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FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1999.
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Commission file number 0-12132
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SILVERADO GOLD MINES LTD.
(Exact name of registrant as specified in its charter)
British Columbia, Canada 98-0045034
(State or other jurisdiction ( IRS Employer ID No.)
of incorporation or organization)
Suite 505, 1111 West Georgia Street
Vancouver, British Columbia, Canada V6E 4M3 (604) 689-1535
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(Address of Principal Executive Offices) (Registrant's
telephone number)
Securities registered pursuant to The Company's Common Stock
section 12(b) of the Act : trades on the OTC Bulletin
None Board under the trading symbol
Securities registered pursuant to SLGLF.OB
section 12(g) of the Act: ------------------------------
Common Shares, no par value (Name of each exchange on
(Title of Class) which registered)
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Indicate by check mark 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 the 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 voting stock held by non-affiliates on March 8,
2000 was $ 3,492,109
The number of shares outstanding on March 8, 2000 was 15,873,224
Total number of pages, including cover page: 49
PART I
ITEM 1 BUSINESS
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FORWARD-LOOKING STATEMENTS
Certain statements contained herein are "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and
are intended to be covered by the safe harbors created thereby. Such
forward-looking statements involve risks and uncertainties regarding the market
price of gold, availability of funds, government regulations, common share
prices, operating costs, capital costs, outcomes of ore reserve development and
other factors.
These risks and uncertainties may cause actual outcomes to materially differ
from those forecasted or suggested. Where the Company makes statements of
expectation or belief as to future outcomes, such expectation or belief is
expressed in good faith and believed to have a reasonable basis.
Forward-looking statements are made, without limitation, in relation to
operating plans, property exploration and development, availability of funds,
environmental reclamation, operating costs and permit acquisition.
Given these uncertainties, readers are cautioned not to place undue reliance on
such forward-looking statements.
(A) GENERAL DEVELOPMENT OF BUSINESS
Silverado Gold Mines Ltd. ("Silverado" or "the Company"), is engaged in the
acquisition, exploration and development of mineral properties. Silverado was
incorporated under the laws of British Columbia, Canada, in June, 1963, and
operates in the United States through a wholly-owned subsidiary, Silverado Gold
Mines Inc., incorporated in the State of Alaska in 1981.
Silverado's exploration and development activities are managed and conducted by
an affiliated company, Tri-Con Mining Ltd. ("Tri-Con") pursuant to a written
operating agreement. Tri-Con is a privately owned corporation controlled by
Garry L. Anselmo, who is President, Chairman, CEO and a Director of Silverado.
The Company holds interests in four groups of mineral properties in Alaska.
Silverado's main projects are exploration and development of the Ester Dome Gold
Project, located 10 miles northwest of Fairbanks, Alaska, and of the Nolan Gold
Project, located 175 miles north of Fairbanks, Alaska.
The Ester Dome Project comprises a contiguous group of 1 Federal claim and 52
State claims totaling 2.5 square miles, including the Grant Mine, May / Barelka
(St. Paul) and Dobb's Properties, all located within the Fairbanks Mining
District in Alaska.
On August 30, 1980 the Company entered into an Option Agreement with Janice B.
Taylor granting Silverado the exclusive right and option to acquire 100% of the
Range I Property, a property situated on Ester Dome near Fairbanks, Alaska.
During 1999, the Company relinquished its rights to this property back to Janice
B. Taylor.
On August 30, 1980 the Company entered into an Option Agreement with Range
Minerals Corporation granting Silverado the exclusive right and option to
acquire 100% of the Range II Property, a property situated on Ester Dome near
Fairbanks, Alaska. During 1999, the Company relinquished its rights to this
property back to Range Minerals Corporation.
During 1999 the Company concentrated its activities on mining The Swede Channel
and Workman's Bench, which are located within Nolan Placer. In 1999, the
Company's share of total gold recovered from The Swede Channel amounted to 289
ounces, and the Company recovered 112 ounces from Workman's Bench and 44 ounces
from old tailings during the same period. The Company reduced the size of its
lode claim holdings from 239 in 1998 to 32 at November 30, 1999.
The Whiskey Gulch Property, consisting of four claims adjoining Newmont's "True
North" property was acquired by the Company in 1996 to further enhance its
Marshall Dome Property by virtue of its proximity to those claims. The Whiskey
Gulch Property was sold to a subsidiary of Kinross Gold Corporation on November
9, 1999 for a cash payment of $50,000 and a retained Net Smelter Return payable
by Kinross to Silverado in respect to any gold recovered from the property.
Kinross is to pay Silverado on the following basis:
PRICE OF GOLD PRODUCTION ROYALTY
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$300.00 or less 2.0% of Net Smelter Returns
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$300.01 to $350.00 3.0% of Net Smelter Returns
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$350.01 to $400.00 3.5% of Net Smelter Returns
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$400.01 and above 4.0% of Net Smelter Returns
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"Price of Gold" is equal to the average, for a particular year for which Net
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Smelter Returns are being calculated, of the daily London Bullion Market
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Association P.M. Gold Fixing, as established from time to time during the year.
- --------------------------------------------------------------------------------
The French Peak Property consists of four mineral claims totaling approximately
one square mile, and is located 40 miles northwest of Smithers, British
Columbia. In February 1999, the Company chose to relinquish its interest in
this property.
(B) FINANCIAL INFORMATION RE: INDUSTRY SEGMENTS
The Company has one operating segment, being mineral exploration, development
and mining.
(C) DESCRIPTION OF BUSINESS
The Company's plan of operation is to continue to develop and mine its Nolan
properties specifically the Workman's Bench and deep Nolan Channel areas. The
Company is planning to mine Workman's Bench this summer with concurrent
processing and gold recovery as well as begin development of the upper portion
of the Nolan Deep Channel this fall.
During 1998 the Company successfully negotiated an option agreement with Placer
Dome U.S. Inc. to conduct exploration and development on 20.5 square miles of
the Company's Ester Dome properties. On November 9, 1998, PDUS terminated the
agreement with the Company. The Company, subsequently, entered into
negotiations with several other companies to possibly joint venture or vend the
property.
As the Company was unable to attract outside interest to the Ester Dome project,
it subsequently reduced its holdings by relinquishing the Range I and II part of
the Ester Dome property back to the owners of those two properties.
The Company plans to continue exploration of its Hammond, St.Paul, Grant, and
O'Dea properties. The extent of activity will be dependent on available
financing.
On August 4, 1989, Silverado assigned its Eagle Creek Property to Can-Ex
Resources (U.S.), Inc. ("Can-Ex") for a 15% net profits interest to a maximum of
$5,000,000. On February 19, 1997, Can-Ex was dissolved and the Eagle Creek
property became the property of its parent corporation, Kintana Resources Ltd.,
a company controlled by Garry Anselmo who is President, Chairman, CEO and a
Director of Silverado. The Company's royalty interest in the property remains
unaffected by this event. There has been no development activity on the
property during the year.
In Canada, the Company has allowed its French Peak Property to lapse and does
not currently intend to acquire additional property in Canada at this time.
From time to time as conditions or funds warrant, the Company may re-evaluate
its development programs in response to changing economic or environmental
conditions. Such re-evaluation may result in the Company either changing its
development priorities or allowing certain properties or portions thereof to
lapse.
Mining activities in the U.S. are subject to regulation and inspection by the
Mining Safety and Health Administration of the United States Department of
Labor. In addition, the Company's activities are regulated by a variety of
Federal, state, provincial and local laws and regulations relating to protection
of the environment and other matters. Many agencies have the authority to
require the Company to cease or curtail operations due to noncompliance with
laws administered by those agencies. The operation of mining properties also
requires a variety of permits from government agencies.
Management believes that it has in place or will be able to obtain as necessary
all of the required permits for the Company's planned operations. Management
knows of no areas of noncompliance with laws or regulations which could close or
curtail operations.
The Company has accrued a total of $196,000 for further reclamation on the Nolan
Gold Project and Grant Mine site on Ester Dome. Additional remediation work
takes place during the normal course of mining.
In the event of closure or abandonment of its facilities, the Company estimates
the accrual for reclamation, net of recoveries, is sufficient to meet its
obligations.
The Company's properties consist of unpatented Federal mining claims and State
mining claims. Titles to unpatented claims are subject to inherent
uncertainties, such as whether there has been a discovery of valuable minerals
on each claim and whether proper locating and filing prerequisites have been
met. Title can only be maintained by the performance of adequate annual
assessment work and / or the payment of prescribed rental fees. While the
Company believes that all claims which it holds were properly located under
applicable law, no assurances can be given in that regard. To date, the Company
believes that it has conducted and recorded all annual assessment work necessary
to maintain the claims in good standing. Changes to U.S. mining laws currently
under consideration would, if enacted, substantially affect all holders of
unpatented Federal mining claims by imposing royalty fees on removal of minerals
and fundamentally changing the rights and status of unpatented claim holders.
Although management believes that the imposition of royalty fees as described
above, at a minimal level, would not have a material adverse effect on the
Company, it is impossible to predict the extent to which mining or environmental
legislation may be enacted or amended nor the effect that such legislation could
have on the Company.
(D) INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
The following table sets forth selected financial data for each of Silverado's
fiscal years ended November 30, 1999, 1998 and 1997, by country of origin for
information purposes only.
YEAR ENDED NOVEMBER 30,
1999 1998 1997
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Loss for the year
Canada. . . . $ (256,641) $ (1,469,472) $(3,594,229)
United States (1,192,750) (15,469,431) (820,543)
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$(1,449,391) $(16,938,903) $(4,414,772)
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END OF PERIOD
Long-lived assets
Canada. . . . $ 183,927 $ 212,492 $ 515,612
United States 2,484,559 3,212,410 17,209,468
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$ 2,668,486 $ 3,424,902 $17,725,080
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For each of the three years ended November 30, 1999, 1998 and 1997, there have
been no transfers between geographic segments, nor have there been export sales.
Revenue for each of the three years is from sales of gold inventory derived from
the Nolan Gold Project.
