ITEM 1. BUSINESS:
A. GENERAL DEVELOPMENT OF BUSINESS
American Eagle Resources, Inc. (the "Company") is a Delaware corporation that was engaged in the exploration of mining properties, and the development and production of gold, silver and other metals. The Company presently has ceased conducting any of those aforementioned activities, and is strictly in the reclamation phase on its mining properties in Nevada. Any previous mining activity was conducted through direct ownership of properties, either alone or in joint ventures with others, and leasing of mineral properties. A description of the principal properties of the Company is contained in Item 2, Properties.
During the fiscal years ended June 30, 1997 and 1996, the Company operated one mine, the Golden Eagle Mine, formerly, the Flowery Mine, (the "Mine"), in Storey County, Nevada. For further details, see Item 1 (c), Narrative Description of Business, and Item 2
ITEM 2. PROPERTIES:
A. GENERAL
The Company's office is located at the minesite. Properties held are described below.
B. GOLDEN EAGLE MINE (FORMERLY THE FLOWERY PROJECT)
The Golden Eagle Mine (formerly the Flowery Project), (the "Mine") is situated in the Flowery Mining District of Storey County, Nevada, approximately four miles east of Virginia City.
The Flowery District was discovered in the 1860's and has been intermittently explored and mined to the present day. From 1924 to 1930, two underground mines in the district produced approximately 100,000 troy ounces of gold from 550,000 short tons.
From 1979 to 1982 the Anaconda Copper Company conducted extensive exploration and drilled 31 holes totaling 5,000 feet. Results of the drilling indicated more than one million tons of mineralized material containing gold and silver could be available by surface mining methods.
During July, 1986 the Company engaged Kiewit Mining and Engineering Company of Reno, Nevada to prepare a technical economic feasibility study of the Mine. Kiewit drilled thirteen additional holes totaling more than 2,000 feet. In addition, metallurgical testing was conducted to determine heap leach procedures. In September, 1986 Kiewit reported that a deposit of 670,000 short tons of mineralized material containing 0.054 troy ounces of gold per short ton and 0.43 troy ounces of silver per short ton existed at the property. The feasibility report also indicates the possibility that the project would be economically feasible with a gold price of more than $343.00 per troy ounce.
Kiewit reported that the mineralized material could be mined by open pit methods and would require the removal of more than 2,000,000 short tons of waste rock. The gold and silver value could be recovered using heap leach technology. Production from the property commenced during October, 1987 however, the Company experienced a lower recovery grade mineralized material than anticipated from the Kiewit study. The initial financing for the Mine was depleted and additional working capital had to be borrowed.
On December 17, 1987 mining operations at the Mine were temporarily suspended pending the results of a confirmation drilling program within the mine pit to determine the extent and grade of the reserves. 110,000 short tons of material which had been mined and heap leached between mid-October 1987 contained 0.026 troy ounces of gold per short ton, produced approximately 2,300 ounces of gold equivalent (gold and silver combined) with a yield of approximately $1,064,000 which was substantially less than projected.
Results of the drilling program indicated there were in-pit proven reserves of 150,000 tons grading at 0.051 gold and .50 silver; however, since the Company lacked funding to make continued payments to its contract mining company and to fund additional development and exploration programs necessary to ensure a continuous mining operation, all mining operations were discontinued.
A Mining and Exploration Potential report on the Mine Property was commissioned by Red Lion Management Ltd. and prepared by Henkel and Associates of Carson City, Nevada in December, 1988 stating an initial drill program indicated ore reserves of approximately 250,000 tons having a grade of approximately 0.05 ounces of gold per ton and 0.50 ounces of silver per ton.
On July 1, 1989 the Companies entered into an agreement with Vaughan Construction ("Vaughan") a mining construction firm, for the operation of the Mine. Leaching began in August, 1989 and recovered 297 ounces of gold and 3,940 ounces of silver from the ore placed on the pad in 1987. This resulted in a net recovery of 2,270 ounces of gold and 26,188 ounces of silver from the 1987 operations. Between August, 1989 and July, 1990 a total of 228,960 tons of ore and 521,806 tons of waste were mined by Vaughan from the Lady Bryan pit.
