Item 1. Business
Silver Mountain Lead Mines, Inc. (Silver Mountain or the Company), an Idaho corporation, was organized in 1952. At present the Company is engaged in no activity other than necessary maintenance work on its property.
On June 15, 1954, Silver Mountain entered into an agreement with Hecla Mining Company (Hecla) and The Bunker Hill Company (Bunker Hill) whereby these two companies would explore and develop the mining properties owned or held by Silver Mountain and would mine any commercial ore deposits discovered as a result of this exploration and development.
The contract provided that if commercial ore was found on the Silver Mountain property, Hecla and Bunker Hill would provide all necessary mining equipment and would mine the ore of which Silver Mountain would receive 25% with Hecla and Bunker Hill sharing equally in the remaining 75%. Any charges against Silver Mountain for such costs, in excess of their net smelter returns from any ores produced, would be carried forward to be paid only from net profits from any future production of such property.
The contract contained a provision that when and if a commercial ore body was discovered on the property or after a total of $1,000,000 had been expended on exploration and development of said property, Silver Mountain would then own an undivided 25% interest in the property.
On October 7, 1959, Silver Mountain was advised by Hecla and Bunker Hill that exploration work, which cost in excess of $1,600,000, had been performed on the property under the terms of the above agreement. $538,000 of such costs was advanced by the Defense Minerals Exploration Administration. After being notified of this fact, Silver Mountain deeded to Hecla and Bunker Hill each an undivided 37.5% interest in the Silver Mountain property under the terms of the agreement.
Since the 1954 Agreement was terminated on October 7, 1959, the necessary maintenance and assessment work on the property has been performed by Hecla and Bunker Hill or other outside parties and Silver Mountain has been charged 25% of such expenses.
On November 1, 1982, Bunker Limited Partnership purchased from Bunker Hill all of its Idaho assets and certain liabilities. Included in this purchase by Bunker Limited Partnership were Bunker Hill's 37.5% interest in the Silver Mountain property, 896,000 shares of Silver Mountain stock, and notes receivable from Silver Mountain. As a result of this purchase, Bunker Limited
Partnership and Hecla continued management of the Silver Mountain property.
On June 6, 1988, the Company entered into a mining lease with Hecla whereby Hecla received the exclusive right to the exploration, development and mining operations upon the Company's property for a period of 25 years subject to cancellation if the property was not in production within 15 years. This lease was in exchange for a net profits royalty of 40%. On January 18, 1991, the lease was terminated.
At February 9, 1995, Bunker Limited Partnership and Hecla Mining Company, pursuant to the agreement dated June 15, 1954, each owned an undivided 37.5% interest in the Silver Mountain property. Stock ownership of the two companies at February 9, 1995, was as follows:
Shares Held as of Percent of February 9, 1995 Ownership ---------------- ---------
Bunker Limited Partnership 896,000 29.22% Hecla Mining Company 115,000 3.75% --------- ----- Total 1,011,000 32.97% --------- -----
On February 10, 1995, Hecla Mining Company acquired Bunker Limited Partnership's 37.5% undivided interest in the Silver Mountain property and their entire stock interest in the Company. Hecla currently holds 1,011,000 or 32.97% shares of common stock of the Company.
Hecla Mining Company provides accounting and legal services to Silver Mountain. In 1998, 1997 and 1996, Silver Mountain paid Hecla Mining Company $9,000 each year for these services. At December 31, 1998, the Company had obligations to Hecla Mining Company totaling $2,306 and $63,927 for accounts payable and notes payable, respectively. At December 31, 1997, the Company had obligations to Hecla Mining Company totaling $2,622 and $63,927 for accounts payable and notes payable, respectively.
