-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q58XNGt7ov8R6A06rxazSH0MEFWOGMt+K7vnv1LEx8Vw1LJCPkywz+VSm4Aud7BH ohRKNbfdqmo89TrUWBRN7Q== 0000041304-98-000039.txt : 19980819 0000041304-98-000039.hdr.sgml : 19980819 ACCESSION NUMBER: 0000041304-98-000039 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980814 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980818 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROYAL OAK MINES INC CENTRAL INDEX KEY: 0000041304 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 980160821 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-04350 FILM NUMBER: 98693470 BUSINESS ADDRESS: STREET 1: 5501 LAKEVIEW DR CITY: KIRKLAND STATE: WA ZIP: 98033 BUSINESS PHONE: 4258228992 MAIL ADDRESS: STREET 1: 5501 LAKEVIEW DR CITY: KIRKLAND STATE: WA ZIP: 98033 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 August 14, 1998 ROYAL OAK MINES INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Commission File Number 1-4350 ONTARIO, CANADA 98-0160821 - ------------------------------- ------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) c/o Royal Oak Mines (USA) Inc. 5501 Lakeview Drive Kirkland, Washington U.S.A. 98033 - ---------------------------------------- ----------------- (Address of principal executive offices) (Postal/Zip Code) (425) 822-8992 - ---------------------------------------- Registrant's telephone number, including area code Item 5. Other Events On August 14, 1998, the Registrant issued the press release set forth as Exhibit 99.1 hereto, which press release is hereby incorporated herein by reference. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (C) Exhibits 99.1 Royal Oak Mines Inc. press release, dated August 14, 1998. SIGNATURE Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ROYAL OAK MINES INC. Date: August 14, 1998 By: /s/ James H. Wood ----------------------- James H. Wood Chief Financial Officer EX-99 2 Exhibit 99.1 Royal Oak Mines Inc. press release, dated August 14, 1998. FOR IMMEDIATE RELEASE FROM KIRKLAND August 14, 1998 Royal Oak Announces Second Quarter Results Royal Oak Mines Inc. (TSE and AMEX: RYO) announced today the unaudited financial results for the three-month and six-month periods ended June 30, 1998. All figures are in thousands of Canadian dollars unless otherwise stated. Second Quarter Highlights Financial Position June 30, 1998 December 31, 1997 June 30, 1997 ------------- ----------------- ------------- Cash 16,423 568 72,254 Total assets 903,876 843,386 763,876 Net debt (1) 433,761 274,135 173,576 Shareholders' 301,971 316,378 391,340 equity
(1) Net debt = Notes payable + current and non-current capital leases - cash * On May 19, 1998 commenced production at Kemess gold-copper mine * Cash flow before net change in other operating items of $2.5 million (2 cents per share) in Q2/98 compared with $2.1 million (2 cents per share) in Q2/97. * Operating loss of $17.1 million in Q2/98 mainly due to provision for loss on foreign currency and commodity contracts of $11.4 million and depreciation of $6.7 million compared with operating loss of $11.9 million in Q2/97. * Net loss of $35.0 million (25 cents per share) after write-off of financing costs in Q2/98 compared with net loss of $52.1 million (38 cents per share) in Q2/97. * Gold production of 45,732 ounces from continuing operations at Giant and Pamour/Nighthawk mines in Q2/98 compared with 49,288 ounces in Q2/97, a decrease of 7%. Total gold production from all operations in Q2/97 (including Hope Brook and Colomac mines closed in late 1997) was 104,845 ounces. Royal Oak Mines, page 2 of 8 * Average cash cost from continuing operations of US$257 per ounce in Q2/98, down 19% from US$316 per ounce in Q2/97. Average cash cost from all operations in Q2/97 was US$351 per ounce. * Average realized gold price of US$342 per ounce in Q2/98, a premium of US$42 per ounce, or 14% above average spot price of US$300 per ounce. * Completed debt financing of US$120 million of senior secured debentures. * Repaid US$46.3 million of principal and accrued interest of senior secured debentures issued in January 1998. Operating Results Three months ended Six months ended June 30 June 