ITEM 2 PROPERTIES
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(A) REGISTRANT'S INTEREST
Silverado holds interests in mineral properties in the State of Alaska. The
Company has conducted sufficient exploration and development work to delineate
100,652 ounces proven and 132,697 probable ore reserves.
(B) GENERAL CHARACTER AND TECHNICAL DESCRIPTION OF EACH
PROPERTY
(1) NOLAN GOLD PROJECT
The Nolan Project consists of five contiguous properties covering approximately
6 square miles, 8 miles west of Wiseman, and 175 miles north of Fairbanks,
Alaska. These properties are as follows:
(A) NOLAN PLACER:
This property consists of 160 unpatented Federal placer claims 100 percent owned
by Silverado.
(B) THOMPSON'S PUP:
This property consists of 6 unpatented Federal placer claims, and is subject to
a royalty of 3 percent of net profits on 80% of production.
(C) DIONNE (MARY'S BENCH):
This property, consisting of 15 unpatented Federal placer claims and
miscellaneous mining equipment, was purchased in 1993 for $1,000,000 payable
over five years. Payments were completed in 1997.
(D) SMITH CREEK:
This property, consisting of 35 unpatented Federal placer claims and
miscellaneous mining equipment, was purchased in 1993 for $200,000 payable over
five years with payments originally scheduled to be completed in 1998. As at
November 30, 1999 $120,000 (1998: $60,000) in acquisition costs are in arrears.
(E) NOLAN LODE:
This property consists of 32 unpatented Federal lode claims 100 percent owned by
Silverado. The lode claims overlie much of the placer properties and extend
beyond them.
Production of placer gold from Nolan Creek and its tributaries originally
commenced in 1903. Silverado began acquiring claims in the area and developing
the placer gold deposits in 1979. Through 1988, Silverado and a lessee produced
2,400 ounces of gold nuggets. Due to the angular nature and attachment to
quartz of much of the placer gold recovered, Silverado believes the lode source
should be nearby and has staked lode claims to cover the potential source areas.
From 1990 to 1993, Silverado conducted reclamation, exploration and development
in preparation for commencement of production. Initially, production was
carried out on the Thompson's Pup property. Then, in November 1993, the Company
commenced production on the Dionne (Mary's Bench) Property. Gold bearing
gravels were mined by underground methods from a frozen bench deposit. Since
the Winter of 1994/95 almost 14,000 ounces of gold have been recovered by
Silverado from these sites, primarily in the form of high-quality nuggets which
sell at premium prices. From 1995 to 1997, the Company restricted its
activities at Nolan as it refocused its resources on its Ester Dome properties.
During this time, the Company substantially reclaimed its previous disturbances
During 1998, the Company re-commenced mining operations. The Company
concentrated its activities on the Archibald Creek area, located within Nolan
Placer. Limited mining on the Swede Channel located within Dionne was also
undertaken by a third party. The Company's share of total gold recovered from
the Nolan Gold Project in 1998 amounted to 144 ounces.
During 1999, the Company conducted mining operations. Mining on the Swede
Channel located within Dionne was completed by a third party. The Company's
share of the total gold recovered from the Swede Channel in 1999 was 289 ounces.
The Company mined and processed gold from the Workman's Bench area located
within Smith Creek. A small part of this area was mined in the last week of the
fall mining season (prior to winter freeze-up) and yielded 112 ounces of gold.
(2) HAMMOND PROPERTY
The Hammond Property, consisting of 28 Federal placer claims and 36 Federal lode
claims covering one and one-half square miles, was acquired by the Company in
December 1994. The Company completed a drilling program in 1995 which
identified placer gold deposits similar to those on the adjoining Nolan Gold
Project. The lode claims also extended the area of interest for exploration for
the lode sources of the placer gold. As at November 30, 1999 $160,000 (1998:
$80,000) in option payments are in arrears.
(3) MARSHALL DOME PROPERTY
The Marshall Dome Gold Project, consists of 38 State claims, 35 of which were
acquired by the Company in 1995 due to its proximity and similar geological
setting to Newmont Mining Company's now Kinross Gold Corporation's "True North"
gold property, immediately to the southwest. The remaining three adjacent
claims were located and acquired by the Company prior to 1995. The project
covers an area of two and one-half square miles, and is located eighteen miles
northeast of Fairbanks and is on the same geological trend as the "True North"
gold deposit one mile to the southwest, which is being developed by Kinross Gold
Corporation.
(4) WHISKEY GULCH PROPERTY
This property, acquired by the Company in 1996, is one-half mile southwest of
the Marshall Dome Property and adjoins the "True North" property. During 1999,
the Company sold its 100% interest to a subsidiary of Kinross Gold Corporation.
The Company retains an overriding Net Smelter Interest (see Item 1 "General
Development of Business").
(5) ESTER DOME GOLD PROJECT
The Ester Dome Project encompasses all of Silverado's optioned properties on
Ester Dome, which is accessible by road 10 miles northwest of Fairbanks, Alaska.
The specific properties at this site are as follows:
(A) GRANT MINE:
This property consists of 19 state mineral claims subject to payments of 15% of
net profits until $2,000,000 has been paid and 3% of net profits thereafter. In
December of 1997, for the purpose of facilitating an agreement with Placer Dome
U.S. Inc. and in consideration of a payment by the Company of $20,000, the
conditional purchase and sale agreement was amended to reduce the royalty
payments to 3% of net profits as defined in the agreement.
(B) MAY (ST. PAUL) / BARELKA:
This gold property consists of 22 State mineral claims subject to payments of
15% of net profits until $2,000,000 (inflation indexed from 1979) has been paid
and 3% of net profits thereafter.
(C) DOBB'S:
This property consists of 1 unpatented Federal mineral claim and 4 State
mineral claims subject to payments of 15% of net profits until $1,500,000 has
been paid and 3% of the net profits thereafter.
(D) RANGE MINERALS #1:
This property consisted of 6 State mineral claims. During 1999 the Company
relinquished its interest in this property.
(E) RANGE MINERALS #2:
This property consists of 419 State mineral claims and one Federal claim.
During 1999 the Company relinquished its interest in this property.
(6) FRENCH PEAK PROPERTY
The French Peak property consists of four mineral claims totaling approximately
one square mile, located 40 miles northwest of Smithers, British Columbia.
During 1999, the Company relinquished its interest in this property.
(C) GLOSSARY OF TECHNICAL TERMS
DEVELOPMENT. The process following exploration, whereby a mineral deposit is
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further evaluated and prepared for production. This generally involves
significant drilling and may include underground work.
DRILLING. The process of boring a hole in the rock to obtain a sample for
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determination of metal content. "Diamond Drilling" involves the use of a hollow
bit with diamonds on the cutting surface to recover a cylindrical core of rock.
"Reverse Circulation Drilling" involves chips of rock being forced back through
the center of the drill pipe using air or water.
EXPLORATION. The process of using prospecting, geological mapping, geochemical
- -----------
and geophysical surveys, drilling, sampling and other means to detect and
perform initial evaluations of mineral deposits.
FEDERAL LODE CLAIMS, FEDERAL PLACER CLAIMS. Mineral claims up to 20 acres,
- ------------------------------------------------
located on federal land under the U.S. Mining Law of 1872. See below for
definitions of "Lode" and "Placer".
GEOCHEMICAL SURVEY. Sample of soil, rock, silt, water or vegetation analyzed to
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detect the presence of valuable metals or other metals which may accompany them.
E.g., Arsenic may indicate the presence of gold.
GEOPHYSICAL SURVEY. Electrical, magnetic and other means used to detect
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features which may be associated with mineral deposits.
GOLD DEPOSIT. A concentration of gold in rock sufficient to be of economic
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interest.
LODE. Mineral in place in the host rock, as in "lode gold".
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LODE SOURCE. The lode mineral deposit from which placer minerals have been
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derived by erosion.
MINERAL CLAIMS. General term used to describe the manner of land acquisition
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under which the right to explore, develop and extract metals is established.
PLACER. Mineral which has been separated from its host rock by natural
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processes and is often reconcentrated in streams as "placer deposits" or "placer
gold".
RESERVE. That part of a mineral deposit which could be economically and legally
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extracted or produced at the time of the reserve determination. Reserves are
customarily stated in terms of "ore" when dealing with metalliferous minerals.
STATE CLAIMS. Mineral claims up to 40 acres, located on State of Alaska lands.
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ITEM 3 LEGAL PROCEEDINGS
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A former employee of the Tri-Con Group has initiated a claim against the Company
for wrongful dismissal/breach of contract in the amount of $150,000. The
Company has
been named as a co-defendant in the suit. No provision for this litigation has
been made in the financial statements for the year ended November 30, 1999 as
the amount of the loss, if any, is indeterminable at this time.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matters were submitted during the fourth quarter of the fiscal year covered
by this report to a vote of security holders through the solicitation of proxies
or otherwise.
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------
(A) MARKET INFORMATION
Silverado's common stock trades on the OTC Bulletin Board under the symbol
SLGLF.OB. The following table indicates the high and low bid prices of the
common shares during the periods indicated:
QUARTER ENDED HIGH BID LOW BID
Feb 28, 1998 11/32 3/16
May 31, 1998 15/16 1/16
Aug 31, 1998 1 1/32 7/32
Nov 30 1998 11/32 5/32
Feb 28, 1999 1/8 5/64
May 31, 1999 3/16 7/64
Aug 31, 1999 13/64 1/16
Nov 30 1999 1/8 1/16
(B) HOLDERS OF COMMON SHARES
As at March 6, 2000 there were 3,729 registered holders of Silverado's common
shares, approximately 81% of whom were located in the United States.
(C) DIVIDENDS
Silverado Gold Mines Ltd. has not declared dividends on its common stock in the
two most recent fiscal years.
Silverado is restricted in its ability to pay dividends by limitations under
British Columbia law relating to the sufficiency of profits from which dividends
may be paid. In addition, Silverado's Articles (the equivalent of the Bylaws of
a United States corporation) provide that no dividend shall be paid otherwise
than out of funds or assets properly available for
the payment of dividends and declaration by the directors as to the amount of
such funds or assets available for dividends shall be conclusive.