On August 28, 1997, the United States Department of Justice filed a Motion for Leave to File a First Amended Complaint which sought to add the Company and 16 other companies in litigation pending in the United States District Court in and for the State of Idaho, captioned United States of America, Plaintiff, v. ASARCO Incorporated, et al., Defendants, Civil No. 96-0122-N-EJL. The litigation involves a claim under the Comprehensive Environmental Response, Compensation and Liability Act by the United States of America for alleged damages to the environment and associated natural resources through the Company's historic mining activities in and near the Bunker Hill Superfund Site and the
Coeur d'Alene River watershed located in North Idaho. In March 1998, the Court denied the motion to add parties including the Company. Although the Court stated that the plaintiff could renew their motion to add parties following the Court's ruling on a number of substantive motions pending before the Court, a later ruling by the Court indicated a strong desire not to have additional parties added to this proceeding.
Silver Mountain is an inactive company. It has no known ore reserves and at present has no immediate plans for developing the property.
Item 2.
Item 2. Property
Silver Mountain's property is located about one and one-half miles east of Mullan, Idaho. In 1993, Silver Mountain, together with the co-owners (Hecla Mining Company and Bunker Limited Partnership) relinquished its rights to certain unpatented mining claims, some of which were traded for patented mineral rights in a land exchange with the U.S. Forest Service, thereby changing its property ownership from a 25% interest in 24 patented claims, 93 unpatented claims, and 160 acres of mineral rights to a 25% interest in 24 patented mining claims and 268 acres of patented mineral property.
Item 3.
Item 3. Legal Proceedings
On August 28, 1997, the United States Department of Justice filed a Motion for Leave to File a First Amended Complaint which sought to add the Company and 16 other companies in litigation pending in the United States District Court in and for the State of Idaho, captioned United States of America, Plaintiff, v. ASARCO Incorporated, et al., Defendants, Civil No. 96-0122-N-EJL. The litigation involves a claim under the Comprehensive Environmental Response, Compensation and Liability Act by the United States of America for alleged damages to the environment and associated natural resources through the Company's historic mining activities in and near the Bunker Hill Superfund Site and the Coeur d'Alene River watershed located in North Idaho. In March 1998, the Court denied the motion to add parties including the Company. Although the Court stated that the plaintiff could renew their motion to add parties following the Court's ruling on a number of substantive motions pending before the Court, a later ruling by the Court indicated a strong desire not to have additional parties added to this proceeding.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5.
Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters
a. The Company's stock ceased to be traded on any stock exchange on May 24, 1991, when the Spokane Stock Exchange (where the stock had been listed) discontinued operations. At February 26, 1999, the bid and ask price for the Company's common stock was five cents and twelve cents, respectively. However, there has not been an established trading market for the common stock since May 24, 1991, and, as such, the bid and ask price do not constitute a reliable indication of the price that a holder of common stock could expect to receive upon the sale of any particular quantity thereof.
b. As of February 26, 1999, there were approximately 974 shareholders of the Company's common stock.
c. The Company has paid no dividends and does not anticipate being able to pay any dividends in the foreseeable future.
Item 6.
Item 6. Selected Financial Data (unaudited)
The Company is an inactive company. A summary of its operations for the five- year period ended December 31, 1998 is as follows:
No cash dividends were declared in the five-year period ended December 31, 1998.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The Company's general financial condition remained substantially unchanged during 1998 compared to 1997. Cash and cash equivalents decreased $7,143 (16%) from $44,203 at December 31, 1997, to $37,060 at December 31, 1998. Working capital declined $6,827 (16%) from $41,581 at December 31, 1997, to $34,754 at December 31, 1998. The decreases in cash and cash equivalents and working capital are primarily attributable to administrative expenses, partly offset by a $464 increase in interest income.
The 1998 net loss of $6,827 was $1,423 less than the net loss in 1997 which totaled $8,250. This decreased loss was primarily attributable to a $967 decrease in administrative expenses and a $456 increase in interest and transfer fee income.
The Company expects to keep the property on a care-and-maintenance basis. Management believes that the Company has sufficient cash and cash equivalents at December 31, 1998, to meet its present and intermediate financial requirements.
The Company is presently inactive and is no longer considered to be in the development stage. All costs are being expensed as incurred. Through December 31, 1994, the Company was considered a development stage company.
The information reported under Item 6. Selected Financial Data and Item 8.
