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 September 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 October 31, 1995 was
137,959,336.
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>
September 30, December 31,
1995 1994
------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents ....................................................... $ 131,869 $ 105,701
Short-term investments ..................................................... 107,827 99,479
Receivables ................................................................ 58,688 58,994
Inventories:
Finished products ....................................................... 12,925 15,004
Ore and in-process ...................................................... 27,903 26,889
Supplies ................................................................ 29,602 29,822
Other ...................................................................... 9,226 6,910
----------- -----------
Total current assets .................................................... 378,040 342,799
----------- -----------
Property, plant and equipment - at cost ........................................ 1,638,963 1,579,502
Accumulated depreciation, depletion and amortization ....................... (844,078) (771,281)
----------- -----------
Property, plant and equipment - net ..................................... 794,885 808,221
----------- -----------
Investments and other assets
Noncurrent investments ..................................................... 36,883 15,774
Other assets ............................................................... 29,672 35,174
----------- -----------
Total investments and other assets ...................................... 66,555 50,948
----------- -----------
Total Assets ................................................................... $ 1,239,480 $ 1,201,968
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable ........................................................... $ 31,453 $ 35,674
Accrued liabilities:
Payroll and other compensation .......................................... 21,051 22,178
Reclamation ............................................................. 11,546 15,266
Other ................................................................... 18,235 16,694
Income and other taxes payable ............................................. 6,569 7,083
----------- -----------
Total current liabilities ............................................... 88,854 96,895
----------- -----------
Long-term liabilities
Long-term debt ............................................................. 185,000 185,000
Other long-term obligations ................................................ 116,625 110,719
----------- -----------
Total long-term liabilities ............................................. 301,625 295,719
----------- -----------
Deferred income and mining taxes ............................................... 153,634 136,274
Minority interests in consolidated subsidiaries ................................ 98,804 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 - 137,954; 1994 - 137,785 ........................................ 137,954 137,785
Other shareholders' equity ................................................. 458,609 450,985
----------- -----------
Total shareholders' equity .............................................. 596,563 588,770
----------- -----------
Total Liabilities and Shareholders' Equity ..................................... $ 1,239,480 $ 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 Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues
Gold and ore sales ..................... $ 164,176 $ 156,276 $ 502,301 $ 479,636
Sulphur and oil sales .................. 9,334 7,322 31,701 17,918
Interest income ........................ 4,085 2,723 12,686 6,673
Equity earnings ........................ 1,223 812 1,684 2,312
Gain on issuance of stock by subsidiary 11,224
Other income (expense) ................. 2,610 (142) 8,578 23,709
--------- --------- --------- ---------
181,428 166,991 556,950 541,472
--------- --------- --------- ---------
Costs and Expenses
Production costs ....................... 119,356 111,326 355,625 327,389
Depreciation, depletion and amortization 25,240 19,419 73,866 60,613
Administrative and general expense ..... 8,926 9,028 28,977 27,868
Exploration expense .................... 7,221 6,943 19,387 14,944
Interest expense ....................... 2,551 2,345 8,324 7,872
Other expense .......................... 404 390 2,155 6,154
--------- --------- --------- ---------
163,698 149,451 488,334 444,840
--------- --------- --------- ---------
Income Before Taxes and Minority Interest .... 17,730 17,540 68,616 96,632
Income and Mining Taxes ...................... (7,883) (5,055) (33,091) (23,333)
Minority Interest ............................ (4,902) (1,636) (12,841) (5,281)
--------- --------- --------- ---------
Net Income ................................... $ 4,945 $ 10,849 $ 22,684 $ 68,018
========= ========= ========= =========
Net Income Per Share ......................... $ 0.04 $ 0.08 $ 0.16 $ 0.49
========= ========= ========= =========
Average Shares Used in the Computation ....... 137,949 137,742 137,891 137,717
========= ========= ========= =========
Dividends Per Common Share ................... $ 0.05 $ 0.05 $ 0.15 $ 0.125
========= ========= ========= =========
</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>
Nine Months Ended September 30,
1995 1994
-------------------------------
<S> <C> <C>
Cash Flows from Operations
Net income ............................................. $ 22,684 $ 68,018
Reconciliation to net cash provided by operations:
Depreciation, depletion and amortization ........... 73,866 60,613
Deferred taxes, minority interest and other ........ 46,838 27,727
Gain on disposals of assets ........................ (4,956) (19,056)
Gain on issuance of stock by subsidiary ............ (11,224)
Effect of changes in operating working capital items (13,785) (30,059)
--------- ---------
Net cash provided by operations ........................ 124,647 96,019
--------- ---------
Investment Activities
Increase in short-term investments ..................... (8,348) (80,431)
Additions to property, plant and equipment ............. (58,142) (56,116)
Investment in Navan Resources plc ...................... (24,000)
Proceeds from sales of assets .......................... 10,554 22,792
Other .................................................. (144) (6,929)
--------- ---------
Net cash used in investment activities ................. (80,080) (120,684)
--------- ---------
Financing Activities
Common shares issued ................................... 2,286 4,928
Dividends paid ......................................... (20,685) (17,216)
Debt repayments ........................................ (8,352)
Stock issued by subsidiary ............................. 31,870
--------- ---------
Net cash provided by (used in) financing activities .... (18,399) 11,230
--------- ---------
Net increase (decrease) in cash and equivalents .............. 26,168 (13,435)
Cash and equivalents, January 1 .............................. 105,701 134,719
--------- ---------
Cash and equivalents, September 30 ........................... $ 131,869 $ 121,284
========= =========
</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.