In December, 1989 and January, 1990 a drill program was conducted at the Mine. Results from the drilling confirmed certain geologic concepts originally formulated by the Anaconda Company when it held the Mine Property during 1979-82. Eight holes drilled in the Bonanza area encountered gold mineralization of economic interest.
Miramar Gold Corporation, the Company's joint venture partner at the Mine, entered into an agreement on January 30, 1990 with Dragon Consolidated in which Miramar acquired all Dragon's rights and interests in the Mine. Final payment was made on the underlying purchase option on the Otte Fee land, which is now owned 60% by Miramar and 40% by the Company. In May, 1991 Miramar transferred a 40% interest in the 85 unpatented claims purchased from Dragon to the Company. Fifty-seven new claims were staked by the Companies during the 1990 fiscal year and an additional block of 63 claims in the same area were staked in the 1991 fiscal year to expand the property holdings over what is believed to be geologically favorable ground.
An extensive drill program consisting of 106 holes in three areas was conducted by the Companies in June and July, 1991. The results of this extensive program are summarized in an April, 1992 report by Kevin Russell, Stephen P. Quin and Fred Holabird.
As a results of the favorable reserve calculations and an opportunity to purchase the equipment of another Nevada mine which was closing down, the Companies decided to commence production. It was then decided that the Companies would operate the mine without using a contractor. In May, 1992 the Companies purchased the majority of the equipment required to commence production at a rate of 40,000 tons per month. This equipment included four 35 ton trucks, D9 sized bulldozer, 8 cubic yard loader, road grader, rotary blast hole/RC drill rig and a complete crusher line. The Company also acquired all the associated equipment necessary to commence production including conveyors and an inventory of spare parts.
Staff was hired to assemble all necessary components of the mining operation. The name of the project was changed from the Flowery Mine to the Golden Eagle Mine.
Production commenced on August 3, 1992 at a rate of 40,000 tons of ore per month to be mined, crushed, and stacked on the leach pad. A total of 80,000 tons of ore had been mined and delivered to the crusher, while 55,000 tons had been crushed and stacked on the leach pad. Production blast holes generally confirmed or increased the reserve versus that predicted by the exploration drilling. Delays in getting this material onto the leach pad because of under performance by the crushing plant resulted in a temporary suspension of mining operations for the winter in November 1992. This allowed the remainder of the ore to be crushed, stacked and loaded on the leach pad prior to the onset of winter. Leaching operations continued throughout the winter and net production at June 30, 1993 was 2,821.11 oz of gold and 42,011.38 oz of silver. Mining of fresh ore recommenced in August, 1993 on the Bonanza Zone. Heap leaching continued, resulting in the recovery of precious metals from the ores stacked. During the year ended June 30, 1994, 172,032 tons were crushed and stacked on the leach pad and there was 5,199 ounces of gold and 52,199 ounces of silver leached from the heap. In 1995, 163,565 tons were crushed and stacked on the leach pad and there was 7,885 ounces of gold and 136,861 ounces of silver leached from the heap. While in 1996, only 80,065 tons were crushed and stacked on the leach pad and there were 4,577 ounces of gold and 52,974 ounces of silver leached from the heap.
Fiscal 1997 saw 606 ounces of gold and 10,119 ounces of silver leached from the heap. As there was no mining for this fiscal period, nothing was crushed or stacked.
The Mine is currently comprised of six patented and 51 (June 30, 1996 - 73) unpatented mining claims and two patented mill sites. Most of the Mine's claims are held under lease.
(1) The advance minimum royalty was re-negotiated in February, 1997 to $ 10,000 semi- annually for gold prices of $ 350.00 per ounce and higher, and revised downwards for prices below $ 350.00 During the year ended June 30, 1997, two payments of $ 15,000 each were made as a minimum payment as there was no production from this claim.
