-----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, QcY1vNLnA6RnuY55G0JiNuXzDu8l0OXlfrtKPUEyC2AYxQNN2auqNUMkWBvxgymD UsQsbuXpOgGJLVwhfNcQvg== 0001085037-00-000038.txt : 20000315 0001085037-00-000038.hdr.sgml : 20000315 ACCESSION NUMBER: 0001085037-00-000038 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991130 FILED AS OF DATE: 20000314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SILVERADO GOLD MINES LTD CENTRAL INDEX KEY: 0000731727 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 980045034 STATE OF INCORPORATION: A1 FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-12132 FILM NUMBER: 568747 BUSINESS ADDRESS: STREET 1: 1111 WEST GEORGIA ST STE 505 STREET 2: VANCOUVER BRITISH COLUMBIA CANADA CITY: V6E 4M3 STATE: A1 BUSINESS PHONE: 6046891535 MAIL ADDRESS: STREET 1: SUITE 505 STREET 2: 1111 WEST GEORGIA STREET CITY: VANCOUVER STATE: A1 ZIP: V6E4M3 FORMER COMPANY: FORMER CONFORMED NAME: SILVERADO MINES LTD DATE OF NAME CHANGE: 19940722 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1999. ------------------- Commission file number 0-12132 ------- SILVERADO GOLD MINES LTD. (Exact name of registrant as specified in its charter) British Columbia, Canada 98-0045034 (State or other jurisdiction ( IRS Employer ID No.) of incorporation or organization) Suite 505, 1111 West Georgia Street Vancouver, British Columbia, Canada V6E 4M3 (604) 689-1535 - ------------------------------------------------ -------------- (Address of Principal Executive Offices) (Registrant's telephone number) Securities registered pursuant to The Company's Common Stock section 12(b) of the Act : trades on the OTC Bulletin None Board under the trading symbol Securities registered pursuant to SLGLF.OB section 12(g) of the Act: ------------------------------ Common Shares, no par value (Name of each exchange on (Title of Class) which registered) - -------------------------------------------------------------------------------- Indicate by check mark the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of voting stock held by non-affiliates on March 8, 2000 was $ 3,492,109 The number of shares outstanding on March 8, 2000 was 15,873,224 Total number of pages, including cover page: 49 PART I ITEM 1 BUSINESS - ------- FORWARD-LOOKING STATEMENTS Certain statements contained herein are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbors created thereby. Such forward-looking statements involve risks and uncertainties regarding the market price of gold, availability of funds, government regulations, common share prices, operating costs, capital costs, outcomes of ore reserve development and other factors. These risks and uncertainties may cause actual outcomes to materially differ from those forecasted or suggested. Where the Company makes statements of expectation or belief as to future outcomes, such expectation or belief is expressed in good faith and believed to have a reasonable basis. Forward-looking statements are made, without limitation, in relation to operating plans, property exploration and development, availability of funds, environmental reclamation, operating costs and permit acquisition. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. (A) GENERAL DEVELOPMENT OF BUSINESS Silverado Gold Mines Ltd. ("Silverado" or "the Company"), is engaged in the acquisition, exploration and development of mineral properties. Silverado was incorporated under the laws of British Columbia, Canada, in June, 1963, and operates in the United States through a wholly-owned subsidiary, Silverado Gold Mines Inc., incorporated in the State of Alaska in 1981. Silverado's exploration and development activities are managed and conducted by an affiliated company, Tri-Con Mining Ltd. ("Tri-Con") pursuant to a written operating agreement. Tri-Con is a privately owned corporation controlled by Garry L. Anselmo, who is President, Chairman, CEO and a Director of Silverado. The Company holds interests in four groups of mineral properties in Alaska. Silverado's main projects are exploration and development of the Ester Dome Gold Project, located 10 miles northwest of Fairbanks, Alaska, and of the Nolan Gold Project, located 175 miles north of Fairbanks, Alaska. The Ester Dome Project comprises a contiguous group of 1 Federal claim and 52 State claims totaling 2.5 square miles, including the Grant Mine, May / Barelka (St. Paul) and Dobb's Properties, all located within the Fairbanks Mining District in Alaska. On August 30, 1980 the Company entered into an Option Agreement with Janice B. Taylor granting Silverado the exclusive right and option to acquire 100% of the Range I Property, a property situated on Ester Dome near Fairbanks, Alaska. During 1999, the Company relinquished its rights to this property back to Janice B. Taylor. On August 30, 1980 the Company entered into an Option Agreement with Range Minerals Corporation granting Silverado the exclusive right and option to acquire 100% of the Range II Property, a property situated on Ester Dome near Fairbanks, Alaska. During 1999, the Company relinquished its rights to this property back to Range Minerals Corporation. During 1999 the Company concentrated its activities on mining The Swede Channel and Workman's Bench, which are located within Nolan Placer. In 1999, the Company's share of total gold recovered from The Swede Channel amounted to 289 ounces, and the Company recovered 112 ounces from Workman's Bench and 44 ounces from old tailings during the same period. The Company reduced the size of its lode claim holdings from 239 in 1998 to 32 at November 30, 1999. The Whiskey Gulch Property, consisting of four claims adjoining Newmont's "True North" property was acquired by the Company in 1996 to further enhance its Marshall Dome Property by virtue of its proximity to those claims. The Whiskey Gulch Property was sold to a subsidiary of Kinross Gold Corporation on November 9, 1999 for a cash payment of $50,000 and a retained Net Smelter Return payable by Kinross to Silverado in respect to any gold recovered from the property. Kinross is to pay Silverado on the following basis: PRICE OF GOLD PRODUCTION ROYALTY - --------------- ------------------- $300.00 or less 2.0% of Net Smelter Returns - -------------------- ------------------------------- $300.01 to $350.00 3.0% of Net Smelter Returns - -------------------- ------------------------------- $350.01 to $400.00 3.5% of Net Smelter Returns - -------------------- ------------------------------- $400.01 and above 4.0% of Net Smelter Returns - -------------------------------------------------------- "Price of Gold" is equal to the average, for a particular year for which Net - -------------------------------------------------------------------------------- Smelter Returns are being calculated, of the daily London Bullion Market - -------------------------------------------------------------------------------- Association P.M. Gold Fixing, as established from time to time during the year. - -------------------------------------------------------------------------------- The French Peak Property consists of four mineral claims totaling approximately one square mile, and is located 40 miles northwest of Smithers, British Columbia. In February 1999, the Company chose to relinquish its interest in this property. (B) FINANCIAL INFORMATION RE: INDUSTRY SEGMENTS The Company has one operating segment, being mineral exploration, development and mining. (C) DESCRIPTION OF BUSINESS The Company's plan of operation is to continue to develop and mine its Nolan properties specifically the Workman's Bench and deep Nolan Channel areas. The Company is planning to mine Workman's Bench this summer with concurrent processing and gold recovery as well as begin development of the upper portion of the Nolan Deep Channel this fall. During 1998 the Company successfully negotiated an option agreement with Placer Dome U.S. Inc. to conduct exploration and development on 20.5 square miles of the Company's Ester Dome properties. On November 9, 1998, PDUS terminated the agreement with the Company. The Company, subsequently, entered into negotiations with several other companies to possibly joint venture or vend the property. As the Company was unable to attract outside interest to the Ester Dome project, it subsequently reduced its holdings by relinquishing the Range I and II part of the Ester Dome property back to the owners of those two properties. The Company plans to continue exploration of its Hammond, St.Paul, Grant, and O'Dea properties. The extent of activity will be dependent on available financing. On August 4, 1989, Silverado assigned its Eagle Creek Property to Can-Ex Resources (U.S.), Inc. ("Can-Ex") for a 15% net profits interest to a maximum of $5,000,000. On February 19, 1997, Can-Ex was dissolved and the Eagle Creek property became the property of its parent corporation, Kintana Resources Ltd., a company controlled by Garry Anselmo who is President, Chairman, CEO and a Director of Silverado. The Company's royalty interest in the property remains unaffected by this event. There has been no development activity on the property during the year. In Canada, the Company has allowed its French Peak Property to lapse and does not currently intend to acquire additional property in Canada at this time. From time to time as conditions or funds warrant, the Company may re-evaluate its development programs in response to changing economic or environmental conditions. Such re-evaluation may result in the Company either changing its development priorities or allowing certain properties or portions thereof to lapse. Mining activities in the U.S. are subject to regulation and inspection by the Mining Safety and Health Administration of the United States Department of Labor. In addition, the Company's activities are regulated by a variety of Federal, state, provincial and local laws and regulations relating to protection of the environment and other matters. Many agencies have the authority to require the Company to cease or curtail operations due to noncompliance with laws administered by those agencies. The operation of mining properties also requires a variety of permits from government agencies. Management believes that it has in place or will be able to obtain as necessary all of the required permits for the Company's planned operations. Management knows of no areas of noncompliance with laws or regulations which could close or curtail operations. The Company has accrued a total of $196,000 for further reclamation on the Nolan Gold Project and Grant Mine site on Ester Dome. Additional remediation work takes place during the normal course of mining. In the event of closure or abandonment of its facilities, the Company estimates the accrual for reclamation, net of recoveries, is sufficient to meet its obligations. The Company's properties consist of unpatented Federal mining claims and State mining claims. Titles to unpatented claims are subject to inherent uncertainties, such as whether there has been a discovery of valuable minerals on each claim and whether proper locating and filing prerequisites have been met. Title can only be maintained by the performance of adequate annual assessment work and / or the payment of prescribed rental fees. While the Company believes that all claims which it holds were properly located under applicable law, no assurances can be given in that regard. To date, the Company believes that it has conducted and recorded all annual assessment work necessary to maintain the claims in good standing. Changes to U.S. mining laws currently under consideration would, if enacted, substantially affect all holders of unpatented Federal mining claims by imposing royalty fees on removal of minerals and fundamentally changing the rights and status of unpatented claim holders. Although management believes that the imposition of royalty fees as described above, at a minimal level, would not have a material adverse effect on the Company, it is impossible to predict the extent to which mining or environmental legislation may be enacted or amended nor the effect that such legislation could have on the Company. (D) INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES The following table sets forth selected financial data for each of Silverado's fiscal years ended November 30, 1999, 1998 and 1997, by country of origin for information purposes only.
