<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(x) Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the Quarterly Period Ended June 30, 1994
( ) Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the transition period from ___________ to __________
Commission File Number 1-8736
HOMESTAKE MINING COMPANY
A Delaware Corporation
IRS Employer Identification No. 94-2934609
650 California Street
San Francisco, California 94108-2788
Telephone: (415) 981-8150
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
----------- ----------
The number of shares of common stock outstanding as of July 31, 1994 was
137,737,866.
Page 1 of 14
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
PART 1 - FINANCIAL INFORMATION
- - ------------------------------
Item 1. Financial Statements
- - ----------------------------
A. Condensed Consolidated Balance Sheets (unaudited)
------------------------------------------------
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
----------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 142,301 $ 134,719
Short-term investments 57,405
Trade receivables 22,410 4,059
Income tax, interest and other
receivables 31,374 24,590
Inventories:
Finished products 16,670 9,548
Ore and in-process 30,717 22,465
Supplies 28,430 34,526
Other 5,654 8,303
----------- -----------
Total current assets 334,961 238,210
----------- -----------
Property, plant and equipment - at cost 1,540,517 1,540,218
Accumulated depreciation, depletion
and amortization (735,921) (709,990)
----------- -----------
Net property, plant and equipment 804,596 830,228
Investments and other assets:
Non-current investments 18,319 20,632
Other assets 38,991 32,180
----------- -----------
Total investments and other assets 57,310 52,812
----------- -----------
Total Assets $1,196,867 $1,121,250
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 29,712 $ 33,002
Accrued liabilities:
Payroll and other compensation 21,521 19,053
Reclamation 16,363 14,041
Other 15,882 24,653
Income and other taxes payable 9,554 9,816
Current portion of long-term debt 3,785
----------- -----------
Total current liabilities 93,032 104,350
----------- -----------
Long-term liabilities:
Long-term debt 185,000 189,191
Other long-term obligations 111,312 93,674
----------- -----------
Total long-term liabilities 296,312 282,865
----------- -----------
Deferred income and mining taxes 159,805 164,030
Minority interest in consolidated
subsidiaries 78,288 54,761
Shareholders' equity:
Capital stock, $1 par value per share:
Preferred - 10,000 shares authorized;
no shares outstanding
Common - 250,000 shares authorized;
shares outstanding:
1994 - 137,738; 1993 - 137,494 137,738 137,494
Other shareholders' equity 431,692 377,750
----------- -----------
Total shareholders' equity 569,430 515,244
----------- -----------
Total Liabilities and Shareholders'
Equity $1,196,867 $1,121,250
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
B. Condensed Statements of Consolidated Income (unaudited)
------------------------------------------------------
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Revenues:
Product sales $168,013 $184,303 $333,956 $347,640
Interest and dividends 2,185 1,437 3,950 2,183
Equity earnings 1,172 329 1,500 (498)
Gain on issuance of
stock by subsidiary 11,224 11,224
Other income 19,485 1,022 23,851 7,759
--------- --------- --------- ----------
202,079 187,091 374,481 357,084
--------- --------- --------- ----------
Costs and Expenses:
Production costs 112,876 117,945 216,063 233,872
Depreciation, depletion
and amortization 21,087 27,785 41,194 52,817
Administrative and general
expense 10,646 11,657 18,840 20,822
Exploration expense 4,937 3,857 8,001 8,148
Interest expense 2,534 1,621 5,527 3,414
Other expense 5,542 2,792 5,764 5,407
--------- --------- --------- ----------
157,622 165,657 295,389 324,480
--------- --------- --------- ----------
Income Before Taxes and
Minority Interest 44,457 21,434 79,092 32,604
Income and Mining Taxes (9,584) (9,182) (18,278) (15,369)
Minority Interest (1,918) (958) (3,645) (380)
--------- --------- --------- ----------
Net Income $ 32,955 $ 11,294 $ 57,169 $ 16,855
========= ========= ========= ==========
Net Income Per Share $ 0.24 $ 0.08 $ 0.42 $ 0.12
========= ========= ========= ==========
Average Shares Used in the
Computation 137,735 136,906 137,705 136,842
========= ========= ========= ==========
Dividends Per Common Share $ 0.05 $ 0.025 $ 0.075 $ 0.05
========= ========= ========= ==========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
C. Condensed Statements of Consolidated Cash Flows (unaudited)
----------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1994 1993
--------- ---------
<S> <C> <C>
Cash Flows from Operations:
Net income $ 57,169 $ 16,855
Reconciliation to net cash provided
by operations:
Depreciation, depletion and
amortization 41,194 52,817
Deferred taxes, minority interest
and other 25,735 13,131
Gain on disposals of assets (18,020) (4,594)
Gain on issuance of stock
by subsidiary (11,224)
Effect of changes in operating
working capital items (35,784) 2,809
