10-K 1 r10kidlm.txt INDEPENDENCE LEAD MINES CO - FORM 10K - 12-31-2001 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 OR [ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transaction period from to Commission file number 1-316 INDEPENDENCE LEAD MINES COMPANY ----------------------------- (Exact name of registrant as specified on its charter) ARIZONA 82-0131980 (State or other jurisdiction (IRS Employer Identification No.) of incorporation) P O BOX 717 WALLACE, IDAHO 83873 (Address of principal executive offices) Registrant's telephone number, including area code: (208) 753-2525 Securities registered pursuant to Section 12 (b) of the Act: Common Non-Assessable Stock, Par Value $1.00 per Share None ---------------------- ------------- Title of each class Name of each exchange on which registered Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of December 31, 2001, the aggregate market value of the voting stock held by non-affiliates of the registrant was $255,738. (APPLICABLE ONLY TO CORPORATE REGISTRANTS) As of December 31, 2001, there were 4,175,357 shares outstanding of the registrant's $1.00 par value common stock; authorized common shares of 5,000,000. DOCUMENTS INCORPORATED BY REFERENCE The following documents are incorporated by reference in the indicated parts of this Form 10-K: NONE INDEPENDENCE LEAD MINES COMPANY FORM 10-K ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2001 ---------------- TABLE OF CONTENTS PART I Page Item 1. Business . . . . . . . . . . . . . . . . . . 1 Item 2. Properties . . . . . . . . . . . . . . . . . 2 Item 3. Legal Proceedings . . . . . . . . . . . . . 2 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . 3 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters . . . . . . . 3 Item 6. Selected Financial Data . . . . . . . . . . . 4 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . 4 Item 8. Financial Statements and Supplementary Data . 4 Item 9. Disagreements on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . 4 PART III Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . 5 Item 11. Executive Compensation . . . . . . . . . . . . 5 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . 6 Item 13. Certain Relationships and Related Transaction . . . . . . . . . . . . . . . . . 6 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . 6 Exhibit Index . . . . . . . . . . . . . . . . . . . . . 7 Schedule of Property, Plant and Equipment . . . . . . . 8 Index to Financial Statements . . . . . . . . . . . . . 9 Signature Page . . . . . . . . . . . . . . . . . . F/S-6 [The balance of this page has been intentionally left blank] (i) INDEPENDENCE LEAD MINES COMPANY FORM 10-K ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2001 PART I ------- Item 1. Business. ------------------- Independence Lead Mines Company (the "Company") is a corporation organized under the laws of the State of Arizona on September 16, 1929. The Company is the owner of fifteen patented and seventeen unpatented mining claims. This claim group (the "property") is situated Northwest of Hecla Mining Company's Lucky Friday Mine in the Coeur d'Alene Mining District, Shoshone County Idaho. Adjacent is the community of Mullan and U.S. Interstate Highway 90. Pursuant to the terms of an agreement dated February 8, 1968, among Hecla Mining Company ("Hecla"), Day Mines, Inc. ("Day"), Abot Mining Company ("Abot") and the Company (the "Unitization Agreement"), the Eastern portion of the Company's Property (approximately five-eighths of the total area of the Property) was unitized with certain adjoining and near-by properties owned by the Day and Abot into a unitized area, consisting of 55 claims, (known as the "DIA Area"). Under the terms of the Unitization Agreement, ores and minerals in place are owned by the parties thereto in the following percentages: Day (now Hecla by merger) 47.70% Independence 46.30% Abot (now Hecla by purchase) 6.00% By a second agreement also dated February 8, 1968, (the "Lease Agreement"), Hecla leased the DIA Area for a period of fifty (50) years, subject to a 30-year extension, for the purpose of conducting mineral exploration and development of the DIA Area and mining such commercial ore as may be discovered in the DIA Area by Hecla. Since inception of the Lease Agreement, Hecla has performed exploration and development work on the DIA Project at a cost of $31,241,930 at yearend December 31, 2001. Ore production for 2001 was 185,781 tons and averaged 15.33 ounces silver, 8.48 % lead and 1.60% zinc. Total Proven and Probable Ore Reserves as of January 1, 2001 were 953,820 tons assaying 18 ounces silver per ton, 9.7% lead and 1.3% zinc. Reserves in all categories were 6,178,450 tons averaging 9.6 ounces silver, 5.4% lead and 2.3% zinc. Gold Hunter veins in all categories contain 59,515,413 ounces silver, 33,508,728 units lead and 14,312,746 units zinc. The Lease