<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 15, 1995
REGISTRATION NO. 33-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HOMESTAKE MINING COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 1041 94-2934609
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) No.)
</TABLE>
650 CALIFORNIA STREET, SAN FRANCISCO, CALIFORNIA 94108-2788
(415) 981-8150
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
WAYNE KIRK
VICE PRESIDENT AND GENERAL COUNSEL
HOMESTAKE MINING COMPANY
650 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94108-2788
(415) 981-8150
(Name, address, including zip code, and telephone number,
including area code of agent for service)
------------------------
COPIES TO:
MICHELLE L. JOHNSON PETER CAMERON
THELEN, MARRIN, JOHNSON & BRIDGES ALLEN ALLEN & HEMSLEY
Two Embarcadero Center The Chifley Tower
Suite 2100 2 Chifley Square
San Francisco, California Sydney NSW
U.S.A. 94111 Australia 2000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS PROMPTLY AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION
STATEMENT.
------------------------
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT (1) PRICE (1) FEE (1)
<S> <C> <C> <C> <C>
Common Stock, $1.00 par
value (2)............... 9,755,000 $16.44 $160,417,947 $55,316.53
<FN>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933 on the basis of
U.S.$1.4636, the average of the high and low prices of the ordinary shares
of Homestake Gold of Australia Limited on the Australian Stock Exchange on
September 11, 1995, converted to U.S. dollars at the noon rate on September
11, 1995, as certified by the Federal Reserve Bank of New York.
(2) Each share of Common Stock, $1.00 par value, includes one Right issued
pursuant to the Registrant's Shareholder Rights Plan.
</TABLE>
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
HOMESTAKE MINING COMPANY
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(B)
<TABLE>
<CAPTION>
ITEM NO. LOCATION IN PROSPECTUS
------------- ---------------------------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ Inside Front Cover Page of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information............................. SUMMARY OF OFFER
The Offer;
Value of the Offer and Premium to HGAL
Share Price;
Investment Considerations and Risks in
Respect of the Share Offer;
Overview of Homestake;
Overview of HGAL;
Purpose of the Offer;
Intentions about Business of HGAL;
Selected Financial Data;
Australian and United States Tax
Considerations for HGAL Shareholders;
Compulsory Acquisition and Possible
Delisting;
Approvals
4. Terms of the Transaction........................... SUMMARY OF OFFER
The Offer;
Value of the Offer and Premium to HGAL
Share Price;
Market Prices of Homestake and HGAL
Shares;
Dividends;
Investment Considerations and Risk Factors
in Respect of the Share Offer;
Overview of Homestake;
Overview of HGAL;
Purpose of the Offer;
Intentions about Business of HGAL;
Selected Financial Data;
Accounting Treatment;
Resale of Homestake Shares;
Australian and United States Tax
Considerations for HGAL Shareholders;
Compulsory Acquisition and Possible
Delisting;
Approvals;
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. LOCATION IN PROSPECTUS
------------- ---------------------------------------------------
<S> <C> <C>
THE OFFER
The Offer;
Consideration;
Period of Offer;
How to Accept this Offer;
Offerees;
Entitlement of Homestake;
HGAL Capital;
Effect of Acceptance of This Offer;
Obligations of Homestake;
Variation;
PART A STATEMENT
Proposed Takeover Offers;
Information about Homestake;
Information about HGAL;
Information about the Transaction;
Legal Matters
5. Pro Forma Financial Information.................... SUMMARY OF OFFER
Selected Financial Data;
Appendix D
6. Material Contacts with the Company Being
Acquired.......................................... PART A STATEMENT
Information about HGAL;
Appendix J
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters..... Not Applicable
8. Interest of Named Experts and Counsel.............. Legal Matters; Independent Accountants
PART A STATEMENT
Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities....................................... Not Applicable
10. Information with Respect to S-3 Registrants........ Not Applicable
11. Incorporation of Certain Information by
Reference......................................... Incorporation of Certain Documents by Reference
12. Information with Respect to S-2 or S-3
Registrants....................................... Not Applicable
13. Incorporation of Certain Information by
Reference......................................... Not Applicable
14. Information with Respect to Registrants Other Than
S-3 or S-2 Registrants............................ Not Applicable
15. Information with Respect to S-3 Companies.......... Not Applicable
16. Information with Respect to S-2 or S-3 Companies... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. LOCATION IN PROSPECTUS
------------- ---------------------------------------------------
<S> <C> <C>
17. Information with Respect to Companies Other Than
S-2 or S-3 Companies*............................. SUMMARY OF OFFER
Overview of HGAL;
Selected Financial Data;
PART A STATEMENT
Information about HGAL;
Appendices H, I, J and K
18. Information if Proxies, Consents or Authorizations
are to be Solicited............................... Not Applicable
19. Information if Proxies, Consents or Authorizations
are not to be Solicited in an Exchange Offer...... THE OFFER
Entitlement of Homestake;
HGAL Capital;
PART A STATEMENT
Information about HGAL
<FN>
------------------------
* Pursuant to Instruction F to Form S-4, information with respect to HGAL is
being provided in accordance with Item 17 of Form F-4.
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE
SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH JURISDICTION.
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
THIS IS AN IMPORTANT DOCUMENT THAT REQUIRES YOUR IMMEDIATE ATTENTION
IF YOU ARE IN DOUBT AS TO HOW TO DEAL WITH IT
PLEASE CONSULT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER
[HOMESTAKE LOGO]
------------------------
HOMESTAKE MINING COMPANY
(A.R.B.N. 070 799 067)
------------------------
UNCONDITIONAL OFFER TO ACQUIRE
ALL OF YOUR FULLY PAID ORDINARY SHARES OF
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(A.C.N. 008 143 137)
ON THE BASIS OF
0.089 SHARES OF HOMESTAKE COMMON STOCK FOR EACH FULLY PAID HGAL ORDINARY SHARE
OR
A$1.90 IN CASH FOR EACH FULLY PAID HGAL ORDINARY SHARE
THIS OFFER IS MADE FOR THE SECURITIES OF AN AUSTRALIAN COMPANY AND IS SUBJECT TO
COMPLIANCE WITH APPLICABLE AUSTRALIAN LAW. HGAL FINANCIAL INFORMATION HAS BEEN
PREPARED IN ACCORDANCE WITH AUSTRALIAN ACCOUNTING PRINCIPLES.
HOMESTAKE FINANCIAL INFORMATION AND DISCLOSURE REGARDING ORE RESERVES AND
ADDITIONAL MINERAL DEPOSITS HAS BEEN PREPARED IN ACCORDANCE WITH UNITED STATES
STANDARDS. THESE STANDARDS DIFFER FROM THOSE APPLICABLE IN AUSTRALIA. AN
EXPLANATION OF THE DIFFERENCES BETWEEN UNITED STATES AND AUSTRALIAN STANDARDS
REGARDING CALCULATION OF ORE RESERVES AND ADDITIONAL MINERAL DEPOSITS APPEARS IN
CLAUSE 2.2 OF THE PART A STATEMENT AND AN EXPLANATION OF THE DIFFERENCES BETWEEN
UNITED STATES AND AUSTRALIAN ACCOUNTING PRINCIPLES APPEARS IN APPENDICES K AND L
TO THIS OFFER DOCUMENT.
ADVISERS TO HOMESTAKE MINING COMPANY
BARING BROTHERS BURROWS & CO LIMITED ALLEN ALLEN & HEMSLEY
FINANCIAL ADVISERS LEGAL ADVISERS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENCE.
THE DATE OF THIS OFFER DOCUMENT IS [ ] OCTOBER 1995.
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
This document (the "Offer Document") constitutes a prospectus under United
States securities laws and includes the Offer and Part A statement required in
respect of a takeover scheme under Australian securities laws.
The Share Offer is not being made to HGAL shareholders in any jurisdiction in
which the making or acceptance of the Share Offer would not be in compliance
with the laws of such jurisdiction. Where this restriction applies, then
notwithstanding any other provision of the Offer and any election an HGAL
shareholder may make, that person shall only be entitled to receive the
consideration specified in the Cash Offer. In addition, Homestake may, in its
sole discretion, take such action as it may deem necessary to make the Share
Offer in any such jurisdiction and extend the Share Offer to HGAL shareholders
in such jurisdiction.
No broker, dealer, salesperson or other person has been authorised to give any
information or make any representation other than those contained or
incorporated by reference in this Offer Document and, if given or made, such
information or representation must not be relied upon as having been authorised
by Homestake.
In any jurisdiction in which the Offer is required to be made by a licensed
broker or dealer, the Offer shall be made on behalf of Homestake by brokers and
dealers licensed under the laws of that jurisdiction.
Neither the delivery of this Offer Document nor any exchange or sale of shares
pursuant to this Offer Document shall, under any circumstances, create any
implication that there has been no change in the affairs of Homestake or HGAL
since the date as of which information is furnished or the date hereof.
References to "U.S.$" and "U.S. dollars" are to United States dollars.
References to "A$" are to Australian dollars. In the appendices, unless
otherwise indicated, documents prepared by Homestake present financial
information in United States dollars and documents prepared by HGAL present
financial information in Australian dollars.
AVAILABLE INFORMATION
Homestake Shares are listed on the New York Stock Exchange ("NYSE"), traded on
the Swiss Stock Exchange (Basel, Geneva and Zurich) and quoted on Australian
Stock Exchange Limited ("ASX"). Homestake is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and in accordance therewith, files reports and other information with the
United States Securities and Exchange Commission ("SEC"). Reports, registration
and proxy statements and other information filed by Homestake with the SEC can
be inspected and copied at prescribed rates at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such reports, statements and other information are also
available for inspection and copying at the SEC's regional offices in New York,
at Seven World Trade Center, Suite 1300, New York, NY 10048 and in Chicago at
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, IL 60611,
and at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
Reports and other information filed by Homestake at the ASX may be inspected and
copied at any office of the ASX.
HGAL Shares are quoted on the ASX. Material filed with the ASX can be inspected
and copied at any office of the ASX.
This Offer Document is part of a Registration Statement filed with the SEC. It
does not contain all the information set forth in the Registration Statement,
certain portions of which have been omitted pursuant to the Rules and
Regulations of the SEC. Reference is made to those portions for further
information with respect to Homestake.
--------------------------------------------------------------------------------
ii
<PAGE>
--------------------------------------------------------------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Homestake with the SEC are specifically
incorporated by reference in this Offer Document and form an integral part of
this Offering:
(a) Annual Report on Form 10-K for the year ended 31 December 1994
(Appendices C and D);
(b) Quarterly Reports on Form 10-Q for the quarters ended 31 March
1995 and 30 June 1995 (Appendices E and F);
(c) Current Reports on Form 8-K dated 20 March 1995, 14 August 1995
and 25 August 1995; and
(d) Proxy Statement for 1995 Annual Meeting (Appendix G).
All reports and other documents filed by Homestake with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Offer Document and prior to the expiry of the Offer (a "Subsequent Filing")
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing of such reports and other documents.
Any statement contained herein or in a document incorporated by reference in
this Offer Document will be deemed to be modified or superseded for the purposes
of this Offer Document to the extent that a statement contained in any
Subsequent Filing modifies or supersedes that statement. Any statement so
modified or superseded will not be deemed, except as so modified or superseded,
to constitute a part of this Offer Document.
SUCH DOCUMENTS (OTHER THAN EXHIBITS THERETO UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) WILL BE AVAILABLE
WITHOUT CHARGE TO EACH PERSON TO WHOM THIS OFFER DOCUMENT IS DELIVERED, UPON
REQUEST DIRECTED TO:
(A) THE CORPORATE SECRETARY OF HOMESTAKE, 650 CALIFORNIA STREET, SAN
FRANCISCO, CALIFORNIA 94108-2788, TELEPHONE NUMBER (415)
981-8150.
(B) THE MANAGER, ERNST & YOUNG REGISTRY SERVICES PTY LIMITED, LEVEL
2, 321 KENT STREET, SYDNEY, NEW SOUTH WALES 2000, TELEPHONE
NUMBER (02) 290 4111.
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE
BY NOVEMBER 1995.
LEGAL MATTERS
Certain legal matters in connection with the issue of Homestake Shares pursuant
to the Offer have been passed on by Thelen, Marrin, Johnson & Bridges, San
Francisco, California. The description of the United States federal income tax
consequences of the Offer to HGAL shareholders reflects the opinion of Thelen,
Marrin, Johnson & Bridges. The description of Australian federal income tax
consequences of the Offer to HGAL Shareholders reflects the opinion of Allen
Allen & Hemsley, Sydney, Australia.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements and the related financial statement
schedules of Homestake for 31 December 1994 and 1993 and for each of the three
years in the period ended 31 December 1994 included in this Offer Document have
been audited by Coopers & Lybrand L.L.P., San Francisco, California,
--------------------------------------------------------------------------------
iii
<PAGE>
--------------------------------------------------------------------------------
independent accountants, as stated in that firm's reports appearing with the
financial statements included in Appendices C and D, and have been so included
in reliance upon such report given upon the authority of that firm as experts in
accounting and auditing.
The pro forma condensed consolidated statement of operations for the year ended
31 December 1994 appearing in Clause 4.1 of the Part A statement of the Offer
Document and the forecasted condensed statements of consolidated operations and
forecasted condensed statements of consolidated cash flows for the six months
ending 31 December 1995 and the year ending 31 December 1996, appearing in
Clause 4.2 of the Part A statement of the Offer Document, have been examined by
Coopers & Lybrand L.L.P., San Francisco, California, independent accountants,
and are included herein in reliance on the authority of that firm as experts in
reporting on examinations of pro forma financial information and financial
forecasts.
With respect to the unaudited interim financial information of Homestake for the
six months ended 30 June 1995 included in Appendix F to this Offer Document and
the pro forma condensed consolidated balance sheet as of 30 June 1995 and pro
forma condensed consolidated statement of operations for the six months then
ended included in this Offer Document in Clause 4.1 of the Part A statement, the
independent accountants, Coopers & Lybrand L.L.P., San Francisco, California,
have reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their separate
report on the condensed consolidated balance sheet as of 30 June 1995 and the
related condensed consolidated statement of operations for the six months ended
30 June 1995 appearing in Appendix F and their report on the pro forma condensed
consolidated financial information for the six months ended 30 June 1995
appearing in Clause 4.1 of the Part A statement of the Offer Document, states
that they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their reports on
such information should be restricted in light of the limited nature of the
review procedures applied. The accountants are not subject to the liability
provisions of Section 11 of the Securities Act of 1933 for their reports on the
unaudited interim financial information because those reports are not "reports"
or "parts" of the registration statement prepared or certified by the
accountants within the meaning of Sections 7 and 11 of the Act.
The investigating accountant's report in Appendix A of this Offer Document with
respect to Homestake's:
- summarised audited historical financial information for each of
the three years in the period ended 31 December 1994;
- summarised unaudited interim financial information for the six
months ended 30 June 1995; and
- pro forma condensed consolidated financial information for the
six month and twelve month periods ended 30 June 1995 and 31
December 1996, respectively
appearing in Sections 2 and 4 of this Offer Document, has been prepared by
Coopers & Lybrand (Securities) Limited, Sydney, Australia, and is included
herein in reliance on the authority of that Company as experts in accounting and
auditing. The degree of reliance on the investigating accountant's report should
be restricted in the light of its stated scope.
The consolidated balance sheets of HGAL as of 31 December 1994 and 1993, and the
profit and loss accounts and statements of cash flows for each of the three
years in the period ended 31 December 1994, included in this Offer Document,
have been audited by Coopers & Lybrand, Australia, chartered accountants, as
stated in that firm's reports appearing with the financial statements included
in Appendix H, and have been so included in reliance upon such reports given the
authority of that firm as experts in auditing and accounting. With respect to
the unaudited interim financial information of HGAL for the six months ended 30
June 1995 included in Appendix I to this Offer Document and the U.S. GAAP
reconciliation of the condensed balance sheets and related condensed profit and
loss accounts of HGAL for the years ended 31 December 1994 and 31 December 1993
and the half year ended 30 June 1995, included in Appendix K to
--------------------------------------------------------------------------------
iv
<PAGE>
--------------------------------------------------------------------------------
this Offer Document, the independent accountants, Coopers & Lybrand, Australia,
have reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their separate
report on the financial statements of HGAL for the half year ended 30 June 1995
appearing in Appendix I and their report on the U.S. GAAP reconciliation of the
condensed balance sheets and related condensed profit and loss accounts of HGAL
for the years ended 31 December 1993 and 31 December 1994 and the half year
ended 30 June 1995 appearing in Appendix K, states that they did not audit and
they do not express an opinion on that financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures applied. The accountants
are not subject to the liability provisions of Section 11 of the Securities Act
of 1993 for their reports on the unaudited interim financial information and the
U.S. GAAP reconciliation of the condensed balance sheets and related condensed
profit and loss accounts of HGAL for the years ended 31 December 1993 and 31
December 1994 and the half year ended 30 June 1995 because those reports are not
"reports" or "parts" of the registration statement prepared or certified by the
accountants within the meaning of Sections 7 and 11 of the Act.
Apart from the preparation of its reports, appearing in the form and context in
which they are included in this Offer Document, Coopers & Lybrand L.L.P., San
Francisco, California, independent accountants, Coopers & Lybrand Australia,
chartered accountants, and Coopers & Lybrand (Securities) Limited, Australia,
have had no involvement in the preparation of this Offer Document and have not
authorised or caused the issue of this Offer Document.
EXCHANGE RATES
The exchange rates expressed in United States dollars for A$1.00 at the end of
the five years ended 31 December 1994 and the period ended [*] October 1995, and
the average, the high and the low exchange rates for each of such periods were
as follows (being the noon buying rates in New York City for cable transfers in
Australian dollars as certified for customs purposes by the Federal Reserve Bank
of New York):
<TABLE>
<CAPTION>
1 JANUARY
TO 31 DECEMBER
[*] OCTOBER -----------------------------------------------------
1995 1994 1993 1992 1991 1990
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
At end of period..................................... .7753 .6783 .6890 .7593 .7720
Average for period................................... .7345 .6785 .7314 .7779 .7807
High for period...................................... .7778 .7213 .7700 .8011 .8351
Low for period....................................... .6840 .6450 .6822 .7507 .7452
</TABLE>
The exchange rates expressed in Australian dollars for U.S.$1.00 at the end of
the five years ended 31 December 1994 and the period ended [ ] October 1995,
and the average, the high and the low exchange rates for each of such periods
were as follows (being the inverse of the exchange rates set forth in the table
above):
<TABLE>
<CAPTION>
1 JANUARY
TO 31 DECEMBER
[*] OCTOBER -----------------------------------------------------
1995 1994 1993 1992 1991 1990
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
At end of period......................... 1.2898 1.4743 1.4514 1.3170 1.2953
Average for period....................... 1.3615 1.4738 1.3672 1.2855 1.2809
High for period.......................... 1.2857 1.3864 1.2987 1.2483 1.1975
Low for period........................... 1.4620 1.5504 1.4658 1.3321 1.3419
</TABLE>
The noon buying rates for Australian dollars on 11 August 1995 and on [*]
October 1995 as reported by the Federal Reserve Bank of New York were,
respectively, A$1.00 = U.S.$.7420 and A$1.00 = U.S.$[ ], and the inverse
of such rates were U.S.$1.00 = A$1.3477 and U.S.$1.00 = A$ , respectively.
--------------------------------------------------------------------------------
v
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
-------------
<S> <C> <C> <C>
LETTER FROM CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF HOMESTAKE...........................................
1
SECTION 1. DEFINITIONS.......................................................................... 3
SECTION 2. SUMMARY OF OFFER..................................................................... 6
1. The Offer................................................................. 6
2. Value of the Offer and Premium to HGAL Share Price........................ 7
3. Market Prices of Homestake and HGAL Shares; Dividends..................... 8
4. Investment Considerations and Risk Factors in Respect of the Share
Offer.................................................................... 8
5. Overview of Homestake..................................................... 9
6. Overview of HGAL.......................................................... 11
7. Purpose of the Offer...................................................... 12
8. Intentions about Business of HGAL......................................... 12
9. Selected Financial Data................................................... 12
10. Accounting Treatment...................................................... 20
11. Resale of Homestake Shares................................................ 20
12. Australian and United States Tax Considerations for HGAL Shareholders..... 20
13. Part B Statement.......................................................... 21
14. Compulsory Acquisition and Possible Delisting............................. 21
15. Approvals................................................................. 22
SECTION 3. THE OFFER............................................................................ 23
1. The Offer................................................................. 23
2. Consideration............................................................. 23
3. Period of Offer........................................................... 24
4. How to Accept this Offer.................................................. 25
5. Offerees.................................................................. 26
6. Entitlement of Homestake; HGAL Capital.................................... 27
7. Effect of Acceptance of this Offer........................................ 28
8. Obligations of Homestake.................................................. 29
9. Variation................................................................. 30
10. Definitions and Interpretation............................................ 30
SECTION 4. PART A STATEMENT..................................................................... 32
1. Proposed Takeover Offers.................................................. 32
2. Information about Homestake............................................... 33
3. Information about HGAL.................................................... 46
4. Information about the Transaction......................................... 48
5. Information about Homestake Shares........................................ 62
6. Legal Matters............................................................. 79
7. Interpretation............................................................ 88
</TABLE>
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vi
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE NO.
-------------
<S> <C> <C> <C>
APPENDICES:
APPENDIX A - INVESTIGATING ACCOUNTANT'S REPORT...................... A-1
APPENDIX B - CORPORATIONS LAW - EXEMPTIONS AND MODIFICATIONS........ B-1
APPENDIX C - HOMESTAKE FORM 10-K FOR THE YEAR ENDED 31 DECEMBER
1994.................................................. C-1
APPENDIX D - HOMESTAKE FINANCIAL STATEMENTS AND MANAGEMENT'S
DISCUSSION AND ANALYSIS FOR THE YEAR ENDED 31 DECEMBER
1994.................................................. D-1
APPENDIX E - HOMESTAKE FORM 10-Q FOR THE QUARTER ENDED 31 MARCH
1995.................................................. E-1
APPENDIX F - HOMESTAKE FORM 10-Q FOR THE QUARTER ENDED 30 JUNE
1995.................................................. F-1
APPENDIX G - HOMESTAKE PROXY STATEMENT FOR THE 1995 ANNUAL MEETING
OF SHAREHOLDERS....................................... G-1
APPENDIX H - HGAL FINANCIAL STATEMENTS FOR THE YEARS ENDED 31
DECEMBER 1994 AND 1993................................ H-1
APPENDIX I - HGAL FINANCIAL STATEMENTS FOR THE HALF-YEARS ENDED 30
JUNE 1995 AND 1994 AND REVIEW OF OPERATIONS........... I-1
APPENDIX J - HGAL MANAGEMENT'S DISCUSSION AND ANALYSIS.............. J-1
APPENDIX K - HGAL DIFFERENCES BETWEEN AUSTRALIAN AND U.S. GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES........................ K-1
APPENDIX L - HOMESTAKE DIFFERENCES BETWEEN U.S. AND AUSTRALIAN
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.............. L-1
</TABLE>
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vii
<PAGE>
--------------------------------------------------------------------------------
[HOMESTAKE LETTERHEAD]
[ ] October 1995
To the Shareholders of
Homestake Gold of Australia Limited
On 14 August 1995, Homestake Mining Company ("Homestake") announced its
intention to make an offer for the shares it does not own in Homestake Gold of
Australia Limited ("HGAL"). I now have pleasure in enclosing a formal Offer to
acquire all of your ordinary shares in HGAL.
Homestake is an international gold mining company, with major mines in the
United States, Canada and Australia (through HGAL). Homestake, directly and
through subsidiaries, has conducted business since 1877, maintaining a stock
listing on the New York Stock Exchange continuously since 1879.
Homestake is offering you the choice of receiving either:
(A) 0.089 shares of Homestake Common Stock for each fully paid HGAL ordinary
share that you own (the "Share Offer"); or
(B) A$1.90 in cash for each fully paid HGAL ordinary share that you own (the
"Cash Offer").
The enclosed Offer Document contains information on Homestake and the
considerations relevant to holding Homestake Shares. I suggest you read it
carefully.
Homestake holds approximately 81.5% of the HGAL Shares.
Reasons why you should accept the Offer include the following.
(A) BASED ON THE CLOSING PRICE OF HOMESTAKE SHARES ON THE NEW YORK STOCK
EXCHANGE AND CURRENCY EXCHANGE RATES ON 11 AUGUST 1995 (THE LAST TRADING
DAY BEFORE THE ANNOUNCEMENT OF THE BID) AND OCTOBER 1995, THE SHARE
OFFER REPRESENTS A PREMIUM OF 26.2% AND %, RESPECTIVELY, COMPARED WITH
THE CLOSING PRICE OF HGAL SHARES ON 11 AUGUST 1995. THE CASH OFFER
REPRESENTS A PREMIUM OF 20.3% COMPARED WITH THE CLOSING PRICE OF HGAL
SHARES ON 11 AUGUST 1995.
(B) The Share Offer gives HGAL shareholders the opportunity to enjoy an
interest in Homestake gold assets and exploration opportunities in the
United States, Canada and elsewhere, as well as the opportunity to
continue participation in the Kalgoorlie mines through a shareholding in
Homestake.
(C) As one of North America's largest gold mining companies, Homestake has
the financial strength to pursue significant development and exploration
projects. Homestake Shares are listed on the Australian Stock Exchange,
the New York Stock Exchange and the Swiss Stock Exchange, making
Homestake Shares a readily tradable investment.
Other advantages of an investment in Homestake are set out in Clause 2 of the
Offer, which is contained in Section 3 of this Offer Document and Clause 2.2 of
the Part A statement, which is contained in Section 4 of this Offer Document.
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
THE OFFER IS UNCONDITIONAL AND IS NOT SUBJECT TO A MINIMUM LEVEL OF ACCEPTANCE.
If you accept the Share Offer, you will be allotted Homestake Shares and sent a
cheque for any fractional entitlement as soon as practicable. If you accept the
Cash Offer, a cheque also will be sent to you as soon as practicable. Each
business day in Sydney, Ernst & Young Registry Services Pty Limited will
endeavour to process all valid acceptances received during the preceding
business day. In any event, you will be sent the consideration within seven days
of receipt of your valid acceptance.
The independent directors of HGAL recommend [description to come]. The reasons
for that recommendation appear in the Part B statement enclosed with the Offer
Document.
I look forward to welcoming you as a shareholder of Homestake.
Yours faithfully
Harry M Conger
Chairman and
Chief Executive Officer
--------------------------------------------------------------------------------
2
<PAGE>
DEFINITIONS
SECTION 1. DEFINITIONS
7.1 DEFINITIONS
In this Offer Document the following words have these meanings unless the
contrary intention appears or the context otherwise requires:
"ASSOCIATE" of a body corporate includes a reference to:
(a) a director or secretary of the body corporate;
(b) a related body corporate; or
(c) a director or secretary of a related body corporate.
"ASC" means Australian Securities Commission;
"ASX" means Australian Stock Exchange Limited;
"AUSTRALIAN GAAP" means Australian generally accepted accounting
principles;
"BROKER" means a person who is a share broker and a participant in CHESS;
"CHESS" means Clearing House Electronic Sub-register System, which
provides for electronic share transfers in Australia;
"CHESS HOLDING" means a holding of HGAL Shares on the CHESS subregister
of HGAL;
"CONTROLLING PARTICIPANT" means the broker or NBP in CHESS who is
designated as the controlling participant for shares in a CHESS Holding
in accordance with the SCH business rules;
"CORPORATIONS LAW" means the Corporations Law of New South Wales;
"DELAWARE LAW" means the Delaware General Corporations Law, as amended;
"DISTINCT PORTIONS" means separate holdings of HGAL Shares held by a
custodian, trustee or other nominee on behalf of one or more beneficial
holders;
"ENTITLEMENT" in relation to shares, includes shares which a person owns
or in which a person has a relevant interest, shares in which a person
who is an associate of that person has a relevant interest and shares to
which a person has a deemed entitlement and "ENTITLED" has a
corresponding meaning;
"EXCHANGE ACT" means the United States Securities Exchange Act of 1934,
as amended;
"EXCHANGE RATE" means the noon buying rate in New York City for cable
transfers in Australian dollars expressed in U.S. dollars as certified
for customs purposes by the Federal Reserve Bank of New York, or the
inverse thereof, as the case may be;
"HGAL" means Homestake Gold of Australia Limited (A.C.N. 008 143 137) of
1st Floor, 226 Great Eastern Highway, Belmont, Western Australia, 6104;
"HGAL EMPLOYEE OPTIONS" means options issued as at the date of this Offer
by HGAL under its employee option scheme;
3
<PAGE>
DEFINITIONS
"HGAL SHARES" means the fully paid ordinary shares of A$0.20 each in HGAL
on issue at the date of this Offer and all Rights attaching to them, and
those ordinary shares of A$0.20 each in HGAL which are issued by HGAL
during the Offer Period following the exercise of HGAL Employee Options
or payment of the amount unpaid on partly paid shares in HGAL and all
Rights attaching to them;
"HOMESTAKE" means Homestake Mining Company (A.R.B.N. [070 779 067]), a
Delaware corporation, of 650 California Street, San Francisco, California
94108-2788, United States of America;
"HOMESTAKE CERTIFICATE" means the Restated Certificate of Incorporation
of Homestake, in effect on the date of this Offer;
"HOMESTAKE SHARES" means shares of common stock, U.S.$1 par value, in
Homestake;
"JORC CODE" means the Australasian Code for reporting of Identified
Mineral Resources and Ore Reserves, September 1992, prepared by the Joint
Committee of the Australian Institute of Mining and Metallurgy,
Australian Institute of Geoscientists and Australian Mining Industry
Council;
"NYSE" means New York Stock Exchange;
"NEW YORK CITY TIME" means United States Eastern Standard time, or United
States Eastern Daylight time (if applicable);
"NBP" means a non-broker participant under the SCH business rules;
"OFFER PERIOD" means the period during which the Offers are to remain
open for acceptance, as specified in Clause 3.1 of the Offer;
"OFFERS" means the offers in Section 3 of this Offer Document and "OFFER"
means any one of the Offers;
"PART A STATEMENT" means the statement of Homestake set out in Section 4
of this Offer Document pursuant to Part A in Section 750 of the
Corporations Law;
"PERSON" means an incorporated or unincorporated body or association as
well as a natural person;
"RELEVANT INTEREST" in relation to a share, includes the power to vote or
dispose of a voting share in a body corporate;
"RIGHTS" means all accretions and rights attaching to or arising from the
HGAL Shares (including, without limiting the generality of the foregoing,
all rights to receive dividends and to receive or subscribe for shares,
stock units, notes or options and all other distributions or entitlements
declared, paid or issued by HGAL);
"SCH" means Securities Clearing House, the body which administers the
CHESS system in Australia;
"SCH BUSINESS RULES" means the business rules of the Securities Clearing
House;
"SEC" means the United States Securities and Exchange Commission;
4
<PAGE>
DEFINITIONS
"SWISS STOCK EXCHANGE" means the Swiss Stock Exchange with locations in
Basel, Geneva and Zurich;
"SYDNEY TIME" means Australian Eastern Standard Time or, if applicable,
Australian Eastern Summer Time;
"TAKEOVER SCHEME" means the takeover scheme constituted in accordance
with Division 1 of Part 6.3 of the Corporations Law pursuant to which
Homestake proposes to make offers to acquire all the HGAL Shares of which
Homestake is not the holder;
"TON" means a short ton of 2,000 pounds;
"TONNE" means a metric ton of 1,000 kilograms or 2,204.6 pounds;
"UNITED STATES HOLDER" means a person who holds shares and who is a
United States citizen or resident, a corporation organized under the laws
of the United States or any state thereof, and a trust or estate which is
not treated as a foreign trust or estate for federal income tax purposes;
"U.S. GAAP" means United States generally accepted accounting principles.
5
<PAGE>
SUMMARY OF OFFER
SECTION 2. SUMMARY OF OFFER
THE FOLLOWING IS A SUMMARY ONLY AND IS QUALIFIED BY THE DETAILED INFORMATION
CONTAINED IN THE SECTIONS ENTITLED "THE OFFER" AND "PART A STATEMENT," AND IN
THE APPENDICES. THIS SUMMARY IS INCORPORATED BY REFERENCE AND FORMS PART OF THE
PART A STATEMENT. HGAL SHAREHOLDERS ARE URGED TO READ THE OFFER DOCUMENT IN ITS
ENTIRETY.
1. THE OFFER
Homestake is offering HGAL shareholders the choice of receiving either:
(a) 0.089 Homestake Shares for each fully paid HGAL Share (the "Share
Offer"); or
(b) A$1.90 in cash for each fully paid HGAL Share (the "Cash Offer").
You cannot accept the Offer for less than all of your HGAL Shares.
THE OFFER IS NOT SUBJECT TO A MINIMUM LEVEL OF ACCEPTANCE OR ANY OTHER
CONDITION. If you accept the Share Offer, Homestake will allot Homestake
Shares to you and send the amount due to you for any fractional
entitlement as soon as practicable. If you accept the Cash Offer, you
will be sent a cheque for the amount due to you on the same basis. Each
business day in Sydney, Ernst & Young Registry Services Pty Limited will
endeavour to process all valid acceptances received during the preceding
business day. In any event, you will be sent the consideration within
seven days of receipt of your valid acceptance.
The Offer is due to close at 5.00 pm Sydney time on [*] November 1995. If
you wish to accept this Offer, you will need to ensure a valid acceptance
is received in Sydney before 5.00 pm (Sydney time) on that date or, if
you are lodging your acceptance in New York City, in New York City before
5.00 pm (New York City time) on the preceding business day.
Homestake will not allot fractional shares. If you choose the Share Offer
and your entitlement to Homestake Shares is not a whole number then you
will receive:
(a) the next lowest whole number of Homestake Shares; and
(b) payment by cheque in Australian dollars for the value of the
fractional entitlement, using the last trading price of Homestake
Shares on the ASX before the day Homestake receives your valid
acceptance.
If Homestake receives your valid acceptance but you do not indicate which
of the Share Offer or the Cash Offer you wish to accept, you will be
deemed to have accepted the Share Offer. However, if you are resident in
a jurisdiction where it would be illegal for Homestake to make or for you
to accept the Share Offer, you may only accept the Cash Offer.
HGAL had issued a total of 591,854,573 ordinary shares as at [*] October
1995, 482,538,026 of which are already owned by a subsidiary of
Homestake. As at [ ] October 1995, Homestake had 137,953,936 shares of
Common Stock outstanding. If all HGAL shareholders (and persons entitled
to become HGAL shareholders) were to accept the Share Offer, Homestake
would issue approximately 9,755,000 Homestake Shares, being approximately
6.6% of its shares outstanding as at [*] October 1995.
6
<PAGE>
SUMMARY OF OFFER
2. VALUE OF THE OFFER AND PREMIUM TO HGAL SHARE PRICE
Homestake announced its intention to make the Offer on 14 August 1995.
The following chart shows the closing prices for Homestake Shares on the
NYSE (in both U.S. and Australian dollars) and for HGAL Shares (in
Australian dollars) on the ASX on 11 August 1995 (the last trading day
before the Offer was announced) and [ ] October 1995:
<TABLE>
<CAPTION>
HOMESTAKE SHARES (NYSE) HGAL SHARES (ASX)
----------------------------- --------------------------
<S> <C> <C> <C> <C>
11 August 1995 U.S.$16.625 A$22.457* A$1.58
[ ] October 1995
</TABLE>
The Homestake Shares have been quoted on the ASX since 1995. On
[ ] October 1995, the closing price of the Homestake Shares on the ASX
was A$ .
The following table shows the equivalent market price (in both U.S. and
Australian dollars) on 11 August 1995 and [ ] October 1995 for 0.089
Homestake Shares, being the amount of Homestake Shares offered for each
HGAL Share, based on the closing prices of Homestake Shares on the NYSE
on those days:
<TABLE>
<S> <C> <C>
11 August 1995 U.S.$1.48 A$2.00*
[ ] October 1995
</TABLE>
Based on the information set out above, the Share Offer represents a
premium of 26.2% at 11 August and % at October compared to the
closing price of HGAL Shares on 11 August 1995. The Cash Offer represents
a premium of 20.3% compared to the closing price of HGAL Shares on 11
August 1995.
------------------------
* Australian dollar amounts calculated by multiplying the actual U.S.
dollar amounts by the Exchange Rate on that date.
The following graph shows the monthly closing price of HGAL Shares since
HGAL quotation on the ASX as compared with the Cash Offer, and the volume
of shares traded in each month.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HOMESTAKE GOLD AUST - MONTHLY DATA
<S> <C> <C> <C> <C>
Date Close Vol Cas
Oct87 $ 1.32 13 16.81584 1.9
Nov87 $ 1.53 11 16.97325 1.9
Dec87 $ 1.25 10 11.963313 1.9
Jan88 $ 0.84 5 3.888308 1.9
Feb88 $ 0.86 7 6.103296 1.9
Mar88 $ 1.02 10 10.50561 1.9
Apr88 $ 1.00 4 3.607146 1.9
May88 $ 0.97 7 6.91656 1.9
Jun88 $ 0.88 7 6.001625 1.9
Jul88 $ 0.92 3 3.036885 1.9
Aug88 $ 0.77 3 2.031444 1.9
Sep88 $ 0.58 7 3.96488 1.9
Oct88 $ 0.65 5 3.546648 1.9
Nov88 $ 0.48 5 2.577376 1.9
Dec88 $ 0.49 4 1.844152 1.9
Jan89 $ 0.63 8 4.961553 1.9
Feb89 $ 0.65 4 2.514813 1.9
Mar89 $ 0.73 8 5.674464 1.9
Apr89 $ 0.69 2 1.379156 1.9
May89 $ 0.63 1 0.879614 1.9
Jun89 $ 0.67 5 3.402641 1.9
Jul89 $ 0.84 8 6.406804 1.9
Aug89 $ 1.08 9 9.746198 1.9
Sep89 $ 1.12 8 9.051591 1.9
Oct89 $ 1.08 4 4.485558 1.9
Nov89 $ 1.40 15 20.96082 1.9
Dec89 $ 1.53 9 13.311725 1.9
Jan90 $ 1.92 11 20.68072 1.9
Feb90 $ 1.61 4 6.215876 1.9
Mar90 $ 1.49 4 5.71131 1.9
Apr90 $ 1.32 4 4.813402 1.9
May90 $ 1.48 6 8.503375 1.9
Jun90 $ 1.07 7 7.909608 1.9
Jul90 $ 1.40 9 12.93566 1.9
Aug90 $ 1.38 9 11.888268 1.9
Sep90 $ 1.42 1 1.2987592 1.9
Oct90 $ 1.19 5 5.87265 1.9
Nov90 $ 0.99 8 8.263666 1.9
Dec90 $ 0.82 5 3.8007 1.9
Jan91 $ 0.77 3 2.65727 1.9
Feb91 $ 0.71 3 2.35862 1.9
Mar91 $ 0.86 5 4.56144 1.9
Apr91 $ 0.78 5 3.77286 1.9
May91 $ 0.69 3 2.18109 1.9
Jun91 $ 0.72 7 5.38272 1.9
Jul91 $ 0.84 5 4.4562 1.9
Aug91 $ 0.65 8 5.12005 1.9
Sep91 $ 0.59 10 5.68347 1.9
Oct91 $ 0.68 6 4.3758 1.9
Nov91 $ 0.72 11 7.8336 1.9
Dec91 $ 0.80 6 4.7192 1.9
Jan92 $ 0.78 5 4.1691 1.9
Feb92 $ 0.79 6 4.72736 1.9
Mar92 $ 0.71 6 4.5156 1.9
Apr92 $ 0.66 4 2.48622 1.9
May92 $ 0.65 6 3.91365 1.9
Jun92 $ 0.78 9 6.64404 1.9
Jul92 $ 0.84 20 16.7664 1.9
Aug92 $ 0.80 8 6.3424 1.9
Sep92 $ 0.79 6 4.89563 1.9
Oct92 $ 0.81 5 3.90744 1.9
Nov92 $ 0.77 3 2.30153 1.9
Dec92 $ 0.78 7 5.20962 1.9
Jan93 $ 0.76 7 5.0806 1.9
Feb93 $ 0.82 11 9.266 1.9
Mar93 $ 1.00 9 8.867 1.9
Apr93 $ 1.33 10 12.8079 1.9
May93 $ 2.05 20 40.6515 1.9
Jun93 $ 1.95 6 12.0198 1.9
Jul93 $ 2.35 13 30.5735 1.9
Aug93 $ 2.00 13 25.76 1.9
Sep93 $ 1.58 7 10.57178 1.9
Oct93 $ 1.90 3 5.6487 1.9
Nov93 $ 1.78 3 5.93274 1.9
Dec93 $ 2.38 2 5.76674 1.9
Jan94 $ 2.18 9 20.09306 1.9
Feb94 $ 1.73 22 37.4199 1.9
Mar94 $ 2.05 10 19.96085 1.9
Apr94 $ 1.85 6 10.53575 1.9
May94 $ 1.83 5 9.45927 1.9
Jun94 $ 1.85 5 8.63765 1.9
Jul94 $ 1.79 3 5.64924 1.9
Aug94 $ 1.84 11 19.964 1.9
Sep94 $ 1.95 7 13.90155 1.9
Oct94 $ 1.85 4 6.697 1.9
Nov94 $ 1.51 7 10.56547 1.9
Dec94 $ 1.48 5 7.04184 1.9
Jan95 $ 1.26 3 4.0509 1.9
Feb95 $ 1.30 10 12.7868 1.9
Mar95 $ 1.38 9 12.25992 1.9
Apr95 $ 1.60 9 14.3776 1.9
May95 $ 1.48 3 4.03004 1.9
Jun95 $ 1.46 6 9.4389 1.9
Jul95 $ 1.54 6 8.87348 1.9
Aug95 $ 1.58 1 1.7064 1.9
654 809.82
$ 1.24
</TABLE>
7
<PAGE>
SUMMARY OF OFFER
3. MARKET PRICES OF HOMESTAKE AND HGAL SHARES; DIVIDENDS
The price ranges of the Homestake Shares on the NYSE and the HGAL Shares
on the ASX are set out in the following table for the periods indicated.
<TABLE>
<CAPTION>
HOMESTAKE SHARES
(NYSE) HGAL SHARES (ASX)
-------------------- --------------------
HIGH LOW HIGH LOW
--------- --------- --------- ---------
(U.S.$) (A$)
<S> <C> <C> <C> <C>
1990 23.625 15.250 1.963 0.750
1991 19.625 13.875 0.920 0.580
1992 16.500 10.250 0.890 0.610
1993 22.875 9.6250 2.500 0.700
1994 24.875 16.125 2.620 1.370
1995 through October
</TABLE>
For the period from [ ] September 1995 until October 1995, the high
and the low prices for Homestake Shares on the ASX were and ,
respectively.
Homestake has paid a dividend on Homestake Shares continuously (on a
quarterly basis) for more than 20 years. Homestake paid dividends of
U.S.$0.20 per share in 1990, 1991 and 1992, U.S.$0.10 per share in 1993,
and U.S.$0.175 per share in 1994. For the first three quarters of 1995,
Homestake has paid U.S.$0.15 per share, at a rate of U.S.$0.05 per share
per quarter. The Homestake Board of Directors conducts a quarterly review
of Homestake's cash situation and earnings and expenditure prospects in
deciding whether to pay dividends and the dividend level.
For the convenience of Australian residents, Homestake will pay dividends
in Australian dollars to shareholders who have an Australian address in
its register of shareholders. Those dividends will not be franked in
Australia and will be subject to U.S. withholding tax for non-U.S.
residents, (currently 15% for Australian residents). The Australian tax
considerations of receiving dividends from Homestake are summarised in
Clause 12 below and Clause 6.7 of the Part A statement.
HGAL has not paid a dividend since 1988.
4. INVESTMENT CONSIDERATIONS AND RISK FACTORS IN RESPECT OF THE SHARE OFFER
Potential advantages for HGAL shareholders who accept the Share Offer
include the following.
- Participation in Homestake's geographically diverse interests, which
comprise existing mines in the United States, Canada and Australia
(through HGAL), active exploration in the United States, Canada,
Australia and South America and, projects in Bulgaria and Russia.
- A shareholding in one of North America's largest gold mining
companies with a market capitalisation of U.S.$2.3 billion at 6
September 1995, and listings on the New York, Swiss and Australian
stock exchanges.
- Homestake has the financial strength to pursue significant
development and exploration projects.
- Continued participation in the HGAL Kalgoorlie operations.
8
<PAGE>
SUMMARY OF OFFER
Other considerations and risk factors in respect of investing in
Homestake Shares include the following.
- The business of mineral exploration, development and production by
its nature contains significant risks. The business depends on,
amongst other things, successful location of mineable ore reserves
and skillful management. Profitable mining of any ore bodies located
can be affected by unforeseen changes in operating circumstances,
ore reserves and technical issues.
- Because Homestake undertakes very limited hedging of its production,
fluctuations in the prices of gold (and to a lesser degree, silver)
will have a direct effect on the price of Homestake Shares.
- Fluctuations in the exchange rates between the Australian and
Canadian dollars in relation to the U.S. dollar will have a direct
effect on Homestake profitability, as revenue from production is
earned in U.S. dollars but expenses are incurred in the local
currencies of the relevant operation. Fluctuations in the exchange
rate between the U.S. dollar and the currency of the shareholder's
residence also will have a direct effect on the value of Homestake
Shares in local currencies.
- Changes in government regulations regarding environmental
protection, exploration and production activities in the numerous
jurisdictions in which Homestake operates could adversely affect
production or financial results.
HGAL shareholders who do not wish to participate in the opportunities and
risks of investing in Homestake may accept the Cash Offer.
5. OVERVIEW OF HOMESTAKE
Homestake is an international gold mining company, with major mines in
the United States, Canada and Australia (through its 81.5% interest in
HGAL). Homestake also owns 16.7% of a large sulphur mine in the Gulf of
Mexico.
Homestake, directly and through subsidiaries, has conducted business
since 1877, maintaining a stock listing on the NYSE continuously since
1879.
The principal mines in which Homestake has an interest are described
briefly below. The statistics for reserves and additional mineral
deposits which follow are stated as at 31 December 1994. Information with
respect to percentage ownership and production is given without
adjustment for minority interests in publicly held subsidiaries (HGAL and
Prime Resources Group Inc.). Information with respect to ore reserves and
additional mineral deposits has been adjusted for minority interests in
publicly held subsidiaries. See Clause 2.1 of the Part A statement and
Appendix C for additional information regarding ore reserves, production
and other information with respect to Homestake.
See Clause 6 below for recent information with respect to ore reserves
and mineral resources for HGAL's Kalgoorlie mines at 30 June 1995.
Information regarding Homestake's ore reserves and additional mineral
deposits has been prepared according to SEC standards, not the JORC Code.
Please refer to Clause 2.2 of the Part A statement for a statement of the
differences between the Australian standards for determining ore reserves
and mineral resources, and the SEC standards for determining ore reserves
and additional mineral deposits.
9
<PAGE>
SUMMARY OF OFFER
<TABLE>
<CAPTION>
ADDITIONAL
MINERAL
RESERVES DEPOSITS
HOMESTAKE AS AT AS AT
PERCENTAGE PRODUCTION FOR 31 DECEMBER 31 DECEMBER
GOLD MINES INTEREST(1) 1994(1, 2) 1994(2, 3) 1994(2, 3)
---------- --------------- --------------- ---------------
(OUNCES) (CONTAINED OUNCES)
<S> <C> <C> <C> <C>
UNITED STATES
The HOMESTAKE mine in Lead, South 100 393,934 4,138,000 4,261,000
Dakota has operated for almost
119 years. Operations consist of
an 8,000 foot deep underground
mine, open pit mine, mill and
refinery. The Homestake mine has
produced over 38 million ounces
of gold since 1877.
The MCLAUGHLIN open pit mine is 100 250,453 1,665,000 --
located in northern California.
The operation began production in
1985. Mining will cease in 1996
and processing of stockpiled ore
will continue until 2003 at a
significantly reduced level of
production.
The ROUND MOUNTAIN open pit mine 25 105,877 1,950,000 654,000
is located in central Nevada. The
property has been mined
intermittently since 1906 and was
reopened most recently in 1977.
It is one of the largest
heap-leach gold mines in the
world.
CANADA (4)
Located in northwestern British 100 -- GOLD --
Columbia, the ESKAY CREEK mine is 1,151,000
a high grade underground gold and
silver mine. The first
ore shipment was made in January SILVER --
1995. Prime Resources Group Inc. 51,507,000
owns and Homestake Canada Inc.
operates the mine.
NICKEL PLATE is an open-pit mine 100 82,117 223,000 --
located in southern British
Columbia. Production will cease
in 1996 when reserves will be
depleted.
The SNIP mine is an underground 40 (4) 51,592 (4, 5) 89,000 20,000
mine located in northwestern
British Columbia. It is a small
high grade mine, which recovers
approximately 92% of the gold
contained in the ore.
Discovered in 1982, the WILLIAMS 50 222,660 2,835,000 669,000
mine is the largest underground
gold mine in Canada.
The adjacent DAVID BELL mine is a 50 103,854 948,000 --
smaller, higher-grade underground
mine. Included with the David
Bell mine is a "Quarter Claim"
royalty interest in a
neighbouring mine. Located
immediately north of Lake
Superior, the mines are modern
and low cost.
</TABLE>
10
<PAGE>
SUMMARY OF OFFER
<TABLE>
<CAPTION>
ADDITIONAL
MINERAL
RESERVES DEPOSITS
HOMESTAKE AS AT AS AT
PERCENTAGE PRODUCTION FOR 31 DECEMBER 31 DECEMBER
GOLD MINES INTEREST(1) 1994(1, 2) 1994(2, 3) 1994(2, 3)
---------- --------------- --------------- ---------------
(OUNCES) (CONTAINED OUNCES)
<S> <C> <C> <C> <C>
AUSTRALIA
The KALGOORLIE operations are 50 (6) 352,081 (6) 4,695,000 (7) 3,291,000 (7)
part of Australia's largest gold
mining complex. The Kalgoorlie
district has produced over 43
million ounces during a century
of operations. The operations
consist of the Super Pit, the Mt
Charlotte Mine, several mills and
a roaster.
SULPHUR MINE 16.7 SULPHUR (8) (8)
THE MAIN PASS 299 sulphur deposit 376,571 SULPHUR --
is located in the Gulf of Mexico 11,723,000
off the coast of Louisiana. It is
the largest Frasch sulphur
deposit discovered in North OIL (9) OIL (9) --
America since 1920. In addition 727,966 2,080,000
to the sulphur, oil reserves
overlie the deposit.
<FN>
-----------------------------------
(1) Homestake's proportionate interest including minority interest.
(2) Ounces of gold unless otherwise indicated.
(3) Homestake's proportionate interest excluding minority interest.
(4) Homestake's interest without reduction for the 49.4% minority
interest in Prime Resources Group Inc.
(5) Includes contained ounces of gold in dore and concentrates sold
to smelters.
(6) Homestake's interest without reduction for the 18.5% minority
interest in HGAL.
(7) See Clause 2.2 of the Part A statement, "Ore Reserves and
Additional Mineral Deposits Estimates," for a discussion of the
difference between Homestake's and HGAL's reporting with
respect to ore reserves and additional mineral deposits at the
Mt Charlotte mine.
(8) Long tons of 2,240 pounds.
(9) Barrels.
</TABLE>
Homestake is engaged in exploration in the United States, Canada and
South America, as well as in Australia (through HGAL), and has interests
in gold mining projects in Bulgaria and Russia, with options to increase
its interests in the Bulgarian and Russian projects.
6. OVERVIEW OF HGAL
HGAL was incorporated by Homestake as a wholly owned subsidiary in 1974
to participate in gold mining in the Kalgoorlie district. Its initial
investment was a 48% interest in the Kalgoorlie Mining Associates
partnership. In 1987, Homestake sold 20% of its HGAL ordinary shares to
the Australian public, and HGAL became listed on the ASX. In 1989, HGAL
increased its interest in the Kalgoorlie Mining Associates partnership to
50%, and acquired 50% interests in adjacent properties and joint venture
operations. The Kalgoorlie mines and related facilities are managed by
Kalgoorlie Consolidated Gold Mines Limited, which is owned 50% by HGAL
and 50% by the other participant, Gold Mines of Kalgoorlie Limited. HGAL
also engages in exploration activity in Australia.
On 30 August 1995, HGAL announced new estimates of ore reserves and
mineral resources at the Kalgoorlie operations. The newly announced
figures, prepared as at 30 June 1995, represent a
11
<PAGE>
SUMMARY OF OFFER
19.4% increase in contained gold in ore reserves and a 23.7% increase in
contained gold in other mineral resources, as contrasted with figures at
31 December 1994. HGAL's 50% share of the ore reserves are estimated at
6,350,000 contained ounces, with HGAL's 50% share of other mineral
resources estimated at 5,650,000 contained ounces. See Clause 3.1 of the
Part A statement for additional information.
7. PURPOSE OF THE OFFER
Homestake has maintained a long-standing objective of expanding its
reserves and replacing reserves as they are mined, through acquisition
and exploration. Homestake's principal reason for seeking to acquire the
minority shareholdings in HGAL is to acquire additional production and
long-life gold reserves in a politically and economically stable country.
In deciding to make the Offer, Homestake reviewed available data with
respect to the Kalgoorlie operations, including data which forms the
basis for HGAL's recently announced increases in ore reserves and mineral
resources at Kalgoorlie. Based upon that analysis, Homestake believes
that the newly announced ore reserve estimates for the operation will be
recoverable. Homestake also believes that some portion of the additional
mineral resources will eventually be upgraded into ore reserves, although
it cannot estimate the amount that will eventually become ore reserves.
Finally, Homestake believes that the Kalgoorlie district has good
potential for the discovery of additional mineral resources and ore
reserves in the future.
The Offer also has the objective of eliminating the cost of maintaining
separate ASX listing and associated public company administration costs
in Australia, given the relatively small proportion of HGAL Shares not
already owned by Homestake.
8. INTENTIONS ABOUT BUSINESS OF HGAL
At the time HGAL became a listed company in 1987, it was Homestake's
stated policy that HGAL would be Homestake's sole vehicle for gold
exploration, development and mining in Australia. If Homestake does not
acquire all of the HGAL Shares, Homestake intends to pursue future
exploration, development and mining opportunities in Australia directly
for its own account and not through HGAL. That will likely reduce
opportunities that would otherwise become available to HGAL. If Homestake
acquires 100% of the HGAL Shares, Homestake would expect to use HGAL as
one of the vehicles for the expansion of Homestake's business in
Australia. Homestake presently intends that the existing interests in the
Kalgoorlie mines and HGAL's existing exploration projects will continue
in HGAL. See Clause 4.4 of the Part A statement for more detailed
information regarding Homestake's intentions about the business, assets
and employees of HGAL.
9. SELECTED FINANCIAL DATA
Set out below is historical selected financial data, together with
forecast and pro forma selected financial data. The pro forma information
does not purport to represent what the financial position or results of
operations actually would have been if the acquisition had occurred or to
project the financial position or results of operations for any future
date or period. The financial information relating to Homestake is, and
future financial information relating to Homestake will be, prepared in
accordance with United States generally accepted accounting principles.
HGAL shareholders should be aware that these principles differ from
Australian generally accepted accounting principles, which HGAL has
applied in the past. Explanations of the significant differences between
these accounting principles as they apply to HGAL and Homestake are set
out in Appendices K and L, respectively.
12
<PAGE>
SUMMARY OF OFFER
9. SELECTED FINANCIAL DATA (CONTINUED)
HOMESTAKE HISTORICAL SELECTED FINANCIAL INFORMATION (1)
(TABULAR DOLLAR AMOUNTS ARE IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER
SHARE AMOUNTS)
(PREPARED IN ACCORDANCE WITH U.S. GAAP)
The following table sets forth certain financial information of
Homestake. This information should be read in conjunction with the
historical financial statements of Homestake, including the notes
thereto, which are included in Appendices D, E and F, and Appendix L --
Homestake Differences Between U.S. and Australian Generally Accepted
Accounting Principles, and the Pro Forma Condensed Consolidated Financial
Statements, which are included in Clause 4.1 of Part A Statement.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED 31 DECEMBER
-----------------------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues................. $ 705,487 $ 722,228 $ 683,520 $ 671,600(6) $ 793,660
Income (loss) from
continuing operations... 78,016(2) 52,494(3) (175,836)(4,5) (207,756)(6) 4,211(8)
Net income (loss)........ 78,016(2) 52,494(3) (175,836)(4,5) (261,915)(6,7) 12,190(8,9)
Income (loss) from
continuing operations
per share............... 0.57(2) 0.38(3) (1.31)(4,5) (1.57)(6) 0.02(8)
Net income (loss) per
share................... 0.57(2) 0.38(3) (1.31)(4,5) (1.98)(6,7) 0.08(8,9)
Cash dividends per
share................... 0.175 0.10 0.20 0.20 0.20
<CAPTION>
31 DECEMBER
-----------------------------------------------------------------------------
1994 1993 1992 1991(1) 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total assets............. $1,201,968 $1,121,250 $1,145,169 $1,352,831 $1,911,815
Long-term obligations
(10).................... 295,719 282,865 293,176 365,383 460,155
Shareholders' equity..... 588,770 515,244 465,438 675,642 1,058,694
<CAPTION>
FOR THE SIX MONTHS ENDED 30
JUNE
-----------------------------
1995 1994
---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues................. $ 375,522 $ 374,481
Net income............... 17,739 57,169(2)
Net income per share..... 0.13 0.42(2)
<FN>
------------------------------
(1) Selected financial information reflects the 1992 combination of
Homestake and Homestake Canada Inc. ("HCI") accounted for as a
pooling of interests, and accounts for Homestake's former
interests in base metals, oil and gas, uranium and HCI's
non-gold operations as discontinued operations. The reductions
in total assets and shareholders' equity in 1991 compared to
1990 were primarily due to the 1991 net loss, including
write-downs of certain mining properties and investments, and
HCI's 1991 restructuring in which certain non-gold assets of
HCI were transferred to Dundee Bancorp Inc. HCI's 1991
restructuring also resulted in a reduction in long-term debt
and the retirement of certain capital stock of HCI.
(2) Includes a gain of $12.6 million ($15.7 million pretax) or
$0.09 per share on the sale of Homestake's interest in the Dee
mine and a gain of $11.2 million (no tax expense) or $0.08 per
share on dilution of Homestake's interest in Prime Resources
Group Inc.
(3) Includes expense of $12.8 million ($16 million pretax) or $0.09
per share for the write-down of Homestake's investment in the
oil and gas assets at Main Pass 299 and expense of $6.8 million
($8.2 million pretax) or $0.05 per share for restructuring and
business combination costs.
(4) Includes expense of $117.7 million ($130.3 million pretax) or
$0.87 per share for write-downs of certain mining properties
and investments.
(5) Includes expense of $32.3 million ($48.4 million pretax) or
$0.24 per share for restructuring and business combination
costs.
(6) Revenues declined in 1991 compared to 1990 primarily due to
lower production and sales volumes and lower gold prices. Loss
amounts include expense of $165.5 million ($172.4 million
pretax) or $1.25 per share for write-downs of certain mining
properties and investments and expense of $7.8 million ($13.6
million pretax) or $0.06 per share for HCI's restructuring.
(7) Includes a loss from discontinued operations of $25.4 million
($26.3 million pretax) or $0.19 per share and expense of $28.8
million (no tax benefit) or $0.22 per share for the cumulative
effect of the change in accounting for postretirement benefits
other than pensions.
</TABLE>
FOOTNOTES CONTINUE ON FOLLOWING PAGE.
13
<PAGE>
SUMMARY OF OFFER
9. SELECTED FINANCIAL DATA (CONTINUED)
<TABLE>
<S> <C>
(8) Includes expense of $32.6 million (no tax benefit) or $0.25 per share
for the write-down of Homestake's investment in North American Metals
Corp.
(9) Includes income from discontinued operations of $8 million ($27 million
pretax) or $0.06 per share.
(10) Long-term obligations consist of:
31 December
------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
Long-term debt................. $ 185,000 $ 189,191 $ 205,174 $ 279,190 $ 408,902
Accrued reclamation costs...... 33,892 22,138 32,344 34,222 29,616
Accrued pension and other
postretirement benefit
obligations................... 64,066 59,626 49,900 41,776(A) 9,096
Other.......................... 12,761 11,910 5,758 10,195 12,541
---------- ---------- ---------- ---------- ----------
$ 295,719 $ 282,865 $ 293,176 $ 365,383 $ 460,155
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
------------------------------
(A) The 1991 increase in accrued pension and other
postretirement benefit obligations primarily is due to the
cumulative effect of adoption of Statement of Financial
Accounting Standards 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions", which
resulted in a $28.8 million accrual.
</TABLE>
HGAL HISTORICAL SELECTED FINANCIAL INFORMATION
(TABULAR DOLLAR AMOUNTS ARE IN THOUSANDS OF AUSTRALIAN DOLLARS, EXCEPT
PER SHARE AMOUNTS)
(PREPARED IN ACCORDANCE WITH AUSTRALIAN GAAP)
The following table sets forth certain financial information of HGAL.
This information should be read in conjunction with (i) the historical
financial statements of HGAL, including the notes thereto, which are
included in Appendices H and I, (ii) Appendix K -- HGAL Differences
Between Australian and U.S. Generally Accepted Accounting Principles, and
(iii) the Pro Forma Condensed Consolidated Financial Statements, which
are included in Clause 4.1 of the Part A statement.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED 31 DECEMBER
--------------------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues.................... $ 199,807 $ 178,756 $ 177,116 $ 161,932 $ 203,337
Income (loss) from
continuing operations...... 34,827 27,394 2,580 (34,194)(1) 6,949(2)
Net income (loss)........... 34,827 27,394 2,580 (34,194)(1) (93,051)(2)
Income (loss) from
continuing operations
per share.................. 0.06 0.05 -- (0.07)(1) 0.01(2)
Net income (loss) per
share...................... 0.06 0.05 -- (0.07)(1) (0.19)(2)
Cash dividends per share.... 0.00 0.00 0.00 0.00 0.00
<CAPTION>
31 DECEMBER
--------------------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total assets................ $ 255,422 $ 245,375 $ 237,490 $ 278,072 $ 267,807
Long-term obligations (3)... 57,483 66,959 93,834 107,658 145,922
Shareholders' equity........ 176,467 141,575 113,540 110,925 63,701
<CAPTION>
FOR THE SIX MONTHS ENDED
30 JUNE
--------------------------
1995 1994
---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues.................... $ 91,689 $ 96,460
Net income.................. 10,219 18,355
Net income per share........ 0.02 0.03
<FN>
------------------------------
(1) Includes expenses of $26.1 million (no tax benefit) or $0.04
per share on the closure and write-downs of certain mining
properties and assets.
(2) Includes extraordinary loss of $100.0 million (no tax benefit)
or $0.20 per share on a change in accounting policy related to
the carrying value of certain mining assets.
</TABLE>
FOOTNOTES CONTINUE ON FOLLOWING PAGE.
14
<PAGE>
SUMMARY OF OFFER
9. SELECTED FINANCIAL DATA (CONTINUED)
(3) Long-term obligations consist of:
<TABLE>
<CAPTION>
31 DECEMBER
--------------------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Amount owed to
Homestake.............. $ 55,000 $ 65,000 $ 75,000 $ 85,000 $ 95,000
Finance lease
liabilities and other
debt................... 95 199 12,012 17,621 50,000
Other................... 2,388 1,760 6,822 5,037 922
---------- ---------- ---------- ---------- ----------
$ 57,483 $ 66,959 $ 93,834 $ 107,658 $ 145,922
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
HGAL HISTORICAL SELECTED FINANCIAL INFORMATION
(TABULAR DOLLAR AMOUNTS ARE IN THOUSANDS OF AUSTRALIAN DOLLARS, EXCEPT
PER SHARE AMOUNTS)
(PREPARED IN ACCORDANCE WITH U.S. GAAP)
The following table sets forth certain financial information of HGAL
adjusted to U.S. GAAP. This information should be read in conjunction
with (i) the historical financial statements of HGAL, including the notes
thereto, which are included in Appendices H and I, (ii) Appendix K --
HGAL Differences Between Australian and U.S. Generally Accepted
Accounting Principles, and (iii) the Pro Forma Condensed Consolidated
Financial Statements, which are included in Clause 4.1 of the Part A
statement.
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED 30 YEAR ENDED
JUNE 31 DECEMBER
---------------------- ----------------------
1995 1994 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues.............................................. $ 90,385 $ 100,121 $ 200,938 $ 178,530
Net income............................................ 9,379 22,016 35,124 27,168
Net income per share.................................. 0.02 0.04 0.06 0.05
<CAPTION>
31 DECEMBER
----------------------
1994 1993
---------- ----------
<S> <C> <C> <C> <C>
Total assets.................................................................. $ 264,440 $ 242,160
Long-term obligations (1)..................................................... 57,483 66,959
Shareholders' equity.......................................................... 172,280 137,091
<FN>
------------------------
(1) Long-term obligations consist of:
</TABLE>
<TABLE>
<CAPTION>
31 DECEMBER
--------------------
1994 1993
--------- ---------
<S> <C> <C> <C> <C>
Amount owed to Homestake........................................................ $ 55,000 $ 65,000
Other........................................................................... 2,483 1,959
--------- ---------
$ 57,483 $ 66,959
--------- ---------
--------- ---------
</TABLE>
15
<PAGE>
SUMMARY OF OFFER
9. SELECTED FINANCIAL DATA (CONTINUED)
FORECAST AND PRO FORMA SELECTED FINANCIAL INFORMATION
(ALL DOLLAR AMOUNTS ARE IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE
AMOUNTS)
(PREPARED IN ACCORDANCE WITH U.S. GAAP)
The following table sets forth certain forecast and pro forma financial
information of Homestake. This information should be read in conjunction
with (i) the historical financial statements of Homestake and HGAL,
including the notes thereto, which are included in Appendices D, E, F, H
and I, (ii) the Pro Forma Condensed Consolidated Financial Statements,
which are included in Clause 4.1 of the Part A statement, and (iii) the
Forecasted Condensed Consolidated Financial Statements, including the
Summary of Significant Assumptions, which are included in Clause 4.2 of
the Part A statement.
Except as noted, the Forecast and Pro Forma Selected Financial
Information reflect the effects of the acquisition of all of the HGAL
Shares not already owned by Homestake, assuming 50% of the HGAL Shares
are exchanged for Homestake Shares and 50% of the HGAL Shares are
acquired for cash as of the beginning of each period.
<TABLE>
<CAPTION>
FORECAST PRO FORMA PRO FORMA
FOR THE YEAR FORECAST FOR THE SIX MONTHS FOR THE YEAR
ENDING FOR THE SIX MONTHS ENDED ENDED
31 DECEMBER ENDING 31 DECEMBER 30 JUNE 31 DECEMBER
1996(1) 1995(1) 1995 1994
------------ ------------------ ------------------ ------------
<S> <C> <C> <C> <C>
Revenues.......................... $ 748,600 $ 380,300 $ 373,122 $ 700,878
Net income........................ 38,500 20,000 15,003 74,431
Net income per share.............. 0.27 0.14 0.11 0.52
Cash dividends per share.......... 0.20 0.10 0.10 0.175
<CAPTION>
PRO FORMA BALANCES
AT
30 JUNE 1995
------------------
<S> <C> <C> <C> <C>
Total assets....................... $ 1,340,923
Long-term obligations.............. 300,383
Shareholders' equity............... 669,118
See footnotes (2) and (10) of the Homestake Historical Selected Financial
Information above, and the Pro Forma Condensed Consolidated Balance Sheet and
Statements of Operations, which are included in Clause 4.1 of the Part A
statement.
<FN>
------------------------
(1) The forecasts for the six months ending 31 December 1995 and for the year
ending 31 December 1996 assume the acquisition of the 18.5% of HGAL
effective 1 December 1995.
(2) Combined Information for the Year Ending 31 December 1995
The following combined information has been prepared to illustrate to the
HGAL shareholders the effect on projected 1995 results of the proposed
acquisition of the 18.5% of HGAL, assuming the acquisition occurred
effective 1 January 1995. This information does not purport to comply with
the SEC rules for preparation of pro forma information.
FOOTNOTES
CONTINUE ON FOLLOWING PAGE.
</TABLE>
16
<PAGE>
SUMMARY OF OFFER
<TABLE>
<S> <C>
The combined information for the year ending 31 December 1995 has been
prepared assuming the acquisition of the 18.5% of HGAL, effective 1 January
1995, using Homestake's historical Condensed Statement of Consolidated
Income for the six months ended 30 June 1995 and the Forecasted Condensed
Statement of Consolidated Operations for the six months ending 31 December
1995.
</TABLE>
<TABLE>
<CAPTION>
HOMESTAKE
HISTORICAL
FOR THE SIX FORECAST FOR THE COMBINED INFORMATION
MONTHS ENDED SIX MONTHS ENDING FOR THE YEAR ENDING
30 JUNE 1995 31 DECEMBER 1995 ADJUSTMENTS(A) 31 DECEMBER 1995
------------- ----------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
Revenues................. $ 375.5 $ 380.3 $ (4.4) $ 751.4
Net income............... 17.7 20.0 (5.5) 32.2
Net income per share..... 0.13 0.14 (.04) 0.23
Dividends per share...... 0.10 0.10 -- 0.20
------------------------------
a) Adjustments to record the acquisition of the 18.5% of HGAL effective January 1, 1995, assuming
50% of the HGAL Shares are exchanged for Homestake Shares and 50% of the HGAL Shares are acquired
for cash, are as follows: (i) to eliminate interest income in respect of the assumed cash
component of the HGAL purchase price of $81 million and related tax effect, (ii) to record the
amortization of excess purchase price paid over the net book value of assets acquired and related
tax effect, and (iii) to eliminate minority interests' share of HGAL's earnings.
</TABLE>
17
<PAGE>
SUMMARY OF OFFER
9. SELECTED FINANCIAL DATA (CONTINUED)
FORECAST, PRO FORMA AND HISTORICAL SELECTED STATISTICAL INFORMATION
(ALL DOLLAR AMOUNTS ARE IN U.S. DOLLARS)
The following table sets forth certain forecast, pro forma and historical
statistical information of Homestake. This information should be read in
conjunction with (i) the Statistical Summary of Homestake, which is
included in Clause 2.1 of the Part A statement, (ii) the Pro Forma
Condensed Consolidated Financial Statements, which are included in Clause
4.1 of the Part A statement, and (iii) the Forecasted Condensed
Consolidated Financial Statements, including the Summary of Significant
Assumptions, which are included in Clause 4.2 of the Part A statement.
<TABLE>
<CAPTION>
HISTORICAL
31 DECEMBER
PRO FORMA 31 ----------------------
DECEMBER 1994 1994 1993
------------- --------- -----------
<S> <C> <C> <C>
(THOUSANDS OF OUNCES)
Gold reserves (1).............................................. 19,007 17,942 18,436
Additional mineral deposits (1)................................ 11,932 11,186 N/A(8)
Silver reserves (1,2).......................................... 51,507 51,507 55,131
</TABLE>
<TABLE>
<CAPTION>
FORECAST PRO FORMA
FORECAST FOR THE FOR THE PRO FORMA
FOR THE SIX MONTHS SIX MONTHS FOR THE
YEAR ENDING ENDING ENDED YEAR ENDED
31 DECEMBER 31 DECEMBER 30 JUNE 31 DECEMBER
1996 1995(3) 1995 1994
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Average realized price per ounce................ $395 $385 $385 $384
Production (equivalent ounces) (4,5)............ 1,850,000 950,000 946,000 1,696,000
Cash costs per equivalent ounce (6)............. $245 $246 $251 $254
Noncash costs per equivalent ounce (7).......... 52 55 52 51
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
FOR THE FOR THE
SIX MONTHS YEAR ENDED
ENDED 31 DECEMBER
30 JUNE ----------------------
1995 1994 1993
----------- ---------- ----------
<S> <C> <C> <C>
Average realized price per ounce................................. $385 $384 $359
Production (equivalent ounces) (4,5)............................. 946,000 1,696,000 1,918,000
Cash costs per equivalent ounce (6).............................. $251 $254 $231
Noncash costs per equivalent ounce (7)........................... 49 47 51
<FN>
------------------------------
(1) Homestake's proportionate interest excluding minority interest.
(2) Eskay Creek only.
(3) See footnote (1) on prior page.
(4) Homestake's proportionate interest including minority interest.
(5) Gold and silver are accounted for as co-products at Eskay Creek
which commenced production in January of 1995. Silver
production is converted to gold equivalent, using the ratio of
the gold market price to the silver market price. The ratios
are 72 ounces of silver equals one ounce of gold for the
forecast year ending 31 December 1996, 70 ounces of silver
equals one ounce of gold for the forecast six months ending 31
December 1995 and 75 ounces of silver equals one ounce of gold
for the pro forma and historical six months ended 30 June 1995.
(6) Cash costs include all site operating expenses, third-party
smelter and treatment charges, and royalties but exclude
corporate administration, non-mine exploration and general
expenses.
(7) Noncash costs include depreciation, end-of-mine reclamation
accruals, and amortization of the cost of property
acquisitions.
(8) 1993 additional mineral deposits not available.
</TABLE>
18
<PAGE>
SUMMARY OF OFFER
9. SELECTED FINANCIAL DATA (CONTINUED)
PER SHARE DATA
(IN U.S. DOLLARS)
The following table presents Homestake's historical, HGAL's historical,
and pro forma per share data for the six months ended 30 June 1995 and
for the year ended 31 December 1994, giving effect to the proposed
acquisition of HGAL Shares to be accounted for as a purchase, based upon
the historical financial statements of Homestake and HGAL and the Pro
Forma Condensed Consolidated Financial Statements.
The information provided below should be read in conjunction with (i) the
historical financial statements of Homestake and HGAL, including the
notes thereto, which are included in Appendices D, E, F, H and I, (ii)
the Pro Forma Condensed Consolidated Financial Statements, which are
included in Clause 4.1 of the Part A statement, (iii) the historical
selected data of Homestake and HGAL above, and (iv) Appendix K -- HGAL
Differences Between Australian and U.S. Generally Accepted Accounting
Principles.
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
30 JUNE 1995 31 DECEMBER 1994
------------------- -----------------
<S> <C> <C>
HOMESTAKE HISTORICAL:
(PREPARED IN ACCORDANCE WITH U.S. GAAP; AMOUNTS IN U.S. DOLLARS)
Per share of Homestake common stock:
Book value (1)............................................... $ 4.26 $ 4.27
Cash dividends (2)........................................... 0.10 0.175
Net income................................................... 0.13 0.57
HGAL HISTORICAL:
(PREPARED IN ACCORDANCE WITH AUSTRALIAN GAAP; AMOUNTS IN AUSTRALIAN DOLLARS)
Per share of HGAL common stock:
Book value (1)............................................... $ 0.32 $ 0.30
Cash dividends............................................... 0.00 0.00
Net income................................................... 0.02 0.06
HGAL HISTORICAL:
(PREPARED IN ACCORDANCE WITH U.S. GAAP; AMOUNTS IN AUSTRALIAN DOLLARS)
Per share of HGAL common stock:
Book value (1)............................................... $ 0.31 $ 0.29
Cash dividends............................................... 0.00 0.00
Net income................................................... 0.02 0.06
PRO FORMA:
(PREPARED IN ACCORDANCE WITH U.S. GAAP; AMOUNTS IN U.S. DOLLARS)
Per share of Homestake common stock:
Book value (1)............................................... $ 4.69 $ 4.70
Cash dividends (2)........................................... 0.10 0.175
Net income................................................... 0.11 0.52
<FN>
------------------------
(1) Book value per share is shareholders' equity divided by common
shares outstanding at 30 June 1995 and 31 December 1994.
(2) Pro forma cash dividends per Homestake share reflect
Homestake's historical cash dividends declared in the periods
indicated.
</TABLE>
19
<PAGE>
SUMMARY OF OFFER
10. ACCOUNTING TREATMENT
Homestake intends to account for the transaction as a purchase under U.S.
GAAP. Under this method of accounting, the cost of acquiring the 18.5% of
HGAL not already owned by Homestake is determined by the value of the
shares and the cash which Homestake will exchange, plus the direct costs
associated with the acquisition, which are estimated at approximately
U.S.$3 million.
11. RESALE OF HOMESTAKE SHARES
Homestake is listed on and its shares are quoted by the ASX. Homestake
Shares allotted pursuant to the Share Offer may be sold on the ASX
following approval of Homestake's application for official quotation of
those shares. The Homestake Shares to be allotted pursuant to the Share
Offer have been registered with the SEC. Such shares may be sold on the
NYSE and on the Swiss Stock Exchanges immediately following allotment.
12. AUSTRALIAN AND UNITED STATES TAX CONSIDERATIONS FOR HGAL SHAREHOLDERS
Details of the Australian and United States taxation consequences of
owning and disposing of Homestake Shares are set out in Clause 6.7 of the
Part A statement.
(A) AUSTRALIAN INCOME TAX CONSIDERATIONS
An Australian resident holder who accepts the Offer will generally have a
taxable gain or loss for Australian capital gains tax purposes. In
general, disposal of HGAL Shares by Australian resident shareholders at a
price in excess of the price at which they were acquired will give rise
to a taxable capital gain in Australia. The amount of that taxable gain
is based on the value of the Homestake Shares or A$1.90 (depending on
which alternative is chosen), subject to adjustment of the cost of the
HGAL Shares for inflation over the period of the shareholding if that
period is in excess of 12 months. Where the value of the Offer (as
calculated above) is less than the cost of the HGAL Shares, shareholders
who accept the Offer should incur a capital loss. A capital loss may be
offset only against other capital gains arising in the same or subsequent
year of income.
A disposal of HGAL Shares by non-Australian resident holders pursuant to
the Offer will generally not give rise to any Australian capital gains
tax liability.
Dividends received from Homestake by Australian residents will not be
franked and will be subject to a U.S. withholding tax. That withholding
tax may be available as a credit against Australian tax on the dividends.
Gains and losses from the subsequent disposition of Homestake Shares
received pursuant to the Offer generally will be taxable for Australian
capital gains tax purposes in the case of an Australian resident holder.
(B) UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
A U.S. Holder who accepts the Offer will have a taxable gain or loss for
U.S. federal income tax purposes, measured by the difference between the
tax basis of the HGAL Shares surrendered and the fair market value of the
Homestake Shares or Australian dollars received. If the HGAL Shares were
held as capital assets, such gain or loss will be treated as a capital
gain or loss and will be a long-term gain or loss if the HGAL Shares were
held for more than one year.
20
<PAGE>
SUMMARY OF OFFER
Dividends received on Homestake Shares will be taxable as ordinary income
to U.S. Holders. Such dividends will be eligible for the dividends
received deduction in the hands of recipients that are U.S. corporations.
Dividends received on Homestake Shares by Non-U.S. Holders will be
subject to U.S. withholding tax at a rate of 30% unless a lower treaty
rate is applicable. The Australia/U.S. tax treaty provides for a 15%
withholding rate from dividends paid to Australian residents.
Gains and losses from the subsequent disposition of Homestake Shares
received pursuant to the Offer generally will be taxable in the case of
U.S. Holders, but generally will not be taxable in the case of Non-U.S.
Holders.
A U.S. Holder who receives Australian dollars in the exchange may realise
taxable currency exchange gains or losses on the subsequent disposition
of such Australian dollars.
AS THE TAX CONSEQUENCES MAY VARY DEPENDING ON A SHAREHOLDER'S PARTICULAR
CIRCUMSTANCES, EACH HGAL SHAREHOLDER SHOULD CONSULT HIS OR HER
PROFESSIONAL TAX ADVISER BEFORE DECIDING WHETHER AN INVESTMENT IN
HOMESTAKE SHARES IS APPROPRIATE.
13. PART B STATEMENT
This Offer Document is accompanied by the Part B statement of HGAL and a
letter from HGAL's chairman. [description of recommendation to come] You
should read the Part B statement and its annexures in full.
14. COMPULSORY ACQUISITION AND POSSIBLE DELISTING OF HGAL SHARES
Homestake will be entitled to compulsorily acquire any minority shares
remaining following the Offer if Homestake:
(a) becomes entitled to at least 90% of all HGAL Shares before the
close of the Offer; and
(b) at least 75% of offerees have disposed of the HGAL Shares to
Homestake, or at least 75% of the HGAL shareholders registered
immediately before the day on which the Part A statement was
served on HGAL cease to be registered as HGAL shareholders within
one month after the end of the Offer Period.
The Offer is not subject to any minimum level of acceptance.
If Homestake is entitled to compulsorily acquire all HGAL Shares under
the Corporations Law, it intends to exercise those rights. Under the
standard procedures of the ASX, HGAL Shares will be suspended from
quotation following notice from Homestake that it intends to proceed to
compulsory acquisition, and will subsequently be delisted.
The ASX Listing Rules require HGAL to maintain a spread of shareholdings
which, in the opinion of the ASX, is sufficient in order to maintain
official quotation of HGAL Shares. Even if Homestake does not become
entitled to proceed to compulsory acquisition, the number of HGAL
shareholders may, before or after the Offer closes, fall below this
minimum requirement. If this were to happen, the HGAL Shares could be
suspended from quotation by the ASX.
21
<PAGE>
SUMMARY OF OFFER
15. APPROVALS
Australian Foreign Investment Review Board approval has been obtained. No
other approvals are required for Homestake to make and consummate the
Offers.
22
<PAGE>
THE OFFER
--------------------------------------------------------------------------------
SECTION 3. THE OFFER
OFFER BY
HOMESTAKE MINING COMPANY
TO ACQUIRE ALL OF YOUR FULLY PAID ORDINARY SHARES IN
HOMESTAKE GOLD OF AUSTRALIA LIMITED
1. THE OFFER
1.1 Homestake Mining Company ("Homestake") offers to acquire all of your
fully paid ordinary shares in Homestake Gold of Australia Limited
(respectively "HGAL Shares" and "HGAL") (including any HGAL Shares issued
during the term of this Offer pursuant to the exercise of HGAL Employee
Options or which result from paying up in full the amount unpaid on
partly paid HGAL Shares) on the terms set out in this Offer.
You may accept this Offer only for all of your HGAL Shares, and your
acceptance may not be apportioned between the Share Offer and the Cash
Offer. Therefore you must elect to receive either all Homestake Shares or
all cash.
Nominee holders for multiple accounts may, in accordance with Clause 5.3
below, accept this Offer only for all of the HGAL Shares held in each
distinct portion. Shares held in HGAL comprising a distinct portion may
not be apportioned between the Share Offer and the Cash Offer.
You may, in accordance with Clause 4.2 below, accept this Offer
separately for HGAL Shares issued upon exercise of HGAL Employee Options.
1.2 Homestake will be entitled to all Rights accruing after 14 August 1995 in
respect of HGAL Shares which it acquires under this Offer. If any Rights
are received by you and the benefit of those Rights are not passed on to
Homestake, Homestake may reduce the consideration payable to you under
this Offer by the value, as reasonably assessed by Homestake, of those
Rights.
1.3 This Offer extends to any assignee of yours who becomes registered or
entitled to be registered as the holder of your HGAL Shares during the
Offer Period.