All dollar amounts are in United States dollars, unless otherwise
indicated.
2. In June 1994, Prime Resources Group Inc. (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 mine in Canada. This transaction resulted in a reduction of the
Company's interest in Prime from 54.2% to 50.6%. It is the Company's
policy to recognize in the income statement any gains or losses on the
issuance of stock of the Company's subsidiaries. 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 nine months ended September 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 nine months ended September 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. Total proceeds from this sale
were $16.5 million.
Other expense for the nine months ended September 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 September 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 $118,900,000 0.67 0.77 1995-1997
Australian 49,900,000 0.68 0.76 1995-1996
--------------------
$168,800,000
</TABLE>
5. In the fourth quarter of 1994, the Company entered into forward sales
for 183,200 ounces of gold it expected to produce at the Nickel Plate
mine during 1995 and 1996. 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 nine months ended September 30, 1995 include sales under
this program of 22,500 ounces and 65,400 ounces at an average price of
$400 per ounce and $394 per ounce, respectively. At September 30, 1995
forward sales for 117,800 ounces at an average price of $421 per ounce
remain outstanding under this program. In October 1995, the Company
closed out forward sales contracts covering 24,400 ounces for delivery
in 1996.
5
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
6. In July 1995, the Company acquired for $24 million a 10% interest
(fully-diluted) in Navan Resources plc (Navan) and an option to acquire
50% of Navan's interest in the Chelopech gold-copper mining operations
located 45 miles east of Sofia, Bulgaria. Navan is an Irish public
company with diverse mineral interests in Europe. The Company currently
is conducting a study to determine the feasibility of increasing the
annual rate of production at the Chelopech mine. Once the feasibility
study is completed, the Company can acquire 50% of Navan's interest in
the Chelopech operations by investing an additional $48 million, which
would be used to fund a portion of the cost of the expansion.
7. The Company's income and mining tax rate for the nine months ended
September 30, 1995 was 48% compared to 24% for the comparable period of
1994. The 1994 rate was low due to the availability of certain tax
benefits. The higher effective tax rates experienced in 1995 will
continue as the tax benefits available in 1994 have been utilized and
the major portion of the Company's current earnings are in
jurisdictions with higher income and mining tax rates.
The Company's deferred tax liability of $136.3 million at December 31,
1994 was comprised of gross deferred tax liabilities of $215.2 million
less net deferred tax assets of $78.9 million. Deferred tax assets were
net of deferred tax asset valuation allowances of $49.8 million. The
Company's deferred tax valuation allowances represent the portion of
its consolidated deferred tax assets which, based on projections at
December 31, 1994, the Company does not believe that realization is
more likely than not. The $49.8 million of deferred tax valuation
allowances is comprised of United States, Chile and Australia
unrealizable deferred tax assets of $29.2 million, $16.4 million and
$4.2 million, respectively.
The largest portion of the $49.8 million of unrealizable deferred tax
assets is comprised of $23.0 million of future tax benefits (United
States - $18.8 million and Australia - $4.2 million) relating to
expenses (previously charged against consolidated book earnings) that
the Company projects will not be deductible for tax return purposes
until after the year 2009. In projecting U.S. source income beyond this
period, the Company currently does not meet the "more likely than not"
criteria required to recognize the U.S. tax benefit. In addition, there
currently is not a tax strategy which would result in the realization
of the Australian benefit. The remaining $26.8 million principally is
comprised of future tax benefits relating to net operating loss
carry-forwards in Chile and the United States that the Company projects
it will be unable to utilize.
8. In 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. (SFAS) 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." SFAS 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable, and, if deemed impaired, measurement and
recording of an impairment loss be based on the fair value of the
asset which generally will be computed based on the discounted cash
flows arising from such asset. The Company expects to adopt SFAS 121
for the year beginning January 1, 1996. Based on current carrying
values and estimated undiscounted cash flows of the Company's
long-lived assets, the Company currently does not expect any income
statement impact upon adopting SFAS 121.
9. 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 monitoring 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 the near future.
6
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
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 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,
which has been approved by the DOE for $13.9 million, for the DOE's
share of past costs incurred through December 31, 1993. 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 preceding year. The accompanying balance sheet at September
30, 1995 includes a receivable of $11.4 million from the DOE for claims
filed, net of $9.8 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.