--------- ---------
Net cash provided by operations 59,070 81,018
--------- ---------
Investment Activities:
Decrease (increase) in short-term
investments (57,405) 9,988
Additions to property, plant and
equipment (33,430) (29,016)
Proceeds from sales of assets 21,611 4,968
Other 1,033
--------- ---------
Net cash used in investment activities (69,224) (13,027)
--------- ---------
Financing Activities:
Proceeds from debt 146,150
Debt repayments (8,352) (183,355)
Dividends paid - common shares (10,329) (6,844)
- preferred shares (769)
Common shares issued 4,547 3,521
Stock issued by subsidiary 31,870
Other 6
--------- ---------
Net cash provided by (used in)
financing activities 17,736 (41,291)
--------- ---------
Net increase in cash and equivalents 7,582 26,700
Cash and equivalents, January 1 134,719 54,208
--------- ---------
Cash and equivalents, June 30 $142,301 $ 80,908
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
- - ---------------------------------------------------------------
1. The condensed consolidated financial statements included herein should
be read in conjunction with the financial statements and notes
thereto, which include information as to significant accounting
policies, in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993.
The information furnished in this report reflects all adjustments
which, in the opinion of management, are necessary for a fair
statement of the results for the interim periods. Except as described
in Notes 2 through 4, such adjustments consist of items of a normal
recurring nature. Results of operations for interim periods are not
necessarily indicative of results for the full year.
2. In May 1994, the Company sold its interest in the Dee mine to Rayrock
Mines, Inc. (Rayrock) for $16.5 million. Rayrock assumed
responsibility for and indemnified Homestake against all related
environmental and reclamation matters. This sale resulted in a second
quarter pretax gain of $15.7 million.
3. In June 1994, Prime Resources Group Inc. (Prime) completed a
transaction whereby Prime issued five million common shares at
approximately $6.70 per share to the public. Net proceeds of
approximately $31.9 million will be used to fund a portion of the
construction and development costs for the Eskay Creek project. This
transaction resulted in a reduction of the Company's interest in Prime
from 54.2% to 50.6%. The Company recorded a gain of $11.2 million on
the transaction in recognition of the net increase in value of the
Company's investment in Prime. Deferred income taxes were not
provided on this gain since the Company's tax basis in Prime
substantially exceeds its book carrying value.
4. Other expense for the three and six months ended June 30, 1994
includes a $5 million accrual for additional estimated reclamation
costs for non-operating properties.
Other expense for the three and six months ended June 30, 1993
includes restructuring expenses of approximately $1.9 million related
to the reorganization of Homestake Gold of Australia, including the
relocation of its principal office.
5. Under the Company's foreign currency protection program, the Company
has entered into a series of foreign currency option contracts which
establish trading ranges within which the United States dollar will be
exchanged for foreign currencies by setting minimum and maximum
exchange rates. Option contracts outstanding as of June 30, 1994 were
as follows:
<TABLE>
<CAPTION>
Amount Covered Exchange Rates To U.S.$ Expiration
Currency (U.S. Dollars) Minimum Maximum Date
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Canadian $131,200,000 .67 .79 1994-1997
Australian 40,300,000 .61 .70 1994-1995
-------------
$171,500,000
</TABLE>
6. 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.
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 that requires the Company to perform
remedial work on the site and long-term monitoring. The on-site
remedial work has been completed. The Company estimates that EPA
oversight and monitoring costs through 1995 will be approximately $2
million.
5
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
The tailings facility at the Company's discontinued uranium mill near
Grants, New Mexico, is also 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 groundwater
standards. The Company has decommissioned and disposed of the mills
and has closed 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 issued by the
Department of Energy (DOE). 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
the approved reclamation plan and Nuclear Regulatory Commission
license requirements. The Company estimates the total costs to
reclaim the Grants facility, including costs incurred to date by the
Company will be $59.2 million. The DOE's share of these estimated
costs will amount to approximately $30.2 million. Congress has
appropriated $41 million for disbursement in 1994 to eligible
licensees and has requested $42 million for disbursement in fiscal
1995. The Company has submitted an initial claim of $14.1 million for
the DOE's share of past costs incurred through December 31, 1993.