1.4 Holders of HGAL Employee Options may accept Offers for the HGAL Shares
issuable to them on exercise of their HGAL Employee Options without the
need first to send a notice of exercise to HGAL. Those Offers may be
accepted by duly completing and signing the relevant notice of exercise
in respect of the HGAL Employee Options, drawing a cheque in favour of
HGAL for the whole of the subscription price due on exercise of the HGAL
Employee Options, duly completing and signing the Form of Acceptance and
Transfer in respect of the HGAL Shares which will be issued upon exercise
of the HGAL Employee Options and sending the notice of exercise, cheque
and Form of Acceptance and Transfer to Ernst & Young Registry Services
Pty Limited in accordance with Clause 4.2 below, together with the
certificate(s) for the relevant HGAL Employee Options.
2. CONSIDERATION
2.1 Each HGAL shareholder may elect to receive either:
(a) 0.089 Homestake Shares for each fully paid HGAL Share (the "Share
Offer"); or
--------------------------------------------------------------------------------
23
<PAGE>
THE OFFER
--------------------------------------------------------------------------------
(b) A$1.90 for each fully paid HGAL Share (the "Cash Offer").
Your acceptance may not be apportioned between the Share Offer and the
Cash Offer.
Holders of partly paid shares in HGAL who wish to accept this Offer must
first pay to HGAL the balance of the subscription price due on those
shares.
If the number of HGAL Shares which you hold is such that your entitlement
to Homestake Shares under the Share Offer is not a whole number, your
entitlement to Homestake Shares will be rounded down to the closest whole
number. In that case, the value of the fractional entitlement will be
paid by cheque in Australian dollars, using the last trading price of
Homestake Shares on the ASX on the last trading day before your
acceptance is received.
If you are a shareholder resident in a jurisdiction where the Share Offer
cannot be lawfully made, then notwithstanding any other provision of this
Offer or any election you make, you shall only be entitled to receive the
consideration specified in the Cash Offer.
2.2 If you accept the Share Offer, the Homestake Shares to be allotted to
you:
(a) will be issued credited as fully paid;
(b) will rank equally in all respects with existing Homestake Shares;
(c) will participate in dividends if you are registered as a
shareholder of Homestake on the record date for the dividend; and
(d) will have the right to acquire 0.01 of a Series A Participating
Cumulative Preferred Share at a price of U.S.$75, in the
circumstances described in Clause 5.3 of the Part A statement.
2.3 Homestake was first listed on the ASX on [*] September 1995. Homestake
will apply to the ASX for quotation of the Homestake Shares to be
allotted pursuant to this Offer immediately after their allotment.
Quotation of those shares on the ASX is not guaranteed or automatic, but
Homestake will use its best endeavours to procure such quotation.
The Homestake Shares alloted pursuant to the Share Offer have been
approved for listing on the NYSE upon notice of allotment and may be
traded on the Swiss Stock Exchange.
3. PERIOD OF OFFER
3.1 This Offer will, unless extended or withdrawn, remain open for acceptance
until 5.00 pm Sydney time on [ ] November, 1995. Acceptances may be made
in Sydney until 5.00 p.m. Sydney time on that date, or in New York City
until 5.00 pm New York City time on the preceding business day.
3.2 Homestake may extend the period during which this Offer remains open for
acceptance by giving notice to HGAL shareholders who have not yet
accepted the Offer.
--------------------------------------------------------------------------------
24
<PAGE>
THE OFFER
--------------------------------------------------------------------------------
4. HOW TO ACCEPT THIS OFFER
4.1 IF ANY OF YOUR HGAL SHARES ARE IN A CHESS HOLDING, ACCEPTANCE OF THIS
OFFER CAN ONLY BE MADE IN ACCORDANCE WITH THE SCH BUSINESS RULES. DO NOT
TRY TO ACCEPT THIS OFFER BY USING THE FORM OF ACCEPTANCE AND TRANSFER AS
IT WILL ONLY DELAY YOUR RECEIPT OF THE CONSIDERATION UNDER THE OFFER. To
accept this Offer you should:
(a) instruct your Controlling Participant to initiate acceptance of
this Offer in accordance with Rule 16.3 of the SCH business rules
before the end of the Offer Period; or
(b) if you are a Broker or an NBP, initiate acceptance of this Offer
in accordance with Rule 16.3 of the SCH business rules before the
end of the Offer Period.
4.2 IF YOU HOLD CERTIFICATED SHARES, YOU MAY ONLY ACCEPT THIS OFFER BY
COMPLETING AND EXECUTING THE ENCLOSED FORM OF ACCEPTANCE AND TRANSFER AND
SENDING IT TOGETHER WITH THE HGAL SHARE CERTIFICATE(S) IN RESPECT OF THE
HGAL SHARES HELD BY YOU TO:
<TABLE>
<CAPTION>
In Australia In the United States
------------------------------------------------------- -------------------------------------
<S> <C>
Ernst & Young Registry Services Pty Limited BancBoston Trust Company of New York
GPO Box 7045 55 Broadway, 3d Floor
Sydney NSW 2001 New York, New York 10006
or
Level 2, 321 Kent Street
Sydney NSW 2000
</TABLE>
If you hold HGAL Employee Options and wish to accept this Offer in
respect of HGAL Shares resulting from exercise of your options without
first submitting a notice of exercise to HGAL, please also execute the
notice of exercise in respect of your HGAL Employee Options and send it,
together with the subscription price due, the completed Form of
Acceptance and Transfer and the relevant certificates for your HGAL
Employee Options, to Ernst & Young Registry Services Pty Limited.
HOLDERS OF CERTIFICATED SHARES ARE ADVISED THAT THE METHOD CHOSEN TO
TRANSMIT HGAL SHARE CERTIFICATES, THE FORM OF ACCEPTANCE AND TRANSFER AND
OTHER DOCUMENTS IS AT THE RISK OF EACH ACCEPTING SHAREHOLDER. FOR THE
SHAREHOLDER'S PROTECTION, HOMESTAKE RECOMMENDS THAT MATERIAL BE DELIVERED
BY HAND TO ERNST & YOUNG REGISTRY SERVICES PTY LIMITED OR BANCBOSTON
TRUST COMPANY OF NEW YORK AND A RECEIPT OBTAINED. OTHERWISE THE USE OF
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. BENEFICIAL OWNERS WHOSE HGAL SHARES ARE REGISTERED IN THE
NAME OF A BROKER, INVESTMENT DEALER, BANK, TRUST COMPANY OR OTHER NOMINEE
SHOULD CONTACT THAT NOMINEE FOR ASSISTANCE IN ACCEPTING THE OFFER.
4.3 The enclosed Form of Acceptance and Transfer forms part of this Offer and
its requirements must be observed in the acceptance of this Offer.
--------------------------------------------------------------------------------
25
<PAGE>
THE OFFER
--------------------------------------------------------------------------------
4.4 ACCEPTANCE OF THIS OFFER FOR CERTIFICATED HGAL SHARES WILL BE DEEMED
EFFECTED ONLY WHEN THE DULY COMPLETED FORM OF ACCEPTANCE AND TRANSFER AND
THE RELEVANT SHARE CERTIFICATE(S) HAVE BEEN RECEIVED BY HOMESTAKE AT ONE
OF THE ABOVE ADDRESSES AND:
(a) where the accepting offeree is a corporation, (i) the Form of
Acceptance and Transfer has been executed by duly authorised
officers or directors of the corporation in accordance with its
constituent documents; or (ii) it is executed under power of
attorney and paragraph (c) has been complied with;
(b) where the accepting offerees are joint holders, all have signed
the Form of Acceptance and Transfer;
(c) where an offeree has accepted through an attorney under power,
the power of attorney has been validly executed, has not been
revoked (and the attorney declares that it has not been) and
empowers the attorney to sign the Form of Acceptance and Transfer
and (unless already noted on the HGAL share register) the power
of attorney has been produced to Homestake;
(d) where an accepting offeree is a trust or partnership, the
signatory produces the trust instrument, partnership agreement or
other authority to act in that capacity acceptable to Homestake's
share registrar; and
(e) where the offeree is deceased, the Form of Acceptance and
Transfer has been executed by the person or persons authorised to
control the estate of that offeree under grant of probate or
letters of administration and (unless already noted on the HGAL
share register) the grant of probate or letters of administration
and (if required by law for the purpose of transfer) certificates
verifying the payment of death or estate duties or taxes have
been produced to Homestake.
4.5 Notwithstanding Clauses 4.2, 4.3 and 4.4 above, Homestake may in its
discretion treat any Form of Acceptance and Transfer received before the
end of the Offer Period as valid or waive any requirement of Clauses 4.2,
4.3 and 4.4 above in any case, but the payment of the consideration in
accordance with this Offer will not be made until any irregularity has
been resolved and the share certificate(s) or an acceptable indemnity in
lieu of receipt of the share certificate(s) together with any other
documents required to procure registration have been received by
Homestake.
5. OFFEREES
5.1 An offer in this form and bearing the same date is being made to each
holder of HGAL Shares registered in the register of members of HGAL at
9.00 am (Sydney time) on the date of this Offer and to each holder of
such shares who becomes so registered prior to the expiry of the Offer
Period. Offers will also be made in respect of HGAL Shares issued by HGAL
during the Offer Period pursuant to the exercise of HGAL Employee Options
and upon the payment of the amount outstanding on partly paid shares in
HGAL.
5.2 If at the time this Offer is made to you or at any time during the Offer
Period another person is, or is entitled to be, registered as the holder
of some or all of your HGAL Shares then:
(a) a corresponding Offer is deemed to have been made to that other
person in respect of those HGAL Shares;
--------------------------------------------------------------------------------
26
<PAGE>
THE OFFER
--------------------------------------------------------------------------------
(b) a corresponding Offer is deemed to have been made to you in
respect of any other HGAL Shares to which the Offers relate; and
(c) this Offer is deemed to have been withdrawn immediately after
that time.
5.3 If at any time during the Offer Period you hold HGAL Shares as a nominee
and the Shares consist of two or more distinct portions, you may accept
the Offer as if it were a single offer in relation to each distinct
portion of shares. However, if you accept the Offers separately in
respect of a distinct portion of shares, such acceptance is ineffective
unless you have given to Homestake a notice which:
(a) if it relates to HGAL Shares in a CHESS Holding, must be in an
electronic form approved by the SCH business rules; or
(b) if it relates to certificated HGAL Shares, must be in writing.
The notice must state that the relevant HGAL Shares consist of a distinct
portion and specify the number of shares in the distinct portion to which
the acceptance relates. If this applies to you, contact the persons
listed below for additional copies of this Offer Document and (if you
hold certificated shares) of the Form of Acceptance and Transfer.
<TABLE>
<CAPTION>
In Australia In the United States
------------------------------------------------------------- -------------------------------
<S> <C>
Ernst & Young Registry Services Pty Limited The First National Bank of
GPO Box 7045 Boston
Sydney NSW 2001 450 Tasso Street
or Suite 250
Level 2, 321 Kent Street Palo Alto, California 94301
Sydney NSW 2000 ph: (415) 853-0980
ph: (02) 290 4111 fax: (415) 853-1425
fax: (02) 262 2574
</TABLE>
6. ENTITLEMENT OF HOMESTAKE; HGAL CAPITAL
6.1 Immediately before this Offer was despatched, Homestake was entitled to
482,538,026 fully paid ordinary shares in HGAL, representing 81.5% of its
issued capital. That entitlement would not change if all HGAL Employee
Options had been exercised and all partly paid shares in HGAL had been
fully paid on that date.
Homestake was not entitled to any other marketable securities of HGAL,
except a deemed entitlement to 150,000 HGAL Employee Options.
6.2 According to documents lodged by HGAL with the ASX as at the date of this
Offer:
(a) the total number of fully paid HGAL Shares on issue is
591,854,573;
(b) the total number of HGAL Shares on issue which are partly paid is
37,000;
(c) the total number of HGAL Employee Options outstanding is 251,500;
and
--------------------------------------------------------------------------------
27
<PAGE>
THE OFFER
--------------------------------------------------------------------------------
(d) the total number of HGAL Shares, if all HGAL Employee Options and
all shares in HGAL which are partly paid were converted into
fully paid HGAL Shares, would be 592,143,073.
6.3 Other than the shares described above there are no other classes of
shares on issue in the capital of HGAL.
7. EFFECT OF ACCEPTANCE OF THIS OFFER
7.1 By completing and executing the Form of Acceptance and Transfer and
returning it as provided, or initiating acceptance of this Offer through
CHESS, you will have:
(a) accepted this Offer in respect of the relevant HGAL Shares and
agreed to the terms and conditions of this Offer to sell such
HGAL Shares to Homestake;
(b) agreed to transfer the relevant HGAL Shares to Homestake in
accordance with the terms set out in this Offer;
(c) authorised Homestake or its servants or agents to complete the
Form of Acceptance and Transfer (if you accepted this Offer
pursuant to Clause 4.2 above) by inserting such details as are
omitted in respect of your HGAL Shares and to rectify any errors
in or omissions from the Form of Acceptance and Transfer as may
be necessary to make the form an effective acceptance of this
Offer or to enable registration of the transfer of your HGAL
Shares to Homestake;
(d) subject to Clause 8.3 below, if you fail to select the Share
Offer or the Cash Offer in the Form of Acceptance and Transfer,
authorised Homestake to complete the Form of Acceptance and
Transfer by electing to accept the Share Offer on your behalf;
(e) warranted to Homestake that all of the HGAL Shares for which you
have accepted this Offer and any Rights will, at the date of the
transfer of them to Homestake, be fully paid and free from all
mortgages, charges, liens, encumbrances and interests of third
parties of any kind, whether legal or otherwise, and restrictions
on transfer of any kind, and that you have full power and
capacity to sell and to transfer all such HGAL Shares and Rights;
(f) appointed Homestake as your true and lawful attorney, with effect
from acceptance of the Offer, with power to do all things which
you could lawfully do in relation to your HGAL Shares and Rights
tendered under this Offer or in exercise of any right derived
from the holding of such HGAL Shares, including, with respect to
such HGAL Shares (without limiting the generality of the
foregoing):
(i) attending and voting at any meeting of HGAL;
(ii) demanding a poll for any vote taken at any meeting of
HGAL;
(iii) proposing or seconding any resolution to be considered
at any meeting of HGAL;
(iv) requisitioning the convening of any meeting of HGAL and
convening a meeting pursuant to any such requisition;
--------------------------------------------------------------------------------
28
<PAGE>
THE OFFER
--------------------------------------------------------------------------------
(v) notifying HGAL that your address in the records of HGAL
for all purposes including the despatch of notices of
meeting, annual reports and dividends, should be altered
to an address nominated by Homestake; or
(vi) doing all things incidental and ancillary to any of the
foregoing,
and to have agreed that in exercising the powers conferred by
that power of attorney, the attorney may act in the interests of
Homestake as the intended registered holder and beneficial holder
of those HGAL Shares.
Homestake will indemnify you and keep you indemnified in respect
of all costs, expenses and obligations which might otherwise be
incurred or undertaken as a result of the exercise by an attorney
of any powers under this Offer. This appointment, being given for
valuable consideration to secure the interest acquired in your
HGAL Shares, is irrevocable. This appointment terminates upon the
registration of Homestake as the registered holder of the
tendered HGAL Shares;
(g) irrevocably authorised and directed HGAL to pay to Homestake or
to account to Homestake for all Rights in respect of the relevant
HGAL Shares;
(h) except where Rights have been paid or accounted for under
paragraph (g) above, irrevocably authorised Homestake to deduct
from the consideration payable in accordance with the terms of
this Offer to which your acceptance relates, the amount of all
Rights referred to in paragraph (g) or an amount equal to the
value of those Rights as reasonably assessed by Homestake;
(i) notwithstanding the instructions in Clause 4.1 above, if you
signed the Form of Acceptance and Transfer in respect of any of
your HGAL Shares in a CHESS Holding, irrevocably authorised
Homestake:
(i) to instruct your Controlling Participant to initiate
acceptance of this Offer in respect of all such HGAL
Shares in accordance with the SCH business rules; and
(ii) to give any other instructions in relation to those HGAL
Shares to your Controlling Participant on your behalf
under the sponsorship agreement between you and the
Controlling Participant.
(j) if you accept, or are deemed to have accepted, the Share Offer,
authorised Homestake to issue and allot to you the Homestake
Shares which you are entitled to receive for your HGAL Shares
pursuant to this Offer and to enter your name in its register of
members as the holder of those Homestake Shares, and agreed that
you will be bound by the Homestake Certificate and By-laws.
8. OBLIGATIONS OF HOMESTAKE
8.1 (a) If you accept the Share Offer, Homestake will allot to you the
Homestake Shares required and forward to you the share
certificate(s) or confirmation of allotment to your CHESS Holding
for the Homestake Shares allotted to you (together with a cheque
for any fractional entitlement, if applicable), at the address as
shown in the Form of Acceptance and Transfer or as shown in the
CHESS subregister as soon as practicable and, in any event,
within 7 days of receipt of your valid acceptance.
--------------------------------------------------------------------------------
29
<PAGE>
THE OFFER
--------------------------------------------------------------------------------
(b) If you accept the Cash Offer, Homestake will send the cheque to
you at the address shown in the Form of Acceptance and Transfer
or as shown in the CHESS subregister as soon as practicable and,
in any event, within 7 days of receipt of your valid acceptance.
Each business day in Sydney, Ernst & Young Registry Services Pty Limited
will endeavour to process all valid acceptances received during the
preceding business day.
All Homestake Shares allotted under this Offer will be registered on the
principal register of shareholders maintained by The First National Bank
of Boston. In addition, all Homestake Shares allotted under this Offer to
Australian residents will be recorded on the New South Wales subregister
of members to be maintained in Sydney.
8.2 All costs and expenses of the preparation and circulation of the Offer
Document, and all stamp duty payable on transfers of HGAL Shares in
respect of which Offers are accepted, will be paid by Homestake.
8.3 If you accept the Share Offer and your address as shown in the register
of members of HGAL is a place outside Australia and its external
territories or outside the United States, and Homestake is prevented from
lawfully making the Share Offer to you or it is unlawful for you to
accept the Share Offer by the law of that place, then you shall be deemed
to have elected to receive the Cash Offer.
9. VARIATION
9.1 Homestake may not vary this Offer except in accordance with Section 654
of the Corporations Law. This means that Homestake may only vary the
Offer in the following ways:
(a) with the written consent of the ASC and subject to any conditions
specified by the ASC in that consent, in such manner as the ASC
may permit;
(b) by extending the Offer Period; or
(c) by increasing the consideration payable under the Offer.
9.2 If Homestake extends the Offer Period you will receive notice of the
extension unless you have already accepted the Offer.
9.3 If Homestake increases the consideration under the Offer you will receive
notice of the increase even if you have accepted the Offer. If you have
accepted the Offer at the time of any increase in consideration, you will
get the benefit of that increase if the increase relates to the type of
consideration you selected when accepting the Offer.
10. DEFINITIONS AND INTERPRETATION
10.1 In this Offer Document and the Form of Acceptance and Transfer, unless
the contrary intention appears or the context otherwise requires, all
defined terms shall have the same meaning as in the Part A statement made
by Homestake in relation to and accompanying this Offer.
10.2 Words denoting one gender include the other genders and the singular
includes the plural and VICE VERSA.
--------------------------------------------------------------------------------
30
<PAGE>
THE OFFER
--------------------------------------------------------------------------------
10.3 Headings are for ease of reference only and do not affect the meaning or
interpretation of this Offer.
10.4 Words and phrases to which a meaning is ascribed by the Corporations Law
or the SCH business rules have the same meaning when used in this Offer
unless the context otherwise requires.
10.5 Time is Sydney time or New York City time, as the case may be.
THIS OFFER is dated [ ]
1995
SIGNED ON BEHALF OF
HOMESTAKE MINING COMPANY by:
______________________________________
--------------------------------------------------------------------------------
31
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
SECTION 4. PART A STATEMENT
A copy of this Part A statement was registered by the Australian Securities
Commission ("ASC") on [ ] 1995. The ASC takes no responsibility as to
its contents.
STATEMENT BY HOMESTAKE MINING COMPANY
(A.R.B.N. 070 799 067)
PURSUANT TO PARTS 6.3 AND 6.12 OF THE CORPORATIONS LAW OF AUSTRALIA
1. PROPOSED TAKEOVER OFFERS
Homestake Mining Company, ("Homestake") proposes making takeover offers
("Offers") under a takeover scheme ("Takeover Scheme") in respect of all
of the fully paid ordinary shares of A$0.20 each in the capital of
Homestake Gold of Australia Limited (A.C.N. 008 143 137) ("HGAL")
including those shares issued during the term of the Offer pursuant to
the exercise of any HGAL Employee Options, and partly paid shares of HGAL
which become fully paid during the term of the Offer. Accompanying this
Part A statement are the proposed Offers.
1.1 PARTICULARS OF THE PROPOSED OFFERS
(a) The Offers will extend to all persons registered as holders of
HGAL Shares at 9.00 am Sydney time on the date of the Offers and
to persons who, during the Offer Period, become registered as
holders of HGAL Shares as a result of the transfer of HGAL
Shares, the exercise of HGAL Employee Options or the paying up of
the amount unpaid on shares in HGAL which are partly paid.
(b) The consideration offered is:
(i) 0.089 Homestake Shares for each HGAL Share (the "Share
Offer"); or
(ii) A$1.90 for each HGAL Share (the "Cash Offer").
If the number of HGAL Shares held is such that the entitlement to
Homestake Shares calculated above is not a whole number, the
entitlement to Homestake Shares will be rounded down to the
closest whole number. In that case, the value of the fractional
entitlement will be paid by cheque (in Australian dollars), using
the last trading price of the Homestake Shares on the ASX on the
last trading day before the acceptance is received.
(c) Holders of HGAL Employee Options may accept Offers by duly
completing and signing the relevant notice of exercise in respect
of the HGAL Employee Options, drawing a cheque in favour of HGAL
for the whole of the subscription price due on exercise of the
HGAL Employee Options, completing and signing the Form of
Acceptance and Transfer and sending to Homestake both documents
and the cheque, together with the certificate(s) for the relevant
HGAL Employee Options.
Holders of shares in HGAL which are partly paid and who wish to
accept the Offer must first pay the balance of the subscription
price unpaid on those shares, and then accept the Share Offer or
the Cash Offer in respect of the HGAL Shares issued to them.
--------------------------------------------------------------------------------
32
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
1.2 OFFER PERIOD
The Offers are intended to remain open until 5.00 pm Sydney time on the
date which is one month after the date to be specified in the Offer.
Offers may be accepted in Sydney until such time, and in New York City
until 5.00 pm New York City time on the preceding business day, unless
the Offers are withdrawn or the Offer Period is extended.
2. INFORMATION ABOUT HOMESTAKE
2.1 OVERVIEW OF HOMESTAKE
Homestake is a Delaware corporation incorporated in 1983 as the parent
holding company to a California corporation which has been engaged in the
gold mining business since 1877.
Homestake is one of the largest North American-based gold mining
companies. Operations include mineral exploration, extraction, processing
and refining. Gold bullion is Homestake's principal product. Homestake
has significant operations in the United States, Canada and Australia.
Homestake also has operations in Chile. In addition to exploration
activity in the countries where its operations are conducted, Homestake
is engaged in active exploration projects in Venezuela and other South
American countries. Homestake has the opportunity to substantially
increase its interest in gold mining projects in Bulgaria and Russia
(described in Clause 2.4 of this Part A statement).
Homestake was founded to develop the Homestake mine discovered in the
Black Hills of the Dakota Territory (now South Dakota, U.S.A.) in 1876.
It was predominately a gold mining company until its diversification into
uranium mining and production in the early 1950s and into lead and zinc
in the 1960s. In 1990, Homestake closed its last remaining uranium mine
and sold its interest in its base metals business.
In 1975, Homestake made its initial investment in the Kalgoorlie gold
district of Western Australia (known as the "Golden Mile") when HGAL
acquired a 48% interest in the Kalgoorlie Mining Associates partnership.
In 1987, Homestake sold 20% of the shares of HGAL to the public.
Subsequently, HGAL increased its interest in Kalgoorlie Mining Associates
to 50% and acquired a 50% interest in adjacent joint ventures and
properties.
In 1989, Homestake joined with two partners in the development of a major
sulphur discovery, Main Pass 299, in the Gulf of Mexico.
In 1992, Homestake acquired International Corona Corporation (now known
as Homestake Canada, Inc.), a large Canadian gold producer, for
approximately 37.2 million Homestake Shares having a value of
approximately U.S.$480 million. At the time of the acquisition, Corona
had indebtedness of approximately Can.$300 million, which was
subsequently discharged by a combination of cash flow from operations and
a loan from Homestake. As a result of the acquisition, Homestake added
approximately 600,000 ounces to its yearly production of gold and
increased its gold reserves by more than 5.4 million ounces. In addition,
Homestake acquired an interest in the high-grade Eskay Creek deposit in
British Columbia. Homestake now holds a 50.6% interest in Eskay Creek
mine through its shareholding in Prime Resources Group Inc., a British
Columbia company listed on The Toronto Stock Exchange.
Homestake's annual gold production is expected to be approximately 1.9
million ounces in 1995. Operations in the United States are expected to
contribute slightly more than 40% of 1995
--------------------------------------------------------------------------------
33
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
production, primarily from the Homestake, McLaughlin and Round Mountain
mines. Gold production from Canada is expected to be about 40% of 1995
production, principally from the Williams, David Bell and Eskay Creek
mines. Production from the Kalgoorlie operations in Western Australia is
expected to account for almost 20% of 1995 production. Average cash
operating costs for 1995 are estimated at U.S.$249 per ounce with total
operating costs estimated at U.S.$301 per ounce.
The accompanying table shows 1994 and 1993 information with respect to
ownership of mines, production, costs, reserves and additional mineral
deposits. A discussion of the bases for calculating ore reserves and
additional mineral deposits is included under "Ore Reserves and
Additional Mineral Deposits Estimates" in Clause 2.2 of this Part A
statement. See Clause 3.1 below for recent information with respect to 30
June 1995 ore reserves and other mineral resources estimates for HGAL's
Kalgoorlie mines.
Further details on Homestake's business and properties, including title
information, are contained in Appendices C, D, E and F.
--------------------------------------------------------------------------------
34
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
STATISTICAL SUMMARY
<TABLE>
<CAPTION>
PRODUCTION AND COSTS PER OUNCE
-----------------------------------------------------------------
COSTS
PER
PRODUCTION(1) OUNCE(6)
------------------------------------------------------- --------
GRADE
INTEREST(1) TONS MILLED -------------------- RECOVERY OUNCES
GOLD (%) YEAR (MILLIONS) (OZ/TON) (GM/TONNE) (%) PRODUCED CASH
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States Homestake 100 1994 2.6 0.160 5.5 95 393,934 U.S.$292
1993 2.7 0.174 6.0 96 447,593 268
McLaughlin 100 1994 2.2 0.126 4.3 87 250,453 252
1993 2.2 0.154 5.3 92 305,312 196
Round Mountain(2) 25 1994 6.5 0.040 1.4 79 105,877 187
1993 6.1 0.033 1.1 69 93,674 230
Joint Ventures -- 1994 -- -- -- -- 40,145 257
1993 -- -- -- -- 43,518 225
Ruby Hill 100 1994 -- -- -- -- -- --
1993 -- -- -- -- -- --
Canada Eskay Creek 100 1994 -- -- -- -- -- --
1993 -- -- -- -- -- --
Williams 50 1994 1.3 0.184 6.3 95 222,660 204
1993 1.3 0.202 6.9 95 246,126 199
David Bell(3) 50 1994 0.3 0.399 13.7 94 103,854 168
1993 0.3 0.416 14.2 95 118,688 154
Nickel Plate 100 1994 1.4 0.070 2.4 81 82,117 351
1993 1.4 0.061 2.1 85 73,908 312
Snip(4) 40 1994 0.1 0.743 25.4 92 51,592 171
1993 0.1 0.865 29.6 92 59,790 152
Joint Ventures -- 1994 -- -- -- -- -- --
1993 -- -- -- -- -- --
Australia Kalgoorlie 50 1994 5.4 0.078 2.7 88 352,081 259
1993 5.3 0.074 2.5 86 332,636 230
Chile El Hueso(2) 100 1994 2.7 0.035 1.2 80 56,447 403
1993 3.0 0.040 1.4 82 71,683 299
Mines Not Shown or(5) -- 1994 -- -- -- -- 37,229 212
Sold 1993 -- -- -- -- 124,925 277
Total Production -- 1994 -- -- -- -- 1,696,389 U.S.$254
1993 -- -- -- -- 1,917,853 231
Minority Interest Share -- 1994 -- -- -- -- 89,826 --
1994 -- -- -- -- 88,663 --
Homestake's Share of -- 1994 -- -- -- -- 1,606,563 --
Gold 1993 -- -- -- -- 1,829,190 --
SILVER
Eskay Creek 100 1994 -- -- -- -- -- --
1993 -- -- -- -- -- --
OTHER
Sulphur (long tons) 16.7 1994 -- -- -- -- 376,571 --
1993 -- -- -- -- 115,960 --
Oil (barrels) 16.7 1994 -- -- -- -- 727,966 --
1993 -- -- -- -- 928,559 --
<CAPTION>
RESERVES AND ADDITIONAL MINERAL DEPOSITS
---------------------------------------------------------------------------------------------
RESERVES(7) ADDITIONAL MINERAL DEPOSITS(7),(8)
--------------------------------------------- ---------------------------------------------
GRADE CONTAINED GRADE CONTAINED
TONS -------------------- OUNCES TONS -------------------- OUNCES
GOLD NONCASH (MILLIONS) (OZ/TON) (GM/TONNE) (THOUSANDS) (MILLIONS) (OZ/TON) (GM/TONNE) (THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States U.S.$ 31 20.4 0.203 7.0 4,138 27.1 0.157 5.4 4,261
20 20.4 0.203 7.0 4,148 -- -- -- --
78 22.1 0.075 2.6 1,665 -- -- -- --
107 22.0 0.083 2.9 1,839 -- -- -- --
59 87.2 0.022 0.8 1,950 26.8 0.024 0.8 654
63 75.6 0.024 0.8 1,781 -- -- -- --
57 5.9 0.041 1.4 243 -- -- -- --
79 6.6 -- -- 263 -- -- -- --
-- -- -- -- -- 13.6 0.108 3.7 1,467
-- -- -- -- -- -- -- -- --
Canada -- 0.6 1.910 65.4 1,151 -- -- -- --
-- 0.6 1.910 65.4 1.232 -- -- -- --
42 17.0 0.166 5.7 2,835 5.2 0.130 4.5 669
48 17.5 0.170 5.8 2,967 -- -- -- --
43 3.0 0.318 10.9 948 -- -- -- --
52 3.5 0.316 10.8 1,109 -- -- -- --
54 2.9 0.077 2.6 223 -- -- -- --
24 4.8 0.077 2.6 370 -- -- -- --
59 0.1 0.797 27.3 89 -- 0.729 25.0 20
83 0.2 0.788 27.0 123 -- -- -- --
-- -- -- -- -- 2.6 0.322 11.0 824
-- -- -- -- -- -- -- -- --
Australia 39 64.7 0.073 2,5 4,695 43.5 0.076 2.6 3,291
40 59.9 0.074 2.5 4,408 -- -- -- --
Chile 13 0.1 0.039 1.3 5 -- -- -- --
30 3.2 0.039 1.3 122 -- -- -- --
Mines Not Shown or(5) 114 -- -- -- -- -- -- -- --
Sold 55 1.7 -- -- 74 -- -- -- --
Total Production U.S.$ 47 -- -- -- -- -- -- -- --
51 -- -- -- -- -- -- -- --
Minority Interest Share -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
Homestake's Share of -- 224.0 -- -- 17,942 118.8 -- -- 11,186
Gold -- 216.0 -- -- 18,436 -- -- -- --
SILVER
-- 0.6 85.5 2,928.4 51,507 -- -- -- --
-- 0.6 85.5 2,928.4 55,131 -- -- -- --
OTHER
-- -- -- -- 11,723 -- -- -- --
-- -- -- -- 11,056 -- -- -- --
-- -- -- -- 2,080 -- -- -- --
-- -- -- -- 2,852 -- -- -- --
<FN>
(1) Homestake's proportionate interest including minority interest.
(2) Recovery and grade relate to the reusable pad of the Round Mountain mine and
to the higher-grade ore at the El Hueso mine.
(3) Ounces produced includes 7,745 ounces and 11,094 ounces of gold production
from the Quarter Claim in 1994 and 1993, respectively. Reserves include 25%
net profits interest in Quarter Claim.
(4) Production includes contained ounces of gold in dore and concentrates sold
to smelters.
(5) Includes production from the Torres Complex, Dee and Santa Fe mines in 1994
and production from the Torres Complex, Dee, Santa Fe, Golden Bear and
Mineral Hill mines in 1993.
(6) Cash costs include all site operating expenses, smelter and treatment
charges, and royalties but exclude corporate administration, exploration and
general expenses. Noncash costs include depreciation, end-of-mine
reclamation accruals, and amortization of the cost of property acquisitions.
(7) Homestake's proportionate interest, excluding minority interest, at 31
December.
(8) 1993 additional mineral deposits not available.
</TABLE>
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35
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
2.2 INVESTMENT CONSIDERATIONS
HGAL shareholders should consider the following factors in deciding
whether to accept the Share Offer.
(A) ADVANTAGES OF BECOMING A HOMESTAKE SHAREHOLDER
(i) Homestake has the financial strength to pursue significant
development and exploration projects.
(ii) Homestake's operations are geographically diverse, with current
production in the United States, Canada and Australia (through
HGAL), exploration in the United States, Canada, Australia
(through HGAL) and South America and the opportunity to increase
participation in projects in Bulgaria and Russia.
(iii) Shareholders will have the opportunity to continue participation
in the Kalgoorlie mines through a shareholding in Homestake.
(iv) Homestake is one of North America's largest gold producing
companies, with a market capitalisation of $2.3 billion at 6
September 1995. Homestake shares are listed on the New York,
Swiss and Australian stock exchanges.
(B) ADDITIONAL INVESTMENT CONSIDERATIONS AND RISK FACTORS
RISKS OF GOLD MINING
The business of mineral exploration, development and production by its
nature contains significant risks. The business depends on, amongst other
things, successful location of mineable ore reserves and skillful
management. Profitable mining of any ore bodies located can be affected
by unforeseen changes in operating circumstances, ore reserves and
technical issues.
GOLD AND SILVER PRICE FLUCTUATIONS; FORWARD SALES
The market price of gold and, to a lesser degree, the market price of
silver have a significant effect on Homestake's results of operations and
the price of Homestake Shares. Gold and silver prices are influenced by
numerous factors over which Homestake has no 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, demand for jewellery and
industrial products, and sales by central banks and other holders and
producers of gold and silver in response to these factors. The supply of
gold and silver consists of a combination of new mine production and
sales from existing stocks of bullion and fabricated gold and silver held
by governments, public and private financial institutions, and
individuals.
Homestake's general policy is to sell its production at current prices
and not to enter into hedging arrangements. As a result, in general
Homestake's profitability is fully exposed to fluctuations in the current
price of gold in world markets. Homestake's average realised selling
price of gold was U.S.$384 per ounce in 1994 compared to U.S.$359 per
ounce in 1993 and U.S.$348 per ounce in 1992. The average realised
selling price of gold for the year to 31 August 1995 was U.S.$385, and is
forecast to be U.S.$385 for the balance of the year.
HGAL's general policy is also to sell its production at current prices.
--------------------------------------------------------------------------------
36
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
In certain limited circumstances, Homestake will enter into forward sales
commitments for small portions of its production. During the fourth
quarter of 1994, Homestake sold for future delivery 183,200 ounces of
gold it expects to produce at the Nickel Plate mine during 1995 and 1996.
These forward sales represent less than 5% of the gold that Homestake
expects to produce over those years. The average price is approximately
U.S.$412 per ounce, which should cover the mine's relatively high cash
costs through the end of mine life in 1996. The forward sales should also
allow for recovery of Homestake's remaining investment in the mine and
provide for estimated reclamation costs.
CURRENCY FLUCTUATIONS
Gold is sold throughout the world principally based on the U.S. dollar
price, but operating expenses for gold mining companies are incurred
principally in local currencies. Homestake's operations are principally
based in the United States, Canada and Australia. As Homestake is a
United States-based corporation, Homestake has conducted, and expects to
continue to conduct, currency hedging programs for Canadian and
Australian dollars to protect against significant currency fluctuations
relative to the U.S. dollar.
In addition, Homestake Shares are traded principally in U.S. dollars on
the NYSE. For this reason, Australian residents who plan to hold
Homestake Shares can expect to be subject to the benefits and detriments
of fluctuations in the U.S. dollar-Australian dollar exchange rate and,
to a lesser extent, the U.S.-Canadian dollar exchange rate. In general, a
weakening of the Australian dollar against the United States dollar would
result in an increase in the value of Homestake Shares in Australian
dollars, while a strengthening of the Australian dollar against the
United States dollar would result in a decrease in the value of Homestake
Shares in Australian dollars. The Australian dollar value of Homestake
dividends, which are declared in U.S. dollars (but will be paid to
Australian resident shareholders in Australian dollars) are similarly
affected by the relative value of the U.S. dollar and the Australian
dollar.
--------------------------------------------------------------------------------
37
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
DIVIDENDS
The following chart sets out the historical dividend payments made by
Homestake since 1991.
<TABLE>
<CAPTION>
CALENDAR PERIOD DIVIDENDS
------------------------------------------------------------------------- ------------
<S> <C>
1991
First Quarter.......................................................... U.S.$0.050
Second Quarter......................................................... 0.050
Third Quarter.......................................................... 0.050
Fourth Quarter......................................................... 0.050
1992
First Quarter.......................................................... U.S.$0.050
Second Quarter......................................................... 0.050
Third Quarter.......................................................... 0.050
Fourth Quarter......................................................... 0.050
1993
First Quarter.......................................................... U.S.$0.025
Second Quarter......................................................... 0.025
Third Quarter.......................................................... 0.025
Fourth Quarter......................................................... 0.025
1994
First Quarter.......................................................... U.S.$0.025
Second Quarter......................................................... 0.050
Third Quarter.......................................................... 0.050
Fourth Quarter......................................................... 0.050
1995
First Quarter.......................................................... U.S.$0.050
Second Quarter......................................................... 0.050
Third Quarter.......................................................... 0.050
</TABLE>
Homestake has paid quarterly dividends continuously for more than 20
years.
The Homestake Board of Directors conducts a quarterly review of
Homestake's cash situation and earnings and expenditure prospects in
deciding whether to pay dividends and the dividend level. Homestake has a
minimum consolidated net worth covenant of U.S.$500 million under its
outstanding U.S.$150 million bank credit line, but otherwise it is not
subject to contractual limitations on its ability to pay dividends. At 30
June 1995, Homestake's consolidated net worth was U.S.$587.4 million.
HGAL has not paid a dividend since 1988.
Based on an annual dividend rate of U.S.$0.20 per Homestake Share and an
exchange rate of U.S.$1.00 = A$ , a holder of 1,000 HGAL Shares would
be entitled to receive an annual dividend of A$ (before U.S.
withholding tax) on the 89 Homestake Shares that would be allotted under
the Share Offer.
DIVIDEND FRANKING AND U.S. WITHHOLDING TAX
Dividends payable by Homestake will not be franked under Australian tax
law. The entire amount of the dividend will constitute assessable income
for Australian income tax purposes, without any rebate for franking.
--------------------------------------------------------------------------------
38
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
Dividends payable by Homestake will also be subject to a 15% withholding
tax in the United States, before being remitted to Australian resident
shareholders. That withholding tax generally may be claimed as a credit
against Australian income taxes.
The taxation consequences of owning and disposing of Homestake Shares are
considered generally in Clause 6.7 of this Part A statement.
REGULATION
Homestake's mining operations and exploration activities are subject to
extensive regulation governing development, production, proposed
amendments, labor standards, occupational health, waste disposal,
protection and remediation of the environment, mine safety, toxic
substances, and other matters in all of the jurisdictions where it
operates.
There is a prospect that the United States Mining Law of 1872 will be
amended. Under current law, persons staking mining claims on United
States federal government-owned property open to exploration (unpatented
mining claims) are entitled to secure title to the property (patented
mining claims) at nominal cost on the making and documenting of a
discovery of gold in commercial quantities. Under the law as proposed to
be amended, the United States federal government would be entitled to
receive royalties based on either the gross or net value of production
from government-owned property. This would have only a minimal impact on
Homestake's current operations, as substantially all of Homestake's
current operations in the United States are conducted on privately held
land. However, Homestake's recent discovery at Ruby Hill is located on
unpatented mining claims. It is possible that Homestake would be required
to pay royalties on production from that property when it is placed into
production, but the amount if any, is not predictable. Expansion at Round
Mountain may also occur on government-owned property, as to which
royalties might similarly be payable. Should the Mining Law of 1872 be so
amended, it may reduce the amount of future exploration and development
activity conducted by Homestake in the United States.
TAX
Homestake's operations are conducted in a number of jurisdictions, with
differing rates of taxation. Homestake's income taxes and mining taxes
have been higher in 1995 in part because a substantial part of its
revenue and net income derive from Canada, which has a combination of
income and mining taxes significantly higher than those in the United
States and Australia. Also, under current circumstances there is only
limited ability to receive tax credits in the United States for taxes
paid in Canada.
ORE RESERVES AND ADDITIONAL MINERAL DEPOSITS ESTIMATES
Information in this Offer Document with respect to ore reserves and
additional mineral deposits has been prepared and defined in accordance
with SEC definitions, as follows.
"Mineral Deposit" is a mineralized body which has been delineated by
appropriate drilling and/or underground sampling. 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 noncash costs
for the mine and related facilities.
"Ore Reserves" are that part of a mineral deposit which can be
economically and legally extracted or produced at the time of the
reserve determination.
--------------------------------------------------------------------------------
39
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
For SEC purposes, ore reserves may be proven or probable:
"Proven (Measured) Reserves" are those reserves for which (a)
quantity is computed from dimensions revealed in outcrops, trenches,
workings, or drill holes; grade and/or quality are computed from
results of detailed sampling and (b) the sites for inspection,
sampling, and measurement are so closely spaced and the geologic
character is so well defined that size, shape, depth, and mineral
content of reserves are well-established.
"Probable (Indicated) Reserves" are those reserves for which quantity
and grade and/or quality are computed from information similar to
that for proven (measured) reserves, but the sites for inspection,
sampling, and measurement are farther apart or are otherwise less
adequately spaced. The degree of assurance, although lower then that
for proven (measured) reserves, is high enough to assume continuity
between points of observation.
The JORC Code applicable in Australia provides that Australian companies
reporting on mineralization are to prepare information on the following
bases.
"Mineral Resource" is defined as an identified in-situ mineral
occurrence from which valuable or useful minerals may be recovered.
Mineral resources are subdivided into:
-- Measured Mineral Resources;
-- Indicated Mineral Resources; and
-- Inferred Mineral Resources.
In reporting a mineral resource, there is a clear implication that there
are reasonable prospects for eventual economic exploitation.
"Measured Mineral Resource" means a mineral resource intersected and
tested by drill holes, underground openings or other sampling
procedures at locations which are spaced closely enough to confirm
continuity and where geoscientific data are reliably known. A
measured mineral resource estimate will be based on a substantial
amount of reliable data, interpretation and evaluation of which
allows a clear determination to be made of shapes, sizes, densities
and grades.
"Indicated Mineral Resource" means a mineral resource sampled by
drill holes, underground opening or other sampling procedures at
locations too widely spaced to ensure continuity but close enough to
give a reasonable indication of continuity and where geoscientific
data are known with a reasonable level of reliability. An indicated
mineral resource estimate will be based on more data, and therefore
will be more reliable, than an inferred mineral resource estimate.
"Inferred Mineral Resource" means a mineral resource inferred from
geoscientific evidence, drill holes, underground openings or other
sampling procedures where the lack of data is such that continuity
cannot be predicted with confidence and where geoscientific data may
not be known with a reasonable level of reliability.
--------------------------------------------------------------------------------
40
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
Under the JORC Code, "Ore Reserve" is defined as that part of a measured
or indicated mineral resource which could be mined, inclusive of
dilution, and from which valuable or useful minerals could be recovered
economically under conditions realistically assumed at the time of
reporting. Ore reserves are subdivided into proved ore reserves and
probable ore reserves.
"Proved Ore Reserve" means an ore reserve stated in terms of minable
tonnes/volume and grade in which the corresponding identified mineral
resource has been defined in three dimensions by excavation or
drilling (including minor extensions beyond actual openings and drill
holes), and where the geological factors that limit the ore body are
known with sufficient confidence that the mineral resource is
categorized as "measured."
"Probable Ore Reserve" means an ore reserve stated in terms of
minable tonnes/volume and grades where the corresponding identified
mineral resource has been defined by drilling, sampling or excavation
(including extensions beyond actual openings and drill holes), and
where the geological factors that control the ore body are known with
sufficient confidence that the mineral resource is categorized as
"indicated."
Except with respect to the Mt Charlotte underground mine at Kalgoorlie,
Homestake believes that its ore reserve estimates, based on SEC
definitions, are approximately the same as those that would result from
the application of the JORC Code for determining proved and probable ore
reserves. Also except with respect to the Mt Charlotte underground mine
at Kalgoorlie, Homestake believes that its additional mineral deposit
estimates, based on SEC definitions, are approximately the same as would
result from the application of the JORC Code for mineral resources, after
deduction for proved and probable ore reserves. In the case of Mt
Charlotte, Kalgoorlie Consolidated Gold Mines Limited ("KCGM"), the
operator of the Kalgoorlie mines, only includes as proved and probable
reserves that mineralisation for which a mining plan has been prepared,
I.E., stope design and scheduling has been completed. This is not
required by SEC guidelines and, accordingly, Homestake recalculates Mt
Charlotte ore reserves for its reporting purposes. As so recalculated,
Homestake's estimates of HGAL's 50% of ore reserves at 31 December 1994
and 1993 were greater than those calculated by KCGM by 406,000 and
326,000 ounces of contained gold (330,890 and 265,690 ounces for
Homestake's proportionate interest), respectively. Homestake's estimate
of HGAL's additional mineral deposits were correspondingly less. In
presenting HGAL's 30 June 1995 information with respect to Kalgoorlie in
this Offer Document, Homestake has not adjusted the HGAL ore reserve and
mineral resource estimates as it would when calculating those amounts for
Homestake reporting. If it were to do so, Homestake believes that its
proportionate part of the ore reserve amount would be increased by
approximately the same amount as at 31 December 1994, and the additional
mineral deposit amount would be correspondingly decreased.
Although Homestake ore reserve and additional mineral deposit estimates
are believed to have been prepared and evaluated reliably and
professionally, ore reserve and additional mineral deposit estimates
involve interpretation of known data and subjective judgments regarding
grade, mineralisation, continuity and, in the case of ore reserves,
economic factors.
Homestake used U.S.$360 per ounce as the gold price in evaluating
Homestake's ore reserves at the end of 1993 and 1994. HGAL used A$525,
the equivalent of approximately U.S.$375, in determining ore reserves at
Kalgoorlie at 30 June 1995. Future market price fluctuations, production
costs, recovery rates and many other factors may result in an ore reserve
becoming uneconomic or a mineral deposit being upgraded into an ore
reserve.
--------------------------------------------------------------------------------
41
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
Information with respect to Homestake's additional mineral deposits is
included in this Offer Document to comply with Australian disclosure
requirements applicable to the Share Offer. SEC regulations do not permit
mineral deposit disclosures in documents that are filed with the SEC
under United States securities laws unless required by applicable foreign
securities laws. Homestake does not expect to include additional mineral
deposit information in documents to be filed in the future with the SEC
under United States securities laws.
2.3 ENVIRONMENTAL POLICY
Homestake has a policy of conducting extensive environmental audits of
its operations in order to minimise the impact of those operations on the
environment and to monitor compliance with environmental legislation. A
committee of the Homestake Board of Directors oversees the establishment
and implementation of environmental policy. An environmental audit has
been conducted on all of Homestake's operations within the last 2 years.
During 1994, Homestake received one environmental notice of
non-compliance and one environmental citation, resulting in a Can.$200
fine.
Homestake has made significant capital expenditures to minimise the
environmental impact of its operations. Such expenditures totalled
approximately U.S.$6 million in 1994, and are expected to be
approximately U.S.$3 million in 1995. Operating costs incurred in order
to comply with regulatory requirements include reclamation costs and
environmental operating costs. Such costs totalled approximately U.S.$16
million in 1994 (excluding related depreciation costs of U.S.$6 million),
and are expected to be approximately the same in 1995.
Further details on environmental matters relevant to Homestake's
operations are set out in Appendices C, E and F.
2.4 EXPLORATION AND ACQUISITION
Homestake's principal exploration activities are in the United States,
Canada, Australia and South America. Homestake's exploration expenses in
1994 were U.S.$21.3 million compared with U.S.$17.5 million in 1993.
These figures do not include additional exploration expenses incurred at
Homestake's operating mines, which totaled U.S.$8.4 million in 1994. The
total exploration expenditures in 1995 are expected to be U.S.$ 30
million, not including in-mine exploration expenses of U.S.$9 million.
In June 1995, Homestake exercised its option to acquire 5% of Zoloto
Mining Limited ("Zoloto"), an English company, for U.S.$1 million. Zoloto
holds a 75% interest in the 2 million ounce Pokrovskoye gold deposit
located in the Amur region in eastern Russia. Homestake and Zoloto are
preparing a feasibility study on the Pokrovskoye project. Following
completion of the feasibility study, Homestake may exercise a second
option to acquire an additional 62% of Zoloto by paying a further U.S.$15
million, giving Homestake a 50% indirect interest in the Pokrovskoye
project.
In July 1995, Homestake acquired for U.S.$24 million (i) a 10% interest
in Navan Resources Plc. ("Navan"), an Irish public company, and (ii) an
option to acquire 50% of Navan's wholly owned subsidiary which owns a 68%
indirect interest in the Chelopech gold and copper mining operations
located near Sofia, Bulgaria. Current reserves and additional mineral
deposits at Chelopech total 4.5 million ounces of gold and 1.1 billion
pounds of copper with annual production of approximately 500,000 tonnes
of ore containing 46,000 ounces of gold annually. Further development is
in progress, which is expected to increase annual production to 750,000
tonnes of ore containing
--------------------------------------------------------------------------------
42
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
72,000 ounces of gold. Homestake is conducting a feasibility study to
determine if certain additional capital expenditures could increase the
annual production rate to approximately 2 million tonnes of ore
containing about 200,000 ounces of gold beginning in 2000. Once the
feasibility study is completed, Homestake is entitled to exercise the
option to acquire 50% of Navan's interest in the operation by investing
an additional U.S.$48 million during 1996 and 1997, which would be used
to fund a portion of the cost of the mine expansion.
If Homestake proceeds with the additional investments in Russia and
Bulgaria, Homestake expects that it will procure political risk insurance
to protect against nationalisation of its interests in these projects.
2.5 DIRECTORS AND SENIOR MANAGEMENT
(A) DIRECTORS
The names, occupations and addresses of the directors of Homestake are as
follows:
<TABLE>
<CAPTION>
NAME OCCUPATION BUSINESS ADDRESS
--------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
Henry Gurney Grundstedt Mining consultant Capital Group, Inc.
333 So. Hope Street
Los Angeles, CA 90071
William Albert Humphrey Mining consultant 500 Ygnacio Valley Road
Suite 250
Walnut Creek, CA 94596
John Neerhout, Jr. Executive Vice President - Bechtel Group Inc.
Bechtel Group Inc. 50 Beale Street
23rd Floor
San Francisco, CA 94105
Stuart Thorne Peeler Petroleum industry consultant Casa Codorniz
7601 North Calle Sin Controversia
Tucson, AZ 85718
Jack Edward Thompson President and Chief Operating Homestake Mining Company
Officer - Homestake 650 California Street
San Francisco, CA
94108-2788
Carol Ann Rae President and Chief Executive 13117 N. Creekview Road
Officer - Rapid City, SD 57702
Magnum Diamond Corporation
</TABLE>
--------------------------------------------------------------------------------
43
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME OCCUPATION BUSINESS ADDRESS
--------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
Myles Norman Anderson Mining consultant Norman Anderson & Associates Ltd.
502 - 455 Granville Street
Vancouver, B.C., Canada V6C 1V2
Robert Henry Clark, Jr President and Chief Executive Case, Pomeroy & Co., Inc.
Officer - 529 Fifth Avenue, Suite 1600
Case, Pomeroy & Company NYC, NY 10017
Douglas Winston Fuerstenau Professor of Metallurgy, Dept. of Materials Science and
Department of Materials Science Mineral Engineering
and Mineral Engineering, University of California
University of California, 477 Evans Hall # 1760
Berkeley Berkeley, CA 94720-1760
Harry Milton Conger Chairman and Chief Executive Homestake Mining Company
Officer - Homestake 650 California Street
San Francisco, CA 94108-2788
Glen Robert Durham President and Chief Executive Walters Industries, Inc.
Officer - Walter Industries, Inc. 1500 North Dale Mabry
Tampa, FL 33607
Robert Keith Jaedicke Professor (Emeritus) of Graduate School of Business
Accounting, Stanford University Stanford University
Graduate School of Business Stanford, CA 94305-5015
Berne Adair Schepman Management consultant The Adair Company
1670 South Amphlett Blvd.
Suite 214
San Mateo, CA 94402
</TABLE>
Details of the age, length of service, biographical information and
entitlements of Homestake's directors are set out in Appendix G.
--------------------------------------------------------------------------------
44
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
(B) EXECUTIVE OFFICERS
The executive officers of Homestake are as follows:
Harry M Conger - Chairman of the Board and Chief Executive Officer.
Jack E Thompson - President and Chief Operating Officer.
Gene G Elam - Vice President, Finance and Chief Financial Officer.
Lee A Graber - Vice President, Corporate Development.
Wayne Kirk - Vice President, General Counsel and Corporate Secretary.
Gillyeard J Leathley - Vice President, Operations.
William F Lindqvist - Vice President, Exploration
Ronald D Parker - Vice President, Canada and President, Homestake Canada
Inc.
Richard A Tastula - Vice President, Australia.
Jan P Berger - Treasurer.
David W Peat - Controller.
Appendix C contains further information about Homestake's executive
officers and Appendix G contains information regarding the compensation
of certain executive officers and stock option plans of Homestake,
together with a description of the shareholder agreement and transactions
with Case Pomeroy & Company.
2.6 HOMESTAKE SELECTED FINANCIAL DATA
Selected Financial Data for Homestake is set out at Clause 9 of the
Summary of Offer and in Appendices C and D.
--------------------------------------------------------------------------------
45
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
3. INFORMATION ABOUT HGAL
3.1 OVERVIEW OF HGAL
HGAL was incorporated by Homestake as a wholly owned subsidiary in 1974
to participate in gold mining in the Kalgoorlie district. Its initial
investment was a 48% interest in the Kalgoorlie Mining Associates
partnership. In 1987, Homestake sold 20% of its HGAL shares to the
Australian public, and HGAL became listed on the ASX. In 1989, HGAL
increased its interest in the Kalgoorlie Mining Associates partnership to
50%, and acquired 50% interests in adjacent properties and joint venture
operations. The Kalgoorlie mines and related facilities are operated by
KCGM, which is owned 50% by HGAL and 50% by Gold Mines of Kalgoorlie
Limited ("GMK"). HGAL also engages in exploration activity in Australia.
Principal mines and facilities at Kalgoorlie include the following.
- The Super Pit is a large open pit mine located along the
"Golden Mile" ore bodies previously mined from
underground. In 1994, 8.1 million tonnes of ore were
mined.
- The Mt Charlotte underground mine uses bulk mining
methods to produce ore at the rate of approximately 1.5
million tonnes per year. Production in 1994 was 1.52
million tonnes of ore.
- The Fimiston Mill was recently expanded to a capacity of
9.1 million tonnes per year. The increased capacity will
permit dismantling of the Oroya Mill to allow for
expansion of the Super Pit.
- The Gidji roaster complex processes refractory
concentrates.
HGAL pays 50% of the costs and is entitled to receive 50% of production
from all operations except for a portion of the Super Pit, where HGAL
pays 50% of the costs but may receive less than 50% of the production.
GMK is entitled to receive more than 50% of gold from that area under
certain circumstances out of the first 32.5 million tonnes of ore mined
by open pit method. In 1994, GMK received 15,781 ounces of gold under the
disproportionate sharing arrangement. At the end of 1994, approximately
14.4 million tonnes of ore had been mined from that area of the Super
Pit.
On 30 August 1995, HGAL announced new estimates of ore reserves and
mineral resources at the Kalgoorlie operations. The newly announced
figures, prepared as at 30 June 1995, represent a 19.4% increase in
contained gold in ore reserves and a 23.7% increase in contained gold in
additional mineral resources, as contrasted with figures at 31 December
1994. HGAL's 50% share of the ore reserves are estimated at 6,350,000
contained ounces, with HGAL's 50% share of additional mineral resources
estimated at 5,650,000 contained ounces (prepared applying the JORC
Code).
The newly revised estimates, prepared by KCGM, the manager of the
operation, take into account the following factors, among others:
- an estimated gold price of A$525 has been used in
preparing the estimates (approximately U.S.$375 at the
30 June 1995 Exchange Rate);
--------------------------------------------------------------------------------
46
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
- consideration has been given to the unique circumstances
at the Super Pit in estimating low grade lodes adjoining
previously mined high grades lodes;
- additional data has been taken into account, including
(i) experience during the past five years, where actual
production of gold has exceeded the mine model estimate
by approximately 20%, (ii) additional exploration and
in-fill drilling data, and (iii) reevaluation and
reinterpretation of historical data; and
- the mine model and pit design have been revised to take
account of recent experience, the additional data, and
revised expectations for future operations.
Additional information with respect to HGAL's business and properties and
financial information for HGAL is contained in Appendices C, H, I and J.
3.2 MATERIAL CHANGES TO HGAL'S FINANCIAL POSITION SINCE 31 DECEMBER 1994
The financial position of HGAL has not changed materially since 31
December 1994 except as described in Clause 3.1 above and Appendix I, the
half-yearly report filed by HGAL with the ASX on 30 August 1995.
Homestake considers that the material matters in these disclosures, in
addition to the ore reserve and additional mineral resource information
described in Clause 3.1 above, are as follows:
- sales revenue for the period was A$86,208,000, down 8.1%
compared to the results for the 6 months ended 30 June
1994 (the "previous period");
- operating profit before tax was A$13,706,000, down 25.3%
compared to the previous period;
- operating profit after tax was A$10,219,000, down 44.3%
compared to the previous period; and
- earnings per share were A$0.017, compared to A$0.031 for
the previous period.
3.3 RELATIONSHIPS BETWEEN HOMESTAKE AND HGAL
In addition to owning approximately 81.5% of HGAL, Homestake has the
following relationships with HGAL.
(a) Messrs. Humphrey, Peeler and Schepman, three of HGAL's seven
directors, are also directors of Homestake.
(b) The managing director of HGAL, Richard A Tastula, is also an
executive officer of Homestake.
(c) In 1989, Homestake and HGAL entered into a forward gold sales
contract under which Homestake bought 210,277 ounces of gold from
HGAL for a total sale price of A$100 million, based on the gold
price at the transaction date. The gold was paid for in
--------------------------------------------------------------------------------
47
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
1989. The gold is deliverable in equal semi-annual instalments
and the first instalment was delivered on 31 December 1991. The
final instalment is due on 29 June 2001. A gold fee is payable
quarterly on the undelivered portion of the gold.
4. INFORMATION ABOUT THE TRANSACTION
4.1 PRO FORMA FINANCIAL INFORMATION
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following Pro Forma Condensed Consolidated Financial Statements have
been prepared by Homestake to illustrate the estimated effects of the
proposed acquisition (the "Acquisition") of the 109,605,000 HGAL Shares
not presently owned by Homestake. The Pro Forma Condensed Consolidated
Financial Statements include a Pro Forma Condensed Consolidated Balance
Sheet as of 30 June 1995, assuming the Acquisition occurred as of that
date, and Pro Forma Condensed Consolidated Statements of Operations for
the six months ended 30 June 1995 and for the year ended 31 December
1994, assuming the Acquisition occurred as of the beginning of each
period.
Homestake has made an offer to acquire the 109,605,000 HGAL Shares it
does not already own. HGAL shareholders accepting Homestake's offer will
receive, at their option, either 0.089 of a Homestake Share or A$1.90
cash for each HGAL Share.
The Pro Forma Condensed Consolidated Financial Statements are presented
utilizing the purchase method of accounting whereby the cost of acquiring
the 18.5% of HGAL not already owned by Homestake is determined by the
value of the shares and the cash which Homestake will exchange, plus the
direct costs associated with the Acquisition, which are estimated at
approximately U.S.$3 million. All amounts in the Pro Forma Condensed
Consolidated Financial Statements are stated in U.S. dollars. The Pro
Forma Condensed Consolidated Financial Statements do not purport to
represent what the financial position or results of operations actually
would have been if the Acquisition had occurred at the beginning of the
periods or to project the financial position or results of operations for
any future date or period.
The Pro Forma Condensed Consolidated Financial Statements should be read
in conjunction with the historical consolidated financial statements,
including the notes thereto, of Homestake, prepared in accordance with
U.S. GAAP, which are included in Appendices D, E and F. The Pro Forma
Condensed Consolidated Financial Statements also include pro forma
adjustments which are based on available information and certain
assumptions that management of Homestake believes are reasonable in the
circumstances. Such pro forma adjustments reflect the effects of the
acquisition of all of the HGAL Shares not already owned by Homestake,
assuming 50% of the HGAL Shares are exchanged for Homestake Shares and
50% of the HGAL Shares are acquired for cash.
At the date the offer was announced (August 14, 1995), Homestake's
investment advisor estimated that 50% of the HGAL Shares tendered would
be exchanged for Homestake Shares based on the price of Homestake Shares
on August 14, 1995. However, the ultimate number of HGAL Shares which
will be exchanged for Homestake Shares will depend on a number of
factors, including the price of Homestake Shares during the time the
offer is open. The price of Homestake Shares may vary significantly
during that time, due to many factors including changes in the price of
gold.
--------------------------------------------------------------------------------
48
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
HOMESTAKE MINING COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
30 JUNE 1995
(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
HOMESTAKE PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------ --------------- ------------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and equivalents.................................... $ 150,804 $ (80,573)(A) $ 70,231
Short-term investments.................................. 99,418 99,418
Receivables............................................. 71,835 71,835
Inventories............................................. 67,080 67,080
Other................................................... 7,973 7,973
------------ --------------- ------------
Total current assets.................................. 397,110 (80,573) 316,537
------------ --------------- ------------
Property, Plant and Equipment - net....................... 791,345 188,865(A) 980,210
------------ --------------- ------------
Investments and Other Assets
Noncurrent investments.................................. 12,454 12,454
Other assets............................................ 31,722 31,722
------------ ------------
Total investments and other assets.................... 44,176 44,176
------------ --------------- ------------
$ 1,232,631 $ 108,292 $ 1,340,923
------------ --------------- ------------
------------ --------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities....................................... $ 104,858 $ 104,858
Long-term Liabilities
Long-term debt.......................................... 185,000 185,000
Other long-term obligations............................. 115,383 115,383
------------ ------------
Total long-term liabilities........................... 300,383 300,383
------------ ------------
Deferred Income and Mining Taxes.......................... 149,280 49,994(A) 199,274
------------ --------------- ------------
Minority Interest......................................... 90,690 (23,400)(A) 67,290
------------ --------------- ------------
Shareholders' Equity...................................... 587,420 81,698(A) 669,118
------------ --------------- ------------
$ 1,232,631 $ 108,292 $ 1,340,923
------------ --------------- ------------
------------ --------------- ------------
<FN>
(A) To reflect the acquisition of the 109,605,000 HGAL Shares that
Homestake does not presently own, assuming the issuance of
4,877,500 shares of Homestake valued at $81,698 and the payment
of $77,573 in cash, plus acquisition and related costs of $3,000.
Accordingly, the total pro forma acquisition cost is $162,271
compared to the book value for minority interest of $23,400. As a
result of this acquisition, Homestake's accounting for the
minority interest of HGAL is eliminated. The excess purchase
price paid over the net book value of assets acquired and related
deferred taxes is allocated as follows:
</TABLE>
<TABLE>
<S> <C>
Increase in Property, Plant and Equipment........................ $ 188,865
Increase in Deferred Taxes....................................... (49,994)
---------
Excess of Purchase Price Paid over Net Book Value of Assets
Acquired........................................................ $ 138,871
---------
---------
</TABLE>
--------------------------------------------------------------------------------
49
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
HOMESTAKE MINING COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED 31 DECEMBER 1994
(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HOMESTAKE PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- --------------- -----------
<S> <C> <C> <C>
Revenues
Product sales............................................... $ 656,056 $ 656,056
Interest income............................................. 9,762 $ (4,609)(A) 5,153
Gain on issuance of stock by subsidiary..................... 11,224 11,224
Other income................................................ 28,445 28,445
----------- --------------- -----------
705,487 (4,609) 700,878
----------- --------------- -----------
Costs and Expenses
Production costs............................................ 447,129 447,129
Depreciation, depletion and amortization.................... 76,171 6,086(B) 82,257
Administrative and general expense.......................... 38,159 38,159
Exploration expense......................................... 21,347 21,347
Interest expense............................................ 10,124 10,124
Other expense............................................... 6,744 6,744
----------- --------------- -----------
599,674 6,086 605,760
----------- --------------- -----------
Income Before Taxes and Minority Interest..................... 105,813 (10,695) 95,118
Income and Mining Taxes....................................... (18,880) 2,478(C) (16,402)
Minority Interest............................................. (8,917) 4,632(D) (4,285)
----------- --------------- -----------
Net Income.................................................... $ 78,016 $ (3,585) $ 74,431
----------- --------------- -----------
----------- --------------- -----------
Net Income Per Share.......................................... $ 0.57 $ 0.52
----------- -----------
----------- -----------
Average Shares Used in the Computation (thousands)............ 137,733 142,611
----------- -----------
----------- -----------
<FN>
(A) To eliminate interest income in respect of the assumed cash
component of the HGAL purchase price in the amount of $80,573.
(B) To record the amortization of excess purchase price paid over the
net book value of assets acquired.
(C) To record the tax effect of adjustments (A) and (B) above.
(D) To eliminate the minority interest's share of HGAL's earnings.
</TABLE>
--------------------------------------------------------------------------------
50
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
HOMESTAKE MINING COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED 30 JUNE 1995
(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HOMESTAKE PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
--------- ----------- ---------
<S> <C> <C> <C>
Revenues
Product sales........................................................................... $360,492 $360,492
Interest income......................................................................... 8,601 $(2,400)(A) 6,201
Other income............................................................................ 6,429 6,429
--------- ----------- ---------
375,522 (2,400) 373,122
--------- ----------- ---------
Costs and Expenses
Production costs........................................................................ 236,269 236,269
Depreciation, depletion and amortization................................................ 48,626 2,947(B) 51,573
Administrative and general expense...................................................... 20,051 20,051
Exploration expense..................................................................... 12,166 12,166
Interest expense........................................................................ 5,773 5,773
Other expense........................................................................... 1,751 1,751
--------- ----------- ---------
324,636 2,947 327,583
--------- ----------- ---------
Income Before Taxes and Minority Interest................................................. 50,886 (5,347) 45,539
Income and Mining Taxes................................................................... (25,208) 1,284(C) (23,924)
Minority Interest......................................................................... (7,939) 1,327(D) (6,612)
--------- ----------- ---------
Net Income................................................................................ $ 17,739 $(2,736) $ 15,003
--------- ----------- ---------
--------- ----------- ---------
Net Income Per Share...................................................................... $ 0.13 $ 0.11
--------- ---------
--------- ---------
Average Shares Used in the Computation (thousands)........................................ 137,862 142,740
--------- ---------
--------- ---------
<FN>
(A) To eliminate interest income in respect of the assumed cash
component of the HGAL purchase price in the amount of $80,573.
(B) To record the amortization of excess purchase price paid over the
net book value of assets acquired.
(C) To record the tax effects of adjustments (A) and (B) above.
(D) To eliminate the minority interest's share of HGAL's earnings.
</TABLE>
--------------------------------------------------------------------------------
51
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
To the Directors of Homestake Mining Company:
We have examined the pro forma adjustments reflecting the transaction
described in Clause 4.1 of the Part A statement of the Offer Document and
the application of those adjustments to the historical amounts in the
accompanying pro forma condensed consolidated statement of operations for
the year ended 31 December 1994. The historical condensed consolidated
financial statements are derived from the historical consolidated
financial statements of Homestake Mining Company that are included in
Appendix D to this Offer Document, which were audited by us. Such pro
forma adjustments are based upon management's assumptions described in
Clause 4.1 of the Part A statement of the Offer Document. Our examination
was made in accordance with standards established by the American
Institute of Certified Public Accountants and, accordingly, included such
procedures as were considered necessary in the circumstances.
In addition, we have reviewed the related pro forma adjustments and the
application of those adjustments to the historical amounts in the
accompanying pro forma condensed consolidated balance sheet of Homestake
Mining Company as of 30 June 1995, and the pro forma condensed
consolidated statement of operations for the six months then ended. The
historical condensed consolidated financial statements are derived from
the historical consolidated financial statements of Homestake Mining
Company appearing in Appendix F, which were reviewed by us. Such pro
forma adjustments are based upon management's assumptions described in
Clause 4.1 of the Part A statement of the Offer Document. Our review was
made in accordance with standards established by the American Institute
of Certified Public Accountants.
The objective of this pro forma financial information is to show what the
significant effects on the historical information might have been had the
transaction occurred at an earlier date. However, the pro forma condensed
consolidated financial statements are not necessarily indicative of the
results of operations or related effects on financial position that would
have been attained had the above mentioned transaction actually occurred
earlier.
In our opinion, management's assumptions provide a reasonable basis for
presenting the significant effects directly attributable to the
transaction described in Clause 4.1 of the Part A statement of the Offer
Document, the related pro forma adjustments give appropriate effect to
those assumptions, and the pro forma column reflects the proper
application of those adjustments to the historical financial statement
amounts in the pro forma condensed consolidated statement of operations
for the year ended 31 December 1994.
A review is substantially less in scope than an examination, the
objective of which is the expression of an opinion on management's
assumptions, the pro forma adjustments and the application of those
adjustments to historical financial information. Accordingly, we do not
express an opinion on the pro forma adjustments or the application of
such adjustments to the pro forma condensed consolidated balance sheet as
of 30 June 1995, and the pro forma condensed consolidated statement of
operations for the six months then ended. Based on our review, however,
nothing came to our attention that caused us to believe that management's
assumptions do not provide a reasonable basis for presenting the
significant effects directly attributable to the above mentioned
transaction, that the related pro forma adjustments do not give
appropriate effect to those assumptions, or that the pro forma column
does not reflect the proper application of those adjustments to the
historical consolidated financial statement amounts in the pro forma
condensed consolidated balance sheet as of 30 June 1995, and the pro
forma condensed consolidated statement of operations for the six months
then ended.
Coopers & Lybrand L.L.P.
San Francisco, California
14 September 1995
--------------------------------------------------------------------------------
52
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
4.2 FINANCIAL FORECAST
HOMESTAKE MINING COMPANY
FORECASTED CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDING YEAR ENDING 31
31 DECEMBER 1995 DECEMBER 1996
----------------- -----------------
<S> <C> <C>
Revenues
Product sales.................................................. $ 363.4 $ 727.7
Interest and other............................................. 16.9 20.9
------- -------
380.3 748.6
------- -------
Costs and Expenses
Production costs............................................... 232.5 452.4
Depreciation, depletion and amortization....................... 54.8 102.8
Administrative and general expense............................. 18.9 39.0
Exploration expense............................................ 15.0 29.5
Interest and other............................................. 5.2 10.4
------- -------
326.4 634.1
------- -------
Income Before Taxes and Minority Interest........................ 53.9 114.5
Income and Mining Taxes.......................................... (26.0) (61.0)
Minority Interest................................................ (7.9) (15.0)
------- -------
Net Income....................................................... $ 20.0 $ 38.5
------- -------
------- -------
Net Income Per Share............................................. $ 0.14 $ 0.27
------- -------
------- -------
Average Shares Used in the Computation (thousands)............... 138,800 142,900
------- -------
------- -------
SEE "SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS" BELOW.
</TABLE>
HOMESTAKE MINING COMPANY
FORECASTED CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(MILLIONS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDING YEAR ENDING 31
31 DECEMBER 1995 DECEMBER 1996
----------------- -----------------
<S> <C> <C>
Cash Flow From Operations
Net income..................................................... $ 20.0 $ 38.5
Depreciation, depletion and amortization....................... 54.8 102.8
Changes in working capital and other........................... 24.6 49.7
------ ------
Net Cash Provided by Operations.................................. 99.4 191.0
Investment and Financing Activities
Acquisition of HGAL minority interest.......................... 80.6 --
Additions to property plant and equipment...................... 58.9 56.0
Exploration/development projects............................... 24.0 50.0
Dividends...................................................... 13.8 28.6
------ ------
Net Cash Used in Investment and Financing Activities............. 177.3 134.6
------ ------
Net Increase (Decrease) in Cash and Equivalents.................. $ (77.9) $ 56.4
------ ------
------ ------
SEE "SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS" BELOW.
</TABLE>
--------------------------------------------------------------------------------
53
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
HOMESTAKE MINING COMPANY
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
FOR THE SIX MONTHS ENDING DECEMBER 31, 1995
AND THE YEAR ENDING DECEMBER 31, 1996
The financial forecast has been prepared to comply with Australian
securities law which requires a description of the prospects of the
offeror where the consideration offered includes shares of the offeror.
Homestake will not update this forecast in future regulatory filings. The
financial forecast has been prepared by Homestake's management to provide
the reader with an indication of Homestake's future production, earnings,
cash flow and dividends following the acquisition of the 18.5% of HGAL
not already owned by Homestake.
This financial forecast presents, to the best of management's knowledge
and belief, Homestake's expected consolidated results of operations and
consolidated cash flows for the forecast period. Accordingly, the
forecast reflects management's judgement as of 7 September 1995, the date
of this forecast, of the expected conditions and its expected course of
action. The assumptions disclosed herein are those that management
believes are significant to the forecast. There will usually be
differences between forecasted and actual results, because events and
circumstances frequently do not occur as expected, and those differences
may be material. Homestake's Consolidated Financial Statements for the
Year Ended 31 December 1994, which are included in Appendix D should be
read for additional information.
HOMESTAKE CAUTIONS READERS THAT A FORECAST FOR A PERIOD OF UP TO SIXTEEN
MONTHS FROM THE TIME THAT THE FORECAST IS MADE IS SUBJECT TO MANY
UNCERTAINTIES AND NEEDS TO BE TREATED WITH CAUTION.
Unless specifically stated otherwise, all comments and production
statistics relate to the consolidated Homestake entity, without reduction
for minority interest.
The forecast has been prepared in accordance with accounting principles
generally accepted in the United States and the accounting policies
adopted by Homestake. (See note 1 to Homestake's 31 December 1994
Consolidated Financial Statements in Appendix D and Appendix L --
Homestake Differences Between U.S. and Australian Generally Acccepted
Accounting Principles.)
SIGNIFICANT FORECAST ASSUMPTIONS
The following is a summary of the significant assumptions used in the
preparation of the forecast. These assumptions were based on Homestake's
judgement at 7 September 1995, the date the forecast was completed. These
assumptions should not be considered an all-inclusive list of the
assumptions used in the preparation of the forecast.
1) Management has assumed that effective 1 December 1995, Homestake
acquires 100% of the HGAL Shares that it does not already own and
that 50% of the HGAL Shares acquired are exchanged for Homestake
Shares and 50% are acquired for cash. Therefore, the purchase
price has been assumed to consist of approximately 4.9 million
Homestake Shares and cash payments totaling U.S.$77.6 million.
Transaction costs associated with the acquisition of the HGAL
Shares are estimated to be U.S.$3 million. Management has assumed
that all cash payments made in the acquisition of the HGAL Shares
are funded from Homestake's available cash and investment
balances and no debt is incurred by Homestake as a result of this
acquisition.
--------------------------------------------------------------------------------
54
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
HOMESTAKE MINING COMPANY
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS (CONTINUED)
At the date the offer was announced, Homestake's investment
advisor estimated that 50% of the HGAL Shares tendered would be
exchanged for Homestake Shares based on Homestake's then share
price. However, the ultimate number of HGAL Shares which will be
exchanged for Homestake Shares will depend on a number of factors
including Homestake's Share price during the time the offer is
open. Homestake's Share price may vary significantly during that
time, due to many factors including changes in the price of gold.
A sensitivity analysis has been included in note 17 below to show
the effects on net income, net income per share and cash and
equivalents of two possible outcomes of the offer: (1) 100% of
the HGAL Shares being acquired for cash and, (2) 100% of the HGAL
Shares being exchanged for Homestake Shares.
2) Management assumes that Homestake will produce 950,000 and
1,850,000 equivalent ounces of gold in the six months ending 31
December 1995 and the year ending 31 December 1996, respectively.
3) The average spot market price of gold is assumed to be U.S.$385
and U.S.$395 per ounce in 1995 and 1996 periods, respectively.
The price of gold was U.S.$384 per ounce on 14 August 1995, the
day that the offer to acquire the HGAL Shares was announced. The
gold price has varied between U.S.$372 and U.S.$396 per ounce
over the last twelve months preceding the date of preparation of
this forecast. In determining the gold price to be used in this
forecast, Homestake took into consideration many factors,
including the price of gold available in the forward markets and
consultations with gold market analysts and trading institutions.
A sensitivity analysis is included in note 17 below to show the
impact of 5% movements in the U.S. dollar gold price.
4) Average exchange rates used throughout the forecast period were
U.S.$0.745 for both the Australian and Canadian dollars.
Approximately 19% and 31% of Homestake's forecast 1995 operating
costs and 19% and 29% of Homestake's forecast 1996 operating
costs are denominated in Australian and Canadian currencies,
respectively. To help minimise the effects of fluctuations of the
Australian and Canadian currencies in relation to the U.S.
dollar, Homestake has implemented a foreign currency protection
program by entering into a series of foreign currency option
contracts which establish trading ranges within which the U.S.
dollar may be exchanged for these currencies by setting minimum
and maximum exchange rates. See note 23 to Homestake's 31
December 1994 Consolidated Financial Statements in Appendix D for
details of this program.
A sensitivity analysis is included in note 17 below to show the
impact of 5% movements in the Australian and Canadian currencies
in relation to the U.S. dollar. This sensitivity analysis
incorporates the effects of the foreign currency protection
program described above.
5) Homestake has engaged in some limited forward selling of gold to
be produced in 1995 and 1996. See note 23 to Homestake's 31
December 1994 Consolidated Financial Statements in Appendix D for
details of these sales.
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55
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
HOMESTAKE MINING COMPANY
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS (CONTINUED)
6) Ore produced at the Eskay Creek mine currently is sold to two
smelters under long-term ore sales contracts. These contracts
provide for a combined minimum delivery of 100,000 tons in 1995,
with options to increase deliveries to 130,000 tons per year in
1996 and beyond, subject to smelter approvals. Management assumes
that 120,000 tons of Eskay Creek ore will be sold to smelters
during 1996. However, while Homestake believes that the smelters
will accept the additional tonnage, approval from the smelters
for the additional tonnage has not been received at this time.
7) In determining operating cost levels used in the forecast,
management took into consideration many factors, including
historical operating performance, inflation and continuing cost
improvements, at each of Homestake's operating locations. A
sensitivity analysis is included in note 17 below to show the
impact of 3% movements in production costs.
8) Income and mining taxes for the forecast period are based on
forecast earnings and the statutory tax rates as presently
enacted in the geographical and tax jurisdictions that Homestake
operates. Management also assume that Homestake will continue to
be subject to the United States alternative minimum tax at a 20%
rate on its United States taxable income throughout 1995 and
1996. Homestake's actual consolidated income and mining tax rate
can vary significantly as a result of numerous factors,
including, but not limited to, changes in the geographical mix of
pretax income or loss, nondeductible expenses, and changes in the
tax rules, rates and regulations of the various taxing regulatory
authorities. The applicable statutory income and mining tax rates
(as reduced by applicable statutory mining incentives) utilized
in the forecast are as follows:
<TABLE>
<S> <C>
United States........................................................ 20%
Canada............................................................... 49%
Australia............................................................ 36%
</TABLE>
9) Management assumes that Homestake's current levels of exploration
spending will continue throughout the forecast period. No
benefits from this exploration have been included in the
forecast. (See note 13 below.)
10) Management has assumed that the current dividend policies of
Homestake and its subsidiary companies remain unchanged
throughout the forecast period.
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56
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
HOMESTAKE MINING COMPANY
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS (CONTINUED)
11) Other assumptions are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDING YEAR ENDING 31
31 DECEMBER 1995 DECEMBER 1996
----------------- -----------------
<S> <C> <C>
Silver price (per ounce)................................................... U.S.$5.50 U.S.$5.50
Sulphur price (per long ton) (a)........................................... U.S.$75.00 U.S.$75.00
Short-term interest rates
United States............................................................ 6.0% 6.0%
Australia................................................................ 8.0% 8.0%
Canada................................................................... 7.0% 7.0%
<FN>
------------------------
(a) Forecasted sulphur prices for Main Pass mine sulphur
production have been provided by the operator of the
joint venture who has responsibility for marketing
Homestake's share of production.
</TABLE>
12) The excess of purchase price over the underlying book value of
the HGAL Shares to be acquired in the amount of U.S.$138.9
million has been allocated to property, plant and equipment and
deferred taxes in the amounts of U.S.$188.9 million and U.S.$50.0
million, respectively. The amount allocated to property plant and
equipment will be charged to earnings using the
units-of-production method.
13) Homestake currently is involved in several late stage
exploration/development projects. Ongoing exploration,
prefeasibility and feasibility study costs related to these
projects are included in the forecast.
Forecasted cash flow for the six months ending 31 December 1995
includes $24 million invested in Navan Resources Plc. (Navan) by
Homestake in July 1995, related to the Chelopech mine.
The forecast also includes $50 million of additional
capital/investment during the year ending 31 December 1996 which,
based on Homestake's current understanding of the late stage
exploration/development projects, will be required if these
projects proceed. Homestake plans to fund the capital/investment
requirements for these projects through 31 December 1996 from
available cash reserves or operating cash flows.
With the exception of capitalised property and related investment
acquisition costs of U.S.$26 million (including the U.S.$24
million invested in Navan in July, 1995), all expenditures on
these projects to date have been expensed. Homestake can
terminate its involvement in these projects at any time. However,
the possibility of recovering expenditures incurred up to the
point of exit may be limited. No benefits from these projects
have been included in the forecast.
14) Homestake currently has outstanding long-term debt obligations of
U.S.$185 million. No payments of principal are due under these
obligations until the year 2000. Homestake also has a
U.S./Canadian cross-border credit facility providing a total
availability of U.S.$150 million. No amounts have been borrowed
under this facility as of the date of this forecast. (See note 14
to Homestake's 31 December 1994 Consolidated
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57
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
HOMESTAKE MINING COMPANY
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS (CONTINUED)
Financial Statements in Appendix D for details of Homestake's
debt and credit facilities.) Management assumes no debt
repayments or additional borrowings during the forecast period.
