN AMERICAN EXPLORATION
GENERAL
In 1995, the Company concentrated its exploration activities in Brazil,
Argentina, and Panama. Precious metal opportunities were also evaluated in
Bolivia and Ecuador. The Company terminated its option with Minera Cachabi Ltda.
on the Pampa Blanca property in Ecuador during 1995. The Company ceased
conducting work in Venezuela in mid-1995 and is in the process of disposing of
its Venezuelan subsidiary.
ARGENTINA
The Company, through wholly owned subsidiary, CR International Corporation
(CRIC), conducted early stage exploration work on most of the 18 properties held
at the start of 1995 in Chubut, La Rioja, Catamarca and Jujuy Provinces in
Argentina. In addition, in 1995, four properties in Santa Cruz Province were
acquired under an exploration contract from Empresa F.K. Minera S.A. and CRIC
filed cateos (mining claims) on 6 properties. On a number of the properties, the
exploration programs conducted indicated low potential for economic occurrences
of gold and as a result 10 of the properties were abandoned by the end of 1995.
The Company decided in 1995 that other areas in Latin America and Africa
offered better potential to quickly find and develop gold resources than
Argentina. The Company decided to market its Argentine properties to other
mining companies in joint ventures or options. CRIC closed its Argentina office
in October, 1995, and has maintained Argentinean activities through the use of
consultants since that time.
In February 1996, CRIC entered into an exploration agreement with Phelps
Dodge Exploration de Argentina, S.A. (PDA), a wholly owned subsidiary of Phelps
Dodge Corporation, on five CRIC properties. By funding $3.9 million in
exploration expenditures over a six-year period, PDA will earn a 50% interest in
the properties. PDA will be manager and has the optional right to increase its
ownership to 65% on any particular property by financing a feasibility study
suitable for submission for bank financing of that property.
The CRIC - PDA joint venture properties include 724 square kilometers in
the Arroyo Cascada property in Chubut Province and 120 square kilometers in four
properties in Santa Cruz Province. The Arroyo Cascada property contains strongly
anomalous gold values in rocks, soils, and stream-sediments within an altered
volcanic pile, suggestive of a buried porphyry system with potential for both
gold and copper. The Santa Cruz properties contain gold-bearing quartz veins and
stockworks in volcanic rocks, similar geologically to the nearby multi-million
ounce Cerro Vanguardia gold deposit.
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CRIC currently has 6 properties in La Rioja Province under an option to
Argentina Mineral Development Co. which expires May 31, 1996. CRIC is in
discussions regarding an option on its remaining seven properties. There is no
assurance that any agreement will be finalized.
BRAZIL
In 1995 the Company acquired approximately 60,000 hectares of mineral
rights in the Rio Maria area of Para State in Brazil. These mineral rights are
on areas for which mineral concessions have been applied. Although there can be
no assurance, the Company has conducted a due diligence of the status of these
applications and believes that the concessions will be formally granted in due
course. Gold has been produced by informal miners from alluvial and bedrock gold
deposits within and adjacent to the Company's properties. A primary target area
has been identified, comprising about 140 square kilometers within which most
streams contain anomalous gold in pan concentrates. These streams drain an area
of folded and sheared greenstones and sediments, presenting a geologic setting
similar to that of some multi-million-ounce gold deposits in the region.
Numerous workings of local gold miners and gold occurrences are located within
this target area.
In December 1995, Canyon's wholly owned subsidiary, Canyon Mineracao do
Brasil Ltda. acquired the concession applications from a Brazilian gold mining
company, Mineracao Vale das Andorinhas Ltda., after conducting property
evaluations on over 240,000 hectares of mineral rights during 1995. The Rio
Maria properties were selected as having exceptional potential to host one or
more significant gold deposits. Work during 1996 will consist of detailed
surface mapping and sampling with the expectation of delineating initial drill
targets before year's end.
DOMINICAN REPUBLIC
Effective April 13, 1995, an Option Agreement was signed with Eldorado
Corporation Ltd. (Eldorado) giving Eldorado the right to purchase all the issued
and outstanding shares of Minera Hispaniola, S.A. (MH). The Option Agreement
requires Eldorado to: (i) pay $50,000 upon signing; (ii) $3.0 million work
commitment over three years; (iii) pay $500,000 to exercise the option within 3
years; (iv) pay $500,000 upon commencement of commercial production; and (v) pay
various net smelter return royalty on production. MH is a company incorporated
in the Dominican Republic and owned 40% by Canyon Resources Corporation and 60%
by Battle Mountain (Dominican Republic) Inc. By a Consent Agreement dated June
8, 1995, Eldorado assigned all of its right, title and interest in the Option
Agreement to Energold Mining Ltd. (Energold).
Energold has, since acquiring the Option Agreement, been conducting
exploration activities on several of the MH exploration concessions and on other
areas in the Dominican Republic. Energold completed 3 core holes on the El Higo
Exploration Concession in 1995 and, through January 1996, had completed 5
additional core drill holes on the adjacent Los Pedregones Concession. Drilling
was halted at El Higo in September 1995 due to environmental concerns expressed
to the government Forestry Service by outside parties opposed to the project.
Energold, at the request of the government, has conducted an environmental
baseline assessment of the exploration work, which indicates that the
environment will not be endangered by the work program. Energold is uncertain
when permission to
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recommence the exploration program will be granted and has initiated further
drilling on the Los Pedregones Concession.
PANAMA
In August 1995, the Company, through its wholly owned subsidiary Canyon de
Panama, S.A., was formally granted the 10,594 hectare San Pedrito Concession,
applied for in 1994. The San Pedrito property covers the area between the Santa
Rosa open-pit, heap-leach gold mine (over one million ounces of gold) and a
smaller underground gold mine at Remance. Geologic mapping and geochemical
sampling by the Company on the property have identified gold-bearing alteration
zones in andesitic volcanic rocks. The geologic environment is similar to that
at Santa Rosa. Work during 1996 will consist of detailed geologic mapping and
geochemical sampling with the objective of delineating drill targets before the
end of the year. The Company is investigating the possibility of forming a joint
venture with another mining company to continue the work at San Pedrito.
AFRICA EXPLORATION
GENERAL
In February 1994, the Company entered into an agreement with Africa Mineral
Resource Specialists Inc. (AMRS), a Colorado corporation, whereby the Company
would finance the exploration and acquisition of precious metal properties in
Africa and the AMRS staff would conduct certain exploration/acquisition
activities under the direction of the Company. To conduct the business
activities in Africa, a subsidiary company, Canyon Resources Africa Ltd. (CRAL)
was formed - of which the Company owns 90% and AMRS owns 10%.
CRAL is concentrating exploration efforts in Ethiopia and Tanzania, while
also evaluating property specific opportunities elsewhere in Africa. CRAL has
acquired one property in Zimbabwe and has applied for a Prospecting License in
Burkina Faso.
ETHIOPIA
In August 1994, CRAL filed applications on two areas which had been
selected for competitive bid by the government of Ethiopia. CRAL also filed
applications for Exploration Licenses on two additional areas in Ethiopia which
were open to non-competitive applications. In January 1995, CRAL was notified by
the Ministry of Mines of Ethiopia that its bid had been selected for the
Megado-Serdo area of the Adola gold belt in southern Ethiopia. On September 6,
1995, CRAL and the Ministry of Mines signed a three-year Exploration License,
renewable for two additional one-year terms on the 60 square kilometer
Megado-Serdo area. The Megado Serdo Exploration License requires that CRAL spend
at least $500,000 and complete an approved work program during the first year.
CRAL has posted a $500,000 Performance Guarantee Bond with the Ethiopian
government to assure completion of the work.
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The Megado-Serdo area is within a greenstone belt of metamorphic rocks of
Proterozoic age. The property is located 10-15 kilometers southwest of the large
Lega Dembi gold mine owned and operated by the Ethiopian Government Mining
Corporation. Government workers have conducted considerable exploration work and
have identified several areas of gold mineralization associated with quartz
veins within favorable schist horizons on the Megado-Serdo property and have
conducted trenching and limited drilling. Most of the streams draining the
Megado-Serdo area have had considerable placer mining activity. CRAL commenced a
detailed review and compilation of prior government work at Megado Serdo in
September 1995 and conducted preliminary site studies in December 1995. The
field work program commenced in February 1996 and should be completed by August
1996. The work program will consist of surveying, line cutting, geochemical
sampling, geologic mapping, road building and trenching. Geophysical surveys are
also being considered.
In August 1994, CRAL also applied for an Exploration License on the 108
square kilometer Meleka-Abeba area located about 50 kilometers north of the Lega
Dembi mine in the northern end of the Adola Gold Belt. Stream sediment
geochemistry conducted by the government has identified numerous concentrations
of anomalous gold which have not been followed-up to date. Some artisanal placer
mining has recently been conducted within the application area. Negotiations
with the Ministry of Mines for an Exploration License on the Meleka-Abeba area
commenced in July 1995. On March 26, 1996 the Meleka-Abeba Exploration License
was issued.
CRAL has also applied for an Exploration License on the 1,700 square
kilometer Adi Dairo-Adi Hageray area located in Tigray Province of northern
Ethiopia just south of the border with Eritrea. The region is underlain by
Proterozoic greenstone rocks and has had recent artisanal mining of both placer
and lode gold occurrences. The CRAL application is in the review process and
there is no assurance that it will be granted.
On February 6, 1996 CRAL entered into a joint venture agreement with JCI
Limited, a large South African mining company, to finance gold exploration on
CRAL's Exploration Licenses and license applications in Ethiopia. By funding
$4.5 million in exploration expenditures on three licenses, JCI would earn a 51%
joint venture interest. JCI, with 100 years of African mining experience, is a
leading South African mining company which produces approximately 1.8 million
ounces of gold per year from a mineable reserve of over 80 million ounces.
CRAL will be the manager of the joint venture through the $4.5 million of
exploration financing and JCI earn-in of its 51% interest. Thereafter, JCI will
be the joint venture manager. JCI has the optional right to increase its
ownership to 65% of any particular license by financing the lesser of an
additional $4.5 million of expenditures or a bankable feasibility study on that
license.
TANZANIA
In November 1994, Canyon Resources Tanzania Limited (CRTL) was established
(90% owned by Canyon and 10% owned by AMRS), to conduct business and hold
mineral properties in Tanzania. CRTL has been actively evaluating property
submittals from several companies holding Mineral Licenses in Tanzania. AMRS, on
behalf of CRTL, filed several Mineral License applications in April 1994.
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In October 1995, the Tanzanian government granted AMRS Prospecting Licenses
for gold on three areas in the Lake Victoria Goldfields region totaling 264
square kilometers; two Reconnaissance Licenses for diamonds in southwestern
Tanzania near Lake Nyasa totaling 1,138 square kilometers; and one
Reconnaissance Licenses for platinum to the east of Lake Victoria totalling 243
square kilometers. In addition, in October 1995, CRTL entered into a joint
venture with Sampo Resources (T) Limited on a 150 square kilometer Prospecting
License for gold in the Musoma District (Lake Victoria region). CRTL can earn a
60% interest in the property by expenditure of $1 million over three years. CRTL
also has the option to increase interest to 85% by spending an additional $2
million.
The Lake Victoria Goldfields region has had historic gold production of
more than two million ounces through 1970. Gold mining has concentrated in areas
of Archean-aged greenstones and banded iron formations and associated alluvial
concentrations of placer gold. The Lake Nyasa area has recent artisanal placer
gold production and geologic mapping in the past has identified kimberlite
pipes. Ultramafic rock occurrences similar to those of the Bushveld complex of
South Africa and the Great Dyke of Zimbabwe have been mapped to the east of the
Lake Victoria Goldfields region. During 1996, CRTL plans to conduct geologic
mapping and geochemical sampling on each of the mineral licenses to determine if
they warrant a more detailed exploration program, including drilling. CRTL is
evaluating the possibility of forming joint ventures with one or more mining
companies to continue work on the Tanzanian properties.
ZIMBABWE
In September 1995, CRAL was granted Exclusive Prospecting Order (EPO) #1005
covering an area of approximately 234 square kilometers to the east of the town
of Chegutu in north-central Zimbabwe. There has been recorded gold production of
more than 200,000 ounces from numerous small mines and prospects within the EPO.
In addition, there has been considerable unrecorded production by artisanal
miners and ancient mining by indigenous peoples. Numerous small parcels within
the EPO are held by others which represent earlier filed claims, mainly in the
areas of past production.
The regional geology consists of low grade metamorphic mafic volcanic rocks
(greenstone) of Archean age which are intercalated with felsic volcanics and
banded iron formations. These rocks are cut by somewhat younger Archean
granites. Most of the prior gold production has been derived from either granite
or greenstone hosts adjacent to or on the granite-greenstone contact.
Mineralization is often related to major shear zones, parallel to, and within
the greenstone belt.
CRAL has completed a review of the known information on geology, land
ownership, past production and claimholders of record. In 1996, CRAL will
conduct orientation geochemical surveys to select the best techniques for
identifying favorable target areas and will investigate the possibility of
forming a joint venture to continue the exploration of EPO #1005.
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TITLE TO PROPERTY
U.S. MINERAL PROPERTIES
The Company's U.S. mineral properties consist of fee mineral rights, leases
covering state and private lands, leases of unpatented mining claims, and
unpatented mining claims located or otherwise acquired by the Company. Many of
the Company's mining properties which are in the United States are unpatented
mining claims to which the Company has only possessory title. Because title to
unpatented mining claims is subject to inherent uncertainties, it is difficult
to determine conclusively ownership of such claims. Since a substantial portion
of all mineral exploration, development and mining in the United States now
occurs on unpatented mining claims, this uncertainty is inherent in the mining
industry. In addition, in order to retain title to an unpatented mining claim, a
claim holder must have met annual assessment work requirements ($100 per claim)
through September 1, 1992 and must have complied with stringent state and
federal regulations pertaining to the filing of assessment work affidavits.
Moreover, after September 1, 1992, the right to locate or maintain a claim
generally is conditional upon payment to the United States of a rental fee of
$100 per claim per year for each assessment year instead of performing
assessment work. State law may, in some instances, still require performance of
assessment work.
The present status of the Company's properties as unpatented mining claims
located on public lands of the U.S. allows the claimant the exclusive right to
mine and remove valuable minerals, such as precious and base metals and
industrial minerals, found therein, and also to use the surface of the land
solely for purposes related to mining and processing the mineral-bearing ores.
However, legal ownership of the land remains with the U.S. Accordingly, with an
unpatented claim, the U.S. retains many of the incidents of ownership of land,
the U.S. regulates use of the surface, and the Company remains at risk that the
claims may be forfeited either to the U.S. or to rival private claimants due to
failure to comply with statutory requirements as to location and maintenance of
the claims. If there exists a valuable deposit of locatable minerals (which is
the requirement for the unpatented claim to be valid in the first place), and
provided certain levels of work and improvements have been performed on an
unpatented mining claim, the Mining Law of 1872 authorizes claimants to then
seek to purchase the full title to the claim, thereby causing the claim to
become the private property of the claimant. Such full ownership expands the
claimant's permissible uses of the property (to any use authorized for private
property) and eliminates the need to comply with maintenance and reporting
requirements necessary to protect rights in an unpatented claim.
Because the Company believes that it has established the existence of
valuable mineral deposits in certain of its properties, and has maintained and
improved the claims in the manner required by law, it has sought to enhance its
rights in those properties by seeking issuance of mineral patents. In July of
1992, the Company caused four applications for mineral patent for the 20 lode
mining claims comprising the then-known ore reserves at the Briggs property to
be filed with the Bureau of Land Management ("BLM"). However, due to
administrative backlogs in the California State Office of the BLM, processing of
those applications has not proceeded. On December 30, 1993, the Company caused
five applications for mineral patent for the 15 placer mining claims which
encompass known ore reserves on public lands for the diatomite operations
conducted by the Company's subsidiary, CR Minerals, to be filed with the Nevada
State Office of the BLM. Those applications have been processed to the point
where the purchase price for the claims has been accepted.
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On October 1, 1994, while the above patent applications were pending,
Congress imposed a moratorium on accepting and processing mineral patent
applications within the Department of the Interior. Under the terms of the
continuing statutory moratorium (as interpreted by the Secretary of the
Interior), and solely as a result of the actions or inactions of the respective
state offices prior to the time the moratorium became effective, the Secretary
considers the California applications not to be exempt from the moratorium, and
therefore will not allow them to be processed while the moratorium remains in
effect, but the Nevada applications are considered exempt and should be
adjudicated. The Company instituted litigation in the U.S. District Court for
the District of Nevada to attempt to force the Secretary to construe all of the
applications as exempt from the moratorium and to diligently process all of
them, either by granting patents or be contesting the claims. However, the Court
has declined to compel the Secretary to expedite processing of the applications.
The Court's decision does not determine the validity of the claims, nor does it
directly affect the Company's basic ability to conduct mining operations on the
claims.
The Company has no reason to believe that grounds exist for denial of any
of the patents when and if they are ultimately adjudicated. However, there can
be no assurance that such patents will be granted.
