<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______ to ______
Commission file number 1-8736
HOMESTAKE MINING COMPANY
(Exact name of registrant as specified in its charter)
Delaware 94-2934609
(State of Incorporation) (I.R.S. Employer
Identification No.)
650 California Street
San Francisco, California 94108-2788
(Address of principal executive office) (Zip Code)
(415) 981-8150
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $1.00 par value New York Stock Exchange, Inc.
Rights to Purchase Series A New York Stock Exchange, Inc.
Participating
Cumulative Preferred Stock
Securities registered pursuant to Section 12(g) of the Act:
Not Applicable
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
---- ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $2,653,866,000 as of March 14, 1994.
The number of shares of common stock outstanding as of March 14, 1994 was
137,703,149.
Documents Incorporated by Reference:
Specified sections of Homestake Mining Company's 1993 Annual Report to
Shareholders, as described herein, are incorporated by reference in Parts I
and II of this Form 10-K. The definitive Proxy Statement for the 1994
Annual Meeting of Shareholders, which will be filed with the Securities and
Exchange Commission within 120 days after December 31, 1993, is
incorporated by reference in Part III of this Form 10-K.<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
PART I
ITEM - 1 BUSINESS
INTRODUCTION
Homestake is a Delaware corporation organized in 1983 as the
parent holding company to a California corporation organized in
1877. In this report, the terms "Homestake" and "Company" refer
to Homestake Mining Company and its Subsidiaries.
Homestake is engaged in gold mining and related activities,
including exploration, extraction, processing and refining. Gold
bullion, the Company's principal product, is produced in the
United States, Canada, Australia, Mexico and Chile.
The results of the Company's operations are affected
significantly by the market price of gold. Gold prices fluctuate
and are influenced by numerous factors beyond the Company's
control, including expectations with respect to the rate of
inflation, the relative strength of the U.S. dollar and certain
other currencies, interest rates, global or regional political or
economic crises and sales by holders and producers of gold in
response to such factors. The supply of gold consists of a
combination of new mine production and existing stocks of bullion
and fabricated gold held by governments, public and private
financial institutions and individuals. The Company's current
policy is to sell its production at current prices and not enter
into arrangements which would establish a price for the sale of
its future gold production.
Homestake also owns a 16.7% co-tenancy interest in the Main
Pass 299 offshore sulphur and oil deposit in the Gulf of Mexico.
Dollar amounts in this report are in U.S. dollars unless
otherwise indicated.
See pages 20 and 21 in the Company's 1993 Annual Report to
Shareholders for detailed listing of gold reserves and operating
statistics and see Note 22 to the consolidated statements on
pages 46 and 47 of the 1993 Annual Report to Shareholders for
geographic and segment information. Such information is hereby
incorporated by reference.
SIGNIFICANT 1993 DEVELOPMENTS
In the second half of 1993, gold prices began to increase.
Homestake's average realized price was $359 per ounce in 1993
compared with $348 per ounce in 1992 and $376 per ounce in 1991.
In August, the Company completed the feasibility study for
the Eskay Creek project which resulted in the addition of 1.2
million ounces of gold and 55.1 million ounces of silver to the
Company's proven and probable ore reserves. This represents the
Company's 54.2% interest in the property's total reserves. In
February 1994, the Company selected a development plan for Eskay
Creek which includes a 330 to 400 ton-per-day (TPD) underground
mine. Under this development plan, ore will be sold directly to
smelters, eliminating the necessity of constructing a processing
plant. Capital costs to complete the project, including working
capital requirements, are estimated to be $60 million. A mine
development certificate could be granted early in 1994 allowing
commercial production to begin by early 1995.
2<PAGE>
In December, Prime Resources Group Inc. (Prime) acquired all
of the stock of Stikine Resources Ltd. (Stikine) through a share
exchange. Prime and Stikine each have a 50% interest in the
Eskay Creek project. Prior to this transaction, Homestake's
effective ownership in Prime and Stikine was 54.3% and 54.1%,
respectively. The combination of these two companies simplifies
the ownership and operation of the Eskay Creek project.
Following the business combination the Company owned
approximately 54.2% of Prime.
In December, sulphur production at the Main Pass 299 sulphur
mine reached full production levels of 5,500 TPD (100% basis).
At December 31, 1993, due to a decline in oil prices the Company
recorded a $16 million write-down in the carrying value of the
oil and gas property associated with the sulphur mine.
In July, the Company sold its 83% interest in North American
Metals Corp., which owns and operates the Golden Bear mine in
northwestern British Columbia, for approximately $1 million and a
retained royalty interest. The Company recorded a $0.5 million
pretax gain and a $12.9 million income tax benefit on this sale.
In the fourth quarter, the Company sold its 50% interest in
the Mineral Hill gold mine in Montana to TVX Gold Inc. (TVX) for
$4 million in cash and 140,000 common shares of TVX. The Company
recorded a gain of $3.6 million on this sale.
In June 1993, the Company issued $150 million of 5.5%
convertible subordinated notes maturing June 23, 2000. Interest
on the notes is payable semi-annually beginning December 23,
1993. The notes are convertible into the Company's common shares
at a rate of $23.06 per common share and are redeemable at par by
the Company in whole at any time on or after June 23, 1996.
Proceeds from the notes were used to retire existing gold loans
and other long-term debt. Repayment of the gold loans resulted
in $6.8 million of net deferred gains, which are being recognized
in revenue over the original repayment periods of the gold loans.
During the third quarter, $5.8 million was expensed in
connection with an early retirement and work force reduction
program at the Homestake mine in South Dakota. The program will
reduce the mine's personnel level by approximately 120 people.
In the second quarter, Homestake Gold of Australia Limited
completed a restructuring of its operations, including relocation
of its principal office to Perth, Australia. The Company
recorded expenses of $1.9 million related to this restructuring.
A significant portion of the Company's gold operations are
transacted in Canadian and Australian currencies. Fluctuations
in these currencies' exchange rates relative to the U.S. dollar
affect the Company's results. In order to minimize the effects
of these fluctuations, the Company has implemented a foreign
currency protection program. Under the program the Company
enters into foreign currency option contracts which establish
minimum and maximum exchange rates ranges within which the United
States dollar may be exchanged for these foreign currencies.
3<PAGE>
1994 DEVELOPMENTS
On February 23, 1994, Prime issued five million fully-paid
warrants which are convertible into five million common shares of
Prime on completion of regulatory requirements. Net proceeds of
this offering of approximately $33 million will be used to fund a
portion of the Eskay Creek project construction and development
costs. When completed, this transaction will reduce the
Company's interest in Prime from 54.2% to 50.6%.
On March 15, 1994, the Company signed a letter of intent to
sell its interest in the Dee mine to Rayrock Mines, Inc. for
$16.5 million. Completion of this sale will result in a pretax
gain of approximately $15.8 million.
GLOSSARY OF TERMS
See pages 28-30 GLOSSARY and INFORMATION ON RESERVES, for
definitions of terms used in the following discussion.
GOLD OPERATIONS
UNITED STATES
Homestake conducts operations at the Homestake mine in the
Black Hills of South Dakota and at the McLaughlin mine in
northern California. Homestake also owns a 25% interest in the
Round Mountain mine in central Nevada and owns or has an interest
in four smaller mines in Nevada: Santa Fe mine (100%), Marigold
mine (33.3%), Pinson mine (26.3%) and Dee mine (44%). The
Company has exploration offices in Reno, Nevada and Lead, South
Dakota.
Homestake Mine
The 118-year old Homestake mine is located in Lawrence
County in and near Lead, South Dakota. Homestake owns 100% of
the operation.
The Homestake mine properties cover approximately 11,700
acres of which approximately 8,200 acres are owned in fee and the
remainder are held as unpatented mining claims. Paved public
roads provide access to the operation.
The Homestake mine is comprised of underground and open-pit
(the Open Cut) mining operations, an ore processing plant, a
wastewater treatment plant and tailings disposal facilities. The
underground mine is serviced by two 5,000-foot vertical shafts
from surface connecting with internal shafts which provide
hoisting and services to the 8,000-foot level. Ore from
underground is hoisted to surface, crushed and transported to the
nearby processing plant. Open Cut ore is crushed and transported
more than a mile to the processing plant by an enclosed conveyor.
The 7,400 TPD processing plant recovers gold through a
combination of gravity, carbon-in-pulp (CIP) and vat leaching
processes. Recycled process water is pumped through a carbon-in-
leach (CIL) circuit, also contributing to production. The
refinery produces fine gold bullion. Process tails are used for
underground fill or are deposited in a tailings impoundment
facility three miles from the plant. The capacity of the tailing
impoundment will be adequate through the year 2000, at which time
a new lift will be required. The facilities and equipment at
this operation have been upgraded over the years for
technological advances and are generally in good operating
condition.
4<PAGE>
Untreated water for use in the mine's facilities is obtained
from local watersheds under Homestake mine water rights and
potable water is purchased from the Lead/Deadwood sanitation
district. Electric power is purchased by contract from Black
Hills Corporation and is supplemented by Homestake mine
hydroelectric facilities.
Expansion of the Open Cut is nearing completion and waste
stripping currently is taking place. A comprehensive evaluation
of the Homestake mine is nearing completion also. Thus far, this
evaluation has resulted in a reevaluation of ore reserves, a new
underground mining plan, improvements in maintenance and
reductions in the work force. As a result of the reevaluation of
ore reserves, approximately 25% of the Homestake mine's
underground ounces previously categorized as mineable reserves
were reclassified to a geological resource category. During
1994, all administrative functions will be relocated to the mine
office as part of a surface facilities consolidation.
Hourly employees at the Homestake mine are represented by
the United Steel Workers of America. The current three year
contract expires on June 3, 1995.
The Homestake mine has received no notices of violation and
is under no regulatory orders of any kind mandating specific
environmental expenditures. Reclamation projects and the
upgrading of environmental practices and facilities are ongoing.
No royalties are payable on production from the Homestake
mine. The State of South Dakota currently imposes a severance
tax of 2% of gross receipts and 8% of net profits from the sale
of gold produced in the state. Effective July 1, 1994, the South
Dakota severance tax will change to 10% of net profits plus $4
per ounce of gold sold when the price of gold is $499 per ounce
or less, increasing by $1 per ounce for each $100 increment or
part thereof, in excess of $499 per ounce.
Year-end Proven and Probable Ore Reserves
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Underground
Tons of ore (000s) 15,014 20,802
Ounces of gold per ton .230 .240
Contained ounces of gold (000s) 3,447 4,985
Open Cut
Tons of ore (000s) 5,388 6,185
Ounces of gold per ton .130 .126
Contained ounces of gold (000s) 700 781
5<PAGE>
Operating Data
<CAPTION>
1993 1992
<S> <C> <C>
Production Statistics:
Tons of ore mined (000s):
Underground 1,471 1,551
Open Cut 1,048 1,049
Ore grade (oz. gold/ton):
Underground .235 .177
Open Cut .111 .136
Open Cut stripping ratio (waste:ore) 8.4:1 8.7:1
Tons of ore milled (000s) 2,695 2,638
Mill feed ore grade (oz. gold/ton) .174 .158
Mill recovery (%) 96 95
Gold recovered (000 ozs.) 448 397
Cost per Ounce of Gold:
Cash operating cost $ 268 $ 316
Non-cash cost 20 21
----- -----
Full production cost $ 288 $ 337
</TABLE>
McLaughlin Mine
The McLaughlin gold mine is located at the junction of Lake,
Napa and Yolo Counties in northern California. The McLaughlin
mine has been in operation since 1985 and is 100% owned by
Homestake.
The McLaughlin mine properties cover approximately 20,200
acres. Approximately 17,100 acres, which encompass all of the
mineable reserves, are owned and approximately 500 acres are
leased. The Company holds 133 unpatented mining claims and six
millsite claims covering the remaining 2,600 acres. Access to
the property is by paved road.
Ore is mined by open-pit methods using a fleet of 85-ton
haul trucks and two hydraulic shovels. Ore is crushed and
transported by slurry pipelines five miles to the processing
site. The processing plant consists of two parallel circuits.
The primary circuit utilizes pressure oxidation (autoclaves) to
treat higher grade sulfide ores, followed by neutralization and
cyanide leaching. The second circuit uses conventional crushing
and grinding, and sulfide flotation. Concentrates produced from
flotation are added to the sulfide ores prior to treatment
through the autoclaves. Flotation tailings go directly to
cyanide leach. Cyanidation and the CIP process with pressure
stripping and electrowinning are used to recover gold. Total
mill capacity through both circuits is approximately 5,800 TPD.
Tailings are deposited in a 28 million ton capacity tailings
impoundment that will be adequate through 1999, at which time a
new lift is scheduled to be added to the existing dam. The new
lift will increase the impoundment's capacity to allow for the
treatment of all known remaining reserves. Facilities are modern
and in good operating condition.
Water for the mine is obtained from the Company's fresh
water reservoir in Yolo County and from reclaimed tailings water.
The reservoir has approximately four years of storage capacity.
Electric power is purchased under interruptible tariff from
Pacific Gas and Electric Company.
6<PAGE>
During 1993, McLaughlin mine ore reserves were adjusted to
include 379,000 ounces of gold contained in previously excluded
low-grade stockpiles following favorable processing results. In
addition, plant tests indicated higher grades in an existing ore
reserve stockpile, which resulted in the addition of 74,000
ounces of gold to ore reserves.
Cash costs per ounce decreased in 1993 due to increased
recoveries in both circuits, higher usage of flotation
concentrates and continuing efforts on cost reduction.
The average grade to be milled over the remaining life of
the mine is expected to be approximately 0.083 ounce per ton.
Mining is currently expected to continue for approximately three
years and processing of stockpiles is expected to continue for an
additional seven years, unless substantial new reserves are
discovered.
McLaughlin mine royalties are equivalent to approximately 2%
of revenues.
Year-end Proven and Probable Reserves
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Open Pit
Tons of ore (000s) 7,176 5,739
Ounces of gold per ton .101 .150
Contained ounces of gold (000s) 727 861
Stockpiled*
Tons of ore (000s) 14,866 8,557
Ounces of gold per ton .075 .075
Contained ounces of gold (000s) 1,112 643
Total
Tons of ore (000s) 22,042 14,296
Ounces of gold per ton .083 .105
Contained ounces of gold (000s) 1,839 1,504
Operating Data
<CAPTION>
1993 1992
<S> <C> <C>
Production Statistics:
Tons of ore mined (000s) 2,043 2,608
Stripping ratio (waste:ore) 6.5:1 4.6:1
Tons of ore milled (000s) 2,164 2,051
Mill feed ore grade (oz. gold/ton) .154 .164
Mill recovery (%) 92 87
Gold recovered (000 ozs.) 305 291
Cost per Ounce of Gold:
Cash operating cost $ 196 $ 204
Non-cash cost 107 122
----- -----
Full production cost $ 303 $ 326
<FN>
* The cost of mining substantially all the low-grade ore in
the stockpiles has been expensed.
</TABLE>
7<PAGE>
Round Mountain Mine
The Round Mountain mine is an open-pit gold mine located in
Nye County, Nevada, about 60 miles north of Tonopah. Homestake
owns a 25% undivided interest in the mine. Echo Bay Mines Ltd.
owns a 50% undivided interest and is the operator. The remaining
25% interest is owned by Case Pomeroy & Company, Inc. The mine
has been in operation since 1977.
The Round Mountain properties cover a total of 28,362 acres
of private property and public domain land some of which is under
patent application. Of the total reserves, 83% are located on
the privately-owned land. Access to the property is by one mile
of gravel road.
Ores from the mine are leached using two methods. The
higher grade ore is processed on reusable heap-leach pads and the
lower grade ore is leached on a dedicated pad. During 1993,
total ore processed averaged 68,000 TPD. The reusable heap-leach
pads processed 28,000 TPD and the balance was processed on a
dedicated pad. The average ore and waste mining rate was 157,000
TPD. The reusable pad processing facilities consist of a
gyratory crusher, an intermediate ore storage and reclaim system,
secondary and tertiary cone crushers and screens, and a conveyor
system used to transport ore to two asphalt leach pads. The
reusable pads have a total capacity of approximately 4 million
tons. A separate dedicated heap-leach pad to process uncrushed
run-of-mine ore was commissioned during 1993. Facilities are in
good condition.
Water comes from wells on the property and power is
purchased under contract from Sierra Pacific Power Company.
Homestake's share of total 1993 gold production from the
Round Mountain mine was 93,674 ounces, compared with 92,646
ounces in 1992. Gold recoveries on the reusable pads are
improving as a result of placing fewer tons and higher grade ores
on the pads, which has allowed longer leaching times. Larger
quantities of lower grade ores are being processed on the
dedicated pad. Gold production in 1993 and 1992 benefited from a
very high-grade vein ore occurrence from which over 53,000 ounces
(1992: 52,000) of gold (100% basis) were recovered through
gravity separation. Additional high-grade vein material will be
processed in 1994. The lower overall 1993 ore grade of 0.022
ounce per ton in comparison to 0.036 ounce per ton in 1992 was
due to the lowering of the cut-off grade for ore placed on the
dedicated pad.
Ore reserves increased by 336,000 ounces in 1993.
Exploration drilling resulted in extension of the economic pit
limits, mainly to the northwest. In addition, revisions to the
ore reserve, primarily for changes in density of the various ore
bearing rock types, increased the reserve base.
Consideration presently is being given to the construction
of a mill at the property to process higher grade sulphide ores.
A revised mine plan incorporating a gravity milling process has
been submitted to the U.S. Bureau of Land Management (BLM) for
approval.
During 1993, a study which satisfied the zero discharge
groundwater provisions of the mine's permits was presented to the
Nevada Department of Environmental Protection. Further
monitoring will be completed in 1994. During 1993, the mine
operated in compliance with its permits.
All Round Mountain mine production is subject to royalties
determined by a complex royalty formula based on the price of
gold.
8<PAGE>
The royalties range from approximately 3.5% of gold revenues at
prices of $320 per ounce of gold or less to approximately 6.4% at
prices of $440 per ounce of gold or more. During 1993, the
royalty averaged 3.7% of revenues.
Homestake has a 25% share of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Tons of ore (000s) 302,426 276,552
Ounces of gold per ton .024 .025
Contained ounces of gold (000s) 7,123 6,787
Operating Data (100% Basis)
<CAPTION>
1993 1992
<S> <C> <C>
Production Statistics:
Tons of ore mined (000s) 25,929 17,147
Stripping ratio (waste:ore) 1.2:1 2.0:1
Tons of ore crushed (000s) 10,130 15,602
Tons of ore processed (000s) 24,443 16,530
Weighted average ore grade
placed on pads (oz. gold/ton) .022 .036
Leach recovery - reusable pads (%) 69 58
Gold recovered (000 ozs.) 375 371
Cost per Ounce of Gold
Cash operating cost $ 230 $ 233
Non-cash cost 63 50
----- -----
Full production cost $ 293 $ 283
</TABLE>
Santa Fe Mine
The Santa Fe mine is located in Mineral County, Nevada,
approximately 40 miles east of Hawthorne. Homestake owns 100% of
this operation. The mine has operated since 1988. Access to the
property is by paved road.
Mining operations at the Santa Fe mine's main pit were
completed in June 1992 and mining in the Calvada area adjacent to
the Santa Fe mine ceased in late 1993 as ore reserves were
depleted. In 1994, the operation will enter a reclamation phase
which is estimated to continue until 1997. During this period
some gold production will be derived from rinsing the heaps, a
process in which any residual cyanide is destroyed. Revenues
received from gold production during the reclamation period will
be applied toward remaining reclamation expenditures. Based on
current estimates, full provision for reclamation, after
considering the additional revenues to be received from gold
produced during reclamation phase, is included in the December
31, 1993 financial statements. The mine and its facilities are
fully depreciated.
Water for the property is obtained from three deep alluvial
wells located two miles from the minesite. Power is purchased
from Sierra Pacific Power Company.
9<PAGE>
During 1993, the mine operated in compliance with its
environmental permits.
The Calvada area is subject to three separate net smelter
royalties aggregating 3.5% to 15% depending upon the grade of ore
and the price of gold.
Year-end Proven and Probable Ore Reserves
<TABLE>
<CAPTION>
1992
<S> <C>
Tons of ore (000s) 1,721
Ounces of gold per ton .032
Contained ounces of gold (000s) 55
Operating Data
<CAPTION>
1993 1992
<S> <C> <C>
Production Statistics:
Tons of ore mined (000s) 2,043 2,164
Stripping ratio (waste:ore) 1.5:1 1.6:1
Tons of ore crushed (000s) 2,288 1,996
Ore grade put on pads (oz. gold/ton) .034 .037
Leach recovery (%) 61 71
Gold recovered (000 ozs.) 54 61
Cost per Ounce of Gold:
Cash operating cost $ 269 $ 255
Non-cash cost 89 93
----- -----
Full production cost $ 358 $ 348
</TABLE>
Dee Mine
The Dee gold mine is located in Elko County, Nevada.
Homestake owns an undivided 44% interest in the property.
Rayrock Mines, Inc. (Rayrock), a wholly-owned subsidiary of
Rayrock Yellowknife Resources, Inc., owns a 44% interest and is
the operator. The mine has operated since 1984.
The Dee property consists primarily of leasehold lands
covering approximately 4,000 acres. The leasehold land is
comprised of 299 unpatented lode claims and 102 unpatented mill
site claims. The leases remain in effect as long as the mine
continues production. Access to the property is by gravel road.
Mining is conducted by conventional open-pit methods. Ore
is processed by both heap leaching and conventional milling
methods. Total material movement is approximately 25,000 TPD.
In April 1993, continuous milling operations were suspended due
to a lack of ore of sufficient grade to feed the 1,250 TPD
capacity mill. However, mill grade ore above 0.10 ounce per ton
is stockpiled and periodically processed through the mill to
maximize gold recovery. Mine facilities are in good condition.
Water is supplied by wells on site and power is purchased
from Sierra Pacific Power Company.
Gold production (100% basis) in 1993 of 25,800 ounces was
33% below 1992 production of 38,800 ounces. Operating cost
reductions resulting from suspension of milling were not
sufficient to offset the production shortfall, and cash costs per
ounce increased from $362 in 1992 to $393 in 1993. In addition,
much of the ore placed
10<PAGE>
on the pads originated from a highly silicified section of the
orebody which adversely affected metallurgical recoveries.
During 1993, the mine operated in compliance with its
environmental permits and was the recipient of the Dupont
Environmental Leadership Award and the Governor's Excellence in
Reclamation Award.
Lease payments are made in the form of production royalties
ranging from 4% to 9% of gross receipts, depending on ore grade,
tonnage and gold price.
Homestake's share of production from the Dee mine was 11,340
ounces of gold in 1993 compared to 17,080 ounces in 1992.
Homestake has a 44% share of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Tons of ore (000s) 3,844 5,225
Ounces of gold per ton .044 .049
Contained ounces of gold (000s) 169 258
Operating Data (100% Basis)
<CAPTION>
1993 1992
<S> <C> <C>
Production Statistics:
Tons of ore mined (000s) 1,148 930
Stripping ratio (waste:ore) 4:1 7:1
Tons of ore milled (000s) 86 389
Ore grade milled (oz. gold/ton) .073 .087
Mill recovery (%) 80 81
Tons of ore leached (000s) 1,003 540
Ore grade leached (oz. gold/ton) .031 .020
Gold recovered (000 ozs.) 26 39
Cost per Ounce of Gold:
Cash operating cost $ 393 $ 362
Non-cash cost 142 42
----- -----
Full production cost $ 535 $ 404
</TABLE>
On March 15, 1994, the Company signed a letter of intent to
sell its interest in the Dee mine to Rayrock for $16.5 million.
Completion of this sale will result in a pretax gain of
approximately $15.8 million.
11<PAGE>
Marigold Mine
The Marigold gold mine is located approximately 40 miles
southeast of Winnemucca, Nevada. Homestake owns an undivided
33.3% interest in the Marigold property. Rayrock owns the
remaining interest and is the operator. The mine has operated
since 1989.
The property consists of approximately 3,920 acres of owned
land and 14,920 acres of leasehold lands held under leases which
remain in effect as long as the mine continues production.
Access to the property is by two miles of gravel road.
Mining is conducted by conventional open-pit methods. Ore is
currently produced from three open-pit mines. The 8-South open
pit provides most of the milling grade ore; the other two pits
produce mostly lower grade ore which is processed by heap
leaching. Total material movement is approximately 40,000 TPD.
Stripping will begin on a fourth pit in 1994. The mill is
scheduled to process approximately 1,900 TPD in 1994. Based on
current ore reserves, the milling operations will cease in early
1995 due to lack of mill grade ore, as the high-grade reserves in
the 8-South pit will have been depleted. Heap leaching will
continue until 1999. Mine facilities are in good condition.
Water is supplied from on site wells and power is purchased
from Sierra Pacific Power Company.
The 1993 exploration program concentrated on detailed ore
delineation in the four known pit areas for reserve modeling, pit
design and long range production scheduling purposes.
During 1993, the mine operated in compliance with its
permits and was the recipient of the Dupont Environmental
Leadership Award.
Production royalties are paid to two underlying ownerships
of the leasehold lands in amounts of 3% and 5% of gross receipts,
respectively.
Homestake's share of production from the Marigold mine was
30,165 ounces of gold in 1993 compared to 28,257 ounces in 1992.
Homestake has a 33.3% share of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Tons of ore (000s) 15,749 16,483
Ounces of gold per ton .034 .036
Contained ounces of gold (000s) 536 593
12<PAGE>
Operating Data (100% Basis)
<CAPTION>
1993 1992
<S> <C> <C>
Production Statistics:
Tons of ore mined 2,243 2,647
Stripping ratio (waste:ore) 2:1 1:1
Tons of ore milled (000s) 689 650
Ore grade milled (oz. gold/ton) .108 .111
Mill recovery (%) 91 91
Tons of ore leached (000s) 1,505 1,945
Ore grade leached (oz. gold/ton) .021 .024
Gold recovered (000 ozs.) 90 91
Cost per Ounce of Gold:
Cash operating cost $ 207 $ 231
Non-cash cost 95 119
----- -----
Full production cost $ 302 $ 350
</TABLE>
Pinson Mine
The Pinson gold mine is located approximately 30 miles
northeast of Winnemucca, Nevada. Homestake owns an undivided
26.3% interest in the Pinson property. Rayrock owns a 26.5%
interest and is the operator. The mine has operated since 1981.
The Pinson property consists of approximately 22,826 acres
of which 11,583 acres are held under leases which remain in
effect as long as the mine continues production. The remaining
land is comprised of 7,780 acres of unpatented mining claims and
3,463 acres of primarily fee lands. Access to the property is by
paved road.
Several open pits are mined simultaneously using
conventional open-pit mining methods. Ore is processed by both
heap leaching and conventional milling methods. Total material
movement is between 25,000 to 30,000 TPD. The mill has a capacity
of 1,500 TPD. The process uses both CIP and CIL circuits due to
the mildly refractory nature of a portion of the ore. Low-grade
ore is treated by heap leaching. In 1993, 86% of total gold
production was from ore milled. Mine facilities are in good
condition.
Water is obtained from wells on the property and power is
purchased from Sierra Pacific Power Company.
The 1993 exploration program failed to identify significant
new reserves on the property but delineated some ore extensions
in current mining areas.
Production royalties of 2.2% of net smelter returns (NSR)
are payable on the principal producing areas of the mine.
Overall, the underlying property ownership is complex, requiring
special arrangements with respect to the commingling of ore from
various locations.
During 1993, the mine operated in compliance with its
environmental permits and was the recipient of the Dupont
Environmental Leadership Award.
13<PAGE>
Homestake's share of production from the Pinson mine was
13,353 ounces of gold in 1993 compared to 13,214 ounces in 1992.
Homestake has a 26.3% share of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Tons of ore (000s) 4,771 4,980
Ounces of gold per ton .068 .064
Contained ounces of gold (000s) 323 319
Operating Data (100% Basis)
<CAPTION>
1993 1992
<S> <C> <C>
Production Statistics:
Tons of ore mined (000s) 882 1,013
Stripping ratio (waste:ore) 7:1 6:1
Tons of ore milled (000s) 552 544
Ore grade milled (oz. gold/ton) .093 .093
Mill recovery (%) 85 79
Tons of ore leached (000s) 415 383
Ore grade leached (oz. gold/ton) .031 .035
Gold recovered (000 ozs.) 51 50
Cost per Ounce of Gold:
Cash operating cost $ 267 $ 285
Non-cash cost 41 48
----- -----
Full production cost $ 308 $ 333
</TABLE>
Mineral Hill Mine
In November 1993, the Company sold its 50% interest in the
Mineral Hill mine to TVX, which also held a 50% interest, for $4
million in cash and 140,000 shares of TVX. In addition, the
Company retained a royalty interest on certain exploration lands
and received an indemnification from TVX for all past, present
and future reclamation requirements. The Company recorded a gain
of $3.6 million on the sale.
Homestake's share of 1993 gold production from Mineral Hill
was 18,335 ounces compared with 21,087 ounces in 1992.
CANADA
Homestake has a 50% interest in the Williams and David Bell
mines in the Hemlo mining district in Ontario and a 25% net
profits interest in the Quarter Claim (adjacent to the David Bell
mine). Homestake also owns and operates the Nickel Plate mine in
south central British Columbia and has a 54.2% interest in Prime.
Prime has a 40% interest in the Snip mine and owns the Eskay
Creek development property, both of which are located in
northwestern British Columbia.
14<PAGE>
The Company conducts exploration and investigates mineral
acquisition and development opportunities throughout Canada.
Canadian activities are managed from an office in Vancouver,
British Columbia.
Williams Mine
The Williams gold mine is located in the Hemlo Gold Camp 217
miles east of Thunder Bay, Ontario adjacent to the Trans Canada
Highway. The mine is operated by Williams Operating Corporation
(WOC). Homestake and Teck Corporation each own a 50% interest in
WOC. The mine commenced operations in 1985.
The property consists of 11 patented mining claims covering
approximately 400 acres and one Crown mining lease. WOC operates
the Williams mine with its own personnel. Homestake and Teck are
required to provide funds equally to WOC for all costs incurred
to operate the mine. Homestake and Teck have mutual rights of
first refusal over the other's direct interest in the Williams
mine and shares of WOC.
The Williams mine is an underground operation which is
accessible by a 4,300 foot shaft. Mining is carried out by the
longhole, open-stope method with cemented rock fill. In
addition, 300-400 TPD of low-grade ore is recovered from an open
pit which is operated mainly to produce waste rock for backfill.
Cyanidation and the CIP process are used to recover gold. The
mill's capacity was expanded to 7,000 TPD in 1992. The
facilities and equipment are modern and in good condition.
Water for the property is supplied from Cedar Creek and
power is purchased from Ontario Hydro via long-term contracts.