15) In 1994, Homestake was awarded U.S.$4.7 million in a lawsuit
Homestake initiated against its former auditor and tax advisor.
The judgement has been appealed and Homestake has deferred
recognition of any gain pending final resolution of this action.
Management assumes resolution of this matter in 1996, and the
forecast for the year ending 31 December 1996 includes proceeds
including interest of U.S.$5 million.
16) In 1990, Homestake entered into a long-term contract for the sale
of its then remaining uranium inventories. Amounts due under this
contract are secured. The purchaser has declared bankruptcy and
has defaulted under the terms of the contract. Homestake expects
the bankruptcy court to release the 1.3 million pounds of uranium
to Homestake before the end of 1995. Management assumes receipt
and sale of the uranium in 1995. Based on the current uranium
market price of U.S.$12 per pound, the forecast for the six
months ending 31 December 1995 includes estimated sales proceeds
of U.S.$15.8 million and a pretax gain of U.S.$5.5 million which
is included in other income.
17) SENSITIVITY ANALYSIS
The following sensitivity analysis projects the estimated effects
on results of operations and cash flows of changes in certain
assumptions from those used in the preparation of the forecast.
Except for the acquisition of HGAL Shares, the sensitivities
should not be interpreted as establishing lower and upper limits
of possible outcomes.
(MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CHANGES IN NET INCOME,
NET INCOME PER SHARE (EPS) AND CASH FLOW
----------------------------------------------------------------------------
SIX MONTHS ENDING 31 DECEMBER 1995 YEAR ENDING
31 DECEMBER 1996
------------------------------------- -------------------------------------
NET INCOME EPS CASH FLOW NET INCOME EPS CASH FLOW
------------- --------- ----------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
5% increase in gold price............. $ 8.3 $ 0.06 $ 11.0 $ 21.0 $ 0.15 $ 22.0
5% decrease in gold price............. (8.3) (0.06) (11.0) (19.0) (0.13) (20.0)
A$ weakens against U.S.$ by 5% (a).... 1.0 0.01 3.5 3.0 0.02 0.2
A$ strengthens against U.S.$ by 5%
(a).................................. (0.3) -- (3.5) (3.0) (0.02) 0.8
C$ weakens against U.S.$ by 5% (a).... 1.0 0.01 2.7 4.5 0.03 1.2
C$ strengthens against U.S.$ by 5%
(a).................................. 0.6 -- (2.5) (4.5) (0.03) 2.5
Production costs decrease by 3%....... 3.4 0.02 4.6 8.5 0.06 10.0
Production costs increase by 3%....... (3.4) (0.02) (4.6) (8.5) (0.06) (10.0)
100% HGAL Shares acquired for cash.... (0.3) -- (78.0) (3.5) (0.02) (2.7)
100% HGAL Shares exchanged for
Homestake Shares..................... 0.3 -- (78.0) 3.5 0.02 2.7
<FN>
------------------------------
(a) The sensitivity analysis incorporates the effects of the foreign currency
protection program
</TABLE>
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58
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
HOMESTAKE MINING COMPANY
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS (CONTINUED)
18) SIGNIFICANT CHANGES EXPECTED IN 1997
While management has not prepared a financial forecast for the
year ended 31 December 1997, management is not aware of any
non-recurring items, such as those discussed in note 15 and 16
above, which may have a significant effect on Homestake's results
from operations.
Homestake estimates that based on its current operations,
excluding production from the late stage development/exploration
projects discussed in note 13 above, its 1997 consolidated
production will be approximately 1.7 million equivalent ounces of
gold. McLaughlin mine production is expected to decline
significantly with the shut down of mining operations and
commencement of the processing of lower-grade stockpiles in
mid-1996, and Nickel Plate mine will cease operation in 1996.
Since both of these mines are higher cost operations, these
reductions in production are not expected to have a significant
impact on Homestake's results from operations.
Cash taxes are expected to increase in 1997 as tax deductions for
capital expenditures made in prior years are depleting.
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59
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
HOMESTAKE MINING COMPANY
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS (CONTINUED)
To the Directors of Homestake Mining Company:
We have examined the accompanying forecasted condensed statements of
consolidated operations and forecasted condensed statements of
consolidated cash flows of Homestake Mining Company for the six months
and year ending 31 December 1995, and 31 December 1996, respectively,
appearing in this Clause 4.2 of the Part A statement of the Offer
Document. Our examination was made in accordance with standards for an
examination of a forecast established by the American Institute of
Certified Public Accountants and, accordingly, included such procedures
as we considered necessary to evaluate both the assumptions used by
management and the preparation and presentation of the forecast.
In our opinion, the accompanying forecast is presented in conformity with
guidelines for presentation of a forecast established by the American
Institute of Certified Public Accountants and the underlying assumptions
provide a reasonable basis for management's forecast. However, there will
usually be differences between the forecasted and actual results, because
events and circumstances frequently do not occur as expected; and those
differences may be material. We have no responsibility to update this
report for events and circumstances occurring after the date of this
report.
Coopers & Lybrand L.L.P.
San Francisco, California
14 September 1995
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60
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
4.3 INVESTIGATING ACCOUNTANT'S REPORT
The Investigating Accountant's Report of Coopers & Lybrand (Securities)
Limited with respect to certain financial information presented herein is
set forth in Appendix A.
4.4 INTENTIONS ABOUT BUSINESS, ASSETS AND EMPLOYEES OF HGAL
At the time HGAL became a listed company in 1987, it was Homestake's
stated policy that HGAL would be Homestake's sole vehicle for gold
exploration, development and mining in Australia. If Homestake does not
acquire all of the HGAL Shares, Homestake intends to pursue future
exploration, development and mining opportunities in Australia directly
for its own account and not through HGAL. That will likely reduce
opportunities that would otherwise become available to HGAL. If Homestake
acquires 100% of the HGAL Shares, Homestake would expect to use HGAL as
one of the vehicles for the expansion of Homestake's business in
Australia. Homestake presently intends that the existing interests in the
Kalgoorlie Mines and HGAL's existing exploration projects will continue
in HGAL. In either case, Homestake presently intends to more fully
integrate the personnel and operations of HGAL into the Homestake group.
Subject to the matters set out above, it is the present intention of
Homestake:
(i) that the existing business of HGAL will continue to be conducted
in its present form;
(ii) not to redeploy any of the fixed assets of HGAL; and
(iii) to continue the employment of HGAL's present employees.
4.5 EFFECT OF OFFER ON HGAL MARKETS AND LISTINGS
The purchase of HGAL Shares by Homestake pursuant to the Offer will
reduce the number of HGAL Shares that might otherwise trade publicly and
will also reduce the number of HGAL shareholders. Depending on the number
of HGAL Shares purchased, this could adversely affect the liquidity and
market value of the remaining HGAL Shares held by the public.
The rules of the ASX on which HGAL Shares are quoted impose certain
criteria which, if not met, could lead to the suspension of quotation of
the HGAL Shares or delisting of HGAL from such exchange. This includes
HGAL maintaining a sufficient spread of shareholders acceptable to the
ASX. If Homestake does not receive sufficient acceptances of the Offer to
proceed to compulsory acquisition of the remaining HGAL Shares, depending
upon the number of HGAL Shares purchased pursuant to the Offer, it is
possible that HGAL could fail to meet the criteria for continued listing
on the ASX. If this were to happen, the HGAL Shares could be suspended
from quotation on the ASX and this would, in turn, adversely affect the
market or result in a lack of an established market for the HGAL Shares.
If Homestake becomes entitled to compulsorily acquire HGAL Shares,
Homestake presently intends to exercise those rights and to delist HGAL
from the ASX. If Homestake proceeds to compulsorily acquire all
outstanding HGAL Shares, in the absence of an election by the dissenting
offeree as permitted under the Corporations Law, a dissenting offeree
will be treated as having elected the Share Offer.
It is possible that Homestake will be unable to determine the current
address of some HGAL shareholders. If this is the case, Homestake will
apply to the ASC for a modification of the
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61
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
Corporations Law, to exclude such persons when calculating whether 75% of
offerees have disposed of their shares to Homestake or 75% of registered
shareholders have ceased to be so registered within the relevant periods.
5. INFORMATION ABOUT HOMESTAKE SHARES
5.1 GENERAL DESCRIPTION
Homestake is authorised by its Restated Certificate of Incorporation (the
"Homestake Certificate") to issue 250,000,000 Homestake Shares, and
10,000,000 preferred shares, each class having a par value of U.S.$1 per
share. As at 14 August 1995 (the date of announcement of the Offers),
Homestake had 137,953,936 Homestake Shares on issue and no preferred
shares on issue.
The transfer agent and registrar for the Homestake Shares in the United
States is The First National Bank of Boston. Ernst & Young Registry
Services Pty Limited acts as branch transfer agent and registrar in
Australia for the Homestake Shares.
The preferred shares may be issued in one or more series in the
discretion of the Board of Directors of Homestake, with such rights,
preferences and privileges as to dividends, voting rights, conversion
rights, liquidation preferences and redemption provisions as the Board of
Directors may in its discretion establish at the time of creation of such
series. Homestake's Board of Directors has authorised the issue of
2,500,000 Series A Participating Cumulative Preferred Shares in
connection with Homestake's shareholder rights plan described below.
The Homestake Shares are not redeemable and do not have conversion or
pre-emptive rights.
5.2 FAIR PRICE PROVISION
The Homestake Certificate contains a "Fair Price" provision which applies
to mergers and certain other types of business combinations with "Related
Persons." The Fair Price provision defines "Related Person" to include
any person who, together with any associate, beneficially owns (or within
the preceding five years owned) shares having 10% or more of the total
votes able to be cast at a meeting of shareholders ("voting power") of
Homestake. The Fair Price provision defines "Business Combination" to
include mergers, reorganisations, sales of assets, issue of securities,
mortgages, leases and a variety of transactions which involve the
securities or assets of Homestake.
The Fair Price provision requires that Business Combinations between
Homestake and a Related Person (or other persons related to Related
Persons) meet certain criteria (explained below). If none of the criteria
are met, such transactions must be approved by
(i) holders of not less than 50% of the voting power of Homestake
entitled to vote on the matter; and
(ii) holders of not less than 50% of the voting power other than the
Related Person and its affiliates and associates.
The special voting requirements are avoided if:
(a) the Business Combination is approved by the Board of Directors of
Homestake before the Related Person has acquired any shares of
Homestake;
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62
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
(b) the Board of Directors of Homestake unanimously approves the
acquisition of shares by the Related Person before the person
acquires the shares and the Business Combination is then
considered by the Board of Directors after the Related Person
acquires stock in an approved transaction;
(c) the Business Combination involves solely Homestake and one of its
subsidiaries and all shareholders are treated equally; or
(d) all of the following conditions are satisfied:
(A) the per share consideration to be received by holders of
Homestake Shares in the Business Combination (other than
the Related Person) is not less than the higher of (1)
the highest per share price paid by such Related Person
in acquiring any of the Homestake Shares or (2) a
percentage premium over the market price of the
Homestake Shares immediately prior to the announcement
of such Business Combination which is at least as high
as the percentage premium paid by the Related Person
over the market price of the Homestake Shares
immediately prior to the commencement of the acquisition
of the Homestake Shares by such Related Person, but in
no event in excess of two times the highest per share
price determined under (2) above;
(B) after becoming a Related Person and prior to completing
the Business Combination, (1) such Related Person must
not have acquired any newly issued shares from Homestake
(except upon conversion of the convertible securities
acquired prior to becoming a Related Person or upon
compliance with the Fair Price provision or as a result
of a pro rata stock dividend or stock split) and (2)
such Related Person must not have received the benefit,
directly or indirectly (except proportionately as a
shareholder), of any loans, advances, guarantees,
pledges or other financial assistance or tax credits
provided by Homestake, or made any changes in
Homestake's business or equity capital structure; and
(C) a proxy statement meeting the requirements of the United
States federal securities laws must be used for the
purpose of soliciting shareholder approval of such
Business Combination. The proxy statement must also
contain (1) any recommendation as to the advisability of
the Business Combination which any continuing or
independent or "outside" directors may choose to state,
and (2) the opinion of a reputable national investment
banking firm in the United States as to the fairness of
the terms of such Business Combination from the point of
view of the remaining public shareholders of Homestake.
The investment banking firm must be engaged solely on
behalf of the public shareholders and must be selected
by a majority of any continuing directors and outside
directors.
The Fair Price provision further provides that if there is a Related
Person, the Fair Price provision cannot be amended or repealed unless
such a change is approved by at least 80% of the total voting power and
also by holders of a majority of the total voting power who are
independent of the Related Person.
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63
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
5.3 SHAREHOLDER RIGHTS PLAN
Pursuant to a Rights Agreement dated 16 October 1987, each Homestake
Share issued pursuant to the Offer will be accompanied by a right to
purchase 0.01 of a Series A Participating Cumulative Preferred Share
("Preferred Shares") at a price of U.S.$75 (the "Purchase Price").
The rights are not exercisable until the "Distribution Date" and will
expire on 2 November 1997 (the "Expiration Date") unless they are earlier
redeemed by Homestake. The Distribution Date is defined to be the earlier
of:
(i) the 10th day after the first public disclosure that a person or
group, together with its associates acquired or obtained the
right to acquire beneficial ownership of 20% or more of the
issued and outstanding Homestake Shares (the "Acquisition Date");
and
(ii) the 10th day after the commencement of, or first public
disclosure of an intent to commence, a tender or exchange offer
for 20% or more of the issued Homestake Shares.
If Homestake is acquired in any merger or other business combination of
50% or more of its assets or assets representing 50% or more of its
earning power are sold, leased, exchanged or otherwise transferred to a
publicly traded corporation (an "Acquiring Person") each right will
entitle its holder to purchase for the Purchase Price that number of
common shares of the Acquiring Person which at the time of the
transaction would have a market value of twice the Purchase Price. If the
Acquiring Person in these circumstances is not a publicly traded
corporation, each right will entitle its holder to purchase for the
Purchase Price, at such holder's option:
(i) that number of shares of the Acquiring Person which at the time
of the transaction would have a book value of twice the Purchase
Price; or
(ii) if the Acquiring Person has any associate which has publicly
traded common shares, that number of shares of such associate
which at the time of the transaction would have a market value of
twice the Purchase Price.
If an Acquiring Person:
(i) acquires beneficial ownership of 30% or more of the issued
Homestake Shares, unless such Homestake Shares are acquired
pursuant to an all cash tender offer for all issued Homestake
Shares and all other classes or series of issued shares of
Homestake; or
(ii) engages in one or more "self dealing" transactions with Homestake
as set forth in the agreement creating the rights plan (the
"Triggering Event"),
the rights will entitle each holder to purchase, for the Purchase Price,
Preferred Shares in Homestake equivalent to the number of Homestake
Shares which at the time of the transaction would have a market value of
twice the Purchase Price.
--------------------------------------------------------------------------------
64
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
If Homestake merges with an Acquiring Person, Homestake is the surviving
corporation, and all the Homestake Shares issued and outstanding
immediately prior to the merger remain outstanding and unchanged (an
"Affiliate Merger"), each right will entitle its holder to purchase, for
the Purchase Price, that number of Homestake Shares which at the time of
the transaction would have a market value of twice the Purchase Price.
Any rights that are or were, at any time on or after the earlier of the
Distribution Date or the Acquisition Date, beneficially owned by an
Acquiring Person will become null and void in the event of an Affiliate
Merger or a Triggering Event and any holder of any such right will be
unable to exercise any such right after an Affiliate Merger or Triggering
Event has occurred.
The Board of Directors of Homestake may redeem the rights at any time
prior to the earliest of the 10th day following the Acquisition Date, the
occurrence of a Triggering Event or the Expiration Date for cash or
securities equivalent to U.S.$0.01 per right.
Until a right is exercised, the holder will have no rights as a
shareholder of Homestake with respect to the right.
All of the foregoing could discourage, delay or prevent certain types of
transactions involving an actual or potential change in control of
Homestake, including transactions in which shareholders might otherwise
receive a premium for their shares over current market price, and could
therefore have a negative impact on the price of the Homestake Shares.
The Fair Price provision and the shareholder rights plan described above
do not apply to the Offer.
5.4 COMPARISON OF SHAREHOLDERS' RIGHTS
HGAL shareholders who accept the Share Offer will become shareholders of
a Delaware corporation and will have rights and privileges as set out in
the Delaware General Corporation Law ("Delaware Law"), and the Homestake
Certificate and by-laws. While the rights and privileges of shareholders
of a Delaware corporation are, in some instances, comparable to those of
shareholders of an Australian corporation, there are some material
differences, which are summarised below.
VOTE REQUIRED FOR ORDINARY TRANSACTIONS; QUORUM
Under Delaware Law and Homestake's constituent documents, matters
requiring shareholder approval (other than as described in this Clause
5.4) must be approved by the vote of holders of a majority of the
outstanding shares in person or by proxy at the meeting and entitled to
vote.
With respect to election of directors, the nominees receiving the highest
number of votes are elected. Directors of Homestake are appointed for a
term of 3 years, with approximately one-third of the directors elected
each year.
A majority of the shares of voting stock outstanding on the record date,
present in person or by proxy, constitutes a quorum for the transaction
of business at a meeting of shareholders.
Under Australian law, matters which are decided by a general meeting of
shareholders generally require the approval of the shareholders by
ordinary resolution, which is a resolution passed by the majority of
shares present in person or by proxy. Some matters (such as amendments to
the articles
--------------------------------------------------------------------------------
65
<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
of association) require approval by special resolution, which is a
resolution passed by at least 75% of the shares present in person or by
proxy, where at least 21 days notice of the resolution has been given.
Three shareholders present in person or by proxy constitutes a quorum for
a meeting, under HGAL's articles of association.
VOTE REQUIRED FOR EXTRAORDINARY TRANSACTIONS
Under Australian law, a merger or consolidation of HGAL with another
company would require:
(a) a takeover scheme or takeover announcement under Chapter 6 of the
Corporations Law; or
(b) a scheme of arrangement.
Neither a takeover scheme nor a takeover announcement requires
shareholder approval. However, a scheme of arrangement requires approval
by majorities of 50% in number and 75% in value of all shareholders and
each class of shareholders, together with court approval.
A merger or consolidation involving Homestake will be governed by
Delaware Law. Under Delaware Law, a merger or consolidation requires the
approval of holders of a majority of the outstanding shares of each
constituent corporation except as described below. Unless specifically
required in the surviving corporation's certificate of incorporation,
approval of shareholders of the surviving corporation is not required
where the merger requires the issue of common shares not exceeding 20% of
such corporation's outstanding shares immediately prior to the merger and
the merger agreement does not amend in any respect the surviving
corporation's certificate of incorporation. (The Homestake Certificate
does not require shareholder approval in these circumstances.) Where the
corporation surviving the merger is a 90% parent of the other
corporation, shareholder approval is not required by either corporation.
A dissolution and a sale of substantially all of a corporation's assets
requires shareholder approval under Delaware Law and under Australian law
(if the company is listed on the ASX). The ASX Listing Rules require
approval by ordinary resolution.
As noted above, the Homestake Certificate contains a "Fair Price"
provision which applies to mergers, reorganisations, sales of assets and
a variety of other transactions. The shareholders rights plan described
above also may affect such transactions.
TRANSACTIONS INVOLVING SHAREHOLDERS, OFFICERS OR DIRECTORS
In the case of HGAL, the ASX Listing Rules require shareholder approval
by ordinary resolution before a listed company may purchase, gain, obtain
or otherwise acquire or give, sell or otherwise dispose of (whether by
means of an agreement transaction, subscription for securities or
otherwise) any assets or securities in excess of 5% of shareholders'
funds to:
(i) any director, officer or associate (at the relevant time or
within the previous 6 months);
(ii) a shareholder with an entitlement to 5% or more of the company's
voting shares (at the relevant time or within the previous 6
months);
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(iii) a person who is an associate of the company or its related
corporations; or
(iv) a person whose association with any of the foregoing is such that
the ASX decides the proposed acquisition should be referred to
shareholders.
Delaware Law has no equivalent provisions.
The Corporations Law also prohibits a public company or an entity
controlled by it from giving any type of financial benefit to a "related
party" (including parent companies, controlling entities, directors and
their families, and entities which they control) unless the financial
benefit:
(i) constitutes reasonable remuneration to an officer;
(ii) is a loan of less than $2,000;
(iii) is given between wholly owned entities;
(iv) is given on arm's length terms or pursuant to a court order;
(v) constitutes a benefit given to shareholders in their capacity as
shareholders and does not discriminate unfairly between
shareholders (e.g. a dividend); or
(vi) is approved by a general meeting of shareholders.
Delaware Law has no equivalent provisions. However, the NYSE Listing
Rules require shareholder approval for certain transactions in which
directors or officers, or their affiliates, have an interest.
In the case of Homestake, with certain exceptions described below,
Delaware Law prohibits a "business combination" between the corporation
and an "interested stockholder" within three years of the stockholder
becoming an "interested stockholder". An "interested stockholder" is one
who, directly or indirectly, controls 15% or more of the issued voting
shares. A "business combination" includes a merger, consolidation, sale
or other disposition of assets having an aggregate value in excess of 10%
of the consolidated assets of the corporation, and certain transactions
that would increase the interested stockholder's proportionate share
ownership in the corporation. This provision does not apply where:
(i) the business combination is approved by the corporation's board
of directors prior to the date the interested stockholder
acquired its shares;
(ii) the interested stockholder acquired at least 85% of the issued
and outstanding voting shares of the corporation in the
transaction in which the stockholder became an interested
stockholder excluding, in determining the number of shares
outstanding, shares held by persons who are directors and also
officers and by employee stock plans in which participants do not
have the right to determine confidentially whether shares held
subject to the plan will be tendered; or
(iii) the business combination is approved by a majority of the board
of directors and affirmative vote of two-thirds of the votes
entitled to be cast by disinterested shareholders at an annual
special meeting.
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As noted above, the Homestake Certificate contains a "Fair Price"
provision which will apply to business combinations between Homestake and
"Related Persons". Homestake's Shareholder Rights Plan will apply also to
certain business combinations.
Delaware Law provides that a contract or transaction ("transaction")
between a Delaware corporation and one or more of its directors or
officers (an "interested person"), or an entity controlled by such
person, is not void or voidable if the interested person is present or
participates in a board meeting approving the transaction if:
(i) the material facts of the transaction are disclosed to the board
and approved by a majority of the disinterested directors;
(ii) the material facts of the transaction are disclosed to, and
approved in good faith by, the shareholders; or
(iii) the transaction is fair as to the corporation.
Failure to obtain approval as set out in (i) or (ii) above means, in
essence, that if the transaction is challenged, the interested person has
the burden of proving that the transaction was fair as to the
corporation.
DISSENTERS' APPRAISAL RIGHTS
Delaware Law generally entitles a shareholder voting against a merger or
consolidation to exercise dissenters' appraisal rights upon a merger or
consolidation of the corporation if the shareholder complies with certain
procedural requirements. Exercise of appraisal rights requires the
acquisition by the surviving corporation of the dissenter's shares at a
fair market value, generally determined by a court.
Unless specified in the corporation's certificate of incorporation,
Delaware Law does not provide dissenters' appraisal rights for
shareholders of a corporation that engages in:
(i) a sale of substantially all assets;
(ii) an amendment to its certificate of incorporation; or
(iii) a merger or consolidation where the consideration received
consists solely of shares of the surviving or resulting
corporation, or shares of any other corporation listed on a
national securities exchange in the United States or held more
than 2,000 shareholders (and cash in lieu of fractional shares)
and either:
(A) the corporation before the merger or consolidation was
listed on a national securities exchange or its shares
were held by more than 2,000 shareholders; or
(B) the corporation survived the merger or consolidation and
the approval of its shareholders was not required
because the merger or consolidation agreement did not
amend the surviving corporation's certificate of
incorporation and did not provide for the issue of
common shares of the survivor in excess of 20% of such
survivor's shares issued and outstanding immediately
prior to the merger or consolidation.
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Because the Homestake Shares are listed on the NYSE, Homestake
shareholders would not have dissenters' appraisal rights in the event
that Homestake is a constituent corporation to a merger or consolidation
which otherwise would give rise to dissenters' appraisal rights under
Delaware Law and the consideration meets the requirement of (iii) above.
OPPRESSION REMEDY
Under the Corporations Law, a shareholder or the ASC (following an
investigation) may apply to the court if that person or the ASC,
following an investigation, believes:
(i) the affairs of the company are being conducted in a manner which
is oppressive or unfairly prejudicial to, or unfairly
discriminatory against, a shareholder or shareholders, or in a
manner that is contrary to the interests of the members as a
whole; or
(ii) that an actual or proposed act or omission by or on behalf of the
company or an actual or proposed resolution of a class of
shareholders was or would be oppressive or unfairly prejudicial
to, or unfairly discriminatory against, a shareholder or
shareholders, or was or would be contrary to the interests of the
shareholders as a whole.
The court has power to make such order or orders as it sees fit to deal
with any oppressive or unfairly prejudicial matter. These orders include
orders for:
(i) winding up of the company;
(ii) regulation of the company's affairs or appointment of a receiver
or receiver and manager; or
(iii) purchase of shares by another shareholder or by the company.
The Corporations Law and the general law also provide a range of legal
and equitable remedies for breach of duty by directors of a company.
Delaware Law does not provide a statutory remedy like the Corporations
Law oppression remedy. However, Delaware Law provides a variety of legal
and equitable remedies to a corporation's shareholders for improper acts
or omissions of its officers and directors. Under Delaware Law, only
shareholders can bring an action alleging a breach of fiduciary duty by
the directors of a corporation. In order to be successful, the
shareholder must overcome the "business judgment rule" which, simply
stated, means that absent a showing of intentional misconduct, gross
negligence or a conflict of interest, disinterested directors' decisions
are presumed (subject to rebuttal) by the courts to have been made in
good faith and in the best interests of the corporation.
LIMITATION OF DIRECTOR LIABILITY
The Corporations Law provides that a company or related body corporate
must not indemnify a person who is or has been an officer (including a
director) or auditor against a liability incurred in that capacity, or
exempt such a person from such a liability. However, a person may be
indemnified:
(i) against a liability (other than to the company) unless the
liability arises out of conduct involving a lack of good faith;
or
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(ii) against a liability for costs and expenses incurred in defending
civil or criminal proceedings where judgment is given in favour
of the person, the person is acquitted or the court grants relief
to the person under the Corporations Law.
The Homestake Certificate contains a provision, permitted by Delaware
Law, limiting the personal monetary liability of directors for breach of
fiduciary duties as a director. Delaware Law provides that such a
provision does not eliminate or limit liability:
(i) for any breach of the director's duty of loyalty to Homestake or
its shareholders;
(ii) for unlawful payments of dividends or unlawful stock repurchases
or redemptions as provided in Delaware Law;
(iii) for acts of omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; or
(iv) for any transaction from which the director derived an improper
personal benefit.
Delaware Law permits indemnification against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with actions, suits, or
proceedings in which an officer, director, employee or agent is a party
by reason of the fact that he is or was such a director, officer,
employee or agent, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. However, in
connection with actions by or in the right of the corporation, such
indemnification is not permitted if such person has been adjudged liable
for negligence or misconduct in the performance of his duty to the
corporation unless the court determines that, under all of the
circumstances, such person is nonetheless fairly and reasonably entitled
to indemnity for such expenses as the court deems proper. Under
Homestake's By-laws, Homestake must indemnify directors and officers to
the fullest extent permitted by law.
Delaware Law also permits a corporation to purchase and maintain
insurance on behalf of its directors and officers against any liability
which may be asserted against, or incurred by, such persons in their
capacities as directors or officers of the corporation whether or not the
corporation would have the power to indemnify such persons against such
liabilities. Homestake has purchased such insurance. Delaware Law further
provides that the statutory provision is not exclusive of any right which
may exist under any by-law, agreement, vote of shareholders or
independent directors, or otherwise.
DISTRIBUTIONS AND DIVIDENDS
Under the Corporations Law, a corporation may only pay dividends out of
profits, as determined under Australian law, or, in certain instances,
out of the share premium account. The HGAL articles of association add
that declaration of dividends is a matter for the discretion of the
directors, where profits are available for distribution.
Under Delaware Law, a corporation may pay dividends out of surplus and,
if there is no surplus, out of net profits for the current and/or the
preceding fiscal year, unless the net assets of the corporation are less
than the capital represented by issued and outstanding stock having a
preference on asset distributions. Surplus is defined in the Delaware Law
as the excess of the net assets (essentially, the amount by which total
assets exceed total liabilities) over capital
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(essentially, the aggregate par value of the shares of the corporation
having a par value that have been issued plus consideration paid for
shares without par value), as such capital may be adjusted by the
corporation's board of directors.
The constituent documents of Homestake allow Homestake's Board of
Directors to set the dividend structure, if any, of any shares of
preferred stock. Under those documents, no dividends are to be paid to
holders of Homestake Shares until all accrued and unpaid dividends are
paid to the holders of preferred stock of Homestake. No shares of
preferred stock of Homestake have been issued. Consequently, there are
currently no limitations on the payment of dividends to the holders of
Homestake Shares, except as otherwise imposed by Delaware Law, and except
that Homestake's bank credit agreement prohibits payment of dividends if
consolidated net worth is less than U.S.$500 million. At 30 June 1995,
Homestake's consolidated net worth was U.S.$587.4 million.
5.5 MAJOR SHAREHOLDERS OF HOMESTAKE
The names and registered shareholdings of the twenty largest shareholders
in Homestake as at 5 September 1995 are set out in the table below:
<TABLE>
<CAPTION>
PERCENTAGE OF
SHAREHOLDER SHARES HELD ISSUED CAPITAL
------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Cede & Co................................................................ 112,933,849 81.86%
Case, Pomeroy & Company, Inc............................................. 6,001,776 4.35
SNOC Swiss Nominee Company .............................................. 3,238,876 2.35
Kray & Co................................................................ 2,829,201 2.05
Philadep & Co............................................................ 434,822 0.32
Damon Wells Jr........................................................... 205,000 0.15
Credit Suisse............................................................ 115,202 0.08
Joseph B Heitman......................................................... 113,000 0.08
The Witt-Touchion Company................................................ 80,000 0.06
E Cooke Inc.............................................................. 75,084 0.05
J Streicher & Co......................................................... 63,000 0.05
Peter Steen.............................................................. 62,295 0.05
George A Forman Jr....................................................... 59,200 0.04
Mildred S Veneziano...................................................... 58,000 0.04
Mansell & Co............................................................. 56,060 0.04
Ernst Cooke.............................................................. 48,324 0.04
Damon Wells Jr Investment................................................ 45,000 0.03
Andromeda Investments Ltd................................................ 44,667 0.03
G Green Holdings Ltd..................................................... 44,667 0.03
Goldbar Development Ltd.................................................. 44,666 0.03
</TABLE>
In general, a majority of the shares of United States publicly-traded
corporations are registered in nominee names. For example, Cede & Co. is
the nominee for all NYSE brokerage firms. To Homestake's knowledge, Case,
Pomeroy & Company, Inc. is the only holder of more than 1% of the
Homestake Shares that is not a nominee.
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5.6 RESALE OF HOMESTAKE SHARES
The Homestake Certificate permits Homestake Shares to be freely
transferred following allotment. Once allotted, Homestake Shares offered
under the Share Offer will be automatically listed on and available for
sale through the NYSE and the Swiss Stock Exchange. Homestake will apply
for official quotation of the Homestake Shares allotted under the Share
Offer on the ASX but quotation is not guaranteed or automatic. Once
listed, Homestake Shares may also be sold on the ASX.
Homestake Shares are also traded in the over-the-counter markets in
Frankfurt, Germany and Paris, France. Options on Homestake Shares are
also traded on the NYSE and the Chicago Board of Options Exchange.
5.7 HOMESTAKE ENTITLEMENT IN HGAL SECURITIES
At the date of this Part A statement, Homestake is entitled (within the
meaning of the Corporations Law) to a total of 482,696,662 shares in
HGAL, comprised of:
- 482,538,026 shares registered in the name of Homestake Mining
Company of California, a subsidiary of Homestake; and
- 158,636 shares held by associates of Homestake.
Homestake is not entitled (within the meaning of the Corporations Law) to
any other marketable securities of HGAL other than a deemed entitlement
to the following options held by Richard A Tastula, the managing director
of HGAL:
- 50,000 options to subscribe for HGAL Shares on a one-for-one
basis at $0.70 per share, with $0.01 payable on exercise and
$0.69 payable within 5 years of exercise, expiring 24 June 1996;
and
- 100,000 options to subscribe for HGAL Shares on a one-for-one
basis at $1.64 per share, with $0.01 payable on exercise of the
option and $1.63 payable within 5 years of exercise, expiring 6
May 1999.
5.8 RECENT TRANSACTIONS
(A) TRANSACTIONS IN HGAL BY HOMESTAKE OR ITS ASSOCIATES DURING
PREVIOUS FOUR MONTHS
In the four months ending on the day immediately before the day on which
this Part A statement was lodged for registration with the ASC, there
have been no acquisitions or disposals of shares in HGAL by Homestake or
any of its associates.
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(B) TRANSACTIONS IN HOMESTAKE BY ASSOCIATES DURING PREVIOUS FOUR
MONTHS
In the four months ending on the day immediately before the date on which
this Part A statement was lodged with the ASC, there have been no
acquisitions or dispositions of Homestake Shares by Homestake or any
associate of Homestake, other than the following transactions:
<TABLE>
<CAPTION>
NUMBER NUMBER
PERSON DATE ACQUIRED DISPOSED OF PRICE PER SHARE
------------------------------------------ ----------- ------------ ------------- ---------------------
<S> <C> <C> <C> <C>
Harry M Conger 1-30 June 88.3(1) U.S.$16.50-17.50
1-31 July 89.6(1) U.S.$16.375-17.125
1-31 Aug. 98.6(1) U.S.$16.50-17.00
1-30 Sep.
Wayne Kirk 1-30 June 88.3(1) U.S.$16.50-17.50
1-31 July 89.6(1) U.S.$16.375-17.125
1-31 Aug. 98.6(1) U.S.$16.50-17.00
1-30 Sep.
Gillyeard J Leathley 11 July 1,625(2) U.S.$12.175
11 July 1,625 U.S.$17.25
<FN>
------------------------
(1) These shares were acquired for the accounts of the named persons
by Wells Fargo Bank, N.A., the trustee of the Homestake Savings
Plan, an employee benefit plan in which all Homestake salaried
employees in the United States with at least six months service
are eligible to participate. Shares are purchased monthly by the
trustee with proceeds automatically deducted from employee
compensation and contributed on a monthly basis to the Saving
Plan by employees who elect to have their contributions into the
Plan invested in Homestake Shares, and with matching
contributions by Homestake. The timing of purchases is determined
by the trustee.
(2) Purchased on exercise of employee stock option granted on 2 March
1993.
</TABLE>
(C) HOMESTAKE SHARES SOLD IN THE PAST 3 MONTHS
The latest recorded sale price of Homestake Shares on the NYSE on the
date on which this Part A statement was lodged for registration was
U.S.$[*].
During the 3 months ending on the day immediately before the date on
which this Part A statement was lodged for registration:
- the highest recorded sale price of Homestake Shares on the NYSE
was US$[*] on [date]; and
- the lowest recorded sale price of Homestake Shares on the NYSE
was US$[*] on [date].
The last recorded sale price of Homestake Shares on the NYSE on 11 August
1995 (the last trading day before the public announcement of the Offers)
was U.S.$16.625
Homestake was listed on the ASX on , 1995. From , 1995
until , 1995, the highest and lowest recorded sale price were
A$ and A$ respectively.
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5.9 ALTERATIONS TO CAPITAL STRUCTURE DURING PREVIOUS FIVE YEARS
(A) HOMESTAKE
During the five years ending on the day immediately before the day on
which this Part A statement was lodged with the ASC, the following
changes in the capital structure of Homestake have occurred.
<TABLE>
<CAPTION>
DATE PARTICULARS
------------------------ -----------------------------------------------------------------------------
<S> <C>
1990
1 Jan. - 31 Dec. Homestake allotted a total of 106,606 shares to the Homestake Savings Plan as
matching contributions to employee contribution, discharging a total
contribution obligation of U.S.$2,041,708.
1 Jan. - 31 Dec. Homestake allotted a total of 514,485 shares to employees exercising employee
stock options for a total consideration of U.S.$6,385,231 and 25,574
Homestake Shares, which shares were retired.
Feb. - Nov. Homestake allotted 296,348 shares in four related transactions to Canadian
investment funds for a total of U.S.$5,493,190.
1991
1 Jan. - 31 Dec. Homestake allotted a total of 89,623 shares to the Homestake Savings Plan as
matching contributions to employee contribution, discharging a total
contribution obligation of U.S.$1,427,705.
1 Jan. - 31 Dec. Homestake allotted a total of 221,746 shares to employees exercising employee
stock options for a total consideration of U.S.$2,672,155.
Feb. Homestake allotted 35,077 shares to a Canadian investment fund for
U.S.$695,313.
1992
1 Jan. - 31 Dec. Homestake allotted a total of 45,304 shares to the Homestake Savings Plan as
matching contributions to employee contribution, discharging a total
contribution obligation of U.S.$605,595.
1 Jan. - 31 Dec. Homestake allotted a total of 23,404 shares to employees exercising employee
stock options for a total consideration of U.S.$37,410 and 7,154 Homestake
Shares, which shares were retired.
22 July 1992 Homestake allotted a total of 37,236,929 shares to acquire all of the
outstanding Common, Class A and Class C shares of International Corona
Corporation, having a value of U.S.$535,280,765.
1993
1 Jan. - 31 Dec. Homestake allotted a total of 35,748 shares to the Homestake Savings Plan as
matching contributions to employee contribution, discharging a total
contribution obligation of U.S.$527,701.
1 Jan. - 31 Dec. Homestake allotted a total of 685,847 shares to employees exercising employee
stock options for a total consideration of U.S.$10,609,802.
1994
1 Jan. - 31 Dec. Homestake allotted a total of 290,346 shares to employees exercising employee
stock options for a total consideration of U.S.$4,990,413.
</TABLE>
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<TABLE>
<S> <C>
1995
1 Jan. - October Homestake allotted a total of 169,325 shares to employees exercising employee
stock options for a total consideration of U.S.$2,156,388.
</TABLE>
(B) SUBSIDIARIES OF HOMESTAKE
In the five years ending on the day immediately before the day on which
this Part A statement was lodged for registration with the ASC, the
following changes have occurred in the capital structure of subsidiaries
of Homestake, which have exceeded 5% of the issued capital of each
subsidiary. If in any financial year, the aggregate alterations in the
capital structure exceeded 10% of the issued capital of the subsidiary,
the aggregate alterations are listed:
<TABLE>
<CAPTION>
DATE PARTICULARS
------------------------ -----------------------------------------------------------------------------
<S> <C>
Homestake Mining Company of California (California)
1990
26 Jan. Homestake Mining Company of California allotted 600 shares to Homestake
Mining Company for a total consideration of U.S.$6,000,000.
28 Feb. Homestake Mining Company of California allotted 61 shares to Homestake Mining
Company for a total consideration of U.S.$610,000.
1992
15 July Homestake Mining Company of California allotted 277 shares to Homestake
Mining Company for a total consideration of U.S.$2,770,000.
22 July Homestake Mining Company of California allotted 622 shares to Homestake
Mining Company in consideration of the purchase of all of the outstanding
Common, Series A Preference and Series C Preference shares of Homestake
Canada Inc., all of which were owned by Homestake Mining Company.
Homestake Canada Inc. (Ontario), formerly named International Corona Corporation, became a subsidiary
on 22 July 1992.
1992
31 Dec. Homestake Canada Inc. allotted 4,734,222 Common Shares to Homestake Mining
Company of California in consideration for the conversion of all of the
outstanding Series A Preference and Series C Preference shares of Homestake
Canada Inc., all of which were owned by Homestake Mining Company of
California.
31 Dec. Homestake Canada Inc. allotted one Common Share to Homestake Mining Company
of California in consideration for the acquisition of all of the outstanding
shares of Homestake Canada, Ltd., all of which were owned by Homestake Mining
Company of California.
1993
5 Feb. Homestake Canada Inc. allotted 5,057 shares of Third Preference Shares,
Series 1 to Homestake Mining Company of California for C$5,057,000.
</TABLE>
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<TABLE>
<S> <C>
22 Feb. Homestake Canada Inc. allotted 6,943 shares of Third Preference Shares,
Series 1 to Homestake Mining Company of California for C$6,943,000.
24 June Homestake Canada Inc. allotted 93,500 shares of Third Preference Shares,
Series 1 to Homestake Mining Company of California for C$93,500,000.
23 July Homestake Canada Inc. redeemed 419,475 shares of its Second Preference
Shares, Series 1 by paying to the holders of such shares a total of C$70 per
share plus accrued dividends of C$0.35 per share, for a total of
C$29,510,066.
1994
4 Nov. Homestake Canada Inc. allotted 3,250,000 Common Shares to Homestake Mining
Company of California in consideration for all of the outstanding shares of
Homestake Mineral Development Company Ltd., all of which were owned by
Homestake Mining Company of California.
Prime Resources Group, Inc. (British Columbia) became a subsidiary on 22 July 1992.
1993
14 Dec. Prime Resources Group Inc. allotted 25,624,059 Common Shares in exchange for
all of the outstanding Common Shares of Stikine Resources Ltd.
Dec. Prime Resources Group Inc. allotted 25,000 Common Shares to a commercial bank
on exercise by that bank of a warrant for a total consideration of C$84,000.
1994
31 Jan. Prime Resources Group Inc. cancelled 11,620,940 of its own shares which it
held as treasury stock.
17 Feb. Prime Resources Group Inc. allotted 44,444 Common Shares to one of its
directors on exercise by that director of an outstanding stock option, for a
total consideration of C$287,000.
7 June Prime Resources Group Inc. allotted 5,000,000 Common Shares for C$44,173,000
in a public offering.
Stikine Resources Limited (British Columbia) became a subsidiary on 22 July 1992.
1994
30 Nov. Stikine Resources Limited was wound up into Prime Resources Group Inc. and
all outstanding shares were cancelled.
Homestake Gold of Australia Limited (South Australia)
1990
1 Jan. - 31 Dec. HGAL allotted a total of 15,000 fully paid shares to employees exercising
employee stock options and 25,000 fully paid shares (25,000 shares paid to
one cent were paid up to 20 cents) for a total consideration of A$39,750.
</TABLE>
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PART A STATEMENT
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
1991
Jan. - Mar. HGAL allotted 90,919,600 fully paid shares to shareholders on a rights
offering for a total consideration of A$81,827,640.
1992
1 Jan. - 31 Dec. HGAL allotted a total of 50,000 fully paid shares to employees exercising
employee stock options for a total consideration of A$35,000.
1993
1 Jan. - 31 Dec. HGAL allotted a total of 743,000 fully paid shares to employees exercising
stock options and also allotted 97,000 shares paid up to one cent to
employees exercising stock options for a total consideration of A$640,070.
1994
1 Jan. - 31 Dec. HGAL allotted a total of 10,000 fully paid shares to employees exercising
employee stock options and 65,000 fully paid shares (65,000 shares paid to
one cent were paid up to 20 cents) for a total consideration of A$66,050.
Homestake Mineral Development Company Limited (British Columbia), formerly named Homestake Mineral
Development Company.
1990
5 Feb. Homestake Mineral Development Company allotted 47 shares to Homestake Mining
Company of California for a total consideration of C$470,000.
9 Nov. Homestake Mineral Development Company allotted 169 shares to Homestake Mining
Company of California for a total consideration of C$1,690,000.
20 Nov. Homestake Mineral Development Company allotted 300 shares to Homestake Mining
Company of California for a total consideration of C$3,000,000.
24 Dec. Homestake Mineral Development Company allotted 190 shares to Homestake Mining
Company of California for a total consideration of C$1,900,000.
1991
25 Feb. Homestake Mineral Development Company allotted 43 shares to Homestake Mining
Company of California for a total consideration of C$430,000.
</TABLE>
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--------------------------------------------------------------------------------
<TABLE>
<S> <C>
1994
24 Oct. Homestake Mineral Development Company allotted 950 shares to Homestake Mining
Company of California in consideration of the repurchase of U.S.$10,808,000
of Homestake Mineral Development Company indebtedness held by Homestake
Mining Company of California.
31 Oct. In connection with its change of domicile from Wyoming to British Columbia on
October 31, 1994, Homestake Mineral Development Company changed its name to
Homestake Mineral Development Company Limited and its 2,227 outstanding
shares, U.S.$1.00 par value, were converted into 3,012.0175 shares, C$1.00
par value.
2241633 Canada Ltd. (Canada), formerly named Homestake Canada Limited.
1990
20 Mar. Homestake Canada Limited allotted 14 shares to Homestake Mining Company of
California for a total consideration of C$140,000.
16 Nov. Homestake Canada Limited allotted 27 shares to Homestake Mining Company of
California for a total consideration of C$270,000.
30 Nov. Homestake Canada Limited allotted 70 shares to Homestake Mining Company of
California for a total consideration of C$700,000.
24 Dec. Homestake Canada Limited allotted 76 shares to Homestake Mining Company of
California for a total consideration of C$760,000.
31 Dec. Homestake Canada Limited allotted 73 shares to Homestake Mining Company of
California for a total consideration of C$730,000.
1993
31 May 2241633 Canada Ltd. was wound up into Homestake Canada Inc. and all
outstanding shares were cancelled.
</TABLE>
5.10 TRADING HISTORY
Homestake Shares trade principally on the NYSE.
The following table sets out the high and low sales prices of the
Homestake Shares for the periods indicated, as reported by the NYSE.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
(U.S.$)
<S> <C> <C>
1990
First Quarter 23.625 17.125
Second Quarter 20.250 15.750
Third Quarter 23.500 16.750
Fourth Quarter 21.500 15.250
1991
First Quarter 19.625 14.625
Second Quarter 17.000 13.875
Third Quarter 18.375 14.250
Fourth Quarter 17.375 14.375
</TABLE>
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<TABLE>
<CAPTION>
HIGH LOW
------ ------
(U.S.$)
<S> <C> <C>
1992
First Quarter 16.625 12.500
Second Quarter 13.875 10.875
Third Quarter 14.750 12.125
Fourth Quarter 14.000 10.000
1993
First Quarter 14.625 9.625
Second Quarter 19.625 13.375
Third Quarter 21.625 15.250
Fourth Quarter 22.875 16.250
1994
First Quarter 24.875 18.875
Second Quarter 22.625 17.375
Third Quarter 22.000 17.500
Fourth Quarter 21.500 16.125
1995
First Quarter 19.125 14.750
Second Quarter 19.125 15.625
July 18.125 16.125
August 17.250 16.125
September
</TABLE>
6. LEGAL MATTERS
6.1 PRE-EMPTION CLAUSES IN HGAL'S CONSTITUTION
The constitution of HGAL, namely its memorandum and articles of
association, contains no restriction on the right to transfer shares to
which the Offers relate that has the effect of requiring the holders of
those shares, before transferring them, to offer them for purchase to
members of HGAL or to any other person.
6.2 HOW CONSIDERATION TO BE PROVIDED
The consideration to be provided under the Share Offer will be provided
by Homestake allotting Homestake Shares to HGAL shareholders who accept
the Share Offer. No shareholder approval or other third-party consents
are required for Homestake to make the Offer and allot Homestake Shares
thereunder.
The maximum amount payable under the Cash Offer will be approximately
A$208,250,000 if all the partly paid shares in HGAL become fully paid and
Homestake receives acceptances for the resulting HGAL shares, all the
HGAL Employee Options are converted into HGAL Shares and all HGAL
shareholders accept the Cash Offer.
Homestake Mining Company of California, a wholly owned subsidiary of
Homestake ("Homestake California") has agreed to provide the
consideration required under the Cash Offer by loan or dividend (the
"Funding Agreement"). There are no conditions precedent to Homestake
California's obligations under the Funding Agreement.
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The amount which Homestake California is required to pay under the
Funding Agreement will be funded:
(a) as to amounts up to U.S.$125,000,000, from the disposal of highly
liquid short-term investments including securities and
certificates of deposit; and
(b) as to any amounts in excess of U.S.$125,000,000, from Homestake's
syndicated credit facility managed by the Bank of Nova Scotia and
the Canadian Imperial Bank of Commerce. This facility allows
Homestake California to make drawings without the need to satisfy
any conditions precedent, other than notice and certification of
compliance with all covenants set forth in the facility.
Homestake is, and intends to continue to be, in compliance with
all such covenants.
6.3 NO PROPOSED BENEFITS TO OFFICERS OF HGAL, ET CETERA.
In connection with the Offers:
(i) no prescribed benefit (as defined in the Corporations Law), other
than an excluded benefit (as defined in the Corporations Law),
will or may be given to a person in connection with the
retirement of a person from a prescribed office (as defined in
the Corporations Law) in relation to HGAL; and
(ii) no prescribed benefit will or may be given to a prescribed person
(as defined in the Corporations Law) in relation to HGAL in
connection with the transfer of the whole or any part of the
undertaking or property of HGAL.
6.4 NO OTHER AGREEMENTS WITH DIRECTORS OF HGAL
There is no other agreement made between Homestake and any of the
directors of HGAL in connection with or conditional upon the outcome of
the Offers.
6.5 NO AGREEMENT BY HOMESTAKE TO TRANSFER SHARES UNDER OFFERS
There is no agreement whereby any shares acquired by Homestake pursuant
to the Offers will or may be transferred to any other person.
6.6 NO ESCALATION CLAUSES
There is no agreement for the acquisition of shares in HGAL by Homestake
or by an associate of it, under which the person, or either or any of the
persons, from whom the shares have been or are to be acquired, or an
associate of that person or of either or any of those persons, may, at
any time after an Offer is sent, become entitled to any benefit, whether
by way of receiving an increased price for those shares or by payment of
cash or otherwise, that is related to, dependent upon, or calculated in
any way by reference to, the consideration payable for shares acquired
after the agreement was entered into.
6.7 TAXATION CONSIDERATIONS
The following opinions are not exhaustive of all possible Australian and
U.S. federal income tax considerations that could apply to particular
shareholders. In particuar, the summary does not
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address all tax considerations applicable to shareholders that may be
subject to special tax rules, such as banks, insurance companies, tax
exempt organizations, superannuation funds or dealers in securities.
EACH HGAL SHAREHOLDER IS ADVISED TO CONSULT WITH THE SHAREHOLDER'S OWN
TAX ADVISOR REGARDING THE CONSEQUENCES OF ACQUIRING, HOLDING OR DISPOSING
OF HGAL SHARES, HOMESTAKE SHARES OR AUSTRALIAN DOLLARS IN LIGHT OF
CURRENT TAX LAWS, THE SHAREHOLDER'S PARTICULAR INVESTMENT CIRCUMSTANCES
AND THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS.
(A) AUSTRALIAN INCOME TAX CONSIDERATIONS
The following is the opinion of Allen Allen & Hemsley of Sydney,
Australia, Australian counsel of Homestake, as to the principal
Australian income tax consequences, generally applicable to an HGAL
shareholder who disposes of HGAL Shares under the Offer. The opinion
reflects counsel's interpretation of the convention between the
Government of Australia and the Government of the United States for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
respect to Taxes and Income (the "Australia/United States Tax Treaty"),
the current provisions of the Australian Income Tax Assessment Act of
1936 (the "Act") and the regulations thereunder, taking into account
currently proposed amendments and counsel's understanding of the current
administrative practices of the Australian Taxation Office. The opinion
does not otherwise take into account or anticipate changes in the law,
whether by way of judicial decision or legislative action, nor does it
take into account tax legislation of other countries.
AUSTRALIAN RESIDENT SHAREHOLDERS
The Australian tax consequences for holders of HGAL Shares, who are
residents of Australia for tax purposes, are as follows.
(i) Disposal of HGAL Shares
The sale of HGAL Shares pursuant to the Offer will generally result in a
disposal of HGAL Shares for capital gains tax purposes. A capital gain
would arise if the HGAL Shares are disposed of at a price in excess of
their cost base. In this regard, the price received for the HGAL Shares
is the market value of the Homestake Shares at the time the Share Offer
is accepted, or A$1.90 if the Cash Offer is accepted. If the HGAL Shares
have been held for more than 12 months, any capital gain would be reduced
by an adjustment for inflation over the period for which the HGAL Shares
have been held.
Shareholders in HGAL who dispose of their HGAL Shares should incur a
capital loss if the cost of the HGAL Shares was greater than the market
value of the Homestake Shares received or A$1.90 (depending on whether
the Share Offer or the Cash Offer is accepted). A capital loss may be
offset against capital gains arising in the current or future years of
income. A capital loss cannot be offset against ordinary income.
Profits realised by certain categories of shareheolders, such as
sharetraders, may be taxed as ordinary income without any adjustment for
inflation.
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(ii) Homestake Shares held by Australian Holders
Dividends paid on Homestake Shares would generally be subject to U.S.
withholding tax at the rate of 15%. This tax would be deducted by
Homestake before the dividend is paid.
Generally, such dividends would also be subject to Australian income tax.
The entire amount of the dividend would be taxable including the amount
representing U.S. withholding tax. The Australian tax payable on such
dividends would generally be reduced by the amount of any U.S. tax
withheld. Dividends paid by Homestake cannot be franked and a shareholder
will not be entitled to franking rebates. Dividends paid by Homestake
will not qualify for the inter-corporate dividend rebate.
Dividends will be exempt from Australian tax if paid to an Australian
resident company on Homestake Shares which confer a voting interest of
greater than 10%.
The rules relating to the taxation of FOREIGN INVESTMENT FUNDS do not
currently apply to investors who hold Homestake Shares.
(iii) Subsequent Sale of Homestake Shares
Gain or loss from the sale or other disposal of Homestake Shares will
generally be subject to the same tax rules as those referred to at item
(i) above.
The sale of Homestake Shares on the ASX will generally be subject to
share transfer duty at the rate of 0.3%. The transfer of Homestake Shares
on a branch register of Homestake in Australia (other than those pursuant
to a sale on the ASX) generally will be subject to share transfer duty at
the rate of 0.6%.
NON-AUSTRALIAN RESIDENT SHAREHOLDERS
The Australian tax consequences for holders of HGAL Shares, who are not
Australian residents for tax purposes, are as follows.
(i) Disposal of HGAL Shares
Generally, if the HGAL Shares held by a shareholder (plus any HGAL Shares
held by an associate) during the five years preceding the sale of such
shares pursuant to the Offer represent less than 10% of the issued shares
in HGAL, their sale pursuant to the Offer will not give rise to any
Australian capital gains tax liability.
Profits realised by certain categories of shareholders, such as
sharetraders, may be taxed in Australia as ordinary income depending on
whether or not such profits have an Australian source. Determining the
source of income is a factual matter which depends on all the surrounding
circumstances. However, if the shareholder is resident in a country with
which Australia has a double tax treaty, it is possible that the terms of
the particular treaty could deem any profit arising on the acceptance of
the Offer to have an Australian source. That will be the case under the
Australia/United States Tax Treaty if the assets of HGAL consist
principally of real property situated in Australia.
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(ii) Dividends
Any dividend paid by Homestake to a non-Australian resident shareholder
will generally not be taxable in Australia.
(iii) Subsequent Sale of Homestake Shares
Gain or loss from the sale or other disposal of Homestake Shares by a
non-Australian resident shareholder will generally not be subject to
Australian tax.
The sale of Homestake Shares on the ASX in Australia will generally be
subject to share transfer duty at the rate of 0.3%. The transfer of
Homestake Shares on a branch register of Homestake in Australia (other
than those pursuant to a sale on the ASX) generally will be subject to
share transfer duty at the rate of 0.6%.
(B) UNITED STATES TAX CONSIDERATIONS
The following is the opinion of Thelen, Marrin, Johnson & Bridges of San
Francisco, California, United States counsel to the Offeror in connection
with the Offer, as to the principal United States federal income tax
consequences generally applicable to an HGAL shareholder who sells or
exchanges HGAL Shares pursuant to the Offer. Generally, this opinion
describes the principal tax consequences to United States citizens or
residents, corporations organized under the laws of the United States or
any state thereof, and trusts or estates that are not treated as foreign
trusts or estates for federal income tax purposes ("U.S. Holders").
Income or gains derived with respect to HGAL Shares by U.S. Holders
through partnerships generally will be taxed as described herein. In
addition, the opinion also describes the United States federal income tax
consequences of ownership and disposition of Homestake Shares by holders
who are not U.S. Holders.
The opinion reflects counsel's interpretation of the Australia/United
States Tax Treaty, the provisions of the United States Internal Revenue
Code of 1986, as amended (the "Tax Code"), applicable Treasury
regulations thereunder, judicial authority and administrative rulings and
practices now in effect, as applied to the proposed transactions. There
can be no assurance that the Internal Revenue Service will not take a
different position concerning the consequences of the ownership or
disposition of the HGAL Shares, Homestake Shares or Australian dollars or
that any such position would not be sustained. Thus, future legislative,
judicial or administrative changes or interpretations, which may or may
not be retroactive, could produce United States tax consequences
different from those expressed in counsel's opinion. The opinion does not
discuss all aspects of federal income taxation that may be relevant to a
particular holder in light of the holder's particular investment
circumstances, or to certain types of holders subject to special
treatment under the federal income tax laws (for example, life insurance
companies, tax-exempt entities, dealers in securities or currencies and
persons having a "functional currency" other than the U.S. dollar for
federal income tax purposes), and does not discuss any aspect of state,
local or foreign tax laws.
UNITED STATES SHAREHOLDERS
(i) Disposal of HGAL Shares
All sales of HGAL Shares for Australian dollars and all exchanges of HGAL
Shares for Homestake Shares by U.S. Holders pursuant to the Offer are
expected to be taxable transactions for U.S. federal income tax purposes.
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A U.S. Holder who receives payment in the form of Australian dollars will
recognise taxable gain or loss on the exchange measured by the difference
between the Holder's tax basis in the HGAL Shares surrendered and the
fair market value, expressed in U.S. dollars, of the Australian dollars
received in exchange for the HGAL Shares. In the case of a U.S. Holder
using the cash method of accounting, the fair market value of the
Australian dollars received will be determined based on the spot
conversion rate on the date received.
A U.S. Holder who receives payment in the form of Homestake Shares will
recognise taxable gain or loss on the exchange measured by the difference
between the Holder's tax basis in the HGAL Shares surrendered and the sum
of (1) the fair market value of the Homestake Shares and (2) the fair
market value, expressed in U.S. dollars, of the Australian dollar
payment, if any, in lieu of fractional Homestake Shares received in
exchange for the HGAL Shares.
A U.S. Holder's tax basis in any Homestake Shares or Australian dollars
received in exchange for HGAL Shares will be the fair market value of the
Homestake Shares or Australian dollars on the date of the exchange.
A gain or loss on an exchange of HGAL Shares pursuant to the Offer will
generally be a capital gain or loss if the Shares are held as capital
assets, and will be long-term or short-term capital gain depending on
whether the HGAL Shares have been held for more than one year.
A person whose exchange of HGAL Shares pursuant to the Offer is subject
to tax in both Australia and the United States should consult a tax
adviser concerning the availability of foreign tax credits or other
benefits under the Australia/United States Tax Treaty.
In the unlikely event that every holder of HGAL Shares elects to receive
Homestake Shares as payment for the HGAL Shares rather than Australian
dollars, the exchange of HGAL Shares solely for Homestake Shares would
qualify as a tax-free reorganization for United States federal income tax
purposes. In that event, except for cash received in lieu of fractional
shares, exchanging shareholders would recognize no gain or loss; their
tax bases in the Homestake Shares received in the exchange would be equal
to their tax bases in the HGAL Shares surrendered in exchange therefor;
and their holding periods in the Homestake Shares received would include
the periods for which they had held the HGAL Shares surrendered.
Homestake will notify all former HGAL shareholders promptly following the
completion of the exchange if Homestake determines that the conditions
for tax-free reorganization treatment have been met.
(ii) Currency Gains and Losses
In general, U.S. Holders are required to determine their taxable incomes
in United States dollars, and other currencies are treated as "property"
which can give rise to taxable gains or losses on disposition.
Accordingly, a U.S. Holder who receives Australian dollars in exchange
for HGAL Shares will be required to determine gain or loss on the
disposition of the Australian dollars, whether by conversion into U.S.
dollars or by the purchase of other property. In the case of conversion
into U.S. dollars, gain or loss is measured by the difference between the
U.S. Holder's tax basis in the Australian dollars surrendered and the
number of U.S. dollars received on the conversion. In the case of a
purchase of other property for Australian dollars, gain or loss generally
is measured by the difference between the U.S. Holder's tax basis in the
Australian dollars surrendered and the number of U.S. dollars into which
such Australian dollars could have been converted at the spot rate on the
date of the purchase. Currency exchange gains and losses are taxable as
ordinary income.
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(iii) Dividends
Dividends paid on the Homestake Shares to U.S. Holders will be treated as
ordinary income to the extent of Homestake's current or accumulated
earnings and profits (as computed for United States federal income tax
purposes). Dividends paid on the Homestake Shares will be eligible for
the deduction for dividends received by corporations.
(iv) Subsequent Sale of Homestake Shares
Generally, U.S. Holders will be subject to United States federal income
tax on any gain recognised upon the disposition of Homestake Shares.
NON-U.S. SHAREHOLDERS
The following is a general discussion of certain anticipated U.S. federal
income and estate tax consequences of the ownership and disposition of
Homestake Shares applicable to Non-U.S. Holders of such shares.
A "Non-U.S. Holder" is any person other than:
(i) a citizen or resident of the United States,
(ii) a corporation created or organised in the United States or under
the laws of the United States or of any state thereof, or
(iii) an estate or trust whose income is includable in gross income for
U.S. federal income tax purposes regardless of its sources.
An individual who has been lawfully accorded the privilege of residing in
the United States as an immigrant, commonly referred to as a "green card
holder," and who has not abandoned or suffered revocation of such
privilege, is treated as a resident of the United States for federal
income tax purposes whether or not such individual is actually present in
the United States for any minimum period of time during the taxable year.
Additionally, subject to certain exceptions, an individual may be treated
as a resident of the United States for federal income tax purposes if the
individual is present in the United States for an aggregate of 183 days
during the current and two preceding calendar years (counting for such
purpose one-third of the days in the immediately preceding year and
one-sixth of the days in the second preceding year) and for at least 31
days during the current calendar year.
(i) Dividends
In general, dividends paid to a Non-U.S. Holder will be subject to U.S.
withholding tax at a rate of 30% of the amount of the dividend, or at a
lower rate prescribed by an applicable tax treaty. (The Australia/United
States Tax Treaty prescribes a U.S. withholding tax rate of 15% for
Australian residents.)
To determine the applicability of a tax treaty providing for a lower rate
of withholding, dividends paid to an address in a foreign country are
presumed under current Treasury regulations to be paid to a resident of
that country. Treasury regulations proposed in 1984 which have not been
finally
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adopted, however, would require Non-U.S Holders to file certain forms to
obtain the benefit of any applicable tax treaty providing for a lower
rate of withholding tax on dividends. Such forms would be required to:
(a) contain the holder's name, address and other pertinent
information,
(b) be certified by such holder under penalties of perjury, and
(c) include an official statement by the competent authority (as
defined in the applicable treaty) in the foreign country
attesting to the holder's status as a resident thereof.
In general, dividends paid to a Non-U.S. Holder will not be subject to
U.S. withholding tax if the dividends are effectively connected with a
trade or business carried on by the Non-U.S. Holder within the United
States (and the Non-U.S. Holder files certain forms with the payer of the
dividend) but in that case will be subject to U.S. federal income tax at
regular rates.
(ii) Subsequent Sale of Homestake Shares
Generally, a Non-U.S. Holder will not be subject to U.S. federal income
tax on any gain recognised upon the disposition of Homestake Shares
unless:
(a) Homestake is or has been a "U.S. real property holding
corporation" for federal income tax purposes (which Homestake
does not believe that it is or is likely to become within the
foreseeable future) and the Non-U.S. Holder held, directly or
indirectly, at any time during the five-year period ending on the
date of disposition, more than 5% of all outstanding Homestake
Shares;
(b) the gain is effectively connected with a trade or business
carried on by the Non-U.S. Holder within the United States;
(c) the Non-U.S. Holder is an individual who is present in the United
States for 183 days or more in the taxable year of the
disposition and certain other conditions are met; or
(d) the Non-U.S. Holder is subject to tax pursuant to the provisions
of the U.S. federal tax law applicable to certain non-resident
aliens who have surrendered United States citizenship with a
principal purpose of tax avoidance.
(iii) Estate Tax
Homestake Shares owned or treated as owned by an individual who
is not a citizen or resident (as specially defined for United
States federal estate tax purposes) of the United States at the
time of death will be includable in the individual's gross estate
for United States federal estate tax purposes, unless an
applicable tax treaty provides otherwise. Such individual's
estate may be subject to United States federal estate tax on the
property includable in the estate for United States federal
estate tax purposes.
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(iv) Backup Withholding and Information Reporting
Homestake must report annually to the United States Internal
Revenue Service (the "Service") and to each Non-U.S. Holder the
amount of dividends paid to, and the tax withheld with respect
to, each Non-U.S. Holder. These reporting requirements apply
regardless of whether withholding was reduced by an applicable
tax treaty. Copies of these information returns may also be made
available under the provisions of a specific treaty or agreement
with the tax authorities in the country in which the Non-U.S.
Holder resides. Backup withholding tax (which is a withholding
tax imposed at the rate of 31% on certain payments to persons
that fail to furnish the information required under the
information reporting requirements) will generally not apply to
dividends paid on Homestake Shares to an address outside the
United States unless Homestake has knowledge that the payee is a
U.S. Holder.
Payment of the proceeds of sale of Homestake Shares to or through
a U.S. office of a broker will be subject to information
reporting and backup withholding unless the holder certifies,
under penalties for perjury, among other things, as to its status
as a Non-U.S. Holder or otherwise establishes an exemption.
Payment of the proceeds of a sale of Homestake Shares to or
through a non-United States office of a broker generally will not
be subject to backup withholding and information reporting.
However, if such broker is
(a) a United States person,
(b) a "controlled foreign corporation", or
(c) a foreign person that derives 50% or more of its gross
income for certain periods from the conduct of a trade
or business in the United States,
such payments will be subject to information reporting (but
currently not backup withholding, although the issue of whether
backup withholding should apply is under consideration by the
Service), unless such broker has documentary evidence in its
records that the holder is a Non-U.S. Holder and certain other
conditions are met or the holder otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules will be
credited against the Non-U.S. Holder's federal income tax
liability, if any, or refunded, provided the required information
is furnished to the Service.
6.9 OTHER MATERIAL INFORMATION
(A) GENERAL
There is no other information material to the making of a
decision by an offeree whether or not to accept Homestake's offer
(being information that is known to Homestake and has not
previously been disclosed to the holders of shares in HGAL) other
than:
(i) as disclosed in this Part A statement;
(ii) as set out in the Appendices to this Part A statement.
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(B) ASC EXEMPTIONS AND MODIFICATIONS
Homestake has obtained exemptions and modifications of the
application of the Corporations Law, granted by the ASC which are
set out in Appendix B to this Part A statement, the effect of
which is:
(i) to permit this Part A statement and any variation to the
Offer to be signed by agents of the directors of
Homestake;
(ii) to permit the payment of cash only to certain foreign
shareholders of HGAL Shares pursuant to the procedures
described in Clause 8.3 of the Offer;
(iii) to permit the Offer to extend to HGAL Shares issued
during the Offer Period as a result of the exercise of
HGAL Employee Options or the paying up of amounts
outstanding on partly paid shares in HGAL;
(iv) to permit the business addresses of Homestake's
directors to appear in this Part A statement;
(v) to permit Homestake to disclose in this Part A
statement:
(A) only those changes in capital structure of it and
its subsidiaries during the past five years where
the amount of the alteration exceeds 5% of the
issued capital of the relevant body corporate
immediately before the date of the alteration;
and
(B) where, in any financial year, the aggregate
alteration in the capital structure of any body
corporate (excluding alterations disclosed
pursuant to (A) above) exceeds 10% of the issued
capital of any body corporate, the aggregate
alteration;
(vi) to permit trading information on Homestake Shares to be
appear in a format similar to that which would have
applied had Homestake Shares been listed for quotation
on the ASX for the 3 months ending on the day
immediately before the day at which the Part A statement
was lodged for registration; and
(vii) to permit the incorporation of certain documents by
reference in this Part A statement.
7. INTERPRETATION
7.1 DEFINITIONS
In this Part A statement the following words have these meanings unless
the contrary intention appears or the context otherwise requires:
"ASSOCIATE" of a body corporate includes a reference to:
(a) a director or secretary of the body corporate;
(b) a related body corporate; or
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(c) a director or secretary of a related body corporate;
"ASC" means Australian Securities Commission;
"ASX" means Australian Stock Exchange Limited;
"AUSTRALIAN GAAP" means Australian generally accepted accounting
principles;
"BROKER" means a person who is a share broker and a participant in CHESS;
"CHESS" means Clearing House Electronic Sub-register System, which
provides for electronic share transfers in Australia;
"CHESS HOLDING" means a holding of HGAL Shares on the CHESS subregister
of HGAL;
"CONTROLLING PARTICIPANT" means the broker or NBP in CHESS who is
designated as the controlling participant for shares in a CHESS Holding
in accordance with the SCH business rules;
"CORPORATIONS LAW" means the Corporations Law of New South Wales;
"DELAWARE LAW" means the Delaware General Corporations Law, as amended;
"DISTINCT PORTIONS" means separate holdings of HGAL Shares held by a
custodian, trustee or other nominee on behalf of one or more beneficial
holders;
"ENTITLEMENT" in relation to shares, includes shares which a person owns
or in which a person has a relevant interest, shares in which a person
who is an associate of that person has a relevant interest and shares to
which a person has a deemed entitlement and "ENTITLED" has a
corresponding meaning;
"EXCHANGE ACT" means the United States Securities Exchange Act of 1934,
as amended;
"EXCHANGE RATE" means the noon buying rate in New York City for cable
transfers in Australian dollars expressed in United States dollars as
certified for customs purposes by the Federal Reserve Bank of New York or
the inverse thereof, as the case may be;
"HGAL" means Homestake Gold of Australia Limited (A.C.N. 008 143 137) of
1st Floor, 226 Great Eastern Highway, Belmont, Western Australia, 6104;
"HGAL EMPLOYEE OPTIONS" means options issued as at the date of this Offer
by HGAL under its employee option scheme;
"HGAL SHARES" means the fully paid ordinary shares of A$0.20 each in HGAL
on issue at the date of this Offer and all Rights attaching to them, and
those ordinary shares of A$0.20 each in HGAL which are issued by HGAL
during the Offer Period following the exercise of HGAL Employee Options
or payment of the amount unpaid on partly paid shares in HGAL and all
Rights attaching to them;
"HOMESTAKE" means Homestake Mining Company (A.R.B.N. 070 799 067), a
Delaware corporation, of 650 California Street, San Francisco, California
94108-2788, United States of America;
"HOMESTAKE CERTIFICATE" means the Restated Certificate of Incorporation
of Homestake, in effect on the date of this Offer;
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"HOMESTAKE SHARES" means shares of common stock, U.S.$1 par value, in
Homestake;
"JORC GUIDELINES" means the guidelines to the Australasian Code for
reporting of Identified Mineral Resources and Ore Reserves, September
1992, prepared by the Joint Committee of the Australian Institute of
Mining and Metallurgy, Australian Institute of Geoscientists and
Australian Mining Industry Council;
"NYSE" means New York Stock Exchange;
"NEW YORK CITY TIME" means United States Eastern Standard time, or United
States Eastern Daylight time (if applicable);
"NBP" means a non-broker participant under the SCH business rules;
"OFFER PERIOD" means the period during which the Offers are to remain
open for acceptance, to be specified in Clause 3.1 of the Offer;
"OFFERS" means the offers referred to in Clause 1 of the Part A statement
and, if the context so requires, the Offer Document accompanying this
statement and "OFFER" means any one of the Offers;
"PART A STATEMENT" means this statement of Homestake pursuant to Part A
in Section 750 of the Corporations Law;
"PERSON" means an incorporated or unincorporated body or association as
well as a natural person;
"RELEVANT INTEREST" in relation to a share, includes the power to vote or
dispose of a voting share in a body corporate;
"RIGHTS" means all accretions and rights attaching to or arising from the
HGAL Shares (including, without limiting the generality of the foregoing,
all rights to receive dividends and to receive or subscribe for shares,
stock units, notes or options and all other distributions or entitlements
declared, paid or issued by HGAL);
"SCH" means Securities Clearing House, the body which administers the
CHESS system in Australia;
"SCH BUSINESS RULES" means the business rules of the Securities Clearing
House;
"SEC" means the United States Securities and Exchange Commission;
"SWISS STOCK EXCHANGE" means the Swiss Stock Exchange with locations in
Basel, Geneva and Zurich;
"SYDNEY TIME" means Australian Eastern Standard Time or, if applicable,
Australian Eastern Summer Time;
"TAKEOVER SCHEME" means the takeover scheme constituted in accordance
with Division 1 of Part 6.3 of the Corporations Law pursuant to which
Homestake proposes to make offers to acquire all the HGAL Shares of which
Homestake is not the holder;
"TON" means a short ton of 2,000 pounds;
"TONNE" means a metric ton of 1,000 kilograms or 2,204.6 pounds;
--------------------------------------------------------------------------------
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<PAGE>
PART A STATEMENT
--------------------------------------------------------------------------------
"UNITED STATES HOLDER" means a person who holds shares and who is a
United States citizen or resident, a corporation organized under the laws
of the United States or any state thereof, and a trust or estate which is
not treated as a foreign trust or estate for federal income tax purposes;
"U.S. GAAP" means United States generally accepted accounting principles.
7.2 INTERPRETATIONS
Headings are for convenience only and do not affect interpretation. The
following rules of interpretation apply unless the context requires
otherwise.
(i) The singular includes the plural and conversely.
(ii) A gender includes all genders.
(iii) Where a word or phrase is defined, its other grammatical forms
have a corresponding meaning.
(iv) A reference to a person includes a body corporate, an
unincorporated body or other entity and conversely.
(v) A reference to any legislation or to any provision of any
legislation includes any modification or re-enactment of it, any
legislative provision substituted for it and all regulations and
statutory instruments issued under it.
(vi) A reference to "A$" is to Australian dollars, a reference to
"U.S.$" is to United States dollars, and a reference to Can.$ is
to Canadian dollars.
(vii) A reference to a right or obligation of any two or more persons
confers that right, or imposes that obligation, as the case may
be, jointly and severally.
(viii) Time is Sydney time or New York City time, as the case may be.
(ix) A term not specifically defined in this Part A statement has the
meaning given to it (if any) in the Corporations Law.
DATED [ ] 1995.
SIGNED on behalf of Homestake by [ ] and [ ], two persons
appointed by the directors of Homestake and authorised to sign this Part
A statement by a resolution passed at a meeting of the directors of
Homestake.
----------------------------------- ------------------------------------
[ ] [ ]
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91
<PAGE>
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INVESTIGATING ACCOUNTANT'S REPORT ("IAR")
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A-1
<PAGE>
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APPENDIX A-1
INVESTIGATING ACCOUNTANT'S REPORT ("IAR")
[14 September 1995]
The Directors
Homestake Mining Company
650 California Street
SAN FRANCISCO
CALIFORNIA
Dear Directors
INTRODUCTION
We have prepared this report for inclusion in the Offer Document to be issued by
Homestake Mining Company (Homestake) in relation to its Offers to acquire all of
the Homestake Gold of Australia Limited (HGAL) shares it does not own. Further
details of the Offers are set out in Section 3 of the Offer Document.
1 Coopers & Lybrand L.L.P. has separately issued the following opinions:
(a) an examination opinion on Homestake's Forecasted Condensed Statements of
Consolidated Operations and Cash Flows for the six month and twelve month
periods ending 31 December 1995 and 31 December 1996, respectively, which
is in Clause 4.2 of the Part A statement of the Offer Document;
(b) an examination opinion on Homestake's Pro Forma Condensed Consolidated
Statement of Operations for the twelve month period ended 31 December
1994 and a review opinion on Homestake's Pro Forma Condensed Consolidated
Balance Sheet as of 30 June 1995 and Pro Forma Condensed Consolidated
Statement of Operations for the six month period then ended (the "Pro
Forma Financial Information") which is in Clause 4.1 of the Part A
statement of the Offer Document; and
(c) a review opinion on Homestake's unaudited Condensed Consolidated
Financial Statements for the six month period ended 30 June 1995
("Unaudited Financial Information") which is in Appendix F.
2 The above opinions have been prepared in accordance with the standards
and guidelines of the American Institute of Certified Public Accountants which
are substantially the same standards for assignments of this nature in
Australia.
3 Coopers & Lybrand L.L.P. has consented to the inclusion in the Offer
Document of their audit opinions relating to Homestake's audited Consolidated
Financial Statements for 31 December 1994 and 1993 and for each of the three
years in the period ended 31 December 1994 ("Historical Financial Information").
These financial statements, including the notes thereto, and their audit
opinions are in Appendix D.
4 Homestake is a corporation organized under the laws of the State of
Delaware, United States of America, and its functional and statutory financial
reporting is expressed in accordance with U.S. GAAP and U.S. dollars. Homestake
will continue to report on this basis in the future and accordingly, for the
purpose of this report, all financial information contained herein is expressed
in U.S. dollars and is prepared in accordance with U.S. GAAP. Explanations of
certain differences between Australian GAAP and U.S. GAAP as they apply to
Homestake are in Appendix L.
5 Expressions defined in the Offer Document have the same meaning when
used in this report.
--------------------------------------------------------------------------------
A-2
<PAGE>
--------------------------------------------------------------------------------
SCOPE OF REPORT
6 This report has been prepared by Coopers & Lybrand (Securities) Limited
which holds a dealers license under the Australian Corporations Law. Coopers &
Lybrand (Securities) Limited is wholly owned by Coopers & Lybrand, Australia,
which is the auditor of HGAL. Coopers & Lybrand L.L.P. is the auditor of
Homestake. The audit reports issued on the statutory accounts of Homestake and
HGAL over the relevant periods were unqualified. These audit reports are at
Appendix H in relation to HGAL and Appendix D in relation to Homestake.
7 This report addresses (a) Homestake's historical selected financial
information for the three years ended 31 December 1994 and six months ended 30
June 1995, set out in Clause 9 of the Summary of Offer, to which no adjustments
are considered necessary, and which has been extracted from Homestake's
Historical Financial Information and Unaudited Financial Information; and (b)
Homestake's Pro Forma Financial Information for the six month and twelve month
periods ended 30 June 1995 and 31 December 1994, respectively, which is set out
in Clause 4.1 of the Part A statement of the Offer Document. The pro forma
adjustments detailed in Clause 4.1 of the Part A statement of the Offer Document
reflect the effects on Homestake's historical financial statements of the
acquisition of all of the HGAL Shares not already owned by Homestake, assuming
50% of the HGAL Shares are exchanged for Homestake Shares and 50% of the HGAL
Shares are acquired for cash.
OPINIONS
8 In our opinion, Homestake's historical selected financial information in
Clause 9 of the Summary of Offer and Clause 4.1 of the Part A statement of the
Offer Document presents fairly in all material respects for the purposes of this
report, the financial position of Homestake as of 31 December 1994 and the
results of Homestake's operations for the three year period then ended on a
basis consistent with U.S. GAAP and Homestake's accounting policies which are
disclosed in note 1 to Homestake's Historical Financial Information in Appendix
D.
9 Based on our review of Homestake's Unaudited Financial Information and
Pro Forma Financial Information, and in the context of the scope of this report,
nothing has come to our attention which causes us to believe that:
(a) Homestake's historical selected financial information in Clause 9 of the
Summary of Offer and Clause 4.1 of the Part A statement of the Offer
Document does not present fairly in all material respects for the
purposes of this report, the financial position of Homestake as of 30
June 1995 and the results of the operations for the six month period then
ended; and
(b) Homestake's Pro Forma Financial Information for the six month and twelve
month periods ended 30 June 1995 and 31 December 1994, respectively, in
Clause 4.1 of the Part A statement of the Offer Document is not presented
fairly.
10 In our opinion, this Historical Financial Information and Pro Forma
Financial Information has been compiled and presented on a basis consistent with
U.S. GAAP and Homestake's accounting policies which are disclosed in note 1 to
the Historical Financial Information in Appendix D.
SUBSEQUENT EVENTS
11 Other than the matters dealt with in this report, to the best of our
knowledge and belief there have been no material transactions or events
subsequent to 30 June 1995 outside the ordinary course of business of Homestake
which require comment or adjustment to the information contained in this report
or which would cause such information to be misleading.
--------------------------------------------------------------------------------
A-3
<PAGE>
--------------------------------------------------------------------------------
12 This report is not an expert's report providing an opinion on the
fairness or reasonableness of the implied value of the Offers and we express no
opinion on that matter.
Yours faithfully
C H Humphrey G M Cottrell
Authorised Representative Authorised Representative
--------------------------------------------------------------------------------
A-4
<PAGE>
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APPENDIX B
CORPORATIONS LAW - EXEMPTIONS AND MODIFICATIONS
--------------------------------------------------------------------------------
B-1
<PAGE>
[TRADING INFORMATION FORMAT AS IF ASX LISTED]
AUSTRALIAN SECURITIES COMMISSION
CORPORATIONS LAW
SECTION 730
DECLARATION
Pursuant to subsection 730(1) of the Corporations Law ("Law") the
Australian Securities Commission ("Commission") declares that Chapter 6
of the Law applies in relation to the person named in Schedule A in the
case referred to in Schedule B as if clause 21 of Part A to section 750
were modified or varied by:
(a) deleting the words "the stock market of a securities exchange"
where they appear in paragraphs (2) and (4) and substituting "a
stock market";
(b) deleting the words "the securities exchange" in paragraph (2) and
substituting "the stock market"; and
(c) deleting the words "securities exchange" each time they appear in
paragraph (3) and substituting "stock market".
SCHEDULE A
Homestake Mining Company (ARBN 070 799 067)
SCHEDULE B
The takeover scheme by the person named in Schedule A in relation to
ordinary shares in the company named in Schedule C in respect of which
an application for modification dated [date] was lodged with the
Commission on [date] and a Part A statement is registered by the
Commission at or about the date this instrument is executed.
SCHEDULE C
Homestake Gold of Australia Limited (ACN 008 143 137)
Dated this day of September 1995.
Signed by
as a Delegate of the Australian Securities Commission.
B-2
<PAGE>
[EXECUTION OF DOCUMENTS BY AGENT]
AUSTRALIAN SECURITIES COMMISSION
CORPORATIONS LAW
SECTION 728
EXEMPTION
Pursuant to section 728 of the Corporations Law ("Law") the Australian
Securities Commission ("Commission") hereby exempts the person named in
Schedule A from compliance with paragraph 637(1)(a) of the Law in the
case referred to in Schedule B to the extent that the provision requires
the Part A statement to be signed by a director of the offeror in person
on condition that:
(a) the Part A statement is signed by an agent, authorised in writing,
in his or her place; and
(b) an original or verified copy authorisation is lodged with the
Commission within 14 days of execution by the Commission of this
instrument.