For the last several Congressional sessions, bills have been repeatedly
introduced in the U.S. Congress which would supplant or radically alter the
provisions of the Mining Law of 1872. As of December 31, 1995, no such bills
have passed, although a number of differing and sometimes conflicting bills are
now pending. If enacted, such legislation could substantially increase the cost
of holding unpatented mining claims and could impair the ability of companies to
develop mineral resources on unpatented mining claims. Under the terms of
certain proposed legislation, the ability of companies to obtain a patent on
unpatented mining claims would be nullified or substantially impaired. Moreover,
certain forms of such proposed legislation contain provisions for the payment of
royalties to the federal government in respect of production from unpatented
mining claims, which could adversely affect the potential for development of
such claims and the economics of operating existing mines on federal unpatented
mining claims. The Company's financial performance could therefore be affected
adversely by passage of such legislation. It is impossible to predict at this
point what any legislated royalties might be, but a potential three to four
percent gross royalty, assuming a gold price of $400 per ounce, would have an
approximated $12 to $16 per ounce impact on the Company's costs of production
from unpatented mining claims.
The Company supports reasonable, rational changes to the Mining Law of 1872
and is currently active in industry efforts to work with Congress to achieve
responsible changes to mining law. Although the exact nature or timing of any
mining law changes cannot be predicted, enactment of any federal mining law
changes would not affect the Company's Kendall, McDonald, or Seven-Up Pete
projects, or the CR Minerals property currently being mined, because these
projects are not on federal lands. The Fernley Diatomite project, Briggs
project, the Mountain View project, and certain other exploration properties,
however, do occur on federal mining claims and could be materially affected by
such legislation.
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FOREIGN MINERAL PROPERTIES
In the countries outside the United States where the Company is operating,
the rights to minerals are vested with the government. Mineral rights are
granted by the government through concessions, licenses or leases. Often, the
earliest stage work is conducted under Reconnaissance or Prospecting Permits
which have a duration of one to two years and cover large areas. Exploration
Licenses or Concessions often will involve a considerably smaller area and will
have a duration of one to three years, often with the right to extend for one or
two additional years with a reduction of the size of the area with each renewal.
Exploration Licenses usually contain the right to convert to a Mining License or
Concession provided the Licensee adheres to the terms of the Exploration License
and has defined an economic mineral deposit. Mining Licenses are generally for a
term of 10 to 20 years or longer or for the economic life of the deposit.
Usually the Licensee must considerably reduce the size of the area held when
converting from an Exploration License to a Mining License.
Mineral Licenses generally have a land rental charge which varies from a
few cents to several dollars per hectare per year and increases from Prospecting
to Exploration to Mining Licenses. Some countries have no royalty provisions on
production from Mining Licenses, whereas others will charge royalties varying
from 1-5% of the value of the minerals produced. Several countries require a
free carried interest in a mining operation at levels of 10-20% equity
participation, although most countries in which the Company is working do not. A
number of countries charge a tax of 10-20% on dividends which are remitted
outside the country. Income tax rates vary from 30-45% in the countries in which
the Company is working. In several countries the sole benefit, outside of land
rental, that the country derives from Mining Licenses is through collection of
income tax.
LEASED PROPERTY
The Company leases approximately 5,600 square feet of office space at 14142
Denver West Parkway, Suite 250, Golden, Colorado 80401, under a lease which
expires March 31, 1996. Rent is presently $5,406 per month. An additional 1,500
square feet of office space is leased at the same location for $1,761 per month.
The Company maintains storage and/or facilities in Golden, Colorado; and
Ridgecrest, California on a month-to-month basis. CR Minerals maintains storage
facilities in several states and leases land for its processing facilities in
Fernley, Nevada for $1,050 per month under a lease which expires September 2007.
ITEM 3. LEGAL PROCEEDINGS
Following the completion of the environmental review process for the
permitting of the Briggs Project, the United States Department of the Interior,
Bureau of Land Management (BLM) issued an approval of the Plan of Operations for
the project on July 10, 1995. That approval was appealed to the Interior Board
of Land Appeals within the Department of the Interior (IBLA) on August 10, 1995
by the Timbisha Shoshone Tribe of Death Valley, Madeline Esteves (a member of
the Tribe), and the Desert Citizens Against Pollution (DCAP). The appeal alleges
that BLM failed to adequately consult with the Tribe prior to taking its action
and also alleges various technical errors in the environmental review process
and requested a stay of the effectiveness of the approval pending resolution of
the appeal. On August 29, 1995 the IBLA issued a temporary stay of the
effectiveness of the Plan of Operations pending
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resolution of the request for stay included in the appeal. The Company has
vigorously opposed this appeal through the filing of responsive briefs with the
IBLA. In addition, the BLM has vigorously opposed the appeal through the filing
of its own brief. The IBLA denied the request for stay and removed the temporary
stay on October 23, 1995, stating that there was not a likelihood that the
appellants would prevail on the merits of the appeal, thus allowing the Company
to proceed with the development and operation of the project under the BLM Plan
of Operations. The same appellants filed a Petition for Expedited Secretary's
Review on November 14, 1995 with the office of the Secretary of the Interior
requesting that the Secretary take jurisdiction of the proceeding and overrule
the Interior Board of Land Appeals. On March 13, 1996, the Office of the
Solicitor of the Interior on behalf of the Secretary issued a decision refusing
to take jurisdiction with respect to the appeal. No final decision on the merits
of the appeal has yet been rendered by the Interior Board of Land Appeals. Once
the Interior Board of Land Appeals rules on the merits of the appeal, a further
appeal by any of the parties to the proceeding can be filed in Federal Court.
The Company believes that the appeal will be dismissed in the ordinary course of
the appeals process as being without substantial merit or basis in law or fact.
On July 12, 1995, the Inyo County Planning Commission approved the Mine
Reclamation Plan for the Briggs Project under applicable California law. This
approval was appealed on July 26, 1995 to the Inyo County Board of Supervisors
by the same appellants listed above in connection with the appeal to the IBLA.
The Inyo County Board of Supervisors unanimously rejected the appeal and issued
its decision on August 30, 1995. The appellants (hereafter "Tribe") appealed the
decision of the Inyo County Board of Supervisors to the Superior Court of
California in and for Inyo County on November 10, 1995 under a Petition for Writ
of Mandate and Complaint for Injunctive Relief ("Petition") filed November 13,
1995 as No. 21419. Both the Company and Inyo County have answered the complaint
and are vigorously defending the appeal.
The Petition alleged violations of the California Environmental Quality Act
(hereinafter, "CEQA") and the Surface Mining and Reclamation Act ("SMARA"). The
Tribe sought a Temporary Restraining Order from the Court on January 16, 1996.
However, on January 17, the Inyo County Superior Court denied that request and
set the matter for an Order to Show Cause regarding the issuance of a
Preliminary Injunction on February 5, 1996.
The matter was heard on February 5, and, on February 16, 1996, the Court
denied the Tribe's request for the issuance of a Preliminary Injunction. This
matter will now proceed with briefing for a hearing before the Court on June 13,
1996. The Company believes that the matter will be dismissed as being without
substantial merit or basis in law or fact.
On July 14, 1995, the Lahontan Regional Water Quality Control Board
("Lahontan") in California issued a Waste Discharge Order to the Company for the
Briggs Project. On October 2, 1995, the same appellants identified above filed a
petition with the California State Water Quality Control Board challenging
certain of the findings and certain aspects of the Waste Discharge Order. In
this petition, the appellants have not requested a stay and have not asked that
the Waste Discharge Order be withdrawn or rescinded. Instead, they have
petitioned to change various technical matters of the Waste Discharge Order and
to have the financial assurance bond be increased. The Company and Lahontan are
responding to this petition through the staff of the State Water Quality Control
Board. The Company believes that the petition will be dismissed administratively
through the staff consultation process without the necessity of a hearing before
the entire board.
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The Company has vigorously defended its position in each of the proceedings
before the Interior Board of Land Appeals, the Inyo County Court and the Water
Board, and believes that all of the claims of the Timbisha Shoshone Tribe and
the local environmental group are without merit. No assurances can be given
regarding the outcome of these actions or the effects those outcomes might have
on the Company's ability to complete and operate the mine.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were brought to a vote of Security Holders in the last quarter
of 1995.
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market and is
quoted on the National Association of Securities Dealers Automated Quotation
System (NASDAQ), National Market, under the symbol CYNR. The Company's common
stock was first included on NASDAQ on February 9, 1986, following the completion
of the Company's initial public offering and on the NASDAQ National Market on
May 15, 1990. Canyon also has warrants that trade on the National Market under
the symbol CYNRW. The following table reflects the high and low bid prices for
the Company's common stock and warrants during the indicated periods:
================================================================
COMMON STOCK WARRANTS
----------------------------------------------------------------
High Low High Low
---- --- ---- ---
1995
Fourth Quarter $2.56 $1.81 $0.25 $0.09
Third Quarter $2.75 $2.13 $0.28 $0.13
Second Quarter $2.44 $1.88 $0.38 $0.13
First Quarter $2.13 $1.50 $0.31 $0.16
1994
Fourth Quarter $2.56 $1.50 $0.63 $0.13
Third Quarter $2.88 $2.00 $0.63 $0.13
Second Quarter $3.63 $2.25 $1.06 $0.38
First Quarter $4.44 $3.38 $1.81 $0.91
================================================================
On March 1, 1996 the high and low prices for the Company's common stock
were $3.38 and $3.25, respectively. The high and low prices for the Company's
warrants on March 1, 1996 were $0.28 and $0.25, respectively. These prices
represent prices between dealers, do not include retail markups, markdowns, or
commissions, and do not necessarily represent actual transactions. All price
quotations were provided by NASDAQ.
As of March 1, 1996, there were approximately 1,359 holders of record of
the Company's common stock. The number of shareholders of the Company who
beneficially own shares in nominee or "street" name or through similar
arrangements is estimated by the Company to be approximately 3,000. As of March
1, 1996, there were also 29 holders of record of trading warrants and 12 holders
of unregistered warrants to purchase common stock.
As of March 1, 1996, there were outstanding; a) 25,943,459 shares of common
stock; b) 4,118,632 warrants to purchase common stock; c) 2,128,500 employee and
non-qualified stock options to purchase common stock; and d) 6,137,681 shares of
common stock issuable upon conversion of debentures totalling $21.2 million.
For the foreseeable future, it is anticipated that the Company will use any
earnings to finance its growth and that dividends will not be paid to
shareholders. Further, pursuant to an agreement executed by the Company in favor
of its wholly owned subsidiary, CR Briggs Corporation, in connection with a loan
for the Briggs Project, the Company has agreed to maintain certain levels of
working capital,
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tangible net worth, and leverage ratios which could restrict the payment of
dividends where such payment would result in a failure to maintain such levels.
Similarly, CR Briggs Corporation is prohibited from repaying the Company for
advances or from paying dividends to the Company from the Briggs Project cash
flow unless certain conditions relating to the financial performance of the
Briggs Project are met.
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected information regarding the
Company's financial condition and results of operations over the past five
years.
=========================================================================================================================
DECEMBER 31,
---------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------------------------------------------------------------------------------
SUMMARY OF CONSOLIDATED
BALANCE SHEETS
Working Capital (Deficit) $25,787,400 $14,953,000 $19,301,600 $ 1,846,700 ($ 957,400)
Current Assets 28,654,800 18,318,100 24,264,500 6,615,800 5,926,300
Total Assets 72,424,200 52,187,600 53,235,700 29,143,500 43,747,400
Current Liabilities 2,867,400 3,365,100 4,962,900 4,769,100 6,883,700
Long-term Obligations 49,486,300 23,468,900 22,846,300 2,550,400 5,194,600
Total Liabilities 52,353,700 26,834,000 27,809,200 7,319,500 12,078,300
Common Stockholders' Equity 20,070,500 25,353,600 25,426,500 21,824,000 31,669,100
=========================================================================================================================
SUMMARY OF CONSOLIDATED
STATEMENTS OF OPERATIONS
Sales $ 9,006,600 $19,580,200 $19,879,600 $ 22,506,400 $21,690,800
Income (Loss) Before
Extraordinary Items (6,143,200) (337,700) 920,700 (14,277,000)(1) 297,700
Extraordinary Items -- -- -- -- 1,818,300(2)
Net Income (Loss) (6,143,200) (337,700) 920,700 (14,277,000) 2,116,000
Income (Loss) Per Share
Before Extraordinary Items (0.24) (0.01) 0.04 (0.61) 0.01
Net Income (Loss) Per Share (0.24) (0.01) 0.04 (0.61) 0.10
=========================================================================================================================
(1) Includes asset writedowns of $14,075,400 for 1) Kendall Mine -
$8,000,000; 2) Exploration Properties - $4,042,100; 3) Non-Compete
Agreement - $2,033,300.
(2) Gain on extinguishment of debt, net of taxes ($1,098,900) and credit
equivalent to tax benefit from utilization of net operating loss
carryforwards ($719,400).
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
The Company recorded a net loss of $6.1 million, or $0.24 per share, on
revenues of $9.0 million in 1995, compared to a net loss of $0.3 million, or
$0.01 per share, on revenues of $19.6 million in 1994. The 1995 results were
principally impacted by lower gold production, a provision for final site
restoration costs, and the writedown of remaining carrying values at the Kendall
Mine.
Active mining of new ore at Kendall ceased in January, 1995, with
production of 16,624 ounces realized from continued leaching of all previously
mined ore. As a result, substantially lower revenues of $9.0 million were
realized during 1995, a 54% decrease from the $19.6 million in revenues during
1994. The Company sold 16,386 ounces of gold and 8,694 ounces of silver in 1995
at an average realized price of $386 per equivalent gold ounce. Comparable
amounts in 1994 were 45,877 ounces of gold and 21,126 ounces of silver at an
average price of $374 per equivalent gold ounce. The New York Commodity Exchange
(COMEX) gold prices averaged $385 per ounce in 1995 and $384 per ounce in 1994.
All ounces sold in 1995 were at spot prices, in contrast to sales in 1994 which
included 18,300 ounces settled with spot deferred contracts averaging $351 per
ounce and 6,393 ounces delivered against a gold loan monetized at $374.50 per
ounce. As a result of the hedging program and gold deliveries in 1994, the
Company recognized lower revenues of $755,900 relative to spot prices in effect
on the settlement dates.
Cost of sales was $7.4 million in 1995 as compared to $12.3 million in
1994. Cost of sales per ounce at Kendall in 1995 increased to $362 as compared
to $238 in 1994 due to the lower production levels associated with cessation of
mining of new ore. Included in cost of sales for 1995 and 1994 are all direct
and indirect costs of mining, crushing, processing and general and
administrative expenses of the mine, including normal provisions for reclamation
of $0.8 million for each year. In addition, the Company recorded a fourth
quarter 1995 charge for remaining final site restoration at Kendall of $1.1
million as a consequence of reviewing and updating its anticipated scope of work
to achieve mine closure.
Depreciation, depletion, and amortization was lower during 1995 due
principally to lower ounces sold from the Kendall Mine. Effective October 1,
1995, the Company adopted Statement of Financial Accounting Standards No. 121
(SFAS 121), Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. SFAS 121 requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that their carrying amount may not be recoverable. Concurrent with adoption, the
Company has determined that its carrying value for property and equipment at the
Kendall Mine is not recoverable, due principally to the maturing life of the
mine (remaining economic life of one year) and the level of site restoration
costs anticipated during the next two to three years to achieve mine closure. As
estimated cash outflows exceed estimated cash inflows, the Company has reduced
the carrying value to zero and recorded a fourth quarter 1995 impairment of
$296,000.
Selling, general and administrative expenses were $3.4 million in 1995 as
compared to $3.0 million in 1994. The increase was due primarily to increased
corporate activity for business development and to increased diatomite sales and
corresponding support levels.
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Exploration costs expensed, almost entirely foreign related, decreased by
$0.2 million to $1.0 million in 1995. During the current year, the Company
closed its Mendoza, Argentina office and focused principally on opportunities in
Brazil and Africa.
Abandonments of $0.3 million in 1995 were in the ordinary course of
business, and related principally to properties in Latin America.
Interest income was marginally lower in 1995, as higher yields partially
offset the effects of lower investible balances. Interest expense was lower in
the current period as a gold loan was not outstanding for the full year. In
addition, interest expense associated with the Company's debentures declined due
to voluntary conversions of $725,000 principal during the year.
There was no current or deferred provision for income taxes during 1995 or
1994. The Company computes deferred taxes according to the provisions of
Statement of Financial Accounting Standards No. 109 (SFAS 109). SFAS 109
requires deferred income taxes to be computed under the asset and liability
method and to be adjusted to and maintained thereafter at statutory rates in
effect when the taxes are expected to be paid. SFAS 109 also requires that a
valuation allowance be provided if it is more likely than not that some portion
or all of a deferred tax asset will not be realized. Although the Company
maintains significant net deferred tax assets, principally in the form of
operating loss carry-forwards, the Company did not record a deferred tax credit
in either 1995 or 1994 due to an assessment of the "more likely than not"
realization criteria required by SFAS 109.
Inflation did not have a material impact on operations in 1995 or 1994.
Management of the Company does not anticipate that inflation will have a
significant impact on continuing operations.
1994 COMPARED TO 1993
The Company recorded a net loss of $0.3 million, or $0.01 per share, on
revenues of $19.6 million in 1994, compared to net income of $0.9 million, or
$0.04 per share, on revenues of $19.9 million in 1993. The 1994 results were
adversely affected by higher interest expense and exploration costs, as compared
to 1993.
