-----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, BWWtkO+BBYH8wmc3ysuHsBdeijiFEKJU7Bicgnx7lqMCPythVS8wGl9IXkatxne2 E3cP3PbQunwSDm/d6Gi5/A== 0000912057-96-026186.txt : 19961118 0000912057-96-026186.hdr.sgml : 19961118 ACCESSION NUMBER: 0000912057-96-026186 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WHARF RESOURCES LTD CENTRAL INDEX KEY: 0000721924 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 810348170 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13374 FILM NUMBER: 96662789 BUSINESS ADDRESS: STREET 1: STE 2700 145 KING STREET W CITY: TORONTO ONT M5H1J8 STATE: A6 ZIP: 00000 BUSINESS PHONE: 4163610402 MAIL ADDRESS: STREET 1: 145 KING STREET SUITE 2700 STREET 2: TORONTO ONTARIO M5H 1J8 CITY: TORONTO ONTARIO STATE: A6 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended September 30, 1996. or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to . -------------------- ---------------------- Commission File Number: 0-13374 WHARF RESOURCES LTD. (Exact name of Registrant as specified in its charter) CANADA 81-0348170 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) SUITE 2700, 145 KING STREET WEST TORONTO, ONTARIO, CANADA M5H 1J8 (Address of principal executive offices) (416) 865-0326 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] There were 19,229,504 Common Shares outstanding at October 25, 1996. 1 WHARF RESOURCES LTD. FORM 10-Q SEPTEMBER 30, 1996 INDEX Page No. - -------- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets (Unaudited) - September 30, 1996 and December 31, 1995 3 Consolidated Statements of Earnings (Unaudited) - Three and nine months ended September 30, 1996 and 1995 4 Consolidated Statements of Cash Flows (Unaudited) - Three and nine months ended September 30, 1996 and 1995 5 Notes to Consolidated Financial Statements (Unaudited) 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Takeover Bid 8 Financial Results 8 Liquidity and Capital Resources 9 Operations 9 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12 SIGNATURES 13 2 PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS WHARF RESOURCES LTD. CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS OF UNITED STATES DOLLARS) As at As at September 30, December 31, 1996 1995 ------------- ------------ ASSETS CURRENT ASSETS Cash and short-term investments $ 27,636 $ 22,988 Gold bullion inventory 716 604 Inventories 4,184 8,541 Prepaid expenses and other 1,747 1,400 ------------- ------------ 34,283 33,533 DEPOSITS FOR RECLAMATION COSTS 3,369 2,412 MINING INTERESTS, NET 31,270 33,914 ------------- ------------ $ 68,922 $ 69,859 ------------- ------------ ------------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 6,291 $ 5,551 Current portion of long-term debt 3,574 3,568 Exchangeable preferred shares 115 115 ------------- ------------ 9,980 9,234 ------------- ------------ LONG-TERM DEBT 151 2,080 ------------- ------------ PROVISION FOR RECLAMATION COSTS AND OTHER LIABILITIES 4,084 1,769 ------------- ------------ EXCHANGEABLE PREFERRED SHARES 2,406 2,509 ------------- ------------ SHAREHOLDERS' EQUITY Capital stock 37,302 37,302 Retained earnings 14,999 16,965 ------------- ------------ 52,301 54,267 ------------- ------------ $ 68,922 $ 69,859 ------------- ------------ ------------- ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 3 WHARF RESOURCES LTD. CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)
Three months ended Nine months ended September 30, September 30, 1996 1995 1996 1995 --------- --------- --------- --------- Bullion revenue $ 12,171 $ 14,030 $ 34,821 $ 36,427 --------- --------- --------- --------- Expenses Operating Production costs 7,535 8,264 24,318 22,877 Severance taxes 635 468 1,260 942 Royalties 412 409 1,049 1,003 Corporate administration 423 336 1,202 1,049 Depreciation and depletion 1,221 2,162 5,149 5,670 Exploration 49 90 142 277 Writedown of Golden Reward Mine 3,226 --------- --------- --------- --------- 10,275 11,729 36,346 31,818 --------- --------- --------- --------- Earnings (loss) from operations 1,896 2,301 (1,525) 4,609 --------- --------- --------- --------- Other income (expense) Interest and other income, net 398 322 1,174 1,043 Interest expense Long-term debt (74) (162) (311) (557) Dividends on and discount on redemption of exchangeable preferred shares (26) (44) (92) (122) Other (3) (3) (10) (10) --------- --------- --------- --------- 295 113 761 354 --------- --------- --------- --------- Earnings (loss) before income taxes 2,191 2,414 (764) 4,963 Income taxes 280 565 240 1,194 --------- --------- --------- --------- Earnings (loss) for the period $ 1,911 $ 1,849 $ (1,004) $ 3,769 --------- --------- --------- --------- --------- --------- --------- --------- Earnings (loss) per common share $ 0.10 $ 0.09 $ (0.05) $ 0.19 --------- --------- --------- --------- --------- --------- --------- --------- Weighted average number of common shares outstanding (000's) 19,230 19,230 19,230 19,229 --------- --------- --------- --------- --------- --------- --------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 4 WHARF RESOURCES LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS OF UNITED STATES DOLLARS)
