-----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, Bt6MOz+oBqhKYooE8UKOiR1uMtJmdGbRZEGWruvpDbT30VeSDCdqgtWei7lBOmZP 7gY1qkyZpcO4t1GnMBAnuQ== 0001085037-01-000124.txt : 20010319 0001085037-01-000124.hdr.sgml : 20010319 ACCESSION NUMBER: 0001085037-01-000124 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001130 FILED AS OF DATE: 20010316 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: 1570162 BUSINESS ADDRESS: STREET 1: 1111 WEST GEORGIA ST STREET 2: SUITE 505 CITY: VANCOUVER STATE: A1 BUSINESS PHONE: 6046891535 MAIL ADDRESS: STREET 1: 1111 WEST GEORGIA ST STREET 2: SUITE 505 CITY: VANCOUVER STATE: A1 FORMER COMPANY: FORMER CONFORMED NAME: SILVERADO MINES LTD DATE OF NAME CHANGE: 19940722 10-K 1 0001.txt 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, 2000 ------------------- 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 of incorporation or organization) (IRS Employer ID No.) Suite 505, 1111 West Georgia Street Vancouver, British Columbia, Canada V6E 4M3 (604) 689-1535 - ------------------------------------------------ -------------- (Address of Principal Executive Offices) (Registrant's telephone number) Securities registered pursuant to section 12(b) of the Act: None Securities registered pursuant to section 12(g) of the Act: Common Shares, no par value (Title of Class) The Company's Common Stock trades on the OTC Bulletin Board under the trading symbol SLGLF.OB (Name of each exchange on which registered) Indicate by check mark the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if 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 February 28, 2001 was $ 4,778,141. The number of shares outstanding on February 28, 2001 was 30,589,891 Total number of pages, including cover page: F1 Consolidated Financial Statements (Expressed in U.S. Dollars) SILVERADO GOLD MINES LTD. Years ended November 30, 2000, 1999 and 1998 F2 KPMG LLP CHARTERED ACCOUNTANTS BOX 10426, 777 Dunsmuir Street Vancouver BC V7Y 1K3 Canada Telephone (604) 691-3000 Telefax (604) 691-3031 www.kpmg.ca AUDITORS' REPORT TO THE SHAREHOLDERS We have audited the consolidated balance sheets of Silverado Gold Mines Ltd. as at November 30, 2000 and 1999, and the consolidated statements of operations, stockholders' equity (deficiency) and cash flows for each of the years in the three year period ended November 30, 2000. 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. With respect to the consolidated financial statements for the year ended November 30, 2000, we conducted our audit in accordance with Canadian and United States generally accepted auditing standards. With respect to the consolidated financial statements for the years ended November 30, 1999 and 1998, 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, 2000 and 1999, and the results of its operations and its cash flows for each of the years in the three year period ended November 30, 2000, in accordance with United States and Canadian 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. /s/ KPMG LLP Chartered Accountants Vancouver, Canada March 14, 2001 COMMENTS BY AUDITOR FOR U.S. READERS ON CANADA-U.S. REPORTING DIFFERENCE 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 2(a) to the financial statements. Our report to the shareholders dated March 14, 2001, is expressed in accordance with 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. /s/ KPMG LLP Chartered Accountants Vancouver, Canada March 14, 2001 F3
SILVERADO GOLD MINES LTD. Consolidated Balance Sheets (Expressed in U.S. Dollars) November 30, 2000 and 1999 2000 1999 Assets Current assets: Gold inventory. . . . . . . . . . . . . . . . . . . . . . . . $ 18,750 $ 10,567 Accounts receivable . . . . . . . . . . . . . . . . . . . . . 5,856 79,935 24,606 90,502 Mineral properties (note 3) . . . . . . . . . . . . . . . . . 1,209,529 1,224,200 Buildings, plant and equipment (note 4) . . . . . . . . . . . 2,982,608 2,982,608 Accumulated depreciation. . . . . . . . . . . . . . . . . . . 1,891,048 1,538,322 -------------------------------------- 1,091,560 1,444,286 -------------------------------------- $ 2,325,695 $ 2,758,988 Liabilities and Stockholders' Equity (Deficiency) Current liabilities: Bank indebtedness . . . . . . . . . . . . . . . . . . . . . . $ 3,007 $ 2,385 Accounts payable and accrued liabilities (note 5) . . . . . . 1,213,503 1,162,023 Loans payable secured by gold inventory . . . . . . . . . . . 36,651 49,130 Mineral claims payable. . . . . . . . . . . . . . . . . . . . 366,500 286,500 Due to related party (note 8) . . . . . . . . . . . . . . . . 111,776 - Convertible debenture, current portion (note 6(a)). . . . . . 2,000,000 2,000,000 ------------------------------------ 3,731,437 3,500,038 Convertible debenture (note 6(b)) . . . . . . . . . . . . . . 75,000 75,000 Stockholders' equity (deficiency): Common stock (note 7): Authorized: 100,000,000 common shares Issued and outstanding: November 30, 2000 - 30,589,891 shares . . . . . . . . . . . . 45,669,977 44,454,365 November 30, 1999 - 15,873,224 shares Share subscriptions received. . . . . . . . . . . . . . . . . 20,000 28,188 Accumulated deficit . . . . . . . . . . . . . . . . . . . . . (47,170,719) (45,298,603) -------------------------------------- (1,480,742) (816,050) -------------------------------------- $ 2,325,695 $ 2,758,988 Continuing operations (note 2(a)) Commitments and contingencies (notes 3 and 10) Subsequent events (notes 10(c) and 13) See accompanying notes to consolidated financial statements. Approved on behalf of the Board: /s/ signed /s/ signed Garry L. Anselmo Stuart C. McCulloch Director. . . . . . . . . . . . . . . . . . . . . . . . . . . Director
F4
