-----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, Dfoe2atJLmgaLPBcrn4uv+Gxsy5zSY4AEtfZzjCzXGBliPZMp7u8rcB1odRMxw5n gEXrWkf6xgfX7pDV2JgNxg== 0001047469-97-003899.txt : 19971114 0001047469-97-003899.hdr.sgml : 19971114 ACCESSION NUMBER: 0001047469-97-003899 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961030 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SILVERADO GOLD MINES LTD CENTRAL INDEX KEY: 0000731727 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 980045034 FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-12132 FILM NUMBER: 97713558 BUSINESS ADDRESS: STREET 1: SUITE 505 1111 WEST GEORGIA ST STREET 2: STE 505 CITY: VANCOUVER BC CANADA STATE: A1 BUSINESS PHONE: 6046891535 MAIL ADDRESS: STREET 1: 1111 WEST GEORGIA STREET STREET 2: STE 505 CITY: VANCOUVER BC STATE: A1 FORMER COMPANY: FORMER CONFORMED NAME: SILVERADO MINES LTD DATE OF NAME CHANGE: 19940722 10-K/A 1 FORM 10-K/A FORM 10-K/A No. 2 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, 1996. Commission file number 0-12132 ------- SILVERADO MINES LTD. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) British Columbia, Canada 98-0045034 - ------------------------ ---------- (State or other jurisdiction of (IRS Employer ID No.) incorporation or organization) Suite 505, 1111 West Georgia Street Vancouver, British Columbia, Canada V6E 4M3 (604) 689-1535 - -------------------------------------------- -------------- (Address of Principal Executive Offices) (Registrant's telephone number) Securities registered pursuant to section 12(b) of the Act: None - ---- The Company's Common Stock Securities registered pursuant to trades on the NASDAQ Small Cap section 12(g) of the Act: Market under the trading Common Shares, no par value symbol GOLDF - --------------------------- ------------------------------- (Title of Class) (Name of each exchange on which registered) - ------------------------------------------------------------------------------- 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 the 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. / / The aggregate market value of voting stock held by non-affiliates on January 28, 1997 was $25,647,744. The number of shares outstanding on January 28, 1997 was 58,556,493 Documents incorporated by Reference: None. 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 for the years indicated: November 30, 1996 1995 1994 ----------------------------------- CASH AND CASH EQUIVALENTS $1,925,469 $ 155,849 $ 190,724 OTHER CURRENT ASSETS 1,054,228 652,574 2,180,299 ---------- ----------- ---------- 2,979,697 808,423 2,371,023 ---------- ----------- ---------- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (351,154) (553,931) LOANS PAYABLE SECURED BY GOLD INVENTORY (66,511) (717,792) - PAYABLE TO RELATED PARTIES - (176,568) - CURRENT PORTION OF MINERAL CLAIMS PAYABLE (179,000) (851,610) (200,000) CURRENT PORTION OF CAPITAL LEASE OBLIGATION (64,939) (330,000) (169,765) (203,203) ---------- ----------- ---------- (661,604) (2,279,173) (923,696) ---------- ----------- ---------- WORKING CAPITAL (DEFICIENCY) $2,318,093 $(1,470,750) $1,447,327 ---------- ----------- ---------- ---------- ----------- ---------- The major increase in the Company's working capital from a deficiency of $1,470,750 at the end of 1995 to a surplus of $2,318,093 at the end of 1996 resulted from private placements and the exercise of options. The Company further decreased its liabilities by executing and paying-off lease purchase options on several large items of heavy mining equipment. Subsequent to year end the Company's President, J.P. Tangen, relinquished his office to the Company's previous President, Garry Anselmo, who assumed those duties on an unpaid basis. This change is part of an overall strategy by the Company to reduce its administrative overhead. The decrease in revenues from gold sales from $3,053,000 in 1995 to $298,000 in 1996 is attributable to the Company's reduced production schedule from its Nolan properties as it focused its primary efforts upon its extensive Fairbanks claims in response to the large amount of competitive activity in that area. As part of this process, the Company was able to further develop its Ester Dome Project, develop two other properties for potential sale, and to acquire, by location, the 53.86 square mile Chatanika property northwest of Fairbanks. Long term liabilities consist of the long term portion of the Company's remaining capital lease obligation, and the Company's two-million dollar debenture which has a maturity of July 2, 1999, if not sooner converted. The Company intends to continue its efforts to define ore bodies on Ester Dome so as to bring that property into production as soon as practical, and simultaneously, continue its placer operations at Nolan Creek. The Company intends to continue the solicitation of additional capital through either equity or debt financing, and may also engage in joint venturing or other similar arrangements conducive to accelerating production at Ester Dome. There is, however, no commitment by any party to provide such financing at this time, nor assurance that such capital will be available on terms favorable to the Company. The Company has received $335,250 subsequent to the year end as a result of options to purchase common stock being exercised. Management believes the Company has adequate funds to operate for the coming fiscal year, and will continue its exploration and development programs as additional funds become available. OPERATING RESULTS NOLAN GOLD PROJECT In November, 1993, the Company commenced production of placer gold from frozen bench deposits on the Mary's Bench portion of the Dionne Property. Since then, almost 14,000 ounces of gold have been recovered. Information gained during the early mining operations resulted in a management decision to engage in the construction of a larger infrastructure including the construction of a thirty man camp, a larger machine shop, the acquisition of several pieces of earth moving equipment and a more aggressive