The Canadian Income Tax Act (the "Tax Act") provides in subsection 212(2) that
dividends and other distributions deemed to be dividends paid or deemed to be
paid by a Canadian resident company to a non-resident person shall be subject to
a non-resident withholding tax of 25 percent on the gross amount of the
dividend. Subject to certain exceptions, paragraph 212(1)(b) of the Tax Act
similarly imposes a 25 percent withholding tax on the gross amount of interest
paid by a Canadian resident to a non-resident person.
Subsection 115 (1) and Subsection 2 (3) of the Tax Act provide that a
non-resident person is subject to tax at the rates generally applicable to
persons resident in Canada on any "Taxable capital gain" arising on the
disposition of shares of a corporation that is listed on a prescribed stock
exchange (which includes OTC bulletin board) if:
(i) such non-resident, together with persons with whom he does not deal at
arm's length, has held 25% or more of the outstanding shares of any class of
stock of the corporation at any time during the five years preceding such
disposition; or
(ii) the shares disposed of were used by such non-resident in carrying on a
business in Canada.
A taxable capital gain is presently equal to two-thirds of a capital gain
(three-quarters prior to February 27, 2000).
Provisions in the Tax Act relating to dividend and interest payments by Canadian
residents to persons resident in the United States are subject to the 1980
Canada - United States Income Tax Convention (the "1980 Convention"). Article X
of the 1980 Convention provides that the rate of non resident withholding tax on
dividends shall not exceed 5 percent of the gross amount of the dividends where
the non-resident person who is the beneficial owner of the shares is a
corporation which owns at least 10 percent of the voting stock of the
corporation paying the dividend. In other cases, the rate of non-resident
withholding tax shall not exceed 15 percent.
Article XI of the 1980 Convention provides that the rate of non-resident
withholding tax on interest shall not generally exceed 10 percent of the gross
amount of the interest.
The reduced rates of non-resident withholding relating to dividends and interest
provided by the 1980 Convention do not apply if the recipient carries on
business or provides independent personal services through a permanent
establishment situated in Canada, and the shareholding or debt claim is
effectively connected with that permanent establishment. In that case, the
dividends and interest as the case may be, are subject to tax at the rates
generally applicable to persons resident in Canada.
Article XIII of the 1980 Convention provides that gains realized by a United
States resident on the sale of shares such as those of Silverado may be taxed in
both Canada and the United States. However, taxes paid in Canada by a United
States resident
would, subject to certain limitations, be eligible for foreign tax credit
treatment in the United States, thereby minimizing the element of double
taxation.
Except as described above, there are no government laws, decrees, regulations or
treaties that materially restrict the export or import of capital, including
foreign exchange controls, or which impose taxes, including withholding
provisions, to which United States shareholders are subject.
ITEM 6 SELECTED FINANCIAL DATA
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The following table sets forth selected financial data for each of Silverado's
fiscal years ended November 30, 1999, 1998, 1997, 1996 and 1995.
YEARS ENDED NOVEMBER 30,
1999 1998 1997 1996 1995
000's except per share amounts:
Revenues . . . . . . . . . . . . $ 128 $ 58 $ 169 $ 298 $ 3,053
Loss for the Year. . . . . . . . $(1,449) $(16,939) $(4,415) $(4,330) $(4,095)
Loss Per Share . . . . . . . . . $ (0.11) $ (1.89) $ (0.66) $ (0.88) $ (1.10)
END OF PERIOD
Assets . . . . . . . . . . . . . $ 2,759 $ 3,477 $18,231 $18,461 $15,140
Gold Inventory (1) . . . . . . . $ 11 $ 23 $ 49 $ 213 $ 389
Long term Obligations. . . . . . $ 75 $ - $ 2,010 $ 2,092 $ 2,395
(1) Gold inventory is valued at the lower of weighted average cost or net
realizable value.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- -------
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The table below sets forth Silverado's working capital and liquidity at the
dates indicated:
NOVEMBER 30,
1999 1998 1997
------------ ------------ ----------
Cash . . . . . . . . . . . . . . . . . . . . $ - $ - $ 20,914
Other current assets . . . . . . . . . . . . 90,502 27,208 423,475
------------ ------------ ----------
90,502 27,208 444,389
------------ ------------ ----------
Bank indebtedness. . . . . . . . . . . . . . (2,385) (4,396) -
Accounts payable and accrued liabilities . . (1,162,023) (904,568) (597,478)
Mineral claims payable . . . . . . . . . . . (286,500) (342,000) -
Loans payable secured by gold inventory. . . (49,130) - -
Current portion of capital lease obligation. - - (81,749)
Convertible debentures, current portion. . . (2,000,000) (2,000,000) -
------------ ------------ ----------
(3,500,038) (3,250,964 (679,227)
------------ ------------ ----------
Working capital (deficiency) . . . . . . . . $(3,409,536) $(3,223,756) $(234,838)
------------ ------------ ----------
(a) Liquidity
As at November 30, 1999 the Company has a working capital deficiency of
$3,409,536, including a $2,000,000 convertible debenture which matured and
became payable on July 2, 1999. The Company has not made required interest
payments of $320,000 to December 31, 1999. The Company is also in arrears for
$286,500 of required mineral claims and options payments for certain of its
mineral properties during 1999 and 1998. As a result, the Company's rights to
these properties may be adversely affected.
The Company funded its exploration activities in 1999 by generating $379,445 in
capital through private placements and the exercise of options and warrants;
receiving $35,642 from the sale of equipment; receiving $127,940 from sale of
gold; issuances of a $75,000 convertible debenture; and the receipt of $50,000
cash from the sale of its interest in the Whiskey Gulch Mineral property.
The Company plans to continue to raise capital through private placements and
warrant issues. The Company also plans to option to third parties the Ester
Dome and Marshall Dome properties, near Fairbanks, Alaska. The Company expects
to supplement financing activities with gold sales in fiscal 2000.
The Company has a significant working capital deficiency at November 30, 1999.
As of that date, uncertainty as to the Company's ability to meet its liabilities
and commitments as they become payable causes doubt about the Company's ability
to continue as a going concern. The Company's ability to continue as a going
concern and recover the amounts recorded as mineral properties is dependant on
its ability to obtain to obtain the continued forbearance of its creditors, to
obtain additional financing and / or the entering into a joint venture
agreements with third parties in order to complete exploration, development and
production of its mineral properties, the continued delineation of reserves on
its properties and the attainment of profitable operations. There is no
assurance that such items can be obtained by the Company. Failure to obtain
these may cause the Company to significantly decrease its level of exploration
and operations and to possibly sell or abandon certain mineral properties or
capital assets to reduce commitments or raise cash as required.
(b) Capital Resources
The Company has minimum aggregate future cash expenditures for work commitments
of $50,000 in each of the next five years to maintain one of its properties in
good standing in addition to $286,500 of payments in arrears on two properties.
The Company has interest commitments of $320,000 as at December 31, 1999 on a
$2,000,000 convertible debenture which has matured and is due and payable. The
Company and the debenture holders are in negotiations to extend the debenture.
(c) Results of Operations
NOLAN GOLD PROJECT
- --------------------
During 1999, mining of the Swede Channel was continued. The Company's share of
total gold recovered from the Swede Channel in 1999 was 289 ounces (1998: 144
ounces). Limited mining was also conducted on the Workman's Bench part of the
Smith Creek property and the Company recovered 112 ounces from this area. The
Company also processed some of the old tailings from the Dionne property which
yielded 44 ounces. The Company recovered a total of 445 ounces of gold from
the Nolan Gold Project in 1999. The Company also performed reclamation work on
the Archibald part of the Nolan Placer property and on the Swede Channel part of
the Dionne property.
OPERATING RESULTS
1999 1998 1997
-------- -------- --------
Revenue from gold sales. . $127,490 $ 57,915 $168,924
Operating Costs. . . . . . 254,242 336,244 378,315
-------- -------- --------
Loss before other expenses $126,302 $278,329 $209,391
The Company incurred only limited gold sales in 1999. The Company expects to
maintain only minimal inventory until production from its Nolan properties
resume in the spring of 2000.
The price of gold has an impact upon the Company's results of operations. The
price of gold has maintained a range of $252 to $323 per ounce, down from the
1996 level of $400 per ounce.
OTHER EXPENSES
- ---------------
1999 1998 1997
---------- ----------- ----------
Other Expenses . . . . . . . . . $1,156,089 $ 2,196,520 $4,205,381
Write down of mineral properties 167,000 14,464,054 -
---------- ----------- ----------
$1,323,089 $16,660,574 $4,205,381
DURING 1999, THE COMPANY EVALUATED ITS MINERAL PROPERTIES AND RECORDED A
WRITE-DOWN OF $167,000 (1998: 14,464,054).
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -------
The consolidated financial statements listed below were prepared on the basis of
accounting principles generally accepted in the United States and are expressed
in U.S. dollars. These principles conform, in all material respects, with those
generally accepted in Canada.
PAGE
Auditors' Report F-1
Comments by Auditors for U.S. Readers on Canada
- U.S. Reporting Conflict F-1
Consolidated Balance Sheets, November 30, 1999 and 1998 F-2
Consolidated Statements of Operations and Accumulated Deficit,
Years Ended November 30, 1999, 1998, and 1997 F-3
Consolidated Statements of Changes in Share Capital F-4
Consolidated Statements of Cash Flows,
Years Ended November 30, 1999, 1998 and 1997 F-5
Notes to Consolidated Financial Statements F-6 to F-21
No schedules are presented either because the required information is disclosed
- --------------------------------------------------------------------------------
elsewhere in the financial statements, or the schedules are not applicable.
- --------------------------------------------------------------------------------
F-1
AUDITORS' REPORT
To the Shareholders of Silverado Gold Mines Ltd.
We have audited the consolidated balance sheets of Silverado Gold Mines Ltd. as
at November 30, 1999 and 1998, and the consolidated statements of operations and
accumulated deficit, changes in share capital and cash flows for each of the
years in the three year period ended November 30, 1999. 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 Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at November 30 1999
and 1998, and the results of its operations and its cash flows for each of the
years in the three year period ended November 30, 1999, in accordance with
United States generally accepted accounting principles. As required by the
Company Act (British Columbia), we report, that in our opinion, these principles
have been applied on a consistent basis.