10. On August 14, 1995 the Company announced its intention to acquire the
18.5% of Homestake Gold of Australia Limited (HGAL) it does not
already own. Homestake's offer of .089 of a Homestake share or A$1.90
in cash for each of the 109,605,000 HGAL shares held by the public was
mailed to the HGAL shareholders on October 31, 1995. This offer will
remain open until December 5, 1995. The offer is not subject to any
minimum level of acceptance or any other condition. In accordance with
Australian securities laws, the Company intends to compulsorily
acquire any minority shares of HGAL remaining following the offer. The
Company will be entitled to compulsorily acquire any remaining shares
if it is successful in acquiring at least 90% of all HGAL shares
before the close of the offer, and at least 75% of the shareholders
have disposed of their HGAL shares to the Company or at least 75% of
the HGAL shareholders, registered immediately before the day on which
the offering document was served on HGAL, cease to be registered as
HGAL shareholders within one month after the end of the offer period.
The following Pro Forma Condensed Consolidated Financial Statements
have been prepared to illustrate the estimated effects of the proposed
acquisition (the "Acquisition") of the 109,605,000 shares of HGAL not
presently owned by the Company. The Acquisition will be accounted for
as a purchase under U.S. GAAP. The Pro Forma Condensed Consolidated
Financial Statements include a Pro Forma Condensed Consolidated Balance
Sheet as of September 30, 1995, assuming the Acquisition occurred as of
that date,
7
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
and a Pro Forma Condensed Consolidated Statement of Operations for the
nine months ended September 30, 1995, assuming that the Acquisition
occurred on January 1, 1995.
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 the Company is
determined by the value of the shares and the cash which the Company
will exchange, plus the direct costs associated with the Acquisition,
which are estimated to be approximately $3 million. 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 the Company. The Pro Forma
Condensed Consolidated Financial Statements also include pro forma
adjustments which are based on available information and certain
assumptions that management of the Company 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 the
Company, assuming 50% of HGAL shares are exchanged for Homestake common
stock and 50% of HGAL shares are acquired for cash.
Pro Forma Condensed Consolidated Balance Sheet
September 30, 1995
(In thousands)
<TABLE>
<CAPTION>
Homestake Pro Forma
Historical Adjustments Pro Forma
----------- ------------- ---------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and equivalents ................................................... $ 131,869 $ (81,000)(A) $ 50,869
Short-term investments ................................................. 107,827 107,827
Receivables ............................................................ 58,688 58,688
Inventories ............................................................ 70,430 70,430
Other .................................................................. 9,226 9,226
---------- ---------- ----------
Total current assets ................................................ 378,040 (81,000) 297,040
---------- ---------- ----------
Property, plant and equipment - net ......................................... 794,885 189,100 (A) 983,985
---------- ---------- ----------
Investments and other assets
Noncurrent investments ................................................. 36,883 36,883
Other assets ........................................................... 29,672 29,672
---------- ----------
Total investments and other assets .................................. 66,555 66,555
---------- ---------- ----------
Total Assets ................................................................ $1,239,480 $ 108,100 $1,347,580
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities ......................................................... $ 88,854 $ 88,854
---------- ----------
Long-term liabilities
Long-term debt ......................................................... 185,000 185,000
Other long-term obligations ............................................ 116,625 116,625
---------- ----------
Total long-term liabilities ......................................... 301,625 301,625
---------- ----------
Deferred income and mining taxes ............................................ 153,634 $ 50,000 (A) 203,634
---------- ---------- ----------
Minority interests in consolidated subsidiaries ............................. 98,804 (24,800)(A) 74,004
---------- ---------- ----------
Shareholders' equity ........................................................ 596,563 82,900 (A) 679,463
---------- ---------- ----------
Total Liabilities and Shareholders' Equity .................................. $1,239,480 $ 108,100 $1,347,580
========== ========== ==========
</TABLE>
8
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
[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 Homestake shares valued at $82,900 and the payment
of $78,000 in cash, plus acquisition and related costs of
$3,000. Accordingly, the total pro forma acquisition cost is
$163,900 compared to the book value for minority interest of
$24,800. The actual purchase price will be determined based
upon the value of the Homestake shares issued and cash paid
for the purchase of the HGAL shares acquired. As discussed
below, it is the Company's opinion that substantially all of
the purchase price in excess of the net book value of HGAL is
attributable to the mineral property interests held by HGAL.