Propane for heating mine air and surface facilities is also
purchased on long-term contracts.
During 1993, the underground infrastructure was expanded to
facilitate mining operations to the west of the shaft. These
installations include a new crusher and conveyor system and a new
ore pass and vent raise.
Exploration drifting and drilling on 9,450 foot level
replaced over 90% of the 2.6 million tons milled in 1993.
During 1992, the Williams and David Bell mines combined
their separate tailings facilities into one tailings basin
located approximately two miles from the mill. Water from the
tailings basin is treated during the summer months in an effluent
treatment plant prior to discharge. The mines continue to
reclaim mill process water separately. During 1993, all
environmental discharges were in compliance with permit levels.
The mine has completed a reclamation plan which has been
submitted to the regulatory agencies for review.
The 11 patented mining claims are subject to three NSR
royalties totaling a net effective rate of 2.08% and the crown
mining lease is subject to a NSR royalty of 0.75%.
Homestake's share of production was 246,126 ounces in 1993
compared with 248,460 ounces in 1992.
15<PAGE>
Homestake has a 50% share of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Tons of ore (000s) 34,905 35,150
Ounces of gold per ton .170 .174
Contained ounces of gold (000s) 5,934 6,117
Operating Data (100% Basis)
<CAPTION>
1993 1992
<S> <C> <C>
Production Statistics:
Tons of ore milled (000s) 2,557 2,535
Mill feed ore grade (oz. gold/ton) .202 .205
Mill recovery (%) 95 95
Gold recovered (000s oz..) 492 497
Cost per Ounce of Gold:
Cash operating cost $ 199 $ 186
Non-cash cost 48 52
----- -----
Full production cost $ 247 $ 238
</TABLE>
David Bell Mine
The David Bell gold mine is located in the Hemlo Gold Camp.
The mine is operated by the Teck-Corona Operating Corporation
(TCOC). Homestake and Teck Corporation each own a 50% interest
in TCOC. The mine commenced operation in 1986.
The mine is located on the same orebody as the Williams
mine. The property consists of approximately 650 acres held
under two freehold patents. TCOC operates the David Bell mine
with its own personnel. Homestake and Teck are required to
provide funds equally to TCOC for all costs incurred to operate
the mine. Homestake and Teck have mutual rights of first refusal
over the other's interest in the David Bell mine and shares of
TCOC.
The David Bell mine is an underground operation which is
accessible by a 3,819 foot shaft. Production is from stopes
using longhole mining methods with a mixture of cement, tailings
and sand as backfill. The mill operated at 1,470 TPD in 1993.
Cyanidation and the CIP process are used to recover gold. The
facilities and equipment are modern and in good condition.
Water and power supplies are the same as those at the
Williams mine.
Mine development in 1993 included improvements to the mine
ventilation network and the underground roadway system. The
average width of ore at the David Bell mine is decreasing. In an
effort to minimize the costs associated with this decrease,
experimental stoping of narrow width ore by longitudinal longhole
retreat continued during the year. Ore grades decreased in 1993
as expected. However, gold production was consistent with 1992
due to increased productivity and improvements in waste dilution.
16<PAGE>
The current collective bargaining agreement with the United
Steel Workers of America is in effect until October 31, 1995.
Exploration drilling in 1993 replaced approximately 4% of
the 542,000 tons milled. Further in-mine exploration potential
is limited due to tight property boundaries. Homestake and Teck
each have a 50% interest in efforts to explore and develop
mineral properties within approximately two miles of the David
Bell property.
During 1993 all environmental discharges were in compliance
with permit levels. The mine has completed a reclamation plan
which has been submitted to the regulatory agencies for review.
The property is subject to a 3% NSR royalty.
Homestake's share of production at the David Bell mine was
107,594 ounces in 1993 compared with 105,256 ounces in 1992.
Homestake has a 50% share of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Tons of ore (000s) 6,450 6,965
Ounces of gold per ton .316 .321
Contained ounces of gold (000s) 2,041 2,236
Operating Data (100% Basis)
<CAPTION>
1993 1992
<S> <C> <C>
Production Statistics:
Tons of ore milled (000s) 542 517
Mill feed ore grade (oz. gold/ton) .416 .426
Mill recovery (%) 95 95
Gold recovered (000 ozs.) 215 211
Cost per Ounce of Gold:
Cash operating cost $ 154 $ 156
Non-cash cost 52 47
----- -----
Full production cost $ 206 $ 203
</TABLE>
Quarter Claim
A property (the Quarter Claim) constituting approximately
one-fourth of a mining claim, which was originally part of the
David Bell property, was optioned to, and subsequently acquired
by, Hemlo Gold Mines Inc. (Hemlo Gold) in 1982. Hemlo Gold
developed a shaft and reserved hoisting and milling capacity of
500 TPD at its mill to process any ore found on the Quarter
Claim. Homestake has a 25% net profits interest in all ore
recovered from the Quarter Claim. In calculating the net profits
interest, no allowance is made for capital costs unless
specifically required for the Quarter Claim.
17<PAGE>
Homestake's share of production at the Quarter Claim was
11,094 ounces in 1993 compared with 16,204 ounces in 1992.
Homestake has a 25% share of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Tons of ore (000s) 1,380 1,569
Ounces of gold per ton .256 .254
Contained ounces of gold (000s) 354 399
Operating Data (100% Basis)
<CAPTION>
1993 1992
<S> <C> <C>
Production Statistics:
Tons of ore milled (000s) 181 189
Mill feed ore grade (oz. gold/ton) .255 .356
Mill recovery (%) 96 97
Gold recovered (000 ozs.) 44 65
Cost per Ounce of Gold:
Cash operating cost $ 144 $ 140
</TABLE>
Nickel Plate Mine
The Nickel Plate gold mine is located near Hedley, British
Columbia and is owned 100% by Homestake. The mine was an
underground gold mine prior to 1930 and from 1934 to 1955.
Current operations began in 1987.
The property is comprised of 111 Crown-granted claims, six
reverted Crown-granted claims, two mining leases, 13 mineral
claims and certain surface rights, covering approximately 7,275
acres. A paved road from Penticton, approximately 30 miles from
the mine, provides access to the site.
Mining is carried out by conventional open-pit methods. Ore
is processed in a 4,000 TPD mill. Mill processing comprises
crushing, grinding, cyanidation and Merrill Crowe gold recovery.
Tailings effluent is treated to destroy residual cyanide. The
facilities and equipment are modern and in good condition.
Water is supplied from a local creek during spring run-off
and stored in a process water pond. Power is supplied by West
Kootenay Power under an annually renewable contract.
A $17 million waste stripping program, which will extend
current operations to 1997, was completed in September 1993.
During the period of waste stripping, stockpiled ore was
processed through the mill. The potential for additional ore
reserves from exploration drilling is very limited.
The mine operates under a zero effluent discharge permit.
The mine had been placed on a Pollution Concern List by the
Ministry of Environment, Lands and Parks due to tailings dam
seepage and elevated levels of sulphates and nitrates in runoff
water from the
18<PAGE>
waste dumps. During 1993, significant work was undertaken to
modify and further improve the tailings dam seepage handing
system to limit effluent bypassing the system. Additional
reclamation undertaken in 1993 included the rehabilitation of
waste dumps and a small pit that was mined out in 1992. On
February 22, 1994 the mine was removed from the Pollution Concern
List.
The mine has submitted a revised reclamation and closure
plan to the regulatory agencies for review.
Year-end Proven and Probable Ore Reserves
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Tons of ore (000s) 4,823 5,906
Ounces of gold per ton .077 .076
Contained ounces of gold (000s) 370 448
Operating Data
<CAPTION>
1993 1992
<S> <C> <C>
Production Statistics:
Tons of ore milled (000s) 1,412 1,360
Mill feed ore grade (oz. gold/ton) .061 .073
Mill recovery (%) 85 85
Gold recovered (000 ozs.) 74 85
Cost per Ounce of Gold:
Cash operating cost $ 312 $ 295
Non-cash cost 24 70
----- -----
Full production cost $ 336 $ 365
</TABLE>
Snip Mine
The Snip gold mine is located at the junction of Bronson
Creek and the Iskut River, 56 air miles north of Stewart, in
northwestern British Columbia. The Eskay Creek project is
located nearby. The mine is 40% owned by Prime and 60% by
Cominco Ltd., the operator of the mine. Cominco receives a
management fee equivalent to 5% of property cash expenses for its
services as operator. The mine commenced operations in January
1991.
The property consists of a mining lease issued to Cominco
for a term of 30 years, together with three mineral claims also
recorded in the name of Cominco, covering approximately 3,637
acres.
The mine is serviced by both a hovercraft and aircraft which
utilize the mine's 4,500-foot long landing strip. The hovercraft
primarily transports mine concentrates, fuel and other supplies
along the Iskut and Stikine rivers between the mine and Wrangell,
Alaska from late March to early November each year. During the
winter months due to ice accumulations on the rivers, the only
access is by aircraft or helicopter.
The Snip mine is an underground operation serviced by three
adits and a haulageway at the 400-foot level. Mining is carried
out through a combination of shrinkage, conventional and
mechanized cut
19<PAGE>
and fill. Backfill is either underground waste rock or
mill tailings which are pumped to the mine and mixed with cement.
The mill can treat 500 TPD. Approximately 92% of the gold
contained in the ore is recovered. A gravity circuit recovers
about 36% of the gold and the remaining gold is recovered in
flotation concentrates containing approximately 10 ounces of gold
per ton. The concentrates are sold directly to smelters in
Japan. Mill tailings are deposited in a pond close to the mine
and reclaimed water is pumped back to the mill for reuse. The
facilities and equipment are modern and in good condition.
Workers are on a four-week work schedule followed by two weeks
off.
Water is supplied from Bronson Creek and power is generated
on-site by diesel generators.
Exploration drilling in 1993 replaced all of the 188,000
tons milled.
During 1993 all environmental discharges were within permit
levels. The mine's reclamation plan was submitted to the
regulatory authorities in November 1990 and a revision to this
plan will be completed in 1994.
Homestake's share of gold production in 1993 was 59,790
ounces compared with 30,558 ounces in 1992. The increase in
production is due to the consolidation of Prime in the Company's
financial statements effective December 31, 1992.
Prime has a 40% interest of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Tons of ore (000s) 722 707
Ounces of gold per ton .788 .831
Contained ounces of gold (000s) 569 587
Operating Data (100% Basis)
<CAPTION>
1993 1992
<S> <C> <C>
Production Statistics:
Tons of ore milled (000s) 188 182
Mill feed ore grade (oz. gold/ton) .865 .923
Mill recovery (%) 92 91
Gold recovered (000 ozs.)* 149 153
Cost per Ounce of Gold:*
Cash operating cost $ 152 $ 145
Non-cash cost 83 55
----- -----
Full production cost $ 235 $ 200
<FN>
* Includes recoverable gold contained in dore bars and
contained gold in concentrates.
</TABLE>
Eskay Creek Project
Prime owns 100% of the Eskay Creek project. Through its
interest in Prime, the Company has a 54.2% interest in the
project. The property is subject to an effective 1% NSR royalty.
20<PAGE>
The Eskay Creek project consists of four mining leases
comprising approximately 1,266 acres located 50 miles north of
Stewart, British Columbia. Prime retained Homestake to evaluate
the project and prepare a feasibility study. The feasibility
study, which was completed in August 1993, confirmed the economic
viability of the Eskay Creek project utilizing conventional
underground mining methods and a pressure oxidation (autoclave)
circuit to recover precious metals. Preproduction capital costs
were estimated to be approximately $234 million including
allowances for working capital. As a result, the Eskay Creek
resource was upgraded to a proven and probable reserve of 1.2
million tons of ore containing 2.3 million ounces of gold and 102
million ounces of silver (Homestake's share: 1.2 million ounces
of gold and 55.1 million ounces of silver).
Shortly before release of the feasibility study, several
companies inquired about purchasing the Eskay Creek ore as direct
feed material for their smelters. A second feasibility study was
prepared to determine the economic viability of this approach.
In February 1994, the Company selected the smelter option as the
preferred processing method. Capital expenditures to complete
the project are reduced to approximately $60 million under the
smelter option.
Underground mining will utilize a drift-and-fill method.
The mine is expected to produce at an average rate of 120,000
tons of ore per annum containing approximately 210,000 ounces of
gold and 9.4 million ounces of silver. Based on existing
reserves, the mine has a projected life of eight to ten years.
An access road connecting the project to the nearest main
highway was pioneered to the site in the fall of 1993. The
project expects to receive its mine development certificate early
in 1994 and mine-site construction is scheduled to begin shortly
thereafter. Shipments to smelters could begin early in 1995.
Prime has contracted with Homestake to provide all necessary
professional, managerial and administrative services in
connection with further exploration, development and operation of
the Eskay Creek project.
During 1993, the Eskay Creek project was placed on a
Pollution Concern List by the Ministry of Environment, Lands and
Parks due to acid drainage from rock storage areas. In early
1993, a lime treatment plant was installed to treat the acidic
water and the project was removed from the Pollution Concern List
on February 22, 1994.
On February 23, 1994, Prime issued five million fully-paid
warrants which are convertible into five million common shares of
Prime on completion of regulatory requirements. Net proceeds of
approximately $33 million will be used to fund a portion of the
Eskay Creek project construction and development costs. When
completed, this transaction will reduce the Company's interest in
Prime from 54.2% to 50.6%.
Golden Bear Mine
In July 1993, the Company sold its interest in North
American Metals Corp., the owner and operator of the Golden Bear
gold mine in British Columbia, for approximately $1 million plus
a retained royalty interest. The Company recorded a $0.5 million
pretax gain and a $12.9 million income tax benefit on this sale.
21<PAGE>
Homestake's share of 1993 gold production from the Golden
Bear mine totaled 28,440 ounces compared to 58,224 ounces during
1992.
AUSTRALIA
Homestake owns 81.5% of the shares of Homestake Gold of
Australia Limited (HGAL). HGAL is a gold mining and exploration
company whose principal asset is a 50% ownership of Australia's
largest gold mining operation, the consolidated surface and
underground gold operations at Kalgoorlie, Western Australia.
HGAL explores for gold in Australia and has offices in Perth
and Kalgoorlie, Western Australia.
Kalgoorlie Operations
The Kalgoorlie operations are located 340 miles northeast of
Perth, Western Australia on 164 state leases and licenses
covering a total of 47 square miles. The mineral leases are
renewable on an annual basis for a fee to the state. Homestake
acquired its interest in the original Kalgoorlie Mining
Associates joint venture in 1976. Mining operations in the
Kalgoorlie region date back to 1893. Access to the operations is
by paved road.
HGAL owns a 50% interest in three joint ventures in the
Kalgoorlie district: the Fimiston/Paringa Venture (FPV), the Mt
Percy Venture and the Kalgoorlie Mining Associates Venture. Gold
Mines of Kalgoorlie Limited and its affiliates (GMK) own the
other 50% interest. HGAL and GMK formed Kalgoorlie Consolidated
Gold Mines Pty Ltd (KCGM), a jointly-owned and controlled
company, to manage all the operations on a consolidated basis
under the direction of a Management Committee.
Mines operated by KCGM include the Super Pit open-pit gold
mine and the Mt. Charlotte underground gold mine. Ore treatment
is carried out at the Croesus, Fimiston, Mt Percy and Oroya mills
and the Gidji roaster.
HGAL pays 50% of the costs and is entitled to receive 50% of
the production from all operations, except for the FPV area of
the Super Pit where HGAL pays 50% of venture costs but does not
receive 50% of the production. GMK is entitled to receive more
than 50% of gold production from the FPV area until 35.75 million
tons of ore have been mined by open-pit methods from the FPV area
of the Super Pit. The disproportionate quantity of gold to be
received by GMK depends upon capital and production costs, gold
prices and volumes mined from the FPV area. In 1993, GMK was not
entitled to receive any extra gold. Through the end of 1993,
approximately 11.4 million tons of ore have been mined from the
FPV area of the Super Pit.
Contractors are employed to conduct surface mining
operations, ore and concentrate haulage and some specialized
services. Fresh water is supplied under allocation from the
state water system and is piped 350 miles from Perth. Salt water
is taken from bores and underground mines. Power is purchased
under a number of agreements with the state.
Revision of the Super Pit ore resource using computer-aided
modelling techniques in addition to a review of Mt. Charlotte
reserves, expanded proven and probable reserves by 70% during
1993. The Company's share of this increase is approximately two
million ounces.
22<PAGE>
No royalties are payable on production.
Super Pit
This large open pit is located along the "Golden Mile" ore
bodies previously mined from underground.
In 1993, 59 million tons of material were mined containing
10 million tons of ore, compared to 54 million tons containing
9.2 million tons in 1992. HGAL's share of Super Pit gold
production was 256,094 ounces in 1993 and 261,104 ounces in 1992.
Mt. Charlotte
This underground mine uses bulk mining methods and large
conventional diesel powered loaders and trucks to produce ore at
the rate of 1.6 million tons per year. The main production level
is 2,800 feet below surface. Long-hole stoping mining techniques
are employed. The ore is loaded out from draw points and crushed
underground with primary crushers before being hoisted to
secondary crushers at the surface.
In both 1993 and 1992, 1.7 million tons of ore were mined
from Mt. Charlotte. HGAL's share of gold production was 70,981
ounces in 1993 and 70,059 ounces in 1992.
Mt Percy
The Mt Percy open cuts were mined to their planned economic
depth in July 1992, at which time production ceased. The mill
continues to process previously stockpiled low-grade material
blended with non-refractory ore from the Super Pit.
HGAL's share of gold production was 5,457 ounces in 1993 and
11,708 ounces in 1992.
Fimiston Underground
This was an underground operation which used small scale
mining methods to produce high-grade ore. The last operating
shaft stopped production as planned in July 1992. The shaft will
be used in the future to access pumping equipment and exploration
work.
HGAL's share of gold production was 104 ounces in 1993 and
6,902 ounces in 1992.
Mills
Fimiston - a 14,550 TPD mill with CIP leaching and
refractory sulfide flotation circuits that processes ore from the
Super Pit.
Oroya - a 7,700 TPD mill with CIP, refractory and non-
refractory sulfide flotation circuits that processes ore from Mt.
Charlotte and the Super Pit.
Croesus - a 3,000 TPD mill with CIP and refractory sulfide
flotation circuits that processes ore from the Super Pit.
23<PAGE>
Mt Percy - a 2,500 TPD mill with a CIP circuit that
processes ore from Mt Percy and from the Super Pit.
Gidji - a roaster complex situated 12 miles north of
Kalgoorlie which comprises two converters and a CIP circuit to
process all the concentrates.
The combined mills processed 10.7 million tons of ore in
1993 compared with 10.2 million tons in 1992. This increase was
made possible by efficiency improvements in the Fimiston, Oroya
and Croesus mills, and the effect of softer ore being processed
through the Mt Percy mill.
Approximately $70 million (100% basis) of capital
expenditures, primarily for mill expansions and modifications,
are planned at the Kalgoorlie operations during 1994 and 1995.
The mill expansions are required to replace the capacity of the
Oroya mill which will be dismantled in 1995 to allow for an
expansion of the Super Pit.
Cash operating costs were lower in 1993 primarily as a
result of favorable foreign exchange rates. A moderate decline
was achieved on an Australian currency basis.
HGAL's share of 1993 gold production from the consolidated
Kalgoorlie operations was 332,636 ounces compared with 349,773
ounces in 1992.
In 1993, the Gidji roaster performed well within SO2
emission limits established by the Western Australian government.
Intercept drainage channels were constructed to isolate the Oroya
tailings dam from the nearby salt water drainage channel. A
safety exclusion zone (SEZ) surrounding the Super Pit has been
established and progressive acquisition of properties within this
area is taking place. The SEZ, combined with measures to reduce
noise and dust, have resulted in a significant improvement in the
environment of those residents living close to the mining
operations.
HGAL has a 50% interest (subject to the disproportionate
allocation discussed above) of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Tons of ore (000s) 146,895 77,441
Ounces of gold per ton .074 .081
Contained ounces of gold (000s) 10,813 6,288
Operating Data (100% Basis)
<CAPTION>
1993 1992
<S> <C> <C>
Production Statistics:
Super Pit
Tons of ore mined (000s) 9,976 9,177
Stripping ratio 4.93:1 4.83:1
Tons of ore milled (000s) 8,502 7,693
Mill feed ore grade (oz. gold/ton) .072 .079
Mill recovery (%) 86 86
Gold recovered (000s) 512 522
24<PAGE>
Mt Percy
Tons of ore mined (000s) - 297
Stripping ratio - 4.42:1
Tons of ore milled (000s) 465 734
Mill feed ore grade (oz. gold/ton) .027 .036
Mill recovery (%) 88 87
Gold recovered (000s) 11 23
Mt. Charlotte
Tons of ore mined (000s) 1,697 1,664
Tons of ore milled (000s) 1,706 1,700
Mill feed ore grade (oz. gold/ton) .096 .096
Mill recovery (%) 86 87
Gold recovered (000s) 142 140
Fimiston
Tons of ore mined (000s) - 88
Tons of ore milled (000s) 3 91
Mill feed ore grade (oz. gold/ton) .112 .163
Mill recovery (%) 88 90
Gold recovered (000s) 0.2 14
Combined Production Statistics:
Tons of ore mined (000s) 11,673 11,226
Tons of ore milled (000s) 10,677 10,218
Mill feed ore grade (oz. gold/ton) .074 .079
Mill recovery (%) 86 86
Gold recovered (000 ozs.) 665 700
Consolidated Cost Per Ounce of Gold:
Cash operating cost $ 230 $ 255
Non-cash cost 40 43
----- -----
Full production cost $ 270 $ 298
</TABLE>
Fortnum
Fortnum is an open-pit gold mine located 485 miles northeast
of Perth, Western Australia on care and maintenance at December
31, 1993. On February 17, 1994, HGAL sold its interest in
Fortnum to Perilya Mines NL. A gain of approximately $1.3
million will be recorded in 1994 with respect to this sale.
CHILE
Homestake leases and operates the El Hueso gold mine and
also conducts exploration in Chile. Homestake's office is in
Santiago, Chile.
El Hueso is an open-pit gold mine in the Maricunga District
of Chile on property leased through June 1998 from Codelco, a
government agency. The mine is located about 600 miles north of
25<PAGE>
Santiago at an elevation of approximately 12,500 feet. The lease
includes the right to use the existing plant. The land included
in the original lease term has no applicable royalties.
Operations commenced in 1987 and Homestake assumed control of the
operation in 1988. Access to the mine is by a 14-mile dirt road.
In 1991, additional land was contracted from Codelco and
incorporated into the existing lease. This new land was subject
to a net profits royalty of 50% on the first 50,000 ounces of
production, which was achieved during 1993, and is now subject to
a 30% net profits royalty. Exploration on this land increased
proven and probable reserves by 112,000 ounces during 1993.
Ores from the mine are leached in two different ways. The
higher grade ore is mined at an average rate of 6,500 TPD. It is
crushed in three stages and then heap leached. Low-grade run-of-
mine ore is heap leached without crushing. Gold-bearing
solutions from both ores are treated by zinc precipitation to
produce dore bars. The facilities are in good condition.
Water and power are purchased from Codelco.
At current and planned production rates and current
reserves, operations at the El Hueso mine and the neighboring
leases will cease in 1995. During 1993, additional new lands
were contracted with Codelco. Current exploration on these new
lands may prove additional reserves which could extend the
operation beyond 1995. These new lands are subject to net profit
sharing of 30%.
Year-end Proven and Probable Ore Reserves
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Tons of ore (000s) 3,151 3,112
Ounces of gold per ton .039 .039
Contained ounces of gold (000s) 122 120
Operating Data
<CAPTION>
1993 1992
<S> <C> <C>
Production Statistics:
Tons of ore mined (000s) 3,132 2,527
Stripping ratio (waste:ore) 4:1 4:1
Tons high grade ore leached (000s) 1,964 1,964
Leach feed ore grade (oz. gold/ton) .040 .039
Recovery (%) 82 82
Tons low grade ore leached (000s) 1,031 741
Leach feed ore grade (oz. gold/ton) .015 .015
Recovery (%) 47 48
Gold recovered-all ores (000 ozs.) 72 70
Cost per Ounce of Gold:
Cash operating cost $ 299 $ 285
Non-cash cost 30 33
----- -----
Full production cost $ 329 $ 318
</TABLE>
26<PAGE>
MEXICO
Homestake owns an approximate 30% indirect interest in the
Torres Mining Group, which is managed and operated by Industrias
Penoles, S.A. de C.V. The Torres Mining Group covers
approximately 18,000 acres and consists of several small separate
silver-gold mines and a centrally located 2,500 TPD concentrator.
The mining group is located near Guanajuato, about 250 miles
northwest of Mexico City except for the Encantada mine which is
located in the state of Coahuila, 50 miles south of Big Bend,
Texas. Homestake's share of gold production from the Torres
Mining Group totaled 12,844 ounces in 1993 compared to 16,209
ounces in 1992. During 1993, Homestake received dividends of
$0.8 million from its interest in the Torres Mining Group.
SULPHUR
Homestake owns an undivided 16.7% interest in the Main Pass
299 sulphur deposit which at December 31, 1993 contained proven
recoverable reserves of 66 million long tons of sulphur.
Freeport McMoRan Resource Partners, Limited Partnership (FRP)
owns a 58.3% interest in the deposit and is the operator under a
joint operating agreement. IMC Fertilizer Inc. owns the
remaining 25%.
The sulphur deposit is located in the Gulf of Mexico in
waters approximately 210 feet deep, 36 miles east of Venice,
Louisiana. The deposit is approximately 1,500 feet below the sea
floor. The federal sulphur lease under which the deposit is held
requires a royalty of 12.5% of the wellhead value.
The operating agreement provides that each participant pays
its share of capital and operating costs, and has the right to
take its share of production in kind in proportion to its
undivided interest.
The sulphur deposit is being mined using the Frasch process,
a method of extraction which injects hot water steam to liquify
the sulphur, which is then pumped to surface. Based on current
reserve estimates, projected costs and prices, annual production
is expected to average two million long tons over a 33-year
reserve life.
Fabrication and installation of production facilities began
in 1990. Initial sulphur production commenced in 1992. Initial
production was lower than anticipated because oil and gas
production hampered heating the sulphur dome to required
production temperatures. Full sulphur production levels of 5,500
TPD were reached in December 1993. Homestake's share of
development expenditures totaled $123 million through 1993.
FRP filters, blends, markets and delivers Homestake's share
of sulphur production under an agreement having an initial term
of ten years from commencement of production in 1992. Homestake
can terminate the agreement by giving FRP two years notice.
During sulphur exploration, oil and gas was discovered
overlying the sulphur deposit. In 1990, the participants
acquired the oil and gas rights from Chevron USA, Inc., for a
total of $150 million, including reimbursement of certain costs
incurred in partial development of the reserves. Homestake's
16.7% share of the oil and gas purchase and development costs
through 1993 was approximately $52 million.
27<PAGE>
The federal oil and gas lease requires a 16.7% royalty
payment based on wellhead value. In addition, Chevron retained
the right to share in the proceeds of future production should
the price or volume realized exceed those which were used by the
parties as the basis for determining the purchase price.
As expected, oil and gas production peaked during mid-1992
and is expected to continue to decline over the remaining
approximate six-year life. Oil production (100% basis) totaled
7.1 million barrels in 1993 compared to 9.9 million barrels in
1992. In the fourth quarter of 1993, Homestake recorded a pretax
$16 million write down of its investment in the oil and gas
property due to a decline in oil prices. This write down was
based on Main Pass 299's realized price of $10.32 per barrel at
December 31, 1993. The remaining carrying value of Homestake's
investment in the Main Pass 299 oil and gas property was $12.7
million at December 31, 1993.
Homestake's share of remaining recoverable oil reserves at
December 31, 1993 is estimated to be 2.8 million barrels after
adjusting for the federal royalty.
During 1993, the sulphur market continued to weaken, which
has lowered average realized prices. Without an increase in
prices, Homestake expects its sulphur operations to incur a small
loss in 1994.
MINERAL EXPLORATION
As a part of the corporate restructuring in 1992, Homestake
reorganized its exploration activities. The Company's primary
focus has moved away from a grassroots approach organized around
district offices towards a more consolidated and centralized
system.
United States exploration expenses totaled $11.1 million in
1993 and $14.7 million in 1992. These amounts include
expenditures for the North Homestake Project of $3.1 million and
$4.8 million, respectively. The North Homestake drift reached
the target zone in late 1993. Results of drilling were
discouraging and in March 1994 the project was abandoned.
Discovery of a new mineralized zone near Eureka, Nevada, was
announced in November 1993. A $4 million definition drilling
program will begin early in 1994 when exploration permits are
received. Upon completion of the drilling program, Homestake
expects to be able to estimate the size of the resource.
Through subsidiaries, Homestake also explores for gold and
evaluates gold acquisition opportunities primarily in Australia,
Canada and Chile. International exploration expenses totaled
$6.4 million in 1993 and $13.1 million in 1992. In addition,
negotiations were completed recently for exploration rights on a
significant land position in Venezuela.
Exploration expenses in 1994 are expected to be
approximately $18 million.
GLOSSARY AND INFORMATION ON RESERVES
GLOSSARY
The following terms used in the preceding tables of proven
and probable ore reserves and operating data mean:
28<PAGE>
"Cash operating cost" includes all mining, in-mine exploration,
processing and other plant costs, all royalties, state and local
taxes (other than income), refining and marketing expenses,
on-site general and administrative costs, and other direct costs,
but excludes depreciation, depletion, and amortization, corporate
general and administrative expenses, mineral exploration expense,
Canadian provincial mining taxes, financing costs and long-term
reclamation accruals.
"Non-cash cost" includes depreciation, depletion and amortization
of capital assets as well as accruals for the costs of
reclamation, long-term monitoring and care that are usually
incurred at the end of mine life.
"Full production cost" includes all cash operating costs and
non-cash costs.
"In-situ tons" refers to reserves still in the ground. This
differs from previously mined stockpiled reserves that are being
stored for future processing.
"Mineral deposit" is a mineralized body which has been delineated
by appropriate drilling and/or underground sampling. Under SEC
standards, a mineral deposit does not qualify as a reserve unless
the recoveries from the deposit are expected to be sufficient to
recover total cash and non-cash costs for the mine and related
facilities.
"Run-of-mine ore" is mined ore which has not been subjected to
any pretreatment, such as washing, sorting or crushing, prior to
processing.
"Stripping ratio" is the ratio of the number of tons of waste to
the number of tons of ore extracted at an open-pit mine.
"Tonnage" and "grade" refer, respectively, to the quantity of
reserves and the amount of gold (or other product) contained in
such reserves and include estimates for mining dilution but not
for other processing losses.