SILVERADO GOLD MINES LTD. Consolidated Statements of Operations (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 2000 1999 1998 Revenue from gold sales . . . . . . . . . . . . . . . . . . . $ 42,433 $ 127,940 $ 57,915 Operating costs: Mining and processing costs . . . . . . . . . . . . . . . . . 339,911 227,442 232,405 Amortization of mineral properties. . . . . . . . . . . . . . 14,671 26,800 43,264 Reclamation expense . . . . . . . . . . . . . . . . . . . . . - - 60,575 ------------------------------------------ 354,582 254,242 336,244 ------------------------------------------ Loss before the undernoted. . . . . . . . . . . . . . . . . . 312,149 126,302 278,329 Other expenses: Accounting and audit. . . . . . . . . . . . . . . . . . . . . 41,168 34,737 69,054 Amortization of deferred financing fees . . . . . . . . . . . - 24,562 37,200 Consulting expense. . . . . . . . . . . . . . . . . . . . . . 114,000 - 185,813 Corporate capital taxes . . . . . . . . . . . . . . . . . . . 505 5,305 - Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . 352,726 301,408 378,471 Employment contract expense . . . . . . . . . . . . . . . . . - - 22,049 General exploration . . . . . . . . . . . . . . . . . . . . . 135,442 182,977 - Interest on long term debt. . . . . . . . . . . . . . . . . . 163,750 165,000 161,381 Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,323 31,612 145,102 Loss on disposal of buildings, plant and equipment. . . . . . - 43,566 178,916 Loss (gain) on foreign exchange . . . . . . . . . . . . . . . (34,004) 19,573 (28,467) Management services from related party (note 8) . . . . . . . 286,998 58,200 321,513 Office expenses . . . . . . . . . . . . . . . . . . . . . . . 126,290 118,554 174,910 Other interest and bank charges . . . . . . . . . . . . . . . 9,453 14,535 29,228 Printing and publicity. . . . . . . . . . . . . . . . . . . . 82,167 625 38,712 Receivable allowance. . . . . . . . . . . . . . . . . . . . . - 153,561 363,667 Reporting and investor relations. . . . . . . . . . . . . . . 17,337 1,599 55,279 Research. . . . . . . . . . . . . . . . . . . . . . . . . . . 198,827 - - Transfer agent fees and mailing expenses. . . . . . . . . . . 25,985 275 63,692 Write-down of mineral properties and development costs . . . . . . . . . . . . . . . . . . . . . . - 167,000 14,464,054 ------------------------------------------- 1,559,967 1,323,089 16,660,574 Loss and comprehensive loss for the year. . . . . . . . . . . $(1,872,116) $(1,449,391) $(16,938,903) Loss per share. . . . . . . . . . . . . . . . . . . . . . . . $ (0.08) $ (0.11) $ (1.89) See accompanying notes to consolidated financial statements.
F5
SILVERADO GOLD MINES LTD. Consolidated Statements of Cash Flows (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 2000 1999 1998 Cash provided by (used in): Operating activities: Loss for the year. . . . . . . . . . . . . . . . . . . . . . . $(1,872,116) $(1,449,391) $(16,938,903) Items not involving cash: Write down of mineral properties . . . . . . . . . . . . . . . - 167,000 14,464,054 Consulting services expense. . . . . . . . . . . . . . . . . . 100,000 - 167,063 Employment contract expense. . . . . . . . . . . . . . . . . . - - 22,049 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . 352,726 301,408 378,471 Amortization of deferred financing fees. . . . . . . . . . . . - 24,562 37,200 Loss on disposal of buildings, plant and equipment . . . . . . - 43,566 178,916 Amortization of mineral properties . . . . . . . . . . . . . . 14,671 26,800 43,264 Changes in non-cash operating working capital: Accounts receivable. . . . . . . . . . . . . . . . . . . . . . 74,079 (76,175) 4,537 Gold inventory . . . . . . . . . . . . . . . . . . . . . . . . (8,183) 12,881 25,427 Prepaid expenses to related parties. . . . . . . . . . . . . . - - 366,303 Mineral claims payable . . . . . . . . . . . . . . . . . . . . 80,000 136,500 342,000 Accounts payable and accrued liabilities . . . . . . . . . . . 71,480 257,455 382,090 ------------------------------------------- (1,187,343) (555,394) (527,529) Investing activities: Mineral claims and options expenditures, net of recoveries . . - (10,000) (276,127) Deferred exploration expenditures net of recoveries. . . . . . - - (912,888) Proceeds from sale of equipment. . . . . . . . . . . . . . . . - 35,642 718,977 Purchases of equipment . . . . . . . . . . . . . . . . . . . . - - (5,289) ------------------------------------------- - 25,642 (475,327) Financing activities: Bank indebtedness. . . . . . . . . . . . . . . . . . . . . . . 622 (2,011) 4,396 Shares issued for cash . . . . . . . . . . . . . . . . . . . . 872,424 379,445 588,800 Loans payable. . . . . . . . . . . . . . . . . . . . . . . . . - 49,130 - Repayment of loans payable . . . . . . . . . . . . . . . . . . (12,479) - - Share subscriptions received . . . . . . . . . . . . . . . . . 20,000 28,188 - Secured advances to related parties. . . . . . . . . . . . . . - - 480,236 Due to related party . . . . . . . . . . . . . . . . . . . . . 306,776 - - Convertible debentures . . . . . . . . . . . . . . . . . . . . - 75,000 - Capital lease obligation . . . . . . . . . . . . . . . . . . . - - (91,490) ------------------------------------------- 1,187,343 529,752 981,942 Decrease in cash . . . . . . . . . . . . . . . . . . . . . . . - - (20,914) Cash at beginning of year. . . . . . . . . . . . . . . . . . . - - 20,914 ------------------------------------------- Cash at end of the year. . . . . . . . . . . . . . . . . . . . $ - $ - $ - Supplemental cash flow information Interest paid. . . . . . . . . . . . . . . . . . . . . . . . . $ 3,750 $ - $ 80,000 Non-cash activities not reflected in statements of cash flows: Issue of shares in exchange for reduction in accounts payable . . . . . . . . . . . . . . . . . . . . . . . 20,000 - - Issue of shares in exchange for debt reduction to related party . . . . . . . . . . . . . . . . . . . . . . . 195,000 - - Reversal of accrued option payments of a prior year. . . . . . - (192,000) - Issue of shares for purchase of mineral property . . . . . . . - - 289,200 Issue of shares for consulting services in lieu of payment of cash . . . . . . . . . . . . . . . . . . . . . . 100,000 - 112,500 Issue of shares for share subscriptions received in prior year. . . . . . . . . . . . . . . . . . . . . . . . . 28,188 - 112,500 See accompanying notes to consolidated financial statements.
