<PAGE>
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:
Amount Covered Exchange Rates to U.S. $ Expiration
Currency (U.S. Dollars) Minimum Maximum Date
----------------------------------------------------------------------
Canadian $144,600,000 $0.67 $0.77 1995 - 1997
Australian 66,600,000 0.68 0.76 1995 - 1996
------------
$211,200,000
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
===== ====== ===== =====
9
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis (continued)
------------------------------------------------
<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>
EXHIBIT 11
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Computation of Earnings Per Share (unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
--------------------- -------------------
<S> <C> <C> <C> <C>
PRIMARY
Earnings:
Net income applicable
to primary earnings
per share
calculation $11,179 $32,955 $17,739 $57,169
======== ======== ======== ========
Weighted average number
of shares
outstanding 137,909 137,735 137,862 137,705
======== ======== ======== ========
Net income per share
- primary $ 0.08 $ 0.24 $ 0.13 $ 0.42
======== ======== ======== ========
FULLY DILUTED
Earnings:
Net income $11,179 $32,955 $17,739 $57,169
Add: Interest relating
to 5.5% con-
vertible sub-
ordinated notes,
net of tax 1,629 1,629 3,259 3,259
Amortization of
issuance costs
relating to 5.5%
convertible sub-
ordinated notes,
net of tax 110 110 221 221
-------- -------- -------- --------
Net income applicable
to fully diluted
earnings per share
calculation $12,918 $34,694 $21,219 $60,649
======== ======== ======== ========
Weighted average number
of shares outstanding:
Common shares 137,909 137,735 137,862 137,705
Additional shares
relating to con-
version of 5.5%
convertible
subordinated notes 6,505 6,505 6,505 6,505
-------- -------- -------- --------
144,414 144,240 144,367 144,210
======== ======== ======== ========
Net income per share
- fully diluted (a) $ 0.09 $ 0.24 $ 0.15 $ 0.42
======== ======== ======== =========
<FN>
(a) This calculation is submitted in accordance with Regulation S-K item 601
(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an anti-dilutive result.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet at June 30, 1995 and the related condensed
statement of consolidated income for the six months ended June 30, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 150,804
<SECURITIES> 99,418
<RECEIVABLES> 71,835
<ALLOWANCES> 0
<INVENTORY> 67,080
<CURRENT-ASSETS> 397,110
<PP&E> 1,602,133
<DEPRECIATION> 810,788
<TOTAL-ASSETS> 1,232,631
<CURRENT-LIABILITIES> 104,858
<BONDS> 185,000
<COMMON> 137,926
0
0
<OTHER-SE> 449,494
<TOTAL-LIABILITY-AND-EQUITY> 1,232,631
<SALES> 360,492
<TOTAL-REVENUES> 375,522
<CGS> 284,895<F1>
<TOTAL-COSTS> 304,946<F2>
<OTHER-EXPENSES> 13,917<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,773
<INCOME-PRETAX> 50,886
<INCOME-TAX> 25,208
<INCOME-CONTINUING> 17,739
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,739
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.00
<FN>
<F1>Includes Production costs and Depreciation, depletion and amortization from
Condensed Statement of Consolidated Operations.
<F2>Includes Production costs and Depreciation, depletion and amortization and
Administrative and general expense from Condensed Statement of Consolidated
Operations.
<F3>Includes Exploration expense and Other expense from Condensed Statement of
Consolidated Operations.
</FN>
</TABLE>