"Tons" means short tons (2,000 lbs.) unless otherwise specified.
INFORMATION ON RESERVES
Gold
The proven and probable gold ore reserves stated in this
report reflect estimated quantities and grades of gold in in-situ
deposits and in stockpiles of mined material that Homestake
believes can be recovered and sold at prices sufficient to
recover the estimated future cash cost of production and
remaining investment. The estimates of cash costs of production
are based on current and projected costs. Prices are based on
estimated future gold prices. The Company used a price of $360
per ounce of gold in its mine-by-mine evaluation of mining
properties and investments at December 31, 1993.
Silver
The proven and probable silver ore reserves have been
calculated on the same basis as gold ore reserves.
29<PAGE>
Sulphur
Homestake's proved sulphur reserves represent the quantity
of sulphur in the Main Pass 299 deposit for which geological,
engineering and marketing data give reasonable assurance of
recovery and sale under projected economic and operating
conditions at prices sufficient to cover the estimated future
cash cost of production and remaining investment.
Oil
Homestake's proved oil reserves at Main Pass 299 are the
estimated quantity of crude oil and condensate which geological
and engineering data give reasonable assurance of recovery and
sale under projected operating conditions at prices sufficient to
cover the estimated future cash cost of production and remaining
investment. The estimate is based on limited reservoir and
engineering data.
Calculation of Reserves
Gold reserves are calculated for each of Homestake's
properties by Homestake based upon factors relevant to each
deposit. Gold ore reserves for those properties not operated by
Homestake are based on reserve information provided to Homestake
by the operator. Homestake has reviewed but has not
independently confirmed the information provided by the
operators.
The sulphur and oil reserves at Main Pass 299 are based on
information provided by the operator. Homestake has reviewed the
reserve data with independent consultants.
Other Information
Ore reserves are reported as general indicators of the life
of mineral deposits. Changes in reserves generally reflect (i)
efforts to develop additional reserves; (ii) depletion of
existing reserves through production; (iii) actual mining
experience; and (iv) price forecasts. Grades of ore actually fed
to process from time to time may be different from stated reserve
grades because of geologic variation in different areas mined,
mining dilution, losses in processing and other factors.
Recovery rates vary with the metallurgical characteristics and
grade of ore fed to process.
Neither reserves nor projections of future operations should
be interpreted as assurances of the economic life of mineral
deposits or of the profitability of future operations.
ENVIRONMENTAL MATTERS
General
Homestake has made significant capital expenditures to
minimize the effects of its operations on the environment.
Capital expenditures primarily are for the purchase or
development of environmental monitoring equipment and containment
of waste. In both 1993 and 1992, these expenditures totaled
approximately $2 million. Homestake estimates that during 1994,
capital expenditures for such purposes will be approximately $3
million and that during the five years ending December 31, 1998,
such capital expenditures will be approximately $10 million.
30<PAGE>
Homestake also incurs significant operating costs in order
to comply with regulatory requirements. Operating costs include
current reclamation costs, accruals for future reclamation
expenditures and air, water and other environmental monitoring
costs. Such additional costs totaled approximately $11 million
in 1993, compared with approximately $20 million in 1992, not
including related depreciation expense of $7 million and $8
million, respectively. Homestake estimates that environmental
and related operating and depreciation costs in 1994 will
approximate the 1993 amounts. The above amounts exclude
expenditures made related to discontinued uranium operations.
Under applicable law and the terms of permits under which
Homestake operates, Homestake is required to reclaim land
disturbed by its operations. Homestake charges reclamation costs
incurred in connection with its exploration activities as
expenses in the year in which incurred. For mining operations,
Homestake makes periodic accruals for costs of reclamation. Most
reclamation work takes place after mining and related operations
terminate, but Homestake has adopted a policy of conducting
reclamation during operations where practical and therefore, an
increasing amount of reclamation is being conducted
simultaneously with mining. At December 31, 1993 and 1992,
Homestake had accrued a total of $36.2 million and $43.9 million,
respectively, for future reclamation and related costs.
Homestake believes that the cost of compliance with
environmental requirements will continue to increase. Such costs
have not and will not increase productive capacity, efficiency or
revenues. Increased costs cannot be passed on to Homestake's
customers.
Homestake's operations are conducted under permits issued by
regulatory agencies. Many permits require periodic renewal or
review of their conditions. Homestake cannot predict whether it
will be able to renew such permits or whether material changes in
permit conditions will be imposed.
RCRA
The United State Environmental Protection Agency (EPA), has
not yet issued final regulations for management of mining wastes
under the Resource Conservation and Recovery Act (RCRA). The
ultimate effects and costs of compliance with RCRA cannot be
estimated at this time.
CERCLA
The United States Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (CERCLA), requires EPA to
list known or threatened releases of hazardous substances,
pollutants or contaminants. In 1983, EPA began publishing the
National Priorities List (NPL). The listing of a site does not
constitute a determination that any remedial action is required,
nor that any person is liable for any remedial action or
environmental damage. CERCLA imposes heavy liabilities on any
person who is responsible for an actual or threatened release of
any hazardous substance, including liability for so-called
"oversight costs" incurred by EPA. CERCLA is scheduled for a
congressional hearing this year and reauthorization is required
by 1995.
Whitewood Creek
Deposits of gold tailings on lands along an 18-mile stretch
of Whitewood Creek in western South Dakota constitute a site on
the NPL. EPA asserts that discharges of tailings by mining
companies, including Homestake, beginning in the nineteenth
century have contaminated the soil and stream bed.
31<PAGE>
In August 1990, Homestake signed a Consent Decree with EPA
in United States of America v. Homestake Mining Company of
California, (U.S. District Court, W.D., S.D., Civil Action 90-
5101). The consent decree required Homestake to carry out
remedial work at Homestake's expense and to reimburse EPA for
oversight costs. The decree also provided for the three counties
in which the property is located to enact institutional controls
which would limit the future use of the properties included
within the area of the site. Remedial field work was completed
in 1993. Institutional control ordinances prepared with the
assistance of the Company have been adopted in all three of the
affected counties. The Record of Decision also requires the
Company to continue to perform long-term monitoring of the site.
Homestake estimates that EPA oversight and monitoring costs
through 1995 will be $2 million. Homestake expects to
demonstrate by 1995 that the site has been remediated and does
not present a risk to the environment or to public health or
safety.
In connection with the program to implement institutional
controls, the Company decided to offer to purchase all properties
along Whitewood Creek that were affected by the institutional
controls. The Company estimates that the total cost for
purchasing all of the affected property would be approximately $3
million. These costs will be expensed if and when incurred.
In 1983, the State of South Dakota filed claims against
Homestake for natural resources damages resulting from the
Whitewood Creek Site. The State has taken no action to pursue
the claims.
Grants Tailings
The tailings at Homestake's closed uranium mill near Grants,
New Mexico constitutes a site on the National Priorities List
(NPL). EPA asserted that leachate from the tailings contaminated
a shallow aquifer used by adjacent residential subdivisions.
Homestake paid the cost of extending the municipal water supply
to the affected homes. Homestake has operated an injection and
collection system that has significantly improved the quality of
the aquifer to levels that comply with state ground water
standards. The estimated costs of continued compliance are
included in the accrued reclamation liability. Homestake has
petitioned EPA to remove the Grants Site from the NPL. The
petition has been denied by EPA. Homestake has settled with the
EPA concerning their oversight cost for this site and no
additional oversight costs are accruing.
Under a 1987 EPA Administrative Order on Consent, Homestake
studied radon levels in houses in the subdivisions near the
Grants mill. Based on the study, EPA concluded that the
Homestake mill and tailings facilities are not contributing
significantly to radon concentrations in the subdivisions. The
Nuclear Regulatory Commission and the State of New Mexico have
concurred with EPA's decision to take no further action in this
regard.
Effective March 1990, EPA promulgated National Emissions
Standards for radionuclides emissions under Section 112 of the
Clean Air Act. The regulations generally require closure and
compliance by uranium mill tailings facilities on or before
December 1991, or two years after cessation of operations,
whichever is later. Homestake closed its Grants uranium
processing facility in 1990. The EPA, several environmental
groups and a number of mining companies, including the Company,
entered into an agreement which provided that the EPA's
regulations governing radionuclide emissions from uranium mill
tailings disposal sites that are licensed by the Nuclear
Regulatory Commission (NRC) would be rescinded and the NRC would
regulate radionuclide emissions in connection with its regulation
32<PAGE>
of the decommissioning of the uranium mill tailings facilities.
Under NRC regulations, the decommissioning would be effected in
accordance with the provisions of the facility's license. An
EPA-NRC Memorandum of Understanding sets 1996 and 2001 as target
dates for closure of the Company's two tailings impoundments.
The Company has proposed to the NRC a closure schedule for
inclusion in the facility license which contemplates closure in
1996 and 2001, subject to extension under certain circumstances.
The NRC and EPA signed a Memorandum of Understanding in 1993
which has established NRC as the enforcement agency. Reclamation
of the Grants large tailings site is scheduled for completion in
1996 and the mill decommissioning will be completed in 1994.
Title X of the Energy Policy Act of 1992 provides for
reimbursement by the United States Department of Energy for
certain costs of reclamation, decommissioning and remedial action
for byproduct material (primarily tailings) generated as an
incident of uranium sales to the United States. Reimbursement is
subject to compliance with regulations now being drafted by the
Department of Energy and appropriation by Congress from a fund
established under the Energy Policy Act. Congress appropriated
$41 million for fiscal year 1994. The Company and the Department
of Energy have agreed that approximately 51% of the tailings at
Grants were generated as an incident of uranium sales to the
United States. Homestake believes that its reclamation reserves
for uranium operations and amounts expected to be received under
the Energy Policy Act are sufficient to provide for all
reclamation costs for the Grants site.
In 1983, the State of New Mexico filed claims against
Homestake for natural resource damages resulting from the Grants
site. The State has taken no action to pursue the claims.
Other Uranium
The Company (along with a number of other companies and
government agencies) has received notice from EPA that it may be
a potentially responsible party with respect to the cleanup of
the Colorado School of Mines Research Institute (CSMRI) site near
Denver, Colorado. The Company sent ore samples, principally
uranium ore, to the CSMRI site for testing at various times over
a period in excess of 25 years. EPA has conducted certain
remedial actions at the CSMRI site at a cost of in excess of $1
million and proposes to conduct additional remediation and
disposal activities, the cost of which is not yet determinable.
The Company believes that substantially all of the ore material
sent to the site was returned to the company and that the Company
does not have responsibility for cleanup of the site. To the
extent that Company ore samples remained at the site, the Company
believes that it is a de minimis contributor and that cleanup of
the site is primarily the responsibility of CSMRI and
instrumentalities of the State of Colorado.
Lead
Prior to May 1986, Homestake Lead Company of Missouri
(HLCM), a wholly-owned subsidiary of the Company, was a joint
venturer and partner with subsidiaries of AMAX, Inc. (AMAX) in
the production of lead and lead concentrates in Missouri. In May
1986, HLCM acquired AMAX's interest in the Missouri facilities
and operations and agreed to assume certain limited liabilities
of AMAX in connection with the Missouri facilities. In November
1986, HLCM entered into a partnership, The Doe Run Company (Doe
Run), with subsidiaries of Fluor Corporation (Fluor), under which
HLCM and the Fluor subsidiaries combined their existing United
States lead businesses. Under the Doe Run partnership agreement,
HLCM contributed to Doe Run certain liabilities of HLCM arising
out of the lead business, including most obligations HLCM had to
AMAX arising in connection with HLCM's acquisition of AMAX's
interest in the Missouri facilities.
33<PAGE>
In May 1990, HLCM sold its interest in Doe Run to Fluor
under an agreement which provided that Fluor would indemnify HLCM
against all liabilities assumed by Doe Run to the extent that Doe
Run was unable to discharge those liabilities.
In June 1991, HLCM and AMAX were notified of a potential
claim by the Jackson County, Mississippi Port Authority for
contamination of soil and water alleged to have resulted from
storage of lead dross at the Port of Pascagoula prior to the
formation of Doe Run; since that time, a number of other lead
producers and former lead producers have also been so notified.
In July 1991, HLCM tendered the claim to Fluor and Doe Run. They
rejected the tender and HLCM filed suit in the Superior Court of
Orange County, California for breach of contract and declaratory
relief (Superior Court, Dept. 20, No. 673777). Subsequent to the
filing of that action, HLCM tendered two additional potential
claims arising out of the pre-1986 lead business to Fluor and Doe
Run. Doe Run and Fluor rejected both tenders.
During the pendency of the action, Fluor and Doe Run joined
AMAX in the litigation. AMAX took the position that HLCM was
obligated to indemnify AMAX for off-site environmental liability
associated with lead dross and smelter byproducts, but not for
off-site environmental liability associated with lead metal or
lead concentrates. AMAX also took the position that the transfer
to Doe Run of obligations owed by HLCM to AMAX arising in
connection with HLCM's acquisition of AMAX's interest in the
Missouri facilities was not binding on AMAX and did not relieve
HLCM of its obligations to AMAX.
In settlement of the matter in respect of AMAX, HLCM agreed
to indemnify AMAX in respect of future off-site environmental
liability arising in respect of lead dross and other smelter
byproducts. AMAX has acknowledged that it is responsible for
off-site environmental liability associated with lead metal and
lead concentrate, and AMAX has acknowledged the effectiveness of
HLCM's transfer to Doe Run of obligations HLCM had to AMAX
arising in connection with HLCM's acquisition of AMAX's interest
in the Missouri facilities. HLCM and Fluor also agreed to
dismiss Fluor out of the litigation on the basis of a stipulation
by Fluor acknowledging its responsibility with respect to
obligations of Doe Run to HLCM should Doe Run be unable to
satisfy its obligations.
In December 1993, trial was held with respect to HLCM's
claims against Doe Run and in January 1994, the court ruled
against HLCM and in favor of Doe Run.
The State of Mississippi Department of Environmental
Quality, under the Mississippi version of CERCLA, is reviewing
the Port of Pascagoula site. The Port of Pascagoula is
considered the prime PRP (Potentially Responsible Party) at this
site. Homestake and other companies are working with the Port of
Pascagoula and the State of Mississippi to address the potential
lead contamination. The State currently is reviewing analytical
data from the site. As a result of subsequent investigations
conducted by the Company and others, the Company believes that
most of the material at the Pascagoula site, and the material
primarily responsible for the contamination, is lead concentrate.
Based on review of shipping records to date, less than half of
the lead concentrate shipped through the Port of Pascagoula was
produced and sold for the account of the Company.
During 1992, the Company received a notice from Pintlar
Corporation with respect to the Bunker Hill Superfund site, the
location of the former Bunker Hill lead smelter in northern
Idaho. In that notice, Pintlar identified the Company as a
seller of lead concentrate that was processed at the Bunker Hill
site and requested that the Company enter into negotiations with
Pintlar with respect to a contribution by the Company toward
34<PAGE>
cleanup of the site. The Company sold lead concentrate to the
owner/operator of the Bunker Hill smelter, and the Company
believes that none of the material processed at the Bunker Hill
smelter was processed for the Company. The Company believes
that, as a seller of a product that was not a waste material, it
has no liability with respect to the Bunker Hill site.
Foreign Operations
The Nickel Plate mine had been placed on a Pollution Concern
List by the Ministry of Environment Lands and Parks due to
tailings dam seepage and elevated levels of sulfates and nitrates
in run-off water from the waste dumps. During 1993, significant
work was undertaken to modify and further improve the tailings
dam seepage handling system to limit effluent bypassing the
system. Additional reclamation undertaken in 1993 includes the
rehabilitation of waste dumps and a small pit that was mined out
in 1992. On February 22, 1994 mine was removed from the
Pollution Concern List.
During 1993, the Eskay Creek project was placed on a
Pollution Concern List by the Ministry of Environment, Lands and
Parks due to acid drainage from rock storage areas. In early
1993, a lime treatment plant was installed to treat the acidic
water and the project was removed from the Pollution Concern List
on February 22, 1994.
Homestake believes that its foreign operations comply with
applicable laws, regulations and permit conditions and has no
knowledge of any significant environmental liability or
contingent liability resulting from foreign operations.
Homestake expects that environmental constraints in foreign
countries will become increasingly strict.
CUSTOMERS
Sales of $175 million, $145 million and $105 million to
three customers in 1993 were in excess of 10% of Homestake's
consolidated revenues. Homestake believes that the loss of any
of these customers would not have a material adverse impact on
Homestake because of the active worldwide market for gold.
CREDIT FACILITIES
See Note 13 to the consolidated financial statements on
pages 39 and 40 of the 1993 Annual Report to Shareholders for
details of the Company's credit facilities. Such information is
hereby incorporated by reference.
35<PAGE>
EMPLOYEES
The number of full-time employees at December 31, 1993 of
Homestake and its subsidiaries was:
<TABLE>
<CAPTION>
<S> <C>
Homestake mine* 1,107
McLaughlin mine 343
El Hueso mine* 202
Eskay Creek project 14
Santa Fe mine 21
Nickel Plate mine 186
Uranium 14
United States exploration 20
Chile exploration and corporate staff 11
Canada exploration and corporate staff 36
HGAL exploration and other 26
United States corporate staff and other 76
-----
Total 2,056
</TABLE>
The number of full-time employees at December 31, 1993 in
jointly-owned operations in which Homestake participates was:
<TABLE>
<CAPTION>
<S> <C>
Williams mine 616
David Bell mine* 236
Kalgoorlie Consolidated Gold Mines
Pty Ltd* 1,088
Rayrock managed operations (Marigold,
Dee and Pinson mines) 267
Round Mountain mine 535
Snip mine 128
Main Pass 299 146
------
Total 3,016
<FN>
* Operations where some of the employees are represented by a
labor union.
</TABLE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company, their ages at
December 31, 1993, their business experience and principal
occupations during the past five years and their business
backgrounds are:
Harry M. Conger - Chairman of the Board and Chief Executive
Officer since December 1982, age 63. He has been Chief Executive
Officer since December 1978 and was President from 1977 to 1986.
He is a mining engineer with over 38 years of professional
experience.
Peter Steen - President and Chief Operating Officer since
July 1992, age 63. He was President and Chief Executive Officer
of Corona from 1985 to July 1992. He is a mining engineer with
38 years of professional experience.
36<PAGE>
Jack E. Thompson - Executive Vice President, Canada since
July 1992, age 43. He has been President of Prime Resources
Group Inc. since August 1992. He also was President of North
American Metals Corp. from 1988 until 1993. He is a mining
engineer with over 23 years of experience in mining and mine
management.
Gene G. Elam - Vice President, Finance and Chief Financial
Officer since September 1990, age 54. Before joining Homestake,
he was Senior Vice President, Administrative Services of Pacific
Gas and Electric Company from April 1989 through August 1990 and
was Vice President and Controller from January 1987 through March
1989. He was President and Chief Executive Officer of The
Pacific Lumber Company from 1982 to 1986, President in 1980 and
1981, and Chief Financial Officer from 1972 until 1980. He is a
certified public accountant with over 32 years of experience in
accounting and finance.
Lee A. Graber - Vice President, Corporate Development
since 1983, age 45. From 1980 to 1983, he was Manager, Corporate
Development and Planning. He has over 22 years of experience in
finance and corporate development.
Wayne Kirk - Vice President, General Counsel and Secretary
since September 1992, age 50. He was a partner in Thelen,
Marrin, Johnson & Bridges from 1976 to 1992. He has practiced
law for more than 24 years.
Gillyeard J. Leathley - Vice President, Canadian Operations
since July 1992, age 56. He was Senior Vice President,
Operations for Corona for 6 years. He is a mining engineer with
over 36 years of experience in mining and mine management.
Anthony H. Ransom - Vice President, Exploration since July
1992, age 47. Before joining Homestake, he was Vice President,
Exploration for Corona in 1991. Prior to April 1991 he was
Director, Western Exploration for Corona and prior to that was
President of Pamorex Minerals Inc., a gold mining company. He is
a geologist with more than 26 years of professional experience.
Allen S. Winters - Vice President, Mine Operations since
1987, age 53. From 1978 to 1987, and since July 1992 he has been
Resident General Manager of the Homestake Mine. He is a mining
engineer with more than 34 years of experience.
Jan P. Berger - Treasurer since August 1992, age 38. He
has been with Homestake since 1989, first as senior analyst in
the finance group and from 1991 to 1992 was Manager, Internal
Audit. Prior to joining Homestake, he was an analyst for Bechtel
Financing Services Inc. He is a geologist with over 11 years of
experience in exploration and finance.
David W. Peat - Controller since September 1992, age 41.
Prior to joining Homestake, he was Vice President, Controller for
Corona. Prior to 1987 he served as Assistant Corporate
Controller for Sherritt Gordon Mines Limited. He is a chartered
accountant with over 17 years of accounting and finance
experience.
No officer is related to any other officer by blood,
marriage or adoption.
Officers are elected to serve until the next annual meeting
of the Board of Directors at which officers are elected or until
their successors are chosen.
37<PAGE>
No arrangement or understanding exists between any officer
and any other person under which any officer was elected.
ITEM 2 - PROPERTIES
See Item 1 - Business.
ITEM 3 - LEGAL PROCEEDINGS
Certain environmental proceedings in which the Company is or
may become a party are discussed on pages 30 through 35 under the
caption "Environmental Matters".
On October 13, 1993, Goldstake Explorations (S.D.) Inc.
filed an action in the Federal District Court of Colorado against
Homestake Mining Company of California ("Homestake") and its
wholly owned subsidiary, Whitewood Development Corporation
("Whitewood"). Goldstake Explorations (S.D.) Inc. v. Homestake
Mining Company of California et al., No. 93-M-2149. The
complaint alleges that Homestake and Whitewood fraudulently
induced Goldstake to enter into a joint venture agreement in 1988
between Goldstake and Whitewood with respect to the mining of
mine tailings in Whitewood Creek, near the Company's mine in
South Dakota. The complaint alleges that Homestake and Whitewood
misrepresented their intent to mine the tailings in order to
prevent Goldstake from mining the tailings. The complaint also
alleges that Whitewood breached the joint venture agreement and
duties owed to Goldstake under the joint venture agreement in
various respects, that Homestake induced those breaches, and that
Homestake and Whitewood engaged in acts of misrepresentation
during the conduct of the joint venture's activities. Goldstake
claims unspecified compensatory and punitive damages. In the
opinion of the Company, the action is without merit and the
Company intends to vigorously defend. This litigation has been
stayed and the issues will be arbitrated in South Dakota.
The Company and its subsidiaries are defendants in various
other legal actions in the ordinary course of business. In the
opinion of management, such matters will be resolved without
material affect on the Company's financial condition.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
a. The common stock of Homestake Mining Company is registered
and traded principally on the New York Stock Exchange under
the symbol "HM". It is also listed and traded in
Switzerland on the Basel, Geneva and Zurich stock exchanges
under the same symbol.
b. The number of holders of common stock of record as of March
14, 1994 was 21,830.
38<PAGE>
c. Information about the range of sales prices for the common
stock and the frequency and amount of dividends declared
during the past two years appears in the tables on page 50
in the Registrant's 1993 Annual Report to Shareholders. The
tables setting forth sales prices and dividends are hereby
incorporated by reference. Information about certain
restrictive covenants under the Company's line of credit
appears on page 40 in Note 13 entitled "Long-Term Debt and
Gold Loans" in the Notes to Consolidated Financial
Statements in the Company's 1993 Annual Report to
Shareholders. Such information is hereby incorporated by
reference.
d. Reference is hereby made to the Note 18 entitled
"Shareholders' Equity" on page 44 in the Notes to
Consolidated Financial Statements in the Company's 1993
Annual Report to Shareholders. Such information is hereby
incorporated by reference.
ITEM 6 - SELECTED FINANCIAL DATA
A summary of selected consolidated financial data of the
Company and subsidiaries for the five-year period ended December
31, 1993 appears on page 49 in the 1993 Annual Report to
Shareholders. The summary of selected consolidated financial
data is hereby incorporated by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition
and results of operations covering the three-year period ended
December 31, 1993 appears on pages 22 through 27 in the 1993
Annual Report to Shareholders and is hereby incorporated by
reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The 1993 Annual Report to Shareholders includes the
Company's consolidated balance sheets as of December 31, 1993 and
1992 and related statements of consolidated operations,
consolidated shareholders' equity and consolidated cash flows for
each of the three years in the period ended December 31, 1993 and
the independent auditors' report thereon, and certain
supplementary financial information. The following are hereby
incorporated by reference from the 1993 Annual Report to
Shareholders at the pages indicated:
Consolidated Balance Sheets (pages 28-29)
Statements of Consolidated Operations (page 30)
Statements of Consolidated Shareholders' Equity (page 31)
Statements of Consolidated Cash Flows (page 32)
Notes to Consolidated Financial Statements (pages 33-47)
Report of Independent Auditors (page 48)
Quarterly Selected Data (page 50)
39<PAGE>
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
On March 3, 1993, pursuant to the recommendation of the
Audit Committee, the Company terminated Deloitte & Touche as
independent auditors for the Company and its subsidiaries upon
completion of their 1992 audit engagement. Deloitte & Touche's
reports on the consolidated financial statements of the Company
for 1991 and 1992 did not contain an adverse opinion or a
disclaimer of opinion and the reports were not qualified or
modified as to uncertainty, audit scope, or accounting
principles. During 1991 and 1992 and the interim period through
the date of termination there were no disagreements with Deloitte
& Touche on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the satisfaction of Deloitte & Touche
would have caused Deloitte & Touche to make a reference to the
subject matter of the disagreement in connection with its report.
During 1991 and 1992 and the interim period through the date of
termination, there did not occur any kind of event listed in
paragraphs (a)(1)(v)(A) through (D) of Regulation S-K, Item 304.
Effective March 3, 1993, pursuant to the recommendation of
the Audit Committee, the Company engaged Coopers & Lybrand as
independent auditors to audit the Company's financial statements
for 1993. During 1991 and 1992 and the interim period through the
date of termination, neither the Company nor any person acting on
behalf of the Company consulted Coopers & Lybrand regarding (i)
either: the application of accounting principles to a specified
transaction, either completed or proposed; or the type of audit
opinion that might be rendered on the Company's financial
statements; or (ii) any matter that was either the subject of a
disagreement (as defined in paragraph (a)(1)(iv) of Regulation S-
K, Item 304 and the related instructions) or a reportable event
(as described in paragraph (a)(1)(v) of Regulation S-K, Item
304).
PART III
ITEMS 10, 11, 12 AND 13
In accordance with General Instruction G(3), Items 10, 11,
12 and 13 (with the exception of certain information pertaining
to executive officers, which is included in Part I hereof) have
been omitted from this report since a definitive proxy statements
is being filed with the Securities and Exchange Commission and
furnished to shareholders pursuant to Regulation 14A.
The information contained in the proxy statement relating to
directors, executive compensation, security ownership and certain
relationships is hereby incorporated by reference.
40<PAGE>
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORMS 8-K
(a) 1. Financial Statements:
Refer to Part II, Item 8.
2. Financial Statement Schedules:
Schedules for the years ended December 31, 1993,
1992, and 1991 -
II Amounts Receivable from Related Parties and
Underwriters, Promoters and Employees (other than
related parties)
V Property, Plant and Equipment
VI Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
IX Short-term Borrowings
X Supplementary Income Statement Information
Report of Independent Auditors
Schedules not listed above are omitted because they
are not required or because the required information
is included elsewhere in this report.
3. Exhibits
3.1 Restated Certificate of Incorporation of Homestake
Mining Company (incorporated by reference to Exhibit
3.1 to the Registrant's Registration Statement on
Form S-4 filed on June 10, 1992 (the "S-4
Registration Statement")).
3.2 Amendment to Restated Certificate of Incorporation of
Homestake Mining Company dated June 3, 1991
(incorporated by reference to Exhibit 3.2 to the S-4
Registration Statement).
3.3 Certificate of Correction of the Restated Certificate
of Incorporation of Homestake Mining Company dated
February 10, 1992 (incorporated by reference to
Exhibit 3.3 to the S-4 Registration Statement).
3.4 Bylaws (as amended) of Homestake Mining Company
(incorporated by reference to Exhibit 3.5 to the S-4
Registration Statement).
3.5 Rights Agreement dated October 16, 1987 (incorporated
by reference to Exhibit 10 to the Registrant's Report
on Form 8-A dated October 16, 1987).
4.1 Indenture dated as of January 23, 1993 between
Homestake Mining Company, Issuer and The Chase
Manhattan Bank, N.A., Trustee, with respect to US
$150,000,000 principal amount of 5 1/2% Convertible
Subordinated Notes due January 23, 2000 (incorporated
by reference to Exhibit 4.2 to the Registrant's Form
8-K Report dated as of June 23, 1993).
41<PAGE>
4.2 Registrant hereby agrees to furnish to the
Commission, upon request, a copy of the instruments
which define the rights of the holders of long-term
debt of the Company. None of such instruments not
included as exhibits herein collectively represents
long-term debt in excess of 10% of the consolidated
total assets of the Registrant.
10.1 Lease agreement dated June 17, 1988 between the
Registrant's wholly-owned subsidiary, Minera
Homestake Chile, S.A. and CODELCO-Chile (incorporated
by reference to Exhibit 10(f) to the Registrant's
Form 10-K for the year ended December 31, 1989).
10.2 Amendment dated September 4, 1991 to the lease
agreement dated June 17, 1988 between the
Registrant's wholly-owned subsidiary, Minera
Homestake Chile, S.A. and CODELCO-Chile (incorporated
by reference to Exhibit 10(a) to the Registrant's
Form 10-K for the year ended December 31, 1989).
10.3 Agreement dated October 9, 1991 between the
Registrant and Chevron Minerals Ltd. (incorporated by
reference to Exhibit 10(b) to the Registrant's Form
10-K for the year ended December 31, 1991).
10.4 Guarantee dated December 18, 1991 between the
Registrant and Chevron Minerals Ltd. (incorporated by
reference to Exhibit 10(c) to the Registrant's Form
10-K for the year ended December 31, 1991).
10.5 Agreement dated May 4, 1990 for the sale of the
Registrant's 42.5% partnership interest in The Doe
Run Company (incorporated by reference to Exhibit
28(a) to the Registrant's Form 8-K dated May 18,
1990).
10.6 Purchase and sale agreement dated January 15, 1989
between the Registrant's subsidiary Homestake Gold of
Australia Limited and North Kalgoorlie Mines Limited
(and Group Companies) and Kalgoorlie Lake View Pty.
Ltd. (incorporated by reference to Exhibit 10(g) to
the Registrant's Form 10-K for the year ended
December 31, 1989).
10.7 Joint Operating Agreement dated May 1, 1988 between
Freeport-McMoRan Resources Partners, IMC Fertilizer,
Inc. and Felmont Oil Corporation (a subsidiary of
Registrant) relating to the Main Pass Block 299
sulphur project (incorporated by reference to Exhibit
10.16 to the Registrant's Form 10-K for the year
ended December 31, 1992).