YEAR ENDED NOVEMBER 30, 1999 1998 1997 ----------------------------------------- Loss for the year Canada. . . . $ (256,641) $ (1,469,472) $(3,594,229) United States (1,192,750) (15,469,431) (820,543) ----------------------------------------- $(1,449,391) $(16,938,903) $(4,414,772) ------------ ------------- ------------ END OF PERIOD Long-lived assets Canada. . . . $ 183,927 $ 212,492 $ 515,612 United States 2,484,559 3,212,410 17,209,468 ----------------------------------------- $ 2,668,486 $ 3,424,902 $17,725,080 ------------ ------------- ------------
For each of the three years ended November 30, 1999, 1998 and 1997, there have been no transfers between geographic segments, nor have there been export sales. Revenue for each of the three years is from sales of gold inventory derived from the Nolan Gold Project. ITEM 2 PROPERTIES - ------- (A) REGISTRANT'S INTEREST Silverado holds interests in mineral properties in the State of Alaska. The Company has conducted sufficient exploration and development work to delineate 100,652 ounces proven and 132,697 probable ore reserves. (B) GENERAL CHARACTER AND TECHNICAL DESCRIPTION OF EACH PROPERTY (1) NOLAN GOLD PROJECT The Nolan Project consists of five contiguous properties covering approximately 6 square miles, 8 miles west of Wiseman, and 175 miles north of Fairbanks, Alaska. These properties are as follows: (A) NOLAN PLACER: This property consists of 160 unpatented Federal placer claims 100 percent owned by Silverado. (B) THOMPSON'S PUP: This property consists of 6 unpatented Federal placer claims, and is subject to a royalty of 3 percent of net profits on 80% of production. (C) DIONNE (MARY'S BENCH): This property, consisting of 15 unpatented Federal placer claims and miscellaneous mining equipment, was purchased in 1993 for $1,000,000 payable over five years. Payments were completed in 1997. (D) SMITH CREEK: This property, consisting of 35 unpatented Federal placer claims and miscellaneous mining equipment, was purchased in 1993 for $200,000 payable over five years with payments originally scheduled to be completed in 1998. As at November 30, 1999 $120,000 (1998: $60,000) in acquisition costs are in arrears. (E) NOLAN LODE: This property consists of 32 unpatented Federal lode claims 100 percent owned by Silverado. The lode claims overlie much of the placer properties and extend beyond them. Production of placer gold from Nolan Creek and its tributaries originally commenced in 1903. Silverado began acquiring claims in the area and developing the placer gold deposits in 1979. Through 1988, Silverado and a lessee produced 2,400 ounces of gold nuggets. Due to the angular nature and attachment to quartz of much of the placer gold recovered, Silverado believes the lode source should be nearby and has staked lode claims to cover the potential source areas. From 1990 to 1993, Silverado conducted reclamation, exploration and development in preparation for commencement of production. Initially, production was carried out on the Thompson's Pup property. Then, in November 1993, the Company commenced production on the Dionne (Mary's Bench) Property. Gold bearing gravels were mined by underground methods from a frozen bench deposit. Since the Winter of 1994/95 almost 14,000 ounces of gold have been recovered by Silverado from these sites, primarily in the form of high-quality nuggets which sell at premium prices. From 1995 to 1997, the Company restricted its activities at Nolan as it refocused its resources on its Ester Dome properties. During this time, the Company substantially reclaimed its previous disturbances During 1998, the Company re-commenced mining operations. The Company concentrated its activities on the Archibald Creek area, located within Nolan Placer. Limited mining on the Swede Channel located within Dionne was also undertaken by a third party. The Company's share of total gold recovered from the Nolan Gold Project in 1998 amounted to 144 ounces. During 1999, the Company conducted mining operations. Mining on the Swede Channel located within Dionne was completed by a third party. The Company's share of the total gold recovered from the Swede Channel in 1999 was 289 ounces. The Company mined and processed gold from the Workman's Bench area located within Smith Creek. A small part of this area was mined in the last week of the fall mining season (prior to winter freeze-up) and yielded 112 ounces of gold. (2) HAMMOND PROPERTY The Hammond Property, consisting of 28 Federal placer claims and 36 Federal lode claims covering one and one-half square miles, was acquired by the Company in December 1994. The Company completed a drilling program in 1995 which identified placer gold deposits similar to those on the adjoining Nolan Gold Project. The lode claims also extended the area of interest for exploration for the lode sources of the placer gold. As at November 30, 1999 $160,000 (1998: $80,000) in option payments are in arrears. (3) MARSHALL DOME PROPERTY The Marshall Dome Gold Project, consists of 38 State claims, 35 of which were acquired by the Company in 1995 due to its proximity and similar geological setting to Newmont Mining Company's now Kinross Gold Corporation's "True North" gold property, immediately to the southwest. The remaining three adjacent claims were located and acquired by the Company prior to 1995. The project covers an area of two and one-half square miles, and is located eighteen miles northeast of Fairbanks and is on the same geological trend as the "True North" gold deposit one mile to the southwest, which is being developed by Kinross Gold Corporation. (4) WHISKEY GULCH PROPERTY This property, acquired by the Company in 1996, is one-half mile southwest of the Marshall Dome Property and adjoins the "True North" property. During 1999, the Company sold its 100% interest to a subsidiary of Kinross Gold Corporation. The Company retains an overriding Net Smelter Interest (see Item 1 "General Development of Business"). (5) ESTER DOME GOLD PROJECT The Ester Dome Project encompasses all of Silverado's optioned properties on Ester Dome, which is accessible by road 10 miles northwest of Fairbanks, Alaska. The specific properties at this site are as follows: (A) GRANT MINE: This property consists of 19 state mineral claims subject to payments of 15% of net profits until $2,000,000 has been paid and 3% of net profits thereafter. In December of 1997, for the purpose of facilitating an agreement with Placer Dome U.S. Inc. and in consideration of a payment by the Company of $20,000, the conditional purchase and sale agreement was amended to reduce the royalty payments to 3% of net profits as defined in the agreement. (B) MAY (ST. PAUL) / BARELKA: This gold property consists of 22 State mineral claims subject to payments of 15% of net profits until $2,000,000 (inflation indexed from 1979) has been paid and 3% of net profits thereafter. (C) DOBB'S: This property consists of 1 unpatented Federal mineral claim and 4 State mineral claims subject to payments of 15% of net profits until $1,500,000 has been paid and 3% of the net profits thereafter. (D) RANGE MINERALS #1: This property consisted of 6 State mineral claims. During 1999 the Company relinquished its interest in this property. (E) RANGE MINERALS #2: This property consists of 419 State mineral claims and one Federal claim. During 1999 the Company relinquished its interest in this property. (6) FRENCH PEAK PROPERTY The French Peak property consists of four mineral claims totaling approximately one square mile, located 40 miles northwest of Smithers, British Columbia. During 1999, the Company relinquished its interest in this property. (C) GLOSSARY OF TECHNICAL TERMS DEVELOPMENT. The process following exploration, whereby a mineral deposit is - ------------ further evaluated and prepared for production. This generally involves significant drilling and may include underground work. DRILLING. The process of boring a hole in the rock to obtain a sample for - --------- determination of metal content. "Diamond Drilling" involves the use of a hollow bit with diamonds on the cutting surface to recover a cylindrical core of rock. "Reverse Circulation Drilling" involves chips of rock being forced back through the center of the drill pipe using air or water. EXPLORATION. The process of using prospecting, geological mapping, geochemical - ----------- and geophysical surveys, drilling, sampling and other means to detect and perform initial evaluations of mineral deposits. FEDERAL LODE CLAIMS, FEDERAL PLACER CLAIMS. Mineral claims up to 20 acres, - ------------------------------------------------ located on federal land under the U.S. Mining Law of 1872. See below for definitions of "Lode" and "Placer". GEOCHEMICAL SURVEY. Sample of soil, rock, silt, water or vegetation analyzed to - ------------------- detect the presence of valuable metals or other metals which may accompany them. E.g., Arsenic may indicate the presence of gold. GEOPHYSICAL SURVEY. Electrical, magnetic and other means used to detect - -------------------- features which may be associated with mineral deposits. GOLD DEPOSIT. A concentration of gold in rock sufficient to be of economic - -------------- interest. LODE. Mineral in place in the host rock, as in "lode gold". - ----- LODE SOURCE. The lode mineral deposit from which placer minerals have been - ------------- derived by erosion. MINERAL CLAIMS. General term used to describe the manner of land acquisition - ---------------- under which the right to explore, develop and extract metals is established. PLACER. Mineral which has been separated from its host rock by natural - ------- processes and is often reconcentrated in streams as "placer deposits" or "placer gold". RESERVE. That part of a mineral deposit which could be economically and legally - -------- extracted or produced at the time of the reserve determination. Reserves are customarily stated in terms of "ore" when dealing with metalliferous minerals. STATE CLAIMS. Mineral claims up to 40 acres, located on State of Alaska lands. - -------------- ITEM 3 LEGAL PROCEEDINGS - ------- A former employee of the Tri-Con Group has initiated a claim against the Company for wrongful dismissal/breach of contract in the amount of $150,000. The Company has been named as a co-defendant in the suit. No provision for this litigation has been made in the financial statements for the year ended November 30, 1999 as the amount of the loss, if any, is indeterminable at this time. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- No matters were submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders through the solicitation of proxies or otherwise. PART II ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - ------ (A) MARKET INFORMATION Silverado's common stock trades on the OTC Bulletin Board under the symbol SLGLF.OB. The following table indicates the high and low bid prices of the common shares during the periods indicated: QUARTER ENDED HIGH BID LOW BID Feb 28, 1998 11/32 3/16 May 31, 1998 15/16 1/16 Aug 31, 1998 1 1/32 7/32 Nov 30 1998 11/32 5/32 Feb 28, 1999 1/8 5/64 May 31, 1999 3/16 7/64 Aug 31, 1999 13/64 1/16 Nov 30 1999 1/8 1/16 (B) HOLDERS OF COMMON SHARES As at March 6, 2000 there were 3,729 registered holders of Silverado's common shares, approximately 81% of whom were located in the United States. (C) DIVIDENDS Silverado Gold Mines Ltd. has not declared dividends on its common stock in the two most recent fiscal years. Silverado is restricted in its ability to pay dividends by limitations under British Columbia law relating to the sufficiency of profits from which dividends may be paid. In addition, Silverado's Articles (the equivalent of the Bylaws of a United States corporation) provide that no dividend shall be paid otherwise than out of funds or assets properly available for the payment of dividends and declaration by the directors as to the amount of such funds or assets available for dividends shall be conclusive. The Canadian Income Tax Act (the "Tax Act") provides in subsection 212(2) that dividends and other distributions deemed to be dividends paid or deemed to be paid by a Canadian resident company to a non-resident person shall be subject to a non-resident withholding tax of 25 percent on the gross amount of the dividend. Subject to certain exceptions, paragraph 212(1)(b) of the Tax Act similarly imposes a 25 percent withholding tax on the gross amount of interest paid by a Canadian resident to a non-resident person. Subsection 115 (1) and Subsection 2 (3) of the Tax Act provide that a non-resident person is subject to tax at the rates generally applicable to persons resident in Canada on any "Taxable capital gain" arising on the disposition of shares of a corporation that is listed on a prescribed stock exchange (which includes OTC bulletin board) if: (i) such non-resident, together with persons with whom he does not deal at arm's length, has held 25% or more of the outstanding shares of any class of stock of the corporation at any time during the five years preceding such disposition; or (ii) the shares disposed of were used by such non-resident in carrying on a business in Canada. A taxable capital gain is presently equal to two-thirds of a capital gain (three-quarters prior to February 27, 2000). Provisions in the Tax Act relating to dividend and interest payments by Canadian residents to persons resident in the United States are subject to the 1980 Canada - United States Income Tax Convention (the "1980 Convention"). Article X of the 1980 Convention provides that the rate of non resident withholding tax on dividends shall not exceed 5 percent of the gross amount of the dividends where the non-resident person who is the beneficial owner of the shares is a corporation which owns at least 10 percent of the voting stock of the corporation paying the dividend. In other cases, the rate of non-resident withholding tax shall not exceed 15 percent. Article XI of the 1980 Convention provides that the rate of non-resident withholding tax on interest shall not generally exceed 10 percent of the gross amount of the interest. The reduced rates of non-resident withholding relating to dividends and interest provided by the 1980 Convention do not apply if the recipient carries on business or provides independent personal services through a permanent establishment situated in Canada, and the shareholding or debt claim is effectively connected with that permanent establishment. In that case, the dividends and interest as the case may be, are subject to tax at the rates generally applicable to persons resident in Canada. Article XIII of the 1980 Convention provides that gains realized by a United States resident on the sale of shares such as those of Silverado may be taxed in both Canada and the United States. However, taxes paid in Canada by a United States resident would, subject to certain limitations, be eligible for foreign tax credit treatment in the United States, thereby minimizing the element of double taxation. Except as described above, there are no government laws, decrees, regulations or treaties that materially restrict the export or import of capital, including foreign exchange controls, or which impose taxes, including withholding provisions, to which United States shareholders are subject. ITEM 6 SELECTED FINANCIAL DATA - ------- The following table sets forth selected financial data for each of Silverado's fiscal years ended November 30, 1999, 1998, 1997, 1996 and 1995.
YEARS ENDED NOVEMBER 30, 1999 1998 1997 1996 1995 000's except per share amounts: Revenues . . . . . . . . . . . . $ 128 $ 58 $ 169 $ 298 $ 3,053 Loss for the Year. . . . . . . . $(1,449) $(16,939) $(4,415) $(4,330) $(4,095) Loss Per Share . . . . . . . . . $ (0.11) $ (1.89) $ (0.66) $ (0.88) $ (1.10) END OF PERIOD Assets . . . . . . . . . . . . . $ 2,759 $ 3,477 $18,231 $18,461 $15,140 Gold Inventory (1) . . . . . . . $ 11 $ 23 $ 49 $ 213 $ 389 Long term Obligations. . . . . . $ 75 $ - $ 2,010 $ 2,092 $ 2,395
(1) Gold inventory is valued at the lower of weighted average cost or net realizable value. ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL - ------- CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The table below sets forth Silverado's working capital and liquidity at the dates indicated:
NOVEMBER 30, 1999 1998 1997 ------------ ------------ ---------- Cash . . . . . . . . . . . . . . . . . . . . $ - $ - $ 20,914 Other current assets . . . . . . . . . . . . 90,502 27,208 423,475 ------------ ------------ ---------- 90,502 27,208 444,389 ------------ ------------ ---------- Bank indebtedness. . . . . . . . . . . . . . (2,385) (4,396) - Accounts payable and accrued liabilities . . (1,162,023) (904,568) (597,478) Mineral claims payable . . . . . . . . . . . (286,500) (342,000) - Loans payable secured by gold inventory. . . (49,130) - - Current portion of capital lease obligation. - - (81,749) Convertible debentures, current portion. . . (2,000,000) (2,000,000) - ------------ ------------ ---------- (3,500,038) (3,250,964 (679,227) ------------ ------------ ---------- Working capital (deficiency) . . . . . . . . $(3,409,536) $(3,223,756) $(234,838) ------------ ------------ ----------
(a) Liquidity As at November 30, 1999 the Company has a working capital deficiency of $3,409,536, including a $2,000,000 convertible debenture which matured and became payable on July 2, 1999. The Company has not made required interest payments of $320,000 to December 31, 1999. The Company is also in arrears for $286,500 of required mineral claims and options payments for certain of its mineral properties during 1999 and 1998. As a result, the Company's rights to these properties may be adversely affected. The Company funded its exploration activities in 1999 by generating $379,445 in capital through private placements and the exercise of options and warrants; receiving $35,642 from the sale of equipment; receiving $127,940 from sale of gold; issuances of a $75,000 convertible debenture; and the receipt of $50,000 cash from the sale of its interest in the Whiskey Gulch Mineral property. The Company plans to continue to raise capital through private placements and warrant issues. The Company also plans to option to third parties the Ester Dome and Marshall Dome properties, near Fairbanks, Alaska. The Company expects to supplement financing activities with gold sales in fiscal 2000. The Company has a significant working capital deficiency at November 30, 1999. As of that date, uncertainty as to the Company's ability to meet its liabilities and commitments as they become payable causes doubt about the Company's ability to continue as a going concern. The Company's ability to continue as a going concern and recover the amounts recorded as mineral properties is dependant on its ability to obtain to obtain the continued forbearance of its creditors, to obtain additional financing and / or the entering into a joint venture agreements with third parties in order to complete exploration, development and production of its mineral properties, the continued delineation of reserves on its properties and the attainment of profitable operations. There is no assurance that such items can be obtained by the Company. Failure to obtain these may cause the Company to significantly decrease its level of exploration and operations and to possibly sell or abandon certain mineral properties or capital assets to reduce commitments or raise cash as required. (b) Capital Resources The Company has minimum aggregate future cash expenditures for work commitments of $50,000 in each of the next five years to maintain one of its properties in good standing in addition to $286,500 of payments in arrears on two properties. The Company has interest commitments of $320,000 as at December 31, 1999 on a $2,000,000 convertible debenture which has matured and is due and payable. The Company and the debenture holders are in negotiations to extend the debenture. (c) Results of Operations NOLAN GOLD PROJECT - -------------------- During 1999, mining of the Swede Channel was continued. The Company's share of total gold recovered from the Swede Channel in 1999 was 289 ounces (1998: 144 ounces). Limited mining was also conducted on the Workman's Bench part of the Smith Creek property and the Company recovered 112 ounces from this area. The Company also processed some of the old tailings from the Dionne property which yielded 44 ounces. The Company recovered a total of 445 ounces of gold from the Nolan Gold Project in 1999. The Company also performed reclamation work on the Archibald part of the Nolan Placer property and on the Swede Channel part of the Dionne property.
OPERATING RESULTS 1999 1998 1997 -------- -------- -------- Revenue from gold sales. . $127,490 $ 57,915 $168,924 Operating Costs. . . . . . 254,242 336,244 378,315 -------- -------- -------- Loss before other expenses $126,302 $278,329 $209,391
The Company incurred only limited gold sales in 1999. The Company expects to maintain only minimal inventory until production from its Nolan properties resume in the spring of 2000. The price of gold has an impact upon the Company's results of operations. The price of gold has maintained a range of $252 to $323 per ounce, down from the 1996 level of $400 per ounce.