And pursuant to section 728 of the Law the Commission hereby exempts the
person named in Schedule A from compliance with paragraph 657(2)(a) of
the Law in the case referred to in Schedule B to the extent that the
provision requires a notice given thereunder to be signed by a director
of the offeror in person on condition that:
(a) the notice is signed by an agent, authorised in writing, in his or
her place; and
(b) an original or verified copy authorisation is lodged with the
Commission within 14 days of execution by the Commission of this
instrument.
SCHEDULE A
Homestake Mining Company
(ARBN 070 799 067)
SCHEDULE B
The takeover scheme by the person named in Schedule A in relation to
ordinary shares in the company named in Schedule C in respect of which
an application for exemption dated [date] was lodged with the Commission
on [date] and a Part A statement is registered by the Commission at or
about the date this instrument is executed.
SCHEDULE C
Homestake Gold of Australia Limited (ACN 008 143 137)
DATED this day of September 1995.
Signed by [name of delegate]
as a Delegate of the Australian Securities Commission
B-3
<PAGE>
[OFFERS FOR SHARES ISSUED DURING THE OFFER PERIOD]
AUSTRALIAN SECURITIES COMMISSION
CORPORATIONS LAW
SECTION 730
DECLARATION
Pursuant to subsection 730(1) of the Corporations Law ("Law") the
Australian Securities Commission ("Commission") declares that Chapter 6
of the Law applies in relation to the person named in Schedule A in the
case referred to in Schedule B as if a reference to a share included in
a class of shares included a reference to a convertible security on the
conversion or exercise of which such a share might be issued during the
offer period in relation to the takeover scheme referred to in Schedule
B or to a share so issued or to a share otherwise issued, as the case
requires, and a reference to an offer to acquire shares included in a
class included a reference to an offer to acquire such a share upon its
issue or to a share otherwise issued, and included a reference to
acquire such a convertible security and in particular as if:
1. Section 603 were modified or varied by inserting the following
definitions after the definition of "closing phase":
"'convert' includes:
(a) exercise (in the case of an option); and
(b) paying the amount unpaid on the share (in the case
of a partly paid share);
'Convertible Securities', in relation to a company,
comprise options to subscribe for fully paid shares in the
company, and partly paid shares in the company."
2. Section 634 were modified or varied by:
(a) inserting "(1)" at the beginning of the section; and
(b) inserting the following subsection after subsection (1):
"(2) For the purposes of this Chapter:
(a) shares which have the same rights as shares
in the relevant class and that are issued
during the offer period; and
(b) partly paid shares which would have the same
rights as shares in the relevant class once
fully paid,
shall upon issue or becoming fully paid (as the case
may be) form part of the relevant class.";
3. Section 636 were modified or varied by deleting "." at the end of
paragraph (b) and substituting:
(c) any differences in the manner or time prescribed for
acceptance of the offers attributable only to the fact that
at the time the offers for shares in a relevant class were
first made, or at any time during the offer period, the
offeree held a Convertible Security; and
B-4
<PAGE>
(d) the fact that offers made to holders of Convertible
Securities for shares issued on conversion of Convertible
Securities during the offer period may be accepted by
completing the form of acceptance and transfer accompanying
the offer, and a notice of conversion, and providing those
forms with certificates for the relevant Convertible
Securities to the offeror."
4. subsection 636(2) were modified or varied by inserting after the
words "relevant class" the words:
"to each holder of Convertible Securities";
5. subsection 638(2) were modified or varied by omitting "the offer"
and substituting:
"the last offer despatched pursuant to the scheme (other
than an offer for shares issued during the offer period or
partly paid shares which become fully paid during the offer
period)";
6. subsection 638(4) were modified or varied by inserting the
following paragraphs after paragraph (b):
"(c) the number of shares in the relevant class if all
Convertible Securities on issue on a date to be
specified in the offer but not earlier than five
business days before the date on which the Part A
statement relating to the offer is signed were
converted into shares in the relevant class; and
(d) the number of shares in the relevant class to which
the offeror would be entitled if all Convertible
Securities on issue were converted into shares in
the relevant class on the date referred to in
paragraph (c).";
7. section 639 were modified or varied by adding the following
subsection at the end of the section:
"(3) The offeror shall, not later than two business days
after becoming aware of the name and address of a
person to whom shares in the relevant class of
shares are issued during the offer period and to
whom an offer has not already been sent, give to
that person a copy of each document or notice which
has been published or given under Divisions 3, 5 or
6 of this Part during the offer period.";
8. subsection 647(1) were modified or varied by deleting the text in
paragraph (b)(ii) and substituting:
"give a copy of that statement to each person:
(A) registered at the date of the Part B statement as
the holder of shares to which the Part A statement
relates; and
(B) to whom an offer to which that Part A statement
relates was made.";
9. section 647 were modified or varied by inserting the following
subsection after subsection (1):
"(1A) The offeror shall, within two business days of the
target company giving a Part B statement in
B-5
<PAGE>
accordance with subparagraphs (1)(b)(i) and (ii),
give a copy of the Part B statement to each person
to whom an offer was made under the takeover scheme
because the person was a holder of Convertible
Securities, or under subsection 639(3).";
B-6
<PAGE>
10. subsection 662(4) were modified or varied to read as follows:
"(4) The number of shares specified in accordance with
sub-section (3) may be expressed as a number of
shares, or as a percentage of the total number of
shares in the relevant class, or as a percentage of
the total number of shares which are at the end of
the offer period included in that class to which the
offer relates.";
11. section 698(5) was modified or varied by inserting the following
new paragraph after paragraph (b):
(c) (i) the offering to give, agreeing to give or giving of
a benefit provided for in an offer to acquire shares
on conversion or exercise of other Convertible
Securities of the target company; and
(ii) the variation of any such offer."
12. subsection 699(1) were modified or varied by:
(a) deleting "or" after "renounceable options" in paragraph (a)
and substituting ",";
(b) inserting ", Convertible Securities" after "convertible
notes" in paragraph (a);
(c) deleting "and" at the end of paragraph (c); and
(d) deleting "." at the end of paragraph (d) and substituting:
"; and
(e) in respect of each person who held Convertible
Securities - particulars of the Convertible
Securities and the number of shares to which the
Convertible Securities relate.";
13. paragraph 701(1)(a) were modified or varied by:
(a) inserting after the words "the shares in respect of which
the offers were made" the following words:
"including shares resulting from the conversion of
Convertible Securities"; and
(b) inserting after the words "the first of the offers was
made" the following words:
"and shares to which the offeror became entitled
upon the conversion of Convertible Securities"; and
14. clause 11 in Part A in section 750 were modified or varied by
inserting after the words "offers relate" the following:
"(including any shares referred to in paragraph 638(4)(c))".
SCHEDULE A
Homestake Mining Company (ARBN 070 799 067)
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<PAGE>
SCHEDULE B
The takeover scheme by the person named in Schedule A in relation to
ordinary shares in the company named in Schedule C in respect of which
an application for modification dated [*] 1995 was lodged with the
Commission on [*] 1995 and a Part A statement is registered by the
Commission at or about the date this instrument is executed.
SCHEDULE C
Homestake Gold of Australia Limited (ACN 008 143 137)
Dated this day of September 1995.
Signed by [*]
as a Delegate of the Australian Securities Commission.
B-8
<PAGE>
[PAYMENT OF CASH ONLY TO FOREIGN SHAREHOLDERS]
AUSTRALIAN SECURITIES COMMISSION
CORPORATIONS LAW
SECTION 730
DECLARATION
Pursuant to subsection 730(1) of the Corporations Law ("Law") the
Australian Securities Commission ("Commission") declares that Chapter 6
of the Law applies in relation to the company named in Schedule A in the
case referred to in Schedule B as if:
Subsection 636(1) were modified or varied by inserting the following
paragraph after paragraph (d):
"(e) any differences in the consideration specified for each
share in the offers that are attributable only to the fact
that holders of shares in the company whose addresses as
shown in the company's register of members are places
outside Australia and the external Territories where it
would be illegal for the offeror to offer or for the
holders of such shares to accept the share alternative may
only accept the cash alternative as consideration for their
shares".
SCHEDULE A
Homestake Mining Company (ARBN 070 799 067)
SCHEDULE B
The takeover scheme by the company named in Schedule A in relation to
ordinary shares in the company named in Schedule C in respect of which
an application for modification dated [*] 1995 was lodged with the
Commission on [*] 1995 and a Part A Statement is registered by the
Commission at or about the date this instrument is executed.
SCHEDULE C
Homestake Gold of Australia (ACN 008 143 137)
Dated this [*] day of September 1995.
Signed by [*]
a delegate of the Australian Securities Commission
B-9
<PAGE>
[OFFERS FOR SHARES ISSUED DURING THE OFFER PERIOD]
AUSTRALIAN SECURITIES COMMISSION
CORPORATIONS LAW
SECTION 730
DECLARATION
Pursuant to subsection 730(1) of the Corporations Law ("Law") the
Australian Securities Commission ("Commission") declares that Chapter 6
of the Law applies in relation to the person named in Schedule A in the
case referred to in Schedule B as if a reference to a share included in
a class of shares included a reference to a convertible security on the
conversion or exercise of which such a share might be issued during the
offer period in relation to the takeover scheme referred to in Schedule
B or to a share so issued or to a share otherwise issued, as the case
requires, and a reference to an offer to acquire shares included in a
class included a reference to an offer to acquire such a share upon its
issue or to a share otherwise issued, and included a reference to
acquire such a convertible security and in particular as if:
1. Section 603 were modified or varied by inserting the following
definitions after the definition of "closing phase":
"'convert' includes:
(a) exercise (in the case of an option); and
(b) paying the amount unpaid on the share (in the case
of a partly paid share);
'Convertible Securities', in relation to a company,
comprise options to subscribe for fully paid shares in the
company, and partly paid shares in the company."
2. Section 634 were modified or varied by:
(a) inserting "(1)" at the beginning of the section; and
(b) inserting the following subsection after subsection (1):
"(2) For the purposes of this Chapter:
(a) shares which have the same rights as shares
in the relevant class and that are issued
during the offer period; and
(b) partly paid shares which would have the same
rights as shares in the relevant class once
fully paid,
shall upon issue or becoming fully paid (as the case
may be) form part of the relevant class.";
3. Section 636 were modified or varied by deleting "." at the end of
paragraph (b) and substituting:
(c) any differences in the manner or time prescribed for
acceptance of the offers attributable only to the fact that
at the time the offers for shares in a relevant class were
first made, or at any time during the offer period, the
offeree held a Convertible Security; and
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<PAGE>
(d) the fact that offers made to holders of Convertible
Securities for shares issued on conversion of Convertible
Securities during the offer period may be accepted by
completing the form of acceptance and transfer accompanying
the offer, and a notice of conversion, and providing those
forms with certificates for the relevant Convertible
Securities to the offeror."
4. subsection 636(2) were modified or varied by inserting after the
words "relevant class" the words:
"to each holder of Convertible Securities";
5. subsection 638(2) were modified or varied by omitting "the offer"
and substituting:
"the last offer despatched pursuant to the scheme (other
than an offer for shares issued during the offer period or
partly paid shares which become fully paid during the offer
period)";
6. subsection 638(4) were modified or varied by inserting the
following paragraphs after paragraph (b):
"(c) the number of shares in the relevant class if all
Convertible Securities on issue on a date to be
specified in the offer but not earlier than five
business days before the date on which the Part A
statement relating to the offer is signed were
converted into shares in the relevant class; and
(d) the number of shares in the relevant class to which
the offeror would be entitled if all Convertible
Securities on issue were converted into shares in
the relevant class on the date referred to in
paragraph (c).";
7. section 639 were modified or varied by adding the following
subsection at the end of the section:
"(3) The offeror shall, not later than two business days
after becoming aware of the name and address of a
person to whom shares in the relevant class of
shares are issued during the offer period and to
whom an offer has not already been sent, give to
that person a copy of each document or notice which
has been published or given under Divisions 3, 5 or
6 of this Part during the offer period.";
8. subsection 647(1) were modified or varied by deleting the text in
paragraph (b)(ii) and substituting:
"give a copy of that statement to each person:
(A) registered at the date of the Part B statement as
the holder of shares to which the Part A statement
relates; and
(B) to whom an offer to which that Part A statement
relates was made.";
9. section 647 were modified or varied by inserting the following
subsection after subsection (1):
"(1A) The offeror shall, within two business days of the
target company giving a Part B statement in
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<PAGE>
accordance with subparagraphs (1)(b)(i) and (ii),
give a copy of the Part B statement to each person
to whom an offer was made under the takeover scheme
because the person was a holder of Convertible
Securities, or under subsection 639(3).";
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<PAGE>
10. subsection 662(4) were modified or varied to read as follows:
"(4) The number of shares specified in accordance with
sub-section (3) may be expressed as a number of
shares, or as a percentage of the total number of
shares in the relevant class, or as a percentage of
the total number of shares which are at the end of
the offer period included in that class to which the
offer relates.";
11. section 698(5) was modified or varied by inserting the following
new paragraph after paragraph (b):
(c) (i) the offering to give, agreeing to give or giving of
a benefit provided for in an offer to acquire shares
on conversion or exercise of other Convertible
Securities of the target company; and
(ii) the variation of any such offer."
12. subsection 699(1) were modified or varied by:
(a) deleting "or" after "renounceable options" in paragraph (a)
and substituting ",";
(b) inserting ", Convertible Securities" after "convertible
notes" in paragraph (a);
(c) deleting "and" at the end of paragraph (c); and
(d) deleting "." at the end of paragraph (d) and substituting:
"; and
(e) in respect of each person who held Convertible
Securities - particulars of the Convertible
Securities and the number of shares to which the
Convertible Securities relate.";
13. paragraph 701(1)(a) were modified or varied by:
(a) inserting after the words "the shares in respect of which
the offers were made" the following words:
"including shares resulting from the conversion of
Convertible Securities"; and
(b) inserting after the words "the first of the offers was
made" the following words:
"and shares to which the offeror became entitled
upon the conversion of Convertible Securities"; and
14. clause 11 in Part A in section 750 were modified or varied by
inserting after the words "offers relate" the following:
"(including any shares referred to in paragraph 638(4)(c))".
SCHEDULE A
Homestake Mining Company (ARBN 070 799 067)
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<PAGE>
SCHEDULE B
The takeover scheme by the person named in Schedule A in relation to
ordinary shares in the company named in Schedule C in respect of which
an application for modification dated [*] 1995 was lodged with the
Commission on [*] 1995 and a Part A statement is registered by the
Commission at or about the date this instrument is executed.
SCHEDULE C
Homestake Gold of Australia Limited (ACN 008 143 137)
Dated this day of September 1995.
Signed by [*]
as a Delegate of the Australian Securities Commission.
B-14
<PAGE>
[CAPITAL STRUCTURE]
1. (i) each of paragraphs 6(c) and (d) in Part A in section 750
were modified or varied by omitting "any alterations in the
capital structure of any body corporate" and substituting
"each alteration in the capital structure of any body
corporate the amount of which exceeds 5% of the issued
capital of the body corporate immediately before the date
of the alteration"; and
(ii) the following word and paragraph were inserted after
paragraph (d)"
"; and
(e) where, in any financial year, the aggregate
alteration in the capital structure of any body
corporate (excluding alterations disclosed pursuant
to paragraphs (c) and (d)) exceeds 10% of the issued
capital of any body corporate, the aggregate
alteration."
[PAYMENT OF FOREIGN SHAREHOLDERS CASH ONLY]
2. subsection 636(1) were modified or varied by inserting the
following paragraph after paragraph (b):
"(c) any differences in the consideration specified for each
share in the offers that are attributable only to the fact
that holders of shares in the company whose addresses as
shown in the company's register of members are places
outside Australia and the external Territories may only
accept:
(i) the cash alternative as consideration for their
shares; or
(ii) consideration in the form of cash after the
procedure set out in subsection 621(3), with such
adaptations as are necessary, has been carried out."
[TRADING INFORMATION FORMAT AS IF ASX LISTED]
3. clause 21 of Part A to section 750 were modified or varied by:
(a) deleting the words "the stock market of a securities
exchange" where they appear in paragraphs (2) and (4) and
substituting "a stock market";
(b) deleting the words "the securities exchange" in paragraph
(2) and substituting "the stock market"; and
(c) deleting the words "securities exchange" each time they
appear in paragraph (3) and substituting "stock market".
B-15
<PAGE>
[PAYMENT OF CASH ONLY TO FOREIGN SHAREHOLDERS]
AUSTRALIAN SECURITIES COMMISSION
CORPORATIONS LAW
SECTION 730
DECLARATION
Pursuant to subsection 730(1) of the Corporations Law ("Law") the
Australian Securities Commission ("Commission") declares that Chapter 6
of the Law applies in relation to the company named in Schedule A in the
case referred to in Schedule B as if:
Subsection 636(1) were modified or varied by inserting the following
paragraph after paragraph (d):
"(e) any differences in the consideration specified for each
share in the offers that are attributable only to the fact
that holders of shares in the company whose addresses as
shown in the company's register of members are places
outside Australia and the external Territories where it
would be illegal for the offeror to offer or for the
holders of such shares to accept the share alternative may
only accept the cash alternative as consideration for their
shares".
SCHEDULE A
Homestake Mining Company (ARBN 070 799 067)
SCHEDULE B
The takeover scheme by the company named in Schedule A in relation to
ordinary shares in the company named in Schedule C in respect of which
an application for modification dated [*] 1995 was lodged with the
Commission on [*] 1995 and a Part A Statement is registered by the
Commission at or about the date this instrument is executed.
SCHEDULE C
Homestake Gold of Australia (ACN 008 143 137)
Dated this [*] day of September 1995.
Signed by [*]
a delegate of the Australian Securities Commission
B-16
<PAGE>
[REDUCTION OF PART A DISCLOSURE IN RELATION TO CHANGES
IN CAPITAL STRUCTURE]
AUSTRALIAN SECURITIES COMMISSION
CORPORATIONS LAW
SECTION 730
DECLARATION
Pursuant to subsection 730(1) of the Corporations Law ("Law") the
Australian Securities Commission ("Commission") declares that Chapter 6
of the Law applies in relation to the person named in Schedule A in the
case referred to in Schedule B as if each of paragraph 6(c) and (d) in
Part A in section 750 were modified or varied by omitting "any
alterations in the capital structure of any body corporate" and
substituting "each alteration in the capital structure of any body
corporate the amount of which exceeds 5% of the issued capital of the
body corporate immediately before the date of the alteration (other than
alterations in issued capital resulting from the incorporation or
liquidation of such body corporate)".
SCHEDULE A
Homestake Mining Company
(ARBN 070 799 067)
SCHEDULE B
The takeover scheme by the person named in Schedule A in relation to
ordinary shares in the company named in Schedule C in respect of which
an application for modification dated [date] was lodged with the
Commission on [date] and a Part A statement is registered by the
Commission at or about the date this instrument is executed.
SCHEDULE C
Homestake Gold of Australia Limited
(ACN 008 143 137)
Dated this day of 1995.
Signed by [name of delegate]
as a delegate of the Australian Securities Commission.
B-17
<PAGE>
--------------------------------------------------------------------------------
APPENDIX C
HOMESTAKE FORM 10-K FOR THE YEAR ENDED
31 DECEMBER 1994
--------------------------------------------------------------------------------
C-1
<PAGE>
APPENDIX C
UNITED STATES
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, 1994
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 Participating
Cumulative Preferred Stock New York Stock Exchange, Inc.
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 $2,203,000,000 as of March 13, 1995.
The number of shares of common stock outstanding as of March 13, 1995 was
137,857,427.
Documents Incorporated by Reference:
Specified sections of Homestake Mining Company's 1994 Annual Report to
Shareholders, as described herein, are incorporated by reference in Parts I
and II of this Form 10-K. Specified sections of the definitive Proxy
Statement for the 1995 Annual Meeting of Shareholders, which will be filed
with the Securities and Exchange Commission within 120 days after December 31,
1994, are 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, refining and reclamation. Gold bullion,
the Company's principal product, is produced in the United States, Canada,
Australia, and Chile.
The results of the Company's operations are affected significantly by
the market price of gold. Gold prices are influenced by numerous factors over
which the Company has no 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,
demand for gold for jewelry and industrial products, and sales by holders and
producers of gold in response to these factors. The supply of gold consists
of a combination of new mine production and sales from existing stocks of
bullion and fabricated gold held by governments, public and private financial
institutions, and individuals.
The Company's general policy is to sell its production at current prices
and not enter into arrangements which establish a price for the sale of its
future gold production. As a result, the Company's profitability is fully
exposed to fluctuations in the current price of gold in world markets.
However, in certain limited circumstances, the Company will enter into forward
sales commitments for small portions of its gold production. During the
fourth quarter of 1994, the Company sold for future delivery 183,200 ounces of
gold it expects to produce at the Nickel Plate mine during 1995 and 1996.
These forward sales represent less than 5% of the gold that Homestake expects
to produce over the next two years. The average price to be received is
approximately $412 per ounce, which should cover the mine's relatively high
cash costs during its two-year remaining life. The forward sales should also
allow for recovery of the Company's remaining investment in the mine and
provide for estimated reclamation costs.
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 Note 24 to the consolidated statements on pages 46 and 47 of the
Company's 1994 Annual Report to Shareholders for geographic and segment
information. Such information is hereby incorporated by reference.
SIGNIFICANT 1994 DEVELOPMENTS
During 1994, gold prices continued to increase. Homestake's average
realized price was $384 per ounce in 1994 compared to $359 per ounce in 1993
and $348 per ounce in 1992.
In May, the Company sold its 44% 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. The Company recorded a $15.7 million pretax gain on this sale.
2
<PAGE>
In June, Prime Resources Group Inc. (Prime) completed the sale of five
million common shares to the public. Net proceeds of approximately $31.9
million were used to fund a portion of the construction and development costs
of the Eskay Creek mine. 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 the
book value of the Company's investment in Prime.
Construction of the Eskay Creek gold/silver mine was substantially
completed in 1994 and ore shipments to third-party smelters began in January
1995. Proven and probable ore reserves totaled 2.3 million contained ounces
of gold and 101.8 million contained ounces of silver at December 31, 1994.
Through Prime, the Company has a 50.6% interest in these reserves.
At the Kalgoorlie operations approximately $13 million was spent in 1994
and a further $39 million of expenditures are planned during 1995 on an
expansion program at the Fimiston mill.
During 1994, exploration expenses totaling $6.5 million were made on a
delineation drilling program at the new mineralized zone (Ruby Hill) near
Eureka, Nevada. In October 1994, following completion of this program, the
Company announced its decision to proceed with a $4 million feasibility study
on the West Archimedes oxide zone. In addition, exploration expenses of $5
million are planned for this project in 1995.
1995 DEVELOPMENTS
In February 1995, the Company sold its 28% equity interest in the Torres
silver mining complex in Mexico for $6 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 three smaller mines in Nevada: the Santa Fe mine
(100%), the Marigold mine (33.3%) and the Pinson mine (26.3%). The Company
has exploration offices in Reno, Nevada and Lead, South Dakota.
Homestake Mine
The 118-year old Homestake gold 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 waste-water treatment plant
and tailings disposal facilities. The underground mine is serviced by two
5,000-foot vertical shafts from the surface connecting with internal shafts
which provide hoisting and services to the 8,000-foot level. Ore from
underground is hoisted to the surface, crushed and transported to
3
<PAGE>
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 tons-
per-day (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 tailings 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 generally are in good operating
condition.
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 owned
hydroelectric facilities.
During 1994, the main ventilation raise for the underground mine
collapsed and access to the higher-grade mining areas in the lower mine was
restricted. A 14-foot borehole, which was being drilled between the 5,900 and
6,800-foot levels to replace the raise, was completed in March 1995. In
addition, a second bulk air cooling chamber has been constructed on the
6,650-foot level to provide further cooling capability for expanded mining
operations in the lower levels.
Expansion of the Open Cut, which began in 1989, is largely complete with
work continuing on residential and public facilities around the pit. The
highway overpass leading to the main Open Cut waste dump was closed during the
second half of 1994 while stabilization and additional arch support work was
completed to the highway tunnel below. Detailed monitoring of the tunnel
liner will continue.
During the next few years, as mining progresses in the lower levels of
the Homestake mine, the remaining higher-grade ore deposits will become
narrower and less continuous and therefore more difficult to mine. The
Company has developed various alternatives to help minimize the effect that
this may have on future costs. During 1995, a large tonnage, lower-grade
stope in the upper levels of the mine will be bulk-mined. In addition, narrow
vein mining is being tested in other portions of the mine. These trials will
help determine the future underground mine operating strategy.
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. In March 1995, a new labor contract was ratified covering the period
June 4, 1995 through May 31, 1998.
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 10% of net profits
from the sale of gold produced in the state, 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.
4
<PAGE>
Geology
The Homestake mine is the largest known iron formation hosted gold
deposit. In its 118-year life, the mine has produced in excess of 38 million
ounces of gold from more than 155 million tons of ore. The Homestake gold
deposit is Proterozoic in age (approximately 1.9 billion years).
Mineralization is generally stratabound within the Homestake Formation, which
is a quartz-veined, sulfide-rich sedimentary sequence that has been complexly
deformed by tight folding, faulting and shearing. Ten southeast-plunging fold
structures, locally called ledges, have produced gold ore over a vertical
extent of more than 8,000 feet.
Year-end Proven and Probable Ore Reserves
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Underground
Tons of ore (000s) 15,595 15,014
Ounces of gold per ton .228 .230
Contained ounces of gold (000s) 3,559 3,448
Open Cut
Tons of ore (000s) 4,787 5,388
Ounces of gold per ton .121 .130
Contained ounces of gold (000s) 579 700
Total
Tons of ore (000s) 20,382 20,402
Ounces of gold per ton .203 .203
Contained ounces of gold (000s) 4,138 4,148
Operating Data
1994 1993
----- -----
Production Statistics:
Tons of ore mined (000s):
Underground 1,331 1,471
Open Cut 1,092 1,048
Ore grade (oz. gold/ton):
Underground .224 .235
Open Cut .100 .111
Open Cut stripping ratio (waste:ore) 10.1:1 8.4:1
Tons of ore milled (000s) 2,590 2,695
Mill feed ore grade (oz. gold/ton) .160 .174
Mill recovery (%) 95 96
Gold recovered (000 ozs.) 394 448
Cost per Ounce of Gold:
Cash operating cost $ 292 $ 268
Noncash cost 31 20
----- -----
Total production cost $ 323 $ 288
</TABLE>
5
<PAGE>
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 17,200 acres.
Approximately 15,400 acres, which encompass all of the minable reserves, are
owned and approximately 845 acres are leased. The Company holds 52 unpatented
mining claims covering the remaining acreage. 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. Conventional CIP cyanidation
with pressure stripping and electrowinning is used to recover gold and silver.
Total mill capacity through both circuits is approximately 6,000 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.
The majority of process water is recycled from the tailings pond. Fresh
water make-up is obtained from the Company's reservoir in Yolo County, which
has approximately four years of storage capacity. Electric power is purchased
under interruptible tariff from Pacific Gas and Electric Company.
Cash costs per ounce increased in 1994 primarily due to a decrease in ore
grades.
Gold production had been expected to increase in 1995 as the higher-grade
zones at the bottom of the South Pit are reached. However, heavy rainfall in
northern California in the first quarter of 1995 has caused flooding and other
related operating problems at the McLaughlin mine. As a result, gold
production at McLaughlin in the first quarter of 1995 probably will be about
27% below the first quarter of 1994. Depending upon the amount of any
additional rainfall, more normal levels of gold production at the mine may not
resume before June.
In mid-1996 mining in the South Pit will cease and gold production levels
are expected to decline significantly with production principally derived from
processing lower-grade stockpiles. Processing is expected to continue for
approximately seven years.
An underground exploration program completed in 1994 resulted in a minor
addition to pit reserves. During 1994, the mine operated in compliance with
environmental permits.
McLaughlin mine royalties are equivalent to approximately 2% of revenues.
Geology
The McLaughlin ore body is a structurally-controlled siliceous vein
network, overlain by hotspring terraces (sinter). The mineralization is the
product of 0.5 to 1.0 million year old geothermal activity, induced by
regional volcanism. Precious metals were transported in hot spring fluids
and coprecipitated with quartz, chalcedony and opal in open fractures along
and adjacent to a northeast-dipping structure, known as the Stony Creek fault.
The ore body is wedge-shaped and extends to depths of over 1,000 feet along a
strike-length of more than a mile.
6
<PAGE>
Year-end Proven and Probable Reserves
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Open Pit
Tons of ore (000s) 5,040 7,176
Ounces of gold per ton .101 .101
Contained ounces of gold (000s) 508 727
Stockpiled*
Tons of ore (000s) 17,024 14,866
Ounces of gold per ton .068 .075
Contained ounces of gold (000s) 1,157 1,112
Total
Tons of ore (000s) 22,064 22,042
Ounces of gold per ton .075 .083
Contained ounces of gold (000s) 1,665 1,839
<FN>
* The cost of mining substantially all the low-grade ore in the stockpiles
has been expensed.
</TABLE>
<TABLE>
<CAPTION>
Operating Data
1994 1993
----- -----
<S> <C> <C>
Production Statistics:
Tons of ore mined (000s) 2,667 2,043
Stripping ratio (waste:ore) 5.6:1 6.5:1
Tons of ore milled (000s) 2,244 2,164
Mill feed ore grade (oz. gold/ton) .126 .154
Mill recovery (%) 87 92
Gold recovered (000 ozs.) 250 305
Cost per Ounce of Gold:
Cash operating cost $ 252 $ 196
Noncash cost 78 107
----- ------
Total production cost $ 330 $ 303
</TABLE>
Round Mountain Mine
The Round Mountain gold 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 are under patent application
and the remainder of which are subject to unpatented mining claims. Of the
total reserves, 83% are located on the privately-owned land. Paved public
roads provide access to the operations.
7
<PAGE>
Ore from the mine is 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 1994, total ore processed averaged 73,000 TPD. The
reusable heap-leach pads processed 19,000 TPD and the balance was processed on
a dedicated pad. The average ore and waste mining rate was 161,000 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
four million tons. A separate 11.4 million square foot dedicated heap-leach
pad to process uncrushed run-of-mine ore has a total capacity of 89 million
tons. Facilities are in good condition.
Water is supplied from wells on the property and power is purchased under
contract from Sierra Pacific Power Company.
Homestake's share of total 1994 gold production from the Round Mountain
mine was 105,877 ounces compared to 93,674 ounces in 1993. Gold recoveries on
the reusable pads have improved as a result of placing higher-grade ores and
fewer total tons on the pads, which has allowed longer leaching times. Larger
quantities of lower-grade ore are being processed on the dedicated pad due to
a reduced ore grade cut-off threshold. Gold production in 1994 and 1993 also
benefited from a very high-grade vein ore occurrence from which 8,263 ounces
of gold (Homestake's share) were recovered through gravity separation in 1994
(1993: 13,344 ounces). A small amount of high-grade vein material will be
processed in 1995.
Round Mountain ore reserves increased by 676,000 ounces (100% basis) in
1994 primarily due to exploration drilling which extended pit limits, and the
inclusion of previously leached material following favorable processing tests.
Engineering and permitting for the construction of an 8,000-TPD gravity
mill to process higher-grade sulfide ores is planned for 1995. Estimated
capital costs are $58 million (100% basis). Completion of mill construction
is estimated in 1997.
During 1994, 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. 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 1994, the royalty averaged 5.3% of revenues.
Geology
The Round Mountain ore body straddles the margin of a volcanic caldera
complex. Gold bearing hydrothermal fluids were transported along major
structural conduits created by the volcano's collapse and associated faulting.
These ascending fluids deposited gold in permeable zones along a broad
northwest trend. Primary gold mineralization at Round Mountain occurs as
electrum, a natural gold/silver alloy, in association with quartz, adularia
and pyrite. Narrow fractures in shear zones host the higher-grade
mineralization while porous sites within the volcanic rocks host the
disseminated mineralization. Economic gold mineralization is found in both
the volcanic and surrounding sedimentary rocks as well as overlying alluvial
placers. The oblong open-pit mine is well over a mile at its longest
dimension and currently more than 1,000 feet from the highest working level to
the bottom of the pit.
8
<PAGE>
Homestake has a 25% share of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Tons of ore (000s) 348,910 302,426
Ounces of gold per ton .022 .024
Contained ounces of gold (000s) 7,799 7,123
Operating Data (100% Basis)
1994 1993
------ ------
Production Statistics:
Tons of ore mined (000s) 26,242 25,929
Stripping ratio (waste:ore) 1.2:1 1.2:1
Tons of ore crushed (000s) 6,629 10,130
Tons of ore processed (000s) 25,965 24,443
Weighted average ore grade
placed on pads (oz. gold/ton) .020 .022
Leach recovery - reusable pads (%) 79 69
Gold recovered (000 ozs.) 424 375
Homestake's Cost per Ounce of Gold
Cash operating cost $ 187 $ 230
Noncash cost 59 63
----- -----
Total production cost $ 246 $ 293
</TABLE>
Santa Fe Mine
The Santa Fe gold mine is located in Mineral County, Nevada, approximately
40 miles east of Hawthorne. Homestake owns 100% of this operation. The mine
commenced operations in 1988.
The Santa Fe mine property is comprised of 190 unpatented lode claims, 69
unpatented millsite claims and 24 patented claims on Bureau of Land Management
land covering approximately 3,600 acres. The mining and processing facilities
occupy 900 acres. Access to the property is by paved road.
Mining operations at the Santa Fe mine ceased in late 1993 as ore reserves
were depleted. During 1994, production continued with the leaching of all
four crushed and run-of-mine ore heaps. In 1995, the operations will enter a
reclamation phase. During this period, some gold production will be derived
from rinsing and neutralization of the heaps, a process in which any residual
cyanide is destroyed. Revenues received from gold production during the first
eight months of 1994 were applied toward remaining reclamation expenditures.
Based on current estimates, a full provision for reclamation is included in
the December 31, 1994 financial statements. The mine and its facilities are
fully depreciated.
The carbon absorption capacity of the processing facility was doubled in
1994 in anticipation of rinsing the heaps. Water for the property is obtained
from alluvial wells located two miles from the minesite. Power is purchased
from Sierra Pacific Power Company.
During 1994, the mine operated in compliance with its environmental
permits. The Company has received a notice of noncompliance with respect to a
wildlife mortality and the matter currently is under investigation.
9
<PAGE>
The mine is subject to three separate net smelter royalties aggregating
3.5% to 15% depending upon the grade of ore and the price of gold.
Operating Data
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Production Statistics:
Tons of ore mined (000s) - 2,043
Stripping ratio (waste:ore) - 1.5:1
Tons of ore crushed (000s) - 2,288
Ore grade put on pads (oz. gold/ton) - .034
Leach recovery (%) - 61
Gold recovered (000 ozs.) 22 54
Cost per Ounce of Gold:
Cash operating cost $ 175 $ 269
Noncash cost 171 89
----- -----
Total production cost $346 $ 358
</TABLE>
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 held by unpatented
mining claims 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. In 1994, ore was
produced from four open-pit mines. Milling operations ceased in early 1995
with the depletion of the ore reserves in the 8-South pit which had provided
most of the mill-grade ore. The other three pits produce mostly lower-grade
ore which is processed by heap leaching. Mill-grade ore from the these pits
will be stockpiled and periodically processed through the mill to maximize
gold recovery. The mill has a capacity of 1,900 TPD. In 1995, 79% of total
gold production will be derived from heap leaching compared to only 28% in
1994. Total material movement is approximately 45,000 TPD. Mine facilities
are in good condition.
Water is supplied from on-site wells and power is purchased from Sierra
Pacific Power Company.
The 1994 exploration program concentrated on detailed ore delineation in
the three known pit areas for reserve modeling, pit design and long-range
production scheduling purposes, and for reserve expansion on the property.
During 1994, the mine operated in compliance with all of its permits.
Production royalties were paid to two owners of the leasehold lands in
amounts of 5% of net smelter returns and 3.5% of net profits interest.
Homestake's share of production from the Marigold mine was 28,328 ounces
of gold in 1994 compared to 30,165 ounces in 1993.
10
<PAGE>
Geology
Gold resources at the Marigold mine are distributed within even known
mineralized zones. Ore bodies are associated with broad zones of
silicification and local decalcification largely within the Permian Antler
formation and the underlying Ordovician Valmy formation. Both stratigraphy
and structure control the location and geometry of the zones of
mineralization. The ore bodies are sediment-hosted, disseminated deposits of
micron-size gold, and are entirely oxidized.
Homestake has a 33.3% share of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Tons of ore (000s) 14,070 15,749
Ounces of gold per ton .033 .034
Contained ounces of gold (000s) 459 536
Operating Data (100% Basis)
1994 1993
------ ------
Production Statistics:
Tons of ore mined 2,247 2,243
Stripping ratio (waste:ore) 3.3:1 2:1
Tons of ore milled (000s) 678 689
Ore grade milled (oz. gold/ton) .097 .108
Mill recovery (%) 92 91
Tons of ore leached (000s) 1,616 1,505
Ore grade leached (oz. gold/ton) .018 .021
Gold recovered (000 ozs.) 85 90
Homestake's Cost per Ounce of Gold:
Cash operating cost $ 226 $ 207
Noncash cost 62 95
----- -----
Total production cost $ 288 $ 302
</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 1994, 83% 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.
11
<PAGE>
The 1994 exploration program delineated some ore extensions in current
mining areas but did not identify significant new reserves on the property.
Production royalties of 2.2% of net smelter returns 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 1994, the mine operated in compliance with all its environmental
permits.
Homestake's share of production from the Pinson mine was 11,817 ounces of
gold in 1994 compared to 13,353 ounces in 1993.
Geology
The Pinson deposit includes six or more zones of gold mineralization
largely hosted by carbonate rocks and calcareous siltstones of the Ordovician
Conus formation. Ore bodies consist of diffuse disseminations of micron-size
gold peripheral to faults cutting favorable stratigraphy. High-grade stringer
zones have been identified deep in the system and are the subject of
continuing investigation.
Homestake has a 26.3% share of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Tons of ore (000s) 4,743 4,771
Ounces of gold per ton .072 .068
Contained ounces of gold (000s) 343 323
Operating Data (100% Basis)
1994 1993
----- -----
Production Statistics:
Tons of ore mined (000s) 968 882
Stripping ratio (waste:ore) 6.6:1 7:1
Tons of ore milled (000s) 562 552
Ore grade milled (oz. gold/ton) .078 .093
Mill recovery (%) 83 85
Tons of ore leached (000s) 379 415
Ore grade leached (oz. gold/ton) .029 .031
Gold recovered (000 ozs.) 45 51
Homestake's Cost per Ounce of Gold:
Cash operating cost $ 332 $ 267
Noncash cost 44 41
----- -----
Total production cost $ 376 $ 308
</TABLE>
12
<PAGE>
Dee Mine
In May 1994, the Company sold its interest in the Dee gold mine in Nevada
to Rayrock for $16.5 million. Rayrock assumed responsibility for and
indemnified Homestake against all environmental and reclamation matters. The
Company recorded a $15.7 million pretax gain on this sale.
Prior to the sale, the Company's share of gold production for 1994
totaled 1,984 ounces compared to 11,340 ounces during 1993.
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 50.6% interest
in Prime. Prime owns the Eskay Creek mine and has a 40% interest in the Snip
mine, both of which are located in northwestern British Columbia.
The Company conducts exploration and investigates mineral acquisition and
development opportunities throughout Canada. Canadian activities are managed
from an office in Vancouver, British Columbia.
Eskay Creek Mine
Prime owns 100% of the Eskay Creek gold/silver mine. Through its interest
in Prime, the Company has a 50.6% interest in the mine. 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 mine.
The Eskay Creek property consists of five mining leases and various other
mineral and surface rights comprising approximately 3,477 acres located 51
miles north of Stewart, British Columbia. The leases have remaining terms of
approximately 26 to 30 years, subject to renewal rights. Access from the main
highway to the mine is by 38 miles of single-lane gravel road.
A feasibility study conducted in January 1994 determined that the most
economical way of processing the ore was by direct shipment and sale of ore to
smelters. A Mine Development Certificate was received from the Province of
British Columbia on March 31, 1994. Construction of surface facilities
commenced immediately and was completed in late October. Rehabilitation of
the main access ramp and underground ventilation and electrical services was
undertaken prior to the commencement of mining in December 1994. Shipments of
ore commenced in January 1995. Underground mining utilizes a drift-and-fill
method. Ore is processed through a crushing and blending facility located at
the minesite. There are no tailings produced at the minesite. Some of the
mine waste-rock is potentially acid-generating and is disposed of under water
in a nearby barren lake. Workers are on a two-week work schedule followed by
two weeks off.
Two long-term sale contracts have been signed with smelters in Japan and
Quebec. These contracts provide for a combined minimum delivery of 100,000
tons in the first year, with options to increase deliveries to 130,000 tons in
the second year and beyond, subject to smelter approvals. A long-term truck
hauling contract currently is being negotiated for the movement of ore 164
miles to Stewart for shipment to Japan and 224 miles to Kitwanga, British
Columbia for shipment to Quebec. A dedicated ship-loading facility at Stewart
has been upgraded to handle ore shipments. In addition, a new load-out
facility has been constructed at the railhead in Kitwanga. Prime has also
entered into a rail contract with Canadian National Railway to transport ore
to Quebec.
13
<PAGE>
During 1994, Prime entered into agreements with Adrian Resources Ltd. and
the Tagish Group and acquired 100% of mineral claims which cover a small
portion of the Eskay Creek ore body. This acquisition settled all known Eskay
Creek mine title disputes.
In 1995, the mine is expected to produce 100,000 tons of ore containing
approximately 170,000 ounces of gold and 7.3 million ounces of silver. Based
on existing reserves, the mine has a projected life of eight to ten years.
Power is produced on-site by diesel generation.
See page 34 for a discussion of environmental matters.
The mine is subject to an effective 1% net smelter royalty, with the
exception of a small portion of the ore body, which is subject to an effective
2% net smelter royalty.
Geology
The Eskay Creek ore body is a precious metal-enriched volcanogenic massive
sulfide deposit that occurs in association with volcanics of the Jurassic-aged
(190+ million years) Hazelton Group. Eskay Creek mineralization is generally
stratabound and occurs in a contact mudstone and breccia sandwiched between a
rhyolite flow-dome complex and overlain by volcanic rocks in the west limb of
a north-plunging fold. Sphalerite, pyrite, galena and tetrahedrite are the
most abundant ore minerals. Native gold occurs as mostly microscopic
particles located between sulfide grains or in fractures within sulfide
grains, some locked in pyrite. Gold also occurs in volcanic rocks beneath the
contact mudstone with visible gold, coarse grained sphalerite, pyrite and
galena disseminated in quartz veins or stockwork.
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1994
------
<S> <C>
Tons of ore (000s) 1,190
Ounces of gold per ton 1.91
Contained ounces of gold (000s) 2,274
Ounces of silver per ton 85.5
Contained ounces of silver (000s) 101,800
</TABLE>
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 (Teck) 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 each other's interest in the Williams mine
and shares of WOC.
14
<PAGE>
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 a nearby open pit. Waste rock from the open pit is used for
backfill in the underground operations. Cyanidation and the CIP process are
used to recover gold. The mine has a 7,000 TPD capacity mill which operated
at 6,954 TPD during 1994. The Williams and David Bell mines share one
tailings basin facility located approximately two miles from the mill. This
facility was expanded during 1994. 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. The mine's
facilities and equipment are modern and in good condition.
Following the installation of new crushing and ventilation systems in
1994, mining between the 9,065 and 9,240-foot levels commenced. In addition,
exploration drifting and diamond drilling were carried out on the 9,175 and
9,450-foot levels and part of the open pit was redesigned and expanded to
maximize ore extraction. Approximately two-thirds of the ore mined in 1994
was replaced by additions to ore reserves.
During the next few years, production at the mine is expected to be
slightly lower as the grades of ore mined more closely approximate the
remaining life-of-mine ore grades.
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. A new glycol
heat recovery system was installed during 1994 which will reduce propane
consumption.
All environmental discharges during 1994 were in compliance with permit
levels. The mine has submitted a reclamation and closure plan to the
Government of Ontario for review.
The 11 patented mining claims are subject to three net smelter royalties
totaling a net effective rate of 2.08% and the Crown mining lease is subject
to a net smelter royalty of 0.75%.
Homestake's share of production was 222,660 ounces in 1994 compared to
246,126 ounces in 1993.
Geology
The Hemlo Gold Camp occurs within the east-west striking Heron Bay belt
of metamorphosed Archean aged rocks (3.5 billion years). The steeply
dipping ore bodies lie along the contact between overlying metasedimentary
rocks and underlying volcanic rocks. Gold mineralization is hosted mainly
by a fine grained feldspar porphyry unit associated with pyrite, barite and
molybdenum.
Homestake has a 50% share of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Tons of ore (000s) 34,050 34,905
Ounces of gold per ton .166 .170
Contained ounces of gold (000s) 5,669 5,934
</TABLE>
15
<PAGE>
Operating Data (100% Basis)
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Production Statistics:
Tons of ore milled (000s) 2,538 2,557
Mill feed ore grade (oz. gold/ton) .184 .202
Mill recovery (%) 95 95
Gold recovered (000s ozs.) 445 492
Homestake's Cost per Ounce of Gold:
Cash operating cost $ 204 $ 199
Noncash cost 42 48
----- -----
Total production cost $ 246 $ 247
</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
each own a 50% interest in TCOC. The mine commenced operations in 1985.
The mine is located on the same ore body 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
each 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, sand and waste rock produced underground
as backfill. The mill operated at 1,402 TPD in 1994. Cyanidation and the CIP
process are used to recover gold. The facilities and equipment are modern and
in good condition.
Mine development in 1994 included development of the new C-zone by a
contractor and improvements to the mine ventilation network. The average width
of ore at the David Bell mine is decreasing. In an effort to minimize the
costs associated with this decrease, stoping of narrow width ore by
longitudinal longhole retreat continued during the year. Gold production
decreased slightly, reflecting lower ore grades and recoveries and reduced
mill throughput associated with ore shortages from the underground due to
narrower ore widths.
During the next few years, production at the mine is expected to be
slightly lower as the grades of ore mined more closely approximate the
remaining life-of-mine ore grades.
In-mine exploration potential is limited due to property boundary limits.
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.
The current collective bargaining agreement with the United Steel Workers
of America is in effect until October 31, 1995.
Water and power supplies are the same as those at the Williams mine.
During 1994, all environmental discharges were in compliance with permit
levels. The mine has submitted a reclamation and closure plan to the
Government of Ontario for review.
The property is subject to a 3% net smelter royalty.
Homestake's share of production at the David Bell mine was 96,109 ounces
in 1994 compared with 107,594 ounces in 1993.
16
<PAGE>
Geology
See "Williams Mine - Geology."
Homestake has a 50% share of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Tons of ore (000s) 5,463 6,450
Ounces of gold per ton .317 .316
Contained ounces of gold (000s) 1,731 2,041
Operating Data (100% Basis)
1994 1993
----- -----
Production Statistics:
Tons of ore milled (000s) 512 542
Mill feed ore grade (oz. gold/ton) .399 .416
Mill recovery (%) 94 95
Gold recovered (000 ozs.) 192 215
Homestake's Cost per Ounce of Gold:
Cash operating cost $ 168 $ 154
Noncash cost 43 52
----- -----
Total production cost $ 211 $ 206
</TABLE>
Quarter Claim
The Quarter Claim constitutes approximately one-fourth of a mining claim,
which was originally part of the David Bell property and 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 by Hemlo Gold for
capital costs unless that capital is specifically required for the Quarter
Claim.
Homestake's share of production at the Quarter Claim was 7,745 ounces in
1994 compared with 11,094 ounces in 1993.
17
<PAGE>
Geology
See "Williams Mine - Geology."
Homestake has a 25% share of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Tons of ore (000s) 1,185 1,380
Ounces of gold per ton .254 .256
Contained ounces of gold (000s) 300 354
Operating Data (100% Basis)
1994 1993
----- -----
Production Statistics:
Tons of ore milled (000s) 114 181
Mill feed ore grade (oz. gold/ton) .281 .255
Mill recovery (%) 97 96
Gold recovered (000 ozs.) 31 44
Homestake's Cost per Ounce of Gold:
Cash operating cost $ 177 $ 144
</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, 25 mineral claims and certain surface
rights, covering approximately 8,015 acres. A paved road from Penticton,
British Columbia, 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 before deposition in a closed circuit effluent
discharge impoundment basin. The facilities and equipment are modern and in
good condition.
The majority of the mine's process water is obtained from solutions
recycled from the tailings impoundment basin. Fresh water make-up 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.
Mining at the Nickel Plate mine will be reduced substantially in early
1995. A milling rate of 4,000 TPD is planned through the end of 1996 at
which time the ore reserve is expected to be depleted. During the fourth
quarter of 1994, the Nickel Plate ore reserve was reduced by 8% reflecting
mining experience in the Stage IV pit. The potential for additional ore
reserves from exploration drilling is very limited.
See page 34 for discussion of environmental matters.
The mine has submitted a revised reclamation and closure plan to the
regulatory agencies for review.
18
<PAGE>
Geology
The Nickel Plate ore body is situated within the rocks of the Jurassic
aged Hedley Formation consisting of thinly bedded calcareous siltstones
and layered to massive limestone units dipping northwest at 20 to 30
degrees. The formation is intruded by Early Jurassic, coarse-
grained porphyritic diorite. A large hydrothermal system was
associated with the diorite intrusions. Gold bearing sulfides
(pyrrhotite, pyrite and chalcopyrite) were emplaced during the
latest phase of this hydrothermal process. Higher grades are associated
with the contacts of the diorite dikes and sills and the Hedley formation
and are confined to the skarn zone.
Year-end Proven and Probable Ore Reserves
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Tons of ore (000s) 2,889 4,823
Ounces of gold per ton .077 .077
Contained ounces of gold (000s) 223 370
Operating Data
1994 1993
------ ------
Production Statistics:
Tons of ore milled (000s) 1,438 1,412
Mill feed ore grade (oz. gold/ton) .070 .061
Mill recovery (%) 81 85
Gold recovered (000 ozs.) 82 74
Cost per Ounce of Gold:
Cash operating cost $ 351 $ 312
Noncash cost 54 24
----- -----
Total production cost $ 405 $ 336
</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 mine is 40% owned by Prime. Cominco Ltd. (Cominco) owns the remaining
interest and is the operator. Cominco receives a management fee for its
services as operator equivalent to 5% of cash expenditures made at the
property. 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 aircraft which utilize the mine's 4,500-foot long
landing strip. In addition, a hovercraft 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, the only access is by aircraft due to ice accumulations on the
rivers.
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 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 ten ounces of gold per ton. The concentrates are
sold to a third-party facility located near Stewart for final gold recovery.
Mill tailings are deposited in a pond close to the mine and reclaimed water is
pumped back to the mill
19
<PAGE>
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 produced on-site by
diesel generators.
During 1994, all environmental discharges were within permit levels.
There has been recent controversy regarding the environmental impact of the
mine's hovercraft operations on fish in the Iskut river. The Company has
agreed to further studies despite prior investigations indicating little
environmental impact.
Homestake's share of gold production in 1994 was 51,592 compared to 59,790
ounces in 1993.
Geology
The main ore body at the Snip mine is called the Twin Zone, a 1.5
to 50 feet thick quartz-carbonate-sulfide-filled shear structure within a
Triassic sedimentary unit. Gold primarily occurs as finely disseminated
grains along pyrite grain boundaries. Other sulfides within the Twin Zone
include pyrrhotite, chalcopyrite and sphalerite, with trace arsenopyrite.
The vein structure has been traced over a strike length of 3,300 feet and has
a known vertical extent to 1,650 feet.
Prime has a 40% share of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Tons of ore (000s) 553 722
Ounces of gold per ton .797 .788
Contained ounces of gold (000s) 441 569
Operating Data (100% Basis)
1994 1993
------ -----
Production Statistics:
Tons of ore milled (000s) 190 188
Mill feed ore grade (oz. gold/ton) .743 .865
Mill recovery (%) 92 92
Gold recovered (000 ozs.)* 129 149
Homestake's Cost per Ounce of Gold:*
Cash operating cost $ 171 $ 152
Noncash cost 59 83
----- -----
Total production cost $ 230 $ 235
<FN>
* Includes recoverable gold contained in dore bars and in concentrates.
</TABLE>
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 in 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.
20
<PAGE>
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 may not receive 50% of the production. GMK
is entitled to receive more than 50% of gold production from the FPV area
under certain circumstances out of the first 35.8 million tons of ore 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 1994, HGAL paid to
GMK 15,781 ounces under the disproportionate sharing arrangement. Through the
end of 1994, approximately 15.9 million tons of ore have been mined from the
FPV area of the Super Pit. The operations' facilities and equipment generally
are in good condition.
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 power authority.
In 1994, 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, has
resulted in a significant improvement in the environment of residents living
close to the mining operations.
Revision of the Super Pit ore resource using computer-aided modelling
techniques, in addition to a review of Mt. Charlotte reserves, expanded year-
end proven and probable reserves by 7% during 1994. The Company's share of
this increase was approximately 0.3 million ounces.
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 1994, 59.7 million tons of material were mined containing 12.4 million
tons of ore, compared to 59 million tons containing 10 million tons in 1993.
HGAL's share of Super Pit gold production was 289,625 ounces in 1994 and
256,094 ounces in 1993.
21
<PAGE>
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 3,200 feet below surface. Long-
hole stoping mining techniques are employed. Ore is crushed underground with
primary crushers before being hoisted to secondary crushers at the surface.
In 1994 and 1993, 1.7 million tons of ore were mined from Mt. Charlotte.
HGAL's share of gold production was 61,021 ounces in 1994 and 70,981 ounces in
1993.
Mt Percy
The Mt Percy open cuts were mined to their planned economic depth in July
1992, at which time mining ceased. Through May 1994, the mill continued to
process previously stockpiled low-grade material blended with non-refractory
ore from the Super Pit and Mt. Charlotte.
HGAL's share of gold production was 1,353 ounces in 1994 and 5,457 ounces
in 1993.
Mills
Fimiston - a 14,550 TPD mill with CIP leaching and refractory sulfide
flotation circuits that processes ore from the Super Pit. Approximately $15
million (100% basis) was spent in 1994 and a further $39 million of
expenditures are planned during 1995 on an expansion program at the Fimiston
mill. This program, which will be completed in 1995, will increase the mill's
capacity to 28,000 TPD, including a 5,000 TPD free-milling sulfide circuit to
treat Mt. Charlotte ore. The increase in capacity will improve the mill's
efficiency and will also replace the capacity of the Oroya mill which is being
dismantled in 1995 to allow for an expansion of 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.
Mt Percy - a 2,500 TPD mill with a CIP circuit that processes ore from Mt
Percy, the Super Pit and Mt. Charlotte.
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 1994 and 1993.
Cash operating costs were higher in 1994 primarily as a result of
unfavorable foreign exchange rates. A moderate decline in costs was achieved
on an Australian currency basis.
HGAL's share of 1994 gold production from the consolidated Kalgoorlie
operations was 352,081 ounces compared with 332,636 ounces in 1993.
22
<PAGE>
Geology
The ore deposits mined in the Kalgoorlie Goldfields occur within an
intensely mineralized shear zone system in dolerite host rocks, within
the Norseman-Wiluna Greenstone Belt which is part of the Yilgarn Block of
Western Australia. The rocks are of Archaen age. The favorable
structural metamorphic and lithologic setting in conjunction with
hydrothermal activity controlled gold mineralization. In excess of 38
million ounces of gold have been produced at depths of up to
4,000 feet from high-grade lodes and adjacent disseminated
mineralization in the Golden Mile Dolerite, and from the large
stockwork mineralization which characterizes the Mt. Charlotte and
Reward (underground) ore bodies.
HGAL has a 50% share (subject to the disproportionate allocation discussed
above) of the following amounts:
Year-end Proven and Probable Ore Reserves
(100% Basis)
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Tons of ore (000s) 158,790 146,895
Ounces of gold per ton .073 .074
Contained ounces of gold (000s) 11,519 10,813
Operating Data (100% Basis)
1994 1993
------ ------
Production Statistics:
Super Pit
Tons of ore mined (000s) 12,372 9,976
Stripping ratio 3.8:1 4.9:1
Tons of ore milled (000s) 8,963 8,502
Mill feed ore grade (oz. gold/ton) .077 .072
Mill recovery (%) 88 86
Gold recovered (000s) 611 512
Mt Percy
Tons of ore milled (000s) 94 465
Mill feed ore grade (oz. gold/ton) .029 .027
Mill recovery (%) 86 88
Gold recovered (000s) 3 11
Mt. Charlotte
Tons of ore mined (000s) 1,680 1,697
Tons of ore milled (000s) 1,682 1,706
Mill feed ore grade (oz. gold/ton) .085 .096
Mill recovery (%) 87 86
Gold recovered (000s) 122 142
Combined Production Statistics:
Tons of ore mined (000s) 14,052 11,673
Tons of ore milled (000s) 10,740 10,677
Mill feed ore grade (oz. gold/ton) .078 .074
Mill recovery (%) 88 86
Gold recovered (000 ozs.) 736 665
23
<PAGE>
Homestake's Consolidated Cost Per Ounce of Gold:
Cash operating cost $ 259 $ 230
Noncash cost 39 40
----- -----
Total production cost $ 298 $ 270
</TABLE>
Super Pit mining during the last five years has produced approximately
20% more ore than predicted by the ore reserve model.
Fortnum
Fortnum is an open-pit gold mine located 485 miles northeast of Perth,
Western Australia which had been on care and maintenance. On February 17,
1994 HGAL sold its interest in Fortnum to Perilya Mines NL. A gain of
approximately $1.3 million was recorded on this sale.
CHILE
Homestake leases and operates the El Hueso gold mine and also conducts
exploration throughout 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 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 14 miles of 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.
Ores from the mine are leached by two different methods of production.
Higher-grade ore 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.
Active mining operations at the El Hueso mine and the neighboring leases
ceased in February 1995. Leaching of the piles will continue through to the
end of the year at which time the operation will enter a reclamation phase.
During this period some gold production will be derived from rinsing the
heaps, a process in which residual cyanide is destroyed. Based on current
estimates, full provision for mine closure, after considering the additional
revenues to be received from gold produced during the reclamation phase, is
included in the December 31, 1994 financial statements.
In January 1994, additional new land was leased from Codelco and
exploration activities on this land are ongoing. The Company plans to spend
approximately $1 million in 1995 on an exploration prospect on this land,
which, if successful, could require use of the El Hueso facilities. These new
lands are subject to a 30% net profits royalty.
24
<PAGE>
Geology
The El Hueso ore body is hosted by Lower Tertiary volcanic rocks and
decalcified Jurassic sandstones and limestones in the Potrerillos
porphyry copper district. Gold mineralization occurs in vertical
"feeder" structures and disseminated stratabound deposits associated
with quartz, alunite, cervantite, scorodite, jarosite, goethite and stibnite.
Year-end Proven and Probable Ore Reserves
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Tons of ore (000s) 136 3,151
Ounces of gold per ton .039 .039
Contained ounces of gold (000s) 5 122
Operating Data
1994 1993
----- -----
Production Statistics:
Tons of ore mined (000s) 2,895 3,132
Stripping ratio (waste:ore) 3.8:1 2.5:1
Tons high-grade ore leached (000s) 1,720 1,964
Leach feed ore grade (oz. gold/ton) .035 .040
Recovery (%) 80 82
Tons low-grade ore leached (000s) 1,001 1,031
Leach feed ore grade (oz. gold/ton) .014 .015
Recovery (%) 47 47
Gold recovered - all ores (000 ozs.) 56 72
Cost per Ounce of Gold:
Cash operating cost $ 403 $ 299
Noncash cost 13 30
----- -----
Total production cost $ 416 $ 329
</TABLE>
MEXICO
Following a reorganization of its Mexican interests during 1994, Homestake
owned an approximate 28% equity interest in Compania Minera Las Torres, S.A.
De C.V. (Torres). Torres' primary asset is the Torres silver mining complex
located near Guanajuato, about 250 miles northwest of Mexico City. Torres
also owns the Encantada lead/silver mine located in the state of Coahuila, 50
miles south of Big Bend, Texas. Both of these operations are operated by
Industrias Penoles, S.A. de C.V. The Torres silver mining complex covers
approximately 18,000 acres and consists of several small separate silver/gold
mines and a centrally located 2,500-TPD concentrator. Homestake's share of
gold production from Torres totaled 12,884 ounces in 1994 compared to 12,844
ounces in 1993. Homestake received dividends from Torres of $1.6 million and
$0.8 million in 1994 and 1993, respectively. In February 1995, the Company
sold its 28% interest in Torres for $6 million.
SULPHUR
Homestake owns an undivided 16.7% interest in the Main Pass 299 sulphur
deposit, which at December 31, 1994 contained proven recoverable reserves of
approximately 70 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%.
25
<PAGE>
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 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
remaining reserve life in excess of 30 years.
Fabrication and installation of production facilities began in 1990.
Initial sulphur production commenced in 1992. Initial production was lower
than anticipated because the production of overlying oil and gas reserves
slowed the heating of the sulphur dome to required production temperatures.
Full sulphur production levels of 5,500 TPD were reached in December 1993.
Sulphur production averaged 6,200 TPD by the end of 1994. Homestake's 16.7%
share of development expenditures through 1994 was approximately $123 million.
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 1994, the sulphur market strengthened from a 20-year low which had
lowered average realized prices to approximately $45 per ton at the end of
1993. With a modest increase in prices, Homestake expects its sulphur
operations to break even or provide a small profit during 1995.
Homestake was recently notified by Freeport that sulphur reserves at
December 31, 1994 have been increased by approximately 6.4 million tons (100%
basis). This increase includes 1.8 million tons added as a result of
development drilling and 4.6 million tons added as a result of utilizing a
lower porosity assumption based on experience to date.
During sulphur exploration, oil and gas were 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 1994 was
approximately $55 million.
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.
Oil and gas production peaked during 1992 and is expected to decline over
the next five years. Oil production (100% basis) totaled 5.2 million barrels
in 1994 compared to 7.1 million barrels in 1993. In the fourth quarter of
1993, Homestake recorded a $16 million pretax write-down of its investment in
the oil and gas assets 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 is $11.6 million at December 31, 1994.
Homestake's share of remaining recoverable oil reserves at December 31,
1994 is estimated to be 2.1 million barrels after adjusting for the federal
royalty.
26
<PAGE>
Homestake has a 16.7% share of the following amounts:
Year-end Proven and Recoverable Reserves
(100% Basis)
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Tons of sulphur (000s) 70,321 66,205
Barrels of oil (000s) 15,521 20,751
Production Statistics (100% Basis)
1994 1993
----- ------
Tons of sulphur (000s) 2,259 696
Barrels of oil (000s) 5,240 7,080
Homestake's Per Unit Data
1994 1993
----- ------
Average Sales Realizations:
Per ton of Sulphur $ 53 $ 59
Per barrel of oil 13 14
Costs
Sulphur cash costs per ton $ 49 $ 131
Sulphur noncash costs per ton 11 11
----- ------
Total production cost $ 60 $ 142
Oil cash costs per barrel $ 4 $ 4
Oil noncash costs per barrel 6 9
----- -----
Total production cost $ 10 $ 13
</TABLE>
MINERAL EXPLORATION
As part of the corporate restructuring in 1992, Homestake reorganized its
exploration activities. The Company moved away from a grassroots approach
organized around district offices towards a more consolidated and centralized
system which allows it to focus on large, high-quality, low-cost
opportunities.
United States exploration expenses totaled $11.8 million in 1994 and $11.1
million in 1993. Domestic exploration expenses in 1995 are expected to be
approximately $11 million.
Discovery of a new mineralized zone (Ruby Hill) near Eureka, Nevada, was
announced in November 1993. In 1994, exploration expenses totaling $6.5
million formed part of a delineation drilling program which commenced in
April. In October 1994, following completion of this program, the Company
announced its decision to proceed with a feasibility study on the West
Archimedes oxide zone. This $4 million study will examine the economics of a
portion of the preliminary geological resource estimate of 1.6 million ounces
of gold. Advanced metallurgical studies will also commence in early 1995. In
addition, exploration expenses of $5 million are planned for the Ruby Hill
project in 1995.
Through subsidiaries, Homestake also explores for gold and evaluates gold
acquisition opportunities internationally, primarily in Australia, Canada and
Chile. International exploration expenses totaled $9.5 million in 1994 and
$6.4 million in 1993.
27
<PAGE>
In May 1994, the Company signed a Letter of Intent Agreement with L.B.
Mining Co. for the exploration, development and operation of gold properties
in the Guariche District of Bolivar State, Venezuela. This agreement was
terminated in November 1994 due to disappointing exploration results.
Additionally, the Company entered into an agreement with Corporacion
Venezolana de Guayana for exploration and development of the El Foco mining
property in Bolivar State, Venezuela. Exploration expenses related to the
Venezuelan projects totaled $2.3 million in 1994.
During 1994, the Company made a discovery near its El Hueso operation
which, if follow-up work is successful, could result in the reopening of that
mine. Homestake plans to spend approximately $1 million on exploration of
this prospect located on its Agua de la Falda lease.
Total exploration expenses of $21.3 million in 1994 compares to $17.5
million in 1993. In addition, expenses related to the exploration at
Homestake's operating mines totaled $8.4 million in 1994. These expenses are
included in the individual mine property operating expenses and cost per ounce
calculations.
GLOSSARY AND INFORMATION ON RESERVES
GLOSSARY
The following terms used in the preceding discussion mean:
"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 expense, mineral exploration expense,
Canadian provincial mining taxes, financing costs and long-term reclamation
accruals.
"Noncash 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.
"Total production cost" includes all cash operating costs and noncash 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 noncash 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 products) 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.
28
<PAGE>
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 spot price of $360 per ounce of gold in its mine-
by-mine evaluation of mining properties and investments at December 31, 1994.
Silver
The proven and probable silver ore reserves have been calculated on the
same basis as gold ore reserves.
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 these operators.
The sulphur and oil reserves at Main Pass 299 are based on information
provided by the operator. Homestake reviewed the initial reserve data with
independent consultants. Homestake has reviewed subsequent adjustments to
these reserves but has not independently confirmed the reserve adjustments
provided by the operator.
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.
29
<PAGE>
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 1994, these expenditures totaled approximately $6
million compared to $2 million in 1993. Homestake estimates that during 1995,
capital expenditures for such purposes will be approximately $3 million and
that during the five years ending December 31, 1999, such capital expenditures
will be approximately $6 million.
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
$16 million in 1994, compared with approximately $10 million in 1993, not
including related depreciation expense of $6 million and $7 million,
respectively. Homestake estimates that environmental and related operating
and depreciation costs in 1995 will approximate the 1994 amounts. The above
amounts exclude expenditures related to the Company's 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. In
the mining industry, most reclamation work takes place generally after mining
and related operations terminate. However, 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, 1994 and 1993, Homestake had accrued a total of $49.2
million and $36.2 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 States 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
30
<PAGE>
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 oversight costs incurred by EPA.
Congressional hearings for CERCLA reauthorization occurred in 1994. CERCLA
reauthorization was not enacted in 1994 but is expected to occur in 1995.
Whitewood Creek
Deposits of mine rock tailings on lands along a 21-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.
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. Homestake and EPA are involved in negotiations to
terminate the consent decree. The Record of Decision also requires the
Company to continue to perform long-term monitoring of the site. Homestake
expects to demonstrate by 1996 that the site does not present any risk to the
environment or to public health or safety. Homestake has requested deletion
of the site from the NPL and EPA has notified Homestake of their intention to
move forward with the deletion. The Company expects the site to be deleted in
1995. The Company has paid all oversight costs billed to date.
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. Approximately $0.2 million has
been spent to acquire property at the site from two separate landowners.
Negotiations are continuing to acquire more of the site. 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 release of tailings into the
Whitewood Creek Site. The State has taken no action to pursue the claims.
Grants Tailings
Homestake's closed uranium mill site near Grants, New Mexico is listed 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 a water injection and
collection system that has significantly improved the quality of the aquifer
to a point where contaminants are below natural background levels off the
millsite. The estimated costs of continued compliance are included in the
accrued reclamation liability. Homestake has settled with EPA concerning
their oversight cost for this site and no additional oversight costs are
accruing. The consent decree has been terminated.
Under a 1987 EPA Administrative Order on Consent (AOC), 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. The AOC has been
terminated.
31
<PAGE>
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. EPA, several environmental groups and a number of mining
companies, including the Company, entered into an agreement which provided
that 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 of the decommissioning of the uranium mill
tailings facilities. Under NRC regulations, the decommissioning would be
affected in accordance with the provisions of the facility's license. The
facility license sets the closure of the two tailings impoundments for 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. Mill decommissioning was completed in 1994 and
reclamation of the Grants large tailings site is scheduled for completion in
1996. During 1994, the Company incurred approximately $14 million of
expenditures at the Grant's facility and an additional $15 million is planned
to be expended during 1995.
Title X of the Energy Policy Act of 1992 provides for reimbursement by the
United States Department of Energy (DOE) 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 the regulations issued by the DOE
and appropriation by Congress from a fund established under the Energy Policy
Act. Congress has appropriated $83 million for disbursement in fiscal years
1994 and 1995. The Company and the DOE have agreed that approximately 51% of
the tailings at Grants were generated as an incident of uranium sales to the
United States. Homestake has submitted an initial reimbursement claim for
$14.2 million for the 1975 to 1993 time period and has received $4.3 million
to date. A claim for approximately $7 million will be submitted in 1995 for
1994 expenditures. 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
In 1994, the Company (along with a number of other companies and
government agencies) 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 in excess of $1 million and proposes to
conduct additional remediation and disposal activities, the cost of which is
not yet determinable. The Company demonstrated to the EPA's satisfaction that
Homestake is a de minimus contributor and has settled the claim such that the
Company has no liability as long as the clean-up costs are less than $20
million.
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
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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.
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 and shipment 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 its proportionate share of 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.
That ruling is being appealed.
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, but the Port has also made claims for reimbursement against
customers whose material was stored at and shipped through the 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.
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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 1994 includes 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.
During 1993, the Eskay Creek mine 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 its
foreign operations. Homestake expects that environmental constraints in
foreign countries will become increasingly strict.
CUSTOMERS
Sales of $129 million, $118 million and $100 million to three customers in
1994 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 14 to the consolidated financial statements on page 41 of the
1994 Annual Report to Shareholders for details of the Company's credit
facilities. Such information is hereby incorporated by reference.
EMPLOYEES
The number of full-time employees at December 31, 1994 of Homestake and
its subsidiaries was:
Homestake mine* 996
McLaughlin mine 343
El Hueso mine* 181
Nickel Plate mine 164
United States corporate staff and other 75
Eskay Creek mine 71
Canada exploration and corporate staff 33
HGAL exploration and corporate staff 28
United States exploration 27
Santa Fe mine 16
Uranium 12
Chile exploration and corporate staff 10
-----
Total 1,956
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The number of full-time employees at December 31, 1994 in jointly-owned
operations in which Homestake participates was:
Kalgoorlie Consolidated Gold Mines Pty Ltd* 1,128
Williams Operating Corporation 603
Round Mountain mine 536
Teck-Corona Operating Corporation* 232
Rayrock managed operations (Marigold and
Pinson mines) 212
Snip mine 138
Main Pass 299 150
-----
Total 2,999
* Operations where a portion of the employees are represented by a labor
union.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company, their ages at December 31, 1994,
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 64. He has been Chief Executive Officer since
December 1978 and was President from 1977 to 1986. He is a mining engineer
with over 39 years of professional experience.
Jack E. Thompson - President and Chief Operating Officer since August
1994, age 44. Since August 1994, he has also been Chairman of Prime. He was
Executive Vice President, Canada of the Company and President of Prime from
1992 through August 1994. He also was President of North American Metals
Corp. from 1988 until 1993. He is a mining engineer with over 24 years of
experience in mining and mine management.
Gene G. Elam - Vice President, Finance and Chief Financial Officer
since September 1990, age 55. 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 33 years of experience in accounting and finance.
Lee A. Graber - Vice President, Corporate Development since 1983, age
46. From 1980 to 1983, he was Manager, Corporate Development and Planning.
He has over 23 years of experience in finance and corporate development.
Wayne Kirk - Vice President, General Counsel and Secretary since
September 1992, age 51. He was a partner in Thelen, Marrin, Johnson & Bridges
from 1976 to 1992. He has practiced law for more than 25 years.
Gillyeard J. Leathley - Vice President, Canadian Operations since
September 1992, age 57. Before joining Homestake, he was Senior Vice
President, Operations for International Corona Corporation from 1986 to
September 1992. He has over 37 years of experience in mining and mine
management.
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Ronald D. Parker - Vice President Canada and President, Homestake Canada
Inc. since August 1994, age 44. He also has been President and Chief
Executive Officer of Prime since August 1994. He was the Resident General
Manager of the McLaughlin mine from 1988 until August 1994. He is an engineer
with over 23 years of experience in mining and mine management.
Anthony H. Ransom - Vice President, Exploration since September 1992,
age 48. Before joining Homestake, he was Vice President, Exploration for
International Corona Corporation from 1991 to September 1992. Prior to 1991
he was Director, Western Exploration for International Corona Corporation and
prior to 1988 was President of Pamorex Minerals Inc., a gold mining and
exploration company. He is a geologist with more than 27 years of
professional experience.
Allen S. Winters - Vice President, Mine Operations since 1987, age 54.
From 1978 to 1987, and from July 1992 until December 31, 1994, he was Resident
General Manager of the Homestake Mine. He is a mining engineer with more than
35 years of experience.
Jan P. Berger - Treasurer since August 1992, age 39. 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. Before Bechtel, he worked as
an engineering and exploration geologist in the consulting and petroleum
industries. He has over 13 years of experience in exploration and finance.
David W. Peat - Controller since September 1992, age 42. Prior to
joining Homestake, he was Vice President, Controller for International Corona
Corporation. Prior to 1987 he served as Assistant Corporate Controller for
Sherritt Gordon Mines Limited. He is a chartered accountant with over 18
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.
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 34 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 California") 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 California 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
California and Whitewood misrepresented their intent to mine the tailings in
order to prevent Goldstake from mining the tailings. The
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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 California induced those breaches, and that Homestake
California 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 was stayed in order for the
matter to be arbitrated. During the second quarter of 1994, Goldstake amended
its claim to allege actual damages of $137.5 million. The arbitration hearing
was held in January 1995. At the arbitration, Goldstake claimed damages of
approximately $79 million. On March 27, 1995 the arbitrators entered their
decision under which Homestake California and Whitewood are to pay Goldstake
$0.5 million within 30 days and promptly apply for all necessary permits to
construct and operate a mine and processing facility. If all permits have not
been obtained by December 31, 1995, Homestake California and Whitewood are to
pay Goldstake an additional $0.5 million. If all permits have not been
obtained by December 31, 1996, Homestake California and Whitewood are to pay
Goldstake an additional $0.5 million.
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 13, 1995 was
25,463.
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 1994 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
41 in Note 14 entitled "Long-term Debt" in the Notes to Consolidated
Financial Statements in the Company's 1994 Annual Report to
Shareholders. Such information is hereby incorporated by reference.
d. Reference is hereby made to the Note 20 entitled "Shareholders' Equity"
on pages 44 and 45 in the Notes to Consolidated Financial Statements in
the Company's 1994 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 its
subsidiaries for the seven-year period ended December 31, 1994 appears on
pages 48 and 49 in the 1994 Annual Report to Shareholders. The summary of
selected consolidated financial data is hereby incorporated by reference.
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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, 1994 appears
on pages 25 through 30 in the 1994 Annual Report to Shareholders and is hereby
incorporated by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The 1994 Annual Report to Shareholders includes the Company's
consolidated balance sheets as of December 31, 1994 and 1993 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, 1994 and the independent auditors' report thereon, and certain
supplementary financial information. The following are hereby incorporated by
reference from the 1994 Annual Report to Shareholders at the pages indicated:
Report of Independent Auditors (page 31)
Statements of Consolidated Operations (page 32)
Consolidated Balance Sheets (page 33)
Statements of Consolidated Shareholders' Equity (page 34)
Statements of Consolidated Cash Flows (page 35)
Notes to Consolidated Financial Statements (pages 36-47)
Quarterly Selected Data (page 50)
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 LLP as independent auditors for the
Company and its subsidiaries upon completion of their 1992 audit engagement.
Deloitte & Touche LLP'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 1992 and the
interim period through the date of termination, there were no disagreements
with Deloitte & Touche LLP 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 LLP would have
caused Deloitte & Touche LLP to make a reference to the subject matter of the
disagreement in connection with its report. During 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 LLP as independent auditors
to audit the Company's financial statements for 1993. During 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 LLP
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).
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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 statement 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 (other
than the performance graph and Compensation Committee report contained
therein) is hereby incorporated by reference.
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, 1994, 1993, and 1992 -
II Valuation and Qualifying Accounts
Report of Independent Auditors
Schedules not listed 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).
39
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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 Amended and restated credit agreement dated as of September 30,
1994 between the Registrant, the Lenders, 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 10.1 to the Registrant's
Form 8-K dated March 20, 1995).
* 10.2 Retirement plan for outside directors of the Registrant dated
as of July 21, 1994 (incorporated by reference to Exhibit 10.2
to the Registrant's Form 8-K dated March 20, 1995).
10.3 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).
10.4 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).
10.5 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).
10.6 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).
10.7 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).
10.8 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).
10.9 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).
10.10 Amendment No. 1 dated July 1, 1993 to Joint Operating Agreement
between Freeport McMoRan Resources Partners, IMC Fertilizer, Inc.
and Homestake Sulphur Company (incorporated by reference to
Exhibit 10.8 to the Registrant's Form 10-K for the year ended
December 31, 1993).
10.11 Amendment No. 2 dated November 30, 1993 to Joint Operating
Agreement between Freeport McMoRan Resources Partners, IMC
Fertilizer, Inc. and Homestake Sulphur Company (incorporated by
reference to Exhibit 10.9 to the Registrant's Form 10-K for the
year ended December 31, 1993).
10.12 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).
40
<PAGE>
10.13 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 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).
10.14 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).
10.15 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).
10.16 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).
10.17 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).
* 10.18 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).
* 10.19 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).
* 10.20 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).
* 10.21 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).
* 10.22 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, 1989).
* 10.23 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).
* 10.24 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).
10.25 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).
10.26 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).
41
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* 10.27 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).
* 10.28 Consulting agreement dated March 1, 1993 between William A.
Humphrey and the Registrant (incorporated by reference to Exhibit
10.27 to the Registrant's Form 10-K for the year ended December
31, 1993).
* 10.29 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).
* 10.30 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).
* 10.31 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).
* 10.32 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).
11 Computation of Earnings Per Share.
13 Specified sections of the 1994 Annual Report to Shareholders.
22 Subsidiaries of the Registrant.
24 Consent of Coopers & Lybrand LLP, Independent Auditors.
27 Financial Data Schedule.
* 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 1994.
42
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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 23, 1995 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
--------- -------- ----
<S> <C> <C>
/s/ G. G. Elam Vice President, Finance March 23, 1995
-------------- and Chief Financial
G. G. Elam Officer (Principal
Financial Officer)
/s/ D. W. Peat Controller (Principal March 23, 1995
-------------- Accounting Officer)
D. W. Peat
</TABLE>
(Signatures continued on following page.)
43
<PAGE>
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ------------
<S> <C> <C>
/s/ Harry M. Conger Chairman of the Board, March 23, 1995
------------------- Chief Executive Officer
Harry M. Conger and Director
/s/ M. Norman Anderson Director March 23, 1995
----------------------
M. Norman Anderson
Director March 23, 1995
---------------
Hadley Case
/s/ Robert H. Clark, Jr. Director March 23, 1995
-----------------------
Robert H. Clark, Jr.
/s/ G. Robert Durham Director March 23, 1995
--------------------
G. Robert Durham
/s/ Douglas W. Fuerstenau Director March 23, 1995
-------------------------
Douglas W. Fuerstenau
/s/ Henry G. Grundstedt Director March 23, 1995
-----------------------
Henry G. Grundstedt
/s/ William A. Humphrey Director March 23, 1995
-----------------------
William A. Humphrey
/s/ Robert K. Jaedicke Director March 23, 1995
----------------------
Robert K. Jaedicke
/s/ John Neerhout, Jr. Director March 23, 1995
---------------------
John Neerhout, Jr.
/s/ Stuart T. Peeler Director March 23, 1995
--------------------
Stuart T. Peeler
/s/ Glen L. Ryland Director March 23, 1995
------------------
Glen L. Ryland
/s/ Berne A. Schepman Director March 23, 1995
---------------------
Berne A. Schepman
/s/ Jack E. Thompson President, Chief March 23, 1995
-------------------- Operating Officer
Jack E. Thompson and Director
</TABLE>
44
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(In thousands)
<TABLE>
<CAPTION>
----------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
BALANCE
BALANCE AT AT
BEGINNING END OF
DESCRIPTION OF PERIOD ADDITIONS DEDUCTIONS PERIOD
------------------------------------------------------------------------
DEFERRED TAX ASSET VALUATION ALLOWANCES (1)
<S> <C> <C> <C> <C>
Year ended
December 31, 1994 $52,066 $10,210 $12,437(2) $49,839
Year ended
December 31, 1993 $ 0 $52,066(3) $ 0 $52,066
Year ended
December 31, 1992 Not applicable
<FN>
(1) For further information see Note 7, Income Taxes, in the Notes
to the Financial Statements included in the 1994 Annual Report
to Shareholders.
(2) Deductions in 1994 relate to the reversals of Canadian and
Australian tax loss carry-forwards.
(3) Additions in 1993 relate to the implementation of SFAS 109,
"Accounting for Income Taxes."
</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, 1994 and 1993, and for each of
the three years in the period ended December 31, 1994, which financial
statements are included on pages 32 through 47 of the 1994 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, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. 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 L.L.P.
---------------------------
San Francisco, California
February 8, 1995
<PAGE>
--------------------------------------------------------------------------------
APPENDIX D
HOMESTAKE FINANCIAL STATEMENTS AND MANAGEMENT'S
DISCUSSION AND ANALYSIS FOR THE YEAR ENDED
31 DECEMBER 1994
--------------------------------------------------------------------------------
D-1
<PAGE>
APPENDIX D
Selected information from the 1994 Annual Report to Shareholders is
incorporated by reference in the Form 10-K. Such selected information
is listed below. Noted page references correspond to pagination in the
1994 Annual Report to Shareholders.
Annual Report
Page
Management's Discussion and Analysis 25-30
Report of Independent Auditors 31
Management's Responsibility for
Financial Reporting 31
Consolidated Financial Statements 32-35
Notes to Consolidated Financial Statements 36-47
Seven-Year Selected Financial Data 48-49
Quarterly Selected Data 50
Common Stock Price Range 50
Appendix 1: Description of Bar Charts in Management's
Discussion and Analysis
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS
Homestake Mining Company and Subsidiaries
(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.)