drilling program. These costs have yet to be fully defrayed by production. The Company continued a limited production program in 1996 during the course of reclamation activities, as it focused its primary efforts on expansion, exploration, and development of its Fairbanks properties in response to increased competitive activity in that area. The Company intends to continue development of both placer and lode gold deposits at Nolan in 1997. HAMMOND PROPERTY In December 1994, the Company entered a lease with option to purchase an additional property adjoining the Nolan Gold Project. This new property has a history of gold production and the Company anticipates that it will add to the potential for developing additional gold reserves. The property also has lode gold and antimony potential, which the Company intends to further explore and define in 1997. ESTER DOME GOLD PROJECT The Company has a 100 percent interest in the Ester Dome Gold Project. The Company commenced a number of geophysical surveys in 1995 on gold-bearing target areas selected from ACNC's data and Silverado's own previous drill results, then expanded this data with an intensive trenching and drilling program in 1996. To date, the Company has identified gold mineralization over a length of 2,500 feet, widths up to 300 feet, and to a depth of 600 feet with grades up to 3.5 ounces per ton. The Company intends to further define this ore body so as to be able to bring it into production as soon as practical. MARSHALL DOME GOLD PROJECT The Marshall Dome Gold Project was acquired by the Company in 1995. It covers an area of two and one-half square miles, and is located eighteen miles northeast of Fairbanks. On November 1, 1996, the Company entered into an agreement in principle to vend this property to Homestake Mining Company in return for annual cash payments, annual expenditures on the property, and the payment of a Net Smelter Return to the Company in the event of the sale of gold or other valuable minerals; but that agreement in principle has not yet been consummated. WHISKEY GULCH PROPERTY This property, acquired by the Company in 1996 to further enhance the desirability of its previously acquired Marshall Dome Property, above, is part of the unconsummated agreement in principle with Homestake Mining. MINING AND ENVIRONMENTAL REGULATION 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 all 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 $70,000 for further reclamation on the Nolan Gold Project. Additional remediation work takes place during the normal course of mining. In the event of closure or abandonment, the additional cost of reclamation would not be material. The Company posted bond of $1,500 in January, 1995 with the ALASKA STATEWIDE BOND POOL to cover this event. With regard to the Ester Dome Gold Project, in the case of closure or abandonment, the Company estimates that any reclamation costs, net of recovery, would be immaterial. NATURE OF CLAIMS UNDER FEDERAL AND STATE LAW 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, and such 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. OTHER EXPENSES YEARS ENDED NOVEMBER 30, 1996 1995 1994 -------------------------------------------- OTHER EXPENSES $4,077,978 $2,074,626 $2,286,068 The Company's total other expenses increased in 1996 as a direct result of the increase in employment contract expenses (see Note 6(d)) which are in part accrued, and related to a number of agreements for services in specialized marketing and investor relations fields. Depreciation increased as a function of re-instituting depreciation on the company's Grant Mine assets. Depreciation on those assets was suspended during the time they were inoperative, as no "wear and tear" was occurring and due to the fact that the carrying value exceeded the salvage value, they were only being carried on the books at 45% of their total cost, the remaining 55% having been contributed and paid for by a former joint-venture partner. Management salaries increased reflecting the effect of a full twelve month's salary for the company's new president, and management services from related party (Tri-Con) increased as a function of the increased level of work undertaken by Tri-Con on behalf of Silverado. Other interest and bank charges decreased substantially as the company paid off several obligations on large pieces of mining equipment. Interest on long term debt represents the semi-annual installments on the Company's $2,000,000 convertible debenture. As with most companies involved in the mining industry, the price of the Company's product (mainly gold) has a significant impact upon the Company's profitability. Similarly the Company's costs, as reflected in labor and materials are also affected by inflation. During the fiscal year ended November 30, 1996, the price of gold remained fairly stable, as did the rate of inflation and, thus, neither item significantly affected the Company's performance. NEW ACCOUNTING STANDARDS Statement of Financial Accountings Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS TO BE DISPOSED OF (SFAS 121) was issued in March, 1995, by the Financial Accounting Standards Board. It requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS 121 is required to be adopted for fiscal years beginning after December 15, 1995. Management believes this statement will not have a material effect upon the carrying value of the Company's assets. Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION (SFAS 123), was issued by the Financial Accounting Standards Board in October, 1995. SFAS 123 establishes financial accounting and reporting standards for stock-based employee compensation plans. This statement defines a fair value based method of accounting for employee stock option or similar equity instruments, and encourages all entities to adopt that method of accounting for all of their employee stock compensation plans. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. Entities electing to remain with the accounting in Opinion 25 must make proforma disclosures of net income and, if presented, earnings per share, as if the fair value based method of accounting defined by SFAS 123 had been applied. SFAS 123 is applicable to fiscal years beginning after December 15, 1995. The Company currently accounts for its equity instruments using the accounting prescribed by Opinion 25. The Company does not currently expect to adopt the accounting prescribed by SFAS 123; however, the Company will include the disclosures required by SFAS 123 in future consolidated financial statements. SIGNATURES PURSUANT to the requirements of Section 13 or 15(d) 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. SILVERADO MINES LTD. BY: /s/ G.L. Anselmo November 10, 1997 - ---------------------------------- ------------------------------------ G.L. Anselmo, Chairman Chief Financial Officer F-1 KPMG Chartered Accountants Box 10426 777 Dunsmuir Street Vancouver BC V7Y 1K3 Canada AUDITORS' REPORT To the Shareholders of Silverado Mines Ltd. We have audited the consolidated balance sheets of Silverado Mines Ltd. as at November 30, 1996 and 1995, and the consolidated statements of operations and accumulated deficit, cash flows and changes in share capital and capital surplus for each of the years in the three year period ended November 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform 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, 1996 and 1995, and the results of its operations and the changes in its financial position for each of the years in the three year period ended November 30, 1996 in accordance with generally accepted accounting principles in the United States. As required by the Company Act (British Columbia), we report, that in our opinion, these principles have been applied on a consistent basis. KPMG Chartered Accountants Vancouver, Canada January 17, 1997 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 the uncertainty of the Company's ability to continue as a going concern, as discussed in Note 1(a). Our report to the shareholders dated January 17, 1997 is expressed in accordance with Canadian reporting standards which do not permit a reference to such uncertainty in the auditors' report when the uncertainty is adequately disclosed in the financial statements and accompanying notes. KPMG Chartered Accountants Vancouver, Canada January 17, 1997 SILVERADO MINES LTD. F-2 CONSOLIDATED BALANCE SHEETS EXPRESSED IN U.S. DOLLARS - ------------------------------------------------------------------------------- Years Ended November 30 1996 1995 - ------------------------------------------------------------------------------- Assets Current Assets Cash and cash equivalents $ 1,925,469 $ 155,849 Gold inventory 213,004 389,119 Accounts receivable 11,265 1,010 Prepaid expenses to related parties 479,959 31,676 Deferred employment contract expense 350,000 230,769 -------------------------- 2,979,697 808,423 Mineral Properties and Development (Note 2) Claims and options 2,327,025 1,755,811 Deferred exploration and development expenditures 11,286,816 10,084,116 -------------------------- 13,613,841 11,839,927 Less accumulated amortization (1,384,338) (1,260,834) -------------------------- 12,229,503 10,579,093 Building, Plant and Equipment (Note 3) 4,423,428 4,250,714 Less accumulated depreciation (920,246) (444,364) -------------------------- 3,503,182 3,806,350 Deferred Financing Fees (net of amortization of $87,038: 1995 - $49,838) 98,962 136,162 -------------------------- $ 18,811,344 $ 15,330,028 -------------------------- -------------------------- Liabilities and Shareholders' Equity Current Liabilities Accounts payable and accrued liabilities (Note 4) $ 351,154 $ 717,792 Loans payable secured by gold inventory 66,511 176,568 Current portion of mineral claims payable (Note 2a) 179,000 330,000 Capital lease obligations - current (Note 9b) 64,939 203,203 Payable to related parties - 851,610 -------------------------- 661,604 2,279,173 Long Term Liabilities Mineral claims payable (Note 2a) - 200,000 Capital lease obligations (Note 9b) 92,214 194,569 Convertible debenture (Note 5) 2,000,000 2,000,000 -------------------------- 2,092,214 2,394,569 Shareholders' Equity Share capital (Note 6) Authorized: 75,000,000 common shares Issued and outstanding: November 30, 1996 - 56,406,493 shares 38,553,063 28,775,211 November 30, 1995 - 37,431,493 shares Capital surplus - 46,352 Deficit (22,495,537) (18,165,277) -------------------------- 16,057,526 10,656,286 -------------------------- $ 18,811,344 $ 15,330,028 -------------------------- -------------------------- See accompanying notes to consolidated financial statements SILVERADO MINES LTD. F-3 CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT EXPRESSED IN U.S. DOLLARS - -------------------------------------------------------------------------------------------------- Years Ended November 30 1996 1995 1994 - -------------------------------------------------------------------------------------------------- Revenue from gold sales $ 298,124 $ 3,053,289 $ 1,515,762 Operating costs Mining and processing costs 366,249 4,515,138 1,861,728 Amortization of property and development costs 123,504 431,384 418,336 Reclamation expense 31,993 29,397 70,000 Production related depreciation expense 28,660 97,300 - ------------------------------------------ 550,406 5,073,219 2,350,064 ------------------------------------------ Loss from Operations (252,282) (2,019,930) (834,302) Other Expenses Accounting and audit 69,331 62,891 110,312 Amortization of deferred financing fees 37,200 37,200 12,638 Corporate capital taxes (5,967) 32,014 - Depreciation 447,222 86,346 16,556 Employment contract expense (Note 6) 1,910,060 223,273 604,090 Financing activities 35,159 18,900 88,551 General exploration 13,980 - - Interest on long term debt 160,000 160,000 57,425 Legal 35,733 114,294 193,027 Loss on disposal of buildings, plant and equipment - - 222,188 Loss (gain) on foreign exchange (5,298) (5,332) (349) Management salaries 263,000 184,349 - Management services from related party 323,108 190,009 61,785 Office expenses 262,333 387,498 149,771 Other interest and bank charges (net) 4,908 82,928 41,525 Printing and publicity 371,281 410,195 391,318 Reporting and investor relations 26,833 24,447 190,623 Transfer agent fees and mailing expenses 129,095 65,614 146,608 ------------------------------------------ 4,077,978 2,074,626 2,286,068 Loss for the year (4,330,260) (4,094,556) (3,120,370) Accumulated deficit at beginning of year (18,165,277) (14,070,721) (10,950,351) ------------------------------------------ Accumulated deficit at end of year $(22,495,537) $(18,165,277) $(14,070,721) ------------------------------------------ ------------------------------------------ Loss per share (Note1(h)) $ (0.09) $ (0.11) $ (0.09) ------------------------------------------ ------------------------------------------