F6
SILVERADO GOLD MINES LTD. Consolidated Statements of Stockholders' Equity (Deficiency) (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 Unamortized Share stock Number Share subscriptions compensation of shares capital received expense Balance, November 30, 1997 . . . . . . . . . . . . . . . . . . . 80,012,218 $ 43,084,420 $ - $ (151,612) Year ended November 30, 1998 Loss of the year . . . . . . . . . . . . . . . . . . . . . . . . - - - - 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 . . . . . . . . . . . . . . . . . . . . . . . . - - - - Uncollected balance recorded as a receivable allowance . . . . . . . . . . . . . . . . . . . . . - - - - ------------------------------------------------------------------ (69,014,328) 990,500 - 151,612 ------------------------------------------------------------------ Balance, November 30,1998. . . . . . . . . . . . . . . . . . . . 10,997,890 44,074,920 - - Year ended November 30, 1999 Loss for the year. . . . . . . . . . . . . . . . . . . . . . . . - - - - Shares issued: On exercise of warrants for cash . . . . . . . . . . . . . . . . 4,008,667 250,050 - - Private placements for cash. . . . . . . . . . . . . . . . . . . 866,667 129,395 - - Cash received for shares to be issued. . . . . . . . . . . . . . - - 28,188 - ------------------------------------------------------------------ 4,875,334 379,445 28,188 - ------------------------------------------------------------------ Balance, November 30, 1999 . . . . . . . . . . . . . . . . . . . 15,873,224 44,454,365 28,188 - Year ended November 30, 2000 Loss for the year. . . . . . . . . . . . . . . . . . . . . . . . - - - - Shares issued: Private placements for cash. . . . . . . . . . . . . . . . . . . 4,276,866 323,091 - - Private placement for consulting services. . . . . . . . . . . . 1,000,000 100,000 - - Shares issued for subscriptions received in prior year . . . . . . . . . . . . . . . . . . . . . . . . . . . 373,134 28,188 (28,188) - Cash received for shares to be issued. . . . . . . . . . . . . . - - 20,000 - On exercise of warrants for cash . . . . . . . . . . . . . . . . 6,716,667 529,333 - - On exercise of options for cash. . . . . . . . . . . . . . . . . 200,000 20,000 - - On issuance of shares for settlement of accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 200,000 20,000 - - On issuance of shares for settlement of due to related party . . . . . . . . . . . . . . . . . . . . . . . . 1,950,000 195,000 - - ------------------------------------------------------------------ 14,716,667 1,215,612 (8,188) - ------------------------------------------------------------------ Balance, November 30, 2000 . . . . . . . . . . . . . . . . . . . 30,589,891 $ 45,669,977 $ 20,000 $ - See accompanying notes to the consolidated financial statements. Advances to related parties secured by common shares Accumulated in the Company deficit Total Balance, November 30, 1997 . . . . . . . . . . . . . . . . . . . $ (480,236) $(26,910,309) $ 15,542,263 Year ended November 30, 1998 Loss of the year . . . . . . . . . . . . . . . . . . . . . . . . - (16,938,903) (16,938,903) Share consolidation. . . . . . . . . . . . . . . . . . . . . . . - - - Shares issued: On exercise of warrants for cash . . . . . . . . . . . . . . . . - - 216,200 Private placements for cash. . . . . . . . . . . . . . . . . . . - - 372,600 Private placement for consulting services: . . . . . . . . . . . - - 112,500 Fair value of shares issued for mineral property . . . . . . . . . . . . . . . . . . . . . . . . - - 289,200 Amortization of stock compensation . . . . . . . . . . . . . . . - - 151,612 Cash received on sale of common shares by related party . . . . . . . . . . . . . . . . . . . . . . . . 225,448 - 225,448 Uncollected balance recorded as a receivable allowance . . . . . . . . . . . . . . . . . . . . . 254,788 - 254,788 ------------------------------------------------ 480,236 (16,938,903) (15,316,555) Balance, November 30,1998. . . . . . . . . . . . . . . . . . . . - (43,849,212) 225,708 Year ended November 30, 1999 Loss for the year. . . . . . . . . . . . . . . . . . . . . . . . - (1,449,391) (1,449,391) Shares issued: On exercise of warrants for cash . . . . . . . . . . . . . . . . - - 250,050 Private placements for cash. . . . . . . . . . . . . . . . . . . - - 129,395 Cash received for shares to be issued. . . . . . . . . . . . . . - - 28,188 ------------------------------------------------ - (1,449,391) (1,041,758) Balance, November 30, 1999 . . . . . . . . . . . . . . . . . . . - (45,298,603) (816,050) Year ended November 30, 2000 Loss for the year. . . . . . . . . . . . . . . . . . . . . . . . - (1,872,116) (1,872,116) Shares issued: Private placements for cash. . . . . . . . . . . . . . . . . . . - - 323,091 Private placement for consulting services. . . . . . . . . . . . - - 100,000 Shares issued for subscriptions received in prior year . . . . . . . . . . . . . . . . . . . . . . . . . . . - - Cash received for shares to be issued. . . . . . . . . . . . . . - - 20,000 On exercise of warrants for cash . . . . . . . . . . . . . . . . - - 529,333 On exercise of options for cash. . . . . . . . . . . . . . . . . - - 20,000 On issuance of shares for settlement of accounts payable . . . . . . . . . . . . . . . . . . . . . . . . - - 20,000 On issuance of shares for settlement of due to related party . . . . . . . . . . . . . . . . . . . . . . . . - - 195,000 ------------------------------------------------ - (1,872,116) (664,692) ------------------------------------------------ Balance, November 30, 2000 . . . . . . . . . . . . . . . . . . . $ - $(47,170,719) $ (1,480,742) See accompanying notes to the consolidated financial statements.