Agreement provides that all costs and expenses incurred in the exploration, development and operation of the DIA Area are to be paid by Hecla subject to the right of Hecla to be reimbursed for such costs and expenses, together with all advance royalties paid, out of any future net profits realized from the operation of the DIA Area. After recovery of Hecla's costs and expenses and amounts paid as advance royalties, and the establishment of a three-month working capital reserve, net profit royalties are to be paid to the Company and the other property owners as follows: Day (now Hecla by Merger) 19.08% Independence 18.52% Abot now Hecla by purchase) 2.40% Hecla, as the lessee, will retain the remaining sixty percent (60%) of any net profits realized. Under the terms of the Unitization Agreement, one-half of the first net profit/royalties received by the Company are to be paid over to Day (now Hecla) until Day recovers the sum of $450,000. The relationship of the parties to the Agreement may, under certain circumstances, be converted to a joint venture at the option of the property owners, where after the property owners would become participating, non-operating working interest owners who would share profits and expenses in connection with the DIA Area in the same ratio as exists pursuant to lease arrangement with Hecla described above. Page 1 Until Hecla commences to pay net profit royalties and during such period as the Lease Agreement is in effect, Hecla is obligated to pay an advance royalty to the Company of $750 per month subject to increase to $1,500 when production for the DIA Area exceeds 2,000 tons per month. Pursuant to the terms of the February 8, 1968, agreements, Hecla will be obligated to pay a royalty of 18.52 percent of defined net profits after Hecla has recouped its costs to explore and develop this property from the new discovery to Independence Lead Mines Company. The Company has no patents, licenses, franchises or concessions, which are considered by the Company to be of importance. The business is not of a seasonal nature. Since the potential products are traded in the open market, the Company has no control over the competitive conditions in the industry. There is no backlog of orders. There are numerous Federal and State laws and regulation related to environmental protection, which have direct application to mining and milling activities. The more significant of these laws deal with mined land reclamation and wastewater discharge from mines and milling operations. The Company does not believe that these laws and regulations as presently enacted will have a direct material adverse effect on its operations. The current officers and directors of the Company serve without compensation and are not considered by the Company to be employees. The western portion of the Company's property is not under the DIA Area agreement. West Independence, as it is called, consists of 10 patented mining claims of which four (4) claims are partly included in the DIA Area agreement. Patented acres owned are listed below. West Independence Acres 81.362 East Independence Acres 91.808 ------ Total Acres 173.170 Since June 30, 1999 the Company has experienced substantial differences with the Lessee. To establish a greater understanding of the DIA Project, Independence commissioned Mine Systems Design, Inc. to conduct an overview of the Project. Under Hecla's management, as of December 31, 2001 more than 944 tons have been mined and milled while incurring more than $15,000,000 of additional DIA Project debt. We believe the record indicates the DIA Project was not viable to undertake with the mining method chosen and the existing economic conditions, and did not justify the startup of a large mining operation on the Lessor's property. Because we believe this action by Hecla's management resulted in the waste of the resource, the Company gave written notice to Hecla Mining Company on March 1, 2002 of termination of the February 8, 1968 Lease Agreement and called for arbitration under the terms of the Agreement. In 1999 the Company acquired 38,436 shares on the open market at an average price of $0.49 per share, and in 2000 the Company acquired 94,800 shares at an average price of $0.38 per share. These shares are carried as treasury stock by the Company. Item 2. Properties ------------------- By an agreement dated February 8, 1968 among the Company and the owners of other adjacent or neighboring mining properties, the Company and the owners of the other properties entered into certain agreements, the general effect of which was to establish certain vertical boundaries between their respective properties and to waive certain existing or potential claims to extralateral rights to veins or ores found outside of the vertical boundaries of their respective properties. The Property of the Company is subject to this