This amount has been recorded as a receivable ($5.8 million classified
as current and $8.3 million as non-current) in the accompanying
balance sheet at June 30, 1994 with a corresponding $14.1 million
increase in long-term accrued reclamation.
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.
6
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Item 2 - Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
- - ---------------------
RESULTS OF OPERATIONS
(Unless specifically stated otherwise, all comments, production statistics,
etc. relate to amounts included in the consolidated financial statements
including the Company's interests in mining partnerships accounted for
using the equity method, without reduction for minority interest.)
Net income in the second quarter of 1994 increased to $33.0 million or
$0.24 per share from $11.3 million or $0.08 per share in the second quarter
of 1993 and year-to-date net income increased to $57.2 million or $0.42 per
share from $16.9 million or $0.12 per share for the first half of 1993. In
addition to the positive impact of higher gold prices, the 1994 results
include pretax gains of $15.7 million ($12.6 million after tax) from the
sale of the Company's interest in the Dee mine and $11.2 million ($11.2
million after tax) on dilution of the Company's interest in Prime Resources
Group Inc. (Prime) following Prime's sale of additional shares to the
public.
Revenue of $168.0 million from product sales during the second quarter of
1994 compares to revenue of $184.3 million during the prior year's second
quarter reflecting a 15% decline in ounces of gold sold partially offset by
a $22 per ounce increase in the average price of gold realized. During the
1994 second quarter 440,400 ounces of gold were sold compared to 518,200
ounces in the 1993 second quarter. The lower sales volume is due in part
to the absence of production from the Dee mine in Nevada which was sold
effective March 31, 1994, the 1993 sales of the Mineral Hill mine in
Montana and the Golden Bear mine in British Columbia, and the cessation of
mining at the Santa Fe mine in Nevada. After adjusting for the foregoing,
production from the Company's operations decreased by 8% during the second
quarter of 1994 compared to the second quarter of 1993.
Lower overall domestic production in the second quarter of 1994 is the
result of production declines at the Homestake mine in South Dakota and the
McLaughlin mine in California, partially offset by an increase in
production at the Round Mountain mine in Nevada. Production at the
Homestake mine decreased by 20% to 97,400 ounces during the 1994 second
quarter due primarily to development work in the mine's open pit (Open Cut)
and the caving in of an exhaust raise in the underground operations which
limited access to higher grade mining areas. The development work at the
Open Cut was completed in May and construction of a new exhaust raise is
underway. Production volumes at the mine are expected to return to normal
levels by the end of the third quarter. Homestake mine cash costs per
ounce were $294 during the second quarter of 1994 compared to $253 in the
second quarter of 1993. Production at the McLaughlin mine decreased by 13%
to 66,100 ounces due to an expected decline in ore grades and recovery
rates. This resulted in an increase in McLaughlin mine cash costs to $235
per ounce during the second quarter of 1994 from $193 per ounce in the
second quarter of 1993. Gold production at the Round Mountain mine
increased by 7% to 25,300 ounces during the second quarter of 1994. This
increase was due to a process improvement strategy of optimizing the
distribution of ore between the reusable and the dedicated leach pads and
extending the reusable pad leach cycles. As a result, recoveries on the
reusable pad improved from 67% in the second quarter of 1993 to 84% in 1994
and cash costs per ounce decreased to $206 from $225.
Excluding the effect of the sale of the Golden Bear mine, overall foreign
production declined only slightly during the second quarter of 1994
compared to the second quarter of 1993. Combined production of 89,500
ounces from the Hemlo operations in Canada during the 1994 second quarter
is 2% higher than the 1993 second quarter production of 87,400 ounces
reflecting the effect of higher grades at the David Bell mine and Quarter
Claim partially offset by the effect of expected slightly lower grade at
the Williams mine and fewer tons milled at the David Bell mine. Production
at the Nickel Plate mine increased by 29% to 22,500 ounces during the
second quarter of 1994 from 17,500 ounces during the 1993 second quarter
and cash costs decreased from $312 to $289 per ounce. The improvement in
operating performance at the Nickel Plate mine is due to higher ore grades
resulting from the pit expansion waste stripping program which commenced in
1993.