(2) The advance minimum royalty was $5,000 per year, until such time as this part of the property was put into production. When production commenced, the advanced minimum royalty is increased to $10,000 per year. PPI percent stands for the percentage increase in the Producer Price Index over the preceding year. During the year ended June 30, 1997, a total of $ 10,000 was paid.
(3) Miramar Gold Corporation is a joint venture partner with the Company on the Mine. Miramar purchased the Dragon Consolidated (formerly North Lily) leases during 1990. No advance minimum royalties will be made to Miramar Gold, but production royalties are charged to the Joint Venture in the amount of 7-1/2 percent, less amounts paid to others, as outlined in the Dragon lease until all prepaid royalties are fully credited. As at June 30, 1993, all prepaid royalties were fully credited and no further production credits have been charged to the Joint Venture.
C. OCCIDENTAL CLAIMS
In 1994, the company re-evaluated the Occidental claims held. As the focus of the Company's joint venture partner has turned to larger size deposits as future mine targets, plans to mine these claims in the future were no longer appropriate. These claims were also in a historic district in which mining would create potentially high environmental costs. As a result the Company has abandoned such claims.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There is nothing to report under this item.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
There is nothing to report under this item.
PART II -------
ITEM 5.
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
A. MARKET INFORMATION
During reorganization, Alhambra Mines, Inc. common stock was consolidated at a ratio of 100 to 1 for shares of American Eagle Resources, Inc. common stock. Alhambra Mines preferred stock was converted to American Eagle Resources, Inc. common stock at a ratio of 3.125 preferred to one common.
No quotations were obtained for American Eagle Resources, Inc. stock for the fiscal years ended June 30, 1997 and June 30, 1996. As of this date, no market has been established for this common stock.
B. HOLDERS
According to the records of the Company's stock transfer agent, as of June 30, 1997, there were 644 holders of the Company's common stock.
C. DIVIDENDS
There have been no dividends declared on the common stock of the Company during the Company's last three fiscal years and the Company anticipates that for the foreseeable future any earnings will be reinvested in the Company's operations. ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Selected Financial Data - American Eagle Resources, Inc. (1993 - 1997):
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
In the following discussion, references to operation years 1997, 1996, and 1995, refer to fiscal years ended June 30 unless otherwise indicated.
A. RESULTS OF OPERATIONS
1997 COMPARED TO 1996: - ------------------------
Much of the large swings in these various categories may be attributable to the fact that since January 11, 1996 the Company has ceased any mining operations, and, moreover, since January, 1997, the Company has been in a reclamation phase- no mining or leaching. Hence the precipitous drop in revenue, led by an 83% drop in mineral sales and royalties: 1996, $737,110 as compared to 1997, $ 128,252. The fact that there was no mining or leaching on the site dictated a sale of assets. American Eagle realized a gain in 1997 of $ 141,036, while in 1996, only $ 160. Finally, interest income decreased slightly due to lower interest rates during the year, as the bank balances remained equivalent to the previous year.
No ore was crushed or stacked in 1997. Compare this with 1996 where 80,065 tons of ore was crushed and stacked, or with 1995 where 163,595 tons of ore was crushed and stacked.
During the year ended June 30, 1997, there was nothing added to the leach heap. However, the final bit of leaching during the year of ore already stacked produced 606 ounces of gold (1996 - 4,104 ounces) and 10,119 ounces of silver (1996 - 47,347 ounces), of which American Eagle's share was 242 ounces of gold and 4,048 ounces of silver. Realized prices of gold and silver were higher in the previous year at $375 per ounce of gold (1996 - $387 per ounce) --- and $4.82 per ounce of silver (1995 - $5.35 per ounce). ----
Mine operating costs increased by 3.16% from the prior year due in large part to the increased reclamation activities and accruals for reclamation work to be carried out, as well as the cessation of mining operations and leaching in January 1996 and January 1997, respectively. The major focus of operations after January 1996 was to continue leaching and processing the ore that had been stacked on the leach heap. As of January 1997, the company's sole purpose is to proceed with the reclamation process in accordance with the reclamation plan that had been filed and accepted in the prior year with the Bureau of Land Management in Nevada The Company has plans to complete the reclamation work over the next few years.