Revenues of $19.6 million were realized from the sale of gold, silver, and
diatomite products during 1994, representing a 2% decrease from the $19.9
million in revenues during 1993. The Company sold 45,877 ounces of gold and
21,126 ounces of silver in 1994 at an average realized price of $374 per
equivalent gold ounce. The New York Commodity Exchange (COMEX) gold price
averaged $384 per ounce in 1994. Comparable amounts in 1993 were 51,113 ounces
of gold and 29,633 ounces of silver at an average realized price of $353 per
equivalent gold ounce and a COMEX average of $360 per ounce. As a condition of a
gold loan secured in May 1993, the Company was required to hedge a portion of
the Kendall Mine's future production to ensure adequate cash flow for repayment
of the obligation. Accordingly, the Company entered into spot deferred contracts
totalling 42,000 ounces of gold at prices ranging from $339 per ounce to $357
per ounce. During 1994, 18,300 ounces were settled at an average price of $351
per ounce. In addition, 6,393 ounces were delivered against the gold loan at a
monetized price of $374.50 per ounce. During 1993, the Company settled 23,700
ounces at an average price of $343 per ounce and delivered 4,288 ounces against
the gold loan. As a result of the hedging programs and gold loan deliveries, the
Company recognized lower revenues of $755,900 and $580,600 in 1994 and 1993,
respectively, relative to spot prices in effect on the settlement dates.
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Cost of sales was $12.3 million in 1994 as compared to $12.5 million in
1993. Cost of sales per ounce at Kendall in 1994 was $238 as compared to $223 in
1993, representing a 7% increase. The higher unit costs were due principally to
lower ore tons and ounces mined, and therefore lower production levels (-11%),
and higher strip ratios of the ores mined. Included in cost of sales for 1994
and 1993 are all direct and indirect costs of mining, crushing, processing, and
general and administrative expenses of the mine, including provisions for
reclamation of $0.8 million and $0.4 million, respectively. The higher
reclamation accrual in 1994 was due to a fourth quarter revision to the
anticipated cost of final site restoration. Although higher metal prices were
realized, lower production levels resulted in a decline of Kendall's operating
earnings (defined as sales less cost of sales) to $6.2 million as compared to
$6.7 million in the prior period.
Depreciation, depletion and amortization was higher during 1994 than 1993
due principally to an increase in the capital base at Kendall and the resulting
DD&A rate to $41 per ounce in 1994 from $35 per ounce in 1993. Other Company
DD&A charges increased marginally in 1994 as well, due to current year capital
additions.
Selling, general and administrative expenses were $3.0 million in 1994 as
compared to $2.1 million in 1993. The increase was due to: a) higher corporate
costs of $0.4 million; b) increased diatomite sales and corresponding support
levels ($0.2 million); and c) cost of establishing and maintaining an office in
Mendoza, Argentina to support exploration activities ($0.3 million).
Exploration costs expensed in 1994 were $1.2 million as compared to $0.3
million in 1993 and reflect the commencement of a worldwide exploration effort.
Foreign activity in 1994 totalled $1.1 million with a focus on exploration
opportunities in Central and South America, Africa and the Pacific Rim. U.S.
spending was a nominal $0.1 million in 1994.
Abandonments in 1994 resulted in a nominal charge of $0.1 million as
compared to $1.3 million in 1993. The prior year amount related principally to
properties in the Moccasin and Judith Mountains in Montana.
Interest income was higher in 1994 due to higher average cash balances.
Interest expense was higher in the current period due to a full year of interest
expense on the Company's $22.0 million, 6% interest, subordinated convertible
debentures which were sold in June 1993. During 1994, $0.1 million of principal
was converted to 29,900 shares of common stock.
There was no current provision for income taxes in 1994. The prior period
amount was a credit of $35,800, reflecting an adjustment to the Company's 1992
estimate of its alternative minimum tax liability.
Inflation did not have a material impact on operations in 1994 or 1993.
LIQUIDITY & CAPITAL RESOURCES
SUMMARY:
The Company's cash and cash equivalents decreased $11.4 million during 1995
to $1.9 million at year end. The decrease was a result of cash outflows from
operations of $2.4 million, $7.6 million of cash spent on investing activities,
and $1.4 million of cash used in financing activities.
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OPERATING ACTIVITIES:
Operations used $2.4 million of cash in 1995 in contrast to providing cash
of $2.4 million and $5.2 million in 1994 and 1993, respectively. The decreasing
trend is principally a result of declining production and sales of gold from the
Kendall Mine, now in its final year (1996) of economic life.
INVESTING ACTIVITIES:
Capital expenditures in 1995 totaled $8.1 million. Major components
included $5.5 million at Briggs, of which $1.6 million were financed by drawings
under a loan facility; approximately $1.2 million for the Company's share of
costs on the McDonald project, relating principally to permitting; $0.3 million
at the Company's diatomite operations; $0.8 million on foreign exploration
properties, with the remaining amount spent on miscellaneous projects.
Capital expenditures in 1994 totalled $6.7 million. Major components
included $3.4 million at the Briggs property, principally related to
environmental, metallurgical and engineering work; $1.0 million for the
Company's share of costs on the McDonald project which principally related to
engineering and environmental analyses to support the Plan of Operations and
commencement of the permitting process; $0.5 million at the Kendall Mine,
principally to construct a carbon adsorption plant to process lower grade
solutions expected with the cessation of new ore mining; $0.3 million at the
Company's diatomite operations; with the remaining amount associated with
miscellaneous exploration projects and corporate activities.
Capital expenditures in 1993 totalled $7.6 million. Major components
included $3.1 million at the Briggs property, principally related to
environmental, metallurgical and engineering work; $2.0 million for the
Company's share of costs on the McDonald project which principally related to
hydrological, metallurgical and engineering work and to additional purchases of
property within the area of interest; $1.1 million at the Kendall Mine,
principally for final leach pad expansion; with the remaining amount associated
with the Company's diatomite operations and miscellaneous exploration projects.
FINANCING ACTIVITIES:
On December 6, 1995, the Company's wholly owned subsidiary, CR Briggs
Corporation, secured a $34.0 million loan facility to finance the capital
requirements of mine construction and working capital for its Briggs Mine in
California. Costs of approximately $1.2 million incurred in connection with
obtaining the facility will also be financed. The Company is guaranteeing the
loan obligations of CR Briggs Corporation, and the loan facility is
collateralized by a first mortgage lien on the property, non-leased assets of CR
Briggs Corporation, and a pledge of the Company's stock in CR Briggs
Corporation. The facility was provided by a syndication of three banks; Banque
Paribas, Bayerische Vereinsbank AG, and NM Rothschild & Sons Ltd. and includes
three tranches; a $25 million gold loan; a $5 million cash loan; and a $4
million cost overrun facility. The cost overrun facility is available only in
the event of spending in excess of $30 million and an additional $2 million
contribution by the Company. The Company has escrowed $2.0 million in connection
with this requirement. The amount is included in other long-term assets on the
Balance Sheet at December 31, 1995, as it is not contemplated to be available to
the Company until 1997. On December 27, 1995 drawing commenced on the facility
and $25.0 million principal in the form of a gold loan and $1.0 million
principal as a dollar loan were drawn. At December 31, 1995, unspent proceeds of
$23.3 million are included as restricted cash on the Company's balance sheet.
The gold loan portion was monetized at $388.05 per ounce, or 64,425 ounces and
carries an initial interest rate for 90 days of 5.32%. The dollar loan's initial
interest rate for 90 days is 9.87%. Varying interest rate periods can be
selected under the terms of the facility. Repayment terms
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require quarterly installments over six years, commencing in 1997 which include
scheduled principal reductions and a varying cash sweep amount equal to 30% of
free cash flow after primary debt service. Within three years of project
completion (approximately 4 months beyond construction completion and start-up)
an additional 70,000 ounces of recoverable reserves must be identified or 100%
of excess cash flow after scheduled repayments will be applied as additional
prepayments against the loan amounts. As a condition of the loan, a portion of
the Briggs Mine's future production was hedged to ensure adequate cash flow for
repayment of the obligation. Accordingly, fixed forward contracts totalling
186,600 ounces were entered into at prices ranging from $395 per ounce to $424
per ounce. In addition, put options on 21,600 ounces at a strike price of $380
per ounce were purchased. The put options were financed by the sale of call
options on 10,800 ounces at a strike price of $403 per ounce. Approximately 41%
of the Briggs Mine production from current reserves was hedged through forwards
and put options as of December 31, 1995.
In connection with the issue of certain surety bonds in 1995 for the
performance of reclamation obligations at the Kendall and Briggs Mines, a bank
Letter of Credit has been provided in favor of the Surety as partial collateral
for such bond obligations. The Letter of Credit, in the amount of $1,953,000,
will expire no earlier than December 31, 1996, and at the bank's option, may be
renewed for successive one-year periods. The Company has fully collateralized
the Letter of Credit by depositing cash in the amount of $1,953,000 with the
bank. The amount is included as restricted cash on the Company's balance sheet
at December 31, 1995. Of the amount on deposit, $84,000 was funded in 1995 and
$1,869,000 was funded in prior years in connection with a separate
collateralized letter of credit for only the Kendall Mine.
During 1995, in connection with a first year work commitment on an
exploration property in Ethiopia, a bank Letter of Credit has been provided in
favor of the Ministry of Mines and Energy, Federal Democratic Republic of
Ethiopia. The Letter of Credit, in the amount of $500,000, will expire on
January 6, 1997. The Company has fully collateralized the Letter of Credit by
depositing cash in the amount of $500,000 with the bank. The amount is included
in other non-current assets in the Company's balance sheet at December 31, 1995.
During 1994, the Company fully repaid a previous gold loan by delivering
6,393 ounces to the lender. The initial loan amount of $4.0 million, secured in
1993, was monetized at $374.50 per ounce (10,681 ounces). The Company repaid
4,288 ounces on the loan during 1993. Because the gold price at the repayment
dates was higher than the original monetized price in 1994, the Company
recognized lower revenues and cash flow of $103,000 than it would have received
if all gold were sold at spot market prices. During 1993, the gold price was
lower than the original monetized price at the repayment dates and the Company
recognized higher revenues and cash flow of $28,500 than it would have received
if all gold were sold at spot market prices.
In August 1994, the Company exercised purchase options on its leased mining
equipment at the Kendall Mine for $0.9 million and financed the purchase price
over a three year period. Most of the equipment was transferred to the Briggs
Mine in late 1995 to be utilized during the mine development phase, some
equipment was disposed of during 1995, and some equipment will remain at Kendall
during the final year of production and reclamation activity.
On June 2, 1993 the Company raised a total of $22.0 million ($20.5 million
after financing costs) through the sale of subordinated debentures which are due
June 1, 1998. Interest is payable semi-annually on December 1 and June 1 at the
rate of 6% per annum. The debentures are convertible at the option of the holder
any time prior to maturity into common stock at the rate of $3.45 per share.
During 1995, $725,000 of principal was converted into 210,100 common shares of
the Company. The Company,
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after June 1, 1996, may redeem the debentures by issuing common stock at a rate
of 94% of the then trading price of its common stock or by payment in cash at
par. During 1995, the Company made interest payments of $1.3 million. On-going
annual debt service costs will be comparable until any future conversions or
redemptions.
The expiration date on the Company's 3,943,600 trading warrants and a
private warrant to purchase 100,000 shares to purchase common stock (all at an
exercise price of $3.50 per share) were extended at various times during 1995
and are currently scheduled to expire on April 12, 1996.
At December 31, 1995, the Company's debt consisted of the following: 1)
$26.0 million Briggs loan; 2) $21.2 million convertible debentures; and 3) $0.4
million on a mining equipment loan.
OUTLOOK:
Operations
Mine development and construction of facilities at Briggs is expected to
take approximately seven months. Financed expenditures for the period will total
approximately $26 million. Gold production will commence in the second half of
1996, after sufficient ore stacking and leaching to facilitate gold recovery has
occurred with production of approximately 19,000 ounces anticipated. Direct cash
operating costs, after achieving design capacity, are expected in the range of
$215-$225 per ounce during the fourth quarter of 1996 and approximately
$230-$240 per ounce over the mine life.
The Company anticipates gold production from residual leaching at Kendall
in 1996 of approximately 7,000 ounces at direct cash operating costs of
approximately $330-340 per ounce. The Company expects to spend approximately
$0.7 million on reclamation during 1996, and a further $2.0 million beyond 1996
through mine closure. The Company has fully accrued the expected reclamation
costs as of December 31, 1995.
During 1996, the Company expects to contribute approximately $1.8 million
to fund its share of expenditures for the McDonald Project, principally relating
to ongoing permitting and support activities. The permitting process will be
rigorous and is expected to take a minimum of 30-36 months from the initial
filing of the Plan of Operations in November 1994. The Company's overall
exploration objectives in 1996 will be to seek quality joint venture partners
for several of its foreign properties and focus internally on exploring and
drilling within and adjacent to the Briggs claim block and select foreign
properties, particularly in Brazil. These expenditures are expected to total
$3.0 million.
Financing
On March 26, 1996, the Company completed a private placement in the amount
of $12.1 million ($11.3 million net of expenses). The offering was completed at
a price of $3.00 per unit which included one share of common stock (4,034,300
total shares) and one-half warrant (2,017,200 total warrants). Each whole
warrant entitles the holder to purchase one share of common stock at an exercise
price equal to $3.75 per share. The warrants expire on March 25, 1999. The
Company intends to file a Registration Statement under the Securities and
Exchange Act of 1933 in respect of the common shares, the warrants, and the
common shares underlying the warrants and use its best efforts to cause such
Registration Statement to become effective as soon as practical. In the event
that the Registration Statement does not become effective on or before the 90th
day following the completion of the private placement, each purchaser of units
will be issued an additional 1/10 of one common share and 1/20 of one warrant
for each unit purchased. The Company's planned use of proceeds are for
exploring properties within and in proximity to the Briggs claim block,
continuing to fund its share of
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expenditures on the McDonald Project, exploration work on select foreign
properties, particularly in Brazil, and for general corporate purposes. This
financing is expected to adequately capitalize the Company for the next two
years consistent with its present objectives.
The Company engages in an ongoing evaluation of opportunities in the mining
business which may require other uses or additions of capital which cannot be
predicted at this time. In addition, the Company, upon successful completion of
the permitting process at the McDonald Project, will be required to fund its
share of construction costs in order to maintain its present ownership level.
The Company's share of these costs may exceed $50 million, which will require
additional financing from external sources.
Gold Prices and Hedging
The Company's revenues, earnings and cash flow are strongly influenced by
world gold prices, which fluctuate widely and over which the Company has no
control. The Company's strategy is to provide an acceptable floor price for a
portion of its production in order to meet minimum coverage ratios as required
by loan facilities while providing participation in potentially higher prices.
Production not subject to loan covenants has historically been sold at spot
prices. The Company's hedging program for 1996 consists of forwards and put
options with approximately 52% of estimated total production hedged at an
average price of $394 per ounce. The risks of hedging include opportunity risk
by limiting unilateral participation in upward prices; production risk
associated with delivering physical ounces against a forward commitment; and
credit risk associated with counterparties to the hedged transaction. The
Company believes its production risk is minimal, and furthermore has the
flexibility to selectively extend maturity dates, thereby postponing delivery
against forward commitments. With regard to credit risk, the Company uses only
creditworthy counterparties and does not anticipate non-performance by such
counterparties.
Environmental Regulation
In 1995, the Montana State Legislature passed legislation which streamlined
the permitting process of new industrial projects by reorganizing the several
state agencies that had jurisdiction over environmental permitting into one
central agency, the new Department of Environmental Quality (DEQ). This agency
will be responsible for acting on an application for a Hard Rock Mining
Operating Permit in connection with a Plan of Operations filed by the Seven-Up
Pete Joint Venture for the McDonald gold project. This permit, as well as
several other local, state and federal permits, including a joint state and
federal Environmental Impact Statement (EIS), will be required before permits
can be issued. There are no assurances that all permits will be issued nor that,
in the event they are issued, such issuances will be timely, nor that conditions
contained in the permits will not be so onerous as to preclude construction and
operation of the project.
The Kendall Mine in Montana operates under permits granted by the DEQ. The
DEQ requires the Company to maintain a $1,869,000 Reclamation Bond to ensure
appropriate reclamation. The Company has filed a final closure plan which
provides for enhanced measures not contemplated in the original permit. The
reclamation portion of the closure plan has been approved, however, the water
quality and monitoring plans are still being reviewed. Release of bonding will
only take place once the regulatory agencies are satisfied that all reclamation
requirements have been met.
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The U.S. Bureau of Land Management (BLM), Inyo County, the California
Department of Conservation, and the Lahontan Regional Water Quality Control
Board (Lahontan) have jointly required the Company to post a reclamation bond in
the amount of $3,030,000 to ensure appropriate reclamation of the Briggs Mine.
Additionally, the Company will be required by Lahontan to post a $1,010,000 bond
to ensure adequate funds to mitigate any "foreseeable release" of pollutants to
state waters at least 90 days prior to initiation of cyanide on the heap leach
pads. Both bonds are subject to annual review and adjustment.
Based upon current knowledge, the Company believes that it is in material
compliance with all applicable environmental laws and regulations as currently
promulgated. However, the exact nature of environmental control problems, if
any, which the Company may encounter in the future cannot be predicted,
primarily because of the increasing number, complexity and changing character of
environmental requirements that may be enacted or of the standards being
promulgated by federal and state authorities.
Federal Legislation
In 1994, the United States Congress passed the California Desert Protection
Act (CDPA), resolving surface management classifications for large portions of
BLM managed lands in the desert areas of California. The passing of the CDPA
released lands around the Briggs Mine for multiple use management, significantly
reducing constraints on exploration and mine operations.