F7 SILVERADO GOLD MINES LTD. Notes to Consolidated Financial Statements (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 1. DESCRIPTION OF BUSINESS: Silverado Gold Mines Ltd. is engaged in the acquisition, exploration and development of mineral properties and the development of low-rank coal-water fuel as a replacement for oil fired boilers and utility generators. The Company has produced gold from its Nolan property during each of the past three years and has had production from its mineral properties in years prior to those years. 2. SIGNIFICANT ACCOUNTING POLICIES: These consolidated financial statements are prepared in conformity with United States generally accepted accounting principles. The application of Canadian generally accepted accounting principles to these financial statements would not result in material measurement or disclosure differences. (a) Continuing operations: At November 30, 2000, the Company had a working capital deficiency of $3,706,831 including a $2,000,000 convertible debenture that matured on July 2, 1999, and is in arrears. The Company has not made required interest payments on the convertible debenture of $400,000 to December 31, 2000. The Company is also in arrears of required mineral claims and option payments for certain of its mineral properties at November 30, 2000, in the amount of $366,500 (1999 - $286,500) and therefore, the Company's rights to these properties with a carrying value of $315,000 may be adversely affected as a result of these non-payments. The Company understands that it is not in default of the agreements in respect of these properties. 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 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. These 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 (note 14). The Company also plans to option to third parties the Ester Dome and Marshall Dome properties, near Fairbanks, Alaska. In addition, the Company is exploring other business opportunities including the development of low-rank coal-water fuel as replacement fuel for oil fired industrial boilers and utility generators. (b) Basis of consolidation: The consolidated financial statements include the accounts of Silverado Gold Mines Inc., a wholly owned subsidiary. All material intercompany accounts and transactions have been eliminated. F8 SILVERADO GOLD MINES LTD. Notes to Consolidated Financial Statements (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): (c) Gold inventory: Gold inventory is valued at the lower of weighted average cost and estimated net realizable value. Gold inventory is valued at net realizable value for all periods presented. Any write-down of inventory to net realizable value is included in mining and processing costs. (d) Mineral properties: 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. The Company capitalizes the costs of acquiring mineral claims until such time as the properties are placed into production or abandoned. Amortization of mineral property costs relating to properties in production is provided during periods of production using the units-of-production method based on the estimated economic life of the ore reserves. On an ongoing basis, the Company evaluates each property for impairment based on exploration results to date, and considering facts and circumstances such as operating results, cash flows and material changes in the business climate. 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. If an asset is impaired, 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 discounted cash flows with a discount rate commensurate with the risk involved. Losses on other 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 2000, the Company evaluated its mineral properties and recorded a write-down of nil (1999 - $167,000; 1998 - $14,464,054) based on this evaluation. The write-down for 1998 related primarily to deferred exploration and 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. (e) 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. (f) Buildings, plant and equipment: Buildings, plant and equipment are stated at cost. Depreciation is provided on buildings, plant and equipment using the straight-line method based on estimated lives of 3 to 20 years. F9 SILVERADO GOLD MINES LTD. Notes to Consolidated Financial Statements (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): (g) 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. Non-monetary assets and 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 results from operations for the year. (h) Loss per share: Loss per share has been calculated based on the weighted average number of shares outstanding during the year. The weighted average number of shares outstanding, for the purpose of loss per share calculations, is as follows: 2000 24,335,165 1999 13,596,272 1998 8,942,186 Loss per share does not include the effect of the potential exercise of options and warrants and the conversion of debentures, as their effect would be anti-dilutive. (i) Revenue recognition: Gold sales are recognized when title passes to the purchaser and delivery occurs. (j) Research expenditures: Research expenditures are expensed in the year incurred. (k) Accounting for stock-based compensation: For stock options granted to employees and directors, the Company accounts for stock compensation arising from these options in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). 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 and is recognized over the service period. For stock options granted to independent contract employees, 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 fair value of the options granted as the service and period are the options earned. F10 SILVERADO GOLD MINES LTD. Notes to Consolidated Financial Statements (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): (l) 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 for, and recoverability of, mineral properties and buildings, plant and equipment, and the determination of accrued remediation expense. Actual results could differ from those estimates. (m) Income taxes: The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is recorded against any future tax asset if it is more likely than not that the asset will not be realized. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Income tax expense or benefit is the sum of the Company's provision for current income taxes and the difference between the opening and ending balance of the future income tax assets and liabilities. 3. MINERAL PROPERTIES: (a) Mineral properties: (A) Ester Dome Gold Project, Fairbanks Mining District, Alaska: The Ester Dome Gold Project encompasses all of the Company's properties on Ester Dome, which is accessible by road 10 miles northwest of Fairbanks, Alaska. The specific properties at this site are as follows: (i) Grant Mine: This property consists of 26 state mineral claims subject to payments of 15% of net profits until $2,000,000 has been paid and 3% of net profits thereafter. (ii) 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. (iii) 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 net profits thereafter. F11 SILVERADO GOLD MINES LTD. Notes to Consolidated Financial Statements (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 3. MINERAL PROPERTIES (CONTINUED): (a) Mineral properties (continued): (A) Ester Dome Gold Project, Fairbanks Mining District, Alaska (continued): (iv) Range Minerals #1 and Range Minerals #2: 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. (B) Marshall Dome Property, Fairbanks Mining District, Alaska: This property consists of 38 State claims and covers an area of two and one-half square miles, and is located eighteen miles northeast of Fairbanks. (C) Nolan Gold Project, Wiseman Mining District, Alaska: The Nolan Gold Project consists of five contiguous properties covering approximately six square miles, eight miles west of Wiseman, and 175 miles north of Fairbanks, Alaska. The specific properties at this site are as follows: (i) Nolan Placer: This property consists of 160 unpatented Federal placer claims. (ii) Thompson's Pup: This property consists