General and administrative costs increased during the year by 12.49% as the company shifted it's focus from mining/leaching operations to reclamation of the land and all of it's associated costs. Couple this with the costs incurred in selling the Company's various equipment, of which it sold significantly more than the prior year. The administrative staff consists of only two staff members.
Due to the cessation of mining operations during fiscal 1996, an impairment allowance for long-lived assets was established as of June, 1996 which fully reserved the remaining net book value of property and equipment; because of this impairment, depreciation and depletion is not recognized for fiscal 1997. The impairment of long-lived assets was the most significant change in the financial statements for fiscal year-end 1996; such a write-down will not be evident in fiscal year-end 1997.
The working capital of the Company shows a large deficiency of $ 373,237 and 1996 working capital shows a deficiency of $ 33,733 due to a re-classifying of an accounts receivable from current to long-term . This large increase in working capital deficiency is due to an increase to the reclamation liability of 259 % over the prior year as Mine's management revised its estimate of total reclamation costs to be incurred. To a smaller extent, accounts receivable dropped 100% as there was no mining of gold or silver to be refined.
1996 COMPARED TO 1995: - ------------------------
The small increase in total revenue from 1996 to 1995 is due to a combination of two factors in particular: Interest income was increased due to higher bank balances during the year and interest being earned on the increased deposits for reclamation, and the decrease in mineral sales is a result of the cessation of mining operations in January 1996.
During the year ended June 30, 1996, there was 80,065 tons of ore added to the leach heap which contained approximately 4,577 ounces of gold and 52,974 ounces of silver. Leaching during the year produced 4,104 ounces of gold (1995 - 4,638 ounces) and 47,347 ounces of silver (1995 - 57,534 ounces), of which American Eagle's share was 1,642 ounces of gold and 18,939 ounces of silver. Realized prices of gold and silver were higher than in the previous year at $387 per ounce of gold and $5.35 per ounce of silver.
Mine operating costs decreased by 42% from the prior year due to the increased reclamation activities and accruals for reclamation work to be carried out and the cessation of mining operations in January 1996. The number of employees during the year was changed significantly, decreasing to 9 employees ( 1995- 20 ) due to the decision to cease mining operations. The major focus of operations after January 1996 was to continue leaching and processing the ore that had been stacked on the leach heap, and proceed with the reclamation process in accordance with the reclamation plan that had been filed and accepted in the prior year with the Bureau of Land Management in Nevada. The Company has plans to complete the reclamation work over the next several years.
Depreciation and depletion was decreased over the prior year due to the normal decreasing value in the assets and the lower number of ounces produced for the fiscal year. General and administrative costs were increased during the year due to extra time spent on reclamation supervision by Miramar personnel which is charged to the mine. The administrative staff consists of only two staff members. Interest costs were decreased due to the mine paying off the silver loan during the year. There is no longer any debt carried by the mine and there are no interest charges expected for the upcoming year.
The working capital of the Company shows a deficiency of $ 33,733 and 1995 working capital has been restated to show a deficiency of $ 111,854 due to the reclamation accrual being reclassified to a current rather than a long-term liability. Excluding the reclamation liability, working capital increased by $ 59,952 due to the reduction of current accounts payable of $ 47,538 and an increase in the current accounts receivable of $ 11,073
The most significant change in the balance sheet is the write-down of the Property and Equipment of $ 442,181. Based on the Company's decision to cease mining in January 1996, which resulted in a re-evaluation of the assets, it was decided to write-down these assets, although leaching will continue over the next few months.