Homestake Gold of Australia's (HGAL) share of production at the Kalgoorlie
operations in Australia decreased by 3% to 86,500 ounces during the second
quarter of 1994 from 88,900 ounces in the 1993 second quarter. The
decrease in production primarily is due to the payment of 2,900 ounces to
HGAL's joint venture partner under the disproportionate sharing
arrangement. Cash costs at the Kalgoorlie operations increased to $256 per
ounce in the 1994 second quarter compared to $239 in 1993 second quarter
primarily as a result of the strengthening Australian dollar. Production
at the El Hueso mine in Chile declined to 13,600 ounces during the second
quarter of 1994 from 19,700 ounces in the second quarter of 1993 reflecting
fewer tons placed under leach at lower grades.
7
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis (continued)
- - -----------------------------------------------
The Company's overall cash cost per ounce during the second quarter of 1994
was $245 compared to $230 in the second quarter of 1993.
Year-to-date revenue of $334.0 million from product sales during 1994 was
lower than revenue of $347.6 million during the first six months of 1993
reflecting a higher average realized gold price offset by lower gold sales
volumes. Year to date the Company realized an average price of $383 per
ounce compared to $346 during the first half of 1993. The lower gold sales
volumes are due to the absence of production from mines sold, cessation of
mining activities at the Santa Fe mine, the lower 1994 second quarter
production discussed above, and a 13,200 ounce increase in finished gold
inventory during 1994 compared to a 39,900 ounce reduction in inventory
during the first half of 1993. The Company's overall cash cost per ounce
during the first half of 1994 was $240 compared to $228 in the first half
of 1993.
Year-to-date revenue from the Main Pass 299 sulphur mine increased to $10.6
million from $6.9 million during the first half of 1993. Operating losses
at the sulphur mine were $1.1 million during the second quarter of 1994
compared to losses of $1.8 million in the second quarter of 1993 and year-
to-date operating losses were $2.2 million compared to losses of $4.5
million in the first half of 1993. The improved operating performance
reflects continuing cost control measures and an increase in sulphur
production, which reached 6,000 tons per day during the second quarter of
1994.
Depreciation, depletion and amortization expense of $21.1 million and $41.2
million during the second quarter and first half of 1994 declined from
$27.8 million and $52.8 million, respectively, in the comparable periods of
1993. The decrease in depreciation expense reflects the lower 1994
production, reserve expansions at the McLaughlin and Kalgoorlie operations,
and the write-down of the oil and gas assets at the Main Pass 299 mine at
December 31, 1993.
Administrative and general expenses declined to $18.8 million during the
first half of 1994 compared to $20.8 million in 1993 reflecting continued
cost restraints and the impact of the 1992 and 1993 restructuring programs.
Exploration expense of $8.0 million in the first half of 1994 compares to
$8.1 million in the first half of 1993 reflecting an increase in spending
during 1994 at the Ruby Hill advanced exploration project near Eureka,
Nevada offset by the cessation of the North Homestake Project in South
Dakota during the first quarter of 1994.
Other expenses of $5.8 million in the first half of 1994 include $5.0
million of additional reclamation accruals at non-operating properties.
Other expenses of $5.4 million in the first half of 1993 include $2.9
million of pre-feasibility costs related to the Eskay Creek project and
$1.9 million related to the reorganization of HGAL.
On May 5, 1994, the Company completed the sale of its interest in the Dee
mine to Rayrock Mines, Inc. for $16.5 million. Rayrock assumed
responsibility for and indemnified Homestake against all related
environmental and reclamation matters.
During the second quarter of 1994 Prime exchanged five million special
warrants, which were issued on March 9, 1994, for five million common
shares of Prime. Net proceeds of $31.9 million from this issue will be
used to fund a portion of the Eskay Creek project development costs. As a
result of the issuance of shares, Homestake's interest in Prime was reduced
to 50.6%.
Approximately one-half of Homestake's gold sales are generated outside the
United States, principally in Canada and Australia. The value of these
countries' currencies can fluctuate significantly compared with the U.S.
dollar. In 1993, the Company implemented a program to establish exchange
rate ranges within which a portion of U.S. dollar receipts from the sale of
gold may be converted into the currencies of these countries. Under
existing SEC pronouncements, contracts entered into under this program do
not qualify for hedge accounting and must be marked to market. At June 30,
1994 the Company had a net unrealized gain of $2.4 million on open
contracts.
Other income in the first half of 1994 includes the gains on the sale of
the Dee mine and dilution of the Company's interest in Prime, net gains of
$2.6 million related to contracts entered into under the foreign currency
protection program, $1.8 million of insurance proceeds and a $1.3 million
gain on the sale of HGAL's Fortnum property. Other income in the 1993
first half includes a net loss of $0.4 million associated with the foreign
currency protection program and a $4.0 million gain on the sale of a
mineral property in Canada.