OTHER EXPENSES - --------------- 1999 1998 1997 ---------- ----------- ---------- Other Expenses . . . . . . . . . $1,156,089 $ 2,196,520 $4,205,381 Write down of mineral properties 167,000 14,464,054 - ---------- ----------- ---------- $1,323,089 $16,660,574 $4,205,381
DURING 1999, THE COMPANY EVALUATED ITS MINERAL PROPERTIES AND RECORDED A WRITE-DOWN OF $167,000 (1998: 14,464,054). ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ------- The consolidated financial statements listed below were prepared on the basis of accounting principles generally accepted in the United States and are expressed in U.S. dollars. These principles conform, in all material respects, with those generally accepted in Canada. PAGE Auditors' Report F-1 Comments by Auditors for U.S. Readers on Canada - U.S. Reporting Conflict F-1 Consolidated Balance Sheets, November 30, 1999 and 1998 F-2 Consolidated Statements of Operations and Accumulated Deficit, Years Ended November 30, 1999, 1998, and 1997 F-3 Consolidated Statements of Changes in Share Capital F-4 Consolidated Statements of Cash Flows, Years Ended November 30, 1999, 1998 and 1997 F-5 Notes to Consolidated Financial Statements F-6 to F-21 No schedules are presented either because the required information is disclosed - -------------------------------------------------------------------------------- elsewhere in the financial statements, or the schedules are not applicable. - -------------------------------------------------------------------------------- F-1 AUDITORS' REPORT To the Shareholders of Silverado Gold Mines Ltd. We have audited the consolidated balance sheets of Silverado Gold Mines Ltd. as at November 30, 1999 and 1998, and the consolidated statements of operations and accumulated deficit, changes in share capital and cash flows for each of the years in the three year period ended November 30, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at November 30 1999 and 1998, and the results of its operations and its cash flows for each of the years in the three year period ended November 30, 1999, in accordance with United States generally accepted accounting principles. As required by the Company Act (British Columbia), we report, that in our opinion, these principles have been applied on a consistent basis. KPMG LLP Chartered Accountants Vancouver, Canada February 25, 2000 COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-U.S. REPORTING CONFLICT In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the company's ability to continue as a going concern, such as those described in Note 1(a) to the financial statements. Our report to the shareholders dated February 25, 2000, is expressed in accordance with the Canadian reporting standards which do not permit a reference to such events and conditions in the auditor's report when these are adequately disclosed in the financial statements. KPMG LLP Chartered Accountants Vancouver, Canada February 25, 2000
SILVERADO GOLD MINES LTD. F-2 CONSOLIDATED BALANCE SHEETS EXPRESSED IN U.S. DOLLARS NOVEMBER 30, NOVEMBER 30, 1999 1998 ---------------------- ---------------------- Assets Current Assets Gold inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,567 $ 23,448 Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . 79,935 3,760 ---------------------- ---------------------- 90,502 27,208 Mineral Properties and Development (Note 2). . . . . . . . . . . . . . . . 1,224,200 1,600,000 Buildings, Plant and Equipment (Note 3). . . . . . . . . . . . . . . . . . 2,982,608 3,114,785 Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . (1,538,322) (1,289,883) ---------------------- ---------------------- 1,444,286 1,824,902 Deferred financing fees (net of amortization of $186,000; 1998 - $161,438) - 24,562 ---------------------- ---------------------- $ 2,758,988 $ 3,476,672 ---------------------- ---------------------- Liabilities and Shareholders' Equity (Deficiency in Assets) Current Liabilities Bank indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,385 $ 4,396 Accounts payable and accrued liabilities (Note 4). . . . . . . . . . . . 1,162,023 904,568 Mineral claims payable (Note2(a)). . . . . . . . . . . . . . . . . . . . 286,500 342,000 Loans payable secured by gold inventory. . . . . . . . . . . . . . . . . 49,130 - Convertible debentures, current portion (Note 5(a)). . . . . . . . . . . 2,000,000 2,000,000 ---------------------- ---------------------- 3,500,038 3,250,964 Convertible debentures (Note 5(b)) . . . . . . . . . . . . . . . . . . . . 75,000 - Shareholders' Equity (Deficiency in Assets) Share capital (Note 6) Authorized: 100,000,000 (1998-100,000,000) common shares Issued and outstanding: November 30, 1999 - 15,873,224 shares November 30, 1998 - 10,997,890 shares. . . . . . . . . . . . . . . . . 44,454,365 44,074,920 Shares to be issued. . . . . . . . . . . . . . . . . . . . . . . . . . . 28,188 - Deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45,298,603) (43,849,212) ---------------------- ---------------------- (816,050) 225,708 ---------------------- ---------------------- - $ 2,758,988 $ 3,476,672 ---------------------- ---------------------- Continuing operations (Note 1(a)) Commitments and contingencies (Notes 2 and 9) Subsequent events (Note 10)
See accompanying notes to consolidated financial statements.
SILVERADO GOLD MINES LTD. F-3 CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT EXPRESSED IN U.S. DOLLARS YEAR ENDED YEAR ENDED YEAR ENDED NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, 1999 1998 1997 ----------------------- ---------------------- ---------------------- Revenue from gold sales $ 127,940 $ 57,915 $ 168,924 Operating costs Mining and processing costs 227,442 232,405 164,835 Amortization of property and development costs 26,800 43,264 - Reclamation expense (Note 9(c)) - 60,575 213,480 ----------------------- ---------------------- ---------------------- Loss before the undernoted (126,302) (278,329) (209,391) Other expenses Accounting and audit 34,737 69,054 93,450 Amortization of deferred financing fees 24,562 37,200 37,200 Consulting expense - 185,813 78,945 Corporate capital taxes 5,305 - 21,934 Depreciation 301,408 378,471 475,175 Employment contract expense - 22,049 1,099,340 Financing activities - - 100,847 General exploration and development 182,977 - 75,566 Interest on long term debt 165,000 161,381 160,000 Legal 31,612 145,102 206,740 Loss on disposal of buildings, plant and equipment 43,566 178,916 1,557 Loss (gain) on foreign exchange 19,573 (28,467) 55,335 Management salaries - - 65,744 Management services from related party (Note 7) 58,200 321,513 992,646 Office expenses 118,554 174,910 239,518 Other interest and bank charges (net) 14,535 29,228 7,356 Printing and publicity 625 38,712 293,095 Receivable allowance 153,561 363,667 - Reporting and investor relations 1,599 55,279 52,576 Transfer agent fees and mailing expenses 275 63,692 148,357 Write down of deferred mineral properties 167,000 14,464,054 - ----------------------- ---------------------- ---------------------- and development expenditures 1,323,089 16,660,574 4,205,381 Loss for the year (1,449,391) (16,938,903) (4,414,772) Accumulated deficit at beginning of the year (43,849,212) (26,910,309) (22,495,537) ----------------------- ---------------------- ---------------------- Accumulated deficit at end of the year $ (45,298,603) $ (43,849,212) $ (26,910,309) ----------------------- ---------------------- ---------------------- Loss per share (Note 1(g)) $ (0.11) $ (1.89) $ (0.66) ----------------------- ---------------------- ----------------------
SILVERADO GOLD MINES LTD. F-4 CONSOLIDATED STATEMENTS OF CHANGES IN SHARE CAPITAL EXPRESSED IN U.S. DOLLARS YEARS ENDED NOVEMBER 30, 1999, 1998, AND 1997 UNAMORTIZED ADVANCES TO RELATED STOCK PARTIES SECURED BY NUMBER OF SHARE COMPENSATION COMMON SHARES SHARES CAPITAL EXPENSE IN THE COMPANY Balance at November 30, 1996 56,406,493 $ 38,651,294 $ - $ - ------------ -------------------- -------------- ---------------- Year ended November 30, 1997 Shares issued: Share split 4,934,725 - On exercise of contract employee share options 3,390,000 487,500 On exercise of warrants 600,000 102,000 Private placements for cash 14,181,000 2,863,229 Private placement for consulting services: 500,000 For cash 500 For consulting services 169,500 Fair value of share options granted to contract employees 771,389 Fair value of share options granted to consultants 39,008 Stock compensation cost (151,612) Advances to related parties (480,236) ------------ -------------------- -------------- ---------------- 23,605,725 4,433,126 (151,612) (480,236) ------------ -------------------- -------------- ---------------- Balance as at November 30, 1997 80,012,218 43,084,420 (151,612) (480,236) ------------ -------------------- -------------- ---------------- Year ended November 30, 1998 Share consolidation (72,010,996) Shares issued: On exercise of warrants for cash 255,000 216,200 Private placements for cash 2,446,668 372,600 Private placement for consulting services: 125,000 112,500 Fair value of shares issued for mineral property 170,000 289,200 Amortization of stock compensation 151,612 Cash received on sale of common shares by related party 225,448 Uncollected balance recorded as a receivable allowance 254,788 ------------ -------------------- -------------- ---------------- (69,014,328) 990,500 151,612 480,236 ------------ -------------------- -------------- ---------------- Balance as at November 30, 1998 10,997,890 44,074,920 - - ------------ -------------------- -------------- ---------------- Year ended November 30, 1999 Shares issued: On exercise of warrants for cash 4,008,667 250,050 Private placements for cash 866,667 129,395 ------------ -------------------- -------------- ---------------- 4,875,334 379,445 - - ------------ -------------------- -------------- ---------------- Balance as at November 30, 1999 15,873,224 $ 44,454,365 $ - $ - ============ ==================== ============== ================
See accompanying notes to the consolidated financial statements.