See accompanying notes to consolidated financial statements SILVERADO MINES LTD. F-4 CONSOLIDATED STATEMENTS OF CASH FLOWS EXPRESSED IN U.S. DOLLARS - -------------------------------------------------------------------------------------------------------------- Years Ended November 30 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------- CASH PROVIDED BY (USED FOR): Operations: Loss for the period $(4,330,260) $ (4,094,556) $(3,120,370) Items not involving cash: Employment contract expense 1,910,060 223,273 597,689 Depreciation 475,882 183,646 16,556 Amortization of deferred financing fees 37,200 37,200 12,638 Loss on disposal of buildings, plant and equipment - - 222,188 Amortization of property and development costs 123,504 431,384 418,336 Changes in non-cash operating working capital: Increase in accounts receivable (10,255) (1,010) - Decrease (increase) in gold inventory 176,115 1,638,670 (1,582,189) Increase in deferred employment contract expense (119,231) (230,769) - Decrease (increase) in prepaid expenses to related parties (448,283) 120,835 67,489 Increase (decrease) in accounts payable and accrued liabilities (155,198) 513,257 (16,207) ------------------------------------------ (2,340,466) (1,178,070) (3,383,870) Financing: Shares issued for cash 7,610,000 1,104,600 199,050 Proceeds on issue of convertible debenture - - 2,000,000 Financing fees - - (186,000) Increase (decrease) in loans payable secured by gold inventory (110,057) 176,568 - Increase (decrease) in payable to related parties (851,610) 851,610 (47,434) Decrease in mineral claims payable (351,000) (70,000) - Increase (decrease) in capital lease obligation (240,619) 85,072 - ------------------------------------------ 6,056,714 2,147,850 1,965,616 Investments: Mineral claims and options (571,214) (32,900) (474,504) Deferred exploration and development expenditures (1,202,700) (617,118) (1,603,382) Purchases of equipment (172,714) (354,637) (1,039,318) ------------------------------------------ (1,946,628) (1,004,655) (3,117,204) Increase (decrease) in cash and cash equivalents 1,769,620 (34,875) (4,535,458) Cash and cash equivalents at beginning of year 155,849 190,724 4,726,182 ------------------------------------------ Cash and cash equivalents at end of the year $ 1,925,469 $ 155,849 $ 190,724 ------------------------------------------ ------------------------------------------ Supplemental cash flow information Interest paid $ 242,562 $ 233,942 $ 39,776 ------------------------------------------ ------------------------------------------ Issue of shares for purchase of mineral property, a non-cash financing and investing activity $ - $ 43,750 $ 12,500 ------------------------------------------ ------------------------------------------
See accompanying notes to consolidated financial statements SILVERADO MINES LTD. F-5 CONSOLIDATED STATEMENTS OF CHANGES IN SHARE CAPITAL AND CAPITAL SURPLUS (EXPRESSED IN U.S. DOLLARS) Years ended November 30, 1996, 1995, and 1994 Number of Share Capital shares Capital Surplus ---------- ----------- ------- Balance as at November 30, 1993 33,946,243 $25,899,869 $46,352 ---------- ----------- ------- Year ended November 30, 1994 Shares issued: Private placement for cash 700,000 654,150 On exercise of share options: 331,750 for cash 199,050 for employment contract services 288,622 For mineral property 50,000 12,500 ---------- ----------- ------- 1,081,750 1,154,322 - ---------- ----------- ------- Balance as at November 30, 1994 35,027,993 27,054,191 46,352 ---------- ----------- ------- Year ended November 30, 1995 Shares issued: On exercise of share options: 2,303,500 for cash 1,104,600 for employment contract services 572,670 For mineral property 100,000 43,750 ---------- ----------- ------- 2,403,500 1,721,020 - ---------- ----------- ------- Balance as at November 30, 1995 37,431,493 28,775,211 46,352 ---------- ----------- ------- Year ended November 30, 1996 Shares issued: On exercise of share options: 18,050,000 for cash 7,180,000 for employment contract services (Note 6 (d)) 2,121,500 Private placement for cash 925,000 430,000 Capital surplus reallocated 46,352 (46,352) ---------- ----------- ------- 18,975,000 9,777,852 (46,352) ---------- ----------- ------- Balance as at November 30, 1996 56,406,493 $38,553,063 $ 0 ---------- ----------- ------- ---------- ----------- -------
RECONCILIATION OF THE SHARE CAPITAL AMOUNTS FOR EMPLOYMENT CONTRACT SERVICE AMOUNT TO THE STATEMENT OF OPERATIONS' EXPENSE AMOUNT 1994 1995 1996 FROM THE STATEMENT OF OPERATIONS - -------------------------------- Employment contract expense 597,689.00 223,273.00 1,910,060.00 (1994 amount from cash flow statement) FROM THE SHARE CAPITAL STATEMENT - -------------------------------- On exercise of share options: for employment contract services 288,622.00 572,670.00 2,121,500.00 FROM THE BALANCE SHEET - ---------------------- Deferred contract services (or change in) 0 230,769.00 119,231.00 (1996 = 350,000-230,769=119,231) --------------------------------------- Difference 309,067.00 (118,628.00) (92,209.00) Balance of Accrued Employment Contract service 309,067.00 190,440.00 98,231.00 --------------------------------------- Difference from prior year 0 (118,627.00) (92,209.00) ---------------------------------------