The excess purchase price paid over the net book value of
assets acquired and related deferred taxes is allocated as
follows:
<TABLE>
<S> <C>
Total Purchase Price $163,900
Net Book Value of Minority Interest in HGAL, September 30, 1995 24,800
--------
Excess of Purchase Price Paid over Net Book Value of
Assets Acquired Attributed to Mineral Properties 139,100
Increase in Mineral Properties Due to the Recognition of the
Deferred Tax Consequences of Differences Between the
Assigned Values and Tax Bases of the Net Assets Acquired 50,000
-------
Total Increase in Property, Plant and Equipment 189,100
Increase in Deferred Taxes (50,000)
--------
Excess of Purchase Price Paid over Net Book Value of
Assets Acquired $139,100
========
</TABLE>
With the exception of property, plant and equipment, the
assets and liabilities of HGAL included in Homestake's
consolidated financial statements consist primarily of working
capital items, the carrying values of which are substantially
at fair market value. Based on the history of the Kalgoorlie
property and the identification and development of mineral
deposits and their conversion to ore reserves, the financial
analysis undertaken by the Company in connection with its
decision to acquire the additional 18.5% of HGAL, and the
Company's experience in ownership and operation at Kalgoorlie
and other long-life mines, it is the Company's opinion that
all of the purchase price in excess of the net book value of
assets acquired is attributable to mineral properties at
Kalgoorlie. The Company used discounted cash flow analysis to
determine the allocation of the purchase price between
reserves and other mineral deposits. This analysis indicated
that approximately 62% of the purchase price allocated to
mineral properties is attributable to reserves and the
remainder is attributable to other mineral deposits and
mineral properties, as follows:
<TABLE>
Purchase Price Allocated to Property Plant and Equipment:
<S> <C>
Acquisition of minority interests' share of
property, plant and equipment $ 28,600
Allocation of excess purchase price 189,100
---------
$217,700
=========
Allocation of Property, Plant and Equipment:
Proven and probable reserves:
Minority interests' share of property,
plant and equipment acquired $ 28,600
Excess purchase price allocation 106,200
---------
134,800 (62%)
Other mineral deposits and mineral
properties, allocation of excess purchase price 82,900 (38%)
---------
$ 217,700 (100%)
=========
The final allocation of the purchase price will be made when
the acquisition is completed and when the Company completes
its annual detailed analysis of reserves as of December 31,
1995. However, management does not expect the final actual
allocation of the purchase price to be materially different
from the pro forma balance sheet.
</TABLE>
9
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended September 30, 1995
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Homestake Pro Forma
Historical Adjustments Pro Forma
----------------- --------------- -----------------
<S> <C> <C> <C>
Revenues
Product sales $ 534,002 $ 534,002
Interest income 12,686 $ (3,600)(A) 9,086
Other income 10,262 10,262
----------------- --------------- -----------------
556,950 (3,600) 553,350
----------------- --------------- -----------------
Costs and Expenses
Production costs 355,625 355,625
Depreciation, depletion and amortization 73,866 4,200 (B) 78,066
Administrative and general expense 28,977 28,977
Exploration expense 19,387 19,387
Interest expense 8,324 8,324
Other expense 2,155 2,155
----------------- --------------- -----------------
488,334 4,200 492,534
----------------- --------------- -----------------
Income Before Taxes and Minority Interest 68,616 (7,800) 60,816
Income and Mining Taxes (33,091) 1,800 (C) (31,291)
Minority Interest (12,841) 1,076 (D) (11,765)
----------------- --------------- -----------------
Net Income $ 22,684 $ (4,924) $ 17,760
================= =============== =================
Net Income Per Share $ 0.16 $ 0.12
================= =================
Average Shares Used in the Computation (thousands) 137,891 142,769
================= =================
</TABLE>
[FN]
(A) To eliminate interest income, based on the year-to-date
average earnings rate of approximately 6% per annum, in
respect of the assumed cash component of the HGAL purchase
price in the amount of $81,000.
(B) To record amortization of the excess purchase price paid over
the net book value of assets acquired, using the
units-of-production method, as follows:
<TABLE>
(Tabular amounts in thousands, except per ounce amount)
<S> <C>
1)Excess purchase price allocated to proven
and probable reserves $ 106,200
2)Estimate of HGAL's share of
ounces of gold to be recovered
based on Homestake's estimate of 6.75 million ounces contained
in reserves and an estimated recovery rate of 89% 6,007
3)Estimate of recoverable ounces attributed to minority interests'
18.5% of HGAL 1,111
4)Amortization rate per ounce ((1) divided by (3)) $ 95.60
5)HGAL's year-to-date September 1995 ounces of gold produced 238.7
6)Minority interests' share of HGAL's year-to-date September
1995 production 44.2
7)Pro forma amortization adjustment ((4) times (6)) $ 4,200
(C) To record the tax effects of adjustments (A) and (B) above.
(D) To eliminate the minority interests' share of HGAL's earnings.
</TABLE>
10
<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, the following information relates 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 $4.9 million or 4 cents per share in the third
quarter of 1995 compared to $10.8 million or 8 cents per share in the third
quarter of 1994. The lower 1995 third quarter earnings primarily reflect a
temporary production decline at the Kalgoorlie operations in Western Australia
where a major mill expansion was completed during the quarter, fewer ounces
produced at certain operations in the United States, and a higher effective
income and mining tax rate. Year-to-date net income of $22.7 million or 16 cents
per share compares to 1994 year-to-date net income of $68.0 million or 49 cents
per share. The lower earnings in 1995 reflect $23.8 million of nonrecurring
gains included in the year-to-date 1994 results and a higher income and mining
tax rate in 1995. The 1994 year-to-date net income included nonrecurring pretax
gains of $15.7 million ($12.6 million after tax) on the sale of the Company's
interest in the Dee mine and $11.2 million ($11.2 million after tax) from
dilution of the Company's interest in Prime Resources Group Inc. (Prime)
following Prime's sale of additional shares to the public.