KPMG LLP
Chartered Accountants
Vancouver, Canada
February 25, 2000
COMMENTS BY AUDITORS FOR U.S. READERS
ON CANADA-U.S. REPORTING CONFLICT
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the company's ability to continue as a going concern, such as those described in
Note 1(a) to the financial statements. Our report to the shareholders dated
February 25, 2000, is expressed in accordance with the Canadian reporting
standards which do not permit a reference to such events and conditions in the
auditor's report when these are adequately disclosed in the financial
statements.
KPMG LLP
Chartered Accountants
Vancouver, Canada
February 25, 2000
SILVERADO GOLD MINES LTD. F-2
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN U.S. DOLLARS
NOVEMBER 30, NOVEMBER 30,
1999 1998
---------------------- ----------------------
Assets
Current Assets
Gold inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,567 $ 23,448
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . 79,935 3,760
---------------------- ----------------------
90,502 27,208
Mineral Properties and Development (Note 2). . . . . . . . . . . . . . . . 1,224,200 1,600,000
Buildings, Plant and Equipment (Note 3). . . . . . . . . . . . . . . . . . 2,982,608 3,114,785
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . (1,538,322) (1,289,883)
---------------------- ----------------------
1,444,286 1,824,902
Deferred financing fees (net of amortization of $186,000; 1998 - $161,438) - 24,562
---------------------- ----------------------
$ 2,758,988 $ 3,476,672
---------------------- ----------------------
Liabilities and Shareholders' Equity (Deficiency in Assets)
Current Liabilities
Bank indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,385 $ 4,396
Accounts payable and accrued liabilities (Note 4). . . . . . . . . . . . 1,162,023 904,568
Mineral claims payable (Note2(a)). . . . . . . . . . . . . . . . . . . . 286,500 342,000
Loans payable secured by gold inventory. . . . . . . . . . . . . . . . . 49,130 -
Convertible debentures, current portion (Note 5(a)). . . . . . . . . . . 2,000,000 2,000,000
---------------------- ----------------------
3,500,038 3,250,964
Convertible debentures (Note 5(b)) . . . . . . . . . . . . . . . . . . . . 75,000 -
Shareholders' Equity (Deficiency in Assets)
Share capital (Note 6)
Authorized: 100,000,000 (1998-100,000,000) common shares
Issued and outstanding: November 30, 1999 - 15,873,224 shares
November 30, 1998 - 10,997,890 shares. . . . . . . . . . . . . . . . . 44,454,365 44,074,920
Shares to be issued. . . . . . . . . . . . . . . . . . . . . . . . . . . 28,188 -
Deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45,298,603) (43,849,212)
---------------------- ----------------------
(816,050) 225,708
---------------------- ----------------------
-
$ 2,758,988 $ 3,476,672
---------------------- ----------------------
Continuing operations (Note 1(a))
Commitments and contingencies (Notes 2 and 9)
Subsequent events (Note 10)
See accompanying notes to consolidated financial statements.
SILVERADO GOLD MINES LTD. F-3
CONSOLIDATED STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT
EXPRESSED IN U.S. DOLLARS YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1999 1998 1997
----------------------- ---------------------- ----------------------
Revenue from gold sales $ 127,940 $ 57,915 $ 168,924
Operating costs
Mining and processing costs 227,442 232,405 164,835
Amortization of property and development costs 26,800 43,264 -
Reclamation expense (Note 9(c)) - 60,575 213,480
----------------------- ---------------------- ----------------------
Loss before the undernoted (126,302) (278,329) (209,391)
Other expenses
Accounting and audit 34,737 69,054 93,450
Amortization of deferred financing fees 24,562 37,200 37,200
Consulting expense - 185,813 78,945
Corporate capital taxes 5,305 - 21,934
Depreciation 301,408 378,471 475,175
Employment contract expense - 22,049 1,099,340
Financing activities - - 100,847
General exploration and development 182,977 - 75,566
Interest on long term debt 165,000 161,381 160,000
Legal 31,612 145,102 206,740
Loss on disposal of buildings, plant and equipment 43,566 178,916 1,557
Loss (gain) on foreign exchange 19,573 (28,467) 55,335
Management salaries - - 65,744
Management services from related party (Note 7) 58,200 321,513 992,646
Office expenses 118,554 174,910 239,518
Other interest and bank charges (net) 14,535 29,228 7,356
Printing and publicity 625 38,712 293,095
Receivable allowance 153,561 363,667 -
Reporting and investor relations 1,599 55,279 52,576
Transfer agent fees and mailing expenses 275 63,692 148,357
Write down of deferred mineral properties 167,000 14,464,054 -
----------------------- ---------------------- ----------------------
and development expenditures
1,323,089 16,660,574 4,205,381
Loss for the year (1,449,391) (16,938,903) (4,414,772)
Accumulated deficit at beginning of the year (43,849,212) (26,910,309) (22,495,537)
----------------------- ---------------------- ----------------------
Accumulated deficit at end of the year $ (45,298,603) $ (43,849,212) $ (26,910,309)
----------------------- ---------------------- ----------------------
Loss per share (Note 1(g)) $ (0.11) $ (1.89) $ (0.66)
----------------------- ---------------------- ----------------------
SILVERADO GOLD MINES LTD. F-4
CONSOLIDATED STATEMENTS OF CHANGES IN SHARE CAPITAL
EXPRESSED IN U.S. DOLLARS
YEARS ENDED NOVEMBER 30, 1999, 1998, AND 1997
UNAMORTIZED ADVANCES TO RELATED
STOCK PARTIES SECURED BY
NUMBER OF SHARE COMPENSATION COMMON SHARES
SHARES CAPITAL EXPENSE IN THE COMPANY
Balance at November 30, 1996 56,406,493 $ 38,651,294 $ - $ -
------------ -------------------- -------------- ----------------
Year ended November 30, 1997
Shares issued:
Share split 4,934,725 -
On exercise of contract employee share options 3,390,000 487,500
On exercise of warrants 600,000 102,000
Private placements for cash 14,181,000 2,863,229
Private placement for consulting services: 500,000
For cash 500
For consulting services 169,500
Fair value of share options granted to contract employees 771,389
Fair value of share options granted to consultants 39,008
Stock compensation cost (151,612)
Advances to related parties (480,236)
------------ -------------------- -------------- ----------------
23,605,725 4,433,126 (151,612) (480,236)
------------ -------------------- -------------- ----------------
Balance as at November 30, 1997 80,012,218 43,084,420 (151,612) (480,236)
------------ -------------------- -------------- ----------------
Year ended November 30, 1998
Share consolidation (72,010,996)
Shares issued:
On exercise of warrants for cash 255,000 216,200
Private placements for cash 2,446,668 372,600
Private placement for consulting services: 125,000 112,500
Fair value of shares issued for mineral property 170,000 289,200
Amortization of stock compensation 151,612
Cash received on sale of common shares by related party 225,448
Uncollected balance recorded as a receivable allowance 254,788
------------ -------------------- -------------- ----------------
(69,014,328) 990,500 151,612 480,236
------------ -------------------- -------------- ----------------
Balance as at November 30, 1998 10,997,890 44,074,920 - -
------------ -------------------- -------------- ----------------
Year ended November 30, 1999
Shares issued:
On exercise of warrants for cash 4,008,667 250,050
Private placements for cash 866,667 129,395
------------ -------------------- -------------- ----------------
4,875,334 379,445 - -
------------ -------------------- -------------- ----------------
Balance as at November 30, 1999 15,873,224 $ 44,454,365 $ - $ -
============ ==================== ============== ================
See accompanying notes to the consolidated financial statements.
SILVERADO GOLD MINES LTD. F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS
EXPRESSED IN U.S. DOLLARS
YEAR ENDED
NOVEMBER 30,
1999
--------------------------
CASH PROVIDED BY (USED FOR):
Operations:
Loss for the year $ (1,449,391)
Items not involving cash:
Write down of deferred mineral properties and development expenditures 167,000
Employment contract expense -
Consulting services expense -
Depreciation 301,408
Amortization of deferred financing fees 24,562
Loss on disposal of buildings, plant and equipment 43,566
Amortization of mineral properties and development 26,800
Changes in non-cash operating working capital:
Decrease (increase) in accounts receivable (76,175)
Decrease in gold inventory 12,881
Decrease in prepaid expenses paid to related parties -
Increase (decrease) in mineral claim payable 136,500
Increase in accounts payable and accrued liabilities 257,455
--------------------------
(555,394)
Financing:
Bank indebtedness (2,011)
Shares issued for cash 379,445
Share subscriptions 28,188
Decrease (increase) in secured advances to related parties -
Increase (decrease) in loans payable secured by gold inventory, net 49,130
Increase in convertible debentures 75,000
Decrease in capital lease obligation -
529,752
Investments:
Mineral claims and options expenditures, net of recoveries (10,000)
Deferred exploration and development expenditures, net of recoveries -
Proceeds from sale of equipment 35,642
Purchases of equipment
25,642
Decrease in cash $ -
Cash at beginning of the year -
--------------------------
Cash at end of the year -
--------------------------
Supplemental cash flow information
Interest paid -
--------------------------
Non-cash activities not reflected in the Statements of cashflows:
Reversal of accrued option payments of a prior year $ (192,000)
--------------------------
Issue of shares for purchase of mineral property -
--------------------------
Issue of shares for consulting services in lieu of payment of cash -
--------------------------
Fair value of share options granted to contract employees and consultants -
--------------------------
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1998 1997
------------------------ -----------------------
CASH PROVIDED BY (USED FOR):
Operations:
Loss for the year $ (16,938,903) $ (4,414,772)
Items not involving cash:
Write down of deferred mineral properties and development expenditures 14,464,054 -
Employment contract expense 22,049 1,099,340
Consulting services expense 167,063 78,945
Depreciation 378,471 475,175
Amortization of deferred financing fees 37,200 37,200
Loss on disposal of buildings, plant and equipment 178,916 1,557
Amortization of mineral properties and development 43,264 -
Changes in non-cash operating working capital:
Decrease (increase) in accounts receivable 4,537 2,968
Decrease in gold inventory 25,427 164,129
Decrease in prepaid expenses paid to related parties 366,303 113,656
Increase (decrease) in mineral claim payable 342,000 (179,000)
Increase in accounts payable and accrued liabilities 382,090 344,555
------------------------ -----------------------
(527,529) (2,276,247)
Financing:
Bank indebtedness 4,396 -
Shares issued for cash 588,800 3,453,229
Share subscriptions - -
Decrease (increase) in secured advances to related parties 480,236 (480,236)
Increase (decrease) in loans payable secured by gold inventory, net - (66,511)
Increase in convertible debentures - -
Decrease in capital lease obligation (91,490) (65,663)
----------------------- -----------------------
981,942 2,840,819
Investments:
Mineral claims and options expenditures, net of recoveries (276,127) (109,947)
Deferred exploration and development expenditures, net of recoveries (912,888) (2,289,654)
Proceeds from sale of equipment 718,977 -
Purchases of equipment (5,289) (69,526)
------------------------ ----------------------
(475,327) (2,469,127)
Decrease in cash (20,914) (1,904,555)
Cash at beginning of the year 20,914 1,925,469
------------------------ -----------------------
Cash at end of the year - $ 20,914
------------------------ -----------------------
Supplemental cash flow information
Interest paid $ 80,000 $ 181,436
------------------------ -----------------------
Non-cash activities not reflected in the Statements of cashflows:
Reversal of accrued option payments of a prior year - -
------------------------ -----------------------
Issue of shares for purchase of mineral property $ 289,200 -
------------------------ -----------------------
Issue of shares for consulting services in lieu of payment of cash $ 112,500 $ 169,500
------------------------ -----------------------
Fair value of share options granted to contract employees and consultants - $ 810,397
------------------------ -----------------------
See accompanying notes to consolidated financial statements.