agreement. Pursuant to existing law, the Company is required to pay $100 per claim as a rental fee in order to maintain possessory title to such properties. This requirement has been performed by Hecla Mining Company under the terms of the February 8, 1968 agreements described in Item 1 of this report. Page 2 Further information regarding the Properties of the Company is set forth in this report under "Item 1. Business" and is incorporated herein by reference. Item 3. Legal Proceedings ------------------------- There are no legal proceedings pending. The Company has retained the Boise, Idaho law firm of Marcus, Merrick, Montgomery, Christian and Hardee in connection with the notice of termination of the 1968 Lease Agreement issued to Hecla Mining Company on March 1, 2002. It is anticipated that arbitration proceedings will begin in the first or second quarter of 2002. Item 4. Submission of matter to a Vote of Security Holders ------------------------------- There was no shareholder meeting held in 2001. PART II ------- Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. ------------------------------- (a)The market price ranges of the Company's common stock during each quarter of the years 2001 and 2000, respectively, were as follows:

(b)Approximate Number of Equity Security Holders. -------------------------------- Title of Class (1) Number of Record Holders December 31, 2001 ----------------- --------------------------------- Common non-assessable Approximately 2,300 (1) Capital stock, par value $1.00 per share ------------------------- (1)Included in the number of shareholders of record are shares held in "nominee" or "street" name. (c) No dividends were paid by the Registrant in 2001 or 2000, and the Company has no plans to pay a dividend in the foreseeable future. [The balance of this page has been intentionally left blank.] Page 3 Item 6. Selected Financial Data --------------------------

Selected Balance Sheets Data: Year ended December 31, ------------ 2001 2000 1999 1998 ---- ---- ---- ---- Current Assets 170,180 199,232 60,086 8,883 Current Liabilities 11,462 26,039 105,065 105,185 Working Capital 158,718 173,193 (44,979) (96,302) Total Assets 3,303,507 3,332,559 3,296,413 3,244,105 Deferred Income 356,000 337,250 301,250 283,250 Long-Term Debt -0- -0- -0- -0- Stockholders' Equity 2,936,045 2,969,270 2,890,098 2,855,670

Item 7. Management's Discussion and Analysis of Financial Condition and Result of Operations. -------------------------------- LIQUIDITY. The liquidity of the Company decreased over the past year, primarily due to normal expenses of operation with no offsetting revenue. Current assets of the Company consist primarily of cash, which decreased by $29,0523 from 2000. CAPITAL RESOURCES. The Property of the Company is leased to Hecla Mining Company. Capital improvements are to be paid for by Hecla pursuant to the terms of the leases. The Company has no long-term debt. RESULTS OF OPERATIONS. The Company is in the exploratory and development stage and has no operations. General and administrative costs in 2001 decreased by $6,909 over 2000 due to reduced activity following the 2000 legal settlement with H.F. Magnuson & Co. The Company realized no revenue from operations and received $7,167 in interest income. The Company reported a net loss of $33,225 after provision for income taxes. Item 8. Financial Statements and Supplementary Data. -------------------------------- The Company's financial statements appear elsewhere in this report, beginning at page F/S-1, following page 9. Item 9. Disagreements on Accounting and Financial Disclosure. -------------------------------- Not applicable. Page 4 PART III -------- Item 10. Directors and Executive Officers of the Registrant. ------------------------------ Name of Executive Officers and Directors Brief profile of and Position Held Age Officers and Directors ---------------------- --- ---------------------- Bernard C Lannen 65 Semi Retired Director of Lucky President and Director Friday Extension Mining Company Wayne L Schoonmaker 64 Certified Public Accountant, Secretary / Treasurer Secretary/Treasurer of Hanover Gold Company Inc, Sterling Mining Company, and Metalline Mining Co Forrest G Godde 85 President of Corporate Ranches Director in California and Nevada, Director of Mineral Mountain Mining Robert Bunde 63 Semi-retired farmer with investments Director in the mining field Gordon Berkhaug 67 Management of real estate investments with experience in the mining field The by-laws of the Company provide that the Directors serve until the next annual meeting of shareholders or until their respective successors have been duly elected and qualified. Officers serve at the discretion of the Board of Directors. Item 11. Executive Compensation ------------------------ The directors and officers of this company are not considered employees. There was no remuneration