No congressional legislation was enacted in 1995 to modify the requirements
applicable to mining claims on federal lands under the Mining Law of 1812. The
timing and exact nature of any mining law changes cannot presently be predicted,
however, the Company will continue its active role in industry efforts to work
with Congress to achieve responsible changes to mining law. The Company is also
continuing its present efforts to patent the Briggs and diatomite claims into
private ownership in accordance with the provisions of currently applicable law.
Legal Actions
Certain actions are pending with respect to permits issued for the Briggs
Mine in California. A local environmental group and the Timbisha Shoshone Tribe
have; 1) appealed the Bureau of Land Management's decision to approve the Final
Environmental Impact Statement and Plan of Operations; 2) petitioned the
Superior Court of Inyo County alleging violations of the California
Environmental Quality Act and the Surface Mining and Reclamation Act; and 3)
filed a challenge to the issuance of Waste Discharge requirements by the
Lahontan Regional Water Quality Board. The Company has vigorously defended its
position in each of the proceedings and believes that all claims are without
merit, however, there are no assurances regarding the outcome of these actions
or the effects those outcomes might have on the Company's ability to complete
and operate the mine.
Other
In October, 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting For
Stock-Based Compensation. SFAS 123 defines a "fair value" based method of
accounting for employee options or similar equity instrument. SFAS 123
encourages, but does not require the method of accounting prescribed by the
Statement, and
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does allow for an entity to continue to measure compensation cost as prescribed
by APB Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees.
Entities electing to remain with APB 25 must make proforma disclosures of net
income and earnings per share as if the fair value based method had been
applied, effective for fiscal years beginning after December 15, 1995. The
Company expects to continue to measure compensation cost under APB 25, subject
to the proforma disclosure requirements of SFAS 123.
For the foreseeable future, it is anticipated that the Company will use any
earnings to finance its growth and that dividends will not be paid to
shareholders. Further, pursuant to an agreement executed by the Company in favor
of its wholly owned subsidiary, CR Briggs Corporation, in connection with a loan
for the Briggs Project, the Company has agreed to maintain certain levels of
working capital, tangible net worth, and leverage ratios which could restrict
the payment of dividends where such payment would result in a failure to
maintain such levels. Similarly, CR Briggs Corporation is prohibited from
repaying the Company for advances or from paying dividends to the Company from
the Briggs Project cash flow unless certain conditions relating to the financial
performance of the Briggs Project are met.
ITEM 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants ........................................ 41
Consolidated Balance Sheets............................................... 42
Consolidated Statements of Operations .................................... 43
Consolidated Statement of Changes in Stockholders' Equity................. 44
Consolidated Statements of Cash Flows..................................... 47
Notes to Consolidated Financial Statements................................ 47-62
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REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
of Canyon Resources Corporation:
We have audited the consolidated financial statements of Canyon Resources
Corporation and Subsidiaries listed in Item 14(a) of this Form 10-K. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Canyon Resources Corporation and Subsidiaries as of December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note 9 to the consolidated financial statements, the
Company changed its method of accounting for impairment of long-lived assets, as
required by Statement of Financial Accounting Standards No. 121, in 1995.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Denver, Colorado
March 27, 1996
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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1995 1994
----------------- ----------------
ASSETS
Cash and cash equivalents $1,893,800 $13,280,100
Restricted cash 25,212,600 1,869,000
Accounts receivable 586,300 520,100
Inventories 664,200 2,430,400
Prepaid and other assets 297,900 218,500
----------------- ----------------
Total current assets 28,654,800 18,318,100
----------------- ----------------
Property and equipment, at cost
Mining claims and leases 34,321,800 28,624,200
Producing properties 2,869,100 29,988,500
Other 2,692,600 566,800
----------------- ----------------
39,883,500 59,179,500
Accumulated depreciation and depletion (1,359,100) (27,162,000)
----------------- ----------------
Net property and equipment 38,524,400 32,017,500
----------------- ----------------
Debt issuance costs, net of amortization of $741,100 for 1995, and $414,200 for 1994 1,981,800 1,079,600
Other assets 3,263,200 772,400
----------------- ----------------
Total Assets $72,424,200 $52,187,600
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $806,900 $847,300
Notes payable - current 216,600 276,400
Accrued taxes, other than payroll and income 413,200 757,700
Accrued reclamation costs 686,000 731,700
Deferred income taxes 267,900 245,600
Other accrued liabilities 476,800 506,400
----------------- ----------------
Total current liabilities 2,867,400 3,365,100
Notes payable - long term 47,371,800 22,479,900
Accrued reclamation costs 2,026,000 867,200
Other noncurrent liabilities 88,500 121,800
----------------- ----------------
Total Liabilities 52,353,700 26,834,000
----------------- ----------------
Commitments and contingencies (Notes 10 and 11)
Common stock ($.01 par value) 100,000,000 shares authorized; issued and out-
standing: 25,793,300 at December 31, 1995 and 25,497,100 at December 31, 1994 257,900 255,000
Capital in excess of par value 46,072,500 45,215,300
Deficit (26,259,900) (20,116,700)
----------------- ----------------
Total Stockholders' Equity 20,070,500 25,353,600
----------------- ----------------
Total Liabilities and Stockholders' Equity $72,424,200 $52,187,600
================= ================
The accompanying notes are an integral part of these consolidated financial
statements.
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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
1995 1994 1993
---------------- ---------------- ----------------
REVENUE
Sales $9,006,600 $19,580,200 $19,879,600
---------------- ---------------- ----------------
EXPENSES
Cost of sales 7,393,600 12,307,300 12,534,100
Depreciation, depletion, and amortization 723,100 2,118,000 1,956,700
Selling, general and administrative 3,377,600 3,020,600 2,058,200
Exploration costs 991,700 1,158,700 303,800
Abandoned mineral properties 302,300 101,400 1,316,400
Provision for final site restoration 1,087,300 - -
Impairment of assets 296,000 - -
---------------- ---------------- ----------------
14,171,600 18,706,000 18,169,200
---------------- ---------------- ----------------
OTHER INCOME (EXPENSE)
Interest income 570,000 652,200 420,000
Interest expense (1,679,300) (1,861,000) (1,217,400)
Other 131,100 (3,400) (28,100)
---------------- ---------------- ----------------
(978,200) (1,212,200) (825,500)
---------------- ---------------- ----------------
Income (loss) before income tax expense
and minority interest in consolidated subsidiaries (6,143,200) (338,000) 884,900
Minority interest in net (loss) of consolidated
subsidiaries - 300 -
Provision for (benefit of) income taxes - - (35,800)
---------------- ---------------- ----------------
Net income (loss) ($6,143,200) ($337,700) $920,700
================ ================ ================
Net income (loss) per share ($0.24) ($0.01) $0.04
================ ================ ================
Weighted average shares outstanding 25,696,800 25,470,400 24,636,100
================ ================ ================
The accompanying notes are an integral part of these consolidated financial
statements.
43
46
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
For the years ended December 31, 1995, 1994, and 1993
Capital Retained
Common Stock in excess Earnings
Shares Amount of par value (Deficit)
--------------- -------------- --------------- ---------------
Balances, December 31, 1992 24,019,100 $240,200 $42,283,500 ($20,699,700)
-------------- --------------- --------------- ----------------
Issuance of stock and warrants 250,000 2,500 846,900 -
Exercise of stock options 259,500 2,600 329,800 -
Conversion of debenture 789,500 7,900 1,492,100
Net income - - - 920,700
-------------- --------------- --------------- ----------------
Balances, December 31, 1993 25,318,100 253,200 44,952,300 (19,779,000)
Exercise of stock options 150,000 1,500 163,300 -
Conversion of debenture 29,000 300 99,700 -
Net (loss) - - - (337,700)
-------------- --------------- --------------- ----------------
Balances, December 31, 1994 25,497,100 255,000 45,215,300 (20,116,700)
-------------- --------------- --------------- ----------------
Issuance of stock 61,600 600 99,400
Exercise of stock options 24,400 200 34,900 -
Conversion of debentures 210,200 2,100 722,900 -
Net (loss) - - - (6,143,200)
-------------- -------------- --------------- ----------------
Balances, December 31, 1995 25,793,300 $257,900 $46,072,500 ($26,259,900)
============== =============== =============== ================
The accompanying notes are an integral part of these consolidated financial
statements.
44
47
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
1995 1994 1993
------------------- ----------------- -----------------
Cash flows from operating activities:
Net income (loss) ($6,143,200) ($337,700) $920,700
Adjustments to reconcile net income (loss) to net cash:
Depreciation, depletion, and amortization 723,100 2,118,000 1,956,700
Amortization of financing costs 326,900 411,800 251,200
Abandoned mineral properties 302,300 101,400 1,316,400
Impairment of assets 296,000 - -
Equity in loss of Minera Hispaniola 7,100 22,400 29,000
Loss (gain) on disposal of equipment (161,000) (10,500) 1,800
Other 74,200 4,900 -
Changes in assets and liabilities,
(Increase) in receivables (70,100) (120,800) (157,200)
Decrease (increase) in inventories 1,766,200 (781,400) 846,500
Decrease (increase) in prepaid and other assets (97,000) 264,300 (229,600)
Increase (decrease) in accounts payable and accrued liabilities (604,500) 575,100 435,500
Increase (decrease) in other liabilities 1,223,900 154,100 (220,300)
------------------- ----------------- -----------------
Total adjustments 3,787,100 2,739,300 4,230,000
------------------- ----------------- -----------------
Net cash provided by (used in) operating activities (2,356,100) 2,401,600 5,150,700
------------------- ----------------- -----------------
Cash flows from investing activities:
Purchases of property and equipment (8,082,900) (6,667,400) (7,578,400)
Proceeds on asset dispositions 430,800 200,000 6,000
Increase (decrease) in accounts payable and accrued liabilities 2,100 (143,100) 410,500
Other 20,000 (72,500) (186,900)
------------------- ----------------- -----------------
Net cash used in investing activities (7,630,000) (6,683,000) (7,348,800)
------------------- ----------------- -----------------
Cash flows from financing activities:
Issuance of stock 35,100 174,200 619,900
Debenture conversion cost (43,500) (9,500) -
Payments on debt (386,400) (2,447,100) (4,606,000)
Payments on capital lease obligations (35,000) (35,700) (55,100)
Proceeds from gold loans and debentures 2,740,400 - 26,000,000
Payments for debt issuance costs (1,126,500) - (1,563,400)
Payments to escrow account (2,000,300) - -
Payments to collateralize letters of credit (584,000) (286,800) (1,582,200)
------------------- ----------------- -----------------
Net cash provided by (used in) financing activities (1,400,200) (2,604,900) 18,813,200
------------------- ----------------- -----------------
Net increase (decrease) in cash and cash equivalents (11,386,300) (6,886,300) 16,615,100
Cash and cash equivalents, beginning of year 13,280,100 20,166,400 3,551,300
------------------- ----------------- -----------------
Cash and cash equivalents, end of year $1,893,800 $13,280,100 $20,166,400
=================== ================= =================
The accompanying notes are an integral part of these consolidated financial
statements.
45
48
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
Supplemental disclosures of cash flow information:
1. The Company paid $1,369,100, $1,453,500, and $891,400 of interest during
1995, 1994, and 1993, respectively.
2. The Company paid no income taxes during 1995 and 1994, and $78,200 of income
taxes during 1993.
Supplemental schedule of noncash investing and financing activities:
1. Capital lease obligations of $48,600, $55,600, and $62,100 were incurred for
equipment in 1995, 1994, and 1993, resepectively.
2. Debentures in the principal amount of $725,000 were converted into 210,100
shares of common stock during 1995 and $100,000 in principal were converted
into 29,000 shares of common stock during 1994.
3. The Company issued 61,500 shares of common stock which was valued at
$100,000 in exchange for a joint venture interest during 1995 and issued
150,000 shares of common stock and warrants to purchase an additional 75,000
shares of common stock which was valued at $394,500 in exchange for a joint
venture interest during 1993.
4. During 1995, the Company transferred title to previously financed equipment
back to the creditor for consideration equal to the unpaid balance of
$56,500.
5. Certain stock options were exercised and paid for by tendering shares
otherwise issuable in lieu of cash payment. Fair market value of the shares
tendered was $9,500, $254,600, and $265,100 during 1995, 1994, and 1993,
respectively.
6. The Company financed $899,900 of equipment purchases during 1994.
7. The Company issued a warrant to purchase 200,000 shares of common stock
which was valued at $167,400 during 1993.
8. A note payable in the amount of $1,500,000 was converted into 789,500 shares
of common stock during 1993.
The accompanying notes are an integral part of these consolidated financial
statements.
46
49
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS:
Canyon Resources Corporation ("the Company") is a United States based
corporation involved in all phases of the mining business from exploration,
permitting, developing, operating and final closure of mining projects. The
Company has gold and industrial mineral production operations in the western
United States and conducts exploration activities in search of additional
mineral properties (emphasizing precious metals and industrial minerals) in the
western United States and throughout Latin America and Africa. The principal
market for the Company's precious metals products are European-based bullion
trading concerns. The Company's industrial minerals products (diatomite) are
differentiated based on particle size distribution and sold through a
distributor network in the United States, Canada and internationally to the
paint, plastics, asphalt coatings, and filler markets. Direct sales of diatomite
are also made to agricultural markets as an insecticide.
2. USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CONSOLIDATION: The consolidated financial statements of the Company include the
accounts of Canyon and its wholly-owned subsidiaries: CR Kendall Corporation; CR
Minerals Corporation; CR Briggs Corporation; CR Montana Corporation; CR
International Corporation; Canyon Resources (Chile) S.A.; Canyon de Panama,
S.A.; CR Brazil Corporation; and its 90% owned subsidiaries: Canyon Resources
Venezuela, C.A.; Canyon Resources Africa Ltd.; and Canyon Resources Tanzania
Limited. The Company applies equity accounting principles for its 40% ownership
in Minera Hispaniola, S.A., a foreign corporation, and proportionately
consolidates its interests in undivided interest joint ventures. All
intercompany balances and transactions have been eliminated.
Certain prior period items have been reclassified in the consolidated financial
statements to conform with the current year presentation.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include amounts which are
readily convertible into cash and which are not subject to significant risk from
changes in interest rates. The Company maintained at December 31, 1995 and 1994,
a significant portion of its cash in two financial institutions.
RESTRICTED CASH: Cash held as collateral for letters of credit or in escrow for
contingencies is classified based on the expected expiration of such facilities.
Cash restricted to specific uses is classified based on the expected timing of
such disbursements. See Note 7.
INVENTORIES: Processed ores and metal-in-process are stated at the lower of
average cost or market. Materials and supplies are stated at cost.
47
50
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
DEFERRED MINING COSTS: The Company, in order to more closely match expenses and
revenues, capitalizes costs of overburden removal that are in excess of the
estimated average pit strip ratio over the pit life. When the actual strip ratio
becomes less than the estimated average pit strip ratio, these costs are
expensed.
MINING CLAIMS AND LEASES: The Company's policy is to expense exploration costs
incurred prior to identification of specific land areas of interest and to defer
all costs directly associated with acquisition, exploration and development of
specific properties until the land area of interest to which they relate is put
into operation, sold or abandoned. Gains or losses resulting from the sale or
abandonment of mining properties are included in operations. Proceeds from sales
of properties and earn-in arrangements in which the Company has retained an
economic interest are credited against property costs and no gain is recognized
until all costs have been fully recovered.
Costs associated with producing properties are charged to operations using the
units-of-production method based on estimated recoverable reserves.
PROPERTY AND EQUIPMENT: Gold production facilities and equipment are stated at
cost and are depleted over the estimated production base of the related
property. Diatomite production facilities and equipment are stated at cost and
are depreciated using the straight-line method over estimated useful lives of
three to forty years. Vehicles and office equipment are stated at cost and are
depreciated using the straight-line method over estimated useful lives of three
to five years. Maintenance and repairs are charged to expense as incurred. Gains
or losses on dispositions are included in operations.
The Company has elected early adoption of Statement of Financial Accounting
Standards No. 121 (SFAS 121), Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of. SFAS 121 requires that an
impairment loss be recognized when the estimated future cash flows (undiscounted
and without interest) expected to result from the use of an asset are less than
the carrying amount of the asset. Measurement of an impairment loss is based on
fair value of the asset if the asset is expected to be held and used.
RECLAMATION: Costs are estimated based primarily upon environmental and
regulatory requirements and are accrued and charged to expense over the expected
economic life of the operation using the units of production method. The accrual
for reclamation is classified based on the timing of expected expenditures.
GOLD HEDGING: Gains or losses related to changes in values of hedging
instruments are included in revenues when the related inventories are sold. The
resulting cash flow is included in net cash provided by operating activities on
the statements of cash flows.
GOLD LOANS: Gold loans are monetized at the original proceeds amount and are
recognized into revenue at the time of physical delivery of the metal. At any
time that it is not probable that the timing and amount of production will be
sufficient to repay the gold loan, or the cost of the production exceeds the
market price of the gold, the gold loan is recorded at the higher of the
original proceeds or the market value.
48
51
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
DEFERRED FINANCING COSTS: Costs incurred to obtain debt financing are
capitalized and amortized over the life of the debt facilities using the
effective interest method.