Consolidated production increased 10% to 453,400 ounces in the third quarter of
1995 compared to the prior year's third quarter as a result of production from
the new Eskay Creek mine, partially offset by production declines at other
operations. Revenues from gold operations totaled $164.2 million in the third
quarter of 1995 compared to revenues of $156.3 million in third quarter of 1994.
The higher 1995 third quarter revenues reflect a 9% increase in the ounces of
gold sold. During the third quarter of 1995, the Company sold 457,000 equivalent
ounces of gold at an average realized price of $385 per ounce compared to
417,500 ounces of gold sold at an average realized price of $384 per ounce
during the third quarter of 1994.
In January 1995, commercial production began at the new Eskay Creek mine in
British Columbia. Eskay Creek sold ore containing 48,200 ounces of gold and 2.2
million ounces of silver, equivalent to approximately 79,000 ounces of gold
during the 1995 third quarter. Cash costs, including the costs of third-party
smelters, were $187 per equivalent ounce during the third quarter of 1995. Eskay
Creek's first year of operation continues to exceed expectations and the mine
now is expected to produce ore containing in excess of 310,000 ounces of gold
equivalent during 1995. A recent exploration drilling program at Eskay Creek was
successful in intersecting a high grade gold and silver zone which appears to be
a stratigraphic extension to the northeast end of the main ore zone. This zone,
which has the potential to add to the known reserves, is well located for mining
access from the current underground workings. Additional exploration drilling is
planned in 1996 for this zone and in the area surrounding the Eskay Creek mine.
Domestic production decreased by 5% to 184,500 ounces during the 1995 third
quarter, primarily due to temporary production declines at the Homestake mine in
South Dakota and the Round Mountain mine in Nevada, partially offset by
increased production at the McLaughlin mine in northern California. At the
Homestake mine, production was hampered during the 1995 third quarter by
processing harder than normal ore from the open pit. Steps have been taken to
increase mill throughput and production is expected to return to more normal
levels in the fourth quarter of this year. The Homestake mine produced 90,400
ounces at a cash cost of $316 per ounce during the third quarter of 1995
compared to 97,400 ounces at a cash cost of $295 per ounce during the third
quarter of 1994. Production at the Round Mountain mine decreased by 6,100 ounces
during the 1995 third quarter to 20,600 ounces compared to the prior year's
third quarter, reflecting lower grades and volumes of ore placed on the leach
pads earlier in the year. The quantity of ore placed on the pads was increased
during the 1995 third quarter. However, due to the time lag between the initial
loading and the commencement of leaching, the benefit of this additional tonnage
will not begin to be realized until the fourth quarter of this year. Round
Mountain mine cash costs were $261 per ounce in the third quarter of 1995
compared to $216 per ounce in the third quarter of 1994. Production at the
McLaughlin mine increased by 5% to 62,900 ounces during the 1995 third quarter
compared to the 1994 third quarter, primarily due to slightly higher grades. As
a result, cash costs per ounce decreased to $263 in the third quarter of 1995
from $267 in the third quarter of 1994. Gold production levels at the McLaughlin
mine are expected to decline significantly in 1996 as mining operations will
cease and production will be principally derived from processing lower grade
stockpiles.
11
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Overall foreign gold production increased by 26% during the 1995 third quarter
compared to the prior year's third quarter primarily due to the commencement of
production at the Eskay Creek mine, partially offset by decreased production at
the Kalgoorlie operations and the El Hueso mine. Homestake Gold of Australia
Limited's (HGAL) share of production at the Kalgoorlie operations in Western
Australia was 72,000 ounces during the third quarter of 1995 compared to 84,400
ounces during the third quarter of 1994 reflecting a temporary decline in
production while the new Fimiston mill additions were integrated with the
existing complex. As a result, cash costs per ounce at Kalgoorlie increased to
$303 per ounce during the 1995 third quarter from $261 per ounce during the
prior year's third quarter. At the El Hueso mine in Chile, production decreased
from 14,100 ounces during the 1994 third quarter to 3,300 ounces during the 1995
third quarter primarily due to fewer tons leached. Gold mining at El Hueso
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 third quarter of 1995 was
$260 compared to $259 during the third quarter of 1994.
Main Pass 299 sulphur project revenues increased to $9.3 million during the 1995
third quarter from $7.3 million during the 1994 third quarter and operating
earnings were $0.7 million during the third quarter of 1995 compared to
operating earnings of $0.5 million during the prior year's quarter. The improved
results primarily are attributable to rising sulphur prices and an increase in
the sales volumes of oil.
Year to date, gold and ore sales totaled $502.3 million compared to 1994
year-to-date sales of $479.6 million primarily reflecting increased gold sales
volumes. The higher gold sales volumes are attributable to production from the
Eskay Creek mine, partially offset by temporary production declines at certain
other locations. Production exceeded sales by 1,600 ounces and 8,300 ounces in
the 1995 and 1994 year-to-date periods, respectively. The Company's average
realized price of gold was $385 for the first nine months of 1995 compared to
$384 for the first nine months of 1994.