8
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis (continued)
- - -----------------------------------------------
GOLD PRODUCTION
The following charts detail Homestake's economic interest in gold
production by location and revenue and costs per ounce.
<TABLE>
<CAPTION>
Production
(Ounces in thousands)
Three Months Ended Three Months Ended
Percentage June 30, June 30,
Mine Ownership (%) 1994 1993 1994 1993
- - ---- ------------ ------------------ -----------------
<S> <C> <C> <C> <C> <C>
Homestake 100 97.4 121.8 200.6 229.7
McLaughlin 100 66.1 76.2 132.9 153.5
Round
Mountain 25 25.3 23.7 59.3 42.8
Santa Fe 100 5.3 14.4 13.4 28.3
Marigold 33 7.3 8.0 14.3 15.8
Pinson 26 3.0 3.1 6.3 6.2
Dee 44 3.6 2.0 6.5
Mineral
Hill 50 5.3 11.6
------- ------- ------- -------
Total United
States 204.4 256.1 428.8 494.4
Williams 50 61.2 63.7 122.9 130.7
David Bell 50 24.3 21.9 47.3 50.8
Quarter Claim 25 4.0 1.8 5.9 7.5
Nickel Plate 100 22.5 17.5 46.5 35.7
Snip (1) 40 12.4 16.1 25.2 31.7
Golden Bear 100 13.4 28.5
------- ------- ------- -------
Total Canada 124.4 134.4 247.8 284.9
Kalgoorlie,
Australia 50 86.5 88.9 176.4 159.2
El Hueso,
Chile 100 13.6 19.7 28.2 41.1
Torres, Mexico 30 3.5 3.9 5.7 7.1
------- ------- ------- -------
Total Production 432.4 503.0 886.9 986.7
Minority Interest (21.9) (23.8) (44.3) (43.8)
------- ------- ------- -------
Homestake's Share 410.5 479.2 842.6 942.9
======= ======= ======= =======
</TABLE>
9
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis (continued)
- - ------------------------------------------------
<TABLE>
<CAPTION>
Cash Operating Costs
(Dollars per ounce)
Three Months Ended Three Months Ended
Percentage June 30, June 30,
Mine Ownership (%) 1994 1993 1994 1993
- - ---- ------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
Homestake 100 $294 $253 $274 $255
McLaughlin 100 235 193 233 189
Round Mountain 25 206 225 177 242
Santa Fe 100 176 278 158 255
Marigold 33 182 219 211 220
Pinson 26 260 275 281 288
Dee 44 251 407 366
Mineral Hill 50 272 252
Williams 50 186 197 192 196
David Bell 50 166 204 170 165
Quarter Claim 25 119 230 139 130
Nickel Plate 100 289 312 284 304
Snip (1) 40 182 160 170 140
Golden Bear 100 191 229
Kalgoorlie 50 256 239 261 246
El Hueso,
Chile 100 419 282 378 263
Torres,
Mexico 30 304 207 317 291
Weighted Average $245 $230 $240 $228
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
Per Ounce of Gold 1994 1993 1994 1993
- - ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Average Realized Price $382 $360 $383 $346
Cash Operating Costs 245 230 240 228
Non-Cash Costs (2) 51 51 48 51
<FN>
(1) Production and cash costs relate to gold contained in concentrates
and recovered from dore.
(2) Includes depreciation, depletion, amortization and reclamation
costs.
</TABLE>
10
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis (continued)
- - -----------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
Cash provided by operations totaled $59.1 million in the first half of 1994
compared to $81.0 million in the 1993 first half. Working capital at June
30, 1994 amounted to $241.9 million, including $199.7 million in cash and
short-term investments.
Capital additions of $33.4 million during the first half of 1994 include
$13.0 million at the Homestake mine primarily for Open Cut development and
$12.5 million at the Eskay Creek project. Approximately $45 million
(HGAL's share) of capital expenditures for mill expansions and
modifications are currently planned at the Kalgoorlie operations during
1994 and 1995. The modifications 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.
In February 1994, the Company repaid its $8.3 million of Australian finance
lease debt. At June 30, 1994, the Company has no required debt payments
until the year 2000. Additionally, Homestake has a $150 million line of
credit which provides for borrowings to be drawn in U.S. dollars, Canadian
dollars, gold loans or a combination of these. No amounts have been
borrowed under this facility.
During the second quarter of 1994 the Company increased its quarterly
dividend from $0.025 to $0.05 per share. For the six months ended June 30,
1994 the Company paid common stock dividends of $10.3 million compared to
$6.8 million in the comparable period of 1993.