of 6 unpatented Federal placer claims and is subject to a royalty of 3% of net profits on 80% of production. (iii) Dionne (Mary's Bench): This property consists of 15 unpatented Federal placer claims. (iv) Smith Creek: This property consists of 35 unpatented Federal placer claims. The property was purchased in 1993 with scheduled payments to be completed in 1998. As at November 30, 2000 $120,000 (1999 - $120,000) of the acquisition costs are unpaid, in arrears, and included in mineral claims payable. (v) Nolan Lode This property consists of 32 unpatented Federal lode claims. The lode claims overlie much of the placer properties and extend beyond them. (D) Hammond Property, Wiseman Mining District, Alaska: This property consists of 28 Federal placer claims and 36 Federal lode claims covering one and one-half square miles and adjoining the Nolan Gold Properties. As at November 30, 2000, option payments totaling $240,000 (1999 - $160,000) are unpaid, in arrears, and included in mineral claims payable. F12 SILVERADO GOLD MINES LTD. Notes to Consolidated Financial Statements (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 3. MINERAL PROPERTIES (CONTINUED): (a) Mineral properties (continued): (E) French Peak Property, Omineca Mining District, British Columbia: This property consisted of 4 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. (F) Whiskey Gulch Property, Fairbanks Mining District, Alaska This property consists of 4 claims and is half a mile southwest of the Marshall Dome Property. 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. (b) Property commitments: As at November 30, 2000, 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: 2001 $ 50,000 2002 50,000 2003 50,000 2004 50,000 2005 50,000 F13 SILVERADO GOLD MINES LTD. Notes to Consolidated Financial Statements (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 3. MINERAL PROPERTIES (CONTINUED): (c) Mineral claim expenditures: Cumulative claims expenditures are as follows:
Alaska ------------ Hammond Whiskey British Columbia Ester Dome Marhall Dome Nolan Gold Property Gulch French Peak Total Balance, November 30, 1998 . . . . . $ 750,000 $ 350,000 $ 350,000 $ 85,000 $ 50,000 $ 15,000 $1,600,000 Mineral claims payments and accruals . (192,000) - 60,000 - - - (132,000) Recoveries/ proceeds . . . - - - - (50,000) - (50,000) Amortization . - - (26,800) - - - (26,800) Writedown. . . (152,000) - - - - (15,000) (167,000) Balance, November 30, 1999 . . . . . 406,000 350,000 383,200 85,000 - - 1,224,200 Amortization . - - (14,671) - - - (14,671) Balance, November 30, 2000 . . . . . $ 406,000 $ 350,000 $ 368,529 $ 85,000 $ - $ - $1,209,529
4. 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 Net book 2000 Cost depreciation value Grant Mine Mill Equipment $2,076,780 $1,176,939 $ 899,841 Nolan Gold Project Mining Equipment 60,757 52,837 7,920 Mining Equipment 459,787 396,244 63,543 Other Equipment, Leasehold Improvements 385,284 265,028 120,256 $2,982,608 $1,891,048 $1,091,560 Accumulated Net book 1999 Cost depreciation 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
F14 SILVERADO GOLD MINES LTD. Notes to Consolidated Financial Statements (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES: Accounts payable and accrued liabilities consist of: 2000 1999 Accounts payable $ 550,836 $ 659,356 Accrued interest 466,667 306,667 Accrued reclamation expense 196,000 196,000 $ 1,213,503 $ 1,162,023 6. 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 a period of twenty consecutive trading days. The Company has not made required interest payments of $400,000 to December 31, 2000. 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, 2000, amounting to $466,667 (1999 - $306,667) 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. 7. SHARE CAPITAL: (a) Common shares: 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 has been retroactively applied to all share capital balances disclosed in these financial statements. The Company has reserved 295,192 (1999 - 295,192) shares for issuance upon the potential conversion of convertible debentures. F15 SILVERADO GOLD MINES LTD. Notes to Consolidated Financial Statements (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 7. SHARE CAPITAL (CONTINUED): (b) Director and employee options: The following director and employee options were granted and canceled during the years ended November 30, 1998, 1999, and 2000 and were outstanding on those dates:
Number Weighted average of options exercise price 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 Cancelled. . . . . . . . . . . . (238,461) 6.47 Outstanding at November 30, 1999 3,500,000 0.10 Exercised. . . . . . . . . . . . (2,350,000) 0.10 Outstanding at November 30, 2000 1,150,000 0.10
All of the options were fully vested on granting. The weighted average remaining contractual life of the options outstanding at November 30, 2000, was 4 years (1999 - 5 years). All outstanding options at November 30, 2000 are exercisable. The Company accounts for stock compensation arising from options to employees and directors in accordance with APB 25. 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.
2000 1999 1998 Loss for the year: As reported. . . . . . $(1,872,116) $(1,449,391) $(16,938,903) Pro forma. . . . . . . (1,872,116) (1,633,121) (16,938,903) Loss per common share: As reported. . . . . . $ (0.08) $ (0.11) $ (1.89) Pro forma. . . . . . . (0.08) (0.12) (1.89)
The estimated weighted average fair value of the options granted in 1999 was prepared using the Black-Scholes Pricing Model assuming a risk-free rate of 6.5% (1998 - 6%), an expected dividend yield of 0% (1998 - 0%), an expected volatility of 105% (1998 - 57%), and a weighted average expected life of 5 years (1998 - 9 years). F16 SILVERADO GOLD MINES LTD. Notes to Consolidated Financial Statements (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 7. SHARE CAPITAL (CONTINUED): (c) Warrants: In conjunction with the private placements of common shares, the Company has issued and has outstanding at November 30, 1999 and 2000, the following share purchase warrants. Each share purchase warrant entitles the holder to acquire one common share of the Company.
Balance, Balance, November 30, Issued in Exercised Expired November 30, Exercise Expiry 1999 2000 in 2000 in 2000 2000 price date Notes 866,667 - (866,667) - $ 0.05 Mar99 250,000 - - (250,000) - 2.20 Mar00 250,000 - - (250,000) - 2.20 Mar00 - 1,000,000 (500,000) (500,000) - 0.22 Mar00 - 2,000,000 (2,000,000) - - 0.04 Jun00 - 1,000,000 (1,000,000) - - 0.08 Aug00 (1) - 1,750,000 (1,750,000) - - 0.08 Mar02 - 1,400,000 (300,000) - 1,100,000 0.10 Mar02 - 800,000 (300,000) - 500,000 0.12 Jul02 - 700,000 - - 700,000 0.40 Mar02 1,366,667 8,650,000 (6,716,667) (1,000,000) 2,300,000
(1) Original exercise price was $0.20. The exercise price was reduced to $0.10 and 500,000 warrants were exercised. The exercise price was reduced further to $0.08 and an additional 500,000 warrants were exercised. (d) Contract employee options: The following contract employee stock options were granted, exercised, canceled and expired during the years ended November 30, 1998, 1999, and 2000 and were outstanding at these dates: Number Weighted average of options exercise price Outstanding at November 30, 1997 62,892 $ 4.83 Expired or cancelled (46,738) 4.54 Outstanding at November 30, 1998 16,154 5.57 Expired or cancelled (16,154) 5.57 Outstanding at November 30, 1999 and 2000 - $ - (e) Other stock-based compensation: In fiscal 1998, the Company issued 125,000 common shares with a market value of $0.90 per share in exchange for consulting services. In fiscal 2000, the Company issued 1,000,000 common shares with a market value of $0.10 per share in exchange for consulting services. F17 SILVERADO GOLD MINES LTD. Notes to Consolidated Financial Statements (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 8. 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 dated 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, 2000, the Company had prepaid $nil (1999 - $241,265; 1998 - $363,667) to the Tri-Con Group for exploration, development and administration services to be performed during the next fiscal period 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 interest charged on outstanding balance at the Tri-Con Group's borrowing costs are shown below:
2000 1999 1998 Operations and field services. . . . . . . . $120,850 $ 24,562 $ 192,706 Exploration and development services . . . . 244,771 214,211 1,160,169 Administrative and management services . . . 286,998 58,200 321,513 Research . . . . . . . . . . . . . . . . . . 198,827 - - $851,446 $296,973 $1,674,388 Amount of total charges in excess of Tri-Con costs incurred . . . . . . . . . . . . . . . $126,699 $ 54,526 $ 248,858 Excess amount charged as a percentage of actual costs incurred. . . . . . . . . . . . 17.5% 24.0% 17.5%
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. F18 SILVERADO GOLD MINES LTD. Notes to Consolidated Financial Statements (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 9. INCOME TAXES: Tax effects of temporary differences that give rise to deferred tax assets at November 30, 2000 and 1999 are as follows:
2000 1999 Net operating loss carry forwards . . . . . . . . . . . . $ 9,610,000 $ 9,849,000 Valuation allowance . . . . . . . . . . . . . . . . . . . (9,363,000) (9,479,000) Net deferred tax assets . . . . . . . . . . . . . . . . . 247,000 370,000 Deferred tax liability: Temporary differences arising from mineral properties and building, plant and equipment . . . . . . . . . . . . . . (247,000) (370,000) Net deferred tax asset. . . . . . . . . . . . . . . . . . $ - $ -
At November 30, 2000, the Company has losses carried forward totaling $22,032,000 available to reduce future years' income for U.S. income tax purposes which expire in various years to 2020. In addition, the Company has losses carried forward in Canada totaling $13,419,000 which expire in various years to 2007. The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate of 34% (1999 and 1998: 34%) to net loss before provision for income taxes. The sources and tax effects of the differences are as follows:
2000 1999 1998 Computed "expected" tax benefit. . . . . $(637,000) $(493,000) $(5,759,000) Tax loss expired during the year . . . . 666,000 227,000 186,000 Change in valuation allowance. . . . . . (116,000) 266,000 5,573,000 Difference in foreign tax rate and other 87,000 - - Income tax provision . . . . . . . . . . $ - $ - $ -
10. 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 $84,700 (Cdn$130,000) 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 (1999 - $4,200,000) plus the amount of annual bonuses and other benefits that they would have received in the eighteen months following termination. F19 SILVERADO GOLD MINES LTD. Notes to Consolidated Financial Statements (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 10. COMMITMENTS AND CONTINGENCIES (CONTINUED): (c) Litigation: A former employee of the Tri-Con Group had initiated a claim against the Tri-Con Group and the Company for wrongful dismissal/breach of contract in the amount of $150,000. The Company was named as a co-defendant in the suit. Subsequent to November 30, 2000, the claim was settled for $15,000. Range Minerals Corporation has initiated a claim against the Company for $185,665. The lawsuit pertains to required payments covering the Ester Dome Property. The Company has denied the claim of Range Minerals Corporation and has counter claimed for the return of 50,000 shares and $88,000 previously paid, and such further additional relief as the court may deem to be just and equitable under the circumstances. Management of the Company believes that the claim by Range Minerals Corporation is without merit and the Company will defend itself against the claim. As the outcome and the amount of any loss is not determinable at November 30, 2000, no provision for this litigation has been made in the consolidated financial statements. 11. FINANCIAL INSTRUMENTS: The carrying amounts reported in the balance sheet for accounts receivable, bank indebtedness, accounts payable and accrued liabilities, and loans payable secured by gold inventory approximate fair values due to the short-term to 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. The fair value of due to related parties can not be determined with sufficient reliability due to the relationship between the Company and the related party and the lack of a readily available market for such instruments. Details of this amount are disclosed in note 8. F20 SILVERADO GOLD MINES LTD. Notes to Consolidated Financial Statements (Expressed in U.S. Dollars) Years ended November 30, 2000, 1999 and 1998 12. SEGMENT DISCLOSURES: (a) Reportable segments: The Company operates in one reportable segments being the acquisition, exploration and development of mineral properties . (b) Geographic information: The following presents financial information about geographic areas:
2000 1999 1998 Loss for the year: Canada . . . . . . $ 404,271 $ 256,641 $ 1,469,472 United States. . . 1,467,845 1,192,750 15,469,431 $1,872,116 $1,449,391 $16,938,903 Long-lived assets: Canada . . . . . . $ 120,224 $ 183,927 $ 212,492 United States. . . 2,180,865 2,484,559 3,212,410 $2,301,089 $2,668,486 $ 3,424,902
13. SUBSEQUENT EVENTS: (a) Subsequent to November 30, 2000, the Company issued an additional 1,400,000 common share purchase warrants, with an exercise price of $0.10 each, to a warrant holder from a previous private placement. (b) On March 5, 2001, 1,000,000 share purchase warrants were exercised at a price of $0.10 per share and the Company issued 1,000,000 common shares from treasury for proceeds of $100,000. (c) Between the dates of March 8, 2001 and March 14, 2001, 1,450,000 share purchase warrants were exercised at a price of $0.10 per share and the Company issued 1,450,000 common shares from treasury for proceeds of $145,000. (d) On March 14, 2001 the Company completed a private placement of 500,000 units at a price of CDN$0.30 per unit for total proceeds of CDN$150,000. Each unit consists of one common share and one common share purchase warrant. Each common share purchase warrant entitles the holder to purchase one common share at a price of U.S.$0.30 until March 14, 2003. 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 and the development of low-rank coal-water fuel as a replacement for oil fired boilers and utility generators. 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(St. Paul)/Barelka and Dobb's Properties, all located within the Fairbanks Mining District in Alaska. 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 that time, the Company substantially reclaimed its previous disturbances. During 1998 and 1999, 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. During 2000, the Company conducted mining operations on the Workman's Bench located within Smith Creek. In fiscal 1999 the Company reduced its mineral property holdings by relinquishing the Range I and Range II properties, part of the Ester Dome Project, and relinquishing the French Peak Property in British Columbia, Canada. (B) FINANCIAL INFORMATION ABOUT SEGMENTS The Company has one reportable operating segment being: mineral exploration, development and mining. The Company is also exploring opportunities in the development of low-rank coal-water fuel as a replacement fuel for oil fired industrial boilers and utility generators. However, significant operations in the development of low-rank coal-water fuel have not yet begun. (C) NARRATIVE DESCRIPTION OF BUSINESS The Company's plan of operation is to continue to develop and mine its Nolan properties, specifically the deep Nolan Channel areas. During 2000, the Company entered the fuel sector by forming a "New Fuel Technology Division" which operates out of Fairbanks, Alaska under the supervision of Dr. Warrack Willson, V.P. of the new division. 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'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) FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS The following table sets forth selected financial data for each of Silverado's fiscal years ended November 30, 2000, 1999 and 1998, by country of origin for information purposes only.