INTEREST CAPITALIZATION: Interest costs are capitalized as part of the
historical cost of facilities and equipment, if material. Interest is not
capitalized on properties in the exploration stage until a decision is made to
develop the property and construct facilities, and all necessary permits and
financing (if necessary) are in place.
EARNINGS PER SHARE: Earnings per share are based on the weighted average number
of common shares outstanding during 1995, 1994, and 1993. Common share
equivalents were not included in 1995 and 1994 because their effect would be
antidilutive. During 1993, common share equivalents were not included because
they did not reduce per share amounts by more than 3%. Fully diluted earnings
per share are reported if the calculation results in per share dilution greater
than 3%.
4. INVENTORIES:
Inventories consisted of the following at December 31:
1995 1994
---------- ----------
Gold-in-process (a) $389,200 $2,177,300
Diatomite (a) 120,000 90,000
Materials and supplies 155,000 163,100
-------- ----------
$664,200 $2,430,400
======== ==========
(a) Includes all direct and indirect costs of mining, crushing, processing
and general and administrative expenses of the operation.
5. INCOME TAXES:
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109). SFAS 109 requires deferred income taxes
to be computed under the asset and liability method and to be adjusted to and
maintained thereafter at statutory rates in effect when the taxes are expected
to be paid. SFAS 109 also requires that a valuation allowance be provided if it
is more likely than not that some portion or all of a deferred tax asset will
not be realized. Although the Company has significant deferred tax assets,
principally in the form of operating loss carryforwards, its ability to generate
future taxable income to realize the benefit of these assets will depend
primarily on bringing new mines into production. The market, capital, and
environmental uncertainties associated with that growth requirement are
considerable, resulting in the Company's conclusion that a full valuation
allowance be provided, except to the extent that the benefit of operating loss
carryforwards can be used to offset future reversals of existing deferred tax
liabilities. As a result, adoption had no net cumulative effect on the results
of operations. No changes occurred during 1995, 1994 and 1993 in the conclusions
regarding the need for the valuation allowance. During 1995, 1994 and 1993, the
change in the valuation allowance was $2,190,200, $1,474,300, and $52,100,
respectively.
49
52
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. INCOME TAXES, CONTINUED:
Deferred tax assets and liabilities were comprised of the following at
December 31, 1995 and December 31, 1994:
December 31, 1995 December 31, 1994
----------------- -----------------
DEFERRED TAX ASSETS
Reserve for mine reclamation $ 1,084,800 $ 639,600
Inventories 759,500 1,191,200
Net Operating Loss Carryforwards 14,580,800 10,252,400
Other 333,600 317,900
------------ ------------
Total Gross Deferred Tax Assets 16,758,700 12,401,100
Valuation Allowances (12,560,600) (10,393,200)
------------ ------------
Net Deferred Tax Assets $ 4,198,100 $ 2,007,900
------------ ------------
DEFERRED TAX LIABILITIES
Net PP&E (writedowns, depreciation/depletion and
exploration/development expenditures) $ (4,198,100) $ (2,007,900)
------------ ------------
NET DEFERRED INCOME TAX ASSET (LIABILITY) $ - $ -
============= ============
The provision for income taxes for the years ended December 31, 1995, 1994,
and 1993 consists of the following:
1995 1994 1993
-------- -------- --------
Federal:
Current $ -- $ -- $(35,800)
Deferred -- -- --
-------- -------- --------
$ -- $ -- $(35,800)
======== ======== ========
The provision for income taxes differs from the amounts computed by
applying the U.S. federal statutory rate as follows: 1995 1994 1993
1995 1994 1993
-------- -------- --------
Tax at Statutory Rate of 34% $(2,063,200) $ (114,800) $ 300,900
Net Operating Loss (With) Without Tax Benefit 2,063,200 114,800 (300,900)
Alternative Minimum Tax -- -- (35,800)
----------- ---------- -----------
$ -- $ -- $ (35,800)
=========== ========== ===========
At December 31, 1995, the Company had net operating loss carryforwards for
regular tax purposes of approximately $37,186,200 and approximately $17,800,400
of net loss carryforwards available for the alternative minimum tax. The net
loss carryforwards will expire from 1999 through 2009.
50
53
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. INCOME TAXES, CONTINUED:
As a result of a merger in 1987, net operating loss carryforwards are
limited by Section 382 of the Internal Revenue Tax Code to approximately
$112,800 annually. As of December 31, 1995, the amount of remaining net
operating loss carryforwards limited by Section 382 is $1,251,500.
6. NOTES PAYABLE:
Notes payable consisted of the following at:
December 31, December 31,
1995 1994
----------- ------------
Briggs Loan (a) $26,000,000 $ --
6% Debentures (b) 21,175,000 21,900,000
Caterpillar Finance Note (c) 413,400 856,300
----------- -----------
47,588,400 22,756,300
Current portion 216,600 276,400
----------- -----------
Notes Payable - Long Term $47,371,800 $22,479,900
=========== ===========
(a) On December 6, 1995, the Company's wholly owned subsidiary, CR Briggs
Corporation, secured a $34.0 million loan facility to finance the capital
requirements of mine construction and working capital for its Briggs Mine in
California. The Company is guaranteeing the loan obligations of CR Briggs
Corporation, and the loan facility is collateralized by a first mortgage lien on
the property, non-leased assets of CR Briggs Corporation, and a pledge of the
Company's stock in CR Briggs Corporation. The facility was provided by a
syndication of three banks; Banque Paribas, Bayerische Vereinsbank AG, and NM
Rothschild & Sons Ltd. and includes three tranches; a $25 million gold loan; a
$5 million cash loan; and a $4 million cost overrun facility. The cost overrun
facility is available only in the event of spending in excess of $30 million and
an additional $2 million contribution by the Company. (See Note 7(d)). On
December 27, 1995 drawing commenced on the facility and $25.0 million principal
in the form of a gold loan and $1.0 million principal as a dollar loan were
drawn. The gold loan portion was monetized at $388.05 per ounce, or 64,425
ounces and carries an initial interest rate for 90 days of 5.32%. The dollar
loan's initial interest rate for 90 days is 9.87%. Varying interest rate periods
can be selected under the terms of the facility. Repayment terms require
quarterly installments over six years, commencing in 1997 which include
scheduled principal reductions and a varying cash sweep amount equal to 30% of
free cash flow (as defined) after primary debt service. After funding certain
reserve accounts, if necessary, remaining cash flow is available to the Company,
subject to further restrictive conditions. These restrictions include assertions
of no potential or actual defaults at the time of transfer and to the frequency
of such transfers. Within three years of project completion (approximately 4
months beyond construction completion and start-up) an additional 70,000 ounces
of recoverable reserves must be identified or 100% of excess cash flow after
scheduled repayments will be applied as additional prepayments against the loan
amounts. As a condition of the loan, a portion of the Briggs Mine's future
production was hedged to ensure adequate cash flow for repayment of the
obligation. Accordingly, fixed forward contracts totalling 186,600 ounces were
entered into at prices ranging from $395 per ounce to
51
54
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
6. NOTES PAYABLE, CONTINUED:
$424 per ounce. In addition, put options on 21,600 ounces at a strike price of
$380 per ounce were purchased. The put options were financed by the sale of call
options on 10,800 ounces at a strike price of $403 per ounce. Approximately 41%
of the Briggs Mine estimated production from current reserves was hedged through
forwards and put options as of December 31, 1995. Upon the occurrence and during
a default (as defined) the lenders may, by notice to CR Briggs Corporation,
terminate the commitment and declare all amounts immediately due and payable.
The Company (through project completion) and CR Briggs Corporation are also
subject to cross-default provisions without the giving of notice in respect of
other indebtedness and agreements which would cause such indebtedness to become
due prior to its maturity.
(b) On June 2, 1993, the Company sold $22.0 million of Subordinated Convertible
Debentures which are due June 1, 1998. Expenses associated with the financing
totalled $1.5 million. Interest is payable semi-annually on June 1 and December
1 at a rate of 6% per annum. Interest payments in 1995, 1994 and 1993 totalled
$1,289,300, $1,317,000 and $656,300, respectively. The debentures are
convertible at the option of the holder any time into common shares at the rate
of $3.45 per share. During 1995, $725,000 of principal was converted into
210,100 shares of common stock. During 1994, $100,000 of principal was converted
into 29,000 shares of common stock. After three years, the Company may redeem
the debentures by issuing common stock at a rate equal to 94% of the then
trading common stock price or by payment in cash at par. Upon the occurrence of
certain events, principally relating to changes in control of the Company, each
note holder has the right, at the holder's option, to require the Company to
repurchase the notes for cash at par plus accrued interest to the repurchase
date.
(c) In August 1994, the Company exercised purchase options on its leased mining
equipment at the Kendall Mine for $899,900. Caterpillar Financial Services
subsequently agreed to finance the purchase price over a three year period at a
fixed interest rate of 9.5%. During 1995, the Company paid $59,700 of interest
and reduced the principal balance by $442,900, including a prepayment of
$210,500 related to equipment which was sold because it was no longer needed.
During 1994, the Company paid $14,100 of interest and reduced the principal
balance by $57,600 in connection with the financing terms.
Maturities of notes payable, excluding additional payments under the gold loan
as more fully described in (a) above, are as follows for the next five years:
1996 $ 216,600
1997 2,884,300
1998 24,612,500
1999 3,562,500
2000 3,187,500
Thereafter 13,125,000
-----------
Total $47,588,400
===========
52
55
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
7. RESTRICTED CASH:
Restricted cash consisted of the following at December 31:
1995 1994
----------- ----------
Collateral for Letter of Credit (a) $ 1,953,000 $1,869,000
Collateral for Letter of Credit (b) 500,000 --
Unexpended proceeds from loan drawing (c) 23,259,600 --
Contingency account (d) 2,000,300 --
----------- ----------
Current portion (a and c) $27,712,900 $1,869,000
Noncurrent portion (b and d) 25,212,600 1,869,000
---------- ----------
$ 2,500,300 $ --
=========== ==========
(a) In connection with the issue of certain bonds in 1995 for the performance of
reclamation obligations at the Kendall and Briggs Mines, a bank Letter of Credit
has been provided in favor of the Surety as partial collateral for such bond
obligations. The Letter of Credit, in the amount of $1,953,000, will expire no
earlier than December 31, 1996, and at the bank's option, may be renewed for
successive one-year periods. The Company has fully collateralized the Letter of
Credit by depositing cash in the amount of $1,953,000 with the bank. At December
31, 1994, cash held as collateral for a Letter of Credit related only to
reclamation bonding requirements at the Kendall Mine.
(b) In connection with a first year work commitment on an exploration property
in Ethiopia, a bank Letter of Credit has been provided in favor of the Ministry
of Mines and Energy, Federal Democratic Republic of Ethiopia. The Letter of
Credit, in the amount of $500,000, will expire on January 6, 1997. The Company
has fully collateralized the Letter of Credit by depositing cash in the amount
of $500,000 with the bank.
(c) As described in Note 6(a), the loan proceeds are restricted solely for the
development of the Briggs Mine.
(d) As a condition precedent to securing a loan facility (See Note 6(a)), the
Company transferred $2.0 million to an escrow account to be held in reserve
against construction cost overruns at the Briggs Mine. These funds, net of any
cost overruns, will be returned to the Company upon final completion of an
expansion phase of development, currently scheduled in 1997.
53
56
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. MINING CLAIMS AND LEASES:
The carrying value of the Company's mining claims and leases consists of
the following components at December 31, 1995 and 1994:
December 31,
1995 1994
----------- -----------
Mining Property:
Briggs $17,973,200 $14,346,500
McDonald 7,216,900 6,038,100
Exploration Properties 9,131,700 8,239,600
----------- -----------
$34,321,800 $28,624,200
=========== ===========
Feasibility studies on the Briggs and McDonald properties indicate sufficient
mineable reserves that, with subsequent development, would allow the Company to
ultimately recover its carrying value at December 31, 1995. The results of
exploration activities on the Company's exploration properties to date have not
resulted in conclusions that the carrying value of these properties will or will
not be recoverable by charges against income from future mining operations or
sale of properties. The Company cannot presently determine the ultimate
realizability of the carrying values of the exploration properties ($9,131,700
and $8,239,600 at December 31, 1995 and 1994, respectively) since the
realization is dependent upon the discovery of reserves in commercial quantities
and the subsequent development or sale of those reserves.
9. ASSET IMPAIRMENT:
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 121 (SFAS 121), Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. SFAS 121 requires
that long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable.
Concurrent with adoption, the Company has determined that its carrying value for
property and equipment at the Kendall Mine is not recoverable, due principally
to the maturing life of the mine (remaining economic life of one year) and the
level of site restoration costs anticipated during the next two to three years
to achieve mine closure. As estimated cash outflows exceed estimated cash
inflows, the Company has reduced the carrying value to zero, recorded a fourth
quarter 1995 impairment of $296,000, and removed gross property and equipment
costs and accumulated depreciation and depletion amounts from the Balance Sheet
of $26,763,900 and $26,467,900, respectively, as of the adoption date.
10. LEASE COMMITMENTS:
The Company has entered into various operating leases for office space and
equipment, including a mining fleet at the Briggs Mine, and vehicles used in its
operations. At December 31, 1995, future minimum lease payments extending beyond
one year under noncancellable leases were as follows:
1996 1997 1998 1999 2000 Thereafter Total
---------- ---------- ---------- ---------- ---------- ----------- ----------
$1,558,200 $1,557,900 $1,551,700 $1,511,200 $1,511,200 $ 84,000 $7,774,200
54
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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
10. LEASE COMMITMENTS, CONTINUED:
The Company has also entered into various mining lease arrangements for
purposes of exploring, and if warranted, developing and producing minerals from
the underlying leasehold interests. The lease arrangements typically require
advance royalty payments during the pre-production phase and a production
royalty upon commencement of production, with previously advanced payments
credited against the production royalties otherwise payable. Advance royalty
commitments will vary each year as the Company adds or deletes properties.
Currently, minimum advance royalty payments total approximately $152,300
annually.
The Company is also required to pay an annual rental fee to the federal
government for any unpatented mining claims, mill or tunnel site claim on
federally owned lands at the rate of $100 per mining claim. The Company's
present inventory of claims would require approximately $134,100 in annual
rental fees, however, this amount will vary as claims are added or dropped. The
Company has submitted patent applications for its Briggs and diatomite claims,
however, no assurances can be made that patents will be issued. The Company is
also subject to rental fees to various other owners or lessors of mining claims.
Currently, rental payments to these parties total approximately $124,000
annually.
Lease costs included in cost of goods sold for the years ended December 31,
1995, 1994 and 1993 were $85,600; $1,013,000 and $1,419,500, respectively. Rent
expense included in selling, general and administrative expense of the Company
for the years ended December 31, 1995, 1994 and 1993, was $121,200; $107,900;
and $72,800, respectively.
Property and equipment includes equipment with a cost and accumulated
amortization of $143,500 and $46,200, respectively, at December 31, 1995 and
$330,600 and $234,300, respectively, at December 31, 1994 for leases that have
been capitalized. Future minimum lease obligations under capital leases are as
follows:
1996 $ 61,900
1997 45,900
1998 16,300
-----------
Total $ 124,100
Less amounts representing interest 15,500
-----------
Present value of minimum lease payments 108,600
Less current obligations 51,800
-----------
Long-term obligations under capital lease $ 56,800
===========
11. COMMITMENTS AND CONTINGENCIES:
Certain actions are pending with respect to permits issued for the Briggs
Mine in California. A local environmental group and the Timbisha Shoshone Tribe
have; 1) appealed the Bureau of Land Management's decision to approve the Final
Environmental Impact Statement and Plan of Operations; 2) petitioned the
Superior Court of Inyo County alleging violations of the California
Environmental Quality Act and the Surface Mining and Reclamation Act; and 3)
filed a challenge to the issuance of Waste Discharge requirements by the
Lahontan Regional Water Quality Board. The Company has vigorously defended its
position in each of the proceedings and believes that all claims are without
merit.
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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. COMMITMENTS AND CONTINGENCIES, CONTINUED:
Based upon current knowledge, the Company believes that it is in material
compliance with environmental laws and regulations as currently promulgated.
However, the exact nature of environmental control problems, if any, which the
Company may encounter in the future cannot be predicted, primarily because of
the increasing number, complexity and changing character of environmental
requirements that may be enacted or of the standards being promulgated by
federal, state, or foreign authorities.
12. CERTAIN CONCENTRATIONS AND CONCENTRATIONS OF CREDIT RISK:
The Company sold its gold and silver production predominately to one
customer during 1995, 1994 and 1993. Given the nature of the commodities being
sold and because many other potential purchasers of gold and silver exist, it is
not believed that loss of such customer would adversely affect the Company.
Sales of diatomite were made to a diverse base of customers during 1995, 1994,
and 1993.
The Company is subject to credit risk in connection with its price
protection arrangements as outlined in Note 6(a) in the event of non-performance
by its counterparties. The Company uses only highly-rated creditworthy
counterparties, however, and does not anticipate non-performance.