10.8 Amendment No. 1 dated July 1, 1993 to Joint Operating
Agreement between Freeport McMoRan Resources
Partners, IMC Fertilizer, Inc. and Homestake Sulphur
Company.
10.9 Amendment No. 2 dated November 30, 1993 to Joint
Operating Agreement between Freeport McMoRan
Resources Partners, IMC Fertilizer, Inc. and
Homestake Sulphur Company.
10.10 Amended and Restated Project Agreement (David Bell
Mine) dated as of April 1, 1986 among Teck
Corporation, International Corona Resources Ltd. (a
subsidiary of International Corona Corporation, now
Homestake Canada Inc. and a subsidiary of
Registrant), Teck-Hemlo Inc., Corona-Hemlo Inc. (a
subsidiary of International Corona Corporation, now
Homestake Canada Inc. and a subsidiary of
Registrant)(incorporated by reference to Exhibit
10.17 to the Registrant's Form 10-K for the year
ended December 31, 1992).
10.11 Amended and Restated Operating Agreement (David Bell
Mine) among Teck Corporation, International Corona
Resources Ltd. (a subsidiary of International Corona
Corporation, now Homestake Canada Inc. and a
subsidiary of Registrant), Teck Mining Group Limited,
Teck-Corona Operating Corporation, Teck-Hemlo Inc.
and Corona-Hemlo Inc. (a subsidiary of International
Corona Corporation, now renamed Homestake Canada Inc.
and a subsidiary of Registrant)(incorporated by
reference to Exhibit 10.18 to the Registrant's Form
10-K for the year ended December 31, 1992).
42<PAGE>
10.12 Project Agreement (Williams Mine) dated August 11,
1989 among Teck Corporation, Corona Corporation (now
Homestake Canada Inc. and a subsidiary of Registrant)
and Williams Operating Corporation (incorporated by
reference to Exhibit 10.19 to the Registrant's Form
10-K for the year ended December 31, 1992).
10.13 Operating Agreement (Williams Mine) dated August 11,
1989 among Teck Corporation, Corona Corporation (now
Homestake Canada Inc. and a subsidiary of
Registrant), Teck Mining Group Limited and Williams
Operating Corporation (incorporated by reference to
Exhibit 10.20 to the Registrant's Form 10-K for the
year ended December 31, 1992).
10.14 Shareholders' Agreement dated August 11, 1989 among
Corona Corporation (now Homestake Canada Inc. and a
subsidiary of Registrant), Teck Corporation and
Williams Operating Corporation (incorporated by
reference to Exhibit 10.21 to the Registrant's Form
10-K for the year ended December 31, 1992).
10.15 Agreement dated January 25, 1983 between Noranda
Exploration Company Limited, Teck Corporation and
International Corona Resources Limited (a subsidiary
of International Corona Corporation, now Homestake
Canada Inc. and a subsidiary of Registrant), relating
to development of the Quarter Claim mine
(incorporated by reference to Exhibit 10.22 to the
Registrant's Form 10-K for the year ended December
31, 1992).
* 10.16 1986 Deferred Income Plan of Homestake Mining Company
(incorporated by reference to Exhibit 10(a) to the
Registrant's Form 10-K for the year ended December
31, 1990).
* 10.17 First Amendment to the 1986 Deferred Income Plan of
Homestake Mining Company (incorporated by reference
to Exhibit 10(b) to the Registrant's Form 10-K for
the year ended December 31, 1990).
* 10.18 Agreement dated July 16, 1982, as amended November 3,
1987 and February 23, 1990, between the Registrant
and H. M. Conger (incorporated by reference to Exhibit
10(a) to the Registrant's Form 10-K for the year
ended December 31, 1989).
* 10.19 Description of Change of Control Severance Plan
applicable to certain officers of Registrant
(incorporated by reference to Exhibit 10.27 to the
Registrant's Form 10-K for the year ended December
31, 1992).
* 10.20 Executive Supplemental Retirement Plan of Homestake
Mining Company, amended and restated effective
January 1, 1990 (incorporated by reference to Exhibit
10(d) to the Registrant's Form 10-K for the year
ended December 31,989).
* 10.21 Supplemental Retirement Plan of Homestake Mining
Company, amended and restated effective as of January
1, 1990 (incorporated by reference to Exhibit 10(e)
to the Registrant's Form 10-K for the year ended
December 31, 1989).
* 10.22 Share Incentive Plan effective July 1, 1988 of
International Corona Corporation (now Homestake
Canada Inc. and subsidiary of Registrant), as amended
October 22, 1991 (incorporated by reference to
Exhibit 10.32 to the Registrant's Form 10-K for the
year ended December 31, 1992).
10.23 Shareholder Agreement dated January 1, 1989 among
Homestake Mining Company, Case, Pomeroy & Company,
Inc. and Hadley Case (incorporated by reference to
Exhibit 10(a) to the Registrant's Form 10-K for the
year ended December 31, 1988).
10.24 Amendment dated March 27, 1992 to Shareholder
Agreement dated January 1, 1989 among Homestake
Mining Company, Case, Pomeroy & Company, Inc., and
Hadley Case (incorporated by reference to Exhibit
10.14 to the S-4 Registration Statement).
* 10.25 Consulting agreement dated September 1, 1984 between
Hadley Case and Homestake Sulphur Company, a
wholly-owned subsidiary of Registrant (incorporated
by reference to Exhibit 10.35 to the Registrant's
Form 10-K for the year ended December 31, 1992).
43<PAGE>
* 10.26 Consulting Agreement dated July 24, 1992, between
Stuart T. Peeler and the Registrant (incorporated by
reference to Exhibit 10.36 to the Registrant's Form
10-K for the year ended December 31, 1992).
* 10.27 Consulting agreement dated March 1, 1993 between
William A. Humphrey and the Registrant.
* 10.28 Employees Non-Qualified Stock Option Plan--1978
(incorporated by reference to Exhibit 10(a) to the
Registrant's Form 10-K for the year ended
December 31, 1984, Commission File Number 1-1235 and
to Post Effective Amendment No. 3 to the Registrant's
Registration Statement on Form S-8 dated March 11,
1988).
* 10.29 1981 Incentive Stock Option Plan (incorporated by
reference to Exhibit 10(b) to the Registrant's Form
10-K for the year ended December 31, 1984, Commission
File Number 1-1235 and to Post Effective Amendment
No. 3 to the Registrant's Registration Statement on
Form S-8 dated March 11, 1988).
* 10.30 Long Term Incentive Plan of 1983 of Homestake Mining
Company (incorporated by reference to Exhibit 10(g)
to the Registrant's Registration Statement on Form S-
14 dated May 16, 1984).
* 10.31 Employees' Stock Option and Share Rights Plan--1988
(incorporated by reference to Exhibit 10(n) to the
Registrant's Form 10-K for the year ended
December 31, 1987).
10.32 Credit Agreement dated as of August 24, 1993 among
the Registrant, Homestake Mining Company of
California and Homestake Canada Inc., the Bank of
Nova Scotia and Canadian Imperial Bank of Commerce as
Managing Agents, and Canadian Imperial Bank of
Commerce, as Administrative Agent (incorporated by
reference to Exhibit 10.41 to the Registrant's Form
10-Q for the quarter ended September 30, 1993).
11 Computation of Earnings Per Share.
13 1993 Annual Report to Shareholders.
22 Subsidiaries of the Registrant.
24 Consent of Coopers & Lybrand, Independent Auditors.
* Compensatory plan or management contract.
(b) Reports Filed on Form 8-K
No reports on Form 8-K were filed during the fourth quarter
of 1993.
44<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
HOMESTAKE MINING COMPANY
Date March 24, 1994 By /s/ H. M. Conger
--------------------
H. M. Conger
Chairman of the Board
and Chief Executive
Officer
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.
<TABLE>
<CAPTION>
Signature Capacity Date
<C> <S> <C>
/s/G. G. Elam Vice President, Finance March 24, 1994
-------------- and Chief Financial Officer
G. G. Elam (Principal Financial Officer)
/s/D. W. Peat Controller (Principal March 24, 1994
------------ Accounting Officer
D. W. Peat
</TABLE>
(Signatures continued on following page.)
45<PAGE>
<TABLE>
<CAPTION>
Signature Capacity Date
<S> <S> <C>
/s/ Harry M. Conger Chairman of the Board,
------------------------ Chief Executive Officer
Harry M. Conger and Director March 24, 1994
/s/ M. Norman Anderson Director March 24, 1994
------------------------
M. Norman Anderson
/s/ Hadley Case Director March 24, 1994
------------------------
Hadley Case
/s/ Robert H. Clark, Jr. Director March 24, 1994
------------------------
Robert H. Clark, Jr.
/s/ G. Robert Durham Director March 24, 1994
------------------------
G. Robert Durham
/s/ Douglas W. Fuerstenau Director March 24, 1994
------------------------
Douglas W. Fuerstenau
/s/ Henry G. Grundstedt Director March 24, 1994
------------------------
Henry G. Grundstedt
/s/ William A. Humphrey Director March 24, 1994
------------------------
William A. Humphrey
/s/ Robert K. Jaedicke Director March 24, 1994
------------------------
Robert K. Jaedicke
/s/ John Neerhout, Jr. Director March 24, 1994
------------------------
John Neerhout, Jr.
/s/ Stuart T. Peeler Director March 24, 1994
------------------------
Stuart T. Peeler
/s/ Glen L. Ryland Director March 24, 1994
------------------------
Glen L. Ryland
/s/ Berne A. Schepman Director March 24, 1994
------------------------
Berne A. Schepman
/s/ Peter Steen President, Chief Operating
------------------------ Officer and Director March 24, 1994
Peter Steen
</TABLE>
46<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND EMPLOYEES (OTHER THAN RELATED PARTIES)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In Thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D
BALANCE AT ADDITIONS DEDUCTIONS
BEGINNING (INCLUDING AMOUNTS
NAME OF DEBTOR OF PERIOD<7> INTEREST) COLLECTED
------------------------------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
P. Steen<1> $1,507 $(1,506)
G. Leathley<2> 110 (106)
D. Peat<2> 6 (6)
YEAR ENDED DECEMBER 31, 1992
P. Steen<1> $1,919 $(251)
G. Leathley<2> 138 (17)
D. Peat<2> 82 $221 (294)
YEAR ENDED DECEMBER 31, 1991
P. Steen<1> $1,882 $36 $(6)
G. Leathley<2> 226 (89)
D. Peat<2> 86 (4)
A. Winters<3> 112 1 (113)
R. Hinkel<3> 107 7 (21)
D. Fagin<4> 382 (259)
P. Carroll<5> 1,610 55
N. Goodman<5> 1,918
T. Hoare<5> 735 38
A. Walsh<5,6> 120 (39)
<PAGE>
<CAPTION>
------------------------------------------------------------------
COLUMN E
FOREIGN BALANCE AT END
CURRENCY OF PERIOD
TRANSLATION ---------------------
ADJUSTMENTS CURRENT NOT CURRENT
------------------------------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
P. Steen<1> $ (1) - -
G. Leathley<2> (4) - -
D. Peat<2> - -
YEAR ENDED DECEMBER 31, 1992
P. Steen<1> $(161) $11 $1,496
G. Leathley<2> (11) 16 94
D. Peat<2> (3) 6 -
YEAR ENDED DECEMBER 31, 1991
P. Steen<1> $7 $11 $1,908
G. Leathley<2> 1 17 121
D. Peat<2> 4 78
A. Winters<3> - -
R. Hinkel<3> 17 76
D. Fagin<4> - 123
P. Carroll<5> 6 - 1,671
N. Goodman<5> 8 - 1,926
T. Hoare<5> 3 - 776
A. Walsh<5,6> 1 3 79
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND EMPLOYEES (OTHER THAN RELATED PARTIES)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<FN>
<1> Prior to the Company's acquisition of control of Corona, Corona
loaned C$330 thousand (US$284 thousand) to Peter Steen for the
purpose of purchasing a house in connection with his
relocation. The loan was non-interest bearing and was secured
by a mortgage on his residence. The maximum principal amount
outstanding during 1993 was C$41 thousand (US$32 thousand), and
the loan was repaid in full in 1993. Also prior to the
Company's acquisition of control of Corona, Corona loaned Mr.
Steen C$1,865 thousand (US$1,604 thousand) for use in
purchasing Corona common shares, which amount accrued interest
in the total amount of C$29 thousand (US$25 thousand) until
January 1, 1991, after which it was non-interest bearing. The
loan was secured by a pledge of shares of Corona. (Following
the Company's acquisition of Corona, the Homestake shares
replaced the Corona shares pledged as security.) The loan was
repaid in full in 1993.
<2> Prior to the Company's acquisition of control of Corona, Corona
made employee relocation loans to Gillyeard J. Leathley (now a
Vice President of the Company) and David W. Peat (now
Controller of the Company) in the amounts of C$200 thousand
(US$172 thousand) and C$100 thousand (US$86 thousand),
respectively, for the purpose of purchasing a home. The loans
were non-interest bearing and were secured by mortgages on
their homes. The loan to Mr. Peat was repaid in full in 1992
and the loan to Mr. Leathley was repaid in full in 1993.
Also, in 1992 the Company made an employee relocation loan to
Mr. Peat for the purpose of purchasing a house. The loan was
secured by a mortgage on his residence. The majority of the
loan was repaid in 1992 and the balance was repaid in early
1993.
<3> Represents notes receivable, including accrued interest, in
connection with the exercise of options to purchase Homestake
common stock. Such notes are secured by a pledge of the shares
of common stock purchased and bear interest at the rate from
time to time specified by the IRS as necessary to avoid
imputation of interest income. Interest and 10% of original
principal balance are due annually on each of the first four
anniversary dates of the notes with a final payment of the
balance on the fifth anniversary date.
<4> Represents promissory note dated 5/2/91 from former officer of
the Company (officer through June 30, 1991). Interest at 7.69%
is payable quarterly and certain principal payments are due ten
business days following the exercise of stock options and as
otherwise described in the note.
<5> Represents primarily notes receivable from former directors and
officers of Corona for loans made for the purchase of shares of
Corona. The loans are secured by a pledge of shares of Corona.
(Following the Company's acquisition of Corona, the Homestake
shares have replaced the Corona shares pledged as security.)
The loans have been non-interest bearing since January 1, 1991
and are required to be repaid the later of 1995 or when the
pledged securities are equal in value to the loans.
<6> Includes employee relocation loan made by Corona in 1990 to
former officer of Corona. The loan is secured by a mortgage on
the borrower's residences, is non-interest bearing and is
repayable semi-monthly over 25 years.
<7> Balance at the beginning of each year excludes amounts
receivable from those persons who no longer are related
parties.
</TABLE>
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In Thousands)
<TABLE>
<CAPTION>
--------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D
RETIRE-
BEGINNING ADDITIONS MENTS OR
DESCRIPTION OF YEAR AT COST SALES
--------------------------------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Mining properties and mine
development costs $ 670,899 $27,317 $ (9,886)
Plant and equipment 842,858 14,521 (15,034)
Land and royalty interests 4,028 (73)
Construction and mine
development in progress 14,055 15,987
---------- -------- --------
$1,531,840 $57,825 $(24,993)
========== ======== ========
YEAR ENDED DECEMBER 31, 1992
Mining properties and mine
development costs $ 537,387 $ 19,602 $(28,606)
Plant and equipment 765,993 21,183 (21,066)
Land and royalty interests 3,934 249
Construction and mine
development in progress 105,702 22,419
---------- -------- ---------
$1,413,016 $ 63,453 $(49,672)
========== ======== =========
YEAR ENDED DECEMBER 31, 1991
Mining properties and mine
development costs $ 566,941 $ 24,210 $(27,073)
Plant and equipment 710,180 24,668 (12,777)
Land and royalty interests 7,885 46 (178)
Construction and mine
development in progress 53,845 117,534
---------- -------- --------
$1,338,851 $166,458 $(40,028)
========== ======== ========
<PAGE>
<CAPTION>
--------------------------------------------------------
COLUMN A COLUMN E COLUMN F
OTHER
CHANGES
ADD END OF
DESCRIPTION (DEDUCT)<1> YEAR
--------------------------------------------------------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Mining properties and mine
development costs $ 6,555 $ 694,885
Plant and equipment (5,398) 836,947
Land and royalty interests 3,955
Construction and mine
development in progress (25,611) 4,431
--------- ----------
$(24,454) $1,540,218
========= ==========
YEAR ENDED DECEMBER 31, 1992
Mining properties and mine
development costs $142,516<2>$ 670,899
Plant and equipment 76,748<2> 842,858
Land and royalty interests (155) 4,028
Construction and mine
development in progress (114,066) 14,055
-------- ----------
$105,043 $1,531,840
======== ==========
YEAR ENDED DECEMBER 31, 1991
Mining properties and mine
development costs $(26,691)<3>$ 537,387
Plant and equipment 43,922 <3> 765,993
Land and royalty interests (3,819) 3,934
Construction and mine
development in progress (65,677) 105,702
-------- ----------
$(52,265) $1,413,016
======== ==========
<FN>
(1) Primarily reclassifications to other accounts, and the effect
of exchange rate changes on property held by foreign
subsidiaries, except as noted.
(2) Includes additions totaling $194.8 million for the
consolidation of Prime and Stikine and deductions totaling
$43.8 million for write-downs of mining property, plant and
equipment.
(3) Includes deductions totaling $56.9 million for write-downs of
mining and exploration property, plant and equipment.
</TABLE>
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In Thousands)
<TABLE>
<CAPTION>
--------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D
ADDITIONS
CHARGED TO RETIRE-
BEGINNING COSTS AND MENTS OR
DESCRIPTION OF YEAR EXPENSES SALES
--------------------------------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Mining properties and mine
development costs $255,383 $ 40,022 $(10,300)
Plant and equipment 364,869 63,355 (12,653)
--------- -------- ----------
$620,252 $103,377 $(22,953)
========= ======== ==========
YEAR ENDED DECEMBER 31, 1992
Mining properties and mine
development costs $239,302 $ 49,738 $(27,732)
Plant and equipment 328,805 67,745 (20,389)
--------- -------- ----------
$568,107 $117,483 $(48,121)
========= ======== ==========
YEAR ENDED DECEMBER 31, 1991
Mining properties and mine
development costs $205,966 $ 54,718 $(21,395)
Plant and equipment 275,657 62,275 (10,130)
--------- -------- ----------
$481,623 $116,993 $(31,525)
========= ======== ==========
<CAPTION>
---------------------------------------------------------
COLUMN A COLUMN E COLUMN F
OTHER
CHANGES
ADD END OF
DESCRIPTION (DEDUCT)<1> YEAR
---------------------------------------------------------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Mining properties and mine
development costs $ 10,207 <2>$295,312
Plant and equipment (893) 414,678
-------- --------
$ 9,314 $709,990
======== ========
YEAR ENDED DECEMBER 31, 1992
Mining properties and mine
development costs $ (5,925) $255,383
Plant and equipment (11,292) 364,869
-------- --------
$(17,217) $620,252
======== ========
YEAR ENDED DECEMBER 31, 1991
Mining properties and mine
development costs $ 13 $239,302
Plant and equipment 1,003 328,805
-------- --------
$ 1,016 $568,107
======== ========
<FN>
<1> Primarily reclassifications and the effect of exchange rate
changes on property held by foreign subsidiaries, except as
noted.
<2> Includes additional costs of $16.0 million for the write-down of
the oil and gas property at Main Pass 299.
See significant accounting policies (page 33) in the 1993
Annual Report to Shareholders for methods used in computing
depreciation, depletion and amortization.
</TABLE>
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In Thousands)
<TABLE>
<CAPTION>
--------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D
MAXIMUM
AMOUNT
WEIGHTED AVG OUTSTANDING
BALANCE AT INTEREST RATE DURING THE
DESCRIPTION END OF YEAR END OF YEAR PERIOD
--------------------------------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
Not applicable
YEAR ENDED DECEMBER 31, 1992:
Bank borrowings:
- non-revolving
term loan None Not applicable $50,000
YEAR ENDED DECEMBER 31, 1991:
Not applicable
<CAPTION>
--------------------------------------------------------------------
COLUMN A COLUMN E COLUMN F
AVG AMOUNT WEIGHTED AVG
OUTSTANDING INTEREST RATE
DURING THE DURING THE
DESCRIPTION PERIOD<1> PERIOD<2>
--------------------------------------------------------------------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
Not applicable
YEAR ENDED DECEMBER 31, 1992:
Bank borrowings:
- non-revolving
term loan $29,167 4.3%
YEAR ENDED DECEMBER 31, 1991:
Not applicable
The Company has two lines of credit providing a total availability
of $155.7 million. No funds have been borrowed under these
agreements.
<FN>
<1> Computed based on month-end balances divided by twelve.
<2> Computed based on average interest rate in effect during the
period that borrowings were outstanding.
</TABLE>
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
(In Thousands)
<TABLE>
<CAPTION>
---------------------------------------------------------------------
COLUMN A COLUMN B
CHARGED TO COSTS
AND EXPENSES
_____________________________________________________________________
ITEM 1993 1992 1991
_____________________________________________________________________
<S> <C> <C> <C>
MAINTENANCE AND REPAIRS <1> $ 71,229 $81,258 $78,136
======== ======= =======
TAXES, OTHER THAN PAYROLL AND INCOME TAXES:
Property $ 5,752 $ 7,214 $ 9,856
Severance/Production 4,486 3,310 2,489
Other 4,357 6,196 5,653
-------- ------- -------
$14,595 $16,720 $17,998
======== ======= =======
ROYALTY EXPENSE $7,236 $8,747 $9,850
======== ======= =======
<FN>
<1> Maintenance and repairs include labor, materials, and other
expenses incurred for those purposes, as well as minor renewals
and betterments; major renewals and betterments are added to
property, plant and equipment.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Shareholders and Board of Directors
Homestake Mining Company
We have audited the consolidated financial statements of Homestake
Mining Company and subsidiaries as of December 31, 1993 and 1992, and
for each of the three years in the period ended December 31, 1993,
which financial statements are included on pages 28 through 47 of the
1993 Annual Report to Shareholders of Homestake Mining Company and
incorporated by reference herein. We have also audited the financial
statements schedules listed in Item 14(a)(2) of this Form 10-K.
These financial statements and financial statement schedules are the
responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements and financial
statement schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Homestake Mining Company and subsidiaries as of December 31, 1993
and 1992, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December
31, 1993, in conformity with generally accepted accounting
principles. As discussed in Note 16 to such consolidated financial
statements, in 1991, the Company changed its method of accounting for
post-retirement benefits other than pensions to conform with
Statement of Financial Accounting Standards No. 106. In addition, in
our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken
as a whole, present fairly, in all material respects, the information
required to be included therein.
/s/ Coopers & Lybrand
San Francisco, California
February 14, 1994
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
METHOD OF
EXHIBIT FILING
- ------- ------------
<C> <S> <C>
10.8 Amendment No. 1 dated July 1, 1993 to Joint
Operating Agreement between Freeport McMoRan
Resources Partners, IMC Fertilizer, Inc. and
Homestake Sulphur Company.......................... Filed herewith
electronically
10.9 Amendment No. 2 dated November 30, 1993 to
Joint Operating Agreement between Freeport
McMoRan Resources Partners, IMC Fertilizer,
Inc. and Homestake Sulphur Company................. Filed herewith
electronically
10.27 Consulting Agreement dated March 1, 1993
between William A. Humphrey and the
Registrant........................................ Filed herewith
electronically
11 Computation of Earnings Per Share................. Filed herewith
electronically
13 1993 Annual Report to Shareholders................ Filed herewith
electronically
22 Subsidiaries of Registrant........................ Filed herewith
electronically
24 Consent of Coopers & Lybrand, Independent
Auditors.......................................... Filed herewith
electronically
</TABLE>
<PAGE>
<PAGE>
Exhibit 10.8
AMENDMENT NO. 1 TO JOINT OPERATING AGREEMENT
THIS AMENDMENT NO. 1 TO JOINT OPERATING AGREEMENT ("Amendment"),
dated as of July 1, 1993, is entered into between FREEPORT McMORAN RESOURCE
PARTNERS, Limited Partnership, a Delaware limited partnership ("Freeport"),
IMC FERTILIZER, INC., a Delaware corporation ("IMC") and HOMESTAKE SULPHUR
COMPANY, a Delaware corporation ("Homestake"). Capitalized terms used
herein without definition shall have the meanings given them in the Joint
Operating Agreement (as defined below).
W I T N E S S E T H:
WHEREAS:
A. Freeport, IMC and Homestake (by assignment from Felmont Oil
Corporation) are parties to that certain Joint Operating Agreement dated as
of May 1, 1988, as amended ("Joint Operating Agreement").
B. Freeport, IMC and Homestake desire to amend certain
provisions of Attachment 3 to the Joint Operating Agreement as set forth
herein.
NOW, THEREFORE, Freeport, IMC and Homestake hereby agree as
follows:
1. Amendment of Joint Operating Agreement.
1.1 Definitions. Article I of Attachment 3 to the Joint
Operating Agreement is hereby amended by adding thereto the following
defined terms:
"CTI" shall mean Crescent Technology, Inc.
"FSCO" shall mean the Freeport Sulphur Company Division of
Freeport.
"FM" shall mean Freeport McMoRan, Inc.
"Production Ratio" shall mean for any accounting period the ratio
of total sulphur production from Joint Operations for that period
to the sum of total sulphur production from Joint Operations plus
total sulphur production from all other mines operated by FSCO
for that period.
<PAGE>
"Sulphur Local G&A" shall mean personnel and related costs of the
President's Staff of FSCO, the Commercial Marketing, Mine
Planning and Purchasing Departments of FSCO, and any other
departments that FSCO may maintain from time to time that provide
local G&A services consistent with those provided as of June 30,
1993, including cash compensation, benefits, payroll overhead,
office rent, office supplies, communications and other department
costs, but excluding costs associated with the Commercial
Marketing Department and Recovered Sulphur Purchasing activities
of FSCO, costs associated with the FSCO Purchasing Department's
activities related to P.T. Freeport Indonesia's copper and gold
operations, and costs relating to any other non-sulphur
activities of FSCO departments.
"Adjustment Period" shall mean the period from July 1, 1996 to
June 30, 1999, and each consecutive three-year period thereafter.
"GNP Deflator Index" shall mean the GNP Deflator Index (final) as
published by the U.S. Department of Commerce.
"Corporate G & A Charge" shall mean (i) for 1993 and 1994
$12,736,000 and (ii) for each calendar year after 1994 the sum of
(x) the Corporate G&A Charge for the immediately preceding
calendar year plus (y) the product of the Corporate G & A Charge
for the immediately preceding calendar year multiplied by the
percentage change in the GNP Deflator Index from the immediately
preceding calendar year (in every case subject to adjustment as
necessary to reasonably reflect any increase in FTX Corporate
Personnel and FTX Service Costs that result from increases in
government mandated taxes and charges imposed on employers to
cover employee and retiree health care costs and subject to
Section 5(B) of this Attachment 3).
1.2 Amendment to Article IV of Attachment 3. Article IV of
Attachment 3 to the Joint Operating Agreement is amended to read in its
entirety as follows:
IV. INDIRECT CHARGES
1. Sulphur Local G&A. Sulphur Local G&A will be charged to
the Joint Operations at actual cost allocated to the Joint Operations
on the basis of the Production Ratio.
-2-
<PAGE>
2. Other Costs. The following will be charged to Joint
Operations at actual cost allocated to the Joint Operations on the
basis of the Production Ratio: (i) CTI charges to FSCO for contract
engineering, environmental, safety and analytical services and FSCO's
allocation of costs incurred by FM on CTI's behalf under the Services
Agreement dated February 1, 1993 between FM and CTI, including
facilities costs, MIS contract costs and other costs as provided
therein; and (ii) FM Hydrocarbon costs allocated to FSCO for securing
and administering supplies of natural gas to the Joint Operations.
3. Aircraft. Fully loaded costs of aircraft (except "Mallard")
owned by or chartered to FM will be charged to the Joint Operations on
the basis of actual usage by FSCO allocated to the Joint Operations on
the basis of the Production Ratio. Fully loaded costs of the
"Mallard" (or other aircraft dedicated exclusively to mine operations)
will be allocated to the Joint Operations on the basis of the
Production Ratio (excluding, however, from the calculation of the
Production Ratio in determining such allocation any sulphur production
from mines not serviced by the Mallard or such other aircraft).
"Fully loaded costs" include all costs of ownership and operation of
aircraft including hangering, maintenance and depreciation.
4. Outside Legal. Outside legal costs directly related to FSCO
sulphur business will be allocated to the Joint Operations on the
basis of the Production Ratio, excluding any such costs that are
directly related to another mine operated by FSCO. Outside legal
costs directly related to the Joint Operations will be charged 100% to
the Joint Operations.
5. Corporate G&A.
(A) FM corporate general and administrative services included in
the categories FTX Corporate Personnel Costs, Facilities'
Management/Internal Security Costs, FTX Service Costs and FTX General
Corporate Costs as set out in Annex 1 hereto for each year during the
term of this Agreement will be covered by an annual fee calculated by
multiplying the Corporate G & A Charge for that year by the Production
Ratio for that year.
(B) If the Operator or any Non-Operator believes that the
Corporate G&A Charge then in effect no longer reasonably reflects the
actual costs experienced by FM in the categories set out in paragraph
5(A) above and Annex 1 hereto that comprise the Corporate G&A Charge,
that Party may so notify the other Parties (which notice shall be in
writing) not earlier than 90 days or later than 30 days prior to the
commencement of an Adjustment Period and
-3-
<PAGE>
request an adjustment to the Corporate G&A Charge for the ensuing
Adjustment Period. In the event such notice is given the Parties
shall have until the commencement of the ensuing Adjustment Period to
agree upon the amount of Corporate G & A Charge for such Adjustment
Period. If the Parties are unable to agree upon the amount of the
Corporate G&A Charge for the ensuing Adjustment Period before the
commencement of such Adjustment Period the Corporate G & A Charge
shall be determined through a proceeding for resolution of dispute
submitted to Endispute Incorporated ("Endispute") in San Francisco,
California. The Non-Operators participating in such proceeding,
whether one or more, shall act as a single party. Not later than 60
days after commencement of the applicable Adjustment Period, Operator,
on the one hand, and Non-Operator(s), on the other, each shall submit
to Endispute the amount it proposes as the Corporate G&A Charge for
the Adjustment Period. Endispute, after conducting such investigation
and review as it deems appropriate shall adopt the amount proposed by
Operator or the amount proposed by Non-Operator(s), but not any other
amount. The decision of Endispute shall be final and binding on the
Parties and shall establish the Corporate G&A Charge for the entire
Adjustment Period, including retroactively for any portion of the
Adjustment Period that precedes the decision. The prevailing side in
such proceeding shall be entitled to recover its reasonable attorney's
fees and expenses from the other side. If at the time such proceeding
is to commence, Endispute is not in the business of resolving disputes
in San Francisco, California any Party may ask the Chief Judge of the
United States Court of Appeals for the Ninth Circuit to select a
similar firm located in San Francisco, California.