SILVERADO GOLD MINES LTD. F 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements are prepared in conformity with United
States generally accepted accounting principles.
(A) CONTINUING OPERATIONS
At November 30, 1999, the Company had a working capital deficiency of $3,409,536
including a $2,000,000 convertible debenture which matured on July 2, 1999, but
was not repaid. The Company has not made required interest payments on the
convertible debenture of $320,000 to December 31, 1999.
In addition, the Company is in arrears of required mineral claims and option
payments for certain of its mineral properties at November 30, 1999, in the
amount of $286,500 (1998: $342,000) and therefore, the Company's rights to these
properties with a carrying value of $315,000 may be adversely affected as a
result of this non-payment.
These financial statements have been prepared on a going concern basis, which
assumes the realization of assets and settlement of liabilities in the normal
course of business. The application of the going concern concept and the
recovery of amounts recorded as mineral properties and development and
buildings, plant and equipment is dependent on the Company's ability to obtain
the continued forbearance of certain creditors, to obtain additional financing
to fund its operations and acquisition, exploration and development activities,
the discovery of economically recoverable ore on its properties, and the
attainment of profitable operations. Current uncertainty with regard to these
matters raises substantial doubt about the Company's ability to continue as a
going concern, and the financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
The Company plans to continue to raise capital through private placements and
warrant issues. The Company also plans to option to third parties the Ester
Dome and Marshall Dome properties, near Fairbanks, Alaska. Production on the
Nolan Placer property is set to begin after the winter thaw in May-June 2000,
and the Company expects gold sales to supplement financing activities.
SILVERADO GOLD MINES LTD. F 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
(B) BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Silverado Gold
Mines Inc., a wholly owned subsidiary. All significant intercompany accounts
and transactions have been eliminated.
(C) GOLD INVENTORY
Gold Inventory is valued at the lower of weighted average cost and estimated net
realizable value. At November 30, 1999, 1998 and 1997, gold inventory is valued
at net realizable value. Any write-down of inventory to net realizable value is
included in mining and processing costs.
(D) MINERAL PROPERTIES AND DEVELOPMENT
The Company confines its exploration activities to areas from which gold has
previously been produced or to properties which are contiguous to such areas and
have demonstrated mineralization. Accordingly, the Company capitalizes the
costs of acquiring mineral claims until such time as the properties are placed
into production or abandoned. At that time, costs are amortized on a units of
production basis or written off.
On an ongoing basis, the Company evaluates each property based on exploration
results to date, and considering facts and circumstances such as operating
results, cash flows and material changes in the business climate, determines
whether any of the properties may be impaired. The carrying value of a
long-lived asset is considered impaired when the anticipated discounted cash
flow from such asset is separately identifiable and is less than its carrying
value. In that event, a loss is recognized based on the amount by which the
carrying value exceeds the fair market value of the long-lived asset. Fair
market value is determined primarily using the anticipated cash flows on a
discounted rate commensurate with the risk involved. Losses on long-lived
assets to be disposed of are determined in a similar manner, except that fair
market values are reduced for the costs of disposal.
During 1999, the Company evaluated its mineral properties and recorded a
write-down of $167,000 (1998: $14,464,054) based on this evaluation. The
write-down for 1998 related primarily to deferred exploration and
SILVERADO GOLD MINES LTD. F 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
development which was capitalized in previous years. Exploration costs and
option payments are expensed as incurred commencing in 1998.
The amounts shown for mineral properties and development which have not yet
commenced commercial production represent costs incurred to date, net of
recoveries from developmental production, and are not intended to reflect
present or future values.
Amortization of mineral property costs relating to properties in production is
provided during periods of production using the units-of-production method based
on an estimated economic life of the ore reserves.
The Company's accounting policy for reclamation expenses is contained in note
9(c).
(E) BUILDINGS, PLANT AND EQUIPMENT
Buildings, plant and equipment are stated at cost. Depreciation is provided on
buildings, plant and equipment using the straight-line method based on estimated
lives of 3 to 20 years.
(F) FOREIGN CURRENCIES
The Company considers its functional currency to be the U.S. dollar for its U.S.
and Canadian operations. Monetary assets and liabilities denominated in foreign
currencies are translated into U.S. funds at the rates of exchange in effect at
the year end. Revenue and expense transactions are translated at the rate in
effect at the time at which the transactions took place. Foreign exchange gains
and losses are included in the determination of income.
(G) LOSS PER SHARE
Loss per share has been calculated based on the weighted average number of
shares outstanding during the year. During fiscal 1998, the outstanding share
capital of the Company was consolidated on a 1:10 basis. The effect of the
share consolidation was given retroactive recognition in all periods
SILVERADO GOLD MINES LTD. F 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
presented. The weighted average number of shares outstanding, for the purpose
of loss per share calculations, is as follows:
Year to November 30, 1999 13,596,272
Year to November 30, 1998 8,942,186
Year to November 30, 1997 6,699,956
Loss per share does not include the effect of the potential conversions of
options, warrants, and debentures as their effect would be anti-dilutive.
(H) REVENUE RECOGNITION
Gold sales are recognized when title passes to the purchaser.
(I) ACCOUNTING FOR STOCK BASED COMPENSATION
The Company uses the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") in accounting for its stock based compensation.
Compensation cost is the excess, if any, of the quoted market price of the stock
at grant date over the amount an employee or director must pay to acquire the
stock. The Company's accounting policy for stock based incentive plans to
contract employees and consultants is contained in Note 6(d).
(J) 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.
Significant areas requiring the use of management estimates relate to the
amortization and depreciation rates and recoverability of mineral properties and
development and buildings, plant and equipment, and the determination of accrued
remediation expense. Actual results could differ from those estimates.
(K) FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for accounts receivable, bank
indebtedness, accounts payable and accrued liabilities,
SILVERADO GOLD MINES LTD. F 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
and loans payable secured by gold inventory approximate fair values due to the
short-term maturity of these instruments. The carrying amounts reported in the
balance sheet for convertible debentures approximate their fair values as they
bear interest at rates which approximate market rates.
2. MINERAL PROPERTIES AND DEVELOPMENT
(A) MINERAL PROPERTIES
Ester Dome Properties, Fairbanks Mining District, Alaska
--------------------------------------------------------------
These properties, which include the Grant Mine (Burggraf), May/Barelka (St.
Paul), and Dobb's properties, and previously included the Range Minerals #1 and
Range Minerals #2 properties, make up a contiguous group of claims. The
Company's property holdings in this area were expanded by the acquisition of
five additional claims in October 1997, known as the "Alaska Gold" property. On
February 6, 1998 the Company entered into an agreement with Placer Dome US Inc.
("PDUS") which provided for PDUS to explore and develop the Company's
May/Barelka and Range Minerals properties on Ester Dome. Under the agreement,
PDUS was to earn a 51.5% interest by performing a minimum of $10,000,000 of work
on the property and purchasing $5,450,000 common shares of the Company over a
period of five years. During fiscal 1998, the Company received $400,000 in cash
and PDUS performed $1,000,000 of work on the property. On November 9, 1998,
PDUS exercised its option to terminate the agreement with the Company.
During the year ended November 30, 1999, the Company chose to relinquish its
interest in the Range Minerals #1 and Range Minerals #2 mineral properties
reducing the Company's holdings to an area of approximately 2.5 square miles.
All previous deferred costs related to these mineral properties were written off
during 1999.
Marshall Dome Property, Fairbanks Mining District, Alaska
---------------------------------------------------------------
The Company acquired this property in 1995. It covers an area of two and
one-half square miles, and is located eighteen miles northeast of Fairbanks.
Whiskey Gulch Property, Fairbanks Mining District, Alaska
---------------------------------------------------------------
The Company acquired four claims collectively known as "Whiskey Gulch" in 1996.
These claims are located near the Company's Marshall Dome property.
SILVERADO GOLD MINES LTD. F 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
On November 9, 1999, the Company sold its 100% interest in the Whiskey Gulch
mineral property to a subsidiary of Kinross Gold Corporation for $50,000 in cash
and a net smelter royalty which escalates from 2.0% to 4.0% depending on the
market price of gold. All previous deferred costs were written off during 1999.
Nolan Properties, Wiseman Mining District, Alaska
- ------------------------------------------------------
These properties, which include the Nolan Placer, Nolan Lode, Thompson's Pup,
Dionne (Mary's Bench), and Smith Creek Properties, make up a contiguous group of
claims, covering approximately four square miles. As at November 30, 1999,
payments on the Smith Creek properties totaling $120,000 (1998: $60,000) are in
arrears and included in mineral claims payable.