The Company is subject to concentrations of credit risk in connection with
maintaining its cash primarily in two financial institutions. The Company
considers the institutions to be financially strong and does not consider the
underlying risk to be significant. To date, these concentrations of credit risk
have not had a significant effect on the Company's financial position or results
of operations.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company does not acquire, hold or issue financial instruments for
trading purposes. The estimated fair values of the Company's financial
instruments at December 31, 1995 and December 31, 1994, are as follows:
=============================================================================================================
AT DECEMBER 31 1995 1994
------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ----------- ----------- -----------
Cash and Cash Equivalents $ 1,893,800 $ 1,893,800 $13,280,100 $13,280,100
Restricted Cash $27,712,900 $27,712,900 $ 1,869,000 $ 1,869,000
Long-term Investments:
Practicable to Estimate $ 353,700 $ 432,600 $ 50,000 $ 68,700
Not Practicable to Estimate -- -- $ 360,800 --(1)
Long-term Debt (2) $21,588,400 $18,200,400 $22,756,300 $15,310,300
=============================================================================================================
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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
13. FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED:
(1) At December 31, 1994, it was not practicable for the Company to
estimate fair value for its 40% ownership in an untraded foreign company
carried at historic cost, the principal assets of which were exploration
properties. During 1995, the shareholders of the foreign subsidiary entered
into an option to purchase shares agreement with a third party, allowing
the third party to acquire 100% ownership (subject to the shareholders
retaining certain royalty rights) after certain work commitments and
purchase obligations were fulfilled. At December 31, 1995, fair value was
estimated based on the Company's share of expected discounted cash flows
resulting from such agreement.
(2) Long-term debt excludes the carrying and fair value amounts for the
Company's gold loan (see Note 6(a)) because the commodity based loan does
not meet the criteria established for inclusion as a financial instrument.
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:
CASH AND CASH EQUIVALENTS: Carrying amounts approximate fair value based on the
short-term maturity of those instruments.
RESTRICTED CASH: Carrying amounts approximate fair value based on the short term
maturity of those instruments.
LONG-TERM INVESTMENTS: Fair value estimate based on expected discounted cash
flows at a discount rate commensurate with the risk and contingent nature of
future payments.
LONG-TERM DEBT: Fair value estimate for convertible debentures based on quoted
market prices. Fair value estimate for other long-term debt based on discounted
cash flows using the Company's current rate of borrowing for a similar
liability.
14. STOCK OPTIONS:
The Company adopted an Incentive Stock Option Plan on April 12, 1982, as
amended (the "Plan"), whereby options to purchase shares of the Company's common
stock may be granted to employees of the Company, including those who are also
directors of the Company, or subsidiary corporations in which the Company owns
greater than a 50% interest. Exercise price for the options is at least equal to
100% of the market price of the Company's common stock at the date of grant for
employees who own 10% or less of the total voting stock of the Company; and 110%
of the market price of the Company's common stock at the date of grant for
employees who own more than 10% of the Company's voting stock. Options become
exercisable after the second anniversary of the date of the grant and can expire
up to 10 years from the date of the grant.
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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
14. STOCK OPTIONS, CONTINUED:
Information on incentive stock option activity follows:
1995 1994 1993
-----------------------------------------------------------------------------------------------
Price Range Amount Price Range Amount Price Range Amount
-----------------------------------------------------------------------------------------------
Outstanding,
beginning of year $1.00 - $3.69 1,689,000 $1.00 - $3.69 1,455,000 $0.97 - $3.50 1,498,500
Granted $2.00 - $2.31 540,500 $1.63 - $3.56 422,000 $2.72 - $3.69 422,500
Exercised $1.00 - $1.63 (23,500) $1.00 - $3.50 (141,500) $0.97 - $3.50 (321,500)
Cancelled $1.63 - $3.69 (240,500) $1.63 - $3.69 (46,500) $1.00 - $3.50 (144,500)
Outstanding,
end of year $1.00 - $3.69 1,965,500 $1.00 - $3.69 1,689,000 $1.00 - $3.69 1,455,000
========= ========= =========
At December 31, 1995, the 1,965,500 shares under option are exercisable from
January 1, 1996 through December 6, 2000 and 911,386 shares remain reserved for
future issuance under the Plan.
On March 20, 1989, the Company's Board of Directors approved the adoption
of a Non-Qualified Stock Option Plan (the "Non-Qualified Plan"). Under the
Non-Qualified Plan, the Board of Directors may award stock options to
consultants, directors and key employees of the Company, and its subsidiaries
and affiliates, who are responsible for the Company's growth and profitability.
The Non-Qualified Plan does not provide criteria for determining the number of
options an individual shall be awarded, or the term of such options, but confers
broad discretion on the Board of Directors to make these decisions. Total
options granted under the Non-Qualified Plan may not have a term longer than 10
years or an exercise price less than 50 percent of the fair market value of the
Company's common stock at the time the option is granted.
By vote of the Company's shareholders at the May 17, 1995 Annual
Shareholders Meeting, the Company adopted a motion to award each non-employee
Director options to purchase 10,000 shares of common stock each year during
their tenure on the Board of Directors. Such stock option awards from the
Non-Qualified Plan are made at an exercise price equal to the closing price of
the Company's common stock one day prior to the Annual Shareholders Meeting. The
non-employee Director grants are exercisable at any time between one and five
years from the date of grant.
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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
14. STOCK OPTIONS, CONTINUED:
Information on non-qualified stock option activity follows:
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
Price Range Amount Price Range Amount Price Range Amount
- -------------------------------------------------------------------------------------------------------------------
Outstanding,
beginning of year $1.44 - $3.69 305,000 $1.44 - $3.69 360,000 $1.44 - $2.50 310,000
Granted $2.06 60,000 $2.19 20,000 $3.19 - $3.69 75,000
Exercised $1.88 (5,000) $1.75 - $2.00 (75,000) $1.75 - $1.88 (25,000)
Cancelled $2.50 (25,000) -- -- -- --
------- ------- -------
Outstanding,
end of year $1.44 - $3.69 335,000 $1.44 - $3.69 305,000 $1.44 - $3.69 360,000
======= ======= =======
At December 31, 1995, the 335,000 shares under option (all issued at 100% of
fair market value) are exercisable from January 1, 1996 through May 16, 2000 and
273,357 shares remain reserved for future issuance under the Non-Qualified Plan.
The Company has not recognized any compensation expense in connection with
option grants under the Non-Qualified Plan as all grants were issued at fair
market value.
In conjunction with the initial public offering of the Company's common
stock, the Company issued options to purchase 55,000 shares of the Company's
common stock at $2.00 per share to two members of the Company's Board of
Directors. The options were exercised in 1994.
In October, 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting For
Stock-Based Compensation. SFAS 123 defines a "fair value" based method of
accounting for employee options or similar equity instrument. SFAS 123
encourages, but does not require the method of accounting prescribed by the
Statement, and does allow for an entity to continue to measure compensation cost
as prescribed by APB Opinion No. 25 (APB 25), Accounting for Stock Issued to
Employees. Entities electing to remain with APB 25 must make proforma
disclosures of net income and earnings per share as if the fair value based
method had been applied, effective for fiscal years beginning after December 15,
1995. The Company expects to continue to measure compensation cost under APB 25,
subject to the proforma disclosure requirements of SFAS 123.
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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
15. WARRANTS:
As a result of a private placement during January 1990, warrants to
purchase 2,923,700 shares of $.01 par value common stock were sold. For each
four shares of the Company's common stock purchased in the private placement,
the purchaser received one warrant to purchase one share of the Company's common
stock, at an exercise price of $3.50 per share. The warrants were initially
scheduled to expire on December 31, 1994, however, the Company has extended the
expiration date to April 12, 1996. No warrants have been exercised to date.
As a result of a private placement during March 1992, warrants to purchase
1,019,900 shares of $.01 par value common stock were sold. For each two shares
of the Company's common stock purchased in the private placement, the purchaser
received one warrant to purchase one share of the Company's common stock, at an
exercise price of $3.50 per share. The warrants were initially scheduled to
expire on December 31, 1994, however, the Company has extended the expiration
date to April 12, 1996. No warrants have been exercised to date.
A warrant to purchase 200,000 shares of common stock at an exercise price
of $2.875 per share, exercisable until December 31, 1994, was issued in
connection with a gold loan secured by the Company in May 1993. One-half of the
warrant was subsequently exercised in October 1993. A replacement warrant was
issued for the remaining 100,000 shares and, the Company has extended the
scheduled expiration date to April 12, 1996.
In connection with the purchase of the Minex II parties' interests in May
1993 (see Note 17), warrants to purchase 75,000 shares of the Company's common
stock were issued at an exercise price of $3.00 per share, exercisable until May
11, 1996. No warrants have been exercised to date.
16. SITE RESTORATION COSTS:
Reclamation at the Kendall Mine is ongoing throughout the life of the
operation. Approximately $1.5 million has been spent to date reclaiming
disturbed areas by contouring, replacing topsoil and reseeding. As of the end of
January 1995, all identifiable mineable ore reserves have been mined. Final
reclamation will require recontouring of waste rock dumps, roads and other
areas, and rinsing of the spent ore in the heaps. In the fourth quarter of 1995,
the Company revised its anticipated scope of work for final reclamation and
estimates total costs of approximately $4.2 million. As of December 1, 1995, the
Company had accrued approximately $3.1 million of the total anticipated cost
and, as a result of the revised estimate, recorded a charge of $1.1 million in
the fourth quarter of 1995 to fully provide for remaining restoration costs as
currently contemplated.
The Kendall Mine operates under permits granted by the Montana Department
of Environmental Quality (DEQ). The DEQ requires the Company to maintain a
$1,869,000 Reclamation Bond to ensure appropriate reclamation. The Company has
filed a final closure plan which provides for enhanced measures not contemplated
in the original permit. The reclamation portion of the closure plan has been
approved, however, the water quality and monitoring plans are still being
reviewed. If these plans are not approved as submitted, the current estimate of
remaining closure costs could be impacted. Release of bonding will only take
place once the regulatory agencies are satisfied that all reclamation
requirements have been met.
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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
16. SITE RESTORATION COSTS, CONTINUED:
The U.S. Bureau of Land Management (BLM), Inyo County, the California
Department of Conservation, and the Lahontan Regional Water Quality Control
Board (Lahontan) have jointly required the Company to post a reclamation bond in
the amount of $3,030,000 to ensure appropriate reclamation of the Briggs Mine.
Additionally, the Company will be required by Lahontan to post a $1,010,000 bond
to ensure adequate funds to mitigate any "foreseeable release" of pollutants to
state waters at least 90 days prior to initiation of cyanide on the heap leach
pads. Both bonds are subject to annual review and adjustment.
17. RELATED PARTY TRANSACTIONS:
Keene Valley Minerals, a limited partnership, was a participant in the
Canyon-Minex II Joint Venture. One of the Company's Directors is the sole
general partner of a partnership which was a partner in Keene Valley Minerals.
The participation of his partnership in this joint venture was on the same terms
and conditions as were available to unaffiliated participants. Effective May 12,
1993, the Company acquired the Minex II parties' 38.25% interest in the venture
by issuing 150,000 shares of common stock and warrants to purchase 75,000 shares
of common stock at an exercise price of $3.00 per share, exercisable until May
11, 1996. The fair market value of the Company's common stock on the acquisition
date was $2.38 per share. The principal assets acquired were the Mountain View,
Rattlesnake and Judith Mountain properties. Keene Valley Minerals owned 22.5% of
the Canyon-Minex II Joint Venture and had invested $750,000 in the venture as of
May 12, 1993.
In January 1989, VenturesTrident II, L.P., one of the Company's major
shareholders, loaned the Company $2,000,000 as part of a Stock Purchase and Loan
Agreement. The Company paid $500,000 of the Debenture in early 1993. The
remaining principal amount of $1.5 million was repaid on July 20, 1993 by the
issuance of 789,473 fully paid and non-assessable common shares of the Company
based upon a conversion rate of $1.90 per share. For the year ended December 31,
1993, interest expense on the Debenture was $77,700.
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18. UNAUDITED QUARTERLY FINANCIAL DATA:
Quarterly financial information for the years ended December 31, 1995 and
1994 is summarized as follows:
1995
==================================================================
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Sales $ 3,689,900 $ 2,158,100 $ 1,978,800 $ 1,179,800
Gross profit $ 1,035,400 $ 348,200 $ 214,100 $ 15,300
Net (loss) $ (647,900) $(1,351,100) $(1,250,500) $(2,893,700)
Net (loss) per share $ (0.03) $ (0.05) $ (0.05) $ (0.11)
1994
==================================================================
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Sales $3,917,000 $4,101,800 $6,703,700 $4,857,700
Gross profit $1,377,100 $1,280,400 $2,920,300 $1,695,100
Net income (loss) $ (237,200) $ (683,800) $ 632,200 $ (48,900)
Net income (loss) per share $ (0.01) $ (0.03) $ 0.02 $ (0.01)
Climate conditions at the Kendall Mine in Montana curtail gold production
during the winter months.
19. SUBSEQUENT EVENT:
On March 26, 1996, the Company completed a private placement in the amount
of $12.1 million ($11.3 million net of expenses). The offering was completed at
a price of $3.00 per unit which included one share of common stock (4,034,300
total shares) and one-half warrant (2,017,200 total warrants). Each whole
warrant entitles the holder to purchase one share of common stock at an exercise
price equal to $3.75 per share. The warrants expire on March 25, 1999. The
Company intends to file a Registration Statement under the Securities and
Exchange Act of 1933 in respect of the common shares, the warrants, and the
common shares underlying the warrants and use its best efforts to cause such
Registration Statement to become effective as soon as practical. In the event
that the Registration Statement does not become effective on or before the 90th
day following the completion of the private placement, each purchaser of units
will be issued an additional 1/10 of one common share and 1/20 of one warrant
for each unit purchased.
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ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no change in the Company's certified public accountants
during the past two years. There has been no report on Form 8-K of a
disagreement between the Company and its accountants on any matter of accounting
principles or practices or financial statement disclosure.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
OFFICERS AND DIRECTORS
The following table lists the names, ages, and positions of the executive
officers and directors of the Company as of March 1, 1996. Directors are divided
into classes, each of which is elected to serve for three years, with one class
being elected each year. All officers have been appointed to serve until their
successors are elected and qualified. Additional information regarding the
business experience, length of time served in each capacity, and other matters
relevant to each individual is set forth below the table.
DIRECTORS' TERMS
NAME AGE POSITION EXPIRE
- ----------------------------------------- --------- ----------------------------------- ----------------
Richard H. De Voto 61 President, Director and Chairman 1998
of the Board
Gary C. Huber 44 Vice President-Finance 1997
and Director
William W. Walker 56 Vice President-Exploration and 1996
Director
John R. Danio 45 Vice President-Operations
George S. Young 44 Vice President-Law and
Corporate Secretary
Richard T. Phillips 41 Treasurer
Paul A. Bailly 69 Director 1998
Leland O. Erdahl 67 Director 1997
George W. Holbrook, Jr. 64 Director 1998
Frank M. Monninger 71 Director 1997
William C. Parks 54 Director 1996
Christopher M.T. Thompson 48 Director 1996
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DR. RICHARD H. DE VOTO was a founder of the Company and has been a Director
of the Company since its formation in 1979. Dr. De Voto served as President of
the Company from September 1979 to April 1985, and became President again in
April 1987. He is President of CR Montana Corporation, CR Briggs Corporation,
and CR International Corporation, each wholly owned subsidiaries of the Company.
Dr. De Voto is Professor Emeritus of Geology at the Colorado School of Mines,
where he taught from 1966 to 1987. Dr. De Voto was a founder of the private
Australian mining firm, Canyon Resources Proprietary Ltd., which later became
Delta Gold N.L., a publicly listed company of which he was a Director from 1983
to 1989. From 1966 to 1979, he was a Vice President of Earth Sciences, Inc., a
mineral exploration company, where he was involved in property acquisition and
exploration and development ventures. Dr. De Voto also has worked in the
petroleum business with Shell Oil and Mobil Oil. After graduating from Dartmouth
College in 1956 with an A.B. Degree in Engineering Sciences, he received an
M.Sc. Degree in Civil Engineering from Dartmouth in 1957 and a Doctor of Science
Degree in Geology from the Colorado School of Mines in 1961. Dr. De Voto is a
registered Professional Engineer in the State of Colorado.
GARY C. HUBER was a founder of the Company and served as Secretary of the
Company from inception through June 1986, as Treasurer from 1980 through
December 1991, as Vice President from April 1985 to April 1987, and as Vice
President-Finance since April 1987. He was elected as a Director of the Company
in June 1985 and serves as President of CR Minerals Corporation, a wholly owned
subsidiary of the Company. He was employed by Energy Reserves Group, Inc., an
energy fuels company, as District Geologist from 1975 to 1977, where his
responsibilities included exploration and development of several
uranium/vanadium mines in western Colorado. He graduated in 1973 from Fort Lewis
College with a B.Sc. Degree in Geology and received a Ph.D in Geology with a
minor in Mineral Economics from the Colorado School of Mines in 1979. Dr. Huber
has been responsible for the financial operations of the Company since its
inception and currently manages the Company's industrial minerals program.
WILLIAM W. WALKER was a founder of the Company and served as its Vice
President from 1979 to April 1985, and its President from April 1985 to April
1987. In April 1987, Mr. Walker became the Company's Vice President-Exploration.
He was elected as a Director of the Company in June 1985 and serves as President
of Canyon Resources Africa Ltd., the Company's African exploration subsidiary.
Mr. Walker directs the Company's exploration programs and is responsible for
joint venture activities and property farmouts. He has served as Division
Geologist for Central and Southwest Fuels, Inc., a uranium and coal exploration
company; as Vice President of Earth Sciences, Inc., a mineral exploration
company; and as geologist for Climax Molybdenum Company (AMAX). Mr. Walker
received a Professional Engineering Degree in Geological Engineering from the
Colorado School of Mines in 1961.