Three months ended Nine months ended September 30, September 30, 1996 1995 1996 1995 --------- --------- --------- --------- Cash provided by (used in) Operating activities Earnings (loss) for the period $ 1,911 $ 1,849 $ (1,004) $ 3,769 Items not affecting cash Depreciation and depletion 1,221 2,162 5,149 5,670 Writedown of Golden Reward Mine 3,226 Other (133) 948 298 1,643 --------- --------- --------- --------- 2,999 4,959 7,669 11,082 Change in non-cash operating working capital 3,728 (303) 3,860 (960) --------- --------- --------- --------- Net cash provided by operating activities 6,727 4,656 11,529 10,122 --------- --------- --------- --------- Investing activities Mining interests (1,262) (1,117) (2,952) (5,435) Notes receivable (19) 667 Increase in deposits for reclamation costs (321) (957) (128) --------- --------- --------- --------- Net cash used in investing activities (1,583) (1,136) (3,909) (4,896) --------- --------- --------- --------- Financing activities Repayment of long-term debt (156) (163) (1,923) (1,916) Redemption of exchangeable preferred shares (31) (12) (87) (63) Dividends paid to common shareholders (962) (961) --------- --------- --------- --------- Net cash used in financing activities (187) (175) (2,972) (2,940) --------- --------- --------- --------- Increase in cash and short-term investments 4,957 3,345 4,648 2,286 Cash and short-term investments at beginning of period 22,679 18,772 22,988 19,831 --------- --------- --------- --------- Cash and short-term investments at end of period $ 27,636 $ 22,117 $ 27,636 $ 22,117 --------- --------- --------- --------- --------- --------- --------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 5 WHARF RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (TABULAR AMOUNTS IN THOUSANDS OF UNITED STATES DOLLARS) 1. GENERAL The accompanying unaudited consolidated financial statements should be read in conjunction with the notes to the Company's audited consolidated financial statements for the year ended December 31, 1995. The unaudited consolidated financial statements include the financial statements of the Company and its subsidiaries. The Company accounts for its 60% undivided interest in the Golden Reward Mining Company Limited Partnership using the proportionate consolidation method of accounting. These unaudited interim consolidated financial statements reflect all normal and recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the respective interim periods presented. 2. CHANGE IN ACCOUNTING POLICY Effective January 1, 1996, the Company adopted the new provisions of CICA Handbook section 3860, "Financial instruments - disclosure and presentation". The provisions have been applied retroactively and prior periods have been restated to reflect this change. Accordingly, any dividends on, and discount on redemption of, the exchangeable preferred shares, previously recorded as a charge to retained earnings, have been recorded in earnings. The adoption of the new provisions has no impact on retained earnings but reduced earnings for the nine months ended September 30, 1995 by $122,000 (as restated). The new provisions of the section require disclosure regarding the fair value of financial instruments. At September 30, 1996, the exchangeable preferred shares have a fair value, based on quoted market prices, of $1,925,000, compared to a carrying value of $2,521,000. The carrying amounts of all other financial instruments approximate fair values. 6 3. ACCOUNTING PRINCIPLES The Company follows Canadian accounting principles which are different in some respects from those applicable in the United States and from practices prescribed by the United States Securities and Exchange Commission. These differences have no material effect on the unaudited consolidated financial statements for the nine months ended September 30, 1996 and 1995, except for the effect on reported earnings (loss) resulting from the adoption of the new Canadian accounting principles for financial instruments (see note 2). Accordingly, under United States accounting principles, earnings (loss), and earnings (loss) per common share would be as follows:
Three months ended Nine months ended September 30, September 30, 1996 1995 1996 1995 -------- -------- -------- -------- Earnings (loss) $ 1,937 $ 1,893 $ (912) $ 3,891 -------- -------- -------- -------- -------- -------- -------- -------- Earnings (loss) per common share $ 0.10 $ 0.09 $ (0.05) $ 0.19 -------- -------- -------- -------- -------- -------- -------- --------