Depreciation, depletion and amortization expense during the 1995 third quarter
of $25.2 million compares to $19.4 million during the 1994 third quarter, and
1995 year-to-date depreciation expense of $73.9 million compares to $60.6
million during the first nine months of 1994. The increase primarily is a result
of depreciation related to the Eskay Creek mine, partially offset by lower
depreciation due to lower production at other operations.
Exploration expense increased to $19.4 million during the first nine months of
1995 from $14.9 million during the prior year's comparable period. The increase
in exploration expense primarily is due to increased activity at the Ruby Hill
feasibility project in Nevada and continued work near the El Hueso mine and on
the El Foco concession in Venezuela. Exploration expenditures in 1995 will
continue to exceed the prior year's level of spending as the Company pursues
numerous attractive exploration targets and prospects. Total exploration
expenses for 1995 will be approximately $30 million compared to $21 million in
1994. In addition, approximately $9 million will be spent on in-mine exploration
in 1995 compared to $8.4 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 expected to produce at the Nickel Plate mine during 1995 and 1996. 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 nine months ended September 30, 1995 include sales
under this program of 22,500 ounces and 65,400 ounces at an average price of
$400 per ounce and $394 per ounce, respectively. At September 30, 1995 forward
sales for 117,800 ounces at an average price of $421 per ounce remain
outstanding under this program. In October 1995, the Company closed out forward
sales contracts covering 24,400 ounces for delivery in 1996.
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 September 30, 1995 the Company
had a net unrealized gain of $1.0 million on open contracts.
12
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Other income for the first nine months of 1995 includes a $2.7 million gain on
the February 1995 sale of the Company's 28% interest in the Torres mining
complex in Mexico, a $1.9 million gain on the sale of certain exploration
properties in Australia, and royalty income of $1.7 million. Other income for
the first nine months of 1994 included a $15.7 million gain on the sale of the
Company's 44% interest in the Dee mine in Nevada, royalty income of $2.6
million, $2.1 million of insurance proceeds, a $1.3 million gain related to the
sale of HGAL's Fortnum property and a net foreign currency exchange loss of $1.1
million.
The Company's income and mining tax rate for the first nine months of 1995 was
48% compared to 24% for the comparable period of 1994. The 1994 rate was low due
to the availability of certain tax benefits. The higher effective tax rates
experienced in 1995 will continue as the tax benefits available in 1994 have
been utilized and the major portion of the Company's current earnings are in
jurisdictions with higher income and mining tax rates.
At December 31, 1994 the Company had tax valuation allowances of $49.8 million.
While future circumstances could occur which would permit the Company to reduce
its $49.8 million deferred tax valuation allowances in 1995 and future years,
based on the Company's current projections it does not expect future reductions
to be material. Future events that would allow the Company to materially reduce
such allowances in the future would include (i) generating substantial taxable
income in Chile, (ii) an acceleration of the payment of the Company's
postretirement benefit obligation accrual and (iii) the Company no longer being
subject to the U.S. alternative minimum tax.
Income allocable to minority interests in consolidated subsidiaries increased to
$12.8 million during the first nine months of 1995 from $5.3 million in the
first nine months 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.
The Company evaluates its accruals for remediation, reclamation and site
restoration regularly. With respect to non-operating properties, the Company
believes it has fully provided for all remediation liabilities and for estimated
reclamation and site restoration costs. With respect to operating properties,
the Company is providing for estimated ultimate reclamation relating to ongoing
and end-of-mine life restoration and closure costs over the lives of its
individual operations using the units-of-production method. While the ultimate
amount of reclamation and site restoration costs to be incurred in the future is
uncertain, the Company has estimated that the aggregate amount of these costs,
plus remediation liabilities, will be $94 million. This figure does not include
approximately $16 million of reclamation costs at the Company's former uranium
facility at Grants, New Mexico, which will be funded by the United States
Federal Government. At September 30, 1995 the Company had accrued $52.1 million
for estimated ultimate reclamation and site restoration costs and remediation
liabilities. For additional discussion of certain environmental matters, see
note 9 to the condensed consolidated financial statements.