JOHN R. DANIO was appointed Vice President-Operations of the Company in
September 1987, and has overall responsibility for the Company's mine
development and production operations. Prior to joining the Company, he operated
several open-pit gold mines and heap-leaching operations as Project Engineer and
Mine Manager. Mr. Danio received a B.Sc. Degree in Mining Engineering from the
Colorado School of Mines in 1973. He is a registered professional engineer in
the States of Colorado and Nevada.
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GEORGE S. YOUNG was appointed Vice President - Law and Corporate Secretary
of the Company in November, 1993. Mr. Young was most recently employed as
President and Director of the Uruguayan and Argentinean affiliated companies of
American Resource Corporation, Inc. during 1992 and 1993 and as Vice President
and General Counsel of Alta Gold Co. from 1990-92. Mr. Young previously held
various positions in the mining and resources industries including General
Counsel of Bond International Gold, Inc. (1988-90), General Counsel and Acting
General Manager of Intermountain Power Agency (1984-88), Legal Supervisor for
the U.S. Minerals and Coal Division of Getty Oil Company (1981-84), and as a
Metallurgical Engineer for Kennecott Copper Corporation (1975-76). Mr. Young has
a B.S. degree in Metallurgical Engineering (1975) and a Law Degree (1979) from
the University of Utah, and served as a law clerk to Judge Aldon J. Anderson in
Utah Federal District Court (1979-80).
RICHARD T. PHILLIPS was appointed Treasurer of the Company in December
1991. Initially joining the Company as Controller in July 1991, he is
responsible for the Company's cash management, risk management, and financial
reporting functions. From 1988 to 1991, Mr. Phillips served as Controller for
Western Gold Exploration and Mining Company, a gold mining partnership between
Minorco and Inspiration Resources Corporation. From 1975 to 1987, he was
employed by subsidiaries of Inspiration Resources Corporation, a natural
resources company, in various financial capacities including Director of
Corporate Accounting. Mr. Phillips received a B.S. Degree in Business
Administration from the University of Phoenix in 1984 and is a Certified
Management Accountant.
PAUL A. BAILLY has been a Director of the Company since February 1989.
Pursuant to the provisions of a Stock Purchase and Loan Agreement between the
Company and VenturesTrident II, L.P. ("VT II"), the Company is required to
nominate a designee of VT II as a candidate for Director. Mr. Bailly is the
designee of VT II. He is Chairman of Castle Group, Inc., the successor to
Fulcrum Management, Inc. From 1984 through 1992, he served as President of
Fulcrum Management, Inc., the managing company for two private U.S. venture
capital funds, VenturesTrident L.P. and VenturesTrident II, L.P., which invest
in precious metals companies and projects. He has previously served as President
of Occidental Minerals Corporation and Bear Creek Mining, an exploration
subsidiary of Kennecott Copper. Mr. Bailly received an M.S. Degree in
Geology/Mineralogy and a Geological Engineering Degree from the University of
Nancy in France in 1948 and a Doctor of Science Degree in Geology from Stanford
University in 1951. Mr. Bailly serves as Chairman of Dakota Mining Corporation
(formerly MinVen Gold Corporation); Chairman of Golden Queen Mining Company,
Ltd.; and Director of Golden Sitka Resources, Inc., Minven, Inc., and Olympic
Mining Corporation.
LELAND O. ERDAHL has been a Director of the Company since February 1986. He
served as President and CEO of Stolar, Inc., a privately held service and
communication supply company for the mining industry, from July 1987 to
September 1991, and as President and CEO of Albuquerque Uranium Corporation, a
privately held company engaged in the production and sale of uranium from
November 1987 to January 1992. From October 1984 through October 1987, and from
January 1992 to January 1995, Mr. Erdahl served as an independent management
consultant. From 1970 through July 1984, he was employed by Ranchers'
Exploration and Development Corporation, a mining company, in various capacities
including Treasurer, Vice President-Finance, Senior Vice President, Executive
Vice President, and, from 1982 to 1984, President. Mr. Erdahl holds a B.S.
Degree in Business from the College of Santa Fe and is a Certified Public
Accountant. Mr. Erdahl serves as a Director of Hecla Mining Company, Freeport
McMoRan Copper & Gold Inc., Uranium Resources, Inc., and Original Sixteen to One
Mine, Inc., all publicly held mineral resources companies, and as a trustee of a
group of John Hancock Mutual Funds, all publicly held investment
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entities. Mr. Erdahl is also a Director of Santa Fe Ingredients Company of
California, Inc. and Santa Fe Ingredients Company, Inc., private food processing
companies.
GEORGE W. HOLBROOK, JR. has been a Director of the Company since 1981.
Since 1984, he has been the Managing Partner of Bradley Resources Company, a
private investment company. Mr. Holbrook received a B.S. Degree in Mechanical
Engineering from Cornell University in 1953. He is a Director of the Merrill
Lynch Institutional Fund and other associated funds, Thoratec Laboratories and
several private companies.
FRANK M. MONNINGER has been a Director of the Company since September 1990.
He is currently a consultant to the mining industry. From 1984 to 1988, he was
Executive Vice President of Operations for Coeur D'Alene Mines Corporation, a
publicly held mining company. From 1982 to 1984, Mr. Monninger was a consultant
for San Francisco Mining Associates. From 1979 to 1982, he was the Vice
President of Development and Operations for Occidental Minerals Corporation. In
addition, Mr. Monninger has held positions of Vice President and General Manager
for Inspiration Consolidated Copper Company, Manager of Mine and Plant
Operations for Bechtel Corporation, Vice President of Anaconda Company, and
President of the Montana Mining Division of Anaconda Company. Mr. Monninger
received a Professional Degree in Metallurgical Engineering from the Colorado
School of Mines in 1949 and an Honorary Degree of Metallurgical Engineering from
Montana College of Mineral Science and Technology in 1973. He currently serves
as Chairman of the Board of ISL Ventures, a Nevada corporation involved in
in-situ leaching and precious metals lixiviants.
WILLIAM C. PARKS has been a Director of the Company since February 1986. He
is currently Executive Vice President and General Manager of R.A. Pearson
Company, a privately held company engaged in the design and manufacture of
packaging machinery. From August 1989 through December 1991, he was the
President of United Management Company, a company involved in providing
management consulting services to the mining, manufacturing, and transportation
industries. From November 1987 through August 1989, he was Vice President of,
through December 1991, a consultant to, and through February 1991, a Director of
Artech Recovery Systems, Inc., a publicly held company engaged in the processing
and extraction of metals from arsenic-bearing ores. From August 1983 through
November 1987, he was President and Director of Nevex Gold Company, Inc., a
publicly held mining company. Mr. Parks received his B.A. Degree in 1965 in
Economics and English from Western Washington University. He currently serves as
a Director of Advanced Recording Instruments, Inc., a manufacturer of on-board
electronic recording equipment for the transportation industry.
CHRISTOPHER M.T. THOMPSON has been a Director of the Company since
September 1990. He is President of Castle Group, Inc., the successor to Fulcrum
Management, Inc. From 1984 through 1992, he served as Executive Vice President
and Chief Financial Officer for Fulcrum Management, Inc., the managing company
for two private U.S. venture capital funds, VenturesTrident L.P. and
VenturesTrident II, L.P., which invest in precious metals companies and
projects. He is also a Director of EMGF Management Company which manages The
Emerging Markets Gold Fund. Castle Group is by subcontract, manager of the
Emerging Markets Gold Fund. From 1982 to 1983, he was Manager of New Business
Development for Gulf Canada, Ltd. From 1978 to 1982, Mr. Thompson was a Partner,
Director, and Mining Analyst for Gordon Securities Limited, a Canadian
institutional brokerage firm. Mr. Thompson received a B.A. Law Degree from
Rhodes University in 1969 and graduated with a M.Sc. from Bradford University in
1971. He currently serves as a Director of Golden Queen Mining Company, Ltd.;
Golden Shamrock Mines, Ltd.; Minven, Inc.; Olympic Mining Corporation; Silver
Standard Resources Inc.; and Santa Elina Gold Inc.
67
70
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears in the Company's Proxy
Statement for the 1996 Annual Meeting to be filed within 120 days after the end
of the fiscal year and is incorporated by reference in this Annual Report on
Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table on the next page sets forth information, as of March 1, 1996 with
respect to beneficial ownership of the Company's common stock by each person
known by the Company to be the beneficial owner of more than 5% of its
outstanding common stock, by each director of the Company, by each named
executive officer, and by all officers and directors of the Company as a group.
Unless otherwise noted, each shareholder has sole investment and voting power
over the shares owned.
68
71
===========================================================================================
NAME AND ADDRESS TYPE OF NUMBER OF PERCENT
OF BENEFICIAL OWNER OWNERSHIP SHARES OF CLASS
===========================================================================================
VenturesTrident II, L.P.(1) Record and 4,489,473(2) 16.9%
475 Seventeenth Street, Suite 750 Beneficial
Denver, CO 80202-4017
Richard H. De Voto Record and 732,698(3) 2.8%
14142 Denver West Pkwy, Suite 250 Beneficial
Golden, CO 80401
Gary C. Huber Record and 679,124(4) 2.6%
14142 Denver West Pkwy, Suite 250 Beneficial
Golden, CO 80401
William W. Walker Record and 263,137(5) 1.0%
14142 Denver West Pkwy, Suite 250 Beneficial
Golden, CO 80401
Paul A. Bailly(6) Record and 30,000(7) *
475 Seventeenth Street, Suite 750 Beneficial
Denver, CO 80202-4017
Leland O. Erdahl Record and 64,289(8) *
9449 Navy Blue Court Beneficial
Las Vegas, NV 89117
George W. Holbrook, Jr. Record and 1,001,775(9) 3.9%
P.O. Box 761 Beneficial
Southport, CT 06490-0761
Frank M. Monninger Record and 40,000(10) *
150 Quail's Roost Road Beneficial
Sequim, WA 98382
William C. Parks Record and 116,255(11) *
South 5919 Yale Road Beneficial
Spokane, WA 99223
Christopher M.T. Thompson(12) Record and 50,000(13) *
475 Seventeenth Street, Suite 750 Beneficial
Denver, CO 80202-4017
All Officers & Directors as a Group Record and 3,254,644 11.9%
(12 persons) Beneficial
=========================================================================================
* Less than 1%
69
72
(1) The general partner of VenturesTrident II, L.P. is Fulcrum Management
Partners II, L.P., a Delaware limited partnership. Mr. Landon T. Clay and
MinVen, Inc., a Delaware corporation are the two general partners of
Fulcrum Management Partners II, L.P.
(2) This number includes (i) 3,889,473 shares owned of record, and (ii) the
right to acquire 650,000 shares of common stock upon the exercise of
650,000 warrants at an exercise price of $3.50 per share.
(3) This number includes (i) 9,719 shares owned of record; (ii) 560,628 shares
held by the Richard H. De Voto Trust No. 1; (iii) 351 shares held as
Co-Trustee of Trust for his mother; (iv) an option to purchase 37,000
shares at an exercise price of $3.00 per share; (v) an option to purchase
50,000 shares at an exercise price of $1.63 per share; and (vi) an option
to purchase 75,000 shares at an exercise price of $3.69 per share.
(4) This number includes (i) 519,124 shares owned of record; (ii) two trusts of
15,000 shares each held by wife, Gwen D. Huber, as Trustee for two minor
children; (iii) an option to purchase 50,000 shares at an exercise price of
$3.00 per share; and (iv) an option to purchase 30,000 shares at an
exercise price of $1.63 per share; and (v) an option to purchase 50,000
shares at an exercise price of $3.69 per share.
(5) This number includes (i) 198,137 shares owned of record; (ii) an option to
purchase 30,000 shares at an exercise price of $3.00 per share; and (iii)
an option to purchase 35,000 shares at an exercise price of $3.69 per
share.
(6) Mr. Bailly is the Chairman of Castle Group, Inc., the management service
company for VenturesTrident II, L.P. Mr. Bailly disclaims beneficial
ownership of the shares held by VenturesTrident II, L.P.
(7) This number includes an option to purchase 30,000 shares at an exercise
price of $2.50 per share.
(8) This number includes (i) 24,289 shares owned of record; (ii) an option to
purchase 30,000 shares at an exercise price of $1.44 per share; and (iii)
an option to purchase 10,000 shares at an exercise price of $2.19 per
share.
(9) This number includes (i) 5,000 shares owned of record; (ii) 694,946 shares
owned of record by Bradley Securities Corporation of which Mr. Holbrook is
the President and major shareholder; (iii) 167,629 shares owned by two
partnerships in which Mr. Holbrook is a controlling partner; (iv) 80,000
shares owned of record by Bradley Resources Company, of which Mr. Holbrook
is the Managing partner; (v) 20,000 shares of common stock issuable to
Bradley Resources Company upon exercise of 20,000 warrants at an exercise
price of $3.50 per share; (vi) 4,200 shares of common stock issuable to a
partnership in which Mr. Holbrook is a controlling partner upon exercise of
warrants at an exercise price of $3.00 per share; and (vii) an option to
purchase 30,000 shares at an exercise price of $2.50 per share.
(10) This number includes (i) an option to purchase 30,000 shares at an exercise
price of $1.44 per share and (ii) an option to purchase 10,000 shares at an
exercise price of $2.19 per share.
(11) This number includes (i) 65,541 shares owned of record; (ii) 714 shares
held by Mr. Parks as custodian for a minor child; (iii) an option to
purchase 20,000 shares at an exercise price of $1.44 per share; and (iv) an
option to purchase 30,000 shares at an exercise price of $3.19 per share.
70
73
(12) Mr. Thompson is the President of Castle Group, Inc., the management service
company for VenturesTrident II, L.P. Mr. Thompson disclaims beneficial
ownership of the shares held by VenturesTrident II, L.P.
(13) This number includes (i) an option to purchase 20,000 shares at an exercise
price of $1.44 per share; and (ii) an option to purchase 30,000 shares at
an exercise price of $3.19 per share.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTION WITH A DIRECTOR
Keene Valley Minerals, a limited partnership, was a participant in the
Canyon-Minex II Joint Venture. Mr. Holbrook is the sole general partner of a
partnership which is a partner in Keene Valley Minerals. The participation of
his partnership in this joint venture is on the same terms and conditions as
were available to unaffiliated participants. Effective May 12, 1993, the Company
acquired the Minex II parties' 38.25% interest in the venture by issuing 150,000
shares of common stock and warrants to purchase 75,000 shares of common stock at
an exercise price of $3.00 per share, exercisable until May 11, 1996. The fair
market value of the Company's common stock on the acquisition date was $2.38 per
share. Keene Valley Minerals owned 22.5% of the Canyon-Minex II Joint Venture
and had invested $750,000 in the venture as of May 12, 1993.
TRANSACTIONS WITH VENTURESTRIDENT II, L.P.
On January 27, 1989, the Company entered into a Stock Purchase and Loan
Agreement (the Agreement) with VenturesTrident II, L.P., a Delaware limited
partnership (VT II). Pursuant to the Agreement, the Company (i) sold to VT II
1,000,000 shares of its $.01 par value common stock for $2,000,000; and (ii)
accepted a $2,000,000 loan from VT II evidenced by a Variable Interest Secured,
Recourse Convertible Debenture (the "Debenture").
On January 26, 1993, the Company and VT II agreed to amend certain
provisions of the Debenture which included a two year extension of $1.5 million
of the principal. The Company paid $500,000 of the Debenture in early 1993 and,
on July 20, 1993, gave notice of intent to prepay the $1.5 million convertible
debenture otherwise scheduled for payment on January 26, 1995. VT II elected to
receive shares in lieu of cash as consideration for the repayment and was issued
789,473 fully paid and non-assessable shares of the Company's common stock.
Pursuant to the terms of the Agreement, and for so long as VT II owns more
than 4% of the Company's issued and outstanding stock, the Company has agreed to
nominate a designee of VT II as a candidate for Director of the Company. Mr.
Paul A. Bailly, Chairman of Castle Group Inc., Manager of VT II, was elected by
the Board as a Director of the Company, effective as of February 10, 1989, and
has continued in that capacity henceforth. Mr. Bailly's present term as a
Director is scheduled to expire in 1998. On September 18, 1991, the Board also
elected Mr. Christopher M.T. Thompson, President of Castle Group, Inc., as a
member of the Board. Mr. Thompson was re-elected by the Company's shareholders
on June 17, 1993 to serve as a Director until 1996.
71
74
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) Financial Statements (included in Part II of this Report):
Report of Independent Accountants'
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Operations - Years ended December 31, 1995,
1994, and 1993
Consolidated Statement of Changes in Stockholders' Equity - Years
ended December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows - Years ended December 31, 1995,
1994, and 1993
Notes to Consolidated Financial Statements
(b) There were no Form 8-K reports filed during the last quarter of the period
covered by this report.
(c) Exhibits, as required by Item 601 of Regulation S-K, are listed on pages 73
to 76. The exhibit numbers correspond to the numbers assigned in Item 601
of Regulation S-K.