paid to any of the directors and officers of this company during the fiscal year ended December 31, 2001, other than the payment of $765 to the Treasurer for accounting services. No retirement benefit, bonus or other remuneration plans are in effect with respect to the Company's officers and directors. The Company has no standard or other arrangements for compensating directors. Page 5 Item 12. Security Ownership of Certain Beneficial Owners and Management ----------------------------- To the knowledge of the Company, no person beneficially owned more than five percent (5%) of any class of the Registrant's voting securities as of December 31, 2001. The following tabulation shows the beneficial ownership's of the Company's officers and directors in the securities of the Company as of March 1, 2002: Shares of Approximate Common Stock Percentage of Name Beneficially Owned Class ---- ------------------ ------------ Bernard C. Lannen 201,182 4.82 Wayne L. Schoonmaker 4,000 0.10 Forrest G. Godde 95,000 (F1) 2.28 Robert Bunde 159,500 3.82 Gordon Berkhaug 62,275 1.49 All directors and executive officers of the Company as a group (5 persons in a group) own 521,957 shares or approximately 12.50 percent of the Company are outstanding voting securities. (FN1) Includes 45, 000 shares that represent Mr. Godde's 50% interest in the Godde 1980 Trust. Item 13. Certain Relationships and Related Transaction -------------------------------- NONE. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K --------------------------------- (a)1. Financial Statements See index to Financial Statements at page 9 of this report 2. Financial Statement Schedules V - Statement of Property, Plant and Equipment, Page 8. Other financial statement schedules are omitted because of conditions under which they are required, or because the required information is given in the financial statements or notes thereto. (b) The company filed its report on Form 8-K during the last quarter of 1992. (c) Exhibits No additional exhibits are filed as a part of this report. The Exhibit Index appears at Page 7 of this report. Page 6 EXHIBIT INDEX Exhibits 3.1 Articles of Incorporation of Independence Lead Mines, Inc., as amended, previously filed as Exhibit 3.1 to form 10-K for 1983 and incorporated by reference herein. 3.2 Bylaws of Independence Lead Mines Company, as amended, previously filed as Exhibit 3.2 to form 10-K for 1983 and incorporated by reference herein. 10.1 Unitization Agreement dated February 8, 1968 among Day Mines, Inc., Independence Lead Mines company and Abot Mining Company, previously filed as Exhibit 10.1 to Form 10-K for 1983 and incorporated by reference herein. 10.2 Agreement dated February 8, 1968 among Hecla Mining Company, Day Mines, Inc., Independence Lead Mines Company and Abot Mining Company, previously filed Exhibit 10.2 to Form 10-K for 1983 and incorporated by reference herein. 10.3 Agreement dated February 8, 1968 among Independence Lead Mines Company, Day Mines, Inc., Abot Mining Company, Wall Street Mining Company, Hunter Creek Mining Company, Lucky Friday Extension Mining Company, Hecla Mining Company and the Bunker Hill Mining Company relating to extralateral and intralimital rights to mining claims, previously filed as Exhibit 10.7 to Form 10-K for 1983 and incorporated by reference herein. [The balance of this page has been intentionally left blank.] Page 7 INDEPENDENCE LEAD MINES COMPANY (AN EXPLORATION STAGE COMPANY) PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 ---------------------------------------

Page 8 INDEX TO FINANCIAL STATEMENTS Filed as part of the Annual Report Form 10-K December 31, 2001 FINANCIAL STATEMENTS: Page Balance Sheets, December 31, 2001 and 2000 . . . . . . F/S-1 Statement of Operations and Deficit Accumulated During The Exploratory Stage for the Years Ended December 31, 2001, 2000 and 1999 . . . . . . . . . . . F/S-2 Statement of Cash flows, for the years ended December 31, 2001, 2000 and 1999 . . . . . . . . . . . F/S-3 Notes to Financial Statements . . . . . . . . . . . . . F/S-4 The Company's financial statements are unaudited in reliance upon Section 210.3-11 of Regulations S-X adopted by the Securities and Exchange Commission. [The balance of this page has been intentionally left blank.] Page 9 INDEPENDENT LEAD MINES COMPANY (AN EXPLORATION STAGE COMPANY) BALANCE SHEET - UNAUDITED DECEMBER 31, 2001 AND 2000 --------------------

F/S-1 INDEPENDENT LEAD MINES COMPANY (AN EXPLORATION STAGE COMPANY) STATEMENT OF OPERATIONS AND DEFICIT ACCUMULATED DURING THE EXPLORATORY STAGE UNAUDITED FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999 -----------------------------------------------

F/S-2 INDEPENDENT LEAD MINES COMPANY (AN EXPLORATION STAGE COMPANY) STATEMENT OF CASH FLOWS - UNAUDITED FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999 ------------------------------------