Hammond Property, Wiseman Mining District, Alaska
- ------------------------------------------------------
The Company acquired this two square mile property, adjoining the Nolan Gold
Properties, in 1994. As at November 30, 1999, option payments totaling $160,000
(1998: $80,000) are in arrears and included in mineral claims payable.
French Peak Property, Omineca Mining District, British Columbia
- ----------------------------------------------------------------------
This property consisted of four mineral claims covering approximately one square
mile located 40 miles northwest of Smithers, British Columbia. During the year
ended November 30, 1999, the Company chose to relinquish its interest in the
French Peak mineral property. All previous deferred costs were written off
during 1999.
Property Commitments
---------------------
As at November 30, 1999, minimum aggregate future cash expenditures for work
commitments required in the next five years to maintain the properties in good
standing, in addition to amounts accrued as mineral claims payable, are as
follows:
Year
2000 $ 50,000
2001 50,000
2002 50,000
2003 50,000
2004 50,000
SILVERADO GOLD MINES LTD. F 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
(B) MINERAL CLAIM EXPENDITURES
Cumulative claims expenditures are as follows:
Net Book Net Book
Value Year ended November 30, 1999 Value
Nov. 30, 1998 Nov. 30, 1999
--------------- ---------------------------------------------- ----------- -----------------
Mineral claim Mineral Recoveries Amortization Write-downs
payments claims /Proceeds
payments and
accruals
--------------- ---------------------------------------------- ----------- -----------------
Alaska
- ------------------
Ester Dome Gold
Project . . . . $ 750,000 $(192,000) $ - $ - $ (152,000) $ 406,000
Marshall Dome. . . 350,000 - - - - 350,000
Nolan Gold Project 350,000 60,000 - (26,800) - 383,200
Hammond Property . 85,000 - - - - 85,000
Whiskey Gulch. . . 50,000 - (50,000) - - -
---------- ---------- ------------ -------------- ------------- ----------
1,585,000 (132,000) (50,000) (26,800) (152,000) 1,224,200
British Columbia
- ------------------
French Peak. . . . 15,000 - - - (15,000) -
---------- ---------- ------------ -------------- ------------- ----------
$1,600,000 $(132,000) $ (50,000) $ (26,800) $ (167,000) $1,224,200
========== ========== ============ ============== ============= ==========
3. BUILDINGS, PLANT AND EQUIPMENT
Buildings, plant and equipment primarily include the mill facility and equipment
of the Ester Dome/Grant Mine Gold Project and mining equipment and camp
facilities at the Nolan Gold Project.
Accumulated 1999 Net
Cost Depreciation Book Value
---------- ------------- -----------
Grant Mine Mill Equipment . . . . . . . $2,076,780 $ 1,014,530 $ 1,062,250
Nolan Gold Project Mining Equipment . . 60,757 29,117 31,640
Mining Equipment. . . . . . . . . . . . 459,787 269,665 190,122
Other Equipment, Leasehold Improvements 385,284 225,010 160,274
---------- ------------- -----------
$2,982,608 $ 1,538,322 $ 1,444,286
---------- ------------- -----------
Accumulated 1998 Net
Cost Depreciation Book Value
---------- ------------- -----------
Grant Mine Mill Equipment . . . . . . . $2,076,780 $ 799,282 $ 1,277,498
Nolan Gold Project Mining Equipment . . 60,757 24,579 36,178
Mining Equipment. . . . . . . . . . . . 591,651 277,917 313,734
Other Equipment, Leasehold Improvements 385,597 188,105 197,492
---------- ------------- -----------
$3,114,785 $ 1,289,883 $ 1,824,902
---------- ------------- -----------
SILVERADO GOLD MINES LTD. F 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of:
1999 1998
---- ----
Accounts payable $ 659,356 $ 561,902
Accrued interest 306,667 146,666
Accrued reclamation expense (Note 9(c)) 196,000 196,000
----------- ---------
$1,162,023 $ 904,568
----------- ---------
5. CONVERTIBLE DEBENTURES
(A) In July 1994, the Company issued a convertible callable debenture for
$2,000,000 with interest payable at the rate of 8.0% per annum on December 31
and June 30 each year. The debenture is unsecured and was due July 2, 1999. The
debenture may be converted in whole or in part by the holder into common shares
of the Company at a conversion price of $18.57 U.S. per share (the "Conversion
Price"). In addition, conversion of the debenture may be called by the Company
provided that the average trading price of the Company's common stock has
exceeded 125% of the Conversion Price for period of twenty consecutive trading
days. Financing fees paid related to the debenture have been deferred and
amortized on a straight line basis over the debenture term of 60 months. The
Company has not made required interest payments of $320,000 to December 31,
1999. The Company was granted a deferral of these payments based on
semi-monthly progress updates until financing is in place. Total interest
payable at November 30, 1999, amounting to $306,667 (1998 - $146,666) has been
recorded as a current liability.
(B) In February 1999, the Company issued a convertible debenture for $75,000
with interest payable at a rate of 5.0% per annum. The debenture is unsecured
and is due February 28, 2002. The debenture may be converted in whole or in
part by the holder into common shares of the Company at a conversion price of
$0.40 per share.
6. SHARE CAPITAL
(A) COMMON SHARES
By special resolution passed on May 21, 1997, the Company subdivided its common
shares with each 13 common shares being subdivided into 14 common shares.
SILVERADO GOLD MINES LTD. F 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
By Special Resolution passed May 25, 1998, the Company consolidated its common
shares with each 10 common shares being consolidated into 1 common share.
Concurrently, the Company increased its authorized capital to 100,000,000 common
shares without par value.
The effect of the 1:10 consolidation during 1998 and the 14:13 share split
during 1997 has been retroactively applied to all share capital balances
disclosed in this note.
The Company has reserved 295,192 (1998: 107,692) shares for issuance upon the
potential conversion of convertible debentures.
(B) DIRECTOR AND EMPLOYEE OPTIONS
The following director and employee options were granted and canceled during the
years ended November 30, 1997, 1998, and 1999 and were outstanding at these
dates:
Number of Weighted Average
shares Exercise Price
---------- ---------------
Outstanding at November 30, 1996 177,692 $ 7.33
Granted. . . . . . . . . . . . 50,769 4.20
---------- ---------------
Outstanding at November 30, 1997 228,461 6.63
Granted. . . . . . . . . . . . 10,000 2.80
---------- ---------------
Outstanding at November 30, 1998 238,461 6.47
Granted. . . . . . . . . . . . 3,500,000 0.10
Canceled . . . . . . . . . . . (238,461) 6.47
---------- ---------------
Outstanding at November 30, 1999 3,500,000 $ 0.10
---------- ---------------
The weighted average remaining contractual life of the options outstanding at
November 30, 1999, was 5 years (1998: 7 years).
The Company accounts for stock compensation arising from options to employee and
directors in accordance with APB 25. The exercise price of the options is equal
to the market price of the underlying shares on the date of grant of the
options. Therefore no compensation cost arises when the options are granted.
If, at the time of any alteration to the terms of an option, the market price of
the Company's shares exceeds the exercise price of the option at that date, then
this excess is credited to share capital and expensed over the term of the
service period.
SILVERADO GOLD MINES LTD. F 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
Had the compensation cost for these employee and director options been
determined based on fair value at the grant dates, consistent with the
requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation", the Company's net loss and loss per
share would have increased to the pro forma amounts indicated below.
1999 1998 1997
---- ---- ----
Loss for the year
As reported $1,449,391 $16,938,403 $4,414,772
Pro Forma 1,633,121 16,938,403 4,543,773
1999 1998 1997
---- ---- ----
Loss per common share
As reported $0.11 $1.89 $0.66
Pro Forma 0.12 1.89 0.88
The estimated weighted average fair value of the options granted was prepared
assuming a risk-free rate of 6.5% (1998 and 1997 - 6%), an expected dividend
yield of 0% (1998 and 1997 - 0%), an expected volatility of 105% (1998 and 1997
- - 57%), and a weighted average expected life of 5 years (1998 and 1997 - 9
years). The estimate was made using the Black-Scholes Pricing Model.
SILVERADO GOLD MINES LTD. F 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
(C) WARRANTS
In conjunction with the private placement of common shares, the Company has
issued and has outstanding at November 30, 1998 and 1999, the following share
purchase warrants. Each share purchase warrant entitles the holder to acquire
one common share of the Company.
Balance Exercised in Canceled in Outstanding Exercise Expiry
Nov. 30, 1998 Issued in 1999 1999 1999 Nov. 30, 1999 Price Date Notes
- ------------- -------------- ----------- --------- ------------- ------ ----- ------
215,385 - - (215,385) - $ 3.90 Mar99
38,200 343,800 (382,000) - - 0.07 Sep99 (1)
51,000 459,000 (510,000) - - 0.07 Sep99 (2)
36,000 324,000 (360,000) - - 0.07 Oct99 (3)
55,000 - - (55,000) - 1.70 Sep99
250,000 - - - 250,000 2.20 Mar00
250,000 - - - 250,000 2.20 Mar00
200,000 - (200,000) - - 0.04 Jun00 (4)
140,000 - (140,000) - - 0.04 Aug00 (5)
216,667 - (216,667) - - 0.04 Sep00 (6)
533,334 866,666 (1,400,000) - - 0.05 Sep00 (7)
800,000 - (800,000) - - 0.07 Oct00 (8)
866,667 - - 866,667 0.05 Oct00 (9)
- ------------- -------------- ----------- --------- -------------
2,785,586 2,860,133 (4,008,667) (270,385) 1,366,667
- ------------- -------------- ----------- --------- -------------
(1) Original exercise price changed from $0.20 per share to $0.07 per share and an
additional 343,800 share purchase warrants granted to the warrant holder.
(2) Original exercise price changed from $0.20 per share to $0.07 per share and an
additional 459,000 share purchase warrants granted to the warrant holder.
(3) Original exercise price changed from $0.20 per share to $0.07 per share and an
additional 324,000 share purchase warrants granted to the warrant holder.