Page 1 - ------------------------------------------------------------------------------- SILVERADO GOLD MINES LTD. F-6 NOTES TO CONSOLIDATES FINANCIAL STATEMENTS (EXPRESSES IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994 - ------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These consolidated financial statements for the years ended November 30, 1996, 1995 and 1994 are prepared in conformity with accounting principles generally accepted in the United States. (a) CONTINUING OPERATIONS During the year ended November 30, 1996, the Company focused its activities on the Fairbanks area, explored and drilled several sites on its Ester Dome property, acquired two new properties, and continued production, on a limited basis, on other claims. The Company generated $7,610,000 in additional capital through a private placement and the exercise of options, thereby addressing its previous working capital deficiency of $1,470,750. At November 30, 1996, the Company had $2,979,697 in current assets, primarily cash, which management believes will permit it to continue its present operations for the next fiscal year. The ability of the Company to continue operations and recover amounts recorded as mineral properties, development, and buildings, plant and equipment is dependent on obtaining additional capital to fund its liabilities as they come due and to fund its operations, and exploration and development activities, the discovery of recoverable ore on its properties, and the attainment of profitable commercial operations. (b) FUNCTIONAL CURRENCY The Company's reporting currency, and currency of measurement, is the U.S. dollar. (c) BASIS OF CONSOLIDATION The consolidated financial statements include the accounts of Silverado Mines (U.S.), Inc., a wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated. (d) GOLD INVENTORY Gold Inventory is valued at the lower of weighted average cost and estimated net realizable value. At November 30, 1996 and 1995, gold inventory is valued at net realizable value. Any write-down of inventory to net realizable value is included in mining and processing costs. (e) 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 costs of acquiring, exploring and developing mineral claims and options until such time as the properties are placed into production or abandoned; at that time costs are amortized or written off. On an on-going basis, the Company evaluates each property based on results to date to determine the nature of exploration work that is warranted in the future. If there is little prospect of further work on a property being carried out, the deferred costs related to that property are written down to the estimated amount recoverable. The "estimated amount recoverable" is based on the future cash flows expected to result from production from the property and its eventual disposition. 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. - ------------------------------------------------------------------------------- SILVERADO GOLD MINES LTD. F-7 NOTES TO CONSOLIDATES FINANCIAL STATEMENTS (EXPRESSES IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994 - ------------------------------------------------------------------------------- Amortization of the deferred exploration and development costs of properties in production is provided during periods of production using the straight-line method based on an estimated economic life of the ore reserves. The Company's accounting policy for reclamation expenses is contained in note 9(e). (f) 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 an estimated life of 3 to 20 years. The Company anticipates reactivating the grant mine, and as a result, has started to again depreciate the assets accordingly. (g) FOREIGN CURRENCIES Monetary assets and liabilities denominated in foreign currencies are translated into U.S. funds at the rate of exchange in effect at the year end. Revenue and expense transactions are translated at the average rates in effect during the year except depreciation of plant and equipment and amortization of mineral properties and development which are translated at historical rates. Foreign exchange gains and losses are included in the determination of income. (h) LOSS PER SHARE Loss per share has been calculated based on the weighted average number of shares outstanding during the year. Loss per share does not include the effect of the potential conversions as their effect would be anti-dilutive. The weighted average number of shares outstanding is as follows: Year to November 30, 1996 45,611,698 Year to November 30, 1995 35,678,501 Year to November 30, 1994 34,756,800 (i) REVENUE RECOGNITION Gold sales are recognized when title passes to the purchaser. (j) NEW ACCOUNTING STANDARDS Statement of Financial Accountings Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS TO BE DISPOSED OF (SFAS 121) was issued in March, 1995, by the Financial Accounting Standards Board. It requires that long-lived assets and CERTAIN identifiable intangibles to be held and USED BY an entity be REVIEWED for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS 121 is required to be adopted for fiscal years beginning after December 15, 1995. Management believes this statement will not have a material effect upon the carrying value of the Company's assets. Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION (SFAS 123), was issued by the Financial Accounting Standards Board in October, 1995. SFAS 123 establishes financial accounting and reporting standards for stock-based employee compensation plans. This statement defines a fair value based method of accounting for employee - -------------------------------------------------------------------------------- SILVERADO GOLD MINES LTD. F-8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1996, 1995, AND 1994 - -------------------------------------------------------------------------------- stock option or similar equity instruments, and encourages all entities to adopt that method of accounting for all of their employee stock compensation plans. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by APB OPINION NO. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. Entities electing to remain with the accounting in Opinion 25 must make proforma disclosures of net income and, if presented, earnings per share, as if the fair value based method of accounting defined by SFAS 123 had been applied. SFAS 123 is applicable to fiscal years beginning after December 15, 1995. The Company currently accounts for its equity instruments using the accounting prescribed by Opinion No. 25. The company does not currently expect to adopt the accounting prescribed by SFAS 123; However, the Company will include the disclosures required by SFAS 123 in future consolidated financial statements. 2. MINERAL PROPERTIES AND DEVELOPMENT a. Mineral Properties ESTER DOME PROPERTIES, FAIRBANKS MINING DISTRICT, ALASKA -------------------------------------------------------- These properties, which include the Grant Mine, Range Minerals #1, Range Minerals #2, St. Paul / Barelka, and Dobb's properties, make up a contiguous group of claims. 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 very near the Company's Marshall Dome property. CHATANIKA PROPERTY, FAIRBANKS MINING DISTRICT, ALASKA ----------------------------------------------------- The Company staked 774 mining claims and 24 prospecting sites in 1996. This property covers an area of 53.86 square miles, and is located approximately 20 miles northwest of Fairbanks. 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. HAMMOND PROPERTY, WISEMAN MINING DISTRICT, ALASKA ------------------------------------------------- The Company acquired this property, adjoining the Nolan Gold Properties, in 1994. EAGLE CREEK PROPERTY, FAIRBANKS MINING DISTRICT, ALASKA ------------------------------------------------------- The Company assigned its interest and obligations related to this property to Can-Ex Resources (U.S.), Inc. ("Can-Ex"), a related company (see Note 8), and retained a 15 percent net profit interest from production to a maximum of $5,000,000. FRENCH PEAK PROPERTY, OMINECA MINING DISTRICT, BRITISH COLUMBIA --------------------------------------------------------------- Anselmo Holdings Ltd., a related company, has a 10 percent net profits interest in the property. - -------------------------------------------------------------------------------- SILVERADO GOLD MINES LTD. F-9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1996, 1995, AND 1994 - -------------------------------------------------------------------------------- PROPERTY COMMITMENTS -------------------- Minimum aggregate future expenditures required in the next five years to maintain the properties in good standing are as follows: YEAR COMMITMENT ---- ---------- ---------------------------------- 1997 $393,920 1998 423,920 1999 363,920 2000 213,220 2001 268,240 ---------------------------------- The Company is also required to pay $179,000 in 1997 with respect to the Dionne (Mary's Bench) property. This amount is not at the discretion of the Company, and accordingly, has been recorded as a liability in these financial statements. (b) CLAIMS AND OPTIONS AND DEFERRED EXPLORATION AND DEVELOPMENT EXPENDITURES Cumulative claims and options and deferred exploration and development expenditures are as follows: Net Book Value 1996 1996 Net Book Value ALASKA Nov. 30, 1995 Expenditures Amortization Nov. 30, 1996 ------ ------------- ------------ ------------ -------------- Ester Dome Gold Project $ 4,573,782 $ 595,426 $ - $ 5,169,208 Marshall Dome 138,531 40,497 - 179,028 Nolan Gold Project 4,118,636 508,055 (36,500) 4,590,191 Hammond Property 253,808 17,048 - 270,856 Eagle Creek Royalty Interest 126,320 7,027 - 133,347 Whiskey Gulch - 21,791 - 21,791 Chatanika - 12,861 - 12,861 BRITISH COLUMBIA ---------------- French Peak 261,110 - - 261,110 ---------------------------------------------------------- 9,472,187 1,202,705 (36,500) 10,638,392 ---------------------------------------------------------- PLUS: Cumulative net mineral claims and option payments 1,106,906 571,209 (87,004) 1,591,111 ---------------------------------------------------------- $10,579,093 $1,773,914 $(123,504) $12,229,503 ---------------------------------------------------------- ----------------------------------------------------------
- ------------------------------------------------------------------------------- SILVERADO GOLD MINES LTD. F-10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994 - ------------------------------------------------------------------------------- 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. 1996 1995 Cost Accumulated Net Book Net Book Depreciation Value Value ------------------------------------------------------------------------------------- Grant Mine Mill Equipment $2,215,680 $(377,754) $1,837,926 $2,019,700 Nolan Gold Project Mining Equip 60,757 (14,483) 46,274 43,013 Mining Equipment 1,768,612 (419,837) 1,348,775 1,444,127 Other Equip, Leasehold Improv 378,381 (108,174) 270,207 299,510 ---------------------------------------------------- Totals: $4,423,430 $(920,248) $3,503,182 $3,806,350 ---------------------------------------------------- ----------------------------------------------------