F/S-3 INDEPENDENT LEAD MINES COMPANY (AN EXPLORATION STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 ------------------------------ Note 1 - Company business - The Company was incorporated under the laws of the State of Arizona on September 16, 1929. The Company is presently in the exploratory stage. Note 2 - The significant accounting principles and practices of the Company are as follows: a. The financial statements are prepared on the accrual basis of accounting. b. The Company depreciated its equipment on the straight- line method over their estimated useful life of 7 years. The Company currently has no depreciable property. c. Earning per share have been computed using the weighted average of shares outstanding during the period. Note 3 - Company property - The Company has 15 patented and 17 unpatented claims situated in the Hunter Mining District, Shoshone County, Idaho. On February 8, 1968, the Company entered into an agreement with Day Mines, Inc., Abot Mining Company and Hecla Mining Company. Certain properties of the four companies were combined for purposes of exploration and development. These properties were referred to as the DIA Area. The DIA Area consists of 9 patented and 14 unpatented claims of Independence Lead Mines Company. Hecla Mining Company is the exploring and developing company. The DIA agreement allows Hecla Mining Company to recover all of its exploration and development cost, advance royalties paid, and to build a three months' reserve for working capital prior to splitting profits. Independence is to receive 18.52% of the profits, and under the terms of the DIA agreement the Company has been receiving an advance of $1,500 for each month 2,000 tons of ore is mined. In March 2002 the Company notified Hecla Mining Company that it considers the DIA lease terminated and as a result will no longer accept advance royalty payments. Note 4 - In addition to cash costs in the amount of $23,302, the amount reflected in the balance sheet as the cost of mining claims reflects the par value assigned to 3,024,000 shares of stock issued for $3,034,000. The underlying cost basis of the mining claims is unknown and unobtainable. Since it was an accepted accounting practice at the time of the transaction, all subsequent financial statements have used the par value of the shares issued as the cost basis of the mining claims. The Company has considered revaluation of the mining properties, but feels that to revalue them at an amount that has no basis would be misleading. The Company feels that the claims are of value, as Hecla Mining Company has continued with its lease since 1968 and is currently conducting mining operations on the property. F/S-4 Note 5 -As shown in the financial statements, the Company incurred net loss of $33,225 during the year ended December 31, 2001, a net income of $305,473 during the year ended December 31, 2000, and a net loss of $121,391 during the year ending December 31, 1999. The income for the year 2000 was a one-time benefit and the Company has no continuing source of cash. These factors indicate doubt as to the ability of the Company to continue business on a going concern basis. The financial statements do not include any adjustments relating to the recoverability of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. Note 6 -Statements of income, cash flows, and shareholders' equity since the inception of the Company, September 16, 1929, through December 31, 2001 have not been presented due to the unavailability of past records. Generally accepted Accounting principles require that such statements be presented when financial statements purport to present financial position and results of operations for an exploration stage company. [The balance of this page has been intentionally left blank.] F/S-5 SIGNATURES Pursuant to the requirement of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be sign on its behalf by the undersigned, thereunto duly authorized. INDEPENDENCE LEAD MINES COMPANY By: /s/ Bernard C. Lannen ----------------------- Bernard C. Lannen, its President and Chief Administrative Officer Dated: March 22, 2002 By: /s/ Wayne L. Schoonmaker ------------------------ Wayne L. Schoonmaker, its Principal Accounting Officer Dated: March 22, 2002 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 as of the date indicated. By: /s/ Bernard C. Lannen By: /s/ Wayne L. Schoonmaker --------------------- ------------------------ Bernard C. Lannen Wayne L. Schoonmaker Director Secretary and Treasurer Dated: March 25, 2002 Dated: March 25, 2002 By: /s/ Forrest G. Godde By: /s/ Gordon Berkhaug --------------------- ------------------------ Forrest G. Godde Gordon Berkhaug Director Director Dated: March 25, 2002 Dated: March 25, 2002 By: /s/ Robert Bunde --------------------- Robert Bunde Director Dated: March 25, 2002 F/S - 6

INDEPENDENCE LEAD MINES CO 10-K