Item 8. Financial Statements and Supplementary Data
SILVER MOUNTAIN LEAD MINES, INC. UNAUDITED BALANCE SHEETS December 31, 1998 and 1997 ------------
The accompanying notes are an integral part of the financial statements.
SILVER MOUNTAIN LEAD MINES, INC. UNAUDITED STATEMENTS OF INCOME AND ACCUMULATED SURPLUS For the years ended December 31, 1998, 1997, and 1996 ----------
The accompanying notes are an integral part of the financial statements.
SILVER MOUNTAIN LEAD MINES, INC. UNAUDITED STATEMENTS OF CASH FLOWS For the years ended December 31, 1998, 1997 and 1996 -------------
The accompanying notes are an integral part of the financial statements.
SILVER MOUNTAIN LEAD MINES, INC.
NOTES TO FINANCIAL STATEMENTS
-------------
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
The Company is presently inactive and is no longer considered to be in the exploration and development stage. All costs are presently being expensed as incurred.
No provision has been made for depreciation since the Company is inactive.
The Company considers cash equivalents to consist of highly liquid investments with a remaining maturity of three months or less when purchased.
Property, plant and equipment are stated at the lower of cost or estimated net realizable value. Maintenance, repairs and renewals are charged to operations. Betterments of a major nature would be capitalized. When assets are retired or sold, the costs and related allowances for depreciation and amortization are eliminated from the accounts and any resulting gain or loss is reflected in operations. Idle facilities, placed on a standby basis, are carried at the lower of net book value or estimated net realizable value. Effective January 1, 1996, the Company adopted the provisions of Statement of Financial Accounting Standards, No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS No. 121). The adoption of the provisions of SFAS No. 121 had no material effect on the results of operations or financial condition of the Company.
In February 1997, Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share" was issued. SFAS 128 established standards for computing and presenting earnings per share and simplifies the existing standards, including the presentation of basic earnings per share in lieu of primary earnings per share. The Company adopted the provisions of SFAS 128 in 1997, and all prior period earnings per share calculations have been restated to conform with SFAS 128. Due to the lack of existence of common stock equivalents in 1998, 1997, and 1996, there is no difference between the calculation of basic and primary earnings per share.
NOTE 2: PROPERTY, PLANT AND EQUIPMENT
The Company acquired its property located in the Coeur d'Alene Mining District, Shoshone County, Idaho, for cash of $494.50 and through issuance of 3,066,000 shares of capital stock. A total of
316,000 shares were issued to officers and/or directors at the date of issuance.
NOTE 3: LONG-TERM LIABILITIES
The notes payable to Hecla Mining Company represent noninterest bearing advances for annual assessment work which are to be repaid only from production should a commercial ore deposit be discovered and mined. At December 31, 1998 and 1997, the Company owed Hecla Mining Company $63,927 for such advances.
NOTE 4: RELATED PARTIES
Hecla Mining Company (which owns 32.97% of the Company's common stock) provides accounting and legal services to Silver Mountain. In 1998, 1997 and 1996, Silver Mountain paid Hecla Mining Company $9,000 each year for these services. At December 31, 1998, the Company had obligations to Hecla Mining Company totaling $2,306 and $63,927 for accounts payable and notes payable, respectively. At December 31, 1997, the Company had obligations to Hecla Mining Company totaling $2,622 and $63,927 for accounts payable and notes payable, respectively.
NOTE 5: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data and to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value. Potential income tax ramifications related to the realization of unrealized gains and losses that would be incurred in an actual sale or settlement have not been taken into consideration.
The carrying amounts for cash and cash equivalents and current liabilities are a reasonable estimate of their fair values.