(C) Section 5(B) above notwithstanding, the Parties agree that
no adjustment will be made pursuant to Section 5(B) with respect to
any increase in the following Corporate G&A Charge categories at any
time: Shareholder Reports and Meetings - $234,000; Transfer Fees -
$97,000; Advertising - $308,000; Golf Tournament - $385,000; and
External Facilities - $138,000.
6. Conditions Precedent to Effectiveness of this Amendment.
This Amendment shall become effective as of the date first above written
when each of the Parties has delivered to the others duly executed
counterparts hereof.
7. Absence of Waiver. The Parties agree that the amendments
set forth in Section 1 hereof shall be limited precisely as written and
shall not be deemed to:
(a) be a consent to any waiver or modification of any other term
or condition of the Joint Operating Agreement;
-4-
<PAGE>
(b) be a consent to, or waiver of, any default under the Joint
Operating Agreement;
(c) impose upon any Party any obligation, express or implied, to
consent to any further amendment or modification of the Joint Operating
Agreement; or
(d) prejudice any right or remedy which any Party may now have
under the Joint Operating Agreement or may have in the future under or in
connection with the Joint Operating Agreement including, without
limitation, any right or remedy resulting from any default.
8. Representations. Each Party hereby represents and warrants
to the other Parties that:
(a) It is a corporation (or in the case of Freeport a limited
partnership) duly organized and validly existing under the laws of the
State of Delaware;
(b) The execution, delivery and performance of this Amendment by
it are within its corporate (or in the case of Freeport partnership)
powers, have been duly authorized by all necessary corporate (or in the
case of Freeport partnership) action, have received all necessary consents
and approvals (if any shall be required), and do not and will not
contravene or conflict with any provision of law or of its charter or
bylaws, or of any agreement binding upon it or its property; and
(c) This Amendment is its legal, valid and binding obligation,
enforceable against it in accordance with this Amendment's terms.
9. Miscellaneous
(a) Section headings used in this Amendment are for convenience
of reference only and shall not affect the construction of this Agreement.
(b) This Amendment may be executed in any number of counterparts
and by the different Parties on separate counterparts and each such
counterpart shall be deemed to be an original, but all such counterparts
shall together constituted but one and the same agreement.
(c) This Amendment is a contract made under and governed by the
laws of the State of Louisiana, without giving effect to principles of
conflicts of laws.
(d) All obligations and rights of the Parties that are expressed
herein, shall be in addition to and not in limitation of those provided by
applicable law.
-5-
<PAGE>
(e) Whenever possible, each provision of this Amendment shall be
interpreted in such manner as to be effective and valid under applicable
law; but if any provision of this Amendment shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Amendment.
(f) This Amendment shall be binding upon each of the Parties and
their respective successors and assigns, and shall inure to the benefit of
their respective successors and assigns.
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment
to be executed as of the date first above written.
FREEPORT-McMORAN RESOURCE PARTNERS,
Limited Partnership
By:
Title:
IMC FERTILIZER, INC.
By:
Title:
HOMESTAKE SULPHUR COMPANY
By:
Title:
-6-
<PAGE>
<PAGE>
Exhibit 10.9
AMENDMENT NO. 2 TO JOINT OPERATING AGREEMENT
THIS AMENDMENT NO. 2 TO JOINT OPERATING AGREEMENT ("Amendment"),
dated as of November 30, 1993, is entered into between FREEPORT McMORAN
RESOURCE PARTNERS, Limited Partnership, a Delaware limited partnership
("Freeport"), IMC FERTILIZER, INC., a Delaware corporation ("IMC") and
HOMESTAKE SULPHUR COMPANY, a Delaware corporation ("Homestake").
Capitalized terms used herein without definition shall have the meanings
given them in the Joint Operating Agreement (as defined below).
W I T N E S S E T H:
WHEREAS:
A. Freeport, IMC and Homestake (by assignment from Felmont Oil
Corporation) are parties to that certain Joint Operating Agreement dated as
of May 1, 1988 ("Joint Operating Agreement").
B. Freeport, IMC and Homestake desire to amend certain
provisions of the Joint Operating Agreement as set forth herein.
NOW, THEREFORE, Freeport, IMC and Homestake hereby agree as
follows:
1. Amendment of Joint Operating Agreement.
1.1 Definitions. Article I of the Joint Operating
Agreement is hereby amended by adding thereto the following defined terms:
1.38 "Closure Cost" shall mean the total cost of abandonment and
reclamation of the Property and the Joint Assets, including costs
required by government or other legal authority.
1.39 "Closure Cost Estimate" shall mean the estimate of the Closure
Cost as updated from time to time pursuant to Section 20.03 hereof.
1.40 "Closure Cost Share" shall mean, with respect to any Party at
any time, an amount of money equal to the product obtained by
multiplying (i) the Closure Cost Estimate at such time, by (ii) a
percentage equal to the percentage constituting such Party's
Participating Interest at such time.
<PAGE>
1.41 "Net Cash Flow" shall mean net cash flow from continuing
operations determined in accordance with generally accepted accounting
principles except that net cash flow to a Party, or its Affiliate, as
applicable, which is from any entity partially owned by such Party or
Affiliate and accounted for under the equity method, shall be included
only to the extent of net cash distributions received.
1.42 "Financial Assurance" shall mean, with respect to any
Party, any one of the following:
(a) A representation by such Party to the other Parties
certified by such Party's chief financial officer, that such
Party's Net Cash Flow, during the period comprising the four
fiscal quarters immediately preceding the quarter in which the
notice was given, was an amount in excess of the amount obtained
by multiplying by 2 such Party's Closure Cost Share as of the end
of such period; or
(b) A written commitment by an Affiliate of such Party,
made to the other Parties, to guarantee such Party's payment of
its Closure Cost Share, provided such Affiliate's chief financial
officer can certify that the Affiliate's Net Cash Flow, during
the period comprising the four fiscal quarters immediately
preceding the quarter in which the notice was given, was an
amount in excess of the amount obtained by multiplying by 2 such
Party's Closure Cost Share as of the end of such period; or
(c) A performance bond or letter of credit issued by a Non-
Party in an amount equal to such Party's Closure Cost Share as of
the time of issuance of such bond or letter, provided the issuing
Non-Party and the terms of draw-down are acceptable to each of
the other Parties; or
(d) Such other form of assurance as shall be agreed to by
all Parties.
1.43 "Funding Party" shall have the meaning prescribed for such term
in Section 20.03 hereof.
1.44 "Previously Non-Funding Party" shall have the meaning prescribed
for such term in Section 20.03 hereof.
1.45 "Interim Closure Fund" shall mean, with respect to any Funding
Party, an account funded by that Funding Party and maintained by
Operator prior to January 1, 2006 to fund that Funding Party's Closure
Cost Share.
-2-
<PAGE>
1.46 "Closure Fund" shall mean, with respect to any Party, an account
funded by that Party and maintained by Operator on and after January
1, 2006 to fund that Party's Closure Cost Share.
1.47 "Initial Funding Date" shall have the meaning prescribed for
such term in Section 20.03 hereof.
1.48 "Remaining Tonnage" shall mean, with respect to any Funding
Party, the number of tons obtained by multiplying (i) Operator's
estimate of the commercially producible tonnage of sulphur reserves
remaining to be produced from the Mine on the Property as of the
Initial Funding Date, by (ii) the percentage equal to the percentage
constituting the Participating Interest of the Funding Party as of
such time.
1.2 Amendment to Section 20.03 of the Joint Operating Agreement.
Section 20.03 of the Joint Operating Agreement is amended to read in its
entirety as follows:
20.03 Reclamation and Abandonment Security. On or before February 1,
1994, Operator shall submit to Non-Operators a Closure Cost Estimate
dated as of such date. On or before each subsequent February 1 during
the term o f this Agreement: (i) Operator shall deliver to Non-
Operators written notice stating whether Operator has become aware of
any changed circumstance that would significantly effect the then
current Closure Cost Estimate and describing any such circumstance,
and (ii) if on or before the immediately preceding December 1 Operator
has become aware of any changed circumstance that would significantly
effect the then current Closure Cost Estimate or any one or more of
the Non-Operators requests in writing an updated Closure Cost
Estimate, Operator shall submit to Non-Operators an updated Closure
Cost Estimate dated as of that February 1. As described in more
detail hereinafter in this Section 20.03, the Closure Cost Estimate
shall serve as the basis upon which the Parties shall provide funds to
be applied against each Party's Closure Cost Share.
If at any time prior to January 1, 2006 a Party should require
assurance as to the ability of each Party to pay its Closure Cost
Share, the Party requiring such assurance shall so notify the other
Parties. Within 30 days after the date upon which such notice was
transmitted to the Parties, each Party (including the Party giving the
notice) shall provide Financial Assurance to the other Parties.
If prior to January 1, 2006 a Party fails to provide requested
Financial Assurance as required above,then Operator shall promptly
establish for such Party (a "Funding Party") an Interim Closure Fund.
Such Interim Closure Fund shall be funded by a per ton charge
collected by Operator
-3-
<PAGE>
from the Funding Party (through Operator's monthly statement or
billing to the Funding Party) on each ton of sulphur produced
hereunder for the account of the Funding Party during the period
beginning on the first day of the month following the month in which
the Funding Party failed to provide requested Financial Assurance as
required above (the "Initial Funding Date") and ending on the earlier
of January 1, 2006 or the date of release of the Interim Closure Fund
to the Funding Party in accordance with the further provisions of this
Section 20.03. Such per ton charge shall be equal to the dollar
amount obtained by dividing the Funding Party's Closure Cost Share as
of the Initial Funding Date by the Funding Party's Remaining Tonnage
as of such time. The per ton charge shall be revised from time to
time (but not more than twice per year) by the Operator to take into
account changes in the Closure Cost Estimate, changes in the Remaining
Tonnage, changes in the Funding Party's Participating Interest, and
earnings accrued on amounts previously collected from the Funding
Party and maintained in the Interim Closure Fund.
Each Interim Closure Fund shall be invested in U.S. government
securities or certificates of deposit of banks mutually agreed to
among the Parties. Each Interim Closure Fund shall be released to the
applicable Funding Party only upon the occurrence of one of the
following events: (i) the Funding Party provides Financial Assurance
to each of the other Parties; or (ii) such release is expressly agreed
to by all of the Parties.
In the case of each Party for which no Interim Closure Fund is
maintained as of January 1, 2006 (a "Previously Non-Funding Party")
Operator shall establish a Closure Fund. Each such Previously Non-
Funding Party's Closure Fund shall be funded by a monthly charge to be
collected by Operator from the Previously Non-Funding Party (through
Operator's monthly statement or billing to the Previously Non-Funding
Party) for the month of January, 2006 and for each month during the
term of this Agreement thereafter until the Closure Cost has been paid
in full. The amount of such monthly charge shall be equal to the
dollar amount obtained by dividing the Previously Non-Funding Party's
Closure Cost Share as of January 1, 2006 by Operator's estimate of the
number of months of the remaining productive life of the Mine on the
Property as of such date.
In the case of each Funding Party for which an Interim Closure
Fund is maintained as of January 1, 2006, such Interim Closure Fund
shall on such date automatically convert to, and thereafter be, such
Funding Party's Closure Fund. Each such Funding Party's Closure Fund
shall be funded by a monthly charge to be collected by Operator from
the Funding Party (through Operator's monthly statement or billing to
the Funding Party) for the month of January,
-4-
<PAGE>
2006, and for each month during the term of this Agreement thereafter
until the Closure Cost has been paid in full. The amount of such
monthly charge shall be equal to the dollar amount obtained by (i)
subtracting the number of dollars in such Funding Party's Interim
Closure Fund immediately prior to such Fund's conversion to a Closure
Fund on January 1, 2006, from such funding Party's Closure Cost Share
as of January 1, 2006, and (ii) dividing the difference by Operator's
estimate of the number of months of the remaining productive life of
the Mine on the Property as of such date.
The monthly charge to be collected from each Funding Party, if
any, and the monthly charge to be collected from each Previously Non-
Funding Party, if any, to fund the Closure Funds shall each be revised
from time to time (but not more than twice per year) by Operator to
take into account changes in the Closure Cost Estimate, changes in the
estimate of the remaining productive life of the Mine on the Property,
changes in the Participating Interest of the Funding Party or the
Previously Non-Funding Party (as the case may be), and earnings
accrued on amounts previously collected and maintained in the
applicable Closure Fund.
The Closure Fund of each Party (irrespective of such Party's
status as a Funding Party or Previously Non-Funding Party) shall be:
(i) invested in U.S. government securities or certificates of deposit
of banks mutually agreed to among the Parties; and (ii) unavailable
for refund to such Party except as hereinafter provided in this
Section 20.03.
At such time as the Closure Cost is finally determined, Operator
shall compare the dollar amount of each Party's Closure Cost Share as
of such time against the dollar amount balance of such Party's Closure
Fund at such time (inclusive of earnings on deposits therein). If the
comparison indicates that such Party's Closure Cost Share exceeds such
Party's Closure Fund balance, Operator shall cause the entire Closure
Fund balance to be applied against the Closure Cost and shall invoice
such Party for the amount by which the Party's Closure Cost Share
exceeds such balance. The invoiced Party shall pay such invoice in
full promptly following such Party's receipt thereof. If the
comparison indicates that such Party's Closure Fund balance exceeds
such Party's Closure Cost Share, Operator shall cause to be promptly
refunded to such Party from such Party's Closure Fund the amount by
which such Closure Fund balance exceeds such Closure Cost Share, and
shall cause the entire Closure Fund balance remaining after such
refund to be applied against the Closure Cost.
-5-
<PAGE>
Operator also shall cause to be paid to each Party all interest
or other amounts earned following such time as the Closure Cost is
finally determined and the comparisons provided for in the immediately
preceding paragraph are completed on that Party's Closure Fund balance
to the extent the Closure Fund balance is not disbursed at such time
to pay the Closure Cost; provided that Operator in its sole discretion
may from time to time set-off such interest and other amounts payable
to a Party against any amount by which that Party's Closure Cost Share
exceeds that Party's Closure Fund balance. Subject to Operator's
right to set-off as just described, payment of any such interest and
other amounts earned shall be made not less than quarterly by the 15th
day of each calendar quarter following the quarter in which such
interest or other amounts were earned.
2. Conditions Precedent to Effectiveness of this Amendment.
This Amendment shall become effective as of the date first above written
when each of the Parties has delivered to the others duly executed
counterparts hereof.
3. Absence of Waiver. The Parties agree that the amendments
set forth in Section 1 hereof shall be limited precisely as written and
shall not be deemed to:
(a) be a consent to any waiver or modification of any other term
or condition of the Joint Operating Agreement;
(b) be a consent to, or waiver of, any default under the Joint
Operating Agreement;
(c) impose upon any Party any obligation, express or implied, to
consent to any further amendment or modification of the Joint Operating
Agreement; or
(d) prejudice any right or remedy which any Party may now have
under the Joint Operating Agreement or may have in the future under or in
connection with the Joint Operating Agreement including, without
limitation, any right or remedy resulting from any default.
4. Representations. Each Party hereby represents and warrants
to the other Parties that:
(a) It is a corporation (or in the case of Freeport a limited
partnership) duly organized and validly existing under the laws of the
State of Delaware;
(b) The execution, delivery and performance of this Amendment by
it are within its corporate (or in the case of Freeport partnership)
powers, have been duly authorized by all necessary corporate (or in the
case of Freeport partnership) action, have received all necessary consents
and approvals (if any shall be required), and do not and will not
contravene or conflict with any provision of law or of its charter or
bylaws, or of any agreement binding upon it or its property; and
-6-
<PAGE>
(c) This Amendment is its legal, valid and binding obligation,
enforceable against it in accordance with this Amendment's terms.
5. Miscellaneous
(a) Section headings used in this Amendment are for convenience
of reference only and shall not affect the construction of this Agreement.
(b) This Amendment may be executed in any number of counterparts
and by the different Parties on separate counterparts and each such
counterpart shall be deemed to be an original, but all such counterparts
shall together constituted but one and the same agreement.
(c) This Amendment is a contract made under and governed by the
laws of the State of Louisiana, without giving effect to principles of
conflicts of laws.
(d) All obligations and rights of the Parties that are expressed
herein, shall be in addition to and not in limitation of those provided by
applicable law.
(e) Whenever possible, each provision of this Amendment shall be
interpreted in such manner as to be effective and valid under applicable
law; but if any provision of this Amendment shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Amendment.
(f) This Amendment shall be binding upon each of the Parties and
their respective successors and assigns, and shall inure to the benefit of
their respective successors and assigns.
-7-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment
to be executed as of the date first above written.
FREEPORT-McMORAN RESOURCE PARTNERS,
Limited Partnership
By:
Title:
IMC FERTILIZER, INC.
By:
Title:
HOMESTAKE SULPHUR COMPANY
By:
Title:
-8-
<PAGE>
<PAGE>
Exhibit 10.27
CONSULTING AGREEMENT
This CONSULTING AGREEMENT, dated as of March 1, 1993 ("Effective
Date"), is between William A. Humphrey ("Consultant") and Homestake Mining
Company of California ("Homestake").
1. Homestake agrees to engage Consultant, and Consultant agrees to
accept the engagement, to provide consulting services with respect to such
matters as Consultant and Homestake agree ("Services"). Services under
this agreement shall not include testifying as a witness in legal
proceedings, and compensation shall not be payable under this agreement
with respect to testifying in any proceeding.
2. The engagement shall begin on the Effective Date and continue
until terminated by either party by written notice of termination.
3. (a) Consultant shall perform Services for Homestake as, when and
where reasonably requested to do so by Homestake.
(b) Homestake shall pay Consultant $125 per hour for Services
performed at Homestake's request, services to be billed in minimum one-hour
increments or parts thereof. Travel time, including travel to a location
at which services are to be performed, shall be considered time in which
services are performed. If, in connection with providing Services under
this agreement, Consultant is required to be away from home on weekends or
on any other day during which Services are not to be performed, Consultant
may charge for up to eight hours at a rate of $125 per hour. Homestake
shall not be obligated to employ Consultant for any minimum number of hours
or days during the term of this agreement.
(c) Homestake shall make reasonable advances to Consultant for travel
related to Services, and after presentation of customary receipts shall
reimburse Consultant for approved expenses related to Services in
accordance with the travel advance and expense reimbursement policies for
Homestake employees.
(d) Homestake shall pay Consultant for Services, and reimburse
Consultant for related expenses, within ten days of its receipt and
approval of Consultant's invoice. Consultant's invoices shall contain a
summary of all Services performed and time spent, identify the countries in
which Services were performed and expenses incurred, allocate the charges
for Services and the expenses by project and country, identify the
Homestake Representative(s) authorizing such Services, and contain such
additional information in such detail as Homestake may reasonably require.
4. (a) Consultant shall keep and make available to Homestake records
showing all Services performed and time spent in such performance.
Consultant shall make such written reports of Consultant's activities to
Homestake as Homestake may from time to time reasonably request.
(b) All such records and reports shall be the sole and exclusive
property of Homestake, to be delivered to Homestake by Consultant upon
Homestake's request. Consultant expressly agrees to deliver to Homestake
all papers, drawings, models, maps, or any other thing related to Services
in Consultant's possession or under its control upon termination of this
agreement.
<PAGE>
5. Consultant shall not, within three years after the termination of
this agreement, divulge to any person any proprietary or confidential
information relating to Homestake or its Subsidiaries or Affiliates
("Homestake Companies"), or relating to any business or property in which
any of the Homestake Companies has an interest, acquired by Consultant
while in the prior employment of any of the Homestake Companies or in the
course of performance of duties under this agreement without express
written authorization by an officer of Homestake. For purposes of this
agreement, "Subsidiary" shall mean any corporation, partnership, joint
venture or other entity or person in which Homestake has a total direct
and/or indirect equity or voting interest of at least 20%, and "Affiliate"
shall mean any corporation, partnership, joint venture or other entity or
person which is directly or indirectly controlling, controlled by or under
common control with Homestake.
6. Consultant represents and warrants to Homestake that his
performance of Services will not breach any obligation Consultant may have
to any third party.
7. Consultant agrees that until termination of this agreement,
Consultant shall not engage in any employment or consulting services with
anyone other than one of the Homestake Companies relating to the Services
performed or relating to any business or property in which any of the
Homestake Companies has an interest without Homestake's prior written
consent.
8. Consultant shall not delegate, subcontract, assign, or employ any
person to perform any work directly or indirectly related to Services
without Homestake's prior written consent.
9. (a) In the performance of Services Consultant shall be an
independent contractor. Nothing in this agreement shall be deemed to make
Consultant an agent, employee or partner of Homestake. Consultant shall
not, by reason of this agreement, participate in any employee benefits
available to employees of Homestake Companies, nor shall this agreement
diminish any benefits or rights Consultants may otherwise be entitled to
receive as a former employee or officer of the Homestake Companies.
(b) Consultant assumes full responsibility and liability for the
payment of any taxes due on any amount received hereunder.
(c) Except to the extent required by law, Homestake shall not make any
deduction from any amount paid by it to Consultant for taxes or for
insurance or benefits.
10. The Homestake Representatives authorized to assign work to
Consultant and coordinate Consultant's performance of Services is Harry M.
Conger. Homestake may assign such responsibility to any other
Representative or Representatives.
2
11. (a) All notices provided for in this agreement shall be delivered
personally or by facsimile or by first class mail, postage prepaid, and
shall be deemed received when personally delivered or, if by facsimile, on
the next business day after receipt or, if mailed, five business days after
date of mailing.
(b) Any notice of default shall only be effective if delivered
personally, or sent by registered or certified mail.
(c) Any notice from Consultant to Homestake shall be delivered or
addressed to the Homestake Representative.
(d) All notices to be delivered by mail or facsimile shall be sent to
the addresses and facsimile numbers shown below (or as changed by notice
given as provided herein).
12. The interpretation and performance of this agreement shall be
governed by the domestic law of the State of California, without regard to
conflict of laws principles.
13. This agreement constitutes the entire agreement between the
parties related to its subject matter. It supersedes all prior proposals,
agreements, understandings, representations and conditions. It may not be
changed or amended except in writing.
CONSULTANT
Name: William A. Humphrey
Address: 500 Ygnacio Valley Road,
Suite 250
Walnut Creek, CA 94596
Tel No.: (510) 942-3125
Fax No.: (510) 942-3035
Signature:________________________
HOMESTAKE MINING COMPANY OF
CALIFORNIA
11th Floor
650 California Street
San Francisco, CA 94108-2788
Tel. No.: (415) 981-8150
Fax No.: (415) 397-0952
By:______________________________
Harry M. Conger, Chairman
Agremnts\Consult.Hum
3
<PAGE>
<PAGE>
EXHIBIT 11
(Page 1 of 2)
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
1993 1992 1991
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Primary:
Earnings:
Income (loss) from continuing
operations $52,494 $(175,836) $(207,756)
Less dividends on:
HCI first preferred series X (118) (306)
HCI series 1 second preference
shares (885) (971)
-------- --------- ---------
Income (loss) from continuing
operations applicable to earnings
per share calculations 51,609 (176,925) (208,062)
Loss from discontinued operations (25,359)
-------- --------- ---------
Income (loss) before cumulative
effect applicable to earnings
per share calculations 51,609 (176,925) (233,421)
Cumulative effect of change in
accounting for post-retirement
benefits (28,800)
-------- --------- ---------
Net income (loss) applicable to
earnings per share calculations $51,609 $(176,925) $(262,221)
======== ========= =========
Weighted average number of shares
outstanding 137,046 135,221 132,110
======== ========= =========
Per share amounts:
Income (loss) from continuing
operations $0.38 $(1.31) $(1.57)
Loss from discontinued
operations (0.19)
------- ------- -------
Income (loss) before cumulative effect 0.38 (1.31) (1.76)
Cumulative effect of change in
accounting for post-retirement
benefits (0.22)
------- ------- -------
Net income (loss) per share $0.38 $(1.31) $(1.98)
======= ======= =======
<PAGE>
EXHIBIT 11
(Page 2 of 2)
<CAPTION>
- --------------------------------------------------------------------------
1993 1992 1991
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Fully Diluted:
Earnings:
Income (loss) from continuing
operations $52,494 $(175,836) $(207,756)
Less dividends on:
HCI first preferred series X (118) (306)
HCI series 1 second preference
shares (885) (971)
Add:
Interest relating to 5.5%
convertible subordinated notes,
net of tax 3,447
Amortization of issuance costs
relating to 5.5% convertible
subordinated notes, net of tax 234
--------- --------- ---------
Income (loss) from continuing
operations applicable to earnings
per share calculations 55,290 (176,925) (208,062)
Income (loss) from discontinued
operations (25,359)
--------- --------- ---------
Income (loss) before cumulative effect
applicable to earnings per share
calculations 55,290 (176,925) (233,421)
Cumulative effect of change in
accounting for post-retirement
benefits (28,800)
-------- ---------- ----------
Net income (loss) applicable to
earnings per share calculations $55,290 $(176,925) $(262,221)
======== ========== ==========
Weighted average number of shares
outstanding:
Common shares 137,046 135,221 132,110
Additional average shares outstanding
assuming conversion of 5.5%
convertible subordinated notes 3,397
--------- --------- ---------
140,443 135,221 132,110
========= ========= =========
Per share amounts:
Income (loss) from continuing
operations $0.39 $(1.31) $(1.57)
Loss from discontinued
operations (0.19)
--------- --------- ---------
Income (loss) before cumulative
effect 0.39 (1.31) (1.76)
Cumulative effect of change in
accounting for post-retirement
benefits (0.22)
--------- --------- ---------
Net income (loss) per share $0.39(a) $(1.31) $(1.98)
========= ========= =========
<FN>
(a) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No.
15 because it produced an anti-dilutive result.
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 13
Index to Exhibit 13:
Selected information from the 1993 Annual Report to Shareholders is
incorporated by reference in the Form 10-K and such information is herewith
transmitted electronically as Exhibit 13. Such selected information is
listed below. Noted page references correspond to pagination in the Annual
Report to Shareholders.
<TABLE>
<CAPTION>
Annual Report
Page
<S> <C>
Statistical Summary 20-21
Management's Discussion and Analysis 22-27
Consolidated Financial Statements 28-32
Notes to Consolidated Financial Statements 33-47
Report of Independent Auditors 48
Management's Responsibility for Financial Reporting 48
Five-Year Selected Financial Data 49
Quarterly Selected Data 50
Common Stock Price Range 50
Appendix 1: Description of Bar Charts in Management's
Discussion and Analysis
</TABLE>
<PAGE>
STATISTICAL SUMMARY
<TABLE>
<CAPTION>
MINE PRODUCTION
=========================== ===========================================
Tons
Owner- Milled
ship Production (mil- Grade Recovery
(%)<1> Year (ozs.)<1> lions)<1> (ozs./ton) (%)
- --------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES
Homestake 100 1993 447,593 2.7 0.174 96
1992 396,626 2.6 0.158 95
1991 319,080 2.5 0.140 93
McLaughlin 100 1993 305,312 2.2 0.154 92
1992 291,094 2.1 0.164 87
1991 262,719 2.3 0.125 91
Round 25 1993 93,674 6.1 0.033 69
Mountain<6> 1992 92,646 4.4 0.036 58
1991 84,755 3.9 0.031 66
Santa Fe 100 1993 53,966 2.3 0.034 61
1992 60,905 2.0 0.037 71
1991 67,102 2.7 0.034 64
Marigold<7> 33 1993 30,165 0.7 0.108 91
33 1992 28,257 0.8 0.111 91
23 1991 15,274 0.4 0.092 92
Mineral
Hill 50 1993 18,335 0.1 0.243 93
1992 21,087 0.2 0.264 93
1991 21,344 0.1 0.279 91
Pinson<7> 26 1993 13,353 0.3 0.093 85
1992 13,214 0.2 0.093 79
1991 15,695 0.3 0.098 84
Dee<7> 44 1993 11,340 0.5 0.073 80
1992 17,080 0.4 0.087 81
1991 18,499 0.3 0.092 83
<CAPTION>
Corporate
Non-Cash Admin-
OTHER COSTS Costs istration Exploration
($/oz.) ---------------------------------------------------
<C> <C> <C> <C>
1993 $51 $21 $ 9
1992 $55 $25 $15
1991 $64 $26 $26
<CAPTION>
Realized
--------------------
<C> <C>
GOLD PRICES 1993 $359
($/oz.) 1992 $348
1991 $376
<PAGE>
<CAPTION>
RESERVES<4>
COSTS (Homestake Share)
================== ============================
Ore
Cash Total Tons Grade Ounces
Year ($/oz.)<2> ($/oz.)<3> (mil- (ozs./ (mil-
lions) ton) lions)
----- ------------------ ----------------------------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES
Homestake 1993 $268 $288 20.4 0.203 4.1
1992 $316 $337 27.0 0.214 5.8
1991 $377 $400 29.3 0.202 5.9
McLaughlin 1993 $196 $303 22.0 0.083 1.8
1992 $204 $326 14.3 0.105 1.5
1991 $223 $343 15.6 0.113 1.8
Round 1993 $230 $293 75.6 0.024 1.8
Mountain<6> 1992 $233 $283 69.1 0.025 1.7
1991 $258 $314 72.6 0.026 1.9
Santa Fe 1993 $269 $358 - - -
1992 $255 $348 1.7 0.032 0.1
1991 $316 $381 3.8 0.034 0.1
Marigold<7> 1993 $207 $302 5.3 0.034 0.2
1992 $231 $350 5.5 0.036 0.2
1991 $292 $387 3.2 0.056 0.2
Mineral
Hill 1993 $285 $294 - - -
1992 $280 $369 0.4 0.260 0.1
1991 $261 $381 0.4 0.268 0.1
Pinson<7> 1993 $267 $308 1.3 0.068 0.1
1992 $285 $333 1.3 0.064 0.1
1991 $253 $287 1.6 0.063 0.1
Dee<7> 1993 $393 $535 1.7 0.044 0.1
1992 $362 $404 2.3 0.049 0.1
1991 $332 $389 2.9 0.040 0.1
20<PAGE>
<CAPTION>
MINE PRODUCTION
========================= =============================================
Tons
Owner- Milled
ship Production (mil- Grade Recovery
(%)<1> Year (ozs.)<1> lions)<1> (ozs./ton) (%)
------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CANADA
Williams 50 1993 246,126 1.3 0.202 95
1992 248,460 1.3 0.205 95
1991 259,352 1.2 0.227 95
David Bell 50 1993 107,594 0.3 0.416 95
1992 105,256 0.3 0.426 95
1991 141,564 0.3 0.570 96
Quarter
Claim 25 1993 11,094 0.1 0.255 96
1992 16,204 0.1 0.356 97
1991 18,585 0.1 0.447 97
Nickel
Plate 100 1993 73,908 1.4 0.061 85
1992 84,673 1.4 0.073 85
1991 91,396 1.3 0.085 85
Snip<8> 40 1993 59,790 0.1 0.865 92
22 1992 30,558 0.1 0.923 91
20 1991 21,335 0.1 0.887 91
Golden
Bear 100 1993 28,440 0.1 0.430 90
1992 58,224 0.1 0.450 89
50 1991 28,350 0.1 0.499 89
Eskay
Creek 100 1993
Gold
Silver
AUSTRALIA
Kalgoorlie 50 1993 332,636 5.3 0.074 86
1992 349,773 5.1 0.079 86
1991 285,560 4.1 0.082 88
CHILE
El Hueso<6>100 1993 71,683 3.0 0.040 82
1992 70,406 2.7 0.039 82
1991 65,356 3.5 0.036 74
TOTAL PRODUCTION<5>
1993 1,917,853 - - -
1992 1,911,593 - - -
1991 1,801,295 - - -
MINORITY INTEREST
SHARE<5> 1993 88,663 - - -
1992 66,196 - - -
1991 59,241 - - -
HOMESTAKE SHARE
OF GOLD<5> 1993 1,829,190 - - -
1992 1,845,397 - - -
1991 1,742,054 - - -
<PAGE>
<CAPTION>
RESERVES<4>
COSTS (Homestake Share)
================== ===========================
Ore
Cash Total Tons Grade Ounces
Year ($/oz.)<2> ($/oz.)<3> (mil- (ozs./ (mil-
lions) tons) lions)
----- ------------------ ---------------------------
<S> <C> <C> <C> <C> <C> <C>
CANADA
Williams 1993 $199 $247 17.5 0.170 3.0
1992 $186 $238 17.6 0.174 3.1
1991 $182 $224 17.6 0.174 3.1
David Bell 1993 $154 $206 3.2 0.316 1.0
1992 $156 $203 3.5 0.321 1.1
1991 $113 $166 3.8 0.328 1.2
Quarter
Claim 1993 $144 $144 0.3 0.256 0.1
1992 $140 $140 0.4 0.254 0.1
1991 $105 $105 0.5 0.308 0.2
Nickel
Plate 1993 $312 $336 4.8 0.077 0.4
1992 $295 $365 5.9 0.076 0.4
1991 $332 $351 2.1 0.090 0.2
Snip<8> 1993 $152 $235 0.2 0.788 0.1
1992 $145 $200 0.2 0.831 0.1
1991 $178 $243 0.2 0.830 0.1
Golden Bear 1993 $229 $229 - - -
1992 $293 $302 0.2 0.515 0.1
1991 $313 $369 0.5 0.618 0.3
Eskay Creek 1993
Gold 0.6 1.910 1.2
Silver 85.500 55.1
AUSTRALIA
Kalgoorlie 1993 $230 $270 59.9 0.074 4.4
1992 $255 $298 31.6 0.081 2.6
1991 $306 $350 34.9 0.085 3.0
CHILE
El Hueso<6> 1993 $299 $329 3.2 0.039 0.1
1992 $285 $318 3.1 0.039 0.1
1991 $322 $422 4.2 0.036 0.1
TOTAL PRODUCTION<5>
1993 $231 $282
1992 $248 $303
1991 $269 $333
MINORITY INTEREST
SHARE<5> 1993 - -
1992 - -
1991 - -
HOMESTAKE SHARE
OF GOLD<5>
1993 $231 $282 216.0 N/M 18.4
1992 $248 $303 185.3 N/M 17.3
1991 $269 $333 195.0 N/M 18.5
<FN>
N/M = Not meaningful.