7 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TAKEOVER BID On October 16, 1996, Goldcorp Inc. announced that it proposes to make a takeover bid for all the outstanding common shares of Wharf that it does not already own. Goldcorp currently owns approximately 50.3% of the outstanding common shares of Wharf. Under the proposed terms of the takeover bid holders of Wharf common shares will be entitled to receive, at the option of such holders, either $9.00 cash or 0.72 of a Goldcorp Class A Subordinate Voting Share for each Wharf common share. The Board of Directors of Wharf received the proposal and has formed a Special Committee to consider the proposal. Wharf also announced that, in the event the conditions to be contained in the Goldcorp takeover bid are satisfied, the outstanding exchangeable preferred shares of Wharf will be redeemed at a price of C$25.25 per share. FINANCIAL RESULTS Wharf recorded earnings for the third quarter of 1996 of $1.9 million, or 10 cents per share, on revenues of $12.2 million. For the same period last year, Wharf recorded earnings of $1.8 million, or nine cents per share, on revenues of $14 million. For the nine months ended September 30, 1996, Wharf recorded a loss of $1 million, or five cents per share, on revenues of $34.8 million. For the same period last year, Wharf recorded earnings of $3.8 million, or 19 cents per share, on revenues of $36.4 million. The improvement in the third quarter results is due mainly to improved operating results from the Wharf Mine. The financial results during the nine months ended September 30, 1996 reflect the writedown of a further $3.2 million in respect of the Company's 60% interest in the Golden Reward Mine. Excluding the writedown, earnings were $2.2 million, or 12 cents per share, for the nine months ended September 30, 1996. Cash flow from operations for the third quarter of 1996 was $6.7 million, or 35 cents per share, compared to $4.7 million, or 25 cents per share, a year ago. For the nine months ended September 30, 1996, cash flow from operations was $11.5 million, or 60 cents per share, compared to $10.1 million, or 53 cents per share, a year ago. The Company's total gold production, during the third quarter of 1996, from its 100%-owned Wharf Mine and its 60% share in the Golden Reward Mine was 37,500 ounces, compared to 35,599 ounces a year ago. For the nine months ended September 30, 1996, total gold production was 93,523 ounces compared to 91,848 ounces a year ago. 8 The average cash production cost per ounce of gold sold, during the third quarter and the nine months ended September 30, 1996, was $228 and $267, respectively. For the same periods last year, the average cash production cost per ounce was $206 and $228, respectively. Total average operating cost per ounce of gold sold, including royalties, severance taxes and non-cash costs, during the third quarter and the nine months ended September 30, 1996 was $289 and $346, respectively. For the same periods last year, the total average operating cost per ounce was $310 and $321, respectively. Higher operating costs at the Golden Reward Mine, as a result of its early shutdown, contributed to the increase in the cash production cost per ounce for the third quarter of 1996. The grade and tonnage shortages at the Golden Reward Mine, and a poor recovery of gold from one of the leach pads at the Wharf Mine in the second quarter, contributed to the increase in the cash production cost per ounce for the nine months ended September 30, 1996. Gold sales for the third quarter of 1996 were 35,207 ounces, at an average realized price of $385 per ounce, compared to 36,343 ounces at $385 per ounce a year ago. For the nine months ended September 30, 1996, gold sales were 92,570 ounces at an average realized price of $390 per ounce, compared to 94,535 ounces at $384 per ounce a year ago. LIQUIDITY AND CAPITAL RESOURCES Cash and short-term investments at September 30, 1996 were $27.6 million, compared to $23 million at December 31, 1995. Working capital at September 30, 1996 was $24.3 million, the same level as December 31, 1995. The debt-to-equity ratio, including current portion of long-term debt was reduced by 20% to 0.12:1, from 0.15:1 at December 31, 1995. OPERATIONS WHARF MINE GOLD PRODUCTION AND COST DATA Gold production for the third quarter and the nine months ended September 30, 1996 was 35,633 ounces and 80,987 ounces, respectively. For each of the corresponding periods last year, gold production was 26,549 ounces and 69,999 ounces, respectively. Cash production cost per ounce for the third quarter and the nine months ended September 30, 1996 was $211 and $245, respectively, compared to $226 and $237, respectively, a year ago. The total operating cost per ounce for the third quarter and the nine months ended September 30, 1996 was $275 and $316, respectively. By comparison, in the same period in 1995, the total operating cost per ounce was $321 and $320, respectively. The gold production target for 1996 has been increased to 105,000 ounces, from 94,000 ounces at a cash production cost of $246 per ounce and a total operating cost of $316 per ounce. 9 The decrease in the cash production cost during the third quarter was mainly as a result of higher gold production. The increase in the cash production cost during the nine months ended September 30, 1996, was mainly due to the 4,400 ounces unanticipated shortfall in gold production in the second quarter, resulting from the refractory nature of the ore on one of the leach pads. Production costs for the period include $1.3 million relating to the loss of those ounces. OPERATING RESULTS In the third quarter of 1996, the Wharf Mine recorded an operating profit of $3.5 million, compared to $1.7 million a year ago. For the nine months ended September 30, 1996, the Wharf Mine recorded an operating profit of $5.7 million, which is 32% higher than the $4.3 million recorded a year ago. Operating cash flow for the third quarter and the nine months ended September 30, 1996 was $4.6 million and $9.3 million, respectively, compared to $3.5 million and $8.8 million, respectively, a year ago. WHARF MINE PRODUCTION STATISTICS