RESULTS OF OPERATIONS
Homestake recorded net income of $78 million or $0.57 per share in 1994
compared to net income of $52.5 million or $0.38 per share in 1993 and a net
loss of $175.8 million or $1.31 per share in 1992. The improved 1994 results
reflect after-tax gains of $12.6 million from the sale of the Company's
interest in the Dee mine in Nevada and $11.2 million from dilution of the
Company's interest in Prime Resources Group Inc. (Prime) following Prime's
sale of additional shares to the public, as well as higher gold prices. The
current year's results also include a $7.8 million income tax benefit
resulting from a reorganization of Canadian exploration assets. The 1993
results included a pretax write-down of oil and gas assets of $16 million
compared to pretax write-downs of mining properties and investments of $130.3
million in 1992. The 1993 and 1992 results also included restructuring and
business combination expenses of $8.2 million and $48.4 million, respectively.
See notes 5 and 6 to the consolidated financial statements for details of the
write-downs and the restructuring and business combination expenses.
(See Appendix 1: Description of Bar Chart A "Net Income.")
In May 1994, the Company sold its 44% 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.
During the second quarter of 1994, Prime completed the sale of five
million common shares to the public. Net proceeds of $31.9 million were used
to fund a portion of the construction and development costs at the Eskay Creek
mine in British Columbia, Canada. As a result, Homestake's interest in Prime
was reduced from 54.2% to 50.6% and a gain of $11.2 million was recorded in
recognition of the net increase in the book value of the Company's interest in
Prime.
Eskay Creek Mine: Construction and development of the Eskay Creek gold/silver
mine was substantially completed by December 1994 and ore shipments to third-
party smelters began in January 1995. The mine is expected to produce 100,000
tons of ore in 1995 containing approximately 170,000 payable ounces of gold
and 7.3 million payable ounces of silver or 270,000 payable ounces of gold and
gold equivalent. The Company estimates that the Eskay Creek mine's average
cash cost per ounce, including the costs of third-party smelters, will
approximate $185 per equivalent ounce during 1995. Proven and probable ore
reserves at the Eskay Creek mine at December 31, 1994 totaled 1.2 million tons
containing 2.3 million ounces of gold and 102 million ounces of silver,
sufficient for eight to ten years of production. Through Prime, the Company
has a 50.6% economic interest in these reserves.
Gold Operations: The results of the Company's operations are affected
significantly by the market price of gold. Gold prices are influenced by
numerous factors over which the Company has no 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, demand for gold for jewelry and industrial
products, and sales by holders and producers of gold in response to these
factors. The supply of gold consists of a combination of new mine production
and sales from existing stocks of bullion and fabricated gold held by
governments, public and private financial institutions, and individuals.
(See Appendix 1: Description of Bar Chart B "Gold Production.")
The Company's general policy is to sell its production at current
prices. However, in certain limited circumstances, the Company will enter
into forward sales commitments for small portions of its gold production.
During the fourth quarter of 1994, the Company sold for future delivery
183,200 ounces of gold it expects to produce at the Nickel Plate mine during
1995 and 1996. These forward sales represent less than 5% of the gold that
25
<PAGE>
Homestake expects to produce over the next two years. The average price to be
received is approximately $412 per ounce, which should cover the mine's
relatively high cash costs during its two-year remaining life. The forward
sales should also allow for recovery of the Company's remaining investment in
the mine and provide for estimated reclamation costs.
A significant portion of the Company's operating expenses are incurred
in Australian and Canadian currencies. The Company's profitability is impacted
by fluctuations in these currencies' exchange rates relative to the U.S.
dollar. In 1992, the Company implemented a foreign currency protection
program to minimize the effects of these fluctuations. 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 Australian and Canadian dollars. See note 23 to the consolidated
financial statements for additional information regarding this program.
Gold revenues of $632.0 million in 1994 compare to gold revenues of
$688.1 million and $639.3 million in 1993 and 1992, respectively. The decline
in 1994 revenues from the prior year reflects lower gold sales volumes,
partially offset by higher realized gold prices. The lower 1994 gold sales
volumes are due to lower gold production and a 3,600 ounce increase in gold
inventories during 1994 versus a 65,400 ounce decrease in gold inventories in
1993. The increase in 1993 revenues from 1992 is due to higher gold sales
volumes and higher realized gold prices. During 1994, the Company sold
1,692,800 ounces of gold at an average realized price of $384 per ounce
compared to 1,983,300 ounces sold at an average realized price of $359 during
1993 and 1,945,500 ounces sold at an average realized price of $348 during
1992.
(See Appendix 1: Description of Bar Chart C "Gold Revenues.")
Total gold production of 1,696,400 ounces during 1994 compares to
1,917,900 ounces during 1993 and 1,911,600 ounces during 1992. The 1994
decline in production in part reflects the absence of production following the
sale of the Dee mine effective March 31, 1994, the 1993 sales of the Mineral
Hill and Golden Bear mines, and the completion of mining operations in 1993
at the Santa Fe mine. After adjusting for the foregoing, production from the
Company's remaining operations decreased by 8% in 1994 compared to 1993,
principally due to lower production at the Homestake and McLaughlin mines.
The 1993 increase in production 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 production following the consolidation of Prime effective December
31, 1992, partially offset by the absence of production from the operations
sold in 1993.
In 1994, the Company's overall cash cost per ounce increased to $254
from $231 in 1993 and $248 in 1992. The increase in costs per ounce primarily
was due to the Homestake and McLaughlin mines. The effect on total cash costs
of a strengthening Australian dollar was largely offset by a weakening of the
Canadian dollar. The Company's overall noncash cost per ounce was $47 in 1994
compared to $51 and $55 in 1993 and 1992, respectively. The decline in
noncash costs per ounce primarily reflects lower depreciation charges as a
result of the write-downs of mining properties in 1992 and ore reserve
expansions at several of the Company's operations.
(See Appendix 1: Description of Bar Chart D "Cash Costs Per Ounce.")
Production of 393,900 ounces at the Homestake mine in South Dakota in
1994 compares to 447,600 ounces in 1993 and 396,600 ounces in 1992. The
production decline during 1994 primarily was due to lower grades resulting
from an extended pre-stripping and development program in the Open Cut and the
collapse of a ventilation raise in the underground operations during the
second quarter which limited access to the deeper higher-grade mining areas.
A new ventilation shaft was completed in March 1995. Production in 1994 also
was impacted adversely by flooding following a severe storm in October. The
lower production resulted in an increase in cash costs to $292 per ounce
during 1994 from $268 per ounce during 1993. Several operating improvements
were made at the
26
<PAGE>
Homestake mine during 1993, including a grade-control program to better
identify ore and reduce dilution and an improved safety program. These
improvements reduced 1993 cash costs from $316 per ounce experienced in 1992.
During the next few years, as mining progresses in the lower levels of
the Homestake mine, the remaining higher-grade ore deposits will become
narrower and less continuous and therefore more difficult to mine. The
Company has developed various alternatives to help minimize the effect that
this may have on future costs. During 1995, a large tonnage, lower-grade
stope in the upper levels of the mine will be bulk-mined. In addition, narrow
vein mining is being tested in other portions of the mine. These trials will
help determine the future underground mine operating strategy. In-mine
exploration replaced underground ore reserves mined during 1994.
Production at the McLaughlin mine in California decreased to 250,500
ounces in 1994 from 305,300 ounces in 1993 and 291,100 ounces in 1992.
Production in 1994 was derived from the South Pit following completion of
mining in the North Pit in 1993. The grade of ore mined in the South Pit
during 1994 was lower than the grade of ore mined in the North Pit during 1993
and 1992. The lower grade of ore, together with costs associated with an
underground exploration program, increased cash costs to $252 per ounce in
1994 from $196 and $204 in 1993 and 1992, respectively. Gold production is
expected to increase in 1995 as the higher-grade zones at the bottom of the
South Pit are reached. However, during the second quarter of 1996, mining in
the South Pit will cease and gold production levels are expected to decline
significantly with production principally derived from processing lower-grade
stockpiles.
The Company's share of gold production from the Round Mountain mine in
Nevada increased to 105,900 ounces during 1994 from 93,700 ounces during 1993
and 92,600 ounces in 1992. The loading of fewer tons at a higher grade on the
reusable pads has allowed for longer leach times, thereby improving gold
recoveries from 69% in 1993 to 79% in 1994. In addition, larger quantities of
lower-grade ore are being placed on the dedicated pad. The higher production
levels resulted in a decrease in cash costs per ounce to $187 in 1994 from
$230 in 1993 and $233 in 1992. Production during the last few years includes
ounces recovered from a very high-grade vein of gold. Homestake's share of
gold from this vein during 1994, 1993 and 1992 was 8,300 ounces, 13,300 ounces
and 13,000 ounces, respectively. Only 1,600 ounces are expected to be
recovered from the high-grade vein during 1995. The Company's share of Round
Mountain ore reserves increased by 169,000 ounces in 1994 primarily due to
exploration drilling which extended pit limits, and the inclusion of
previously leached material following favorable processing tests.
Mining at the Santa Fe mine in Nevada ceased in November 1993 as ore
reserves were depleted. Re-leaching of ore on existing pads continued during
1994 resulting in production of 22,400 ounces compared to 54,000 ounces and
60,900 ounces during 1993 and 1992, respectively.
The Company's share of gold production from the Williams mine amounted
to 222,700 ounces at an average cash cost of $204 per ounce during 1994
compared to 246,100 ounces at a cost of $199 per ounce during 1993 and 248,500
ounces at a cost of $186 per ounce in 1992. The increase in costs per ounce
during the current year is due to processing lower-grade ore, partially offset
by a weakening in the Canadian dollar in relation to the United States dollar.
In December 1994, a system was installed to capture heat from exhaust air and
mine water. The heat is used to warm fresh air entering the mine. Annual
savings from this process could exceed $0.3 million.
The Company's share of gold production from the David Bell mine amounted
to 96,100 ounces at an average cash cost of $168 per ounce in 1994 compared to
107,600 ounces at a cost of $154 per ounce during 1993 and 105,300 ounces at a
cost of $156 per ounce during 1992. The increase in cash costs per ounce
during the current year is due to processing lower-grade ore, partially offset
by a weakening in the Canadian dollar in relation to the United States dollar.
Mining activity in 1994 included a major underground development program to
prepare the C-zone mining block. The C-zone, which is scheduled to commence
production in June 1995, will provide a third production block and thereby
increase mining flexibility.
During the next few years, production at the Williams and David Bell
mines is expected to be slightly lower as the grades of ore mines more closely
approximate the average remaining life-of-mine ore grades.
Production of 82,100 ounces at the Nickel Plate mine in Canada during
1994 compares to 73,900 ounces in 1993 and 84,700 ounces in 1992. The
increase in 1994 production primarily is due to the processing of higher-
grade ore from the Stage IV pit expansion program which commenced in late
1992. Cash costs increased to $351 per ounce in 1994 compared to $312 per
ounce in 1993 and $295 per ounce in 1992. The increase in cash costs per
ounce during 1994 is due to higher milling costs reflecting the refractory
nature of a portion of the ore which required increased reagent use, and an
increase in the rate of mining. Mining at the Nickel Plate mine will be
reduced substantially in early 1995. A milling rate of 4,000 tons per day is
planned through the end of 1996 at which time the ore reserve is expected to
be depleted.
27
<PAGE>
During the fourth quarter of 1994, the Nickel Plate ore reserve was reduced by
8% reflecting lower than anticipated grades from the Stage IV pit expansion.
The Company's share of production at the Snip mine in Canada in 1994 was
51,600 ounces contained in concentrate and gold dore, with an average cash
cost of $171 per ounce, compared to 59,800 contained ounces at a cost of $152
per ounce in 1993 and 30,600 contained ounces at a cost of $145 per ounce in
1992. The decrease in production and resulting increase in cash costs per
contained ounce during the current year was due to lower grade. The increase
in the Company's share of production in 1993 was due to the consolidation of
Prime effective December 31, 1992.
Homestake Gold of Australia's (HGAL) share of production from its
Kalgoorlie operations in Western Australia increased to 352,100 ounces during
1994 from 332,600 ounces in 1993 and 341,800 ounces in 1992. The 1994
increase in production is due to an increase in tons mined, higher grades and
improved recoveries from the Super Pit, partially offset by a decrease in
production at Mt. Charlotte and the payment of 15,800 ounces to HGAL's joint
venture partner under the disproportionate sharing arrangement. No ounces
were paid to the joint venture partner under this arrangement in 1993 or 1992.
The lower Mt. Charlotte production was due to lower tonnage and grades
resulting from underground operational difficulties which hampered the
movement of ore. These difficulties were rectified during the year. Cash
costs at the Kalgoorlie operations increased to $259 per ounce in 1994 from
$230 per ounce in 1993 and $255 per ounce in 1992. The increase in costs per
ounce during 1994 and decrease in costs per ounce in 1993 primarily are due to
fluctuations in the Australian dollar in relation to the United States dollar.
Cash costs per ounce measured in Australian dollars have shown little change
since 1992.
The El Hueso mine in Chile produced 56,400 ounces at an average cash
cost of $403 per ounce in 1994 compared to 71,700 ounces at a cost of $299 per
ounce in 1993 and 70,400 ounces at a cost of $285 per ounce in 1992. Mining
operations at the El Hueso mine ceased in the first quarter of 1995. Leaching
operations will continue through the end of the year. In 1995, the Company
plans to spend approximately $1 million on exploration at a nearby prospect
which, if successful, could result in the reopening of the El Hueso
operations.
Main Pass 299: Homestake has a 16.7% interest in the Main Pass 299 sulphur
mine in the Gulf of Mexico. Oil and gas operations commenced in 1991 and
sulphur start-up operations began in the second quarter of 1992. Full design
production levels of 5,500 tons of sulphur per day were reached in December
1993. During 1994, sulphur production levels continued to increase and
averaged 6,200 tons per day by year end.
The Company's share of sulphur revenues from Main Pass 299 was $16.9
million in 1994 compared to $2 million in 1993 reflecting the higher sulphur
production levels. The Company's average realized price per ton of sulphur
was $53 in 1994 compared to $59 per ton in 1993. Oil revenues of $10 million
in 1994 compare to $14.2 million in 1993 and $22.1 million in 1992. Oil
production peaked in 1992 and is expected to continue to decline over the next
five years.
Operating losses of $0.2 million were recorded by the Company from Main
Pass 299 operations during 1994 compared to losses of $9.9 million in 1993 and
operating income of $4 million in 1992. The 1994 improvement in Main Pass
operations reflects rising sulphur production levels and increased operating
efficiencies, partially offset by lower oil production and prices. The lower
1993 earnings reflect the commencement of sulphur operations and lower oil
production and prices. In addition, at December 31, 1993 the Company recorded
a pretax write-down of oil and gas assets of $16 million based on a decline in
the market price of oil.
Other Revenues: Interest income of $9.8 million in 1994 compares to $4.8
million in 1993 and $9.9 million in 1992. The increase in interest income in
1994 reflects higher cash and equivalents and short-term investment balances
and a rise in interest rates during the year. The decrease in interest income
in 1993 from 1992 primarily is due to lower cash and equivalents and short-
term investment balances and lower interest rates during 1993. The gain on
sale of stock by subsidiary of $11.2 million represents the gain recorded on
the dilution of the Company's ownership interest in Prime. Other income of
$25.6 million in 1994 includes a pretax gain of $15.7 million on the sale of
the Company s interest in the Dee mine.
Depreciation, Depletion and Amortization: Depreciation, depletion and
amortization declined to $76.2 million in 1994 compared to $103.4 million and
$117.5 million in 1993 and 1992, respectively. The changes primarily were due
to lower 1994 production and the write-downs of oil and gas assets in 1993 and
mining properties in 1992.
28
<PAGE>
Administrative and General: Administrative and general expense decreased to
$38.2 million in 1994 from $40.6 million in 1993 and $48.5 million in 1992.
The decline in administrative and general expense reflects continued cost
constraints and the impact of the 1992 and 1993 restructuring programs.
(See Appendix 1: Description of Bar Chart E "Administrative And General
Expense.")
Exploration: Exploration expense of $21.3 million in 1994 compares to $17.5
million and $27.8 million in 1993 and 1992, respectively. The increase in
exploration expense in 1994 from 1993 reflects increased activity at the Ruby
Hill advanced exploration project, partially offset by the cessation of the
North Homestake mine project in early 1994. The decrease in exploration
expense in 1993 from 1992 primarily reflects the Company's efforts in
concentrating on fewer, higher quality projects.
(See Appendix 1: Description of Bar Chart F "Exploration Expense.")
Interest Expense: Interest expense of $10.1 million in 1994 compares to $9.1
million in 1993 and $13.4 million in 1992. Capitalized interest related to
the development of certain assets amounted to $0.7 million in 1994, compared
to $0.1 million and $3.5 million in 1993 and 1992, respectively. The increase
in interest expense in 1994 from 1993 reflects a full year's interest on the
Company's convertible subordinated notes which were issued in June 1993,
partially offset by the repayment of $8.3 million of Australian finance lease
debt in February 1994. Interest expense declined in 1993 from 1992 primarily
as a result of the repayment of $87 million of debt in the second half of
1992. The average rate of interest on the Company's long-term debt was 5.5%
at December 31, 1994 compared to 5.1% and 4.5% at December 31, 1993 and 1992,
respectively.
Income Taxes: In 1994, the Company benefited from reversals of tax valuation
allowances principally in foreign jurisdictions. These items were fully
utilized in 1994 and, as a result, the Company will be subject to a higher
effective tax rate in 1995.
In 1993, the Company adopted Statement of Financial Accounting Standards
No. (SFAS) 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 the 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
$70.5 million to $205.2 million at December 31, 1994 as a result of strong
cash flows from the Company's operations. In addition, cash provided by
financing activities before dividend payments in 1994 amounted to $28.9
million and $24.5 million was realized on the sale of assets. During 1993,
net debt repayments amounted to $48 million and a further $15.8 million were
used to redeem preferred shares which had been issued by Homestake Canada Inc.
(See Appendix 1: Description of Bar Chart G "Cash and Equivalents and Short-
Term Investments.")
29
<PAGE>
Additions to property, plant and equipment totaled $88.7 million in 1994
compared to $57.8 million and $63.5 million in 1993 and 1992, respectively.
Capital additions in 1994 include $42 million at the Eskay Creek mine, $20
million at the Homestake mine primarily for Open Cut expansion and $13 million
at the Kalgoorlie operations for mill expansions and modifications. Additions
in 1993 included $19 million at the Nickel Plate mine for a pit expansion and
$12 million at the Homestake mine for the Open Cut expansion and additions in
1992 included $14 million at the Kalgoorlie operations, primarily for Super
Pit development. The remaining expenditures during these years primarily were
for replacement capital to maintain existing production capacity.
(See Appendix 1: Description of Bar Chart H "Cash Provided By Operations.")
In addition to replacement capital at existing operations, expenditures
of $39 million are planned for 1995 at the Kalgoorlie operations to complete
the expansion of the Fimiston mill, which will increase ore processing
efficiency and capability, and replace the capacity of the Oroya mill which
will be dismantled to allow for an expansion of the Super Pit. Additions of
$25 million are planned at the Homestake mine primarily for pre-stripping and
development at the Open Cut and continuing modernization projects.
During 1994, the Company issued 293,000 shares for proceeds of $5.3
million from the exercise of stock options.
Through a series of transactions from 1989 to 1994, the Company acquired
50.6% of Prime's common shares. For further details, see note 3 to the
consolidated financial statements.
In February 1994, HGAL repaid the remaining $8.3 million of its
Australian finance lease debt.
In June 1993, the Company sold $150 million of 5.5% convertible
subordinated notes maturing in the year 2000. The notes are convertible into
the Company's shares at a price of $23.06 per common share and are redeemable
by the Company 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.
In 1993, the Company entered into a $150 million revolving credit
facility. This facility provides for borrowings denominated in U.S. dollars,
Canadian dollars, ounces of gold or any combination of these. The credit
agreement includes a minimum consolidated net worth requirement of $500
million. In October 1994, the Company amended this facility which resulted in
a reduction of commitment and borrowing fees, a one-year extension of the
facility to 1999 and the elimination of a number of financial covenants. No
amounts have been borrowed under this facility. The Company has no required
debt repayments until the convertible notes mature in the year 2000.
The Company incurred $14.2 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 (DOE) is responsible for funding 51% of all past and future reclamation
expenditures at this facility. The total cost for reclamation of the Grants
site is estimated to be $59.2 million, of which $40.1 million had been
expended by December 31, 1994. The Company's share of the cost of reclaiming
the Grants facility is fully provided in the financial statements at December
31, 1994. The Company received $4.3 million in 1994 from the DOE. The
accompanying balance sheet as of December 31, 1994 includes a receivable of
$9.8 million for unreimbursed claims filed with the DOE pertaining to the
DOE's share of reclamation expenditures made by the Company through 1993. For
discussion of certain environmental matters, see note 22 to the consolidated
financial statements.
In May 1994, the Company increased its regular quarterly dividend from
$0.025 to $0.05. Total common share dividends paid by Homestake were $24.1
million in 1994 compared to $13.7 million in 1993 and $23.6 million in 1992.
Future results will be impacted by such factors as the market price of
gold, the Company's ability to expand its ore reserves and the fluctuations of
foreign currency exchange rates. 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 and
anticipated dividends.
30
<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, 1994 and 1993, and the related
statements of consolidated operations, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1994. 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 financial position of
Homestake Mining Company and Subsidiaries at December 31, 1994 and 1993,
and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994 in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand LLP
--------------------------
San Francisco, California
February 8, 1995
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
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 and by the independent auditors in connection with their audit of
the Company's consolidated financial statements.
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
of 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
February 8, 1995
31
<PAGE>
STATEMENTS OF CONSOLIDATED OPERATIONS
Homestake Mining Company and Subsidiaries
For the years ended December 31, 1994, 1993 and 1992
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------
<S> <C> <C> <C>
Revenues
Product sales $656,056 $703,505 $659,646
Interest income 9,762 4,832 9,892
Equity earnings 2,857 795 2,474
Gain on issuance of stock by
subsidiary 11,224
Other income 25,588 13,096 11,508
---------------------------------------------
705,487 722,228 683,520
--------------------------------------------
Costs and Expenses
Production costs 447,129 454,623 470,374
Depreciation, depletion and
amortization 76,171 103,377 117,483
Administrative and general
expense 38,159 40,553 48,514
Exploration expense 21,347 17,457 27,798
Interest expense 10,124 9,147 13,420
Other expense 6,744 4,492 5,694
Write-downs of mining
properties and investments 16,032 130,290
Restructuring and business
combination expenses 8,151 48,442
---------------------------------------------
599,674 653,832 862,015
---------------------------------------------
Income (Loss) Before Taxes
and Minority Interest 105,813 68,396 (178,495)
Income and Mining Taxes (18,880) (12,775) 2,889
Minority Interest (8,917) (3,127) (230)
---------------------------------------------
Net Income (Loss) $78,016 $52,494 $(175,836)
---------------------------------------------
Net Income (Loss) Per Share $0.57 $0.38 $(1.31)
---------------------------------------------
Average Shares Used in
the Computation 137,733 137,046 135,221
---------------------------------------------
</TABLE>
See notes to consolidated financial statements.
32
<PAGE>
CONSOLIDATED BALANCE SHEETS
Homestake Mining Company and Subsidiaries
December 31, 1994 and 1993
(In thousands, except per share amount)
<TABLE>
<CAPTION>
1994 1993
--------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents $ 105,701 $ 134,719
Short-term investments 99,479
Receivables 58,994 28,649
Inventories 71,715 66,539
Other 6,910 8,303
--------------------------
Total current assets 342,799 238,210
--------------------------
Property, Plant and Equipment - net 808,221 830,228
--------------------------
Investments and Other Assets
Noncurrent investments 15,774 20,632
Other assets 35,174 32,180
--------------------------
Total investments and other
assets 50,948 52,812
--------------------------
Total Assets $1,201,968 $1,121,250
--------------------------
--------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 35,674 $ 33,002
Accrued liabilities 54,138 57,747
Income and other taxes payable 7,083 9,816
Current portion of long-term debt 3,785
--------------------------
Total current liabilities 96,895 104,350
--------------------------
Long-term Liabilities
Long-term debt 185,000 189,191
Other long-term obligations 110,719 93,674
--------------------------
Total long-term liabilities 295,719 282,865
--------------------------
Deferred Income Taxes 136,274 164,030
--------------------------
Minority Interest in Consolidated
Subsidiaries 84,310 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 - 137,785;
1993 - 137,494 137,785 137,494
Additional paid-in capital 339,785 334,737
Retained earnings 106,405 52,495
Accumulated currency translation
adjustments 8,869 (5,620)
Other (4,074) (3,862)
--------------------------
Total shareholders' equity 588,770 515,244
--------------------------
Total Liabilities and Shareholders'
Equity $1,201,968 $1,121,250
--------------------------
--------------------------
</TABLE>
Commitments and Contingencies - see notes 22 and 23.
See notes to consolidated financial statements.
33
<PAGE>
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
Homestake Mining Company and Subsidiaries
For the years ended December 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings
----------------------------------
<S> <C> <C> <C>
BALANCES, DECEMBER 31, 1991 $132,325 $325,629 $215,886
Net loss (175,836)
Common share dividends (23,624)
Preference share dividends (1,834)
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
Common share dividends (13,706)
Preference share dividends (885)
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
Net income 78,016
Common share dividends (24,106)
Exercise of stock options 291 5,048
Currency translation
adjustments
Unrealized loss on investments
Other
------------------------------------
BALANCES, DECEMBER 31, 1994 $137,785 $339,785 $106,405
------------------------------------
------------------------------------
<CAPTION>
Accumulated
Currency
Translation
Adjustments Other Total
-------------------------------------
<S> <C> <C> <C>
BALANCES, DECEMBER 31, 1991 $7,970 $(6,168) $675,642
Net loss (175,836)
Common share dividends (23,624)
Preference share dividends (1,834)
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) (6,837)
Other (3,579) (2,780)
-------------------------------------
BALANCES, DECEMBER 31, 1992 1,133 (9,747) 465,438
Net income 52,494
Common share dividends (13,706)
Preference share dividends (885)
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) (6,753)
Other 1,627 1,632
--------------------------------------
BALANCES, DECEMBER 31, 1993 (5,620) (3,862) 515,244
Net income 78,016
Common share dividends (24,106)
Exercise of stock options 5,339
Currency translation
adjustments 14,489 14,489
Unrealized loss on investments (382) (382)
Other 170 170
--------------------------------------
BALANCES, DECEMBER 31, 1994 $8,869 $(4,074) $588,770
--------------------------------------
--------------------------------------
</TABLE>
See notes to consolidated financial statements.
34
<PAGE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
Homestake Mining Company and Subsidiaries
For the years ended December 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net income (loss) $78,016 $52,494 $(175,836)
Reconciliation to net cash
provided by operations:
Depreciation, depletion
and amortization 76,171 103,377 117,483
Write-downs of mining
properties and
investments 16,032 130,290
Gain on issuance of stock
by subsidiary (11,224)
Gain on disposals of assets (19,521) (7,974) (12,456)
Deferred income taxes (3,665) 2,583 (11,121)
Reclamation - net 3,986 (8,459) (4,160)
Minority interest 8,917 3,127 230
Other noncash items - net 27,222 17,435 9,573
Effect of changes in operating
working capital items:
Receivables (8,824) (18,993) 12,096
Inventories (14,045) 10,357 12,933
Accounts payable 2,484 (4,009) (10,424)
Accrued liabilities and
taxes payable (6,938) 4,877 8,408
Other 1,138 (765) (3,521)
---------------------------------
Net cash provided by operations 133,717 170,082 73,495
---------------------------------
INVESTMENT ACTIVITIES
Decrease (increase) in short-term
investments (99,479) 16,739 115,334
Additions to property, plant
and equipment (88,654) (57,825) (63,453)
Proceeds from sales of assets 24,542 9,649 11,858
Other (8,033) 1,060 7,260
---------------------------------
Net cash provided by (used in)
investment activities (171,624) (30,377) 70,999
---------------------------------
FINANCING ACTIVITIES
Borrowings 146,074 115,239
Debt repayments (8,352) (194,037) (215,251)
Dividends paid on common shares (24,106) (13,706) (23,624)
Dividends paid on preference
shares (885) (1,834)
Common shares issued 5,339 11,611 321
Stock issued by subsidiary 31,870
Redemption of HCI preference
shares (15,810) (4,727)
Sale of Homestake stock held by
Prime 6,361
Other 1,452 326
---------------------------------
Net cash provided by (used in)
financing activities 4,751 (58,940) (129,550)
---------------------------------
Effect of Exchange Rate Changes
on Cash 4,138 (254) 3,882
---------------------------------
Net Increase (Decrease) in Cash
and Equivalents (29,018) 80,511 18,826
Cash and Equivalents, January 1 134,719 54,208 35,382
---------------------------------
Cash and Equivalents, December 31 $105,701 $134,719 $54,208
---------------------------------
---------------------------------
</TABLE>
See notes to consolidated financial statements.
35
<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, 1994 the Company owned 81.5% of Homestake Gold of
Australia Limited (HGAL) and 50.6% 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 mine in the United States; HGAL's interest
in the gold mining operations in Kalgoorlie, Western Australia; Homestake
Canada Inc.'s (HCI) interests in the Williams and David Bell mines in
Canada; and Prime's interests in the Eskay Creek and Snip mines in Canada)
and in the sulphur and oil recovery operations at Main Pass 299 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 Pinson and
Marigold mines in Nevada (in which the Company has ownership interests of
26% and 33%, respectively), 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 minimizes its
credit risk by placing its cash and equivalents with major international
banks and financial institutions located principally in the United States,
Canada and Australia. The Company believes that no concentration of credit
risk exists with respect to cash and equivalents.
Short-term investments consist principally of highly-liquid U.S. and
foreign government and corporate securities with original maturities in
excess of three months. Effective January 1, 1994 the Company adopted
Statement of Financial Accounting Standards No. (SFAS) 115, "Accounting for
Certain Investments in Debt and Equity Securities." In accordance with
this statement, the Company classifies all short-term investments as
available-for-sale securities and, accordingly, includes all unrealized
gains and losses on these investments as a separate component of
shareholders' equity, except that declines in market value judged to be
other than temporary are recognized in determining net income or loss. The
effect on net income of adoption of SFAS 115 was not material and did not
result in the recording of a cumulative effect on adoption.
Inventories, including finished products, ore in-process, stockpiled ore,
ore in-transit 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. All costs related to property acquisitions are
capitalized.
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 periodically. Estimated future net cash flows from each mine are
calculated using estimates of proven and probable ore 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 periodically 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 on 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
36
<PAGE>
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.
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, principally by the units-of-
production method based on estimated proven and probable ore reserves.
Noncurrent 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 title passes at the shipment or delivery
point.
Income taxes: The Company follows the liability method of accounting for
income taxes whereby deferred income taxes are recognized for the tax
consequences of temporary differences by applying enacted statutory tax
rates applicable to future years to differences between the financial
statement amounts and the tax bases of certain assets and liabilities.
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 or loss.
Pension plans and other postretirement 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
costs of the postretirement 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
preference share dividends by the weighted average number of common shares
and common share equivalents outstanding during the year. Fully diluted
net income (loss) per share is not presented since the exercise of stock
options would not result in a material dilution of earnings per share and
the conversion of the 5.5% convertible subordinated notes would produce an
anti-dilutive result.
Reclassifications: Certain amounts for 1993 and 1992 have been
reclassified to conform to the 1994 presentation.
Note 2: HOMESTAKE CANADA INC.
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. 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 HCI's common and first preference
shares. This business combination was accounted for as a pooling of
interests.
Note 3: PRIME RESOURCES GROUP INC.
In June 1994, Prime sold five million common shares at approximately $6.70
per share to the public. Net proceeds of approximately $31.9 million from
this issue were used to fund a portion of the construction and development
costs of the Eskay Creek gold mine in Canada. 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
37
<PAGE>
of the net increase in the book 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 carrying value.
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 had a 50% interest in the Eskay Creek
mine. Following this transaction, the Company owned 54.2% of the
outstanding shares of Prime. Homestake's effective ownership in Prime and
Stikine prior to this transaction was 54.3% and 54.1%, respectively.
In December 1992, HCI acquired two million common shares of Prime for
$3.2 million in 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 included Prime in its consolidated financial
statements effective December 31, 1992.
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 mine by approximately $24.9 million and the
Company's ownership of Stikine increased above 50%. Stikine has been
included in the consolidated financial statements as of that date. In July
1993, all of the Series 1 shares were redeemed at par for cash of $54.61
per share, plus unpaid dividends.
Note 4: SALES OF MINING OPERATIONS
Dee mine: In May 1994, the Company sold its 44% interest in the Dee gold
mine in Nevada 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 pretax gain
of $15.7 million, which is included in other income.
NAM: In July 1993, the Company sold its 83% interest in North American
Metals Corp. (NAM), the owner and operator of the Golden Bear mine in
Canada, 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 this transaction.
Mineral Hill mine: 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 certain exploration lands and received an indemnification from
TVX for all past, present and future reclamation requirements. This sale
resulted in a pretax gain of $3.6 million, which was included in other
income in 1993.
Note 5: WRITE-DOWNS OF MINING PROPERTIES AND INVESTMENTS
As discussed in note 1, the Company performs periodic property evaluations
to assess the recoverability of its mining properties and investments. In
1993 and 1992, the Company determined that based upon its estimates of
proven and probable reserves, sales prices and operating costs at certain
locations, it would not fully recover its investment in certain assets and,
accordingly, recorded write-downs as a result of these evaluations totaling
$16 million and $130.3 million in 1993 and 1992, respectively.
In 1993, the Company recorded a $16 million write-down of its investment
in the oil and gas assets at the Main Pass 299 sulphur mine due to a
decline in oil prices. In 1992, based on Homestake's assessment of the
then recoverable value of its investment in the Eskay Creek property, the
Company recorded a $70 million write-down of its investments in Prime and
Stikine, the holders of the Eskay Creek property. The write-down was
recorded at the time of the acquisition of HCI to reflect Homestake's
estimates of capital costs and future gold prices. Other write-downs in
1992 included property write-downs of $44.3 million and $12.5 million in
the United States and Canada, respectively, and a $3.5 million reduction of
the carrying value of certain Latin American mining securities.
Note 6: RESTRUCTURING AND BUSINESS COMBINATION EXPENSES
In 1993, the Company recorded restructuring and business combination
expenses totaling $8.2 million primarily related to a second early
retirement and work force reduction program at the Homestake mine in South
Dakota and the reorganization of HGAL, including the relocation of HGAL's
principal office. In 1992, concurrent with the business combination with
HCI, the Company recorded a charge of $48.4 million for the corporate
restructuring of its North American operations. The restructuring included
the consolidation
38
<PAGE>
of many administrative and exploration activities, the closure of several
existing offices and the initiation of an early retirement and work force
reduction program at the Homestake mine.
Note 7: INCOME TAXES
Effective January 1, 1993 the Company adopted SFAS 109, "Accounting for
Income Taxes." The adoption of this standard changed 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 were not 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 on adoption.
The provision (credit) for income and mining taxes consists of the
following:
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------
<S> <C> <C> <C>
Current
Income taxes
Federal $ 7,560 $(2,465) $ (513)
State 1,258 105 305
Canadian 2,258 1,177 1,936
Other foreign 206 1,013 185
-------------------------------
11,282 (170) 1,913
Canadian mining taxes 9,741 10,287 6,319
-------------------------------
Total current taxes 21,023 10,117 8,232
-------------------------------
Deferred
Income taxes
Federal 6,867 3,639 (11,040)
State (1,086) 95 (601)
Canadian (13,796) 2,203 (3,364)
Other foreign 4,438 (262)
-------------------------------
(3,577) 5,937 (15,267)
Canadian mining taxes 1,434 (3,279) 4,146
-------------------------------
Total deferred taxes (2,143) 2,658 (11,121)
-------------------------------
Total income and mining
taxes (benefit) $18,880 $12,775 $ (2,889)
------------------------------
------------------------------
</TABLE>
The provision for income taxes is based on pretax income (loss) before
minority interest as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------------------------------
<S> <C> <C> <C>
United States $ 28,415 $ 6,222 $ (86,278)
Canada 49,690 41,434 (91,989)
Other foreign 27,708 20,740 (228)
----------------------------------
$105,813 $68,396 $(178,495)
----------------------------------
----------------------------------
</TABLE>
Deferred tax liabilities and assets on the balance sheet as of December
31, 1994 and 1993 relate to the following:
<TABLE>
<CAPTION>
1994 1993
----------------------------
<S> <C> <C>
Deferred tax liabilities
Depreciation and other resource
property differences
United States $ 73,826 $ 65,194
Canada - Federal 46,671 56,289
Canada - Provincial 74,653 84,032
Australia 5,214 5,373
----------------------------
200,364 210,888
Inventory 2,854
Other 11,946 22,397
----------------------------
Gross deferred tax liabilities 215,164 233,285
----------------------------
Deferred tax assets
Tax loss carry-forwards
United States 3,958
Canada - Federal 17,793 17,387
Canada - Provincial 4,836 5,655
Australia 2,972 5,682
Chile 16,363 15,564
---------------------------
45,922 44,288
Reclamation costs
United States 9,957 13,630
Other 4,071 1,949
---------------------------
14,028 15,579
Employee benefit costs 28,120 23,699
Alternative minimum tax credit
carry-forwards 16,476 12,423
Other resource property
- Australia 4,193 2,778
Deductible mining taxes 3,080
Foreign tax credit carry-forwards 2,831 2,442
Reorganization costs 1,649 2,103
Lease obligations not currently
deductible 2,683
Other 12,430 15,326
---------------------------
Gross deferred tax assets 128,729 121,321
Deferred tax asset valuation
allowances (49,839) (52,066)
---------------------------
Net deferred tax assets 78,890 69,255
---------------------------
Net deferred tax liability $136,274 $164,030
---------------------------
---------------------------
</TABLE>
Deferred tax assets and liabilities are classified in accordance with
SFAS 109, which generally requires classification 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. The net change in the valuation allowance for deferred
tax assets decreased by $2.2 million in 1994. The deferred tax valuation
allowance of $49.8 million at
39
<PAGE>
December 31, 1994 primarily is attributable to United States and Australian
deferred tax assets. Net deferred tax assets at December 31, 1994 include
$9.3 million of Canadian deferred tax assets, the realization of which is
based on the Company s judgement regarding future income.
Major items causing the Company's income tax provision (credit) to
differ from the federal statutory rate of 35% in 1994 and 1993 and 34% in
1992 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-----------------------------
<S> <C> <C> <C>
Income tax based on statutory rate $37,035 $23,938 $(60,689)
Nondeductible write-downs 32,122
Percentage depletion (11,106) (14,401) (6,216)
Earnings in foreign jurisdictions
taxed at different rates (6,175) (1,440) (2,433)
State income taxes,
net of federal benefit 1,614 130 (245)
Tax relating to reorganizations 7,682 4,387 6,596
Unrealized minimum tax credits 1,753 23,844 10,617
Nontaxable book income (4,784)
Other nondeductible losses 9,401 3,757 3,539
Deferred tax assets not recognized
in prior years (1) (27,697) (36,706)
Foreign taxes withheld 2,089 2,669
Other - net (2,107) (411) 3,355
------------------------------
Total income taxes 7,705 5,767 (13,354)
Canadian mining taxes 11,175 7,008 10,465
------------------------------
Total income and mining taxes
(benefit) $18,880 $12,775 $(2,889)
------------------------------
------------------------------
<FN>
(1) The 1994 and 1993 amounts include (i) a reversal of prior year
valuation allowances of $12.4 million and $0, respectively, and (ii)
the realization of additional deferred tax assets that could not be
recognized in prior years of $15.3 million and $36.7 million,
respectively.
</TABLE>
The Company's 1994 income tax expense includes a $3.6 million tax
benefit relating to tax law changes enacted in 1994 and a $9.6 million tax
benefit relating to a change in the Company's judgement concerning the
realizability of deferred tax assets in future years.
For income tax purposes, the Company has foreign tax losses and U.S.
foreign tax credit carry-forwards of approximately $62 million and $2.7
million, respectively, which are due to expire at various times through the
year 2001.
Note 8: RECEIVABLES
<TABLE>
<CAPTION>
December 31,
1994 1993
-----------------------
<S> <C> <C>
Trade $23,318 $ 4,059
Income taxes 3,049 14,966
Uranium receivables 17,616 21
Interest and other 15,011 9,603
-----------------------
$58,994 $28,649
-----------------------
-----------------------
</TABLE>
Note 9: INVENTORIES
<TABLE>
<CAPTION>
December 31,
1994 1993
-----------------------
<S> <C> <C>
Finished products $15,004 $ 9,548
Ore and in-process 26,889 22,465
Supplies 29,822 34,526
-----------------------
$71,715 $66,539
-----------------------
-----------------------
</TABLE>
At December 31, 1994 and 1993, the cost of certain finished gold
inventories in the United States stated on the LIFO cost basis aggregated
$2.5 million and $0.4 million, respectively. Such inventories would have
approximated $4.0 million and $1.4 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.
Ore stockpiles in the amount of $10.7 million that are not expected to
be processed within the next 12 months are included in other assets (see
note 12).
Note 10: PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
December 31,
1994 1993
--------------------------
<S> <C> <C>
Mining properties and development
costs $ 714,479 $ 694,885
Plant and equipment 846,547 836,947
Land and royalty interests 3,843 3,955
Construction and mine development
in progress 14,633 4,431
---------------------------
1,579,502 1,540,218
Accumulated depreciation, depletion
and amortization (771,281) (709,990)
---------------------------
$ 808,221 $ 830,228
---------------------------
---------------------------
</TABLE>
40
<PAGE>
Note 11: NONCURRENT INVESTMENTS
<TABLE>
<CAPTION>
December 31,
1994 1993
------------------------
<S> <C> <C>
Equity investments
Pinson and Marigold mining
partnerships $ 6,298 $ 8,363
Other equity investments 5,041 7,626
Other investments 4,435 4,643
------------------------
$15,774 $20,632
------------------------
------------------------
</TABLE>
Note 12: OTHER ASSETS
<TABLE>
<CAPTION>
December 31,
1994 1993
-------------------------
<S> <C> <C>
Uranium receivables and other
uranium assets $ 5,694 $13,567
Ore stockpiles 10,684
Other 18,796 18,613
-------------------------
$35,174 $32,180
-------------------------
-------------------------
</TABLE>
Note 13: ACCRUED LIABILITIES
<TABLE>
<CAPTION>
December 31,
1994 1993
------------------------
<S> <C> <C>
Accrued payroll and other compensation $22,178 $19,053
Accrued reclamation costs 15,266 14,041
Other 16,694 24,653
------------------------
$54,138 $57,747
------------------------
------------------------
</TABLE>
Note 14: LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31,
1994 1993
-----------------------
<S> <C> <C>
Long-term debt
Convertible subordinated notes
(due 2000) $150,000 $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 7,976
------------------------
185,000 192,976
Less current portion 3,785
------------------------
$185,000 $189,191
------------------------
------------------------
</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 is payable semi-annually in
June and December. The notes are convertible into common shares of the
Company at a price of $23.06 per common share and are redeemable by the
Company 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.
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, 1994 and 1993 were 5.7% and 3.1%,
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 also 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 1994, the Company repaid the
remaining balance of its Australian finance lease debt.
Lines of credit: The Company has a U.S./Canadian cross-border credit
facility providing a total availability of $150 million. The Company pays
a commitment fee of 0.25% per annum on the unused portion of this facility.
The credit facility is available through September 30, 1999 and provides
for borrowings in U.S. dollars, Canadian dollars, gold loans or any
combination of these. The credit agreement requires a minimum consolidated
net worth of $500 million. In addition, Prime has a credit facility which
provides a total availability of $7.1 million. No amounts have been
borrowed under these agreements as of December 31, 1994.
The Company has no required debt payments in the five years subsequent
to December 31, 1994.
41
<PAGE>
Note 15: OTHER INCOME
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------
<S> <C> <C> <C>
Gain on disposals of assets $19,521 $ 7,974 $12,456
Royalty income 3,061 4,284 3,309
Foreign currency contracts gains
(losses) 4,569 (1,381) (469)
Foreign currency transaction
losses (6,617) (1,519) (5,500)
Other 5,054 3,738 1,712
-------------------------------
$25,588 $13,096 $11,508
-------------------------------
-------------------------------
</TABLE>
Note 16: INTEREST EXPENSE
Interest costs of $10.1 million, $9.1 million and $13.4 million were
expensed in 1994, 1993 and 1992, respectively. During 1994, 1993 and 1992
interest costs of $0.7 million, $0.1 million and $3.5 million,
respectively, related to construction and mine development in progress were
capitalized.
Note 17: OTHER LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
December 31,
1994 1993
------------------------
<S> <C> <C>
Accrued reclamation costs (see
notes 1, 13 and 22) $ 33,892 $22,138
Accrued pension and other postretirement
benefit obligations (see note 18) 64,066 59,626
Other 12,761 11,910
------------------------
$110,719 $93,674
------------------------
------------------------
</TABLE>
Note 18: EMPLOYEE BENEFIT PLANTS
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 costs for 1994, 1993 and 1992 for the Company sponsored United
States employee plans included the following components:
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the year $3,928 $ 3,513 $ 3,854
Interest cost on projected
benefit obligations 13,497 12,957 11,993
Actual net return on assets (1,828) (17,198) (13,390)
Net amortization (deferral) (11, 202) 4,821 1,555
-------------------------------
Net periodic pension cost 4,395 4,093 4,012
Early retirement program cost 4,062 5,000
-------------------------------
$4,395 $ 8,155 $ 9,012
-------------------------------
-------------------------------
</TABLE>
Assumptions used in determining net periodic pension cost for 1994, 1993
and 1992 include discount rates of 7%, 8% and 8%, respectively, and assumed
rates of increase in compensation of 5%, 6% and 6%, respectively. 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, 1994 and 1993 include discount rates of 8% and 7%,
respectively, and an assumed rate of increase in compensation of 5%.
The funded status and amounts recognized for pension plans in the
consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
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 $ (99,615) $(51,749) $(101,000) $(50,529)
---------------------------------------------------
---------------------------------------------------
Accumulated
benefits $(108,838) $(57,761) $(111,454) $(56,815)
---------------------------------------------------
---------------------------------------------------
Projected benefits $(127,006) $(61,261) $(131,078) $(60,100)
Plan assets at fair
value (1) 117,966 37,687 124,095 41,049
---------------------------------------------------
Projected benefit
obligation in
excess of plan
assets (9,040) (23,574) (6,983) (19,051)
Unrecognized net loss 1,318 5,353 11 3,760
Unrecognized net
transition
obligation (asset)
amortized over
15 years 77 (3,635) 93 (4,020)
Unrecognized prior
service cost (benefit) (608) 2,322 267 2,133
Additional minimum
liability (612) (1,520)
---------------------------------------------------
Pension liability
recognized in the
consolidated
balance sheets $ (8,253) $(20,146) $ (6,612) $(18,698)
---------------------------------------------------
---------------------------------------------------
<FN>
(1) Approximately 15% and 20% of the plan assets were invested in fixed-
rate insurance contracts and the balance was invested in listed
stocks and bonds in 1994 and 1993, respectively.
</TABLE>
42
<PAGE>
HGAL participates in several pension plans, primarily defined
contribution plans, covering its employees and, through its 50% ownership
interest in the consolidated Kalgoorlie operations, the employees of
Kalgoorlie Consolidated Gold Mines. HGAL's share of contributions to these
plans was $0.8 million in 1994 and 1993 and $1 million in 1992.
Postretirement 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. Net periodic
postretirement benefit costs for 1994, 1993 and 1992 included the following
components:
<TABLE>
<CAPTION>
1994 1993 1992
---------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the year $ 565 $ 717 $ 625
Interest cost on accumulated
postretirement
benefit obligation 2,860 3,575 2,475
Net amortization and deferral 60 369
---------------------------------
$3,485 $4,661 $3,100
---------------------------------
---------------------------------
</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 actuarial assumptions used in determining net periodic postretirement
benefit costs include discount rates of 7% for 1994 and 8% for 1993, an
initial health care cost trend rate of 12% grading down to an ultimate
health care cost trend rate of 5% for 1994, and an initial health care cost
trend rate of 12.5% grading down to an ultimate health care cost trend rate
of 6% for 1993. Net periodic postretirement benefit cost assumptions for
1992 included a discount rate of 8% and increases in medical costs of 8%.
The actuarial assumptions used in determining the Company's accumulated
postretirement benefit obligation as of December 31, 1994 and 1993 include
discount rates of 8% and 7%, respectively. A one percentage-point increase
in the assumed health care cost trend rate would result in an increase of
approximately $8 million in the accumulated postretirement benefit
obligation and an increase of approximately $0.6 million in net periodic
postretirement benefit costs.
The following table sets forth amounts recorded in the Company's
consolidated balance sheets at December 31, 1994 and 1993. The Company has
not funded any of its estimated future obligation.
<TABLE>
<CAPTION>
1994 1993
---------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation
Retirees $ (30,000) $(36,000)
Fully-eligible active plan participants (1,000) (1,000)
Other active plan participants (9,000) (11,261)
---------------------------
(40,000) (48,261)
Unrecognized net loss 996 10,549
Unrecognized prior service cost 737 797
---------------------------
Accumulated postretirement benefit
obligation liability recognized in
the consolidated balance sheets $ (38,267) $(36,915)
---------------------------
---------------------------
</TABLE>
Other plans: Substantially 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 1994 and 1993 and $1.7 million in 1992.
Under the Company's stock option plans, options to buy 2.3 million common
shares at an average price of $18.34 per share were outstanding at
December 31, 1994, of which 1.5 million shares were exercisable. An
additional 0.8 million and 1 million shares were available for future
grants at December 31, 1994 and 1993, respectively.
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 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
43
<PAGE>
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>
1994 1993 1992
-------------------------------------------------
Average Average Average
Price Price Price
Per Per Per
Number Share Number Share Number Share
-------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1 2,600 2,193 1,569
HCI converted 787 $29.04
Granted 268 $20.50 516 12.18 688 $14.20
Exercised (293) 15.98 (695) 15.88 (24) 5.75
Expired (274) 15.86 (201) 29.20 (40) 16.10
------------------------------------------------
Balance at
December 31 2,301 2,600 2,193
------------------------------------------------
------------------------------------------------
</TABLE>
Note 19: 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, 1994 December 31, 1993
Carrying Estimated Carrying Estimated
Asset/(Liability) Amount Fair Value Amount Fair Value
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and equivalents
and short-term
investments $ 205,180 $ 205,180 $134,719 $134,719
Noncurrent marketable
equity investments 4,435 5,109 4,643 5,319
Long-term debt (185,000) (182,188) (192,976) (224,471)
Off-balance sheet financial
instruments -
Foreign currency
options 651 651 (156) (156)
</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 the fair value due to the short-term
maturities of these instruments. The fair value of short-term investments
was estimated based on quoted market prices. If a quoted market price was
not available, the fair value was estimated using quoted market prices for
similar securities.
Noncurrent marketable equity investments: The fair value of noncurrent
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 reasonable estimates
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 price.
Foreign currency options: The fair value of foreign currency options was
estimated based on the quoted market prices. 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, 1994 and 1993.
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, 1994 and 1993 may differ significantly from the amounts
presented herein.
Note 20: SHAREHOLDERS' EQUITY
At December 31, 1994 and 1993 other equity includes deductions of $3.7
million and $3.9 million, respectively, for 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 respective loans. Other equity at
December 31, 1992 includes $4.2 million for common shares of Homestake
owned by Prime. These Homestake shares were sold by Prime in 1993.
Effective April 30, 1992 all 2.7 million HCI Series B first preference
shares then outstanding were redeemed for 4.3 million common shares of the
Company.
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
44
<PAGE>
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 21: ADDITIONAL CASH FLOW INFORMATION
Cash paid for interest and for income and mining taxes is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------
<S> <C> <C> <C>
Interest, net of amounts capitalized $10,110 $ 8,600 $13,203
Income and mining taxes 10,670 18,170 7,328
</TABLE>
Certain investing and financing activities of the Company affect
financial position but do not affect cash flows. Significant noncash
investing and financing activities were as follows:
In 1992, HCI increased its equity interest in the Marigold mine venture
to 33.3% as a result of a land exchange.
See notes 2 and 3 for discussions of the noncash acquisitions of the
interests in HCI, Prime and Stikine.
In 1992, HCI redeemed its Series B first preference shares for common
stock (see note 20).
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 3) 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
Noncurrent investments (79,476)
Long-term debt 12,287
Deferred income taxes 78,619
Minority interests 32,470
Shareholders' equity (4,258)
</TABLE>
Note 22: CONTINGENCIES
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. The EPA asserted that discharges of
tailings by mining companies, including the Company, for more than 100
years, 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 on-site remedial work has been
completed. The Company estimates that the remaining cost of actions
required by the decree, including EPA oversight costs, will be less than $1
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 contaminated a shallow aquifer that served 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 a
point where contaminates are below natural background levels. The Company
has decommissioned and disposed of the mills and has closed the tailings
impoundments at the site.
Title X of the Energy Policy Act of 1992 (the Act) authorized
appropriations of $270 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 of the Department of Energy (DOE)
which were issued in 1994. Pursuant to the Act, the Company may submit
requests for reimbursement under the Act for 51.2% of the past and future
costs of reclaiming the Grants site in accordance with the approved
reclamation plan and Nuclear 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. To date,
Congress has appropriated $83 million for disbursement in fiscal
45
<PAGE>
years 1994 and 1995 to eligible licensees. In 1994, the Company submitted
an initial claim of $14.1 million for the DOE's share of past costs
incurred through December 31, 1993 and the Company expects to file
additional claims on an annual basis for expenditures made in the prior
year. The Company records a receivable and an increase in long-term
accrued reclamation when claims are filed with the DOE. The accompanying
balance sheet at December 31, 1994 includes a receivable of $9.8 million
from the DOE for claims filed, net of $4.3 million reimbursements received
through that date. A claim for approximately $7 million will be submitted
in 1995 for 1994 expenditures.
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 the above matters
will not have a material adverse impact on its financial condition or
results of operations.
OTHER CONTINGENCIES
In addition to the above, the Company is party to legal actions and
administrative proceedings and is subject to claims arising in the ordinary
course of business. While the amounts claimed may be substantial and the
ultimate liability cannot, at this time, be determined, the Company
believes the disposition of these matters will not have a material adverse
effect on its financial position or results of operations.
Note 23: 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 may 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. The contracts
are marked to market at each balance sheet date. Unrealized gains (losses)
on contracts outstanding at December 31, 1994 and 1993 totaled $0.7 million
and $(0.2) million, respectively. Other income for the years ended
December 31, 1994 and 1993 includes income (loss) of $4.6 million and
$(1.4) million, respectively, related to the foreign currency protection
program. At December 31, 1994 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>
Canadian $112,700 $0.67 $0.78 1995-1997
Australian 66,600 0.70 0.76 1995
---------
$179,300
---------
---------
</TABLE>
In addition to amounts related to the foreign currency option contracts,
the Company realized foreign currency transaction losses (see note 1) of
$6.6 million in 1994, $1.5 million in 1993 and $5.5 million in 1992, which
were recorded as a reduction to other income.
In the fourth quarter of 1994, the Company entered into forward sales
for 183,200 ounces of gold it expects to produce at the Nickel Plate mine
during 1995 and 1996. The prices to be received range from $386 to $437
and average $412 per ounce. The purpose of the forward sales program is
to allow for recovery of the Company's remaining investment in the mine and
provide for estimated reclamation costs.
The Company has entered into various commitments in the ordinary course
of its business, which include 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 24: 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
expenses, 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.
46
<PAGE>
Sales to individual customers exceeding 10% of the Company's
consolidated revenues were as follows: in 1994 gold sales of $129 million,
$118 million and $100 million to three customers; in 1993 gold sales of
$175 million, $145 million and $105 million to three customers; and in
1992 gold sales of $92 million to one customer. 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.
GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------------
<S> <C> <C> <C>
Revenues
United States (1,2) $ 346,629 $ 380,458 $ 354,018
Canada 192,363 194,755 178,401
Australia 143,944 121,025 124,799
Latin America 22,551 25,990 26,302
------------------------------------
$ 705,487 $ 722,228 $ 683,520
------------------------------------
------------------------------------
Operating Earnings (Loss)(3)
United States (1) $ 72,379 $ 33,295 $ (11,666)
Canada 55,804 70,788 40,603
Australia 29,026 29,660 10,284
Latin America (1,359) 2,272 (869)
------------------------------------
$ 155,850 $ 136,015 $ 38,352
------------------------------------
------------------------------------
Exploration Expense
United States $ 11,841 $ 11,128 $ 14,735
Canada 2,445 1,907 6,328
Australia 4,008 2,888 4,097
Latin America and other 3,053 1,534 2,638
------------------------------------
$ 21,347 $ 17,457 $ 27,798
------------------------------------
------------------------------------
Identifiable Assets as of
December 31
United States $ 598,059 $ 550,645 $ 559,558
Canada 382,575 385,324 406,883
Australia 207,837 165,683 159,993
Latin America 13,497 19,598 18,735
------------------------------------
$1,201,968 $1,121,250 $1,145,169
------------------------------------
------------------------------------
<FN>
(1) Includes a gain of $15.7 million in 1994 on the sale of the Company's
interest in the Dee mine.
(2) Includes a gain of $11.2 million in 1994 on the dilution of the
Company's interest in Prime.
(3) Includes write-downs of: $16 million and $28.5 million in 1993 and
1992, respectively, for the United States; $7.1 million in 1992 for
Canada; and $3.5 million in 1992 for Latin America.
</TABLE>
SEGMENT INFORMATION
<TABLE>
<CAPTION>
1994 1993 1992
-----------------------------------
<S> <C> <C> <C>
Revenues
Gold $ 632,031 $ 688,080 $ 639,253
Sulphur 26,882 16,220 22,867
Interest and other (1,2) 46,574 17,928 21,400
-------------------------------------
$ 705,487 $ 722,228 $ 683,520
-------------------------------------
-------------------------------------
Operating Earnings (Loss)
Gold (1,3) $ 156,013 $ 161,947 $ 34,318
Sulphur (4) (163) (25,932) 4,034
-------------------------------------
Operating earnings 155,850 136,015 38,352
Exploration expense (21,347) (17,457) (27,798)
Net corporate expense (2,5) (28,690) (50,162) (189,049)
-------------------------------------
Income (Loss) Before Taxes
and Minority Interest $ 105,813 $ 68,396 $ (178,495)
-------------------------------------
-------------------------------------
Depreciation, Depletion and
Amortization
Gold $ 66,857 $ 90,842 $ 103,569
Sulphur 7,861 10,629 13,133
Corporate 1,453 1,906 781
--------------------------------------
$ 76,171 $ 103,377 $ 117,483
--------------------------------------
--------------------------------------
Exploration Expense
Gold $ 21,318 $ 17,017 $ 27,726
Sulphur 29 440 72
--------------------------------------
$ 21,347 $ 17,457 $ 27,798
--------------------------------------
--------------------------------------
Additions to Property,
Plant and Equipment
Gold $ 83,597 $ 54,219 $ 40,614
Sulphur 3,039 1,828 21,044
Corporate 2,018 1,778 1,795
--------------------------------------
$ 88,654 $ 57,825 $ 63,453
--------------------------------------
--------------------------------------
Identifiable Assets as of
December 31
Gold $ 796,016 $ 788,122 $ 863,017
Sulphur 143,742 142,220 160,616
Corporate:
Cash and equivalents and
short-term investments 205,180 134,719 71,064
Other 57,030 56,189 50,472
-------------------------------------
$1,201,968 $1,121,250 $1,145,169
-------------------------------------
-------------------------------------
<FN>
(1) Includes a gain of $15.7 million in 1994 on the sale of the Company's
interest in the Dee mine.
(2) Includes a gain of $11.2 million in 1994 on the dilution of the
Company's interest in Prime.
(3) Includes write-downs of mining properties and equity investments of
$39.1 million in 1992.
(4) Includes a write-down of the oil and gas property of $16 million in
1993.
(5) Includes write-downs of non-operating mining properties and
investments of $91.2 million in 1992 and restructuring and business
combination expenses of $8.2 million in 1993 and $48.4 million in
1992.
</TABLE>
47
<PAGE>
SEVEN-YEAR SELECTED DATA (1)
Homestake Mining Company and Subsidiaries
(Dollar amounts in thousands, except per share and per ounce amounts)
<TABLE>
<CAPTION>
1994 1993 1992 1991
---------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Revenues $705,487 $722,228 $683,520 $671,600
Production costs 447,129 454,623 470,374 468,107
Depreciation, depletion
and amortization 76,171 103,377 117,483 116,993
Exploration 21,347 17,457 27,798 47,440
Administrative and
general 38,159 40,553 48,514 47,405
Interest and other 16,868 13,639 19,114 12,336
Write-downs and
restructuring costs 24,183 178,732 185,987
Income and mining tax
expense (credit) 18,880 12,775 (2,889) 5,582
Minority interest
(credit) 8,917 3,127 230 (4,494)
---------------------------------------------------
Income (loss) from
continuing
operations 78,016(2) 52,494(3) (175,836)(4,5) (207,756)(6)
Income (loss) from
discontinued
operations (25,359)
Extraordinary gain
Cumulative effect (28,800)(7)
----------------------------------------------------
(2) (3) (4,5) (6,7)
Net income (loss) $78,016 $52,494 $(175,836) $(261,915)
PER SHARE
Income (loss) from
continuing
operations $0.57(2) $0.38(3) $(1.31)(4,5) $(1.57)(6)
Income (loss) from
discontinued
operations (0.19)
Extraordinary gain
Cumulative effect (0.22)(7)
-----------------------------------------------------
Net income (loss) $0.57(2) $0.38(3) $(1.31)(4,5) $(1.98)(6,7)
-----------------------------------------------------
Dividends paid
(Homestake only) $0.175 $0.10 $0.20 $0.20
-----------------------------------------------------
<CAPTION>
1990 1989 1988
------------------------------------
<S> <C> <C> <C>
OPERATIONS
Revenues $793,660 $771,126 $520,708
Production costs 473,688 405,246 276,082
Depreciation,
depletion and
amortization 113,443 103,110 59,472
Exploration 50,695 49,394 47,952
Administrative and
general 50,631 44,641 38,674
Interest and other 28,475 33,073 26,315
Write-downs and
restructuring
costs 32,600 44,963 28,163
Income and mining
tax expense (credit) 40,267 56,195 25,702
Minority interest
(credit) (350) (266) 1,036
------------------------------------
Income (loss) from
continuing
operations 4,211(8) 34,770(9) 17,312(11)
Income (loss) from
discontinued
operations 7,979 31,667 15,558
Extraordinary gain 3,678(10)
Cumulative effect 3,125(12)
------------------------------------
(8) (9,10) (11,12)
Net income (loss) $12,190 $70,115 $35,995
PER SHARE
Income (loss) from
continuing
operations $0.02(8) $0.28(9) $0.14(11)
Income (loss) from
discontinued
operations 0.06 0.25 0.13
Extraordinary gain 0.03(10)
Cumulative effect 0.02(12)
--------------------------------------
Net income (loss) $0.08(8) $0.56(9,10) $0.29(11,12)
--------------------------------------
Dividends paid
(Homestake
only) $0.20 $0.20 $0.20
--------------------------------------
<FN>
1 Seven-year selected data reflects the 1992 combination of Homestake
and HCI accounted for as a pooling of interests and treats base
metals, oil and gas, uranium and HCI's non-gold operations as
discontinued operations.
2 Includes a gain of $12.6 million ($15.7 million pretax) or $0.09 per
share on the sale of the Company's interest in the Dee mine and a gain
of $11.2 million (no tax expense) or $0.08 per share on dilution of
the Company's interest in Prime.
3 Includes expense of $12.8 million ($16 million pretax) or $0.09 per
share for the write-down of the Company's investment in the oil and
gas assets at Main Pass 299 and expense of $6.8 million ($8.2 million
pretax) or $0.05 per share for restructuring and business combination
costs.
4 Includes expense of $117.7 million ($130.3 million pretax) or $0.87
per share for write-downs of certain mining properties and
investments.
5 Includes expense of $32.3 million ($48.4 million pretax) or $0.24 per
share for restructuring and business combination costs.
6 Includes expense of $165.5 million ($172.4 million pretax) or $1.25
per share for write-downs of certain mining properties and investments
and expense of $7.8 million ($13.6 million pretax) or $0.06 per share
for HCI's 1991 restructuring.
</TABLE>
48
<PAGE>
Homestake Mining Company and Subsidiaries
(Dollar amounts in thousands, except per share and per ounce amounts)
<TABLE>
<CAPTION>
1994 1993 1992 1991
---------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL POSITION
Cash and short-term
investments $205,180 $134,719 $71,064 $164,353
Other current assets 137,619 103,491 108,288 137,217
Property, plant and
equipment - net 808,221 830,228 911,588 844,909
Other long-term
assets 50,948 52,812 54,229 206,352
---------------------------------------------------
Total assets $1,201,968 $1,121,250 $1,145,169 $1,352,831
---------------------------------------------------
---------------------------------------------------
Current liabilities $96,895 $104,350 $155,894 $191,145
Long-term debt 185,000 189,191 205,174 279,190
Other long-term
obligations 110,719 93,674 88,002 86,193
Deferred income
taxes 136,274 164,030 162,587 100,797
Minority interest (13) 84,310 54,761 68,074 19,864
Shareholders' equity 588,770 515,244 465,438 675,642
---------------------------------------------------
Total liabilities
and shareholders'
equity $1,201,968 $1,121,250 $1,145,169 $1,352,831
---------------------------------------------------
---------------------------------------------------
RATIOS
Debt to Equity 31% 37% 53% 52%
Return on Shareholders'
Equity 14% 11% (31)% (30)%
CAPITAL EXPENDITURES $88,654 $57,825 $63,453 $166,458
OPERATING STATISTICS
Gold production
(thousand ounces) 1,696 1,918 1,912 1,801
Cash cost per ounce $254 $231 $248 $269
Average gold price
realized per ounce $384 $359 $348 $376
RESERVES
Gold (million ounces) 17.9 18.4 17.3 18.5
Eskay Creek Silver
(million ounces) 51.5 55.1
Sulphur (million
long tons) 11.7 11.0 11.2 11.2
<CAPTION>
1990 1989 1988
-------------------------------------
<S> <C> <C> <C>
FINANCIAL POSITION
Cash and short-term
investments $332,690 $323,501 $295,538
Other current assets 295,843 209,998 172,936
Property, plant and
equipment - net 902,161 947,494 692,020
Other long-term
assets 381,121 267,504 213,321
-------------------------------------
Total assets $1,911,815 $1,748,497 $1,373,815
-------------------------------------
-------------------------------------
Current liabilities $205,863 $145,325 $95,926
Long-term debt 408,902 440,888 283,600
Other long-term
obligations 51,253 47,000 41,425
Deferred income
taxes 108,681 114,828 61,663
Minority interest (13) 78,422 98,972 58,976
Shareholders' equity 1,058,694 901,484 832,225
-------------------------------------
Total liabilities and
shareholders'
equity $1,911,815 $1,748,497 $1,373,815
-------------------------------------
-------------------------------------
RATIOS
Debt to Equity 48% 51% 37%
Return on
Shareholders' Equity 1% 8% 4%
CAPITAL EXPENDITURES $139,352 $266,279 $281,040
OPERATING STATISTICS
Gold production
(thousand ounces) 1,979 1,738 1,312
Cash cost per ounce $248 $247 $263
Average gold price
realized per ounce $392 $394 $434
RESERVES
Gold (million ounces) 19.6 20.6 14.3
Eskay Creek Silver
(million ounces)
Sulphur (million
long tons) 11.2
<FN>
7 Includes expense of $28.8 million (no tax benefit) or $0.22 per share
for the cumulative effect of the change in accounting for
postretirement benefits other than pensions.
8 Includes expense of $32.6 million (no tax benefit) or $0.25 per share
for the write-down of the Company's investment in North American
Metals Corp.
9 Includes expense of $30.7 million ($45 million pretax) or $0.24 per
share for the write-downs of certain mining properties of HCI.
10 Includes an extraordinary gain of $3.7 million or $0.03 per share on
the monetization of gold loans.
11 Includes expense of $28.2 million ($40 million pretax) or $0.23 per
share for write-downs of certain mining properties of HCI.
12 Includes income of $3.1 million or $0.02 per share from the cumulative
effect of the change in accounting for income taxes.
13 Includes redeemable preference shares of wholly-owned subsidiaries of
$15.9 million, $4.9 million, $46.1 million, $50.4 million and $48.9
million at December 31, 1992, 1991, 1990, 1989 and 1988, respectively.
</TABLE>
49
<PAGE>
QUARTERLY SELECTED DATA
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>
1994:
Revenues $172,402 $202,079 $166,991 $164,015 $705,487
Net income 24,214 32,955(1) 10,849 9,998 78,016(1)
Per common
share:
Net income 0.18 0.24(1) 0.08 0.07 0.57(1)
Dividends
paid 0.025 0.05 0.05 0.05 0.175
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 common
share:
Net income 0.04 0.08(2) 0.16(2) 0.09(2,3) 0.38(2,3)
Dividends
paid 0.025 0.025 0.025 0.025 0.10
<FN>
(1) Includes a gain of $12.6 million ($15.7 million pretax) or $0.09 per
share on the sale of the Company's interest in the Dee mine and a gain
of $11.2 million (no tax expense) or $0.08 per share on the dilution of
the Company's interest in Prime.
(2) Includes expense 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 the write-down of the Company's investment in the oil and gas
assets at Main Pass 299.
</TABLE>
COMMON STOCK PRICE RANGE
Homestake Mining Company and Subsidiaries
(Prices as quoted on the New York Stock Exchange)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994:
High $ 24.88 $ 22.63 $22.00 $ 20.75 $ 24.88
Low 18.88 17.38 17.50 16.13 16.13
1993:
High $ 14.63 $ 19.63 $ 21.63 $ 22.88 $ 22.88
Low 9.63 13.38 15.25 16.25 9.63
</TABLE>
50
<PAGE>
APPENDIX 1: Description of Bar Charts in Management's Discussion and Analysis
Bar Chart A:
Chart depicting net income (dollars in millions) as follows:
Year: 1992 1993 1994
Dollars: -$175.8 $52.5 $78.0
Bar Chart B:
Chart depicting gold production (ounces in millions) as follows:
Year: 1992 1993 1994
Ounces:
Homestake's
Interest: 1.75 1.77 1.61
Minority Interest: 0.06 0.09 0.09
Operations Sold: 0.10 0.06 -
Total 1.91 1.92 1.70
Bar Chart C:
Chart depicting gold revenues (dollars in millions) as follows:
Year: 1992 1993 1994
Dollars: $639.3 $688.1 $632.0
Bar Chart D:
Chart depicting cash costs per ounce (dollars per ounce) as follows:
Year: 1992 1993 1994
Dollars: $248 $231 $254
Bar Chart E:
Chart depicting administrative and general expense (dollars in millions) as
follows:
Year: 1992 1993 1994
Dollars: $48.5 $40.6 $38.2
Bar Chart F:
Chart depicting exploration expense (dollars in millions) as follows:
Year: 1992 1993 1994
Dollars:
United States: $14.8 $11.1 $11.8
Canada: $6.3 $1.9 $2.4
Australia: $4.1 $2.9 $4.0
Latin America
and Other: $2.6 $1.6 $3.1
Total $27.8 $17.5 $21.3
Bar Chart G:
Chart depicting cash and equivalents and short-term investments (dollars in
millions) as follows:
Year: 1993 1994
Dollars: $134.7 $205.2
Bar Chart H:
Chart depicting cash provided by operations (dollars in millions) as follows:
Year: 1992 1993 1994
Dollars: $73.5 $170.1 $133.7
<PAGE>
--------------------------------------------------------------------------------
APPENDIX E
HOMESTAKE FORM 10-Q FOR THE
QUARTER ENDED 31 MARCH OF 1995
--------------------------------------------------------------------------------
E-1
<PAGE>
APPENDIX E
UNITED STATES
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 March 31, 1995
( ) 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 April 28, 1995 was
137,913,000.
Page 1
<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 amount)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents $ 81,923 $ 105,701
Short-term investments 142,657 99,479
Receivables 68,961 58,994
Inventories:
Finished products 14,697 15,004
Ore and in-process 23,805 26,889
Supplies 30,134 29,822
Other 7,051 6,910
------------ -----------
Total current assets 369,228 342,799
------------ -----------
Property, plant and equipment
- at cost 1,574,626 1,579,502
Accumulated depreciation,
depletion and amortization (785,112) (771,281)
------------ -----------
Property, plant and
equipment - net 789,514 808,221
------------ -----------
Investments and other assets
Noncurrent investments 11,723 15,774
Other assets 33,718 35,174
------------ -----------
Total investments and other
assets 45,441 50,948
------------ -----------
Total Assets $1,204,183 $1,201,968
------------ -----------
------------ -----------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Accounts payable $ 31,118 $ 35,674
Accrued liabilities:
Payroll and other
compensation 20,268 22,178
Reclamation 16,094 15,266
Other 18,706 16,694
Income and other taxes payable 9,485 7,083
------------ -----------
Total current liabilities 95,671 96,895
------------ -----------
Long-term liabilities
Long-term debt 185,000 185,000
Other long-term obligations 110,277 110,719
------------ -----------
Total long-term liabilities 295,277 295,719
------------ -----------
Deferred income and mining taxes 145,606 136,274
Minority interest in consolidated
subsidiaries 85,361 84,310
Shareholders' equity
Capital stock, $1 par value
per share:
Preferred - 10,000 shares
authorized; no shares
outstanding
Common - 250,000 shares
authorized; shares
outstanding:
1995 - 137,871;
1994 - 137,785 137,871 137,785
Other shareholders' equity 444,397 450,985
------------ -----------
Total shareholders' equity 582,268 588,770
------------ -----------
Total Liabilities and
Shareholders' Equity $1,204,183 $1,201,968
------------ -----------
------------ -----------
</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 March 31,
1995 1994
---------- ------------
<S> <C> <C>
Revenues
Gold and ore sales $ 159,909 $ 161,003
Sulphur and oil sales 12,154 4,940
Interest income 4,263 1,765
Equity earnings (80) 328
Other income 3,686 4,366
---------- -----------
179,932 172,402
---------- -----------
Costs and Expenses
Production costs 118,434 103,187
Depreciation, depletion
and amortization 23,003 20,107
Administrative and
general expense 9,291 8,194
Exploration expense 4,754 3,064
Interest expense 2,632 2,993
Other expense 697 222
---------- -----------
158,811 137,767
---------- -----------
Income Before Taxes and
Minority Interest 21,121 34,635
Income and Mining Taxes (11,393) (8,694)
Minority Interest (3,168) (1,727)
---------- -----------
Net Income $ 6,560 $ 24,214
---------- -----------
---------- -----------
Net Income Per Share $ 0.05 $ 0.18
---------- -----------
---------- -----------
Average Shares Used in
the Computation 137,816 137,675
---------- -----------
---------- -----------
Dividends Per Common Share $ 0.05 $ 0.025
---------- -----------
---------- -----------
</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>
Three Months Ended March 31,
1995 1994
---------- -----------
<S> <C> <C>
Cash Flows from Operations
Net income $ 6,560 $ 24,214
Reconciliation to net cash provided
by operations:
Depreciation, depletion and
amortization 23,003 20,107
Deferred taxes, minority interest
and other 10,044 8,068
Gain on disposals of assets (4,473) (1,743)
Effect of changes in operating
working capital items (6,062) (18,048)
---------- ---------
Net cash provided by operations 29,072 32,598
---------- ---------
Investment Activities
Increase in short-term
investments (43,178) (36,685)
Additions to property, plant and
equipment (11,815) (15,173)
Proceeds from sales of assets 7,634 3,997
Other 331
---------- ---------
Net cash used in investment
activities (47,028) (47,861)
---------- ---------
Financing Activities
Common shares issued 1,070 4,367
Dividends paid (6,892) (3,442)
Debt repayments (8,352)
---------- ---------
Net cash used in financing activites (5,822) (7,427)
---------- ---------
Net decrease in cash and equivalents (23,778) (22,690)
Cash and equivalents, January 1 105,701 134,719
---------- ---------
Cash and equivalents, March 31 $ 81,923 $112,029
---------- ---------
---------- ---------
</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,
1994.
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 Note 2, 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 February 1995, the Company sold its 28% equity interest in the Torres
silver mining complex for $6 million. This sale resulted in a pretax
gain of $2.7 million, which is included in other income.
3. Under the Company's foreign currency protection program, the Company
has entered into a series of foreign currency option contracts which
established trading ranges within which the United States dollar may
be exchanged for foreign currencies by setting minimum and maximum
exchange rates. Option contracts outstanding as of March 31, 1995 were
as follows:
<TABLE>
<CAPTION>
Exchange Rates
Amount Covered To U.S. $ Expiration
Currency (U.S. Dollars) Minimum Maximum Date
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Canadian $137,500,000 $0.67 $0.77 1995 - 1997
Australian 66,500,000 0.70 0.76 1995 - 1996
------------
$204,000,000
</TABLE>
4. In the fourth quarter of 1994, the Company entered into forward sales
for 183,200 ounces of gold it expects to produce at the Nickel Plate
mine during 1995 and 1996. The prices to be received range from $386 to
$437 per ounce and average $412 per ounce. The purpose of the forward
sales program is to allow for recovery of the Company's remaining
investment in the mine and provide for estimated reclamation costs.
Results for the first quarter of 1995 include sales under this program
of 21,500 ounces at an average price of $389 per ounce. At March 31,
1995 forward sales for 161,700 ounces at an average price of $415 per
ounce remain outstanding under this program.
5. 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. The EPA asserted 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 on-site remedial work
has been completed. The Company estimates that the remaining cost of
actions required by the decree, including EPA oversight costs, will be
less than $1 million. The EPA has certified that the Company has fully
performed remedial actions required by the decree. The EPA also has
notified the Company of its intention to move forward with the deletion
of this site from the NPL, and the Company expects deletion to occur in
1995.
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 served 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 a point where contaminates off-site are below natural
background levels. The Company has decommissioned and disposed of the
mills and has closed the tailings impoundments at the site. The
estimated costs of continued compliance are included in the accrued
reclamation liability. All EPA oversight costs for the site have been
paid and no additional oversight costs are accruing.
5
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Title X of the Energy Policy Act of 1992 (the Act) authorized
appropriations of $270 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 of the
Department of Energy (DOE), which were issued in 1994. Pursuant to the
Act, the Company may submit requests for reimbursement under the Act for
51.2% of the past and future costs of reclaiming the Grants site in
accordance with the approved reclamation plan and Nuclear 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. To date, Congress has
appropriated $83 million for disbursement in fiscal years 1994 and 1995
to eligible licensees. In 1994, the Company submitted an initial claim
of $14.1 million for the DOE's share of past costs incurred through
December 31, 1993 and a claim for approximately $7 million will be
submitted in 1995 for 1994 expenditures. The Company expects to file
additional claims on an annual basis for expenditures made in the prior
year. The Company records a receivable and an increase in long-term
accrued reclamation when claims are filed with the DOE. The
accompanying balance sheet at March 31, 1995 includes a receivable of
$9.8 million from the DOE for claims filed, net of $4.3 million
reimbursements received through that date. The Company believes that
its reclamation reserves for uranium operations and amounts expected to
be received under the Act are sufficient to provide for all reclamation
costs for the Grants site.
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 the above matters
will not have a material adverse impact on its financial condition or
results of operations.
In addition to the above, the Company is party to legal actions and
administrative proceedings and is subject to claims arising in the
ordinary course of business. The Company believes the disposition of
these matters will not have a material adverse effect on its financial
position or results of operations.
6
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Item 2 - Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
GOLD PRODUCTION
The following chart details Homestake's gold production and cash operating
costs per ounce by location, and consolidated revenue, cash operating costs
and noncash costs per ounce.
<TABLE>
<CAPTION>
Production Cash Operating Costs
(Ounces in thousands) (Dollars per ounce)
Three Months Ended Three Months Ended
Percentage March 31, March 31,
Mine Interest (%) 1995 1994 1995 1994
---- ------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C>
Homestake 100 98.7 103.2 $305 $255
McLaughlin 100 52.2 66.8 288 231
Round Mountain 25 23.0 34.0 264 155
Joint Ventures 7.1 10.3 332 260
------ -----
Total United
States 181.0 214.3
Eskay Creek (1,2) 100 65.2 186
Williams 50 48.1 61.7 235 199
David Bell (3) 50 17.4 25.0 253 175
Nickel Plate 100 21.5 24.0 342 278
Snip (2,4) 40 12.6 12.7 162 170
------ -----
Total Canada 164.8 123.4
Kalgoorlie,
Australia 50 88.9 89.8 260 265
El Hueso,
Chile 100 8.8 14.6 384 339
Mines not shown
or sold 5.3 12.3 169 223
------ ------
Total Production 448.8 454.4 $263 $234
Minority Interest (54.9) (22.4)
------ ------
Homestake's Share 393.9 432.0
------ ------
------ ------
<CAPTION>
Three Months Ended
March 31,
Per Ounce of Gold 1995 1994
----------------- ----- -----
<S> <C> <C>
Revenue $381 $385
Cash Operating Costs 263 234
Noncash Costs (5) 51 47
<FN>
(1) Ounces produced are expressed on a gold equivalent basis and include
43,000 payable ounces of gold and 1.8 million ounces of silver
contained in ore sold to smelters.
(2) For comparison purposes, cash operating costs per ounce include
estimated third-party costs incurred by smelters and others to produce
marketable gold and silver.
(3) Ounces produced include 1,000 and 1,900 ounces of gold production from
the Quarter Claim in the 1995 and 1994 first quarters, respectively.
(4) Includes ounces of gold contained in dore and concentrates.
(5) Includes depreciation, end-of-mine reclamation accruals, and
amortization of the cost of property acquisitions.
</TABLE>
7
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis (continued)
-----------------------------------------------
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.)
The Company recorded net income of $6.6 million or 5 cents per share during
the first quarter of 1995 compared to net income of $24.2 million or 18 cents
per share during the first quarter of 1994. The decrease in earnings resulted
primarily from lower gold production at certain locations, higher exploration
costs and a higher effective tax rate. Gold production was 448,800 equivalent
ounces in the 1995 first quarter, almost equal to the 454,400 ounces produced
in the 1994 first quarter. Lower production due to the effects of severe
weather conditions at the McLaughlin mine and to temporary production problems
at certain of the Company's other operations was offset by initial production
from the new Eskay Creek mine.
Product sales from gold operations of $159.9 million during the 1995 first
quarter compare to $161 million during the prior year's first quarter. During
the first quarter of 1995, 444,700 equivalent ounces of gold were sold at an
average gold price of $381 per ounce compared to 433,200 ounces of gold sold
at an average price of $385 per ounce during the first quarter of 1994.
Finished gold inventories decreased by 4,100 ounces during the first quarter
of 1995 compared to a 21,200 ounce decrease during the first quarter of 1994.
In January 1995, commercial production began at Prime Resources Group Inc's
(Prime) Eskay Creek mine in northern British Columbia. During the 1995 first
quarter, the Eskay Creek mine sold ore containing 43,000 ounces of gold and
1.8 million ounces of silver, equivalent to 65,200 ounces of gold. Cash
production costs, including the costs incurred by third-party smelters to
produce marketable gold and silver, were $186 per ounce of gold equivalent.