YEAR ENDED NOVEMBER 30, 2000 1999 1998 Loss for the year Canada. . . . $ (404,271) $ (256,641) $ (1,469,472) United States (1,467,845) (1,192,750) (15,469,431) ------------------------------------------- $(1,872,116) $(1,449,391) $(16,938,903) ------------ ------------ ------------- END OF PERIOD Long-lived assets Canada. . . . $ 120,224 $ 183,927 $ 212,492 United States 2,180,865 2,484,559 3,212,410 ------------ ---------- ------------- $ 2,301,089 $ 2,668,486 $ 3,424,902 ------------ ------------ -------------
For each of the three years ended November 30, 2000, 1999 and 1998, 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 111,298 ounces proven and 329,616 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. (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, 2000 $120,000 (1999: $120,000) in acquisition costs are in arrears. (E) NOLAN LODE: This property consists of 32 unpatented Federal lode claims. The lode claims overlie much of the placer properties and extend beyond them. (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 that 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, 2000, $240,000 (1999 $160,000) in option payments are in arrears. The company's rights to this property may be adversely affected as a result of the payments in arrears. The property has a carrying value of $85,000. (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 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, consists of four claims and is one-half mile southwest of the Marshall Dome Property and adjoins the "True North" property. During 1999 the Whiskey Gulch Property was sold to a subsidiary of Kinross Gold Corporation 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. (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 26 state mineral claims subject to payments of 15% of net profits until $2,000,000 has been paid and 3% of net profits thereafter. (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 claims 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) EAGLE CREEK 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. (7) 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 Tri-Con Group and the Company for wrongful dismissal/breach of contract in the amount of $150,000. Subsequent to November 30, 2000, the claim was settled for $15,000. Range Minerals Corporation has sued Silverado Gold Mines Ltd. and Silverado Gold Mines Inc. for $185,665. The lawsuit pertains to required payments covering the Ester Dome Property. Silverado Gold Mines Ltd. and Silverado Gold Mines Inc. have denied the claim of Range Minerals Corporation and have counter claimed for the return of 50,000 shares and $88,000 previously paid to Range Minerals Corporation, and such further additional relief as the court may deem to be just and equitable under the circumstances. The Company believes that the claims made by Range Minerals Corporation are without merit and it will defend itself against the claim. As the outcome of this action and any loss resulting therefrom can not be determined, no provision for this litigation has been made in the consolidated financial statements. 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, 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 Feb 28, 2000. 38/128 4/64 May 31, 2000. 61/64 11/64 Aug 31, 2000. 17/64 1/8 Nov 30 2000 . 13/64 3/32
(B) HOLDERS OF COMMON SHARES As at February 28, 2001 there were 23,610,868 registered holders of Silverado's common shares, approximately 77% 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 one-half of a capital gain (two-thirds prior to October 15, 2000, 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, 2000, 1999, 1998, 1997, and 1996.
YEARS ENDED NOVEMBER 30, 2000 1999 1998 1997 1996 -------- -------- --------- -------- -------- 000's except per share amounts: Revenues. . . . . . . . . . . . . $ 42 $ 128 $ 58 $ 169 $ 298 Loss for the Year . . . . . . . . $(1,872) $(1,449) $(16,939) $(4,413) $(4,330) Loss Per Share. . . . . . . . . . $ (0.08) $ (0.11) $ (1.89) $ (0.66) $ (0.88) END OF PERIOD Assets. . . . . . . . . . . . . . $ 2,326 $ 2,759 $ 3,477 $18,231 $18,461 Long term Obligations . . . . . . $ 75 $ 75 $ - $ 2,010 $ 2,092 Total Liabilities . . . . . . . . $ 3,806 $ 3,575 $ 3,251 $ 2,689 $ 2,656 -------- -------- --------- -------- --------
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES (a) Liquidity At November 30, 2000, the Company had a working capital deficiency of $3,706,831 (1999 - $3,409,536; 1998 - $3,223,756) including a $2,000,000 convertible debenture that matured on July 2, 1999, and is in arrears. To December 31, 2000, the Company has also not made required interest payments on the convertible debenture of $400,000 (1999 - $240,000; 1998 -$160,000). The Company is also in arrears of required mineral claims and option payments for certain of its mineral properties at November 30, 2000, in the amount of $366,500 (1999 - $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 these non-payments. During the past three fiscal years, the Company has funded its exploration activities primarily by generating capital through private placements and the exercise of options and warrants. The Company has supplemented these financing activities with gold sales. During the year ended November 30, 2000 the Company funded a net cash outflow from operating activities of $1,187,343 primarily through option and warrant exercises totaling $872,424 and by an increase in the due to related party balance with the Tri-Con Group. The Company intends to continue to finance its operations by generating capital through private placements. In addition, the Company is working towards completing a joint venture or partnership for its low-rank coal-water fuel technology. 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 and building, plant, and equipment is dependant on its ability to obtain the continued forbearance of its creditors, to obtain additional financing and / or the entering into 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 or achieved by the Company. Failure to obtain or achieve these items 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. The auditors' report on the Company's consolidated financial statements filed herein in response to item 8 include additional comments by auditor on Canada, U.S reporting differences that indicates that there are conditions and events that cast substantial doubt on the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of that 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. In addition, the Company is exploring other business opportunities including the development of low-rank coal-water fuel as replacement fuel for oil fired industrial boilers and utility generators. (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. RESULTS OF OPERATIONS - ----------------------- NOLAN GOLD PROJECT - -------------------- During 2000, the company continued mining on the Workmans Bench part of the Smith Creek property. The company recovered 173.2 troy ounces of gold. The company also performed additional reclamation work on the Archibald part of the Nolan Placer Property, and on the Swede Channel part of the Dionne property. Operating results 2000 1999 1998 ---- ---- ---- Revenue from gold sales $ 42,433 $ 127,940 $ 57,915 Operating Costs 354,582 254,242 336,244 ------- ------- ------- Loss before other expenses $ 312,149 $ 126,302 $ 278,329 The Company incurred only limited gold sales