(B) LIQUIDITY AND CAPITAL RESOURCES
Any cash flow during this fiscal year was attained through the sale of the Company's assets, and to a lesser extent from either it's joint venture partner or accounts receivable. This is in contrast to the previous two years where the Company's sale of gold and silver and/or financing through it's joint venture partner, Miramar, provided most of the cash flow. Now, though, with mine management's decision to cease mining operations back in January 1996, any cash flow must come from Miramar, or the sale of any of the Company's remaining assets. Because of the joint venture arrangements between the two companies, Miramar represents it will not demand payment in fiscal 1998. Repayments will be made as cash flow permits. The company owns approximately 2% of Miramar Mining Corporation- a related party. Miramar is a mining company listed on NASDAQ and such investment is recorded in the financial statements at cost due to its related party nature. The market value of the shares is approximately $ 3,562,500 at June 30, 1997. Due to the thinly traded nature of such shares, and their susceptibility to market fluctuations, there is no assurance such fair value will be realized.
As the working capital deficiency for the fiscal year end 1997 is $373,237 ( 1996, a deficiency of $ 33,733) , it would seem that the company will require more assistance from Miramar to help pay some of it's current liabilities, on top of selling more of it's assets. Ceasing mining operations put an end to any cash flow from the sale of gold and/or silver.
The Company is in the process of evaluating various future business directions. During fiscal 1997, the Company's management entered into negotiations with various entities, including related parties, which could ultimately result in a change in the Company's operating entities and a reorganization of the corporate structure of the Company. The reorganization contemplated includes 1) a transaction in which the Company's 40% interest in the Golden Eagle Mine joint venture is sold or transferred, 2) to acquire shares of the Company's common stock from related entities, 3) the liquidation of a portion of the Company's investment in Miramar, and 4) to eliminate a portion or all of the amounts due to related parties. Subsequently, management plans to acquire or lease new properties and to continue in the business of exploration, development , and production of precious metals. The terms of such reorganization have not been finalized, nor can its impact on the financial statements be determined at this time. Accordingly, no amounts have been recorded in the financial statements which could result from these proposed transactions. There can be no assurance that such transactions will occur.
(C) IMPACT OF INFLATION
The price of gold, which is established by daily trading in world commodity markets, determines in large measure the Company's profitability and cash flow. This is particularly so in the short term, as the gold price can change substantially in several days of trading, while the Company's mining operations are governed by ore grades, waste to ore stripping ratios, metallurgical recoveries and processing rates, none of which can be adjusted easily in the short term. Operating costs in the mining industry over time reflect the underlying rate of inflation in the general economy, as does the price of gold. The latter, however, also responds rapidly to changes in interest and exchange rates, political tensions and investor anxieties, all of which are beyond the control of or influence by the Company.
(C) IMPACT OF FINANCIAL ACCOUNTING STANDARD BOARD PRONOUNCEMENTS NOT YET ADOPTED Federal Income Taxes - In February, 1992, the Financial Accounting ---------------------- Standards Board ("FASB") issued Statement of Financial Accounting Standards - ("SFAS") No. 109, "Accounting for Income Taxes", which changes the accounting for income taxes. Adoption of this standard is required for fiscal years beginning after December 15, 1992, although earlier implementation is permitted. The Company has adopted this standard for the first time for the June 30, 1994 year end with the only affect being improved disclosure concerning the tax position of the Company.
Earnings Per Share - The Financial Accounting Standards Board (FASB) -------------------- recently issued SFAS No. 128 entitled " Earnings Per Share". This statement establishes standards for computing and presenting earnings per share and is effective for financial statements issued for periods ending after December 15, 1997. Earlier application of this statement is not permitted and upon adoption requires restatement (as applicable) of all prior-period earnings per share data presented.