30 ------------------ ---------------- 1998 1997 1998 1997 -------- ------- ------ ------- Gold production (ounces) 45,732 104,845 91,289 189,925 Revenue 22,621 58,872 45,050 106,846 Cash flow before net change in other operating items 2,481 2,105 3,411 1,617 Cash flow before net change in other operating items per share (C$) 0.02 0.02 0.02 0.01 Net loss (35,002) (52,089) (32,742) (60,202) Net loss per share (C$) (0.25) (0.38) (0.24) (0.43) Cash cost of production (US$/oz) 257 351 268 358 Average spot gold price (US$/oz) 300 343 297 347 Average realized gold price (US$/oz) 342 406 343 405 Weighted average common shares outstanding (millions) 138.940 138.884 138.940 138.864 Period-end common shares outstanding (millions) 148.940 138.910 148.940 138.910
Operating results in the three months and six months ended June 30, 1998, compared with the same two periods in 1997, were impacted by the closure of the Hope Brook and Colomac mines in September and December of 1997, respectively. Both mines were placed on care and maintenance. In the second quarter of 1998, gold production from continuing operations at the Giant and Pamour/Nighthawk mines was 45,732 ounces, a decrease of 7% from the 49,288 ounces produced at these mines in the same period of 1997. Total gold production in the second quarter of 1997 (including production from the Hope Brook and Colomac mines) was 104,845 ounces. In the six months ended June 30, 1998 gold production from continuing operations was 91,289 ounces, a decrease of 6% from the 97,287 ounces produced in the same period of 1997. Total gold production in the first half of 1997 was 189,925 ounces. Revenue in the second quarter of 1998 was $22.6 million compared with $58.9 million in the same period of 1997. The decrease in revenue in the second quarter this year reflected a decrease in gold production of 59,113 ounces, mainly due to the closure of the Hope Brook and Colomac mines, and a decrease of 16% in the average realized gold price from US$406 per ounce in the Royal Oak Mines, page 3 of 8 second quarter of 1997 to US$342 per ounce in the same period this year. Revenue in the second quarter of 1998 included hedging gains of $2.7 million compared with $10.0 million in the same period last year. Revenue in the first half of 1998 was $45.1 million compared with $106.8 million in the same period of 1997. The decrease in revenue in the first half of this year was attributed to a decrease in gold production of 98,636 ounces, and a decrease of 15% in the average realized gold price from US$405 per ounce in the second half of 1997 to US$343 per ounce in the same period this year. Revenue in the second half of 1998 included hedging gains of $5.9 million compared with $18.5 million in the same period last year. In the second quarter of 1998, the Company reported an operating loss of $17.1 million primarily due to a provision for loss on foreign currency and commodity contracts of $11.4 million and depreciation of $6.7 million. In the second quarter of 1997 there was an operating loss of $11.9 million. The Company reported an operating loss of $13.9 million in the first half of 1998 compared with $21.1 million in the same period of 1997. The Company recorded a provision for loss on foreign currency and commodity contracts of $3.5 million and $10.3 million in the two periods, respectively, and depreciation of $10.7 million and $11.5 million in each period. After a write-off of financing costs of $15.0 million, the Company reported a net loss of $35.0 million, or 25 cents a share, in the second quarter of 1998. This compared with a net loss of $52.1 million, or 38 cents a share, in the same period of 1997. There was a net loss of $32.7 million, or 24 cents a share, in the first half of 1998 compared with a net loss of $60.2 million, or 43 cents a share, in the same period a year ago. In the second quarter of 1998, the average cash cost of production for continuing operations at the Giant and Pamour/Nighthawk mines was US$257 per ounce, a decrease of 19% from the US$316 per ounce for these mines reported in the same period of 1997. The significant reduction in cash cost was attributable to sustained