from the 10k p9-10 -emphasis added-they did reach N C beds obviously but say dont have funds to complete the decline to such -must mean to rest of the C -bed? - questions which may be answered at the conference call today
9
Operations at Troy are on care and maintenance. We operated Troy continuously until December 2012, when operations were suspended due to unstable ground conditions in portions of the mine. In November 2013, we commenced construction of a new access decline from the main service adit to the North C Bed and to the undeveloped I Bed. In the fourth quarter of 2014, we successfully reached the North C Beds and resumed limited mining and milling operations. However, on January 19, 2015 we placed Troy on care and maintenance due to low metals prices. Although we took significant steps to improve our liquidity during the first quarter of 2014, we currently do not have sufficient cash on hand to re-start mining and milling operations or complete development to the I Beds. If we are not able to complete our proposed merger with Hecla, we will necessarily have to obtain additional capital in order to meet our capital spending and debt service requirements or consider other alternatives, which could include a sale of all or substantially all of our assets. There is no assurance our financing efforts will be successful under current market conditions. Our business has been materially and adversely affected by the decline in copper and silver prices and by the suspension of commercial mining operations at Troy.
Copper and silver prices fluctuate markedly. Our operations are significantly influenced by the prices of copper and silver. Copper and silver prices fluctuate widely and are affected by numerous factors that are beyond our control, such as the strength of the United States dollar, global and regional industrial demand, and the political and economic conditions of major producing countries throughout the world. During the last four years, annual average copper prices have fluctuated from a low of $3.11 per pound in 2014 to a high of $4.00 per pound in 2011, and world average annual silver prices have fluctuated from a low of $19.08 per ounce in 2014 to a high of $35.11 per ounce in 2011.
There are other formidable risks to mining. We are subject to all of the risks inherent in the mining industry, including industrial accidents, labor disputes, environmental related issues, unusual or unexpected geologic formations, cave-ins, surface subsidence, flooding, power disruptions and periodic interruptions due to inclement weather. These risks could result in damage to or destruction of our mineral properties and production facilities, personal injury, environmental damage, delays, monetary losses and legal liability. In addition, we are subject to competition for new minerals properties, management and skilled miners from other mining companies, many of which have significantly greater resources than we do. We also have no direct control over changes in governmental regulation of mining activities, the speculative nature of mineral exploration and development, operating hazards, fluctuating metal prices and inflation and other economic conditions.
Legal challenges could prevent us from ever developing Rock Creek. Our proposed development of Rock Creek has been challenged by several regional and national conservation groups at various times since the Forest Service issued its initial Record of Decision in 2003 approving our plan of operation. Some of these challenges have alleged violations of a variety of federal and state laws and regulations pertaining to our permitting activities at Rock Creek, including the Endangered Species Act, the National Environmental Policy Act, the 1872 Mining Law, the Federal Land Policy Management Act, the Wilderness Act, the National Forest Management Act, the Clean Water Act, the Clean Air Act, the Forest Service Organic Act of 1897 and the Administrative Procedural Act. Although we have successfully addressed most all of these challenges, we were directed by the Montana Federal District Court in May 2010 to produce a Supplemental EIS (“SEIS”) to address NEPA procedural deficiencies that were identified by the court. We cannot predict with any degree of certainty how possible future challenges will be resolved. Rock Creek is potentially the more significant of our two mining assets. New court challenges to the SEIS and a revised Record of Decision may delay us from proceeding with our planned development at Rock Creek. If we are successful in completing the SEIS and defending any challenges, we still must comply with a number of requirements and conditions as development progresses, failing which we could be denied the ability to continue with our proposed activities.
10
Our reclamation liability at Troy Mine could be substantial. Our financial obligations to reclaim, restore and close Troy are presently covered by a $12.9 million surety bond, which includes $6.5 million in a restricted cash account. In late 2012, Montana DEQ and the U.S. Forest Service issued a new EIS and Record of Decision pertaining to the Troy reclamation. We do not presently know whether the revised reclamation plan will increase our bonding costs. Laws governing the closure of mining operations in Montana have become more stringent since Troy was first placed into production. These factors could result in the imposition of a higher performance bond. Our reclamation liability for Troy is not limited by the amount of the performance bond itself; the bond serves only as security for the payment of these obligations. We would necessarily have to pay for any substantial increase in actual costs over and above the maximum allowed under the bond.
We presently do not have the financial resources to complete the construction of the new decline at Troy or to develop Rock Creek. We presently do not have sufficient funds to complete the construction of a new decline to the North C Bed and deeper I Bed areas at Troy. We also do not have sufficient cash to develop a mine or begin mining operations at Rock Creek should it prove feasible to do so.