The estimated fair values of financial instruments are as follows:
NOTE 6: CONTINGENCIES
On August 28, 1997, the United States Department of Justice filed a Motion for Leave to File a First Amended Complaint which sought to add the Company and 16 other companies in litigation pending in the United States District Court in and for the State of Idaho, captioned United States of America, Plaintiff, v. ASARCO Incorporated, et al., Defendants, Civil No. 96-0122-N-EJL. The litigation involves a claim under the Comprehensive Environmental Response, Compensation and Liability Act by the United States of America for alleged damages to the environment and associated natural resources through the Company's historic mining activities in and near the Bunker Hill Superfund Site and the Coeur d'Alene River watershed located in North Idaho. In March 1998, the Court denied the motion to add parties including the Company. Although the Court stated that the plaintiff could renew their motion to add parties following the Court's ruling on a number of substantive motions pending before the Court, a later ruling by the Court indicated a strong desire not to have additional parties added to this proceeding.
Item 9.
Item 9. Disagreements on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The names, ages and present principal occupation of management's nominees, other directorships held by them and the year each first became a director are set forth in the table below.
Name, Age & Date First Elected Principal Occupation & Directorships - ------------------------------ ------------------------------------
MICHAEL B. WHITE Vice President - Secretary and Director since March 20, 1995 General Counsel of Hecla Mining Age 48 Company, Coeur d'Alene, Idaho
JOHN P. STILWELL Vice President - Chief Financial Director since January 2, 1996 Officer of Hecla Mining Company, Age 46 Coeur d'Alene, Idaho
EXECUTIVE OFFICERS
Name Age Office - -----------------------------------------------------------------
Michael B. White 48 President John P. Stilwell 46 Vice President Nathaniel K. Adams 37 Secretary
Item 11.
Item 11. Executive Compensation
Silver Mountain paid no remuneration in 1998 to its officers and directors. Any compensation that may have been paid to the officers and directors of Silver Mountain for their services to the Company was paid by their respective principal employers. Silver Mountain has no compensation plans for its officers and directors and there are no stock options outstanding.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners & Management
As of December 31, 1998, there were 3,066,000 shares of the Company's common stock, par value $.10 per share outstanding.
The table below sets forth, as of December 31, 1998, the number of shares of the Company's outstanding common stock held by Hecla Mining Company.
Name & Address of Amount and Nature Beneficial Owner of Beneficial Ownership Percent of Class - ----------------- ----------------------- ----------------
Hecla Mining Company 1,011,000 shares direct 32.97% 6500 Mineral Drive (Sole voting & investment Coeur d'Alene, ID 83815 power)
The Company is not aware of any person (including any "group" as that term is used in Section 13 (d) (3) of the Securities Exchange Act of 1934), other than as set forth above, who is the beneficial owner of more than five percent of the Company's common stock as of December 31, 1998.
As of December 31, 1998, no shares of the Company's outstanding stock were held by any director individually or by all directors and officers of the Company as a group.
Item 13.
Item 13. Certain Relationships and Related Transactions
Not applicable.
PART IV
Item l4. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) and (2) All Financial Statements: Unaudited Balance Sheets, December 31, 1998 and Unaudited Statements of Income and Accumulated Surplus for the Years Ended December 31, 1998, 1997 and 1996 Unaudited Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996 Notes to Financial Statements
(a) (3) and (c) Exhibits:
The exhibit numbers in the following list correspond to the numbers assigned to such exhibits in Item 601 of Regulation S-K.
Number Description of Exhibits ------ -----------------------
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
(d) Financial Statements Required by Regulations S-X which are excluded from the annual report to shareholders:
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 19, 1999.
SILVER MOUNTAIN LEAD MINES, INC.
By /s/ Michael B. White ------------------------------ Michael B. White, President and Director
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 and on the dates indicated.
/s/ Michael B. White 3/19/99 /s/ John P. Stilwell 3/19/99 - ------------------------------- ------------------------------ Michael B. White Date John P. Stilwell Date President and Director Vice President and Director Chief Executive Officer Chief Accounting Officer
/s/ Nathaniel K. Adams 3/19/99 /s/ David F. Wolfe 3/19/99 - ------------------------------- ------------------------------ Nathaniel K. Adams Date David F. Wolfe Date Secretary Chief Financial Officer
EXHIBIT INDEX -------------
Exhibit No. Description - -------- ---------------------------------
27 Financial Data Schedule