In addition, the FASB issued SFAS 129 entitled " Disclosure of Information about Capital Structure" in February 1997. This statement establishes standards for disclosing information about an entity's capital structure. The Company already complies with SFAS 129 and foresees no material impact on the financial statements in adopting the statement for periods ending after December 15, 1997.
On June 30, 1997, the FASB issued SFAS 130 entitled " Reporting Comprehensive Income". This statement requires companies to classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid- in capital in the equity section of a statement of financial position, and is effective for financial statements issued for fiscal years beginning after December 15, 1997. Management does not believe this new FASB will have a material impact on the financial statements of the company.
On June 30, 1997, the FASB issued SFAS 131 entitled " Disclosure About Segments of an Enterprise and Related Information". This statement establishes additional standards for segment reporting in the financial statements and is effective for fiscal years beginning after December 15, 1997. Management has not determined the effect of this statement on its financial statement disclosure.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Please see the exhibits attached to this document as noted under Part 4 Item #14.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There is nothing to report under this item.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table and biographical data summarize the principal occupations and business experience for the last five years of each of the directors of the Company post-reorganization.
W.H. Berukoff. Mr. Berukoff is President and a Director of the Company. Mr. Berukoff is also President of Miramar Mining Corporation, Miramar Gold Corporation, Miramar Con Mine, Ltd., Orcana Resources, Inc., Northern Orion Explorations Ltd., Red Lion Management Ltd., Red Lion Equities Ltd., A.G.M. Steel Industries, A.G.M. Mining Systems, Laco Holdings Ltd., First Quay Holdings Ltd., and Tiger Resources Ltd. Mr. Berukoff has held his position in these companies from 1973 to date except as to Miramar Con Mine Ltd. which was acquired by Miramar in October 1993. Red Lion Equities Ltd., Miramar Mining Corporation, Miramar Con Mine Ltd. and Miramar Gold Corporation are affiliated with the Company.
James E. McKay. Mr. McKay is the Business Manager and a Director of the Company and is responsible for the technical and management operations of the Company in Nevada. He has held this position since August, 1992. Mr. McKay holds a Bachelor of Science Degree in Geological Engineering from the University of Nevada and earned an M.B.A. from the University of Nevada in 1984. Mr. McKay has over 20 years minerals industry experience including the position of on-site Manager and Project Geologist leading to Homestake Mining Company's McLaughlin gold discovery. From 1989 until joining the Company, Mr. McKay was a consultant to the minerals industry, specializing in project
management. From 1985 to 1989 Mr. McKay was a planning Analyst for Sierra Pacific Power company.
No officer or director of the Company has any family relationship to any other officer or director of the Company.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table contains certain information regarding cash compensation paid by the Company during the fiscal year ended June 30, 1997, to certain executive officers and to all executive officers as a group.
Stock Option Plans ------------------
There is no stock option plan in effect.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company has one class of stock, common. On June 30, 1997 there were 5,400,000 shares outstanding. Each share of stock is entitled to one vote.
As of June 30, 1997 the following persons were known to the Company to be beneficial owners of more than five percent (5%) of the voting securities.
(1) With respect to the 3,456,028 shares listed as beneficially owned by Red Lion Equities Ltd. ("Red Lion"), Red Lion has sole voting power with respect to all the shares. Mr. W.H. Berukoff, an officer and director of the Company is the principal shareholder, President and a director of Red Lion.
(2) With respect to the 864,007 shares listed as beneficially owned by Miramar Gold Corporation ("Miramar"), Miramar has sole voting power with respect to all the shares. Mr. W.H. Berukoff, an officer and director of the Company is also the President and a director of Miramar.
As of June 30, 1997 the number of shares of any class of equity securities of the Company, or any of its parents and subsidiaries, beneficially owned by all directors of the Company, naming them, and by the directors and officers of the Company as a group, without naming them, are as follows:
(1) These shares are held in the names of Red Lion Equities Ltd., a Canadian corporation.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In September, 1989 the Company entered into an agreement with Miramar Gold Corporation ("Miramar Gold"), a Nevada corporation, for the operation of mining properties and equipment. Miramar Gold is a wholly owned subsidiary of Miramar Mining Corporation. Mr. W.H. Berukoff is President and Chairman of the Board of Directors of the Company. He is also President and Chairman of the Board of Directors of Miramar Gold and Miramar Mining Corporation.