(4) Original exercise price changed from $0.25 per share to $0.04 per share.
(5) Original exercise price changed from $0.30 per share to $0.04 per share.
(6) Original exercise price changed from $0.18 per share to $0.04 per share.
(7) Original exercise price changed from $0.20 per share to $0.05 per share and an
additional 866,666 share purchase warrants granted to the warrant holder.
(8) Original exercise price changed from $0.20 per share to $0.07 per share.
(9) Original exercise price changed from $0.20 per share to $0.05 per share.
(D) CONTRACT EMPLOYEE OPTIONS
From time to time, the Company issues options for the purchase of common shares
to selected part-time independent contract employees as sole compensation for
contracted services. The options are exercisable either at the date the options
are granted, or in increments over the terms of the employment contracts.
The Company accounts for stock compensation arising from these options in
accordance with Statement of Financial Standards No. 123, "Accounting for Stock
Based Compensation". Under this statement, stock compensation cost to contract
employees is measured at the grant date of the stock option based on the fair
value of the award and is recognized over the service period.
SILVERADO GOLD MINES LTD. F 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
The following contract employee stock options were granted, exercised, canceled
and expired during the years ended November 30, 1997, 1998, and 1999 and were
outstanding at these dates:
Number of Weighted Average
shares Exercise Price
--------- --------------
Outstanding at November 30, 1996 310,208 $ 5.20
Granted. . . . . . . . . . . . . 397,385 1.67
Exercised. . . . . . . . . . . . (365,077) 1.30
Expired or canceled. . . . . . . (279,623) 5.29
--------- -------
Outstanding at November 30, 1997 62,892 4.83
Expired or canceled. . . . . . . (46,738) 4.54
--------- -------
Outstanding at November 30, 1998 16,154 5.57
Expired or canceled. . . . . . . (16,154) 5.57
--------- -------
Outstanding at November 30, 1999 - $ -
--------- -------
The weighted average remaining contractual life of the options outstanding at
November 30, 1998 was 7 months (1997 - 1 month). The estimated fair value of
the options granted during 1997 was prepared assuming a risk-free rate of 6%, an
expected volatility of 57%, an expected dividend yield of 0%, and a weighted
average expected life of 3 months. The estimate was made using the
Black-Scholes Pricing Model. No such options were issued in 1998 or 1999.
(E) OTHER STOCK-BASED COMPENSATION
In fiscal 1997, the Company issued 50,000 common shares with a fair value of
$3.40 per share and agreed to grant options to purchase 50,000 common shares at
an exercise price of $2.80 per share exerciseable until September 5, 1999 to
Millennium Holdings Group Ltd. ("Millennium") as partial consideration for a
consulting agreement dated September 1997. As at November 30, 1999, there are
nil (1998 - 50,000; 1997 - nil) options outstanding.
SILVERADO GOLD MINES LTD. F 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
In fiscal 1997, the Company estimated the fair value of the options which were
granted to Millennium in 1998 using the Black-Scholes Pricing Model. This
estimate assumed a risk free rate of 6%, an expected volatility of 57%, and a
life of two years. The cost of this compensation was recognized over the term
of the contract, being one year.
In fiscal 1998, the Company issued 125,000 common shares with a fair value of
$0.90 per share in exchange for consulting services.
7. RELATED PARTY TRANSACTIONS
The Company has had related party transactions with Tri-Con Mining Ltd., Tri-Con
Mining Inc., Tri-Con Mining Alaska Inc. collectively the "Tri-Con Mining Group";
and Anselmo Holdings Ltd., all of which are controlled by a director of the
Company, and Kintana Resources Ltd., a company related by virtue of common
directors.
The Tri-Con Group are operations, exploration and development contractors, and
have been employed by the Company under contract since 1972 to carry out all its
field work and to provide administrative and management services. Under the
current contract of January, 1997, work is charged at cost plus 15% for
operations and cost plus 25 percent for exploration and development. Cost
includes a 15 percent charge for office overhead. Services of the directors of
the Tri-Con Group are charged at a rate of Cdn. $75 per hour. Services of the
directors of the Tri-Con Group who are also Directors of the Company are not
charged. At November 30, 1999, the Company had paid $241,265 (1998 - $363,667)
to the Tri-Con Group for exploration, development and administration services to
be performed during fiscal 2000 on behalf of the Company. The amounts have been
written-off in the respective years as a receivable allowance.
The aggregate amounts paid to the Tri-Con Group each year by category, including
amounts relating to the Grant Mine Project and Nolan properties, for
disbursements and for services rendered by the Tri-Con Group personnel working
on the Company's projects, and including
SILVERADO GOLD MINES LTD. F 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
interest charged on outstanding balance at the Tri-Con Group's borrowing costs
are shown below:
1999 1998 1997
--------- ----------- -----------
Operations and Field Services. . . . . . . . . . . . . . . . . $ 24,562 $ 192,706 $ 277,479
Exploration and Development Services . . . . . . . . . . . . . 214,211 1,160,169 2,190,240
Administrative and Management Services . . . . . . . . . . . . 58,200 321,513 992,646
--------- ----------- -----------
$296,973 $1,674,388 $3,460,365
--------- ----------- -----------
Amount of total charges in excess of Tri-Con
costs incurred. . . . . . . . . . . . . . . . . . . . . . . . $ 54,526 $ 248,858 $ 395,240
--------- ----------- -----------
Excess amount charged as a percentage of actual costs incurred 24.0% 17.5% 12.8%
--------- ----------- -----------
During fiscal 1997, the Company advanced $480,236 to the Tri-Con Group secured
by that portion of the 2,119,834 common shares of the Company owned by Tri-Con.
During fiscal 1998, the Tri-Con Group sold all of the 2,119,934 common shares
held in the Company for net proceeds of $225,448. The Company received $225,448
from the Tri-Con Group as part payment of the $480,236 advance receivable at
November 30, 1997. The remaining unpaid amount was written off as a receivable
allowance.
8. INCOME TAXES
Tax effects of temporary differences that give rise to deferred tax assets at
November 30, 1999 and 1998 are as follows:
1999 1998
------------ ------------
Net operating loss carry forwards . . . . . . . . . . $ 9,849,000 $ 9,844,000
Valuation allowance . . . . . . . . . . . . . . . . . (9,479,000) (9,213,000)
------------ ------------
Net deferred tax assets . . . . . . . . . . . . . . . 370,000 631,000
Deferred tax liability
Temporary differences arising from mineral properties
and building, plant and equipment. . . . . . . . . . (370,000) (631,000)
------------ ------------
Net deferred tax asset. . . . . . . . . . . . . . . . $ - $ -
------------ ------------
SILVERADO GOLD MINES LTD. F 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
At November 30, 1999, the Company has the following losses carried forward
available to reduce future years' income for U.S. income tax purposes. The tax
effect of these losses has not been recorded in the accounts.
Available Until Losses Carried Forward
--------------- ----------------------
2000 $ 1,235,000
2001 2,749,000
2002 1,178,000
2003 1,504,000
2004 1,161,000
2005 742,000
2006 431,000
2007 747,000
2008 2,101,000
2009 2,011,000
2010 2,786,000
2011 1,781,000
2012 1,596,000
2013 1,050,000
2014 658,000
--------------- ----------------------
$ 21,730,000
--------------- ----------------------
Income tax expense attributable to net losses for the year ended November 30,
1999 was $nil (1998 and 1997: $nil). The provision for income taxes differs
from the amount computed by applying the statutory federal income tax rate of
34% (1998 and 1997: 34%) to income before provision for income taxes. The
sources and tax effects of the differences are as follows:
1999 1998 1997
---------- ------------ ------------
Computed "expected" tax benefit. $(493,000) $(5,759,000) $(1,501,000)
Tax loss expired during the year 227,000 186,000 336,000
Change in valuation allowance. . 266,000 5,573,000 1,165,000
---------- ------------ ------------
Income tax provision . . . . . . $ - $ - $ -
---------- ------------ ------------
SILVERADO GOLD MINES LTD. F 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
9. COMMITMENTS AND CONTINGENCIES
(A) OFFICE LEASE
On January 20, 1994, the Company entered into a lease agreement for office
premises for a term of 10 years commencing April 1, 1994, with an approximate
annual rental of $120,000 (Cdn) including operating costs.
(B) SEVERANCE AGREEMENTS WITH DIRECTORS
The Company has entered into compensation agreements with the three directors of
the Company. The agreements provide for severance arrangements where a change
of control of the Company occurs, as defined, and the directors are terminated.
The compensation payable to the directors aggregates $4,200,000 (1998:
$4,200,000) plus the amount of annual bonuses and other benefits that they would
have received in the eighteen months following termination.
(C) RECLAMATION
The Company's operations are affected by Federal, state, provincial and local
laws and regulations regarding environmental protection. The Company estimates
the cost of reclamation based primarily upon environmental and regulatory
requirements. These costs are accrued annually and the accrued liability is
reduced as reclamation expenditures are made. Details of the Company's accrued
liability at November 30, 1999 and 1998 are as follows:
1999 1998
-------- ---------
Balance, beginning of year $196,000 $196,000
Cost incurred in year. . . - (60,575)
Amount expensed in year. . - 60,575
-------- ---------
Balance, end of year . . . $196,000 $196,000
======== =========
(D) LITIGATION
A former employee of the Tri-Con Group has initiated a claim against the Company
for wrongful dismissal/breach of contract in the amount of $150,000. The
Company has been named as a co-defendant in the suit. No provision for this
litigation has been made in these financial statements and the amount of the
loss, if any, would be accounted for prospectively.
SILVERADO GOLD MINES LTD. F 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ---------------------------------------------------
10. SUBSEQUENT EVENTS
(a) On February 18, 2000, 866,667 share purchase warrants were exercised at a
price of $0.05 per share and the Company issued 866,667 common shares from
treasury for proceeds of $43,333.