72
75
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Certificate of Incorporation of the Company, as amended (2)
3.1.1 Articles of Amendment to the Company's Certificate of Amendment
as filed with the Delaware Secretary of State on January 23, 1990
(9)
3.1.2 Executed Certificate of Designations, dated December 26, 1990, as
filed with the Delaware Secretary of State on December 26, 1990
(11)
3.2 Bylaws of the Company, as amended (2)
4.1 Specimen Common Stock Certificate (1)
4.2 Variable Interest, Secured, Resource Convertible Debenture (7)
4.3 Specimen Warrant Certificate (10)
4.4 Warrant Agreement dated January 26, 1990 by and between the
Company and American Securities Transfer, Inc. (9)
4.5 Stock and Warrant Purchase Agreement, dated December 26, 1990
among the Company, Kennecott Exploration Company, CR Briggs
Corporation, CR Kendall Corporation, and CR Montana Corporation
(11)
4.6 Executed Common Stock Purchase Warrant, dated December 26, 1990
(11)
4.7 Indenture dated June 2, 1993, between the Company and Bank of
America Arizona, Trustee, with respect to $22,000,000, 6%
Convertible Debentures due June 1, 1998 (15)
4.8 Specimen 6% Convertible Subordinated Note (15)
4.9* Specimen Warrant Certificate
4.10* Warrant Agreement dated March 20, 1996 by and between the Company
and American Securities Transfer, Inc.
10.1 Canyon-Minex Joint Venture Agreement dated March 1, 1983, as
amended, among the Company, Saranac Minerals, EMK Resources II,
Black Hawk Resources Corporation, and Atlantic Associates (3)
10.2 Office Building Lease, dated August 10, 1992, as amended, between
Denver West Office Building No. 51 and the Company (14)
10.3 Canyon-Minex Joint Venture and Meridian Minerals Company
Agreement dated March 23, 1988 (4)
10.4 Mining Venture Agreement between Recursos Canyon Dominicana, S.A.
and Battle Mountain Gold Company dated June 28, 1988 (5)
73
76
10.4.1 Letter Agreement dated February 16, 1992, among the Company,
through its subsidiary Recursos Canyon Dominicana, S.A., and
Battle Mountain Gold Company (14)
10.5 Agreement between the Company, Meridian Minerals Company, and the
Canyon-Minex Joint Venture dated December 27, 1988 (6)
10.6 Stock Purchase and Loan Agreement between the Company and
VenturesTrident II, L.P., dated January 27, 1989 (7)
10.6.1 Amendment to Stock Purchase and Loan Agreement between the
Company and VenturesTrident II, L.P., dated January 26, 1993 (14)
10.7 Option to Purchase Agreement, dated July 14, 1989, by and between
Addwest Gold, Inc. and Western Energy Company (8)
10.8 Seven-Up Pete Venture Agreement between Addwest Gold, Inc. and
Phelps Dodge Mining Company (8)
10.9 Letter Agreement dated July 8, 1989 between Addwest Gold, Inc.
and Phelps Dodge Mining Company (8)
10.10 Purchase Agreement by and between the Company and Addington
Resources, Inc. dated January 26, 1990 (9)
10.11 Gold Loan Agreement by and between the Company and Bankers Trust
Company dated January 26, 1990 (9)
10.12 Net Smelter Return Royalty Deed from Addwest Gold, Inc. to
Addington Resources, Inc. dated January 26, 1990 (9)
10.13 Covenant Not to Compete between Addwest Gold, Inc. and Addington
Resources, Inc. dated January 26, 1990 (9)
10.14 Master Tax Lease between the Company and Caterpillar Financial
Services Corporation dated June 15, 1990 (12)
10.15 Judith Mountains Memorandum of Understanding between the
Canyon-Minex II Joint Venture and Cominco American Resources,
Inc. dated August 1, 1990 (12)
10.16 Farm-In Agreement, effective December 1, 1990, among Kennecott
Exploration Company, Canyon Resources Corporation, and CR Briggs
Corporation (11)
10.17 Consent, Subordination and Release Agreement, dated December 26,
1990, among Kennecott Exploration Company, Canyon Resources
Corporation, CR Briggs Corporation, CR Kendall Corporation, and
CR Montana Corporation (11)
10.18 Amended and Restated Gold Loan and Letter of Credit Facility
Agreement (without exhibits) by and between the Company and Mase
Westpac Limited dated March 23, 1992 (13)
74
77
10.19 Amendment No. 1 to Amended and Restated Gold Loan and Letter of
Credit Facility Agreement by and between the Company and Mase
Westpac Limited effective December 31, 1992 (14)
10.20 Change of Control Agreements, dated December 6, 1991 between the
Company and Richard H. De Voto, Gary C. Huber and William W.
Walker (14)
10.21 Amended and Restated Credit Facility Agreement dated May 26,
1993, among N M Rothschild & Sons Limited, Canyon Resources
Corporation, CR Kendall Corporation, CR Briggs Corporation, CR
Montana Corporation, and CR Minerals Corporation (15)
10.22* Loan Agreement dated December 6, 1995 among CR Briggs Corporation
as Borrower and Banque Paribas as Agent.
10.23* Master Tax Lease dated December 27, 1995 between CR Briggs
Corporation and Caterpillar Financial Services Corporation.
11.1* Statement regarding computation of per share earnings
22.1* Subsidiaries of the Registrant
24.1* Consent of Coopers & Lybrand L.L.P.
24.2* Consent of Davy International
24.3* Consent of Roberts and Schaefer Company
24.4* Consent of Mine Reserves Associates, Inc.
24.5* Consent of Remy and Thomas
24.6* Consent of Chamberlin & Associates
27* Financial Data Schedule
* Filed herewith
- -------------------------------------------------------------------------------
(1) Incorporated by reference from the Company's Registration Statement on Form
8-A as declared effective by the Securities and Exchange Commission on
March 18, 1986.
(2) Exhibits 3.1 and 3.2 are incorporated by reference from Exhibits 3.1 and
3.2, respectively, to the Company's Registration Statement on Form S-1
(File No. 33-19264) declared effective by the Securities and Exchange
Commission on February 1, 1988.
(3) Exhibit 10.1 is incorporated by reference from Exhibit 10.1 to the
Company's Registration Statement on Form S-18 (File No. 2-99249-D) declared
effective by the Securities and Exchange Commission on November 8, 1985.
75
78
(4) Exhibit 10.3 is incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1988.
(5) Exhibit 10.4 is incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1987.
(6) Exhibit 10.5 is incorporated by reference from the Company's Report on the
Form 8-K filed with the Securities and Exchange Commission on January 4,
1989.
(7) Exhibits 4.2 and 10.6 are incorporated by reference from Exhibits 1 and 2
of the Company's Report on Form 8-K filed with the Securities and Exchange
Commission on January 27, 1989.
(8) Exhibits 10.7, 10.8, and 10.9 are incorporated by reference from Exhibits
10.19, 10.20, and 10.21, respectively, to the Company's Annual Report on
Form 10-K, as amended, for the fiscal year ended December 31, 1989.
(9) Exhibits 3.1.1, 4.4, 10.10, 10.11, 10.12, and 10.13 are incorporated by
reference from Exhibits 3.1, 4.1, 2.1, 10.1, 28.1, and 28.2, respectively,
to the Company's Report on Form 8-K dated January 26, 1990.
(10) Exhibit 4.3 is incorporated by referenced from Exhibit 4.3 to the Company's
Registration Statement on Form S-2, effective August 13, 1990.
(11) Exhibits 3.1.2, 4.5, 4.7, 10.16 and 10.17 are incorporated by reference
from Exhibits 4, 3, 5, 1, and 2, respectively, of the Company's Report on
Form 8-K filed with the Securities and Exchange Commission on December 26,
1990.
(12) Exhibits 4.6, 10.14 and 10.15 are incorporated by reference from the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1990.
(13) Exhibit 10.18 is incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991.
(14) Exhibits 10.2, 10.4.1, 10.6.1, 10.19, and 10.20 are incorporated by
reference from the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992.
(15) Exhibits 4.7, 4.8, and 10.21 are incorporated by reference from Exhibits
4.3, 4.2, and 10.1, respectively, to the Company's report on Form 8-K dated
May 26, 1993.
76
79
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf of the undersigned, thereunto duly authorized.
CANYON RESOURCES CORPORATION
Date: March 27, 1996 /s/ Richard H. De Voto
------------------------------------------
Richard H. De Voto
Principal Executive Officer
Date: March 27, 1996 /s/ Gary C. Huber
------------------------------------------
Gary C. Huber
Principal Financial and Accounting Officer
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 Company
and in the capacities and on the dates indicated.
Date: March 27, 1996 /s/ Richard H. De Voto
------------------------------------------
Richard H. De Voto, Director
Date: March 27, 1996 /s/ Gary C. Huber
------------------------------------------
Gary C. Huber, Director
Date: March 27, 1996 /s/ William W. Walker
------------------------------------------
William W. Walker, Director
Date: March 27, 1996 /s/ Paul A. Bailly
------------------------------------------
Paul A. Bailly, Director
Date: March 27, 1996 /s/ Leland O.Erdahl
------------------------------------------
Leland O. Erdahl, Director
Date: March 27, 1996 /s/ George W. Holbrook, Jr.
------------------------------------------
George W. Holbrook, Jr., Director
77
80
Date: March 27, 1996 /s/ Frank M. Monninger
------------------------------------------
Frank M. Monninger, Director
Date: March 27, 1996 /s/ William C. Parks
------------------------------------------
William C. Parks, Director
Date: March 27, 1996 /s/ Christopher M.T. Thompson
------------------------------------------
Christopher M.T. Thompson, Director
78
81
EXHIBIT INDEX
NUMBER DESCRIPTION
- ------- -----------
3.1 Certificate of Incorporation of the Company, as amended (2)
3.1.1 Articles of Amendment to the Company's Certificate of Amendment
as filed with the Delaware Secretary of State on January 23, 1990
(9)
3.1.2 Executed Certificate of Designations, dated December 26, 1990, as
filed with the Delaware Secretary of State on December 26, 1990
(11)
3.2 Bylaws of the Company, as amended (2)
4.1 Specimen Common Stock Certificate (1)
4.2 Variable Interest, Secured, Resource Convertible Debenture (7)
4.3 Specimen Warrant Certificate (10)
4.4 Warrant Agreement dated January 26, 1990 by and between the
Company and American Securities Transfer, Inc. (9)
4.5 Stock and Warrant Purchase Agreement, dated December 26, 1990
among the Company, Kennecott Exploration Company, CR Briggs
Corporation, CR Kendall Corporation, and CR Montana Corporation
(11)
4.6 Executed Common Stock Purchase Warrant, dated December 26, 1990
(11)
4.7 Indenture dated June 2, 1993, between the Company and Bank of
America Arizona, Trustee, with respect to $22,000,000, 6%
Convertible Debentures due June 1, 1998 (15)
4.8 Specimen 6% Convertible Subordinated Note (15)
4.9* Specimen Warrant Certificate
4.10* Warrant Agreement dated March 20, 1996 by and between the Company
and American Securities Transfer, Inc.
10.1 Canyon-Minex Joint Venture Agreement dated March 1, 1983, as
amended, among the Company, Saranac Minerals, EMK Resources II,
Black Hawk Resources Corporation, and Atlantic Associates (3)
10.2 Office Building Lease, dated August 10, 1992, as amended, between
Denver West Office Building No. 51 and the Company (14)
10.3 Canyon-Minex Joint Venture and Meridian Minerals Company
Agreement dated March 23, 1988 (4)
10.4 Mining Venture Agreement between Recursos Canyon Dominicana, S.A.
and Battle Mountain Gold Company dated June 28, 1988 (5)
82
10.4.1 Letter Agreement dated February 16, 1992, among the Company,
through its subsidiary Recursos Canyon Dominicana, S.A., and
Battle Mountain Gold Company (14)
10.5 Agreement between the Company, Meridian Minerals Company, and the
Canyon-Minex Joint Venture dated December 27, 1988 (6)
10.6 Stock Purchase and Loan Agreement between the Company and
VenturesTrident II, L.P., dated January 27, 1989 (7)
10.6.1 Amendment to Stock Purchase and Loan Agreement between the
Company and VenturesTrident II, L.P., dated January 26, 1993 (14)
10.7 Option to Purchase Agreement, dated July 14, 1989, by and between
Addwest Gold, Inc. and Western Energy Company (8)
10.8 Seven-Up Pete Venture Agreement between Addwest Gold, Inc. and
Phelps Dodge Mining Company (8)
10.9 Letter Agreement dated July 8, 1989 between Addwest Gold, Inc.
and Phelps Dodge Mining Company (8)
10.10 Purchase Agreement by and between the Company and Addington
Resources, Inc. dated January 26, 1990 (9)
10.11 Gold Loan Agreement by and between the Company and Bankers Trust
Company dated January 26, 1990 (9)
10.12 Net Smelter Return Royalty Deed from Addwest Gold, Inc. to
Addington Resources, Inc. dated January 26, 1990 (9)
10.13 Covenant Not to Compete between Addwest Gold, Inc. and Addington
Resources, Inc. dated January 26, 1990 (9)
10.14 Master Tax Lease between the Company and Caterpillar Financial
Services Corporation dated June 15, 1990 (12)
10.15 Judith Mountains Memorandum of Understanding between the
Canyon-Minex II Joint Venture and Cominco American Resources,
Inc. dated August 1, 1990 (12)
10.16 Farm-In Agreement, effective December 1, 1990, among Kennecott
Exploration Company, Canyon Resources Corporation, and CR Briggs
Corporation (11)
10.17 Consent, Subordination and Release Agreement, dated December 26,
1990, among Kennecott Exploration Company, Canyon Resources
Corporation, CR Briggs Corporation, CR Kendall Corporation, and
CR Montana Corporation (11)
10.18 Amended and Restated Gold Loan and Letter of Credit Facility
Agreement (without exhibits) by and between the Company and Mase
Westpac Limited dated March 23, 1992 (13)
83
10.19 Amendment No. 1 to Amended and Restated Gold Loan and Letter of
Credit Facility Agreement by and between the Company and Mase
Westpac Limited effective December 31, 1992 (14)
10.20 Change of Control Agreements, dated December 6, 1991 between the
Company and Richard H. De Voto, Gary C. Huber and William W.
Walker (14)
10.21 Amended and Restated Credit Facility Agreement dated May 26,
1993, among N M Rothschild & Sons Limited, Canyon Resources
Corporation, CR Kendall Corporation, CR Briggs Corporation, CR
Montana Corporation, and CR Minerals Corporation (15)
10.22* Loan Agreement dated December 6, 1995 among CR Briggs Corporation
as Borrower and Banque Paribas as Agent.
10.23* Master Tax Lease dated December 27, 1995 between CR Briggs
Corporation and Caterpillar Financial Services Corporation.
11.1* Statement regarding computation of per share earnings
22.1* Subsidiaries of the Registrant
24.1* Consent of Coopers & Lybrand L.L.P.
24.2* Consent of Davy International
24.3* Consent of Roberts and Schaefer Company
24.4* Consent of Mine Reserves Associates, Inc.
24.5* Consent of Remy and Thomas
24.6* Consent of Chamberlin & Associates
27* Financial Data Schedule
* Filed herewith
- -------------------------------------------------------------------------------
(1) Incorporated by reference from the Company's Registration Statement on Form
8-A as declared effective by the Securities and Exchange Commission on
March 18, 1986.
(2) Exhibits 3.1 and 3.2 are incorporated by reference from Exhibits 3.1 and
3.2, respectively, to the Company's Registration Statement on Form S-1
(File No. 33-19264) declared effective by the Securities and Exchange
Commission on February 1, 1988.
(3) Exhibit 10.1 is incorporated by reference from Exhibit 10.1 to the
Company's Registration Statement on Form S-18 (File No. 2-99249-D) declared
effective by the Securities and Exchange Commission on November 8, 1985.
84
(4) Exhibit 10.3 is incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1988.
(5) Exhibit 10.4 is incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1987.
(6) Exhibit 10.5 is incorporated by reference from the Company's Report on the
Form 8-K filed with the Securities and Exchange Commission on January 4,
1989.
(7) Exhibits 4.2 and 10.6 are incorporated by reference from Exhibits 1 and 2
of the Company's Report on Form 8-K filed with the Securities and Exchange
Commission on January 27, 1989.
(8) Exhibits 10.7, 10.8, and 10.9 are incorporated by reference from Exhibits
10.19, 10.20, and 10.21, respectively, to the Company's Annual Report on
Form 10-K, as amended, for the fiscal year ended December 31, 1989.
(9) Exhibits 3.1.1, 4.4, 10.10, 10.11, 10.12, and 10.13 are incorporated by
reference from Exhibits 3.1, 4.1, 2.1, 10.1, 28.1, and 28.2, respectively,
to the Company's Report on Form 8-K dated January 26, 1990.
(10) Exhibit 4.3 is incorporated by referenced from Exhibit 4.3 to the Company's
Registration Statement on Form S-2, effective August 13, 1990.
(11) Exhibits 3.1.2, 4.5, 4.7, 10.16 and 10.17 are incorporated by reference
from Exhibits 4, 3, 5, 1, and 2, respectively, of the Company's Report on
Form 8-K filed with the Securities and Exchange Commission on December 26,
1990.
(12) Exhibits 4.6, 10.14 and 10.15 are incorporated by reference from the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1990.
(13) Exhibit 10.18 is incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991.
(14) Exhibits 10.2, 10.4.1, 10.6.1, 10.19, and 10.20 are incorporated by
reference from the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992.
(15) Exhibits 4.7, 4.8, and 10.21 are incorporated by reference from Exhibits
4.3, 4.2, and 10.1, respectively, to the Company's report on Form 8-K dated
May 26, 1993.