Three months ended Nine months ended September 30, September 30, 1996 1995 1996 1995 -------- -------- -------- -------- Tons of ore mined (000's) 1,032 1,339 3,058 3,413 Tons of waste removed (000's) 2,057 1,121 5,718 3,388 Ratio of waste to ore 1.99:1 0.84:1 1.87:1 0.99:1 Tons of ore processed (000's) 1,328 1,304 3,390 3,300 Average grade of gold per ton of ore processed 0.029 0.031 0.028 0.029 Ounces of gold produced 35,633 26,549 80,987 69,999 Operating cost per ounce of gold sold Cash production cost $ 211 $ 226 $ 245 $ 237 Royalties and severance taxes 31 28 27 23 Non-cash costs 33 67 44 60 -------- -------- -------- -------- Total operating cost $ 275 $ 321 $ 316 $ 320 -------- -------- -------- -------- -------- -------- -------- --------
GOLDEN REWARD MINE (WHARF'S 60% PROPORTIONATE SHARE) GOLD PRODUCTION AND COST DATA The Golden Reward Mine has been out of active production for all of the third quarter of this year, except for the ongoing leaching of ore from the pads. Wharf's share of gold production from the Golden Reward Mine, for the third quarter and the nine months ended September 30, 1996, was 1,867 ounces and 12,536 ounces, respectively. For the same periods last year, Wharf's share of gold production was 10 9,050 ounces and 21,849 ounces, respectively. Cash production cost per ounce for the third quarter and the nine months ended September 30, 1996 was $485 and $399, respectively, compared to $149 and $198, respectively, a year ago. The total operating cost per ounce for the third quarter and the nine months ended September 30, 1996 was $493 and $522, respectively, compared to $279 and $322, respectively, a year ago. The increase in the cash production cost for the nine months ended September 30, 1996 was mainly as a result of a lower grade of ore processed due to the grade and tonnage shortages encountered at both the Hannibal and West Liberty pits, that, in conjunction with potential safety concerns, ultimately lead to the early closure of the mine. Leaching of remaining ounces on the pads will continue until mid-November. OPERATING RESULTS For the third quarter of 1996, the Golden Reward Mine recorded an operating loss, of which Wharf's proportionate share was $1.2 million, compared to an operating profit, of which Wharf's proportionate share was $1 million, a year ago. As a result of the increase in production costs and the writedown of the remaining assets of the mine in June 1996, in the amount of $3.2 million, the Golden Reward Mine recorded an operating loss for the nine months ended September 30, 1996, of which Wharf's proprtionate share was $6 million, compared to an operating profit a year ago, of which Wharf's proportionate share was $1.3 million. The mine generated a negative operating cash flow for the third quarter of 1996 of $1.2 million, compared to a positive operating cash flow of $2.2 million a year ago. For the nine months ended September 30, 1996, Golden Reward recorded a negative operating cash flow of $1 million, compared to a positive operating cash flow of $4.1 million a year ago. GOLDEN REWARD MINE PRODUCTION STATISTICS (100%)
Three months ended Nine months ended September 30, September 30, 1996 1995 1996 1995 -------- -------- -------- -------- Tons of ore mined (000's) 16 492 665 1,314 Tons of waste removed (000's) 236 2,703 1,192 Ratio of waste to ore 0.48:1 4.06:1 0.91:1 Tons of ore processed (000's) 43 507 745 1,347 Average grade of gold per ton of ore processed 0.073 0.049 0.037 0.041 Ounces of gold produced - 100% 3,112 15,083 20,894 36,415 - Wharf's 60% share 1,867 9,050 12,536 21,849 Wharf's proportionate operating cost per ounce of gold sold Cash production cost $ 485 $ 149 $ 399 $ 198 Royalties and severance taxes 8 15 12 12 Non-cash costs 115 111 112 -------- -------- -------- -------- Total operating cost $ 493 $ 279 $ 522 $ 322 -------- -------- -------- -------- -------- -------- -------- --------
11 PART II - OTHER INFORMATION ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (i) Reports on Form 8-K There were no reports on Form 8-K filed during the period. 12 SIGNATURE Pursuant to the requirements 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. WHARF RESOURCES LTD. BY /s/ Dalen B. Fairbairn -------------------------------------- Dalen B. Fairbairn Senior Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) October 31, 1996 13 SIGNATURE Pursuant to the requirements 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. WHARF RESOURCES LTD. BY -------------------------------------- Dalen B. Fairbairn Senior Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) October 31, 1996 -----END PRIVACY-ENHANCED MESSAGE-----