Sales of ore containing approximately 6,000 equivalent ounces of gold were
delayed and will not be realized until the 1995 second quarter due to a rail
strike which halted shipments to a smelter in Quebec during the latter part of
March. Operating efficiency and related costs should continue to improve at
Eskay Creek and the Company expects the mine will produce ore containing
approximately 270,000 ounces of gold equivalent in 1995.
Domestic production during the 1995 first quarter decreased by 16% to 181,000
ounces from the prior year's first quarter, primarily due to declines in
production at the Homestake, McLaughlin and Round Mountain mines. During the
1995 first quarter, production of 98,700 ounces at the Homestake mine in South
Dakota was 4,500 ounces lower than the 1994 first quarter. The collapse of a
ventilation shaft in 1994 continued to limit access to the deeper higher-grade
mining areas in the underground operations. A new ventilation shaft was
completed in March 1995, which has enabled the mine to increase production
from the higher-grade areas. The McLaughlin mine in northern California
produced 52,200 ounces at a cash cost of $288 per ounce during the first
quarter of 1995 compared to 66,800 ounces at a cash cost of $231 per ounce
during the first quarter of 1994. The decrease in production primarily is a
result of severe rainstorms which caused flooding and related problems at the
mine during the 1995 first quarter. Despite the flooding, environmental
protection systems performed as expected and there was no degradation in
downstream water quality. Production at the McLaughlin mine is expected to
return to more normal levels by the end of the 1995 second quarter.
Homestake's share of the production from the Round Mountain mine in Nevada
decreased by 32% to 23,000 ounces during the 1995 first quarter. Production
during the first quarter of 1994 was unusually high due to the one-time
benefit resulting from applying more solution to ore on the dedicated heap-
leach pads. The lower production resulted in an increase in the Round
Mountain mine's cash costs from $155 per ounce during the 1994 first quarter
to $264 per ounce during the 1995 first quarter.
Overall foreign gold production during the first quarter of 1995 increased by
14% from the prior year's first quarter, primarily due to the commencement of
production at the Eskay Creek mine, partially offset by decreases in
production from the Williams and David Bell mines in Canada and the El Hueso
mine in Chile. Production of 48,100 ounces at the Williams mine during the
first quarter of 1995 decreased from 61,700 ounces during the first quarter of
1994 reflecting an expected decline in ore grades. As a result, cash costs at
the Williams mine increased by 18% to $235 per ounce over the prior year's
first quarter. The David Bell mine produced 16,400 ounces at a cash cost of
$253 per ounce during the first quarter of 1995 compared to 23,100 ounces at a
cash cost of $168 per ounce during the first quarter of 1994. The lower
production and resulting
8
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
increase in cash costs at the David Bell mine is due to the failure of a stope
hanging wall and variations in grade related to stope scheduling.
Homestake Gold of Australia's (HGAL) share of gold production at the
Kalgoorlie operations in Western Australia totaled 88,900 ounces during the
1995 first quarter compared to 89,800 ounces during the 1994 first quarter.
Cash costs at the Kalgoorlie operations decreased slightly to $260 per ounce
during the first quarter of 1995 from $265 during the first quarter of 1994.
Gold production at the El Hueso mine totaled 8,800 ounces during the 1995
first quarter compared to 14,600 ounces during the prior year's first quarter
reflecting a decrease in tons leached. Gold mining at El Hueso ceased in
February 1995 and limited production from heap leaching is expected to
continue through 1995.
Because of the lower production, cash operating costs during the first quarter
of 1995 were $263 per ounce, 12% higher than in the first quarter of 1994.
However, the Company has resolved most of the problems which adversely
affected first quarter production, and still expects to produce approximately
1.9 million ounces of gold during 1995 at an average production cost which
will be lower than experienced during the 1995 first quarter.
The Main Pass 299 sulphur mine recorded operating income of $2.1 million
during the 1995 first quarter compared to an operating loss of $1.1 million
during the 1994 first quarter. This increase primarily is due to
significantly higher sales volumes and a $17 per ton increase in the average
realized price of sulphur.
Depreciation, depletion and amortization expense of $23 million during the
first quarter of 1995 compares to $20.1 million during the first quarter of
1994. The increase primarily is due to depreciation related to the Eskay
Creek mine.
Exploration expense increased to $4.8 million during the first quarter of 1995
from $3.1 million during the first quarter of 1994. The increase is primarily
due to increased activity at the Ruby Hill advanced exploration project in
Nevada and exploration work near the El Hueso mine.
In February 1995, the Company sold its 28% interest in the Torres silver
mining complex in Mexico for $6 million. A pretax gain of $2.7 million was
recorded on the sale.
The Company's general policy is to sell its production at current prices.
However, in certain limited circumstances, the Company will enter into forward
sales commitments for small portions of its gold production. In the fourth
quarter of 1994, the Company entered into forward sales for 183,200 ounces of
gold it expects to produce at the Nickel Plate mine during 1995 and 1996. The
prices to be received range from $386 to $437 per ounce and average $412 per
ounce. The purpose of the forward sales program is to allow for recovery of
the Company's remaining investment in the mine and provide for estimated
reclamation costs. Results for the first quarter of 1995 include sales under
this program of 21,500 ounces at an average price of $389 per ounce. At March
31, 1995 forward sales for 161,700 ounces at an average price of $415 per
ounce remain outstanding under this program.
A substantial portion 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 with the U.S. dollar. The
Company has a foreign currency protection program which establishes 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 March 31, 1995 the
Company had a net unrealized loss of $0.1 million on open contracts.
Other income for the first quarter of 1995 includes the $2.7 million gain on
the sale of the Company's interest in the Torres mining complex, a $1.9
million gain on the sale of certain exploration properties in Australia and a
net foreign currency exchange loss of $2.4 million. The net foreign currency
loss includes a $2 million foreign currency transaction loss on the repayment
of intercompany debt denominated in Canadian dollars. Other income for the
first quarter of 1994 included a foreign currency exchange gain of $0.4
million, income of $1.8 million from insurance proceeds, and a $1.3 million
gain on the sale of HGAL's Fortnum property.
9
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
The effective income tax rate for the Company in 1995 has increased from the
prior year. In 1994, the Company benefited from reversals of tax valuation
allowances principally in foreign jurisdictions. These items were fully
utilized in 1994 and, as a result, the Company will now report a higher tax
rate for all of 1995.
Income allocable to minority interests in consolidated subsidiaries increased
to $3.2 million in the first quarter of 1995 from $1.7 million in the first
quarter of 1994. This increase primarily is due to the income derived from
the Eskay Creek mine. Prime, which owns 100% of the Eskay Creek mine, is a
50.6%-owned subsidiary of Homestake.
Liquidity and Capital Resources
Cash provided by operations totaled $29.1 million in the first quarter of 1995
compared to $32.6 million in the first quarter of 1994. Working capital at
March 31, 1995 amounted to $273.6 million, including $224.6 million
in cash and equivalents and short-term investments.
Capital additions of $11.8 million for the first quarter of 1995 include $7.5
million at the Kalgoorlie operations primarily for the Fimiston mill
expansion. The Fimiston mill expansion should be completed by the end of the
1995 third quarter. When finished, it will provide an additional 4 million
tons of mill capacity at the Kalgoorlie operations. The 3 million ton Oroya
mill will then be dismantled to make room for the next major development of
the Super Pit, resulting in a net increase of 1 million tons in Kalgoorlie
mill capacity.
The Company has a $150 million line of credit under which borrowings may be
drawn in U.S. dollars, Canadian dollars, ounces of gold or any combination of
these. No amounts have been borrowed under this facility. The Company has no
required debt payments until the year 2000.
During the second quarter of 1994, the Company increased its quarterly
dividend from $0.025 to $0.05 per share. Total common stock dividends paid
during the first quarter of 1995 were $6.9 million compared to $3.4 million
for the comparable period of 1994.
Future results will be impacted by such factors as the market price of gold,
the Company's ability to expand its ore reserves and the fluctuations of
foreign currency exchange rates. The Company believes that the combination of
cash, short-term investments, available lines of credit and future cash flows
from operations will be sufficient to meet normal operating requirements and
anticipated dividends.
10
<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 California") 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 California 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
California 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 California induced those breaches, and that Homestake California 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 was stayed in order for the matter to be arbitrated.
During the second quarter of 1994, Goldstake amended its claim to allege
actual damages of $137.5 million. The arbitration hearing was held in January
1995. At the arbitration, Goldstake claimed damages of approximately $79
million. On March 27, 1995 the arbitrators entered their decision under which
Homestake California and Whitewood are to pay Goldstake $0.5 million within 30
days and promptly apply for all necessary permits to construct and operate a
mine and processing facility. If all permits have not been obtained by
December 31, 1995, Homestake California and Whitewood are to pay an additional
$0.5 million. If all permits have not been obtained by December 31, 1996,
Homestake California and Whitewood are to pay Goldstake an additional $0.5
million.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Method of Filing
----------------
3.4 - Bylaws (as amended through
May 9, 1995) of Homestake Filed herewith
Mining Company electronically
11 - Computation of Earnings Filed herewith
Per Share electronically
27 - Financial Data Schedule Filed herewith
electronically
(b) Reports on Form 8-K
One report on Form 8-K was filed during the quarter ended March 31,
1995. The report, dated March 20, 1995, was submitted in order to file
two documents as follows: (1) Amended and Restated Credit Agreement and
(2) Retirement plan for outside directors of the Company.
11
<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: May 10, 1995 By: /s/ Gene G. Elam
---------------- -----------------
Gene G. Elam
Vice President, Finance
and Chief Financial
Officer
Date: May 10, 1995 By: /s/ David W. Peat
---------------- ------------------
David W. Peat
Controller (Chief
Accounting Officer)
12
<PAGE>
--------------------------------------------------------------------------------
APPENDIX F
HOMESTAKE FORM 10-Q FOR THE
QUARTER ENDED 30 JUNE 1995
--------------------------------------------------------------------------------
F-1
<PAGE>
--------------------------------------------------------------------------------
REVIEW OPINION OF INDEPENDENT ACCOUNTANTS
To the Directors of Homestake Mining Company:
We have made a review of the condensed consolidated balance sheet of Homestake
Mining Company as of 30 June 1995, and the related condensed statements of
consolidated income and cash flows for the six month period then ended as set
out in Form 10-Q for the quarterly period ended 30 June 1995 as appearing in
Appendix F of this Offer Document. We were not engaged to review or report on
the condensed statements of consolidated income for the three months ended 30
June 1995, the three and six months ended 30 June 1994, and the condensed
statement of consolidated cash flows for the six months ended 30 June 1994. Our
review was made in accordance with standards established by the American
Institute of Certified Public Accountants.
A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical procedures to financial data, and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of 31 December 1994, and the
related statements of consolidated operations, shareholders' equity, and cash
flows for the year then ended as included in Appendix D of this Offer Document;
and in our report dated 8 February 1995, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of 31 December
1994, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
Coopers & Lybrand L.L.P.
San Francisco, California
14 September 1995
--------------------------------------------------------------------------------
F-2
<PAGE>
APPENDIX F
UNITED STATES
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, 1995
( ) 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 August 4, 1995 was
137,953,936.
Page 1
<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 amount)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents $ 150,804 $ 105,701
Short-term investments 99,418 99,479
Receivables 71,835 58,994
Inventories:
Finished products 14,642 15,004
Ore and in-process 23,361 26,889
Supplies 29,077 29,822
Other 7,973 6,910
------------ -----------
Total current assets 397,110 342,799
------------ -----------
Property, plant and equipment - at cost 1,602,133 1,579,502
Accumulated depreciation, depletion
and amortization (810,788) (771,281)
------------ -----------
Property, plant and equipment
- net 791,345 808,221
------------ -----------
Investments and other assets
Noncurrent investments 12,454 15,774
Other assets 31,722 35,174
------------ -----------
Total investments and other assets 44,176 50,948
------------ -----------
Total Assets $1,232,631 $1,201,968
------------ -----------
------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 37,730 $ 35,674
Accrued liabilities:
Payroll and other compensation 21,746 22,178
Reclamation 13,314 15,266
Other 14,565 16,694
Income and other taxes payable 17,503 7,083
----------- -----------
Total current liabilities 104,858 96,895
----------- -----------
Long-term liabilities
Long-term debt 185,000 185,000
Other long-term obligations 115,383 110,719
------------ -----------
Total long-term liabilities 300,383 295,719
------------ -----------
Deferred income and mining taxes 149,280 136,274
Minority interest in consolidated
subsidiaries 90,690 84,310
Shareholders' equity
Capital stock, $1 par value per share:
Preferred - 10,000 shares authorized;
no shares outstanding
Common - 250,000 shares authorized;
shares outstanding:
1995 - 137,926; 1994 - 137,785 137,926 137,785
Other shareholders' equity 449,494 450,985
------------ -----------
Total shareholders' equity 587,420 588,770
------------ -----------
Total Liabilities and Shareholders' Equity $1,232,631 $1,201,968
------------ -----------
------------ -----------
</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,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Gold and ore sales $178,216 $162,357 $338,125 $323,360
Sulphur and oil sales 10,213 5,656 22,367 10,596
Interest income 4,338 2,185 8,601 3,950
Equity earnings 541 1,172 461 1,500
Gain on issuance of
stock by subsidiary 11,224 11,224
Other income 2,282 19,485 5,968 23,851
--------- --------- --------- --------
195,590 202,079 375,522 374,481
--------- --------- --------- --------
Costs and Expenses
Production costs 117,835 112,876 236,269 216,063
Depreciation, depletion
and amortization 25,623 21,087 48,626 41,194
Administrative and
general expense 10,760 10,646 20,051 18,840
Exploration expense 7,412 4,937 12,166 8,001
Interest expense 3,141 2,534 5,773 5,527
Other expense 1,054 5,542 1,751 5,764
--------- --------- --------- --------
165,825 157,622 324,636 295,389
--------- --------- --------- --------
Income Before Taxes and
Minority Interest 29,765 44,457 50,886 79,092
Income and Mining Taxes (13,815) (9,584) (25,208) (18,278)
Minority Interest (4,771) (1,918) (7,939) (3,645)
--------- --------- --------- ---------
Net Income $ 11,179 $ 32,955 $ 17,739 $ 57,169
--------- --------- --------- ---------
--------- --------- --------- ---------
Net Income Per Share $ 0.08 $ 0.24 $ 0.13 $ 0.42
--------- --------- --------- ---------
--------- --------- --------- ---------
Average Shares Used in
the Computation 137,909 137,735 137,862 137,705
--------- --------- --------- --------
--------- --------- --------- --------
Dividends Per Common Share $ 0.05 $ 0.05 $ 0.10 $ 0.075
--------- --------- --------- --------
--------- --------- --------- --------
</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,
1995 1994
--------- --------
<S> <C> <C>
Cash Flows from Operations
Net income $ 17,739 $ 57,169
Reconciliation to net cash provided by
operations:
Depreciation, depletion and amortization 48,626 41,194
Deferred taxes, minority interest and other 27,179 25,735
Gain on disposals of assets (4,823) (18,020)
Gain on issuance of stock by subsidiary (11,224)
Effect of changes in operating working
capital items (2,806) (35,784)
--------- ---------
Net cash provided by operations 85,915 59,070
--------- ---------
Investment Activities
Decrease (increase) in short-term investments 61 (57,405)
Additions to property, plant and equipment (39,487) (33,430)
Proceeds from sales of assets 10,163 21,611
Other 324
--------- ---------
Net cash used in investment activities (28,939) (69,224)
--------- ---------
Financing Activities
Common shares issued 1,914 4,547
Dividends paid (13,787) (10,329)
Debt repayments (8,352)
Stock issued by subsidiary 31,870
--------- ---------
Net cash provided by (used in) financing
activities (11,873) 17,736
--------- ---------
Net increase in cash and equivalents 45,103 7,582
Cash and equivalents, January 1 105,701 134,719
--------- ---------
Cash and equivalents, June 30 $150,804 $142,301
--------- ---------
--------- ---------
</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,
1994.
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 and 3,
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 June 1994, Prime Resources Group Inc. (Prime) sold five million
common shares at approximately $6.70 to the public. Net proceeds of
approximately $31.9 million from this issue were used to fund a portion
of the construction and development costs of the Eskay Creek mine in
Canada. This transaction resulted in a reduction of the Company's
interest in Prime from 54.2% to 50.6%. The Company recorded an $11.2
million gain in the second quarter of 1994 on the transaction in
recognition of the net increase in the book value of the Company's
investment in Prime. Deferred income taxes were not provided for on the
gain since the Company's tax basis in Prime substantially exceeds its
carrying value.
3. Other income for the six months ended June 30, 1995 includes a gain of
$2.7 million on the February 1995 sale of the Company's 28% equity
interest in the Torres silver mining complex. Proceeds from this sale
totaled $6 million.
Other income for the six months ended June 30, 1994 included a $15.7
million gain on the May 1994 sale of the Company's 44% interest in the
Dee mine to Rayrock Mines, Inc. (Rayrock). Total proceeds from this
sale were $16.5 million.
Other expense for the three and six months ended June 30, 1994 included
a $5 million accrual for additional estimated reclamation costs for non-
operating properties.
4. Under the Company's foreign currency protection program, the Company has
entered into a series of foreign currency option contracts which
established trading ranges within which the United States dollar may be
exchanged for foreign currencies by setting minimum and maximum exchange
rates. Option contracts outstanding as of June 30, 1995 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 $144,600,000 $0.67 $0.77 1995 - 1997
Australian 66,600,000 0.68 0.76 1995 - 1996
------------
$211,200,000
</TABLE>
5. In the fourth quarter of 1994, the Company entered into forward sales
for 183,200 ounces of gold it expects to produce at the Nickel Plate
mine during 1995 and 1996. The prices to be received range from $386 to
$437 per ounce and average $412 per ounce. The purpose of the forward
sales program is to allow for recovery of the Company's remaining
investment in the mine and provide for estimated reclamation costs.
Results for the three and six months ended June 30, 1995 include sales
under this program of 21,400 ounces and 42,900 ounces at an average
price of $394 per ounce and $391 per ounce, respectively. At June 30,
1995 forward sales for 140,300 ounces at an average price of $418 per
ounce remain outstanding under this program.
5
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
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. The EPA asserted 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 on-site remedial work
has been completed. The Company estimates that the remaining cost of
actions required by the decree, including EPA oversight costs, will be
less than $1 million. The EPA has certified that the Company has fully
performed remedial actions required by the decree. The EPA also has
notified the Company of its intention to move forward with the deletion
of this site from the NPL, and the Company expects deletion to occur in
1995.
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 served 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 a point where contaminates off-site are below natural
background levels. The Company has decommissioned and disposed of the
mills and has closed the tailings impoundments at the site. The
estimated costs of continued compliance are included in the accrued
reclamation liability. All EPA oversight costs for the site have been
paid and no additional oversight costs are accruing.
Title X of the Energy Policy Act of 1992 (the Act) authorized
appropriations of $270 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 of the
Department of Energy (DOE), which were issued in 1994. Pursuant to the
Act, the Company may submit requests for reimbursement under the Act for
51.2% of the past and future costs of reclaiming the Grants site in
accordance with the approved reclamation plan and Nuclear 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. To date, Congress has
appropriated $83 million for disbursement in fiscal years 1994 and 1995
to eligible licensees. In 1994, the Company submitted an initial claim
of $14.1 million for the DOE's share of past costs incurred through
December 31, 1993 and a claim for $7.3 million was submitted in 1995 for
1994 expenditures. The Company expects to file additional claims on an
annual basis for expenditures made in the prior year. The Company
records a receivable and an increase in long-term accrued reclamation
when claims are filed with the DOE. The accompanying balance sheet at
June 30, 1995 includes a receivable of $17.1 million from the DOE for
claims filed, net of $4.3 million reimbursements received through that
date. The Company believes that its reclamation reserves for uranium
operations and amounts expected to be received under the Act are
sufficient to provide for all reclamation costs for the Grants site.
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 the above matters
will not have a material adverse impact on its financial condition or
results of operations.
In addition to the above, the Company is party to legal actions and
administrative proceedings and is subject to claims arising in the
ordinary course of business. The Company believes the disposition of
these matters will not have a material adverse effect on its financial
position or results of operations.
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.)
Homestake recorded net income of $11.2 million or 8 cents per share in the
second quarter of 1995 compared to net income of $33 million or 24 cents per
share in the second quarter of 1994. The decrease in earnings primarily is
due to the inclusion of nonrecurring gains totaling $23.8 million in the 1994
second quarter. The 1994 second quarter results included nonrecurring after-
tax gains of $12.6 million ($15.7 million pretax) on the sale of the Company's
interest in the Dee mine and $11.2 million ($11.2 million pretax) from
dilution of the Company's interest in Prime Resources Group Inc. (Prime)
following Prime's sale of additional shares to the public. After adjusting
for these gains, the Company's net income increased by 22% for the quarter,
reflecting higher production and sales volumes and higher average realized
gold prices, partially offset by increased exploration costs and a higher
effective tax rate. Net income for the first six months of 1995 was $17.7
million or 13 cents per share compared to net income of $57.2 million or 42
cents per share in the corresponding period in 1994. The lower level of
earnings in the first six months of 1995 compared to 1994 primarily is due to
the 1994 second quarter gains and the effect of a significantly higher income
and mining tax rate in 1995.
The Company achieved record gold production of almost 497,000 ounces in the
second quarter of 1995, surpassing last year's second quarter production by
approximately 65,000 ounces. Revenue from the Company's gold operations
increased to $178.2 million during the 1995 second quarter from $162.4
million during the 1994 second quarter. During the second quarter of 1995,
495,600 equivalent ounces of gold were sold at an average realized
price of $388 per ounce compared to 440,400 equivalent ounces of gold sold at
an average realized price of $382 per ounce during the prior year's second
quarter. Finished gold inventory increased by 1,100 ounces during the second
quarter of 1995 compared to a decrease of 8,000 ounces during the second
quarter of 1994.
In January 1995, commercial production began at the new Eskay Creek mine in
British Columbia. During the 1995 second quarter, the mine sold ore
containing 60,800 payable ounces of gold and 2.9 million payable ounces of
silver, equivalent to approximately 100,900 ounces of gold. Cash costs,
including the costs of third-party smelters, were $182 per ounce during the
1995 second quarter. The start-up of the Eskay Creek operations has been
extremely successful, and for the 1995 full year the mine is expected to
produce ore containing in excess of 300,000 ounces of gold equivalent at a
cash cost of less than $190 per ounce.
Domestic production during the 1995 second quarter decreased by 2% to 195,100
ounces reflecting production declines at the McLaughlin and Round Mountain
mines, partially offset by increased production at the Homestake mine.
Production at the McLaughlin mine in northern California, which had been
hampered by the effects of severe weather conditions in early 1995, returned
to expected levels in June. As a result, production of 63,700 ounces in the
second quarter of 1995 was only 2,400 ounces less than in the second quarter
of 1994. In June 1995, the Company received insurance proceeds of $3.5
million as reimbursement for costs associated with flooding at the mine in
early 1995. These proceeds were credited against operating costs and, as a
result, the McLaughlin mine's cash costs per ounce for the 1995 second quarter
decreased 25% to $176 per ounce from the prior year's second quarter. During
the 1995 second quarter, production at the Round Mountain mine in Nevada
decreased by 5,200 ounces to 20,100 ounces compared to the 1994 second quarter
as the result of a lower average ore grade placed on the leach pads. This
resulted in an increase in cash costs per ounce at the Round Mountain mine
from $206 in the 1994 second quarter to $247 in the 1995 second quarter. At
the Homestake mine in South Dakota, production in the second quarter of 1995
was 102,400 ounces compared to 97,400 ounces in the second quarter of 1994.
The increase in production reflects the March 1995 completion of a new
ventilation shaft, which had collapsed in the 1994 second quarter and limited
access to higher-grade ore in the lower levels of the mine. Plans for
modernizing and improving the efficiency of the mine are continuing. During
the quarter, a $5 million program to replace the obsolete pneumatic jumbo
drilling fleet with new electric hydraulic jumbos was initiated. Cash costs
at the mine decreased slightly during the 1995 second quarter to $292 per
ounce from $294 per ounce during the 1994 second quarter.
Overall foreign gold production increased by 31% to 295,000 ounces from the
prior year's second quarter primarily due to the commencement of production at
the Eskay Creek mine, partially offset by decreases at the Williams and David
Bell mines in Canada, the Kalgoorlie operations in Western Australia and the
El Hueso mine in Chile. Production of 52,900 ounces at the Williams mine
during the 1995 second quarter was 8,300 ounces lower than in the 1994 second
quarter, reflecting an expected decline in ore grades. The lower production
resulted in an increase in cash costs per ounce to
7
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
$220 per ounce during the 1995 second quarter from $186 per ounce during the
prior year's second quarter. During the 1995 second quarter, the David Bell
mine produced 22,800 ounces (including production from the 25% Quarter Claim
royalty interest) at a cash cost of $199 per ounce compared to 1994 second
quarter production of 28,300 ounces at a cash cost of $166 per ounce. The
decrease in production is attributable to temporary grinding problems in the
mill and the processing of ore which more closely approximates the remaining
life of mine average grade.
Homestake Gold of Australia's (HGAL) share of production from the Kalgoorlie
operations was 77,800 ounces during the second quarter of 1995 compared to
86,500 ounces in the prior year's second quarter. The decrease primarily is
due to a power interruption which lasted for several days and downtime to
upgrade the ore handling system. As a result, cash costs at the Kalgoorlie
operations increased from $256 per ounce during the 1994 second quarter to
$296 per ounce during the 1995 second quarter. At the El Hueso mine,
production declined by 9,200 ounces, primarily due to a decrease in tons
leached. Gold mining at the mine ceased in February 1995 and limited
production from heap leaching is expected to continue through 1995.
The Company's overall cash cost per ounce during the second quarter of 1995
was $240 per ounce compared to $245 per ounce during the second quarter of
1994.
Year-to-date 1995 revenues from gold and ore sales of $338.1 million were 5%
higher than year-to-date 1994 revenues of $323.4 million reflecting higher
gold sales volumes and a higher average realized price for gold sold. The
higher gold sales volumes are attributable to the production at the new Eskay
Creek mine and a 5,300 ounce increase in finished goods inventory during the
first half of 1995 compared to a 13,200 increase during the first half of
1994. The Company's 1995 year-to-date average realized gold price was $385
per ounce, $2 per ounce higher than in the prior year's first half. Cash
operating costs during the first six months of 1995 were $251 per ounce
compared to $240 per ounce during the first six months of 1994.
Year-to-date revenues from the Main Pass 299 sulphur mine increased to $22.4
million during the first six months of 1995 from $10.6 million during the
first six months of 1994. Operating income from the Main Pass mine of $1.3
million for the second quarter of 1995 compares to an operating loss of $1.1
million for the second quarter of 1994 and year-to-date operating income of
$3.4 million for the first half of 1995 compares to an operating loss of $2.2
million for the first half of 1994. The improved results primarily are due to
significantly higher sales volumes and a $19 per ton increase in the year-to-
date average realized price of sulphur.
Depreciation, depletion and amortization expense of $25.6 million during the
second quarter of 1995 compares to $21.1 million during the second quarter of
1994 and year-to-date depreciation expense of $48.6 million compares to $41.2
million during the first six months of 1994. The increase primarily is due to
depreciation related to the Eskay Creek mine.
Exploration expense increased to $12.2 million for the first six months of
1995 from $8 million for the first six months of 1994. The increase in
exploration expense is attributable to increased activity at the Ruby Hill
feasibility project in Nevada and exploration work near the El Hueso mine.
The higher rate of exploration expenditures will continue for the balance of
the year as the Company pursues numerous attractive exploration targets and
prospects. Total exploration expense for 1995 will be approximately $28
million compared to $21 million in 1994.
The Company's general policy is to sell its production at current prices.
However, in certain limited circumstances, the Company will enter into forward
sales commitments for small portions of its gold production. In the fourth
quarter of 1994, the Company entered into forward sales for 183,200 ounces of
gold it expects to produce at the Nickel Plate mine during 1995 and 1996. The
prices to be received range from $386 to $437 per ounce and average $412 per
ounce. The purpose of the forward sales program is to allow for recovery of
the Company's remaining investment in the mine and provide for estimated
reclamation costs. Results for the three and six months ended June 30, 1995
include sales under this program of 21,400 ounces and 42,900 ounces at an
average price of $394 per ounce and $391 per ounce, respectively. At June 30,
1995 forward sales for 140,300 ounces at an average price of $418 per ounce
remain outstanding under this program.
A substantial portion 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 with the U.S. dollar. The
Company has a foreign currency protection program which establishes 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, 1995 the
Company had a net unrealized loss of $0.2 million on open contracts.
8
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Other income for the first half of 1995 includes a $2.7 million gain on the
February 1995 sale of the Company's interest in the Torres mining complex, a
$1.9 million gain on the sale of certain exploration properties in Australia,
royalty income of $1.2 million, and a net foreign currency exchange loss of
$1.8 million. The net foreign currency loss includes a $2 million foreign
currency transaction loss on the repayment of intercompany debt denominated in
Canadian dollars. Other income for the first half of 1994 includes the $15.7
million gain on the sale of the Company's interest in the Dee mine, a foreign
currency exchange gain of $1.3 million, $1.8 million in insurance proceeds,
royalty income of $1.6 million, and $1.3 million related to the sale of HGAL's
Fortnum property.
The effective income tax rate for the Company in 1995 has increased from the
prior year. In 1994, the Company benefitted from reversals of tax valuation
allowances principally in foreign jurisdictions. These items were fully
utilized in 1994.
Income allocable to minority interests in consolidated subsidiaries increased
to $7.9 million during the first half of 1995 from $3.6 million in the first
half of 1994. This increase primarily is due to the income derived from the
Eskay Creek mine. Prime, which owns 100% of the Eskay Creek mine, is a 50.6%-
owned subsidiary of Homestake.
GOLD PRODUCTION
The following charts detail Homestake's gold production and cash operating
costs per ounce by location, and consolidated revenue, cash operating costs
and noncash costs per ounce.
<TABLE>
<CAPTION>
Production
(Ounces in thousands)
Three Months Ended Six Months Ended
Percentage June 30, June 30,
Mine Interest (%) 1995 1994 1995 1994
---- ------------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Homestake 100 102.4 97.4 201.1 200.6
McLaughlin 100 63.7 66.1 115.9 132.9
Round Mountain 25 20.1 25.3 43.1 59.3
Joint Ventures 8.9 10.3 16.0 20.6
----- ------ ------ ------
Total United States 195.1 199.1 376.1 413.4
Eskay Creek (1) 100 100.9 - 166.1 -
Williams 50 52.9 61.2 101.0 122.9
David Bell 50 22.8 28.3 40.2 53.2
Nickel Plate 100 22.4 22.5 43.9 46.5
Snip (2) 40 13.8 12.4 26.4 25.2
----- ----- ----- -----
Total Canada 212.8 124.4 377.6 247.8
Kalgoorlie,
Australia 50 77.8 86.5 166.7 176.4
El Hueso, Chile 100 4.4 13.6 13.2 28.2
Mines not shown or sold 6.6 8.8 11.9 21.1
----- ----- ----- -----
Total Production 496.7 432.4 945.5 886.9
Less Minority Interest 71.1 21.9 126.0 44.3
----- ------ ----- ------
Homestake's Share 425.6 410.5 819.5 842.6
----- ------ ----- -----
----- ------ ----- -----
</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 Six Months Ended
Percentage June 30, June 30,
Mine Interest (%) 1995 1994 1995 1994
---- ------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Homestake 100 $292 $294 $298 $274
McLaughlin 100 176 235 227 233
Round Mountain 25 247 206 256 177
Joint Ventures 277 205 302 233
Eskay Creek (3) 100 182 - 183 -
Williams 50 220 186 227 192
David Bell 50 199 166 223 170
Nickel Plate 100 369 289 356 284
Snip (3) 40 170 191 166 179
Kalgoorlie 50 296 256 277 261
El Hueso, Chile 100 458 419 408 378
Mines not shown
or sold 126 228 145 225
Weighted Average $240 $245 $251 $240
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
Per Ounce of Gold 1995 1994 1995 1994
----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Revenue $388 $382 $385 $383
Cash Operating Costs 240 245 251 240
Noncash Costs (4) 48 51 49 48
<FN>
(1) Ounces produced are expressed on a gold equivalent basis and include
60,800 payable ounces of gold and 2.9 million payable ounces of silver
contained in ore sold to smelters in the 1995 second quarter, and
103,800 payable ounces of gold and 4.7 million payable ounces of silver
contained in ore sold to smelters in the 1995 year-to-date period.
(2) Includes ounces of gold contained in dore and concentrates.
(3) For comparison purposes, cash operating costs per ounce include
estimated third-party costs incurred by smelter owners and others to
produce marketable gold and silver.
(4) Includes depreciation, end-of-mine reclamation accruals, and
amortization of the cost of property acquisitions.
</TABLE>
10
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis (continued)
------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations totaled $85.9 million in the first six months of
1995 compared to $59.1 million in the first six months of 1994. Working
capital at June 30, 1995 amounted to $292.3 million, including $250.2 million
in cash and equivalents and short-term investments.
Capital additions of $39.5 million during the first half of 1995 include $31.8
million at the Kalgoorlie operations primarily for the Fimiston mill
expansion. The Fimiston mill expansion is progressing on schedule. The four
million ton per year modification is scheduled for completion by the end of
the third quarter. The three million ton Oroya mill then will be dismantled
to allow for the next major development of the Super Pit, resulting in a net
increase of one million tons in Kalgoorlie mill capacity.
The Company has a $150 million line of credit under which borrowings may be
drawn in U.S. dollars, Canadian dollars, ounces of gold or any combination of
these. No amounts have been borrowed under this facility. The Company has no
required debt payments until the year 2000.
During the second quarter of 1994, the Company increased its quarterly
dividend from $0.025 per share to $0.05 per share. Total common stock
dividends paid during the first half of 1995 were $13.8 million compared to
$10.3 million for the comparable period of 1994.
In June, Homestake exercised its option to acquire 5% of Zoloto Mining Ltd.
for $1 million. Zoloto owns a 75% interest in the Pokrovskoye gold deposit
located in the Amur region of eastern Russia. Homestake and Zoloto are
preparing a feasibility study for the 2 million ounce deposit. Following
completion of the feasibility study, Homestake may exercise a second option
to acquire an additional 62% of Zoloto by paying a further $15 million,
thereby acquiring a 50% indirect interest in the Pokrovskoye gold deposit.
In July 1995, Homestake acquired a 10% interest (fully-diluted) in Navan
Resources plc, an Irish public company with diverse mineral interests in
Europe, for $24 million. As part of the purchase, Homestake acquired an
option to acquire 50% of Navan's interest in the Chelopech gold-copper mining
operations located 45 miles east of Sofia, Bulgaria. Current reserves and
resources at Chelopech total 4.5 million ounces of gold and 1.1 billion pounds
of copper with annual production of approximately 500,000 tonnes of ore
containing 46,000 ounces of gold annually. Further development is in
progress to increase annual production to 750,000 tonnes of ore containing
72,000 ounces of gold. Homestake is conducting a study to determine the
feasibility of further increasing the annual production rate to approximately
2,000,000 tonnes of ore containing about 200,000 ounces of gold, beginning in
2000. Once the feasibility study is completed, Homestake can acquire 50% of
Navan's interest in the operations by investing an additional $48 million,
which will be used to fund a portion of the cost of the expansion.
Future results will be impacted by such factors as the market price of gold,
the Company's ability to expand its ore reserves and the fluctuations of
foreign currency exchange rates. The Company believes that the combination
of cash, short-term investments, available lines of credit and future cash
flows from operations will be sufficient to meet normal operating requirements
and anticipated dividends.
11
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Part II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
At the Annual Meeting of Shareholders held on May 9, 1995, shareholders voted
on and approved 1) the election of five Class II Directors to serve until the
1998 Annual Meeting and one Class III Director to serve until the 1996 Annual
Meeting and 2) the appointment of Coopers & Lybrand L.L.P. as independent
auditors for 1995. Shareholder votes were as follows:
(1) The election of five Class II and one Class III Directors:
Votes for Votes Withheld
----------- --------------
Class II
--------
Henry G. Grundstedt 106,462,216 2,049,756
William A. Humphrey 106,497,006 2,014,966
John Neerhout, Jr. 107,562,173 949,799
Stuart T. Peeler 106,360,476 2,151,497
Jack E. Thompson 107,441,081 1,070,891
Class III
---------
Carol A. Rae 107,446,736 1,065,236
In addition to the aforementioned directors, the following directors
continued in office: M. Norman Anderson, Robert H. Clark, Jr., Harry M.
Conger, G. Robert Durham, Douglas W. Fuerstenau, Robert K. Jaedicke and
Berne A. Schepman. Immediately prior to the annual meeting, Hadley Case
retired and assumed the status of Director Emeritus and Glen L. Ryland
retired.
(2) Approval of the appointment of Coopers & Lybrand L.L.P. as independent
auditors:
Votes for Votes Against Abstain
--------- ------------- -------
107,670,970 327,757 513,245
Item 6.
-------
(a) Exhibits Method of Filing
----------------
11 - Computation of Earnings
Per Share Filed herewith
electronically
27 - Financial Data Schedule Filed herewith
electronically
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30,
1995.
12
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
SIGNATURE
---------
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 7, 1995 By:/s/ Gene G. Elam
-------------- ----------------
Gene G. Elam
Vice President, Finance
and Chief Financial Officer
13
<PAGE>
--------------------------------------------------------------------------------
APPENDIX G
HOMESTAKE PROXY STATEMENT FOR THE
1995 ANNUAL MEETING OF SHAREHOLDERS
--------------------------------------------------------------------------------
G-1
<PAGE>
[LOGO] HOMESTAKE MINING COMPANY
650 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94108
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 9, 1995
To the Shareholders of Homestake Mining Company:
The annual meeting of shareholders of Homestake Mining Company will be held
at the Hyatt Regency Hotel, 5 Embarcadero Center, San Francisco, California, on
Tuesday, May 9, 1995, at 11:00 a.m. local time, for the following purposes:
1. Election of five Class II Directors and one Class III Director.
2. Approval of the appointment of Coopers & Lybrand LLP as
independent auditors for 1995.
3. Transaction of such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 13, 1995,
as the record date for the determination of shareholders entitled to vote at the
annual meeting. Only shareholders of record at the close of business on March
13, 1995, will be entitled to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person. TO
ENSURE THAT YOU ARE REPRESENTED AT THE MEETING, PLEASE FILL IN, SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, using the return envelope which
requires no postage if mailed in the United States. Your early attention to the
proxy will be greatly appreciated because it will reduce the cost your Company
incurs in obtaining voting instructions from its shareholders.
By Order of the Board of Directors
/s/ Wayne Kirk
WAYNE KIRK
Secretary
March 24, 1995
<PAGE>
HOMESTAKE MINING COMPANY
650 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94108
March 24, 1995
PROXY STATEMENT
MAY 9, 1995 ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Homestake Mining Company ("Homestake" or
the "Company") for use at the annual meeting of shareholders of Homestake to be
held at the Hyatt Regency Hotel, 5 Embarcadero Center, San Francisco,
California, on Tuesday, May 9, 1995, at 11:00 a.m. local time, or any
postponement or adjournment thereof.
This Proxy Statement and the enclosed proxy card are first being sent to
Homestake's shareholders on or about March 24, 1995.
MATTERS TO BE CONSIDERED.
The following matters will be acted on at the annual meeting:
1. Election of five Class II Directors and one Class III Director.
2. Approval of the appointment of Coopers & Lybrand LLP as
independent auditors for 1995.
3. Transaction of such other business as may properly come before the
meeting.
VOTING SECURITIES AND VOTING RIGHTS.
Only shareholders of record on March 13, 1995, or their proxies, will be
entitled to vote at the annual meeting of shareholders. On March 13, 1995,
Homestake had 137,857,427 shares of common stock outstanding.
A majority of the shares of Homestake common stock outstanding must be
represented at the annual meeting in person or by proxy to constitute a quorum
for the transaction of business. Each share of common stock is entitled to one
vote on all matters other than the election of directors. In the election of
directors, each share of common stock is entitled to one vote for a nominee for
each director position. Homestake does not have cumulative voting. A
shareholders' list will be available for examination by shareholders at the
annual meeting.
VOTING PROCEDURE.
The shares represented by each properly executed proxy returned to
Homestake will be voted at the meeting as indicated on the proxy. If no
instructions are given, the persons authorized by the proxy will vote in favor
of election of the nominees named in this Proxy Statement and to approve the
appointment of Coopers & Lybrand LLP as independent auditors for 1995. Any
person giving a proxy has the right to revoke it at any time before it is
exercised (1) by filing with the Secretary of Homestake a duly signed revocation
or proxy bearing a later date or (2) by voting in person at the meeting.
The Board of Directors is not aware of any matters other than those set
forth above which may come before the annual meeting. If any other matters are
properly presented to the meeting for action, unless contrary instructions are
given, the persons named in the enclosed form of proxy and acting thereunder
have the power to vote in accordance with their best judgment on such matters.
On voting for Class II Directors, the five nominees receiving the highest
number of votes will be elected. On voting for the Class III Director, the
nominee receiving the highest number of votes will be elected. Approval of the
appointment of independent auditors will require the affirmative vote of a
majority of the shares of Homestake common stock represented at the meeting.
<PAGE>
If a proxy is marked with instructions to withhold authority to vote for
one or more director nominees or to abstain from voting on any matter, those
shares will be treated as represented at the meeting and entitled to vote in
determining whether a quorum is present. Withholding authority to vote for a
director nominee will not prevent that director nominee from being elected
except to the extent the failure to vote for the nominee results in another
nominee receiving a larger number of votes. In other matters where approval is
required by a majority of shares outstanding or represented at the meeting,
abstentions from voting on a matter will have the effect of a vote against the
matter.
If a broker indicates on a proxy that it is not voting shares on any
matter, the shares not voted will be counted for purposes of determining the
presence of a quorum at the meeting but will not be treated as represented at
the meeting or entitled to vote in respect of that matter.
SOLICITATION OF PROXIES.
The cost of solicitation of proxies will be borne by Homestake.
Solicitation of proxies may be made by officers, directors and employees of
Homestake in person, by telephone or by mail. In addition, brokers, banks and
other nominee holders will be reimbursed for expenses they incur in forwarding
proxy materials to and obtaining voting instructions from beneficial owners of
Homestake common stock. D.F. King & Co., Inc. has been engaged to assist with
proxy solicitation for a fee not to exceed $12,000 plus expenses.
PRINCIPAL HOLDERS OF HOMESTAKE COMMON STOCK.
On March 13, 1995, there were 25,463 record holders of Homestake common
stock.
As of the close of business on March 13, 1995, the only person known to
Homestake to own beneficially five percent or more of the outstanding Homestake
common stock was:
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS
-----------------------------------------------------------------------------
Case, Pomeroy & Company, Inc........... 6,836,776 5.0%
529 Fifth Avenue, Suite 1600 Common Shares
New York, NY 10017-4608
2
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The following table shows: (i) the number of shares of Homestake common stock
beneficially owned by directors, nominees for directors and the five highest
paid executive officers, and all directors, nominees and executive officers as a
group, as of February 28, 1995 (excluding shares which such persons have the
right to acquire within 60 days of February 28, 1995 but do not actually own),
(ii) the number of shares of Homestake common stock which such persons have the
right to acquire within 60 days of February 28, 1995 but do not actually own,
and (iii) the total number of shares of Homestake common stock which such
persons own and have the right to acquire within 60 days of February 28, 1995.
The shares so shown include shares held in Homestake's Savings Plan (determined
as of December 31, 1994) for the accounts of executive officers and share rights
(determined as of February 28, 1995) granted under the Employees' Stock Option
and Share Rights Plan--1988, which entitle outside directors to receive shares
on the date of ceasing to serve as a director. Excluding the shares held by
Case, Pomeroy & Company, Inc., but including the shares which the identified
persons have the right to acquire but do not own, the shares of Homestake common
stock beneficially owned by all directors, nominees and executive officers as a
group represent approximately one percent of the total number of shares of
Homestake common stock outstanding.
<TABLE>
<CAPTION>
TOTAL
NUMBER OF SHARES NUMBER
BENEFICIALLY OWNED, RIGHT TO OF SHARES
EXCLUDING RIGHT TO ACQUIRE SHARES BENEFICIALLY
NAME ACQUIRE SHARES(1) WITHIN 60 DAYS OWNED
----------------------------------------------- ------------------- -------------- ---------
<S> <C> <C> <C>
M. Norman Anderson............................. 2,529 5,487 8,016
Hadley Case(2)................................. 128,099 1,103 129,202
Robert H. Clark, Jr.(3)........................ 50,000 1,292 51,292
Harry M. Conger(4)............................. 174,351 427,232 601,583
G. Robert Durham............................... 5,000 842 5,842
Douglas W. Fuerstenau.......................... 1,300 1,315 2,615
Henry G. Grundstedt............................ 1,000 406 1,406
William A. Humphrey............................ 61,117 110,566 171,683
Robert K. Jaedicke............................. 400 1,291 1,691
John Neerhout, Jr.............................. 1,000 905 1,905
Stuart T. Peeler............................... 5,000 1,440 6,440
Carol A. Rae................................... 0 0 0
Glen L. Ryland................................. 2,800 1,276 4,076
Berne A. Schepman.............................. 1,300 1,336 2,636
Gene G. Elam................................... 3,279 50,600 53,879
Wayne Kirk(5).................................. 2,681 34,075 36,756
Jack E. Thompson............................... 4,600 41,375 45,975
Allen S. Winters............................... 12,830 39,075 51,905
All Directors, Nominees and Executive Officers
as a Group (24 persons)....................... 472,219 911,863 1,384,082
------------
<FN>
(1) In some instances voting and investment power is shared with the spouse of
the identified person.
(2) Includes 20,000 shares owned by Mr. Case's spouse. Does not include
6,836,776 shares owned by Case Pomeroy. Hadley Case, with family associates,
is the controlling shareholder of Case Pomeroy.
(3) Includes 26,000 shares owned by Mr. Clark's spouse and one of his children.
Does not include 6,836,776 shares owned by Case Pomeroy. Mr. Clark, with
family members, is a principal shareholder of Case Pomeroy. Mr. Clark is a
son-in-law of Hadley Case.
(4) Includes 553 shares held of record by a Savings Plan Trust for Mr. Conger's
spouse. Mr. Conger disclaims beneficial ownership of these shares.
(5) Includes 400 shares held of record by two of Mr. Kirk's children. Mr. Kirk
disclaims beneficial ownership of these shares.
</TABLE>
Messrs. Fuerstenau, Peeler and Schepman respectively hold 2,000, 35,000,
and 35,000 common shares of Homestake Gold of Australia Limited ("HGAL"), an
81.5 percent owned subsidiary of the Company which is publicly traded in
Australia. The total HGAL shares owned by all directors and executive officers
of the Company is less than 0.02 percent of the outstanding HGAL common shares.
3
<PAGE>
Section 16(a) of the Securities Exchange Act of 1934 and related rules
require the Company's directors, executive officers and more than 10%
shareholders to file reports of beneficial ownership and changes in beneficial
ownership with the Securities and Exchange Commission and with the Company.
Based on its review of reports of beneficial ownership filed with the Company
and written representations of directors and executive officers, the Company
believes that during 1994 all of its directors, executive officers and more than
10% shareholders timely filed all reports of beneficial ownership and changes in
beneficial ownership required under Section 16(a), except that the Form 3
Initial Report of Ownership of Ronald D. Parker, a Vice President elected in
1994, was filed approximately one month late. No directors, executive officers
or more than 10% shareholders reported in 1994 a transaction or ownership of
shares that should have been reported in an earlier year.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of Homestake currently consists of 14 members,
divided into three classes with staggered terms of three years each. Five Class
II Directors are to be elected to serve until the annual meeting in 1998 or
until their successors are elected and qualified. In addition, one Class III
Director is to be elected to replace Hadley Case. Mr. Case, a director since
1984, has elected to retire immediately prior to the annual meeting, and to
assume the status of Director Emeritus. As Director Emeritus, Mr. Case will be
eligible to attend all Board of Directors' meetings but will not be a voting
member of the Board of Directors. The newly elected Class III Director will
serve until the annual meeting in 1996 or until a successor is elected and
qualified.
Mr. Glen L. Ryland, a Class I Director, became age 70 during 1994. Pursuant
to the Company's retirement policy for directors, Mr. Ryland will retire as a
director immediately prior to the annual meeting. At the time of Mr. Ryland's
retirement, it is expected that the Board of Directors will amend the Company's
by-laws to reduce the number of directors to 13, thereby eliminating the
resulting vacancy.
Each nominee has consented to be named in this Proxy Statement and to serve
if elected. If any nominee should become unable to serve as a director prior to
the annual meeting, the persons authorized by the proxy will vote for the
election of a substitute nominee recommended by the Nominating Committee of the
Board of Directors in place of that nominee.
THE BOARD OF DIRECTORS OF HOMESTAKE RECOMMENDS A VOTE FOR THE ELECTION OF
THE FIVE CLASS II NOMINEES AND THE ONE CLASS III NOMINEE NAMED BELOW. PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THE NAMED NOMINEES UNLESS
INSTRUCTIONS ARE GIVEN TO THE CONTRARY.
INFORMATION CONCERNING NOMINEES FOR ELECTION.
Certain information as to each of the five nominees for election as a Class
II Director and the nominee for election as a Class III Director is set forth in
the table below. The information appearing in the table and the information
regarding beneficial ownership of securities by such nominees contained in this
Proxy Statement has been furnished to Homestake by the nominees.
NOMINEES FOR CLASS II DIRECTORS TO SERVE UNTIL 1998 ANNUAL MEETING:
<TABLE>
<CAPTION>
AGE AT DIRECTOR
MAY 9, 1995 SINCE BIOGRAPHICAL INFORMATION
------------ -------- --------------------------------------
<S> <C> <C> <C>
Henry G. Grundstedt........... 66 1992 Mr. Grundstedt is a mining consultant.
He was Senior Vice President of
Capital Guardian Trust Company (money
manager of pension and mutual funds)
from 1973 to 1991 and held other
executive positions with that firm
beginning in 1972, specializing in the
mining and metals industry. He is a
director of Azco Mining Company
(copper mining).
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
AGE AT DIRECTOR
MAY 9, 1995 SINCE BIOGRAPHICAL INFORMATION
------------ -------- --------------------------------------
<S> <C> <C> <C>
William A. Humphrey........... 68 1982 Mr. Humphrey has been a mining
consultant since March 1993. He has
been Vice Chairman of Homestake since
July 1992, was President and Chief
Operating Officer of Homestake from
April 1991 to July 1992, and was an
Executive Vice President of Homestake
from 1981 to April 1991. He is a
director of Homestake Gold of
Australia Limited (gold mining).
John Neerhout, Jr............. 64 1989 Mr. Neerhout has been Executive Vice
President of Bechtel Group Inc.
(engineering and construction) since
1986. He is a director and holds
executive positions with Bechtel Group
Inc. and other of its affiliated
companies.
Stuart T. Peeler.............. 65 1981 Mr. Peeler has been a petroleum
industry consultant since 1989. From
1982 until 1988 he was Chairman of the
Board and Chief Executive Officer of
Statex Petroleum, Inc. He is a director
of CalMat Company (aggregates, asphalt,
and property development), Chieftain
International, Inc. (oil and gas
exploration and production), Chieftain
International Funding Corp. (financial
services), and Homestake Gold of
Australia Limited.
Jack E. Thompson.............. 44 1994 Mr. Thompson has been President and
Chief Operating Officer and a director
of Homestake since August 1994. He has
been Chairman of the Board of Prime
Resources Group Inc. (gold mining)
since July 1992 and was Executive Vice
President-Canada of Homestake and
President and Chief Executive Officer
of Prime and Homestake Canada Inc.
from July 1992 to August 1994. He was
President of Homestake Mineral
Development Company and North American
Metals Corp. (gold mining) from 1988
until July 1992. Prior to 1988, Mr.
Thompson was general manager of Home-
stake's McLaughlin mine.
</TABLE>
5
<PAGE>
NOMINEE FOR CLASS III DIRECTOR TO SERVE UNTIL 1996 ANNUAL MEETING:
<TABLE>
<CAPTION>
AGE AT DIRECTOR
MAY 9, 1995 SINCE BIOGRAPHICAL INFORMATION
------------ -------- --------------------------------------
<S> <C> <C> <C>
Carol A. Rae.................. 49 -- Ms. Rae has been the President and
Chief Executive Officer of Magnum
Diamond Corporation (manufacturer of
surgical instruments) since 1989, and
she has been Senior Vice President and
General Manager of the Refractive
Division of Chiron Vision Corporation
(manufacturer of ophthalmic intraocu-
lar lenses) since March, 1994. She has
also been the President of MedVal
Technologies International, Inc.
(manufacturer of orthopedic splints)
since 1982. She is a member of the
board of directors of the U.S. Chamber
of Commerce.
</TABLE>
INFORMATION CONCERNING CONTINUING DIRECTORS.
Certain information as to each director who will continue in office is set
forth in the following tables. The information appearing in the tables and the
information regarding beneficial ownership of securities by such directors
contained in this Proxy Statement has been furnished to Homestake by the
directors.
CONTINUING CLASS III DIRECTORS TO SERVE UNTIL 1996 ANNUAL MEETING:
<TABLE>
<CAPTION>
AGE AT DIRECTOR
MAY 9, 1995 SINCE BIOGRAPHICAL INFORMATION
------------ -------- --------------------------------------
<S> <C> <C> <C>
Harry M. Conger............... 64 1977 Mr. Conger has been Chairman of the
Board of Homestake since 1982 and
Chief Executive Officer since 1978. He
was also President of Homestake from
1977 to 1986. He is a director of ASA
Limited (investment company), Baker
Hughes Incorporated (oil service and
equipment manufacturing), CalMat
Company (aggregates, asphalt, and
property development), and Pacific Gas
and Electric Company.
G. Robert Durham.............. 66 1990 Mr. Durham has been President and
Chief Executive Officer and a director
of Walter Industries, Inc. (building
materials, home building, mortgage
financing and natural resource
development) since June 1991. He was
Chairman of the Board and President of
Phelps Dodge Corporation (mining) from
1987 to 1989, President and Chief
Operating Officer from 1985 to 1987,
and held other executive positions
with Phelps Dodge Corporation or
affiliated corporations beginning in
1977. He is a director of Atlantic
Gulf Communities Corporation (planned
community development), a director of
GFC Financial Corporation (financial
services), a director of Mincorp Ltd.
(engineering services), and a trustee
of Mutual Life Insurance Company of
New York.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AGE AT DIRECTOR
MAY 9, 1995 SINCE BIOGRAPHICAL INFORMATION
------------ -------- --------------------------------------
<S> <C> <C> <C>
Robert K. Jaedicke............ 66 1983 Mr. Jaedicke is a Professor (emeritus)
of Accounting at Stanford University
Graduate School of Business. He has
been a member of the Stanford faculty
since 1961 and was Dean of the
Graduate School of Business from 1983
to 1990. He is a director of Boise
Cascade Corporation (forest products
and paper), California Water Service
Company, Enron Corp. (natural gas and
liquid fuels), GenCorp (aerospace,
auto, polymer products), State Farm
Insurance Companies, and Wells Fargo &
Company and Wells Fargo Bank, N.A.
</TABLE>
CONTINUING CLASS I DIRECTORS TO SERVE UNTIL 1997 ANNUAL MEETING:
<TABLE>
<CAPTION>
AGE AT DIRECTOR
MAY 9, 1995 SINCE BIOGRAPHICAL INFORMATION
------------ -------- --------------------------------------
<S> <C> <C> <C>
M. Norman Anderson............ 64 1992 Mr. Anderson is President of Norman
Anderson & Associates Ltd. (mining
consultants). Mr. Anderson was a
director of Homestake Canada Inc. from
1987 to 1993, and was the Chairman of
the Board of Directors of Homestake
Canada Inc. from February 1991 to July
1992, when the Company acquired the
outstanding voting shares of Homestake
Canada Inc. He is a director of Prime
Resources Group Inc., Solv-ex Corpo-
ration (tar sands processing), Finning
Ltd. (construction equipment sales and
service), Toronto Dominion Bank, and
Western Star Truck Holdings Ltd.
(truck manufacturing).
Robert H. Clark, Jr.*......... 54 1984 Mr. Clark has been Chief Executive
Officer since 1993, President since
1983, and a director since 1968 of
Case, Pomeroy & Company, Inc. (mining,
oil and gas, real estate). He is a
director of Putnam Trust Company
(banking).
Douglas W. Fuerstenau......... 66 1977 Mr. Fuerstenau has been a Professor of
Metallurgy, Department of Materials
Science and Mineral Engineering,
University of California, Berkeley
since 1959. He was P. Malozemoff
Professor of Mineral Engineering from
1987 to 1993, professor emeritus from
1993 to July 1994, and has been a
professor in the Graduate School since
July 1994.
---------------
<FN>
* See "Certain Transactions with Affiliates and Indebtedness of Directors and
Officers--Shareholder Agreement with Case Pomeroy" regarding the agreement
with the Company under which Mr. Clark is entitled to be nominated as a
director. Mr. Clark is the son-in-law of Hadley Case, one of the directors
who will retire immediately before the annual meeting.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
AGE AT DIRECTOR
MAY 9, 1995 SINCE BIOGRAPHICAL INFORMATION
------------ -------- --------------------------------------
<S> <C> <C> <C>
Berne A. Schepman............. 68 1973 Mr. Schepman has been President of
Adair Company (management consulting)
since 1982 and President of Russian
Technology Group (technology
marketing) since July 1992. He is a
director of Homestake Gold of
Australia Limited.
</TABLE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD.
Homestake's Board of Directors held 12 meetings during calendar year 1994.
The Board of Directors has six standing committees: Executive, Finance,
Audit, Compensation, Nominating, and Environment, Health and Safety.
The Executive Committee has authority to exercise most of the powers of the
Board of Directors. It is intended to function on a standby basis. The members
of the Committee are Messrs. Case, Conger (Chairman), Humphrey, Peeler, Schepman
and Thompson. The Executive Committee did not meet during 1994.
The Finance Committee reviews and makes recommendations to the Board of
Directors about proposed dividends, investments and financial matters. The
members of the Committee are Messrs. Clark, Conger, Grundstedt, Humphrey, Peeler
(Chairman), Ryland and Thompson. The Finance Committee held four meetings during
1994.
The Audit Committee recommends to the Board of Directors appointment of the
firm of independent auditors to examine and report to shareholders on the
consolidated financial statements of Homestake, and receives and considers the
reports of the auditors. The Committee also oversees Homestake's internal
auditing. The members of the Committee are Messrs. Anderson, Clark, Jaedicke
(Chairman), Neerhout and Ryland, all non-employee directors. The Committee held
two meetings during 1993.
The Compensation Committee evaluates and recommends to the full Board of
Directors the levels of compensation and benefits for officers and key
employees. The Compensation Committee also administers the Company's stock
option plans. The members of the Committee are Messrs. Durham, Fuerstenau,
Grundstedt, Jaedicke, Neerhout and Schepman (Chairman), all non-employee
directors. The Committee held four meetings during 1994.
The Nominating Committee reviews and evaluates candidates for director,
including nominees recommended by shareholders, and makes recommendations on
candidates to the Board of Directors. Applications and communications relating
to candidates for director may be sent to the Secretary of Homestake at the
corporate offices in San Francisco. The members of the Committee are Messrs.
Anderson, Case, Durham, Fuerstenau (Chairman), Ryland and Schepman, all
non-employee directors. The Nominating Committee did not meet during 1994.
The Environment, Health and Safety Committee was formed in March 1995. The
Committee oversees Homestake's compliance with environmental, health and safety
laws and policies. The members are Messrs. Anderson (Chairman), Durham,
Fuerstenau, Humphrey and Neerhout, all non-employee directors.
Each director attended at least 75 percent of the total number of meetings
of the Board of Directors and the respective committees on which he served. The
aggregate average attendance at meetings of the Board of Directors and its
committees was 97.5 percent.
COMPENSATION OF DIRECTORS.
A director of Homestake who is not an employee of the Company or its
subsidiaries receives an annual retainer fee of $16,000 and each chairman of a
committee of the Board of Directors who is not an employee of Homestake receives
an additional annual retainer of $2,000. All directors, including employee
directors,
8
<PAGE>
receive attendance fees of $900 for each meeting of the Board of Directors and
$800 for each committee meeting. Directors who are non-residents of the State of
California also receive an additional amount equal to 13% of their retainers and
fees for meetings held in the State of California in order to compensate them
for possible double taxation of such amounts by the State of California and
their states or provinces of residence. Directors are entitled to defer
compensation under the Deferred Income Plan described below under "Compensation
of Executive Officers--Summary Compensation Table."
During 1994, the Board of Directors adopted a Retirement Plan for Outside
Directors who retire after July 21, 1994, and Outside Directors who retired
prior to that date as designated by the Company. Under the Plan, directors who
do not have a fully vested interest under any tax-qualified Homestake retirement
plan are eligible to receive benefits. The total retirement benefit payable is
an amount equal to the annual retainer fee payable to Outside Directors at the
date of retirement (presently $16,000 per year) multiplied by the number of
years such retiring Director was an Outside Director (i.e., not an employee of
the Company or its subsidiaries). The retirement benefit is payable in monthly
installments over the number of months the retiring Outside Director served as
an Outside Director, beginning on the later of retirement or attaining of age 70
(later of retirement or age 65 in the case of an Outside Director who has served
at least 10 years). Benefits payable to a participant who dies prior to
completion of payout are payable to the participant's spouse.
Under the Employees' Stock Option and Share Rights Plan--1988 ("1988
Plan"), certain automatic share rights are made available to directors who are
not employees of Homestake. For each year that the 1988 Plan is in effect, on
the eighth business day following the day on which Homestake's annual earnings
for the preceding year are released, each non-employee director on that date is
granted share rights entitling him to receive shares of Homestake common stock
for no consideration on the date he ceases to serve as a director. The number of
shares covered by each annual share right grant is calculated by dividing 10
percent of the compensation received for services as a director of Homestake for
the preceding calendar year by the average fair market value of one share of
Homestake common stock for the third through the seventh business days following
release of Homestake's earnings for the preceding calendar year. Share rights
are cancelled if an individual ceases to serve as a director within three years
from the date of grant, other than by reason of death, disability, retirement at
mandatory retirement age for directors, or termination within one year following
a change of control as defined in the 1988 Plan. For 1994, a total of 2,651
share rights were granted under the 1988 Plan. No director was credited with
more than 257 share rights for 1994.
A director of Homestake Gold of Australia Limited ("HGAL"), 81.5% owned by
Homestake, who is not an employee of Homestake or HGAL receives an annual
retainer fee of A$25,000. All directors, including employee directors, receive
attendance fees of $1,800 for each meeting held outside of the continental
United States and $900 for each meeting held in the continental United States.
Messrs. Humphrey, Peeler and Schepman are non-employee directors of HGAL, and
Gene G. Elam is an employee director.
A director of Prime Resources Group Inc. ("Prime"), 50.6% owned by
Homestake, who is not an employee of Homestake or Prime receives an annual
retainer of C$5,000 and attendance fees of C$500 for each board or committee
meeting. M. Norman Anderson is a non-employee director of Prime, and Jack E.
Thompson is an employee director.
Under a consulting agreement with Hadley Case, Homestake Sulphur Company (a
wholly-owned subsidiary of the Company) paid Mr. Case an annual retainer of
$30,000, up to a maximum of $300,000. A total of $285,000 had been paid under
this agreement through December 31, 1993, and the remaining $15,000 was paid to
Mr. Case in 1994.
In July 1992, Homestake entered into a consulting agreement with Stuart T.
Peeler under which Mr. Peeler provides advisory services to the Company with
respect to its investment in the Main Pass 299 oil and sulphur project in the
Gulf of Mexico. The agreement is terminable by either party on 30 days' notice.
Mr. Peeler receives compensation at a rate of $1,000 for each day of service
under the agreement. For 1994, the Company paid $21,812 to Mr. Peeler under the
agreement.
In March 1993, Homestake entered into a consulting agreement with William
A. Humphrey under which Mr. Humphrey provides advisory services to the Company
with respect to various mining matters, principally
9
<PAGE>
involving Latin America. The agreement is terminable by either party at will.
Mr. Humphrey receives compensation at a rate of $1,000 for each day of service
under the agreement. For 1994, the Company paid $2,000 to Mr. Humphrey under the
agreement.
During the year 1994, Messrs. Anderson, Fuerstenau and Grundstedt were paid
consulting fees of $1,000, $7,000 and $945, respectively, for consulting
services.
COMPENSATION OF EXECUTIVE OFFICERS.
Summary Compensation Table
The following table sets forth summary information regarding compensation
paid by Homestake and its subsidiaries for the years ended December 31, 1994,
1993 and 1992 to the chief executive officer and the other four highest
compensated executive officers of Homestake for 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- ---------- -------
OTHER
ANNUAL
COMPEN- SECURITIES LTIP ALL OTHER
NAME AND SATION UNDERLYING PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1) OPTIONS(#) ($) ($)
-------------------------- ----- --------- -------- -------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Harry M. Conger 1994 $500,000 $225,000 $14,900(2) 49,200 $ 0 $ 6,750(3)
Chairman of the 1993 465,000 210,000 17,500(2) 91,500 0 8,254
Board and Chief 1992 465,000 0 17,400(2) 61,000 0 13,738
Executive Officer
Gene G. Elam 1994 252,000 88,200 8,100(4) 13,200 0 6,750(3)
Vice President, 1993 235,000 83,000 900(4) 24,700 0 8,230
Finance and Chief 1992 235,000 0 -- 37,400 0 13,732
Financial Officer
Wayne Kirk 1994 315,000 110,250 -- 16,500 0 6,750(3)
Vice President, 1993 300,000 105,000 -- 31,500 0 8,254
General Counsel 1992 120,000(5) 0 -- 35,000 0 0
and Corporate Secretary
Jack E. Thompson 1994 263,575(6) 146,250 157,438(7) 14,700 0 6,750(3)
President 1993 215,000 75,300 104,810(8) 28,200 0 7,532
1992 177,082 0 116,903(9) 55,500 0 10,630
Allen S. Winters 1994 217,200 72,000 -- 14,200 0 7,795(10)
Vice President 1993 203,000 71,000 -- 26,600 0 10,688
1992 203,000 0 46,714(11) 54,800 0 16,566
------------
<FN>
(1) In accordance with the rules of the Securities and Exchange Commission (the
"SEC"), the Company is not required to report the value of personal
benefits for any year unless the aggregate dollar value exceeds the lesser
of 10 percent of the executive officer's salary and bonus or $50,000.
(2) Directors' fees.
(3) Matching contribution to Savings Plan.
(4) HGAL directors' fees.
(5) Mr. Kirk joined the Company as Vice President, General Counsel and
Corporate Secretary in September 1992.
(6) Mr. Thompson served as Executive Vice President until August 9, 1994, when
he was appointed President.
(7) Consists of $53,844 (cost-of-living adjustment in connection with Mr.
Thompson's foreign assignment), $47,700 (payment made to Mr. Thompson in
connection with sale of residence in Canada), $45,131 (tax gross-up for
payment made in connection with sale of residence), $7,263 (financial
planning) and $3,500 (directors' fees). In connection with his appointment
as President, Mr. Thompson relocated from Canada to the San Francisco area.
10
<PAGE>
(8) Consists of $92,600 (cost-of-living adjustment in connection with Mr.
Thompson's foreign assignment), $9,000 (forgiveness of prior relocation
loan) and $3,210 (tax return preparation).
(9) Consists of $60,432 (relocation expenses paid to or on behalf of Mr.
Thompson), $29,167 (cost-of-living adjustment in connection with Mr.
Thompson's foreign assignment), $15,614 (tax gross-up for relocation
expenses), $9,000 (forgiveness of prior relocation loan), $2,180 (financial
planning), and $510 (tax return preparation). During 1992, Mr. Thompson
relocated from the San Francisco area to Canada.
(10) Consists of $6,750 (matching contribution to Savings Plan) and $1,045
(above-market component of interest earned on deferred income).
(11) Consists of $29,340 (relocation expenses paid to or on behalf of Mr.
Winters), $8,430 (financial planning), $6,000 (forgiveness of prior
relocation loan) and $2,944 (tax gross-up in connection with relocation
expenses).
</TABLE>
Under the Company's Deferred Income Plan, directors, officers and other key
employees selected by the Compensation Committee are permitted to defer income.
Under the plan, participants may elect to defer each year an amount not less
than $2,500 nor more than 100 percent of compensation. Amounts deferred are
credited with interest in an amount equivalent to the monthly Moody's Corporate
Bond Yield Average as published by Moody's Investors Service, Inc.
Agreements with Certain Executives
By an agreement between Harry M. Conger and Homestake dated July 16, 1982,
as amended February 23, 1990 ("Conger Agreement"), Mr. Conger will receive upon
retirement, for life, monthly compensation equal to 55 percent of the average of
his 36 consecutive months of highest compensation less one-half of his Social
Security benefits. On Mr. Conger's death before retirement (or for the remaining
portion of a ten-year period from the date of his retirement if his death occurs
after retirement), his surviving spouse will receive monthly for ten years the
amounts Mr. Conger would have received had he survived and thereafter 50 percent
of such amounts for her life. Under certain circumstances, retirement benefits
payable to Mr. Conger before age 65 will be suspended if he serves as a senior
executive of another enterprise with annual sales of over $100 million in the
preceding year other than following a merger or takeover of Homestake. A merger
or takeover is defined in the Conger Agreement as any of the following events:
(i) Homestake is a party to a merger or combination under the terms of which
less than 75 percent of the shares in the resulting company are owned by the
shareholders of Homestake immediately preceding such event; (ii) at least 75
percent in fair market value of Homestake's assets are sold; or (iii) at least
25 percent in voting power in election of directors of Homestake's capital stock
is acquired by any one person or group as that term is used in Rule 13d-5 under
the Securities Exchange Act of 1934. On termination of Mr. Conger's employment
with Homestake, all unexercised stock options become immediately exercisable and
may be surrendered to Homestake in exchange for a cash payment equal to the
excess of the market price over the option price. Mr. Conger is not entitled to
benefits if his employment is terminated for material acts of willful misconduct
or gross negligence.
Homestake has severance agreements with Messrs. Elam, Kirk, Thompson and
Winters under which they are entitled to benefits in the event of a merger or
takeover (defined as in the Conger Agreement). Entitlement to benefits arises if
within three years of a merger or takeover, the executive's employment is
terminated or if he elects to terminate his employment following (i) a reduction
in salary or certain other benefits, (ii) a change in location of employment,
(iii) a change in position, duties, responsibilities or status inconsistent with
the executive's prior position or (iv) a reduction in responsibilities, titles,
or offices as in effect immediately before such merger or takeover. Benefits
payable under the agreements consist of (i) a lump sum cash payment equal to two
times the highest annual salary and bonus, including deferred compensation,
during the three-year period preceding termination, (ii) continuation of
participation in insurance and certain other fringe benefits for two years,
(iii) full vesting in the Company's Executive Supplemental Retirement Plan
described below under "Retirement Plan," (iv) full vesting and acceleration of
exercisability of options, and (v) relocation assistance to the extent not
provided by another employer. Benefits payable under the agreements are in lieu
of any severance benefits under Homestake's general severance policy. In July
and August 1992, Homestake acquired the outstanding voting securities of
Homestake Canada
11
<PAGE>
Inc. (formerly named International Corona Corporation). The acquisition is
deemed to be a "merger" for the purposes of the severance agreements held by
Messrs. Elam, Thompson and Winters.
STOCK OPTION PLANS.
Options Granted
The following table sets forth certain information with respect to options
granted during 1994 to each named executive officer under the 1988 Plan.
OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NO. OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS EXERCISE ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO OR PRICE APPRECIATION FOR
OPTIONS EMPLOYEES BASE OPTION TERM
GRANTED IN FISCAL PRICE EXPIRATION -----------------------
NAME (#)(1) YEAR ($/SH) DATE 5%(2) 10%(2)
-------------------------------------- ---------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Harry M. Conger 49,200 18.5% $20.625 2/25/04 $638,171 $1,617,250
Gene G. Elam 13,200 4.9 20.625 2/25/04 171,217 433,896
Wayne Kirk 16,500 6.2 20.625 2/25/04 214,021 542,370
Jack E. Thompson 14,700 5.5 20.625 2/25/04 190,673 483,203
15,000 5.6 17.875 8/16/04 168,622 427,322
Allen S. Winters 14,200 5.3 20.625 2/25/04 184,187 466,767
------------
<FN>
(1) Granted at fair market value. Granted on February 25, 1994 (except as
otherwise noted), and vest in 25 percent increments on the first through
fourth anniversaries of the grant date. Vesting of options is accelerated in
specified circumstances, including upon certain reorganizations and the
commencement of certain tender offers.
(2) Compounded annually.
</TABLE>
12
<PAGE>
Options Exercised
The following table sets forth certain information with respect to options
exercised during 1994 by each named executive officer.
AGGREGATED OPTION EXERCISES IN 1994
AND OPTION VALUES AT 1994 YEAR END
<TABLE>
<CAPTION>
NO. OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT YEAR END (#) AT YEAR END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
------------------------------------------- ------------ ------------------- --------------------
<S> <C> <C> <C> <C>
Harry M. Conger 9,992 $42,466 363,357/161,775 $924,182/$421,544
Gene G. Elam -- -- 33,775/ 53,675 63,691/ 155,836
Wayne Kirk 5,000 51,250 22,075/ 47,625 94,450/ 153,225
400 1,600
7,500 71,812
Jack E. Thompson 7,565 50,875 25,700/ 80,925 58,569/ 208,252
5,000 51,625
2,050 21,038
Allen S. Winters 8,625 37,087 20,500/ 65,475 49,109/ 197,543
9,250 79,087
6,650 62,842
</TABLE>
Homestake's stock option plans permit optionees designated by the
Compensation Committee to pay part of the option price by delivering to
Homestake a promissory note. Each note bears interest and is secured by a pledge
of Homestake common shares with an aggregate market value at the time of
delivery of the note at least equal to the principal amount of the note. In
1994, no optionee under Homestake stock option plans had indebtedness to the
Company in respect of stock options.
RETIREMENT PLANS.
Retirement Plan
All full-time salaried employees of Homestake (approximately 500 persons)
participate in the Homestake Retirement Plan, a noncontributory defined benefit
plan ("Retirement Plan").
Under the Retirement Plan, participants accrue benefits at the rate of two
percent per year of service during the first 25 years and one-half percent for
each year of service thereafter. Normal retirement age under the Retirement Plan
is 65. Early retirement, with reduced benefits, is permitted after age 55 with
five years of service. The Retirement Plan is integrated with Social Security.
For a participant who retires at age 65 with 25 years of service, the monthly
benefit payable will be 50 percent of the average monthly compensation during
the 60 consecutive months of highest compensation (salary and bonus), less
one-half of the participant's Social Security benefits. Benefits paid upon
retirement are subject to a cost-of-living increase, up to a maximum of three
percent per year. Vesting requires five years of service. Homestake makes annual
actuarially determined contributions to the Retirement Plan to provide the
benefits to retirees. Funding contributions are not segregated as to individual
employees.
13
<PAGE>
The following table shows selected estimated annual benefits payable upon
retirement at age 65 under the Retirement Plan for persons having specified
years of service and the indicated remuneration. The table includes amounts that
may be payable under the Supplemental Retirement Plan described below ("SRP").
Amounts shown are calculated on a straight life annuity basis and are shown
before deduction for one-half of Social Security benefits. For purposes of the
Retirement Plan and the SRP, the years of service as of December 31, 1994 for
Messrs. Conger, Elam, Kirk, Thompson and Winters are 19 years, 4 years, 2 years,
13 years and 21 years, respectively. For purposes of these plans, earnings
include salary and bonus but exclude directors' fees and other benefits that are
included in the Summary Compensation Table.
YEARS OF SERVICE
<TABLE>
<CAPTION>
AVERAGE
ANNUAL EARNINGS
(60 CONSECUTIVE
HIGHEST MONTHS) 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
--------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$150,000 $ 30,000 $ 45,000 $ 60,000 $ 75,000 $ 78,750 $ 82,500
200,000 40,000 60,000 80,000 100,000 105,000 110,000
250,000 50,000 75,000 100,000 125,000 131,250 137,500
300,000 60,000 90,000 120,000 150,000 157,500 165,000
350,000 70,000 105,000 140,000 175,000 183,750 192,500
400,000 80,000 120,000 160,000 200,000 210,000 220,000
450,000 90,000 135,000 180,000 225,000 236,250 247,500
500,000 100,000 150,000 200,000 250,000 262,500 275,000
550,000 110,000 165,000 220,000 275,000 288,750 302,500
600,000 120,000 180,000 240,000 300,000 315,000 330,000
</TABLE>
Supplemental Retirement Plan
The Employee and Retirement Income Security Act of 1974 ("ERISA") imposes a
maximum limit on annual retirement benefits payable under retirement plans. For
1994, that annual limit was $118,800. In addition, the Internal Revenue Code
("IRC") limits the amount of annual compensation that may be considered under
qualified retirement plans. In 1994, that annual limit was $150,000. Under the
SRP, executive officers and key employees selected by the Compensation Committee
will be entitled to a supplemental retirement benefit equal to the difference
between the full amount of their pension benefits determined under the
Retirement Plan and the maximum amount permitted to be paid under ERISA and the
IRC. All of the officers identified in the Summary Compensation Table are
participants in the SRP.
Executive Supplemental Retirement Plan
Homestake has established an Executive Supplemental Retirement Plan
("Supplemental Plan") for executive officers and key employees selected by the
Compensation Committee. Under the Supplemental Plan, participants accrue
benefits under the following formula. Service credit is determined by
multiplying 3 2/3 percent by years of service, up to a maximum of 15 years.
Service credit is then multiplied by average monthly compensation during the 36
consecutive months of highest compensation (salary and bonus) to determine a
monthly retirement benefit. The monthly benefit is reduced by one-half of Social
Security benefits and by benefits payable under all other Homestake retirement
plans and those of prior employers. Retirement is permitted at age 62 after 10
years of service, although a participant who has attained age 60 and 10 years of
service may elect early retirement and receive a reduced benefit if approved by
the Compensation Committee. The Supplemental Plan is unfunded. The following
table shows selected estimated annual benefits payable under the Supplemental
Plan, calculated on a straight life annuity basis, assuming retirement at age
62, to persons having specified years of service and the indicated average
earnings before reductions for integration with Social Security and also before
reduction for other Homestake retirement plans or those of prior employers.
Payments under the Supplemental Plan are not limited by ERISA or the IRC. All of
the officers identified in the Summary Compensation Table are participants in
the Supplemental Plan. For purposes of the
14
<PAGE>
Supplemental Plan, the years of service as of December 31, 1994 for Messrs.
Conger, Elam, Kirk, Thompson and Winters are 15 years, 8 years, 2 years, 13
years and 15 years, respectively.
YEARS OF SERVICE
<TABLE>
<CAPTION>
AVERAGE
ANNUAL EARNINGS
(36 CONSECUTIVE
HIGHEST MONTHS) 10 YEARS 13 YEARS 15 YEARS
--------------- -------- -------- --------
<S> <C> <C> <C>
$150,000 $ 55,000 $ 71,500 $ 82,500
200,000 73,333 95,334 110,000
250,000 91,667 119,167 137,500
300,000 110,000 143,000 165,000
350,000 128,333 166,835 193,500
400,000 146,668 190,668 220,000
450,000 165,000 214,500 247,500
500,000 183,333 238,335 275,000
550,000 201,667 262,169 302,500
600,000 220,000 286,002 330,000
</TABLE>
15
<PAGE>
PERFORMANCE GRAPH.
Set forth below is a line graph comparing the cumulative total shareholder
return on Homestake common stock for the five years ended December 31, 1994,
based on the market price of the Homestake common stock and assuming
reinvestment of dividends, with the cumulative total return of companies on the
Standard & Poor's 500 Index and Standard & Poor's Gold Index.
THE FOLLOWING PERFORMANCE GRAPH SHALL NOT BE DEEMED TO BE INCORPORATED BY
REFERENCE INTO ANY FILING BY HOMESTAKE UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES EXCHANGE ACT OF 1934.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Homestake S & P 500 S & P GOLD
<S> <C> <C> <C>
1989 100 100 100
1990 102 97 88
1991 86 126 72
1992 60 136 67
1993 120 150 123
1994 94 152 99
------------
<FN>
* $100 invested on December 31, 1989 in stock or index, including reinvestment
of dividends. Fiscal years ending December 31.
</TABLE>
16
<PAGE>
COMPENSATION COMMITTEE REPORT*
The Compensation Committee is responsible for administering the policies
that govern executive compensation. The Compensation Committee evaluates the
performance of management and recommends to the full Board of Directors the
compensation level for all officers and key employees. The Committee also
administers the Company's stock option plans and determines the amount of stock
options granted to officers and key employees. The Committee is comprised of six
non-employee directors.
The Company's executive compensation program has the following objectives:
- Attract and retain key executives critical to the long-term success of
the Company.
- Reward performance that benefits the shareholders.
The basic compensation program consists of both cash and long-term,
equity-based compensation. In addition, officers and key employees may
participate in the Company's Retirement Plan, the Supplemental Retirement Plan,
and the Executive Supplemental Retirement Plan (described elsewhere in this
Proxy Statement), and the Company's Savings Plan, which is generally available
to all salaried employees and which provides for Company matching contributions
with employee contributions. Officers and key employees may also defer income
under the Deferred Income Plan.
Annual cash compensation consists primarily of a base salary and an annual
bonus under the Company's Bonus Plan. In order to emphasize performance and
success, the Company's policy is to pay base salaries that are generally
competitive with the median of base salaries paid by comparable companies, and
to reward performance by paying bonuses when the Company is profitable and when
individual performance or other extraordinary circumstances warrant special
recognition. The Compensation Committee determines and recommends to the Board
of Directors a base salary for each of the officers and key employees, based
upon individual performance, responsibility and competitive factors, including
compensation in the mining industry. To that end, the Company, under the
direction of the Compensation Committee, conducts an annual survey of salary
increases nationally and also by companies believed to be comparable to the
Company (for 1994, Amax Gold, Barrick Gold, Battle Mountain Gold, BHP Gold,
Cypress Minerals, Echo Bay Mining, Hecla Mining, Newmont, Pegasus Gold, Placer
Dome and Santa Fe Minerals), and the Compensation Committee uses that
information in recommending base salary levels.
Although the Compensation Committee gives some consideration to
profitability in determining base salaries, substantial weight is given to
profitability as well as individual performance and level of responsibility in
determining whether to recommend annual bonuses and the amount of bonuses. Under
the Bonus Plan, each officer and key employee is assigned a target bonus amount
at the beginning of each year determined under the Bonus Plan and based on the
individual's salary grade, ranging from 20% to 45% of base salary. At the end of
each year, the Compensation Committee evaluates estimated Company profitability
and individual officer and key employee performance and applies a multiplier
which has both a profitability component and a subjective individual performance
component. The dollar amount of the bonus as so calculated is equal to the
target bonus amount times the profitability multiplier and times the individual
performance multiplier. The Compensation Committee then recommends the bonuses
for approval by the Board of Directors. For the year 1994, the Compensation
Committee adopted a profitability multiplier of 50% for estimated net income of
$30 million, increasing to 100% for estimated net income of $50 million.