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities consist of: 1996 1995 --------------------- Accounts payable $118,858 $360,941 Accrued interest 64,065 66,411 Accrued employment contract expense 98,231 190,440 Accrued reclamation expense 70,000 100,000 --------------------- $351,154 $717,792 --------------------- --------------------- 5. DEBENTURE In July 1994, the Company issued a convertible callable debenture with interest payable at the rate of 8.0% per annum on December 31 and June 30 each year. The debenture is unsecured and is due July 2, 1999, subject to prior redemption or conversion. The debenture may be converted in whole or in part by the holder into common shares of the Company at a conversion price of $2.00 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 the period of 20 consecutive trading days. Financing fees paid related to the debenture have been deferred and are being amortized on a straight line basis over the debenture term of 60 months. The fair value of the debenture is not significantly different than the carrying value. - ------------------------------------------------------------------------------- SILVERADO GOLD MINES LTD. F-11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994 - ------------------------------------------------------------------------------- 6. SHARE CAPITAL (a) COMMON SHARES Authorized: 75,000,000 (1995: 50,000,000) common shares, without par value. (b) DIRECTORS' OPTIONS Directors' options for 450,000 shares exercisable at Cdn. $0.37 per share and which expire June 1, 1997, were outstanding at November 30, 1996, 1995 and 1994. During the year ended November 30, 1995, the Company authorized the issuance of options to directors and officers to acquire 1,300,000 shares at $0.88 (U.S.) per share exercisable until August 14, 2004. (c) WARRANTS In conjunction with a private placement of 600,000 shares, the Company has offered a warrant for 600,000 shares at $0.60 per share exercisable until March 6, 1998, and a warrant for 600,000 shares at $0.70 per share exercisable until September 6, 1999. WARRANTS: Amount Cash Market credited to Balance Issued Exercised Canceled Balance Exercise Received Price Share capital Exp Nov 30, 95 in 1996 in 1996 in 1996 Nov 30, 96 Price on Issue on issue on issuance date ---------- --------- --------- -------- ---------- -------- -------- -------- ------------- ---- - 600,000 - - 600,000 $0.60 - $0.63 - 3/98 - 600,000 - - 600,000 $0.70 - $0.63 - 9/99 ------------------------------------------------------ -------- ------------------- - 1,200,000 - - 1,200,000 - - --------- ---------
(d) EMPLOYEE OPTIONS AND OTHER SHARE TRANSACTIONS From time to time, the Company issues options for the purchase of common shares to selected part time independent contractors 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 APB 25. If the market price of the Company's shares exceed the exercise price of the options at the date the options are granted, then this excess is accrued and expensed as contracted services over the term of the employment contracts on a straight line basis. When the options are exercised, share capital is credited based on the market price at the date the options were granted. - ------------------------------------------------------------------------------- SILVERADO GOLD MINES LTD. F-12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994 - ------------------------------------------------------------------------------- EMPLOYEE OPTIONS AND SHARE TRANSACTIONS: Amount Cash Market Credited to Balance Granted Exercised Canceled Balance Exercise Received Price Share Capital Exp Nov 30, 95 in 1996 in 1996 in 1996 Nov 30, 96 Price on Issue on Issue on Issuance Date - ---------- ------- --------- -------- ---------- -------- ---------- -------- ------------ ---- 800,000 - 800,000 - - $0.30 $ 240,000 $0.50 $ 400,000 n/a 214,750 - - 104,250 110,500 $0.60 - $1.47 - 2/97 250,000 - - 110,000 140,000 $0.94 - $0.94 - 7/97 20,000 - - - 20,000 $0.75 - $0.75 - 8/97 20,000 - - - 20,000 $0.75 - $0.75 - 8/97 - 1,000,000 1,000,000 - - $0.38 380,000 $0.53 530,000 n/a - 400,000 400,000 - - $0.30 120,000 $0.53 212,000 n/a - 300,000 300,000 - - $0.50 150,000 $0.75 225,000 n/a - 150,000 150,000 - - $0.50 75,000 $0.63 94,500 n/a - 50,000 50,000 - - $0.50 25,000 $0.50 25,000 n/a - 500,000 500,000 - - $0.50 250,000 $0.59 295,000 n/a - 500,000 500,000 - - $0.50 250,000 $0.50 250,000 n/a - 500,000 500,000 - - $0.50 250,000 $0.50 250,000 n/a - 500,000 500,000 - - $0.50 250,000 $0.63 315,000 n/a - 500,000 500,000 - - $0.50 250,000 $0.50 250,000 n/a - 1,000,000 1,000,000 - - $0.20 200,000 $0.53 530,000 n/a - 300,000 300,000 - - $0.20 60,000 $0.50 150,000 n/a - 700,000 700,000 - - $0.20 140,000 $0.50 350,000 n/a - 1,000,000 1,000,000 - - $0.40 400,000 $0.50 500,000 n/a - 1,000,000 1,000,000 - - $0.40 400,000 $0.50 500,000 n/a - 3,000,000 3,000,000 - - $0.40 1,200,000 $0.50 1,500,000 n/a - 1,100,000 1,100,000 - - $0.45 495,000 $0.50 550,000 n/a - 900,000 900,000 - - $0.30 270,000 $0.50 450,000 n/a - 3,000,000 3,000,000 - - $0.45 1,350,000 $0.50 1,500,000 n/a - 20,000 - - 20,000 $0.50 - $0.53 - 10/97 - 100,000 - - 100,000 $0.45 - $0.59 - 10/98 - 180,000 - - 180,000 $0.50 - $0.63 - 11/97 - 50,000 - - 50,000 $0.50 - $0.56 - 11/97 - 50,000 - - 50,000 $0.60 - $0.56 - 11/97 - 2,000,000 850,000 - 1,150,000 $0.50 425,000 $0.50 425,000 7/97 - 1,000,000 - - 1,000,000 $0.60 - $0.56 - 9/97 - ----------------------------------------------------- ---------- --------------------- 1,304,750 19,800,000 18,050,000 214,250 2,840,500 $7,180,000 $9,301,500 - --------- ---------- ---------- ------- --------- ---------- ----------
Subsequent to the year end, options to purchase 1,150,000 common shares at $0.50 per share, described above, were amended to $0.12 per share, and exercised for a total amount of $138,000. Subsequent to the year end, options to purchase 1,000,000 common shares at $0.60 per share, described above, were amended to $0.12 per share, and exercised for a total amount of $120,000. Subsequent to the year end, options granted to purchase 50,000 common shares at $0.50 per share, and 50,000 shares at $0.60, were amended to 150,000 shares at $0.50, and 150,000 shares at $0.60, respectively. Each amended option had a fair market value of $0.40. - ------------------------------------------------------------------------------- SILVERADO GOLD MINES LTD. F-13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994 - ------------------------------------------------------------------------------- Subsequent to the year end, options were granted and exercised to purchase 515,000 common shares at $0.15 per share, for a total amount of $77,250. As at January 31, 1997, the Company has reserved 5,469,750 shares for issuance with respect to unexercised options in the Directors' and Employees' Option Plans. The Company has reserved 1,200,000 shares for issuance with respect to the potential exercise of warrants. The Company has reserved 1,000,000 shares for issuance upon the potential conversion of a convertible debenture. 