cost-cutting measures implemented in the fourth quarter of 1997 and a 4% decrease in the value of the Canadian dollar against the U.S. dollar. In the second quarter of last year, the Company reported an average cash cost for all operations of US$351 per ounce, which reflected the impact of the high cost Hope Brook and Colomac mines that were subsequently closed toward the end of the year. In the six-month period this year, the average cash cost of production for continuing operations was US$268 per ounce, a decrease of 17% from US$322 per ounce in the same period of 1997. In the period ended June 30, 1997, the consolidated cash cost for all operations was US$358 per ounce. Cash flow before net change in other operating items in the second quarter this year was $2.5 million, or 2 cents a share, compared with $2.1 million, or 2 cents a share, in the same period of 1997. In the second quarter of this year, net cash used in operating activities was $43.5 million, or 31 cents a share, compared with $5.6 million, or 4 cents a share, in the year-ago period. In the six-month period ended June 30, 1998 cash flow before net change in other operating items was $3.4 million, or 2 cents a share, compared with $1.6 million, or 1 cent a share, in the first half of 1997. Net cash used in operating activities was $78.8 million, or 57 cents a share, in Royal Oak Mines, page 4 of 8 the first half of 1998 compared with $71.9 million, or 52 cents a share, in the period ended June 30, 1997. Successful Start-up at Kemess Mine Royal Oak's new Kemess gold-copper mine commenced production on May 19, 1998. Commissioning and operations are proceeding as planned. During the pre-production stripping phase of the project, which commenced in July of 1997, over nine million tons of overburden and waste were removed from the open pit. From the commencement of operations in mid-May to August 11, 1998, approximately 2.7 million tons of hypogene ore at a grade of 0.22% copper and 0.016 ounces of gold per ton has been mined. The availability of the fleet of mobile equipment in the open pit has exceeded 90%. The average strip ratio for the project is estimated to be approximately 1.18 to 1 over the estimated 16- year life of the mine. The concentrator has processed approximately 2.2 million tons of ore at a head grade of 0.211% copper and 0.016 ounces of gold per ton during this period. Design throughput was reached after approximately two months of operation. A sustainable milling rate of between 50,000 and 60,000 tons per day has been achieved for many consecutive days. Approximately 9,261 tons of concentrate containing between 25% and 26% copper and between 1.3 and 1.7 ounces of gold per ton have been produced. The concentrate is transported to the Far East for smelting and refining to recover metal values. Throughput has been curtailed somewhat during the month of August as the Company is making design and operating modifications to the flotation circuit in the concentrator to optimize gold and copper recoveries. The Company estimates that 1998 projected recoveries of 78% copper and 71% gold should be achieved by the end of September 1998. The average life-of-mine recoveries are estimated to be 82% copper and 78% gold. The Kemess Mine is in substantial compliance with environmental regulations. The impoundment of tailings from the concentrator is operating successfully as a zero discharge system. Measures adopted to control sediment in streams have been successfully implemented, and the re-vegetation of areas disturbed during construction is proceeding well. The Company estimates that commercial production will be achieved on or about September 30, 1998. As of June 30, 1998 all proceeds from the sale of concentrates during the commissioning period have been credited against Kemess capital costs. Outlook Margaret K. Witte, president and chief executive officer of Royal Oak, commenting on the outlook for the Company, said, "We are very pleased with the start-up of operations at our new Kemess Mine. Our main focus at present is to increase the gold and copper recoveries in the concentrator. We have already exceeded the design throughput of the mill on a