SILVERADO GOLD MINES LTD. F-5 CONSOLIDATED STATEMENTS OF CASH FLOWS EXPRESSED IN U.S. DOLLARS YEAR ENDED NOVEMBER 30, 1999 -------------------------- CASH PROVIDED BY (USED FOR): Operations: Loss for the year $ (1,449,391) Items not involving cash: Write down of deferred mineral properties and development expenditures 167,000 Employment contract expense - Consulting services expense - Depreciation 301,408 Amortization of deferred financing fees 24,562 Loss on disposal of buildings, plant and equipment 43,566 Amortization of mineral properties and development 26,800 Changes in non-cash operating working capital: Decrease (increase) in accounts receivable (76,175) Decrease in gold inventory 12,881 Decrease in prepaid expenses paid to related parties - Increase (decrease) in mineral claim payable 136,500 Increase in accounts payable and accrued liabilities 257,455 -------------------------- (555,394) Financing: Bank indebtedness (2,011) Shares issued for cash 379,445 Share subscriptions 28,188 Decrease (increase) in secured advances to related parties - Increase (decrease) in loans payable secured by gold inventory, net 49,130 Increase in convertible debentures 75,000 Decrease in capital lease obligation - 529,752 Investments: Mineral claims and options expenditures, net of recoveries (10,000) Deferred exploration and development expenditures, net of recoveries - Proceeds from sale of equipment 35,642 Purchases of equipment 25,642 Decrease in cash $ - Cash at beginning of the year - -------------------------- Cash at end of the year - -------------------------- Supplemental cash flow information Interest paid - -------------------------- Non-cash activities not reflected in the Statements of cashflows: Reversal of accrued option payments of a prior year $ (192,000) -------------------------- Issue of shares for purchase of mineral property - -------------------------- Issue of shares for consulting services in lieu of payment of cash - -------------------------- Fair value of share options granted to contract employees and consultants - -------------------------- YEAR ENDED YEAR ENDED NOVEMBER 30, NOVEMBER 30, 1998 1997 ------------------------ ----------------------- CASH PROVIDED BY (USED FOR): Operations: Loss for the year $ (16,938,903) $ (4,414,772) Items not involving cash: Write down of deferred mineral properties and development expenditures 14,464,054 - Employment contract expense 22,049 1,099,340 Consulting services expense 167,063 78,945 Depreciation 378,471 475,175 Amortization of deferred financing fees 37,200 37,200 Loss on disposal of buildings, plant and equipment 178,916 1,557 Amortization of mineral properties and development 43,264 - Changes in non-cash operating working capital: Decrease (increase) in accounts receivable 4,537 2,968 Decrease in gold inventory 25,427 164,129 Decrease in prepaid expenses paid to related parties 366,303 113,656 Increase (decrease) in mineral claim payable 342,000 (179,000) Increase in accounts payable and accrued liabilities 382,090 344,555 ------------------------ ----------------------- (527,529) (2,276,247) Financing: Bank indebtedness 4,396 - Shares issued for cash 588,800 3,453,229 Share subscriptions - - Decrease (increase) in secured advances to related parties 480,236 (480,236) Increase (decrease) in loans payable secured by gold inventory, net - (66,511) Increase in convertible debentures - - Decrease in capital lease obligation (91,490) (65,663) ----------------------- ----------------------- 981,942 2,840,819 Investments: Mineral claims and options expenditures, net of recoveries (276,127) (109,947) Deferred exploration and development expenditures, net of recoveries (912,888) (2,289,654) Proceeds from sale of equipment 718,977 - Purchases of equipment (5,289) (69,526) ------------------------ ---------------------- (475,327) (2,469,127) Decrease in cash (20,914) (1,904,555) Cash at beginning of the year 20,914 1,925,469 ------------------------ ----------------------- Cash at end of the year - $ 20,914 ------------------------ ----------------------- Supplemental cash flow information Interest paid $ 80,000 $ 181,436 ------------------------ ----------------------- Non-cash activities not reflected in the Statements of cashflows: Reversal of accrued option payments of a prior year - - ------------------------ ----------------------- Issue of shares for purchase of mineral property $ 289,200 - ------------------------ ----------------------- Issue of shares for consulting services in lieu of payment of cash $ 112,500 $ 169,500 ------------------------ ----------------------- Fair value of share options granted to contract employees and consultants - $ 810,397 ------------------------ -----------------------
See accompanying notes to consolidated financial statements. SILVERADO GOLD MINES LTD. F 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These consolidated financial statements are prepared in conformity with United States generally accepted accounting principles. (A) CONTINUING OPERATIONS At November 30, 1999, the Company had a working capital deficiency of $3,409,536 including a $2,000,000 convertible debenture which matured on July 2, 1999, but was not repaid. The Company has not made required interest payments on the convertible debenture of $320,000 to December 31, 1999. In addition, the Company is in arrears of required mineral claims and option payments for certain of its mineral properties at November 30, 1999, in the amount of $286,500 (1998: $342,000) and therefore, the Company's rights to these properties with a carrying value of $315,000 may be adversely affected as a result of this non-payment. These financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. The application of the going concern concept and the recovery of amounts recorded as mineral properties and development and buildings, plant and equipment is dependent on the Company's ability to obtain the continued forbearance of certain creditors, to obtain additional financing to fund its operations and acquisition, exploration and development activities, the discovery of economically recoverable ore on its properties, and the attainment of profitable operations. Current uncertainty with regard to these matters raises substantial doubt about the Company's ability to continue as a going concern, and the financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company plans to continue to raise capital through private placements and warrant issues. The Company also plans to option to third parties the Ester Dome and Marshall Dome properties, near Fairbanks, Alaska. Production on the Nolan Placer property is set to begin after the winter thaw in May-June 2000, and the Company expects gold sales to supplement financing activities. SILVERADO GOLD MINES LTD. F 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- (B) BASIS OF CONSOLIDATION The consolidated financial statements include the accounts of Silverado Gold Mines Inc., a wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated. (C) GOLD INVENTORY Gold Inventory is valued at the lower of weighted average cost and estimated net realizable value. At November 30, 1999, 1998 and 1997, gold inventory is valued at net realizable value. Any write-down of inventory to net realizable value is included in mining and processing costs. (D) MINERAL PROPERTIES AND DEVELOPMENT The Company confines its exploration activities to areas from which gold has previously been produced or to properties which are contiguous to such areas and have demonstrated mineralization. Accordingly, the Company capitalizes the costs of acquiring mineral claims until such time as the properties are placed into production or abandoned. At that time, costs are amortized on a units of production basis or written off. On an ongoing basis, the Company evaluates each property based on exploration results to date, and considering facts and circumstances such as operating results, cash flows and material changes in the business climate, determines whether any of the properties may be impaired. The carrying value of a long-lived asset is considered impaired when the anticipated discounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows on a discounted rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for the costs of disposal. During 1999, the Company evaluated its mineral properties and recorded a write-down of $167,000 (1998: $14,464,054) based on this evaluation. The write-down for 1998 related primarily to deferred exploration and SILVERADO GOLD MINES LTD. F 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- development which was capitalized in previous years. Exploration costs and option payments are expensed as incurred commencing in 1998. The amounts shown for mineral properties and development which have not yet commenced commercial production represent costs incurred to date, net of recoveries from developmental production, and are not intended to reflect present or future values. Amortization of mineral property costs relating to properties in production is provided during periods of production using the units-of-production method based on an estimated economic life of the ore reserves. The Company's accounting policy for reclamation expenses is contained in note 9(c). (E) BUILDINGS, PLANT AND EQUIPMENT Buildings, plant and equipment are stated at cost. Depreciation is provided on buildings, plant and equipment using the straight-line method based on estimated lives of 3 to 20 years. (F) FOREIGN CURRENCIES The Company considers its functional currency to be the U.S. dollar for its U.S. and Canadian operations. Monetary assets and liabilities denominated in foreign currencies are translated into U.S. funds at the rates of exchange in effect at the year end. Revenue and expense transactions are translated at the rate in effect at the time at which the transactions took place. Foreign exchange gains and losses are included in the determination of income. (G) LOSS PER SHARE Loss per share has been calculated based on the weighted average number of shares outstanding during the year. During fiscal 1998, the outstanding share capital of the Company was consolidated on a 1:10 basis. The effect of the share consolidation was given retroactive recognition in all periods SILVERADO GOLD MINES LTD. F 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- presented. The weighted average number of shares outstanding, for the purpose of loss per share calculations, is as follows: Year to November 30, 1999 13,596,272 Year to November 30, 1998 8,942,186 Year to November 30, 1997 6,699,956 Loss per share does not include the effect of the potential conversions of options, warrants, and debentures as their effect would be anti-dilutive. (H) REVENUE RECOGNITION Gold sales are recognized when title passes to the purchaser. (I) ACCOUNTING FOR STOCK BASED COMPENSATION The Company uses the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") in accounting for its stock based compensation. Compensation cost is the excess, if any, of the quoted market price of the stock at grant date over the amount an employee or director must pay to acquire the stock. The Company's accounting policy for stock based incentive plans to contract employees and consultants is contained in Note 6(d). (J) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management estimates relate to the amortization and depreciation rates and recoverability of mineral properties and development and buildings, plant and equipment, and the determination of accrued remediation expense. Actual results could differ from those estimates. (K) FINANCIAL INSTRUMENTS The carrying amounts reported in the balance sheet for accounts receivable, bank indebtedness, accounts payable and accrued liabilities, SILVERADO GOLD MINES LTD. F 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- and loans payable secured by gold inventory approximate fair values due to the short-term maturity of these instruments. The carrying amounts reported in the balance sheet for convertible debentures approximate their fair values as they bear interest at rates which approximate market rates. 2. MINERAL PROPERTIES AND DEVELOPMENT (A) MINERAL PROPERTIES Ester Dome Properties, Fairbanks Mining District, Alaska -------------------------------------------------------------- These properties, which include the Grant Mine (Burggraf), May/Barelka (St. Paul), and Dobb's properties, and previously included the Range Minerals #1 and Range Minerals #2 properties, make up a contiguous group of claims. The Company's property holdings in this area were expanded by the acquisition of five additional claims in October 1997, known as the "Alaska Gold" property. On February 6, 1998 the Company entered into an agreement with Placer Dome US Inc. ("PDUS") which provided for PDUS to explore and develop the Company's May/Barelka and Range Minerals properties on Ester Dome. Under the agreement, PDUS was to earn a 51.5% interest by performing a minimum of $10,000,000 of work on the property and purchasing $5,450,000 common shares of the Company over a period of five years. During fiscal 1998, the Company received $400,000 in cash and PDUS performed $1,000,000 of work on the property. On November 9, 1998, PDUS exercised its option to terminate the agreement with the Company. During the year ended November 30, 1999, the Company chose to relinquish its interest in the Range Minerals #1 and Range Minerals #2 mineral properties reducing the Company's holdings to an area of approximately 2.5 square miles. All previous deferred costs related to these mineral properties were written off during 1999. Marshall Dome Property, Fairbanks Mining District, Alaska --------------------------------------------------------------- The Company acquired this property in 1995. It covers an area of two and one-half square miles, and is located eighteen miles northeast of Fairbanks. Whiskey Gulch Property, Fairbanks Mining District, Alaska --------------------------------------------------------------- The Company acquired four claims collectively known as "Whiskey Gulch" in 1996. These claims are located near the Company's Marshall Dome property. SILVERADO GOLD MINES LTD. F 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- On November 9, 1999, the Company sold its 100% interest in the Whiskey Gulch mineral property to a subsidiary of Kinross Gold Corporation for $50,000 in cash and a net smelter royalty which escalates from 2.0% to 4.0% depending on the market price of gold. All previous deferred costs were written off during 1999. Nolan Properties, Wiseman Mining District, Alaska - ------------------------------------------------------ These properties, which include the Nolan Placer, Nolan Lode, Thompson's Pup, Dionne (Mary's Bench), and Smith Creek Properties, make up a contiguous group of claims, covering approximately four square miles. As at November 30, 1999, payments on the Smith Creek properties totaling $120,000 (1998: $60,000) are in arrears and included in mineral claims payable. Hammond Property, Wiseman Mining District, Alaska - ------------------------------------------------------ The Company acquired this two square mile property, adjoining the Nolan Gold Properties, in 1994. As at November 30, 1999, option payments totaling $160,000 (1998: $80,000) are in arrears and included in mineral claims payable. French Peak Property, Omineca Mining District, British Columbia - ---------------------------------------------------------------------- This property consisted of four mineral claims covering approximately one square mile located 40 miles northwest of Smithers, British Columbia. During the year ended November 30, 1999, the Company chose to relinquish its interest in the French Peak mineral property. All previous deferred costs were written off during 1999. Property Commitments --------------------- As at November 30, 1999, minimum aggregate future cash expenditures for work commitments required in the next five years to maintain the properties in good standing, in addition to amounts accrued as mineral claims payable, are as follows: Year 2000 $ 50,000 2001 50,000 2002 50,000 2003 50,000 2004 50,000 SILVERADO GOLD MINES LTD. F 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- (B) MINERAL CLAIM EXPENDITURES Cumulative claims expenditures are as follows:
Net Book Net Book Value Year ended November 30, 1999 Value Nov. 30, 1998 Nov. 30, 1999 --------------- ---------------------------------------------- ----------- ----------------- Mineral claim Mineral Recoveries Amortization Write-downs payments claims /Proceeds payments and accruals --------------- ---------------------------------------------- ----------- ----------------- Alaska - ------------------ Ester Dome Gold Project . . . . $ 750,000 $(192,000) $ - $ - $ (152,000) $ 406,000 Marshall Dome. . . 350,000 - - - - 350,000 Nolan Gold Project 350,000 60,000 - (26,800) - 383,200 Hammond Property . 85,000 - - - - 85,000 Whiskey Gulch. . . 50,000 - (50,000) - - - ---------- ---------- ------------ -------------- ------------- ---------- 1,585,000 (132,000) (50,000) (26,800) (152,000) 1,224,200 British Columbia - ------------------ French Peak. . . . 15,000 - - - (15,000) - ---------- ---------- ------------ -------------- ------------- ---------- $1,600,000 $(132,000) $ (50,000) $ (26,800) $ (167,000) $1,224,200 ========== ========== ============ ============== ============= ==========
3. BUILDINGS, PLANT AND EQUIPMENT Buildings, plant and equipment primarily include the mill facility and equipment of the Ester Dome/Grant Mine Gold Project and mining equipment and camp facilities at the Nolan Gold Project.