in 2000. The Company expects to maintain only minimal inventory until production from its Nolan properties resumes. The price of gold has an impact upon the Company's results of operations. OTHER EXPENSES - --------------- 2000 1999 1998 ---- ---- ---- Other Expenses $ 1,559,967 $ 1,156,089 $ 2,196,520 Write down of mineral properties - 167,000 14,464,054 --------- --------- ---------- $ 1,559,467 $ 1,323,089 $ 16,660,574 YEAR ENDED NOVEMBER 30, 2000 COMPARED TO THE YEAR ENDED NOVEMBER 30, 1999 Revenue from gold sales decreased to $42,433 in 2000 from $127,940 in 1999 as a result of reduced gold production and gold inventory available for sale. The Company's total gold recovered was 173 ounces in 2000 compared to 289 ounces in 1999. Operating costs increased in 2000 to $354,582 from $254,242 in 1999 because of increased maintenance efforts on the mineral properties. Other expenses increased to $1,559,967 from $1,323,089 in 1999 because of the following reasons: (a) an increase in consulting expenses of $114,000 relating primarily to consulting expenses incurred for investor relations activities; (b) an increase in management services from a related party of $228,798 because of an increase in activities of the Tri-Con Group with respect to the operations of the Company; (c) an increase in printing and publicity expenditures of $81,542 relating to efforts to better inform potential investors with respect to the operations of the Company; (d) a decrease in receivable allowance of $153,561 because for the current year, funds were not advanced to the Tri-Con Group in advance of work being performed; (e) an increase in research expenditures of $198,827 which relate to research for the Company's low-rank coal water fuel technology, a new project for the Company in 2000; and (f) a decrease in write-down of mineral properties and development costs of $167,000 because no properties were assessed as impaired in 2000. YEAR ENDED NOVEMBER 30, 1999 COMPARED TO THE YEAR ENDED NOVEMBER 30, 1998 During the year ended November 30, 1999 the Company funded a net cash outflow from operating activities of $555,394 primarily through option and warrant exercises totaling $379,445 and by issuance of a $75,000 convertible debenture. Revenue from gold sales increased to $127,940 in 1999 from $57,915 in 1998 as a result of increased gold production and gold inventory for sale. The Company's share of total gold recovered from the Swede Channel in 1999 was 289 ounces compared to 144 ounces in 1998. Operating costs decreased in 1999 to $254,242 from $336,244 in 1998 because of an increase in an accrual for reclamation expense of $60,575 recorded in 1998. Other expenses decreased from $16,660,574 in 1998 to $1,323,089 in 1999, a decrease of $15,337,485. The primary reason for this significant decrease relates to a write-down of mineral properties and development costs of $14,464,054 in 1998. The 1998 write-down relates primarily to deferred exploration and development that was capitalized in prior years. Exploration costs and option payments are expensed as incurred commencing in 1998. The receivable allowance for funds advanced to the Tri-Con Group in advance of work being performed also decreased in 1999 from $363,667 in 1998 to $153,561. The remaining decrease relates to reduced administrative expenditures as the Company sought to attain further financing. ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK None 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. Auditors' Report F-1 Comments by Auditor for U.S. Readers on Canada - U.S. Reporting Difference F-1 Consolidated Balance Sheets, November 30, 2000 and 1999 F-2 Consolidated Statements of Operations Years Ended November 30, 2000, 1999 and 1998 F-3 Consolidated Statements of Cash Flows Years Ended November 30, 2000, 1999 and 1998 F-4 Consolidated Statements of Stockholders' Equity Years Ended November 30, 2000, 1999, 1998 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. ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 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) 57 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) 53 Director since May 6, 1988 Stuart C. McCulloch (1)(2) 65 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 Name and Securities Underlying Principal Position. . Year $ Salary ($) Bonus ($) Other ($) Options/SAR's (#) All Other ($) - ---------------------------------------------------------------------------------------------------------------- Garry L. Anselmo (1). 2000 Cdn $ 0 $ 0 $ 0 $0 Chairman, President,. 1999 Cdn $ 0 $ 0 $ 104,990 2,000,000 $0 CEO & CFO . . . . . . 1998 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) OPTION GRANTS TABLE. During the fiscal year ended November 30, 1999, 2,000,000 stock options were granted to Garry Anselmo:
#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 fair 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.
(D) AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUE TABLE Number of Securities Value of Unexercised Shares acquired Underlying Unexercised In-The-Money Options Name on Exercise Value Realized Options at November 30, 2000 at November 30, 2000 - ------------ -------------------- ----------------------- ---------------------------- - ------------------- G.L. Anselmo 2,000,000 $ 39,110 Nil Nil
(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 (1999: $4,200,000) plus the amount of annual bonuses and other benefits that they would have received in the eighteen months following termination. 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 28, 2001, 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) . . . . . . . . . . . 350,007 1.1 James F. Dixon (2) . . . . . . . . . . . . 762,562 2.5 Stuart C. McCulloch. . . . . . . . . . . . 190,000 0.6 All Directors and Executive Officers as a group. . . . . . . . . . . . . . . . . . . 1,302,569 4.3 (1) Includes 7 shares owned by Tri-Con Mining Ltd., of which Garry Anselmo owns 100%. (2) Includes directors options of 700,000 shares. (3) Includes directors options of 150,000 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, 2000, the Company had prepaid $nil (1999: $241,265; 1998: $363,667) to the Tri-Con Group for exploration, development and administration services to be performed during the next fiscal period on behalf of the Company. The amounts have been written-off in the respective years as a receivable allowance. The aggregate amount paid to the Tri-Con Group, including amounts related to the Grant Mine Project and Nolan Project, for the year ended November 30, 2000 was $851,446, (1999 - $296,973; 1998 - $1,674,388). 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 Auditor for U.S. Readers on Canada - U.S. Reporting Difference Consolidated Balance Sheets at November 30, 2000 and 1999 Consolidated Statements of Operations, years ended November 30, 2000, 1999, and 1998 Consolidated Statements of Cash Flows, years ended November 30, 2000, 1999, and 1998 Consolidated Statements of Stockholders' Equity, years ended November 30, 2000, 1999 and 1998 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, 2000. (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 15, 2000 - --------------------- ---------------- James F. Dixon Date Director /s/ Stuart C. McCulloch March 15, 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 15, 2000 ------------------ G.L. Anselmo, President, Chairman, C.E.O. -----END PRIVACY-ENHANCED MESSAGE-----