EC--If they are debt free, how do you explain this>>
NEW YORK, March 18 - Moody's Investors Service downgraded to Caa2 from B3 the debt rating of
Royal Oak Mines Inc [AMEX:RYO - news].'s US$175 million of 11% senior subordinated debt, due
2006. .....Looks like debt to me.....
The outlook for the rating is negative.
The rating reflects Royal Oak's deteriorating operating and financial performance from its high cash
operating costs and increased expenses relating to mine closures, as well as the write-downs of
properties that have become uneconomic to operate in the current low gold price environment.
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Interest expense accrued on the Company's Series B 11% Senior Subordinated Notes for the three and
nine month periods ended September 30, 1997 was $6.9 and $19.7 million, respectively. Interest
expense was, however, partially offset by interest income earned on, and interest capitalized from, the
proceeds of the Notes used to invest in marketable securities, or expended on long-term construction
projects, primarily the Kemess project, respectively.
The Company's Series B 11% Senior Subordinated Notes are denominated in United States dollars.
Generally accepted accounting principles require the translation of these Notes at the exchange rate in
effect at the balance sheet date. This resulted in the Company recognizing a loss on translation of $2.0
million for the nine month period ended September 30, 1997. A gain of $1.6 million was recorded during
the three and nine months ended September 30, 1996 as the Senior Subordinated Notes were issued in
August of 1996.
Net cash provided by financing activities for the three months ended September 30, 1997 was $16.2
million compared to $231.5 million in the same period in 1996. During the third quarter of 1997, the
Company entered into capital leases for mining equipment for the Kemess project. During the same
period in 1996, the Company issued the Senior Subordinated Notes, the proceeds of which were used
to finance the Kemess and other development projects of the Company. For the nine months ended
September 30, 1997, cash provided by financing activities declined from $348.3 million in the same
period of 1996 to $15.8 million. The issuance of share capital to acquire the Kemess project and the
sale of the Series B 11% Senior Subordinates Notes were the principal reasons for differences in
financing activity in the two periods. |