Long-term, equity-based compensation is provided through the grant of stock
options. The purpose is to provide officers and key employees with an incentive
to continue as employees of the Company over a long term and to align their
long-range interests with those of the shareholders by providing the opportunity
to have a stake in the Company. The Compensation Committee reviews and approves
stock option awards to officers and key employees of the Company and its
subsidiaries. The number of options awarded annually is generally based on a
formula. For each optionee an annual target gain is established based on salary
and a subjective
---------------
* The Compensation Committee Report shall not be deemed to be incorporated
by reference in any filings of the Company under the Securities Act of 1933 or
the Securities Exchange Act of 1934.
17
<PAGE>
evaluation of the perceived impact that the optionee may have on the Company's
success through performance of his or her responsibilities. A number of options
are granted which, assuming an appreciation of 12 percent per year over five
years, will give an amount of appreciation equal to the target gain. The
Compensation Committee does not consider the number of outstanding options in
determining annual option awards. The Compensation Committee has the authority
to determine the recipients of stock option awards, the terms of options, and
the number of shares subject to options. Stock options generally vest over a
four year period and have a 10 year term. Based on an independent survey
commissioned by the Company, as of September 1992 the value of Homestake's
long-term incentive grants have generally been equal to or somewhat below those
of comparable mining companies.
Chief Executive Officer. Evaluation of the Chief Executive Officer's
compensation is conducted by the Compensation Committee without the Chief
Executive Officer being present. In November 1993, after reviewing the proposed
levels of 1994 compensation for other mining company executives and also
considering the Company's 1993 performance, the Compensation Committee
determined that it would be appropriate for the 1994 base salary for the Chief
Executive Officer to be increased from $465,000 (the rate in effect for 1991,
1992 and 1993) to $500,000, and that recommendation was accepted by the Board of
Directors. In November 1994, after considering the Company's estimated profit
performance for 1994 and evaluating the individual performance of Mr. Conger,
the Committee recommended a 1994 bonus of $210,000, equal to 100% of the target
bonus, and that recommendation was accepted by the Board of Directors.
Other Executive Officers. In November 1993, after reviewing the proposed
levels of 1994 compensation for other mining company executives and also
considering the Company's 1993 performance, the Compensation Committee
determined that it would be appropriate for the 1994 base salary for all
executive officers to be increased in amounts ranging from 4% to 11.8% of 1993
base salary, and that recommendation was accepted by the Board of Directors. In
November 1994, after considering the Company's estimated profit performance and
evaluating the individual performances of the executive officers, the Committee
recommended 1994 bonuses ranging from 90% to 107% of the target bonuses for such
officers, and that recommendation was accepted by the Board of Directors.
Limitation on Deductibility of Compensation. Section 162(m) of the
Internal Revenue Code limits the deductibility of compensation of the Chief
Executive Officer and four other highest paid executive officers to $1,000,000
per year (subject to certain exceptions). None of the Company's officers receive
annual compensation in excess of the maximum deductible amount. If, because of
competitive factors and individual performance, the Compensation Committee
should determine that it was appropriate to pay one or more executive officers
in excess of annual maximum deductible amount, the Compensation Committee would
expect to recommend such compensation.
March 13, 1995
COMPENSATION COMMITTEE
G. ROBERT DURHAM
DOUGLAS W. FUERSTENAU
HENRY G. GRUNDSTEDT
ROBERT K. JAEDICKE
JOHN NEERHOUT, JR.
BERNE A. SCHEPMAN, Chairman
18
<PAGE>
CERTAIN TRANSACTIONS WITH AFFILIATES AND
INDEBTEDNESS OF DIRECTORS AND OFFICERS
SHAREHOLDER AGREEMENT WITH CASE POMEROY.
In connection with Homestake's acquisition of Felmont Oil Corporation in
1984, Homestake, Case, Pomeroy & Company, Inc., and Hadley Case entered into a
Shareholder Agreement, which agreement was amended in 1989, and further amended
on March 27, 1992. Mr. Case, with family associates including Robert H. Clark,
Jr., is the controlling shareholder of Case Pomeroy. See "Principal Holders of
Homestake Common Stock." The Shareholder Agreement provides that neither Case
Pomeroy nor Mr. Case nor persons controlled by them will acquire additional
Homestake shares without prior written consent of Homestake if the effect would
be to increase the voting power represented by their holdings of Homestake
shares on January 1, 1989. The Shareholder Agreement grants to Homestake certain
rights of first refusal in the event Case Pomeroy or Mr. Case elects to sell
Homestake shares other than (a) to Homestake or persons approved by Homestake,
(b) to Mr. Case or wholly-owned subsidiaries of Case Pomeroy (who, if they are
to receive more than two percent of the outstanding Homestake voting shares,
must agree to be bound by the terms of the Shareholder Agreement), (c) in
underwritten public offerings registered under the Securities Act of 1933
("Securities Act"), (d) in transactions complying with the volume limitations of
Rule 144 under the Securities Act, (e) to persons who would not hold one percent
or more of the outstanding Homestake voting shares or, (f) pursuant to a tender
or exchange offer.
Until the Shareholder Agreement terminates, Homestake has agreed that so
long as Mr. Case and Mr. Clark are able to serve as directors of Homestake, Case
Pomeroy is entitled to designate Mr. Case and Mr. Clark as nominees. If both Mr.
Case and Mr. Clark are unable to serve or cease to serve as directors of
Homestake for any reason, Case Pomeroy is entitled to designate one person,
approved by Homestake, to fill the vacancy until such other nominee is elected
and qualified. Most provisions of the Shareholder Agreement will terminate on
the earlier of December 31, 1996, or the date on which Case Pomeroy, Mr. Case
and all persons controlled by either of them cease to own, in the aggregate,
securities having at least three percent of the voting power of Homestake. Mr.
Case has elected to resign as a director immediately prior to the 1995 annual
meeting. He will continue as a Director Emeritus. In that capacity he will be
eligible to attend all directors' meetings but he will not be a voting member of
the Board of Directors.
Each of Homestake and Case Pomeroy indirectly owns a 25 percent undivided
co-tenancy interest in the Round Mountain mine in Nye County, Nevada, under the
terms of an Operating Agreement with Round Mountain Gold Corporation, the owner
of a 50 percent undivided interest and the manager of the mine. The Shareholder
Agreement provides that whenever any action is to be taken pursuant to the
Operating Agreement that requires consent or approval of a majority of the
co-tenancy interests, Case Pomeroy and Homestake will cause their respective
subsidiaries to agree to take such action as they agree upon in advance. The
Shareholder Agreement also provides that neither Case Pomeroy, nor Homestake,
nor their respective subsidiaries will, directly or indirectly, transfer any
interest in the Round Mountain mine without the approval of the other. Approval
of a majority of the co-tenancy interests is required for budgets and work
programs carried out by the manager of the Round Mountain mine.
TRANSACTIONS WITH CASE POMEROY.
Under a 1985 agreement, Case Pomeroy transferred to Homestake all of Case
Pomeroy's interests in certain unpatented mining claims and other mineral
properties in the United States and Canada previously jointly owned by Case
Pomeroy and Homestake Sulphur. Case Pomeroy reserved a 2.5 percent net smelter
return royalty interest in each property transferred, as well as an option to
convert all or part of the reserved royalty into a 40 percent participating
interest in the property if commercial production appears feasible. No royalties
have been paid. The transferee has no obligation to explore, develop or make any
expenditures on any property transferred and may drop any property at any time
after first offering to quitclaim it to Case Pomeroy.
19
<PAGE>
TRANSACTION WITH PETER STEEN.
Peter Steen, former President and a director of the Company, resigned in
August 1994. As consideration of the immediate cancellation of all stock options
held by Mr. Steen, the Company paid to Mr. Steen $384,277, representing the
difference between the closing price of the Company's stock on the day prior to
his resignation and the exercise price of the options having an exercise price
less than that closing price.
PROPOSAL NO. 2
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of the Audit Committee, has
engaged the firm of Coopers & Lybrand LLP as independent auditors to audit and
report to the shareholders on the financial statements of Homestake for the year
1995. Representatives of the firm are expected to be present at the annual
meeting and will have the opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions. Although
shareholder approval of the engagement is not required by law, the Board of
Directors desires to solicit such approval. If the appointment of Coopers &
Lybrand LLP is not approved by a majority of the shares represented at the
meeting, the Board of Directors will consider the appointment of other
independent auditors for 1995.
On March 3, 1993, pursuant to the recommendation of the Audit Committee,
the Company terminated Deloitte & Touche LLP as independent accountants for the
Company and its subsidiaries upon completion of their 1992 audit engagement.
Deloitte & Touche LLP's reports on the 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 LLP 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 LLP would have caused Deloitte & Touche LLP to
make a reference to the subject matter of the disagreement in connection with
its reports. 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 SEC Regulation S-K, Item 304.
THE BOARD OF DIRECTORS OF HOMESTAKE UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPROVAL OF APPOINTMENT OF COOPERS & LYBRAND LLP AS INDEPENDENT AUDITORS FOR THE
YEAR 1995. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS
PROPOSAL UNLESS A VOTE AGAINST THIS PROPOSAL OR ABSTENTION IS SPECIFICALLY
INDICATED.
SHAREHOLDER PROPOSALS
To be considered for inclusion in the Proxy Statement for the 1996 annual
meeting, proposals of shareholders must be received by Homestake no later than
November 24, 1995. Such proposals should be directed to the Secretary of
Homestake.
By Order of the Board of Directors
/s/ Wayne Kirk
WAYNE KIRK
Secretary
San Francisco, California
March 24, 1995
20
<PAGE>
--------------------------------------------------------------------------------
APPENDIX H
HGAL FINANCIAL STATEMENTS FOR THE
YEARS ENDED 31 DECEMBER 1994 AND 1993
--------------------------------------------------------------------------------
H-1
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
PROFIT AND LOSS ACCOUNTS
FOR YEAR ENDED 31 DECEMBER 1994
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
NOTE $'000 $'000 $'000 $'000
----- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating profit before abnormal items and income
tax.................................................. 2 38,464 31,676 38,464 28,892
Abnormal items before income tax...................... 2 -- (4,282) -- (1,498)
--------- --------- --------- ---------
Operating profit before income tax.................. 2 38,464 27,394 38,464 27,394
Income tax attributable to operating profit........... 3 3,637 -- 3,637 --
--------- --------- --------- ---------
Operating profit after income tax................... 34,827 27,394 34,827 27,394
Accumulated losses at the beginning of the year....... (40,580) (67,974) (40,580) (67,974)
--------- --------- --------- ---------
Accumulated losses at the end of the year........... (5,753) (40,580) (5,753) (40,580)
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings per share.................................... 29
</TABLE>
THE ABOVE PROFIT AND LOSS ACCOUNTS SHOULD BE READ IN CONJUNCTION WITH THE
ACCOMPANYING NOTES.
--------------------------------------------------------------------------------
H-2
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
BALANCE SHEETS
AS AT 31 DECEMBER 1994
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
NOTE $'000 $'000 $'000 $'000
----- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash................................................ 4 53,353 31,398 53,347 31,363
Receivables......................................... 5 8,384 1,206 8,548 4,122
Inventories......................................... 6 20,317 17,844 20,317 17,367
Other............................................... 7 2,334 3,562 2,334 3,528
--------- --------- --------- ---------
TOTAL CURRENT ASSETS............................ 84,388 54,010 84,546 56,380
--------- --------- --------- ---------
NON-CURRENT ASSETS
Investments......................................... 8 50 50 50 50
Inventories......................................... 9 15,881 9,813 15,881 9,813
Property, plant & equipment......................... 10 150,841 176,148 150,516 172,386
Other............................................... 11 4,262 5,354 4,262 4,668
--------- --------- --------- ---------
TOTAL NON-CURRENT ASSETS........................ 171,034 191,365 170,709 186,917
--------- --------- --------- ---------
TOTAL ASSETS.................................. 255,422 245,375 255,255 243,297
--------- --------- --------- ---------
CURRENT LIABILITIES
Creditors and borrowings............................ 12 4,662 23,846 4,590 10,630
Provisions.......................................... 13 3,173 2,995 3,173 14,524
Other............................................... 14 10,000 10,000 10,000 10,000
--------- --------- --------- ---------
TOTAL CURRENT LIABILITIES....................... 17,835 36,841 17,763 35,154
--------- --------- --------- ---------
NON-CURRENT LIABILITIES
Creditors and borrowings............................ 15 95 199 -- --
Provisions.......................................... 16 6,025 1,760 6,025 1,568
Other............................................... 17 55,000 65,000 55,000 65,000
--------- --------- --------- ---------
TOTAL NON-CURRENT LIABILITIES................... 61,120 66,959 61,025 66,568
--------- --------- --------- ---------
TOTAL LIABILITIES............................. 78,955 103,800 78,788 101,722
--------- --------- --------- ---------
NET ASSETS.......................................... 176,467 141,575 176,467 141,575
--------- --------- --------- ---------
--------- --------- --------- ---------
SHAREHOLDERS' EQUITY
Share capital....................................... 18 118,371 118,357 118,371 118,357
Reserves............................................ 19 63,849 63,798 63,849 63,798
Accumulated losses.................................. (5,753) (40,580) (5,753) (40,580)
--------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY.................... 176,467 141,575 176,467 141,575
--------- --------- --------- ---------
--------- --------- --------- ---------
Commitments and Contingencies....................... 22
</TABLE>
THE ABOVE BALANCE SHEETS SHOULD BE READ IN CONJUNCTION WITH THE
ACCOMPANYING NOTES.
--------------------------------------------------------------------------------
H-3
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 1994
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
---------------------- ----------------------
1994 1993 1994 1993
NOTE $'000 $'000 $'000 $'000
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from gold sales.................... 181,671 176,100 181,671 176,100
Payments to suppliers and employees......... (134,506) (130,191) (133,289) (123,368)
Other receipts.............................. 224 1,059 141 836
Interest received........................... 2,508 1,179 2,508 1,179
Interest paid............................... -- (3) -- (1)
Finance charges on finance leases........... (118) (1,025) -- --
Deferred gold sale fee...................... (2,444) (2,865) (2,444) (2,865)
---------- ---------- ---------- ----------
Net cash provided by operating
activities............................... 31(b) 47,335 44,254 48,587 51,881
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for plant and equipment............ (5,186) (4,318) (5,186) (3,976)
Payments for mine property and
development................................ (2,331) (3,690) (2,331) (3,690)
Proceeds on sale of non-current assets...... 6,562 596 442 283
Payments for exploration and evaluation..... (9,089) (7,583) (9,089) (3,421)
---------- ---------- ---------- ----------
Net cash used in investing activities..... (10,044) (14,995) (16,164) (10,804)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issues of shares.............. 65 640 65 640
Deferred gold sale delivery................. (10,000) (10,000) (10,000) (10,000)
Repayment of principal on finance leases.... (11,890) (5,820) -- --
Advances to a controlled entity............. -- -- (6,993) (17,740)
Realised foreign exchange gain.............. 6,274 289 6,274 289
---------- ---------- ---------- ----------
Net cash used in financing activities..... (15,551) (14,891) (10,654) (26,811)
---------- ---------- ---------- ----------
Net increase in cash held............... 21,740 14,368 21,769 14,266
Cash at beginning of the financial year....... 31,236 16,868 31,201 16,935
---------- ---------- ---------- ----------
Cash at the end of the financial year......... 31(a) 52,976 31,236 52,970 31,201
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
THE ABOVE STATEMENTS OF CASH FLOWS SHOULD BE READ IN CONJUNCTION WITH THE
ACCOMPANYING NOTES.
--------------------------------------------------------------------------------
H-4
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) GENERAL SYSTEMS OF ACCOUNTING UNDERLYING THE FINANCIAL STATEMENTS
The financial statements have been prepared in accordance with disclosure
requirements of Schedule 5 of the Corporations Regulations and relevant
Accounting Standards. Except for certain assets which are as noted, the
financial statements are prepared in accordance with the historical cost
convention. The accounting policies adopted are consistent with those of
the previous year.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements have been prepared by combining the
accounts of all the entities controlled by Homestake Gold of Australia
Limited (the parent entity) as defined in Australian Accounting Standards
Board 1024 "Consolidated Accounts". A list of controlled entities appears
in note 28. Homestake Gold of Australia Limited and its controlled
entities are referred to in these accounts as the economic entity.
The consolidated financial statements include the information and results
of each controlled entity from the date on which the Company obtained
control and until such time as the Company ceases to control such entity.
In preparing the consolidated financial statements, all intercompany
balances and transactions, and unrealised profits arising within the
economic entity are eliminated in full.
(C) FOREIGN CURRENCIES
Transactions in foreign currencies are translated at the rate of exchange
at the date of the transaction. Foreign currency assets and liabilities
at the balance sheet date are translated at the exchange rate at balance
date. Realised and unrealised exchange gains or losses are recorded in
the profit and loss account.
Gains and losses relating to a foreign exchange hedging program are
recognised in the profit and loss account as they are realised.
(D) MINING OPERATIONS
(i) Property, plant and equipment
Depreciation of property, plant and equipment is on the
following basis:
On a units of production basis over the life of the
respective mine;
for assets with an economic life less than the life of
the respective mine, they are depreciated on a straight
line basis over their estimated remaining life.
--------------------------------------------------------------------------------
H-5
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The economic entity regularly reviews the estimated
economic life of each mine considering the physical and
economic factors relating to ore reserves and expected
rate of production and makes adjustments to the
estimates as required.
(ii) Inventories
Stores, which represent consumable supplies and
maintenance spares, are valued at weighted average cost
less provision for obsolescence.
Ore stocks and gold in circuit are valued at the lower
of weighted average cost and net realisable value.
Weighted average cost includes direct material and an
appropriate portion of labour and overhead expenses
including amortisation and depreciation.
(iii) Mining Costs
Certain operating development costs incurred in
underground mining are deferred and allocated to ore
stocks on the basis of tonnes of ore broken.
Costs of waste stripping for open pit operations are
normalised by adding to or deducting from deferred
mining expenditure when stripping ratios exceed or are
less than the life of mine stripping ratio. Where this
results in a credit balance the amount is included in
accumulated amortisation.
(iv) Recognition of Revenue
Gold bullion is recognised as a sale in the period when
it is delivered to a refinery.
(v) Amortisation of Mine Development
Mine development is amortised on a units of production
basis over the economic life of each mine.
(E) INCOME TAX
Tax effect accounting principles have been adopted whereby income tax
expense has been calculated on pre-tax profits after adjustment for
permanent differences. The future tax benefit relating to tax losses is
not carried forward as an asset unless the benefit can be regarded as
being virtually certain of realisation. Income tax on net cumulative
timing differences is deferred in the deferred income tax and future
income tax benefit accounts at the rates which are expected to apply when
those timing differences reverse. The Australian corporate tax rate of
33% has been used for this purpose.
--------------------------------------------------------------------------------
H-6
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(F) EXPLORATION EXPENDITURE
Exploration and evaluation expenditure incurred is accumulated and
capitalised.
Where economically recoverable ore reserves have not been established, or
for which specific development plans have not been scheduled, an
appropriate provision for write off is concurrently charged to the profit
and loss account.
Where economically recoverable ore reserves have been established, costs
are carried on the balance sheet until commencement of mining operations.
For areas where a provision had previously been made and economically
recoverable ore reserves have since been established, the provision is
appropriately reduced to reflect the capital costs associated with the
newly established reserves to the extent that they could be expected to
be recoverable from established reserves.
On commencement of mining operations, capitalised costs are transferred
to mine property, buildings and equipment and are amortised over the
economic life of the ore reserves. Accumulated capitalised expenditure on
abandoned areas is written off during the year the decision to abandon is
made.
(G) JOINT VENTURES
A substantial part of the economic entity's activities is undertaken in
the form of unincorporated joint ventures with other parties. Interests
in joint ventures are reported in the accounts by including the economic
entity's share of assets, liabilities, income and expenses employed in
the joint ventures, in their respective classification categories.
Details of major joint venture interests and the total of the economic
entity's interests in joint venture assets and liabilities are set out in
note 27.
(H) LEASES AND DEFERRED INCOME
Leases classified as finance leases are capitalised and amortised on a
straight-line basis over the estimated useful life of each leased asset.
The liability in respect of capitalised leases is reduced by the
principal component of each lease payment and the interest component is
expensed. Where the transaction involves a sale and leaseback, an
appropriate amount of deferred income is recorded in the balance sheet
and is included in the profit and loss account over the lease term. When
cessation of mining occurs and the leased asset no longer operates and
where the transaction involved a sale and leaseback, the unamortised
portion of the leased asset (net of capitalised borrowing costs) is
expensed to the profit and loss account and the profit and loss account
is simultaneously adjusted for the unamortised value of the deferred
income.
Leases classified as operating leases are not capitalised and each lease
payment is expensed.
--------------------------------------------------------------------------------
H-7
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(I) VALUATION OF NON-CURRENT ASSETS
Non-current assets are written down to recoverable amount where the
carrying value exceeds the recoverable amount. In assessing recoverable
amounts the relevant cash inflows arising from the continued use and
subsequent disposal of non-current assets are not discounted. No upward
revaluations have been made.
(J) REHABILITATION
Rehabilitation and environmental expenditure incurred during the
production phase of operations is recognised on an ongoing basis. Where
it is attributable to production it is expensed as part of the cost of
production of the mine property concerned. Where it is to be incurred
subsequent to the cessation of production at each mine property it is
accrued on a straight line basis when its extent can be reasonably
estimated.
(K) EARNINGS PER SHARE
(i) Basic earnings per share
Basic earnings per share is determined by dividing the
operating profit after income tax by the weighted
average number of ordinary shares outstanding during the
year, adjusted for bonus elements in ordinary shares
issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in
the determination of basic earnings per share by taking
into account amounts unpaid on ordinary shares and any
reduction in earnings per share that will probably arise
from the exercise of options outstanding during the
year.
(L) COMPARATIVE FIGURES
Where appropriate, comparative figures are reclassified so as to be
comparable with figures in the current period.
--------------------------------------------------------------------------------
H-8
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
2. OPERATING PROFIT
(A) OPERATING REVENUE
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Gold sales revenue......................................... 183,999 175,649 183,999 175,649
Other Revenue
-- Interest received from other persons.................. 2,508 1,179 2,508 1,179
-- Other income.......................................... 464 1,069 464 846
-- Net foreign exchange gain............................. 6,274 289 6,274 289
-- Proceeds on sale of non-current assets................ 6,562 570 442 283
--------- --------- --------- ---------
199,807 178,756 193,687 178,246
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
(B) OPERATING PROFIT
Operating profit after abnormal items and income tax has been determined
after crediting and charging the following specific items:
(i) Crediting
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
-- Profit on sale of non-current assets.............. 2,189 311 242 216
-- Exploration expenditure written back.............. 373 1,270 373 1,270
-- Write back of provision against net realisable
value............................................. -- 1,408 -- 1,408
-- Write back of provision for guarantee on related
company finance lease............................. -- -- 11,800 1,826
</TABLE>
--------------------------------------------------------------------------------
H-9
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
2. OPERATING PROFIT (CONTINUED)
(ii) Charging
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
-- Interest paid or due and payable:
Other persons.................................. -- 3 -- 1
-- Depreciation of property, plant and
equipment..................................... 11,109 12,481 10,992 12,481
-- Amortisation of:
Mine properties and development............ 8,111 7,537 8,111 7,537
Mine development normalisation
adjustment................................ 10,599 -- 10,599 --
Capital acquisition costs.................. 471 798 406 406
Leased assets.............................. 48 67 -- --
-- Loss on sale of non-current assets............ 5 20 5 9
-- Provisions:
Employee entitlements...................... 2,253 2,492 2,253 2,181
Mine rehabilitation........................ 755 -- 755 --
Non-recovery of a receivable from a
controlled entity......................... -- -- 9,828 14,740
-- Research and development...................... 217 245 217 234
-- Exploration expenditure write off/ provided
against includes depreciation -- $118,000
(1993: $115,000)............................... 9,207 7,698 9,117 3,421
-- Deferred gold sale fee -- related
corporation................................... 2,444 2,865 2,444 2,865
-- Finance charges -- leased assets.............. 118 1,025 -- --
-- Operating leases -- rental expense............ 554 584 447 206
-- Write down of inventories to recoverable
amount........................................ 2,638 -- 2,638 --
</TABLE>
(C) AUDITORS REMUNERATION
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REMUNERATION OF AUDITORS:
Amounts received, or due and receivable, by the auditor of the
Company for:
-- Auditing the accounts........................................... 61 60 61 60
-- Other services.................................................. 108 393 108 393
Amounts received, or due and receivable, by other auditors for:
-- Auditing the accounts........................................... 75 91 75 87
-- Other services.................................................. 89 31 89 23
</TABLE>
--------------------------------------------------------------------------------
H-10
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
2. OPERATING PROFIT (CONTINUED)
(D) ABNORMAL ITEMS
Included in the operating profit before income tax are the following
abnormal items of expense:
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Retrospective withholding tax payment in relation to the financial
years 1989 to 1993.................................................. -- 1,498 -- 1,498
Applicable tax credit -- $494,000
Relocation of head office expenses................................... -- 2,784 -- --
Applicable tax credit -- $919,000
--------- --------- --------- ---------
Total Abnormal Items Before Tax...................................... -- 4,282 -- 1,498
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
3. INCOME TAX
The prima facie income tax expense on pre-tax accounting profit is
reconciled to the income tax expense in the accounts as follows:
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating profit before income tax......................... 38,464 27,394 38,464 27,394
Prima facie income tax expense on operating profit
calculated at 33%......................................... 12,693 9,040 12,693 9,040
ADD (DEDUCT) TAX EFFECT OF:
Permanent differences
-- non-deductible depreciation and amortisation.......... 1,441 1,261 1,420 1,261
-- deductible lease payments............................. -- (2,270) -- --
-- non-deductible increase in provisions................. (651) 4,262 (651) 4,262
-- other items........................................... (85) 232 (85) (152)
--------- --------- --------- ---------
13,398 12,525 13,377 14,411
Benefit of tax losses recouped............................. (11,099) (12,525) (11,099) (14,411)
Under provision in previous years.......................... 1,338 -- 1,359 --
Income tax attributable to operating profit................ 3,637 -- 3,637 --
The Directors estimate that the potential future income tax
benefit at 33% consists of:
-- tax losses unrecognised............................... -- 6,573 -- --
-- exploration expenditure............................... -- 3,565 -- --
--------- --------- --------- ---------
-- 10,138 -- --
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
This future income tax benefit will only be obtained if:
(a) future assessable income is derived of a nature and an
amount sufficient to enable the benefit to be realised;
--------------------------------------------------------------------------------
H-11
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
3. INCOME TAX (CONTINUED)
(b) the conditions for deductibility imposed by tax
legislation continue to be complied with; and
(c) no changes in tax legislation adversely affect the
economic entity in realising the benefit.
4. CURRENT ASSETS -- CASH
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash at bank and on hand................................... 27,904 8,884 27,898 8,849
Short term deposits........................................ 25,449 22,514 25,449 22,514
--------- --------- --------- ---------
53,353 31,398 53,347 31,363
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
5. CURRENT ASSETS -- RECEIVABLES
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Amount receivable from a controlled entity................. -- -- 50,201 43,209
Less: provision for non-recovery........................... -- -- (50,037) (40,209)
--------- --------- --------- ---------
-- -- 164 3,000
Amount receivable from an associated company............... 1,718 -- 1,718 --
Other receivables.......................................... 6,666 1,206 6,666 1,122
--------- --------- --------- ---------
8,384 1,206 8,548 4,122
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
6. CURRENT ASSETS -- INVENTORIES
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Stores at cost............................................. 4,107 4,476 4,107 3,999
Less: provision for obsolescence........................... (195) (195) (195) (195)
--------- --------- --------- ---------
3,912 4,281 3,912 3,804
Stocks at cost -- ore...................................... 8,673 5,036 8,673 5,036
-- gold in circuit............................. 7,732 8,527 7,732 8,527
--------- --------- --------- ---------
20,317 17,844 20,317 17,367
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
--------------------------------------------------------------------------------
H-12
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
7. CURRENT ASSETS -- OTHER
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Deferred mining expenditure................................ 1,435 2,379 1,435 2,379
Prepayments................................................ 899 1,183 899 1,149
--------- --------- --------- ---------
2,334 3,562 2,334 3,528
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
8. NON-CURRENT ASSETS -- INVESTMENTS
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Shares in controlled entity not quoted
-- at cost (refer note 28)............................... -- -- 620 620
Less: provision for diminution of investment............... -- -- (620) (620)
--------- --------- --------- ---------
-- -- -- --
Shares in associated companies not quoted.................. 50 50 50 50
--------- --------- --------- ---------
50 50 50 50
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
9. NON-CURRENT ASSETS -- INVENTORIES
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Stocks -- ore at cost...................................... 16,387 7,681 16,387 7,681
Less: Provision for net realisable value................... (2,638) -- (2,638) --
--------- --------- --------- ---------
13,749 7,681 13,749 7,681
Stores at cost............................................. 2,132 2,132 2,132 2,132
--------- --------- --------- ---------
15,881 9,813 15,881 9,813
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
--------------------------------------------------------------------------------
H-13
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
10. NON-CURRENT ASSETS PROPERTY, PLANT & EQUIPMENT
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Plant and equipment at cost................................ 167,940 175,674 167,196 164,622
Less: accumulated depreciation............................. (72,380) (70,237) (71,797) (61,267)
--------- --------- --------- ---------
Total plant and equipment.............................. 95,560 105,437 95,399 103,355
--------- --------- --------- ---------
Mine property and development at cost...................... 110,192 116,218 110,192 107,942
Less: accumulated amortisation
-- amortisation mine property and development............ (48,917) (47,827) (48,917) (40,979)
-- mine development normalisation adjustment............. (10,599) -- (10,599) --
--------- --------- --------- ---------
(59,516) (47,827) (59,516) (40,979)
--------- --------- --------- ---------
Total mine property and development.................... 50,676 68,391 50,676 66,963
--------- --------- --------- ---------
Leased assets.............................................. 268 339 -- --
Less: accumulated amortisation............................. (104) (87) -- --
--------- --------- --------- ---------
Total leased assets.................................... 164 252 -- --
--------- --------- --------- ---------
146,400 174,080 146,075 170,318
Capital works in progress at cost.......................... 4,441 2,068 4,441 2,068
--------- --------- --------- ---------
150,841 176,148 150,516 172,386
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
11. NON-CURRENT ASSETS -- OTHER
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
EXPLORATION AND EVALUATION EXPENDITURE
Areas of interest where ore reserves have not been
established or for which specific development plans have
not been scheduled........................................ 21,562 18,558 12,416 8,151
Less: provision for write off.............................. (21,562) (18,558) (12,416) (8,151)
--------- --------- --------- ---------
-- -- -- --
Capital acquisition costs.................................. 6,525 7,603 6,525 6,526
Less: accumulated amortisation............................. (2,263) (2,249) (2,263) (1,858)
--------- --------- --------- ---------
4,262 5,354 4,262 4,668
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
--------------------------------------------------------------------------------
H-14
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
12. CURRENT LIABILITIES -- CREDITORS AND BORROWINGS
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
UNSECURED:
Amount payable to
-- related body corporate................................ 113 -- 113 --
-- associated company.................................... -- 8,147 -- 8,147
Trade creditors............................................ 334 147 334 136
Withholding tax payable.................................... 62 1,498 62 1,498
Other creditors............................................ 3,704 2,033 3,704 687
SECURED:
Bank overdraft (refer note 22 B(f))........................ 377 162 377 162
Finance lease liabilities (i).............................. 72 11,859 -- --
--------- --------- --------- ---------
4,662 23,846 4,590 10,630
--------- --------- --------- ---------
--------- --------- --------- ---------
<FN>
------------------------
(i) The finance lease liabilities are effectively secured over the
assets leased.
</TABLE>
13. CURRENT LIABILITIES -- PROVISIONS
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Guarantee on related entity finance lease.................. -- -- -- 11,800
Employee benefits.......................................... 3,173 2,995 3,173 2,724
--------- --------- --------- ---------
3,173 2,995 3,173 14,524
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
14. CURRENT LIABILITIES -- OTHER
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Amount owing to a related body corporate................... 10,000 10,000 10,000 10,000
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
15. NON-CURRENT LIABILITIES -- CREDITORS AND BORROWINGS
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SECURED:
Finance lease liabilities (i).............................. 95 199 -- --
--------- --------- --------- ---------
--------- --------- --------- ---------
<FN>
------------------------
(i) The finance lease liabilities are effectively secured over the
assets leased.
</TABLE>
--------------------------------------------------------------------------------
H-15
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
16. NON-CURRENT LIABILITIES -- PROVISIONS
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Employee benefits.......................................... 1,152 1,087 1,152 1,087
Deferred income tax........................................ 3,637 -- 3,637 --
Mine rehabilitation........................................ 1,236 673 1,236 481
--------- --------- --------- ---------
6,025 1,760 6,025 1,568
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
17. NON-CURRENT LIABILITIES -- OTHER
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Amount owing to a related body corporate................... 55,000 65,000 55,000 65,000
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
18. SHARE CAPITAL
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(a) Authorised Capital
-- 697,350,000 ordinary shares of 20 cents
each................................................. 139,470 139,470 139,470 139,470
--------- --------- --------- ---------
--------- --------- --------- ---------
(b) Issued Capital
-- 591,854,573 (1993: 591,779,573) ordinary shares at
20 cents each fully paid
-- 37,000 (1993: 102,000) ordinary shares at 20 cents
each paid to 1 cent................................... 118,371 118,357 118,371 118,357
--------- --------- --------- ---------
--------- --------- --------- ---------
(c) Options
-- 251,500 (1993: 81,500)
</TABLE>
During the year 10,000 options which were issued in 1991 were exercised
by option holders to fully paid shares. These options gave the holder the
right to acquire one fully paid ordinary share on payment of 70 cents,
including 50 cents premium exercisable at any time up to 24 June 1996.
The exercise price of the option is payable as to one cent on exercise of
the option, with the balance of 69 cents payable within five years of
exercise of option. At 31 December 1994 71,500 of these options remain
outstanding.
On 6 May 1994 180,000 options were issued under the Company's employee
share option scheme. These options give the holder the right to take up
one fully paid ordinary share on payment of $1.64 including $1.44 premium
exercisable at any time up to 6 May 1999. The exercise price of the
option is payable as to one cent on exercise of the option, with the
balance of $1.63 payable within five years of exercise of option. At 31
December 1994, all of these options remain outstanding.
--------------------------------------------------------------------------------
H-16
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
19. RESERVES
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Share premium reserve
Balance at the beginning of the year...................... 63,798 63,307 63,798 63,307
Add:
-- Arising from options exercised and partly paid shares
converted............................................... 51 491 51 491
--------- --------- --------- ---------
63,849 63,798 63,849 63,798
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
20. REMUNERATION AND RETIREMENT BENEFITS OF DIRECTORS
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(a) Aggregate income received, or due and receivable by
Directors of the Parent Entity and its controlled
entities.............................................. 373 620 373 620
The number of Directors of the Parent Entity whose total
remuneration falls within the following bands:
$0 - $9,999............................................ 4 6
$20,000 - $29,999...................................... 1 1
$30,000 - $39,999...................................... -- 1
$40,000 - $49,999...................................... 1 --
$70,000 - $79,999...................................... -- 1
$150,000 - $159,999.................................... -- 1
$300,000 - $309,999.................................... 1 --
$320,000 - $329,999.................................... -- 1
(b) Amounts paid to the economic entity's Superannuation
Fund or directly to Directors in connection with the
retirement of Directors................................ -- 2,191 -- 2,191
</TABLE>
Amounts are shown in summary form as the Directors believe the provision
of full particulars would be unreasonable.
During 1994 four Directors (1993 five Directors) in the $0-$9,999 band
were not paid any remuneration.
--------------------------------------------------------------------------------
H-17
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
21. REMUNERATION AND RETIREMENT BENEFITS OF EXECUTIVES
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(a) Aggregate income received, or due and receivable, by
executive officers whose total income exceeds
$100,000............................................... 461 780 461 780
The number of executives whose total income is more than
$100,000 and falls within the following bands:
$140,000 - $149,999.................................... -- 1 -- 1
$150,000 - $159,999.................................... 1 2 1 2
$300,000 - $309,999.................................... 1 -- 1 --
$320,000 - $329,999.................................... -- 1 -- 1
(b) Amounts paid to the Company Superannuation Fund or
directly to principal executive officers in connection
with the retirement of those officers.................. 236 2,071 236 2,071
</TABLE>
Amounts are shown in summary form as the Directors believe the provision
of full particulars would be unreasonable.
--------------------------------------------------------------------------------
H-18
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
22. COMMITMENTS AND CONTINGENCIES
A. Commitments for lease expenditure
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(a) Operating lease expenditure contracted for:
No later than one year................................. 368 566 342 216
Later than one year but no later than two years........ 233 444 233 104
Later than two years but no later than five years...... 24 502 24 8
--------- --------- --------- ---------
Operating lease liability.............................. 625 1,512 599 328
--------- --------- --------- ---------
--------- --------- --------- ---------
(b) Finance lease expenditure contracted for:
No later than one year................................. 88 12,060 -- --
Later than one year but no later than two years........ 55 121 -- --
Later than two years but no later than five years...... 49 104 -- --
--------- --------- --------- ---------
Minimum finance lease payments (i)..................... 192 12,285 -- --
Deduct future finance charges.......................... (25) (227) -- --
--------- --------- --------- ---------
Finance lease liability................................ 167 12,058 -- --
--------- --------- --------- ---------
--------- --------- --------- ---------
INCLUDED IN THE ACCOUNTS AS:
Creditors and borrowings
-- Current (note 12)..................................... 72 11,859 -- --
-- Non-current (note 15)................................. 95 199 -- --
--------- --------- --------- ---------
167 12,058 -- --
--------- --------- --------- ---------
--------- --------- --------- ---------
<FN>
------------------------
(i) The minimum finance lease payments declared may vary as certain
finance charges are calculated using a variable interest rate
</TABLE>
B. Other commitments
(a) Homestake Gold of Australia Limited and Kalgoorlie Lake View Pty.
Ltd. entered into an agreement for the supply of electricity in
connection with the Kalgoorlie operations with the State Energy
Commission of Western Australia (SECWA) on 2 February 1983.
Pursuant to that Agreement, Homestake Gold of Australia Limited
and Kalgoorlie Lake View Pty. Ltd. are jointly and severally
liable to pay to SECWA a line charge until September 1999.
--------------------------------------------------------------------------------
H-19
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
22. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The line charge cost varies in accordance with exchange and
interest rate movements.
<TABLE>
<CAPTION>
1994 1993
$'000 $'000
--------- ---------
<S> <C> <C>
At 31 December 1994 the total commitment of both parties to SECWA was
payable as follows:
No later than one year............................................... 3,468 3,468
Later than one year but no later than two years...................... 3,468 3,468
Later than two years but no later than five years.................... 9,535 10,403
Later than five years................................................ -- 2,600
--------- ---------
16,471 19,939
--------- ---------
--------- ---------
</TABLE>
(b) The economic entity has certain obligations to perform minimum
exploration work and expend minimum amounts of money on
exploration and mining on related tenements. These obligations
may be varied from time to time, subject to approval, and are
expected to be fulfilled in the normal course of operations of
the economic entity.
(c) The economic entity has given certain guarantees and performance
bonds in connection with exploration, mining and related
activities. The obligations, in respect of which these guarantees
and performance bonds have been given, are expected to be
fulfilled in the normal course of operations of the economic
entity. The total of the bank guarantees is $1,178,000 (1993:
$1,178,000).
(d) The Company has advised its continued support of a controlled
entity and has undertaken that it will not require full repayment
of the amounts receivable (refer note 5) until the controlled
entity is in a position to do so.
(e) The Company entered into a foreign currency protection programme
in 1994 which is designed to protect the Company's revenue stream
against an appreciating Australian dollar. The programme consists
of weekly put and call option contracts of U.S.$1,280,000 which
extend to December 1995. The programme is capped at 76 cents and
has a floor of 70 cents.
(f) The bank overdraft is secured by a fixed and floating charge over
the assets and undertakings of the economic entity, except for
the economic entity's interest in the Kalgoorlie Joint Ventures.
In respect of a portion of the economic entity's foreign exchange
options contracts, a bank holds a charge over the following
economic flows from the Kalgoorlie Joint Ventures, being gold
delivered to Homestake Gold of Australia Limited, the proceeds
from the sale of gold and any amounts distributed to the Company
from the sale of assets of the Joint Ventures.
(g) Capital expenditure commitments
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Payable no later than one year.......................... 32,868 3,495 32,868 3,495
</TABLE>
--------------------------------------------------------------------------------
H-20
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
23. SUPERANNUATION COMMITMENTS
The Homestake Australia Limited Superannuation Fund exists for the
relevant employees of Homestake Gold of Australia Limited, to provide
benefits in the form of lump sum payments on retirement, disability or
death.
Homestake Gold of Australia Limited is required to contribute to the fund
in accordance with the governing trust deeds of the fund and the
contributions are legally enforceable, subject to the cessation or
reduction of contributions on notice being given to the trustees of the
fund.
Actuarial assessments of the Homestake Australia Limited Superannuation
Fund are undertaken at least every three years, the most recent completed
assessment being as at 1 January 1994 by the Wyatt Company Pty. Limited,
Actuaries and Consultants. Based on these assessments, the fund would be
able to satisfy all benefits which would be vested under the fund in the
event of its termination or the voluntary or compulsory termination of
employment of each employee.
24. OTHER RELATED PARTY DISCLOSURES
(a) Related bodies corporate
The chief entity is Homestake Gold of Australia Limited whose ultimate
holding company is Homestake Mining Company, incorporated under Delaware
law, United States of America. The details of the previously disclosed,
1989 deferred gold sale to Homestake Mining Company of California, a
subsidiary of Homestake Mining Company, are as follows:
The transaction involved a sale to Homestake Mining Company of California
of 210,277 ounces of gold for a total sale price of $A100 million, based
on the gold price (London P.M. fix) at the transaction date. The gold
sold is deliverable in equal semi-annual instalments and the first
instalment was delivered on 31 December 1991 and the final instalment is
due on 29 June 2001. A fee is payable in gold calculated quarterly on the
balance of undelivered gold. In accordance with the terms and conditions
of this transaction, Homestake Gold of Australia Limited is required to
pay withholding tax on this fee.
The above transaction reflected commercial terms for the Company at the
time the related party transaction was entered into. The balance
outstanding from this transaction is disclosed in note 14 and note 17,
and the gold fee paid in respect of it is disclosed in note 2.
(b) Controlled entities
A list, showing the amount of the Company's investment in each controlled
entity, is included as note 28.
--------------------------------------------------------------------------------
H-21
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
24. OTHER RELATED PARTY DISCLOSURES (CONTINUED)
Transactions between Homestake Gold of Australia Limited and controlled
entities during the years ended 31 December 1994 and 1993 consisted of:
(i) amounts advanced to a controlled entity and receivable
from a controlled entity as part of the groups
financing. These advances bear no interest and have no
fixed terms of repayment. The amount receivable is shown
in note 5 to the accounts;
(ii) during the year, estimated gross tax losses of
$33,633,000 (1993: $32,765,000) will be transferred
under section 80G of the Income Tax Assessment Act 1936
from Homestake Australia Limited to Homestake Gold of
Australia Limited. These tax losses are transferred for
nil consideration.
(c) Joint ventures
Interests held during the year in joint ventures are set out in note 27.
(d) Associated company
Kalgoorlie Consolidated Gold Mines Pty Ltd (KCGM) and KCGM Engineering
Services Pty Ltd (KCGMES) are 50 per cent owned by Homestake Gold of
Australia Limited and 50 per cent owned by another party. KCGM acts as a
management company for the KMA Joint Venture, Fimiston/Paringa Joint
Venture and Mt Percy Joint Venture. The principal activity of KCGMES is
the provision of engineering services.
All transactions with KCGM are made on terms and conditions that allow
KCGM to neither earn a profit nor incur a loss from its operations. Loans
and transactions arise from the performance of management services. All
transactions with KCGMES are made on normal commercial terms and
conditions. Loans and transactions arise from KCGMES acting as project
manager for major construction projects. Amounts receivable/payable from
KCGM are shown in note 5 and note 12 to the accounts.
(e) Superannuation
Details relating to superannuation commitments are shown in note 23.
(f) Directors
The names of each person holding the position of Director during the year
are W H Clough, AO, OBE, FTS, G G Elam, W A Humphrey, B N Kelman, OA,
CBE, S T Peeler, B A Schepman and R A Tastula.
C F Fimiani (Alternate for Messrs. W A Humphrey, S T Peeler and B A
Schepman), resigned 17 January 1994.
--------------------------------------------------------------------------------
H-22
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
24. OTHER RELATED PARTY DISCLOSURES (CONTINUED)
The amount of Directors remuneration received or receivable by the
Directors and by other Directors of controlled entities is disclosed in
note 20.
A director, Mr B N Kelman, AO, CBE, is a director of Macquarie Bank
Limited. During the year the Company sold gold bullion to Macquarie Bank
Limited on normal commercial terms and conditions. The Company also
placed a portion of its foreign currency protection program with
Macquarie Bank Limited on normal commercial terms and conditions.
Details of all share and share options between Directors of Homestake
Gold of Australia Limited and any entity in the economic entity are as
follows:
<TABLE>
<CAPTION>
PARENT ENTITY
------------------------
1994 1993
NUMBER NUMBER
----------- -----------
<S> <C> <C>
Aggregate number of shares and share options held by Directors at 31
December
Shares -- Homestake Gold of Australia Limited......................... 158,636 158,636
Share options -- Homestake Gold of Australia Limited
-- Employee share option scheme at exercise price of
$0.70........................................................... 50,000 50,000
-- Employee share option scheme at exercise price of
$1.64........................................................... 100,000 --
</TABLE>
During the year a Director acquired 100,000 options to purchase fully
paid shares at an exercise price of $1.64 through the Company's Employee
Share Option Scheme.
25. SEGMENT INFORMATION
Homestake Gold of Australia Limited and its controlled entities are
involved in the exploration for gold within Australia and the sale of
gold produced from operations.
26. SUBSEQUENT EVENTS
On 6 January 1995 Homestake Australia Limited sold its interest in the
Timbarra exploration tenements to Ross Mining NL. The financial effect of
this event was to produce a profit on sale of the tenements of
$2,500,000. This sale will be recorded in 1995.
--------------------------------------------------------------------------------
H-23
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued)
27. JOINT VENTURES
The parent entity has a 50 per cent interest in the gold mining
operations at Kalgoorlie, which comprise three separate joint ventures,
KMA Joint Venture, Fimiston/Paringa Joint Venture and Mt Percy Joint
Venture. The Company has a 50 per cent interest in each joint venture.
(a) Exploration
Interest in joint ventures
A substantial part of the economic entity's exploration activities is
undertaken in the form of unincorporated joint ventures with other
parties. For information on the more advanced joint venture exploration
activities, please refer to the section, Review of Activities --
Exploration on page 13 of this report.
The economic entity's share of joint venture exploration expenditures was
$6,907,000 (1993: $4,326,000). This includes the economic entity's share
of KCGM exploration expenditures of $3,383,000 (1993: $2,151,000).
--------------------------------------------------------------------------------
H-24
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
27. JOINT VENTURES (CONTINUED)
(b) Operations
The economic entity's interests in the Kalgoorlie operations are included
in the balance sheet under the following classifications:
<TABLE>
<CAPTION>
1994 1993
$'000 $'000
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Receivables..................................................................... 75 75
Inventories..................................................................... 20,758 17,367
Other........................................................................... 1,811 3,472
--------- ---------
22,644 20,914
NON-CURRENT ASSETS
Inventories..................................................................... 11,182 9,813
Property plant and equipment.................................................... 124,647 142,816
Other........................................................................... 6,944 --
--------- ---------
142,773 152,629
--------- ---------
TOTAL ASSETS...................................................................... 165,417 173,543
--------- ---------
--------- ---------
CURRENT LIABILITIES
Creditors and borrowings........................................................ 1,375 8,206
Provisions...................................................................... 3,079 2,724
Other........................................................................... -- 686
--------- ---------
4,454 11,616
NON-CURRENT LIABILITIES
Provisions...................................................................... 1,633 1,568
--------- ---------
TOTAL LIABILITIES................................................................. 6,087 13,184
--------- ---------
--------- ---------
SHARE OF NET ASSETS EMPLOYED IN JOINT VENTURES.................................... 159,330 160,359
--------- ---------
--------- ---------
The value of the economic entity's share of the output of the joint ventures for
the period, less the economic entity's share of the cost of production and other
costs in receiving that output................................................... 39,265 48,186
--------- ---------
--------- ---------
</TABLE>
The Company's share of the joint venture capital commitments of the
Kalgoorlie operations at balance date was $32,868,000 (1993: $3,495,000)
Other participants in the Kalgoorlie operations retain ownership of, and
are entitled to receive, 50 per cent of saleable gold from the Kalgoorlie
operations, plus an additional amount of gold until such time as 32.5
million tonnes of ore have been mined by open cut methods from that part
of the Super Pit area contributed to the Kalgoorlie operations by those
parties. The annual quantum of this additional gold depends upon
production rates, costs of production and gold prices. During the current
year the other participants were entitled to 15,781 ounces of additional
gold (1993: nil). Notwithstanding the arrangements for sharing of gold,
the Company is committed to contributing 50 per cent of venture costs of
the Kalgoorlie operations.
--------------------------------------------------------------------------------
H-25
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
28. DETAILS OF INVESTMENTS IN CONTROLLED ENTITIES
<TABLE>
<CAPTION>
AFTER TAX
---------------------------------
BOOK CONTRIBUTION TO
VALUE OF CONSOLIDATED PROFITS
INVESTMENT --------------------
COUNTRY OF PERCENTAGE ----------- 1994 1993
INCORPORATION OF SHARES $'000 $'000 $'000
------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Parent Entity
Homestake Gold of Australia Limited..... Australia 32,855 40,308
Controlled Entities
Homestake Australia Limited............. Australia 100% -- 1,972 (12,914)
Homestake Gold (Queensland) Pty Limited... Australia 100% -- -- --
--------- ---------
34,827 27,394
--------- ---------
--------- ---------
</TABLE>
29. EARNINGS PER SHARE
<TABLE>
<CAPTION>
CONSOLIDATED
----------------------------
1994 1993
------------- -------------
<S> <C> <C>
Basic earnings per share (cents)......................................... 5.9 4.6
Weighted average number of ordinary shares on issue used in the
calculation of basic earnings per share................................. 591,827,929 591,445,335
</TABLE>
The diluted earnings per share is not materially different from basic
earnings per share and is therefore not disclosed.
30. INVESTMENT IN ASSOCIATED COMPANIES
<TABLE>
<CAPTION>
EQUITY DIVIDENDS
OWNERSHIP CARRYING ACCOUNTED RECEIVED/
INTEREST AMOUNT AMOUNT RECEIVABLE
------------ ------------ ------------ ------------
PRINCIPAL 1994 1993 1994 1993 1994 1993 1994 1993
NAME OF COMPANY ACTIVITY % % $'000 $'000 $'000 $'000 $'000 $'000
---------------------------------------- ---------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unlisted Kalgoorlie Consolidated Gold
Mines Pty Limited...................... Management 50 50 50 50 50 50 -- --
Engineering
KCGM Engineering Services Pty Ltd....... Services 50 -- -- -- -- -- -- --
</TABLE>
The above investments are held by Homestake Gold of Australia Limited and
comprise interests in the ordinary share capital of the associates. The
balance date of the associates is June 30. The associated companies do
not have retained profits/accumulated losses, or any reserves.
--------------------------------------------------------------------------------
H-26
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
31. NOTES TO STATEMENTS OF CASH FLOWS
(A) RECONCILIATION OF CASH
For the purpose of the statement of cash flows, cash includes cash on
hand net of outstanding bank overdrafts, investments in short term
deposits and gold bullion. Cash at the end of the financial year as shown
in the statement of cash flows is reconciled to the related items in the
balance sheet as follows:
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash (note 4)................................................... 53,353 31,398 53,347 31,363
Bank overdraft (note 12)........................................ (377) (162) (377) (162)
--------- --------- --------- ---------
52,976 31,236 52,970 31,201
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
(B) RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES TO OPERATING
PROFIT AFTER INCOME TAX
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating profit after income tax.............................. 34,827 27,394 34,827 27,394
Depreciation and amortisation.................................. 30,338 20,998 30,108 20,425
Write off of exploration expenditure........................... 9,207 7,698 9,117 3,421
Exploration expenditure written back........................... (373) (1,270) (373) (1,270)
Profit on sale of assets....................................... (2,189) (311) (242) (216)
Loss on sale of assets......................................... 5 20 5 9
Foreign exchange gain on financing activities.................. (6,274) (289) (6,274) (289)
Provision on non-recovery of a receivable of a controlled
entity........................................................ - - 9,828 14,740
(Increase) decrease in receivables and other assets............ (4,415) 519 (4,526) 428
Increase in inventories........................................ (8,842) (11,312) (8,842) (11,319)
Increase (decrease) in creditors and accruals.................. 1,656 (127) (8,192) (576)
Increase (decrease) in provisions.............................. (6,605) 934 (6,849) (866)
--------- --------- --------- ---------
Net cash provided by operating activities...................... 47,335 44,254 48,587 51,881
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
(C) NON CASH FINANCING AND INVESTING ACTIVITIES
(i) Plant and equipment
During the financial year the economic entity acquired
plant and equipment with an aggregate value of nil
(1993: $182,000) by means of financial leases. These
acquisitions are not reflected in the statement of cash
flows.
--------------------------------------------------------------------------------
H-27
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
31. NOTES TO STATEMENTS OF CASH FLOWS (CONTINUED)
(D) STANDBY ARRANGEMENTS AND INVESTING ACTIVITIES
Credit standby arrangements
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1994 1993 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
- unsecured bank overdraft facilities, subject
to annual review with amounts drawn
payable at call, totalling........................... 5,000 5,000 5,000 5,000
- amount of credit unused.............................. 5,000 5,000 5,000 5,000
</TABLE>
The parent entity has given a negative pledge, subject to certain
conditions, in addition to an interlocking guarantee between the parent
entity and its controlled entity, as security over the overdraft and bank
guarantees (refer note 22).
--------------------------------------------------------------------------------
H-28
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
DIRECTORS' STATEMENT
In the opinion of the Directors:
(a) The accompanying accounts of the Company are drawn up so
as to give a true and fair view of the results of the
Company for the year ended 31 December 1994 and the
state of affairs of the Company at 31 December 1994; and
(b) At the date of this statement there are reasonable
grounds to believe that the Company will be able to pay
its debts as and when they fall due; and
(c) The consolidated accounts:
(i) have been made out in accordance with Divisions
4, 4A and 4B of Part 3.6 of the Corporations Law;
and
(ii) in particular, give a true and fair view of the
matters with which they deal.
Signed in accordance with a resolution of the Directors made pursuant to
section 303(2) of the Corporations Law.
On behalf of the Directors
B N Kelman AO, OBE
Director
R A Tastula
Director
Perth
31 March 1995
--------------------------------------------------------------------------------
H-29
<PAGE>
--------------------------------------------------------------------------------
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF
HOMESTAKE GOLD OF AUSTRALIA LIMITED
SCOPE
We have audited the financial statements of Homestake Gold of Australia
Limited for the financial year ended 31 December 1994. The financial
statements include the consolidated accounts of the economic entity
comprising the Company and the entities it controlled at year end, or
from time to time during the year. The Company's Directors are
responsible for the preparation and presentation of the financial
statements and the information they contain. We have conducted an
independent audit of these financial statements in order to express an
opinion on them to the members of the Company. Our audit has been
conducted in accordance with Australian Auditing Standards to provide
reasonable assurance as to whether the financial statements are free of
material misstatement. Our procedures included examination, on a test
basis, of evidence supporting the amounts and other disclosures in the
financial statements, and the evaluation of accounting policies and
significant accounting estimates. These procedures have been undertaken
to form an opinion as to whether, in all material respects, the financial
statements are presented fairly in accordance with Australian Accounting
Standards and statutory requirements so as to present a view which is
consistent with our understanding of the Company's and the economic
entity's financial position, the results of their operations and their
cash flows. The audit opinion expressed in this report has been formed on
the above basis.
AUDIT OPINION.
In our opinion the financial statements of Homestake Gold of Australia
Limited are properly drawn up:
(a) so as to give a true and fair view of:
(i) the state of affairs as at 31 December 1994 and
the profit and cash flows for the financial year
ended on that date of the Company and the
economic entity; and
(ii) the other matters required by Divisions 4, 4A and
4B of Part 3.6 of the Corporations Law to be
dealt with in the financial statements;
(b) in accordance with the provisions of the Corporations
Law; and
(c) in accordance with applicable Accounting Standards.
COOPERS & LYBRAND
Chartered Accountants
Alan Good
Partner
Perth
31 March 1995
--------------------------------------------------------------------------------
H-30
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
PROFIT AND LOSS ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 1993
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
NOTE $'000 $'000 $'000 $'000
----- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating profit/(loss) before abnormal items and
income tax........................................... 2 31,676 6,381 28,892 (4,825)
Abnormal items before income tax...................... 2 (4,282) (3,801) (1,498) (13,626)
--------- --------- --------- ---------
Operating profit/(loss) before income tax............. 2 27,394 2,580 27,394 (18,451)
Income tax (benefit)/expense attributable to operating
profit/(loss)........................................ 3 -- -- -- --
--------- --------- --------- ---------
Operating profit/(loss) after income tax.............. 27,394 2,580 27,394 (18,451)
Accumulated losses at the beginning of the year....... (67,974) (70,554) (67,974) (49,523)
--------- --------- --------- ---------
Accumulated losses at the end of the year............. (40,580) (67,974) (40,580) (67,974)
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings per share.................................... 27
</TABLE>
THE ABOVE PROFIT AND LOSS ACCOUNTS SHOULD BE READ IN CONJUNCTION WITH THE
ACCOMPANYING NOTES.
--------------------------------------------------------------------------------
H-31
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
BALANCE SHEETS
AS AT 31 DECEMBER 1993
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
NOTE $'000 $'000 $'000 $'000
----- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash................................................ 8,884 6,988 8,849 6,950
Receivables......................................... 4 23,720 11,684 26,636 11,594
Inventories......................................... 5 17,844 21,918 17,367 21,430
Other............................................... 6 3,562 3,409 3,528 3,328
--------- --------- --------- ---------
TOTAL CURRENT ASSETS............................ 54,010 43,999 56,380 43,302
--------- --------- --------- ---------
NON-CURRENT ASSETS
Investments......................................... 7 50 50 50 50
Inventories......................................... 8 9,813 -- 9,813 --
Property, plant & equipment......................... 9 176,148 187,289 172,386 183,510
Other............................................... 10 5,354 6,152 4,668 5,074
--------- --------- --------- ---------
TOTAL NON-CURRENT ASSETS........................ 191,365 193,491 186,917 188,634
--------- --------- --------- ---------
TOTAL ASSETS.................................. 245,375 237,490 243,297 231,936
--------- --------- --------- ---------
CURRENT LIABILITIES
Creditors and borrowings............................ 11 23,846 15,986 10,630 9,545
Provisions.......................................... 12 2,995 4,130 14,524 9,195
Other............................................... 13 10,000 10,000 10,000 10,000
--------- --------- --------- ---------
TOTAL CURRENT LIABILITIES....................... 36,841 30,116 35,154 28,740
--------- --------- --------- ---------
NON-CURRENT LIABILITIES
Creditors and borrowings............................ 14 199 12,012 -- --
Provisions.......................................... 15 1,760 6,822 1,568 14,656
Other............................................... 16 65,000 75,000 65,000 75,000
--------- --------- --------- ---------
TOTAL NON-CURRENT LIABILITIES................... 66,959 93,834 66,568 89,656
--------- --------- --------- ---------
TOTAL LIABILITIES............................. 103,800 123,950 101,722 118,396
--------- --------- --------- ---------
NET ASSETS.......................................... 141,575 113,540 141,575 113,540
SHAREHOLDERS' EQUITY
Share capital....................................... 17 118,357 118,207 118,357 118,207
Reserves............................................ 18 63,798 63,307 63,798 63,307
Accumulated losses.................................. (40,580) (67,974) (40,580) (67,974)
--------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY.................... 141,575 113,540 141,575 113,540
--------- --------- --------- ---------
--------- --------- --------- ---------
Commitments and Contingencies....................... 21
</TABLE>
THE ABOVE BALANCE SHEETS SHOULD BE READ IN CONJUNCTION WITH THE
ACCOMPANYING NOTES.
--------------------------------------------------------------------------------
H-32
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 1993
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
---------------------- ----------------------
1993 1992 1993 1992
NOTE $'000 $'000 $'000 $'000
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from gold sales.................... 176,100 172,953 176,100 167,379
Payments to suppliers and employees......... (130,191) (134,143) (123,368) (125,113)
Other receipts.............................. 1,059 838 836 802
Interest received........................... 1,179 1,854 1,179 1,346
Interest paid............................... (3) (47) (1) (29)
Finance charges on finance leases........... (1,025) (1,700) -- (1,655)
Deferred gold sale fee...................... (2,865) (2,821) (2,865) (2,821)
---------- ---------- ---------- ----------
Net cash provided by operating
activities............................... 30(b) 44,254 36,934 51,881 39,909
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for plant and equipment............ (4,318) (8,965) (3,976) (8,835)
Payments for mine property and
development................................ (3,690) (7,000) (3,690) (7,000)
Proceeds on sale of non-current assets...... 596 656 283 375
Payments for exploration and evaluation..... (7,583) (8,111) (3,421) (2,833)
---------- ---------- ---------- ----------
Net cash used in investing activities..... (14,995) (23,420) (10,804) (18,293)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares............... 640 35 640 35
Repayment of borrowings..................... -- (82) -- (82)
Deferred gold sale delivery................. (10,000) (10,000) (10,000) (10,000)
Repayment of principle on finance leases.... (5,820) (5,652) -- --
Advances to a controlled entity............. -- -- (17,740) (16,784)
Realised foreign exchange gain.............. 289 -- 289 --
---------- ---------- ---------- ----------
Net cash used in financing activities..... (14,891) (15,699) (26,811) (26,831)
---------- ---------- ---------- ----------
Net increase/(decrease) in cash held.... 14,368 (2,185) 14,266 (5,215)
Cash at beginning of the financial year....... 16,868 19,053 16,935 22,150
---------- ---------- ---------- ----------
Cash at end of the financial year............. 30(a) 31,236 16,868 31,201 16,935
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
THE ABOVE STATEMENTS OF CASH FLOWS SHOULD BE READ IN CONJUNCTION WITH THE
ACCOMPANYING NOTES.
--------------------------------------------------------------------------------
H-33
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) GENERAL SYSTEMS OF ACCOUNTING UNDERLYING THE FINANCIAL STATEMENTS
The financial statements have been prepared in accordance with disclosure
requirements of Schedule 5 of the Corporations Regulations, and relevant
Accounting Standards. Except for certain assets which are as noted, the
financial statements are prepared in accordance with the historical cost
convention. The accounting policies adopted are consistent with those of
the previous year.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements have been prepared by combining the
accounts of all the entities controlled by Homestake Gold of Australia
Limited (the parent entity) as defined in Australian Accounting Standards
Board 1024 "Consolidated Accounts". A list of controlled entities appears
in note 26. Homestake Gold of Australia Limited and its controlled
entities are referred to in these accounts as the economic entity.
The consolidated financial statements include the information and results
of each controlled entity from the date on which the Company obtained
control and until such time as the Company ceases to control such entity.
In preparing the consolidated financial statements, all intercompany
balances and transactions, and unrealised profits arising within the
economic entity are eliminated in full.
(C) FOREIGN CURRENCIES
Transactions in foreign currencies are translated at the rate of exchange
at the date of the transaction. Foreign currency assets and liabilities
at the balance sheet date are translated at the exchange rate at balance
date. Realised and unrealised exchange gains or losses are recorded in
the profit and loss account.
Gains and losses relating to a foreign exchange hedging program are
recognised in the profit and loss account in the period in which they are
realised.
(D) MINING OPERATIONS
(i) Property, plant and equipment
Depreciation of property, plant and equipment is on the
following basis:
For assets with an economic life less than the life of
the respective mine, costs are depreciated on a straight
line basis over their estimated remaining life.
The economic entity regularly reviews the estimated
economic life of each mine considering the physical and
economic factors relating to ore reserves and makes
adjustments to the estimates as required.
--------------------------------------------------------------------------------
H-34
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The life of each mine is determined by relating the
projected recoverable tonnes in the orebody to the
expected rate of production.
(ii) Inventories
Stores, which represent consumable supplies and
maintenance spares, are valued at weighted average cost
less provision for obsolescence.
Ore stocks and gold in circuit are valued at the lower
of weighted average cost and net realisable value.
Weighted average cost includes direct material and an
appropriate portion of labour and overhead expenses
including amortisation and depreciation.
(iii) Prepaid mining costs
Certain operating development costs incurred in
underground mining are deferred and allocated to ore
stocks on the basis of tonnes of ore broken.
Costs of waste stripping for open cut operations are
normalised by adding to or deducting from prepaid mining
expenditure when stripping ratios exceed or are less
than the life of mine stripping ratios.
(iv) Recognition of revenue
Gold bullion is taken up as a sale in the period when it
is delivered to a refinery.
(v) Mine development
Amortisation of mine development is over the economic
life of each mine.
(E) INCOME TAX
Tax effect accounting principles have been adopted whereby income tax
expense has been calculated on pre-tax profits after adjustment of
permanent differences. The future tax benefit relating to tax losses is
not carried forward as an asset unless the benefit can be regarded as
being virtually certain of realisation. Income tax on net cumulative
timing differences is set aside to the deferred income tax and future
income tax benefit accounts at the rates which are expected to apply when
those timing differences reverse. The new Australian corporate tax rate
of 33% that became effective this year has been used for this purpose.
(F) EXPLORATION EXPENDITURE
Exploration and evaluation expenditure incurred is accumulated and
capitalised.
--------------------------------------------------------------------------------
H-35
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Where economically recoverable ore reserves have not been established, or
for which specific development plans have not been scheduled, an
appropriate provision for write off is concurrently charged to the profit
and loss account.
Where economically recoverable ore reserves have been established, costs
are carried on the balance sheet until commencement of mining operations.
For areas where a provision had previously been made and economically
recoverable ore reserves have since been established, the provision is
appropriately reduced to reflect the capital costs associated with the
newly established reserves to the extent that they can be expected to be
recoverable from established reserves.
On commencement of mining operations, capitalised costs are transferred
to mine property, buildings and equipment and are amortised over the
economic life of the ore reserves. Accumulated capitalised expenditure on
abandoned areas is written off when the decision to abandon is made.
(G) JOINT VENTURES
A substantial part of the economic entity's activities is undertaken in
the form of unincorporated joint ventures with other parties. Interests
in joint ventures are reported in the accounts by including the economic
entity's share of assets, liabilities, income and expenses employed in
the joint ventures, in their respective classification categories.
Details of major joint venture interests and the sum of the group's
interests in joint venture assets and liabilities are set out in note 25.
(H) LEASES AND DEFERRED INCOME
Leases classified as finance leases are capitalised and amortised on a
straight-line basis so as to write off the value of each leased asset
over its estimated useful life. The liability in respect of capitalised
leases is reduced by the principal component of each lease payment and
the interest component is expensed. Where the transaction involves a sale
and leaseback, an appropriate amount of deferred income is recorded in
the balance sheet and is taken to the profit and loss account over the
lease term. The amount of deferred income amortised to the profit and
loss account is disclosed in note 2. When cessation of mining occurs and
the leased asset no longer operates and where the transaction involved a
sale and leaseback, the unamortised portion of the leased asset (net of
capitalised borrowing costs) is written off to the profit and loss
account and the profit and loss account is simultaneously adjusted for
the unamortised value of the deferred income.
Leases classified as operating leases are not capitalised and each lease
payment is expensed.
(I) VALUATION OF NON-CURRENT ASSETS
Non-current assets are written down to recoverable amount where the
carrying value of any non-current asset exceeds the recoverable amount.
In assessing recoverable amounts the relevant cash inflows arising from
the continued use and subsequent disposal of non-current assets are not
discounted to their present value. No upward revaluations have been made.
--------------------------------------------------------------------------------
H-36
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(J) EARNINGS PER SHARE
(i) Basic earnings per share
Basic earnings per share is determined by dividing the
operating profit after income tax by the weighted
average number of ordinary shares outstanding during the
financial year, adjusted for bonus elements in ordinary
shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in
the determination of basic earnings per share by taking
into account amounts unpaid on ordinary shares and any
reduction in earnings per share that will probably arise
from the exercise of options outstanding during the
financial year.
(K) COMPARATIVE FIGURES
Where appropriate, comparative figures are reclassified so as to be
comparable with figures in the current period.
2. OPERATING PROFIT/(LOSS)
(A) OPERATING REVENUE
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Gold sales revenue......................................... 175,649 168,649 175,649 163,657
Other revenue:
-- Interest received from other persons.................. 1,179 1,398 1,179 1,391
-- Amortisation of deferred income....................... -- 5,608 -- --
-- Other income.......................................... 1,069 805 846 769
-- Net foreign exchange gain............................. 289 -- 289 --
-- Proceeds on sale of non-current assets................ 570 656 283 375
--------- --------- --------- ---------
178,756 177,116 178,246 166,192
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
--------------------------------------------------------------------------------
H-37
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
2. OPERATING PROFIT/(LOSS) (CONTINUED)
(B) OPERATING PROFIT/(LOSS)
Operating profit/(loss) before abnormal items and income tax has been
determined after crediting and charging the following specific items:
(i) Crediting
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
-- Profit on sale of non-current assets.............. 311 394 216 213
-- Exploration expenditure written back.............. 1,270 2,947 1,270 2,947
-- Write back of provision against net realisable
value............................................. 1,408 -- 1,408 --
-- Write back of provision for guarantee on related
company finance lease............................. -- -- 1,826 --
</TABLE>
(ii) Charging
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
-- Interest paid or due and payable:
Other persons.............................. 3 47 1 29
-- Depreciation of property, plant and
equipment..................................... 12,481 13,759 12,481 13,163
-- Amortisation of:
Mine properties and development............ 7,537 7,190 7,537 6,751
Capital acquisition costs.................. 798 406 406 406
Leased assets.............................. 67 6,048 -- --
-- Loss on sale of non-current assets............ 20 88 9 88
-- Provisions:
Employee entitlements...................... 2,492 2,080 2,181 2,080
Mine rehabilitation........................ -- 30 -- --
Diminution in investment in controlled
entity.................................... -- -- -- 620
Non-recovery of a receivable from a
controlled entity......................... -- -- 14,740 19,288
-- Research and Development...................... 245 -- 234 --
-- Exploration expenditure write off/ provided
against includes depreciation -- $115,000
(1992: $149,000)............................... 7,698 8,275 3,421 2,849
-- Deferred gold sale fee -- related
corporation................................... 2,865 2,821 2,865 2,821
-- Finance charges -- leased assets.............. 1,025 1,700 -- 1,655
-- Operating leases -- rental expense............ 584 465 206 465
</TABLE>
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H-38
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
2. OPERATING PROFIT/(LOSS) (CONTINUED)
(C) AUDITORS REMUNERATION
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REMUNERATION OF AUDITORS:
Amounts received, or due and receivable, by the auditor of the
Company for:
-- Auditing the accounts........................................... 60 -- 60 --
-- Other services.................................................. 393 -- 393 --
Amounts received, or due and receivable, by other auditors for:
-- Auditing the accounts........................................... 91 150 87 150
-- Other services.................................................. 31 10 23 10
</TABLE>
(D) ABNORMAL ITEMS
Included in the operating profit before income tax are the following
abnormal items of expense:
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Provision for guarantee on related company finance lease... -- -- -- 13,626
Applicable tax effect -- Nil
Fortnum closure
Loss on cessation of mining and writedown of deferred
mining costs, property, plant and equipment at the
Fortnum operations, including profit on sale of
non-current assets.................................... -- 3,801 -- --
Applicable tax credit -- $1,482,000
Writeoff of leased assets no longer operating.............. -- 15,422 -- --
Writeback of deferred income............................... -- (15,422) -- --
Applicable tax effect -- Nil
Retrospective withholding tax payment in relation to the
financial years 1989 to 1993.............................. 1,498 -- 1,498 --
Applicable tax credit -- $494,000
Relocation of Head office expenses......................... 2,784 -- -- --
Applicable tax credit -- $919,000
--------- --------- --------- ---------
Total Abnormal Items Before Tax............................ 4,282 3,801 1,498 13,626
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
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H-39
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
3. INCOME TAX
The prima facie income tax expense on pre-tax accounting profit/(loss) is
reconciled to the income tax expense in the accounts as follows:
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating profit/(loss) before income tax.................. 27,394 2,580 27,394 (18,451)
Prima facie income tax expense/(benefit) on operating
profit/(loss) calculated at 33% (1992 -- 39%)............. 9,040 1,006 9,040 (7,196)
ADD (DEDUCT) TAX EFFECT OF:
Permanent differences
-- deferred income....................................... -- (2,187) -- --
-- non-deductible depreciation and amortisation.......... 1,261 4,153 1,261 1,794
-- deductible lease payments............................. (2,270) (2,864) -- --
-- non-deductible increase in provisions................. 4,262 -- 4,262 --
-- other items........................................... 232 773 (152) (55)
--------- --------- --------- ---------
12,525 881 14,411 (5,457)
Benefit of tax losses recouped............................. (12,525) (881) (14,411) --
Timing differences and tax losses not brought to account as
future income tax benefits................................ -- -- -- 5,457
Income tax attributable to operating profit/(loss)......... -- -- -- --
The Directors estimate that the potential future income tax
benefit at 33% (1992 -- 39%) in respect of:
-- tax losses not brought to account..................... 6,573 11,791 -- 375
-- exploration expenditure............................... 3,565 9,395 -- 1,843
-- timing differences.................................... -- -- -- 13,977
--------- --------- --------- ---------
10,138 21,186 -- 16,195
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
This future income tax benefit will only be obtained if:
(a) future assessable income is derived of a nature and an
amount sufficient to enable the benefit to be realised;
(b) the conditions for deductibility imposed by tax
legislation continue to be complied with; and
(c) no changes in tax legislation adversely affect the
economic entity in realising the benefit.
--------------------------------------------------------------------------------
H-40
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
4. CURRENT ASSETS -- RECEIVABLES
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Amount receivable from a controlled entity................. -- -- 43,209 25,469
Less: provision for non-recovery........................... -- -- (40,209) (25,469)
--------- --------- --------- ---------
-- -- 3,000 --
Short term deposits........................................ 22,514 9,985 22,514 9,985
Other receivables.......................................... 1,206 1,699 1,122 1,609
--------- --------- --------- ---------
23,720 11,684 26,636 11,594
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
5. CURRENT ASSETS -- INVENTORIES
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Stores at cost............................................. 4,476 6,290 3,999 5,802
Less: provision for obsolescence........................... (195) -- (195) --
--------- --------- --------- ---------
4,281 6,290 3,804 5,802
Stocks -- ore at cost...................................... 5,036 10,084 5,036 10,084
-- gold in circuit at cost............................ 8,527 5,544 8,527 5,544
--------- --------- --------- ---------
17,844 21,918 17,367 21,430
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
6. CURRENT ASSETS -- OTHER
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Prepayments................................................ 3,562 3,409 3,528 3,328
</TABLE>
7. NON-CURRENT ASSETS -- INVESTMENTS
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Shares in controlled entity not quoted
-- at cost (refer note 26)................................ -- -- 620 620
Less: provision for diminution of investment............... -- -- (620) (620)
--------- --------- --------- ---------
-- -- -- --
Shares in an associated company not quoted
-- at cost (refer note 29)................................ 50 50 50 50
--------- --------- --------- ---------
50 50 50 50
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
--------------------------------------------------------------------------------
H-41
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
8. NON-CURRENT ASSETS -- INVENTORIES
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Stores at cost............................................. 2,132 -- 2,132 --
Stocks -- ore at cost...................................... 7,681 -- 7,681 --
--------- --------- --------- ---------
9,813 -- 9,813 --
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
9. NON-CURRENT ASSETS -- PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Plant and equipment at cost................................ 175,674 179,849 164,622 168,877
Less: accumulated depreciation............................. (70,237) (60,729) (61,267) (51,793)
--------- --------- --------- ---------
Total Plant and Equipment.............................. 105,437 119,120 103,355 117,084
--------- --------- --------- ---------
Mine property and development at cost...................... 116,218 100,361 107,942 92,087
Less: accumulated amortisation............................. (47,827) (37,574) (40,979) (30,726)
--------- --------- --------- ---------
Total Mine Property and Development.................... 68,391 62,787 66,963 61,361
--------- --------- --------- ---------
Leased assets.............................................. 339 361 -- --
Less: accumulated amortisation............................. (87) (80) -- --
--------- --------- --------- ---------
Total Leased Assets.................................... 252 281 -- --
--------- --------- --------- ---------
174,080 182,188 170,318 178,445
Capital works in progress at cost.......................... 2,068 5,101 2,068 5,065
--------- --------- --------- ---------
176,148 187,289 172,386 183,510
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
10. NON-CURRENT ASSETS -- OTHER
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
EXPLORATION AND EVALUATION EXPENDITURE
Areas of interest where ore reserves have not been
established or for which specific development plans have
not been scheduled........................................ 18,558 17,136 8,151 6,285
Less: provision for write off.............................. (18,558) (17,136) (8,151) (6,285)
--------- --------- --------- ---------
-- -- -- --
--------- --------- --------- ---------
Capital acquisition costs.................................. 7,603 7,604 6,526 6,526
Less: accumulated amortisation............................. (2,249) (1,452) (1,858) (1,452)
--------- --------- --------- ---------
5,354 6,152 4,668 5,074
--------- --------- --------- ---------
5,354 6,152 4,668 5,074
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
--------------------------------------------------------------------------------
H-42
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
11. CURRENT LIABILITIES -- CREDITORS AND BORROWINGS
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
UNSECURED:
Bank overdraft............................................. -- 105 -- --
Amount payable to
-- related bodies corporate.............................. -- 1 -- 125
Trade creditors............................................ 8,294 9,672 8,283 9,301
Withholding tax payable.................................... 1,498 -- 1,498 --
Other...................................................... 2,033 543 687 119
SECURED:
Bank overdraft (refer note 21 B(g))........................ 162 -- 162 --
Finance lease liabilities (i).............................. 11,859 5,665 -- --
--------- --------- --------- ---------
23,846 15,986 10,630 9,545
--------- --------- --------- ---------
--------- --------- --------- ---------
<FN>
------------------------
(i) The finance lease liabilities are effectively secured over the
assets leased and, in the case of the sale and leaseback
transaction, a first ranking registered fixed and floating charge
over the assets and undertakings of the economic entity exists,
subject to certain exclusions. Subsequent to year end this
finance lease was retired and the fixed and floating charge
removed.
</TABLE>
12. CURRENT LIABILITIES -- PROVISIONS
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Guarantee on related entity finance lease.................. -- -- 11,800 5,600
Employee benefits.......................................... 2,995 4,130 2,724 3,595
--------- --------- --------- ---------
2,995 4,130 14,524 9,195
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
13. CURRENT LIABILITIES -- OTHER
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Amount owing to a related body corporate................... 10,000 10,000 10,000 10,000
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
--------------------------------------------------------------------------------
H-43
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued)
14. NON-CURRENT LIABILITIES -- CREDITORS AND BORROWINGS
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SECURED:
Finance lease liabilities (i).............................. 199 12,012 -- --
--------- --------- --------- ---------
--------- --------- --------- ---------
<FN>
------------------------
(i) The finance lease liabilities are effectively secured over the
assets leased and, in the case of the sale and leaseback
transaction, a first ranking registered fixed and floating charge
over the assets and undertakings of the economic entity exists,
subject to certain exclusions. Subsequent to year end this
finance lease was retired and the fixed and floating charge
removed.
</TABLE>
15. NON-CURRENT LIABILITIES -- PROVISIONS
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Employee benefits.......................................... 1,087 755 1,087 755
Guarantee on related company finance lease................. -- -- -- 8,026
Deferred stripping costs................................... -- 5,394 -- 5,394
Mine rehabilitation........................................ 673 673 481 481
--------- --------- --------- ---------
1,760 6,822 1,568 14,656
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
16. NON-CURRENT LIABILITIES -- OTHER
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Amount owing to a related body corporate................... 65,000 75,000 65,000 75,000
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
17. SHARE CAPITAL
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(a) Authorised Capital
-- 697,350,000 ordinary shares of 20 cents each........ 139,470 139,470 139,470 139,470
--------- --------- --------- ---------
--------- --------- --------- ---------
(b) Issued Capital
-- 591,779,573 (1992: 591,036,573) ordinary shares at
20 cents each fully paid.............................
-- 102,000 (1992: 5,000) ordinary shares at 20 cents
each paid to 1 cent.................................. 118,357 118,207 118,357 118,207
--------- --------- --------- ---------
--------- --------- --------- ---------
(c) Options
-- 81,500 (1992: 957,000)
</TABLE>
During the year, 464,000 options which were issued in 1988 were exercised
by option holders. The option gave the holder the right to take up one
fully paid ordinary share on payment of $1.00, including 80 cents
premium. The exercise price was one cent with the balance repayable
within five years of exercise of option. The remaining 36,000 options
lapsed on 29 April 1993.
--------------------------------------------------------------------------------
H-44
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
17. SHARE CAPITAL (CONTINUED)
During the year 376,000 options which were issued in 1991 were exercised
by option holders. These options give the holder the right to take up one
fully paid ordinary share on payment of 70 cents, including 50 cents
premium exercisable at any time up to 24 June 1996. The exercise price of
the option is payable as to one cent on exercise of the option, with the
balance of 69 cents payable within five years of exercise of option. At
31 December 1993, 81,500 of these options remain outstanding.
18. RESERVES
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Share Premium Reserve
Balance at the beginning of the year..................... 63,307 63,282 63,307 63,282
Add:
-- Arising from options exercised........................ 491 25 491 25
--------- --------- --------- ---------
Balance as at the end of the year........................ 63,798 63,307 63,798 63,307
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
19. REMUNERATION AND RETIREMENT BENEFITS OF DIRECTORS
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(a) Aggregate income received, or due and receivable by
Directors of Homestake Gold of Australia Limited and
its controlled entities............................... 533 643 533 643
The number of Directors of Homestake Gold of Australia
Limited whose total remuneration falls within the
following bands:
$0 - $9,999.......................................... 6 4
$20,000 - $29,999.................................... 1 1
$30,000 - $39,999.................................... 1 --
$40,000 - $49,999.................................... -- 1
$60,000 - $69,999.................................... 1 --
$120,000 - $129,999.................................. 1 1
$190,000 - $199,999.................................. -- 1
$250,000 - $259,999.................................. -- 1
$270,000 - $279,999.................................. 1 --
(b) Contributions paid to the economic entity's
Superannuation Fund in respect of Directors of the
Company and its controlled entities.................... 87 120 87 120
(c) Amounts paid to the economic entity's Superannuation
Fund or directly to Directors in connection with the
retirement of Directors................................ 2,191 -- 2,191 --
</TABLE>
Amounts are shown in summary form as the Directors believe the provision
of full particulars would be unreasonable.