<1> Homestake proportionate interest including minority interest.
<2> Cash operating costs exclude depreciation, amortization and reclamation
accruals.
<3> Total production costs exclude corporate, administrative, exploration and
general expenses.
<4> Proven and probable.
<5> Includes production from closed operations not listed.
<6> Tons milled equates to tons processed; recovery and grade relate to
reusable pad data at Round Mountain and to high grade at El Hueso.
<7> Tons milled includes tons leached; grade and recovery relate to mill
data.
<8> Production and cash costs relate to gold contained in concentrates and
recovered from dore.
</TABLE>
21<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
(Unless specifically stated otherwise, all comments, production statistics,
etc. relate to amounts in the consolidated financial statements, including
the Company's interest in mining partnerships accounted for using the
equity method, without reduction for minority interest.)
Operating results of the Company improved significantly during 1993
primarily as a result of an increase in gold prices and sales volumes and
decreases in both operating and non-operating expenses. The Company had
net income of $52.5 million or $0.38 per share in 1993 compared to net
losses of $175.8 million or $1.31 per share in 1992 and $261.9 million or
$1.98 per share in 1991. The 1993 results include a pretax write-down of
oil and gas assets of $16 million compared with pretax write-downs of
mining properties and investments of $130.3 million and $172.4 million in
1992 and 1991, respectively. The principal components of these write-downs
are described below. The current year results also include restructuring
and business combination expenses of $8.2 million compared to restructuring
and business combination expenses of $48.4 million in 1992. See note 5 to
the consolidated financial statements for details of restructuring and
business combination expenses. The 1991 results include restructuring
expenses of $13.6 million, a charge of $28.8 million for the cumulative
effect of (see Appendix 1: Description of Bar Chart A "Gold Production") a
change in accounting for post-retirement benefits and a $25.4 million loss
from the discontinued non-gold operations of Homestake Canada Inc. (HCI,
formerly International Corona Corporation).
Following a sharp drop in oil prices at the end of 1993, the Company
recorded a write-down of $16 million in the carrying value of the oil and
gas reserves associated with the sulphur deposit at Main Pass 299. The
Company also conducted its annual mine-by-mine evaluation of the carrying
values of its other mining properties and investments during 1993 using an
assumed gold price of $360 per ounce and determined that no write-downs
were required.
In conjunction with the 1992 business combination with HCI, the Company
reviewed HCI's interest in the Eskay Creek gold project and, based on the
Company's assessment of the recoverability of its investment in the Eskay
Creek project, recorded write-downs in 1992 and 1991 totaling $176 million.
A write-down of $106 million was recorded in 1991 to reflect the effect of
discounting the project's estimated future cash flows and estimated gold
mineralization that the Company believed would qualify as proven and
probable reserves, based on then available geological information. An
additional write-down of $70 million was recorded in 1992 primarily to
reflect Homestake's estimates at that time of capital costs and future gold
prices.
The Company's annual evaluations of its mining properties and
investments also resulted in additional write-downs in 1992 and 1991 of
$60.3 million and $66.4 million, respectively. See note 4 to the
consolidated financial statements for a summary of these write-downs.
In December 1993, Prime acquired effectively all of the stock of Stikine
in a share exchange and Homestake now owns 54.2% of Prime. Prior to this
acquisition Homestake owned 54.3% of Prime and 54.1% of Stikine, each of
which had a 50% ownership in the Eskay Creek project. The combination of
Prime and Stikine simplifies the ownership and operation of the Eskay Creek
project.
During 1991, HCI completed a corporate restructuring whereby $231.1
million of non-gold assets were transferred to a new public company, Dundee
22<PAGE>
Bancorp Inc.(Dundee). In exchange, HCI received $87.3 million which was
applied to reduce debt, 5.2 million Dundee preference shares valued at $4.5
million and $153.8 million in notes receivable. The notes subsequently
were cancelled along with an equivalent dollar value of HCI common shares
as part of HCI's restructuring. Costs of $13.6 million associated with
this restructuring were expensed in 1991.
GOLD OPERATIONS: The results of the Company's operations are affected
significantly by the market price of gold. Gold prices fluctuate and are
influenced by numerous factors beyond the Company's control, including
expectations with respect to the rate of inflation, the relative strength
of the U.S. dollar and of certain other currencies, interest rates, global
or regional political or economic crises and sales by holders and producers
of gold in response to such factors. The supply of gold consists of a
combination of new mine production and existing stocks of bullion and
fabricated gold held by governments, public and private financial
institutions and individuals. The Company's current policy is to sell its
production at current prices and not enter into arrangements which would
establish a price for the sale of its future gold production.
A significant portion of the Company's gold operations are transacted in
Australian and Canadian currencies. Fluctuations in these currencies'
exchange rates relative to the U.S. dollar affect the Company's results.
In order to minimize the effects of these fluctuations, in 1992 the
Company instituted a foreign currency protection program. Under the
program the Company enters into foreign currency option contracts which
establish minimum and maximum exchange rate ranges within which the U.S.
dollar may be exchanged for these currencies. See note 21 to the
consolidated financial statements for additional information regarding this
program.
Gold revenues of $688.1 million in 1993 compare with gold revenues of
$639.3 million and $628.3 million in 1992 and 1991, respectively. The
current year's revenues reflect the sale of more ounces of gold and higher
gold prices compared with 1992. Revenues in 1991 reflect the sale of fewer
ounces of gold and higher realized prices. Total gold sales volumes in
1993 of 1,983,300 ounces at an average realized price of $359 per ounce
compare with 1,945,500 ounces at an average price of $348 in 1992 and
1,759,200 ounces at an average price of $376 in 1991.
(See Appendix 1: Description of Bar Chart B "Gold Revenues".)
Total gold production of 1,917,900 ounces in 1993 compares to 1,911,600
ounces in 1992 and 1,801,300 ounces in 1991. The slight increase in total
ounces produced in 1993 compared to 1992 primarily reflects a 51,000 ounce
increase in production at the Homestake mine and the inclusion of 40% (1992
- -22%) of the Snip mine's 1993 production following the consolidation of
Prime effective December 31, 1992. These increases were offset partially
by a decrease in production from the Golden Bear mine in Canada as a result
of the sale of the Company's interest in North American Metals Corp. (NAM)
in July 1993. The excess of ounces sold over ounces produced in 1993
resulted in a decline in finished goods gold inventory, primarily in the
United States. The Company recorded a pretax profit of approximately $7
million on the sale of these ounces due to their low carrying value, which
was $5.2 million less than their replacement cost based on 1993 average
production costs. See note 9 to the consolidated financial statements for
details of finished goods gold inventory.
23<PAGE>
The Homestake mine benefited from higher ore grades and a slight
increase in tons milled, resulting in production of 447,600 ounces in 1993
compared to 396,600 ounces in 1992. Effective December 31, 1993 following
completion of a revised mining plan and reevaluation of ore reserves,
approximately 25% of the Homestake mine's underground ounces previously
categorized as mineable reserves were reclassified to a geological
resource. No reduction to the Homestake mine's carrying value resulted from
this reclassification.
During 1993, production at the McLaughlin mine in California increased
to 305,300 ounces from 291,100 ounces in 1992 due to improved recoveries
and an increase in tons milled, partially offset by a lower grade of ore
milled. Effective December 31, 1993 McLaughlin mine ore reserves were
adjusted to include 379,000 ounces of gold contained in previously excluded
low-grade stockpiles following favorable processing results. As the
McLaughlin mine approaches the end of its economic life, future production
levels are expected to decline.
Combined production of 364,800 ounces at the Williams, David Bell and
Quarter Claim mines located in the Hemlo mining camp in Canada in 1993
compares to 369,900 ounces in 1992. Ore grades at these operations have
been declining slightly as production from the mines more closely
approximates the average remaining life-of-mine ore reserve grades. To
date this decline has not resulted in any significant increase in cash cost
per ounce. However, as grades are expected to decline further, cash cost
per ounce can be expected to increase. At the Williams mine, approximately
90% of the reserve tons milled during 1993 were replaced through
exploration and definition drilling.
Production of 332,600 ounces at the Kalgoorlie operations in Australia
in 1993 compares to 349,800 ounces in 1992, and reflects slightly higher
tons milled offset by slightly lower ore grades. Revision of the Super Pit
ore resource and a review of Mt Charlotte reserves expanded proven and
probable reserves by 70% during 1993. The Company's share of this increase
is approximately two million ounces.
Production of 93,700 ounces at the Round Mountain mine in Nevada during
1993 is relatively unchanged from 1992 production of 92,600 ounces and
reflects higher tonnage at a lower grade. The increase in tonnage and
lower grade are due to the completion in late 1992 of the dedicated leach
pad which processes the lower grade uncrushed run-of-mine ore. As a result
of the completion of the dedicated pad, fewer tons were placed on the
reusable leach pad during 1993. The longer leach times on both the
reusable and dedicated pads are resulting in higher recoveries.
The Nickel Plate mine in Canada produced 73,900 ounces in 1993 compared
to 84,700 ounces in 1992 as a result of milling lower grade ore stockpiles.
During 1993 open-pit mining activities concentrated on accessing more ore
through a prestripping campaign which was completed in September 1993.
Active mining at the Santa Fe mine in Nevada ceased in November 1993 as
ore reserves were depleted.
The largest contributors to the increase in ounces produced in 1992 over
1991 were the Homestake, Kalgoorlie and McLaughlin mines with increases of
77,500 ounces, 64,200 ounces and 28,400 ounces, respectively. The Homestake
mine's 1992 increase resulted from the temporary closing of sections of the
mine in 1991 to conduct and implement the results of a production and
safety review program. The 1992 increase in ounces produced at the
Kalgoorlie operations was due to an increase in tons milled while the
increase at the McLaughlin mine resulted from higher ore grades and the
addition of a flotation circuit. Partially offsetting these increases were
declines in production at the Williams, David Bell and Quarter Claim mines
due to lower ore grades as production from these operations more closely
approximates the average remaining life-of-mine ore reserve grades.
In 1993, the Company's cash operating costs decreased to $231 per ounce
compared to $248 in 1992 and $269 in 1991 as a result of continued emphasis
in cost-reduction programs. At the Homestake mine, improved ore grades and
cost-cutting programs contributed to a 15% reduction or $48 in cash costs
24<PAGE>
per ounce. Higher autoclave availability and improved recoveries decreased
cash costs per ounce by $8 at the McLaughlin mine. At the Kalgoorlie
operations cash costs per ounce decreased by $25, primarily as a result of
favorable foreign exchange rates. A moderate decline was achieved on an
Australian currency basis.
(See Appendix 1: Description of Bar Chart C "Cash Cost per Ounce".)
The Company's non-cash costs per ounce were $51, $55 and $64 in 1993,
1992 and 1991, respectively. The decline in non-cash costs per ounce
primarily reflects lower depreciation charges as a result of the write-
downs of mining properties in 1992 and 1991.
In early 1994 following completion of a feasibility study, the Company
announced it was proceeding with the development of the Eskay Creek
project. Preproduction costs of approximately $60 million, including
working capital requirements, will be incurred in building a 330 ton-per-
day underground mine. A Mine Development Certificate could be granted
early in 1994, allowing commercial production to begin by early 1995. The
ore from this mine will be sold directly to third-party smelters. Total
proven and probable ore reserves at Eskay Creek contain 2.3 million ounces
of gold and 102 million ounces of silver. The Company has a 54.2% economic
interest in these reserves.
SULPHUR PROJECT: Homestake has a 16.7% interest in the Main Pass 299
sulphur project in the Gulf of Mexico. At December 31, 1993 the Company's
share of proved reserves at Main Pass 299 was 11 million long tons of
sulphur underlying remaining oil reserves of 3.5 million barrels. In 1993,
Homestake invested $1.8 million in the project compared to $21 million and
$82.7 million in 1992 and 1991, respectively. Oil and gas operations
commenced in late 1991 and sulphur start-up operations began in the second
quarter of 1992. Full sulphur production levels of 5,500 tons per day were
reached in December of 1993. All gas production is consumed internally in
heating water for extraction of sulphur.
Oil revenues from Main Pass 299 were $14.2 million in 1993 compared to
$22.1 million in 1992 and $1.4 million in 1991. Sulphur sales added $2
million to 1993 project revenues. Oil production peaked in mid-1992 and is
expected to continue to decline over the remaining approximate six-year
reserve life.
As a result of lower oil production and lower prices for both oil and
sulphur, the Company recorded an operating loss of $9.9 million during 1993
compared to operating income of $4 million in 1992. In addition, at
December 31, 1993 the Company recorded a write-down of $16 million based on
a decline in the market price of oil.
OTHER REVENUES: In July 1993, the Company sold its 83% interest in NAM,
which owns and operates the Golden Bear mine in northwestern British
Columbia. As a result of this sale, the Company recognized a $0.5 million
pretax gain and a $12.9 million income tax benefit. In the fourth quarter
of 1993, the Company sold its 50% interest in the Mineral Hill mine in
Montana and recorded a gain of approximately $3.6 million. Interest and
dividend income declined to $4.8 million in 1993 compared to $9.9 million
in 1992 and $25.3 million in 1991 primarily due to lower cash and short-
term investment balances and a decline in interest rates over the three-
year period.
DEPRECIATION, DEPLETION AND AMORTIZATION: Depreciation, depletion and
amortization declined to $103.4 million in 1993 compared to $117.5 million
in 1992 and $117 million in 1991 primarily due to write-downs of mining
properties recorded in prior years.
25<PAGE>
ADMINISTRATIVE AND GENERAL: Administrative and general expenses were $40.6
million in 1993 compared to $48.5 million and $47.4 million in 1992 and
1991, respectively. The decline in administrative and general expenses
primarily is due to the 1992 (see Appendix 1: Description of Bar Chart D
"Administrative and General Costs") restructuring following the business
combination with HCI, partially offset by one-time charges associated with
restructuring the Company's banking arrangements, litigation expenses and
other non-recurring items.
EXPLORATION: Exploration expense in 1993 decreased to $17.5 million from
$27.8 million and $47.4 million in 1992 and 1991, respectively, reflecting
the Company's approach of concentrating on fewer, higher quality projects.
Exploration expense is expected to increase slightly in 1994. The Company
anticipates spending $4 million in 1994 for delineation drilling on the
Ruby Hill property near Eureka, Nevada.
INTEREST EXPENSE: Interest expense was $9.1 million in 1993 compared to
$13.4 million in 1992 and $11.9 million in 1991. Capitalization of
interest costs related to the development of certain assets amounted to
$3.5 million and $14.9 million in 1992 and 1991, respectively. The decline
in interest expense in 1993 from 1992 primarily results from the repayment
of $37 million and $50 million of debt in August and December 1992,
respectively. The average rate of interest on the Company's long-term debt
was 5.1% at December 31, 1993 compared with 4.5% and 7.6% at December 31,
1992 and 1991, respectively.
INCOME TAXES: In 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". In
adopting SFAS 109, the Company provided a full valuation reserve on a
significant portion of its deferred tax assets. The effect on net income
of adoption of SFAS 109 was not material and did not result in the
recording of a cumulative effect for adopting this accounting principle.
LIQUIDITY AND CAPITAL RESOURCES
Homestake's cash and equivalents and short-term investments increased by
$63.6 million to $134.7 million in 1993. Homestake's working capital at
the end of 1993 was $133.9 million compared to $23.5 million at the end of
1992. The increases in cash and equivalents and working capital during
1993 reflect the strong cash flows generated from operations and the
repayment of debt. Cash provided by operations in 1993 amounted to $169.8
million compared to $77.4 million in 1992.
During 1992, the Company sold $115.3 million of short-term investments
compared to $102.4 million in 1991. Funds raised from the sale of the
short-term investments in these years were used for the repayment of debt
and for additions to property, plant and equipment.
Additions to property, plant and equipment were $57.8 million in 1993
compared to $63.5 million and $166.5 million in 1992 and 1991,
respectively. Additions in 1993 included $18.8 million primarily for
deferred stripping at the Nickel Plate mine and $11.8 million for the open-
pit expansion at the Homestake mine. Additions in 1992 included $13.7
million at the Kalgoorlie operations and additions in 1991 included $25.8
million at the Kalgoorlie operations and $12.5 million at the Homestake
mine. The remaining expenditures during these years primarily were for
replacement capital to maintain existing production capacity and for the
Main Pass sulphur project expenditures discussed above.
26<PAGE>
In addition to replacement capital at existing operations, during 1994
capital expenditures of $12.5 million are planned at the Kalgoorlie
operations for mill expansions and approximately $37 million of capital
expenditures are planned for development at the Eskay Creek project.
During 1993, primarily as a result of the exercise of stock options, the
Company issued 722,000 shares for proceeds of $11.6 million. Prime sold
the 395,000 shares of Homestake stock it owned for net proceeds of $6.4
million. In July 1993, the Company redeemed at par the 419,000 HCI Series
1 second preference shares then outstanding.
Through a series of transactions from 1989 to 1992, the Company acquired
54.3% of Prime's and 54.1% of Stikine's common shares. See notes 2 and 19
to the consolidated financial statements.
In 1991, HGAL sold additional common stock. The total proceeds of $63.5
million ($56.3 million of which was invested by Homestake) were used to
repay HGAL's bank debt and provide funds for capital projects.
On June 23, 1993 the Company sold $150 million of 5.5% convertible
subordinated notes maturing June 23, 2000. Interest on the notes is
payable semi-annually beginning December 23, 1993. The notes are
convertible into the Company's common shares at a rate of $23.06 per common
share and are redeemable by the Company in whole at any time on or after
June 23, 1996. Proceeds from the notes were used to retire existing gold
loans and other long-term debt.
Current liabilities of $104.4 million at December 31, 1993 are $51.5
million lower than at December 31, 1992 primarily reflecting repayment of
gold loans and other long-term debt during the year. The Company has no
significant required debt repayments until the convertible notes mature in
the year 2000.
The Company has planned $16.1 million of reclamation-related
expenditures during 1994 at its discontinued uranium facility at Grants,
New Mexico. In accordance with the Energy Policy Act of 1992, the United
States Department of Energy is responsible for funding 51% of all past and
future reclamation expenditures at this facility. The total cost for
reclamation at Grants is estimated to be $59.2 million of which $25.9
million had been incurred to December 31, 1993. The estimated cost of $33.3
million to complete reclamation activities at the Grants facility, after
considering government funding, is fully provided in the financial
statements at December 31, 1993. See note 20 to the consolidated financial
statements for details of the Grants reclamation program and related
government funding.
In 1993, the Company entered into a new $150 million revolving credit
facility. This facility provides for borrowings denominated in U.S.
dollars, Canadian dollars, gold loans or combination of these. Among other
things, the agreement includes a minimum consolidated net worth requirement
and a minimum fixed charge coverage ratio. No amounts have been borrowed
under this facility.
In January 1993, the Company reduced its regular quarterly dividends
from $0.05 to $0.025 per share. Total common share dividends paid by
Homestake were $13.7 million in 1993 compared to $23.6 million in 1992 and
$19.9 million in 1991.
On February 23, 1994 Prime entered into an underwriting agreement to
issue five million special warrants which are exchangeable for five million
common shares of Prime. Net proceeds from this issue of approximately $33
million will be used to fund a portion of the Eskay Creek project
development costs. When completed this issue will reduce the Company's
interest in Prime from 54.2% to 50.6%.
The Company believes that the combination of cash, investments,
available lines of credit and future cash flows from operations will be
sufficient to meet normal operating requirements, debt repayments and
anticipated dividends.
For discussion of certain environmental matters, see notes 6 and 20 to
the consolidated financial statements.
27<PAGE>
CONSOLIDATED BALANCE SHEETS
Homestake Mining Company and Subsidiaries
December 31, 1993 and 1992
(In thousands, except per share amount)
<TABLE>
<CAPTION>
1993 1992
--------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $134,719 $54,208
Short-term investments 16,856
Receivables 28,649 22,157
Inventories 66,539 78,046
Other 8,303 8,085
---------- ----------
Total current assets 238,210 179,352
Property, Plant and Equipment:
Cost 1,540,218 1,531,840
Accumulated depreciation, depletion and
amortization (709,990) (620,252)
---------- ----------
Net property, plant and equipment 830,228 911,588
Investments and Other Assets:
Non-current investments 20,632 25,112
Other assets 32,180 29,117
---------- ----------
Total investments and other assets 52,812 54,229
---------- ----------
Total Assets $1,121,250 $1,145,169
========== ==========
28<PAGE>
<CAPTION>
1993 1992
--------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 33,002 $ 38,434
Accrued liabilities 57,747 65,603
Income and other taxes payable 9,816 10,274
Current portion of long-term debt and
gold loans 3,785 41,583
--------- ----------
Total current liabilities 104,350 155,894
Long-Term Liabilities:
Long-term debt 189,191 65,209
Gold loans 139,965
Other long-term obligations 93,674 88,002
--------- ----------
Total long-term liabilities 282,865 293,176
Deferred Income Taxes 164,030 162,587
Minority Interest in Consolidated Subsidiaries:
Redeemable preferred stock 15,941
Other 54,761 52,133
--------- ----------
Total minority interest 54,761 68,074
Shareholders' Equity:
Capital stock, $1 par value per share:
Preferred - 10,000 shares authorized;
no shares outstanding
Common - 250,000 shares authorized;
shares outstanding:
1993 - 137,494; 1992 - 136,772 137,494 136,772
Additional paid-in capital 334,737 322,688
Retained earnings 52,495 14,592
Accumulated currency translation adjustments (5,620) 1,133
Other (3,862) (9,747)
---------- ----------
Total shareholders' equity 515,244 465,438
---------- ----------
Total Liabilities and Shareholders' Equity $1,121,250 $1,145,169
========== ==========
</TABLE>
Commitments and Contingencies - see notes 20 and 21.
See notes to consolidated financial statements.
29<PAGE>
STATEMENTS OF CONSOLIDATED OPERATIONS
Homestake Mining Company and Subsidiaries
For the years ended December 31, 1993, 1992 and 1991
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1993 1992 1991
--------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Product sales $703,505 $659,646 $625,458
Interest and dividends 4,832 9,892 25,262
Equity earnings 795 2,474 4,242
Other income 13,096 11,508 16,638
-------- -------- --------
722,228 683,520 671,600
Costs and Expenses:
Production costs 454,623 470,374 468,107
Depreciation, depletion and
amortization 103,377 117,483 116,993
Administrative and general expenses 40,553 48,514 47,405
Exploration expense 17,457 27,798 47,440
Interest expense 9,147 13,420 11,923
Other expenses 4,492 5,694 413
Write-downs of mining properties
and investments 16,032 130,290 172,357
Restructuring and business
combination expenses 8,151 48,442 13,630
-------- --------- ---------
653,832 862,015 878,268
Income (Loss) from Continuing Operations
Before Taxes and Minority Interest 68,396 (178,495) (206,668)
Income and Mining Taxes (12,775) 2,889 (5,582)
Minority Interest (3,127) (230) 4,494
-------- --------- ---------
Income (Loss) from Continuing
Operations 52,494 (175,836) (207,756)
Loss from Discontinued Operations (25,359)
-------- --------- ---------
Income (Loss) Before Cumulative Effect 52,494 (175,836) (233,115)
Cumulative Effect of Change in
Accounting for Post-retirement Benefits (28,800)
-------- --------- ---------
Net Income (Loss) $52,494 $(175,836) $(261,915)
======== ========= =========
Per Share Amounts:
Income (loss) from continuing
operations $ 0.38 $ (1.31) $ (1.57)
Loss from discontinued operations (0.19)
Cumulative effect of change in
accounting for post-retirement
benefits (0.22)
-------- -------- --------
Net Income (Loss) Per Share $ 0.38 $ (1.31) $ (1.98)
======== ======== ========
Average Shares Used in the
Computation 137,046 135,221 132,110
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
30<PAGE>
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
Homestake Mining Company and Subsidiaries
For the years ended December 31, 1993, 1992 and 1991
(In thousands)
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings
--------- ---------- ---------
<S> <C> <C> <C>
Balances,
December 31, 1990 $131,951 $422,618 $516,419
Net loss (261,915)
Preference share dividends (4,188)
Common share dividends paid by:
Homestake (19,857)
Homestake Canada Inc. (HCI) (14,573)
Exercise of stock options 276 3,902
Stock issued:
Employee savings plan 75 1,197
Other 23 801
Restructuring of HCI (143,223)
Conversion of HCI
preference shares 40,334
Currency translation
adjustments
Change in unrealized loss
on mining securities
Other
-------- -------- ---------
Balances,
December 31, 1991 132,325 325,629 215,886
Net loss (175,836)
Preference share dividends (1,834)
Common share dividends paid by
Homestake (23,624)
Redemption of HCI preference
shares for common stock 4,271 (4,271)
Exercise of stock options 16 86
Stock issued to employee
savings plan 45 560
Currency translation
adjustments
Other 115 684
------- ------- --------
Balances,
December 31, 1992 136,772 322,688 14,592
Net income 52,494
Preference share dividends (885)
Common share dividends (13,706)
Sale of Homestake stock held
by Prime 1,155
Exercise of stock options 686 10,397
Stock issued to employee
savings plan 36 492
Currency translation
adjustments
Other 5
-------- -------- --------
Balances,
December 31, 1993 $137,494 $334,737 $52,495
======== ======== ========
<PAGE>
<CAPTION>
Accumulated
Currency
Translation Treasury
Adjustments Stock
----------- ----------
<S> <C> <C>
Balances,
December 31, 1990 $5,405 $(551)
Net loss
Preference share dividends
Common share dividends paid by:
Homestake
Homestake Canada Inc. (HCI)
Exercise of stock options
Stock issued:
Employee savings plan 156
Other 395
Restructuring of HCI
Conversion of HCI
preference shares
Currency translation
adjustments 2,565
Change in unrealized loss
on mining securities
Other
-------- --------
Balances,
December 31, 1991 7,970 -
Net loss
Preference share dividends
Common share dividends paid by
Homestake
Redemption of HCI preference
shares for common stock
Exercise of stock options
Stock issued to employee
savings plan
Currency translation
adjustments (6,837)
Other
------- -------
Balances,
December 31, 1992 1,133 -
Net income
Preference share dividends
Common share dividends
Sale of Homestake stock held
by Prime
Exercise of stock options
Stock issued to employee
savings plan
Currency translation
adjustments (6,753)
Other
-------- ---------
Balances,
December 31, 1993 $ (5,620) -
======== =========
<PAGE>
<CAPTION>
Other Total
-------- ---------
<S> <C> <C>
Balances,
December 31, 1990 $(17,148) $1,058,694
Net loss (261,915)
Preference share dividends (4,188)
Common share dividends paid by:
Homestake (19,857)
Homestake Canada Inc. (HCI) (14,573)
Exercise of stock options 4,178
Stock issued:
Employee savings plan 1,428
Other 1,219
Restructuring of HCI (143,223)
Conversion of HCI
preference shares 40,334
Currency translation
adjustments 2,565
Change in unrealized loss
on mining securities 10,654 10,654
Other 326 326
-------- --------
Balances,
December 31, 1991 (6,168) 675,642
Net loss (175,836)
Preference share dividends (1,834)
Common share dividends paid by
Homestake (23,624)
Redemption of HCI preference
shares for common stock -
Exercise of stock options 102
Stock issued to employee
savings plan 605
Currency translation
adjustments (6,837)
Other (3,579) (2,780)
-------- --------
Balances,
December 31, 1992 (9,747) 465,438
Net income 52,494
Preference share dividends (885)
Common share dividends (13,706)
Sale of Homestake stock held
by Prime 4,258 5,413
Exercise of stock options 11,083
Stock issued to employee
savings plan 528
Currency translation
adjustments (6,753)
Other 1,627 1,632
-------- ---------
Balances,
December 31, 1993 $(3,862) $515,244
======== =========
</TABLE>
See notes to consolidated financial statements.