13
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
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 Nine Months Ended
Percentage September 30, September 30,
Mine Interest (%) 1995 1994 1995 1994
-------------- --------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
Homestake 100 90.4 97.4 291.5 298.0
McLaughlin 100 62.9 59.7 178.8 192.6
Round Mountain 25 20.6 26.7 63.7 86.0
Joint Ventures 10.6 9.6 26.6 30.2
----------- ----------- -------------- --------------
Total United States 184.5 193.4 560.6 606.8
Eskay Creek (1) 100 79.0 - 245.1 -
Williams 50 51.9 52.4 152.9 175.2
David Bell 50 25.1 26.1 65.3 79.4
Nickel Plate 100 21.0 19.4 64.9 65.9
Snip (2) 40 13.1 14.1 39.5 39.3
----------- ----------- -------------- --------------
Total Canada 190.1 112.0 567.7 359.8
Kalgoorlie, Australia 50 72.0 84.4 238.7 260.8
El Hueso, Chile 100 3.3 14.1 16.5 42.2
Mines Not Shown or Sold 3.5 8.6 15.4 29.7
----------- ----------- -------------- --------------
Total Production 453.4 412.5 1,398.9 1,299.3
Less Minority Interest 58.8 22.6 184.8 66.9
----------- ----------- -------------- --------------
Homestake's Share 394.6 389.9 1,214.1 1,232.4
=========== =========== ============== ==============
</TABLE>
14
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis (continued)
- ------------------------------------
<TABLE>
<CAPTION>
Cash Operating Costs
(Dollars per ounce)
Three Months Ended Nine Months Ended
Percentage September 30, September 30,
Mine Interest (%) 1995 1994 1995 1994
- ----- ------------ -----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Homestake 100 $316 $295 $304 $281
McLaughlin 100 263 267 239 244
Round Mountain 25 261 216 257 189
Joint Ventures 229 249 273 238
Eskay Creek (3) 100 187 - 185 -
Williams 50 214 203 223 196
David Bell 50 160 157 199 166
Nickel Plate 100 418 418 376 323
Snip (3) 40 189 186 174 182
Kalgoorlie 50 303 261 285 261
El Hueso, Chile 100 376 353 402 370
Mines Not Shown or Sold 173 198 151 217
Weighted Average $260 $259 $254 $246
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
Per Ounce of Gold 1995 1994 1995 1994
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $385 $385 $385 $384
Cash Operating Costs 260 259 254 246
Noncash Costs (4) 54 49 51 48
<FN>
(1) Ounces produced are expressed on a gold equivalent basis and include
48,200 payable ounces of gold and 2.2 million payable ounces of silver
contained in ore sold to smelters in the 1995 third quarter, and
152,000 payable ounces of gold and 6.9 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.
</FN>
</TABLE>
15
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis (continued)
- -------------------------------------
Liquidity and Capital Resources
- -------------------------------
Cash provided by operations totaled $124.6 million in the first nine months of
1995 compared to $96.0 million in the first nine months of 1994. Working capital
at September 30, 1995 amounted to $289.2 million, including $239.7 in cash and
equivalents and short-term investments.
Capital additions of $58.1 million for the 1995 year-to-date period include
$42.1 million at the Kalgoorlie operations primarily for the Fimiston mill
expansion. The new Fimiston mill was commissioned in August 1995, increasing
milling capacity at the Kalgoorlie operations by approximately one million tons
per year and allowing for further planned expansion of the Super Pit. This
increase in milling capacity, together with processing improvements, will lower
milling costs at Kalgoorlie.
In June 1995, 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, the Company acquired for $24 million a 10% interest
(fully-diluted) in Navan Resources plc (Navan) and an option to acquire 50% of
Navan's interest in the Chelopech gold-copper mining operations located 45 miles
east of Sofia, Bulgaria. Navan is an Irish public company with diverse mineral
interests in Europe. The Company currently is conducting a study to determine
the feasibility of increasing the annual rate of production at the Chelopech
mine. Once the feasibility study is completed, the Company can acquire 50% of
Navan's interest in the Chelopech operations by investing an additional $48
million, which would be used to fund a portion of the cost of the expansion.
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's total
debt outstanding at September 30, 1995 is $185 million. The Company has no
required debt payments until the year 2000.
On August 14, 1995 the Company announced its intention to acquire the 18.5% of
Homestake Gold of Australia Limited (HGAL) it does not already own. Homestake's
unconditional offer of .089 of a Homestake share or A$1.90 in cash for each of
the 109,605,000 HGAL shares held by the public was mailed to the HGAL
shareholders on October 31, 1995 and is expected to remain open until December
5, 1995.
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 fund the cash requirements for the acquisition
of the minority interests in HGAL and to meet normal operating requirements and
anticipated dividends.
Part II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
- --------------------------
HGAL and Gold Mines of Kalgoorlie Limited and its affiliates (GMK) each own a
50% interest in the Kalgoorlie operations in Western Australia. Under certain
circumstances, GMK is entitled to more than 50% of the gold production sourced
from a specific area of the Kalgoorlie operations. The entitlement in excess of
50%, which is called the "disproportionate share", is calculated by a formula
linked to gold prices, production costs and capital costs. HGAL and GMK disagree
in respect to the interpretation and application of the formula for calculating
the disproportionate share, principally relating to the treatment of the capital
costs for the recent Fimiston expansion.