--------------------------------------------------------------------------------
H-45
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
19. REMUNERATION AND RETIREMENT BENEFITS OF DIRECTORS (CONTINUED)
During 1993 five Directors (1992 four Directors) in the $0 - $9,999 band
were not paid any remuneration.
20. REMUNERATION AND RETIREMENT BENEFITS OF EXECUTIVES
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(a) Aggregate income received, or due and receivable, by
executive officers whose total income exceeds
$100,000.............................................. 716 803 716 803
The number of executives whose total income is more than
$100,000 and falls within the following bands:
Executive officers of the economic entity and of the
Company
$100,000 - $109,999.................................. -- 1 -- 1
$120,000 - $129,999.................................. 3 2 3 2
$190,000 - $199,999.................................. -- 1 -- 1
$250,000 - $259,999.................................. -- 1 -- 1
$270,000 - $279,999.................................. 1 -- 1 --
(b) Contributions paid to the economic entity's
Superannuation Fund in respect of executives of the
Company and its controlled entities.................... 142 167 142 167
(c) Amounts paid to the Company Superannuation Fund or
directly to principal executive officers in connection
with the retirement of those officers.................. 2,071 -- 2,071 --
</TABLE>
Amounts are shown in summary form as the Directors believe the provision
of full particulars would be unreasonable.
--------------------------------------------------------------------------------
H-46
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
21. COMMITMENTS AND CONTINGENCIES
A. Commitments for lease expenditure
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(a) Operating lease expenditure contracted for:
No later than one year................................. 566 563 216 158
Later than one year but no later than two years........ 444 494 104 131
Later than two years but no later than five years...... 502 928 8 68
Later than five years.................................. -- -- -- --
--------- --------- --------- ---------
Operating lease liability.............................. 1,512 1,985 328 357
--------- --------- --------- ---------
--------- --------- --------- ---------
(b) Finance lease expenditure contracted for:
No later than one year................................. 12,060 7,231 -- --
Later than one year but no later than two years........ 121 6,682 -- --
Later than two years but no later than five years...... 104 6,743 -- --
Later than five years.................................. -- -- -- --
--------- --------- --------- ---------
Minimum finance lease payments (i)..................... 12,285 20,656 -- --
Deduct future finance charges.......................... (227) (2,979) -- --
--------- --------- --------- ---------
Finance lease liability................................ 12,058 17,677 -- --
--------- --------- --------- ---------
--------- --------- --------- ---------
INCLUDED IN THE ACCOUNTS AS:
Creditors and borrowings
-- Current -- note 11.................................... 11,859 5,665 -- --
-- Non-current -- note 14................................ 199 12,012 -- --
--------- --------- --------- ---------
12,058 17,677 -- --
--------- --------- --------- ---------
--------- --------- --------- ---------
<FN>
------------------------
(i) The minimum finance lease payments declared may vary as certain
finance charges are calculated using a variable interest rate.
</TABLE>
B. Other commitments
(a) Homestake Gold of Australia Limited and Kalgoorlie Lake View Pty.
Ltd. entered into an agreement for the supply of electricity in
connection with Kalgoorlie operations with the State Energy
Commission of Western Australia (SECWA) on 2 February 1983.
Pursuant to that Agreement, Homestake Gold of Australia Limited
and Kalgoorlie Lake View Pty. Ltd. are jointly and severally
liable to pay to SECWA a line charge until September 1999.
--------------------------------------------------------------------------------
H-47
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
21. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The line charge cost varies in accordance with foreign exchange and
interest rate movements.
<TABLE>
<CAPTION>
1993 1992
$'000 $'000
--------- ---------
<S> <C> <C>
At 31 December 1993 the total commitment of both parties to SECWA was payble as
follows:
No later than one year.......................................................... 3,468 3,468
Later than one year but no later than two years................................. 3,468 3,468
Later than two years but no later than five years............................... 10,403 10,403
Later than five years........................................................... 2,600 6,068
--------- ---------
19,939 23,407
--------- ---------
--------- ---------
</TABLE>
(b) The economic entity has certain guarantees and obligations to
perform minimum exploration work and expend minimum amounts of
money on exploration, mining and related tenements. These
obligations may be varied from time to time, subject to approval,
and are expected to be fulfilled in the normal course of
operations of the economic entity.
(c) The economic entity has given certain guarantees and performance
bonds in connection with exploration, mining and related
activities. The obligations, in respect of which these guarantees
and performance bonds have been given, are expected to be
fulfilled in the normal course of operations of the economic
entity.
(d) The economic entity has given bank guarantees totalling
$1,178,000 (1992: $949,000) to mining departments and other
public utilities.
(e) The Company has advised its continued support of a controlled
entity and has undertaken that it will not require full repayment
of the amounts receivable (refer note 4) until the controlled
entity is in a position to do so.
(f) The Company entered into a foreign currency protection programme
in 1993 which is designed to protect the company's revenue stream
against an appreciating Australian dollar. The programme consists
of weekly put and call option contracts of US$1,500,000 which
extend to December 1994. The programme is capped at 70 cents and
has a floor of 66 cents.
(g) The bank overdraft is secured by a fixed and floating charge over
the assets and undertakings of the economic entity, except for
the economic entity's interests in the Kalgoorlie Joint Ventures.
In respect of the economic entity's Foreign Exchange Options
Contract, the bank holds a charge over the following economic
flows from the Kalgoorlie Joint Ventures, being gold delivered to
Homestake Gold of Australia Limited (HGAL), the proceeds from the
sale of gold and any amounts distributed to HGAL from the sale of
assets of the Joint Ventures.
--------------------------------------------------------------------------------
H-48
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
21. COMMITMENTS AND CONTINGENCIES (CONTINUED)
(h) Capital expenditure commitments
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Payable no later than one year............................. 3,495 2,149 3,495 2,149
</TABLE>
22. SUPERANNUATION COMMITMENTS
The Homestake Australia Limited Superannuation Fund exists for the
relevant employees of Homestake Australia Limited, to provide benefits in
the form of lump sum payments on retirement, disability or death.
Homestake Australia Limited is required to contribute to the fund in
accordance with the governing trust deeds of the fund and the
contributions are legally enforceable, subject to the cessation or
reduction of contributions on notice being given to the trustees of the
fund.
Actuarial assessments of the Homestake Australia Limited Superannuation
Fund are undertaken at least every three years, the most recent completed
assessment being as at 1 January 1991 by the Wyatt Company Pty. Limited,
Actuaries and Consultants. Based on these assessments, the fund would be
able to satisfy all benefits which would be vested under the fund in the
event of its termination or the voluntary or compulsory termination of
employment of each employee.
At the date of this report Wyatt Company Pty Limited is undertaking an
actuarial assessment.
23. OTHER RELATED PARTY DISCLOSURES
(a) Related bodies corporate
The chief entity is Homestake Gold of Australia Limited whose ultimate
holding company is Homestake Mining Company, incorporated under Delaware
law, United States of America. The details of the previously disclosed,
1989 deferred gold sale to Homestake Mining Company of California, a
subsidiary of Homestake Mining Company, are as follows:
The transaction involved a sale to Homestake Mining Company of California
of 210,277 ounces of gold for a total sale price of $A100.0 million,
based on the gold price (London P.M. fix) at the transaction date. The
gold sold is deliverable in equal semi-annual instalments and the first
instalment was delivered on 31 December 1991 and the final instalment is
due on 29 June 2001. A fee is payable in gold calculated quarterly on the
balance of undelivered gold. In accordance with the terms and conditions
of this transaction, Homestake Gold of Australia Limited is required to
pay withholding tax on this fee.
The above transaction reflected commercial terms for the Company at the
time the related party transaction was entered into. The balance
outstanding from this transaction is included in note 13 and note 16, and
the gold fee paid in respect of it is included in note 2.
--------------------------------------------------------------------------------
H-49
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
23. OTHER RELATED PARTY DISCLOSURES (CONTINUED)
(b) Controlled entities
A list, showing the amount of the Company's investment in each controlled
entity, is included as note 26.
(c) Joint ventures
Interests held during the year in joint ventures are set out in note 25.
(d) Associated company
Kalgoorlie Consolidated Gold Mines Pty Ltd (KCGM) is 50 per cent owned by
Homestake Gold of Australia Limited and 50 per cent owned by another
party. KCGM acts as a management company for the KMA Joint Venture,
Fimiston/Paringa Joint Venture and Mt Percy Joint Venture.
All transactions with KCGM are made on terms and conditions that allow
KCGM to neither earn a profit nor incur a loss from its operations. Loans
and transactions arise from the performance of management services.
(e) Superannuation
Details relating to superannuation commitments are shown in note 22.
(f) Directors
The names of each person holding the position of Director during the year
are Sir Bruce Macklin, OBE, W H Clough, AO, OBE, G G Elam, J P Horan, W A
Humphrey, B N Kelman, AO, CBE, S T Peeler, J B Roberts, B A Schepman, R A
Tastula and C F Fimiani (Alternate for Messrs. W A Humphrey, S T Peeler
and B A Schepman).
G G Elam was appointed 22 July 1993 and W H Clough, AO, OBE, was
appointed 11 October 1993.
J B Roberts resigned 10 May 1993, J P Horan resigned 5 July 1993 and Sir
Bruce Macklin resigned 1 October 1993.
C F Fimiani (Alternate for Messrs. W A Humphrey, S T Peeler and B A
Schepman), resigned 17 January 1994.
The amount of Directors remuneration received or receivable by the
Directors is disclosed in note 19.
A Director, Mr B N Kelman, AO, CBE, is a Director of Macquarie Bank
Limited. During the year the Company sold gold bullion to the Macquarie
Bank Limited on normal commercial terms and conditions. The Company also
placed a portion of its nil cost foreign currency protection program with
Macquarie Bank on normal commercial terms and conditions.
--------------------------------------------------------------------------------
H-50
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
23. OTHER RELATED PARTY DISCLOSURES (CONTINUED)
Details of all share and share options between Directors of Homestake
Gold of Australia Limited and any entity in the economic entity are as
follows:
<TABLE>
<CAPTION>
PARENT ENTITY
--------------------
1993 1992
NUMBER NUMBER
--------- ---------
<S> <C> <C>
Aggregate number of shares and share options held by Directors at 31
December
Shares -- Homestake Gold of Australia Limited........................ 158,636 203,181
Share options -- Homestake Gold of Australia Limited
-- Employee share option scheme at exercise price
of $1.00.......................................................... -- 300,000
-- Employee share option scheme at exercise price
of $0.70.......................................................... 50,000 250,000
</TABLE>
During the year, Directors acquired 280,000 fully paid shares, through
the Employee Share Option Scheme (100,000 shares were acquired at an
exercise price of $1.00 and 180,000 shares were acquired at an exercise
price of $0.70).
During the year, Directors acquired 220,000 partly paid shares to 1 cent
through the Employee Share Option Scheme (200,000 partly paid shares were
acquired with the full exercise price to be $1.00 and 20,000 partly paid
shares were acquired with the full exercise price to be $0.70).
During the year, Directors acquired 50,000 shares through on-market
transactions.
During the year, Directors disposed of 345,000 shares through on-market
transactions.
24. SEGMENT INFORMATION
Homestake Gold of Australia Limited and its controlled entities are
involved in exploration within Australia and the sale of gold produced.
25. JOINT VENTURES
The parent entity has a 50 per cent interest in the gold mining
operations at Kalgoorlie, which are comprised of three separate joint
ventures, Kalgoorlie Mining Associates Joint Venture, Fimiston/ Paringa
Joint Venture and Mt. Percy Joint Venture. The Company has a 50 per cent
interest in each joint venture.
(a) Exploration
Interest in joint ventures
A substantial part of the economic entity's exploration activities is
undertaken in the form of unincorporated joint ventures with other
parties. For information on the more advanced joint venture exploration
activities, please refer to the section, Review of Activities --
Exploration on page 12 of this report.
--------------------------------------------------------------------------------
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<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
25. JOINT VENTURES (CONTINUED)
The economic entity's share of joint venture exploration expenditure,
excluding the Kalgoorlie operations described in note 25(b), was
$2,175,000 (1992: $2,833,000).
(b) Operations
The economic entity's interests in the Kalgoorlie operations are included
in the balance sheet under the following classifications:
<TABLE>
<CAPTION>
1993 1992
$'000 $'000
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash.............................................................................. -- 75
Receivables....................................................................... 75 37
Inventories....................................................................... 17,367 21,430
Other............................................................................. 3,472 3,284
--------- ---------
20,914 24,826
--------- ---------
NON-CURRENT ASSETS
Inventories....................................................................... 9,813 --
Property, plant and equipment..................................................... 142,816 151,242
--------- ---------
152,629 151,242
--------- ---------
TOTAL ASSETS........................................................................ 173,543 176,068
--------- ---------
--------- ---------
CURRENT LIABILITIES
Creditors and borrowings.......................................................... 8,206 9,420
Provisions........................................................................ 2,724 4,075
Other............................................................................... 686 --
--------- ---------
11,616 13,495
--------- ---------
NON-CURRENT LIABILITIES
Provisions........................................................................ 1,568 6,149
--------- ---------
TOTAL LIABILITIES................................................................... 13,184 19,644
--------- ---------
--------- ---------
SHARE OF NET ASSETS EMPLOYED IN JOINT VENTURES...................................... 160,359 156,424
--------- ---------
--------- ---------
The value of the economic entity's share of the output of the joint ventures for the
period, less the economic entity's share of the cost of production and other costs
in receiving that output and including abnormal expenses of $nil (1992: $nil)...... 48,186 32,834
--------- ---------
--------- ---------
</TABLE>
The Company's share of the joint venture capital commitments of the
Kalgoorlie operations at balance date was $3,495,000 (1992: $2,149,000).
Other participants in the Kalgoorlie operations retain ownership of, and
are entitled to receive, 50 per cent of saleable gold from the Kalgoorlie
operations, plus an additional amount of gold until such time as 32.5
million tonnes of ore have been mined by open cut methods from that part
of the Super Pit area contributed to the Kalgoorlie operations by those
parties. The annual
--------------------------------------------------------------------------------
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<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
25. JOINT VENTURES (CONTINUED)
quantum of this additional gold depends upon production rates, costs of
production and gold prices. During the current year the other
participants were entitled to no additional gold. Notwithstanding the
arrangements for sharing of gold, the Company is committed to
contributing 50 per cent of venture costs of the Kalgoorlie operations.
26. DETAILS OF INVESTMENTS IN CONTROLLED ENTITIES
<TABLE>
<CAPTION>
AFTER TAX
---------------------------------------------
CONTRIBUTION TO CONSOLIDATED
BOOK VALUE OF PROFITS & LOSSES
INVESTMENT ----------------------------
COUNTRY OF PERCENTAGE OF --------------- 1993 1992
INCORPORATION SHARES $'000 $'000 $'000
------------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Parent Entity
Homestake Gold of Australia
Limited....................... Australia 40,308 15,083
Controlled Entities
Homestake Australia Limited.... Australia 100% -- (12,914) (12,503)
Homestake Gold (Queensland)
Pty.
Limited....................... Australia 100% -- -- --
------------- -------------
27,394 2,580
------------- -------------
</TABLE>
27. EARNINGS PER SHARE
<TABLE>
<CAPTION>
CONSOLIDATED
----------------------------
1993 1992
------------- -------------
<S> <C> <C>
Basic earnings per share (cents)......................................... 4.6 0.4
Weighted average number of ordinary shares on issue used in the
calculation of basic earnings per share................................. 591,445,335 591,007,748
</TABLE>
The diluted earnings per share is not materially different from basic
earnings per share and is therefore not disclosed.
28. SUBSEQUENT EVENTS
(a) On 17 February 1994 Homestake Australia Limited sold its
interests in the Fortnum plant and tenements to Perilya Mines
N.L. The financial effect of this event was to produce a profit
on sale of the plant and tenements of $1,800,000. This amount has
not been brought to account at balance date.
(b) On 17 February 1994 Homestake Australia Limited paid the State
Bank of South Australia the outstanding obligation under the Sale
and Lease back Transaction. The fixed and floating charge over
the assets of the company relating to this lease has been
discharged. The financial effect of this event was to reduce
current liabilities by $11,800,000. This amount has not been
brought to account at balance date.
--------------------------------------------------------------------------------
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<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
29. INVESTMENT IN ASSOCIATED COMPANIES
<TABLE>
<CAPTION>
EQUITY ACCOUNTED AMOUNT
OWNERSHIP INTEREST CARRYING AMOUNT
PRINCIPAL ------------- ------------------------ ------------------------
NAME OF COMPANY ACTIVITY 1993 % 1992 % 1993 $'000 1992 $'000 1993 $'000 1992 $'000
---------------------------- --------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Unlisted Kalgoorlie
Consolidated Gold Mines Pty
Limited.................... Management 50 50 50 50 50 50
<CAPTION>
DIVIDENDS RECEIVED/
RECEIVABLE
------------------------
NAME OF COMPANY 1993 $'000 1992 $'000
---------------------------- ----- -----
<S> <C> <C>
Unlisted Kalgoorlie
Consolidated Gold Mines Pty
Limited.................... -- --
</TABLE>
The above investment is held by Homestake Gold of Australia Limited and
comprises interests in the ordinary share capital of the associate. The
balance date of the associate is 30 June. The associated company does not
have retained profits/accumulated losses, or any reserves.
30. NOTES TO STATEMENTS OF CASH FLOWS
(A) RECONCILIATION OF CASH
For the purpose of the statement of cash flows, cash includes cash on
hand net of outstanding bank overdrafts, investments in short term
deposits and gold bullion. Cash at the end of the financial year as shown
in the statement of cash flows is reconciled to the related items in the
balance sheet as follows.
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash on hand and in banks.................................. 8,884 6,988 8,849 6,950
Bank overdraft (note 11)................................... (162) (105) (162) --
Short term deposits (note 4)............................... 22,514 9,985 22,514 9,985
--------- --------- --------- ---------
31,236 16,868 31,201 16,935
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
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<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
30. NOTES TO STATEMENTS OF CASH FLOWS (CONTINUED)
(B) RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES TO OPERATING
PROFIT/(LOSS) AFTER INCOME TAX
<TABLE>
<CAPTION>
CONSOLIDATED PARENT ENTITY
-------------------- --------------------
1993 1992 1993 1992
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating profit/(loss) after income tax................... 27,394 2,580 27,394 (18,451)
Depreciation and amortisation.............................. 20,998 21,795 20,425 20,320
Write off of exploration expenditure....................... 7,698 8,275 3,421 2,849
Exploration expenditure written back....................... (1,270) (2,947) (1,270) (2,947)
Write off of prepayment (abnormal)......................... -- 2,032 -- --
Diminution of investment in controlled entity.............. -- -- -- 620
Foreign exchange gain on financing activities.............. (289) -- (289) --
Profit on sale of assets................................... (311) (394) (216) (213)
Loss on sale of assets..................................... 20 88 9 88
Provision of non-recovery of a receivable of a controlled
entity.................................................... -- -- 14,740 19,288
Decrease in receivables and other assets................... 519 3,680 428 2,738
(Increase)/decrease in inventories......................... (11,312) 2,415 (11,319) 1,658
Decrease in creditors and accruals......................... (127) (707) (576) (48)
Increase/(decrease) in provisions.......................... 934 117 (866) 14,007
--------- --------- --------- ---------
Net cash provided by operating activities.................. 44,254 36,934 51,881 39,909
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
(C) NON CASH FINANCING AND INVESTING ACTIVITIES
(i) Plant and equipment
During the financial year the economic entity acquired
plant and equipment with an aggregate value of $182,000
(1992: $59,000) by means of financial leases. These
acquisitions are not reflected in the statement of cash
flows.
(ii) Charge between parties
In 1992 an inter-entity charge was made between entities
within the economic entity of $6,235,000. This charge
was not reflected in the statement of cash flows.
(D) STANDBY ARRANGEMENTS AND CREDIT FACILITIES
Credit standby arrangements
<TABLE>
<S> <C> <C> <C> <C>
subject- unsecured bank overdraft facilities,
to annual review with amounts drawn
payable at call, totalling.............. 5,000 5,000 5,000 5,000
- amount of credit unused................. 5,000 5,000 5,000 5,000
</TABLE>
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<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
30. NOTES TO STATEMENTS OF CASH FLOWS (CONTINUED)
The parent entity has given a negative pledge, subject to certain
conditions, in addition to an interlocking guarantee between the parent
entity and its controlled entity, as security over the overdraft and bank
guarantees (refer note 21).
--------------------------------------------------------------------------------
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<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
DIRECTORS' STATEMENT
In the opinion of the Directors:
(a) the accompanying financial statements are drawn up in
accordance with Divisions 4, 4A and 4B of Part 3.6 of
the Corporations Law and so as to give a true and fair
view of:
(i) the state of affairs as at 31 December 1993 and
the profit for the financial year ended on that
date of the Company and the economic entity; and
(ii) the other matters with which they deal;
(b) at the date of this statement there are reasonable
grounds to believe that the Company will be able to pay
its debts as and when they fall due.
The financial statements are drawn up in accordance with applicable
Accounting Standards.
Signed in accordance with a resolution of the Directors made pursuant to
section 303(2) of the Corporations Law.
On behalf of the Directors
B N Kelman AO, CBE
Director
R A Tastula
Director
Perth
April 1994
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<PAGE>
--------------------------------------------------------------------------------
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF
HOMESTAKE GOLD OF AUSTRALIA LIMITED
SCOPE
We have audited the financial statements of Homestake Gold of Australia
Limited for the financial year ended 31 December 1993. The financial
statements include the consolidated accounts of the economic entity
comprising the Company and the entities it controlled at year end, or
from time to time during the year. The Company's Directors are
responsible for the preparation and presentation of the financial
statements and the information they contain. We have conducted an
independent audit of those financial statements in order to express an
opinion on them to the members of the Company.
Our audit has been conducted in accordance with Australian Auditing
Standards to provide reasonable assurance as to whether the financial
statements are free of material misstatement. Our procedures included
examination, on a test basis, of evidence supporting the amounts and
other disclosures in the financial statements, and the evaluation of
accounting policies and significant accounting estimates. These
procedures have been undertaken to form an opinion as to whether, in all
material respects, the financial statements are presented fairly in
accordance with Australian accounting standards and statutory
requirements so as to present a view which is consistent with our
understanding of the Company's and the economic entity's financial
position and the results of their operations and their cash flows. The
audit opinion expressed in this report has been formed on the above
basis.
AUDIT OPINION.
In our opinion the financial statements of Homestake Gold of Australia
Limited are properly drawn up:
(a) so as to give a true and fair view of:
(i) the state of affairs as at 31 December 1993 and
the profit and cash flows for the financial year
ended on that date of the Company and the
economic entity; and
(ii) the other matters required by Divisions 4, 4A and
4B of Part 3.6 of the Corporations Law to be
dealt with in the financial statements;
(b) in accordance with the provisions of the Corporations
Law; and
(c) in accordance with applicable Accounting Standards.
COOPERS & LYBRAND
Chartered Accountants
Mark C Turner
Partner
Perth
April 1994
--------------------------------------------------------------------------------
H-58
<PAGE>
--------------------------------------------------------------------------------
APPENDIX I
HGAL FINANCIAL STATEMENTS FOR THE HALF-YEARS ENDED 30 JUNE 1995 AND 1994 AND
REVIEW OF OPERATIONS
--------------------------------------------------------------------------------
I-1
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
PROFIT AND LOSS ACCOUNT
FOR THE HALF-YEARS ENDED 30 JUNE 1995 AND 1994
<TABLE>
<CAPTION>
CONSOLIDATED CONSOLIDATED
1995 1994
NOTES $'000 $'000
----- ------------- ------------
<S> <C> <C> <C>
Sales revenue...................................................... 86,208 93,835
Other revenue...................................................... 5,481 2,625
------ ------------
TOTAL REVENUE...................................................... 91,689 96,460
------ ------------
------ ------------
OPERATING PROFIT BEFORE INCOME TAX................................. 2 13,706 18,355
Income tax attributable to operating profit........................ 3,487 Nil
------ ------------
OPERATING PROFIT AFTER INCOME TAX.................................. 10,219 18,355
Accumulated losses at the beginning of the half-year............... (5,753) (40,580)
------ ------------
RETAINED PROFITS AT THE END OF THE REPORTING PERIOD................ 4,466 (22,225)
------ ------------
------ ------------
Earnings per share................................................. 3
</TABLE>
THE ABOVE PROFIT AND LOSS ACCOUNT SHOULD BE READ IN CONJUNCTION
WITH THE ACCOMPANYING NOTES.
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I-2
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
BALANCE SHEET
AS AT 30 JUNE 1995
<TABLE>
<CAPTION>
30 JUNE 31 DECEMBER
1995 1994
$'000 $'000
--------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash........................................................................... 39,444 53,353
Receivables.................................................................... 5,887 8,384
Inventories.................................................................... 17,205 20,317
Other.......................................................................... 2,608 2,334
--------- ------------
TOTAL CURRENT ASSETS........................................................... 65,144 84,388
--------- ------------
NON-CURRENT ASSETS
Investments.................................................................... 50 50
Inventories.................................................................... 14,749 15,881
Property, plant & equipment.................................................... 193,804 150,841
Other.......................................................................... 4,059 4,262
--------- ------------
TOTAL NON-CURRENT ASSETS....................................................... 212,662 171,034
--------- ------------
TOTAL ASSETS................................................................... 277,806 255,422
--------- ------------
--------- ------------
CURRENT LIABILITIES
Creditors and borrowings....................................................... 17,910 4,662
Provisions..................................................................... 3,166 3,173
Other.......................................................................... 10,000 10,000
--------- ------------
TOTAL CURRENT LIABILITIES...................................................... 31,076 17,835
--------- ------------
NON-CURRENT LIABILITIES
Creditors and borrowings....................................................... 47 95
Provisions..................................................................... 9,997 6,025
Other.......................................................................... 50,000 55,000
--------- ------------
TOTAL NON-CURRENT LIABILITIES.................................................. 60,044 61,120
--------- ------------
TOTAL LIABILITIES.............................................................. 91,120 78,955
--------- ------------
NET ASSETS..................................................................... 186,686 176,467
--------- ------------
--------- ------------
SHAREHOLDERS' EQUITY
Share capital.................................................................. 118,371 118,371
Reserves....................................................................... 63,849 63,849
Retained Profits............................................................... 4,466 (5,753)
--------- ------------
TOTAL SHAREHOLDERS' EQUITY..................................................... 186,686 176,467
--------- ------------
--------- ------------
</TABLE>
THE ABOVE BALANCE SHEET SHOULD BE READ IN CONJUNCTION
WITH THE ACCOMPANYING NOTES.
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I-3
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
STATEMENT OF CASH FLOWS
FOR THE HALF-YEARS ENDED 30 JUNE 1995 AND 1994
<TABLE>
<CAPTION>
CONSOLIDATED CONSOLIDATED
1995 1994
NOTES $'000 $'000
----- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from Gold Sales........................................... 85,898 93,835
Payments to suppliers and employees................................ (53,013) (62,612)
------------ ------------
32,885 31,223
Other receipts..................................................... 3,030 128
Interest received.................................................. 2,553 942
Finance charges on finance leases.................................. (9) (106)
Interest paid...................................................... -- (1)
Deferred gold sale fee............................................. (1,106) (1,285)
------------ ------------
Net cash provided by operating activities.......................... 37,353 30,901
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for plant and equipment................................... (39,336) (6,145)
Payments for mine property and development......................... (1,606) (1,111)
Proceeds on sale of non-current assets............................. 83 6,197
Payments for exploration and evaluation............................ (5,034) (4,212)
------------ ------------
Net cash used in investing activities.............................. (45,893) (5,271)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash proceeds from issues of shares, options etc................... -- 41
Deferred gold sale delivery........................................ (5,000) (5,000)
Repayment of principle on finance leases........................... (44) --
Repayment of borrowings............................................ -- (11,800)
Realised foreign exchange gain..................................... 52 1,321
Other.............................................................. -- (24)
------------ ------------
Net cash used in financing activities.............................. (4,992) (15,462)
------------ ------------
Net increase (decrease) in cash held............................... (13,532) 10,168
Cash at beginning of the half year................................. 52,976 31,236
------------ ------------
Cash at the end of the half year................................... 39,444 41,404
------------ ------------
Non-cash financing and investing activities........................ 4
</TABLE>
THE ABOVE STATEMENT OF CASH FLOWS SHOULD BE READ IN CONJUNCTION
WITH THE ACCOMPANYING NOTES.
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I-4
<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
(ALL AMOUNTS ARE EXPRESSED IN AUSTRALIAN DOLLARS)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE HALF-YEARS ENDED 30 JUNE 1995 AND 1994
1 BASIS OF PREPARATION OF HALF-YEAR FINANCIAL STATEMENTS
These general purpose consolidated accounts for the half-years ended 30
June 1995 and 1994 have been prepared in accordance with Accounting
Standard AASB 1029: Half-Year Accounts and Consolidated Accounts. It is
recommended that this report should be read in conjunction with the
Annual Report for the year ended 31 December 1994 and any public
announcements made by the Company during the half-year in accordance with
the continuous disclosure requirements of the Corporations Law.
2 INTEREST AND REVENUE EXPENSE
<TABLE>
<CAPTION>
CONSOLIDATED CONSOLIDATED
1995 1994
$'000 $'000
------------- ---------------
<S> <C> <C>
Operating profit before abnormal items and income tax is arrived at after:
a) crediting interest as revenue......................................... 2,373 942
b) charging interest as expense.......................................... Nil Nil
</TABLE>
3 EARNINGS PER SHARE
<TABLE>
<CAPTION>
CONSOLIDATED CONSOLIDATED
1995 1994
CENTS CENTS
--------------- ---------------
<S> <C> <C>
Basic earnings per share................................................... 1.73 3.10
</TABLE>
The diluted earnings per share is not materially different from basic
earnings per share and is therefore not disclosed.
4 NON-CASH FINANCING AND INVESTING ACTIVITIES
There have been no non-cash financing and investing activities undertaken
by the economic entity during the half-year.
5 CONTINGENCIES
The company and Gold Mines of Kalgoorlie Limited have a disagreement in
respect of the interpretation and application of the formula for
calculating the disproportionate share, principally relating to the
treatment of the capital costs for the Fimiston expansion. This has
resulted in the company and Gold Mines of Kalgoorlie Limited reporting
different amounts for the disproportionate share for the period through
30 June 1995. The difference at 30 June 1995 is approximately 3,500
ounces, having a value of approximately A$1.8 million. Settlement
discussions in respect of the matter are ongoing between the company and
Gold Mines of Kalgoorlie Limited.
6 RECLASSIFICATIONS
Certain amounts for 1994 have been restated to conform to the 1995
presentation.
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I-5
<PAGE>
--------------------------------------------------------------------------------
INDEPENDENT REVIEW REPORT TO THE MEMBERS OF
HOMESTAKE GOLD OF AUSTRALIA LIMITED
SCOPE
We have reviewed the financial statements being the profit and loss
account, balance sheet, statement of cash flows and directors statement
of Homestake Gold of Australia Limited for the half-year ended 30 June
1995. The financial statements are the consolidated accounts of the
economic entity comprising the company and the entities it controlled at
the end of the half-year or from time to time during the half-year. The
company's directors are responsible for the preparation and presentation
of the financial statements and the information they contain. We have
performed a review of the financial statements in order to state whether,
on the basis of the procedures described, anything has come to our
attention that would indicate that the financial statements are not
presented fairly in accordance with Accounting Standard AASB 1029: Half-
Year Accounts and Consolidated Accounts, other mandatory professional
reporting requirements (Urgent Issues Group Consensus Views) and
statutory requirements, and in order for the company to lodge the
financial statements with the Australian Securities Commission.
Our review has been conducted in accordance with Statement of Auditing
Practice/Related Services AUP/RS 1 "Review Engagements". A review is
limited primarily to inquires of company personnel and analytical
procedures applied to the financial data. These procedures do not provide
all the evidence that would be required in an audit, thus the level of
assurance given is less than that given in an audit. We have not
performed an audit and accordingly, we do not express an audit opinion.
STATEMENT
Based on our review, which is not an audit, nothing has come to our
attention that causes us to believe that the half-year financial
statements of Homestake Gold of Australia Limited are not drawn up:
(a) so as to give a true and fair view of:
(i) the economic entity's state of affairs as at 30 June 1995
and its profit and cash flow for the half-year ended on
that date; and
(ii) the other matters required by Divisions 4, 4A and 4B of
Part 3.6 of the Corporations Law to be dealt with in the
financial statements;
(b) in accordance with the provision of the Corporations Law; and
(c) in accordance with Accounting Standard AASB 1029: Half-Year
Accounts and Consolidated Accounts and other mandatory
professional reporting requirements.
COOPERS & LYBRAND
Chartered Accountants
A J Good
Partner
Perth
12 September 1995
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<PAGE>
--------------------------------------------------------------------------------
HOMESTAKE GOLD OF AUSTRALIA LIMITED
REVIEW OF OPERATIONS
HALF-YEAR ENDED JUNE 30, 1994
KALGOORLIE GOLD OPERATIONS
(50% INTEREST)
Gold sales for the half year from the Kalgoorlie operations were down
from the previous six months by 5.9% to 351,501 ounces. After adjusting
for disproportionate sharing, the Company's share was 167,677 ounces.
Treatment rates decreased by 2.8% to 4,832,625 tonnes and the recovered
grade decreased 9.8% to 2.12 grams per tonne. The cash operating cost
increased by 3.2% to $340 per ounce of gold sold.
MINING OPERATIONS
SUPERPIT
Production from the Superpit decreased 1.2% to 4,132,989 tonnes at a
recovered grade of 2.14 grams per tonne, resulting in gold sales of
311,534 ounces. Cash operating costs were higher at $315 per ounce
compared to $314 per ounce in the previous six months.
Rain caused pit production to be interrupted during the half year. The
main production areas were the Open Pit Office Cutback, Horseshoe Pit,
Paringa Cutback, Main Pit and the Horseshoe 2 area.
The next cutback, on the Eastern side, will follow the removal of the
Oroya mill late in 1995, following the decision to replace its capacity
by expanding the Fimiston mill.
MT CHARLOTTE
Production from Mt Charlotte decreased 27.6% to 567,370 tonnes at a
recovered grade of 2.10 grams per tonne, resulting in gold sales of
39,239 ounces. Cash operating costs were higher at $536 per ounce
compared to $403 per ounce in the previous six months.
A major source of Charlotte Deeps ore in a stope pillar containing
650,000 tonnes was mass-blasted in September 1994. Unfortunately, the
blast was choked in some sections with the result that remedial work was
required. This has adversely affected the results for the half-year,
however, production difficulties have now been overcome.
TREATMENT PLANTS
Apart from isolated crushing delays caused by wet ore and power failures,
treatment operations were maintained throughout the half year. Total
treated tonnage was 4,832,625 tonnes from the four mills; Fimiston,
Oroya, Croesus and Mt Percy with the roasting operations at the Gidji
roasting 127,723 tonnes (down 8.0%).
There have also been some logistical problems encountered in
co-ordinating operating and construction requirements in the Fimiston
mill compound, as the Fimiston Expansion approached its maximum activity
level.
PROJECTS
The Fimiston Mill Expansion is approximately 92.6% complete. $104 million
has now been committed out of the budget for the project of $115 million.
The sulphide circuit will be completed on time although a slight
exceedence of budget is expected.
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I-7
<PAGE>
--------------------------------------------------------------------------------
The Mt Charlotte circuit at the Fimiston Plant has been completed and
commissioning commenced in early July. However, ore will continue to be
trucked to the coarse ore stockpile as the conveyor is not expected to be
completed until sometime in September.
EXPLORATION
Regional exploration expenditure by Homestake Gold of Australia Limited
for the half year to June totalled $2.8m. Homestake's share of the
exploration expenditure at the Kalgoorlie Operations (managed by KCGM)
for the six months was $3.8m.
WESTERN AUSTRALIA
At the PORKIES WELL PROJECT (Homestake 51%, Fimiston Mining 49%),
interpretation of a Helimag survey has been completed by a consultant
geophysicist and this was used to assist with the generation of a range
of geophysical drilling targets along the Porkies Shear and neighbouring
structures. Drilling will commence in July.
A short RAB drilling programme was completed over a magnetic anomaly
fourteen kilometres south east of Porkies Hill on the Porkies tenements.
At the MT KILDARE PROJECT (Homestake 60%, Western Reefs 40%) a RAB
drilling programme was completed over a 33 ppb Au in soil anomaly and
several interpreted structural features. A total of 123 holes (MKR81-203)
were completed for 5,546 m with 1,442 composite samples collected and
assayed for gold.
An aircore drilling programme was completed over interpreted structural
features and lithologies at the AUBILS PROJECT (Homestake 70%, Mavia Pty
Limited 30%). A total of 27 holes (AUA1-27) were completed for 1,817 m
with 467 composite samples collected and assayed for gold.
No bedrock gold anomalism was detected.
At the MAJESTIC project (Homestake 60%, Western Mining Corporation [WMC]
40%) a 115 drillhole (4943m) vertical rotary airblast (RAB) drill
programme was conducted during the quarter to further assess broad areas
of low-level (sub-gram) supergene and bedrock gold anomalism, defined
from earlier reconnaissance drilling by WMC, and to extend drill coverage
into previously untested portions of the joint venture tenements. Holes
were generally drilled to blade refusal. Bedrock results have been
disappointing and the project has been significantly downgraded.
Newcrest Mining Limited as managers of the ST CRISPIN joint venture
reported that analytical results have been received for the 6607m
reconnaissance RAB drilling programme carried out in March.
A number of elevated Au values were detected by this programme with a
peak value of 0.52 ppm Au over 4 metres. Plotting of peak Au values in
plan view highlighted two groupings of elevated values, one of which
occurs to the east of the Neptune prospect and the other in the vicinity
of the Moby prospect.
Follow up RAB drilling (2783m in 45 holes) has been completed. Analytical
results are encouraging, and further work is underway.
NEW SOUTH WALES
JUNCTION REEFS PROJECT is a joint venture with Petroleum Securities
Mining and Climax with Homestake earning an equity of 51% by funding
exploration to 31 January 1997.
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A regional RC percussion drilling programme and a more detailed diamond
drilling programme of the Glendale system was commenced during the
quarter. Adverse weather conditions have been hampering the movement of
the RC percussion drilling rig. For the quarter, a total of 7,282 metres
of percussion drilling was completed in 47 holes. Diamond drilling
consisting of two holes for 712 metres was completed at Glendale testing
below the Glendale North mineralisation and Glendale pit.
Weak anomalism has been encountered in several percussion holes
associated with minor alteration. Results for the percussion drilling
will be evaluated during the next quarter, at the completion of drilling.
Denehurst Ltd, managers of the LOWER BORO joint venture (Homestake 49%,
Denehurst 51%) have reported completion of preliminary metallurgical
studies, geophysical modeling, and geological compilation in preparation
for a further round of percussion and diamond drilling slated for the
second half of 1995.
NORTHERN TERRITORY
As manager of the LONE STAR joint venture (Homestake 46.4%, PosGold
53.6%) PosGold have completed a comprehensive re-evaluation of the
tenements, and have proposed a 500 hole bedrock geochemical program and
16 RAB holes. The effort is now underway.
QUEENSLAND
In Queensland, no work was undertaken on Cinque Peaks (Homestake 100%),
Fort Roger (Homestake 100%), Copper Canyon (Homestake 86.4%, Valdora
Minerals 13.6%) or Eldorado (Homestake 65%, Battle Mountain 35%). A
drilling effort is planned during the third quarter, 1995.
As manager of the MT TRACEY/SOLDIER'S BOOT joint venture, Aberfoyle
Resources (60%) reported that further ground EM surveys have been
completed in the area south of Cowie. A drilling program to test
significant anomalies is planned.
Pancontinental Resources (Exploration) Pty Limited, as manager of the
GOLD HILL project and earning 51% reported they are currently completing
a percussion drilling programme on several targets. Numerous low level
gold and zinc intercepts are reported, including best intercepts of 16m
at 1.41 g/t Au and 5m at 8.47% Zn.
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APPENDIX J
HGAL MANAGEMENT'S DISCUSSION AND ANALYSIS
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HGAL MANAGEMENT'S DISCUSSION AND ANALYSIS
(UNLESS SPECIFICALLY STATED OTHERWISE, ALL AMOUNTS INCLUDED IN THE
FOLLOWING
MANAGEMENT'S DISCUSSION AND ANALYSIS ARE IN AUSTRALIAN DOLLARS.)
INTRODUCTION
Homestake Gold of Australia Limited (HGAL) is an 81.5% owned subsidiary
of Homestake Mining Company (Homestake US). HGAL's principal asset is its
50% ownership in Australia's largest gold mining operation located at
Kalgoorlie, Western Australia. The operation consists of the Super Pit
open pit and the Mt Charlotte underground mines.
HGAL's profitability is affected significantly by the market price of
gold. Gold prices are influenced by numerous factors over which HGAL has
no control, including expectations with respect to the rate of inflation,
the relative strength of the Australian dollar in relation to the U.S.
dollar, interest rates, global or regional political or economic crises,
demand for gold jewellry and industrial products and sales by holders and
producers of gold in response to these factors. The supply of gold
consists of a combination of a new mine production and sales from
existing stocks of bullion and fabricated gold held by governments,
public and private financial institutions, and individuals.
HGAL's general policy is to sell its production at the market price of
gold. However, in 1989 HGAL entered into a deferred gold sale with
Homestake US. At 31 December 1994, 136,700 ounces remained outstanding
under this arrangement at a price of $476 per ounce for equal semi-annual
delivery over the period to June 2001. This program's 1994 deliveries
represented approximately 6% of the gold produced by HGAL in 1994.
Gold prices are denominated in U.S. dollars. Therefore, HGAL's
profitability is also impacted by fluctuations in the U.S. dollar
relative to the Australian dollar. In 1993, HGAL implemented a foreign
currency protection program which protects a substantial portion of
HGAL's revenue from an appreciating Australian dollar. Under the program,
HGAL enters into foreign currency option contracts which establish
trading ranges within which the Australian dollar may be exchanged for
U.S. dollars by setting maximum and minimum exchange rates. Within the
range between these maximum and minimum rates the Australian dollar is
exchanged for U.S. dollars at the spot exchange rate. See note 22 to the
consolidated financial statements for additional information regarding
this program.
RESULTS OF OPERATIONS
HGAL recorded an operating profit after tax of $34.8 million or $0.059
per share in 1994 compared to an operating profit after tax of $27.4
million or $0.046 per share in 1993 and $2.6 million or $0.004 per share
in 1992. The improved 1994 results reflect higher gold production and
pretax gains of $6.3 million from the foreign currency protection
program. The 1993 results were a significant improvement over 1992 and
reflect a $61 increase in the gold price and a reduction in operating
costs due to the closure of the Fortnum mine and the cessation of mining
the Mt Percy open cuts. The 1992 results include 10,921 ounces of gold
production from the Fortnum mine. The 1993 and 1992 results also included
abnormal items amounting to $4.3 million and $3.8 million, respectively.
The 1993 abnormal items comprised costs associated with the relocation of
HGAL's corporate office in the amount of $2.8 million and tax payments
related to the 1989 through 1993 financial years totaling $1.5 million.
The 1992 abnormal item was a loss on the closure of the Fortnum mine.
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GOLD OPERATIONS: During 1994, HGAL sold 352,081 ounces of gold at an
average realised price of $523 per ounce compared to 332,636 ounces sold
at an average realised price of $528 during 1993 and 360,693 ounces sold
at an average realised price of $467 during 1992. Gold revenues of $184
million in 1994 compare to gold revenues of $175.6 million and $168.6
million in 1993 and 1992, respectively. The lower 1994 realised gold
price reflects a strengthening of the Australian dollar from US$0.68 to
US$0.73, partially offset by an increase in the U.S. price of gold from
US$358 to US$381 per ounce. The increase in the price of gold in 1993 is
due to an increase in both the U.S. price of gold and a weakening of the
Australian dollar. During 1992, the average U.S. dollar realised price of
gold was US$344 per ounce and the average Australian/U.S. dollar exchange
rate was US$0.74.
HGAL's share of production from the Kalgoorlie operations increased to
352,081 ounces during 1994 from 332,626 ounces in 1993 and 349,772 ounces
in 1992. The 1994 increase in production is due to an increase in tons
milled, higher grades and improved recoveries from the Super Pit,
partially offset by a decrease in production at Mt Charlotte and the
payment of 15,781 ounces to HGAL's joint venture partner under the
disproportionate sharing arrangement. No ounces were paid to the joint
venture partner under this arrangement in 1993 or 1992. The lower Mt
Charlotte production was due to lower tonnage and grades resulting from
underground operational difficulties which hampered the movement of ore.
These difficulties were rectified during the first six months of 1995.
Cash costs at the Kalgoorlie operations, including exploration expenses,
increased to $354 per ounce in 1994 from $338 per ounce in 1993 and $343
per ounce in 1992.
Noncash costs per ounce were $57 in 1994 compared to $61 and $62 in 1993
and 1992, respectively. The decline in noncash costs per ounce primarily
reflects lower depreciation charges as a result of an increase in the
Kalgoorlie ore reserve in 1993.
At the Kalgoorlie operations, costs of waste stripping for open-pit
operations are normalised by adding to or deducting from deferred mining
expenditures when stripping ratios exceed or are less than the
life-of-mine average stripping ratio. Strip normalisation charges of
$10.6 million are included in 1994 earnings compared to reductions in
expense of $5.6 million and $1.2 million in 1993 and 1992, respectively.
OTHER REVENUES: Interest income of $2.5 million in 1994 compares to $1.2
million in 1993 and $1.4 million in 1992. The increase in interest income
in 1994 reflects higher cash and short-term deposit balances and a rise
in interest rates during the year. HGAL realised $6.3 million from the
foreign currency protection program during 1994 compared to a gain of
$0.3 million in 1993. During 1994, the Australian dollar increased in
value in relation to the U.S. dollar and HGAL exercised option contracts
under the foreign currency protection program. Proceeds on the sale of
noncurrent assets of $6.6 million in 1994 related to the sale of the
Fortnum mine and associated tenements. Other revenues in 1992 included
$5.6 million of amortisation of deferred income related to the sale and
lease back of the Fortnum mine facilities.
DEPRECIATION AND AMORTISATION: Depreciation and amortisation expense in
1994 amounted to $30.3 million compared to $20.9 million and $27.4
million in 1993 and 1992, respectively. The 1994 amount includes $10.6
million of strip normalisation charges. The 1992 amount includes $6.0
million of amortisation with respect to the lease back of the Fortnum
mine facilities.
ADMINISTRATIVE AND GENERAL: Administrative and general expense decreased
to $3.8 million in 1994 from $4.4 million in 1993 and $4.6 million in
1992. The decline in administrative and general expense reflects
continued cost constraints and the impact of the 1993 restructuring
program.
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EXPLORATION: Exploration expense of $9.2 million in 1994 compares to $7.7
million and $8.3 million in 1993 and 1992, respectively. The increase in
exploration expense in 1994 from 1993 reflects increased drilling
activity.
FINANCE CHARGES: Finance charges of $0.1 million in 1994 compare to $1.0
million in 1993 and $1.7 million in 1992. The reduction in finance
charges in 1994 reflects the repayment of the finance lease debt in
February 1994.
INCOME TAXES: Income tax expense in 1994 of $3.6 million compares to nil
in both 1993 and 1992. No income tax expense was recorded in 1993 or 1992
due to the availability of loss carry-forwards. During 1994, HGAL began
providing for income tax expense at the statutory rate of 33%. This rate
will increase to 36%, with retroactive effect to 1 January 1995.
LIQUIDITY AND CAPITAL RESOURCES
HGAL's cash and short-term deposits increased by $22 million to $53.4
million at 31 December 1994 as a result of strong cash flows from
operations. Cash used in investing activities amounted to $10 million in
1994 and cash used in financing activities amounted to $15.5 million.
Cash used in investing activities includes $7.5 million and $8 million on
additions to property, plant and equipment and $9.1 million and $7.6
million for exploration and evaluation in 1994 and 1993, respectively.
Capital additions in 1994 include $5 million at the Kalgoorlie operations
for Fimiston Phase III expansions and modifications. Additions in 1993
and 1992 of $7.7 million and $8.6 million, respectively, at the
Kalgoorlie operations were primarily for Super Pit development. The
remaining expenditures during these years were for replacement capital to
maintain existing production capacity.
In addition to replacement capital, expenditures of $57.5 million are
planned for 1995 at the Kalgoorlie operations to complete the expansion
of the Fimiston mill, which will increase ore processing efficiency and
capability, and replace the capacity of the Oroya mill which will be
dismantled to allow for an expansion of the Super Pit.
In February 1994, HGAL sold its interest in the Fortnum mine to Perilya
Mines NL recording a pretax profit of $1.9 million. At the same time,
HGAL repaid the State Bank of South Australia $11.8 million under the
finance lease debt.
During 1994, HGAL commenced providing for final mine rehabilitation costs
and charged $0.7 million to earnings during the year. Management's
current estimate of HGAL's share of final reclamation costs at the
Kalgoorlie operations is $7.5 million. This amount, which will be
adjusted as new information becomes available, is being provided over the
life of the operations.
HGAL believes that the combination of cash and short-term deposits, and
future cash flows from operations will be sufficient to meet normal
operating requirements.
SIX MONTHS ENDED JUNE 30, 1995
HGAL recorded an operating profit after tax of $10.2 million or $0.017
per share in the six months ended 30 June 1995 compared to an operating
profit after tax of $18.4 million or $0.031 per share in the six months
ended 30 June 1994. The lower 1995 earnings are due to lower sales
volumes resulting from lower gold production and lower average realised
gold prices. In addition, the 1994
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half-year earnings included pretax foreign exchange gains of $1.3 and
abnormal items of $1.9 million. The 1994 abnormal items arose from the
sale of the Fortnum mine and associated leases.
During the six months ended 30 June 1995 HGAL sold 166,680 ounces of gold
at an average realised price of $517 per ounce compared to 176,359 ounces
sold at an average realised price of $543 during the six months ended 30
June 1994. Gold revenues of $86.2 million in the 1995 half-year period
compare to gold revenues of $93.8 million in the 1994 half-year period.
The decrease in the price of gold in 1995 is due to a strengthening of
the Australian dollar.
HGAL's share of production from the Kalgoorlie operations decreased to
166,680 ounces during the first six months of 1995 from 176,359 ounces in
the first six months of 1994. The lower 1995 production is due to lower
grades, an increase in the ounces paid to HGAL's joint venture partner
under the disproportionate sharing arrangement, a power interruption
which lasted for several days, and downtime to upgrade the ore handling
system. During the 1995 first half, HGAL paid 9,100 ounces of gold under
the disproportionate sharing agreement compared to 4,800 ounces in the
first half of 1994. The lower production resulted in an increase in cash
costs. During the first six months of 1995, cash costs, including
exploration expenses, increased to $371 per ounce from $363 per ounce in
the first six months of 1994.
Cash and short-term deposits decreased from $53 million at 31 December
1994 to $39.4 million at 30 June 1995. The decrease in cash and
short-term deposits is due to higher capital spending during the first
half of 1995 related to the current expansion of the Fimision plant.
Additions to property, plant and equipment during the six months ended 30
June 1995 of $43 million compare to $3.2 million in the first months of
1994. The increase in capital spending in 1995 is primarily due to costs
associated with the Fimiston mill expansion. The mill expansion is
approximately 92.6% complete and is scheduled for completion during the
third quarter of 1995.
On 30 August 1995, HGAL announced a large increase in ore reserves at the
Kalgoorlie operations. The most significant increase was in the Super Pit
ore reserve from 122.7 million tonnes at a grade of 2.4 grams per tonne
at 31 December 1994 to 151.5 million tonnes at a grade of 2.4 grams per
tonne at 30 June 1994.
HGAL's interest in the identified mineral resources at Kalgoorlie has
been increased to 12 million contained ounces of gold, including
6,350,000 contained ounces in proved and probable ore reserves.
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APPENDIX K
HGAL DIFFERENCES BETWEEN AUSTRALIAN AND U.S.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
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INDEPENDENT REVIEW REPORT
SCOPE
We have reviewed the attached financial report being the reconciliations
of the condensed balance sheet and related condensed profit and loss
accounts of Homestake Gold of Australia Limited for the years ended 31
December 1993 and 31 December 1994 and the half-year ended 30 June 1995.
The financial reports are the consolidated accounts of the economic
entity comprising the Company and the entities it controlled at the end
of the above stated periods or from time to time during those periods.
The Company's management is responsible for the preparation and
presentation of the financial reports and the information they contain.
We have performed a review of the financial reports in order to state
whether, on the basis of the procedures described, anything has come to
our attention that would indicate that the financial reports are not
presented fairly in accordance with the balances stated in the audited
financial statements for the years ended 31 December 1993 and 31 December
1994, and the financial statements for the half-year ended 30 June 1995
and the Company's records for the half-year ended 30 June 1994, then
adjusted for the Australian dollar effect of the application of U.S.
generally accepted accounting principles (GAAP) to those balances.
Our review has been conducted in accordance with Statement of Auditing
Practice/Related Services AUP/RS1 "Review Engagements". Our review has
been limited primarily to inquiries of company personnel, agreement of
base Australian GAAP balances to supporting records, verification of the
accuracy of the U.S. GAAP adjustments and review of the completeness of
the adjustments made by inquiry of Company personnel on the policies
applied.
These procedures do not provide all the evidence that would be required
in an audit, thus the level of assurance provided is less than given in
an audit. We have not performed an audit and, accordingly, we do not
express an audit opinion.
STATEMENT
Based on our review, which is not an audit, nothing has come to our
attention that causes us to believe that the attached financial reports
of Homestake Gold of Australia Limited do not present fairly the
reconciliation of balances determined in accordance with generally
accepted accounting principles in Australia to balances under accounting
principles generally accepted in the United States.
COOPERS & LYBRAND
Chartered Accountants
14 September 1995
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HOMESTAKE GOLD OF AUSTRALIA LIMITED
DIFFERENCES BETWEEN AUSTRALIAN AND U.S. GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
(THOUSANDS OF AUSTRALIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)
Reconciliation of consolidated profit and loss accounts determined in
accordance with generally accepted accounting principles (GAAP) in
Australia to profits under accounting principles generally accepted in
the United States is as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED 30 JUNE 31 DECEMBER
-------------------- --------------------
1995 1994 1994 1993
$'000 $'000 $'000 $'000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating profit after income tax as reported under Australian
GAAP............................................................. 10,219 18,355 34,827 27,394
Reconciliation to U.S. GAAP:
Change in unrealized gains on foreign currency exchange
contracts (1).................................................. (1,304) 3,661 1,131 (226)
Accounting for income taxes (2)................................. 464 (834)
--------- --------- --------- ---------
Operating profit after income tax in accordance with U.S. GAAP.... 9,379 22,016 35,124 27,168
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings per share in accordance with U.S. GAAP................... $ 0.02 $ 0.04 $ 0.06 $ 0.05
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Condensed consolidated balance sheets prepared in accordance with U.S.
GAAP is as follows:
<TABLE>
<CAPTION>
AUSTRALIAN U.S.
GAAP ADJUSTMENTS GAAP
$'000 $'000 $'000
----------- ----------- --------
<S> <C> <C> <C>
AS AT 30 JUNE 1995
Current assets.......................... 65,144 $ 3,497(3) 68,641
Noncurrent assets....................... 212,662 (50)(3)
(4,258)(4) 208,354
----------- --------
Total assets.......................... 277,806 276,995
----------- --------
Current liabilities..................... 31,076 399(1)
3,447(3) 34,922
Noncurrent liabilities.................. 60,044 370(2) 60,414
----------- --------
Total liabilities..................... 91,120 95,336
----------- --------
Net Assets.............................. 186,686 181,659
----------- --------
----------- --------
Shareholders' Equity.................... 186,686 (399)(1)
(370)(2)
(4,258)(4) 181,659
----------- --------
----------- --------
AS AT 31 DECEMBER 1994
Current assets.......................... 84,388 905(1)
2,777(3) 88,070
Noncurrent assets....................... 171,034 9,644(3)
(50)(3)
(4,258)(4) 176,370
----------- --------
Total assets.......................... 255,422 264,440
----------- --------
Current liabilities..................... 17,835 12,371(3) 30,206
Noncurrent liabilities.................. 61,120 834(2) 61,954
----------- --------
Total liabilities..................... 78,955 92,160
----------- --------
Net Assets.............................. 176,467 172,280
----------- --------
----------- --------
Shareholders' Equity.................... 176,467 905(1)
(834)(2)
(4,258)(4) 172,280
----------- --------
----------- --------
AS AT 31 DECEMBER 1993
Current assets.......................... 54,010 1,093(3) 55,103
Noncurrent assets....................... 191,365 (50)(3)
(4,258)(4) 187,057
----------- --------
Total assets.......................... 245,375 242,160
----------- --------
Current liabilities..................... 36,841 226(1)
1,043(3) 38,110
Noncurrent liabilities.................. 66,959 66,959
----------- --------
Total liabilities..................... 103,800 105,069
----------- --------
Net Assets.............................. 141,575 137,091
----------- --------
----------- --------
Shareholders' Equity.................... 141,575 (226)(1)
(4,258)(4) 137,091
----------- --------
----------- --------
</TABLE>
SEE FOOTNOTES ON FOLLOWING PAGE.
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------------------------
(1) Under U.S. GAAP, contracts under the Company's foreign currency
hedging program must be marked to market at the balance sheet
date and the changes in unrealized gains or losses are recorded
in the income statement.
(2) Under U.S. GAAP, income taxes follow the liability method in
accordance with U.S. Statement of Financial Accounting Standards
No. 109, whereby deferred income taxes are recognized for the
tax consequences of temporary differences by applying enacted
statutory tax rates applicable to future years to differences
between the financial statement amounts and the tax bases of
certain assets and liabilities.
(3) Under U.S. GAAP, the Company's 50% pro rata share of the assets
and liabilities of KCGM and KCGMES would be included in the
consolidated financial statements of HGAL.
(4) Under U.S. GAAP, depreciation, depletion and amortization would
have been recorded in years prior to 1991 on certain capitalized
assets. Under Australian GAAP, HGAL began amortizing those
assets in 1991.
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APPENDIX L
HOMESTAKE DIFFERENCES BETWEEN U.S. AND AUSTRALIAN
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
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APPENDIX L
HOMESTAKE DIFFERENCES BETWEEN U.S. AND AUSTRALIAN
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
Financial statements in the United States are prepared in accordance with
accounting principles generally accepted in the United States ("U.S.
GAAP"). In Australia, financial statements are prepared in accordance
with accounting standards issued by the Australian Accounting Standards
Board ("A GAAP"), which are codified in Australian Corporations Law.
Certain differences between U.S. GAAP and A GAAP as they relate to
Homestake's financial statements presented in the Offer Document are
summarised below. This information has not been audited and may not
necessarily detail all differences between U.S. GAAP and A GAAP
applicable to Homestake.
BUSINESS COMBINATIONS
Under U.S. GAAP, business combinations are accounted for by either the
purchase method or the pooling of interests method. During 1992,
Homestake entered into a business combination with Homestake Canada Inc.
("HCI") which was accounted for using the pooling of interests method.
Under A GAAP, business combinations may only be accounted for using the
purchase method.
The criteria for the pooling of interests method relate to the attributes
of the combining enterprises before the combination, the manner of
combining the enterprises, and the absence of certain planned
transactions after the combination. The pooling of interests method
accounts for a business combination as the uniting of the ownership
interests of two or more companies by exchange of equity securities. No
acquisition is recognized because the combination is accomplished without
disbursing resources of the constituents. Ownership interests continue
and the former bases of accounting is retained. The recorded assets and
liabilities of the constituents is carried forward to the combined
corporation at their recorded amounts. Income of the combined corporation
includes income of the constituents for the entire fiscal period in which
the combination occurs. The reported income of the constituents for prior
periods are combined and restated as income of the combined corporation.
The purchase method accounts for a business combination as the
acquisition of one enterprise by another. The acquiring corporation
records as its cost the acquired assets less liabilities assumed. A
difference between the cost of an acquired enterprise and the sum of the
fair values of tangible and identifiable intangible assets less
liabilities assumed is recorded as goodwill. The reported income of an
acquiring corporation includes the operations of the acquired enterprise
after acquisition, based on the cost to the acquiring corporation.
INCOME TAXES
U.S. GAAP and A GAAP require the use of the liability method of
accounting for income taxes. However, there are some differences in how
the liability method is applied under U.S. GAAP and A GAAP. The most
significant of these relates to acquisitions accounted for using the
purchase method.
Under U.S. GAAP, when an acquisition is accounted for using the purchase
method, and the price paid exceeds the underlying net book value of the
assets acquired, the resulting excess purchase price paid above net book
value is allocated to the acquired company's assets and liabilities based
on fair values. To the extent that such allocation creates a temporary
difference, deferred taxes
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must be established and the excess purchase price allocated to the
company's respective assets is increased by an equal amount. The asset is
then amortised in accordance with the company's normal depreciation
policies and the deferred tax provision is accounted for in accordance
with the company's normal tax accounting policies.
Under A GAAP, the excess purchase price is amortised directly to earnings
and is not adjusted for deferred taxes.
EQUITY ACCOUNTING
U.S. GAAP requires investments in associates, where more than 20% but
less than 50% of the voting shares of the associate are owned, to be
accounted for using the equity method. Under the equity method, the
investor's percentage of the associate's net earnings are included in the
investor's net income, and the carrying value of the investment is
adjusted accordingly. Dividends received from the associate reduce the
carrying value of the investment.
Under A GAAP, companies account for investments in associates using the
cost method. Under the cost method, the investment is recorded at cost,
and dividends paid by the associate are included in earnings as received.
Supplementary financial information about the associate is disclosed in a
note to the financial statements.
FOREIGN CURRENCY HEDGING PROGRAM
Under U.S. GAAP, Homestake's foreign currency exchange contacts are
deemed to be hedges of anticipated transactions which do not qualify for
hedge accounting treatment. Therefore, changes in the unrealized gains or
losses on the contracts are included in earnings.
Under A GAAP, only realised gains and losses relating to the foreign
currency exchange contracts would be included in earnings.
INTEREST CAPITALISED
Under both U.S. GAAP and A GAAP interest on debt is capitalised with
respect to assets under construction. Under A GAAP interest capitalised
is limited to interest incurred on specific borrowings for such assets.
Under U.S. GAAP any interest within the consolidated entity must be
capitalised.
RETIREMENT BENEFITS
In accounting for retirement benefits, A GAAP requires the recognition of
expense only when contributions are paid and payable to the pension
plans.
Under U.S. GAAP, the amount charged to the income statement in each
accounting period is the net periodic retirement benefit expense. This
expense is actuarially determined and is comprised of the actual service
cost of the plan, the interest cost of the projected benefit obligations
of the plan, the amortization of any unrecognized prior service costs,
and the amortization of any actuarial gains or losses (including the
effects of changes in the actuarial assumptions) to the extent
recognized, less the actual return achieved by the assets invested in the
plan.
--------------------------------------------------------------------------------
L-3
<PAGE>
--------------------------------------------------------------------------------
INVENTORY ACCOUNTING
Homestake uses the last-in, first-out method (LIFO) as the basis for
determining the cost of gold produced by its United States operations.
LIFO cannot be used under A GAAP.
AMORTISATION OF MINING INTERESTS
Under U.S. GAAP, the impact of a reassessment of reserves on the
determination of amortisation of mining interests is prospective. Under A
GAAP, the amortisation calculation is amended from the commencement of
the reporting period.
CONSOLIDATED FINANCIAL STATEMENTS
Under U.S. GAAP, companies only report consolidated financial results.
Under A GAAP, companies also are required to disclose the financial
statements of the holding company.
INCOME STATEMENT DISCLOSURE
U.S. GAAP requires a higher level of detail to be disclosed in the income
statement than required by A GAAP. Homestake separately discloses
expenses for production costs, administrative and general expense, and
exploration expense in its statements of consolidated operations.
Under A GAAP, items of income or expense which are abnormal by virtue of
their nature or size and are material in amount are required to be
disclosed as abnormal items. Under U.S. GAAP, such items are included in
the net income. Items in Homestake's historical financial statements that
would be likely to be disclosed as abnormal for A GAAP purposes have been
disclosed by way of footnote in the Selected Financial Data, included in
Clause 9 of the Summary of Offer.
CASH FLOW STATEMENT
A GAAP requires that statements of cash flow be presented using the
direct method. U.S. GAAP allows both direct and indirect methods.
Homestake uses the indirect method.
OUTSIDE EQUITY INTERESTS
Outside equity interests (minority interests) are classified as
liabilities for U.S. GAAP purposes but are included as part of total
shareholders' equity under A GAAP.
--------------------------------------------------------------------------------
L-4
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Homestake's Restated Certificate of Incorporation contains a provision,
permitted by Section 102(b)(7) of the Delaware General Corporation Law (the
"Delaware Law"), limiting the personal monetary liability of directors for
breach of fiduciary duties as a director. Delaware Law provides that such a
provision does not eliminate or limit liability (i) for any breach of the
director's duty of loyalty to Homestake or its shareholders, (ii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law, (iii) for acts of
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, or (iv) for any transaction from which the director derived an
improper personal benefit.
Section 145 of the Delaware General Corporation Law permits indemnification
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with actions,
suits, or proceedings in which an officer, director, employee or agent is a
party by reason of the fact that he is or was such a director, officer, employee
or agent, if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. However, in connection with actions by or in the right of
the corporation, such indemnification is not permitted if such person has been
adjudged liable for negligence or misconduct in the performance of his duty to
the corporation unless the court determines that, under all of the
circumstances, such person is nonetheless fairly and reasonably entitled to
indemnity for such expenses as the court deems proper. Section 145 also permits
a corporation to purchase and maintain insurance on behalf of its directors and
officers against and liability which may be asserted against, or incurred by,
such persons in their capacities as directors or officers of the corporation
whether or not the registrant would have the power to indemnify such persons
against such liabilities under the provisions of such section. Homestake has
purchased such insurance. Section 145 further provides that the statutory
provision is not exclusive of any right which may exist under any by-law,
agreement, vote of stockholders or independent directors, or otherwise.
Article XIV, Section 8, of the By-laws of Homestake Mining Company, included as
Exhibit 3.4 to this Registration Statement, provides that Homestake must
indemnify directors and officers, to the fullest extent permitted by Delaware
Law.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(A) EXHIBITS
<TABLE>
<C> <S>
2.1 Form of Acceptance and Transfer.
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 U.S.$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).
4.2 Registrant hereby agrees to furnish to the Commission, upon request, a copy of any
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.
+5 Opinion and consent of Thelen, Marrin, Johnson & Bridges.
10.1 Amended and restated credit agreement dated as of September 30, 1994 between the
Registrant, the Lenders, 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 10.1 to the Registrant's Form 8-K dated March
20, 1995).
*10.2 Retirement plan for outside directors of the Registrant dated as of July 21, 1994
(incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K dated March
20, 1995).
10.3 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).
10.4 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, 1991).
10.5 Agreement dated October 9, 1991 between the Registrant and Chevron Minerals Ltd.
(incorporated by reference to Exhibit 10(b) to Registrant's Form 10-K for the year
ended December 31, 1991).
10.6 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).
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.7 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).
10.8 Purchase and sale agreement dated January 15, 1989 between HGAL 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).
10.9 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).
10.10 Amendment No. 1 dated July 1, 1993 to Joint Operating Agreement between Freeport
McMoRan Resources partners, IMC Fertilizer, Inc. and Homestake Sulphur Company
(incorporated by reference to Exhibit 10.8 to the Registrant's Form 10-K for the
year ended December 31, 1993).
10.11 Amendment No. 2 dated November 30, 1993 to Joint Operating Agreement between
Freeport McMoRan Resources Partners, IMC Fertilizer, Inc. and Homestake Sulphur
Company (incorporated by reference to Exhibit 10.9 to the Registrant's Form 10-K
for the year ended December 31, 1993).
10.12 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 Registrant)
(incorporated by reference to Exhibit 10.17 to the Registrant's Form 10-K for the
year ended December 31, 1992).
10.13 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 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).
10.14 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).
10.15 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).
10.16 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).
10.17 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 Quarter Claim mine (incorporated by
reference to Exhibit 10.22 to the Registrant's Form 10-K for the year ended
December 31, 1992).
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
*10.18 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).
*10.19 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).
*10.20 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).
*10.21 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).
*10.22 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, 1989).
*10.23 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).
*10.24 Share Incentive Plan effective July 1, 1988 of International Corona Corporation (now
Homestake Canada Inc. and a 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).
10.25 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).
10.26 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).
*10.27 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).
*10.28 Consulting agreement dated March 1, 1993 between William A. Humphrey and the
Registrant (incorporated by reference to Exhibit 10.27 to the Registrant's Form
10-K for the year ended December 31, 1993).
*10.29 Employee's 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).
*10.30 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).
*10.31 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).
*10.32 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).
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
11 Computation of Earnings Per Share (incorporated by reference to Exhibit 11 to the
Registrant's Form 10-K for the year ended December 31, 1994).
13 1994 Annual Report to Shareholders (incorporated by reference to Exhibit 13 to the
Registrant's Form 10-K for the year ended December 31, 1994).
22 Subsidiaries of the Registrant (incorporated by reference to Exhibit 22 to the
Registrant's Form 10-K for the year ended December 31, 1994).
24.1 Consents of Coopers & Lybrand L.L.P., Independent Accountants.
24.2 Consent of Coopers & Lybrand, Chartered Accountants.
24.3 Consent of Coopers & Lybrand (Securities) Limited.
24.4 Awareness Letter of Coopers & Lybrand L.L.P., Independent Accountants.
24.5 Awareness Letter of Coopers & Lybrand, Chartered Accountants.
+24.6 Consent of Thelen, Marrin, Johnson & Bridges (included in Exhibit 5).
25 Powers of Attorney of Homestake's directors and officers (See Part II, page II-6).
<FN>
------------------------
+ To be filed by amendment.
* Compensatory plan or management contract.
</TABLE>
(B) FINANCIAL STATEMENT SCHEDULES
None
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS
DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN FRANCISCO, STATE OF
CALIFORNIA, ON SEPTEMBER 14, 1995.
HOMESTAKE MINING COMPANY
By /s/ HARRY M. CONGER
------------------------------------
(Harry M. Conger, Chairman of the
Board
and Chief Executive Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Gene G. Elam, Wayne Kirk and David W. Peat, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done as fully
and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
------------------------------------------------------- ------------------------- --------------------
<C> <S> <C>
/s/ HARRY M. CONGER Chairman of the Board,
------------------------------------------- Chief Executive Officer September 14, 1995
(Harry M. Conger) and Director
(Principal Executive
Officer)
/s/ JACK E. THOMPSON President, Chief
------------------------------------------- Operating Officer and September 14, 1995
(Jack E. Thompson) Director
/s/ G. G. ELAM Vice President, Finance
------------------------------------------- and Chief Financial September 14, 1995
(G. G. Elam) Officer (Principal
Financial Officer)
/s/ DAVID W. PEAT Controller
------------------------------------------- (Principal Accounting September 14, 1995
(David W. Peat) Officer)
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
------------------------------------------------------- ------------------------- --------------------
<C> <S> <C>
/s/ M. NORMAN ANDERSON Director
------------------------------------------- September 14, 1995
(M. Norman Anderson)
/s/ ROBERT H. CLARK, JR. Director
------------------------------------------- September 14, 1995
(Robert H. Clark, Jr.)
/s/ G. ROBERT DURHAM Director
------------------------------------------- September 14, 1995
(G. Robert Durham)
/s/ DOUGLAS W. FUERSTENAU Director
------------------------------------------- September 14, 1995
(Douglas W. Fuerstenau)
Director
------------------------------------------- , 1995
(Henry G. Grundstedt)
/s/ WILLIAM A. HUMPHREY Director
------------------------------------------- September 14, 1995
(William A. Humphrey)
/s/ ROBERT K. JAEDICKE Director
------------------------------------------- September 14, 1995
(Robert K. Jaedicke)
/s/ JOHN NEERHOUT, JR. Director
------------------------------------------- September 14, 1995
(John Neerhout, Jr.)
/s/ STUART T. PEELER Director
------------------------------------------- September 14, 1995
(Stuart T. Peeler)
/s/ CAROL A. RAE Director
------------------------------------------- September 14, 1995
(Carol A. Rae)
/s/ BERNE A. SCHEPMAN Director
------------------------------------------- September 14, 1995
(Berne A. Schepman)
</TABLE>
II-7
<PAGE>
EXHIBIT 2.1
THIS IS AN IMPORTANT DOCUMENT. IF YOU ARE IN ANY DOUBT AS TO HOW TO DEAL WITH
IT,
PLEASE CONSULT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER IMMEDIATELY
OFFER BY HOMESTAKE MINING COMPANY, ARBN [*] ("HOMESTAKE")
TO ACQUIRE ALL YOUR FULLY PAID ORDINARY SHARES IN
HOMESTAKE GOLD OF AUSTRALIA LIMITED, ACN 008 143 137 ("HGAL")
FORM OF ACCEPTANCE AND TRANSFER
(See instructions for completion overleaf -- Please read carefully)
<TABLE>
<S> <C> <C>
Name and Address Your holding of HGAL Shares is
Subregister Holder No.
Consideration offered
SHARE OFFER CASH OFFER
0.089 of a $1.90 for every 1
Homestake Share HGAL
for every 1 Share
HGAL Share and
$
Consideration accepted (tick one only)
SHARE OFFER CASH OFFER
</TABLE>
(If your name, address or shareholding is incorrect please amend and initial.)
IF YOU HOLD SHARE CERTIFICATES
I/We whose name and address appears above being the holder of the number of HGAL
Shares set out above, hereby:
1. ACCEPT the offer dated [ * ] 1995 by Homestake in respect of my/our HGAL
Shares subject to the terms and conditions set out in the Offer.
2. ACKNOWLEDGE the effect of acceptances set out on Clause 8 of the Offer.
3. TRANSFER to Homestake my/our HGAL Shares for the above consideration.
4. ATTACH my share certificates.
Where this document is signed under Power of Attorney the donee of the power
advises that he has no notice of the revocation thereof.
SIGN AND DATE THIS FORM IN ACCORDANCE WITH INSTRUCTIONS OVERLEAF
DATED this day of 19
X
---------------------------------------
X
---------------------------------------
(Attach Common Seal if appropriate)
Telephone number where we may contact you during business hours: ( )
------------------------------
TO ACCEPT THIS OFFER SEND OR DELIVER THIS FORM, TOGETHER WITH YOUR SHARE
CERTIFICATES TO EITHER OF:
<TABLE>
<S> <C>
Ernst & Young Registry Services Pty Limited Postal address:
Level 2, 321 Kent Street Ernst & Young Registry Services Pty Limited
Sydney NSW 2000 GPO Box 7045
Sydney NSW 2001
The First National Bank of Boston Postal address:
Shareholder Services Division The First National Bank of Boston
[address] P.O. Box 644
MS 45-02-07
Boston, MA 02102-0644
</TABLE>
To be received or if delivered, Post Marked no later than 5.00 p.m. Sydney time
on the closing date of the Offer.
CHESS HOLDINGS
IF YOUR HGAL SHARES ARE IN A CHESS HOLDING YOU CANNOT USE THIS FORM TO ACCEPT
THE OFFER. YOU MUST ACCEPT IN ACCORDANCE WITH THE SCH BUSINESS RULES. Please
refer to instruction overleaf.
IF YOU HAVE ANY ENQUIRIES CONCERNING COMPLETION OF YOUR ACCEPTANCE, PLEASE
TELEPHONE:
In Australia: Ernst & Young Registry Services Pty Limited (02) 290 4111
In the United States: The First National Bank of Boston (800) 230-4001 OR (617)
575-3170
<PAGE>
HOW TO DEAL WITH THIS FORM
IF YOU HOLD SHARE CERTIFICATES
1. Check your name, address and holding of HGAL shares overleaf, and correct if
necessary.
2. Sign where marked "X" overleaf.
3. Attach your share certificate(s) in HGAL to this form and post it in the
envelope provided as soon as possible to:
<TABLE>
<S> <C> <C>
Ernst & Young Registry Services Pty Limited OR DELIVER Ernst & Young Registry Services
Level 2, 321 Kent Street TO: Pty Limited
SYDNEY NSW 2000 GPO Box 7045
The First National Bank of Boston SYDNEY NSW 2001
[address]
</TABLE>
4. JOINT HOLDERS -- in the case of Joint Holders, all must sign.
5. POWER OF ATTORNEY -- if signed under Power of Attorney, the power must be
attached hereto unless it has already been noted by HGAL.
6. CORPORATIONS -- execution by a corporation must be under its seal or by its
duly constituted attorney.
7. DECEASED ESTATES -- probate, letters of administration or a certificate of
grant accompanied (where required by law for the purposes of transfer) by a
certificate of payment of death and succession duties and (if necessary) a
declaration in terms of subsection 1091(4) of the Corporations Law must be
forwarded with this form unless noted by HGAL.
CHESS HOLDINGS
If you are in doubt as to how to deal with your uncertificated holding please
contact your Sponsoring Broker or non broker CHESS participant.
TO ACCEPT THIS OFFER CONTACT YOUR SPONSORING BROKER OR NON BROKER CHESS
PARTICIPANT AND INSTRUCT THEM TO INITIATE THE ACCEPTANCE ON THE CHESS SYSTEM.
THIS ACCEPTANCE MUST BE INITIATED BEFORE 5.00 PM SYDNEY TIME OR NEW YORK TIME ON
THE CLOSING DATE.
ALL HOLDERS
1. IF YOU HAVE SOLD all of your HGAL shares please send this transfer form to
the stockbroker who acted on your behalf.
IF YOU HAVE SOLD part of your HGAL shares recently or IF YOU HAVE PURCHASED
further HGAL shares recently please alter the number of HGAL shares shown
overleaf to show that number of HGAL shares now held by you and write on the
form the name and address of the stockbroker who acted for you.
2. IF YOUR HGAL SHARE CERTIFICATE(S) is/are not readily available post the
signed Acceptance Form NOW and your certificate(s) as soon as possible
thereafter.
3. IF YOUR HGAL SHARE CERTIFICATE(S) has/have been lost or destroyed, post the
signed Acceptance Form NOW and notify the Share Registrar of HGAL at the
following address, so that a replacement can be arranged:
<TABLE>
<S> <C> <C>
KPMG Share Registrars or Shareholder Enquiry Line
2nd Floor telephone: Tel: (08) [*]
422 King William Street
Adelaide S.A. 5000
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
EXHIBIT 24.1
CONSENTS OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
Homestake Mining Company on Form S-4 of our report dated 8 February 1995, on our
audits of the consolidated financial statements and financial statement
schedules of Homestake Mining Company as of 31 December 1994 and 1993 and for
the years ended 31 December 1994, 1993 and 1992, as appearing in and
incorporated by reference in the Annual Report on Form 10-K of Homestake Mining
Company for the year ended 31 December 1994.
We also consent to the use of our reports dated 14 September 1995, on our
examinations of the pro forma condensed consolidated statement of operations for
the year ended 31 December 1994 and of the forecasted condensed statements of
consolidated operations and cash flows of Homestake Mining Company for the six
months ending 31 December 1995 and the year ending 31 December 1996, and the use
of our name, and the references to our firm appearing under the heading
Independent Accountants and in Clauses 4.1 and 4.2 in the Part A statement of
the registration statement. It should be noted that, as indicated in our
examination report in Clause 4.2 of the Part A statement of the registration
statement, we have no responsibility, under the standards for an examination of
a financial forecast established by the American Institute of Certified Public
Accountants, to update our report for events and circumstances occurring after
the date of the report, and consequently we have not updated our report.
Coopers & Lybrand L.L.P.
San Francisco, California
14 September 1995
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
EXHIBIT 24.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
reports dated 31 March 1995 and April 1994 on our audits of the financial
statements of Homestake Gold of Australia Limited. We also consent to the
reference to our firm under the caption "Independent Accountants".
COOPERS & LYBRAND
Chartered Accountants
Perth, Western Australia
14 September 1995
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
EXHIBIT 24.3
CONSENT TO BE NAMED IN REGISTRATION STATEMENT -- FORM S-4
As the author of the Investigating Accountant's Report dated 14 September 1995
("the Report") in Appendix A of the Form S-4 Registration Statement of Homestake
Mining Company ("the Registration Statement"), Coopers & Lybrand (Securities)
Limited hereby consents to:
(a) the use of the report in the Registration Statement in the form and
context in which the Report is included; and
(b) being named in the Registration Statement as an Independent Accountant.
Dated this 14th day of September 1995
For and on behalf of Coopers & Lybrand (Securities) Limited
-------------------------------------- --------------------------------------
Charles H Humphrey Geoffrey M Cottrell
Authorised Representative Authorised Representative
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
EXHIBIT 24.4
AWARENESS LETTER OF INDEPENDENT ACCOUNTANTS
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE:HOMESTAKE MINING COMPANY
REGISTRATION ON FORM S-4
We are aware that our report dated 14 September 1995, on our review of the
condensed consolidated balance sheet of Homestake Mining Company as of 30 June
1995, and the related condensed statements of consolidated income and cash flows
for the six month period then ended as contained in Form 10-Q of Homestake
Mining Company appearing in Appendix F to the Offer Document, is incorporated in
this registration statement. We are also aware that our report dated 14
September 1995, on our review of the pro forma condensed consolidated balance
sheet of Homestake Mining Company as of 30 June 1995 and the pro forma condensed
consolidated statement of operations for the six months then ended is
incorporated in this registration statement.
Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not
be considered a part of the registration statement prepared or certified by us
within the meaning of Sections 7 and 11 of that Act.
Coopers & Lybrand L.L.P.
San Francisco, California
14 September 1995
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EXHIBIT 24.5
AWARENESS LETTER OF CHARTERED ACCOUNTANTS
Securities and Exchange Commission
450 Fifth Street, N.W.
WASHINGTON DC USA 20549
RE:HOMESTAKE MINING COMPANY
REGISTRATION ON FORM S-4
We are aware that our report dated 12 September 1995 on our review of interim
financial information of Homestake Gold of Australia Limited for the half-year
ended 30 June 1995 is included in Appendix I to this registration statement.
Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not
be considered a part of the registration statement prepared or certified by us
within the meaning of Sections 7 and 11 of that Act.
We also are aware that our report dated 12 September 1995 on our review of the
differences between Australian and U.S. generally accepted accounting principles
for Homestake Gold of Australia Limited for the periods ended 31 December 1993,
30 June 1994, 31 December 1994 and 30 June 1995, is included in Appendix K to
this registration statement. Pursuant to Rule 436(c) under the Securities Act of
1933, this report should not be considered a part of the registration statement
prepared or certified by us within the meaning of Sections 7 and 11 of that Act.
COOPERS & LYBRAND
Chartered Accountants
Perth, Western Australia
14 September 1995
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