31<PAGE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
Homestake Mining Company and Subsidiaries
For the years ended December 31, 1993, 1992 and 1991
(In thousands)
<TABLE>
<CAPTION>
1993 1992 1991
------- -------- ---------
<S> <C> <C> <C>
Cash Flows From Operations:
Income (loss) from continuing operations $52,494 $(175,836) $(207,756)
Reconciliation to net cash provided by
continuing operations:
Depreciation, depletion and
amortization 103,377 117,483 116,993
Write-downs of mining properties and
investments 16,032 130,290 172,357
Loss (gain) on disposal of assets (7,974) (12,456) 179
Deferred income taxes 2,583 (11,121) (2,914)
Other non-cash items - net 11,849 9,525 11,665
Effect of changes in operating working
capital items:
Receivables (18,993) 12,096 15,670
Inventories 10,357 12,933 (17,574)
Accounts payable (4,009) (10,424) 9,028
Accrued liabilities and taxes payable 4,877 8,408 (8,298)
Other (765) (3,521) 3,162
-------- -------- --------
Net cash provided by continuing
operations 169,828 77,377 92,512
Net cash used by discontinued operations (1,903)
-------- -------- --------
Net cash provided by operations 169,828 77,377 90,609
-------- -------- --------
Investment Activities:
Decrease in short-term investments 16,739 115,334 102,385
Decrease (increase) in other investments 1,060 849 (29,274)
Additions to property, plant and
equipment (57,825) (63,453) (166,458)
Proceeds from sale of assets 9,649 11,858 610
Cash from consolidation of Prime and
Stikine 6,411
Investing activities of discontinued
operations and other 5,831
------- -------- --------
Net cash provided (used) by investment
activities (30,377) 70,999 (86,906)
------- -------- --------
Financing Activities:
Borrowings 146,074 115,239 55,880
Debt repayments (194,037) (215,251) (110,678)
Dividends paid by Homestake (13,706) (23,624) (19,857)
Dividends paid by Homestake
Canada Inc.(HCI) (885) (1,834) (18,761)
Redemption of HCI preferred shares (15,810) (4,727) (4,462)
Common shares issued 11,611 321 1,164
Sale of Homestake stock held by Prime 6,361
Treasury stock issued 200 5,150
Stock issued by subsidiary 7,187
Net cash provided by HCI's 1991
restructuring 2,222
Other 1,452 126 356
-------- ------- -------
Net cash used by financing activities (58,940) (129,550) (81,799)
-------- ------- -------
Net Increase (Decrease) in Cash and
Equivalents 80,511 18,826 (78,096)
Cash and Equivalents, January 1 54,208 35,382 113,478
-------- ------- -------
Cash and Equivalents, December 31 $134,719 $54,208 $35,382
======== ======= =======
</TABLE>
See notes to consolidated financial statements.
32<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Homestake Mining Company and Subsidiaries
(All tabular amounts in thousands)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include Homestake Mining Company
(the Company or Homestake) and its majority-owned subsidiaries and their
undivided interests in joint ventures after elimination of intercompany
amounts. At December 31, 1993 the Company owned 81.5% of Homestake Gold
of Australia Limited (HGAL) and 54.2% of Prime Resources Group Inc.
(Prime) with the remaining interests reflected as minority interest in
the consolidated financial statements. Undivided interests in gold
mining operations (the Round Mountain and Mineral Hill mines in the
United States; HGAL's interests in the gold mining operations in
Kalgoorlie, Western Australia; Homestake Canada Inc.'s interest in the
Williams and David Bell mines in Canada; and Prime's interest in the
Snip mine in Canada) and in the sulphur and oil recovery operations in
the Gulf of Mexico are reported using pro rata consolidation whereby the
Company reports its proportionate share of assets, liabilities, income
and expenses. Investments in gold mining venture partnerships over
which the Company exercises significant influence, principally the Dee,
Pinson and Marigold mines in Nevada, are reported using the equity
method.
CASH AND EQUIVALENTS include all highly-liquid investments with a
maturity of three months or less at the date of purchase. The Company
places its cash and cash equivalents with various financial institutions
located principally in North America and Australia. The Company
believes that no concentration of credit risk exists with respect to
cash and cash equivalents.
INVENTORIES, including gold, ore stockpiles and supplies, are stated at
the lower of cost or net realizable value. The cost of gold produced by
United States operations is determined principally by the last-in,
first-out method (LIFO). The cost of other inventories is determined
primarily by averaging methods.
EXPLORATION COSTS, including those incurred through joint ventures, are
expensed as incurred.
PREOPERATING AND DEVELOPMENT COSTS relating to new mines and major
programs at existing mines are capitalized. Ordinary mine development
costs to maintain production are expensed as incurred.
DEPRECIATION, DEPLETION AND AMORTIZATION of mining properties, mine
development costs and major plant facilities is computed principally by
the units-of-production method based on estimated proven and probable
ore reserves. Proven and probable ore reserves reflect estimated
quantities of economically recoverable reserves which can be recovered
in the future from known mineral deposits. Such estimates are based on
current and projected costs and prices. Other equipment and plant
facilities are depreciated by straight-line or accelerated methods
principally over estimated useful lives of three to ten years.
PROPERTY EVALUATION: Recoverability of investments in operating mines
is evaluated annually. Estimated future net cash flows from each mine
are calculated using estimates of proven and probable reserves,
estimated future prices (considering historical and current prices,
price trends and related factors) and operating capital and reclamation
costs on an undiscounted basis. Reductions in the carrying value of
each mine are recorded to the extent the remaining investment exceeds
the estimate of future net cash flows.
Recoverability of the carrying values of non-operating properties is
evaluated annually based upon estimated future net cash flows from each
property determined as described above using estimates of contained
mineralization, which represent estimated mineralization expected to be
classified as proven and probable reserves, based upon geological
delineation to date, upon completion of a feasibility study. In
addition, estimated future net cash flows may be reduced by a discount
factor after considering the uncertainties inherent in developing non-
operating properties for which a feasibility study has not been
completed, the length of time before mining operations may begin, and
the expected complexity of each individual mining plan. The discount
factor is based principally upon the Company's composite United States
borrowing rate as well as other factors affecting the risk of developing
such properties. Reductions in the carrying value of each property are
recorded to the extent that the Company's carrying value in each
property exceeds its estimate of future net cash flows.
33<PAGE>
Undeveloped properties upon which the Company has not performed
sufficient exploration work to determine whether significant
mineralization exists are carried at original acquisition cost.
RECLAMATION COSTS and related accrued liabilities, which are based on
the Company's interpretation of current environmental and regulatory
requirements, are accrued and expensed over the operating life of the
mine, principally by the units-of-production method.
NON-CURRENT INVESTMENTS, which include mining securities, are carried at
the lower of cost or market. Realized gains and losses are included in
determining net income or loss. Unrealized losses are reported as a
reduction in shareholders' equity, except that declines in market value
judged to be other than temporary are recognized in determining net
income or loss.
PRODUCT SALES are recognized when products are delivered.
INCOME TAXES: The Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes," effective as of January 1, 1993. SFAS 109 requires recognition
of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial
statements or tax returns. Changes in deferred tax assets and
liabilities include the impact of any tax rate changes enacted during
the year. Mining taxes represent Canadian taxes levied on mining
operations.
FOREIGN CURRENCY: Substantially all assets and liabilities of foreign
subsidiaries are translated at exchange rates in effect at the end of
each period. Income and expenses are translated at the average exchange
rate for the year. Accumulated currency translation adjustments are
included as a separate component of shareholders' equity. Foreign
currency transaction gains and losses are included in the determination
of net income (loss).
GOLD LOANS are recorded at the currency amount borrowed. Gains or
losses on gold loans that provide an effective hedge of revenues from
future production are recognized in revenue when the related production
is delivered. Gains or losses on conversion of gold loans to currency
loans and on early repayment of gold loans are recognized in revenue
over the original repayment periods of the gold loans.
PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS: Pension costs related
to United States employees are determined using the projected unit
credit actuarial method. Pension plans are funded through annual
contributions. In addition, the Company provides medical and life
insurance benefits for certain retired employees and accrues the cost of
such benefits over the period in which active employees become eligible
for the benefits. The cost of the post-retirement medical and life
insurance benefits are paid at the time the services are provided.
NET INCOME (LOSS) PER SHARE is computed by dividing net income less
preferred stock dividends by the weighted average number of common
shares and common share equivalents outstanding during the year. The
exercise of stock options would not result in a material dilution of
earnings per share.
NOTE 2: ACQUISITIONS
HCI: On July 22, 1992 Homestake acquired all of the common shares and
first preference shares of International Corona Corporation (Corona), a
publicly traded Canadian gold producer. In December 1992, Corona's name
was changed to Homestake Canada Inc. (HCI). Homestake issued 0.35 of a
Homestake common share for each HCI common share, 0.54 of a Homestake
common share and $0.42 cash for each HCI Series A first preference
share and 1.08 Homestake common shares for each HCI Series C first
preference share. Homestake issued a total of 37.2 million Homestake
common shares and paid approximately $0.5 million in cash in acquiring
100% of the common and first preference shares. This business
combination has been accounted for as a pooling of interests.
PRIME AND STIKINE: In December 1993, Prime acquired effectively all of
the stock of Stikine Resources Ltd. (Stikine) through a share exchange.
This transaction was accounted for as a corporate reorganization of
companies under common control. Prime and Stikine each have a 50%
interest in the Eskay Creek project. The Company now owns 54.2% of the
34<PAGE>
common stock of Prime. Prior to this transaction, Homestake's effective
ownership in Prime and Stikine was 54.3% and 54.1%, respectively.
On June 30, 1992 HCI purchased 419,475 Stikine common shares from the
minority shareholders of Stikine in exchange for 419,475 HCI Series 1
second preference shares (Series 1 shares). As a result, HCI increased
its investment in the Eskay Creek project by approximately $24.9
million. Based on Homestake's assessment of the recoverable value of
the indirect investment in the Eskay Creek project, Homestake recorded a
second quarter 1992 write-down of $16 million of this additional
investment (see note 4). As a result of HCI's June 1992 acquisition of
the Stikine common shares, the Company's ownership of Stikine increased
above 50% and therefore, the Company consolidated Stikine in its
financial statements as of that date.
Each Series 1 share was entitled to a quarterly dividend of
approximately $1.10. At December 31, 1992, 419,475 Series 1 shares were
outstanding, including 130,000 shares which were acquired by Prime
during the third quarter of 1992. Minority interest in consolidated
subsidiaries at December 31, 1992 includes $15.9 million representing
the Series 1 shares outstanding, net of shares held by Prime. In July
1993, all of the Series 1 shares were redeemed at par for cash of $54.61
per share, plus unpaid dividends.
In December 1992, HCI acquired two million common shares of Prime for
$3.2 million cash, representing 4.4% of Prime's shares then outstanding.
As a result of this transaction, Homestake owned in excess of 50% of
Prime's common shares and consolidated Prime in its financial statements
effective December 31, 1992.
NOTE 3: SALES OF MINING OPERATIONS
NAM: In July 1993, the Company sold its 83% interest in North American
Metals Corp. (NAM), the company which owns and operates the Golden Bear
mine, for approximately $1 million plus a retained royalty interest.
The Company recorded a $0.5 million pretax gain and a $12.9 million tax
benefit on the disposal.
MINERAL HILL: In November 1993, the Company sold its 50% interest in
the Mineral Hill gold mine in Montana for $4 million in cash and 140,000
common shares of TVX Gold Inc. (TVX). The Company retained a royalty
interest on the exploration lands and received an indemnification from
TVX for all past, present and future reclamation requirements. A gain
of $3.6 million, which is included in other income, was recorded on the
disposal.
NOTE 4: WRITE-DOWNS OF MINING PROPERTIES AND INVESTMENTS
As discussed in note 1, the Company performs annual property evaluations
to assess the recoverability of its mining properties and investments.
In 1993, 1992 and 1991, the Company determined that based upon
estimates of proven and probable reserves, low sales prices and
operating costs at certain locations, it would not fully recover its
investment in certain properties. The following is a summary of the
write-downs recorded as a result of these evaluations:
<TABLE>
<CAPTION>
1993 1992 1991
------------------------------------------------------------------------
<S> <C> <C> <C>
Canada:
Eskay Creek project $70,000 $106,000
Golden Bear mine 7,088 19,936
Other mining securities
and properties 5,374 18,877
United States:
McLaughlin mine 15,422
Mineral Hill mine 10,545
Whitewood Creek project 9,173
Main Pass 299 oil and gas property $16,032
Other properties 9,145
Latin America:
El Hueso mine 16,000
Other mining securities 3,543
Australia:
Kalgoorlie operations 7,402
Fortnum mine 4,142
--------------------------------
$16,032 $130,290 $172,357
================================
</TABLE>
35<PAGE>
The Company owns a 16.7% undivided interest in the Main Pass 299
sulphur project located in the Gulf of Mexico. Oil and gas production
associated with the Main Pass 299 sulphur project commenced in late 1991
and sulphur start-up operations began in the second quarter of 1992.
Full production levels for sulphur were reached in December of 1993. In
the fourth quarter of 1993, the Company recorded a $16 million write-
down of its investment in the oil and gas property at the Main Pass 299
sulphur project due to a decline in oil prices.
Based on Homestake's assessment of the recoverable value of its
investment in the Eskay Creek project, in 1992 and 1991 the Company
recorded a total of $176 million of write-downs of its investments in
Prime and Stikine, the holders of the Eskay Creek project. A write-down
of $106 million was recorded as of December 31, 1991 to reflect the
effect of discounting the project's estimated future cash flows and gold
mineralization that the Company believed would qualify as proven and
probable reserves. An additional write-down of $54 million was recorded
in 1992 at the time of the acquisition of HCI to reflect Homestake's
capital cost estimates and estimates of future gold prices. Also, as
discussed in note 2, on June 30, 1992 HCI increased its investment in
Stikine by approximately $24.9 million and Homestake recorded a second
quarter 1992 write-down of $16 million on this additional investment.
In 1991, the Company also concluded that it would not recover any of
its investment in certain Canadian mining company securities and
recorded a write-down of $18.9 million of such investments.
NOTE 5: RESTRUCTURING AND BUSINESS COMBINATION EXPENSES
In 1993, the Company offered a second early retirement and work force
reduction program at the Homestake mine and recorded a charge primarily
for additional pension and post-retirement medical costs. Also in 1993,
the Company recorded restructuring charges for the reorganization of
HGAL, including the relocation of HGAL's principal office, and for
business combination expenses related to the merger of Prime and Stikine
(see note 2).
Concurrent with the business combination with HCI in 1992, the Company
announced a major corporate restructuring of its North American
operations. The restructuring included the consolidation of many
administrative and exploration activities, the closure of several
existing offices and initiation of an early retirement and work force
reduction program at the Homestake mine.
During 1991, HCI completed a corporate restructuring whereby $231.1
million of non-gold assets were transferred to a new public company,
Dundee Bancorp Inc. (Dundee), in exchange for $87.3 million which was
applied to reduce debt, 5.2 million Dundee preference shares valued at
$4.5 million and $153.8 million in notes receivable, which were
subsequently cancelled along with an equivalent dollar value of HCI
common shares as part of the restructuring. The non-gold assets
transferred, which included oil and gas, base metals and industrial
mineral interests, have been reflected as discontinued operations in the
consolidated statement of operations for 1991. Net cash provided by the
restructuring amounted to $2.2 million. Costs of $13.6 million
associated with the restructuring were expensed during 1991.
A summary of the amounts recorded for restructuring and business
combination expenses is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------------------------------------------------------------------
<S> <C> <C> <C>
Homestake mine work force reduction
costs $5,770 $ 7,000
Business combination transaction costs 528 9,666
Severance, lease terminations and
other restructuring costs 1,853 29,456 $13,630
Financing costs 2,320
----------------------------
$8,151 $48,442 $13,630
============================
</TABLE>
36<PAGE>
NOTE 6: DISCONTINUED OPERATIONS
HCI NON-GOLD OPERATIONS: HCI's non-gold assets and related operations,
which were transferred to Dundee as part of HCI's 1991 restructuring,
have been accounted for as discontinued operations in the consolidated
financial statements (see note 5). Summarized results of HCI's
discontinued non-gold operations for 1991 include revenues of $6.5
million, a pretax operating loss of $26.3 million and a net loss of
$25.4 million.
URANIUM: During 1990, the Company closed its New Mexico uranium
production facilities and discontinued its uranium business. Other
assets (non-current) at December 31, 1993 and 1992 include $13.6 million
and $14.1 million, respectively, of long-term receivables and other
assets related to uranium operations. Accrued reclamation costs include
amounts related to uranium (see notes 15 and 20).
NOTE 7: INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes." The adoption of this standard changes the criteria
for recognition and measurement of deferred tax assets and certain other
requirements of SFAS 96. The standard was adopted on a prospective
basis and amounts presented for prior years have not been restated. The
effect on net income of adoption of SFAS 109 was not material and did
not result in the recording of a cumulative effect for adopting this
principle.
The provision (credit) for income and mining taxes consists of the
following:
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Income taxes:
Federal $(2,465) $ (513) $ (4,296)
State 105 305 (485)
Canadian 1,177 1,936 9,165
Other foreign 1,013 185 156
-------------------------------
(170) 1,913 4,540
Canadian mining taxes 10,287 6,319 12,332
-------------------------------
Total current taxes 10,117 8,232 16,872
-------------------------------
Deferred:
Income taxes:
Federal 3,639 (11,040) (21,592)
State 95 (601) 125
Canadian 2,203 (3,364) 12,827
Other foreign (262)
-------------------------------
5,937 (15,267) (8,640)
Canadian mining taxes (3,279) 4,146 (2,650)
-------------------------------
Total deferred taxes 2,658 (11,121) (11,290)
-------------------------------
Total income and mining taxes
(benefit) $12,775 $ (2,889) $ 5,582
===============================
</TABLE>
The provision for income taxes is based on pretax income (loss) from
continuing operations before minority interest as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 6,222 $ (86,278) $ (60,943)
Canada 41,434 (91,989) (97,517)
Other foreign 20,740 (228) (48,208)
-------------------------------
$68,396 $(178,495) $(206,668)
===============================
</TABLE>
37<PAGE>
Deferred tax liabilities and assets on the balance sheet as of
December 31, 1993 relate to the following:
<TABLE>
<CAPTION>
1993
---------------------------------------------------------------------
<S> <C>
Deferred tax liabilities
Depreciation and other resource property differences:
United States $ 65,194
Canada - Federal 56,289
Canada - Provincial 84,032
Australia 5,373
---------
210,888
Other 22,397
---------
Gross deferred tax liabilities 233,285
---------
Deferred tax assets
Tax loss carry-forwards:
Canada - Federal 17,387
Canada - Provincial 5,655
Australia 5,682
Chile 15,564
---------
44,288
---------
Reclamation costs:
United States 13,630
Other 1,949
---------
15,579
Employee benefit costs 23,699
Lease obligations not currently deductible 2,683
Foreign tax credit carry-forwards 2,442
Alternative minimum tax credit carry-forwards 12,423
Reorganization costs 2,103
Other 18,104
---------
Gross deferred tax assets 121,321
Deferred tax asset valuation allowances (52,066)
---------
Net deferred tax assets 69,255
---------
Net deferred tax liability $164,030
=========
</TABLE>
Deferred tax assets and liabilities in the current period balance
sheet are classified in accordance with SFAS 109, which generally
requires the classification be based on the related asset or liability
creating the deferred tax. Deferred taxes not related to a specific
asset or liability are classified based on the estimated period of
reversal. A valuation allowance of $52.1 million has been recognized to
offset certain related deferred tax assets due to management's
uncertainty of realizing the benefits of these items.
Major items causing the Company's income tax provision (credit) to
differ from the federal statutory rate of 35% in 1993 and 34% in 1992
and 1991 were:
<TABLE>
<CAPTION>
1993 1992 1991
-------------------------------------------------------------------
<S> <C> <C> <C>
Income tax at statutory rate $ 23,938 $(60,689) $(70,267)
Nondeductible write-downs 32,122 52,183
Percentage depletion (14,401) (6,216) (5,511)
Earnings in foreign jurisdictions
taxed at different rates (1,440) (2,433) (731)
State income taxes,
net of federal benefit 130 (245) (238)
Tax relating to reorganizations 4,387 6,596 7,332
Unrealized minimum tax credits 23,844 10,617
Other nondeductible losses 3,757 3,539 16,091
Deferred tax assets not recognized
in prior years (36,706)
Foreign taxes withheld 2,669
Other, net (411) 3,355 (2,959)
--------------------------------
Total income taxes 5,767 (13,354) (4,100)
Canadian mining taxes 7,008 10,465 9,682
--------------------------------
Total income and mining taxes
(benefit) $ 12,775 $ (2,889) $ 5,582
================================
</TABLE>
For income tax purposes, the Company has foreign tax loss and U.S.
foreign tax credit carry-forwards of approximately $60.3 million and
$2.4 million, respectively, which are due to expire at various times
through the year 2000.
NOTE 8: RECEIVABLES
<TABLE>
<CAPTION>
December 31,
1993 1992
-------------------------------------------------------------------
<S> <C> <C>
Trade $ 4,059 $13,497
Income taxes 14,966
Interest and other 9,624 8,660
---------------------
$28,649 $22,157
=====================
</TABLE>
38<PAGE>
NOTE 9: INVENTORIES
<TABLE>
<CAPTION>
December 31,
1993 1992
-------------------------------------------------------------------
<S> <C> <C>
Finished products $ 9,548 $15,837
Ore and in process 22,465 30,598
Supplies 34,526 31,611
---------------------
$66,539 $78,046
=====================
</TABLE>
At December 31, 1993 and 1992, the cost of certain finished gold
inventories in the United States stated on the LIFO cost basis
aggregated $0.4 million and $8.2 million, respectively. Such
inventories would have approximated $1.4 million and $16.4 million,
respectively, if stated at the lower of market or current year average
production costs. In 1993, 44,750 ounces of gold at an average cost of
$175 per ounce were sold from the LIFO inventory, the effect of which
increased pretax income by $5.2 million compared to the cost of such
inventories based on 1993 average production cost.
NOTE 10: PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
December 31,
1993 1992
------------------------------------------------------------------
<S> <C> <C>
Mining properties and development costs $ 694,885 $ 670,899
Plant and equipment 836,947 842,858
Land and royalty interests 3,955 4,028
Construction and mine development in
progress 4,431 14,055
-----------------------
$1,540,218 $1,531,840
=======================
</TABLE>
NOTE 11: NON-CURRENT INVESTMENTS
<TABLE>
<CAPTION>
December 31,
1993 1992
-------------------------------------------------------------------
<S> <C> <C>
Equity investments:
Dee, Pinson and Marigold mining
partnerships $ 8,966 $11,328
Other equity investments 7,023 8,108
Other investments 4,643 5,676
--------------------
$20,632 $25,112
====================
</TABLE>
NOTE 12: ACCRUED LIABILITIES
<TABLE>
<CAPTION>
December 31,
1993 1992
-------------------------------------------------------------------
<S> <C> <C>
Payroll and other compensation $19,053 $28,704
Reclamation 14,041 11,514
Other 24,653 25,385
--------------------
$57,747 $65,603
====================
</TABLE>
NOTE 13: LONG-TERM DEBT AND GOLD LOANS
<TABLE>
<CAPTION>
December 31,
1993 1992
-------------------------------------------------------------------
<S> <C> <C>
Long-term debt:
Convertible subordinated notes (due 2000) $150,000
Pollution control bonds:
Lawrence County, South Dakota (due 2003) 18,000 $18,000
State of California (due 2004) 17,000 17,000
Australian:
Finance lease debt (due 1994-1995) 7,976 11,968
Canadian:
Unsecured revolving term loan 23,999
Prime 12,287
Other 277
---------------------
192,976 83,531
Less current portion 3,785 18,322
---------------------
$189,191 $65,209
=====================
Gold loans $163,226
Less current portion 23,261
--------
$139,965
========
</TABLE>
CONVERTIBLE SUBORDINATED NOTES: In June 1993, the Company sold $150
million principal amount of 5.5% convertible subordinated notes which
mature on June 23, 2000. Interest on the notes, payable semi-annually,
began on December 23, 1993. The notes are convertible into common
shares of the Company at a rate of $23.06 per common share and are
redeemable by the Company in whole at any time on or after June 23,
1996. Proceeds from the notes were used to retire existing gold loans
and other long-term debt. Issuance costs of $3.9 million were
capitalized and are being amortized over the life of the notes.
39<PAGE>
POLLUTION CONTROL BONDS: The Company pays interest monthly on the
pollution control bonds based on variable short-term tax-exempt
obligation rates. The rates at December 31, 1993 and 1992 were 3.1% and
4.1%, respectively. No principal payments are required until
cancellation, redemption or maturity. Bondholders have the right to
tender the bonds for payment at any time on seven days' notice. The
Company has arrangements with underwriters to remarket any tendered
bonds, and with a bank to provide liquidity and credit support to the
Company and to purchase and hold for up to 15 months any tendered bonds
that the underwriters are unable to remarket. The Company has certain
rights with respect to bond redemption and changes in the interest rate
terms.
AUSTRALIAN FINANCE LEASE DEBT: During 1990, HGAL sold to a bank and
leased back a portion of its Fortnum gold mining property in Western
Australia. This transaction has been accounted for in the Company's
consolidated financial statements as a financing transaction.
Capitalized financing cost of $1.5 million are being amortized over the
life of the lease. The lease requires quarterly payments of
approximately $1 million plus interest through September 30, 1995.
Interest is based on the average yield for Australian three-month
commercial bills plus 0.9%. A final principal payment of approximately
$1.4 million is due upon termination of the lease. The interest rate
was 5.8% and 6.9% at December 31, 1993 and 1992, respectively.
CANADIAN DEBT: In June 1993, the Company repaid the currency loan
balance outstanding under its Canadian unsecured revolving term loan
facility. In December 1993, Prime repaid the borrowings outstanding on
its term loan.
GOLD LOANS: At December 31, 1992 the Company had gold loans outstanding
of $163.2 million representing 417,588 ounces of gold. In June 1993,
the Company repaid all amounts due under these gold loans using proceeds
from the convertible subordinated notes. A deferred net gain of $6.8
million on the repayment of the gold loans is being recognized in
revenue over the original payment periods of the gold loans.
LINES OF CREDIT: In 1993, the Company terminated its separate United
States and Canadian credit facilities and entered into a new
U.S./Canadian cross border credit facility providing a total
availability of $150 million. The Company pays a commitment fee of
0.375% per annum on the unused portion of this facility. The credit
facility is available through August 24, 1998 and provides for
borrowings in U.S. dollars, Canadian dollars, gold loans or a
combination of these. The agreement includes, among other things, a
minimum consolidated net worth requirement and a minimum fixed charge
coverage ratio. In December 1993, Prime entered into a credit facility
which provides a total availability of $5.7 million. No amounts have
been borrowed under these agreements.
Required principal payments of the Company's long-term debt during the
years subsequent to 1993 are as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------
<C> <C>
1994 $ 3,785
1995 4,191
1996
1997
1998
Thereafter 185,000
--------
$192,976
========
</TABLE>
NOTE 14: INTEREST EXPENSE
Interest costs of $9.1 million, $13.4 million and $11.9 million were
expensed in 1993, 1992 and 1991, respectively. During 1992 and 1991
interest costs of $3.5 million and $14.9 million, respectively, related
to the development of certain assets were capitalized.
40<PAGE>
NOTE 15: OTHER LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
December 31,
1993 1992
-------------------------------------------------------------------
<S> <C> <C>
Accrued reclamation costs (see notes 1, 6, 12
and 20) $22,138 $32,344
Accrued pension and other post-retirement
benefit obligations (see note 16) 59,626 49,900
Other 11,910 5,758
------------------
$93,674 $88,002
==================
</TABLE>
NOTE 16: EMPLOYEE BENEFIT PLANS
PENSION PLANS: The Company has pension plans covering substantially all
United States employees. Plans covering salaried and other non-union
employees provide pension benefits based on years of service and the
employee's highest compensation during any 60 consecutive months prior
to retirement. Plans covering union employees provide defined benefits
for each year of service.
Pension cost for 1993, 1992 and 1991, for the Company sponsored United
States employee plans included the following components:
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the year $ 3,513 $ 3,854 $ 3,714
Interest cost on projected
benefit obligations 12,957 11,993 11,492
Actual net return on assets (17,198) (13,390) (23,697)
Net amortization and deferral 4,821 1,555 13,735
-------------------------------
Net periodic pension cost 4,093 4,012 5,244
Early retirement program cost 4,062 5,000
-------------------------------
$ 8,155 $ 9,012 $ 5,244
===============================
</TABLE>
Assumptions used in determining net periodic pension cost for 1993,
1992 and 1991, include a discount rate of 8% and an assumed rate of
increase in compensation of 6%. The assumed long-term rate of return on
assets was 8.5% for each year. Assumptions used in determining the
projected benefit obligations as of December 31, 1993 and 1992 include a
discount rate of 7% and 8%, respectively, and an assumed rate of
increase in compensation of 5% and 6%, respectively.
The funded status and amounts recognized for pension plans in the
consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
Plans Where Plans Where
---------------------- -------------------------
Accumulated Accumulated
Assets Exceed Benefits Assets Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present
value of benefit
obligations:
Vested benefits $(101,000) $(50,529) $(119,000) $ (9,000)
==============================================
Accumulated benefits $(111,454) $(56,815) $(131,981) $(10,000)
==============================================
Projected benefits $(131,078) $(60,100) $(150,858) $(14,000)
Plan assets at fair
value<1> 124,095 41,049 155,792
----------------------------------------------
Plan assets in excess
of (less than)
projected benefit
obligation (6,983) (19,051) 4,934 (14,000)
Unrecognized net loss
(gain) 11 3,760 (8,363) 871
Unrecognized net transi-
tion obligation (asset)
amortized over 15
years 93 (4,020) (5,391) 1,274
Unrecognized prior
service cost 267 2,133 1,545 1,557
Additional minimum
liability (1,520)
----------------------------------------------
Pension liability
recognized in the
consolidated
balance sheets $ (6,612) $(18,698) $ (7,275) $(10,298)
==============================================
<FN>
<1> Approximately 20% and 28% of the plan assets were invested in
fixed-rate insurance contracts and the balance was invested in
listed stocks and bonds in 1993 and 1992, respectively.