Accumulated 1999 Net Cost Depreciation Book Value ---------- ------------- ----------- Grant Mine Mill Equipment . . . . . . . $2,076,780 $ 1,014,530 $ 1,062,250 Nolan Gold Project Mining Equipment . . 60,757 29,117 31,640 Mining Equipment. . . . . . . . . . . . 459,787 269,665 190,122 Other Equipment, Leasehold Improvements 385,284 225,010 160,274 ---------- ------------- ----------- $2,982,608 $ 1,538,322 $ 1,444,286 ---------- ------------- -----------
Accumulated 1998 Net Cost Depreciation Book Value ---------- ------------- ----------- Grant Mine Mill Equipment . . . . . . . $2,076,780 $ 799,282 $ 1,277,498 Nolan Gold Project Mining Equipment . . 60,757 24,579 36,178 Mining Equipment. . . . . . . . . . . . 591,651 277,917 313,734 Other Equipment, Leasehold Improvements 385,597 188,105 197,492 ---------- ------------- ----------- $3,114,785 $ 1,289,883 $ 1,824,902 ---------- ------------- -----------
SILVERADO GOLD MINES LTD. F 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- 4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities consist of: 1999 1998 ---- ---- Accounts payable $ 659,356 $ 561,902 Accrued interest 306,667 146,666 Accrued reclamation expense (Note 9(c)) 196,000 196,000 ----------- --------- $1,162,023 $ 904,568 ----------- --------- 5. CONVERTIBLE DEBENTURES (A) In July 1994, the Company issued a convertible callable debenture for $2,000,000 with interest payable at the rate of 8.0% per annum on December 31 and June 30 each year. The debenture is unsecured and was due July 2, 1999. The debenture may be converted in whole or in part by the holder into common shares of the Company at a conversion price of $18.57 U.S. per share (the "Conversion Price"). In addition, conversion of the debenture may be called by the Company provided that the average trading price of the Company's common stock has exceeded 125% of the Conversion Price for period of twenty consecutive trading days. Financing fees paid related to the debenture have been deferred and amortized on a straight line basis over the debenture term of 60 months. The Company has not made required interest payments of $320,000 to December 31, 1999. The Company was granted a deferral of these payments based on semi-monthly progress updates until financing is in place. Total interest payable at November 30, 1999, amounting to $306,667 (1998 - $146,666) has been recorded as a current liability. (B) In February 1999, the Company issued a convertible debenture for $75,000 with interest payable at a rate of 5.0% per annum. The debenture is unsecured and is due February 28, 2002. The debenture may be converted in whole or in part by the holder into common shares of the Company at a conversion price of $0.40 per share. 6. SHARE CAPITAL (A) COMMON SHARES By special resolution passed on May 21, 1997, the Company subdivided its common shares with each 13 common shares being subdivided into 14 common shares. SILVERADO GOLD MINES LTD. F 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- By Special Resolution passed May 25, 1998, the Company consolidated its common shares with each 10 common shares being consolidated into 1 common share. Concurrently, the Company increased its authorized capital to 100,000,000 common shares without par value. The effect of the 1:10 consolidation during 1998 and the 14:13 share split during 1997 has been retroactively applied to all share capital balances disclosed in this note. The Company has reserved 295,192 (1998: 107,692) shares for issuance upon the potential conversion of convertible debentures. (B) DIRECTOR AND EMPLOYEE OPTIONS The following director and employee options were granted and canceled during the years ended November 30, 1997, 1998, and 1999 and were outstanding at these dates:
Number of Weighted Average shares Exercise Price ---------- --------------- Outstanding at November 30, 1996 177,692 $ 7.33 Granted. . . . . . . . . . . . 50,769 4.20 ---------- --------------- Outstanding at November 30, 1997 228,461 6.63 Granted. . . . . . . . . . . . 10,000 2.80 ---------- --------------- Outstanding at November 30, 1998 238,461 6.47 Granted. . . . . . . . . . . . 3,500,000 0.10 Canceled . . . . . . . . . . . (238,461) 6.47 ---------- --------------- Outstanding at November 30, 1999 3,500,000 $ 0.10 ---------- ---------------
The weighted average remaining contractual life of the options outstanding at November 30, 1999, was 5 years (1998: 7 years). The Company accounts for stock compensation arising from options to employee and directors in accordance with APB 25. The exercise price of the options is equal to the market price of the underlying shares on the date of grant of the options. Therefore no compensation cost arises when the options are granted. If, at the time of any alteration to the terms of an option, the market price of the Company's shares exceeds the exercise price of the option at that date, then this excess is credited to share capital and expensed over the term of the service period. SILVERADO GOLD MINES LTD. F 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- Had the compensation cost for these employee and director options been determined based on fair value at the grant dates, consistent with the requirements of Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation", the Company's net loss and loss per share would have increased to the pro forma amounts indicated below. 1999 1998 1997 ---- ---- ---- Loss for the year As reported $1,449,391 $16,938,403 $4,414,772 Pro Forma 1,633,121 16,938,403 4,543,773 1999 1998 1997 ---- ---- ---- Loss per common share As reported $0.11 $1.89 $0.66 Pro Forma 0.12 1.89 0.88 The estimated weighted average fair value of the options granted was prepared assuming a risk-free rate of 6.5% (1998 and 1997 - 6%), an expected dividend yield of 0% (1998 and 1997 - 0%), an expected volatility of 105% (1998 and 1997 - - 57%), and a weighted average expected life of 5 years (1998 and 1997 - 9 years). The estimate was made using the Black-Scholes Pricing Model. SILVERADO GOLD MINES LTD. F 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- (C) WARRANTS In conjunction with the private placement of common shares, the Company has issued and has outstanding at November 30, 1998 and 1999, the following share purchase warrants. Each share purchase warrant entitles the holder to acquire one common share of the Company.
Balance Exercised in Canceled in Outstanding Exercise Expiry Nov. 30, 1998 Issued in 1999 1999 1999 Nov. 30, 1999 Price Date Notes - ------------- -------------- ----------- --------- ------------- ------ ----- ------ 215,385 - - (215,385) - $ 3.90 Mar99 38,200 343,800 (382,000) - - 0.07 Sep99 (1) 51,000 459,000 (510,000) - - 0.07 Sep99 (2) 36,000 324,000 (360,000) - - 0.07 Oct99 (3) 55,000 - - (55,000) - 1.70 Sep99 250,000 - - - 250,000 2.20 Mar00 250,000 - - - 250,000 2.20 Mar00 200,000 - (200,000) - - 0.04 Jun00 (4) 140,000 - (140,000) - - 0.04 Aug00 (5) 216,667 - (216,667) - - 0.04 Sep00 (6) 533,334 866,666 (1,400,000) - - 0.05 Sep00 (7) 800,000 - (800,000) - - 0.07 Oct00 (8) 866,667 - - 866,667 0.05 Oct00 (9) - ------------- -------------- ----------- --------- ------------- 2,785,586 2,860,133 (4,008,667) (270,385) 1,366,667 - ------------- -------------- ----------- --------- ------------- (1) Original exercise price changed from $0.20 per share to $0.07 per share and an additional 343,800 share purchase warrants granted to the warrant holder. (2) Original exercise price changed from $0.20 per share to $0.07 per share and an additional 459,000 share purchase warrants granted to the warrant holder. (3) Original exercise price changed from $0.20 per share to $0.07 per share and an additional 324,000 share purchase warrants granted to the warrant holder. (4) Original exercise price changed from $0.25 per share to $0.04 per share. (5) Original exercise price changed from $0.30 per share to $0.04 per share. (6) Original exercise price changed from $0.18 per share to $0.04 per share. (7) Original exercise price changed from $0.20 per share to $0.05 per share and an additional 866,666 share purchase warrants granted to the warrant holder. (8) Original exercise price changed from $0.20 per share to $0.07 per share. (9) Original exercise price changed from $0.20 per share to $0.05 per share.