consistent basis. We are gaining a better understanding of the mineralogy of the ore and of the metallurgy of the flotation circuit and have made some design and operating modifications that have resulted in improvement in recoveries. We anticipate achieving design recoveries on the hypogene ore by Royal Oak Mines, page 5 of 8 the time we start processing supergene ore near the end of August. We expect commercial production to begin around the end of September, at which time production is expected to reach full capacity on an annualized basis. At our Giant and Timmins operations, we are encouraged that production costs continue to decrease as a result of cost cutting measures we implemented toward the end of last year. Cash costs at these operations continue to remain below the spot gold price. We are concerned about the continuing weakness in gold and copper prices and their impact on cash flow from operations. If spot gold and copper prices continue at current levels, the Company will examine the carrying value of its assets to determine the recoverability of its investments. The Company is working with its financial advisors in seeking a long-term refinancing alternative to ensure that it will be able to meet principal payments on debt as they fall due and other financial obligations beyond the end of this year." For further information contact: or in Europe contact: Mr. J. Graham Eacott Mr. David Williamson Vice President, Investor Relations David Williamson Associates Limited Royal Oak Mines International Investor Relations 5501 Lakeview Drive 15 St. Helen's Place, 3rd Floor Kirkland, WA 98033-7314 London, England EC2M 1QP Telephone: (425) 822-8992 Telephone: 011-44-171-628-3989 Facsimile: (425) 822-3552 Facsimile: 011-44-171-920-0563 Internet site: http://www.royal-oak-mines.com Royal Oak Mines, page 6 of 8 Royal Oak Mines Inc. Consolidated Balance Sheets (unaudited _ Cdn$ 000's) June 30 December 31 1998 1997 (audited) ========= ========== ASSETS Current Assets Cash and cash equivalents $ 16,423 $ 568 Marketable securities 560 9,875 Receivables 8,891 30,923 Inventories 15,447 21,120 Prepaid expenses 4,933 3,967 --------- ---------- Total Current Assets 46,254 66,453 Property, Plant and Equipment, net 787,740 730,314 Long-Term Investments 12,424 12,145 Reclamation and Other Deposits 14,346 14,332 Deferred Charges and Other Assets 43,112 20,142 --------- ---------- TOTAL ASSETS $ 903,876 $ 843,386 ========= ========== LIABILITIES Current Liabilities Accounts payable $ 31,277 $ 123,586 Accrued payroll costs 3,087 2,599 Deferred revenue 12,865 20,085 Obligation under commodity contracts 19,203 -- Capital leases 5,588 4,531 Taxes payable 1,207 1,723 Long-term debt interest payable 11,437 10,326 Accrued unrealized loss on derivatives 2,454 21,327 Other current liabilities 7,682 9,135 --------- ---------- Total Current Liabilities 94,800 193,312 Deferred Revenue 14,515 23,330 Other Liabilities 63,272 57,427 Long-Term Debt 426,764 250,338 Deferred Income Taxes 2,532 2,532 Minority Interest in Subsidiary Companies 22 69 --------- ---------- TOTAL LIABILITIES 601,905 527,008 --------- ---------- SHAREHOLDERS' EQUITY Share Capital Authorized - unlimited Outstanding - 148,940,263 (Dec. 31, 1997 - 138,840,263) 397,375 379,040 Deficit (95,404) (62,662) --------- --------- TOTAL SHAREHOLDERS' EQUITY 301,971 316,378 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 903,876 $ 843,386 ========= =========
Royal Oak Mines, page 7 of 8 Royal Oak Mines Inc. Consolidated Statements of Income (Loss) (unaudited - Cdn$ 000's except per share amounts) Three months ended Six months ended June 30 June 30 ------------------- ------------------ 1998 1997 1998 1997 ======== ======== ======== ======== REVENUE $ 22,621 $ 58,872 $ 45,050 $106,846 -------- -------- -------- -------- EXPENSES Operating 17,016 50,930 35,247 93,908 Care and maintenance 974 76 2,311 150 Royalties and marketing 312 447 603 871 Administrative and corporate 2,214 3,544 4,460 6,196 Depreciation and amortization 6,711 5,925 10,715 11,478 Reclamation 584 1,246 1,168 2,376 Exploration and other 472 1,319 919 2,666 Provision for loss on foreign currency and commodity contracts 