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. (formerly Tri-Con Mining, Arizona, Inc.), collectively the "Tri-Con 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 carries on business as operations and exploration and development contractors, and has been employed by the Company under continuous contract since 1972 to carry out all its field work and to provide administrative and management services. Under the current contract, work is charged at cost plus 8 percent for operations, and cost plus 25 percent for exploration and development. Cost includes a 12 percent charge for office overhead. Services of the directors of the Tri-Con Group are charged at the rate of Cdn. $100 per hour. Services of the Directors of the Tri-Con Group who are also Officers and Directors of the Company are not charged. 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 interest charged on outstanding balances at the Tri-Con Group's borrowing costs are as follows: 1996 1995 1994 ---- ---- ---- Operations and Field Services $ 715,558 $ 420,296 $ 149,108 Exploration and Development Services $ 596,561 $3,841,471 $5,503,955 Administrative and Management Services $ 323,108 $ 190,009 $ 61,785 ---------- ---------- ---------- $1,635,227 $4,451,776 $5,714,848 Amount of total charges in excess of Tri-Con costs incurred $ 163,493 $ 281,441 $ 396,798 Excess amount charged as a percentage of actual costs incurred 11.1% 6.7% 7.5%
- ------------------------------------------------------------------------------- SILVERADO GOLD MINES LTD. F-14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994 - ------------------------------------------------------------------------------- In 1989, the Company assigned its interest in and obligations related to the Eagle Creek property to Can-Ex Resources (U.S.), Inc., a subsidiary of Kintana Resources Ltd., for a net profit interest from production of 15 percent to a maximum of $5,000,000 U.S. Anselmo Holdings Ltd. has a right to 10 percent of net profits derived from the French Peak Property. At November 30, 1996, $466,688 is receivable from the Tri-Con Group, representing funds advanced for work in progress. At November 30, 1995, $851,610 was payable to the Tri-Con Group. 8. INCOME TAXES At November 30, 1996, the Company has the following losses carried forward available to reduce future years' income for tax purposes. The tax effect of these losses has not been recorded in the accounts. Losses carried forward for U.S., income tax purposes are available until: YEAR LOSSES CARRIED FORWARD ---- ---------------------- 1997 987,000 1998 546,000 1999 667,000 2000 1,235,000 2001 2,749,000 2002 1,178,000 2003 1,524,000 2004 1,161,000 2005 742,000 2006 431,000 2007 747,000 2008 2,101,000 2009 1,960,000 2010 2,400,000 2011 326,000 ----------- OPERATING LOSSES CARRIED FORWARD FOR TAX PURPOSES: $18,754,000 The Company follows Financial Accounting Standards Board Statement No. 109, ACCOUNTING FOR INCOME TAXES. As indicated, the Company has significant unrecognized loss carry forwards for income tax purposes. As there is no certainty as to the utilization of the loss carry forwards, the benefit attributable thereto is fully offset by the valuation allowance. 9. COMMITMENTS AND CONTINGENCIES - ------------------------------------------------------------------------------- SILVERADO GOLD MINES LTD. F-15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994 - ------------------------------------------------------------------------------- (a) 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 rate of $120,000 (Cdn) including operating costs. (b) During 1994 and 1995 the Company entered into capital leases for mining equipment with the following future minimum lease payments: Year ending November 30 - 1997 $ 78,570 1998 78,570 1999 20,815 -------- Total minimum lease payments 177,955 Less: interest payable (20,802) -------- 157,153 Less: current portion (64,939) -------- $ 92,214 -------- (c) The Company has entered into an unconsummated agreement in principle with Homestake Mining Company to possibly vend its Whiskey Gulch and Marshall Dome properties in return for annual cash payments, annual expenditures on the properties, and a Net Smelter Return to the Company in the event of the production and sale of gold or other valuable minerals. (d) 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 $6,200,000 plus the amount of annual bonuses and other benefits that they would have received in the eighteen months following the terminations, though this amount was subsequently reduced to $4,200,000. (e) 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 reclamation liability at November 30, 1996 and November 30, 1995 are as follows: 1996 1995 ---- ---- Balance, beginning of year $ 100,000 $ 100,000 Cost incurred in year (61,993) (29,397) Amount expensed in year 31,993 29,397 --------- --------- Balance, end of year $ 70,000 $ 100,000 10. COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform with the presentation adopted in 1996. ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III The information required by Part III of this report: Item 10 Directors and Executive Officers, Item 11 Executive Compensation Item 12 Security Ownership of Certain Beneficial Owners of Management, and Item 13 Certain Relationships and Related Transactions is incorporated herein by reference from the Company's definitive proxy statement with respect to the 1997 Annual Meeting of the Shareholders to be held in May, 1997. The Company's definitive proxy statement will be filed with the Securities and Exchange Commission pursuant to Rule 14a-6(c) promulgated under THE SECURITIES EXCHANGE ACT OF 1934 not later than 120 days after the end of the fiscal year covered by this report. -----END PRIVACY-ENHANCED MESSAGE-----