9
Operations at Troy are on care and maintenance. We operated Troy continuously until December 2012, when operations were suspended due to unstable ground conditions in portions of the mine. In November 2013, we commenced construction of a new access decline from the main service adit to the North C Bed and to the undeveloped I Bed. In the fourth quarter of 2014, we successfully reached the North C Beds and resumed limited mining and milling operations. However, on January 19, 2015 we placed Troy on care and maintenance due to low metals prices. Although we took significant steps to improve our liquidity during the first quarter of 2014, we currently do not have sufficient cash on hand to re-start mining and milling operations or complete development to the I Beds. If we are not able to complete our proposed merger with Hecla, we will necessarily have to obtain additional capital in order to meet our capital spending and debt service requirements or consider other alternatives, which could include a sale of all or substantially all of our assets. There is no assurance our financing efforts will be successful under current market conditions. Our business has been materially and adversely affected by the decline in copper and silver prices and by the suspension of commercial mining operations at Troy.
Copper and silver prices fluctuate markedly. Our operations are significantly influenced by the prices of copper and silver. Copper and silver prices fluctuate widely and are affected by numerous factors that are beyond our control, such as the strength of the United States dollar, global and regional industrial demand, and the political and economic conditions of major producing countries throughout the world. During the last four years, annual average copper prices have fluctuated from a low of $3.11 per pound in 2014 to a high of $4.00 per pound in 2011, and world average annual silver prices have fluctuated from a low of $19.08 per ounce in 2014 to a high of $35.11 per ounce in 2011.
There are other formidable risks to mining. We are subject to all of the risks inherent in the mining industry, including industrial accidents, labor disputes, environmental related issues, unusual or unexpected geologic formations, cave-ins, surface subsidence, flooding, power disruptions and periodic interruptions due to inclement weather. These risks could result in damage to or destruction of our mineral properties and production facilities, personal injury, environmental damage, delays, monetary losses and legal liability. In addition, we are subject to competition for new minerals properties, management and skilled miners from other mining companies, many of which have significantly greater resources than we do. We also have no direct control over changes in governmental regulation of mining activities, the speculative nature of mineral exploration and development, operating hazards, fluctuating metal prices and inflation and other economic conditions.
Legal challenges could prevent us from ever developing Rock Creek. Our proposed development of Rock Creek has been challenged by several regional and national conservation groups at various times since the Forest Service issued its initial Record of Decision in 2003 approving our plan of operation. Some of these challenges have alleged violations of a variety of federal and state laws and regulations pertaining to our permitting activities at Rock Creek, including the Endangered Species Act, the National Environmental Policy Act, the 1872 Mining Law, the Federal Land Policy Management Act, the Wilderness Act, the National Forest Management Act, the Clean Water Act, the Clean Air Act, the Forest Service Organic Act of 1897 and the Administrative Procedural Act. Although we have successfully addressed most all of these challenges, we were directed by the Montana Federal District Court in May 2010 to produce a Supplemental EIS (“SEIS”) to address NEPA procedural deficiencies that were identified by the court. We cannot predict with any degree of certainty how possible future challenges will be resolved. Rock Creek is potentially the more significant of our two mining assets. New court challenges to the SEIS and a revised Record of Decision may delay us from proceeding with our planned development at Rock Creek. If we are successful in completing the SEIS and defending any challenges, we still must comply with a number of requirements and conditions as development progresses, failing which we could be denied the ability to continue with our proposed activities.
10
Our reclamation liability at Troy Mine could be substantial. Our financial obligations to reclaim, restore and close Troy are presently covered by a $12.9 million surety bond, which includes $6.5 million in a restricted cash account. In late 2012, Montana DEQ and the U.S. Forest Service issued a new EIS and Record of Decision pertaining to the Troy reclamation. We do not presently know whether the revised reclamation plan will increase our bonding costs. Laws governing the closure of mining operations in Montana have become more stringent since Troy was first placed into production. These factors could result in the imposition of a higher performance bond. Our reclamation liability for Troy is not limited by the amount of the performance bond itself; the bond serves only as security for the payment of these obligations. We would necessarily have to pay for any substantial increase in actual costs over and above the maximum allowed under the bond.
We presently do not have the financial resources to complete the construction of the new decline at Troy or to develop Rock Creek. We presently do not have sufficient funds to complete the construction of a new decline to the North C Bed and deeper I Bed areas at Troy. We also do not have sufficient cash to develop a mine or begin mining operations at Rock Creek should it prove feasible to do so.