Under the terms of the agreement Miramar Gold received 80% of the cash flows and paid 60% of the expenses from mining operations until it had received the sum of $1,000,000. Thereafter Miramar Gold receives 60% of the cash flows and pays 60% of the expenses. As of September 30, 1994 Miramar Gold had received the full $1,000,000.
At June 30, 1997 and 1996 the Company had a payable to Miramar Gold of $2,570,915 and $2,521,426 for costs paid by Miramar Gold on behalf of the Company.
Management fees for services relating to the Company were paid to Miramar Gold in 1997 and 1996 in the amounts of $6,438 and $25,752.
At June 30, 1997 and 1996 the Company had a receivable of $53,261 from a company controlled by the President of the Company.
During the year ended June 30, 1994, the Mine sold a loader to Miramar Con Mine Ltd., a subsidiary of Miramar Mining Corporation, at fair market value of $125,000. The Company recorded a gain of $47,287 for its 40% portion of the gain on this sale.
During the year ended June 30, 1995, certain work was performed for Miramar Con Mine Ltd., a related company to Miramar Gold Ltd. The payment for this work was made in July 1994 in the form of gold bullion which was used to repay the silver loan.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) (1) FINANCIAL STATEMENTS. ----------------------
Independent Auditors' Report
Balance Sheets as of June 30, 1997 and 1996
Statements of Operations for the years ended June 30, 1997, 1996 and 1995
Statements of Stockholders' Deficiency for the years ended June 30, 1997, 1996 and 1995
Statements of Cash Flows for the years ended June 30, 1997, 1996 and 1995
Notes to Financial Statements
(2) Financial Statement Schedules. --------------------------------
None.
(3) Exhibits required to be filed by Item 601 of Regulation S-K. ------------------------------------------------------------
There is nothing to report under this item.
(4) Financial Data Schedule -------------------------
(b) Report on Form 8-K ---------------------
None.
SIGNATURES ================
Pursuant to the Requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: September 26, 1997 AMERICAN EAGLE RESOURCES, INC. By:"Walter H. Berukoff" ------------------------------- President
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 Company and in the capacities and on the dates indicated.
Date: September 26, 1997 By:"Walter H. Berukoff ------------------------ President and Director (Chief Executive Officer)
Date: September 26, 1997 By:"James E. McKay" ------------------------- Director
AMERICAN EAGLE RESOURCES, INC.
Financial statements as of June 30, 1997 and 1996 and for Each of the Three Years in the Period Ended June 30, 1997 and Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of American Eagle Resources, Inc.:
We have audited the accompanying balance sheets of American Eagle Resources, Inc. ( the "Company") as of June 30, 1997 and 1996, and the related statements of operations, stockholders' deficiency and cash flows for each of the three years in the period ended June 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 1997 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, during the fiscal 1997 the Company ceased all leaching and production at its sole operating mine site and moved into full reclamation activities. In addition, recurring losses from operations and a stockholders' capital deficiency raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Deloitte & Touche LLP Reno, Nevada August 29, 1997
See notes to financial statements
Costs of mineral properties at June 30, 1997 and 1996 relate principally to the Golden Eagle Mine.
3. INVESTMENT IN MIRAMAR MINING CORPORATION
The Company's investment in Miramar Mining Corporation ("Miramar") represents an approximate 2% interest in that company. Miramar is a mining company listed on the NASDAQ Stock Exchange and is a related party (see Note 5). At June 30, 1997 and 1996, this investment was recorded at cost, which was less than market value. The market value of the investment at June 30, 1997 and 1996, respectively, based on quoted values of shares of stock of Miramar that were traded on the NASDAQ, was $ 3,562,500 and $ 5,500,000. Due to the related party nature of the investment, the investment is not recorded above original cost basis. Due to the nature of marketable securities, and their susceptibility to fluctuations in market conditions, their fair value could change significantly in the next year.