(b) Subsequent to year end the Company issued an additional 2,000,000 common
share purchase warrants, to a warrant holder from a previous private placement,
at an exercise price of $0.04 per share expiring June 23, 2000.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE
- ------ ----------------------------------------------------------------------
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- --------- --------------------------------------------------------
(A) (B) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS. The executive
officers and directors of the Company are listed below. The directors of the
Company are elected to hold office until the next annual meeting of the
shareholders and until their respective successors have been elected and
qualified. Executive officers of the Company are elected by the Board of
Directors and hold office until their successors are elected and qualified.
The current executive officers and directors of the Company are:
Name Age Position
- ----- --- --------
Garry L. Anselmo(1) 56 Chairman of the Board and Chief Operating
Officer since May 4, 1973; President and
Chief Executive Officer from May 1,
1979 to November 4, 1994, and from
March 1,1997 to present.
James F. Dixon(1)(2) 52 Director since May 6, 1988
Stuart C. McCulloch(1)(2) 64 Director since December 14, 1998
_____________
(1) Members of Silverado's Audit Committee
(2) Members of Silverado's Compensation Committee
(C) SIGNIFICANT EMPLOYEES. Not applicable to reporting registrant.
(D) FAMILY RELATIONSHIPS. There are no family relationships among any of
the Company's officers and/or directors.
(E) BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS.
Mr. Anselmo is presently the Chairman of the Board of Directors, President,
Chief Executive and Chief Financial Officer of The Company. He is also the
Chairman, Chief Executive Officer and Chief Financial Officer of its wholly
owned subsidiary, Silverado Gold Mines Inc. He resumed his duties as President,
Chief Executive Officer, and Chief Financial Officer of the Company on March 1,
1997, after transferring those duties to J.P. Tangen from November 1, 1994,
until March 1, 1997. Prior to the arrival of Mr. Tangen, he held those duties
from May of 1973. Mr. Anselmo founded Tri-Con Mining Ltd., a private mining
service company, in 1968, and is currently a shareholder, Director, and
President of Tri-Con. He is also Chairman and a Director of Tri-Con's United
States operating subsidiaries, Tri-Con Mining Inc. and Tri-Con Mining Alaska,
Inc.
Mr. Dixon is a Director of the Company and its U.S. subsidiary Silverado
Gold Mines Inc. Mr. Dixon holds a Bachelor of Commerce Degree and has been
engaged in the practice of law since 1973. He is a lawyer and a partner in the
law firm of Shandro Dixon Edgson, Barristers and Solicitors, of Vancouver,
British Columbia.
Mr. McCulloch is a Director of the Company and its U.S. subsidiary. Mr.
McCulloch retired as District Manager from Canada Safeway in January, 1991.
(F) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS. During the past five years,
no director or executive officer of the Company has been involved in legal
proceedings of the nature required to be disclosed by this Item.
(G) PROMOTERS AND CONTROL PERSONS. Not applicable to reporting registrant.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT. The Company's
executive officers and directors are required under Section 16 of the U.S.
Securities Exchange Act of 1934 to file reports of ownership and changes in
ownership with the U.S. Securities and Exchange Commission. Copies of those
reports must also be furnished to the Company. Based solely on a review of the
copies of reports furnished to the Company and written representations that no
other reports were required, the Company believes that during the fiscal year
ended November 30, 1999 each of its officers and directors timely complied with
all filing requirements.
ITEM 11. EXECUTIVE COMPENSATION.
- --------- -----------------------
(A) (B) SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation Awards
----------------------------------------------------
Name and Securities Underlying
Principal Position Year $ Salary($) Bonus($) Other($) Options/SAR's(#) All Other($)
- ------------------- ---- - ----------- ---------- -------- --------------------- ------------
Garry L. Anselmo (1) 1999 Cdn $0 $0 $0 2,000,000 $0
Chairman, President, 1998 Cdn $0 $0 $0 $0
CEO & CFO 1997 Cdn $0 $0 $0 $0
(1) Mr. Anselmo is employed and compensated by Tri-Con Mining Ltd., which
provides management and mining exploration and development services to the
Company.
(C) (D) OPTION/SAR GRANTS AND EXERCISES AND YEAR END VALUES. During the
fiscal year ended November 30, 1999, 2,000,000 stock options were granted to or
exercised by the above named executive officer. The following table shows the
value of unexercised options held at fiscal year-end by each named executive
officer.
#Securities Percent of Total
Underlying Options Granted Exercise Grant Date
Unexercised to Employees in (Base) Price Present Value $
Executive Officer Options Fiscal Year ($/share) Expiration Date (1)
- ----------------- ----------- ---------------- ------------- --------------- ---------------
G.L. Anselmo 2,000,000 57% $0.10 December 1, 2004 $104,990
- -------------------------------------------------------------------------------------------
(1) The grant date present value was estimated using the Black-Scholes
Option Pricing Model. The estimated weighted average fair value of the options
granted is prepared assuming a risk-free rate of 6.5%, an expected dividend
yield of 0%, an expected volatility of 105%, and a weighted average expected
life of 5 years.
(E) (F) LONG-TERM INCENTIVE PLANS AND DEFINED BENEFIT PLANS. The Company
does not have any long-term incentive plans, pension plans, or similar
compensatory plans for its Executive Officers.
(G) COMPENSATION OF DIRECTORS. Directors of the Company receive no fees on
an annual or per meeting basis, but the Company has periodically granted to
directors Options to purchase Common Shares.
(H) EMPLOYMENT CONTRACTS AND TERMINATION AND CHANGE IN CONTROL
ARRANGEMENTS.
The Company has entered into compensation agreements with
the three directors of the Company. The agreements provide for severance
arrangements where change of control of the Company occurs, as defined, and the
directors are terminated. The compensation payable to the directors aggregates
$4,200,000 (1998: $4,200,000) plus the amount of annual bonuses and other
benefits that they would have received in the eighteen months following
termination.
(I) REPORT ON REPRICING OF OPTIONS/SAR'S. During the fiscal year ended
November 30, 1999, the Company canceled 107,692 stock options previously awarded
to Garry L. Anselmo. These options had an exercise price of $8.17 and were to
expire December 12, 2004. The Company granted 2,000,000 stock options with an
exercise price of $0.10 expiring December 1, 2004. The exercise price is equal
to the market value of the underlying securities at the date of grant.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- --------- -----------------------------------------------------------------
(A) (B) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information as of February 29, 2000, as to
the beneficial ownership of shares of the Company's only outstanding class of
securities, its Common Stock: by each person or group who, to the knowledge of
the Company at that date, was a beneficial owner of 5% or more of the
outstanding shares of Common Stock; by all directors; by each executive officer
required to be named in the summary compensation table; and by all directors and
executive officers as a group. The table does not include information regarding
shares of Common Stock held in the names of certain depositories/clearing
agencies as nominee for various brokers and individuals.
AMOUNT AND NATURE PERCENT OF
NAME/ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OUTSTANDING SHARES
- ---------------------------------------- ----------------------- ------------------
Garry L. Anselmo (1) . . . . . . . . . . 2,000,175 0.9
James F. Dixon (2) . . . . . . . . . . . 717, 331 0.5
All Directors and Executive Officers as
a group. . . . . . . . . . . . . . . . 0.0
Tri-Con Group
Suite 505, 1111 West Georgia Street,
Vancouver, B.C., V6E 4M3 . . . . . . . . 168 0.0
(1) Comprised of 168 shares owned by Tri-Con Mining Ltd., of which Garry Anselmo
owns 75%; 2,000,000 in exercisable stock options, and 7 shares held directly by Mr.
Anselmo.
(2) Includes directors options of 700,000 shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
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The Company has had related party transactions with Tri-Con Mining Ltd., Tri-Con
Mining Inc., Tri-Con Mining Alaska Inc., collectively the "Tri-Con Mining Group"
and Anselmo Holdings Ltd., all of which are controlled by a director of the
Company, and Kintana Resources Ltd., a company related by virtue of common
directors.
The Tri-Con Mining Group are operations, exploration and development
contractors, and have been employed by the Company under contract since 1972 to
carry out all its field work and to provide administrative and management
services. Under the current contract of January, 1997, work is charged at cost
plus 15% for operations and cost plus 25% for exploration and development.
Costs includes a 15% charge for office overhead. Services of the directors of
the Tri-Con Group are charged at a rate of Cdn. $75 per hour. Services of the
directors of the Tri-Con Group who are also Directors of the Company are not
charged. At November 30, 1999, the Company had paid $241,265 (1998: $363,667)
to the Tri-Con Group for exploration, development and administration services to
be performed during fiscal 2000 on behalf of the Company. The amounts have been
written-off in the respective years as a receivable allowance.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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(a) FINANCIAL STATEMENTS
(1) The following financial statements are included in part II, Item 8 to
this report:
Auditors' Report
Comments by Auditors for U.S. Readers on Canada - U.S. Reporting Conflict
Consolidated Balance Sheets at November 30, 1999 and 1998
Consolidated Statements of Operations and Accumulated Deficit, years ended
November 30, 1999, 1998 and 1997
Consolidated Statements of Cash Flow, years ended November 30, 1999, 1998, and
1997
Consolidated Statements of Changes in Share Capital, years ended November 30,
1999, 1998 and 1997
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
No schedules are presented either because the required information is
disclosed elsewhere in the financial statements, or the schedules are not
applicable.
(3) Exhibits required to be filed are listed in Item 14 (c )
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of the fiscal
year ending November 30, 1999.
(c ) EXHIBITS
None.
POWER OF ATTORNEY
-----------------
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature appears below
hereby constitutes and appoints G.L. Anselmo his true and lawful
attorney-in-fact and agent, with full power of substitution and restitution, for
him and in his name, place and stead, in any and all capacities, to sign any and
all amendments to this annual report on Form 10-K, and to file the same with all
exhibits thereto and any other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities on the dates indicated.
/s/ James F. Dixon March 8, 2000
- --------------------- ---------------
James F. Dixon Date
Director
/s/ Stuart C. McCulloch March 8, 2000
- -------------------------- ---------------
Stuart C. McCulloch Date
Director
Pursuant to the requirements of Section 1 of 15(d) the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
SILVERADO GOLD MINES LTD.
BY: /s/ G.L. Anselmo Date: March 9, 2000
------------------
G.L. Anselmo, President, Chairman,
C.E.O.