The Company believes that the combination of cash, investments, available
lines of credit and future cash flows from operations is expected to be
more than sufficient to meet normal operating requirements.
11
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Part II - OTHER INFORMATION
- - ---------------------------
Item 1. Legal Proceedings
- - --------------------------
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 alleged 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 alleged that
Homestake and Whitewood misrepresented their intent to mine the tailings in
order to prevent Goldstake from mining the tailings. The complaint also
alleged 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 claimed unspecified compensatory and punitive
damages. The litigation has been stayed and the issues will be arbitrated
in South Dakota in November 1994. During the second quarter of 1994
Goldstake amended its claim to allege actual damages of $137.5 million. In
the opinion of the Company, the claim is without merit and the Company is
vigorously defending.
Item 4. Submission of Matters to a Vote of Security Holders
- - ------------------------------------------------------------
At the Annual Meeting of Shareholders held on May 10, 1994, shareholders
voted on and approved 1) the election of five Class I Directors to serve
until the 1997 Annual Meeting and 2) the appointment of Coopers & Lybrand
as independent auditors for 1994. Shareholder votes were as follows:
(1) The election of five Class I Directors:
<TABLE>
<CAPTION>
Votes for Votes Withheld
------------ --------------
<S> <C> <C>
M. Norman Anderson 107,827,102 652,704
Robert H. Clark, Jr. 108,386,221 93,585
Douglas W. Fuerstenau 108,206,063 273,743
Glen L. Ryland 107,836,863 642,943
Berne A. Schepman 108,180,530 299,276
</TABLE>
In addition to the Class I Directors, the following directors
continued in office: Hadley Case, Harry M. Conger, G. Robert Durham,
Henry G. Grundstedt, William A. Humphrey, Robert K. Jaedicke, John
Neerhout, Jr., Stuart T. Peeler and Peter Steen. Effective August 9,
1994 Peter Steen tendered his resignation as Director and as President
and Chief Operating Officer of the Company.
(2) Approval of the appointment of Coopers & Lybrand as independent
auditors:
<TABLE>
<CAPTION>
Votes for Votes Against Abstain
----------- ------------- -------
<C> <C> <C>
107,393,823 246,524 839,459
</TABLE>
Item 6.
- - -------
(a) Exhibits Page Number
-----------
11 - Computation of Earnings Per Share 14
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30,
1994.
12
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
SIGNATURES
----------
Pursuant to the requirements 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: August 10, 1994 By: /s/ Gene G. Elam
--------------- -----------------
Gene G. Elam
Vice President, Finance
and Chief Financial
Officer
Date: August 10, 1994 By: /s/ David W. Peat
--------------- -----------------
David W. Peat
Controller and Chief
Accounting Officer
13
<PAGE>
<PAGE>
EXHIBIT 11
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Computation of Earnings Per Share (unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
PRIMARY:
Earnings:
Net income $32,955 $11,294 $57,169 $16,855
Less Homestake Canada
Inc. dividends on
Series 1 second
preference shares (382) (769)
------- -------- ------- --------
Net income applicable
to primary earnings
per share
calculation $32,955 $10,912 $57,169 $16,086
======= ======== ======= ========
Weighted average number
of shares outstanding 137,735 136,906 137,705 136,842
======= ======== ======= ========
Net income per share
- primary $ 0.24 $ 0.08 $ 0.42 $ 0.12
======= ======== ======= ========
FULLY DILUTED:
Earnings:
Net income $32,955 $11,294 $57,169 $16,855
Add: Interest relating
to 5.5% convertible
subordinated notes,
net of tax 1,585 104 3,232 104
Amortization of
issuance costs
relating to 5.5%
convertible
subordinated notes,
net of tax 108 10 220 10
Less Homestake Canada Inc.
dividends on
Series 1 second
preference shares (382) (769)
------- -------- ------- --------
Net income applicable to
fully diluted
earnings per share
calculation $34,648 $11,026 $60,621 $16,200
======= ======== ======= ========
Weighted average number
of shares outstanding:
Common shares 137,735 136,906 137,705 136,842
Additional shares
relating to
conversion of 5.5%
convertible
subordinated notes 6,505 578 6,505 289
------- -------- ------- --------
144,240 137,484 144,210 137,131
======= ======== ======= ========
Net income per share
- fully diluted $ 0.24 $ 0.08 $ 0.42 $ 0.12
======= ======== ======= ========
</TABLE>
14
<PAGE>