4. INCOME TAXES
No provision for income taxes has been recorded in the accompanying financial statements due to the net losses of the Company. At June 30, 1997, the Company had net operating loss ("NOL") carryforwards and investment tax credit carryforwards as follows:
The Company has not recognized a deferred tax asset relating to these carryforwards.
The NOL carryforwards generated through the date of the Company's reorganization in 1990 are subject to an annual limitation of $272,858. The NOL carryforwards generated subsequent to such reorganization are allowed without limitation. Therefore, total NOL carryforwards actually available to offset future taxable income will be limited to approximately $ 6,500,000 before fully expiring during the year ending June 30, 2017. Subsequent ownership changes could further reduce available NOL carryforwards. The annual limitation, and therefore the NOL carryforwards available, are
increased by any recognized built-in gains during a taxable year as provided by Internal Revenue Code Section 382.
The Company has adopted Financial Accounting Standards Board Statement No. 109, Accounting for Income Taxes (SFAS 109). The Company had no recorded deferred taxes before or after implementation of SFAS 109 and, accordingly, there was no cumulative or current period effect from the adoption of SFAS 109.
Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes and the impact of net operating loss carryforwards. The components of the Company's deferred tax assets as of June 30, 1997 were as follows:
5. RELATED PARTY TRANSACTIONS
In September 1989, the Company entered into a joint venture agreement with Miramar Gold Corporation ("Miramar Gold"), a Nevada corporation, for the operation of mining properties and equipment (the Golden Eagle Mine Joint Venture). Miramar Gold is a wholly-owned subsidiary of Miramar (see Note 3), which has a 16% interest in the Company. Mr. W.H. Berukoff is President and a member of the Board of Directors of the Company. He is also President and a member of the Board of Directors of Miramar Gold and Miramar. Under the terms of the agreement, the Company received 20% of the revenue and paid 40% of the expenses from mining operations until Miramar had received the sum of $ 1,000,000. Beginning in September, 1994, the Company received 40% of the revenues and paid 40% of the expenses.
At June 30, 1997 and 1996, the Company had a payable to Miramar Gold of $ 2,570,915 and $ 2,521,426, respectively, for costs paid by Miramar Gold on behalf of the Company. The Company classifies this payable as non-current as Miramar Gold has represented it will not demand payment in fiscal 1998. Repayments will be made as cash flow permits.
Management fees for services rendered to the Company were paid to Miramar Gold in 1997, 1996 and 1995 in the amount of $6,438, $ 25,752, and $ 29,033.
At June 30, 1997 and 1996, the Company had a receivable of $ 53, 261 from Red Lion Management, (a major shareholder) which is controlled by the President of the Company, as well as a receivable of $ 1,860, from other companies that are controlled by the President of the Company. The Company classifies these receivables as non-current as significant repayments are not expected in fiscal 1998.
6. COMMITMENTS
At June 30, 1997 and 1996, as security for the performance of certain reclamation procedures at a mining property, the Company is contingently liable for its pro-rata portion in the amount of $247,000, under unused letters of credit issued by a bank. These letters of credit are secured by certificates of deposit that have been assigned to the bank. The Company has entered into mining leases whereby it has been granted the right to conduct exploration and other mining activities on agreed upon land areas. Such leases, which are cancelable within one year, are generally effective as long as minerals are produced in commercial quantities. Amounts paid under mining leases during the years ended June 30, 1997,1996, and 1995 totaled $ 37,772, $ 57,587, and $ 57,664.
7. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL STATEMENTS
No fair market value was determinable for amounts due to and from related parties. These arrangements are interest free and similar financing arrangements could not be obtained by the Company currently.