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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: waverider who wrote (10364)	4/2/2002 11:54:35 AM
From: Louis V. Lambrecht	Respond to of 36161

Have been reading the 10 K filing for hours. freeedgar.com Only impact I see is a possible default on the conditions of the LT credit line, collateralized with probable ore reserves. Why should they be defaulted if the company has used the same methodology and the same consultant since when she went public? Impact off course on next year's earnings if SWC has to settle early, but I can't find anything impacting earlier earnings. I don't get it. Meanwhile, net income trailing 12 mos. = $1.68/share 10% of float already traded at this point, 8 times average daily volume. New low 14.11. And no support below.

To: waverider who wrote (10364)	4/2/2002 12:15:29 PM
From: inchingup	Read Replies (1) \| Respond to of 36161

SWC Probable Explanation: We are currently engaged in discussions with the SEC concerning our methodology for calculating probable ore reserves. The discussions arose in connection with the SEC's review of our registration statement filed in December 2001. On January 30, 2002, we sold 4,285,715 shares of common stock, at an aggregate offering amount of $60,000,000, to accredited investors in a private placement. These shares of common stock were not registered under the Securities Act. Under the terms of the stock purchase agreement, if a registration statement covering the resale of the shares is not declared effective by the SEC within 90 days after the closing of the private placement, we will be required to pay each investor liquidated damages in a cash amount equal to one-thirtieth of one percent of the purchase price paid by such investor. On February 7, 2002, we amended the registration statement to include the resale of the shares of common stock purchased by the investors. The registration statement has not been declared effective by the SEC. The SEC has informed us that it believes our method for calculating probable reserves should be revised and insisted that we re-designate our probable reserves as mineralized material. Although we believe that our method is appropriate, there can be no assurance as to the outcome of our discussions with the SEC and it is not possible to quantify the amount of any potential adjustment in probable reserves until the matter is resolved, but we believe that any such adjustment could be material. Our depreciation and amortization expense and the carrying amounts of our property, plant and equipment included in our audited financial statements for the year ended December 31, 2001 are dependent upon our ore reserve estimate. If we are not successful in defending our position, it would likely result in a material downward revision of our reserves which, in turn, would result in a reduction to net income reported in the year 2001 and possibly to a restatement of prior years' results. A reduction in reserve estimates could also result in asset impairment charges. Our agreement with the syndicate of financial institutions provides a credit facility that contains an event of default if we fail to own or control, at any time, proven and probable reserves of at least 12.5 million tons. We are currently in compliance with the credit facility, but if we are required to reclassify our probable reserve estimates to a level where proven and probable reserves are less than 12.5 million tons, there will be an immediate event of default under the credit facility, which could cause the financial institutions to accelerate the maturity date of the outstanding borrowings. Changes to our financial statements could also result in violations of, or an event of default under, our credit facility. An event of default under our credit facility, an adjustment of our net income or the recognition of any impairment charges could negatively impact our financial condition, which in turn could negatively effect our stock price."