16
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
On October 20, 1995 HGAL was served a writ of summons and a statement of claim
by GMK, North Kalgurli Mines Pty Ltd, et al v. Homestake Gold of Australia
Limited, et al, Supreme Court of Western Australia, Civ. No 2037 of 1995. GMK
claims a number of declarations relating to the correct interpretation and
application of the formula which calculates the disproportionate share. The
statement of claim also alleges that HGAL has received to date a greater
quantity of gold production than it is entitled to pursuant to the
Disproportionate Sharing Arrangement and that HGAL should account to GMK in
respect of the same. The quantity claimed is 8,313 ounces of gold having a value
of approximately $3.2 million. GMK also seeks damages from HGAL in respect of
damage it claims to have suffered because of the application of the formula
which calculates the disproportionate share. Kalgoorlie Consolidated Gold Mines
Pty Ltd, the manager of the Joint Venture, has been joined as the second
defendant to the action. HGAL is of the view that it will successfully defend
these proceedings.
Item 6.
(a) Exhibits Method of Filing
----------------
2 - Plan of acquisition and offer to purchase the 18.5%
of Homestake Gold of Australia Limited not already
owned by the Company (incorporated by reference
to the Registrant's Registration Statement No. 33-62667
on Form S-4, as amended by Post-Effective
Amendment No. 1 filed on October 19, 1995).
11 - Computation of Earnings Per Share Filed herewith
electronically
27 - Financial Data Schedule Filed herewith
electronically
(b) Reports on Form 8-K
Two reports on Form 8-K were filed during the third quarter ended
September 30, 1995.
Report on Form 8-K dated August 14, 1995
----------------------------------------
The report dated August 14, 1995 announced the Company's intention to
make an offer to acquire the 18.5% of HGAL not already owned by
Homestake.
Report on Form 8-K dated August 25, 1995
----------------------------------------
The report dated August 25, 1995 announced the Company's intention to
file a registration statement under the Securities Act of 1933 with
respect to the shares expected to be issued to acquire the 18.5% of
HGAL not already owned by Homestake.
17
<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: November 13, 1995 By: /s/ Gene G. Elam
------------------ ------------------
Gene G. Elam
Vice President, Finance
and Chief Financial Officer
Date: November 13, 1995 By: /s/ David W. Peat
------------------ ------------------
Controller (Chief
Accounting Officer)
18
EXHIBIT 11
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Computation of Earnings Per Share (unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
PRIMARY 1995 1994 1995 1994
=========== =========== ============ ===========
<S> <C> <C> <C> <C>
Earnings:
Net income applicable to primary earnings
per share calculation $ 4,945 $ 10,849 $ 22,684 $ 68,018
=========== =========== ============ ===========
Weighted average number of shares outstanding 137,949 137,742 137,891 137,717
=========== =========== ============ ===========
Net income per share - primary $ 0.04 $ 0.08 $ 0.16 $ 0.49
=========== =========== ============ ===========
FULLY DILUTED
Earnings:
Net income $ 4,945 $ 10,849 $ 22,684 $ 68,018
Add: Interest relating to 5.5% convertible
subordinated notes, net of tax 1,629 1,629 4,888 4,888
Amortization of issuance costs relating
to 5.5% convertible subordinated notes,
net of tax 111 111 332 332
----------- ----------- ------------ -----------
Net income applicable to fully diluted
earnings per share calculation $ 6,685 $ 12,589 $ 27,904 $ 73,238
=========== =========== ============ ===========
Weighted average number of shares outstanding:
Common shares 137,949 137,742 137,891 137,717
Additional shares relating to conversion of
5.5% convertible subordinated notes 6,505 6,505 6,505 6,505
----------- ----------- ------------ -----------
144,454 144,247 144,396 144,222
=========== =========== ============ ===========
Net income per share - fully diluted(a) $ 0.05 $ 0.09 $ 0.19 $ 0.51
=========== =========== ============ ===========
<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.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet at September 30, 1995 and the related
Condensed Statement of Consolidated Income for the nine months ended September
30, 1995 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 131,869
<SECURITIES> 107,827
<RECEIVABLES> 58,688
<ALLOWANCES> 0
<INVENTORY> 70,430
<CURRENT-ASSETS> 378,040
<PP&E> 1,638,963
<DEPRECIATION> 844,078
<TOTAL-ASSETS> 1,239,480
<CURRENT-LIABILITIES> 88,854
<BONDS> 185,000
<COMMON> 137,954
0
0
<OTHER-SE> 458,609
<TOTAL-LIABILITY-AND-EQUITY> 1,239,480
<SALES> 534,002
<TOTAL-REVENUES> 556,950
<CGS> 429,491<F1>
<TOTAL-COSTS> 458,468<F2>
<OTHER-EXPENSES> 21,542<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,324
<INCOME-PRETAX> 68,616
<INCOME-TAX> 33,091
<INCOME-CONTINUING> 22,684
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,684
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.00
<FN>
<F1>Includes Production costs and Depreciation, depletion and amortization from
Condensed Statement of Consolidated Income.
<F2>Includes Production costs and Depreciation, depletion and amortization and
Administrative and general expense from Condensed Statement of Consolidated
Income.
<F3>Includes Exploration expense and Other expense from Condensed Statement of
Consolidated Income.
</FN>
</TABLE>