11,390 7,250 3,496 10,258 -------- -------- -------- -------- Total operating expenses 39,673 70,737 58,919 127,903 -------- -------- -------- -------- OPERATING LOSS (17,052) (11,865) (13,869) (21,057) OTHER INCOME (EXPENSE) Interest and other income (expense), net (847) 314 (855) 2,027 Interest expense (346) (69) (643) (187) Long-term debt interest (10,400) (6,503) (18,608) (12,847) Interest capitalized 9,977 5,544 18,185 9,964 Foreign currency translation loss on long-term debt (964) 490 (1,256) (2,048) Write-off of financing costs (15,011) -- (15,011) -- Write-down of mine assets -- (39,700) -- (39,700) -------- -------- -------- -------- LOSS BEFORE UNDERNOTED (34,643) (51,789) (32,057) (63,848) Income and mining taxes - current (421) (313) (841) (639) Income and mining taxes - deferred -- -- -- 4,221 Minority interest 16 (5) 47 31 Equity in income of associated companies 46 18 109 33 -------- -------- -------- -------- NET LOSS (35,002) (52,089) (32,742) (60,202) RETAINED EARNINGS (DEFICIT)- BEGINNING OF PERIOD (60,402) 64,440 (62,662) 72,553 -------- -------- -------- -------- RETAINED EARNINGS (DEFICIT) - END OF PERIOD $(95,404) $ 12,351 $(95,404) $ 12,351 ======== ======== ======== ======== LOSS PER SHARE $ (0.25) $ (0.38) $ (0.24) $ (0.43) ======== ======== ======== ======== Weighted average number of common shares outstanding (000's) 138,940 138,884 138,940 138,864 ======== ======== ======== ========
Royal Oak Mines, page 8 of 8 Royal Oak Mines Inc. Consolidated Statements of Cash Flow (unaudited - Cdn$ 000's) Three months Six months ended June 30 ended June 30 ------------------ ------------------ 1998 1997 1998 1997 -------- -------- -------- -------- CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Net loss for the period $(35,002) $(52,089) $(32,742) $(60,202) Items not affecting cash: Depreciation and amortization 6,711 5,925 10,715 11,478 Amortization of deferred finance costs 684 233 1,109 472 Reclamation 584 1,246 1,168 2,376 Deferred income tax -- -- -- (4,221) Provision for unrealized loss on foreign currency and commodity contracts 13,575 7,357 7,036 9,875 Foreign currency translation on senior subordinated notes 964 (490) 1,256 2,048 Write-down of mine assets -- 39,700 -- 39,700 Write-off of deferred finance costs 15,011 -- 15,011 -- Deferred charges and other (46) 223 (142) 91 -------- -------- -------- -------- Cash flow 2,481 2,105 3,411 1,617 Net change in other operating items (45,965) (7,713) (82,162) (73,476) -------- -------- -------- -------- Net cash used in operating activities (43,484) (5,608) (78,751) (71,859) -------- -------- -------- -------- CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES Issue of share capital 18,335 65 18,335 177 Capital lease obligation (473) (249) (947) (527) Issue of long-term debt 169,050 -- 233,109 -- Retirement of long-term debt (64,232) -- (64,232) -- Issue costs of long-term debt (25,775) -- (31,341) -- Deferred credits and other -- (18) -- (18) -------- -------- -------- -------- Net cash provided by (used in) financing activities 96,905 (202) 154,924 (368) -------- -------- -------- -------- CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES Increase in long-term investments -- (17,846) -- (17,846) Proceeds from asset sales 8,606 -- 12,873 -- Investment in other capital assets, net (43,700) (63,248) (80,146) (109,523) B. C. Government assistance -- 47,822 -- 78,787 Investment in exploration and non- producing properties, net (540) (2,377) (814) (4,068) Change in other assets (1,427) (48) (1,546) (635) -------- -------- -------- -------- Net cash used in investing activities (37,061) (35,697) (69,633) (53,285) -------- -------- -------- -------- INCREASE (DECREASE) IN CASH AND MARKETABLE SECURITIES DURING THE PERIOD 16,360 (41,507) 6,540 (125,512) CASH AND MARKETABLE SECURITIES AT BEGINNING OF PERIOD 623 114,351 10,443 198,356 -------- -------- -------- -------- CASH AND MARKETABLE SECURITIES AT END OF PERIOD $ 16,983 $ 72,844 $ 16,983 $ 72,844 ======== ======== ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 2,716 $ 69 $ 16,726 $ 13,386 Income taxes $ -- $ 25 $ -- $ 65
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