</TABLE>
41<PAGE>
HGAL participates in several pension plans, primarily defined
contribution plans, covering its employees and, through its ownership of
a 50% interest in the consolidated Kalgoorlie operations, the employees
of Kalgoorlie Consolidated Gold Mines. HGAL's share of contributions to
these plans for 1993, 1992, and 1991 was $0.8 million, $1 million and
$1.1 million, respectively.
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS: The Company provides
medical and life insurance benefits for certain retired employees,
primarily retirees of the Homestake mine. Retirees are generally
eligible for benefits upon retirement if they are at least age 55 and
have completed five years of service. Spouses and dependent children
are also covered until remarriage or upon being covered by another group
plan.
In 1991, the Company adopted SFAS No. 106 which requires that these
post-retirement benefits be accrued over the period in which active
employees become eligible for such benefits. Previously these costs
were expensed when paid. The accumulated post-retirement benefit
obligation as of January 1, 1991 has been expensed as the cumulative
effect of an accounting change. Such cumulative effect increased the
Company's net loss in 1991 by $28.8 million or $0.22 per share. No
income tax benefit was recorded related to this expense. Net periodic
post-retirement benefit costs for 1993, 1992 and 1991 included the
following components:
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the year $ 717 $ 625 $ 577
Interest cost on accumulated
post-retirement benefit obligations 3,575 2,475 2,290
Net amortization and deferral 369
-----------------------------
$4,661 $3,100 $2,867
=============================
</TABLE>
In 1993 and 1992, the Company also recorded expenses of $0.9 million
and $2 million, respectively, related to early retirement programs at
the Homestake mine. The following table sets forth amounts recorded in
the Company's consolidated balance sheets at December 31, 1993 and 1992.
The Company has not funded any of its estimated future obligation.
<TABLE>
<CAPTION>
1993 1992
------------------------------------------------------------------------
<S> <C> <C>
Accumulated post-retirement benefit obligations:
Retirees $(36,000) $(20,000)
Fully eligible active plan participants (1,000) (4,000)
Other active plan participants (11,261) (9,600)
--------------------
(48,261) (33,600)
Unrecognized net loss 10,549
Unrecognized prior service cost 797
--------------------
Accumulated post-retirement benefit obligation
liability recognized in the consolidated
balance sheets $(36,915) $(33,600)
====================
</TABLE>
The actuarial assumptions used in determining the Company's
accumulated post-retirement benefit obligations include a discount rate
of 8% and increases in medical costs of 8% as of December 31, 1992. The
discount rate was lowered to 7% as of December 31, 1993. The health
care trend assumption was also changed so that costs are assumed to
initially increase at 12% and grade down to an ultimate health care cost
trend of 5%. A one-percentage-point increase in the assumed health
care cost trend rate would result in an increase of approximately $0.8
million in the net periodic post-retirement benefit costs.
OTHER PLANS: All full-time United States employees of the Company are
eligible to participate in the Company's defined contribution savings
plans. The Company's matching contribution was approximately $1.1
million in 1993, $1.7 million in 1992 and $1.6 million in 1991.
42<PAGE>
Under the Company's stock option plans, options to buy two million
common shares at an average price of $17.69 per share were outstanding
at December 31, 1993, of which two million shares were exercisable. An
additional one million and 1.4 million shares were available for future
grants at December 31, 1993 and 1992, respectively. During 1991, all
unexercised stock appreciation rights outstanding at that time were
cancelled.
During 1993, the Company offered to convert all HCI options
outstanding to Homestake options on the basis of 0.35 of a Homestake
common share option for each HCI common share option and at an exercise
price equal to the exercise price of the HCI option divided by 0.35 and
converted from Canadian dollars to U.S. dollars based on the July 22,
1992 exchange rate. All other terms and conditions of the HCI options
remained unchanged. As a result, options covering 787,345 Homestake
shares were substituted for HCI shares under the HCI options at prices
ranging from $17.70 to $42.77 per share. Certain of these converted
options had share appreciation rights and at December 31, 1993 the
Company recorded a charge of $0.2 million with respect to these rights.
Stock option activity was as follows:
(In thousands , except per share amounts)
<TABLE>
<CAPTION>
1993 1992 1991
---------------- ---------------- ---------------
Average Average Average
Price Per Price Per Price Per
Number Share Number Share Number Share
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 2,035 1,569 1,543
HCI converted 787 $29.04
Granted 516 12.18 688 $14.20 318 $13.67
Exercised (695) 15.88 (24) 5.75 (222) 12.05
Expired (201) 29.20 (198) 16.10 (70) 17.03
--------------------------------------------------
Balance at
December 31, 2,442 2,035 1,569
=================================================
</TABLE>
NOTE 17: FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
--------------------- -------------------
Carrying Estimated Carrying Estimated
Asset/(Liability) Amount Fair Value Amount Fair Value
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and equivalents
and short-term
investments $134,719 $134,719 $71,064 $73,215
Non-current marketable
equity investments
4,643 5,319 2,876 4,080
Long-term debt (192,976) (224,471) (83,531) (83,531)
Gold loans (163,226) (139,011)
Off-balance sheet
financial instruments -
Foreign currency
options (156) (156) (469) (469)
</TABLE>
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
CASH AND EQUIVALENTS AND SHORT-TERM INVESTMENTS: The carrying value of
cash and equivalents approximates their fair value due to the short-term
maturities of these instruments. The fair value of short-term
investments was estimated based on the quoted market prices for the
investments. If a quoted market price was not available, the fair value
was estimated using quoted market prices for similar securities.
NON-CURRENT MARKETABLE EQUITY INVESTMENTS: The fair value of non-current
marketable equity investments was estimated based on quoted market
prices.
LONG-TERM DEBT: With the exception of the convertible subordinated
notes, the carrying amounts of the long-term debt items are a reasonable
estimate of their fair value. Interest rates on these debt instruments
fluctuate at prevailing market rates. The fair value of the Company's
convertible subordinated notes was estimated based on the quoted market
prices.
GOLD LOANS: The fair value of gold loans was determined based on the
outstanding ounces of gold valued at the market price.
43<PAGE>
FOREIGN CURRENCY OPTIONS: The fair value of foreign currency options was
estimated based upon the quoted market price for the options. If a
quoted market price was not available, the fair value was estimated
using quoted market prices for similar options.
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1993 and 1992.
Although management is not aware of any factors which would affect the
estimated fair value amounts significantly, such amounts have not been
comprehensively revalued for purposes of these financial statements
since the balance sheet dates, and estimates of fair value at dates
subsequent to December 31, 1993 and 1992 may differ significantly from
the amounts presented herein.
NOTE 18: SHAREHOLDERS' EQUITY
At December 31, 1993 and 1992 other capital includes $3.9 million and
$5.5 million, respectively, of loans made to certain former HCI
employees and directors for the purchase of common shares. The loans,
which were used for the purchase of shares of HCI, are non-interest
bearing, are secured by a pledge of the shares and are not required to
be paid until the later of 1995 or until the pledged securities are
equal to or greater than the value of the loan. Other capital at
December 31, 1992 also includes $4.2 million for common shares of
Homestake owned by Prime. These Homestake shares were sold by Prime in
1993.
In 1991, HCI obtained the right to redeem its Series B first
preference shares for common stock. As a result, in 1991 the HCI
preference shares of $40.3 million were reclassified from minority
interest to stockholders' equity.
Effective April 30, 1992, 2.7 million HCI Series B first preference
shares were redeemed for 4.3 million common shares of the Company. At
December 31, 1992, there were no Series B first preference shares
outstanding (1991 - 2.7 million).
Each share of common stock includes and trades with a right. Rights
are not exercisable currently but become exercisable on the 10th
business day after any person, entity or group ("the Acquiring Person")
acquires 20% or more of the Company's common stock or announces a tender
or exchange offer which would result in such entity acquiring 20% or
more of the Company's common stock. When exercisable, each right
entitles its holder to purchase from the Company one one-hundredth of a
share of Series A Participating Cumulative Preferred Stock, par value $1
per share, at a share price of $75. If the Company is subsequently
involved in a merger or other business combination involving the
Acquiring Person, each right will entitle its holder to purchase certain
securities of the surviving company. Rights also provide for protection
against self-dealing transactions by the Acquiring Person. The rights
expire on November 2, 1997.
NOTE 19: ADDITIONAL CASH FLOW INFORMATION
Cash paid for interest and for income and mining taxes, including
amounts related to discontinued operations in 1991, is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------------------------------------------------------------------
<S> <C> <C> <C>
Interest, net of amounts capitalized $ 8,600 $13,203 $15,949
Income and mining taxes 18,170 7,328 16,133
</TABLE>
In 1991, HGAL sold additional stock to its shareholders. The Company
subscribed to its 80% share of the offering and also acquired part of
the shares not purchased by HGAL's public shareholders. The offering
resulted in an increase in cash on a consolidated basis of $7.2 million.
Certain investing and financing activities of the Company affect
financial position but do not affect cash flows. Significant non-cash
investing and financing activities were as follows:
In 1992, HCI increased its equity interest in the Marigold mine
venture to 33.3% following a land exchange.
44<PAGE>
See notes 2, 5 and 18 for discussions of the non-cash acquisitions of
the interests in HCI, Prime and Stikine and the 1991 HCI restructuring.
In 1992, HCI redeemed its Series B first preference shares for common
stock (See note 18).
The impact on the balance sheet during 1992 as a result of the change
in the accounting for the Company's investments in Prime and Stikine
from the equity method to consolidation (see note 2) was as follows:
<TABLE>
<CAPTION>
Increase/(Decrease)
---------------------------------------------------------------------
<S> <C>
Cash and equivalents $ 6,411
Working capital and other assets (2,624)
Property, plant and equipment 194,807
Non-current investments (79,476)
Long-term debt 12,287
Deferred income taxes 78,619
Minority interests 32,470
Shareholders' equity (4,258)
</TABLE>
NOTE 20: ENVIRONMENTAL CONTINGENCIES
The Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA) imposes heavy liabilities on persons who discharge hazardous
substances. The Environmental Protection Agency (EPA) publishes a
National Priorities List (NPL) of known or threatened releases of such
substances.
WHITEWOOD CREEK: An 18-mile stretch of Whitewood Creek in the Black
Hills of South Dakota is a site on the NPL. EPA asserts that discharges
of tailings by mining companies, including the Company, for more than
100 years, have contaminated soil and water. In 1990, the Company
signed a consent decree with the EPA requiring that the Company perform
remedial work on the site and continue long-term monitoring. The onsite
remedial work has been completed. The Company estimates that the
remaining cost of actions required by the decree, including EPA
oversight costs, will be approximately $2 million.
GRANTS: The tailings facility at the Company's discontinued uranium mill
near Grants, New Mexico, is a site on the NPL. The EPA asserted that
leakage from the tailings has contaminated a shallow aquifer that serves
nearby residential subdivisions. The Company paid the costs for
installing a municipal water supply and continues to operate an
injection and collection system that has significantly improved the
quality of the aquifer to levels that comply with state ground water
standards. The Company has commenced to dismantle the mill facilities
and close the tailings impoundments.
Title X of the Energy Policy Act of 1992 (the Act) authorized
appropriations of $310 million to cover the Federal Government's share
of certain costs of reclamation, decommissioning and remedial action for
byproduct material (primarily tailings) generated by certain licensees
as an incident of uranium sales to the Federal Government.
Reimbursement is subject to compliance with regulations now being
finalized by the Department of Energy (DOE) for issuance in 1994. The
DOE has acknowledged that the Company is an eligible participant
pursuant to the Act and that the Company may submit requests for
reimbursement under the Act for 51% of the past and future costs of
reclaiming the Grants site in accordance with EPA requirements.
The Company estimates that the total cost to reclaim the Grants
facility, including costs incurred to date by the Company of $25.9
million, will be $59.2 million. The DOE's share of these estimated
costs will amount to $30.2 million. Accordingly, a provision of $3.1
million is included in the consolidated financial statements at December
31, 1993 for the Company's estimate of its remaining share of Grants
future expenditures.
Congress has appropriated $41 million dollars for disbursement in
1994 to eligible licensees. As the first installment, the Company
intends to submit an initial claim in 1994 of approximately $13.2
million for past costs incurred through December 31, 1993.
45<PAGE>
In 1983, the state of New Mexico made a claim against the Company for
unspecified natural resource damages resulting from the Grants tailings.
The state of South Dakota made a similar claim in 1983 as to the
Whitewood Creek tailings. The Company denies all liability for damages
at the two CERCLA sites. The two states have taken no action to enforce
the 1983 claims.
The Company believes that the ultimate resolution of these matters
will not have a material adverse impact on its financial condition or
results of operations.
NOTE 21: FOREIGN CURRENCY AND OTHER COMMITMENTS
During 1992, the Company established a foreign currency protection
program and entered into a series of foreign currency option contracts
which established trading ranges within which the United States dollar
will be exchanged for foreign currencies by setting minimum and maximum
exchange rates. The Company does not require or place collateral for
these contracts. However, the Company minimizes its credit risk by
dealing with only major international banks and financial institutions.
Unrealized losses on the contracts outstanding at December 31, 1993 in
the amount of $0.2 million have been included in the 1993 results. At
December 31, 1993 the Company had outstanding forward currency contracts
as follows:
(In thousands, except exchange rates)
<TABLE>
<CAPTION>
Exchange Rates to U.S.$
Currency Amount Minimum Maximum Expiration Date
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Canadian $ 97,300 $0.69 $0.79 1994 - 1997
Australian 79,300 0.61 0.70 1994 - 1995
--------
$176,600
========
</TABLE>
The Company realized foreign currency transaction losses (see note 1)
of $1.4 million in 1993 and $5.5 million in 1992, which were recorded as
a reduction to other income.
The Company has entered into various commitments in the ordinary
course of its business, which includes commitments to perform assessment
work and other obligations necessary to maintain or protect its
interests in mining properties, financing and other obligations to joint
venturers and partners under venture and partnership agreements, and
commitments under federal and state environmental health and safety
permits.
NOTE 22: GEOGRAPHIC AND SEGMENT INFORMATION
The Company primarily is engaged in gold mining and related activities.
Interests in joint ventures are included in segment operations and
identifiable assets. In determining operating earnings, which are
defined as operating revenues less operating costs and expenses, the
following items have been excluded: mineral exploration costs, corporate
income and expense, and income and mining taxes. Identifiable assets
represent those assets used in a segment's operations. Corporate assets
are principally cash and equivalents, short-term investments and assets
related to operations not significant enough to require classification
as a business segment.
Sales to individual customers exceeding 10% of the Company's
consolidated revenues were as follows: in 1993 gold sales of $175
million, $145 million and $105 million to three customers; in 1992 gold
sales of $92 million to one customer; and in 1991 gold sales of $110
million and $94 million to two customers. The Company believes that
the loss of any of these customers would not have a material adverse
impact on the Company because of the active worldwide market for gold.
46<PAGE>
GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
1993 1992 1991
--------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
U.S. $ 380,458 $ 354,018 $ 291,246
Canada 194,755 178,401 243,233
Australia 121,025 124,799 111,854
Latin America 25,990 26,302 25,267
-------------------------------------
$ 722,228 $ 683,520 $ 671,600
=====================================
OPERATING EARNINGS (LOSS):<1>
U.S. $ 33,295 $ (11,666) $ (4,482)
Canada 70,788 40,603 39,449
Australia 29,660 10,284 (12,574)
Latin America 2,272 (869) (18,908)
--------------------------------------
$ 136,015 $ 38,352 $ 3,485
======================================
EXPLORATION EXPENSE:<2>
U.S. $ 11,128 $ 14,735 $ 21,960
Canada 1,907 6,328 15,762
Australia 2,888 4,097 7,232
Latin America and other 1,534 2,638 2,486
--------------------------------------
$ 17,457 $ 27,798 $ 47,440
======================================
IDENTIFIABLE ASSETS AS OF DECEMBER 31:
U.S. $ 550,645 $ 559,558 $ 751,064
Canada 385,324 406,883 385,086
Australia 165,683 159,993 192,787
Latin America 19,598 18,735 23,894
--------------------------------------
$1,121,250 $1,145,169 $1,352,831
======================================
<FN>
<1> Includes write-downs of: $16 million and $28.5 million in 1993 and
1992, respectively, for U.S.; $11.6 million in 1991 for Australia;
$7.1 million and $19.9 million in 1992 and 1991, respectively, for
Canada and $3.5 million in 1992 and $16 million in 1991 for Latin
America.
<2> Includes write-downs in 1991 of: $5.8 million for U.S.; $3.8 million
for Australia; and $2.1 million for Canada.
</TABLE>
<PAGE>
SEGMENT INFORMATION
<TABLE>
<CAPTION>
1993 1992 1991
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Gold $ 688,080 $ 639,253 $ 628,294
Sulphur project 16,220 22,867 1,406
Interest, dividends and other 17,928 21,400 41,900
---------------------------------------
$ 722,228 $ 683,520 $ 671,600
=======================================
OPERATING EARNINGS (LOSS):
Gold<1> $ 161,947 $ 34,318 $ 3,525
Sulphur project<2> (25,932) 4,034 (40)
---------------------------------------
Operating earnings 136,015 38,352 3,485
Exploration expense<3> (17,457) (27,798) (47,440)
Net corporate expense<4> (50,162) (189,049) (162,713)
---------------------------------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE TAXES AND
MINORITY INTEREST $ 68,396 $ (178,495) $ (206,668)
=======================================
DEPRECIATION, DEPLETION AND
AMORTIZATION:
Gold $ 90,842 $ 103,569 $ 114,969
Sulphur project 10,629 13,133 1,118
Corporate 1,906 781 906
---------------------------------------
$ 103,377 $ 117,483 $ 116,993
=======================================
EXPLORATION EXPENSE:
Gold $ 17,017 $ 27,726 $ 47,253
Sulphur project 440 72 187
---------------------------------------
$ 17,457 $ 27,798 $ 47,440
=======================================
ADDITIONS TO PROPERTY, PLANT
AND EQUIPMENT:
Gold $ 54,219 $ 40,614 $ 83,172
Sulphur project 1,828 21,044 82,670
Corporate 1,778 1,795 616
---------------------------------------
$ 57,825 $ 63,453 $ 166,458
=======================================
IDENTIFIABLE ASSETS AS OF
DECEMBER 31:
Gold $ 788,122 $ 863,017 $1,004,403
Sulphur project 142,220 160,616 151,040
Corporate:
Cash and short-term
investments 134,719 71,064 164,353
Other 56,189 50,472 33,035
----------------------------------------
$1,121,250 $1,145,169 $1,352,831
========================================
<FN>
<1> Includes write-downs of mining properties and equity investments of
$39.1 million in 1992 and $47.5 million in 1991.
<2> Includes a write-down of oil and gas property of $16 million in 1993.
<3> Includes write-downs of previously capitalized costs of exploration
properties of $11.7 million in 1991.
<4> Includes write-downs of non-operating mining properties and
investments of $91.2 million in 1992 and $124.9 million in 1991 and
restructuring and business combination expenses of $8.2 million in
1993, $48.4 million in 1992 and $13.6 million in 1991.
</TABLE>
47<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Shareholders and
Board of Directors of
Homestake Mining Company:
We have audited the consolidated balance sheets of Homestake Mining Company
and Subsidiaries as of December 31, 1993 and 1992, and the related
statements of consolidated operations, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Homestake Mining Company and Subsidiaries at December 31,1993
and 1992, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1993 in
conformity with generally accepted accounting principles.
As discussed in note 16 to such consolidated financial statements, in
1991 the Company changed its method of accounting for post-retirement
benefits other than pensions to conform with Statement of Financial
Accounting Standards No. 106.
/s/Coopers & Lybrand
San Francisco, California
February 14, 1994
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
Homestake Mining Company and Subsidiaries
The accompanying consolidated financial statements of Homestake Mining
Company and Subsidiaries are prepared by the Company's management in
conformity with generally accepted accounting principles. Management is
responsible for the fairness of the financial statements, which include
estimates based on judgments.
The Company maintains accounting and other control systems which
management believes provide reasonable assurance that financial records are
reliable for the purposes of preparing financial statements and that assets
are properly safeguarded and accounted for. Underlying the concept of
reasonable assurance is the premise that the cost of controls should not be
disproportionate to the benefits expected to be derived from such controls.
The Company's internal control structure is reviewed by its internal
auditors.
The external auditors conduct an independent audit of the consolidated
financial statements in accordance with generally accepted auditing
standards in order to express their opinion on these financial statements.
These standards require that the external auditors plan and perform the
audit to obtain reasonable assurance that the financial statements are free
from material misstatement.
The Audit Committee of the Board of Directors, composed entirely of
outside directors, meets periodically with management, internal auditors
and the external auditors to discuss the annual audit, internal control,
internal auditing and financial reporting matters. The external auditors
and the internal auditors have direct access to the Audit Committee.
/s/ Harry M. Conger
- -------------------
Harry M. Conger
Chairman of the Board and Chief Executive Officer
/s/ Gene G. Elam
- ----------------
Gene G. Elam
Vice President, Finance and Chief Financial Officer
48<PAGE>
FIVE-YEAR SELECTED FINANCIAL DATA<1>
Homestake Mining Company and Subsidiaries
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $722,228 $683,520 $671,600 $793,660 $771,126
Income (loss)
from continuing
operations 52,494<2> (175,836)<3,4>(207,756)<6> 4,211<8> 34,770
Income (loss)
from discontinued
operations
(25,359) 7,979 31,667
Net income (loss)52,494<2> (175,836)<3,4>(261,915)<6,7> 12,190<8> 70,115<9>
Per share:
Income (loss)
from continuing
operations 0.38<2> (1.31)<3,4> (1.57)<6> 0.02<8> 0.28
Income (loss)
from discontinued
operations (0.19) 0.06 0.25
Net income (loss) 0.38<2> (1.31)<3,4> (1.98)<6,7> 0.08<8> 0.56<9>
Total assets 1,121,250 1,145,169 1,352,831 1,911,815 1,748,497
Long-term debt
and gold
loans 189,191 205,174 279,190 408,902 440,888
Other long-term
obligations 93,674 88,002 86,193 51,253 47,000
Minority interest
in consolidated
subsidiaries 54,761 68,074 <5> 19,864 <5> 78,422<5> 98,972<5>
Dividends paid
per share<10> 0.10 0.20 0.20 0.20 0.20
<FN>
<1> Five-year selected financial data reflects the 1992 combination of
Homestake and HCI on a pooling of interests basis. Information
presented also reflects the 1989 adoption of pro rata consolidation
for HGAL's interest in Kalgoorlie Mining Associates and treats base
metals, oil and gas, uranium and HCI's non-gold operations
transferred to Dundee as discontinued operations.
<2> Includes expense of $12.8 million ($16 million pretax) or $0.09 per
share for a write-down of the Company's investment in the oil and
gas property at the Main Pass 299 sulphur project and expense of
$6.8 million ( $8.2 million pretax) or $0.05 per share for
restructuring and business combination costs.
<3> Includes expense of $117.7 million ($130.3 million pretax) or $0.87
per share from write-downs of certain mining properties and
investments.
<4> Includes expense of $32.3 million ($48.4 million pretax) or $0.24
per share for restructuring and business combination costs.
<5> Includes redeemable preference shares of wholly-owned subsidiaries
of $15.9 million, $4.9 million, $46.1 million and $50.4 million at
December 31, 1992, 1991, 1990, and 1989, respectively.
<6> Includes expense of $165.5 million ($172.4 million pretax) or $1.25
per share from write-downs of certain mining properties and
investments and expense of $7.8 million ($13.6 million pretax) or
$0.06 per share from HCI's 1991 restructuring.
<7> Includes expense of $28.8 million (no tax benefit) or $0.22 per
share from the cumulative effect of the change in accounting for
post-retirement benefits other than pensions.
<8> Includes expense of $32.6 million (no tax benefit) or $0.25 per
share from the write-down of the Company's investment in NAM.
<9> Includes extraordinary gain of $3.8 million or $0.03 per share on
the monetization of gold loans.
<10> Homestake common shares only.
</TABLE>
49<PAGE>
QUARTERLY SELECTED DATA<1>
Homestake Mining Company and Subsidiaries
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993:
Revenues $169,993 $187,091 $180,440 $184,704 $722,228
Net Income 5,561 11,294 <2> 22,739 <2> 12,900 <2,3> 52,494 <2,3>
Per share:
Net income 0.04 0.08 <2> 0.16 <2> 0.09 <2,3> 0.38 <2,3>
Dividends
paid<6> 0.025 0.025 0.025 0.025 0.10
1992:
Revenues $179,503 $168,120 $179,929 $155,968 $683,520
Net loss (1,677) (26,064)<4,5>(120,714)<4,5>(27,381)<4> (175,836)<4,5>
Per share:
Net loss (0.01) (0.20)<4,5> (0.89)<4,5> (0.20)<4> (1.31)<4,5>
Dividends
paid<6> 0.05 0.05 0.05 0.05 0.20
<FN>
<1> Quarterly selected data reflects the 1992 combination of Homestake
and HCI on a pooling of interests basis.
<2> Includes expenses of $6.8 million ($8.2 million pretax) or $0.05 per
share for restructuring and business combination costs, including
expenses of $1.9 million or $0.01 per share, $4.8 million or $0.04
per share and $0.1 million in the second, third and fourth
quarters, respectively.
<3> Includes expense of $12.8 million ($16 million pretax) or $0.09 per
share for a write-down of the Company's investment in oil and gas
property at the Main Pass 299 sulphur project.
<4> Includes expenses of $117.7 million ($130.3 million pretax) or $0.87
per share from the write-downs of certain mining properties and
investments, including expenses of $16 million or $0.12 per share,
$90.3 million or $0.67 per share and $11.4 million or $0.08 per
share in the second, third and fourth quarters, respectively.
<5> Includes expenses of $32.3 million ($48.4 million pretax) or $0.24
per share for restructuring and business combination costs,
including expenses of $3.5 million or $0.03 per share and $28.8
million or $0.21 per share in the second and third quarters,
respectively.
<6> Homestake common shares only.
</TABLE>
COMMON STOCK PRICE RANGE
(Prices as quoted on the New York Stock Exchange)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
1993: High $14.63 $19.63 $21.63 $22.88 $22.88
Low 9.63 13.38 15.25 16.25 9.63
1992: High $16.50 $13.75 $14.50 $13.75 $16.50
Low 12.50 11.13 12.63 10.25 10.25
</TABLE>
50<PAGE>
APPENDIX 1: Description of Bar Charts in Management's Discussion and
Analysis
Bar Chart A:
Chart depicting gold production (ounces in millions) as follows:
Year: 1991 1992 1993
Ounces: 1.80 1.91 1.92
Bar Chart B:
Chart depicting gold revenues (dollars in millions) as follows:
Year: 1991 1992 1993
Dollars: $628.3 $639.3 $688.1
Bar Chart C:
Chart depicting cash cost per ounce (dollars per ounce) as follows:
Year: 1991 1992 1993
Dollars: $269 $248 $231
Bar Chart D:
Chart depicting administrative and general costs (dollars in millions) as
follows:
Year: 1991 1992 1993
Dollars: $47.4 $48.5 $40.6
<PAGE>
<PAGE>
EXHIBIT NO. 22
Page 1 of 2
LIST OF SUBSIDIARIES
--------------------------------------------------------------
Homestake Mining Company, a Delaware Corporation and its
Subsidiaries Interest of Homestake Mining Company is 100%
unless otherwise noted
( ) Denotes state, province or country of incorporation
--------------------------------------------------------------
Homestake Mining Company (Delaware)
Homestake Mining Company of California (California)
Denay Creek Gold Mining Company (California)
Homestake Canada Inc. (Ontario)
588982 Ontario Inc. (Ontario)
759290 Ontario Inc. (Ontario)
759291 Ontario Inc. (Ontario)
759292 Ontario Inc. (Ontario)
Corona Gold Inc. (Nevada)
Santa Fe Gold Inc. (Nevada)
E & B Explorations Inc. (Delaware)
Galveston Resources (Nevada), Inc. (Nevada)
International Corona Resources (Bermuda) Ltd. (Bermuda)
Mexico Exploration (Canada) Limited (Ontario)
PRG Project Development Corp. (British Columbia)
Pezamerica Resource Corporation (Arizona)
Prime Resources Group Inc. (British Columbia) - 54.2%
Stikine Resources Ltd. (British Columbia) - 54.2%
Teck-Corona Operating Company (Ontario) - 50%
The Ventora Corporation (Arizona)
Westcan Holdings Inc. (Nevada)
Williams Operating Company (Ontario) - 50%
Homestake de Argentina S.A. (Buenos Aires)
Homestake Forest Products Company (California)
Homestake Gold of Australia Limited (Western Australia) - 81.5%
Homestake Australia Limited (Western Australia) - 81.5%
Homestake Gold (Queensland) Pty. Ltd. (Australia) - 81.5%
Homestake International Minerals Limited (California)
Homestake Lead Company of Missouri (California)
Homestake Mineral Development Company (California)
Homestake Nevada Corporation (California)
Homestake Sulphur Company (Delaware)
Black Hills Oil and Gas Company (California)
Felmont Natural Gas Storage Company, Inc. (Delaware)
Homestake Venezuela, S.A. (Venezuela)
Minera Rio Carichapo, S.A. (Venezuela)
La Jara Mesa Mining Company (New Mexico)
Minera Homestake Chile S.A. (Chile)
Whitewood Development Corporation (California)
<PAGE>
<PAGE>
Exhibit 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the following Registration
Statements of Homestake Mining Company: Post-Effective Amendment No. 5 to
No. 2-90903 on Form S-8 (originally filed on Form S-3); Post Effective
Amendment No. 3 to No. 2-90905 on Form S-8 (originally filed on Form S-3);
No. 33-26049 on Form S-8; No. 33-32174 on Form S-8; No. 266538 on Form S-8;
Post-Effective Amendment No. 1 to No. 33-48526 on Form S-8 (originally
filed on Form S-4) of our report dated February 14, 1994, appearing in and
incorporated by reference in the Annual Report on Form 10-K of Homestake
Mining Company for the year ended December 31, 1993.
/s/ Coopers & Lybrand
March 28, 1994
Oakland, California