(D) CONTRACT EMPLOYEE OPTIONS From time to time, the Company issues options for the purchase of common shares to selected part-time independent contract employees as sole compensation for contracted services. The options are exercisable either at the date the options are granted, or in increments over the terms of the employment contracts. The Company accounts for stock compensation arising from these options in accordance with Statement of Financial Standards No. 123, "Accounting for Stock Based Compensation". Under this statement, stock compensation cost to contract employees is measured at the grant date of the stock option based on the fair value of the award and is recognized over the service period. SILVERADO GOLD MINES LTD. F 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- The following contract employee stock options were granted, exercised, canceled and expired during the years ended November 30, 1997, 1998, and 1999 and were outstanding at these dates:
Number of Weighted Average shares Exercise Price --------- -------------- Outstanding at November 30, 1996 310,208 $ 5.20 Granted. . . . . . . . . . . . . 397,385 1.67 Exercised. . . . . . . . . . . . (365,077) 1.30 Expired or canceled. . . . . . . (279,623) 5.29 --------- ------- Outstanding at November 30, 1997 62,892 4.83 Expired or canceled. . . . . . . (46,738) 4.54 --------- ------- Outstanding at November 30, 1998 16,154 5.57 Expired or canceled. . . . . . . (16,154) 5.57 --------- ------- Outstanding at November 30, 1999 - $ - --------- -------
The weighted average remaining contractual life of the options outstanding at November 30, 1998 was 7 months (1997 - 1 month). The estimated fair value of the options granted during 1997 was prepared assuming a risk-free rate of 6%, an expected volatility of 57%, an expected dividend yield of 0%, and a weighted average expected life of 3 months. The estimate was made using the Black-Scholes Pricing Model. No such options were issued in 1998 or 1999. (E) OTHER STOCK-BASED COMPENSATION In fiscal 1997, the Company issued 50,000 common shares with a fair value of $3.40 per share and agreed to grant options to purchase 50,000 common shares at an exercise price of $2.80 per share exerciseable until September 5, 1999 to Millennium Holdings Group Ltd. ("Millennium") as partial consideration for a consulting agreement dated September 1997. As at November 30, 1999, there are nil (1998 - 50,000; 1997 - nil) options outstanding. SILVERADO GOLD MINES LTD. F 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- In fiscal 1997, the Company estimated the fair value of the options which were granted to Millennium in 1998 using the Black-Scholes Pricing Model. This estimate assumed a risk free rate of 6%, an expected volatility of 57%, and a life of two years. The cost of this compensation was recognized over the term of the contract, being one year. In fiscal 1998, the Company issued 125,000 common shares with a fair value of $0.90 per share in exchange for consulting services. 7. RELATED PARTY TRANSACTIONS The Company has had related party transactions with Tri-Con Mining Ltd., Tri-Con Mining Inc., Tri-Con Mining Alaska Inc. collectively the "Tri-Con Mining Group"; and Anselmo Holdings Ltd., all of which are controlled by a director of the Company, and Kintana Resources Ltd., a company related by virtue of common directors. The Tri-Con Group are operations, exploration and development contractors, and have been employed by the Company under contract since 1972 to carry out all its field work and to provide administrative and management services. Under the current contract of January, 1997, work is charged at cost plus 15% for operations and cost plus 25 percent for exploration and development. Cost includes a 15 percent charge for office overhead. Services of the directors of the Tri-Con Group are charged at a rate of Cdn. $75 per hour. Services of the directors of the Tri-Con Group who are also Directors of the Company are not charged. At November 30, 1999, the Company had paid $241,265 (1998 - $363,667) to the Tri-Con Group for exploration, development and administration services to be performed during fiscal 2000 on behalf of the Company. The amounts have been written-off in the respective years as a receivable allowance. The aggregate amounts paid to the Tri-Con Group each year by category, including amounts relating to the Grant Mine Project and Nolan properties, for disbursements and for services rendered by the Tri-Con Group personnel working on the Company's projects, and including SILVERADO GOLD MINES LTD. F 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- interest charged on outstanding balance at the Tri-Con Group's borrowing costs are shown below:
1999 1998 1997 --------- ----------- ----------- Operations and Field Services. . . . . . . . . . . . . . . . . $ 24,562 $ 192,706 $ 277,479 Exploration and Development Services . . . . . . . . . . . . . 214,211 1,160,169 2,190,240 Administrative and Management Services . . . . . . . . . . . . 58,200 321,513 992,646 --------- ----------- ----------- $296,973 $1,674,388 $3,460,365 --------- ----------- ----------- Amount of total charges in excess of Tri-Con costs incurred. . . . . . . . . . . . . . . . . . . . . . . . $ 54,526 $ 248,858 $ 395,240 --------- ----------- ----------- Excess amount charged as a percentage of actual costs incurred 24.0% 17.5% 12.8% --------- ----------- -----------
During fiscal 1997, the Company advanced $480,236 to the Tri-Con Group secured by that portion of the 2,119,834 common shares of the Company owned by Tri-Con. During fiscal 1998, the Tri-Con Group sold all of the 2,119,934 common shares held in the Company for net proceeds of $225,448. The Company received $225,448 from the Tri-Con Group as part payment of the $480,236 advance receivable at November 30, 1997. The remaining unpaid amount was written off as a receivable allowance. 8. INCOME TAXES Tax effects of temporary differences that give rise to deferred tax assets at November 30, 1999 and 1998 are as follows:
1999 1998 ------------ ------------ Net operating loss carry forwards . . . . . . . . . . $ 9,849,000 $ 9,844,000 Valuation allowance . . . . . . . . . . . . . . . . . (9,479,000) (9,213,000) ------------ ------------ Net deferred tax assets . . . . . . . . . . . . . . . 370,000 631,000 Deferred tax liability Temporary differences arising from mineral properties and building, plant and equipment. . . . . . . . . . (370,000) (631,000) ------------ ------------ Net deferred tax asset. . . . . . . . . . . . . . . . $ - $ - ------------ ------------
SILVERADO GOLD MINES LTD. F 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- At November 30, 1999, the Company has the following losses carried forward available to reduce future years' income for U.S. income tax purposes. The tax effect of these losses has not been recorded in the accounts. Available Until Losses Carried Forward --------------- ---------------------- 2000 $ 1,235,000 2001 2,749,000 2002 1,178,000 2003 1,504,000 2004 1,161,000 2005 742,000 2006 431,000 2007 747,000 2008 2,101,000 2009 2,011,000 2010 2,786,000 2011 1,781,000 2012 1,596,000 2013 1,050,000 2014 658,000 --------------- ---------------------- $ 21,730,000 --------------- ---------------------- Income tax expense attributable to net losses for the year ended November 30, 1999 was $nil (1998 and 1997: $nil). The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate of 34% (1998 and 1997: 34%) to income before provision for income taxes. The sources and tax effects of the differences are as follows:
1999 1998 1997 ---------- ------------ ------------ Computed "expected" tax benefit. $(493,000) $(5,759,000) $(1,501,000) Tax loss expired during the year 227,000 186,000 336,000 Change in valuation allowance. . 266,000 5,573,000 1,165,000 ---------- ------------ ------------ Income tax provision . . . . . . $ - $ - $ - ---------- ------------ ------------
SILVERADO GOLD MINES LTD. F 21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- 9. COMMITMENTS AND CONTINGENCIES (A) OFFICE LEASE On January 20, 1994, the Company entered into a lease agreement for office premises for a term of 10 years commencing April 1, 1994, with an approximate annual rental of $120,000 (Cdn) including operating costs. (B) SEVERANCE AGREEMENTS WITH DIRECTORS The Company has entered into compensation agreements with the three directors of the Company. The agreements provide for severance arrangements where a change of control of the Company occurs, as defined, and the directors are terminated. The compensation payable to the directors aggregates $4,200,000 (1998: $4,200,000) plus the amount of annual bonuses and other benefits that they would have received in the eighteen months following termination. (C) RECLAMATION The Company's operations are affected by Federal, state, provincial and local laws and regulations regarding environmental protection. The Company estimates the cost of reclamation based primarily upon environmental and regulatory requirements. These costs are accrued annually and the accrued liability is reduced as reclamation expenditures are made. Details of the Company's accrued liability at November 30, 1999 and 1998 are as follows:
1999 1998 -------- --------- Balance, beginning of year $196,000 $196,000 Cost incurred in year. . . - (60,575) Amount expensed in year. . - 60,575 -------- --------- Balance, end of year . . . $196,000 $196,000 ======== =========
(D) LITIGATION A former employee of the Tri-Con Group has initiated a claim against the Company for wrongful dismissal/breach of contract in the amount of $150,000. The Company has been named as a co-defendant in the suit. No provision for this litigation has been made in these financial statements and the amount of the loss, if any, would be accounted for prospectively. SILVERADO GOLD MINES LTD. F 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997 - --------------------------------------------------- 10. SUBSEQUENT EVENTS (a) On February 18, 2000, 866,667 share purchase warrants were exercised at a price of $0.05 per share and the Company issued 866,667 common shares from treasury for proceeds of $43,333. (b) Subsequent to year end the Company issued an additional 2,000,000 common share purchase warrants, to a warrant holder from a previous private placement, at an exercise price of $0.04 per share expiring June 23, 2000. ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE - ------ ---------------------------------------------------------------------- None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. - --------- -------------------------------------------------------- (A) (B) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS. The executive officers and directors of the Company are listed below. The directors of the Company are elected to hold office until the next annual meeting of the shareholders and until their respective successors have been elected and qualified. Executive officers of the Company are elected by the Board of Directors and hold office until their successors are elected and qualified. The current executive officers and directors of the Company are: Name Age Position - ----- --- -------- Garry L. Anselmo(1) 56 Chairman of the Board and Chief Operating Officer since May 4, 1973; President and Chief Executive Officer from May 1, 1979 to November 4, 1994, and from March 1,1997 to present. James F. Dixon(1)(2) 52 Director since May 6, 1988 Stuart C. McCulloch(1)(2) 64 Director since December 14, 1998 _____________ (1) Members of Silverado's Audit Committee (2) Members of Silverado's Compensation Committee (C) SIGNIFICANT EMPLOYEES. Not applicable to reporting registrant. (D) FAMILY RELATIONSHIPS. There are no family relationships among any of the Company's officers and/or directors. (E) BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS. Mr. Anselmo is presently the Chairman of the Board of Directors, President, Chief Executive and Chief Financial Officer of The Company. He is also the Chairman, Chief Executive Officer and Chief Financial Officer of its wholly owned subsidiary, Silverado Gold Mines Inc. He resumed his duties as President, Chief Executive Officer, and Chief Financial Officer of the Company on March 1, 1997, after transferring those duties to J.P. Tangen from November 1, 1994, until March 1, 1997. Prior to the arrival of Mr. Tangen, he held those duties from May of 1973. Mr. Anselmo founded Tri-Con Mining Ltd., a private mining service company, in 1968, and is currently a shareholder, Director, and President of Tri-Con. He is also Chairman and a Director of Tri-Con's United States operating subsidiaries, Tri-Con Mining Inc. and Tri-Con Mining Alaska, Inc. Mr. Dixon is a Director of the Company and its U.S. subsidiary Silverado Gold Mines Inc. Mr. Dixon holds a Bachelor of Commerce Degree and has been engaged in the practice of law since 1973. He is a lawyer and a partner in the law firm of Shandro Dixon Edgson, Barristers and Solicitors, of Vancouver, British Columbia. Mr. McCulloch is a Director of the Company and its U.S. subsidiary. Mr. McCulloch retired as District Manager from Canada Safeway in January, 1991. (F) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS. During the past five years, no director or executive officer of the Company has been involved in legal proceedings of the nature required to be disclosed by this Item. (G) PROMOTERS AND CONTROL PERSONS. Not applicable to reporting registrant. COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT. The Company's executive officers and directors are required under Section 16 of the U.S. Securities Exchange Act of 1934 to file reports of ownership and changes in ownership with the U.S. Securities and Exchange Commission. Copies of those reports must also be furnished to the Company. Based solely on a review of the copies of reports furnished to the Company and written representations that no other reports were required, the Company believes that during the fiscal year ended November 30, 1999 each of its officers and directors timely complied with all filing requirements. ITEM 11. EXECUTIVE COMPENSATION. - --------- ----------------------- (A) (B) SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation Awards ---------------------------------------------------- Name and Securities Underlying Principal Position Year $ Salary($) Bonus($) Other($) Options/SAR's(#) All Other($) - ------------------- ---- - ----------- ---------- -------- --------------------- ------------ Garry L. Anselmo (1) 1999 Cdn $0 $0 $0 2,000,000 $0 Chairman, President, 1998 Cdn $0 $0 $0 $0 CEO & CFO 1997 Cdn $0 $0 $0 $0 (1) Mr. Anselmo is employed and compensated by Tri-Con Mining Ltd., which provides management and mining exploration and development services to the Company.
(C) (D) OPTION/SAR GRANTS AND EXERCISES AND YEAR END VALUES. During the fiscal year ended November 30, 1999, 2,000,000 stock options were granted to or exercised by the above named executive officer. The following table shows the value of unexercised options held at fiscal year-end by each named executive officer.
#Securities Percent of Total Underlying Options Granted Exercise Grant Date Unexercised to Employees in (Base) Price Present Value $ Executive Officer Options Fiscal Year ($/share) Expiration Date (1) - ----------------- ----------- ---------------- ------------- --------------- --------------- G.L. Anselmo 2,000,000 57% $0.10 December 1, 2004 $104,990 - ------------------------------------------------------------------------------------------- (1) The grant date present value was estimated using the Black-Scholes Option Pricing Model. The estimated weighted average fair value of the options granted is prepared assuming a risk-free rate of 6.5%, an expected dividend yield of 0%, an expected volatility of 105%, and a weighted average expected life of 5 years.
(E) (F) LONG-TERM INCENTIVE PLANS AND DEFINED BENEFIT PLANS. The Company does not have any long-term incentive plans, pension plans, or similar compensatory plans for its Executive Officers. (G) COMPENSATION OF DIRECTORS. Directors of the Company receive no fees on an annual or per meeting basis, but the Company has periodically granted to directors Options to purchase Common Shares. (H) EMPLOYMENT CONTRACTS AND TERMINATION AND CHANGE IN CONTROL ARRANGEMENTS. The Company has entered into compensation agreements with the three directors of the Company. The agreements provide for severance arrangements where change of control of the Company occurs, as defined, and the directors are terminated. The compensation payable to the directors aggregates $4,200,000 (1998: $4,200,000) plus the amount of annual bonuses and other benefits that they would have received in the eighteen months following termination. (I) REPORT ON REPRICING OF OPTIONS/SAR'S. During the fiscal year ended November 30, 1999, the Company canceled 107,692 stock options previously awarded to Garry L. Anselmo. These options had an exercise price of $8.17 and were to expire December 12, 2004. The Company granted 2,000,000 stock options with an exercise price of $0.10 expiring December 1, 2004. The exercise price is equal to the market value of the underlying securities at the date of grant. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. - --------- ----------------------------------------------------------------- (A) (B) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth information as of February 29, 2000, as to the beneficial ownership of shares of the Company's only outstanding class of securities, its Common Stock: by each person or group who, to the knowledge of the Company at that date, was a beneficial owner of 5% or more of the outstanding shares of Common Stock; by all directors; by each executive officer required to be named in the summary compensation table; and by all directors and executive officers as a group. The table does not include information regarding shares of Common Stock held in the names of certain depositories/clearing agencies as nominee for various brokers and individuals.
AMOUNT AND NATURE PERCENT OF NAME/ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OUTSTANDING SHARES - ---------------------------------------- ----------------------- ------------------ Garry L. Anselmo (1) . . . . . . . . . . 2,000,175 0.9 James F. Dixon (2) . . . . . . . . . . . 717, 331 0.5 All Directors and Executive Officers as a group. . . . . . . . . . . . . . . . 0.0 Tri-Con Group Suite 505, 1111 West Georgia Street, Vancouver, B.C., V6E 4M3 . . . . . . . . 168 0.0 (1) Comprised of 168 shares owned by Tri-Con Mining Ltd., of which Garry Anselmo owns 75%; 2,000,000 in exercisable stock options, and 7 shares held directly by Mr. Anselmo. (2) Includes directors options of 700,000 shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. - --------- -------------------------------------------------- The Company has had related party transactions with Tri-Con Mining Ltd., Tri-Con Mining Inc., Tri-Con Mining Alaska Inc., collectively the "Tri-Con Mining Group" and Anselmo Holdings Ltd., all of which are controlled by a director of the Company, and Kintana Resources Ltd., a company related by virtue of common directors. The Tri-Con Mining Group are operations, exploration and development contractors, and have been employed by the Company under contract since 1972 to carry out all its field work and to provide administrative and management services. Under the current contract of January, 1997, work is charged at cost plus 15% for operations and cost plus 25% for exploration and development. Costs includes a 15% charge for office overhead. Services of the directors of the Tri-Con Group are charged at a rate of Cdn. $75 per hour. Services of the directors of the Tri-Con Group who are also Directors of the Company are not charged. At November 30, 1999, the Company had paid $241,265 (1998: $363,667) to the Tri-Con Group for exploration, development and administration services to be performed during fiscal 2000 on behalf of the Company. The amounts have been written-off in the respective years as a receivable allowance. PART IV ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES - -------- ------------------------------------------ (a) FINANCIAL STATEMENTS (1) The following financial statements are included in part II, Item 8 to this report: Auditors' Report Comments by Auditors for U.S. Readers on Canada - U.S. Reporting Conflict Consolidated Balance Sheets at November 30, 1999 and 1998 Consolidated Statements of Operations and Accumulated Deficit, years ended November 30, 1999, 1998 and 1997 Consolidated Statements of Cash Flow, years ended November 30, 1999, 1998, and 1997 Consolidated Statements of Changes in Share Capital, years ended November 30, 1999, 1998 and 1997 Notes to Consolidated Financial Statements (2) Financial Statement Schedules No schedules are presented either because the required information is disclosed elsewhere in the financial statements, or the schedules are not applicable. (3) Exhibits required to be filed are listed in Item 14 (c ) (b) REPORTS ON FORM 8-K No reports on Form 8-K were filed during the last quarter of the fiscal year ending November 30, 1999. (c ) EXHIBITS None. POWER OF ATTORNEY ----------------- KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints G.L. Anselmo his true and lawful attorney-in-fact and agent, with full power of substitution and restitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this annual report on Form 10-K, and to file the same with all exhibits thereto and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on the dates indicated. /s/ James F. Dixon March 8, 2000 - --------------------- --------------- James F. Dixon Date Director /s/ Stuart C. McCulloch March 8, 2000 - -------------------------- --------------- Stuart C. McCulloch Date Director Pursuant to the requirements of Section 1 of 15(d) the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SILVERADO GOLD MINES LTD. BY: /s/ G.L. Anselmo Date: March 9, 2000 ------------------ G.L. Anselmo, President, Chairman, C.E.O. EX-27 2 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 1 12-MOS NOV-30-1999 DEC-01-1998 NOV-30-1999 2385) 0 79935 0 10567 90502 2982608 (1538322) 2758988 3500038 0 0 0 44454365 0 2758988 127940 127940 227442 254242 1323089 0 0 (1449391) 0 0 0 0 0 (1449391) (0.11) 0
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